January 18, 2018

People's United Financial Reports Fourth Quarter Net Income of $106.2 Million, or $0.30 Per Common Share; Operating Earnings of $0.31 Per Common Share

Click here to see the fourth quarter Financial Schedule

BRIDGEPORT, CT – People's United Financial, Inc. (NASDAQ: PBCT) today reported net income of $106.2 million, or $0.30 per common share, for the fourth quarter of 2017, compared to $75.9 million, or $0.24 per common share, for the fourth quarter of 2016, and $90.8 million, or $0.26 per common share, for the third quarter of 2017. For the year ended December 31, 2017, net income totaled $337.2 million, or $0.97 per common share, compared to $281.0 million, or $0.92 per common share, for 2016. 

Included in both the fourth quarter and full year 2017 results were the following items, which are deemed non-operating, given their non-recurring nature: merger-related expenses; security losses incurred as a tax planning strategy in response to tax reform; and a tax benefit realized in connection with tax reform. The comparable periods in the prior year included merger-related expenses and acquisition integration costs.

Operating earnings were $104.5 million, or $0.31 per common share, for the fourth quarter of 2017, compared to $75.1 million, or $0.24 per common share, for the fourth quarter of 2016, and $89.3 million, or $0.26 per common share, for the third quarter of 2017. For the year ended December 31, 2017, operating earnings totaled $345.8 million, or $1.04 per common share, compared to $282.3 million, or $0.93 per common share, for 2016.

The Company's Board of Directors declared a $0.1725 per common share quarterly dividend payable February 15, 2018 to shareholders of record on February 1, 2018. Based on the closing stock price on January 17, 2018, the dividend yield on People's United Financial common stock is 3.5 percent.

“The Company’s performance in 2017 demonstrated our commitment to enhancing profitability and building the business for the long-term,” commented Jack Barnes, President and Chief Executive Officer. “Full year operating earnings of $345.8 million is the highest in the bank’s 175 year history, while operating earnings per common share of $1.04 increased for the eighth consecutive year. Period-end loan and deposit balances were $32.6 billion and $33.1 billion, respectively, up 10 percent and 11 percent from a year ago. These results reflect the hard work of our employees who successfully closed and integrated two acquisitions during the year and delivered continued organic growth across the franchise.”

Barnes concluded, “We are excited by the opportunities in front of us to further strengthen and grow the Company. In the year ahead, we will continue to enhance technology and marketing capabilities to better serve existing relationships and develop new ones. We will also provide new and refreshed products as well as align technology-based offerings with our expert bankers to drive a unique client experience. We are confident revenue producing investments along with synergies created by recent acquisitions will result in continued improvement in operating leverage and further create value for shareholders in 2018 and beyond.”

“We closed out 2017 with another quarter of strong financial performance,” stated David Rosato, Senior Executive Vice President and Chief Financial Officer. “Record quarterly operating earnings of $104.5 million increased 17 percent on a linked-quarter basis and generated an operating return on average tangible common equity of 14.1 percent. These results benefited from further improvement in net interest margin, higher fee income and well-controlled expenses. The quarter was also favorably impacted by a lower effective tax rate primarily due to continued investment in tax preferenced items as well as a tax benefit realized as a result of recently enacted tax reform.”

Rosato concluded, “Linked-quarter loan growth continued to highlight the importance of our diversified business mix. Period-end loan growth was driven by strong results across each of our equipment financing units and solid production in middle market commercial and industrial lending. These increases were partially offset by lower commercial real estate balances primarily due to market conditions and continued runoff of the transactional portion of our New York multifamily portfolio. Period-end deposits were up from the end of the third quarter reflecting higher demand deposits as well as a successful CD offering celebrating the Company’s 175th anniversary. On an average balance basis, loans and deposits increased four percent and ten percent annualized, respectively.”

Net loan charge-offs as a percentage of average total loans on an annualized basis were 0.08 percent in the fourth quarter of 2017, an increase from 0.06 percent in both the third quarter of 2017 and fourth quarter of 2016. For the originated loan portfolio, non-performing loans equaled 0.49 percent of loans at December 31, 2017, an improvement from both 0.59 percent at September 30, 2017 and 0.51 percent at December 31, 2016.

Return on average assets of 0.96 percent for the fourth quarter of 2017 was an increase from both 0.84 percent in the third quarter of 2017 and 0.75 percent in the fourth quarter of 2016. Return on average tangible common equity of 13.8 percent for the fourth quarter of 2017 was an increase from both 11.8 percent in the third quarter of 2017 and 10.7 percent in the fourth quarter of 2016.

At December 31, 2017, People's United Financial’s common equity tier 1 capital and total risk-based capital ratios were 9.7 percent and 12.2 percent, respectively, and the tangible common equity ratio stood at 7.2 percent. For People's United Bank, N.A., the common equity tier 1 capital and total risk-based capital ratios were 10.7 percent and 12.6 percent, respectively, at December 31, 2017.

People's United Financial, Inc., a diversified financial services company with $44 billion in total assets, provides commercial and retail banking, as well as wealth management services through a network of approximately 400 branches in Connecticut, New York, Massachusetts, Vermont, New Hampshire and Maine.

4Q 2017 Financial Highlights

Summary

  • Net income totaled $106.2 million, or $0.30 per common share.
    • Net income available to common shareholders totaled $102.7 million.
    • Operating earnings totaled $104.5 million, or $0.31 per common share (see page 16 of the Financial Schedule).
  • Net interest income totaled $292.3 million in 4Q17 compared to $284.6 million in 3Q17.
  • Net interest margin increased three basis points from 3Q17 to 3.07% reflecting:
    • Higher yields on the loan portfolio (increase of six basis points).
    • Higher yields on the securities portfolio (increase of one basis point).
    • Higher rates on deposits (decrease of four basis points)
  • Provision for loan losses totaled $7.5 million.
    • Net loan charge-offs totaled $6.5 million.
    • Net loan charge-off ratio of 0.08% in 4Q17.
  • Non-interest income totaled $87.3 million in 4Q17 compared to $89.3 million in 3Q17.
    • Customer interest rate swap income increased $3.3 million.
    • Commercial banking lending fees increased $1.8 million.
    • Insurance revenue decreased $2.8 million, reflecting the seasonality of commercial insurance renewals.
    • Bank service charges decreased $0.6 million.
    • Net security losses of $9.8 million in 4Q17 include losses totaling $10.0 million incurred as a tax planning strategy in response to tax reform (see page 16 of the Financial Schedule).
    • At December 31, 2017, assets under administration, which are not reported as assets of People’s United Financial, totaled $23.8 billion, of which $9.1 billion are under discretionary management, compared to $23.0 billion and $8.9 billion, respectively, at September 30, 2017.
  • Non-interest expense totaled $239.7 million in 4Q17 compared to $237.1 million in 3Q17.
    • Operating non-interest expense totaled $238.1 million in 4Q17 (see page 16 of the Financial Schedule).
    • Compensation and benefits expense, excluding $0.6 million of merger-related expenses in 4Q17, increased $1.8 million, primarily reflecting higher incentive and health care costs.
    • Regulatory assessment expense increased $1.6 million.
    • Professional and outside services expense, excluding $1.0 million and $2.7 million of merger-related expenses in 4Q17 and 3Q17, respectively, increased $1.2 million.
    • The efficiency ratio was 56.1% for 4Q17 compared to 57.3% for 3Q17 (see page 16 of the Financial Schedule).
  • The effective income tax rate was 19.8% for 4Q17 and 27.8% for the full-year of 2017, compared to 31.4% for the full-year of 2016 (28.5% for 4Q16).
    • The lower rates in 2017 reflect the continued benefit of tax advantaged investments, the effects of certain tax planning strategies and a $6.5 million benefit realized in connection with tax reform (see page 16 of the Financial Schedule).

Commercial Banking

  • Commercial loans totaled $23.7 billion at December 31, 2017, an increase of $194 million, or 3% annualized, from September 30, 2017.
    • The mortgage warehouse portfolio increased $22 million from September 30, 2017.
  • Average commercial loans totaled $23.4 billion in 4Q17, an increase of $236 million, or 4% annualized, from 3Q17.
    • The average mortgage warehouse portfolio decreased $107 million from 3Q17.
  • Commercial deposits totaled $12.1 billion at December 31, 2017 compared to $12.0 billion at September 30, 2017.
  • The ratio of originated non-performing commercial loans to originated commercial loans was 0.49% at December 31, 2017 compared to 0.59% at September 30, 2017.
  • Non-performing commercial assets, excluding acquired non-performing loans, totaled $112.4 million at December 31, 2017 compared to $137.4 million at September 30, 2017.
  • For the originated commercial loan portfolio, the allowance for loan losses as a percentage of loans was 0.93% at December 31, 2017 compared to 0.94% at September 30, 2017.
  • The originated commercial allowance for loan losses represented 200% of originated non-performing commercial loans at December 31, 2017 compared to 159% at September 30, 2017.

Retail Banking

  • Residential mortgage loans totaled $6.8 billion at December 31, 2017, an increase of $25 million, or 1% annualized, from September 30, 2017.
    • Average residential mortgage loans totaled $6.8 billion in 4Q17, an increase of $75 million, or 4% annualized, from 3Q17.
  • Home equity loans totaled $2.0 billion at December 31, 2017, a $26 million decrease from September 30, 2017.
    • Average home equity loans totaled $2.0 billion in 4Q17, a $31 million decrease from 3Q17.
  • Retail deposits totaled $20.9 billion at December 31, 2017 compared to $20.6 billion at September 30, 2017.
  • The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 0.50% at December 31, 2017 compared to 0.52% at September 30, 2017.
  • The ratio of originated non-performing home equity loans to originated home equity loans was 0.78% at December 31, 2017 compared to 0.74% at September 30, 2017.

Conference Call

On January 18, 2018, 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.

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," "should" 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, international, 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) changes in accounting and regulatory guidance applicable to banks; (7) price levels and conditions in the public securities markets generally; (8) competition and its effect on pricing, spending, third-party relationships and revenues; (9) the successful integration of acquisitions; and (10) 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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