View Q4 2015 Financial Schedule
BRIDGEPORT, CT., JANUARY 21, 2016 — People's United Financial, Inc. (NASDAQ: PBCT) today reported net income of $70.8 million, or $0.23 per share, for the fourth quarter of 2015, compared to $64.7 million, or $0.22 per share, for the fourth quarter of 2014, and $68.4 million, or $0.23 per share, for the third quarter of 2015. Included in this quarter’s results is a net after-tax gain of $6.1 million ($0.02 per share) resulting from the sale of the Company’s payroll services business as well as non-operating expenses of $2.5 million after-tax ($0.01 per share).
Operating earnings were $67.2 million, or $0.22 per share, for the fourth quarter of 2015, compared to $65.1 million, or $0.22 per share, for the fourth quarter of 2014, and $68.4 million, or $0.23 per share, for the third quarter of 2015.
For the year ended December 31, 2015, net income totaled $260.1 million, or $0.86 per share, compared to $251.7 million, or $0.84 per share, for 2014. Operating earnings were $262.5 million, or $0.87 per share, for 2015, compared to $244.5 million, or $0.82 per share, for 2014.
The Company's Board of Directors declared a $0.1675 per share quarterly dividend, payable
February 15, 2016 to shareholders of record on February 1, 2016. Based on the closing stock price on January 20, 2016, the dividend yield on People's United Financial common stock is 4.6 percent.
“We are pleased to report growth in full-year operating earnings per share for the sixth consecutive year, particularly given the prolonged low interest rate environment,” commented Jack Barnes, President and Chief Executive Officer. “These results are driven by the strategic investments we have made in talent, products and services. Throughout 2015, we continued to move the Company forward by organically growing loans and deposits, strengthening fee businesses, implementing technology enhancements and furthering cross-sell efforts.”
Barnes continued, “As we continually evaluate the best ways to serve customers and improve operating efficiency, we sold our payroll services business in the fourth quarter to the Company’s current payroll software licensor and entered into a long-term referral agreement. The sale provides customers high-quality payroll solutions at comparable costs and minimal transition impact.”
Barnes concluded, “Entering 2016, the franchise is well-positioned to achieve ongoing growth as we continue to execute on the significant opportunities that exist across our attractive footprint, especially within the Boston and New York markets. We remain focused on improving profitability, while continuing to build the business for long-term success.”
“Our 2015 financial performance reflects ongoing revenue growth and proactive expense management,” stated David Rosato, Senior Executive Vice President and Chief Financial Officer. “Record full year operating earnings of $263 million increased over seven percent from the prior year and benefited from both higher net interest income and fee revenues. We achieved strong annual loan and deposit growth of seven percent and nine percent, respectively. At the same time we maintained excellent asset quality across each portfolio as evidenced by net charge-offs as a percentage of average loans of only eight basis points for the full year.”
Rosato concluded, “Capital ratios continue to be strong, especially given the Company’s diversified business mix and history of exceptional credit risk management. Our balance sheet remains asset sensitive which positions us well to benefit from a rising interest rate environment.”
At December 31, 2015, People's United Financial’s common equity tier 1 capital and total risk-based capital ratios were 9.8 percent and 11.7 percent, respectively, and the tangible equity ratio stood at 7.2 percent. For People's United Bank N.A., common equity tier 1 capital and total risk-based capital ratios were 10.2 percent and 12.6 percent, respectively, at December 31, 2015.
Net loan charge-offs as a percentage of average total loans on an annualized basis were 0.09 percent in the fourth quarter of 2015, a slight increase from 0.06 percent in the third quarter of 2015, but an improvement from 0.13 percent in the fourth quarter of 2014. For the originated loan portfolio, non-performing loans equaled 0.58 percent of loans at December 31, 2015, compared to 0.68 percent at September 30, 2015 and 0.77 percent at December 31, 2014.
Operating return on average assets of 0.71 percent for the fourth quarter of 2015 declined from 0.73 percent in the third quarter of 2015 and 0.75 percent in the fourth quarter of 2014. Operating return on average tangible stockholders' equity of 10.2 percent in the fourth quarter of 2015 declined from 10.5 percent in the third quarter of 2015, but increased from 10.1 percent in the fourth quarter of 2014.
People's United Financial, a diversified financial services company with $39 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 $15.4 billion at December 31, 2015 compared to $15.1 billion at September 30, 2015.
4Q 2015 Financial Highlights
- Net income totaled $70.8 million, or $0.23 per share.
- Operating earnings totaled $67.2 million, or $0.22 per share.
- Net interest income totaled $238.8 million in 4Q15 compared to $234.8 million in 3Q15.
- Interest income on acquired loans decreased $0.7 million to $12.6 million.
- Net interest margin of 2.87% unchanged from 3Q15 reflecting:
- Increase in average investment balances (increase of one basis point).
- New loan volume at rates lower than the existing portfolio (decrease of one basis point).
- Provision for loan losses totaled $9.7 million.
- Net loan charge-offs totaled $6.2 million, of which $3.3 million related to loans with previously-established specific reserves.
- Net loan charge-off ratio of 0.09% in 4Q15.
- Reflects an $8.1 million increase in the originated allowance for loan losses due to loan growth and a $1.3 million allowance reversal related to acquired loans.
- Non-interest income was $93.3 million in 4Q15 compared to $87.1 million in 3Q15.
- Gain on sale of the payroll services business totaled $9.2 million in 4Q15.
- Insurance revenue decreased $1.6 million.
- Bank service charges decreased $1.4 million.
- Commercial banking lending fees 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 $9.8 billion and $5.6 billion, respectively, at December 31, 2015, compared to $9.7 billion and $5.4 billion, respectively, at September 30, 2015.
- Non-interest expense totaled $217.0 million in 4Q15 compared to $214.2 million in 3Q15.
- Operating non-interest expense was $213.2 million in 4Q15 compared to $214.1 million in 3Q15.
- Compensation and benefits decreased $1.4 million, primarily reflecting lower payroll and benefit-related costs in 4Q15.
- Regulatory assessments expense decreased $2.4 million.
- Professional and outside services expense increased $0.9 million.
- The efficiency ratio was 61.0% in 4Q15 compared to 61.7% in 3Q15 (see page 16).
- Non-operating expenses totaled $3.8 million in 4Q15 compared to $0.1 million in 3Q15.
- The effective income tax rate was 32.8% for 4Q15 and 33.4% for the full-year of 2015, compared to 33.9% for the full-year of 2014 (33.5% for 4Q14).
- Commercial loans increased $652 million, or 13% annualized, from September 30, 2015.
- Excluding the mortgage warehouse portfolio, commercial loans increased $528 million, or 11% annualized, in 4Q15.
- Average commercial loans totaled $20.2 billion in 4Q15, an increase of $196 million, or 4% annualized, from 3Q15.
- The ratio of originated non-performing commercial loans to originated commercial loans was 0.51% at December 31, 2015 compared to 0.64% at September 30, 2015.
- Non-performing commercial assets, excluding acquired non-performing loans, totaled $117.6 million at December 31, 2015 compared to $139.6 million at September 30, 2015.
- Net loan charge-offs totaled $4.8 million, or 0.09% annualized, of average commercial loans in 4Q15, compared to $2.9 million, or 0.06% annualized, in 3Q15.
- For the originated commercial portfolio, the allowance for loan losses as a percentage of loans was 0.90% at December 31, 2015 compared to 0.91% at September 30, 2015.
- The commercial originated allowance for loan losses represented 177% of originated non-performing commercial loans at December 31, 2015 compared to 143% at September 30, 2015.
- Commercial deposits totaled $8.9 billion at December 31, 2015 compared to $9.0 billion at September 30, 2015.
- Residential mortgage loans increased $76 million, or 6% annualized, from September 30, 2015.
- Average residential mortgage loans totaled $5.4 billion in 4Q15, an increase of $153 million, or 12% annualized, from 3Q15.
- The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 0.71% at December 31, 2015 compared to 0.74% at September 30, 2015.
- Net loan charge-offs totaled $0.1 million, or less than 0.01% annualized, of average residential mortgage loans in 4Q15, compared to $0.4 million, or 0.03% annualized, in 3Q15.
- Home equity loans increased $12 million, or 2% annualized, from September 30, 2015.
- Average home equity loans totaled $2.1 billion in 4Q15, unchanged from 3Q15.
- The ratio of originated non-performing home equity loans to originated home equity loans was 0.92% at December 31, 2015 compared to 1.00% at September 30, 2015.
- Net loan charge-offs totaled $1.1 million, or 0.22% annualized, of average home equity loans in 4Q15, compared to $0.6 million, or 0.11% annualized, in 3Q15.
- Retail deposits (excluding brokered deposits) totaled $16.9 billion at December 31, 2015 compared to $16.6 billion at September 30, 2015.
On January 21, 2016, 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.