January 17, 2013
January 17, 2013
People's United Financial Reports Fourth Quarter Operating Earnings of $0.19 Per Share; Net Income of $0.18 Per Share
Click here to see the fourth quarter Financial Schedule.
BRIDGEPORT, CT – People's United Financial, Inc. (NASDAQ: PBCT) today reported net income of $61.2 million, or $0.18 per share, for the fourth quarter of 2012, compared to $41.4 million, or $0.12 per share, for the fourth quarter of 2011, and $62.2 million, or $0.18 per share, for the third quarter of 2012. Operating earnings were $63.2 million, or $0.19 per share, for the fourth quarter of 2012, compared to $57.1 million, or $0.17 per share, for the fourth quarter of 2011 and $64.4 million, or $0.19 per share, for the third quarter of 2012.
For the year ended December 31, 2012, net income totaled $245.3 million, or $0.72 per share, compared to $192.4 million, or $0.55 per share, for 2011. Operating earnings were $253.9 million, or $0.75 per share, for 2012, compared to $230.7 million, or $0.66 per share, for 2011.
The Company's Board of Directors declared a $0.16 per share quarterly dividend, payable February 15, 2013 to shareholders of record on February 1, 2013. Based on the closing stock price on January 16, 2013, the dividend yield on People's United Financial common stock is 5.1 percent.
During the fourth quarter of 2012 the Company repurchased 4.7 million shares of People's United Financial common
stock at a total cost of $56 million and, in 2012, the Company repurchased18.2 million shares of common stock at
a total cost of $220 million. Under the new share repurchase authorization announced in November 2012, 33.4
million shares of common stock remain available for repurchase.
"Our performance throughout 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 financial results in 2012 reflect stable operating metrics in a challenging economic environment, supported by solid loan and deposit growth, strength in our fee income businesses and meaningful cost control."
Barnes continued, "We are encouraged by continued strong loan and deposit growth within our legacy franchise and as a result of the strategic revenue initiatives undertaken during the past year. In particular, mortgage warehouse lending, asset-based lending, New York commercial real estate and equipment finance, contributed to total loan growth of $1.4 billion during 2012. The $935 million increase in total deposits in 2012 is confirmation of our dedication to superior customer service and a full-range of products as well as continued emphasis on leveraging our brand throughout the franchise, including targeted in-store branch acquisitions and an expanded presence in the Boston and New York City MSAs."
Barnes concluded, "We continue to demonstrate our ability to prudently and effectively deploy capital through organic loan and deposit growth, a consistent dividend policy, share repurchases and a thoughtful acquisition strategy."
"On an operating basis, earnings were $63 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 fourth quarter reflects our continued focus on operating leverage through increased fee-based income and ongoing expense control to mitigate the negative impact of this prolonged low interest rate environment."
Walters continued, "The net interest margin this quarter primarily reflects the impact of significant loan originations, continued run-off of the acquired loan portfolio and an increase in the investment portfolio. Non-interest income reflects ongoing improvement in most of our fee-based businesses as well as higher loan prepayment fees and gains on sales of residential mortgage loans. Regarding expenses, we are pleased with the steady progress as evidenced by the continued downward trend in operating non-interest expense."
Walters concluded, "We certainly are pleased with the continued improvement in asset quality. Our loan charge-off ratio throughout 2012 represented less than one-half of our peers', which 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 $178 million, or 50 percent, since December 31, 2010."
For the originated loan portfolio, non-performing loans equaled 1.30 percent of loans at December 31, 2012, compared to 1.45 percent at September 30, 2012 and 1.75 percent at December 31, 2011. Non-performing assets (excluding acquired non-performing loans) equaled 1.48 percent of originated loans, REO and repossessed assets at December 31, 2012, compared to 1.59 percent at September 30, 2012 and 2.00 percent at December 31, 2011. Net loan charge-offs as a percentage of average loans on an annualized basis were 0.19 percent in the fourth quarter of 2012 compared to 0.18 percent in the third 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 $181.6 million at December 31,
2012, compared to $202.0 million at September 30, 2012 and
$249.0 million at December 31, 2011.
Operating return on average assets was 0.87 percent for the fourth quarter of 2012, compared to 0.84 percent for the fourth quarter of 2011 and 0.91 percent for the third quarter of 2012. Operating return on average tangible stockholders' equity was 8.6 percent for the fourth quarter of 2012, compared to 7.2 percent for the fourth quarter of 2011 and 8.6 percent for the third quarter of 2012.
At December 31, 2012, People's United Financial's tier 1 common and total risk-based capital ratios were 12.7 percent and 14.7 percent, respectively, and the tangible equity ratio stood at 10.2 percent. People's United Bank's tier 1 risk-based capital and total risk-based capital ratios were 12.2 percent and 13.1 percent, respectively, at December 31, 2012.
People's United Financial, a diversified financial services company with $30 billion in assets, provides
commercial and retail banking, as well as wealth management services through a network of 419 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 $11.4 billion and $4.5 billion, respectively, at December 31, 2012.
On January 17, 2013, 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.
4Q 2012 Financial Highlights
Net income was $61.2 million, or $0.18 per share.
- Operating earnings were $63.2 million, or $0.19 per share.
Net interest income totaled $225.1 million compared to $234.8 million in 3Q12.
- Interest income on acquired loans decreased $6.9 million from 3Q12 to $41.8 million.
- Cost recovery income on acquired loans, representing cash receipts in excess of carrying amount, totaled $4.1 million in 3Q12.
Operating net interest margin decreased 19 basis points from 3Q12 to 3.63%.
- The effects of new loan volume at lower rates and lower interest income on acquired loans reduced the margin by 7 and 5 basis points, respectively.
- An increase in investment balances reduced the margin by 4 basis points.
- The run-off of fair value amortization on acquired deposits and the issuance of senior notes during the quarter each reduced the margin by 2 basis points.
- Lower deposit rates and improved mix benefited the margin by 3 basis points.
Provision for loan losses totaled $12.0 million.
- Net loan charge-offs totaled $10.0 million, of which $5.2 million related to loans with specific reserves established in prior periods.
- Reflects a $7.2 million increase in the allowance for loan losses due to loan growth.
Non-interest income was $84.3 million in 4Q12 compared to $81.4 million in 3Q12.
- Loan prepayment fees increased $2.7 million from 3Q12.
- Net gains on sales of residential mortgage loans increased $2.5 million from 3Q12.
- Insurance revenue decreased $2.8 million from 3Q12, primarily reflecting the seasonal nature of insurance renewals.
Non-interest expense totaled $207.4 million in 4Q12 compared to $208.9 million in 3Q12.
- Operating non-interest expense was $204.5 million in 4Q12 compared to $205.7 million in 3Q12.
- Compensation and benefits expense decreased $9.3 million from 3Q12, primarily reflecting lower incentive costs, including the benefit associated with the final vesting of stock awards granted in 2007 in connection with the Company's second step conversion.
- Real estate owned expenses declined $2.4 million from 3Q12
- Efficiency ratio in 4Q12 increased to 63.1% from 61.4% in 3Q12, primarily reflecting the decrease in interest income on acquired loans.
- Effective income tax rate was 32.0% for 4Q12 and 32.4% for 2012.
- Commercial banking loans, excluding acquired loans, increased $1.1 billion from September 30, 2012.
- Average commercial banking loans totaled $15.1 billion in 4Q12, an increase of $436 million, or 12% annualized, from 3Q12.
The ratio of originated non-performing commercial banking loans to originated commercial banking loans was
1.20% at December 31, 2012 compared to 1.49% at September 30, 2012.
- Non-performing commercial banking assets, excluding acquired non-performing loans, totaled $186.1 million at December 31, 2012 compared to $211.3 million at September 30, 2012.
- Net loan charge-offs totaled $6.2 million, or 0.16% annualized, of average commercial banking loans in 4Q12, compared to $7.2 million, or 0.20% annualized, in 3Q12.
- For the originated commercial banking portfolio, the allowance for loan losses as a percentage of loans was 1.13% at December 31, 2012 compared to 1.22% at September 30, 2012.
- The commercial banking originated allowance for loan losses represented 95% of originated non-performing commercial banking loans at December 31, 2012 compared to 82% at September 30, 2012.
- Commercial deposits totaled $5.8 billion at December 31, 2012 compared to $5.6 billion at September 30, 2012.
- Residential mortgage loans, excluding acquired loans, increased $22 million from September 30, 2012.
- Average residential mortgage loans totaled $3.9 billion in 4Q12, an increase of $24 million, or 2% annualized, from 3Q12.
- The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 1.84% at December 31, 2012 compared to 1.73% at September 30, 2012.
- Net loan charge-offs totaled $1.7 million, or 0.18% annualized, of average residential mortgage loans in 4Q12, compared to $1.3 million, or 0.13% annualized, in 3Q12.
- Home equity loans, excluding acquired loans, increased $6 million from September 30, 2012.
- Average home equity loans totaled $2.0 billion in 4Q12, unchanged from 3Q12.
- The ratio of originated non-performing home equity loans to originated home equity loans was 1.07% at December 31, 2012 compared to 0.74% at September 30, 2012.
- Net loan charge-offs totaled $1.7 million, or 0.32% annualized, of average home equity loans in 4Q12, compared to $0.6 million, or 0.13% annualized, in 3Q12.
Retail deposits totaled $16.0 billion at December 31, 2012 compared to $15.8 billion at September 30,
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.
Access Information About People's United Financial at www.peoples.com.