January 16, 2014
People's United Financial Reports Fourth Quarter Operating Earnings And Net Income of $.20 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 $59.3 million, or $0.20 per share, for the fourth quarter of 2013, compared to $61.2 million, or $0.18 per share, for the fourth quarter of 2012, and $58.5 million, or $0.19 per share, for the third quarter of 2013. Operating earnings were $60.0 million, or $0.20 per share, for the fourth quarter of 2013, compared to $63.2 million, or $0.19 per share, for the fourth quarter of 2012, and $60.8 million, or $0.20 per share, for the third quarter of 2013.
For the year ended December 31, 2013, net income totaled $232.4 million, or $0.74 per share, compared to $245.3 million, or $0.72 per share, for 2012. Operating earnings were $241.1 million, or $0.77 per share, for 2013, compared to $253.9 million, or $0.75 per share, for 2012.
The Company's Board of Directors declared a $0.1625 per share quarterly dividend, payable February 15, 2014 to shareholders of record on February 1, 2014. Based on the closing stock price on January 15, 2014, the dividend yield on People's United Financial common stock is 4.2 percent.
During the fourth quarter of 2013 the Company repurchased 8.9 million shares of People's United Financial common stock at a weighted average price of $14.72 per share, completing the repurchase program authorized by the Board of Directors. In 2013, the Company repurchased 33.4 million shares of common stock at a weighted average price of $13.74 per share.
"Our performance throughout 2013 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," said Jack Barnes, President and Chief Executive Officer. "Our ongoing focus on outstanding customer service has driven healthy loan, deposit and fee income growth over this time period. We remain committed to delivering shareholder value by leveraging opportunities within existing markets, including continued strengthening of our position in the Boston and New York MSAs."
Barnes continued, "I'm pleased with last year's performance, especially in light of the challenging economic and regulatory environment. Most notably, we had a large headwind in the form of a declining net interest margin that continued to be impacted by historically low interest rates. In addition, higher regulatory compliance costs pressured several of our operating metrics."
"Our 2013 financial results reflect another year of meaningful loan and deposit growth," stated Kirk W. Walters, Senior Executive Vice President and Chief Financial Officer. "Annual loan growth was 12 percent in 2013 after a seven percent increase in 2012, while annual deposit growth was four percent in both years. 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. I'm particularly pleased that operating expenses were essentially flat as compared to 2012, considering the number of strategic investments we made and the increasing cost of regulatory compliance."
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,
since December 31, 2012, acquired non-performing loans declined $39 million, or
22 percent, and originated non-performing loans declined $36 million, or 14 percent."
Net loan charge-offs as a percentage of average total loans on an annualized basis were 0.18 percent in the
fourth quarter of 2013, compared to 0.17 percent in the third quarter of 2013 and 0.19 percent in the fourth
quarter of 2012. For the full-year of 2013, net loan charge-offs were 0.19 percent of average total loans
compared to 0.21 percent in 2012. For the originated loan portfolio,
non-performing loans equaled 0.95 percent of loans at December 31, 2013, compared to 1.10 percent at September 30, 2013 and 1.30 percent at December 31, 2012. Non-performing assets (excluding acquired non-performing loans) equaled 1.08 percent of originated loans, REO and repossessed assets at December 31, 2013, compared to 1.26 percent at September 30, 2013 and 1.48 percent at December 31, 2012.
Operating return on average assets was 0.75 percent for the fourth quarter of 2013, compared to 0.78 percent for the third quarter of 2013 and 0.87 percent for the fourth quarter of 2012. Operating return on average tangible stockholders' equity was 9.8 percent for the fourth quarter of 2013, compared to 9.8 percent for the third quarter of 2013 and 8.6 percent for the fourth quarter of 2012.
At December 31, 2013, People's United Financial's tier 1 common and total risk-based capital ratios were 10.2 percent and 11.3 percent, respectively, and the tangible equity ratio stood at 7.8 percent. People's United Bank's tier 1 and total risk-based capital ratios were 11.1 percent and 12.3 percent, respectively, at December 31, 2013.
People's United Financial, a diversified financial services company with $33 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 $16.0 billion at December 31, 2013.
4Q 2013 Financial Highlights
Net income was $59.3 million, or $0.20 per share.
- Operating earnings were $60.0 million, or $0.20 per share.
Net interest income totaled $224.9 million in 4Q13 compared to $223.5 million in 3Q13.
- Interest income on acquired loans decreased $3.1 million from 3Q13 to $26.3 million.
Net interest margin decreased 6 basis points from 3Q13 to 3.24%.
- The effects of new loan volume at lower rates and reduced interest income on acquired loans both impacted the margin by 4 basis points.
Provision for loan losses totaled $10.0 million.
- Net loan charge-offs totaled $10.4 million, of which $5.4 million related to loans with specific reserves established in prior periods.
- Reflects a $5.1 million increase in the originated allowance for loan losses due to loan growth and a $0.1 million allowance reversal related to acquired loans.
Non-interest income was $80.2 million in 4Q13 compared to $84.0 million in 3Q13.
- Operating lease income increased $0.7 million from 3Q13.
- Investment management fees and brokerage commissions both increased $0.4 million from 3Q13.
- Gains on sales of residential mortgage loans decreased $2.9 million from 3Q13.
- Insurance revenue decreased $2.4 million from 3Q13, primarily reflecting the seasonal nature of insurance renewals.
- Bank service charges decreased $1.5 million from 3Q13, 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 $10.8 billion and $5.2 billion, respectively, at December 31, 2013.
Non-interest expense totaled $208.7 million in 4Q13 compared to $212.5 million in 3Q13.
- Operating non-interest expense was $207.7 million in 4Q13 compared to $209.2 million in 3Q13. Excluding operating lease expense and amortization of acquisition-related intangible assets, operating non-interest expense totaled $192.7 million in 4Q13 compared to $194.9 million in 3Q13.
- Compensation and benefits expense increased $0.7 million from 3Q13.
- Compared to 3Q13, real estate owned expenses decreased $2.4 million, advertising and promotion expense decreased $1.0 million and professional and outside service fees decreased $0.3 million.
- Efficiency ratio in 4Q13 increased to 64.3% from 63.6% in 3Q13, primarily reflecting the decrease in total revenues.
- Effective income tax rate was 31.4% for 4Q13 and 31.5% for the full-year of 2013, compared to 32.4% for the full-year of 2012.
- Commercial banking loans increased $967 million, or 23% annualized, from September 30, 2013.
- Average commercial banking loans totaled $17.1 billion in 4Q13, an increase of $465 million, or 11% annualized, from 3Q13.
The ratio of originated non-performing commercial banking loans to originated commercial banking loans was
0.83% at December 31, 2013 compared to 1.01% at September 30, 2013.
- Non-performing commercial banking assets, excluding acquired non-performing loans, totaled $155.4 million at December 31, 2013 compared to $177.1 million at September 30, 2013.
- Net loan charge-offs totaled $6.6 million, or 0.15% annualized, of average commercial banking loans in 4Q13, compared to $7.2 million, or 0.17% annualized, in 3Q13.
- For the originated commercial banking portfolio, the allowance for loan losses as a percentage of loans was 0.95% at December 31, 2013 compared to 1.02% at September 30, 2013.
- The commercial banking originated allowance for loan losses represented 115% of originated non-performing commercial banking loans at December 31, 2013, compared to 101% at September 30, 2013.
- Commercial deposits totaled $6.4 billion at December 31, 2013 compared to $6.3 billion at September 30, 2013.
Residential mortgage loans increased $181 million, or 17% annualized, from September 30, 2013.
- Average residential mortgage loans totaled $4.4 billion in 4Q13, an increase of $215 million, or 21% annualized, from 3Q13.
- The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 1.42% at December 31, 2013 compared to 1.51% at September 30, 2013.
- Net loan charge-offs totaled $1.5 million, or 0.14% annualized, of average residential mortgage loans in 4Q13, compared to $0.4 million, or 0.04% annualized, in 3Q13.
Home equity loans increased $21 million, or 4% annualized, from September 30, 2013.
- Average home equity loans totaled $2.1 billion in 4Q13, an increase of $19 million, or 4% annualized, from 3Q13.
- The ratio of originated non-performing home equity loans to originated home equity loans was 0.98% at December 31, 2013 compared to 1.00% at September 30, 2013.
- Net loan charge-offs totaled $2.0 million, or 0.38% annualized, of average home equity loans in 4Q13, compared to $1.6 million, or 0.30% annualized, in 3Q13.
- Retail deposits totaled $16.2 billion at December 31, 2013 compared to $15.9 billion at September 30, 2013
On January 16, 2014, 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.