People's United Financial Inc.
) reported first-quarter 2013 operating earnings per share of 18
cents, in line with the Zacks Consensus Estimate. Earnings
compared unfavorably with 19 cents per share reported in the
prior quarter but were in line with the prior-year quarter.
Lower non-performing assets and loans and deposits growth were
the tailwinds for the quarter. However, reduction in revenues and
increased expenses were dampeners. Further, higher provision for
loan losses was recorded.
Operating income was reported at $57.9 million compared with
$63.2 million in the prior quarter and $59.3 million in the
prior-year quarter. Including after-tax severance-related costs,
writedowns of banking house assets and integration costs, net
income came in at $52.5 million or 16 cents per share in the
quarter under review.
Performance in Detail
Total revenue, net of expense reported were $302.2 million in the
quarter, down 2.3% sequentially, due to lower net interest and
non-interest income. Moreover, results lagged the Zacks Consensus
Estimate of $310.0 million.
Net interest income was $219.3 million in the reported quarter,
down 2.6% sequentially. Moreover, in the ongoing historically low
interest rate environment and with an asset sensitive balance
sheet, operating net interest margin decreased 25 basis points
sequentially to 3.38%.
Primarily, new loan volume at lower rates and lower interest
income on acquired loans along with the effect of two fewer
calendar days in the quarter led to the reduction in margin.
These were partly offset by lower funding costs and improved mix.
Further, non-interest income was $82.9 million, down 1.7%
sequentially. The dip was mainly attributed to lower bank service
charges and reduced net gains on sales of residential mortgage
loans, partially offset by higher brokerage commissions and
elevated insurance revenue.
Non-interest expenses ascended 2.2% sequentially to $212 million.
The increase in expenses was primarily attributable to rise in
compensation and benefits expenses, partially offset by lower
professional and outside service fees expenses.
Overall, People's United's credit quality reported a mixed bag
during the quarter. As of Mar 31, 2013, People's United's
non-performing loans totaled $180.7 million, down 0.5%
sequentially. Moreover, the ratio of non-performing loans to
total loans declined to 1.25% from 1.30% as of Dec 31, 2012.
Non-performing assets totaled $285.1 million as of Mar 31, 2013,
down 1.6% sequentially. Moreover, non-performing assets
(excluding acquired non-performing loans) were 1.42% of total
related assets, down from 1.48% in the prior quarter.
However, net loan charge-offs totaled $13.1 million, up 31%
sequentially. Net loan charge-offs, as a percentage of average
loans on an annualized basis, were 0.24%, up 5 basis points
sequentially. Provision for loan losses was recorded at $12.4
million, up 3.3% sequentially.
People's United exhibited strong capital position. Total net
loans stood at $22 billion, up 2.3% sequentially. Moreover, total
deposits advanced slightly on a sequential basis to $21.8
Operating return on average assets was 0.77%, down from 0.87% in
the prior quarter. Moreover, operating return on average tangible
stockholders' equity was 8.1%, decreasing from 8.6% in the prior
As of Mar 31, 2013, People's United's tangible equity ratio
plummeted to 9.6% from 10.2% in the prior quarter. Further, tier
1 common and total risk-based capital ratios were 12.0% and 13.7%
compared with 12.7% and 14.7%, respectively, in the prior
Capital Deployment Update
Concurrent with the press release, the board of People's United
declared an increased quarterly dividend of 16.25 cents per
share, up from prior dividend of 16 cents. The dividend will be
paid on May 15, 2013 to shareholders of record as of May 1, 2013.
Considering the closing stock price on Apr 17, the dividend yield
stood at 5.1%.
During first-quarter 2013, People's United repurchased 11.1
million shares for $144 million. Under the existing share
repurchase authorization, 22.3 million shares remain available
Performance of Related Companies
Washington Federal Inc.
) fiscal second-quarter 2013 earnings (ended Mar 31) of 34 cents
per share were ahead of the Zacks Consensus Estimate by a penny.
This also compares favorably with the year-ago earnings of 32
Constantly declining credit costs primarily drove the results.
However, higher operating expenses and lower top line were the
headwinds. Improvement in asset quality and enhanced capital
ratios were the other highlights of the quarter.
First Defiance Financial Corp.
) are scheduled to report their first-quarter 2013 earnings on
Overall, People's United is trying to overcome the slow economic
recovery through opportunistic acquisitions. Going forward,
growth in loans and deposits is expected to boost the company's
In addition, capital deployment activity will definitely boost
investors' confidence. Yet the recent regulatory issues, decline
in top line and rising expenses remain the major areas of
concern. People's United currently retains a Zacks Rank #4
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