April 19, 2012
People's United Financial Reports First Quarter Operating Earnings of $0.18 Per Share; Net Income of $0.17 Per Share; Announces Dividend Increase
Click here to see the first quarter Financial Schedule.
Bridgeport, CT. – People's United Financial, Inc. (NASDAQ: PBCT) today reported net income of $58.6 million, or $0.17 per share, for the first quarter of 2012, compared to $51.7 million, or $0.15 per share, for the first quarter of 2011, and $43.0 million, or $0.12 per share, for the fourth quarter of 2011. Operating earnings were $60.6 million, or $0.18 per share, for the first quarter of 2012, compared to $53.8 million, or $0.15 per share, for the first quarter of 2011 and $58.7 million, or $0.17 per share, for the fourth quarter of 2011.
The Board of Directors of People's United Financial voted to increase the common stock dividend to an annual rate of $0.64 per share. Based on the closing stock price on April 18, 2012, the dividend yield on People's United Financial common stock is 5.0 percent. The quarterly dividend of $0.16 per share is payable May 15, 2012 to shareholders of record on May 1, 2012.
During the first quarter of 2012 the Company repurchased 4.5 million shares of People's United Financial common stock at a total cost of $56 million. Under the existing stock repurchase authorization, 13.5 million shares of common stock remain available to repurchase.
"Our performance in the first quarter of 2012 continues to build on the execution of our primary objectives – optimizing existing businesses and efficiently deploying capital," stated Jack Barnes, President and Chief Executive Officer. "Our first quarter financial results reflect continued loan and deposit growth and ongoing strength in our fee income businesses, including solid contributions from wealth management and insurance. We anticipate continued momentum in loan growth based on our residential, commercial and asset-based lending pipelines and remain encouraged by the significant opportunity for loan and deposit growth throughout the franchise, particularly within the Boston and New York City MSAs.
"Further, we announced the acquisition of 56 branches located in New York state from RBS Citizens, N.A., 52 of which are situated in Stop & Shop supermarkets, and the assumption of $325 million in deposits associated with these branches, which leverages our excellent track record with in-store banking," added Barnes. "The transaction, which is expected to close late in the second quarter pending regulatory approval, is a unique opportunity to be the exclusive provider of banking services at 139 Stop & Shop stores located across Long Island, southern New York state and Connecticut."
Barnes concluded, "We are pleased to announce our 20th consecutive annual dividend increase. Our strong business fundamentals, ongoing ability to leverage our brand in attractive markets, and prospects for organic growth continue to be the foundations of our strength relative to others in the industry. 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."
"On an operating basis, earnings were $61 million, or 18 cents per share, this quarter," stated Kirk W. Walters, Senior Executive Vice President and Chief Financial Officer. "The Company's performance in the first quarter reflects an expected decline in the net interest margin, lower provision expense, improvement in fee-based income and ongoing expense control."
Walters continued, "The operating net interest margin was 4.01 percent in the first quarter of 2012 compared to
4.00 percent in the first quarter of 2011 and 4.07 percent in the fourth quarter of 2011. Non-interest income
this quarter continues to reflect improvements in most of our fee-based business as well as gains on sales of
residential mortgage loans, partially offset by decreases in loan prepayment fees and bank service charges. The
decrease in the level of operating non-interest expense this quarter reflects the continued benefit from
cost-savings initiatives announced in 2011."
Walters concluded, "We continue to be pleased with our overall levels of asset quality, as noted by the improvement this quarter. Our low net loan charge-off ratio, which represents less than one-third of our peers, is a reflection of the Company's historically strong underwriting standards, the strength of the footprint in which we operate and the resilience of our customers, who have successfully managed through the economic crisis."
At March 31, 2012, People's United Financial's tier 1 common and total risk-based capital ratios were 14.0 percent and 16.1 percent, respectively, and the tangible equity ratio stood at 11.7 percent. People's United Bank's tier 1 and total risk-based capital ratios were 13.2 percent and 14.2 percent, respectively, at March 31, 2012.
Operating return on average assets was 0.88 percent for the first quarter of 2012, compared to 0.87 percent for the first quarter of 2011 and 0.86 percent for the fourth quarter of 2011. Operating return on average tangible stockholders' equity was 8.0 percent for the first quarter of 2012, compared to 6.7 percent for the first quarter of 2011 and 7.4 percent for the fourth quarter of 2011.
Loans acquired in connection with acquisitions have been recorded at fair value based on an initial estimate of expected cash flows, including a reduction for estimated credit losses and without carryover of the respective portfolios' historical allowance for loan losses. A decrease in expected cash flows in subsequent periods may indicate that a loan is impaired, which would require the establishment of an allowance for loan losses. As such, selected asset quality metrics have been highlighted to distinguish between the 'originated' portfolio and the 'acquired' portfolio.
At March 31, 2012, the allowance for loan losses for originated loans as a percentage of originated loans, which represents all loans other than those acquired, was 1.03 percent and as a percentage of originated non-performing loans was 61 percent, compared to 1.04 percent and 60 percent, respectively, at December 31, 2011. For the originated commercial banking portfolio, the allowance for loan losses ratio was 1.34 percent at March 31, 2012 and represented 79 percent of non-performing commercial banking loans at that date.
For the originated loan portfolio, non-performing loans equaled 1.67 percent of originated loans at March 31, 2012, compared to 1.75 percent at December 31, 2011 and 1.62 percent at March 31, 2011. Non-performing assets (excluding acquired non-performing loans) equaled 1.85 percent of originated loans, REO and repossessed assets at March 31, 2012 compared to 2.00 percent at December 31, 2011 and 1.96 percent at March 31, 2011.
Non-performing loans in the acquired portfolio, which represent the contractual balances of loans acquired that meet our definition of non-performing but are not, under the accounting model for acquired loans, subject to classification as non-accrual in the same manner as originated loans, totaled $247.2 million at March 31, 2012 compared to $249.0 million at December 31, 2011 and $324.4 million at March 31, 2011.
The provision for loan losses in the first quarter of 2012 totaled $11.5 million, reflecting: (i) net loan charge-offs of $11.2 million, of which $4.8 million carried previously-established specific reserves; (ii) a $4.8 million increase in the originated allowance for loan losses in response to the growth in the commercial and residential mortgage loan portfolios; and (iii) $0.3 million of impairment associated with the acquired loan portfolio. Net loan charge-offs totaled $14.8 million in the fourth quarter of 2011. Net loan charge-offs as a percentage of average loans on an annualized basis were 0.22 percent in the first quarter of 2012 compared to 0.29 percent in the prior year's fourth quarter.
People's United Financial, a diversified financial services company with $28 billion in assets, provides commercial and retail banking, as well as wealth management services through a network of 360 branches in Connecticut, Massachusetts, Vermont, New York, New Hampshire and Maine. Through its subsidiaries, People's United Financial provides equipment financing, brokerage and insurance services. Assets under administration and those under full discretionary management, neither of which are reported as assets of People's United Financial, totaled $13.0 billion and $4.4 billion, respectively, at March 31, 2012.
On April 19, 2012, at 8 a.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 2012 Financial Highlights
Net income was $58.6 million, or $0.17 per share.
- Operating earnings were $60.6 million, or $0.18 per share.
Net interest income totaled $235.1 million compared to $242.1 million in 4Q11.
- Cost recovery income on acquired loans, representing cash receipts in excess of carrying amount, totaled $5 million in 4Q11.
Operating net interest margin decreased 6 basis points from 4Q11 to 4.01%.
- Loan yields and one less calendar day in 1Q12 reduced the net interest margin by 9 and 3 basis points, respectively.
- Lower funding costs in 1Q12 benefited the net interest margin by 6 basis points.
Provision for loan losses totaled $11.5 million.
- Net loan charge-offs totaled $11.2 million, of which $4.8 million related to loans with specific reserves established in prior periods.
- Reflects a $4.8 million increase in the originated allowance for loan losses in response to loan growth.
- Includes a provision for loan losses on acquired loans of $0.3 million.
Non-interest income was $72.4 million in 1Q12 compared to $71.7 million in 4Q11.
- Bank service charges decreased $1.3 million from 4Q11 to $30.3 million.
- Insurance revenue increased $1.2 million from 4Q11, primarily reflecting the seasonal nature of insurance renewals.
- Brokerage commissions increased $0.5 million from 4Q11, primarily reflecting higher commissions on mutual funds and fixed income products.
- Investment management fees increased $0.3 million from 4Q11.
- Net gains on sales of residential mortgage loans increased $1.5 million from 4Q11.
- Loan prepayment fees declined $1.9 million from 4Q11.
Non-interest expense totaled $208.6 million in 1Q12 compared to $230.2 million in 4Q11.
- Operating non-interest expense was $205.6 million in 1Q12 compared to $207.2 million in 4Q11.
- 1Q12 includes $3.0 million of one-time charges (primarily severance-related) while 4Q11 includes $23.0 million of merger-related expenses and one-time charges.
- Efficiency ratio in 1Q12 increased to 63.2% from 61.8% in 4Q11, reflecting a $6.6 million decrease in operating revenue.
- Effective income tax rate was 33.0% for 1Q12 and 32.7% for 2011.
Excluding acquired loans, commercial banking loans increased $187 million, or 6% annualized, from December 31,
- The ratio of originated non-performing commercial banking loans to originated commercial banking loans was 1.70% at March 31, 2012 compared to 1.81% at December 31, 2011.
- Non-performing commercial banking assets, excluding acquired non-performing loans, totaled $222.1 million at March 31, 2012, down from $240.8 million at December 31, 2011.
Average commercial banking loans totaled $14.5 billion, an increase of $77 million, or 2% annualized, from
- Net loan charge-offs totaled $7.2 million, or 0.20% annualized, of average commercial banking loans in 1Q12, compared to $11.8 million, or 0.33% annualized, in 4Q11.
- For the originated commercial banking portfolio, the allowance for loan losses as a percentage of loans was 1.34% at March 31, 2012 compared to 1.39% at December 31, 2011.
- The commercial banking allowance for loan losses represented 79% of originated non-performing commercial banking loans at March 31, 2012 compared to 77% at December 31, 2011.
- Commercial deposits totaled $5.3 billion at March 31, 2012 compared to $5.2 billion at December 31, 2011.
Excluding acquired loans, residential mortgage loans increased $156 million, or 20% annualized, from December
- The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 2.12% at March 31, 2012 compared to 2.19% at December 31, 2011.
Average residential mortgage loans totaled $3.7 billion, an increase of $142 million, or 16% annualized, from
- Net loan charge-offs totaled $2.0 million, or 0.22% annualized, of average residential mortgage loans in 1Q12, compared to $1.6 million, or 0.18% annualized, in 4Q11.
Excluding acquired loans, home equity loans totaled $1.9 billion, unchanged from December 31, 2011.
- The ratio of originated non-performing home equity loans to originated home equity loans was 0.80% at March 31, 2012 compared to 0.82% at December 31, 2011.
Average home equity loans totaled $2.0 billion in 1Q12, unchanged from 4Q11.
- Net loan charge-offs totaled $1.7 million, or 0.33% annualized, of average home equity loans in 1Q12, compared to $0.7 million, or 0.15% annualized, in 4Q11.
- Retail deposits totaled $16.0 billion at March 31, 2012 compared to $15.6 billion at December 31, 2011.
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) changes in regulation resulting from or relating to 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 otherwise.
Access Information About People's United Financial at www.peoples.com.