January 17, 2019
People's United Financial Reports Fourth Quarter Net Income of $132.9 Million, or $0.35 per Common Share
Operating Earnings of $0.36 per Common Share
Click here to see the fourth quarter Financial Schedule
- Announced the acquisition of BSB Bancorp and acquired VAR Technology Finance.
- Return on average assets of 1.11 percent and return on average tangible common equity of 14.9 percent.
- Efficiency ratio of 55.1 percent, an improvement of 160 basis points linked-quarter, reflecting continued revenue growth and well-controlled expenses.
- Net interest margin of 3.17 percent, expanded two basis points linked-quarter.
- End of period loans and deposits each increased nine percent from September 30, reflecting the First Connecticut Bancorp acquisition and organic growth.
BRIDGEPORT, CT., January 17, 2019 – People's United Financial, Inc. (NASDAQ: PBCT) today reported results for the fourth quarter and full year 2018. These results along with comparison periods are summarized below:
“We are pleased with the advancements made in 2018 to further build our franchise for the long-term with investments in revenue producing initiatives and talent as well as enhancements to our digital capabilities and technology infrastructure,” said Jack Barnes, Chairman and Chief Executive Officer. “While making these important strategic investments, we continued to strengthen the profitability of the Company. Full year operating earnings of $461.4 million were up 33 percent from a year ago despite loan growth headwinds. In addition, operating earnings per common share of $1.31 increased for the ninth consecutive year. We also remain focused on balancing organic growth with thoughtful M&A. The integration of First Connecticut continues to progress extremely well and we were excited to announce in November the acquisition of BSB Bancorp, which will deepen our presence in the Greater Boston area. Consistent with this strategy, we disclosed today the all-cash acquisition of VAR Technology Finance, which focuses on serving the technology sector and is ranked among the top independent, privately held equipment finance companies nationwide for new business volume. Similar to our recent equipment financing acquisitions, this transaction further deepens the Company’s network of specialty finance experts and bolsters our nationwide businesses. Looking ahead to 2019, we are excited about realizing on the opportunities across our diverse portfolio of businesses, deepening customer relationships and delivering value to shareholders.”
“Our fourth quarter financial performance resulted in a strong finish to the year as evidenced by another quarter of record earnings, an operating return on average tangible common equity of 15.5 percent and a 160 basis point improvement in the efficiency ratio compared to the third quarter,” said David Rosato, Senior Executive Vice President and Chief Financial Officer. “Operating earnings of $134.2 million increased 18 percent linked-quarter and benefited from the First Connecticut acquisition and further net interest margin expansion. The quarter was also favorably impacted by a lower effective tax rate which reflected discrete tax benefits associated with certain tax-advantaged investments as well as a benefit realized in connection with tax reform. Excluding the addition of First Connecticut, period-end loan and deposit balances grew one percent and two percent, respectively, from September 30th. Loan growth benefited from strong production in equipment financing as well as in our healthcare and large corporate verticals. These results were partially offset by lower mortgage warehouse lending balances and continued runoff of the transactional portion of the New York multifamily portfolio.”
The Company's Board of Directors declared a $0.1750 per common share quarterly dividend payable February 15, 2019 to shareholders of record on February 1, 2019. Based on the closing stock price on January 16, 2019, the dividend yield on People's United Financial common stock is 4.5 percent.
People's United Financial, Inc., a diversified financial services company with $48 billion in total assets, provides commercial and retail banking, as well as wealth management services through a network of over 400 branches in Connecticut, New York, Massachusetts, Vermont, New Hampshire and Maine.
4Q 2018 Financial Highlights
- Net income totaled $132.9 million, or $0.35 per common share.
- Net income available to common shareholders totaled $129.4 million.
- Operating earnings totaled $134.2 million, or $0.36 per common share (see page 16 of the Financial Schedule).
- Net interest income totaled $332.6 million in 4Q18 compared to $306.4 million in 3Q18.
- Net interest margin increased two basis points from 3Q18 to 3.17% reflecting:
- Higher yields on the loan portfolio (increase of 17 basis points).
- Higher yields on the securities portfolio (increase of one basis point).
- Higher rates on deposits and borrowings (decrease of 16 basis points).
- Provision for loan losses totaled $9.9 million.
- Net loan charge-offs totaled $7.5 million.
- Net loan charge-off ratio of 0.09% in 4Q18.
- Non-interest income totaled $88.7 million in 4Q18 compared to $92.3 million in 3Q18.
- Operating non-interest income totaled $98.7 million in 4Q18 (see page 16 of the Financial Schedule).
- Customer interest rate swap income increased $3.5 million.
- Bank service charges increased $2.0 million.
- Commercial banking lending fees increased $1.7 million.
- Insurance revenue decreased $3.1 million.
- Net security losses of $10.0 million in 4Q18 incurred in response to a tax reform-related benefit realized in the period (see page 16 of the Financial Schedule).
- At December 31, 2018, assets under administration totaled $23.2 billion, of which $8.6 billion are under discretionary management, compared to $23.8 billion and $9.3 billion, respectively, at September 30, 2018.
- Non-interest expense totaled $262.7 million in 4Q18 compared to $241.3 million in 3Q18.
- Operating non-interest expense totaled $254.7 million in 4Q18 (see page 16 of the Financial Schedule).
- Compensation and benefits expense, excluding $3.5 million of merger-related expenses, increased $12.3 million, primarily reflecting additional employees resulting from the First Connecticut acquisition.
- Regulatory assessment expense decreased $2.6 million.
- Professional and outside services expense, excluding $3.7 million and $0.4 million of merger-related expenses in 4Q18 and 3Q18, respectively, increased $1.1 million.
- Other non-interest expense includes merger-related expenses of $0.2 million and $0.1 million in 4Q18 and 3Q18, respectively.
- The efficiency ratio was 55.1% for 4Q18 compared to 56.7% for 3Q18 and 56.1% for 4Q17 (see page 16 of the Financial Schedule).
- The effective income tax rate was 10.6% for 4Q18 and 18.8% for the full-year of 2018, compared to 27.8% for the full-year of 2017 (19.8% for 4Q17).
- The rates in 2018 reflect the benefit from a reduction in the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018, as well as a $9.2 million benefit realized in connection with tax reform. The rates in 2017 reflect a $6.5 million benefit realized in connection with tax reform (see page 16 of the Financial Schedule).
- Commercial loans totaled $25.1 billion at December 31, 2018, an increase of $1.7 billion from September 30, 2018.
- Organic loan growth of $292 million.
- The equipment financing portfolio increased $130 million from September 30, 2018.
- The mortgage warehouse portfolio decreased $80 million from September 30, 2018.
- The New York multifamily portfolio decreased $79 million from September 30, 2018.
- Average commercial loans totaled $24.8 billion in 4Q18, an increase of $1.5 billion from 3Q18.
- The average equipment financing portfolio increased $122 million from 3Q18.
- The average mortgage warehouse portfolio decreased $142 million from 3Q18.
- The average New York multifamily portfolio decreased $99 million from 3Q18.
- Commercial deposits totaled $13.1 billion at December 31, 2018 compared to $11.9 billion at September 30, 2018.
- The ratio of originated non-performing commercial loans to originated commercial loans was 0.52% at both December 31, 2018 and September 30, 2018.
- Non-performing commercial assets, excluding acquired non-performing loans, totaled $126.1 million at December 31, 2018 compared to $122.1 million at September 30, 2018.
- For the originated commercial loan portfolio, the allowance for loan losses as a percentage of loans was 0.93% at December 31, 2018 compared to 0.94% at September 30, 2018.
- The originated commercial allowance for loan losses represented 181% of originated non-performing commercial loans at December 31, 2018 compared to 182% at September 30, 2018.
- Residential mortgage loans totaled $8.2 billion at December 31, 2018, an increase of $1.2 billion from September 30, 2018.
- Organic loan growth of $28 million.
- Average residential mortgage loans totaled $8.2 billion in 4Q18, an increase of $1.3 billion from 3Q18.
- Home equity loans totaled $2.0 billion at December 31, 2018, an increase of $95 million from September 30, 2018.
- Average home equity loans totaled $2.0 billion in 4Q18, an increase of $105 million from 3Q18.
- Retail deposits totaled $23.1 billion at December 31, 2018 compared to $21.3 billion at September 30, 2018.
- The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 0.57% at December 31, 2018 compared to 0.48% at September 30, 2018.
- The ratio of originated non-performing home equity loans to originated home equity loans was 0.85% at December 31, 2018 compared to 0.80% at September 30, 2018.
On January 17, 2019, 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, 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.