July 19, 2012

July 19, 2012

PEOPLE'S UNITED FINANCIAL REPORTS SECOND QUARTER OPERATING EARNINGS OF $0.20 PER SHARE; NET INCOME OF $0.19 PER SHARE

Click here to see the second quarter Financial Schedule.

BRIDGEPORT, CT. – People's United Financial, Inc. (NASDAQ: PBCT) today reported net income of $64.8 million, or $0.19 per share, for the second quarter of 2012, compared to $51.2 million, or $0.15 per share, for the second quarter of 2011, and $58.6 million, or $0.17 per share, for the first quarter of 2012. Operating earnings were $67.2 million, or $0.20 per share, for the second quarter of 2012, compared to $57.3 million, or $0.17 per share, for the second quarter of 2011 and $60.6 million, or $0.18 per share, for the first quarter of 2012.

The Company's Board of Directors declared a $0.16 per share quarterly dividend, payable August 15, 2012 to shareholders of record on August 1, 2012. Based on the closing stock price on July 18, 2012, the dividend yield on People's United Financial common stock is 5.3 percent.

During the second quarter of 2012 the Company repurchased 4.5 million shares of People's United Financial common stock at a total cost of $54 million and during the first six months of 2012, the Company repurchased 9.0 million shares of common stock at a total cost of $110 million. Under the existing stock repurchase authorization, 9.0 million shares of common stock remain available for repurchase.

"Our performance this quarter continues to build on the execution of our primary objectives – optimizing existing businesses and efficiently deploying capital," stated Jack Barnes, President and Chief Executive Officer. "Our acquisition of 57 branches in the greater New York metro area strengthens our presence in the nation's largest market. Our second quarter financial results reflect continued organic loan and deposit growth and ongoing strength in our fee income businesses, including solid contributions from wealth management. We anticipate continued momentum in loan growth based on our retail and commercial lending pipelines and remain encouraged by the significant opportunity for loan and deposit growth throughout the franchise.

"Our New York metro footprint of nearly 100 branches further enhances our ability to offer our customers a full range of products and superior service," added Barnes. "We are confident in our ability to build on the success of our Stop & Shop franchise in Connecticut as the Bank is now the exclusive provider of banking services at 140 Stop & Shop stores located across Long Island, southern New York state and Connecticut."

Barnes concluded, "Our strong business fundamentals, ongoing ability to leverage our brand in attractive markets, and prospects for organic growth continue to be the foundations of our strength relative to others in the industry. We have demonstrated our ability to prudently and effectively deploy capital through organic loan and deposit growth, adherence to a consistent dividend policy, share repurchases and a thoughtful acquisition strategy."

"On an operating basis, earnings were $67 million, or 20 cents per share, this quarter," stated Kirk W. Walters, Senior Executive Vice President and Chief Financial Officer. "The Company's performance in the second quarter reflects an expected decline in the net interest margin, lower provision expense, improvement in fee-based income and ongoing expense control."

Walters continued, "The decline in the net interest margin this quarter on both a GAAP and operating basis reflects the overall reduction in interest rates and slower loan growth. Non-interest income continues to reflect improvements in most of our fee-based businesses as well as higher loan prepayment fees, partially offset by the seasonal decrease in insurance revenue and lower gains on sales of residential mortgage loans. The decrease in the level of operating non-interest expense this quarter reflects the continued benefit from cost-savings initiatives announced in 2011."

Walters concluded, "We certainly are pleased with the continued improvement in asset quality. Our low loan charge-off ratio, which represents approximately one-half of our peers, is a reflection of the Company's historically strong underwriting standards, the strength of the footprint in which we operate and the resilience of our customers."

For the originated loan portfolio, non-performing loans equaled 1.52 percent of loans at June 30, 2012, compared to 1.67 percent at March 31, 2012 and 1.69 percent at June 30, 2011. Non-performing assets (excluding acquired non-performing loans) equaled 1.67 percent of originated loans, REO and repossessed assets at June 30, 2012 compared to 1.85 percent at March 31, 2012 and 2.05 percent at June 30, 2011. Net loan charge-offs as a percentage of average loans on an annualized basis were 0.26 percent in the second quarter of 2012 compared to 0.22 percent in this year's first quarter.

Non-performing loans in the acquired portfolio, which represent the contractual balances of loans acquired that meet our definition of non-performing but are not, under the accounting model for acquired loans, subject to classification as non-accrual in the same manner as originated loans, totaled $236.6 million at June 30, 2012 compared to $247.2 million at March 31, 2012 and $250.4 million at June 30, 2011.

Operating return on average assets was 0.97 percent for the second quarter of 2012, compared to 0.92 percent for the second quarter of 2011 and 0.88 percent for the first quarter of 2012. Operating return on average tangible stockholders' equity was 8.9 percent for the second quarter of 2012, compared to 7.1 percent for the second quarter of 2011 and 8.0 percent for the first quarter of 2012.

At June 30, 2012, People's United Financial's tier 1 common and total risk-based capital ratios were 13.6 percent and 15.6 percent, respectively, and the tangible equity ratio stood at 11.5 percent. People's United Bank's tier 1 and total risk-based capital ratios were 13.1 percent and 14.0 percent, respectively, at June 30, 2012.

People's United Financial, a diversified financial services company with $28 billion in assets, provides commercial and retail banking, as well as wealth management services through a network of 416 branches in Connecticut, New York, Massachusetts, Vermont, New Hampshire and Maine. Through its subsidiaries, People's United Financial provides equipment financing, brokerage and insurance services. Assets under administration and those under full discretionary management, neither of which are reported as assets of People's United Financial, totaled $12.7 billion and $4.4 billion, respectively, at June 30, 2012.

Conference Call
On July 19, 2012, at 5 p.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 Us" 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.

2Q 2012 Financial Highlights

Summary

  • Net income was $64.8 million, or $0.19 per share.
    • Operating earnings were $67.2 million, or $0.20 per share.
  • Net interest income totaled $236.0 million compared to $235.1 million in 1Q12.
    •  Cost recovery income on acquired loans, representing cash receipts in excess of carrying amount, totaled $4.7 million in 2Q12 (none in 1Q12
  • Operating net interest margin decreased 12 basis points from 1Q12 to 3.89%
    • Loan yields reduced the net interest margin by 8 basis points.
    • The run-off of fair value amortization on acquired deposits reduced the net interest margin by 4 basis points.
  • Provision for loan losses totaled $10.6 million.
    • Net loan charge-offs totaled $13.5 million, of which $7.5 million related to loans with specific reserves established in prior periods.
    • Reflects a $4.6 million increase in the allowance for loan losses due to loan growth.
  • Non-interest income was $75.7 million in 2Q12 compared to $72.4 million in 1Q12.
    • Bank service charges increased $2.2 million from 1Q12 to $32.5 million
    • Loan prepayment fees increased $1.6 million from 1Q12.
    • 2Q12 includes $0.7 million of net gains on sales of acquired loans (none in 1Q12).
    • Insurance revenue decreased $1.2 million from 1Q12, primarily reflecting the seasonal nature of insurance renewals.
    • Net gains on sales of residential mortgage loans decreased $0.8 million from 1Q12.
  • Non-interest expense totaled $205.7 million in 2Q12 compared to $208.6 million in 1Q12.
    • Operating non-interest expense was $202.1 million in 2Q12 compared to $205.6 million in 1Q12.
    • 2Q12 includes $0.7 million of operating expenses relating to the Citizen's branch purchase late in the second quarter.
    • Efficiency ratio in 2Q12 decreased to 61.5% from 63.2% in 1Q12, reflecting both a $3.4 million increase in operating revenues and a $3.4 million decrease in operating expenses.
  • Effective income tax rate was 32.0% for 2Q12 compared to 33.0% for 1Q12.

 

Commercial Banking

  • Commercial banking loans, excluding acquired loans, increased $374 million, or 13% annualized, from March 31, 2012.
  • Average commercial banking loans totaled $14.5 billion in 2Q12, a $13 million increase from 1Q12.
  • The ratio of originated non-performing commercial banking loans to originated commercial banking loans was 1.57% at June 30, 2012 compared to 1.70% at March 31, 2012.
    • Non-performing commercial banking assets, excluding acquired non-performing loans, totaled $211.2 million at June 30, 2012, down from $222.1 million at March 31, 2012.
  • Net loan charge-offs totaled $10.4 million, or 0.29% annualized, of average commercial banking loans in 2Q12, compared to $7.2 million, or 0.20% annualized, in 1Q12.
  • For the originated commercial banking portfolio, the allowance for loan losses as a percentage of loans was 1.28% at June 30, 2012 compared to 1.34% at March 31, 2012.
  • The commercial banking originated allowance for loan losses represented 82% of originated non-performing commercial banking loans at June 30, 2012 compared to 79% at March 31, 2012.
  • Commercial deposits totaled $5.4 billion at June 30, 2012 compared to $5.3 billion at March 31, 2012.

 

Retail Banking

  • Residential mortgage loans, excluding acquired loans, increased $104 million, or 13% annualized, from March 31, 2012.
  • Average residential mortgage loans totaled $3.8 billion in 2Q12, an increase of $94 million, or 10% annualized, from 1Q12.
  • The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 1.87% at June 30, 2012 compared to 2.12% at March 31, 2012.
  • Net loan charge-offs totaled $1.4 million, or 0.14% annualized, of average residential mortgage loans in 2Q12, compared to $2.0 million, or 0.22% annualized, in 1Q12.
  • Home equity loans, excluding acquired loans, totaled $1.9 billion, unchanged from March 31, 2012.
  • Average home equity loans totaled $2.0 billion in 2Q12, unchanged from 1Q12.
  • The ratio of originated non-performing home equity loans to originated home equity loans was 0.71% at June 30, 2012 compared to 0.80% at March 31, 2012.
  • Net loan charge-offs totaled $1.4 million, or 0.28% annualized, of average home equity loans in 2Q12, compared to $1.7 million, or 0.33% annualized, in 1Q12.
  • Retail deposits totaled $16.1 billion at June 30, 2012 compared to $16.0 billion at March 31, 2012.

 

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; and (11) changes in regulation resulting from or relating to 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.

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Access Information About People's United Financial at www.peoples.com.

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