View Q2 2017 Financial Schedule
BRIDGEPORT, CT., JULY 20, 2017 — People's United Financial, Inc. (NASDAQ: PBCT) today reported net income of $69.3 million, or $0.19 per common share, for the second quarter of 2017, compared to $68.5 million, or $0.23 per common share, for the second quarter of 2016, and $70.8 million, or $0.22 per common share, for the first quarter of 2017.
Included in this quarter's results were merger-related expenses of $24.8 million ($16.8 million after-tax), or $0.05 per common share, compared to $1.2 million ($0.8 million after-tax), or less than $0.01 per common share, for the first quarter of 2017.
The Company's Board of Directors declared a $0.1725 per common share quarterly dividend payable August 15, 2017 to shareholders of record on August 1, 2017. Based on the closing stock price on July 19, 2017, the dividend yield on People's United Financial common stock is 3.9 percent.
"The Company's strong second quarter results reflect our ongoing commitment to deliver exceptional service to clients and profitable growth to shareholders," commented Jack Barnes, President and Chief Executive Officer. "Operating earnings of $82.6 million increased 21 percent from the prior year quarter. The quarter benefited from the Suffolk acquisition and continued net interest margin expansion resulting from higher yields on new business and repricing of floating rate loans. Additionally, we achieved further improvement in operating leverage, organic loan growth and sustained exceptional asset quality across our diverse portfolio of businesses. We are pleased with the Company's performance in the quarter and remain optimistic about opportunities in the second half of the year."
Barnes continued, "The integration of Suffolk has progressed extremely well. The outstanding efforts of our experienced teams provided a seamless transition for clients. We successfully completed the core system conversion in early May and are on track to realize projected year one cost saves. The economics of the transaction remain positive and we look forward to taking advantage of the revenue synergies created by this combination to further enhance earnings."
Barnes concluded, "We were excited to announce the all-cash acquisition of LEAF Commercial Capital, one of the largest independent commercial equipment finance companies in the U.S. The addition of LEAF will diversify our equipment finance portfolio into the small-ticket leasing segment and enable us to leverage their highly scalable, tech-enabled origination platform. At closing, our equipment finance units will have approximately $4 billion of assets and rank as the sixteenth largest bank-owned equipment finance entity in the country. The transaction is financially compelling and will be immediately accretive to earnings."
"Executing on revenue producing initiatives is a key focus of the Company," stated David Rosato, Senior Executive Vice President and Chief Financial Officer. "As such, we are pleased total revenues grew 13 percent from the prior year quarter. Growth was attributable to increases in both net interest income and non-interest income. Net interest income benefited from the net interest margin widening 14 basis points compared to the most recent quarter. Higher revenues along with our constant oversight of expenses produced an efficiency ratio of 58.4 percent and helped generate an operating return on average tangible common equity of 10.9 percent."
Rosato concluded, "Period-end loan and deposit balances increased 26 percent and 17 percent, respectively, on an annualized basis from the end of the first quarter largely due to the addition of Suffolk. Loan growth also benefited from a rebound in mortgage warehouse lending balances and solid organic growth in the commercial real estate portfolio. On an average balance basis, both loans and deposits increased 28 percent annualized for the quarter. In our wealth management business, discretionary assets grew 12 percent annualized during the quarter primarily due to market performance and net client inflows."
At June 30, 2017, People's United Financial's common equity tier 1 capital and total risk-based capital ratios were 10.1 percent and 12.6 percent, respectively, and the tangible common equity ratio stood at 7.5 percent. For People's United Bank, N.A., common equity tier 1 capital and total risk-based capital ratios were 11.3 percent and 13.3 percent, respectively, at June 30, 2017.
Net loan charge-offs as a percentage of average total loans on an annualized basis were 0.09 percent in the second quarter of 2017, an increase from both 0.03 percent in the first quarter of 2017 and 0.07 percent in the second quarter of 2016. For the originated loan portfolio, non-performing loans equaled 0.60 percent of loans at June 30, 2017, an increase from both 0.55 percent at March 31, 2017 and 0.56 percent at June 30, 2016.
Return on average assets of 0.65 percent for the second quarter of 2017 was a decrease from 0.70 percent in both the first quarter of 2017 and second quarter of 2016. Return on average tangible common equity of 8.7 percent in the second quarter of 2017 was a decrease from both 9.6 percent in the first quarter of 2017 and 10.1 percent in the second quarter of 2016. Returns in the second quarter of 2017 were impacted by merger-related expenses. On an operating basis, return on average assets was 0.77 percent and return on average tangible common equity was 10.9 percent.
People's United Financial, Inc., a diversified financial services company with $43 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 2017 Financial Highlights
- Net income totaled $69.3 million, or $0.19 per common share.
- Net income available to common shareholders totaled $65.8 million.
- Operating earnings totaled $82.6 million, or $0.24 per common share (see page 16 of the Financial Schedule).
- Net interest income totaled $274.9 million in 2Q17 compared to $248.6 million in 1Q17.
- Net interest margin increased 14 basis points from 1Q17 to 2.96% reflecting:
- Higher yields on the loan portfolio (increase of 15 basis points)
- Higher yield on the securities portfolio (increase of three basis points).
- One additional calendar day in 2Q17 (increase of two basis points).
- Higher rates on deposits and borrowings (decrease of six basis points).
- Provision for loan losses totaled $7.1 million.
- Net loan charge-offs totaled $6.8 million.
- Net loan charge-off ratio of 0.09% in 2Q17.
- Non-interest income was $91.6 million in 2Q17 compared to $84.7 million in 1Q17.
- Commercial banking lending fees increased $3.3 million.
- Bank service charges increased $1.5 million.
- Bank-owned life insurance increased $1.1 million.
- Insurance revenue decreased $1.6 million, reflecting the seasonality of commercial insurance renewals.
- At June 30, 2017, assets under administration, which are not reported as assets of People’s United Financial, totaled $22.9 billion, of which $8.5 billion are under discretionary management, compared to $22.0 billion and $8.2 billion, respectively, at March 31, 2017.
- Non-interest expense totaled $257.3 million in 2Q17 compared to $226.1 million in 1Q17.
- Operating non-interest expense totaled $232.5 million in 2Q17 (see page 16 of the Financial Schedule).
- Compensation and benefits expense, excluding $3.4 million of merger-related expenses in 2Q17, increased $1.0 million, primarily reflecting additional employees resulting from the Suffolk acquisition.
- Professional and outside services expense, excluding $10.8 million and $0.7 million of merger-related expenses in 2Q17 and 1Q17, respectively, increased $2.5 million.
- Other non-interest expense in 2Q17 includes $10.6 million of merger-related expenses.
- The efficiency ratio was 58.4% in 2Q17 compared to 59.4% in 1Q17 (see page 16 of the Financial Schedule).
- The effective income tax rate was 32.1% for 2Q17 and 31.6% for the first six months of 2017, compared to 31.4% for the full-year of 2016. income totaled $69.3 million, or $0.19 per common share.
- Commercial loans totaled $22.8 billion at June 30, 2017, an increase of $1.7 billion from March 31, 2017.
- Organic loan growth of 7% annualized.
- The mortgage warehouse portfolio increased $366 million from March 31, 2017.
- Average commercial loans totaled $22.6 billion in 2Q17, an increase of $1.7 billion from 1Q17.
- The average mortgage warehouse portfolio increased $172 million from 1Q17.
- Commercial deposits totaled $11.3 billion at June 30, 2017 compared to $10.5 billion at March 31, 2017.
- The ratio of originated non-performing commercial loans to originated commercial loans was 0.62% at June 30, 2017 compared to 0.57% at March 31, 2017.
- Non-performing commercial assets, excluding acquired non-performing loans, totaled $144.8 million at June 30, 2017 compared to $130.4 million at March 31, 2017.
- For the originated commercial loan portfolio, the allowance for loan losses as a percentage of loans was 0.94% at both June 30, 2017 and March 31, 2017.
- The originated commercial allowance for loan losses represented 151% of originated non-performing commercial loans at June 30, 2017 compared to 165% at March 31, 2017.
- Residential mortgage loans totaled $6.7 billion at June 30, 2017, an increase of $200 million from March 31, 2017.
- Organic loan growth of 2% annualized.
- Average residential mortgage loans totaled $6.7 billion in 2Q17, an increase of $319 million from 1Q17.
- Home equity loans totaled $2.1 billion at June 30, 2017, an increase of $40 million from March 31, 2017.
- Organic loan growth of 3% annualized.
- Average home equity loans totaled $2.1 billion in 2Q17, an increase of $25 million from 1Q17.
- Retail deposits totaled $20.5 billion at June 30, 2017 compared to $20.0 billion at March 31, 2017.
- The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 0.48% at June 30, 2017 compared to 0.41% at March 31, 2017.
- The ratio of originated non-performing home equity loans to originated home equity loans was 0.79% at June 30, 2017 compared to 0.76% at March 31, 2017.
On July 20, 2017, 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.