October 15, 2009


People's United Financial Reports Third Quarter Earnings Of $27 Million Or $0.08 Per Share

Click here to see the third quarter Financial Schedule.

BRIDGEPORT, CT.People's United Financial, Inc. (NASDAQ: PBCT) today announced net income of $26.8 million, or $0.08 per share, for the third quarter of 2009, compared to $25.3 million, or $0.08 per share, for the second quarter of 2009, and $46.0 million, or $0.14 per share, for the third quarter of 2008.  Third quarter 2009 earnings reflect an 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 due, in part, to the partial charge-off of a previously disclosed non-performing shared national credit.

For the third quarter of 2009, return on average tangible assets was 0.55 percent and return on average tangible stockholders' equity was 3.0 percent, compared to 0.53 percent and 2.8 percent, respectively, for the second quarter of 2009.  At September 30, 2009, People's United Financial's tangible equity ratio stood at 18.6 percent.

The Board of Directors of People's United Financial declared a $0.1525 per share quarterly dividend, payable November 15, 2009 to shareholders of record on November 1, 2009.  Based on the closing stock price on October 14, 2009, the dividend yield on People's United Financial common stock is 3.9 percent.

"Our third quarter performance reflects continued growth in our core loan portfolios and deposits in spite of a clearly very challenging economic environment," stated Philip R. Sherringham, President and Chief Executive Officer.  Year-over-year core commercial and home equity lending portfolios increased eight percent and deposits grew six percent.  "In addition, the pillars of our financial position – strong asset quality and prudent management of our excess capital – have served us well in these challenging times and continue to differentiate us from most in the banking sector."

Sherringham added, "We believe our asset quality has held up remarkably well on both a relative and absolute basis through the recent recessionary cycle and most of the bad news is substantially behind us.  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 remains funded almost entirely by deposits and stockholders' equity, continue to set us apart from most in the industry."

"Significant drivers of the company's performance this quarter were our first increase in the net interest margin since last year's third quarter, continued loan growth across our strategic lending businesses, improvements in fee income and expense control, partially offset by higher net loan charge-offs and our decision to increase the allowance for loan losses," said Paul D. Burner, Senior Executive Vice President and Chief Financial Officer.  "The 7 basis point increase in the net interest margin was primarily attributable to a reduction in our cost of deposits.  In addition, during the third quarter, mortgage-backed securities with a book value of $308 million were sold, and the proceeds have been reinvested in mortgage-backed securities with substantially-equivalent maturities and yields.  This investment portfolio repositioning, which was undertaken to mitigate prepayment risk, generated security gains totaling $4.8 million."

Commenting on asset quality, Burner stated, "A single shared national credit accounted for $6.1 million, or 38 percent, of this quarter's net loan charge-offs.  Non-performing loans increased $7.7 million, or 5 percent, this quarter, signaling what we believe to be stabilization across the loan portfolio.  Notwithstanding the slight increase in non-performing assets, our continued modest level of net loan charge-offs in this current economic environment remains a testament to our disciplined underwriting standards."

Third quarter net loan charge-offs totaled $16.0 million compared to $6.0 million in the second quarter of 2009.  Net loan charge-offs as a percent of average loans on an annualized basis were 0.44 percent in the third quarter of 2009 compared to 0.16 percent in this year's second quarter and were 0.26 percent for the nine months ended September 30, 2009.  The provision for loan losses in the third quarter of 2009 reflects a $5.5 million increase in the allowance for loan losses to $172.5 million at September 30, 2009.

At September 30, 2009, non-performing loans totaled $175.7 million and the ratio of non-performing loans to total loans was 1.23 percent, compared to $168.0 million and 1.15 percent, respectively, at June 30, 2009.  Non-performing assets totaled $192.7 million at September 30, 2009, a $10.7 million increase from June 30, 2009.  Non-performing assets equaled 1.35 percent of total loans, REO and repossessed assets at September 30, 2009 compared to 1.25 percent at June 30, 2009.  At September 30, 2009, the allowance for loan losses as a percentage of total loans was 1.21 percent and as a percentage of non-performing loans was 98 percent, compared to 1.15 percent and 99 percent, respectively, at June 30, 2009.

Results for the first two quarters of 2009 and the fourth quarter of 2008 have been revised to reflect the recognition of additional non-interest expense relating to an unintentional under accrual of certain operating expenses.  The effect of these revisions was immaterial to each period (no change in diluted earnings per share for the second quarter of 2009 and a one cent reduction in diluted earnings per share for both the first quarter of 2009 and the fourth quarter of 2008).  Net income for the three months ended June 30, 2009, March 31, 2009 and December 31, 2008 was reduced by $2.1 million, $2.5 million and $1.7 million, respectively.

Conference Call

On October 16, 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 tangible equity and efficiency ratios, and tangible book value per share.  Management believes these non-GAAP financial measures provide 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, while the tangible equity ratio and tangible book value per share are used to analyze the relative strength of People's United Financial's capital position.

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 (i) 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) (the numerator) to (ii) 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) (the denominator).  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.

The tangible equity ratio is the ratio of (i) tangible stockholders' equity (total stockholders' equity less goodwill and other acquisition-related intangibles) (the numerator) to (ii) tangible assets (total assets less goodwill and other acquisition-related intangibles) (the denominator).  Tangible book value per share is calculated by dividing tangible stockholders' equity by common shares outstanding.

3Q 2009 Financial Highlights


  • Net income totaled $26.8 million, or $0.08 per share.
  • Net interest income on a fully taxable equivalent basis totaled $146.1 million.
    • Net interest margin increased 7 basis points from 2Q09 to 3.19%.
    • Average short-term investments totaled $3.1 billion, or 17% of average earning assets, and yielded 0.22% in 3Q09.
    • Average deposits increased $151 million, or 4% annualized, from 2Q09.
  • Provision for loan losses totaled $21.5 million.
    • Net loan charge-offs totaled $16.0 million in 3Q09 (including $6.1 million related to one shared national credit) compared to $6.0 million in 2Q09.
    • The allowance for loan losses was increased by $5.5 million in 3Q09 from 2Q09 levels.
  • Non-interest income, excluding net security gains, totaled $75.5 million in 3Q09 compared to $73.0 million in 2Q09.
    • Gains on sales of residential mortgage loans increased $1.4 million from 2Q09.
    • Net security gains totaled $4.7 million in 3Q09 and $12.0 million in 2Q09.
  • Non-interest expense, excluding an FDIC special assessment charge in 2Q09, totaled $165.1 million in 3Q09 compared to $167.8 million in 2Q09.
    • FDIC special assessment charge in 2Q09 totaled $8.4 million.
  • Effective income tax rate was 31.2% in 3Q09.

Commercial Banking

  • Average commercial banking loans, excluding shared national credits, increased $79 million,
    or 4% annualized, from 2Q09 to $8.7 billion.
  • Shared national credits totaled $614.2 million at September 30, 2009, a $24.7 million decrease from June 30, 2009.
  • Non-performing commercial banking assets totaled $131.3 million at September 30, 2009,
    an $8.8 million increase from June 30, 2009.
  • Includes $26.4 million attributable to two non-performing shared national credits.
  • The ratio of non-performing commercial banking loans to total commercial banking loans was 1.28% at September 30, 2009 compared to 1.21% at June 30, 2009.
  • Net loan charge-offs totaled $11.2 million, or 0.48% annualized, of average commercial banking loans in 3Q09, compared to $3.3 million, or 0.15% annualized, in 2Q09.
    • Excluding the shared national credit partial charge-off, net loan charge-offs totaled $5.1 million, or 0.22% annualized in 3Q09.

Retail & Small Business Banking

  • Average residential mortgage loans totaled $2.8 billion, a $180 million decrease from 2Q09, reflecting People's United Financial's strategy to sell essentially all newly-originated loans.
    • Net loan charge-offs totaled $2.6 million, or 0.37% annualized, of average residential mortgage loans.
    • The ratio of non-performing residential mortgage loans to total residential mortgage loans was 1.88% at September 30, 2009 compared to 1.74% at June 30, 2009.
  • Average home equity loans totaled $2.0 billion, unchanged from 2Q09.
    • Net loan charge-offs totaled $0.8 million, or 0.16% annualized, of average home equity loans.
  • Average indirect auto loans totaled $0.2 billion, unchanged from 2Q09.
    • Net loan charge-offs totaled $0.9 million, or 1.54% annualized, of average indirect auto loans.

Wealth Management

  • Wealth Management income increased $0.5 million from 2Q09.
    • Insurance revenue increased $1.1 million, reflecting the seasonal nature of insurance renewals.
  • Assets under custody, management and safekeeping, which are not reported as assets of People's United Financial, totaled $12.3 billion at September 30, 2009 compared to $12.5 billion at June 30, 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.

Access Information About People's United Financial on the World Wide Web at www.peoples.com.

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