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3 Things to Watch When People's United Financial, Inc. Reports Earnings

With the first six months of 2014 behind us, earnings season has officially begun. And there are three things investors need to watch when People's United Financial (NASDAQ: PBCT  ) reports its results this week.

Expanding loan growth
One of the most notable insights from People's United in the first quarter of the year was its rapid expansion in loan growth, particularly its commercial real estate loans. The bank noted its average balance stood at $17.6, and the growth of $524 million loans represented an annualized rate of 12%:

Source: Company Investor Relations.

The FDIC revealed the average bank saw commercial and industrial loans grow by just 6.2% year over year in the first quarter, and knowing People's United more than doubled that growth rate is a sign of encouragement. 

It is worth nothing even despite the growth of 12.5% versus the first quarter of last year its interest income on those loans was up by just 1% thanks to the yield on the loans falling from 4.5% to 4%. This is likely more a function of the broader interest rate environment than anything else, but it will be important to watch the commercial growth and the corresponding income from those loans in the quarter ahead.

Progress on expansion efforts
The second slide of its latest investor presentation noted People's United had a "significant growth runway within existing markets," and noted it is expanding in both New York City and Boston.

At last count it was the 34th largest bank by deposits in New York City, but it did see its total deposits rise by 8% over the year. However the same was not true in Boston, as it moved from the 10th largest bank in 2012 to the 13th largest in 2013. And as shown below, it actually saw its deposits fall even though the total deposits in the city grew by 6.5%:

Source: FDIC Data.

The thought of expansion is always compelling for smaller, regional banks, but actual progress on those initiatives is critical to keep an eye on.

Its own thought on its shares
Over the last year People's Financial has steadily bought back its common stock and in the fourth quarter it exhausted the approval it received in November of 2012 to buyback 10% of its common stock.

Source: Company Investor Relations.

With that in mind, it will be fascinating to know what the company itself thinks of its own stock. Perhaps it will only seek to return money to its common stock holders through its dividend, or maybe its efforts will soon ramp up again as it gains further approval to from its board of directors to buyback more shares.

The decision -- or lack thereof -- likely shouldn't sway the opinion of investors, but further guidance would be beneficial.

The Foolish bottom line
Three months of results likely won't alter the broader investment thesis on People's United Financial, but no matter the opinion an investor has on the bank, it is always important to watch how it did by gauging these, and other trends, over the last three months.

Top dividend stocks for the next decade
One of the compelling things about People's United is its impressive dividend yield of 4.5%. That's because the smartest investors know dividend stocks simply crush their non-dividend paying counterparts over the long term. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

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Patrick Morris

After a few stints in banking and corporate finance, Patrick joined the Motley Fool as a writer covering the financial sector. He's scaled back his everyday writing a bit, but he's always happy to opine on the latest headline news surrounding Berkshire Hathaway, Warren Buffett and all things personal finance.

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9/2/2015 4:00 PM
PBCT $15.09 Down +0.00 +0.00%
People's United Fi… CAPS Rating: ****