April 20, 2011
FOR IMMEDIATE RELEASE
April 20, 2011
People's United Financial Reports First Quarter Earnings of $52 Million or $0.15 per Share and Increases Dividend
Click here to see the first quarter Financial Schedule.
BRIDGEPORT, CT. – People's United Financial, Inc. (NASDAQ: PBCT) today announced net income of $51.7 million, or $0.15 per share, for the first quarter of 2011, compared to $32.0 million, or $0.09 per share, for the fourth quarter of 2010, and $13.6 million, or $0.04 per share, for the first quarter of 2010. The company's Board of Directors voted to increase the common stock dividend to an annual dividend rate of $0.63 per share. Based on the closing stock price on April 19, 2011, the dividend yield on People's United Financial common stock is 4.9 percent. The quarterly dividend of $0.1575 per share is payable May 15, 2011 to shareholders of record on May 1, 2011.
First quarter 2011 earnings were driven by higher net interest income and continued growth in fee-based businesses, partially offset by an increase in the provision for loan losses. In the first quarter of 2011, the return on average assets was 0.84 percent and the return on average tangible stockholders' equity was 6.4 percent, compared to 0.56 percent and 3.7 percent, respectively, for the fourth quarter of 2010. At March 31, 2011, People's United Financial's tangible equity ratio stood at 13.9 percent.
"Our performance this quarter reflects meaningful organic loan and deposit growth, encouraging trends in asset quality, as well as the benefit of acquisitions completed in 2010," stated Jack Barnes, President and Chief Executive Officer. "In fact, on an annualized basis, both loans and deposits increased over 4 percent this quarter; our net interest margin reached its highest level since the end of 2007; and our non-performing assets ratio declined to under 2 percent."
Barnes added, "We continue to invest in our commercial, retail and business banking, and wealth management businesses throughout our franchise. Increases in our originated commercial banking and retail banking loan portfolios of $277 million, or 11 percent annualized, and $136 million, or 12 percent annualized, respectively, were effectively funded by growth in our retail deposits. The revenue increases in all of our wealth management product lines this quarter are further evidence of the progress we are making in this highly competitive area. In addition, our efforts with respect to both the Bank of Smithtown integration and Danversbank planning are well under way. We expect to close the Danversbank acquisition later in the second quarter, pending regulatory and shareholder approvals."
Barnes concluded, "We are pleased to reward our shareholders with a 19th consecutive annual dividend increase. Operating from a position of competitive strength, characterized by our strong business fundamentals, the ability to further leverage our brand in attractive markets and our prospects for organic growth, continues to set us apart from most in the industry. Furthermore, we have demonstrated our ability to prudently and effectively deploy capital through organic loan and deposit growth, adherence to a strong dividend policy, share repurchases and a thoughtful acquisition strategy."
"The company's performance this quarter reflects a solid improvement in the net interest margin and continued positive momentum in our fee businesses, which were partially offset by our decision to increase the allowance for loan losses in response to loan growth," said Kirk W. Walters, Senior Executive Vice President and Chief Financial Officer.
Walters continued, "The net interest margin improved 29 basis points to 4.16 percent, primarily reflecting the benefit of our two acquisitions completed during the fourth quarter of 2010, an increase in investment income, a reduction in our cost of deposits and additional interest accretion from the Financial Federal acquisition as a result of better than expected credit experience and slower than anticipated pre-payment activity. If credit experience within acquired loan portfolios continues to be better than originally expected, we will likely benefit from additional interest accretion over the remaining life of those loans."
Regarding asset quality, Walters stated, "While the overall level of non-performing loans is reflective of a period of prolonged economic weakness, we are pleased with the improvements noted over the past few quarters. In addition, the decline in acquired non-performing loans this quarter reflects our efforts to proactively reduce this portfolio through loan sales. During the first quarter, loans with a contractual balance of approximately $50 million (carrying amount of approximately $25 million) were sold at a gain of approximately $6 million and we continue to evaluate loan sales from within the acquired loan portfolios. The increase in the allowance for loan losses this quarter was driven by loan growth and is not an indication of weakening asset quality."
Loans acquired in connection with acquisitions have been recorded at fair value, including a reduction for estimated credit losses, and without carryover of the respective portfolio's historical allowance for loan losses. As such, selected asset quality metrics have been highlighted to distinguish between the 'originated' portfolio and the 'acquired' portfolios.
For the originated portfolio, representing all loans other than those acquired, non-performing loans totaled $240.5 million at March 31, 2011, or 1.62 percent of originated loans, compared to $245.2 million and 1.70 percent, respectively, at December 31, 2010. Non-performing loans in the acquired portfolios, which represent the contractual balances of loans acquired that meet our definition of non-performing but for which the risk of loss has already been considered by virtue of our estimate of acquisition-date fair value and/or the existence of an FDIC loss-share agreement, totaled $324.4 million at March 31, 2011 compared to $359.8 million at December 31, 2010.
Non-performing assets (excluding acquired non-performing loans) totaled $292.1 million at March 31, 2011, down from $303.1 million at December 31, 2010. Non-performing assets equaled 1.96 percent of originated loans, REO and repossessed assets at March 31, 2011 compared to 2.09 percent at December 31, 2010.
First quarter net loan charge-offs totaled $9.6 million compared to $10.9 million in the fourth quarter of 2010. Net loan charge-offs as a percent of average loans on an annualized basis were 0.22 percent in the first quarter of 2011 compared to 0.28 percent in the prior year's fourth quarter. The provision for loan losses in the first quarter of 2011 reflects a $5.0 million increase in the allowance for loan losses to $177.5 million at March 31, 2011 due to strong growth in the commercial and residential mortgage loan portfolios.
At March 31, 2011, the allowance for loan losses as a percentage of originated loans was 1.19 percent and as a percentage of originated non-performing loans was 74 percent, compared to 1.19 percent and 70 percent, respectively, at December 31, 2010. For the originated commercial banking portfolio, the allowance for loan losses ratio was 1.61 percent at both March 31, 2011 and December 31, 2010. The commercial banking allowance for loan losses represented 104 percent of non-performing commercial banking loans at March 31, 2011.
People's United Financial, a diversified financial services company with $25 billion in assets, provides commercial banking, retail and business banking, and wealth management services through a network of 341 branches in Connecticut, Vermont, New York, New Hampshire, Maine and Massachusetts. Through its subsidiaries, People's United Financial provides equipment financing, asset management, brokerage and financial advisory services, and insurance services.
On April 20, 2011, at 5 p.m., Eastern Time, People's United Financial will host a conference call to discuss this earnings announcement. The call may be heard through www.peoples.com by selecting "Investor Relations" in the "About Us" section on the home page, and then selecting "Conference Calls" in the "News and Events" section. Additional materials relating to the call may also be accessed at People's United Bank's web site. The call will be archived on the web site and available for approximately 90 days.
1Q 2011 Financial Highlights
Net income totaled $51.7 million, or $0.15 per
- Operating earnings were $53.8 million, or $0.15 per share.
Net interest income totaled $220.3 million.
- Net interest margin increased 29 basis points from 4Q10 to 4.16%.
- Additional interest accretion on acquired loans of $9.0 million in 1Q11contributed 16 basis points
- The interest cost on deposits declined 5 basis points to 59 basis points from 4Q10.
Provision for loan losses totaled $14.6 million.
- Net loan charge-offs totaled $9.6 million or 0.22% of average loans.
Non-interest income totaled $74.6 million in 1Q11
compared to $68.1 million in 4Q10.
- 1Q11 includes a full quarter of non-interest income from acquisitions completed on November 30, 2010 (approximately a $2.0 million increase in 1Q11).
- 1Q11 includes $5.5 million of net gains on sales of acquired non-performing loans.
- Net gains on sales of residential mortgages declined $1.1 million from 4Q10.
- Other non-interest income includes a $2.2 million charge for other asset write-offs.
Non-interest expense totaled $202.8 million in 1Q11
compared to $199.1 million in 4Q10.
- 1Q11 and 4Q10 include a total of $3.1 million and $7.0 million, respectively, of merger-related expenses and core system conversion costs.
- 1Q11 includes a full quarter of non-interest expense from acquisitions completed on November 30, 2010 (approximately a $7.2 million increase in 1Q11).
Effective income tax rate was 33.3% in 1Q11 compared to
32.5% for 2010.
- 1Q11 rate reflects a higher state effective income tax rate resulting from our further expansion into states with higher income tax rates.
Excluding acquired loans, commercial banking loans
increased $277 million, or 11% annualized, from December 31, 2010.
- Approximately $875 million of loans secured, in part, by owner-occupied commercial properties were reclassified from commercial real estate loans to commercial and industrial loans as of March 31, 2011.
- Average commercial banking loans totaled $12.4 billion, a $1.3 billion increase from 4Q10.
- Non-performing commercial banking assets, excluding acquired non-performing loans, totaled $192.2 million at March 31, 2011, a slight decrease from December 31, 2010
- The ratio of originated non-performing commercial banking loans to originated commercial banking loans was 1.54% at March 31, 2011 compared to 1.56% at December 31, 2010.
- Net loan charge-offs totaled $6.8 million, or 0.22% annualized, of average commercial banking loans in 1Q11, compared to $7.0 million, or 0.25% annualized, in 4Q10.
- For the originated commercial banking portfolio, the allowance for loan losses as a percentage of loans was 1.61% at both March 31, 2011 and December 31, 2010.
- The commercial banking allowance for loan losses represented 104 percent of non-performing commercial banking loans at March 31, 2011.
Retail and Business Banking
Excluding acquired loans, residential mortgage loans
increased $183 million, or 32% annualized, from December 31, 2010.
- Average residential mortgage loans totaled $2.7 billion, a $248 million increase from 4Q10.
- Net loan charge-offs totaled $1.6 million, or 0.23% annualized, of average residential mortgage loans in 1Q11, compared to $2.0 million, or 0.32% annualized, in 4Q10.
- The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 2.84% at March 31, 2011 compared to 3.44% at December 31, 2010.
Excluding acquired loans, home equity loans declined $38
million, or 8% annualized, from December 31, 2010.
- Average home equity loans totaled $2.0 billion in 1Q11, unchanged from 4Q10.
- Net loan charge-offs totaled $0.8 million, or 0.16% annualized, of average home equity loans in 1Q11, compared to $1.1 million, or 0.23% annualized, in 4Q10.
Wealth Management income increased $1.6 million from
- Insurance revenue increased $1.0 million and investment management fees and brokerage commissions each increased $0.3 million.
- Assets under administration and those under full discretionary management, neither of which are reported as assets of People's United Financial, totaled $12.7 billion and $4.3 billion, respectively.
Certain statements contained in this release are forward-looking in nature.
These include all statements about People's United Financial's plans, objectives, expectations and other
statements that are not historical facts, and usually use words such as "expect," "anticipate," "believe" and
similar expressions. Such statements represent management's current beliefs, based upon information available at
the time the statements are made, with regard to the matters addressed. All forward-looking statements are
subject to risks and uncertainties that could cause People's United Financial's actual results or financial
condition to differ materially from those expressed in or implied by such statements. Factors of particular
importance to People’s United Financial include, but are not limited to: (1) changes in general, national or
regional economic conditions; (2) changes in interest rates; (3) changes in loan default and charge-off rates;
(4) changes in deposit levels; (5) changes in levels of income and expense in non-interest income and expense
related activities; (6) residential mortgage and secondary market activity; (7) changes in accounting and
regulatory guidance applicable to banks; (8) price levels and conditions in the public securities markets
generally; (9) competition and its effect on pricing, spending, third-party relationships and revenues; (10) the
successful integration of acquired companies; and (11) possible changes in regulation resulting from or relating
to recently enacted financial reform legislation. People's United Financial does not undertake any obligation to
update or revise any forward-looking statements, whether as a result of new information, future events or
Access Information About People's United Financial at www.peoples.com.