October 21, 2010


People's United Financial Reports Third Quarter Earnings Of $24 Million Or $0.07 Per Share
Realizes operating earnings of $0.08 per share, excluding one-time costs

Click here to see the third quarter Financial Schedule.

BRIDGEPORT, CT. – People's United Financial, Inc. (NASDAQ: PBCT) today announced net income of $24.1 million, or $0.07 per share, for the third quarter of 2010, compared to $16.0 million, or $0.04 per share, for the second quarter of 2010, and $26.8 million, or $0.08 per share, for the third quarter of 2009.  Included in both this quarter's and the second quarter's results are pre-tax  merger-related expenses, core system conversion costs and one-time charges totaling $5.3 million and $23.2 million, respectively.  Excluding the effect of these items, net income would have been $27.7 million, or $0.08 per share, for the third quarter of 2010 and $31.8 million, or $0.09 per share, for the second quarter of 2010.  Third quarter 2010 earnings reflect a modest increase in the net interest margin despite pressure associated with the historically low interest rate environment and the company's asset sensitive balance sheet, and an increase in the provision for loan losses.

As previously reported, People's United Financial completed its acquisitions of Financial Federal Corporation on February 19, 2010 and Butler Bank on April 16, 2010.  Accordingly, Financial Federal's and Butler Bank's results of operations are included as of the respective acquisition dates, and prior period results have not been restated to include Financial Federal and Butler Bank.

The Board of Directors of People's United Financial declared a $0.1550 per share quarterly dividend, payable November 15, 2010 to shareholders of record on November 1, 2010.  Based on the closing stock price on October 20, 2010, the dividend yield on People's United Financial common stock is 4.7 percent.

"We began the third quarter by successfully completing our core system conversion and commencing the process of rebranding our branches throughout New England to People's United Bank," stated Jack Barnes, President and Chief Executive Officer.  "We also announced the acquisitions of Smithtown Bancorp, Inc. and LSB Corporation, both of which are expected to close in November, pending regulatory and shareholder approvals, and our integration plans for these acquisitions are well under way."

Barnes added, "Our performance this quarter continues to reflect the benefits from our focused commercial, wealth management and retail banking strategy.  While growth in the commercial banking portfolio was offset by declines in residential mortgage and consumer lending, we are pleased by our strong pipeline for both commercial and residential mortgage loans."

Barnes concluded, "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 expenses, core system conversion costs and one-time charges, 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 in the third quarter were an improvement in the net interest margin and higher net loan charge-offs.  The net interest margin improved 5 basis points to 3.73 percent, primarily attributable to higher investment income and a reduction in our cost of deposits."

Regarding the increase in net loan charge-offs, Burner commented, "Two construction loans accounted for $9.8 million, or 45 percent, of this quarter's total.  These loans had been previously identified and carried specific reserves totaling $9.0 million at June 30, 2010."

Loans acquired in connection with acquisitions have been recorded at fair value, including a reduction for estimated credit losses, and without carryover of the respective 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' portfolios.  For the originated loan portfolio, representing all loans other than those acquired, non-accrual loans totaled $251.4 million at September 30, 2010, and the ratio of originated non-accrual loans to originated loans was 1.77 percent, compared to $219.7 million and 1.56 percent, respectively, at June 30, 2010.  Non-accrual loans in the acquired loan portfolios, which represent those loans acquired that meet our definition of non-accrual but for which the risk of loss has already been considered by virtue of our estimate of acquisition-date fair value and/or the existence of an FDIC loss-share agreement, totaled $59.4 million at September 30, 2010.

Non-performing assets totaled $312.0 million at September 30, 2010, up from $284.5 million at June 30, 2010.  Non-performing assets equaled 2.18 percent of originated loans, REO and repossessed assets at September 30, 2010 compared to 2.01 percent at June 30, 2010.  At September 30, 2010, the allowance for loan losses as a percentage of originated loans was 1.21 percent and as a percentage of originated non-accrual loans was 69 percent, compared to 1.23 percent and 79 percent, respectively, at June 30, 2010.

Third quarter net loan charge-offs totaled $21.8 million compared to $17.8 million in the second quarter of 2010.  Net loan charge-offs as a percent of average loans on an annualized basis were 0.57 percent in the third quarter of 2010 compared to 0.46 percent in this year's second quarter.  The level of the allowance for loan losses is unchanged from June 30, 2010.

In the third quarter of 2010, return on average tangible assets was 0.48 percent and return on average tangible stockholders' equity was 2.7 percent, compared to 0.32 percent and 1.7 percent, respectively, for the second quarter of 2010.  At September 30, 2010, People's United Financial's tangible equity ratio stood at 17.8 percent.

Conference Call
On October 22, 2010, at 11 a.m., Eastern Time, People's United Financial will host a conference call to discuss this earnings announcement and our acquisition announcements.  The call may be heard through  

3Q 2010 Financial Highlights


  • Net income totaled $24.1 million, or $0.07 per share.
    • Operating earnings were $27.7 million, or $0.08 per share.
  • Net interest income totaled $175.8 million.
    • Net interest margin increased 5 basis points from 2Q10 to 3.73%.
    • Average securities increased $759 million and average short-term investments decreased
      $642 million from 2Q10.  Total investment income increased $3.0 million from 2Q10.
    • Average deposits increased $97 million and the interest cost on deposits declined 4 basis points from 2Q10.
  • Provision for loan losses totaled $21.8 million.
    • Net loan charge-offs totaled $21.8 million in 3Q10.
  • Non-interest income totaled $75.9 million in 3Q10 compared to $76.8 million in 2Q10.
  • Non-interest expense totaled $194.2 million in 3Q10 compared to $209.8 million in 2Q10.
    • 3Q10 and 2Q10 include a total of $5.3 million and $7.9 million, respectively, of merger-related expenses and core system conversion costs.
    • 2Q10 includes $15.3 million of one-time charges related to the former CEO separation agreement.
  • Effective income tax rate was 32.5% in 3Q10 and 32.1% in the first nine months of 2010.
    • Excluding a $1.2 million non-taxable BOLI death benefit recorded in 2Q10, the income tax rate was 32.6% in the first nine months of 2010.

Commercial Banking

  • Average commercial banking loans, excluding acquired loans, increased $88 million from 2Q10 to $9.6 billion.
  • Non-performing commercial banking assets, excluding acquired non-accrual loans, totaled
    $205.1 million at September 30, 2010, a $23.1 million increase from June 30, 2010.
  • The ratio of originated non-accrual commercial banking loans to originated commercial banking loans was 1.59% at September 30, 2010 compared to 1.36% at June 30, 2010.
  • Net loan charge-offs totaled $18.2 million, or 0.69% annualized, of average commercial banking loans in 3Q10, compared to $16.5 million, or 0.62% annualized, in 2Q10.

Retail & Business Banking

  • Average residential mortgage loans totaled $2.5 billion, a $74 million decrease from 2Q10.
    • Net loan charge-offs totaled $1.2 million, or 0.20% annualized, of average residential mortgage loans.
    • The ratio of originated non-accrual residential mortgage loans to originated residential mortgage loans was 3.68% at September 30, 2010 compared to 3.40% at June 30, 2010.
  • Average home equity loans totaled $2.0 billion, a $12 million decrease from 2Q10.
    • Net loan charge-offs totaled $1.3 million, or 0.26% annualized, of average home equity loans.
  • Average indirect auto loans totaled $176 million, an $11 million decrease from 2Q10.
    • Net loan charge-offs totaled $0.3 million, or 0.59% annualized, of average indirect auto loans.

Wealth Management

  • Wealth Management income increased $1.0 million from 2Q10.
    • Investment management fees decreased $1.0 million (reflecting the timing of certain annual fees) and insurance revenue increased $2.0 million (reflecting the seasonal nature of insurance renewals).
  • Assets managed and administered, which are not reported as assets of People's United Financial, totaled $17.1 billion at September 30, 2010 compared to $16.4 billion at June 30, 2010, primarily reflecting new business acquired during 3Q10 and market appreciation.


 People's United Financial, a diversified financial services company with $22 billion in assets, provides commercial banking, retail and 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; (10) the successful integration of acquired companies; (11) success in addressing management succession issues in a timely and effective manner; and (12) possible changes in regulation resulting from or relating to recently enacted financial reform legislation. 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 at www.peoples.com.

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