People's United Financial Inc.
) reported first-quarter 2014 operating earnings per share of 19
cents, missing the Zacks Consensus Estimate by a penny. However,
earnings compared favorably with 18 cents per share reported in
the prior-year quarter.
People's United's results failed to meet investors' expectations
as its share price declined more than 1% in the after-hour
trading session on Wednesday. However, the performance of the
stock in today's trading session will give a better idea about
investors' sentiments on the company's results.
Our proven model predicted that People's United may not post an
earnings beat as it did not have the right combination of two key
ingredients - positive
and a Zacks Rank of #3 (Hold) or higher. It had a Zacks Rank #3
(Hold), but the Earnings ESP was 0.00%.
Improved credit quality, aided by lower provision for loan losses
was a tailwind for the quarter. Further, increased loans and
deposits as well as higher revenues reflected organic growth of
the company. However, increased expenses depict undisciplined
Operating income was reported at $56.5 million compared with
$57.9 million in the prior-year quarter. Including certain
non-recurring items, net income came in at $53.1 million or 18
cents per share in the quarter under review.
Performance in Detail
Total revenue, net of expense (fully taxable equivalent) reported
was $311.7 million in the quarter, up 1.1% year over year, due to
higher net interest income, partially offset by reduced
non-interest income. However, results lagged the Zacks Consensus
Estimate of $313.0 million.
Net interest income (fully taxable equivalent) was $231.8 million
in the reported quarter, up 3.8% on a year-over-year basis.
However, in the persistent low interest rate environment along
with an asset sensitive balance sheet, operating net interest
margin decreased 21 basis points year over year to 3.17%.
Further, non-interest income was $79.9 million, down 5.9% year
over year. The fall was mainly attributed to lower gains on sales
of residential mortgage loans and reduced other non-interest
Adjusted non-interest expenses ascended 3.7% on a year-over-year
basis to $211.5 million. The increase in expenses was primarily
attributable to higher compensation and benefits costs.
Overall, People's United's credit quality significantly improved
during the quarter under review. As of Mar 31, 2014, People's
United's originated non-performing loans totaled $194.3 million,
down 22.7% year over year. Moreover, the ratio of non-performing
loans to total originated loans declined to 0.84% from 1.25% as
of Mar 31, 2013.
Non-performing assets totaled $231.5 million, down 18.8% year
over year. Moreover, non-performing assets (excluding acquired
non-performing loans) were 1.00% of total related assets, down
from 1.42% in the prior-year quarter.
Moreover, net loan charge-offs totaled $5.5 million, down 43.9%
from the prior-year quarter. Net loan charge-offs, as a
percentage of average loans on an annualized basis, were 0.12%,
down 12 basis points year over year. Provision for loan losses
was recorded at $8.0 million, down 18.4% year over year.
People's United exhibited a strong capital position. Total net
loans stood at $24.4 billion, up 10.9% year over year. Moreover,
total deposits rose 8.7% on a year-over-year basis to $23.7
Operating return on average assets was 0.69%, down from 0.77% in
the prior-year quarter. Moreover, operating return on average
tangible stockholders' equity was 9.3%, increasing from 8.1% in
the prior-year quarter.
As of Mar 31, 2014, People's United's tangible equity ratio fell
to 8.0% from 9.6% in the prior-year quarter. Further, total
risk-based capital ratio was 11.2% compared with 13.7% in the
Concurrent with the press release, the board of People's United
declared an increased quarterly dividend of 16.50 cents per
share, up from 16.25 cents. The new dividend will be paid on May
15, 2014 to shareholders of record as of May 1. Considering the
closing stock price on Apr 16, the dividend yield stood at 4.4%.
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 improve the company's
financial results. In addition, the company's capital deployment
activity will definitely boost investors' confidence.
Yet, the recent regulatory issues, increase in expenses and a low
interest rate environment remain major areas of concern. People's
United currently carries a Zacks Rank #3 (Hold).
Performance of other companies in the Same
Washington Federal Inc.
) second-quarter fiscal 2014 earnings (ended Mar 31) of 38 cents
per share was in line with the Zacks Consensus Estimate.
Moreover, the reported figure was up 11.8% from 34 cents in the
Higher revenues, a benefit from provision and improving credit
quality were positives for the quarter. However, a rise in
operating expenses dragged the results. Further, profitability
ratios remained strong during the quarter.
Among other companies,
First Defiance Financial Corp.
) are expected to report on Apr 21.
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