April 19, 2018
People’s United Financial Reports First Quarter Net Income of $107.9 Million, or $0.30 Per Common Share
Announces Common Dividend Increase for 25th Consecutive Year
Click here to see the first quarter Financial Schedule
- Return on average assets of 0.98 percent and return on average tangible common equity of 13.8 percent.
- Total revenues of $386.2 million, up two percent linked quarter and 16 percent from a year ago.
- Sustained exceptional asset quality as evidenced by net loan charge-offs as a percentage of average total loans of 6 basis points.
- Common dividend payout ratio of 56.3 percent.
BRIDGEPORT, CT – People's United Financial, Inc. (NASDAQ: PBCT) today reported results for the first quarter 2018. Results for the first quarter and comparison periods are summarized below:
“The results this quarter demonstrate our success in enhancing the earnings power of the Company, while continuing to build the franchise for the long-term,” said Jack Barnes, President and Chief Executive Officer. “We are pleased to report record quarterly net income of $107.9 million, or $0.30 per common share, and a return on average tangible common equity of 13.8 percent. While the first quarter is typically a seasonally slower period for loan growth, production in the quarter was also unfavorably impacted by customers remaining cautious across our portfolios. Commercial real estate balances were lower primarily due to continued slow market conditions, heightened competition and elevated payoffs. In addition, commercial real estate balances reflected greater than expected run-off of the transactional portion of the New York multifamily portfolio. Despite the modest decline in loan balances for the quarter, given our diversified business mix and strong commercial loan pipelines at quarter-end, we remain confident the Company can achieve the annual growth goal provided in January. In addition, we are proud to announce our 25th consecutive annual common dividend increase, which demonstrates our commitment to deliver shareholder value through a consistent cash return of capital.”
“We continue to execute on revenue producing initiatives and synergies created by recent acquisitions,” said David Rosato, Senior Executive Vice President and Chief Financial Officer. “As such, we are pleased total revenues increased two percent on a linked-quarter basis driven by both higher net interest income and non-interest income. Net interest margin of 3.05 percent was down two basis points from the fourth quarter. This decline primarily resulted from the unfavorable impact of tax reform on our municipal bond holdings and tax-preferenced items in our commercial & industrial lending portfolio, as well as two fewer calendar days in the first quarter. These declines were partially offset by higher yields on new business and the upward repricing of floating-rate loans. While the first quarter is seasonally higher for expenses, total non-interest expenses increased only two percent from the fourth quarter, reflecting our continued focus on controlling costs.”
The Company's Board of Directors voted to increase the common stock dividend to an annual rate of $0.70 per share. Based on the closing stock price on April 18, 2018, the dividend yield on People's United Financial common stock is 3.8 percent. The quarterly dividend of $0.1750 per share is payable May 15, 2018 to shareholders of record on May 1, 2018.
People's United Financial, Inc., a diversified financial services company with $44 billion in total assets, provides commercial and retail banking, as well as wealth management services through a network of approximately 400 branches in Connecticut, New York, Massachusetts, Vermont, New Hampshire and Maine.
1Q 2018 Financial Highlights
- Net income totaled $107.9 million, or $0.30 per common share.
- Net income available to common shareholders totaled $104.4 million.
- Operating earnings totaled $104.4 million, or $0.30 per common share (see page 13 of the Financial Schedule).
- Net interest income totaled $295.8 million in 1Q18 compared to $292.3 million in 4Q17.
- Net interest margin decreased two basis points from 4Q17 to 3.05% reflecting:
- Higher yields on the loan portfolio (increase of ten basis points).
- Lower yields on the securities portfolio (decrease of two basis points).
- Higher rates on deposits and borrowings (decrease of six basis points).
- Two fewer calendar days in 1Q18 (decrease of four basis points).
- Provision for loan losses totaled $5.4 million.
- Net loan charge-offs totaled $4.5 million.
- Net loan charge-off ratio of 0.06% in 1Q18.
- Non-interest income totaled $90.4 million in 1Q18 compared to $87.3 million in 4Q17.
- Insurance revenue increased $2.9 million, reflecting the seasonality of commercial insurance renewals.
- Commercial banking lending fees increased $1.6 million.
- Customer interest rate swap income decreased $3.7 million.
- Bank service charges decreased $0.9 million.
- Net security losses of $9.8 million in 4Q17 include losses totaling $10.0 million incurred as a tax planning strategy in response to tax reform (see page 13 of the Financial Schedule).
- At March 31, 2018, assets under administration, which are not reported as assets of People’s United Financial, totaled $23.6 billion, of which $9.0 billion are under discretionary management, compared to $23.8 billion and $9.1 billion, respectively, at December 31, 2017.
- Non-interest expense totaled $243.5 million in 1Q18 compared to $239.7 million in 4Q17.
- Operating non-interest expense totaled $243.5 million in 1Q18 (see page 13 of the Financial Schedule).
- Compensation and benefits expense, excluding $0.6 million of merger-related expenses in 4Q17, increased $8.6 million, primarily reflecting seasonally-higher payroll and benefit-related costs in 1Q18.
- Professional and outside services expense, excluding $1.0 million of merger-related expenses in 4Q17, increased $0.9 million.
- Intangible asset amortization expense decreased $2.8 million.
- Regulatory assessment expense decreased $1.3 million.
- The efficiency ratio was 59.4% for 1Q18 compared to 56.1% for 4Q17 and 59.4% for 1Q17 (see page 13 of the Financial Schedule).
- The effective income tax rate was 21.4% for 1Q18 and 27.8% for the full-year of 2017.
- The lower rate in 1Q18 primarily reflects the benefit from a reduction in the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018.
- Commercial loans totaled $23.3 billion at March 31, 2018, a decrease of $433 million from December 31, 2017.
- The New York multi-family and mortgage warehouse portfolios decreased $149 million and $56 million, respectively, from December 31, 2017.
- Average commercial loans totaled $23.2 billion in 1Q18, a decrease of $162 million from 4Q17.
- The average New York multi-family and mortgage warehouse portfolios decreased $70 million and $129 million, respectively, from 4Q17.
- Commercial deposits totaled $12.0 billion at March 31, 2018 compared to $12.1 billion at December 31, 2017.
- The ratio of originated non-performing commercial loans to originated commercial loans was 0.49% at March 31, 2018 compared to 0.47% at December 31, 2017.
- Non-performing commercial assets, excluding acquired non-performing loans, totaled $115.7 million at March 31, 2018 compared to $112.4 million at December 31, 2017.
- For the originated commercial loan portfolio, the allowance for loan losses as a percentage of loans was 0.94% at March 31, 2018 compared to 0.93% at December 31, 2017.
- The originated commercial allowance for loan losses represented 194% of originated non-performing commercial loans at March 31, 2018 compared to 200% at December 31, 2017.
- Residential mortgage loans totaled $6.8 billion at March 31, 2018, an increase of $28 million from December 31, 2017.
- Average residential mortgage loans totaled $6.8 billion in 1Q18, an increase of $31 million from 4Q17.
- Home equity loans totaled $2.0 billion at March 31, 2018, a decrease of $65 million from December 31, 2017.
- Average home equity loans totaled $2.0 billion in 1Q18, a decrease of $42 million from 4Q17.
- Retail deposits totaled $20.9 billion at both March 31, 2018 and December 31, 2017.
- The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 0.54% at March 31, 2018 compared to 0.50% at December 31, 2017.
- The ratio of originated non-performing home equity loans to originated home equity loans was 0.85% at March 31, 2018 compared to 0.78% at December 31, 2017.
On April 19, 2018, 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.
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, international, 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) changes in accounting and regulatory guidance applicable to banks; (7) price levels and conditions in the public securities markets generally; (8) competition and its effect on pricing, spending, third-party relationships and revenues; (9) the successful integration of acquisitions; and (10) 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.