Hartford Business Journal

www.HartfordBusiness.com • January 8, 2018 • Hartford Business Journal 17 Corporate Profile First Connecticut Bancorp One Farm Glen Boulevard, Farmington, CT 06032 | www.farmingtonbankct.com First Connecticut Bancorp Inc. is the holding company for Farmington Bank, which pro- vides commercial and consumer banking services to businesses, individuals and governments. 2014 2015 2016 0 20 40 60 80 100 In millions of dollars Profits Revenues $81.88 $95.33 $9.34 $12.58 $15.22 $99.72 $9.34 $12.58 $15.22 News Headlines ■ ■ In a sign of its improving profitability, Farmington Bank's parent in November increased the company's quarterly dividend to 15 cents per share, up from 14 cents. ■ ■ For the three months ended Sept. 30., First Connecticut Bancorp Inc. posted a 48 percent increase in third-quarter net income, driven by strong loan sales and deposit growth. ■ ■ In August, UConn Athletics announced that Farmington Bank is the official bank of UConn football. Corporate suite Stock Non-equity Exec. Salary Bonus Awards Incentive Total John J. Patrick, Jr. Chairman/CEO $527,875 $0 $0 $300,009 $1,619,629 Michael T. Schweighoffer Chief Lending Officer/Exec. VP $289,111 $0 $0 $98,226 $640,903 Gregory A. White CFO/Exec. VP $265,108 $0 $0 $90,040 $558,927 Profits and Revenues John J. Patrick, Chairman and CEO Fact box Industry: Banking 3Q 2017 Revenue: $28.9M 3Q 2017 Net Income: $5.6M 3Q 2016 Net Income: $3.8M Quarterly Profit Change: $1.8M Cash: $204.6M Employees: 339 Competitors: Citizens Financial Corp. People's United Financial Inc. Webster Financial Corp. Stock watch Ticker Symbol FBNK Market Cap $396M 52 Week Range Price $20.50 - $28.50 Outstanding Shares 15.1M Top institutional investors Shares % Stake Blackrock Inc. 1,022,801 6.41 FJ Capital Management LLC 751,000 4.72 Manufacturers Life Insurance Co. 636,164 3.99 offset with tax credits. In fiscal year 2016, the latest data avail- able, Connecticut companies had $1.8 billion in R&D tax credits they carried over because they were unable to use them. For years, UConn economist Fred Carstensen has championed allowing com- panies to use stranded R&D tax credits in exchange for making impactful invest- ments. The Connecticut Center for Eco- nomic Analysis, which Carstensen oversees at UConn, studied the matter in 2010, concluding that such a policy could more than pay for itself in the long run. Carstensen was elated when he heard recently that legisla- tors had decided to extend the program to other companies beyond UTC. "It's hands down the most powerful economic development tool we've seen," Carstensen said. However, his bubble burst quickly when he learned the program would be capped at just one-eighth the size of the Pratt deal, or $50 million. "That shows that the legislature didn't understand the [CCEA] analysis," he said. "Properly structured, any deal is revenue neutral in the short run but delivers huge fiscal dividends in the long run." CCEA calculated in 2010 that every $1 billion in stranded credits that compa- nies use would create up to 45,000 jobs. Against that measure, $50 million would create no more than 2,250 jobs. While he's frustrated, Carstensen still sees upside in the new program. Even if it doesn't change the state's economy in any significant way right now, at least the program is now enshrined into law. "That's what we had never done before, is put the concept in place," he said. "You can always change the rule." Pescatello, too, wishes the $50 mil- lion cap was higher. "Obviously the power of it as an economic driver would be increased if there was no cap, but we also under- stand the state's limitations with the budget and we're trying to take that into consideration," he said. He's also optimis- tic about anything that could boost the amount of venture capital investments made in Connecticut, which declined in 2015 and 2016. Under the program, companies that form their own venture fund and invest in Connecticut companies and technolo- gies will also be able to use their stranded credits. "We really need to encourage more VC investments in the state compared to our major competitors, which in the biopharma world are really California and Massachusetts," he said. A new tool At $50 million, the stranded tax credit program won't be the largest at DECD's disposal, but it will be significant, and could be used in conjunction with other programs like "First Five," said DECD Commis- sioner Catherine Smith. "I think it could be a really nice tool in the toolbox," Smith said. She said several companies have been persistent in lobbying for the program in recent years. She declined to name them, but one that has testified publicly is Ridge- field pharmaceuti- cal giant Boehring- er Ingelheim. James Baxter, Boehringer's senior vice president of development, said the com- pany is grateful the legislature created the program. "We have a large and active research site in Ridgefield that we invest in heavily, and have accrued tax credits much faster than we have been able to apply them under the current R&D tax credit structure," Baxter said. "As a result, we have millions of dol- lars in stranded tax credits, and are cur- rently evaluating how this new program may impact our future capital investment projects." As for the cap on the program, Baxter said he is waiting to see what happens. "There is still a lot of detail that is yet to be known about how it will be implemented, and we recognize the state's need to balance this newly established program during the current budget climate," he said. While DECD's Smith — who has run economic development for Gov. Dannel P. Malloy since he took office in 2011 — gen- erally speaks positively of using stranded tax credits, she was not always support- ive of the concept. Five years ago, after Carstensen and CCEA released a report criticizing the state's economic strategy, she was lukewarm to the idea and argued it may not be entirely self-funding. Asked about it recently, she said she has softened on that position. "Part of the reason I was kind of luke- warm about it is we were kind of in big discussions with UTC," Smith said. "I didn't want to underdeliver." She said not having to put up new capital to incentivize economic growth is a plus. DECD will aim to structure the deals so that the state pays out as little cash as possible for the credits, either by having companies apply them to sales-and-use tax liabilities or permitting them to apply R&D credits to a greater portion of income tax liability than is normally allowed. "For most of it, we expect it to be non- cash," she said. "As you know, we're kind of cash-strapped these days." Fred Carstensen, Economist, UConn "So many times in economic development, you're promising to do things in the future. Here, you only earn the credit after you've made the investment." Paul Pescatello , executive director of the Connecticut Bioscience Growth Council

• Cover