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Rockville Financial Inc. Reports Operating Results (10-Q)

May 10, 2010 | About:

10qk

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Rockville Financial Inc. (RCKB) filed Quarterly Report for the period ended 2010-03-31.

Rockville Financial Inc. has a market cap of $214.71 million; its shares were traded at around $10.98 with and P/S ratio of 2.59. The dividend yield of Rockville Financial Inc. stocks is 2.19%. Rockville Financial Inc. had an annual average earning growth of 9.3% over the past 5 years.

Highlight of Business Operations:

income of $2.1 million, which was partially offset by increases in the provision for loan loss expense of $604,000, non-interest expense of $531,000 and the income tax provision of $758,000. Non-interest income increased by $696,000 as a result of the recognition of gains on investments and mortgage sales during the period and the Company did not record an other-than-temporary impairment charge as compared to $357,000 taken in the period ended March 31, 2009. Income before income taxes increased $1.7 million to $4.5 million in the first quarter of 2010 from $2.9 million for the same quarter last year.

Net Interest Income: Net interest income before the provision for loan loss was $13.4 million for the three months ended March 31, 2010, compared to $11.3 million for the same period in the prior year, an increase of $2.1 million. Average earning assets increased by $1.9 million, or 0.1%, to $1.5 billion for the three months ended March 31, 2010 when compared to the same period in the prior year. In the first quarter of 2010 interest income on earning assets was $18.9 million, a decrease of $383,000 compared to the same period in 2009, yielding an average of 5.07%, down 11 basis points compared to the first quarter of 2009. Average interest-bearing liabilities decreased $29.9 million, or 2.4% to $1.2 billion for the three months ended March 31, 2010. Average time deposits declined $44.4 million in the first quarter of 2010 compared to the first quarter of 2009. Average NOW and money market account balances increased $56.8 million and average savings account balances increased $22.7 million compared to the same period last year. In the first quarter of 2010, the cost of interest-bearing liabilities was $5.5 million, a decrease of $2.5 million from the same period last year.

The increase in the average interest-earning assets reflects the net impact of continued strong average loan growth of $44.6 million and an average reduction in available for sale securities of $42.9 million compared to the first quarter 2009. The decrease in average interest-bearing liabilities reflects the net impact of continued growth of average core interest-bearing deposits of $79.5 million which was offset by reductions in average time deposits of $44.4 million and FHLB borrowings of $65.0 million compared to the first quarter of last year. Average net interest-earning assets increased by $31.8 million to $250.2 million compared to the same quarter last year. The Companys net interest margin increased 57 basis points to 3.59% for the three months ended March 31, 2010 compared to 3.02% for the same period in the prior year. The Companys net interest rate spread increased 64 basis points to 3.29% due to a decrease in the cost of funds of 75 basis points which was partially offset by an 11 basis point reduction in the earning asset yield.

Interest and Dividend Income: Interest and dividend income decreased $383,000, or 2.0%, to $18.9 million for the three months ended March 31, 2010 from $19.3 million for the same period in the prior year. The Companys yield on interest-earning assets for the three months ended March 31, 2010 decreased 11 basis points to 5.07% when compared to 5.18% for the three months ended March 31, 2009. Interest income on loans receivable increased $322,000, or 1.9%, to $17.6 million compared to $17.3 million. The increase in loan interest income was primarily due to a $44.6 million, or a 3.4%, increase in average loans receivable offset by an 8 basis point decrease in the average yield on the loan portfolio. The decrease in the average yield was attributable to adjustable rate loans repricing downward and the overall lower interest rate environment compared to the first quarter last year. The effect of the lowering rates on the Companys portfolio is delayed for adjustable-rate residential mortgage loans, with interest rates which adjust annually based on the one-year Constant Maturity Treasury Bill Index, after either a one, three, four, five, seven, or nine-year initial fixed rate period. The prime rate used as an index to re-price various commercial and home equity adjustable loans remained unchanged at 3.25% for the three months ended March 31, 2010 compared to the same period last year. The one-year Constant Maturity Treasury Bill Index used to re-price adjustable rate residential mortgages decreased 16 basis points during the past year to 0.43% at March 31, 2010 compared to 0.59% at March 31, 2009.

Interest Expense: Interest expense for the three months ended March 31, 2010 decreased $2.5 million, or 31.2%, to $5.5 million from $8.1 million from the same period in the prior year. The decrease resulted from a decrease of 75 basis points paid on average interest-bearing liabilities in combination with a $29.9 million, or a 2.4%, decrease in average interest-bearing liabilities for the three months ended March 31, 2010 as compared to the three months ended March 31, 2009. The decrease in the cost of funds was primarily due to the impact of the sustained low interest rate environment had on the Banks time deposits during the first three months of 2010. Generally, management would prefer to fund growth with deposits instead of wholesale borrowings. Current market conditions are such that the growth in deposits has eliminated the need for new wholesale borrowings and has allowed management to decrease its use of wholesale borrowings. Average outstanding advances from the Federal Home Loan Bank were $266.3 million, a decrease of $65.0 million, for the three months ended March 31, 2010 compared to $331.3 million for the three months ended March 31, 2009. The interest rate on these borrowings averaged 3.82% for the three months ended March 31, 2010, 67 basis points higher than the average rate for the three months ended March 31, 2009 of 3.15%. The increase in the average rate for FHLB borrowings resulted from a reduced use of lower-cost overnight borrowings in the first quarter of 2010 compared to the same period in the prior year. At March 31, 2010, the Company had no outstanding overnight borrowings from the FHLB compared to $76 million at March 31, 2009 with an average interest rate of 28 basis points. Average balances on interest-bearing deposits rose to $977.4 million, an increase of $35.1 million, or 3.7%, for the three months ended March 31, 2010 compared to $942.4 million for the same period in the prior year.

Non-interest Income: We have the following sources of non-interest income: banking service charges on deposit accounts, bank-owned life insurance, mortgage servicing income, derivative financial instruments and brokerage and insurance fees from Infinex, Inc., the Banks on-premise provider of non-deposit investment services. Non-interest income increased by $696,000 to $1.7 million for the quarter ended March 31, 2010, compared to $991,000 for the same period last year. There was no other-than-temporary impairment of securities for the first quarter of 2010 compared to $357,000 in the first quarter of 2009 accounting for much of the increase in non-interest income. Other contributing factors included an increase of $120,000 from the sale of fixed rate residential mortgages, a $119,000 increase from the gain on the sale of securities and an increase in other income of $101,000. The increase in other income included an $87,000 reduction in the loss on mortgages held for sale and an increase in BOLI income of $5,000 compared to the same period last year. Service charges and fees increased by $5,000. The increase in service charges was due to a $115,000 increase in ATM fees as a result of increased volume in debit card transactions and additions made to our ATM network and additional loan servicing income of $22,000.

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