July 16, 2009


BRIDGEPORT, CT.People's United Financial, Inc. (NASDAQ: PBCT) today announced net income of $27.4 million, or $0.08 per share, for the second quarter of 2009, compared to $26.7 million, or $0.08 per share, for the first quarter of 2009, and $43.0 million, or $0.13 per share, for the second quarter of 2008.  Second quarter 2009 earnings reflect continued margin pressure associated with the historically low interest rate environment and the company's asset sensitive balance sheet, and security gains that served to offset an FDIC special assessment charge.

For the second quarter of 2009, return on average tangible assets was 0.57 percent and return on average tangible stockholders' equity was 3.0 percent, compared to 0.57 percent and 2.9 percent, respectively, for the first quarter of 2009.  At June 30, 2009, People's United Financial's tangible equity ratio stood at 18.7 percent.

The Board of Directors of People's United Financial declared a $0.1525 per share quarterly dividend, payable August 15, 2009 to shareholders of record on August 1, 2009.  Based on the closing stock price on July 15, 2009, the dividend yield on People's United Financial common stock is 3.9 percent.

"Our second quarter performance reflects continued growth in our core commercial and home equity loan portfolios and deposits during a difficult economic environment, specifically as it relates to the current level of interest rates and our asset-sensitive balance sheet," stated Philip R. Sherringham, President and Chief Executive Officer.  "However, the pillars of our financial position – strong asset quality and prudent management of our excess capital – have served us well in these challenging times.  Modest levels of net loan charge-offs and nine percent year-over-year growth in our core lending portfolios 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 show signs of weakness, we still believe that any potential losses attributable to those assets will be limited."

Sherringham added, "While we are well-positioned to benefit from future increases in interest rates given our asset-sensitivity, the current rate environment continues to pressure our net interest margin.  Our strategic focus remains on expansion through opportunistic 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 features that set us apart from most in the industry."

Sherringham continued, "We believe one important catalyst for growth is our ability to enhance the customer experience.  With this in mind, we were very pleased to announce in May that J.D. Power and Associates ranked People's United Bank 'Highest Customer Satisfaction with Retail Banking in the New England Region.'  This recognition underscores our long-term commitment to our customers.  Our continued core business growth in these challenging times is, of course, the most tangible indication of our customers' satisfaction."

"Significant drivers of the company's performance this quarter were loan growth across our strategic lending businesses, continued low levels of net loan charge-offs, improved fee income, and expense control, partially offset by continued margin pressure and our decision to increase the allowance for loan losses," said Paul D. Burner, Senior Executive Vice President and Chief Financial Officer.  "Compared to the first quarter of 2009, average commercial banking loans, excluding shared national credits, increased $125 million, or 6 percent annualized, while our home equity loan portfolio increased $20 million, or 4 percent annualized."

Burner continued, "In addition, during the second quarter, mortgage-backed securities with a book value of $723 million were sold, with a portion of the proceeds reinvested in mortgage-backed securities with longer maturities and substantially-equivalent yields.  This investment portfolio repositioning, which was undertaken to mitigate prepayment risk, generated security gains totaling $12.0 million.  Total non-interest expense, adjusted for the FDIC special assessment charge in the second quarter and one-time charges in the first quarter, increased a modest $1.5 million during the period.  The 13 basis point decline in the net interest margin was primarily attributable to an increase of $540 million, or 15 percent annualized, in average deposits during the second quarter that were invested in federal funds at 25 basis points."

Commenting on asset quality, Burner stated, "As previously disclosed, a single shared national credit accounted for $17 million, or 40 percent, of the increase in non-performing loans this quarter.  Another $9.1 million, or 22 percent, of the increase was attributable to the residential mortgage portfolio, which is a reflection of higher levels of unemployment across our franchise, while $7.5 million, or 18 percent, of the increase was noted within the equipment financing portfolio, reflecting broader economic weakness.  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."

Second quarter net loan charge-offs totaled $6.0 million compared to $6.4 million in the first quarter of 2009.  Net loan charge-offs as a percent of average loans on an annualized basis were 0.16 percent in the second quarter of 2009 compared to 0.18 percent in this year's first quarter.  The provision for loan losses in the second quarter of 2009 reflects an $8.0 million increase in the allowance for loan losses to $167.0 million at June 30, 2009.

At June 30, 2009, non-performing loans totaled $168.0 million and the ratio of non-performing loans to total loans was 1.15 percent, compared to $126.1 million and 0.86 percent, respectively, at March 31, 2009.  Non-performing assets totaled $182.0 million at June 30, 2009, a $40.0 million increase from March 31, 2009.  Non-performing assets equaled 1.25 percent of total loans, REO and repossessed assets at June 30, 2009 compared to 0.97 percent at March 31, 2009.  At June 30, 2009, the allowance for loan losses as a percentage of total loans was 1.15 percent and as a percentage of non-performing loans was 99 percent, compared to 1.09 percent and 126 percent, respectively, at March 31, 2009.

Conference Call
On July 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.

2Q 2009 Financial Highlights


  • Net income totaled $27.4 million, or $0.08 per share.
  • Net interest income on a fully taxable equivalent basis totaled $142.1 million.
    • Net interest margin decreased 13 basis points from 1Q09 to 3.12%.
    • Average investments, excluding mortgage-backed securities, totaled $2.9 billion,
      or 16% of average earning assets, and yielded 0.27% in 2Q09.
    • Average deposits increased $540 million, or 15% annualized, from 1Q09.
  • Provision for loan losses totaled $14.0 million.
    • Net loan charge-offs totaled $6.0 million in 2Q09 compared to $6.4 million in 1Q09.
    • The allowance for loan losses was increased by $8.0 million in 2Q09 from 1Q09 levels.
  • Non-interest income, excluding net security gains, totaled $73.0 million in 2Q09 compared to $66.8 million in 1Q09.
    • Bank service charges increased $2.5 million from1Q09.
    • Gains on sales of residential mortgage loans increased $1.9 million from 1Q09.
    • Net security gains totaled $12.0 million in 2Q09 and $5.4 million in 1Q09.
  • Non-interest expense, excluding an FDIC special assessment charge and one-time charges,
    totaled $164.7 million in 2Q09 compared to $163.2 million in 1Q09.
    • FDIC special assessment charge in 2Q09 totaled $8.4 million.
    • One-time charges in 1Q09 totaled $4.4 million.
  • Effective income tax rate was 30.0% in 2Q09 and 31.2% in the first six months of 2009.

Commercial Banking

  • Average commercial banking loans, excluding shared national credits, increased $125 million,
    or 6% annualized, from 1Q09 to $8.7 billion.
  • Shared national credits totaled $617.3 million at June 30, 2009, a $55.0 million decrease from March 31, 2009.
  • Non-performing commercial banking assets totaled $122.5 million at June 30, 2009,
    a $32.6 million increase from March 31, 2009.
  • The ratio of non-performing commercial banking loans to total commercial banking loans was 1.21% at June 30, 2009 compared to 0.85% at March 31, 2009.
  • Net loan charge-offs totaled $3.3 million, or 0.15% annualized, of average commercial banking loans in 2Q09, compared to $3.7 million, or 0.16% annualized, in 1Q09.

Retail & Small Business Banking

  • Average residential mortgage loans totaled $3.0 billion, a $157 million decrease (excluding loans held for sale) from 1Q09, reflecting People's United Financial's strategy to sell essentially all newly-originated loans.
  • Average home equity loans increased $20 million, or 4% annualized, from 1Q09 to $2.0 billion.
  • Average indirect auto loans totaled $0.2 billion, unchanged from 1Q09.
  • 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 $0.7 million, or 1.14% annualized, of average indirect auto loans.

Wealth Management

  • Investment management fees increased $1.1 million from 1Q09, primarily reflecting the increase in assets under custody and management resulting from the improvement in the equity markets.
  • Insurance revenue declined $1.5 million from 1Q09, reflecting the combination of the seasonal nature of insurance renewals and a continued soft insurance market resulting from the contracting economy.
  • Assets under custody and management, which are not reported as assets of People's United Financial, totaled $9.4 billion at June 30, 2009 compared to $9.2 billion at March 31, 2009.


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 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.


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