January 21, 2010

January 21, 2010

Expects to Complete Acquisition of Financial Federal in mid-February

Click here to see the fourth quarter Financial Schedule.

BRIDGEPORT, CT. – People's United Financial, Inc. (NASDAQ: PBCT) today announced net income of $24.9 million, or $0.07 per share, for the fourth quarter of 2009, compared to $26.8 million, or $0.08 per share, for the third quarter of 2009, and $33.7 million, or $0.10 per share, for the fourth quarter of 2008.  Fourth quarter 2009 earnings reflect a 3.19 percent net interest margin, unchanged from the third quarter of 2009, despite continued pressure associated with the historically low interest rate environment and the company's asset sensitive balance sheet, and a modest increase in non-interest expenses.  For the year ended December 31, 2009, net income totaled $101.2 million, or $0.30 per share, compared to $137.8 million, or $0.42 per share, for 2008.

Included in fourth quarter 2009 results are system conversion and merger-related expenses totaling $4.5 million (included in non-interest expense).  After taxes, these expenses reduced 2009 fourth quarter net income by $3.1 million, or $0.01 per share.  Excluding the effect of these expenses, net income would have been $28.0 million, or $0.08 per share, for the fourth quarter of 2009.

The Board of Directors of People's United Financial declared a $0.1525 per share quarterly dividend, payable February 15, 2010 to shareholders of record on February 1, 2010.  Based on the closing stock price on January 20, 2010, the dividend yield on People's United Financial common stock is 3.7 percent.

"Our pending acquisition of Financial Federal reflects our strategic focus on expansion through opportunistic acquisitions," stated Philip R. Sherringham, President and Chief Executive Officer.  "At the same time, we remain committed to organic growth throughout our franchise.  Our performance during 2009 reflects continued growth in our core loan portfolios as well as deposits in spite of a clearly very challenging economic environment.  Year-over-year core commercial and home equity lending portfolios increased five percent and deposits grew eight percent.  In addition, the pillars of our financial position – strong asset quality and prudent management of our excess capital – have served us well in these challenging times."

Sherringham added, "We feel our asset quality has held up very well on both a relative and absolute basis through the recent recessionary cycle and continue to believe that most of the bad news is substantially behind us.  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 system conversion and merger-related costs, earnings were $28 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 a stable net interest margin, modest loan growth across our strategic lending businesses, and lower net loan charge-offs.  In spite of a 19 basis point reduction in our cost of deposits, the net interest margin was unchanged from the third quarter due to the combined effects of a 15 basis point decline in the yield on average earning assets and a 6 percent annualized increase in average deposits."

Commenting on asset quality, Burner stated, "Non-performing loans decreased $7 million this quarter, a further sign of what we believe is stabilization across the loan portfolio.  Our continued modest level of net loan charge-offs in this current economic environment remains a testament to our disciplined underwriting standards."

Fourth quarter net loan charge-offs totaled $13.6 million compared to $16.0 million in the third quarter of 2009.  Net loan charge-offs as a percent of average loans on an annualized basis were 0.38 percent in the fourth quarter of 2009 compared to 0.44 percent in this year's third quarter.  For the full year, net loan charge-offs as a percent of average loans were 0.29 percent compared to 0.10 percent in 2008.  The level of the allowance for loan losses is unchanged from September 30, 2009.

At December 31, 2009, non-performing loans totaled $168.8 million and the ratio of non-performing loans to total loans was 1.19 percent, compared to $175.7 million and 1.23 percent, respectively, at September 30, 2009.  Non-performing assets totaled $205.6 million at December 31, 2009, a $12.9 million increase from September 30, 2009.  Non-performing assets equaled 1.44 percent of total loans, REO and repossessed assets at December 31, 2009 compared to 1.35 percent at September 30, 2009.  At December 31, 2009, the allowance for loan losses as a percentage of total loans was 1.21 percent and as a percentage of non-performing loans was 102 percent, compared to 1.21 percent and 98 percent, respectively, at September 30, 2009.

For the fourth quarter of 2009, return on average tangible assets was 0.51 percent and return on average tangible stockholders' equity was 2.8 percent, compared to 0.55 percent and 3.0 percent, respectively, for the third quarter of 2009.  At December 31, 2009, People's United Financial's tangible equity ratio stood at 18.2 percent.

Conference Call
On January 22, 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).

4Q 2009 Financial Highlights


  • Net income totaled $24.9 million, or $0.07 per share.
  • Net interest income totaled $147.5 million.
    • Net interest margin unchanged from 3Q09 at 3.19%.
    • Average short-term investments and securities purchased under agreements to resell totaled $3.5 billion, or 19% of average earning assets, and yielded 0.24% in 4Q09.
    • Average deposits increased $236 million, or 6% annualized, from 3Q09.
  • Provision for loan losses totaled $13.6 million.
    • Net loan charge-offs totaled $13.6 million in 4Q09.
  • Non-interest income totaled $71.7 million in 4Q09, compared to $75.5 million (excluding
    $4.7 million of security gains) in 3Q09.
    • Total wealth management income decreased $1.3 million from 3Q09.
    • Net gains on sales of residential mortgage loans decreased $2.2 million from 3Q09.
  • Non-interest expense totaled $172.2 million in 4Q09 compared to $165.1 million in 3Q09.
    • 4Q09 includes $4.5 million of system conversion and merger-related costs.
  • Effective income tax rate was 25.5% in 4Q09.
    • Reflects a $2.0 million deferred tax benefit due to a reduction in the combined state income tax rate following the charter consolidations of the former Chittenden banks.

Commercial Banking

  • Average commercial banking loans, excluding shared national credits, increased $41 million
    from 3Q09 to $8.8 billion.
  • Shared national credits totaled $566.8 million (4% of total loans) at December 31, 2009, a
    $47.4 million decrease from September 30, 2009.
  • Non-performing commercial banking assets totaled $142.4 million at December 31, 2009,
    an $11.1 million increase from September 30, 2009.
    • Includes two previously disclosed non-performing shared national credits ($16.3 million in non-performing loans and $9.8 million in real estate owned).
  • The ratio of non-performing commercial banking loans to total commercial banking loans was 1.17% at December 31, 2009 compared to 1.28% at September 30, 2009.
  • Net loan charge-offs totaled $9.8 million, or 0.42% annualized, of average commercial banking loans in 4Q09, compared to $11.2 million, or 0.48% annualized, in 3Q09.

Retail & Small Business Banking

  • Average residential mortgage loans totaled $2.6 billion, a $200 million decrease from 3Q09, reflecting People's United Financial's strategy to sell essentially all newly-originated loans.
    • Net loan charge-offs totaled $1.2 million, or 0.19% annualized, of average residential mortgage loans.
    • The ratio of non-performing residential mortgage loans to total residential mortgage loans
      was 2.07% at December 31, 2009 compared to 1.88% at September 30, 2009.
  • Average home equity loans totaled $2.0 billion, unchanged from 3Q09.
    • Net loan charge-offs totaled $1.3 million, or 0.26% annualized, of average home equity loans.
  • Average indirect auto loans totaled $0.2 billion, unchanged from 3Q09.
    • Net loan charge-offs totaled $0.7 million, or 1.38% annualized, of average indirect auto loans.

Wealth Management

  • Wealth Management income decreased $1.3 million from 3Q09.
    • Insurance revenue decreased $0.9 million, reflecting the seasonal nature of insurance renewals.
  • Assets managed and administered, which are not reported as assets of People's United Financial, totaled $16.1 billion at December 31, 2009 compared to $16.4 billion at September 30, 2009, primarily reflecting a decline in the market value of fixed-income assets due to an increase in interest rates.


People's United Financial, a diversified financial services company with $21 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.


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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