Expenses affiliated with its recent merger with United Financial Bancorp heavily impacted Rockville Financial’s pre-merger earnings in the first quarter this year.
The company posted net income of $947,000 in the quarter ended March 31, compared with $4.6 million for the comparable period last year. The quarter included $1.8 million in pre-tax expenses related to its merger with United Financial Bancorp, headquartered in West Springfield, Mass. Rockville was the legal acquirer in that transaction, billed as a "merger of equals," but adopted United Financial’s name in the deal.
"Given the merger, the company’s expenses during the first quarter are atypical and reflective of investments in the company’s future. In spite of the emphasis on the merger, the company enjoyed strong loan and deposit growth during the quarter," CEO William H. W. Crawford IV said in a statement. "We remain intensely focused on integrating the two companies and achieving the company’s 2015 goals and objectives."
Net loans grew $43 million during the first quarter, largely due to an increased focus on commercial banking loan originations. Total commercial loans grew $21 million, or 8 percent annualized, during the quarter, mainly because of a $30 million, or 4 percent, increase in the commercial real estate portfolio. Offsetting those increases was a $10 million, or 21 percent, decline in the company’s commercial construction portfolio, as those loans converted to permanent mortgages during the quarter.
Residential mortgage loans grew on-balance sheet by $24 million, or 4 percent, over the previous quarter and $416,000 over the year-ago quarter.
Residential mortgage originations declined 23 percent to $58 million year over year, but grew $24 million, or 4 percent, over the previous quarter. Purchase mortgage activity doubled to $38 million, or 66 percent of production, during the first quarter, compared with $17 million, or 23 percent, in the prior year period. Purchase mortgage production increased by $1 million over the linked quarter.
The provision for loan losses increased $59,000, or 15 percent, to $450,000 in the first quarter compared with the year-ago period, largely due to higher comparable loan originations. Net charge-offs for the first quarter of 2014 totaled $133,000, or 0.03 percent annualized as a percentage of average loans outstanding, a decrease from $331,000, or 0.08 percent annualized as a percentage of average loans outstanding, in the prior year period.
Non-performing assets declined $542,000 to $14.6 million from $15.2 million at Dec. 31, 2013. The ratio of non-performing assets to total assets decreased 4 basis points to 0.62 percent over that same period, and non-performing loans decreased $1.7 million to $12 million.
Deposits increased $73 million from year-end 2013 to $1.81 billion at March 31. That included an $8 million, or 3 percent, increase in non-interest bearing deposits and a $65 million, or 4 percent, increase in interest-bearing deposits. The company’s first quarter 2013 opening of a location in West Hartford helped boost deposit growth. That location reported total deposits of $101 million at quarter-end.
The board of directors declared a cash dividend of 10 cents per share to be paid on May 19 to shareholders of record on May 12.
The company initiated a second buyback plan on May 20 of last year. Under this plan, Rockville is authorized to repurchase up to 2,730,026 shares, or 10 percent, of the outstanding shares at the time the plan was approved. As of March 31, Rockville had repurchased 1,156,891 shares under this plan at an average cost of $13.12 per share, and has authorization to purchase 1,573,135 shares remaining. In total, the company has repurchased 4,108,141 shares as of March 31, or 14 percent of total shares outstanding prior to the first repurchase program. The shares repurchased are unchanged from the prior quarter because the company was precluded from repurchasing shares due to the pending merger.
