October 18, 2012
October 18, 2012
People's United Financial Reports Third Quarter Operating Earnings Of $0.19 Per Share; Net Income Of $0.18 Per Share
Click here to see the third quarter Financial Schedule.
BRIDGEPORT, CT. – People's United Financial, Inc. (NASDAQ: PBCT) today reported net income of $62.2 million, or $0.18 per share, for the third quarter of 2012, compared to $51.5 million, or $0.14 per share, for the third quarter of 2011, and $64.6 million, or $0.19 per share, for the second quarter of 2012. Operating earnings were $64.4 million, or $0.19 per share, for the third quarter of 2012, compared to $65.9 million, or $0.18 per share, for the third quarter of 2011 and $67.0 million, or $0.20 per share, for the second quarter of 2012.
The Company's Board of Directors declared a $0.16 per share quarterly dividend, payable November 15, 2012 to shareholders of record on November 1, 2012. Based on the closing stock price on October 17, 2012, the dividend yield on People's United Financial common stock is 5.3 percent.
During the third quarter of 2012 the Company repurchased 4.5 million shares of People's United Financial common stock at a total cost of $54 million and, during the first nine months of 2012, the Company repurchased 13.5 million shares of common stock at a total cost of $164 million. Under the existing stock repurchase authorization, 4.5 million shares of common stock remain available for repurchase.
"Our performance in the third 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 third quarter financial results reflect another quarter of solid operating metrics in a
challenging economic environment, supported by significant loan growth, ongoing strength in our fee income
businesses and meaningful cost control, all of which contributed to an improvement in our efficiency ratio.
"We anticipate continued momentum in loan growth based on our retail and commercial lending pipelines and remain encouraged by the significant opportunity for growth throughout the franchise, particularly within the Boston and New York City MSAs," added Barnes. "In addition, strategic revenue initiatives in commercial and retail banking, wealth management and insurance are positively impacting our operating results. Moreover, we are pleased with the continued progress in managing the overall level of operating expenses despite absorbing a full quarter of costs related to the 57 branches we acquired late in the second quarter."
Barnes concluded, "Our strong business fundamentals, ongoing ability to leverage our brand in attractive markets, dedicated and customer-focused employees, and prospects for 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, a consistent dividend policy, continued share repurchases and a thoughtful acquisition strategy."
"On an operating basis, earnings were $64 million, or 19 cents per share, this quarter," stated Kirk W. Walters,
Senior Executive Vice President and Chief Financial Officer. "The Company's performance in the third quarter
reflects our continued focus on improving operating leverage by increasing
fee-based income and ongoing expense control."
Walters continued, "The decline in the net interest margin this quarter on both a GAAP and operating basis reflects continued repricing pressure within the loan portfolios partially offset by a reduction in our cost of deposits. Non-interest income reflects ongoing improvement in most of our fee-based businesses, the seasonal increase in insurance revenue and higher loan prepayment fees. The efficiency ratio improved to 61.4 percent this quarter, as revenue growth and the progress we are making as a result of cost savings initiatives offset the increase in the level of operating non-interest expense this quarter attributable to our recent purchase of 57 branches."
Walters concluded, "We certainly are pleased with the continued improvement in asset quality. Our loan
charge-off ratio of 18 basis points this quarter, which represents less than one-half of our peers', is the
Company's lowest in over three years. This is a reflection of the Company's historically strong underwriting
standards, the economic strength of the geography in which we operate and the resilience of our customers. Of
note, non-performing loans in the acquired portfolio have declined $158 million, or 44 percent, since December
For the originated loan portfolio, non-performing loans equaled 1.45 percent of loans at September 30, 2012, compared to 1.52 percent at June 30, 2012 and 1.60 percent at September 30, 2011.
Non-performing assets (excluding acquired non-performing loans) equaled 1.59 percent of originated loans, REO
and repossessed assets at September 30, 2012, compared to 1.67 percent at June 30, 2012 and 1.88 percent at
September 30, 2011. Net loan charge-offs as a percentage of average loans on an annualized basis were 0.18
percent in the third quarter of 2012 compared to 0.26 percent in this year's second quarter.
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 $202.0 million at September 30, 2012, compared to $236.6 million at June 30, 2012 and
$241.6 million at September 30, 2011.
Operating return on average assets was 0.91 percent for the third quarter of 2012, compared to 0.96 percent for the third quarter of 2011 and 0.97 percent for the second quarter of 2012. Operating return on average tangible stockholders' equity was 8.6 percent for the third quarter of 2012, compared to 7.8 percent for the third quarter of 2011 and 8.9 percent for the second quarter of 2012.
At September 30, 2012, People's United Financial's tier 1 common and total risk-based capital ratios were 13.6
percent and 15.6 percent, respectively, and the tangible equity ratio stood at 11.2 percent. People's United
Bank's tier 1 and total risk-based capital ratios were 13.2 percent and 14.1 percent, respectively, at September
Previously reported results for (i) the first two quarters of 2012, (ii) all four quarters of 2011, and (iii)
the fourth quarter of 2010 have been revised to reflect a reduction in interest income on certain acquired loans
relating to an unintentional overstatement of interest income. The effect of these revisions was immaterial to
each period (no change in basic and diluted earnings per share for the first and second quarters of 2012 and the
first and fourth quarters of 2011, and a one cent reduction in basic and diluted earnings per share for the
second and third quarters of 2011 and the fourth quarter of 2010). Net income for the three months ended June 30,
2012, March 31, 2012, December 31, 2011, September 30, 2011, June 30, 2011, March 31, 2011 and December 31, 2010
was reduced by $0.2 million, $1.3 million, $1.6 million, $1.4 million, $1.7 million, $1.7 million and $3.2
million, respectively, reflecting the after-tax decreases in total interest on loans and net interest income in
People's United Financial, a diversified financial services company with $29 billion in assets, provides
commercial and retail banking, as well as wealth management services through a network of 417 branches in
Connecticut, New York, Massachusetts, Vermont, 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 $12.0 billion and
$4.5 billion, respectively, at September 30, 2012.
On October 18, 2012, 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.
3Q 2012 Financial Highlights
Net income was $62.2 million, or $0.18 per share.
- Operating earnings were $64.4 million, or $0.19 per share.
Net interest income totaled $234.8 million compared to $235.6 million in 2Q12.
- Cost recovery income on acquired loans, representing cash receipts in excess of carrying amount, totaled $4.1 million in 3Q12 ($4.7 million in 2Q12).
Operating net interest margin decreased 6 basis points from 2Q12 to 3.82%.
- Loan yields reduced the net interest margin by 9 basis points.
- Lower funding costs in 3Q12 benefited the net interest margin by 3 basis points.
Provision for loan losses totaled $15.1 million.
- Net loan charge-offs totaled $9.4 million, of which $4.8 million related to loans with specific reserves established in prior periods.
- Reflects a $4.8 million increase in the allowance for loan losses due to loan growth.
- Includes a provision for loan losses on acquired loans of $5.7 million.
Non-interest income was $81.4 million in 3Q12 compared to $75.7 million in 2Q12.
- Loan prepayment fees increased $2.5 million from 2Q12.
- Insurance revenue increased $2.3 million from 2Q12, primarily reflecting the seasonal nature of insurance renewals.
- Net gains on sales of residential mortgage loans increased $0.8 million from 2Q12.
- Bank service charges increased $0.5 million from 2Q12 to $33.0 million.
Non-interest expense totaled $208.9 million in 3Q12 compared to $205.7 million in 2Q12.
- Operating non-interest expense was $205.7 million in 3Q12 compared to $202.1 million in 2Q12.
- 3Q12 includes a full quarter of non-interest expense (approximately $7.6 million) related to the purchase of 57 branches late in 2Q12.
- Efficiency ratio in 3Q12 decreased to 61.4% from 61.5% in 2Q12, reflecting a $6.0 million increase in operating revenues and a $3.1 million increase in operating expenses.
- Effective income tax rate was 32.5% for 3Q12 compared to 32.0% for 2Q12.
- Commercial banking loans, excluding acquired loans, increased $722 million from June 30, 2012.
- Average commercial banking loans totaled $14.7 billion in 3Q12, an increase of $184 million, or 5% annualized, from 2Q12.
The ratio of originated non-performing commercial banking loans to originated commercial banking loans was
1.49% at September 30, 2012 compared to 1.57% at June 30, 2012.
- Non-performing commercial banking assets, excluding acquired non-performing loans, totaled $211.3 million at September 30, 2012 compared to $211.2 million at June 30, 2012.
- Net loan charge-offs totaled $7.2 million, or 0.20% annualized, of average commercial banking loans in 3Q12, compared to $10.4 million, or 0.29% annualized, in 2Q12.
- For the originated commercial banking portfolio, the allowance for loan losses as a percentage of loans was 1.22% at September 30, 2012 compared to 1.29% at June 30, 2012.
- The commercial banking originated allowance for loan losses represented 82% of originated non-performing commercial banking loans at both September 30, 2012 and at June 30, 2012.
- Commercial deposits totaled $5.6 billion at September 30, 2012 compared to $5.4 billion at June 30, 2012.
- Residential mortgage loans, excluding acquired loans, increased $97 million from June 30, 2012.
- Average residential mortgage loans totaled $3.9 billion in 3Q12, an increase of $68 million, or 7% annualized, from 2Q12.
- The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 1.73% at September 30, 2012 compared to 1.87% at June 30, 2012.
- Net loan charge-offs totaled $1.3 million, or 0.13% annualized, of average residential mortgage loans in 3Q12, compared to $1.4 million, or 0.14% annualized, in 2Q12.
- Home equity loans, excluding acquired loans, increased $27 million from June 30, 2012.
- Average home equity loans totaled $2.0 billion in 3Q12, unchanged from 2Q12.
- The ratio of originated non-performing home equity loans to originated home equity loans was 0.74% at September 30, 2012 compared to 0.71% at June 30, 2012.
- Net loan charge-offs totaled $0.6 million, or 0.13% annualized, of average home equity loans in 3Q12, compared to $1.4 million, or 0.28% annualized, in 2Q12.
Retail deposits totaled $15.8 billion at September 30, 2012 compared to $16.1 billion at June 30, 2012.
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.