October 19, 2017

People's United Financial Reports Third Quarter Net Income of $90.8 Million, or $0.26 Per Common Share

Click here to see Third Quarter Financial Schedule

BRIDGEPORT, CT - People's United Financial, Inc. (NASDAQ: PBCT) today reported net income of $90.8 million, or $0.26 per common share, for the third quarter of 2017, compared to $73.7 million, or $0.24 per common share, for the third quarter of 2016, and $69.3 million, or $0.19 per common share, for the second quarter of 2017.

Included in this quarter’s results were merger-related expenses of $3.0 million ($2.0 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, and $24.8 million ($16.8 million after-tax), or $0.05 per common share, for the second quarter of 2017.

The Company's Board of Directors declared a $0.1725 per common share quarterly dividend payable November 15, 2017 to shareholders of record on November 1, 2017. Based on the closing stock price on October 18, 2017, the dividend yield on People's United Financial common stock is 3.8 percent.

"Our third quarter performance demonstrates the success of our strategy to improve earnings growth for shareholders," commented Jack Barnes, President and Chief Executive Officer. "We reported record quarterly net income of $90.8 million, an increase of 23 percent from a year ago, and a return on average tangible common equity of 11.8 percent. The positive operating trends in the quarter reflect specific actions we have taken to enhance financial performance. We have recently closed three successful acquisitions, made various investments in organic growth capabilities and maintained tight control of expenses. The result of these efforts was a widening of our net interest margin, improvement in operating leverage and increases in profitability metrics. We are pleased with this progress and remain focused on executing our strategy to further enhance returns."

Barnes concluded, "During the fourth quarter, People’s United will celebrate its 175th anniversary. Over this time, the Company developed a premium brand by understanding that value creation begins with a steadfast dedication to superior service combined with offering a full range of products. Our customer centric approach has enabled us to develop long-lasting relationships that profitably fulfill client needs. This approach differentiates the franchise enabling us to further strengthen our presence in the markets we serve."

"Third quarter financial results were highlighted by an eight basis point linked-quarter increase in net interest margin to 3.04 percent, the strongest level in three years," stated David Rosato, Senior Executive Vice President and Chief Financial Officer. "The expansion was primarily driven by a 16 basis point increase in loan yields resulting from the acquisition of LEAF Commercial Capital, which closed in early August, and repricing of floating rate loans. Deposit costs remained well-controlled and were up only four basis points."

Rosato continued, "Higher revenues along with thoughtful expense control generated a third quarter efficiency ratio of 57.3 percent, an improvement of 110 basis points from the most recent quarter. Total revenues increased two percent as a result of further growth in net interest income, partially offset by a modest decline in non-interest income primarily due to lower commercial loan prepayment fees. Expenses, excluding merger-related costs, were up less than one percent from the second quarter, despite the addition of LEAF."

Rosato concluded, "Period-end loans and deposits increased ten percent and nine percent, respectively, on an annualized basis from the end of the second quarter. Loan growth was primarily attributable to the addition of LEAF as well as solid results in residential mortgage and middle market commercial and industrial lending. These increases were partially offset by lower mortgage warehouse lending balances. The expected rebound in organic deposit growth primarily reflected continued success gathering commercial deposits as well as seasonal inflows in our municipal business."

At June 30, 2017, People's United Financial's common equity tier 1 capital and total risk-based capital ratios were 10.1 percent and 12.6 percent, respectively, and the tangible common equity ratio stood at 7.5 percent. For People's United Bank, N.A., common equity tier 1 capital and total risk-based capital ratios were 11.3 percent and 13.3 percent, respectively, at June 30, 2017.

Net loan charge-offs as a percentage of average total loans on an annualized basis were 0.06 percent in the third quarter of 2017, an improvement from 0.09 percent in the second quarter of 2017, but an increase from 0.04 percent in the third quarter of 2016. For the originated loan portfolio, non-performing loans equaled 0.59 percent of loans at September 30, 2017, an improvement from 0.60 percent at June 30, 2017, but an increase from 0.54 percent at September 30, 2016.

Return on average assets of 0.84 percent for the third quarter of 2017 was an increase from both 0.65 percent (0.77 percent on an operating basis) in the second quarter of 2017 and 0.73 percent in the third quarter of 2016. Return on average tangible common equity of 11.8 percent in the third quarter of 2017 was an increase from both 8.7 percent (10.9 percent on an operating basis) in the second quarter of 2017 and 10.7 percent in the third quarter of 2016.

At September 30, 2017, People's United Financial’s common equity tier 1 capital and total risk-based capital ratios were 9.5 percent and 12.0 percent, respectively, and the tangible common equity ratio stood at 7.1 percent. For People's United Bank, N.A., common equity tier 1 capital and total risk-based capital ratios were 10.7 percent and 12.6 percent, respectively, at September 30, 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.

3Q 2017 Financial Highlights

Summary

  • Net income totaled $90.8 million, or $0.26 per common share.
    • Net income available to common shareholders totaled $87.3 million.
  • Net interest income totaled $284.6 million in 3Q17 compared to $274.9 million in 2Q17.
  • Net interest margin increased eight basis points from 2Q17 to 3.04% reflecting:
    • Higher yields on the loan portfolio (increase of 12 basis points).
    • One additional calendar day in 3Q17 (increase of two basis points).
    • Higher yields on the securities portfolio (increase of one basis point).
    • Higher rates on deposits and borrowings (decrease of seven basis points).
  • Provision for loan losses totaled $7.0 million.
    • Net loan charge-offs totaled $5.2 million.
    • Net loan charge-off ratio of 0.06% in 3Q17.
  • Non-interest income totaled $89.3 million in 3Q17 compared to $91.6 million in 2Q17.
    • Insurance revenue increased $2.2 million, reflecting the seasonality of commercial insurance renewals.
    • Investment management fees increased $0.6 million.
    • Bank service charges increased $0.3 million.
    • Commercial banking lending fees decreased $4.5 million.
    • At September 30, 2017, assets under administration, which are not reported as assets of People’s United Financial, totaled $23.0 billion, of which $8.9 billion are under discretionary management, compared to $22.9 billion and $8.5 billion, respectively, at June 30, 2017.
  • Non-interest expense totaled $237.1 million in 3Q17 compared to $257.3 million in 2Q17.
    • Operating non-interest expense totaled $234.1 million in 3Q17 (See page 16 of the Financial Schedule).
    • Compensation and benefits expense, excluding $3.4 million of merger-related expenses in 2Q17, increased $1.4 million, primarily reflecting additional employees resulting from the LEAF acquisition.
    • Professional and outside services expense, excluding $2.7 million and $10.8 million of merger-related expenses in 3Q17 and 2Q17, respectively, decreased $0.8 million.
    • Other non-interest expense in 2Q17 includes $10.6 million of merger-related expenses.
    • The efficiency ratio was 57.3% for 3Q17 compared to 58.4% for 2Q17 (See page 16 of the Financial Schedule).
  • The effective income tax rate was 30.0% for 3Q17 and 31.0% for the first nine months of 2017, compared to 31.4% for the full-year of 2016.

Commercial Banking

  • Commercial loans totaled $23.5 billion at September 30, 2017, an increase of $719 million from June 30, 2017.
    • Organic loan growth of 1% annualized.
    • The mortgage warehouse portfolio decreased $164 million from June 30, 2017.
  • Average commercial loans totaled $23.1 billion in 3Q17, an increase of $577 million from 2Q17.
    • The average mortgage warehouse portfolio increased $147 million from 2Q17.
  • Commercial deposits totaled $12.0 billion at September 30, 2017 compared to $11.3 billion at June 30, 2017.
  • The ratio of originated non-performing commercial loans to originated commercial loans was 0.59% at September 30, 2017 compared to 0.62% at June 30, 2017.
  • Non-performing commercial assets, excluding acquired non-performing loans, totaled $137.4 million at September 30, 2017 compared to $144.8 million at June 30, 2017.
  • For the originated commercial loan portfolio, the allowance for loan losses as a percentage of loans was 0.94% at both September 30, 2017 and June 30, 2017.
  • The originated commercial allowance for loan losses represented 159% of originated non-performing commercial loans at September 30, 2017 compared to 151% at June 30, 2017.

Retail Banking

  • Residential mortgage loans totaled $6.8 billion at September 30, 2017, an increase of $93 million, or 6% annualized, from June 30, 2017.
    • Average residential mortgage loans totaled $6.7 billion in 3Q17, an increase of $38 million, or 2% annualized, from 2Q17.
  • Home equity loans totaled $2.0 billion at September 30, 2017, a decrease of $36 million from June 30, 2017.
    • Average home equity loans totaled $2.1 billion in 3Q17, a decrease of $21 million from 2Q17.
  • Retail deposits totaled $20.6 billion at September 30, 2017 compared to $20.5 billion at June 30, 2017.
  • The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 0.52% at September 30, 2017 compared to 0.48% at June 30, 2017.
  • The ratio of originated non-performing home equity loans to originated home equity loans was 0.74% at September 30, 2017 compared to 0.79% at June 30, 2017..

Conference Call
On October 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, 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.

Access Information About People's United Financial at www.peoples.com.

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