View Q1 2017 Financial Schedule
BRIDGEPORT, CT., APRIL 19, 2017 — People's United Financial, Inc. (NASDAQ: PBCT), today reported net income of $70.8 million, or $0.22 per common share, for the first quarter of 2017, compared to $62.9 million, or $0.21 per common share, for the first quarter of 2016, and $75.9 million, or $0.24 per common share, for the fourth quarter of 2016. Included in this quarter’s results were merger-related and acquisition integration costs of $1.2 million ($0.8 million after-tax), or less than $0.01 per common share, compared to $1.6 million ($1.0 million after-tax), or less than $0.01 per common share, for the fourth quarter of 2016.
As previously reported, People’s United Financial completed its acquisition of Suffolk Bancorp on April 1, 2017. Accordingly, first quarter results for People’s United Financial do not include the results of Suffolk.
The Company's Board of Directors voted to increase the common stock dividend to an annual rate of $0.69 per share. Based on the closing stock price on April 19, 2017, the dividend yield on People's United Financial common stock is 3.9 percent. The quarterly dividend of $0.1725 per share is payable May 15, 2017 to shareholders of record on May 1, 2017.
“We are pleased to report first quarter net income of $70.8 million, which increased 13 percent from a year ago,” commented Jack Barnes, President and Chief Executive Officer. “The quarter benefited from a four basis point improvement in the net interest margin from the fourth quarter. Loan balances declined one percent on an annualized basis primarily resulting from paydowns in mortgage warehouse lending due to the rate driven nature of this business. Excluding mortgage warehouse lending, the loan portfolio experienced annualized growth of three percent driven by favorable results in residential mortgage as well as middle market commercial and industrial lending, highlighting the importance of our diversified business mix. We remain successful gathering deposits across the franchise as evidenced by nine percent annualized growth since year-end.”
Barnes continued, “With the acquisition of Suffolk Bancorp completed, we are excited to further strengthen and expand People’s United in the New York metro area as one united team. Experienced teams from both companies have worked closely together throughout the integration process to ensure a seamless transition for clients. As planned, the core system conversion will take place in early May. We are very confident this combination of similar customer-focused cultures will create significant value for both clients and shareholders.”
Barnes concluded, “Finally, we are proud to announce our 24th consecutive annual common dividend increase. Our prudent management of capital has enabled us to deliver shareholder value through the consistent return of capital, while still growing organically and investing strategically in the franchise.”
“As we continually strive to enhance operating leverage, we are pleased to report increased revenues on both a linked-quarter and year-over-year basis,” stated David Rosato, Senior Executive Vice President and Chief Financial Officer. “Revenue growth, due to both higher net interest income and non-interest income, drove an efficiency ratio of 59.4 percent, which is comparable to the fourth quarter and an improvement from a year ago, despite modestly higher expenses. We remain comfortable with our ability to proactively control costs and continue to expect further improvements in the efficiency ratio going forward.”
Rosato concluded, “Capital levels at both the holding company and bank continue to be strong, especially given our diversified business mix and history of exceptional credit risk management. Net charge-offs as percentage of average loans were only three basis points in the quarter, reflecting our view that maintaining excellent asset quality is an important lever in building sustainable long-term value. Furthermore, our balance sheet remains asset sensitive, which positions us well in a rising interest rate environment.”
At March 31, 2017, People's United Financial’s common equity tier 1 capital and total risk-based capital ratios were 10.0 percent and 12.6 percent, respectively, and the tangible common 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 11.3 percent and 13.4 percent, respectively, at March 31, 2017.
Net loan charge-offs as a percentage of average total loans on an annualized basis were 0.03 percent in the first quarter of 2017, a decrease from 0.06 percent in the fourth quarter of 2016 and 0.09 percent in the first quarter of 2016. For the originated loan portfolio, non-performing loans equaled 0.55 percent of loans at March 31, 2017, an increase from 0.51 percent at December 31, 2016, but an improvement from 0.61 percent at March 31, 2016.
Return on average assets of 0.70 percent for the first quarter of 2017 was a decrease from 0.75 percent in the fourth quarter of 2016, but an improvement from 0.65 percent in the first quarter of 2016. Return on average tangible common equity of 9.6 percent in the first quarter of 2017 was a decrease from 10.7 percent in the fourth quarter of 2016, but an improvement from 9.4 percent in the first quarter of 2016.
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.
1Q 2017 Financial Highlights
- Net income totaled $70.8 million, or $0.22 per common share.
- Net income available to common shareholders totaled $67.3 million.
- Operating earnings totaled $68.1 million, or $0.22 per common share (see page 13 of the Financial Schedule).
- Net interest income totaled $248.6 million in 1Q17 compared to $246.8 million in 4Q16.
- Net interest margin increased four basis points from 4Q16 to 2.82% reflecting:
- New loan volume at rates higher than the existing portfolio (increase of nine basis points).
- Higher yield on the securities portfolio (increase of three basis points).
- Higher rates on deposits and borrowings (decrease of four basis points).
- Two fewer calendar days in 1Q17 (decrease of four basis points).
- Provision for loan losses totaled $4.4 million.
- Net loan charge-offs totaled $2.4 million.
- Net loan charge-off ratio of 0.03% in 1Q17.
- Non-interest income was $84.7 million in 1Q17 compared to $84.2 million in 4Q16.
- Insurance revenue increased $2.3 million, reflecting the seasonal nature of commercial insurance renewals.
- Investment management fees increased $1.8 million, primarily reflecting the benefit from the addition of Gerstein Fisher.
- Commercial banking lending fees increased $1.0 million.
- Net gains on sales of residential mortgages decreased $1.7 million.
- Net security losses totaled $15.7 million in 1Q17.
- Recorded a $16.1 million gain in 1Q17 (included in other non-interest income) from the exchange of an ownership interest in a legacy privately-held investment.
- At March 31, 2017, assets under administration, which are not reported as assets of People’s United Financial, totaled $22.0 billion, of which $8.3 billion are under discretionary management, compared to $21.3 billion and $8.0 billion, respectively, at December 31, 2016.
- Non-interest expense totaled $226.1 million in 1Q17 compared to $217.2 million in 4Q16.
- Operating non-interest expense totaled $224.9 million in 1Q17 (see page 13 of the Financial Schedule).
- Compensation and benefits expense, excluding $0.7 million of acquisition integration costs in 4Q16, increased $12.3 million, primarily reflecting seasonally-higher payroll and benefit-related costs in 1Q17, as well as merit increases, additional employees and higher incentive and health care costs.
- Regulatory assessments expense decreased $0.8 million.
- Professional and outside services expense, excluding $0.7 million and $0.9 million of merger-related expenses in 1Q17 and 4Q16, respectively, decreased $0.6 million.
- The efficiency ratio was 59.4% in 1Q17 compared to 59.3% in 4Q16 (see page 13 of the Financial Schedule).
- The effective income tax rate was 31.1% for 1Q17 and 31.4% for the full-year of 2016.
- Commercial loans totaled $21.1 billion at March 31, 2017, a $292 million decrease from December 31, 2016.
- The mortgage warehouse portfolio decreased $263 million from December 31, 2016.
- Average commercial loans totaled $20.9 billion in 1Q17, a $200 million decrease from 4Q16.
- The average mortgage warehouse portfolio decreased $345 million from 4Q16.
- Commercial deposits totaled $10.5 billion at March 31, 2017 compared to $10.4 billion at December 31, 2016.
- The ratio of originated non-performing commercial loans to originated commercial loans was 0.57% at March 31, 2017 compared to 0.49% at December 31, 2016.
- Non-performing commercial assets, excluding acquired non-performing loans, totaled $130.4 million at March 31, 2017 compared to $114.4 million at December 31, 2016.
- For the originated commercial portfolio, the allowance for loan losses as a percentage of loans was 0.94% at March 31, 2017 compared to 0.95% at December 31, 2016.
- The commercial originated allowance for loan losses represented 165% of originated non-performing commercial loans at March 31, 2017 compared to 193% at December 31, 2016.
- Residential mortgage loans totaled $6.5 billion at March 31, 2017, an increase of $271 million, or 17% annualized, from December 31, 2016.
- Average residential mortgage loans totaled $6.4 billion in 1Q17, an increase of $239 million, or 16% annualized, from 4Q16.
- Home equity loans totaled $2.0 billion at March 31, 2017, a $35 million decrease from December 31, 2016.
- Average home equity loans totaled $2.1 billion in 1Q17, a $31 million decrease from 4Q16.
- Retail deposits totaled $20.0 billion at March 31, 2017 compared to $19.5 billion at December 31, 2016.
- The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 0.41% at March 31, 2017 compared to 0.45% at December 31, 2016.
- The ratio of originated non-performing home equity loans to originated home equity loans was 0.76% at March 31, 2017 compared to 0.85% at December 31, 2016.
On April 20, 2017, 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.