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Rockville Financial, Inc. Announces Record Core Operating Revenue and ROE

Rockville Financial, Inc. Logo

ROCKVILLE, Conn., Oct. 24, 2013 (GLOBE NEWSWIRE) -- Rockville Financial, Inc. ("Rockville Financial" or the "Company") (Nasdaq:RCKB), the holding company for Rockville Bank (the "Bank"), today announced net income of $4.6 million, or $0.18 per diluted share, for the quarter ended September 30, 2013, compared to net income of $4.7 million, or $0.17 per diluted share, for the quarter ended September 30, 2012.

"I am pleased to announce that Rockville Financial, Inc. achieved two records with regard to earnings in the third quarter of 2013. The Company reported record core operating revenue and return on equity. Additionally, the Company's strong loan and deposit growth and flat core operating expense for the past five consecutive quarters reflect Rockville's strategy for continued organic growth and commitment to enhancement of long term shareholder value," stated William H. W. Crawford, IV, President and Chief Executive Officer of Rockville Financial, Inc. and Rockville Bank.

"Though the Company continues to invest in areas that will expand revenue, Rockville strives to balance reinvestment in the Company with current period profits, and remains mindful of operating leverage, protecting tangible book value and mitigating interest rate risk.I would like to thank our team of dedicated employees who deliver a superior customer experience every day."

Earnings in both 2013 and 2012 were affected by non-core income and expense. A reconciliation of these non-GAAP measures may be found in the last table.

Financial Highlights

  • Diluted earnings per share of $0.18, up 6% compared to third quarter 2012
  • Third quarter net income of $4.6 million
  • 0.85% ROA, compared to 0.64% ROA in the linked quarter
  • 7% core operating revenue growth, compared to linked quarter
  • 3% core operating revenue growth, compared to third quarter 2012
  • 2% increase in core operating expense, compared to linked quarter
  • 2% increase in core operating expense, compared to third quarter 2012
  • $1.7 million net gain from sales of loans, compared to $1.0 million in the linked quarter
  • 3.32% tax equivalent net interest margin, compared to 3.48% in the linked quarter
  • 26% annualized linked quarter deposit growth
  • 19% annualized linked quarter non-interest bearing deposit growth
  • Reduction in NPAs/Total Assets to 0.66% from 0.73%
  • Nominal 0.04% annualized net loan charge-offs to average loans
  • NIE/Average Assets decreased to 2.71% from 3.07% in the linked quarter

Loan Production Highlights

  • Quarterly residential mortgage originations of $70 million
  • 57% of residential mortgage volume is for home purchases
  • 27% increase in purchase mortgage production, compared to the linked quarter
  • 23% increase in purchase mortgage production, compared to third quarter of 2012
  • 9% annualized linked quarter total loan growth
  • 6% linked quarter and 25% annualized linked quarter commercial loan growth

Capital Highlights

  • 89% 3-year total shareholder return
  • 54% dividend increase since 2011 conversion
  • 39% of the second stock buyback plan completed at $13.13 per share average cost, compared to $13.18 per share average closing price
  • 57% dividend payout ratio in the third quarter
  • $11.14 tangible book value per share, compared to $11.11 tangible book value per share in the linked quarter
  • Return on Tangible Common Equity of 4.89%, 5.72% and 6.36% for the third quarter 2011, 2012 and 2013
  • 26% decrease in Tangible Common Equity/Tangible Assets since 2011 conversion to 13.11%

Third Quarter Staffing Highlights

  • FTE up 7 net positions to 336 at September 30, 2013 from 329 at linked quarter-end
  • New hires primarily in revenue driving divisions

Operating Results

Rockville Financial reported net income of $4.6 million for the third quarter of 2013, and $0.18 diluted earnings per share. Stable net interest income, effective execution in the secondary market mortgage business, continued success in the financial advisory business and a strong loan level hedging strategy drove record core operating revenue for the quarter. Supporting the net income growth was a disciplined approach to non-interest expense; therefore, while revenue has increased, core operating expenses have been flat for the past five consecutive quarters. The Company reported return on average assets ("ROA") of 0.85% and return on tangible common equity ("ROTCE") of 6.36% for the third quarter of 2013.

Total operating revenue increased by $1.2 million, or 6%, in the third quarter compared to the linked quarter primarily driven by the mortgage banking business and the loan level hedge program. The Company sold $68 million of residential mortgage loans in the third quarter of 2013, reporting net gains of $1.7 million as compared to net gains of $1.0 million in the linked quarter. Despite the elevated market volatility and lagging competitor reaction to interest rate increases which narrowed spreads, the Company was able to increase the net gains on sales of loans due to the expertise within our secondary market operation which allowed for opportunistic sales during the third quarter. Our strategy remains to sell longer term fixed rate residential loans into the secondary market, however the Company regularly studies the yield curve landscape and the potential macro-economic factors affecting rates, to decision the pace at which residential mortgages are sold in the secondary market. In determining this pace, considerations include the Company's interest rate risk position as it relates to margin and balance sheet composition, as well as market spreads and local competition.

Operating revenue continues to be enhanced by diversified revenue sources. The Company began executing loan level hedges in the second quarter of 2013, thereby introducing an important new fee income driver to Rockville's earnings. For the quarter ended September 30, 2013, the loan level hedge program provided $484,000 of additional non-interest income. Since its introduction, the program has produced $658,000 of income over the two quarters. The Company's investment subsidiary, Rockville Financial Services ("RFS"), also enhanced non-interest income during the quarter by producing $292,000 of non-interest income. While this is a 3% decrease in RFS income from the linked quarter, this business line continues to evolve and has reported four consecutive quarters of substantial fee income since its reorganization in the fourth quarter of 2012. Third quarter RFS income increased by $216,000, or 285%, year-over-year. In fact, between both the financial advisory and loan level hedge programs, non-interest income has increased by $1.1 million over the prior year on a year-to-date basis.

Net interest income was stable and increased slightly by $172,000, or 1%, to $16.9 million in the third quarter compared to the linked quarter, despite a $410,000 decrease in loan prepayment fees. Average earning assets increased by $100 million, or 5%, due to continued business development resulting in commercial loan growth and through strategic actions to expand the available-for-sale investment portfolio.

The tax equivalent net interest margin for the third quarter of 2013 decreased by 16 basis points to 3.32%, compared to 3.48% for the second quarter of 2013. The decline in loan fees impacted the tax equivalent net interest margin by 8 basis points. The net interest margin experienced downward pressure during the quarter due to loan yields declining on new originations, particularly observed in commercial originations as a result of the loan level hedging program and shared national credit growth. Commercial loan yields declined by 18 basis points during the quarter to 4.27%. The loan level hedging program serves as a strong fee generator for the Company, but converts fixed rate assets to floating rate, which typically have a lower yield at inception; the Company added $16 million of floating rate commercial real estate loans in the third quarter 2013. Margin compression was additionally observed in residential loan yields, which declined by 6 basis points from the prior quarter due to adjustable rate mortgage originations that were held for investment on the balance sheet. The yield on the investment portfolio was unchanged from the prior quarter. The margin compression observed in the asset portfolio was partially offset by a 1 basis point reduction in the cost of funds, driven by the continued use of low-cost short term wholesale funding. Wholesale funding costs decreased by 23 basis points during the third quarter to 1.09% from 1.32% in the linked quarter.

The third quarter provision for loan losses increased by $129,000, or 32%, to $532,000 for the three months ended September 30, 2013 due to growth in the commercial loan portfolio during this time period. Net charge-offs for the third quarter were a nominal $174,000, or 0.04% annualized as a percentage of average loans outstanding. Provision expense continues to be assessed in correlation to the Company's loan growth and portfolio risk profile.

Non-interest expense decreased $1.1 million, or 7%, on a linked quarter basis, core operating expense increased slightly by $275,000, or 2%, to $14.8 million, thereby reporting flat core operating expense for five consecutive quarters. The decrease in non-interest expense was primarily attributable to decreases in salaries and benefits as well as occupancy and equipment expense, both of which were related to non-core items reported in the second quarter as a result of Company expense actions. The second quarter's results included $1.4 million of expense related to initiatives to decrease redundant positions across the organization and to execute a lease termination agreement to close a branch location. Salaries and benefits expense did include incremental new hires, such as mortgage loan and commercial banking officers, during the quarter to support expansion in revenue driving divisions. FTE increased to 336 at September 30, 2013 from 329 at June 30, 2013. The third quarter 2013 non-interest expense as a percentage of average assets and the efficiency ratio were 2.71% and 67.18%, respectively, as compared to 3.07% and 76.21% in the second quarter 2013.

Additionally during the third quarter, the Company announced that it will be merging its Employee Stock Ownership Program ("ESOP"), with its Defined Contribution Plan, or 401(k) Plan, effective January 1, 2014. This initiative is expected to save the Company approximately $1.2 million in 2014. The Company continues to evaluate further cost saving efficiencies.

Strong Organic Loan and Deposit Growth;

Decrease Borrowings

Total net loans increased by $38 million, or 2%, during the quarter, driven primarily by commercial loan activity given the Company's strategy to sell fixed rate residential loans to the secondary market to mitigate interest rate risk when market spreads are advantageous. The Company sold $68 million of residential mortgage loans in the third quarter of 2013. Had the Company not sold residential mortgage loans to the secondary market, net loans would have increased by approximately $106 million, or 7%, during the third quarter.

Expansion of the mortgage banking division continues to be a significant driver in the Company's results. Rockville introduced mortgage loan officers ("MLOs") into its mortgage banking business model in 2012 with the hiring of twelve MLOs during the course of the year, and added to that team with five additional MLOs hired in 2013. During the third quarter of 2013 the Company originated residential mortgages totaling $70 million, which is a $7 million decrease from the linked quarter due to the diminishing refinance business. However, the Company increased purchase mortgage originations by 27% to $40 million in the third quarter of 2013 from $31 million in the linked quarter. The Company increased its mortgage market share in the State of Connecticut during the year and is ranked 18th as of September 30, 2013 as reported by the Warren Group, up from a ranking of 21st at year-end 2012.

The Company reported two consecutive quarters of strong linked quarter commercial loan growth of 6% and 7% for the third and second quarters of 2013, respectively. At September 30, 2013, commercial loans totaled $1.03 billion and had increased by $60 million, or 6%, during the quarter, comprised of an $18 million increase in the commercial real estate portfolio, a $26 million increase in the commercial business portfolio and a $16 million increase in the commercial construction portfolio. Average commercial loans grew by $80 million, or 9%, in the third quarter (36% on annualized basis). The commercial pipeline remains strong and the Company continues its disciplined approach to asset quality standards and satisfactory return on capital guidelines. Commercial banking deposits increased to 18.0% of total deposits at September 30, 2013 from 12.6% of total deposits at June 30, 2013. The commercial banking deposits experienced accelerated growth from, and are expected to continue to benefit from, the Company's recently introduced private banking business. This division increases opportunities for the Company by way of increased relationships with high net worth individuals, professionals and business owners.

The available-for-sale securities portfolio increased $20 million and $129 million for the three-months and nine-months ending September 30, 2013, respectively. Securities purchases in the third quarter consisted of A or better rated government sponsored commercial mortgage-backed securities, adjustable rate collateralized loan obligations, adjustable rate government sponsored asset-backed securities, government sponsored mortgage-backed securities and an investment grade corporate debt security. The Company additionally purchased $10 million of municipal debt securities into the held-to-maturity portfolio, increasing that portfolio to $14 million at quarter-end. Collateralized loan obligations were 14% of the investment portfolio as of September 30, 2013, and were purchased due to the Company's strategy to opportunistically increase variable rate or short duration assets that have a favorable risk adjusted return on capital. The Company's municipal bond portfolio and bank-owned life insurance continue to benefit its effective tax rate; however the rate increased to 30.8% in the third quarter of 2013 from 27.5% in the linked quarter.

Deposits totaled $1.69 billion at September 30, 2013, an increase of $105 million, or 7%, from $1.59 billion at June 30, 2013, reflecting a $12 million, or 5%, increase in non-interest bearing deposits and a $93 million, or 7%, increase in interest bearing deposits. Deposits have increased $187 million, or 12%, year-to-date. Deposit growth was enhanced by the first quarter opening of the West Hartford Banking Center, which is reporting total deposits of $105 million at September 30, 2013, up from $25 million at June 30, 2013. Municipal deposits continue to be an important funding source for the Company with a total of $190 million in deposits at September 30, 2013, an increase from $89 million at June 30, 2013. Brokered time deposits remained at $82 million as of quarter-end. Inclusive of commercial money market deposits deemed to be brokered deposits, total brokered deposits were $102 million at September 30, 2013, or 6.0% of total deposits.

The Company's organic growth strategy will be further enhanced by the opening of two new full-service banking locations in New Haven County, both of which were announced during the third quarter of 2013. The Hamden location is expected to open in the fourth quarter of this year and the anticipated opening of the North Haven branch is the third quarter of 2014.

Federal Home Loan Bank of Boston advances decreased by $80 million to $173 million during the quarter ended September 30, 2013. Other borrowings increased by $4 million to $23 million at quarter-end, and consisted of reverse repurchase agreements with terms of six months and a weighted average cost of 0.45%. The Company continues its philosophy to opportunistically diversify funding sources at the lowest possible cost.

Asset Quality

Third quarter asset quality metrics remain very favorable. Non-performing assets decreased $4.3 million to $14.6 million at September 30, 2013 from $18.9 million at December 31, 2012. The ratio of non-performing assets to total assets decreased 29 basis points to 0.66% at September 30, 2013 from 0.95% at December 31, 2012. Loans on non-accrual decreased $3.6 million to $12.5 million at September 30, 2013 from $16.1 million at December 31, 2012. Included in non-accrual loans are non-accruing troubled debt restructurings (TDR). Non-accruing TDRs decreased $1.0 million to $2.1 million at September 30, 2013 from $3.1 million at December 31, 2012. The ratio of non-performing loans to total loans decreased 24 basis points to 0.76% at September 30, 2013 from 1.00% at December 31, 2012. At September 30, 2013, the allowance for loan losses as a percentage of non-performing loans and of total loans outstanding was 149.45% and 1.13%, compared to 115.08% and 1.15% at December 31, 2012, respectively.

Dividend

The Board of Directors declared a cash dividend on the Company's common stock of $0.10 per share to shareholders of record at the close of business on October 28, 2013 and payable on November 4, 2013. This dividend equates to a 3.04% annualized yield based on the $13.17 average closing price of the Company's common stock in the third quarter of 2013. The Company has paid dividends for 30 consecutive quarters. The dividend payout ratio for the quarter ended September 30, 2013 was 57%.

Tangible Book Value

Tangible book value increased by $0.03 during the quarter to $11.14 at September 30, 2013 from $11.11 at June 30, 2013. The stock repurchase program activity during the quarter produced a net $0.04 decline in tangible book value, when considering both cost and share count. The Company remains confident that stock buybacks are an excellent long-term capital management tool which will ultimately lead to increasing return on equity. The negative impact of the Company's $0.10 dividend was more than offset by the third quarter's net income and other less significant components to shareholders' equity.

Stock Repurchase Program

The Company obtained approval and initiated a second buyback plan on May 20, 2013. Under this plan, the Company is authorized to repurchase up to 2,730,026 shares, or 10% of the outstanding shares at the time the plan was approved. As of September 30, 2013, the Company had repurchased 1,059,891 shares at an average cost of $13.13 per share. The average closing price of the Company's common stock over this time period was $13.18 per share.

The Company repurchased 302,183 shares during the quarter ended September 30, 2013, at an average price of $13.08, which was 117% of the Company's tangible book value of $11.14. The average closing price during the third quarter was $13.17, or 118% of the Company's tangible book value. In total, the Company has repurchased 4,011,141 shares as of September 30, 2013, or 14% of total shares outstanding prior to the first repurchase program.

Management Comments

"Rockville has reported significant improvement in earnings as well as favorable returns to its shareholders since its conversion in March 2011. Since conversion, return on tangible common equity has increased from 2.86% to 6.36% (122%), core earnings per share has increased from $0.08 to $0.18 per diluted share (125%), the dividend has increased by 54% and total shareholder return has increased by 32% as of September 30, 2013," stated William H. W. Crawford, IV, President and Chief Executive Officer (CEO). "Rockville Financial will continue to implement strategies to become a top quartile performing bank in the United States."

Investor Conference Call

Rockville Financial, Inc. will host a conference call on Friday, October 25, 2013 at 10:00 a.m. Eastern Time (ET) to discuss the Company's second quarter results. Those wishing to participate in the call may dial toll-free 1-888-317-6016. A telephone replay of the call will be available through November 10, 2013 by calling 1-877-344-7529 and entering conference number 10034902. A podcast will be available on the Company's website for an extended period of time, as well as on the Company's investor relations app.

About Rockville Financial, Inc.

Rockville Financial, Inc. is the parent of Rockville Bank, which is a 22-branch community bank serving Tolland, Hartford and New London counties in Connecticut. Rockville Bank has established a New Haven County Commercial Banking Office in Hamden, Conn., and opened a full service Banking Center in West Hartford, Conn. in January 2013. For more information about Rockville Bank's services and products, call (860) 291-3600 or visit www.rockvillebank.com. For more information about Rockville Financial, Inc., visit www.rockvillefinancialinc.com or download the Company's free Investor Relations app on your Apple or Android device.

To download Rockville Financial, Inc.'s investor relations app on your iPhone, which offers access to SEC documents, press releases, videos, audiocasts and more, please visit https://itunes.apple.com/WebObjects/MZStore.woa/wa/viewSoftware?id=725271098&mt=8 or https://itunes.apple.com/WebObjects/MZStore.woa/wa/viewSoftware?id=725271098&mt=8 for your iPad or https://play.google.com/store/apps/details?id=com.theirapp.rockville for your Android mobile device.

Forward-Looking Statements

This press release may contain certain forward-looking statements about the Company. Forward-looking statements include statements regarding anticipated future events and can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements, by their nature, are subject to risks and uncertainties. Certain factors that could cause actual results to differ materially from expected results include increased competitive pressures, changes in the interest rate environment, general economic conditions or conditions within the securities markets, and legislative and regulatory changes that could adversely affect the business in which the Company and its subsidiaries are engaged.

Rockville Financial, Inc. and Subsidiaries
Consolidated Statements of Net Income
(In Thousands, Except Share Data)
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2013 2012 2013 2012
Interest and dividend income:
Loans $ 16,898 $ 17,883 $ 50,854 $ 53,377
Securities-interest taxable 1,828 1,082 4,692 3,415
Securities-interest non-taxable 685 651 1,985 1,327
Securities-dividends 71 42 178 127
Interest-bearing deposits 18 13 60 50
Total interest and dividend income 19,500 19,671 57,769 58,296
Interest expense:
Deposits 2,000 2,149 5,862 6,646
Borrowed funds 627 558 1,826 1,669
Total interest expense 2,627 2,707 7,688 8,315
Net interest income 16,873 16,964 50,081 49,981
Provision for loan losses 532 793 1,326 2,678
Net interest income after provision for loan losses 16,341 16,171 48,755 47,303
Non-interest income (loss):
Service charges and fees 2,571 1,578 6,125 4,798
Net gain from sales of securities 29 214 585 335
Net gain from sales of loans 1,736 2,514 4,797 3,083
Bank-owned life insurance 544 527 1,578 1,357
Other income (loss) 220 (219) 1,007 (30)
Total non-interest income 5,100 4,614 14,092 9,543
Non-interest expense:
Salaries and employee benefits 8,962 8,314 26,748 23,905
Service bureau fees 888 946 2,624 3,234
Occupancy and equipment 1,514 1,254 5,160 3,355
Professional fees 608 1,049 1,948 2,595
Marketing and promotions 266 70 434 287
FDIC assessments 247 268 871 774
Other real estate owned 173 110 633 444
Other 2,105 2,499 6,873 6,074
Total non-interest expense 14,763 14,510 45,291 40,668
Income before income taxes 6,678 6,275 17,556 16,178
Provision for income taxes 2,058 1,607 5,086 4,706
Net income $ 4,620 $ 4,668 $ 12,470 $ 11,472
Net income per share:
Basic $0.18 $0.17 $0.47 $0.41
Diluted $0.18 $0.17 $0.47 $0.41
Weighted-average shares outstanding:
Basic 25,491,638 27,659,996 26,339,942 27,892,886
Diluted 25,832,623 27,847,021 26,680,762 28,067,129
Rockville Financial, Inc. and Subsidiaries
Consolidated Statements of Net Income
(In Thousands)
(Unaudited)
For the Three Months Ended
September 30, June 30, March 31, December 31, September 30,
2013 2013 2013 2012 2012
Interest and dividend income:
Loans $ 16,898 $ 16,801 $ 17,155 $ 17,824 $ 17,883
Securities-interest taxable 1,828 1,640 1,224 1,109 1,082
Securities-interest non-taxable 685 650 650 652 651
Securities-dividends 71 72 35 46 42
Interest-bearing deposits 18 21 21 25 13
Total interest and dividend income 19,500 19,184 19,085 19,656 19,671
Interest expense:
Deposits 2,000 1,878 1,984 2,088 2,149
Borrowed funds 627 605 594 541 558
Total interest expense 2,627 2,483 2,578 2,629 2,707
Net interest income 16,873 16,701 16,507 17,027 16,964
Provision for loan losses 532 403 391 909 793
Net interest income after provision for loan losses 16,341 16,298 16,116 16,118 16,171
Non-interest income:
Service charges and fees 2,571 2,005 1,549 1,682 1,578
Net gain from sales of securities 29 329 227 579 214
Net gain from sales of loans 1,736 1,001 2,060 1,334 2,514
Bank-owned life insurance 544 524 510 526 527
Other income (loss) 220 249 538 1,043 (219)
Total non-interest income 5,100 4,108 4,884 5,164 4,614
Non-interest expense:
Salaries and employee benefits 8,962 9,112 8,674 9,281 8,314
Service bureau fees 888 921 815 802 946
Occupancy and equipment 1,514 2,210 1,436 1,298 1,254
Professional fees 608 617 723 638 1,049
Marketing and promotions 266 98 70 125 70
FDIC assessments 247 330 294 272 268
Other real estate owned 173 214 246 96 110
Other 2,105 2,356 2,412 2,516 2,499
Total non-interest expense 14,763 15,858 14,670 15,028 14,510
Income before income taxes 6,678 4,548 6,330 6,254 6,275
Provision for income taxes 2,058 1,249 1,779 1,929 1,607
Net income $ 4,620 $ 3,299 $ 4,551 $ 4,325 $ 4,668
Rockville Financial, Inc. and Subsidiaries
Consolidated Statements of Condition
(In Thousands, Except Share Data)
(Unaudited)
September 30, June 30, March 31, December 31, September 30,
ASSETS 2013 2013 2013 2012 2012
Cash and cash equivalents:
Cash and due from banks $ 22,729 $ 29,937 $ 12,427 $ 19,966 $ 14,000
Short-term investments 31,742 53,486 45,116 15,349 24,365
Total cash and cash equivalents 54,471 83,423 57,543 35,315 38,365
Available for sale securities - At fair value 370,127 350,571 312,836 241,389 245,952
Held to maturity securities - At amortized cost 14,141 4,555 5,267 6,084 6,935
Loans held for sale 2,904 3,691 6,547 5,292 5,786
Loans receivable, net of allowance for loan losses 1,637,325 1,599,537 1,555,329 1,586,985 1,530,617
Federal Home Loan Bank of Boston stock, at cost 15,053 15,053 15,053 15,867 15,867
Accrued interest receivable 5,879 6,032 5,445 4,862 5,484
Deferred tax asset, net 14,056 13,618 11,377 10,720 9,843
Premises and equipment, net 22,848 22,278 21,174 20,078 18,965
Goodwill 1,070 1,070 1,070 1,070 1,070
Cash surrender value of bank-owned life insurance 63,949 63,404 58,880 58,370 57,838
Other real estate owned 2,129 2,611 2,587 2,846 2,618
Current Federal tax receivable 306 2,150 -- -- --
Prepaid FDIC assessments -- -- 1,822 2,089 2,334
Other assets 14,822 15,145 7,778 7,832 7,513
$ 2,219,080 $ 2,183,138 2,062,708 $ 1,998,799 $ 1,949,187
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest-bearing $ 259,773 $ 248,144 $ 226,377 $ 238,924 $ 223,525
Interest-bearing 1,432,299 1,338,997 1,320,504 1,265,756 1,253,605
Total deposits 1,692,072 1,587,141 1,546,881 1,504,680 1,477,130
Mortgagors' and investor escrow accounts 3,635 7,030 4,067 6,776 3,364
Federal Home Loan Bank advances and other borrowings 196,246 272,070 172,787 143,106 118,865
Accrued expenses and other liabilities 31,954 19,905 17,981 23,626 22,539
Total liabilities 1,923,907 1,886,146 1,741,716 1,678,188 1,621,898
Total stockholders' equity 295,173 296,992 320,992 320,611 327,289
$ 2,219,080 $ 2,183,138 $ 2,062,708 $ 1,998,799 $ 1,949,187
Rockville Financial, Inc. and Subsidiaries
Selected Financial Highlights
(Dollars In Thousands, Except Share Data)
(Unaudited)
At or For the Three Months Ended
September 30, June 30, March 31, December 31, September 30,
2013 2013 2013 2012 2012
Share Data:
Basic net income per share $ 0.18 $ 0.13 $ 0.17 $ 0.16 $ 0.17
Diluted net income per share 0.18 0.12 0.17 0.16 0.17
Dividends declared per share 0.10 0.10 0.10 0.26 0.09
Operating Data:
Total operating revenue $ 21,973 $ 20,809 $ 21,391 $ 22,191 $ 21,578
Total operating expense 14,763 15,858 14,670 15,028 14,510
Average earning assets 2,054,372 1,954,114 1,918,975 1,846,007 1,812,636
Key Ratios:
Return on average assets 0.85% 0.64% 0.89% 0.88% 0.97%
Return on average equity 6.28% 4.26% 5.68% 5.34% 5.73%
Tax-equivalent net interest margin 3.32% 3.48% 3.48% 3.74% 3.80%
Mortgage Production:
Dollar volume (Purchase & Refi) $ 69,890 $ 77,086 $ 75,048 $ 87,061 $ 82,846
Number of loans 352 404 393 443 413
Mortgages originated for home purchases $ 39,934 $ 31,221 $ 15,900 $ 26,571 $ 32,387
Number of loans 185 151 75 112 149
Loans sold $ 68,446 $ 66,098 $ 62,703 $ 47,007 $ 60,387
Gains on sale of loans $ 1,736 $ 1,001 $ 2,060 $ 1,334 $ 2,514
Non-performing Assets:
Residential real estate $ 7,106 $ 7,521 $ 7,783 $ 7,837 $ 6,911
Commercial real estate 1,086 1,126 1,358 2,162 1,609
Construction 1,442 1,456 1,760 1,470 1,221
Commercial business 799 773 1,568 1,407 1,285
Installment and collateral 3 -- 45 45 32
Non-accrual loans 10,436 10,876 12,514 12,921 11,058
Troubled debt restructured - non-accruing 2,078 2,461 3,312 3,135 2,965
Total non-performing loans 12,514 13,337 15,826 16,056 14,023
Other real estate owned 2,129 2,611 2,587 2,846 2,618
Total non-performing assets $ 14,643 $ 15,948 $ 18,413 $ 18,902 $ 16,641
Non-performing loans to total loans 0.76% 0.83% 1.01% 1.00% 0.91%
Non-performing assets to total assets 0.66% 0.73% 0.89% 0.95% 0.85%
Allowance for loan losses to non-performing loans 149.45% 137.55% 117.13% 115.08% 128.93%
Allowance for loan losses to total loans 1.13% 1.14% 1.18% 1.15% 1.17%
Non-GAAP Ratios: (1)
Non-interest expense to average assets 2.71% 3.07% 2.87% 3.07% 3.00%
Efficiency ratio (2) 67.18% 76.21% 68.58% 67.72% 67.25%
Cost of interest-bearing deposits 0.57% 0.57% 0.61% 0.66% 0.69%
Operating revenue growth rate 5.59% -2.72% -3.61% 2.84% 12.68%
Operating revenue growth rate (annualized) 22.37% -10.88% -14.42% 11.36% 50.72%
Average earning asset growth rate 5.13% 1.83% 3.95% 1.84% 2.49%
Average earning asset growth rate (annualized) 20.52% 7.32% 15.81% 7.36% 9.96%
(1) Non-GAAP Ratios are not financial measurements required by generally accepted accounting principles; however, management believes such information is useful to investors in evaluating Company performance.
(2) The efficiency ratio represents the ratio of non-interest expenses, to the sum of net interest income before provision for loan losses and non-interest income. The efficiency ratio is not a financial measurement required by generally accepted accounting principles. However, the efficiency ratio is used by management in its assessment of financial performance specifically as it relates to non-interest expense control and also believes such information is useful to investors in evaluating Company performance.
Rockville Financial, Inc. and Subsidiaries
Average Balance Sheets, Interest and Yields/Costs
(Dollars In Thousands)
(Unaudited)
Three Months Ended September 30,
2013 2012
Interest Interest
Average and Average and
Interest-earning assets: Balance Dividends Yield/Cost Balance Dividends Yield/Cost
Residential real estate $ 651,996 $ 6,112 3.75% $ 698,319 $ 7,108 4.07%
Commercial real estate 741,345 8,293 4.44 637,107 8,385 5.24
Construction 47,779 435 3.61 50,009 472 3.75
Commercial business 207,656 2,027 3.87 169,314 1,877 4.41
Installment and collateral 2,534 31 4.91 3,199 41 5.17
Investment securities 365,364 2,832 3.10 233,104 1,991 3.42
Federal Home Loan Bank stock 15,053 14 0.37 15,867 20 0.50
Other earning assets 22,645 18 0.32 23,385 13 0.22
Total interest-earning assets 2,054,372 19,762 3.83% 1,830,304 19,907 4.34%
Allowance for loan losses (18,544) (17,668)
Non-interest-earning assets 141,767 122,068
Total assets $2,177,595 $1,934,704
Interest-bearing liabilities:
NOW and money market accounts $ 620,540 481 0.31% $ 518,176 381 0.29%
Savings accounts 224,831 35 0.06 209,197 47 0.09
Certificates of deposit 541,042 1,484 1.09 525,799 1,721 1.30
Total interest-bearing deposits 1,386,413 2,000 0.57 1,253,172 2,149 0.68
Advances from the Federal Home Loan Bank 205,391 603 1.16 119,802 558 1.85
Other borrowings 21,067 24 0.45 -- -- 0.00
Total interest-bearing liabilities 1,612,871 2,627 0.65% 1,372,974 2,707 0.78%
Non-interest-bearing liabilities 270,379 236,068
Total liabilities 1,883,250 1,609,042
Stockholders' equity 294,345 325,662
Total liabilities and stockholders' equity $2,177,595 $1,934,704
Net interest-earning assets $ 441,501 $ 457,330
Tax-equivalent net interest income 17,135 17,200
Tax-equivalent net interest rate spread 3.18% 3.56%
Tax-equivalent net interest margin 3.32% 3.75
Average interest-earning assets to average interest-bearing liabilities 127.37% 133.31%
Less tax-equivalent adjustment 262 236
Net interest income $ 16,873 $ 16,964
Rockville Financial, Inc. and Subsidiaries
Average Balance Sheets, Interest and Yields/Costs
(Dollars In Thousands)
(Unaudited)
Three Months Ended
September 20, 2013 June 30, 2012
Interest Interest
Average and Average and
Interest-earning assets: Balance Dividends Yield/Cost Balance Dividends Yield/Cost
Residential real estate $651,996 $6,112 3.75 % $650,886 $6,203 3.81%
Commercial real estate 741,345 8,293 4.44 695,657 8,398 4.84
Construction 47,779 435 3.61 45,666 406 3.57
Commercial business 207,656 2,027 3.87 175,346 1,761 4.03
Installment and collateral 2,534 31 4.91 2,679 33 4.93
Investment securities 365,364 2,832 3.10 337,896 2,618 3.1
Federal Home Loan Bank stock 15,053 14 0.37 15,053 15 0.4
Other earning assets 22,645 18 0.32 30,931 21 0.27
Total interest-earning assets 2,054,372 19,762 3.83 % 1,954,114 19,455 3.99%
Allowance for loan losses (18,544) (18,443)
Non-interest-earning assets 141,767 128,364
Total assets $2,177,595 $2,064,035
Interest-bearing liabilities:
NOW and money market accounts $620,540 481 0.31% $557,460 370 0.27%
Savings accounts 224,831 35 0.06 232,073 36 0.06
Certificates of deposit 541,042 1,484 1.09 527,102 1,472 1.12
Total interest-bearing deposits 1,386,413 2,000 0.57 1,316,635 1,878 0.57
Advances from the Federal Home Loan Bank 205,391 603 1.16 173,077 591 1.37
Other borrowings 21,067 24 0.45 10,721 14 0.52
Total interest-bearing liabilities 1,612,871 2,627 0.65% 1,500,433 2,483 0.66%
Non-interest-bearing liabilities 270,379 253,738
Total liabilities 1,883,250 1,754,171
Stockholders' equity 294,345 309,864
Total liabilities and stockholders' equity $2,177,595 $2,064,035
Net interest-earning assets $441,501 $453,681
Tax-equivalent net interest income 17,135 16,972
Tax-equivalent net interest rate spread 3.18% 3.33%
Tax-equivalent net interest margin 3.32% 3.48%
Average interest-earning assets to average interest-bearing liabilities 127.37% 130.24%
Less tax-equivalent adjustment 262 271
Net interest income $16,873 $16,701
Rockville Financial, Inc. and Subsidiaries
Average Balance Sheets, Interest and Yields/Costs
(Dollars In Thousands)
(Unaudited)
Nine Months Ended September 30,
2013 2012
Average Balance Interest and Dividends Yield/Cost Average Balance Interest and Dividends Yield/Cost
Interest-earning assets:
Residential real estate $ 659,631 $ 18,945 3.83% $ 689,276 $ 21,613 4.18%
Commercial real estate 711,324 24,882 4.68 616,654 24,763 5.36
Construction 47,207 1,276 3.61 49,828 1,391 3.73
Commercial business 185,369 5,653 4.08 162,566 5,463 4.49
Installment and collateral 2,671 98 4.90 3,648 147 5.37
Investment securities 331,641 7,546 3.03 209,359 5,308 3.38
Federal Home Loan Bank stock 15,279 44 0.39 16,150 63 0.52
Other earning assets 29,370 60 0.27 26,047 50 0.26
Total interest-earning assets 1,982,492 58,504 3.93% 1,773,528 58,798 4.43%
Allowance for loan losses (18,574) (16,986)
Non-interest-earning assets 131,057 111,740
Total assets $ 2,094,975 $ 1,868,282
Interest-bearing liabilities:
NOW and money market accounts $ 575,248 1,225 0.28% $ 475,036 1,015 0.29%
Savings accounts 225,810 105 0.06 204,575 199 0.13
Certificates of deposit 534,812 4,532 1.13 523,627 5,432 1.39
Total interest-bearing deposits 1,335,870 5,862 0.59 1,203,238 6,646 0.74
Advances from the Federal Home Loan Bank 179,137 1,777 1.33 105,852 1,669 2.11
Other borrowings 13,622 49 0.48 -- -- --
Total interest-bearing liabilities 1,528,629 7,688 0.67% 1,309,090 8,315 0.85%
Non-interest-bearing liabilities 258,199 230,963
Total liabilities 1,786,828 1,540,053
Stockholders' equity 308,147 328,229
Total liabilities and stockholders' equity $ 2,094,975 $ 1,868,282
Net interest-earning assets $ 453,863 $ 464,438
Tax-equivalent net interest income 50,816 50,483
Tax-equivalent net interest rate spread 3.26% 3.58%
Tax-equivalent net interest margin 3.43% 3.80%
Average interest-earning assets to average interest-bearing liabilities 129.69% 135.48%
Less tax-equivalent adjustment 735 502
Net interest income $ 50,081 $ 49,981
Rockville Financial, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
(In Thousands)
(Unaudited)
Core Operating Revenue
Three Months Ended
September 30, 2013 June 30, 2013 March 31, 2013 December 31, 2012 September 30, 2012
Net Interest Income Before Provision for Loan Losses $ 16,873 $ 16,701 $ 16,507 $ 17,027 $ 16,964
Non-Interest Income 5,100 4,108 4,884 5,164 4,614
Operating Revenue 21,973 20,809 21,391 22,191 21,578
Adjust net gain from sales of securities (29) (329) (227) (579) (214)
Effect of service disruption on revenue, Hurricane Sandy -- -- -- (893) --
Core Operating Revenue $ 21,944 $ 20,480 $ 21,164 $ 20,719 $ 21,364
Core Operating Expense
Three Months Ended
September 30, 2013 June 30, 2013 March 31, 2013 December 31, 2012 September 30, 2012
Non-Interest Expense (Operating Expense) $ 14,763 $ 15,858 $ 14,670 $ 15,028 $ 14,510
Effect of branch lease termination agreement -- (809) -- -- --
Effect of position eliminations -- (561) -- -- --
Effect of service disruption on expenses, Hurricane Sandy -- -- -- (503) --
Core Operating Expense $ 14,763 $ 14,488 $ 14,670 $ 14,525 $ 14,510

CONTACT: Investor Relations Contact: Marliese L. Shaw Senior Vice President, Investor Relations Officer 860-291-3622 mshaw@rockvillebank.com Media Relations Contact: Adam J. Jeamel Vice President, Corporate Communications 860-291-3765 ajeamel@rockvillebank.com

Source:Rockville Financial, Inc.