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First Community Financial Partners, Inc. Announces First Quarter 2016 Financial Results

Investments for future: Announcement of strategic acquisition and addition of commercial lending team

First Quarter Highlights:

  • Announced the signing of a definitive agreement to acquire Mazon State Bank, a neighboring bank with $85 million in total assets, $33 million in total loans, $48 million in residential mortgage loan serviced, and $74 million in deposits as of March 31, 2016, 99.59% of which are core deposits
  • Announced the addition of six seasoned commercial bankers
  • Asset growth of $20.2 million, or 1.94%, from the fourth quarter
  • Loan growth of $2.0 million, or 0.25%, from the fourth quarter
  • Deposit growth of $13.0 million, or 1.50%, from the fourth quarter
  • Noninterest bearing deposit growth of $8.4 million, or 4.26%, from the fourth quarter
  • Diluted earnings per share (“EPS”) of $0.12 for the first quarter of 2016; $0.03 or 33.33% per diluted share increase over prior year

Pre-tax, pre-provision core income grew by $562,000, or 22.27%, compared to first quarter of 2015

  • Net interest income growth of $1.1 million, or 15.49%, compared to the first quarter of 2015
  • No loan loss provision in first quarter of 2016 or 2015, reflecting continued overall improvement in asset quality
  • Noninterest expense increased by $779,000, or 15.11%, year-over-year primarily due to the addition of six commercial bankers in the first quarter of 2016
  • Shareholders’ equity increased $3.7 million or 3.64% to $106.8 million year-over-year; tangible equity ratio of 10.07% as of March 31, 2016

JOLIET, Ill., April 27, 2016 (GLOBE NEWSWIRE) -- First Community Financial Partners, Inc. (NASDAQ:FCFP) (“First Community” or the “Company”), the parent company of First Community Financial Bank (the “Bank”), today reported financial results as of and for the three months ended March 31, 2016.

Net income applicable to shareholders for the quarter ended March 31, 2016 was $2.0 million, or $0.12 per diluted share, compared with $1.6 million, or $0.09 per diluted share, for the quarter ended March 31, 2015. Earnings in the first quarter of 2016 reflected year-over-year growth in net interest income offset by growth in expenses primarily related to the addition of six commercial bankers and one leasing officer. During the first quarter of 2016, the Company also incurred $100,000 of professional fees related to the acquisition of Mazon State Bank.

From the Mazon State Bank merger, First Community anticipates it will be able to achieve an earnback of less than one year on the estimated dilution to tangible book value and expects accretion to its earnings per share in 2016 and beyond. Subject to regulatory approval, the closing of the transaction is expected to occur during the third quarter of 2016.

Roy Thygesen, CEO said, “We have made some key investments in the first quarter which we expect will facilitate a transformative year for First Community in 2016. The Mazon State Bank organization is a strong cultural and geographic fit for First Community. Additionally, we invested in acquiring a group of talented commercial bankers and expect the merger with Mazon State Bank will help facilitate funding our anticipated loan growth with low-cost core deposits.

Our investments this quarter are consistent with our strategic focus on efficient organic growth along with prudent strategic acquisitions. With our commitment to highly personalized service, we believe these recent activities continue to build on the attractiveness of our organization to existing and potential customers, as well as talented potential strategic hires. We are confident these activities will continue to build the value of our Company for shareholders.”

First Quarter 2016 Financial Results

Loans

Total loans increased $2.0 million, or 0.25%, since the end of the fourth quarter and $62.4 million or 8.77% year-over-year. Commercial loans grew $1.5 million, or 0.85%, since the end of the fourth quarter and $4.9 million, or 2.76%, year-over-year. Commercial real estate loans decreased $2.8 million, or 0.73%, since the end of the fourth quarter, but grew $9.2 million, or 2.49%, year-over-year. Since the end of the fourth quarter, five commercial real estate loans totaling $22.0 million were paid off, $15.3 million of which was due to the sale of the business/property. Residential real estate loans grew $3.3 million, or 2.46%, since the end of the fourth quarter and $36.8 million, or 35.90%, year-over-year. Construction loans were up $5.7 million, or 25.89%, since the end of the fourth quarter and $9.2 million, or 49.81%, year-over-year.

Deposits

Total deposits increased $13.0 million or 1.50% since the end of the fourth quarter and $77.9 million, or 9.72%, year-over-year. The growth in deposits has included growth in lower cost transactional accounts. Noninterest bearing demand deposits increased $8.4 million, or 4.26%, since the end of the fourth quarter 2015 and $36.7 million or, 21.87%, year-over-year. Our focus on relationship banking and growth in transactional accounts has resulted in a decline in time deposits of $200.4 million, or 67.37%, to $294.1 million at March 31, 2016 from $297.5 million at December 31, 2015. The ratio of time deposits to total deposits has steadily improved from 38.78% at March 31, 2015 to 34.36% at December 31, 2015 and 33.46% at March 31, 2016.

Net Interest Income and Margin

First quarter 2016 net interest income was up $131,000, or 1.60%, from the fourth quarter of 2015. The Company’s net interest margin was 3.36% for the first quarter of 2016, compared to 3.29% in the fourth quarter 2015. The increase in net interest income was due to continued growth in the loan portfolio and continued reduction in time deposit balances as a source of funding.

First quarter 2016 net interest income was up $1.1 million or 15.49% from the first quarter of 2015. The Company’s net interest margin was 3.36% for the first quarter of 2016, compared to 3.23% for the first quarter of 2015. The increase in net interest income was due to growth in the loan portfolio, continued reduction in time deposit balances, and refinancing of our subordinated debentures with lower-cost secured borrowings at the end of the second quarter 2015.

Noninterest Income and Expense

Noninterest income decreased $204,000, or 26.88%, from the fourth quarter of 2015 but increased $110,000, or 24.72%, from the first quarter of 2015. The decrease from the fourth quarter was due to no securities gains in the first quarter of 2016 versus $212,000 of securities gains in the fourth quarter of 2015. The increase from the first quarter of 2015 was largely due to $110,000 in additional bank owned life insurance (“BOLI”) income due to a $12.0 million purchase of BOLI in the fourth quarter of 2015.

Noninterest expense increased $891,000, or 17.66%, from the fourth quarter of 2015 and $779,000, or 15.11%, from the first quarter of 2015. The increase was in relation to the addition of six commercial banking officers and one leasing officer during the first quarter of 2016. In addition, $100,000 of professional fees were incurred during the first quarter of 2016 as a result of the work related to the acquisition of Mazon State Bank.

Asset Quality

Total nonperforming assets increased from the fourth quarter by $486,000, or 6.98%, to $7.4 million at March 31, 2016. The ratio of nonperforming assets to total assets was 0.70% at March 31, 2016.

The Company had net charge-offs of $406,000 in the first quarter of 2016, compared to net charge-offs of $127,000 in the first quarter of 2015 and net recoveries of $503,000 in the fourth quarter of 2015.

The Company’s allowance for loan losses to nonperforming loans and allowance to loans was 528.19% and 1.46% at March 31, 2016, respectively.

The Company did not take a provision for loan losses in the first quarter of 2016, or for the same period in 2015, as a result of continued improvement in the level of nonperforming loans and continued lower levels of net charge-offs.

About First Community Financial Partners, Inc.: First Community Financial Partners, Inc., headquartered in Joliet, Illinois, is a bank holding company whose common stock trades on the NASDAQ Capital Market (NASDAQ:FCFP). First Community Financial Partners has one bank subsidiary, First Community Financial Bank. First Community Financial Bank, based in Plainfield, Illinois, is a wholly owned banking subsidiary of First Community Financial Partners, with locations in Joliet, Plainfield, Homer Glen, Channahon, Naperville and Burr Ridge, Illinois. The Bank is dedicated to its founding principles by being actively involved in the communities it serves and providing exceptional personal service delivered by experienced local professionals.

Special Note Concerning Forward-Looking Statements

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Any statements in this release other than statements of historical facts, including statements about management’s beliefs and expectations, are forward-looking statements and should be evaluated as such. These statements are made on the basis of management’s views and assumptions regarding future events and business performance. Words such as “estimate,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “target,” “project,” “should,” “may,” “will” and similar expressions are intended to identify forward-looking statements. Forward-looking statements (including oral representations) involve risks and uncertainties that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. These risks and uncertainties involve a number of factors related to the businesses of First Community and its wholly owned bank subsidiary, including: risks associated with First Community’s possible pursuit of acquisitions; unexpected results of acquisitions, including the planned acquisition of Mazon State Bank; economic conditions in First Community’s, and its wholly owned bank subsidiary’s; service areas; system failures; losses of large customers; disruptions in relationships with third party vendors; losses of key management personnel and the inability to attract and retain highly qualified management personnel in the future; the impact of legislation and regulatory changes on the banking industry, including the implementation of the Basel III capital reforms; losses related to cyber-attacks; and liability and compliance costs regarding banking regulations. These and other risks and uncertainties are discussed in more detail in First Community’s filings with the Securities and Exchange Commission, including First Community’s Annual Report on Form 10-K filed on March 11, 2016.

Many of these risks are beyond management’s ability to control or predict. All forward-looking statements attributable to First Community, and its wholly owned bank subsidiary, or persons acting on behalf of each of them are expressly qualified in their entirety by the cautionary statements and risk factors contained in this communication. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the Securities and Exchange Commission, First Community does not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise.

FINANCIAL SUMMARY
March 31,
2016
December 31,
2015
September 30,
2015
June 30,
2015
March 31,
2015
Period-End Balance Sheet
(In thousands)(Unaudited)
Assets
Mortgage loans held for sale$133 $400 $ $1,449 $1,729
Commercial real estate378,304 381,098 368,896 363,575 369,113
Commercial181,142 179,623 180,674 187,780 176,281
Residential 1-4 family139,208 135,864 126,316 109,819 102,432
Multifamily31,511 34,272 30,771 29,829 26,015
Construction and land development27,798 22,082 19,451 19,612 18,555
Farmland and agricultural production9,060 9,989 8,984 8,604 8,869
Consumer and other7,250 9,391 7,963 8,578 10,570
Total loans774,273 772,319 743,055 727,797 711,835
Allowance for loan losses11,335 11,741 11,753 12,420 13,778
Net loans762,938 760,578 731,302 715,377 698,057
Investment securities205,241 206,971 217,194 184,349 190,909
Other earning assets47,261 23,967 25,743 42,777 14,447
Other non-earning assets45,289 48,736 49,193 50,517 53,997
Total Assets$1,060,862 $1,040,652 $1,023,432 $994,469 $959,139
Liabilities and Shareholders' Equity
Noninterest bearing deposits$204,414 $196,063 $174,849 $174,527 $167,733
Savings deposits38,481 36,206 34,933 33,567 33,101
NOW accounts104,136 102,882 101,828 95,406 71,983
Money market accounts237,873 233,315 232,195 231,185 217,637
Time deposits294,076 297,525 302,892 299,703 310,674
Total deposits878,980 865,991 846,697 834,388 801,128
Total borrowings72,237 68,315 72,551 59,398 57,953
Other liabilities2,855 3,305 4,065 4,513 5,140
Total Liabilities954,071 937,611 923,313 898,299 864,221
Shareholders’ equity106,790 103,041 100,119 96,170 94,918
Total Shareholders’ Equity106,790 103,041 100,119 96,170 94,918
Total Liabilities and Shareholders’ Equity$1,060,862 $1,040,652 $1,023,432 $994,469 $959,139


FINANCIAL SUMMARY
Three months ended,
March 31,
2016
December 31,
2015
September 30,
2015
June 30,
2015
March 31,
2015
Interest income:(In thousands, except per share data)(Unaudited)
Loans, including fees$8,508 $8,401 $8,218 $8,090 $7,815
Securities1,101 1,117 1,103 962 951
Federal funds sold and other19 19 19 15 13
Total interest income9,628 9,537 9,340 9,067 8,779
Interest expense:
Deposits940 986 973 987 977
Federal funds purchased and other borrowed funds93 87 98 17 14
Subordinated debt297 297 297 603 603
Total interest expense1,330 1,370 1,368 1,607 1,594
Net interest income8,298 8,167 7,972 7,460 7,185
Provision for loan losses (515)(813)(749)
Net interest income after provision for loan losses8,298 8,682 8,785 8,209 7,185
Noninterest income:
Service charges on deposit accounts204 190 188 194 183
Gain on sale of securities 212 251 21
Mortgage fee income78 96 178 153 103
Other273 261 152 174 138
Total noninterest income555 759 769 521 445
Noninterest expenses:
Salaries and employee benefits3,256 3,004 2,841 2,810 2,884
Occupancy and equipment expense437 494 486 505 492
Data processing257 203 248 237 224
Professional fees392 68 342 411 380
Advertising and business development215 219 217 227 189
Losses on sale and writedowns of foreclosed assets, net16 109 58 20
Foreclosed assets, net of rental income53 50 (61)70 72
Other expense1,310 898 1,005 919 916
Total noninterest expense5,936 5,045 5,136 5,199 5,157
Income before income taxes2,917 4,396 4,418 3,531 2,473
Income taxes889 1,474 1,471 1,189 867
Net income applicable to common shareholders$2,028 $2,922 $2,947 $2,342 $1,606
Basic earnings per share$0.12 $0.17 $0.17 $0.14 $0.10
Diluted earnings per share$0.12 $0.17 $0.17 $0.14 $0.09


Three months ended,
March 31, 2016December 31, 2015March 31, 2015
Average
Balances
Income/
Expense
Yields/
Rates
Average
Balances
Income/
Expense
Yields/
Rates
Average
Balances
Income/
Expense
Yields/
Rates
Assets(Dollars in thousands)(Unaudited)
Loans (1)$768,983 $8,508 4.43%$760,332 $8,401 4.42%$694,514 $7,815 4.50%
Investment securities (2)206,535 1,101 2.13%209,936 1,117 2.13%182,504 951 2.08%
Federal funds sold % % %
Interest-bearing deposits with other banks13,690 19 0.56%22,378 19 0.34%11,779 13 0.44%
Total earning assets$989,208 $9,628 3.89%$992,646 $9,537 3.84%$888,797 $8,779 3.95%
Other assets55,124 61,572 45,034
Total assets$1,044,332 $1,054,218 $933,831
Liabilities
NOW accounts$104,467 $71 0.27%$102,783 $66 0.26%$72,246 $23 0.13%
Money market accounts234,455 162 0.28%237,818 163 0.27%205,616 137 0.27%
Savings accounts37,194 11 0.12%36,015 14 0.16%31,785 13 0.16%
Time deposits292,491 696 0.95%304,941 743 0.97%303,293 804 1.06%
Total interest bearing deposits668,607 940 0.56%681,557 986 0.58%612,940 977 0.64%
Securities sold under agreements to repurchase23,902 9 0.15%32,315 12 0.15%28,820 7 0.10%
Secured borrowings10,528 74 2.81%12,875 73 2.27%
Mortgage payable % %450 7 6.22%
FHLB borrowings12,067 10 0.33%3,261 2 %656 %
Subordinated debentures15,300 297 7.76%15,300 297 7.76%29,136 603 8.28%
Total interest bearing liabilities$730,404 $1,330 0.73%$745,308 $1,370 0.74%$672,002 $1,594 0.95%
Noninterest bearing deposits205,215 203,108 164,072
Other liabilities3,051 3,963 4,194
Total liabilities$938,670 $952,379 $840,268
Total shareholders' equity$105,662 $101,839 $93,563
Total liabilities and shareholders’ equity$1,044,332 $1,054,218 $933,831
Net interest income $8,298 $8,167 $7,185
Interest rate spread 3.16% 3.10% 3.00%
Net interest margin 3.36% 3.29% 3.23%


Footnotes:
(1) Average loans include nonperforming loans.
(2) No tax-equivalent adjustments were made, as the effect thereof was not material.


COMMON STOCK DATA
20162015
First
Quarter
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
(Unaudited)
Market value (1):
End of period$8.70 $7.24 $6.51 $6.45 $5.47
High8.84 7.31 7.00 6.55 5.75
Low7.00 6.26 6.25 5.47 5.14
Book value (end of period)6.22 6.05 5.88 5.66 5.59
Tangible book value (end of period)6.22 6.05 5.88 5.66 5.59
Shares outstanding (end of period)17,175,864 17,026,941 17,017,441 16,984,221 16,970,721
Average shares outstanding17,125,928 16,939,010 16,993,822 16,970,721 16,768,908
Average diluted shares outstanding17,451,354 17,085,752 17,161,783 17,088,102 16,958,466


(1) The prices shown are as reported on the NASDAQ Capital Market other than the first and second quarters of 2015, which are reported on the OTC Pink Marketplace.


ASSET QUALITY DATA
March 31,
2016
December 31,
2015
September 30,
2015
June 30,
2015
March 31,
2015
(Dollars in thousands)(Unaudited)
Loans identified as nonperforming$2,146 $1,411 $3,117 $4,185 $6,211
Other nonperforming loans 67 55 55
Total nonperforming loans2,146 1,478 3,172 4,240 6,211
Foreclosed assets5,231 5,487 4,109 4,248 2,550
Total nonperforming assets$7,377 $6,965 $7,281 $8,488 $8,761
Allowance for loan losses11,335 11,741 11,753 12,420 13,778
Nonperforming assets to total assets0.70%0.67%0.71%0.85%0.91%
Nonperforming loans to total assets0.20%0.14%0.31%0.43%0.65%
Allowance for loan losses to nonperforming loans528.19%794.38%370.52%292.92%221.83%


ALLOWANCE FOR LOAN LOSSES ROLLFORWARD
(Unaudited)Three months ended,
March 31,
2016
December 31,
2015
September 30,
2015
June 30,
2015
March 31,
2015
Beginning balance$11,741 $11,753 $12,420 $13,778 $13,905
Charge-offs506 133 654 736 335
Recoveries100 636 800 127 208
Net charge-offs406 (503)(146)609 127
Provision for loan losses (515)(813)(749)
Ending balance$11,335 $11,741 $11,753 $12,420 $13,778
Net charge-offs406 (503)(146)609 127
Net chargeoff percentage (annualized)0.21%(0.26)%(0.08)%0.34%0.07%


OTHER DATA
(Unaudited)
Three months ended,
March 31,
2016
December 31,
2015
September 30,
2015
June 30,
2015
March 31,
2015
Return on average assets0.78%1.11%1.17%0.96%0.69%
Return on average equity7.68%11.48%12.01%9.77%6.87%
Net interest margin3.36%3.29%3.31%3.23%3.23%
Average loans to assets73.63%72.12%72.37%73.27%74.37%
Average loans to deposits88.00%85.95%86.63%87.62%89.38%
Average noninterest bearing deposits to total deposits23.35%23.45%20.79%22.08%20.48%
COMPANY CAPITAL RATIOS
(Unaudited)March 31,
2016
December 31,
2015
September 30,
2015
June 30,
2015
March 31,
2015
Tier 1 leverage ratio9.72%9.36%9.39%9.24%9.70%
Common equity tier 1 capital ratio11.94%11.62%11.57%11.20%11.47%
Tier 1 capital ratio11.94%11.62%11.57%11.20%11.47%
Total capital ratio14.99%14.69%14.71%14.39%15.08%
Tangible common equity to tangible assets10.07%9.90%9.78%9.67%9.90%


NON-GAAP MEASURES
Pre-tax pre-provision core income (1)
(Dollars in thousands)(Unaudited)
For the three months ended,
March 31,
2016
December 31,
2015
September 30,
2015
June 30,
2015
March 31,
2015
Pre-tax net income$2,917 $4,396 $4,418 $3,531 $2,473
Provision for loan losses (515)(813)(749)
Gain on sale of securities (212)(251) (21)
Merger related expenses included in professional fees100
Losses on sale and writedowns of foreclosed assets, net16 109 58 20
Foreclosed assets expense, net of rental income53 50 (61)70 72
Pre-tax pre-provision core income$3,086 $3,828 $3,351 $2,872 $2,524


(1) This is a non-GAAP financial measure. The Company’s management believes the presentation of pre-tax pre-provision core income provides investors with a greater understanding of the Company’s operating results, in addition to the results measured in accordance with GAAP.


Glen L. Stiteley Chief Financial Officer (815) 725-1885

Source:First Community Financial Partners, Inc.