Click here to see second quarter Financial Schedule.
BRIDGEPORT, CT - JULY 21, 2016
People's United Financial, Inc. (NASDAQ: PBCT) today reported net income of $68.5 million, or $0.23 per share, for the second quarter of 2016, compared to $61.7 million, or $0.20 per share, for the second quarter of 2015, and $62.9 million, or $0.21 per share, for the first quarter of 2016.
The Company's Board of Directors declared a $0.17 per share quarterly dividend, payable August 15, 2016 to shareholders of record on August 1, 2016. Based on the closing stock price on July 20, 2016, the dividend yield on People's United Financial common stock is 4.4 percent.
"We are pleased with the Company's performance this quarter," commented Jack Barnes, President and Chief Executive Officer. "Net income of $68.5 million increased 11 percent from the prior year quarter and generated a return on average tangible equity of 10.1 percent. As expected, loan production rebounded in the second quarter as the portfolio grew more than seven percent on an annualized basis, with particularly strong results in commercial and industrial lending as well as residential mortgage. While deposit balances were modestly lower due to seasonal declines in our retail and municipal businesses, franchise-wide cross-sell and commercial deposit gathering efforts continue to be successful."
Barnes continued, "Our announced acquisitions of Suffolk Bancorp and Gerstein Fisher are two more successful steps in executing our strategy of growing and strengthening People's United in the New York metro area. Suffolk, with its impressive Long Island footprint, outstanding deposit base and commitment to relationship banking, further bolsters our presence in this attractive banking market. Gerstein Fisher, a New York City-based investment management firm, with its well-known quantitative investment approach and scalable technology platform, will complement our excellent range of wealth management client solutions as well as further diversify revenues through additional non-interest income. We are excited to welcome each of these respected companies to People's United and look forward to building upon their successes."
"Second quarter results reflect our continued focus on improving operating leverage," stated David Rosato, Senior Executive Vice President and Chief Financial Officer. "Ongoing revenue growth and proactive expense management drove an efficiency ratio of 60.4 percent, a decrease of 120 basis points from the prior year quarter. Revenues grew four percent from the prior year quarter as a result of improvements in both net interest income and non-interest income. Total expenses increased modestly from a year ago, but declined on a linked quarter basis as expected."
Rosato concluded, "Capital ratios continue to be strong, especially given the Company's diversified business mix and history of exceptional credit risk management. Our conservative and well-defined underwriting philosophy remains a hallmark of the franchise, as evidenced by net charge-offs as a percentage of average loans of only seven basis points for the quarter. We continue to build the business for the long-term and will not sacrifice asset quality to achieve growth."
At June 30, 2016, People's United Financial's common equity tier 1 capital and total risk-based capital ratios were 9.6 percent and 11.4 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 10.8 percent and 12.8 percent, respectively, at June 30, 2016.
Net loan charge-offs as a percentage of average total loans on an annualized basis were 0.07 percent in the second quarter of 2016, a decrease from 0.09 percent in the first quarter of 2016, but a slight increase from 0.05 percent in the second quarter of 2015. For the originated loan portfolio, non-performing loans equaled 0.56 percent of loans at June 30, 2016, compared to 0.61 percent at March 31, 2016 and 0.71 percent at June 30, 2015.
Return on average assets of 0.70 percent for the second quarter of 2016 increased from 0.65 percent in the first quarter of 2016 and 0.67 percent in the second quarter of 2015. Return on average tangible stockholders' equity of 10.1 percent in the second quarter of 2016 increased from 9.4 percent in the first quarter of 2016 and 9.5 percent in the second quarter of 2015.
People's United Financial, Inc., a diversified financial services company with $40 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. Through its subsidiaries, People's United Financial provides equipment financing, brokerage and insurance services.
2Q 2016 Financial Highlights
- Net income totaled $68.5 million, or $0.23 per share.
- Net interest income totaled $240.0 million in 2Q16 compared to $240.1 million in 1Q16.
- Net interest margin decreased four basis points from 1Q16 to 2.79% reflecting:
- New loan volume at rates lower than the existing portfolio (decrease of three basis points).
- Increase in average investment balances (decrease of one basis point).
- Provision for loan losses totaled $10.0 million.
- Net loan charge-offs totaled $5.1 million, of which $1.2 million related to loans with previously-established specific reserves.
- Net loan charge-off ratio of 0.07% in 2Q16.
- Reflects a $6.6 million increase in the originated allowance for loan losses.
- Non-interest income was $85.4 million in 2Q16 compared to $82.3 million in 1Q16.
- Commercial banking lending fees increased $1.1 million.
- Bank-owned life insurance increased $1.0 million.
- Bank service charges increased $0.9 million.
- Insurance revenue decreased $2.3 million.
- Other non-interest income in 2Q16 includes a $1.2 million gain on the sale of an interest in a real estate investment.
- At June 30, 2016, assets under administration, which are not reported as assets of People’s United Financial, totaled $16.5 billion, of which $5.6 billion are under discretionary management, compared to $16.4 billion and $5.6 billion, respectively, at March 31, 2016.
- Non-interest expense totaled $212.9 million in 2Q16 compared to $217.3 million in 1Q16.
- Compensation and benefits decreased $2.7 million, primarily reflecting lower payroll and benefit-related costs in 2Q16.
- Professional and outside services expense decreased $1.0 million.
- Regulatory assessments expense increased $1.2 million.
- The efficiency ratio was 60.4% in 2Q16 compared to 62.7% in 1Q16 (see page 16).
- The effective income tax rate was 33.2% for 2Q16 and 33.3% for the first six months of 2016, compared to 33.4% for the full-year of 2015.
- Commercial loans totaled $21.1 billion at June 30, 2016, an increase of $352 million, or 7% annualized, from March 31, 2016.
- The mortgage warehouse portfolio increased $217 million from March 31, 2016.
- Average commercial loans totaled $20.7 billion in 2Q16, an increase of $279 million, or 5% annualized, from 1Q16.
- The average mortgage warehouse portfolio increased $203 million in 2Q16.
- Commercial deposits totaled $9.5 billion at June 30, 2016 compared to $9.4 billion at March 31, 2016.
- The ratio of originated non-performing commercial loans to originated commercial loans was 0.53% at June 30, 2016 compared to 0.59% at March 31, 2016.
- Non-performing commercial assets, excluding acquired non-performing loans, totaled $125.0 million at June 30, 2016 compared to $131.2 million at March 31, 2016.
- For the originated commercial portfolio, the allowance for loan losses as a percentage of loans was 0.92% at both June 30, 2016 and March 31, 2016.
- The commercial originated allowance for loan losses represented 172% of originated non-performing commercial loans at June 30, 2016 compared to 156% at March 31, 2016.
- Residential mortgage loans increased $188 million, or 13% annualized, from March 31, 2016.
- Average residential mortgage loans totaled $5.7 billion in 2Q16, an increase of $140 million, or 10% annualized, from 1Q16.
- Home equity loans decreased $14 million from March 31, 2016.
- Average home equity loans totaled $2.1 billion in 2Q16, unchanged from 1Q16.
- Retail deposits (excluding brokered deposits) totaled $16.9 billion at June 30, 2016 compared to $17.1 billion at March 31, 2016.
- The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 0.53% at June 30, 2016 compared to 0.57% at March 31, 2016.
- The ratio of originated non-performing home equity loans to originated home equity loans was 0.83% at June 30, 2016 compared to 0.90% at March 31, 2016.
On July 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.