People’s United Financial reported net income of $62.1 million, or $0.20 per diluted share, in the second quarter of 2013 compared with $64.8 million, or $0.20 per diluted share, in the second quarter of 2012. Loans across all categories showed strong growth during the quarter, increasing at an annualized rate of 13%. The net interest margin declined to 3.33% for the second quarter compared with 3.97% a year ago.

Expenses remained under control; compensation expense declined as a result of lower payroll taxes and occupancy expense was lower as well. Even with the repurchase of 11.2 million common shares during the quarter, capital remained strong with a tangible common equity/tangible asset ratio of 8.7% as of the second quarter of 2013.

Net interest margin decreased to 3.33% in the second quarter of 2013 compared with 3.38% in the trailing quarter and 3.97% a year ago. Lower loan yields replacing higher yields of maturing loans was the primary culprit in pressuring net interest margin during the quarter. Deposit costs remain very low at 0.38%, down from 0.45% last year. Management still expects that the net interest margin has stabilized and will range between 3.30% and 3.40% for the remainder of 2013.

Through the first six months of 2013, net interest margin equaled 3.35%. The bank continued to control its expenses, which equaled $205.8 million for the second quarter. The efficiency ratio decreased to 62.7% from 64.1% in the first quarter, which included expenses related to branch consolidations. Overall,People’s goal is to get its efficiency ratio to 55% by yea rend 2014.

While People’s has done an admirable job controlling its expenses, we still think attaining an efficiency ratio of 55% by year-end 2014 would be out of reach, given the current interest rate environment. People’s continued its common stock repurchase program, acquiring another 11.2 million shares in the second quarter for $149 million. There are still 11.0 million shares available for repurchase under the current authorization.

However, People’s has indicated that it will not renew the authorization when the current repurchase plan is completed. We think the company is adequately capitalized with a tangible common equity/tangible assets ratio of 8.7%. With recent repurchases and its continued dividend, People’s has lowered tangible common equity/tangible assets from 11.7% in early 2012 to 8.7% currently.