Peoples United First-Quarter Profit Off 42%

Peoples United Financial reported first-quarter net income of $13.6 million, a 42% decline from a year earlier, with performance held back by charges.
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BRIDGEPORT, Conn. (

TheStreet

) -- Peoples United Financial

(PBCT) - Get Report

reported first-quarter net income of $13.6 million, a 42% decline from a year earlier, with performance weighed down by expenses related to merger and systems conversion activities.

On a per share basis, the company earned 4 cents a share for the three-month period. Excluding the charges, Peoples United said its profit would have been $29.2 million, or 8 cents a share. The average estimate of analysts polled by

Thomson Reuters

was for earnings of 8 cents a share in the March period.

The thrift holding company completed its acquisition of Financial Federal -- a collateralized lender and lease financing and servicing company with $1.3 billion in total assets -- in February.

Net interest margin -- the difference between the average yield on loans, leases and investments and the average cost of funds -- was 3.47% for the first quarter, an improvement from 3.19% during the previous quarter and 3.25% a year earlier.

Another positive for the company was minimal loan losses. Its annualized ratio of net charge-offs to average loans was 0.26% during the March period and was well below 1% through 2009. While industry figures for the first quarter are not yet available, the aggregate net charge-off ratio for U.S. banks and thrifts was 2.49% according to the Federal Deposit Insurance Corporation.

Nonperforming assets -- excluding $51.7 million acquired from Financial Federal that Peoples United said had already sufficiently written-down -- totaled $247.5 million, or 1.22% of total assets as of March 31. That ratio compares to an industry aggregate of 3.32% as of Dec. 31, according to the FDIC.

Overall earnings have been less than stellar, as the company's annualized return on average assets for the first quarter based on earnings of $29.2 million - netting out the extraordinary expenses - would have been 0.56%. For comparison, its ROA was 0.49% in 2009, 0.68% in 2008 and 1.17% in 2007.

The company reported a tangible equity ratio of 18.6% and a total risk-based capital ratio of 16.0% at quarter's end, putting it in excellent position to acquire a failed institution -- an attractive prospect since the FDIC is still offering loss-sharing guarantees to buyers of failed banks, essentially covering 80% of losses on acquired loans.

CEO Philip Sherringham said the company was continuing to pursue "opportunities for both FDIC-assisted and open bank transactions."

The company also disclosed a penny boost in its annual dividend to 62 cents a share. The dividend is payable on May 15 to shareholders of record on May 1.

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Written by Philip van Doorn in Jupiter Fla.

Philip W. van Doorn joined TheStreet.com Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.