April 18, 2013

April 18, 2013

People’s United Financial Reports First Quarter Operating Earnings of $0.18 Per Share and Net Income of $0.16 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 $52.5 million, or $0.16 per share, for the first quarter of 2013, compared to $57.3 million, or $0.17 per share, for the first quarter of 2012, and $61.2 million, or $0.18 per share, for the fourth quarter of 2012.  Operating earnings were $57.9 million, or $0.18 per share, for the first quarter of 2013, compared to $59.3 million, or $0.18 per share, for the first quarter of 2012 and $63.2 million, or $0.19 per share, for the fourth quarter of 2012.

The Board of Directors of People's United Financial voted to increase the common stock dividend to an annual rate of $0.65 per share. Based on the closing stock price on April 17, 2013, the dividend yield on People's United Financial common stock is 5.1 percent.  The quarterly dividend of $0.1625 per share is payable May 15, 2013 to shareholders of record on May 1, 2013.

During the first quarter of 2013 the Company repurchased 11.1 million shares of People's United Financial common stock at a total cost of $144 million.  Under the existing share repurchase authorization, 22.3 million shares of common stock remain available for repurchase.

"In the first quarter of 2013, we continued to grow our franchise and upgrade our capabilities while efficiently deploying capital," stated Jack Barnes, President and Chief Executive Officer.  "In what is typically a seasonally slower quarter for loan growth, we saw the benefits of our expanded footprint and strengthened product line-up, which resulted in annualized linked quarter loan growth of 8 percent."

Barnes continued, "Importantly, we believe that our net interest margin has now largely stabilized, which should allow net interest income to increase at a pace more closely aligned with our earning asset growth in the quarters ahead. We also took actions this quarter that will assist us in achieving our operating expense goals in 2013.  The prolonged period of low interest rates, combined with our above industry capital levels, provides us with the continued opportunity to repurchase shares at a discount to our earnings power in a more normalized rate environment."

Barnes concluded, "We are pleased to announce our 21st consecutive annual dividend increase.  Our strong business fundamentals, ongoing ability to leverage our brand in attractive markets, and prospects for growth continue to be the foundations of our strength relative to others in the industry."

"On an operating basis, earnings were $58 million, or 18 cents per share, this quarter," stated Kirk W. Walters, Senior Executive Vice President and Chief Financial Officer.  "The net interest margin reflects the impact of strong loan originations, higher average balances in the investment portfolio and a full quarter of interest expense on the senior notes issued in December 2012. Non-interest income reflects ongoing improvement in most of our fee-based businesses as well as continued contributions from gains on sales of residential mortgage loans and loan prepayment fees."

Walters added, "Cost control continues to remain an important area of focus, as evidenced by the decline in operating expenses this quarter, which reflects the benefits from several cost-saving initiatives taken over the past several quarters.  This quarter's decline in operating expenses is particularly noteworthy given that expenses in the first quarter are generally higher than in subsequent quarters due to payroll-related costs."

Walters concluded, "We certainly are pleased with the continued improvement in asset quality. Our low loan charge-off ratio 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 particular note, non-performing loans in the acquired portfolio have declined $179 million, or 50 percent, since December 31, 2010."

For the originated loan portfolio, non-performing loans equaled 1.25 percent of loans at March 31, 2013, compared to 1.30 percent at December 31, 2012 and 1.67 percent at March 31, 2012. Non-performing assets (excluding acquired non-performing loans) equaled 1.42 percent of originated loans, REO and repossessed assets at March 31, 2013, compared to 1.48 percent at December 31, 2012 and 1.85 percent at March 31, 2012.

Net loan charge-offs as a percentage of average loans on an annualized basis were 0.24 percent in the first quarter of 2013 compared to 0.19 percent in the fourth quarter of 2012. Excluding $3.3 million of acquired loan charge-offs, net loan charge-offs as a percentage of average loans on an annualized basis were 0.18 percent in the first quarter of 2013.

Operating return on average assets was 0.77 percent for the first quarter of 2013, compared to 0.86 percent for the first quarter of 2012 and 0.87 percent for the fourth quarter of 2012. Operating return on average tangible stockholders' equity was 8.1 percent for the first quarter of 2013, compared to 7.8 percent for the first quarter of 2012 and 8.6 percent for the fourth quarter of 2012.

At March 31, 2013, People's United Financial's tier 1 common and total risk-based capital ratios were 12.0 percent and 13.7 percent, respectively, and the tangible equity ratio stood at 9.6 percent. People's United Bank's tier 1 risk-based capital and total risk-based capital ratios were 12.1 percent and 13.5 percent, respectively, at March 31, 2013.

People's United Financial, a diversified financial services company with $31 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 managed and administered, which are not reported as assets of People's United Financial, totaled $15.4 billion at March 31, 2013.

Conference Call

On April 18, 2013, 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 2013 Financial Highlights

Summary

  • Net income was $52.5 million, or $0.16 per share.
    • Operating earnings were $57.9 million, or $0.18 per share.
  • Net interest income totaled $219.3 million in 1Q13 compared to $225.1 million in 4Q12.
    • Interest income on acquired loans decreased $4.7 million from 4Q12 to $37.1 million.
  • Net interest margin decreased 25 basis points from 4Q12 to 3.38%.
    • An increase in average investment balances reduced the margin by 7 basis points.
    • The effects of two fewer calendar days in 1Q13, new loan volume at lower rates and lower interest income on acquired loans reduced the margin by 5, 4 and 3 basis points, respectively.
    • The impact from a full quarter of senior notes interest expense reduced the margin by 5 basis points.
    • Lower deposit rates and improved mix benefited the margin by 1 basis point.
  • Provision for loan losses totaled $12.4 million.
    • Net loan charge-offs totaled $13.1 million, of which $9.6 million related to loans with specific reserves established in prior periods.
    • Reflects a $6.3 million increase in the originated allowance for loan losses due to loan growth.
    • Includes a provision for loan losses on acquired loans of $2.6 million, relating almost entirely to a single credit.
  • Non-interest income was $82.9 million in 1Q13 compared to $84.3 million in 4Q12.
    • Insurance revenue increased $1.6 million from 4Q12, primarily reflecting the seasonal nature of insurance renewals.
    • Brokerage commissions increased $0.4 million from 4Q12.
    • Bank service charges decreased $1.3 million from 4Q12, in part due to the seasonal nature of certain fee categories.
    • Assets under administration and those under full discretionary management, neither of which are reported as assets of People's United Financial, totaled $10.7 billion and $4.7 billion, respectively, at March 31, 2013.
  • Non-interest expense totaled $212.0 million in 1Q13 compared to $207.4 million in 4Q12.
    • Operating non-interest expense was $204.0 million in 1Q13 compared to $204.5 million in 4Q12. Excluding operating lease expense and amortization of acquisition-related intangible assets, operating non-interest expense totaled $190.0 million in 1Q13 compared to
      $190.3 million in 4Q12.
    • Compensation and benefits expense increased $10.8 million from 4Q12, primarily reflecting higher payroll-related costs in 1Q13 and lower incentive costs in 4Q12.
    • Real estate owned expenses increased $1.1 million from 4Q12.
    • Efficiency ratio in 1Q13 increased to 64.1% from 63.1% in 4Q12, primarily reflecting the decrease in net interest income.
  • Effective income tax rate was 32.5% for 1Q13 and 32.4% for the full year of 2012.

 

Commercial Banking

  • Commercial banking loans, excluding acquired loans, increased $498 million from December 31, 2012.
  • Average commercial banking loans totaled $15.6 billion in 1Q13, an increase of $518 million, or 14% annualized, from 4Q12.
  • The ratio of originated non-performing commercial banking loans to originated commercial banking loans was 1.13% at March 31, 2013 compared to 1.20% at December 31, 2012.
    • Non-performing commercial banking assets, excluding acquired non-performing loans, totaled $179.0 million at March 31, 2013 compared to $186.1 million at December 31, 2012.
  • Net loan charge-offs totaled $9.4 million, or 0.24% annualized, of average commercial banking loans in 1Q13, compared to $6.2 million, or 0.16% annualized, in 4Q12.
    • Excluding acquired loan charge-offs, net loan charge-offs totaled $6.4 million, or 0.16% annualized, in 1Q13.
  • For the originated commercial banking portfolio, the allowance for loan losses as a percentage of loans was 1.11% at March 31, 2013 compared to 1.13% at December 31, 2012.
  • The commercial banking originated allowance for loan losses represented 98% of originated non-performing commercial banking loans at March 31, 2013, compared to 95% at
    December 31, 2012.
  • Commercial deposits totaled $5.6 billion at March 31, 2013 compared to $5.8 billion at December 31, 2012.

 

Retail Banking

  • Residential mortgage loans, excluding acquired loans, increased $96 million from December 31, 2012.
  • Average residential mortgage loans totaled $3.9 billion in 1Q13, an $11 million increase from 4Q12.
  • The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 1.84% at both March 31, 2013 and December 31, 2012.
  • Net loan charge-offs totaled $1.9 million, or 0.19% annualized, of average residential mortgage loans in 1Q13, compared to $1.7 million, or 0.18% annualized, in 4Q12.
    • Excluding acquired loan charge-offs, net loan charge-offs totaled $1.6 million, or 0.16% annualized, in 1Q13.
  • Home equity loans, excluding acquired loans, remained flat to December 31, 2012.
  • Average home equity loans totaled $2.0 billion in 1Q13, unchanged from 4Q12.
  • The ratio of originated non-performing home equity loans to originated home equity loans was 1.13% at March 31, 2013 compared to 1.07% at December 31, 2012.
  • Net loan charge-offs totaled $1.5 million, or 0.30% annualized, of average home equity loans in 1Q13, compared to $1.7 million, or 0.32% annualized, in 4Q12.
  • Retail deposits totaled $16.2 billion at March 31, 2013 compared to $16.0 billion at December 31, 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," "should" 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 acquisitions; 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. 

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Access Information About People's United Financial at www.peoples.com.

 

 

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