People's United Financial, Inc (NASDAQ: PBCT) today reported net income of$58.6 million, or$0.17per share, for the first quarter of 2012, compared to$51.7 million, or$0.15per share, for the first quarter of 2011, and$43.0 million, or$0.12per share, for the fourth quarter of 2011. Operating earnings were$60.6 million, or$0.18per share, for the first quarter of 2012, compared to$53.8 million, or$0.15per share, for the first quarter of 2011 and$58.7 million, or$0.17per share, for the fourth quarter of 2011.
The Board of Directors of People's United Financial voted to increase the common stock dividend to an annual rate of$0.64per share. Based on the closing stock price onApril 18, 2012, the dividend yield on People's United Financial common stock is5.0 percent. The quarterly dividend of$0.16per share is payableMay 15, 2012to shareholders of record onMay 1, 2012.
During the first quarter of 2012 the Company repurchased 4.5 million shares of People's United Financial common stock at a total cost of$56 million. Under the existing stock repurchase authorization, 13.5 million shares of common stock remain available to repurchase.
"Our performance in the first quarter of 2012 continues to build on the execution of our primary objectives ‘optimizing existing businesses and efficiently deploying capital," statedJack Barnes, President and Chief Executive Officer. "Our first quarter financial results reflect continued loan and deposit growth and ongoing strength in our fee income businesses, including solid contributions from wealth management and insurance. We anticipate continued momentum in loan growth based on our residential, commercial and asset-based lending pipelines and remain encouraged by the significant opportunity for loan and deposit growth throughout the franchise, particularly within theBostonand New York City MSAs.
"Further, we announced the acquisition of 56 branches located inNew York statefrom RBS Citizens, N.A., 52 of which are situated in Stop & Shop supermarkets, and the assumption of$325 millionin deposits associated with these branches, which leverages our excellent track record with in-store banking," added Barnes. "The transaction, which is expected to close late in the second quarter pending regulatory approval, is a unique opportunity to be the exclusive provider of banking services at 139 Stop & Shop stores located acrossLong Island, southernNew York stateandConnecticut."
Barnes concluded, "We are pleased to announce our 20thconsecutive annual dividend increase. Our strong business fundamentals, ongoing ability to leverage our brand in attractive markets, and prospects for organic growth continue to be the foundations of our strength relative to others in the industry. We have demonstrated our ability to prudently and effectively deploy capital through organic loan and deposit growth, adherence to a strong dividend policy, share repurchases and a thoughtful acquisition strategy."
"On an operating basis, earnings were$61 million, or18 centsper share, this quarter," statedKirk W. Walters, Senior Executive Vice President and Chief Financial Officer. "The Company's performance in the first quarter reflects an expected decline in the net interest margin, lower provision expense, improvement in fee-based income and ongoing expense control."
Walters continued, "The operating net interest margin was 4.01 percent in the first quarter of 2012 compared to 4.00 percent in the first quarter of 2011 and 4.07 percent in the fourth quarter of 2011. Non-interest income this quarter continues to reflect improvements in most of our fee-based business as well as gains on sales of residential mortgage loans, partially offset by decreases in loan prepayment fees and bank service charges. The decrease in the level of operating non-interest expense this quarter reflects the continued benefit from cost-savings initiatives announced in 2011."
Walters concluded, "We continue to be pleased with our overall levels of asset quality, as noted by the improvement this quarter. Our low net loan charge-off ratio, which represents less than one-third of our peers, is a reflection of the Company's historically strong underwriting standards, the strength of the footprint in which we operate and the resilience of our customers, who have successfully managed through the economic crisis."
AtMarch 31, 2012, People's United Financial's tier 1 common and total risk-based capital ratios were 14.0 percent and 16.1 percent, respectively, and the tangible equity ratio stood at 11.7 percent. People's United Bank's tier 1 and total risk-based capital ratios were 13.2 percent and 14.2 percent, respectively, atMarch 31, 2012.
Operating return on average assets was 0.88 percent for the first quarter of 2012, compared to 0.87 percent for the first quarter of 2011 and 0.86 percent for the fourth quarter of 2011. Operating return on average tangible stockholders' equity was 8.0 percent for the first quarter of 2012, compared to 6.7 percent for the first quarter of 2011 and 7.4 percent for the fourth quarter of 2011.
Loans acquired in connection with acquisitions have been recorded at fair value based on an initial estimate of expected cash flows, including a reduction for estimated credit losses and without carryover of the respective portfolios' historical allowance for loan losses. A decrease in expected cash flows in subsequent periods may indicate that a loan is impaired, which would require the establishment of an allowance for loan losses. As such, selected asset quality metrics have been highlighted to distinguish between the 'originated' portfolio and the 'acquired' portfolio.
AtMarch 31, 2012, the allowance for loan losses for originated loans as a percentage of originated loans, which represents all loans other than those acquired, was 1.03 percent and as a percentage of originated non-performing loans was 61 percent, compared to 1.04 percent and 60 percent, respectively, atDecember 31, 2011. For the originated commercial banking portfolio, the allowance for loan losses ratio was 1.34 percent atMarch 31, 2012and represented 79 percent of non-performing commercial banking loans at that date.
For the originated loan portfolio, non-performing loans equaled 1.67 percent of originated loans atMarch 31, 2012, compared to 1.75 percent atDecember 31, 2011and 1.62 percent atMarch 31, 2011. Non-performing assets (excluding acquired non-performing loans) equaled 1.85 percent of originated loans, REO and repossessed assets atMarch 31, 2012compared to 2.00 percent atDecember 31, 2011and 1.96 percent atMarch 31, 2011.
Non-performing loans in the acquired portfolio, which represent the contractual balances of loans acquired that meet our definition of non-performing but are not, under the accounting model for acquired loans, subject to classification as non-accrual in the same manner as originated loans, totaled$247.2 millionatMarch 31, 2012compared to$249.0 millionatDecember 31, 2011and$324.4 millionatMarch 31, 2011.
The provision for loan losses in the first quarter of 2012 totaled$11.5 million, reflecting: (i) net loan charge-offs of$11.2 million, of which$4.8 millioncarried previously-established specific reserves; (ii) a$4.8 millionincrease in the originated allowance for loan losses in response to the growth in the commercial and residential mortgage loan portfolios; and (iii)$0.3 millionof impairment associated with the acquired loan portfolio. Net loan charge-offs totaled$14.8 millionin the fourth quarter of 2011. Net loan charge-offs as a percentage of average loans on an annualized basis were 0.22 percent in the first quarter of 2012 compared to 0.29 percent in the prior year's fourth quarter.
People's United Financial, a diversified financial services company with$28 billionin assets, provides commercial and retail banking, as well as wealth management services through a network of 360 branches inConnecticut,Massachusetts,Vermont,New York,New HampshireandMaine. Through its subsidiaries, People's United Financial provides equipment financing, brokerage and insurance services. Assets under administration and those under full discretionary management, neither of which are reported as assets of People's United Financial, totaled$13.0 billionand$4.4 billion, respectively, atMarch 31, 2012.
Conference Call
OnApril 19, 2012, at8 a.m., Eastern Time, People's United Financial will host a conference call to discuss this earnings announcement. The call may be heard throughwww.peoples.comby 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.
1Q 2012 Financial Highlights
Summary
Net income was$58.6 million, or$0.17per share.
Operating earnings were$60.6 million, or$0.18per share.
Net interest income totaled$235.1 millioncompared to$242.1 millionin 4Q11.
Cost recovery income on acquired loans, representing cash receipts in excess of carrying amount, totaled$5 millionin 4Q11.
Operating net interest margin decreased 6 basis points from 4Q11 to 4.01%.
Loan yields and one less calendar day in 1Q12 reduced the net interest margin by 9 and 3 basis points, respectively.
Lower funding costs in 1Q12 benefited the net interest margin by 6 basis points.
Provision for loan losses totaled$11.5 million.
Net loan charge-offs totaled$11.2 million, of which$4.8 millionrelated to loans with specific reserves established in prior periods.
Reflects a$4.8 millionincrease in the originated allowance for loan losses in response to loan growth.
Includes a provision for loan losses on acquired loans of$0.3 million.
Non-interest income was$72.4 millionin 1Q12 compared to$71.7 millionin 4Q11.
Bank service charges decreased$1.3 millionfrom 4Q11 to$30.3 million.
Insurance revenue increased$1.2 millionfrom 4Q11, primarily reflecting the seasonal nature of insurance renewals.
Brokerage commissions increased$0.5 millionfrom 4Q11, primarily reflecting higher commissions on mutual funds and fixed income products.
Investment management fees increased$0.3 millionfrom 4Q11.
Net gains on sales of residential mortgage loans increased$1.5 millionfrom 4Q11.
Loan prepayment fees declined$1.9 millionfrom 4Q11.
Non-interest expense totaled$208.6 millionin 1Q12 compared to$230.2 millionin 4Q11.
Operating non-interest expense was$205.6 millionin 1Q12 compared to$207.2millionin 4Q11.
1Q12 includes$3.0 millionof one-time charges (primarily severance-related) while 4Q11 includes$23.0 millionof merger-related expenses and one-time charges.
Efficiency ratio in 1Q12 increased to 63.2% from 61.8% in 4Q11, reflecting a$6.6 milliondecrease in operating revenue.
Effective income tax rate was 33.0% for 1Q12 and 32.7% for 2011.
Commercial Banking
Excluding acquired loans, commercial banking loans increased$187 million, or 6% annualized, fromDecember 31, 2011.
The ratio of originated non-performing commercial banking loans to originated commercial banking loans was 1.70% atMarch 31, 2012compared to 1.81% atDecember 31, 2011.
Non-performing commercial banking assets, excluding acquired non-performing loans, totaled$222.1 millionatMarch 31, 2012, down from$240.8 millionatDecember 31, 2011.
Average commercial banking loans totaled$14.5 billion, an increase of$77 million, or 2% annualized, from 4Q11.
Net loan charge-offs totaled$7.2 million, or 0.20% annualized, of average commercial banking loans in 1Q12, compared to$11.8 million, or 0.33% annualized, in 4Q11.
For the originated commercial banking portfolio, the allowance for loan losses as a percentage of loans was 1.34% atMarch 31, 2012compared to 1.39% atDecember 31, 2011.
The commercial banking allowance for loan losses represented 79% of originated non-performing commercial banking loans atMarch 31, 2012compared to 77% atDecember 31, 2011.
Commercial deposits totaled$5.3 billionatMarch 31, 2012compared to$5.2 billionatDecember 31, 2011.
Retail Banking
Excluding acquired loans, residential mortgage loans increased$156 million, or 20% annualized, fromDecember 31, 2011.
The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 2.12% atMarch 31, 2012compared to 2.19% atDecember 31, 2011.
Average residential mortgage loans totaled$3.7 billion, an increase of$142 million, or 16% annualized, from 4Q11.
Net loan charge-offs totaled$2.0 million, or 0.22% annualized, of average residential mortgage loans in 1Q12, compared to$1.6 million, or 0.18% annualized, in 4Q11.
Excluding acquired loans, home equity loans totaled$1.9 billion, unchanged fromDecember 31, 2011.
The ratio of originated non-performing home equity loans to originated home equity loans was 0.80% atMarch 31, 2012compared to 0.82% atDecember 31, 2011.
Average home equity loans totaled$2.0 billionin 1Q12, unchanged from 4Q11.
Net loan charge-offs totaled$1.7 million, or 0.33% annualized, of average home equity loans in 1Q12, compared to$0.7 million, or 0.15% annualized, in 4Q11.
Retail deposits totaled$16.0 billionatMarch 31, 2012compared to$15.6 billionatDecember 31, 2011.
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" 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) residential mortgage and secondary market activity; (7) changes in accounting and regulatory guidance applicable to banks; (8) price levels and conditions in the public securities markets generally; (9) competition and its effect on pricing, spending, third-party relationships and revenues; (10) the successful integration of acquired companies; and (11) 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 atwww.peoples.com.
People's United Financial, Inc.
FINANCIAL HIGHLIGHTS
Three Months Ended
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(dollars in millions, except per share data)
2012
2011
2011
2011
2011
Earnings Data:
Net interest income
$ 235.1
$ 242.1
$ 240.0
$ 221.2
$ 220.3
Provision for loan losses
11.5
20.7
14.4
14.0
14.6
Non-interest income (1)
72.4
71.7
84.7
76.6
74.6
Non-interest expense (2)
208.6
230.2
231.9
207.0
202.8
Income before income tax expense
87.4
62.9
78.4
76.8
77.5
Net income
58.6
43.0
52.9
51.2
51.7
Operating earnings (3)
60.6
58.7
67.3
57.3
53.8
Selected Statistical Data:
Net interest margin (4)
4.01%
4.16%
4.11%
4.13%
4.16%
Operating net interest margin (3), (4)
4.01
4.07
4.11
4.09
4.00
Return on average assets (4)
0.85
0.63
0.77
0.82
0.84
Operating return on average assets (3), (4)
0.88
0.86
0.98
0.92
0.87
Return on average tangible assets (4)
0.93
0.68
0.84
0.89
0.91
Return on average stockholders' equity (4)
4.5
3.2
3.8
4.0
4.0
Return on average tangible stockholders' equity (4)
7.7
5.4
6.3
6.3
6.4
Operating return on average tangible
stockholders' equity (3), (4)
8.0
7.4
8.0
7.1
6.7
Efficiency ratio (3)
63.2
61.8
62.0
64.9
65.4
Common Share Data:
Basic and diluted earnings per share
$ 0.17
$ 0.12
$ 0.15
$ 0.15
$ 0.15
Operating earnings per share (3)
0.18
0.17
0.19
0.17
0.15
Dividends paid per share
0.1575
0.1575
0.1575
0.1575
0.1550
Dividend payout ratio
93.8%
127.7%
108.4%
106.4%
104.9%
Operating dividend payout ratio (3)
90.6
93.4
85.3
95.1
100.7
Book value per share (end of period)
$ 15.03
$ 14.99
$ 15.18
$ 15.01
$ 14.92
Tangible book value per share (end of period) (3)
8.74
8.75
9.01
9.38
9.27
Stock price:
High
13.79
13.07
13.96
13.81
14.49
Low
12.20
10.91
10.50
12.55
12.17
Close (end of period)
13.23
12.85
11.40
13.44
12.58
Common shares (end of period) (in millions)
344.73
348.68
348.59
346.12
345.97
Weighted average diluted common shares (in millions)
344.97
346.68
358.28
343.88
346.01
(1) Includes net security gains of $8.6 million for the three months ended Sept. 30, 2011.
(2) Includes a total of $3.0 million, $23.0 million, $21.5 million, $9.2 million and $3.1 million of merger-related expenses and one-time charges for the three months ended March 31, 2012, Dec. 31, 2011, Sept. 30, 2011, June 30, 2011and March 31, 2011, respectively.
(3) See non-GAAP financial measures and reconciliation to GAAP.
(4) Annualized.
People's United Financial, Inc
FINANCIAL HIGHLIGHTS - Continued
As of and for the Three Months Ended
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(dollars in millions)
2012
2011
2011
2011
2011
Financial Condition Data:
General:
Total assets
$ 27,808
$ 27,568
$ 27,213
$ 25,323
$ 24,962
Loans
20,490
20,400
20,148
17,687
17,523
Securities
2,895
2,931
2,540
3,226
3,203
Short-term investments (1)
767
411
779
822
926
Allowance for loan losses
183
183
177
176
178
Goodwill and other acquisition-related intangibles
2,169
2,174
2,151
1,947
1,953
Deposits
21,268
20,816
20,487
18,278
18,110
Borrowings
811
857
881
1,331
1,158
Subordinated notes and debentures
160
160
159
159
176
Stockholders' equity
5,181
5,225
5,291
5,194
5,160
Non-performing assets (2)
316
337
305
315
292
Net loan charge-offs
11.2
14.8
13.4
15.5
9.6
Average Balances:
Loans
$ 20,407
$ 20,217
$ 19,856
$ 17,654
$ 17,290
Securities
2,751
2,411
2,976
3,264
3,089
Short-term investments (1)
536
854
756
629
843
Loans held for sale
39
60
26
17
52
Total earning assets
23,733
23,542
23,614
21,564
21,274
Total assets
27,463
27,285
27,355
24,853
24,623
Deposits
20,843
20,597
20,259
18,225
17,944
Total funding liabilities
21,862
21,653
21,499
19,353
19,121
Stockholders' equity
5,217
5,302
5,515
5,177
5,185
Ratios:
Net loan charge-offs to average loans (annualized)
0.22%
0.29%
0.27%
0.35%
0.22%
Non-performing assets to originated loans,
real estate owned and repossessed assets (2)
1.85
2.00
1.88
2.05
1.96
Allowance for loan losses to:
Originated loans (2)
1.03
1.04
1.09
1.15
1.19
Originated non-performing loans (2)
61.5
59.7
68.5
68.0
73.8
Average stockholders' equity to average total assets
19.0
19.4
20.2
20.8
21.1
Stockholders' equity to total assets
18.6
19.0
19.4
20.5
20.7
Tangible stockholders' equity to tangible assets (3)
11.7
12.0
12.5
13.9
13.9
Total risk-based capital (4)
16.1
16.2
16.7
19.1
19.4
(1) Includes securities purchased under agreements to resell.
(2) Excludes acquired loans.
(3) See non-GAAP financial measures and reconciliation to GAAP.
(4) Consolidated.
People's United Financial, Inc.
CONSOLIDATED STATEMENTS OF CONDITION
March 31,
Dec. 31,
March 31,
(in millions)
2012
2011
2011
Assets
Cash and due from banks
$ 341.1
$ 370.2
$ 315.2
Short-term investments
767.4
410.7
926.2
Total cash and cash equivalents
1,108.5
780.9
1,241.4
Securities:
Trading account securities, at fair value
22.6
71.8
84.9
Securities available for sale, at fair value
2,742.3
2,725.5
3,003.8
Securities held to maturity, at amortized cost
56.4
56.4
55.1
Federal Home Loan Bank stock, at cost
73.7
77.7
59.5
Total securities
2,895.0
2,931.4
3,203.3
Loans held for sale
56.7
101.9
18.0
Loans:
Commercial
7,491.0
7,382.0
6,046.7
Commercial real estate
7,063.1
7,172.2
6,565.7
Residential mortgage
3,755.1
3,628.4
2,783.6
Consumer
2,180.3
2,217.4
2,127.1
Total loans
20,489.5
20,400.0
17,523.1
Less allowance for loan losses
(183.2)
(182.9)
(177.5)
Total loans, net
20,306.3
20,217.1
17,345.6
Goodwill and other acquisition-related intangibles
2,169.2
2,174.2
1,952.6
Premises and equipment
330.4
339.6
326.0
Bank-owned life insurance
334.1
332.7
291.8
Other assets
607.7
690.1
583.6
Total assets
$ 27,807.9
$ 27,567.9
$ 24,962.3
Liabilities
Deposits:
Non-interest-bearing
$ 4,636.9
$ 4,506.2
$ 3,789.5
Savings, interest-bearing checking and money market
11,477.9
10,970.4
9,255.7
Time
5,152.7
5,339.2
5,064.9
Total deposits
21,267.5
20,815.8
18,110.1
Borrowings:
Retail repurchase agreements
452.8
497.2
481.6
Federal Home Loan Bank advances
331.4
332.4
476.3
Federal funds purchased and other borrowings
26.8
27.1
200.0
Total borrowings
811.0
856.7
1,157.9
Subordinated notes and debentures
159.9
159.6
176.3
Other liabilities
388.9
510.8
357.7
Total liabilities
22,627.3
22,342.9
19,802.0
Stockholders' Equity
Common stock
3.9
3.9
3.7
Additional paid-in capital
5,252.3
5,247.0
4,981.5
Retained earnings
745.5
744.1
767.2
Treasury stock, at cost
(549.1)
(493.5)
(307.6)
Accumulated other comprehensive loss
(93.1)
(95.8)
(98.4)
Unallocated common stock of Employee Stock Ownership Plan, at cost
(178.9)
(180.7)
(186.1)
Total stockholders' equity
5,180.6
5,225.0
5,160.3
Total liabilities and stockholders' equity
$ 27,807.9
$ 27,567.9
$ 24,962.3
People's United Financial, Inc.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(in millions, except per share data)
2012
2011
2011
2011
2011
Interest and dividend income:
Commercial
$ 94.7
$ 96.9
$ 97.4
$ 85.9
$ 78.6
Commercial real estate
91.7
100.3
98.0
92.5
101.6
Residential mortgage
36.2
35.6
34.5
29.7
29.3
Consumer
20.7
21.2
21.5
20.6
20.9
Total interest on loans
243.3
254.0
251.4
228.7
230.4
Securities
18.0
17.3
21.7
23.4
21.0
Loans held for sale
0.5
0.7
0.4
0.3
0.7
Short-term investments
0.3
0.5
0.5
0.4
0.7
Total interest and dividend income
262.1
272.5
274.0
252.8
252.8
Interest expense:
Deposits
23.1
25.9
28.5
26.4
26.6
Borrowings
1.7
1.7
2.4
2.4
2.5
Subordinated notes and debentures
2.2
2.8
3.1
2.8
3.4
Total interest expense
27.0
30.4
34.0
31.6
32.5
Net interest income
235.1
242.1
240.0
221.2
220.3
Provision for loan losses
11.5
20.7
14.4
14.0
14.6
Net interest income after provision for loan losses
223.6
221.4
225.6
207.2
205.7
Non-interest income:
Bank service charges
30.3
31.6
35.8
32.9
31.0
Investment management fees
8.6
8.3
8.4
8.3
8.2
Insurance revenue
8.4
7.2
9.0
6.6
7.9
Brokerage commissions
3.1
2.6
2.8
3.3
3.2
Net gains on sales of residential mortgage loans
3.6
2.1
1.3
1.1
3.1
Net (losses) gains on sales of acquired loans
-
(0.4)
(4.8)
7.2
5.5
Bank-owned life insurance
1.8
1.7
2.0
1.4
1.2
Merchant services income, net
1.1
1.1
1.1
1.1
1.0
Net security gains
-
-
8.6
0.1
0.1
Other non-interest income
15.5
17.5
20.5
14.6
13.4
Total non-interest income
72.4
71.7
84.7
76.6
74.6
Non-interest expense:
Compensation and benefits
110.3
111.0
110.1
102.5
105.4
Occupancy and equipment
33.4
34.4
34.9
30.9
33.1
Professional and outside service fees
15.3
18.7
18.6
17.4
15.9
Amortization of other acquisition-related intangibles
6.6
6.9
7.0
6.0
5.9
Merger-related expenses
-
13.3
20.1
6.4
3.1
Other non-interest expense
43.0
45.9
41.2
43.8
39.4
Total non-interest expense (1)
208.6
230.2
231.9
207.0
202.8
Income before income tax expense
87.4
62.9
78.4
76.8
77.5
Income tax expense
28.8
19.9
25.5
25.6
25.8
Net income
$ 58.6
$ 43.0
$ 52.9
$ 51.2
$ 51.7
Basic and diluted earnings per common share
$ 0.17
$ 0.12
$ 0.15
$ 0.15
$ 0.15
(1) In addition to merger-related expenses, total non-interest expense includes $3.0 million, $9.7 million, $1.4 millionand $2.8 million of non-operating expenses for the three months ended March 31, 2012, Dec. 31, 2011,Sept. 30, 2011 and June 30, 2011, respectively. See non-GAAP financial measures and reconciliation to GAAP.
People's United Financial, Inc.
AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE ANALYSIS (1)
March 31, 2012
December 31, 2011
Three months ended
Average
Yield/
Average
Yield/
(dollars in millions)
Balance
Interest
Rate
Balance
Interest
Rate
Assets:
Short-term investments
$ 535.9
$ 0.3
0.24%
$ 853.9
$ 0.5
0.25%
Securities purchased under
agreements to resell
-
-
-
-
-
-
Securities (2)
2,750.7
18.7
2.72
2,410.9
17.9
2.97
Loans held for sale
39.1
0.5
4.96
60.3
0.7
4.61
Loans:
Commercial
7,373.6
96.5
5.24
7,300.8
98.9
5.42
Commercial real estate
7,118.7
91.7
5.15
7,114.9
100.3
5.64
Residential mortgage
3,713.1
36.2
3.89
3,571.6
35.6
3.99
Consumer
2,201.5
20.7
3.77
2,230.1
21.2
3.80
Total loans
20,406.9
245.1
4.81
20,217.4
256.0
5.07
Total earning assets
23,732.6
$ 264.6
4.46%
23,542.5
$ 275.1
4.68%
Other assets
3,729.9
3,742.2
Total assets
$ 27,462.5
$ 27,284.7
Liabilities and stockholders' equity:
Deposits:
Non-interest-bearing
$ 4,406.8
$ -
- %
$ 4,330.6
$ -
- %
Savings, interest-bearing checking
and money market
11,186.5
11.0
0.39
10,841.4
12.4
0.46
Time
5,250.0
12.1
0.92
5,425.2
13.5
1.00
Total deposits
20,843.3
23.1
0.44
20,597.2
25.9
0.50
Borrowings:
Retail repurchase agreements
494.6
0.4
0.30
527.4
0.4
0.33
Federal Home Loan Bank advances
331.9
1.2
1.48
332.9
1.2
1.49
Federal funds purchased and
other borrowings
32.2
0.1
0.84
36.0
0.1
0.78
Total borrowings
858.7
1.7
0.78
896.3
1.7
0.78
Subordinated notes and debentures
159.7
2.2
5.47
159.5
2.8
7.02
Total funding liabilities
21,861.7
$ 27.0
0.49%
21,653.0
$ 30.4
0.56%
Other liabilities
383.8
330.2
Total liabilities
22,245.5
21,983.2
Stockholders' equity
5,217.0
5,301.5
Total liabilities and
stockholders' equity
$ 27,462.5
$ 27,284.7
Net interest income/spread (3)
$ 237.6
3.97%
$ 244.7
4.12%
Net interest margin
4.01%
4.16%
(1)Average yields earned and rates paid are annualized.
(2)Average balances and yields for securities available for sale are based on amortized cost.
(3)The fully taxable equivalent adjustment was $2.5 million, $2.6 million and $1.2 million for the three months ended March 31, 2012, December 31, 2011 and March 31, 2011, respectively.
People's United Financial, Inc
AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE ANALYSIS (1)
March 31, 2011
Three months ended
Average
Yield/
(dollars in millions)
Balance
Interest
Rate
Assets:
Short-term investments
$ 732.4
$ 0.6
0.31%
Securities purchased under
agreements to resell
110.6
0.1
0.17
Securities (2)
3,088.5
21.2
2.75
Loans held for sale
52.5
0.7
5.78
Loans:
Commercial
5,377.3
79.6
5.92
Commercial real estate
7,053.3
101.6
5.76
Residential mortgage
2,707.9
29.3
4.33
Consumer
2,151.2
20.9
3.88
Total loans
17,289.7
231.4
5.35
Total earning assets
21,273.7
$ 254.0
4.78%
Other assets
3,348.8
Total assets
$ 24,622.5
Liabilities and stockholders' equity:
Deposits:
Non-interest-bearing
$ 3,797.4
$ -
- %
Savings, interest-bearing checking
and money market
9,015.1
12.1
0.54
Time
5,131.5
14.5
1.13
Total deposits
17,944.0
26.6
0.59
Borrowings:
Retail repurchase agreements
492.8
0.6
0.46
Federal Home Loan Bank advances
499.6
1.9
1.49
Federal funds purchased and
other borrowings
4.7
-
0.09
Total borrowings
997.1
2.5
0.98
Subordinated notes and debentures
179.7
3.4
7.61
Total funding liabilities
19,120.8
$ 32.5
0.68%
Other liabilities
316.3
Total liabilities
19,437.1
Stockholders' equity
5,185.4
Total liabilities and
stockholders' equity
$ 24,622.5
Net interest income/spread (3)
$ 221.5
4.10%
Net interest margin
4.16%
(1)Average yields earned and rates paid are annualized.
(2)Average balances and yields for securities available for sale are based on amortized cost.
(3)The fully taxable equivalent adjustment was $2.5 million, $2.6 million and $1.2 million for the three months
ended March 31, 2012, December 31, 2011 and March 31, 2011, respectively.
People's United Financial, Inc.
NON-PERFORMING ASSETS
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(dollars in millions)
2012
2011
2011
2011
2011
Originated non-performing loans:
Commercial Banking:
Commercial real estate
$ 97.3
$ 106.7
$ 91.0
$ 90.2
$ 71.7
Commercial and industrial
63.0
59.2
49.2
54.1
48.9
Equipment financing
39.6
42.9
37.9
36.0
38.6
Total
199.9
208.8
178.1
180.3
159.2
Retail:
Residential mortgage
70.0
68.9
65.5
65.8
70.4
Home equity
15.3
15.8
14.2
12.3
10.5
Other consumer
0.2
0.3
0.5
0.4
0.4
Total
85.5
85.0
80.2
78.5
81.3
Total originated non-performing loans (1)
285.4
293.8
258.3
258.8
240.5
REO
21.9
26.8
27.7
33.5
38.1
Repossessed assets
9.1
16.1
19.2
23.1
13.5
Total non-performing assets
$ 316.4
$ 336.7
$ 305.2
$ 315.4
$ 292.1
Acquired non-performing loans (contractual amount) (2)
$ 247.2
$ 249.0
$ 241.6
$ 250.4
$ 324.4
Originated non-performing loans as a percentage
of originated loans
1.67%
1.75%
1.60%
1.69%
1.62%
Non-performing assets as a percentage of:
Originated loans, REO and repossessed assets
1.85
2.00
1.88
2.05
1.96
Tangible stockholders' equity and allowance for
loan losses
9.93
10.44
9.20
9.21
8.63
(1) Reported net of government guarantees totaling $15.6 million at March 31, 2012, $12.1 million at Dec. 31, 2011,$11.3 million at Sept. 30, 2011, $10.7 million at June 30, 2011 and $10.0 million at March 31, 2011.
(2) Represents acquired loans that meet People's United Financial's definition of a non-performing loan but are not, under the accounting model for acquired loans, subject to classification as non-accrual in the same manner as originated loans. Because acquired loans are initially recorded at an amount estimated to be collectible, losses on such loans, when incurred, are first applied against the non-accretable difference established in purchase accounting and then to any allowance for loan losses recognized subsequent to acquisition.
People's United Financial, Inc.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Three Months Ended
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(dollars in millions)
2012
2011
2011
2011
2011
Allowance for loan losses on originated loans:
Balance at beginning of period
$ 175.5
$ 177.0
$ 176.0
$ 177.5
$ 172.5
Charge-offs
(12.9)
(15.7)
(14.6)
(17.4)
(10.4)
Recoveries
1.7
0.9
1.2
1.9
0.8
Net loan charge-offs
(11.2)
(14.8)
(13.4)
(15.5)
(9.6)
Provision for loan losses
11.2
13.3
14.4
14.0
14.6
Balance at end of period
175.5
175.5
177.0
176.0
177.5
Allowance for loan losses on acquired loans:
Balance at beginning of period
7.4
-
-
-
-
Provision for loan losses
0.3
7.4
-
-
-
Balance at end of period
7.7
7.4
-
-
-
Total allowance for loan losses
$ 183.2
$ 182.9
$ 177.0
$ 176.0
$ 177.5
Allowance for loan losses on originated loans as a percentage of:
Originated loans
1.03%
1.04%
1.09%
1.15%
1.19%
Originated non-performing loans
61.5
59.7
68.5
68.0
73.8
Commercial banking allowance for loan losses as a
percentage of originated commercial banking loans
1.34
1.39
1.48
1.55
1.61
Retail allowance for loan losses as a percentage of
originated retail loans
0.34
0.29
0.26
0.25
0.26
NET LOAN CHARGE-OFFS
Three Months Ended
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(dollars in millions)
2012
2011
2011
2011
2011
Commercial Banking:
Commercial real estate
$ 5.0
$ 3.9
$ 4.6
$ 9.3
$ 3.3
Commercial and industrial
1.6
3.4
4.4
1.6
2.3
Equipment financing
0.6
4.5
0.8
2.3
1.2
Total
7.2
11.8
9.8
13.2
6.8
Retail:
Residential mortgage
2.0
1.6
2.1
1.2
1.6
Home equity
1.7
0.7
1.1
0.8
0.8
Other consumer
0.3
0.7
0.4
0.3
0.4
Total
4.0
3.0
3.6
2.3
2.8
Total
$ 11.2
$ 14.8
$ 13.4
$ 15.5
$ 9.6
Net loan charge-offs to average loans (annualized)
0.22%
0.29%
0.27%
0.35%
0.22%
People's United Financial, Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP
In addition to evaluating People's United Financial's results of operations in accordance with U.S. generallyaccepted accounting principles ("GAAP"), management routinely supplements this evaluation with an analysis ofcertain non-GAAP financial measures, such as the efficiency and tangible equity ratios, tangible book value pershare and operating earnings metrics. Management believes these non-GAAP financial measures provide informationuseful to investors in understanding People's United Financial's underlying operating performance and trends, andfacilitates comparisons with the performance of other banks and thrifts. Further, the efficiency ratio and operatingearnings metrics are used by management in its assessment of financial performance, including non-interest expensecontrol, while the tangible equity ratio and tangible book value per share are used to analyze the relative strengthof People's United Financial's capital position.
The efficiency ratio, which represents an approximate measure of the cost required by People's United Financialto generate a dollar of revenue, is the ratio of (i) total non-interest expense (excluding goodwill impairmentcharges, amortization of other acquisition-related intangibles, losses on real estate assets and non-recurringexpenses) (the numerator) to (ii) net interest income on a fully taxable equivalent ("FTE") basis plus totalnon-interest income (including the FTE adjustment on bank-owned life insurance ("BOLI") income, and excludinggains and losses on sales of assets other than residential mortgage loans, and non-recurring income) (thedenominator). People's United Financial generally considers an item of income or expense to be non-recurring if itis not similar to an item of income or expense of a type incurred within the last two years and is not similar to anitem of income or expense of a type reasonably expected to be incurred within the following two years.
Operating earnings exclude from net income those items that management considers to be of such a non-recurringor infrequent nature that, by excluding such items (net of income taxes), People's United Financial's results can bemeasured and assessed on a more consistent basis from period to period. Items excluded from operating earnings,which include, but are not limited to, merger-related expenses, charges related to executive-level managementseparation costs, severance-related costs and writedowns of banking house assets, are generally also excludedwhen calculating the efficiency ratio.Operating earnings per share is calculated by dividing operating earnings bythe weighted average number of dilutive common shares outstanding for the respective period. Operating returnon average assets is calculated by dividing operating earnings (annualized) by average assets. Operating return onaverage tangible stockholders' equity is calculated by dividing operating earnings (annualized) by average tangiblestockholders' equity. The operating dividend payout ratio is calculated by dividing dividends paid by operatingearnings for the respective period.
Operating net interest margin excludes from the net interest margin those items that management considers to beof such an infrequent nature that, by excluding such items, People's United Financial's net interest margin can bemeasured and assessed on a more consistent basis from period to period. Items excluded from operating netinterest margin include, but are not limited to, cost recovery income on acquired loans and changes in theaccretable yield on acquired loans stemming from periodic cash flow reassessments. Operating net interest marginis calculated by dividing operating net interest income (annualized) by average earning assets.
The tangible equity ratio is the ratio of (i)tangible stockholders' equity (total stockholders' equity less goodwilland other acquisition-related intangibles) (the numerator) to (ii) tangible assets (total assets less goodwill and otheracquisition-related intangibles) (the denominator). Tangible book value per share is calculated by dividing tangiblestockholders' equity by common shares (total common shares issued, less common shares classified as treasuryshares and unallocated Employee Stock Ownership Plan ("ESOP")common shares).
In light of diversity in presentation among financial institutions, the methodologies used by People's UnitedFinancial for determining the non-GAAP financial measures discussed above may differ from those used by otherfinancial institutions.
People's United Financial, Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP - continued
EFFICIENCY RATIO
Three Months Ended
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(dollars in millions)
2012
2011
2011
2011
2011
Total non-interest expense
$ 208.6
$ 230.2
$ 231.9
$ 207.0
$ 202.8
Adjustments:
Amortization of other
acquisition-related intangibles
(6.6)
(6.9)
(7.0)
(6.0)
(5.9)
Severance-related costs
(2.4)
(3.9)
(1.4)
-
-
Merger-related expenses
-
(13.3)
(20.1)
(6.4)
(3.1)
Executive-level separation costs
-
(1.0)
-
(2.8)
-
Writedowns of banking house assets
-
(4.8)
-
-
-
Other (1)
(3.0)
(4.0)
(2.3)
(1.9)
(2.1)
Total
$ 196.6
$ 196.3
$ 201.1
$ 189.9
$ 191.7
Net interest income (FTE basis)
$ 237.6
$ 244.7
$ 242.7
$ 222.5
$ 221.5
Total non-interest income
72.4
71.7
84.7
76.6
74.6
Total revenues
310.0
316.4
327.4
299.1
296.1
Adjustments:
BOLI FTE adjustment
0.9
0.8
0.9
0.8
0.6
Net security (gains)
-
-
(8.6)
(0.1)
(0.1)
Net losses (gains) on sales of acquired loans
-
0.4
4.8
(7.2)
(5.5)
Other (2)
-
(0.1)
0.1
-
2.2
Total
$ 310.9
$ 317.5
$ 324.6
$ 292.6
$ 293.3
Efficiency ratio
63.2%
61.8%
62.0%
64.9%
65.4%
(1)Items classified as "other" and deducted from non-interest expense include, as applicable, certainfranchise taxes, real estate owned expenses, contract termination costs and non-recurring expenses.
(2)Items classified as "other" and added to (deducted from) total revenues include, as applicable, assetwrite-offs, gains associated with the sale of branch locations and mortgage servicing rights, andinterest on an income tax refund.
People's United Financial, Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP - continued
OPERATING EARNINGS
Three Months Ended
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(dollars in millions, except per share data)
2012
2011
2011
2011
2011
Net income, as reported
$ 58.6
$ 43.0
$ 52.9
$ 51.2
$ 51.7
Adjustments to arrive at operating earnings:
Severance-related costs
2.4
3.9
1.4
-
-
Other non-operating expenses
0.6
-
-
-
-
Merger-related expenses
-
13.3
20.1
6.4
3.1
Executive-level separation costs
-
1.0
-
2.8
-
Writedowns of banking house assets
-
4.8
-
-
-
Total pre-tax adjustments
3.0
23.0
21.5
9.2
3.1
Tax effect
(1.0)
(7.3)
(7.1)
(3.1)
(1.0)
Total adjustments, net of tax
2.0
15.7
14.4
6.1
2.1
Operating earnings
$ 60.6
$ 58.7
$ 67.3
$ 57.3
$ 53.8
Earnings per share, as reported
$ 0.17
$ 0.12
$ 0.15
$ 0.15
$ 0.15
Adjustments to arrive at
operating earnings per share:
Severance-related costs
0.01
0.01
-
-
-
Other non-operating expenses
-
-
-
-
-
Merger-related expenses
-
0.03
0.04
0.02
-
Executive-level separation costs
-
-
-
-
-
Writedowns of banking house assets
-
0.01
-
-
-
Total adjustments per share
0.01
0.05
0.04
0.02
-
Operating earnings per share
$ 0.18
$ 0.17
$ 0.19
$ 0.17
$ 0.15
Average total assets
$ 27,463
$ 27,285
$ 27,355
$ 24,853
$ 24,623
Operating return on
average assets (annualized)
0.88%
0.86%
0.98%
0.92%
0.87%
OPERATING NET INTEREST MARGIN
Three Months Ended
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(dollars in millions)
2012
2011
2011
2011
2011
Net interest income (FTE basis)
$ 237.6
$ 244.7
$ 242.7
$ 222.5
$ 221.5
Adjustments to arrive at
operating net interest income:
Cost recovery income
-
(5.0)
-
-
-
Changes in accretable yield
-
-
-
(2.2)
(9.0)
Total adjustments
-
(5.0)
-
(2.2)
(9.0)
Operating net interest income
$ 237.6
$ 239.7
$ 242.7
$ 220.3
$ 212.5
Net interest margin, as reported (1)
4.01%
4.16%
4.11%
4.13%
4.16%
Adjustments to arrive at
operating net interest margin: (1)
Cost recovery income
-
(0.09)
-
-
-
Changes in accretable yield
-
-
-
(0.04)
(0.16)
Total adjustments
-
(0.09)
-
(0.04)
(0.16)
Operating net interest margin (1)
4.01%
4.07%
4.11%
4.09%
4.00%
Total earning assets
$ 23,733
$ 23,542
$ 23,614
$ 21,564
$ 21,274
(1)Annualized.
People's United Financial, Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP - continued
OPERATING RETURN ON AVERAGE TANGIBLE STOCKHOLDERS' EQUITY
Three Months Ended
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(dollars in millions)
2012
2011
2011
2011
2011
Operating earnings
$ 60.6
$ 58.7
$ 67.3
$ 57.3
$ 53.8
Average stockholders' equity
5,217
5,302
5,515
5,177
5,185
Less: Average goodwill and average other
acquisition-related intangibles
2,171
2,148
2,154
1,950
1,957
Average tangible stockholders' equity
$ 3,046
$ 3,154
$ 3,361
$ 3,227
$ 3,228
Operating return on average tangible
stockholders' equity (annualized)
8.0%
7.4%
8.0%
7.1%
6.7%
OPERATING DIVIDEND PAYOUT RATIO
Three Months Ended
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(dollars in millions)
2012
2011
2011
2011
2011
Dividends paid
$ 54.9
$ 54.8
$ 57.4
$ 54.5
$ 54.2
Operating earnings
$ 60.6
$ 58.7
$ 67.3
$ 57.3
$ 53.8
Operating dividend payout ratio
90.6%
93.4%
85.3%
95.1%
100.7%
TANGIBLE EQUITY RATIO
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(dollars in millions)
2012
2011
2011
2011
2011
Total stockholders' equity
$ 5,181
$ 5,225
$ 5,291
$ 5,194
$ 5,160
Less: Goodwill and other
acquisition-related intangibles
2,169
2,174
2,151
1,947
1,953
Tangible stockholders' equity
$ 3,012
$ 3,051
$ 3,140
$ 3,247
$ 3,207
Total assets
$ 27,808
$ 27,568
$ 27,213
$ 25,323
$ 24,962
Less: Goodwill and other
acquisition-related intangibles
2,169
2,174
2,151
1,947
1,953
Tangible assets
$ 25,639
$ 25,394
$ 25,062
$ 23,376
$ 23,009
Tangible equity ratio
11.7%
12.0%
12.5%
13.9%
13.9%
TANGIBLE BOOK VALUE PER SHARE
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(in millions, except per share data)
2012
2011
2011
2011
2011
Tangible stockholders' equity
$ 3,012
$ 3,051
$ 3,140
$ 3,247
$ 3,207
Common shares issued
395.84
395.42
395.46
377.02
376.95
Less: Shares classified as treasury shares
42.49
38.03
38.07
22.01
22.01
Unallocated ESOP shares
8.62
8.71
8.80
8.89
8.97
Common shares
344.73
348.68
348.59
346.12
345.97
Tangible book value per share
$ 8.74
$ 8.75
$ 9.01
$ 9.38
$ 9.27
SOURCE People's United Financial, Inc. BRIDGEPORT, Conn.,April 19, 2012/PRNewswire/