April 15, 2010

April 15, 2010

PEOPLE'S UNITED FINANCIAL REPORTS FIRST QUARTER EARNINGS OF $14 MILLION OR $0.04 PER SHARE AND INCREASES DIVIDEND
Operating EPS of $0.08 per share, excluding merger and system conversion costs

Click here to see the first quarter Financial Schedule.

BRIDGEPORT, CT.– People's United Financial, Inc. (NASDAQ: PBCT) today announced net income of $13.6 million, or $0.04 per share, for the first quarter of 2010, compared to $24.9 million, or $0.07 per share, for the fourth quarter of 2009, and $24.2 million, or $0.07 per share, for the first quarter of 2009.  Included in this quarter's results are $23.4 million of merger-related and system conversion expenses.  The net impact of these items reduced first quarter 2010 net income by $15.6 million, or $0.04 per share.  Excluding the effect of these items, net income would have been $29.2 million, or $0.08 per share, for the first quarter of 2010.  As previously reported, People's United Financial completed its acquisition of Financial Federal Corporation on February 19, 2010.  Accordingly, Financial Federal's results of operations are included as of the acquisition date, and prior period results have not been restated to include Financial Federal Corporation.

The Board of Directors of People's United Financial voted to increase the annual common stock dividend by $0.01 per share, resulting in an annual dividend rate of $0.62 per share.  The quarterly dividend of $0.1550 per share is payable May 15, 2010 to shareholders of record on May 1, 2010.  Based on the closing stock price on April 14, 2010, the dividend yield on People's United Financial common stock is 3.8 percent.

For the first quarter of 2010, return on average tangible assets was 0.28 percent and return on average tangible stockholders' equity was 1.5 percent, compared to 0.51 percent and 2.8 percent, respectively, for the fourth quarter of 2009.  At March 31, 2010, People's United Financial's tangible equity ratio stood at 18.6 percent.

"During the first quarter of 2010, we completed our acquisition of Financial Federal, a leader in equipment financing, providing a valuable complement to our existing equipment financing company, People's Capital and Leasing," stated Philip R. Sherringham, President and Chief Executive Officer.  "As anticipated, the transaction was immediately accretive to earnings, though our results will not reflect a full quarter's benefit until the second quarter.  We also successfully completed the first phase of our core systems conversion and are now focused on the final phase, which is slated for July."

Sherringham added, "We continue to diligently pursue acquisition opportunities for both FDIC-assisted and open bank transactions.  As we have previously stated, we are evaluating our current market as well as non-contiguous, attractive high-growth markets for acquisitions."

Sherringham concluded, "We are pleased to reward our shareholders with an 18th consecutive annual dividend increase.  The strength of our capital and liquidity, asset quality and earnings, as well as the fact that our balance sheet remains funded almost entirely by deposits and stockholders' equity, continue to set us apart from most in the industry."

"On an operating basis, excluding merger-related and system conversion costs, earnings were $29.2 million, or 8 cents per share this quarter," said Paul D. Burner, Senior Executive Vice President and Chief Financial Officer.  "Significant drivers of the company's performance this quarter were an improvement in the net interest margin, modest loan growth across our strategic lending businesses, and lower net loan charge-offs for the second consecutive quarter.  The net interest margin improved 28 basis points to 3.47 percent, reflecting the combined benefit of Financial Federal and a 16 basis point reduction in our cost of deposits this quarter."

Commenting on asset quality, Burner stated, "Loans acquired in connection with the Financial Federal acquisition were recorded at fair value, including a reduction for estimated credit losses, and without carryover of that portfolio's historical allowance for loan losses.  As such, selected asset quality metrics have been highlighted to distinguish between the 'originated' portfolio and the 'acquired' portfolio.  For the originated loan portfolio, representing all loans other than those acquired in the Financial Federal transaction, non-performing loans totaled $192.3 million at March 31, 2010, and the ratio of non-performing loans to originated loans was 1.36 percent, compared to $168.8 million and 1.19 percent, respectively, at December 31, 2009.  Non-performing loans in the acquired loan portfolio, which represent those loans acquired in the Financial Federal transaction that meet our definition of non-performing but for which the risk of loss has already been considered in connection with our estimate of acquisition-date fair value, totaled $51.7 million at March 31, 2010."

Non-performing assets totaled $247.5 million at March 31, 2010, a $41.9 million increase from December 31, 2009, of which $19.8 million is attributable to repossessed assets acquired in connection with the Financial Federal acquisition.  Non-performing assets equaled 1.74 percent of originated loans, REO and repossessed assets at March 31, 2010 compared to 1.44 percent at December 31, 2009.  At March 31, 2010, the allowance for loan losses as a percentage of originated loans was 1.22 percent and as a percentage of non-performing originated loans was 90 percent, compared to 1.21 percent and 102 percent, respectively, at December 31, 2009.

First quarter net loan charge-offs totaled $9.5 million compared to $13.6 million in the fourth quarter of 2009.  Net loan charge-offs as a percent of average loans on an annualized basis were 0.26 percent in the first quarter of 2010 compared to 0.38 percent in the prior year's fourth quarter.  The level of the allowance for loan losses is unchanged from December 31, 2009.

Conference Call
On April 16, 2010, at 11 a.m., Eastern Time, People's United Financial will host a conference call to discuss this earnings announcement. The call may be heard through www.peoples.com by selecting "Investor Relations" in the "About People's" section on the home page, and then selecting "Conference Calls" in the "News and Events" section.  Additional materials relating to the call may also be accessed at People's United Bank's web site.  The call will be archived on the web site and available for approximately 90 days.

Selected Financial Terms
In addition to evaluating People's United Financial's results of operations in accordance with U.S. generally accepted accounting principles ("GAAP"), management routinely supplements this evaluation with an analysis of certain non-GAAP financial measures, such as the efficiency and tangible equity ratios, and tangible book value per share.  Management believes these non-GAAP financial measures provide information useful to investors in understanding People's United Financial's underlying operating performance and trends, and facilitates comparisons with the performance of other banks and thrifts.  Further, the efficiency ratio is used by management in its assessment of financial performance specifically as it relates to non-interest expense control, while the tangible equity ratio and tangible book value per share are used to analyze the relative strength of People's United Financial's capital position.

The efficiency ratio, which represents an approximate measure of the cost required by People's United Financial to generate a dollar of revenue, is the ratio of (i) total non-interest expense (excluding goodwill impairment charges, amortization of acquisition-related intangibles and fair value adjustments, losses on real estate assets and nonrecurring expenses) (the numerator) to (ii) net interest income on a fully taxable equivalent basis (excluding fair value adjustments) plus total non-interest income (including the fully taxable equivalent adjustment on bank-owned life insurance income, and excluding gains and losses on sales of assets, other than residential mortgage loans, and nonrecurring income) (the denominator).  People's United Financial generally considers an item of income or expense to be nonrecurring if it is not similar to an item of income or expense of a type incurred within the last two years and is not similar to an item of income or expense of a type reasonably expected to be incurred within the following two years.

The tangible equity ratio is the ratio of (i) tangible stockholders' equity (total stockholders' equity less goodwill and other acquisition-related intangibles) (the numerator) to (ii) tangible assets (total assets less goodwill and other acquisition-related intangibles) (the denominator).  Tangible book value per share is calculated by dividing tangible stockholders' equity by common shares outstanding (total common shares issued, less common shares classified as treasury shares and unallocated ESOP common shares).

1Q 2010 Financial Highlights

Summary

  • Net income totaled $13.6 million, or $0.04 per share.
    • Operating earnings were $29.2 million, or $0.08 per share.
  • Net interest income totaled $159.6 million.
    • Net interest margin increased 28 basis points from 4Q09 to 3.47%.
    • Average short-term investments and securities purchased under agreements to resell
      totaled $2.9 billion, or 16% of average earning assets, and yielded 0.25% in 1Q10.
    • Average deposits decreased $71 million and the interest cost on deposits declined
      16 basis points from 4Q09.
  • Provision for loan losses totaled $9.5 million.
    • Net loan charge-offs totaled $9.5 million in 1Q10.
  • Non-interest income totaled $70.6 million in 1Q10 compared to $71.7 million in 4Q09.
  • Non-interest expense totaled $200.3 million in 1Q10 compared to $172.2 million in 4Q09.
    • 1Q10 and 4Q09 include $23.4 million and $4.5 million, respectively, of merger-related and system conversion costs.
  • Effective income tax rate was 33.2% in 1Q10.

Commercial Banking

  • Average commercial banking loans, excluding shared national credits and acquired loans, increased $66 million from 4Q09 to $8.8 billion.
  • Loans acquired on February 19, 2010 in the Financial Federal transaction averaged
    $543 million in 1Q10.
  • Shared national credits totaled $526.9 million (3% of total loans) at March 31, 2010, a
    $41.0 million decrease from December 31, 2009.
  • Non-performing commercial banking assets, excluding non-performing acquired loans, totaled $168.3 million at March 31, 2010, a $25.9 million increase from December 31, 2009.
    • Repossessed assets acquired in the Financial Federal transaction accounted for
      $19.8 million of the increase.
    • Includes two previously disclosed non-performing shared national credits ($13.8 million in non-performing loans and $9.4 million in real estate owned).
  • The ratio of non-performing commercial banking loans, excluding non-performing acquired loans, to originated commercial banking loans was 1.25% at March 31, 2010 compared to
    1.17% at December 31, 2009.
  • Net loan charge-offs totaled $7.5 million, or 0.30% annualized, of average commercial banking loans in 1Q10, compared to $9.8 million, or 0.42% annualized, in 4Q09.

Wealth Management

  • Wealth Management income increased $0.2 million from 4Q09.
    • Insurance revenue increased $0.3 million, reflecting the seasonal nature of insurance renewals.
  • Assets managed and administered, which are not reported as assets of People's United Financial, totaled $16.8 billion at March 31, 2010 compared to $16.1 billion at December 31, 2009, primarily reflecting the improvement in equity markets.

Retail & Small Business Banking

  • Average residential mortgage loans totaled $2.5 billion, a $103 million decrease from 4Q09, reflecting People's United Financial's strategy to sell essentially all newly-originated loans.
    • Net loan charge-offs totaled $0.1 million, or 0.01% annualized, of average residential mortgage loans.
    • The ratio of non-performing residential mortgage loans to total residential mortgage loans
      was 2.70% at March 31, 2010 compared to 2.07% at December 31, 2009.
  • Average home equity loans totaled $2.0 billion, unchanged from 4Q09.
    • Net loan charge-offs totaled $0.9 million, or 0.17% annualized, of average home equity loans.
  • Average indirect auto loans totaled $0.2 billion, unchanged from 4Q09.
    • Net loan charge-offs totaled $0.6 million, or 1.19% annualized, of average indirect auto loans.

People's United Financial, a diversified financial services company with $22 billion in assets, provides commercial banking, retail and small business banking, and wealth management services through a network of nearly 300 branches in Connecticut, Vermont, New Hampshire, Maine, Massachusetts and New York. Through its subsidiaries, People's United Financial provides equipment financing, asset management, brokerage and financial advisory services, and insurance services.

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Certain statements contained in this release are forward-looking in nature. These include all statements about People's United Financial's plans, objectives, expectations and other statements that are not historical facts, and usually use words such as "expect," "anticipate," "believe" and similar expressions. Such statements represent management's current beliefs, based upon information available at the time the statements are made, with regard to the matters addressed. All forward-looking statements are subject to risks and uncertainties that could cause People's United Financial's actual results or financial condition to differ materially from those expressed in or implied by such statements. Factors of particular importance to People's United Financial include, but are not limited to: (1) changes in general, national or regional economic conditions; (2) changes in interest rates; (3) changes in loan default and charge-off rates; (4) changes in deposit levels; (5) changes in levels of income and expense in non-interest income and expense related activities; (6) residential mortgage and secondary market activity; (7) changes in accounting and regulatory guidance applicable to banks; (8) price levels and conditions in the public securities markets generally; (9) competition and its effect on pricing, spending, third-party relationships and revenues; and (10) the successful integration of acquired companies. People's United Financial does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Access Information About People's United Financial on the World Wide Web at www.peoples.com.

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