April 16, 2009

APRIL 16, 2009


Click here to see the first quarter Financial Schedule 

BRIDGEPORT, CT. – People's United Financial, Inc. (NASDAQ: PBCT) today announced net income of $26.7 million, or $0.08 per share, for the first quarter of 2009, compared to $15.1 million, or $0.05 per share, for the first quarter of 2008.  The company's Board of Directors voted to increase the annual common stock dividend by $0.01 per share, resulting in a quarterly dividend rate of $0.1525 per share.  The dividend is payable May 15, 2009 to shareholders of record on May 1, 2009.  Based on the closing stock price on April 15, 2009, the dividend yield on People's United Financial common stock is 3.5 percent.

First quarter 2009 earnings reflect expected margin pressure associated with the historically low interest rate environment and reduced fee income stemming from continued uncertainty in the equity markets and broader economic weakness.  For the first quarter of 2009, return on average tangible assets was 0.57 percent and return on average tangible stockholders' equity was 2.9 percent, compared to 0.31 percent and 1.6 percent, respectively, for the first quarter of 2008.  At March 31, 2009, People's United Financial's tangible equity ratio was 19.0 percent.

President and Chief Executive Officer, Philip R. Sherringham stated, "Our performance in the first quarter of 2009 continues to reflect the difficult economic environment, specifically as it relates to the current level of interest rates and our asset-sensitive balance sheet.  However, the key elements of our financial position – strong asset quality, predicated on conservative underwriting standards, and prudent management of our excess capital – have served us well in these challenging times.  Modest levels of net loan charge-offs and year-over-year double-digit growth in our core lending businesses continue to differentiate us from most in the banking sector.  Despite an increase in non-performing assets during the quarter as the economy continued to deteriorate, we expect that any potential losses attributable to those assets will be limited."

Sherringham continued, "While we are well-positioned to benefit from future increases in interest rates given our asset-sensitive balance sheet, the current rate environment continues to pressure our net interest margin.  Our strategic focus remains on expansion through acquisitions even as we continue to pursue organic growth throughout our franchise.  The strength of our capital and liquidity, asset quality and earnings, as well as the fact that our balance sheet continues to be funded almost entirely by deposits and stockholders' equity, are hallmarks that set us apart from most in the industry."

Commenting on acquisitions, Sherringham added, "We continue to weigh all of our options in determining the most attractive use of our capital as a means of delivering long-term shareholder value.  As we have said previously, we still feel it is best to exercise patience as we work toward identifying and executing an acquisition that will enhance the long-term profitability of the company.  In addition, our dividend continues to be an appropriate avenue to enhance shareholder returns; in fact, our strong capital position afforded us the ability to increase it for the 17th consecutive year."

"Key drivers of the company's performance this quarter were healthy loan growth across our core lending businesses and continued low levels of net loan charge-offs, somewhat offset by continued margin pressure and lower fee income," said Paul D. Burner, Senior Executive Vice President and Chief Financial Officer.  "Average commercial banking loans, excluding shared national credits, increased $220 million, or 11 percent annualized, while our home equity loan portfolio increased $71 million, or 15 percent annualized, from the fourth quarter of 2008.  As expected, the net interest margin decreased from the fourth quarter of 2008 due to the decline in interest rates."

Commenting on asset quality, Burner stated, "A single shared national credit accounted for $16 million, or 38 percent, of the increase in our non-performing loans this quarter.  Another 43 percent of the increase was attributable to residential mortgage loans, which is a reflection of higher levels of unemployment across our franchise.  Notwithstanding the increase in non-performing assets, our continued low level of net loan charge-offs in this current economic environment is a testament to our disciplined underwriting standards."

First quarter net loan charge-offs totaled $6.4 million compared to $5.7 million in the fourth quarter of 2008.  Net loan charge-offs as a percent of average loans on an annualized basis were 0.18 percent in the first quarter of 2009 compared to 0.16 percent in the prior year's fourth quarter.  The provision for loan losses in the first quarter of 2009 reflects a $1.5 million increase in the allowance for loan losses to $159.0 million at March 31, 2009.

At March 31, 2009, non-performing loans totaled $126.1 million and the ratio of non-performing loans to total loans was 0.86 percent, compared to $84.3 million and 0.58 percent, respectively, at December 31, 2008.  Non-performing assets totaled $142.0 million at March 31, 2009, a $48.3 million increase from December 31, 2008.  Non-performing assets equaled 0.97 percent of total loans, REO and repossessed assets at March 31, 2009 compared to 0.64 percent at December 31, 2008.  At March 31, 2009, the allowance for loan losses as a percentage of total loans was 1.09 percent and as a percentage of non-performing loans was 126 percent, compared to 1.08 percent and 187 percent, respectively, at December 31, 2008.

Conference Call
On April 17, 2009, 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 generally accepted accounting principles ("GAAP"), management routinely supplements this evaluation with an analysis of certain non-GAAP financial measures, such as the efficiency ratio. Management believes this non-GAAP financial measure provides 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.

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 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) to 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). 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.

1Q 2009 Financial Highlights


  • Net income totaled $26.7 million, or $0.08 per share.
  • Net interest income on a fully taxable equivalent basis totaled $143.7 million.
    • Net interest margin decreased 30 basis points from 4Q08 to 3.25%.
    • Average investments, excluding mortgage-backed securities, totaled $2.5 billion, or 14% of average earning assets, and yielded 0.78% in 1Q09.
  • Provision for loan losses totaled $7.9 million.
    • Net loan charge-offs totaled $6.4 million in 1Q09 compared to $5.7 million in 4Q08.
    • The allowance for loan losses was increased by $1.5 million in 1Q09 from 4Q08 levels.
  • Non-interest income totaled $72.2 million.
    • Security gains in 1Q09 reflect the sale of the Bank's entire holdings of Visa, Inc. Class B shares ($5.6 million).
  • Non-interest expense totaled $167.6 million.
    • Other non-interest expense includes one-time charges totaling $4.4 million.
  • Effective income tax rate was 32.5%.

Commercial Banking

  • Average commercial banking loans, excluding shared national credits, increased $220 million,
    or 11% annualized, from 4Q08 to $8.6 billion.
  • Non-performing commercial banking assets totaled $89.9 million, a $27.0 million increase from December 31, 2008.
  • The ratio of non-performing commercial banking loans to total commercial banking loans was 0.85% at March 31, 2009 compared to 0.62% at December 31, 2008.
  • Net loan charge-offs totaled $3.7 million, or 0.16% annualized, of average commercial banking loans in 1Q09, compared to $3.2 million, or 0.14% annualized, in 4Q08.

Retail & Small Business Banking

  • Average residential mortgage loans totaled $3.1 billion, a $70 million decrease from 4Q08, reflecting People's United Financial's strategy to sell essentially all newly-originated loans.
  • Average home equity loans increased $71 million, or 15% annualized, from 4Q08 to $2.0 billion.
  • Average indirect auto loans totaled $0.2 billion, unchanged from 4Q08.
  • Home equity net loan charge-offs totaled $0.6 million, or 0.13% annualized, of average home equity loans.
  • Indirect auto net loan charge-offs totaled $1.0 million, or 1.65% annualized, of average indirect auto loans.

Wealth Management

  • Wealth Management income declined $1.0 million from 4Q08, primarily reflecting market weakness and the economic environment.
  • Assets under custody and management, which are not reported as assets of People's United Financial, totaled $9.5 billion at March 31, 2009.

People's United Financial, a diversified financial services company with $20 billion in assets, provides commercial banking, retail and small business banking, and wealth management services through a network of more than 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 completion of the integration of Chittenden Corporation. 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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