January 19, 2017

People's United Financial Reports Fourth Quarter Net Income of $75.9 Million, or $0.24 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 $75.9 million, or $0.24 per common share, for the fourth quarter of 2016, compared to $70.8 million, or $0.23 per common share, for the fourth quarter of 2015, and $73.7 million, or $0.24 per common share, for the third quarter of 2016.

Included in this quarter’s results were merger-related and acquisition integration costs of $1.6 million ($1.0 million after-tax), or less than $0.01 per common share, compared to $3.1 million ($2.1 million after-tax), or $0.01 per common share, for the third quarter of 2016. Fourth quarter 2015 results included a gain of $9.2 million ($6.1 million after-tax), or $0.02 per common share, resulting from the sale of the Company’s payroll services business.

For the year ended December 31, 2016, net income totaled $281.0 million, or $0.92 per common share, compared to $260.1 million, or $0.86 per common share, for 2015.

The Company's Board of Directors declared a $0.17 per share quarterly dividend, payable February 15, 2017 to shareholders of record on February 1, 2017.  Based on the closing stock price on January 18, 2017, the dividend yield on People's United Financial common stock is 3.5 percent.

“We are pleased with the Company’s financial and operating performance this year,” commented Jack Barnes, President and Chief Executive Officer. “Full year net income of $281 million is the highest in the Company’s history and return on average tangible common equity was 10.2 percent. Our straightforward, solutions-oriented approach to banking enabled us to further expand client relationships and forge new ones as demonstrated by another year of growth in loans, deposits and wealth management assets. We continued to improve operating leverage during the year through revenue growth as well as proactive expense management which has limited the increase in expenses to an average annual rate of less than one percent over the last five years.”

Barnes continued, “We strengthened fee income generating capabilities over the course of the year through infrastructure investments and acquisitions, most notably the addition of Gerstein Fisher which closed in early November. We also continued to strategically add talent across the organization to further drive revenue growth. Earlier in the year, we announced the acquisition of Suffolk Bancorp which upon closing will deepen our presence in the New York metro area.”

Barnes concluded, “We continually strive to balance and utilize six levers to create shareholder value: enhancing client-focused capabilities, growing the balance sheet, maintaining excellent asset quality, diversifying revenues, controlling costs and deploying capital efficiently. As such, we enter 2017 well-positioned across our diverse portfolio of businesses and attractive Northeast footprint to further deliver exceptional service to clients and profitable growth to shareholders.”

 “Our fourth quarter performance provided a strong finish to the year as evidenced by record quarterly net income of $75.9 million and a return on average tangible common equity of 10.7 percent,” stated David Rosato, Senior Executive Vice President and Chief Financial Officer. “Net income increased seven percent from the prior year quarter due to higher net interest income and continued expense control. As a result, the efficiency ratio was 59.3 percent, an improvement of 170 basis points from a year ago.”

Rosato concluded, “Loans grew five percent on an annualized basis, marking the 25th consecutive quarter of growth. The increase was driven by strong results in commercial real estate and residential mortgage, partially offset by lower mortgage warehouse lending balances. We maintained excellent asset quality across each portfolio, reflected by net charge-offs as a percentage of average loans of only six basis points for the quarter. Deposit growth was three percent annualized, while the overall cost of deposits remained consistent with the third quarter. Furthermore, we issued $250 million of preferred stock which enhanced our already strong capital position.”

At December 31, 2016, People's United Financial’s common equity tier 1 capital and total risk-based capital ratios were 9.9 percent and 12.5 percent, respectively, and the tangible common equity ratio stood at 7.2 percent.  For People's United Bank, N.A., common equity tier 1 capital and total risk-based capital ratios were 11.3 percent and 13.4 percent, respectively, at December 31, 2016.

Net loan charge-offs as a percentage of average total loans on an annualized basis were 0.06 percent in the fourth quarter of 2016, a slight increase from 0.04 percent in the third quarter of 2016, but lower than 0.09 percent in the fourth quarter of 2015.  For the originated loan portfolio, non-performing loans equaled 0.51 percent of loans at December 31, 2016, a decrease from 0.54 percent at September 30, 2016 and 0.58 percent at December 31, 2015.

Return on average assets of 0.75 percent for the fourth quarter of 2016 was an increase from 0.73 percent in the third quarter of 2016 and unchanged from the fourth quarter of 2015.  Return on average tangible common equity of 10.7 percent in the fourth quarter of 2016 was unchanged from both the third quarter of 2016 and fourth quarter of 2015.

People's United Financial, Inc., a diversified financial services company with $41 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.  Through its subsidiaries, People's United Financial provides equipment financing, brokerage and insurance services.

4Q 2016 Financial Highlights

Summary

  • Net income totaled $75.9 million, or $0.24 per common share.
    • Net income available to common shareholders totaled $74.1 million.
    • Operating earnings totaled $75.1 million, or $0.24 per common share (see page 16 of the Financial Schedule).
  • Net interest income totaled $246.8 million in 4Q16 compared to $245.3 million in 3Q16.
  • Net interest margin decreased two basis points from 3Q16 to 2.78% reflecting:
    • Higher yield on the securities portfolio (increase of two basis points).
    • New loan volume at rates lower than the existing portfolio (decrease of three basis points).
    • Higher rate on borrowings (decrease of one basis point).
  • Provision for loan losses totaled $7.7 million.
    • Net loan charge-offs totaled $4.7 million.
    • Net loan charge-off ratio of 0.06% in 4Q16.
  • Non-interest income was $84.2 million in 4Q16 compared to $90.8 million in 3Q16.
    • Investment management fees increased $2.6 million, primarily reflecting the benefit from the addition of Gerstein Fisher in early November.
    • Net gains on sales of residential mortgages increased $0.7 million.
    • Recorded a $6.3 million gain in 4Q16 (included in other non-interest income) from the sale of an ownership interest in a legacy privately-held investment.
    • Insurance revenue decreased $3.0 million, reflecting the seasonal nature of commercial insurance renewals.
    • Operating lease income decreased $1.7 million.
    • Bank service charges decreased $1.1 million.
    • Net security losses in 4Q16 totaled $6.0 million.
    • At December 31, 2016, assets under administration, which are not reported as assets of People’s United Financial, totaled $21.3 billion, of which $8.0 billion are under discretionary management, compared to $18.2 billion and $5.7 billion, respectively, at September 30, 2016.
  • Non-interest expense totaled $217.2 million in 4Q16 compared to $221.4 million in 3Q16.
    • Operating non-interest expense totaled $215.6 million in 4Q16 (see page 16 of the Financial Schedule).
    • Compensation and benefits expense, excluding $0.7 million of acquisition integration costs in 4Q16, decreased $2.8 million, primarily reflecting lower payroll and benefit-related costs in 4Q16.
    • Professional and outside services expense, excluding $0.9 million and $3.1 million of merger-related expenses in 4Q16 and 3Q16, respectively, increased $0.8 million.
    • Regulatory assessments expense increased $0.5 million.
    • The efficiency ratio was 59.3% in 4Q16 compared to 59.9% in 3Q16 (see page 16 of the Financial Schedule).
  • The effective income tax rate was 28.5% for 4Q16 and 31.4% for the full-year of 2016, compared to 33.4% for the full-year of 2015 (32.8% for 4Q15).
    • The lower full-year rate reflects an increase in tax advantaged investments as well as the effects of certain tax planning strategies.

Commercial Banking

  • Commercial loans totaled $21.4 billion at December 31, 2016, an increase of $214 million, or 4% annualized, from September 30, 2016.
    • The mortgage warehouse portfolio decreased $107 million from September 30, 2016.
  • Average commercial loans totaled $21.1 billion in 4Q16, a $57 million increase from 3Q16.
    • The average mortgage warehouse portfolio decreased $18 million in 4Q16.
  • Commercial deposits totaled $10.4 billion at December 31, 2016 compared to $10.3 billion at September 30, 2016.
  • The ratio of originated non-performing commercial loans to originated commercial loans was 0.49% at December 31, 2016 compared to 0.53% at September 30, 2016.
  • Non-performing commercial assets, excluding acquired non-performing loans, totaled $114.4 million at December 31, 2016 compared to $127.4 million at September 30, 2016.
  • For the originated commercial portfolio, the allowance for loan losses as a percentage of loans was 0.95% at December 31, 2016 compared to 0.94% at September 30, 2016.
  • The commercial originated allowance for loan losses represented 193% of originated non-performing commercial loans at December 31, 2016 compared to 178% at September 30, 2016.

Retail Banking

  • Residential mortgage loans totaled $6.2 billion at December 31, 2016, an increase of $189 million, or 13% annualized, from September 30, 2016.
    • Average residential mortgage loans totaled $6.1 billion in 4Q16, an increase of $201 million, or 14% annualized, from 3Q16.
  • Home equity loans totaled $2.1 billion at December 31, 2016, a $27 million decrease from September 30, 2016.
    • Average home equity loans totaled $2.1 billion in 4Q16, a $21 million decrease from 3Q16.
  • Retail deposits totaled $19.5 billion at December 31, 2016 compared to $19.4 billion at
    September 30, 2016.
  • The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 0.45% at December 31, 2016 compared to 0.48% at September 30, 2016.
  • The ratio of originated non-performing home equity loans to originated home equity loans was 0.85% at December 31, 2016 compared to 0.80% at September 30, 2016.

Conference Call On January 19, 2017, 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, 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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