October 18, 2018
People’s United Financial Reports Third Quarter Net Income of $117.0 Million, or $0.33 per Common Share
Click here to see the third quarter Financial Schedule
- Completed the acquisition of First Connecticut Bancorp on October 1st.
- Return on average assets of 1.06 percent and return on average tangible common equity of 14.5 percent.
- Efficiency ratio of 56.7 percent, an improvement of 170 basis points linked-quarter reflecting continued emphasis on enhancing operating leverage.
- Net interest margin of 3.15 percent, expanded five basis points linked-quarter and benefited from an increase in loan yields that continue to outpace the rise in deposit costs.
- Strong deposit growth as end of period balances increased $742 million or two percent from June 30th.
BRIDGEPORT, CT., October 18, 2018 – People's United Financial, Inc. (NASDAQ: PBCT) today reported results for the third quarter 2018. Results for the third quarter and comparison periods are summarized below:
“Third quarter results reflect our consistent focus on improving relationship profitability across the Company’s diverse mix of businesses,” said Jack Barnes, Chairman and Chief Executive Officer. “Another quarter of record earnings generated a return on average tangible common equity of 14.5 percent, up 270 basis points from the prior year quarter. The addition of First Connecticut further strengthens the franchise’s earnings power as we are confident in achieving the transaction’s attractive financial returns. Integration has progressed well and the core system conversion will take place in January. Experienced teams at both companies have worked closely together to ensure a seamless transition for clients who will benefit from our full suite of products and services as well as enhanced digital capabilities. We are excited about executing in the market as one team and deepening our well-established presence in the central Connecticut and western Massachusetts regions.”
“Operating earnings of $113.8 million for the third quarter increased 27 percent year-over-year and benefited from higher revenues and well-controlled expenses,” said David Rosato, Senior Executive Vice President and Chief Financial Officer. “Total revenues of $399 million grew seven percent due to increases in both net interest income and non-interest income. Net interest margin expanded 11 basis points from a year ago and five basis points linked-quarter highlighting the asset sensitivity of the balance sheet. As expected, deposits rebounded in the third quarter with average balances rising $522 million or two percent from the second quarter, while average loans were flat over the same period. Loan growth has been below our expectations this year primarily due to heightened competition, lower demand and above average payoffs. In this environment, we continue to emphasize the importance of improving operating leverage as evidenced by a third quarter efficiency ratio of 56.7 percent. We are particularly pleased with our ability to control costs, especially as we further invest in revenue producing talent and enhanced technology.”
The Company's Board of Directors declared a $0.1750 per common share quarterly dividend payable November 15, 2018 to shareholders of record on November 1, 2018. Based on the closing stock price on October 17, 2018, the dividend yield on People's United Financial common stock is 4.3 percent.
People's United Financial, Inc., a diversified financial services company with $47 billion in total assets, provides commercial and retail banking, as well as wealth management services through a network of over 400 branches in Connecticut, New York, Massachusetts, Vermont, New Hampshire and Maine.
3Q 2018 Financial Highlights
- Net income totaled $117.0 million, or $0.33 per common share.
- Net income available to common shareholders totaled $113.5 million.
- Operating earnings totaled $113.8 million, or $0.33 per common share (see page 16 of the Financial Schedule).
- Net interest income totaled $306.4 million in 3Q18 compared to $301.2 million in 2Q18.
- Net interest margin increased five basis points from 2Q18 to 3.15% reflecting:
- Higher yields on the loan portfolio (increase of ten basis points).
- Higher yields on the securities portfolio (increase of one basis point).
- One additional calendar day in 3Q18 (increase of two basis points).
- Higher yields on the securities portfolio (increase of one basis point).
- A decrease in average borrowing balances (increase of one basis point).
- Higher rates on deposits (decrease of nine basis points).
- Provision for loan losses totaled $8.2 million.
- Net loan charge-offs totaled $7.0 million.
- Net loan charge-off ratio of 0.09% in 3Q18.
- Non-interest income totaled $92.3 million in 3Q18 compared to $94.9 million in 2Q18.
- Insurance revenue increased $1.5 million, reflecting the seasonality of commercial insurance renewals.
- Bank service charges increased $0.6 million.
- Commercial banking lending fees decreased $1.5 million.
- Customer interest rate swap income decreased $1.2 million.
- Commercial banking lending fees decreased $1.0 million.
- Other non-interest income in 2Q18 includes $2.0 million in gains related to certain legacy investments.
- At September 30, 2018, assets under administration, which are not reported as assets of People’s United Financial, totaled $23.8 billion, of which $9.3 billion are under discretionary management, compared to $23.6 billion and $9.0 billion, respectively, at June 30, 2018.
- Non-interest expense totaled $241.3 million in 3Q18 compared to $248.6 million in 2Q18.
- Operating non-interest expense totaled $240.8 million in 3Q18 (see page 16 of the Financial Schedule).
- Compensation and benefits expense increased $0.7 million, primarily reflecting additional employees resulting from the Vend Lease acquisition.
- Professional and outside services expense, excluding $0.4 million and $2.1 million of merger-related expenses in 3Q18 and 2Q18, respectively, decreased $1.9 million.
- Other non-interest expense includes merger-related expenses of $0.1 million in 3Q18 and $0.8 million in 2Q18. Also included in 2Q18 is a $4.1 million charge relating to the closing of 10 branches.
- The efficiency ratio was 56.7% for 3Q18 compared to 58.4% for 2Q18 and 57.3% for 3Q17 (see page 16 of the Financial Schedule).
- The effective income tax rate was 21.6% for both 3Q18 and the first nine months of 2018, compared to 27.8% for the full-year of 2017.
- The lower rates in 2018 primarily reflect the benefit from a reduction in the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018.
- Commercial loans totaled $23.4 billion at September 30, 2018, a decrease of $315 million from June 30, 2018.
- The equipment financing portfolio increased $105 million from June 30, 2018.
- The mortgage warehouse portfolio decreased $201 million from June 30, 2018.
- The New York multi-family portfolio decreased $128 million from June 30, 2018.
- Average commercial loans totaled $23.3 billion in 2Q18, an increase of $61 million from 1Q18.
- The average equipment financing portfolio increased $197 million from 2Q18, reflecting in part loans and leases acquired in connection with the Vend Lease acquisition in June.
- The average New York multi-family portfolio decreased $108 million from 2Q18.
- The average mortgage warehouse portfolio decreased $24 million from 2Q18.
- Commercial deposits totaled $11.9 billion at September 30, 2018 compared to $11.4 billion at June 30, 2018.
- The ratio of originated non-performing commercial loans to originated commercial loans was 0.52% at September 30, 2018 compared to 0.55% at June 30, 2018.
- Non-performing commercial assets, excluding acquired non-performing loans, totaled $122.1 million at September 30, 2018 compared to $132.6 million at June 30, 2018.
- For the originated commercial loan portfolio, the allowance for loan losses as a percentage of loans was 0.94% at September 30, 2018 compared to 0.93% at June 30, 2018.
- The originated commercial allowance for loan losses represented 182% of originated non-performing commercial loans at September 30, 2018 compared to 169% at June 30, 2018.
- Residential mortgage loans totaled $6.9 billion at September 30, 2018, an increase of $46 million from June 30, 2018.
- Average residential mortgage loans totaled $6.9 billion in 3Q18, an increase of $34 million from 2Q18.
- Home equity loans totaled $1.9 billion at September 30, 2018, a decrease of $42 million from June 30, 2018.
- Average home equity loans totaled $1.9 billion in 3Q18, a decrease of $46 million from 2Q18.
- Retail deposits totaled $21.3 billion at September 30, 2018 compared to $21.1 billion at June 30, 2018.
- The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 0.48% at September 30, 2018 compared to 0.50% at June 30, 2018.
- The ratio of originated non-performing home equity loans to originated home equity loans was 0.80% at September 30, 2018 compared to 0.81% at June 30, 2018.
On October 18, 2018, 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.
Access Information About People's United Financial at www.peoples.com.