October 16, 2008
October 16, 2008
People's United Financial Reports Third Quarter Earnings Of $46 Million Or $0.14 Per Share
Quarter Characterized by Strong Capital Position and Solid Asset Quality
BRIDGEPORT, CT. –People's United Financial, Inc. (NASDAQ: PBCT) today announced net income of $46.0 million, or $0.14 per share, for the third quarter of 2008, compared to $43.0 million, or $0.13 per share, for the second quarter of 2008 and $57.6 million, or $0.20 per share, for the third quarter of 2007. Earnings for the second and third quarters of 2008 reflect continued low levels of net loan charge-offs and further benefit from previously announced cost-reduction initiatives.
People's United Financial completed its acquisition of Chittenden Corporation on January 1, 2008. Accordingly, People's United Financial's third quarter 2007 results do not include the results of Chittenden Corporation and are not directly comparable to the current quarter's earnings.
For the third quarter of 2008, return on average tangible assets was 0.99 percent and return on average tangible stockholders' equity was 5.0 percent, compared to 0.91 percent and 4.7 percent, respectively, for the second quarter of 2008.
The Board of Directors of People's United Financial declared a $0.15 per share quarterly dividend, payable November 15, 2008 to shareholders of record on November 1, 2008. Based on the closing stock price on October 15, 2008, the dividend yield on People's United Financial common stock is 3.9 percent.
President and Chief Executive Officer, Philip R. Sherringham stated, "Our strength and stability have clearly differentiated our bank in the wake of the current economic and financial sector turmoil. Our performance this quarter continues to be a reflection of our fortress balance sheet and continued strong asset quality, and was further bolstered by an improvement in the net interest margin."
Sherringham added, "We continue to generate healthy loan growth across our core lending businesses. Our average commercial banking and home equity loan portfolios increased $146 million, or 6 percent annualized, from the second quarter of 2008."
Sherringham concluded, "We remain firmly committed to our goal of enhancing our premier regional banking franchise. While our strategic focus remains on growth through acquisitions, we continue to invest in our commercial, retail banking and wealth management businesses throughout New England. Our balance sheet continues to be funded almost entirely by deposits and stockholders' equity. Given the many challenges of today's environment, the strength of our capital and liquidity positions, asset quality and earnings set us apart from most in the industry."
"Key drivers of the company's performance this quarter were an increase in the net interest margin, expense control and ongoing strong asset quality,"said Paul D. Burner, Senior Executive Vice President and Chief Financial Officer. "The 15 basis point improvement in the net interest margin from the second quarter of 2008 reflects the benefits from disciplined loan and deposit pricing. Non-interest expense decreased slightly from the second quarter of 2008, primarily reflecting the continued benefit from cost-savings initiatives announced earlier this year."
At September 30, 2008, non-performing assets totaled $91.4 million, a $5.0 million increase from June 30, 2008. Non-performing assets equaled 0.64 percent of total loans, REO and repossessed assets, compared to 0.60 percent at June 30, 2008. The allowance for loan losses as a percentage of total loans increased to 1.08 percent at September 30, 2008 compared to 1.06 percent at June 30, 2008.
Third quarter net loan charge-offs totaled $4.0 million compared to $2.4 million in the second quarter of 2008. Net loan charge-offs as a percent of average loans on an annualized basis were 0.11 percent in the third quarter of 2008 compared to 0.07 percent in this year's second quarter. The provision for loan losses this quarter reflects a $2.8 million increase in the allowance for loan losses to $154.5 million at September 30, 2008.
Commenting on asset quality, Burner stated, "While we expect the level of non-performing assets to fluctuate in response to changing economic and market conditions, we remain comfortable with the current levels and do not see any pervasive weakness in any sector of the loan portfolio. The ratio of non-performing loans to total loans was stable at 0.59 percent at September 30, 2008 and net loan charge-offs remain extremely low. We feel that the loan portfolio continues to benefit from our stringent underwriting standards."
On October 17, 2008, at 11 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 People's"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.
Fourth Quarter Earnings Release
People's United Financial expects to release its fourth quarter and full year 2008 earnings on January 22, 2009.
Selected Financial Terms
In addition to evaluating People's United Financial's results of operations in accordance with generally accepted accounting principles ("GAAP"), management routinely supplements this evaluation with an analysis of certain non-GAAP financial measures, such as the efficiency ratio. Management believes this non-GAAP financial measure provides information useful to investors in understanding People's United Financial's underlying operating performance and trends, and facilitates comparisons with the performance of other banks and thrifts.
The efficiency ratio, which represents an approximate measure of the cost required by People's United Financial to generate a dollar of revenue, is the ratio of total non-interest expense (excluding goodwill impairment charges, amortization of acquisition-related intangibles and fair value adjustments, losses on real estate assets and nonrecurring expenses) to net interest income on a fully taxable equivalent basis (excluding fair value adjustments) plus total non-interest income (including the fully taxable equivalent adjustment on bank-owned life insurance income, and excluding gains and losses on sales of assets, other than residential mortgage loans, and nonrecurring income). People's United Financial generally considers an item of income or expense to be nonrecurring if it is not similar to an item of income or expense of a type incurred within the last two years and is not similar to an item of income or expense of a type reasonably expected to be incurred within the following two years. Management considers the efficiency ratio to be more representative of People's United Financial's ongoing operating efficiency, as the excluded items are generally related to external market conditions and non-routine transactions.
3Q 2008 Financial Highlights
- Net income totaled $46.0 million, or $0.14 per share.
- Net interest income on a fully taxable equivalent basis totaled $160.8 million.
- Net interest margin increased 15 basis points from 2Q08 to 3.71%.
- Provision for loan losses totaled $6.8 million.
- Net loan charge-offs totaled $4.0 million in 3Q08 compared to $2.4 million in 2Q08.
- The allowance for loan losses was increased by $2.8 million in 3Q08 from 2Q08 levels.
- Non-interest income totaled $74.2 million, a 1% increase from 2Q08.
- Non-interest expense totaled $158.7 million, a $4.2 million, or 3%, decrease from 2Q08.
- Effective income tax rate was 32.9%.
- Average commercial banking loans increased $73 million from 2Q08 to $8.9 billion.
- Commercial banking non-performing assets totaled $64.3 million.
- The ratio of commercial banking non-performing loans to total commercial banking loans was 0.68% at September 30, 2008.
- Net loan charge-offs totaled $2.5 million, or 0.11% annualized, of average commercial banking loans.
Retail &Small Business Banking
- Average residential mortgage loans totaled $3.4 billion.
- Average home equity loans increased $73 million from 2Q08 to $1.8 billion.
- Average indirect auto loans averaged $0.2 billion.
- Home equity net loan charge-offs totaled $0.2 million, or 0.03% annualized, of average home equity loans.
- Indirect auto net loan charge-offs totaled $0.8 million, or 1.41% annualized, of average indirect auto loans.
- Insurance revenue increased 9% from 2Q08 primarily reflecting seasonal renewals.
- Assets under custody and management totaled $10 billion.
People's United Financial, a diversified financial services company with $20 billion in assets, provides consumer and commercial banking services through a network of more than 300 branches in Connecticut, Vermont, New Hampshire, Massachusetts, Maine and New York. Through its subsidiaries, People's United Financial provides equipment financing, asset management, brokerage and financial advisory services, and insurance services.
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;and (10) the successful integration of Chittenden Corporation. 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.