3. Peoples United Financial
Shares of Peoples United Financial ( PBCT) of Bridgeport, Conn., closed at $11.94, down 2% year-to-date, after declining 4% last year. Based on a quarterly payout of 16 cents, the shares have a dividend yield of 5.36%. The shares trade for 1.4 times tangible book value, and for 15 times the consensus 2013 EPS estimate of 82 cents. Peoples United had $28.6 billion in total assets as of Sept. 30. The company reported third-quarter net income of $62.2 million, or 18 cents a share, declining from $64.6 million, or 19 cents a share, in the second quarter, but increasing from $51.5 million, or 14 cents a share, in the third quarter of 2011. The sequential earnings decline reflected an increase in the provision for loan loss reserves to $15.1 million from $10.6 million, as the company made a special $5.7 million provision for losses on acquired loans, after acquiring 57 branches from Royal Bank of Scotland Group PLC ( RBS) subsidiary RBS Citizens NA. Peoples United saw its net interest income decline to $234.8 million in the third quarter, from $235.6 million the previous quarter, and $237.7 million a year earlier, as the net interest margin narrowed to 3.89% from 3.96% in the second quarter, and 4.07% in the third quarter of 2011. Third-quarter noninterest income totaled $81.4 million, increasing from $75.7 million the previous quarter, but declining from $84.7 million a year earlier, when the company booked $8.6 million in securities gains. The sequential increase in noninterest income reflected increases in brokerage fees and in gains on the sale of residential mortgage loans. Average loans grew by 1% sequentially and 4% year-over-year, to $20.7 billion in the third quarter. The company's third-quarter operating ROA was 0.88%, declining from 0.93% the previous quarter, but increasing from 0.77% a year earlier. First United reported that the third-quarter return on average tangible equity was 8.3%, declining from 8.5% in the second quarter, but increasing from 6.1% in the third quarter of 2011. Peoples United repurchased 13.5 million common shares for $164 million during the first three quarters, and had 4.5 million shares authorized for buybacks under its repurchase plan. Sandler O'Neill analyst Mark Fitzgibbon rates Peoples United a "Hold," with a price target of $12.50, and said on Oct. 18 that third-quarter "operating results were generally in line with our expectations," and that "we have a difficult time seeing the company get to a double digit return on capital anytime soon." Fitzgibbon also said that "as a result of the balance sheet growth, stock buybacks and dividends, the
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