October 17, 2013

October 17, 2013

People’s United Financial Reports Third Quarter Operating Earnings Of $0.20 Per Share And Net Income of $0.19 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 $58.5 million, or $0.19 per share, for the third quarter of 2013, compared to $62.2 million, or $0.18 per share, for the third quarter of 2012, and $62.1 million, or $0.20 per share, for the second quarter of 2013.  Operating earnings were $60.8 million, or $0.20 per share, for the third quarter of 2013, compared to $64.4 million, or $0.19 per share, for the third quarter of 2012, and $62.4 million, or $0.20 per share, for the second quarter of 2013.

The Company's Board of Directors declared a $0.1625 per share quarterly dividend, payable November 15, 2013 to shareholders of record on November 1, 2013.  Based on the closing stock price on October 16, 2013, the dividend yield on People's United Financial common stock is 4.4 percent.

During the third quarter of 2013 the Company repurchased 2.1 million shares of People's United Financial common stock at a weighted average price of $14.33 per share and, during the first nine months of 2013, the Company repurchased 24.5 million shares of common stock at a weighted average price of $13.39 per share.  Under the existing share repurchase authorization, 8.9 million shares of common stock remain available for repurchase.

"Our performance this quarter reflects the continued benefits from strategic investments in people, products and services, as well as an expanded geographic footprint developed over the past three years," stated Jack Barnes, President and Chief Executive Officer.  "Ongoing progress in loan and deposit growth, both this quarter and over the past 12 quarters, is a tribute to both our relationship managers and customers. We remain focused on delivering shareholder value by leveraging opportunities within existing markets, including strengthening our position in the Boston and New York MSAs."

"On an operating basis, earnings were $61 million, or 20 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 continued strong loan originations, while non-interest income demonstrates the ongoing improvement in most of our fee-based businesses.  Cost control remains an important area of focus.  The modest increase in operating expenses this quarter primarily reflects higher payroll-related costs, professional and outside service fees, and real estate owned expenses."

Walters concluded, "We certainly are pleased with the sustained 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, acquired non-performing loans have declined $27 million, or 20 percent annualized, and originated non-performing loans have declined $16 million, or 8 percent annualized, from December 31, 2012."

Net loan charge-offs as a percentage of average total loans on an annualized basis were 0.17 percent in the third quarter of 2013 compared to 0.19 percent in the second quarter of 2013 and 0.18 percent in the third quarter of 2012.  For the originated loan portfolio, non-performing loans equaled 1.10 percent of loans at September 30, 2013, compared to 1.18 percent at June 30, 2013 and 1.45 percent at September 30, 2012.  Non-performing assets (excluding acquired non-performing loans) equaled 1.26 percent of originated loans, REO and repossessed assets at September 30, 2013, compared to 1.33 percent at June 30, 2013 and 1.59 percent at September 30, 2012.

Operating return on average assets was 0.78 percent for the third quarter of 2013, compared to 0.81 percent for the second quarter of 2013 and 0.91 percent for the third quarter of 2012.  Operating return on average tangible stockholders' equity was 9.8 percent for the third quarter of 2013, compared to 9.3 percent for the second quarter of 2013 and 8.6 percent for the third quarter of 2012.

At September 30, 2013, People's United Financial's tier 1 common and total risk-based capital ratios were 11.4 percent and 12.6 percent, respectively, and the tangible equity ratio stood at 8.5 percent. People's United Bank's tier 1 and total risk-based capital ratios were 11.8 percent and 13.2 percent, respectively, at September 30, 2013.

People's United Financial, a diversified financial services company with $32 billion in assets, provides commercial and retail banking, as well as wealth management services through a network of 410 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 $15.5 billion at September 30, 2013.

3Q 2013 Financial Highlights

Summary

  • Net income was $58.5 million, or $0.19 per share.
    • Operating earnings were $60.8 million, or $0.20 per share.
  • Net interest income totaled $223.5 million in 3Q13 compared to $220.9 million in 2Q13.
    • Interest income on acquired loans decreased $4.6 million from 2Q13 to $29.4 million.
  • Net interest margin decreased 3 basis points from 2Q13 to 3.30%.
    • The effect of one more calendar day in 3Q13 benefited the margin by 2 basis points.
    • The effect of new loan volume at lower rates reduced the margin by 6 basis points.
  • Provision for loan losses totaled $12.1 million.
    • Net loan charge-offs totaled $9.6 million, of which $6.4 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 $84.0 million in 3Q13 compared to $86.1 million in 2Q13.
    • Insurance revenue increased $2.0 million from 2Q13, primarily reflecting the seasonal nature of insurance renewals.
    • Bank service charges increased $1.2 million from 2Q13, in part due to the seasonal nature of certain fee categories.
    • Operating lease income increased $0.6 million from 2Q13.
    • Net gains on sales of acquired loans totaled $5.8 million in 2Q13 (none in 3Q13).
    • Assets under administration and those under full discretionary management, neither of which are reported as assets of People's United Financial, totaled $10.5 billion and $5.0 billion, respectively, at September 30, 2013.
  • Non-interest expense totaled $212.5 million in 3Q13 compared to $205.8 million in 2Q13.
    • Operating non-interest expense was $209.2 million in 3Q13 compared to $205.4 million in 2Q13. Excluding operating lease expense and amortization of acquisition-related intangible assets, operating non-interest expense totaled $194.9 million in 3Q13 compared to $191.2 million in 2Q13.
    • Compensation and benefits expense increased $2.5 million from 2Q13, primarily reflecting higher payroll-related costs in 3Q13.
    • Compared to 2Q13, professional and outside service fees increased $1.2 million and real estate owned expenses increased $0.5 million.
    • Efficiency ratio in 3Q13 increased to 63.6% from 62.7% in 2Q13, primarily reflecting the increase in total operating expenses.
  • Effective income tax rate was 29.5% for 3Q13 and 31.5% for the first nine months of 2013, compared to 32.4% for the full-year of 2012.

 

Commercial Banking

  • Commercial banking loans increased $212 million, or 5% annualized, from June 30, 2013.
  • Average commercial banking loans totaled $16.6 billion in 3Q13, an increase of $436 million,
    or 11% annualized, from 2Q13.
  • The ratio of originated non-performing commercial banking loans to originated commercial banking loans was 1.01% at September 30, 2013 compared to 1.10% at June 30, 2013.
    • Non-performing commercial banking assets, excluding acquired non-performing loans, totaled $177.1 million at September 30, 2013 compared to $183.8 million at June 30, 2013.
  • Net loan charge-offs totaled $7.2 million, or 0.17% annualized, of average commercial banking loans in 3Q13, compared to $6.9 million, or 0.17% annualized, in 2Q13.
  • For the originated commercial banking portfolio, the allowance for loan losses as a percentage of loans was 1.02% at September 30, 2013 compared to 1.05% at June 30, 2013.
  • The commercial banking originated allowance for loan losses represented 101% of originated non-performing commercial banking loans at September 30, 2013, compared to 96% at June 30, 2013.
  • Commercial deposits totaled $6.3 billion at September 30, 2013 compared to $5.8 billion at June 30, 2013.

 

Retail Banking

  • Residential mortgage loans increased $152 million, or 15% annualized, from June 30, 2013.
    • Average residential mortgage loans totaled $4.1 billion in 3Q13, an increase of $109 million, or 11% annualized, from 2Q13.
    • The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 1.51% at September 30, 2013 compared to 1.58% at June 30, 2013.
    • Net loan charge-offs totaled $0.4 million, or 0.04% annualized, of average residential mortgage loans in 3Q13, compared to $2.3 million, or 0.23% annualized, in 2Q13.
  • Home equity loans increased $5 million from June 30, 2013.
    • Average home equity loans totaled $2.0 billion in 3Q13, unchanged from 2Q13.
    • The ratio of originated non-performing home equity loans to originated home equity loans was 1.00% at September 30, 2013 compared to 1.06% at June 30, 2013.
    • Net loan charge-offs totaled $1.6 million, or 0.30% annualized, of average home equity loans in 3Q13, compared to $1.4 million, or 0.28% annualized, in 2Q13.
  • Retail deposits totaled $15.9 billion at September 30, 2013 compared to $16.2 billion at June 30, 2013.

 

Conference Calls

On October 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.

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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