FCFP First Community Financial Partners, Inc.

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

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 estate	378,304			381,098			368,896			363,575			369,113
Commercial	181,142			179,623			180,674			187,780			176,281
Residential 1-4 family	139,208			135,864			126,316			109,819			102,432
Multifamily	31,511			34,272			30,771			29,829			26,015
Construction and land development	27,798			22,082			19,451			19,612			18,555
Farmland and agricultural production	9,060			9,989			8,984			8,604			8,869
Consumer and other	7,250			9,391			7,963			8,578			10,570
Total loans	774,273			772,319			743,055			727,797			711,835
Allowance for loan losses	11,335			11,741			11,753			12,420			13,778
Net loans	762,938			760,578			731,302			715,377			698,057
Investment securities	205,241			206,971			217,194			184,349			190,909
Other earning assets	47,261			23,967			25,743			42,777			14,447
Other non-earning assets	45,289			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 deposits	38,481			36,206			34,933			33,567			33,101
NOW accounts	104,136			102,882			101,828			95,406			71,983
Money market accounts	237,873			233,315			232,195			231,185			217,637
Time deposits	294,076			297,525			302,892			299,703			310,674
Total deposits	878,980			865,991			846,697			834,388			801,128
Total borrowings	72,237			68,315			72,551			59,398			57,953
Other liabilities	2,855			3,305			4,065			4,513			5,140
Total Liabilities	954,071			937,611			923,313			898,299			864,221
Shareholders’ equity	106,790			103,041			100,119			96,170			94,918
Total Shareholders’ Equity	106,790			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
Securities	1,101			1,117			1,103			962			951
Federal funds sold and other	19			19			19			15			13
Total interest income	9,628			9,537			9,340			9,067			8,779
Interest expense:
Deposits	940			986			973			987			977
Federal funds purchased and other borrowed funds	93			87			98			17			14
Subordinated debt	297			297			297			603			603
Total interest expense	1,330			1,370			1,368			1,607			1,594
Net interest income	8,298			8,167			7,972			7,460			7,185
Provision for loan losses	—			(515		)	(813		)	(749		)	—
Net interest income after provision for loan losses	8,298			8,682			8,785			8,209			7,185
Noninterest income:
Service charges on deposit accounts	204			190			188			194			183
Gain on sale of securities	—			212			251			—			21
Mortgage fee income	78			96			178			153			103
Other	273			261			152			174			138
Total noninterest income	555			759			769			521			445
Noninterest expenses:
Salaries and employee benefits	3,256			3,004			2,841			2,810			2,884
Occupancy and equipment expense	437			494			486			505			492
Data processing	257			203			248			237			224
Professional fees	392			68			342			411			380
Advertising and business development	215			219			217			227			189
Losses on sale and writedowns of foreclosed assets, net	16			109			58			20			—
Foreclosed assets, net of rental income	53			50			(61		)	70			72
Other expense	1,310			898			1,005			919			916
Total noninterest expense	5,936			5,045			5,136			5,199			5,157
Income before income taxes	2,917			4,396			4,418			3,531			2,473
Income taxes	889			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, 2016								December 31, 2015								March 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 banks	13,690			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 assets	55,124								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 accounts	234,455			162			0.28	%	237,818			163			0.27	%	205,616			137			0.27	%
Savings accounts	37,194			11			0.12	%	36,015			14			0.16	%	31,785			13			0.16	%
Time deposits	292,491			696			0.95	%	304,941			743			0.97	%	303,293			804			1.06	%
Total interest bearing deposits	668,607			940			0.56	%	681,557			986			0.58	%	612,940			977			0.64	%
Securities sold under agreements to repurchase	23,902			9			0.15	%	32,315			12			0.15	%	28,820			7			0.10	%
Secured borrowings	10,528			74			2.81	%	12,875			73			2.27	%	—			—			—
Mortgage payable	—			—			—	%	—			—			—	%	450			7			6.22	%
FHLB borrowings	12,067			10			0.33	%	3,261			2			—	%	656			—			—	%
Subordinated debentures	15,300			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 deposits	205,215								203,108								164,072
Other liabilities	3,051								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
	2016			2015
	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
High	8.84			7.31			7.00			6.55			5.75
Low	7.00			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 outstanding	17,125,928			16,939,010			16,993,822			16,970,721			16,768,908
Average diluted shares outstanding	17,451,354			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 loans	2,146			1,478			3,172			4,240			6,211
Foreclosed assets	5,231			5,487			4,109			4,248			2,550
Total nonperforming assets	$	7,377		$	6,965		$	7,281		$	8,488		$	8,761
Allowance for loan losses	11,335			11,741			11,753			12,420			13,778
Nonperforming assets to total assets	0.70		%	0.67		%	0.71		%	0.85		%	0.91		%
Nonperforming loans to total assets	0.20		%	0.14		%	0.31		%	0.43		%	0.65		%
Allowance for loan losses to nonperforming loans	528.19		%	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-offs	506			133			654			736			335
Recoveries	100			636			800			127			208
Net charge-offs	406			(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-offs	406			(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 assets	0.78	%	1.11	%	1.17	%	0.96	%	0.69	%
Return on average equity	7.68	%	11.48	%	12.01	%	9.77	%	6.87	%
Net interest margin	3.36	%	3.29	%	3.31	%	3.23	%	3.23	%
Average loans to assets	73.63	%	72.12	%	72.37	%	73.27	%	74.37	%
Average loans to deposits	88.00	%	85.95	%	86.63	%	87.62	%	89.38	%
Average noninterest bearing deposits to total deposits	23.35	%	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 ratio	9.72	%	9.36	%	9.39	%	9.24	%	9.70	%
Common equity tier 1 capital ratio	11.94	%	11.62	%	11.57	%	11.20	%	11.47	%
Tier 1 capital ratio	11.94	%	11.62	%	11.57	%	11.20	%	11.47	%
Total capital ratio	14.99	%	14.69	%	14.71	%	14.39	%	15.08	%
Tangible common equity to tangible assets	10.07	%	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 fees	100			—			—			—			—
Losses on sale and writedowns of foreclosed assets, net	16			109			58			20			—
Foreclosed assets expense, net of rental income	53			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