July 16, 2015
People's United Financial Reports Second Quarter Net Income of $0.20 per share and Operating Earnings of $0.21 Per Share
BRIDGEPORT, CT – People's United Financial, Inc. (NASDAQ: PBCT) today reported net income of $61.7 million, or $0.20 per share, for the second quarter of 2015, compared to $72.3 million, or $0.24 per share, for the second quarter of 2014, and $59.2 million, or $0.20 per share, for the first quarter of 2015. Included in the results for the second quarter of 2014 is a net after-tax gain of $13.4 million ($0.04 per share) resulting from the formation of a merchant services joint venture. Operating earnings were $63.7 million, or $0.21 per share, for the second quarter of 2015, compared to $59.9 million, or $0.20 per share, for the second quarter of 2014, and $63.2 million, or $0.21 per share, for the first quarter of 2015.
The Company's Board of Directors declared a $0.1675 per share quarterly dividend, payable August 15, 2015 to shareholders of record on August 1, 2015. Based on the closing stock price on July 15, 2015, the dividend yield on People's United Financial common stock is 4.1 percent.
"Our performance this quarter reflects the momentum we have continued to generate across the franchise," commented Jack Barnes, President and Chief Executive Officer. "The superior customer service and extensive suite of products we provide resonates deeply with customers which enables us to broaden existing relationships and foster new ones. As a result, we grew loans nine percent on an annualized basis, marking the 19th consecutive quarter of growth, while at the same time maintaining excellent asset quality. In addition, we are pleased with our continued progress in gathering organic deposits as evidenced by the five percent annualized growth during the quarter."
Barnes concluded, "Looking forward to the second half of the year, we are optimistic we can sustain momentum by continuing to build and deepen relationships across our large and attractive markets. We remain committed to building the business for the long-term and are well positioned to deliver value to both customers and shareholders."
"The continued focus on our most important objective, improving profitability, drove a six percent increase in operating earnings from the prior year quarter," stated David Rosato, Senior Executive Vice President and Chief Financial Officer. "Operating results were primarily driven by revenue growth of two percent reflecting improvements in both net interest income and non-interest income. While operating expenses in the quarter were slightly higher year-over-year, we remain confident in our ability to control expenses despite the ongoing impact of strategic investments and increasing regulatory compliance costs."
Rosato concluded, "We remain comfortable with our capital structure and balance sheet strength. Capital ratios continue to be strong, especially given the Company's diversified business mix and history of exceptional credit risk management. Net charge-offs as a percentage of average loans were only five basis points in the quarter, the lowest level in over eight years, reflecting our view that conservative underwriting is vital for sustainable value creation."
At June 30, 2015, People's United Financial's common equity tier 1 capital and total risk-based capital ratios were 9.9 percent and 11.8 percent, respectively, and the tangible equity ratio stood at 7.4 percent. For People's United Bank N.A., common equity tier 1 capital and total risk-based capital ratios were 10.4 percent and 12.9 percent, respectively, at June 30, 2015.
Net loan charge-offs as a percentage of average total loans on an annualized basis were 0.05 percent in the second quarter of 2015, an improvement from 0.11 percent in the first quarter of 2015 and 0.10 percent in the second quarter of 2014. For the originated loan portfolio, non-performing loans equaled 0.71 percent of loans at June 30, 2015, compared to 0.68 percent at March 31, 2015 and 0.82 percent at June 30, 2014.
Operating return on average assets of 0.70 percent for the second quarter of 2015 declined from 0.71 percent in the first quarter of 2015 and 0.72 percent in the second quarter of 2014. Operating return on average tangible stockholders' equity of 9.8 percent in the second quarter of 2015 declined from 9.9 percent in the first quarter of 2015, but improved from 9.6 percent in the second quarter of 2014.
People's United Financial, a diversified financial services company with over $37 billion in 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. 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 $15.7 billion at both June 30, 2015 and March 31, 2015.
2Q 2015 Financial Highlights
- Net income totaled $61.7 million, or $0.20 per share.
- Operating earnings totaled $63.7 million, or $0.21 per share.
- Net interest income totaled $230.4 million in 2Q15 compared to $228.1 million in 1Q15.
- Interest income on acquired loans decreased $1.0 million to $14.3 million.
- Net interest margin decreased three basis points from 1Q15 to 2.88% reflecting:
- One more calendar day in 2Q15 (increase of two basis points).
- Increase in average investment balances (increase of one basis point).
- New loan volume at rates lower than the existing portfolio (decrease of four basis points).
- Increase in average deposit balances (decrease of two basis points).
- Provision for loan losses totaled $7.7 million.
- Net loan charge-offs totaled $3.2 million, of which $0.3 million related to loans with previously-established specific reserves.
- Net loan charge-off ratio of 0.05% in 2Q15.
- Reflects a $4.3 million increase in the originated allowance for loan losses due to loan growth.
- Includes a provision for loan losses on acquired loans of $0.5 million.
- Non-interest income was $83.0 million in 2Q15 compared to $89.0 million in 1Q15.
- Bank service charges increased $1.4 million.
- Net gains on sales of residential mortgage loans increased $1.3 million.
- Commercial banking lending fees decreased $3.3 million.
- Customer interest rate swap income decreased $3.1 million.
- Net gains on sales of acquired loans decreased $2.1 million
- Insurance revenue decreased $1.1 million.
- Assets under administration and those under full discretionary management, neither of which are reported as assets of People's United Financial, totaled $10.1 billion and $5.6 billion, respectively, at June 30, 2015, compared to $10.0 billion and $5.7 billion, respectively, at March 31, 2015.
- Non-interest expense totaled $211.8 million in 2Q15 compared to $217.6 million in 1Q15.
- Operating non-interest expense was $208.8 million in 2Q15 compared to $211.6 million in 1Q15.
- Compensation and benefits decreased $5.5 million, primarily reflecting lower payroll and benefit-related costs in 2Q15.
- Occupancy and equipment expense decreased $1.9 million.
- Professional and outside services expense increased $1.5 million.
- The efficiency ratio in 2Q15 improved to 61.6% from 61.9% in 1Q15 (see page 16).
- Non-operating expenses totaled $3.0 million in 2Q15 compared to $6.0 million in 1Q15.
- The effective income tax rate was 34.3% for 2Q15 and 34.2% for the first six months of 2015, compared to 33.9% for the full-year of 2014.
- Commercial loans increased $484 million, or 10% annualized, from March 31, 2015.
- Average commercial loans totaled $19.8 billion in 2Q15, an increase of $498 million, or 10% annualized, from 1Q15.
- The ratio of originated non-performing commercial loans to originated commercial loans was 0.65% at June 30, 2015 compared to 0.64%% at March 31, 2015.
- Non-performing commercial assets, excluding acquired non-performing loans, totaled $143.3 million at June 30, 2015 compared to $135.4 million at March 31, 2015.
- Net loan charge-offs totaled $1.5 million, or 0.03% annualized, of average commercial loans in 2Q15, compared to $6.0 million, or 0.12% annualized, in 1Q15.
- For the originated commercial portfolio, the allowance for loan losses as a percentage of loans was 0.90% at June 30, 2015 compared to 0.91% at March 31, 2015.
- The commercial originated allowance for loan losses represented 139% of originated non-performing commercial loans at June 30, 2015 compared to 143% at March 31, 2015.
- Commercial deposits totaled $8.2 billion at June 30, 2015 compared to $7.8 billion at March 31, 2015.
- Residential mortgage loans increased $141 million, or 11% annualized, from March 31, 2015.
- Average residential mortgage loans totaled $5.1 billion in 2Q15, an increase of $121 million, or 10% annualized, from 1Q15.
- The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 0.82% at June 30, 2015 compared to 0.78% at March 31, 2015.
- Net loan charge-offs totaled $0.5 million, or 0.05% annualized, of average residential mortgage loans in 2Q15, compared to $0.4 million, or 0.03% annualized, in 1Q15.
- Home equity loans increased $8 million, or 1% annualized, from March 31, 2015.
- Average home equity loans totaled $2.1 billion in 2Q15, unchanged from 1Q15.
- The ratio of originated non-performing home equity loans to originated home equity loans was 1.02% at June 30, 2015 compared to 0.93% at March 31, 2015.
- Net loan charge-offs totaled $1.1 million, or 0.20% annualized, of average home equity loans in 2Q15, compared to $0.5 million, or 0.10% annualized, in 1Q15.
- Retail deposits (excluding brokered deposits) totaled $16.7 billion at both June 30, 2015 and March 31, 2015.
On July 16, 2015, 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) 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; and (9) 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.