January 22, 2009

January 22, 2009

People's United Financial Reports Fourth Quarter Earnings Of $35 Million Or $0.11 Per Share

2008 Results Characterized by Solid Asset Quality and Strong Capital Position

BRIDGEPORT, CT –People's United Financial, Inc. (NASDAQ: PBCT) today announced net income of $35.4 million, or $0.11 per share, for the fourth quarter of 2008, compared to $46.0 million, or $0.14 per share, for the third quarter of 2008 and $46.0 million, or $0.16 per share, for the fourth quarter of 2007.  Fourth quarter 2008 earnings reflect stable asset quality and, as anticipated, continued margin pressure as a result of the historically low interest rate environment.

For the year ended December 31, 2008, net income totaled $139.5 million, or $0.42 per share, compared to $150.7 million, or $0.52 per share, for 2007.  Included in the 2008 results are merger-related expenses of $41.0 million, other one-time charges totaling $14.8 million and a $6.9 million gain related to the Visa, Inc. initial public offering.  The net impact of these items reduced 2008 net income by $33.2 million, or $0.10 per share.  Results for 2007 included the $60.0 million contribution to The People's United Community Foundation, which had the effect of reducing net income in 2007 by $39.6 million, or $0.13 per share. Excluding the effect of these items from the respective year's results, earnings would have been $172.7 million, or $0.52 per share, in 2008, compared to $190.3 million, or $0.65 per share, in 2007.

People's United Financial completed its acquisition of Chittenden Corporation on January 1, 2008.  Accordingly, People's United Financial's 2007 fourth quarter and full-year results do not include the results of Chittenden Corporation and therefore, are not directly comparable to the 2008 results.

For the fourth quarter of 2008, return on average tangible assets was 0.76 percent and return on average tangible stockholders' equity was 3.8 percent, compared to 0.99 percent and 5.0 percent, respectively, for the third quarter of 2008.

The Board of Directors of People's United Financial declared a $0.15 per share quarterly dividend, payable February 15, 2009 to shareholders of record on February 1, 2009.  Based on the closing stock price on January 21, 2009, the dividend yield on People's United Financial common stock is 3.5 percent.

President and Chief Executive Officer, Philip R. Sherringham stated, "2008 was a significant and evolutionary year for the bank. Beginning with closing the Chittenden acquisition on January 1, 2008 and ending with the consolidation of the six Chittenden bank separate charters into People's United Bank on January 1, 2009, the past twelve months changed the company and positioned us as the premier New England-based regional bank franchise.  Our performance throughout 2008 reflects our fortress balance sheet, strong asset quality and our strategic decision to value the security of our excess capital over the potential to increase short-term earnings at the risk of future impairment. In fact, the strength of our balance sheet and stable asset quality have clearly differentiated us in the wake of the ongoing economic and financial sector turmoil."

Sherringham continued, "While our strategic focus remains on growth through acquisitions, we continue to invest in our commercial, retail banking and wealth management businesses throughout New England. We remain steadfastly committed to our goal of enhancing our premier regional banking franchise. The strength of our capital and liquidity positions, asset quality and earnings, as well as the fact that our balance sheet continues to be funded almost entirely by deposits and stockholders' equity, set us apart from most in the industry, particularly given the many challenges of today's environment."

Commenting on acquisitions, Sherringham added, "We continue to weigh all of our options in determining the most attractive use of our capital to deliver long-term shareholder value.  At the present time, we still feel it is best to exercise patience as we work toward identifying and executing a well-priced acquisition that will enhance the long-term profitability of the company.  In addition, we remain firmly committed to our dividend and feel that it continues to be an appropriate avenue to enhance shareholder returns."

"Key drivers of the company's performance this quarter were continued strong asset quality, a relatively stable net interest margin and healthy loan growth across our core lending businesses,"said Paul D. Burner, Senior Executive Vice President and Chief Financial Officer.  "As expected, the net interest margin decreased slightly from the third quarter of 2008 and was essentially flat with the second quarter of 2008, reflecting the benefits from disciplined loan and deposit pricing that partially offset the decline in interest rates throughout 2008. Average commercial banking loans, excluding shared national credits, increased $155 million, or 8 percent annualized, while our home equity loan portfolio increased $99 million, or 22 percent annualized, from the third quarter of 2008."

Commenting on asset quality, Burner stated, "We are very pleased that our disciplined underwriting standards have resulted in consistent asset quality results, most notably our low levels of loan charge-offs and stability in non-performing assets in this challenging economic environment. Remarkably, for the full year, net loan charge-offs as a percent of average loans were at the same low level of 0.10 percent in both 2008 and 2007."

Fourth quarter net loan charge-offs totaled $5.7 million compared to $4.0 million in the third quarter of 2008. Net loan charge-offs as a percent of average loans on an annualized basis were 0.16 percent in the fourth quarter of 2008 compared to 0.11 percent in that year's third quarter. The provision for loan losses in the fourth quarter of 2008 reflects a $3.0 million increase in the allowance for loan losses to $157.5 million at December 31, 2008.

Non-performing loans decreased $0.8 million from September 30, 2008 to $84.3 million at December 31, 2008. The ratio of non-performing loans to total loans was 0.58 percent at December 31, 2008 compared to 0.59 percent at September 30, 2008. At December 31, 2008, non-performing assets totaled $93.7 million, a $2.3 million increase from September 30, 2008. Non-performing assets equaled 0.64 percent of total loans, REO and repossessed assets, unchanged from September 30, 2008. At December 31, 2008, the allowance for loan losses as a percentage of total loans was 1.08 percent and as a percentage of non-performing loans was 187 percent, compared to 1.08 percent and 182 percent, respectively, at September 30, 2008.

Conference Call
On January 23, 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.

First Quarter Earnings Release
People's United Financial expects to release its first quarter 2009 earnings on April 16, 2009.

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.

4Q 2008 Financial Highlights


  • Net income totaled $35.4 million, or $0.11 per share.
  • Net interest income on a fully taxable equivalent basis totaled $154.3 million.
    • Net interest margin decreased 16 basis points from 3Q08 to 3.55%.
  • Provision for loan losses totaled $8.7 million.
    • Net loan charge-offs totaled $5.7 million in 4Q08 compared to $4.0 million in 3Q08.
    • The allowance for loan losses was increased by $3.0 million in 4Q08 from 3Q08 levels.
  • Non-interest income totaled $73.7 million.
    • Other non-interest income includes gains totaling $4.0 million from the sale of (i) mortgage servicing rights and (ii) two branches located in northern New England.
  • Non-interest expense totaled $165.5 million.
    • Other non-interest expense includes one-time items netting to $2.9 million.
  • Effective income tax rate was 33.0%.


Commercial Banking

  • Average commercial banking loans, excluding shared national credits, increased $155 million,
    or 8% annualized, from 3Q08 to $8.3 billion.
  • Commercial banking non-performing assets totaled $62.9 million, a $1.4 million decrease from September 30, 2008.
  • The ratio of commercial banking non-performing loans to total commercial banking loans was 0.62% at December 31, 2008 compared to 0.68% at September 30, 2008.
  • Net loan charge-offs totaled $3.2 million, or 0.14% annualized, of average commercial banking loans.


Retail &Small Business Banking

  • Average residential mortgage loans totaled $3.2 billion, a $171 million decrease from 3Q08, reflecting People's United Financial's strategy to sell essentially all newly-originated loans.
  • Average home equity loans increased $99 million, or 22% annualized, from 3Q08 to $1.9 billion.
  • Average indirect auto loans totaled $0.2 billion, unchanged from 3Q08.
  • Home equity net loan charge-offs totaled $0.3 million, or 0.07% annualized, of average home equity loans.
  • Indirect auto net loan charge-offs totaled $0.8 million, or 1.47% annualized, of average indirect auto loans.


Wealth Management

  • Wealth Management income declined $1.7 million from 3Q08, primarily reflecting market weakness and the economic environment.
  • Assets under custody and management totaled $9 billion.

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 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.


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