Posted January 21, 2021


People’s United Financial Reports Fourth Quarter Net Income of $207.7 Million, or $0.49 per Common Share

Operating Earnings of $0.35 per Common Share

People's United Bank in the News

View Q4 2020 Financial Schedule

  • Sustained excellent asset quality as evidenced by net loan charge-offs to average total loans of 12 basis points and provision for credit losses of $14.7 million, both of which improved from the third quarter.
  • Increased period-end deposits $2.5 billion or 5 percent from September 30, primarily due to continued strong growth in non-interest bearing balances.
  • Completed the sale of People’s United Insurance Agency on November 2; realized a pre-tax gain, net of expenses, of $75.9 million or $0.14 per common share.

BRIDGEPORT, CT., January 21, 2021 – People's United Financial, Inc. (NASDAQ: PBCT) today reported results for the fourth quarter and full year 2020. These results along with comparison periods are summarized below:

“We are pleased with our performance in 2020, especially in light of the uncertain economic environment caused by the pandemic,” said Jack Barnes, Chairman and Chief Executive Officer. “Full year financial and operating results were strong and reflect the resilience of People’s United, its employees and customers. Pre-provision net revenue of $827 million, on an operating basis, increased 12 percent from the prior year, reflecting the success of recent acquisitions and solid execution across core operations. Higher revenues and continued emphasis on controlling costs lowered the efficiency ratio 160 basis points to 54.2 percent, marking the seventh consecutive year of improvement. Asset quality remained excellent, indicative of the Company’s conservative approach to underwriting, diversified loan portfolio, and deep customer relationships. We are particularly pleased by the continued reduction in loan deferrals, which ended the year at $271 million or 0.6 percent of total loans, down from $1.6 billion or 3.5 percent of total loans at the close of the third quarter.”

Barnes continued, “As consumer preferences evolve to more digitally-driven experiences, we have continually enhanced our technology capabilities to deliver value, provide convenience and create efficiencies. As a result, customers are increasingly utilizing our online and mobile platforms for their banking needs. Given these accelerating digital banking trends and shifts in retail shopping behavior, we announced today the decision not to renew our existing in-store branch contracts with Stop & Shop in Connecticut and New York upon expiration in 2022. This decision enables us to further optimize our branch network, while providing the same level of personalized service across each of our channels.”

“We concluded the year with a solid financial performance in the fourth quarter,” stated David Rosato, Senior Executive Vice President and Chief Financial Officer. “Operating earnings of $147.7 million increased two percent linked-quarter and benefited from a lower provision, higher fee income and well-controlled expenses. Net interest margin of 2.84 percent was 13 basis points lower than the third quarter, primarily due to increased excess liquidity and lower yields in both the loan and securities portfolios. These headwinds were partially offset by our continued discipline managing deposit pricing as costs declined for the sixth consecutive quarter. The loan-to-deposit ratio at quarter-end was 84 percent as loans decreased nearly $1.4 billion or three percent from September 30, while deposits grew $2.5 billion or five percent. The decline in period-end loans was primarily driven by $715 million in lower retail balances, $289 million in forgiven PPP loans, and a combined $107 million reduction in our runoff portfolios. Conversely, we continued to achieve strong growth in our mortgage warehouse and LEAF businesses. Period-end deposit growth reflected a $1.8 billion increase in non-interest bearing balances, partially offset by the roll-off of higher cost time deposits.”

The Board of Directors declared a $0.18 per common share quarterly dividend payable February 15, 2021 to shareholders of record on February 1, 2021. Based on the closing stock price on January 20, 2021, the dividend yield on People's United Financial common stock is 5.0 percent.

The Company is currently in the process of performing its annual goodwill impairment assessment. Additional time is necessary to complete the analysis given the complexities brought about by the macroeconomic effects of the Covid-19 pandemic, particularly the current and projected low interest rate environment and a decline in bank stock valuations last fall, including on the date of the Company’s annual assessment (October 1st). Any potential goodwill impairment charge could be material to reported earnings, but would represent a non-cash charge and have no effect on the Company’s cash balances, liquidity or tangible equity. In addition, because goodwill and other intangible assets are not included in the calculation of regulatory capital, the Company’s well-capitalized regulatory capital ratios would not be affected by this potential non-cash expense. The analysis will be completed prior to filing the Annual Report on Form 10-K with the Securities and Exchange Commission.

People's United Bank, N.A. is a subsidiary of People's United Financial, Inc., a diversified, community-focused financial services company headquartered in the Northeast with over $63 billion in assets. Founded in 1842, People’s United Bank offers commercial and retail banking through a network of more than 400 retail locations in Connecticut, New York, Massachusetts, Vermont, New Hampshire and Maine, as well as wealth management solutions. The company also provides specialized commercial services to customers nationwide.

4Q 2020 Financial Highlights

Summary

  • Net income totaled $207.7 million, or $0.49 per common share.
    • Net income available to common shareholders totaled $204.2 million.
    • Operating earnings totaled $147.7 million, or $0.35 per common share (see page 16).
  • Net interest income totaled $382.8 million in 4Q20 compared to $391.4 million in 3Q20.
  • Net interest margin decreased 13 basis points from 3Q20 to 2.84% reflecting:
    • Excess liquidity resulting from deposits at the Federal Reserve Bank (decrease of nine basis points).
    • Lower yields on the loan and securities portfolios (decrease of nine basis points).
    • Lower rates on deposits (increase of five basis points).
  • Provision for credit losses on loans totaled $14.7 million.
    • Allowance for credit losses on loans increased $1.3 million.
    • Net loan charge-offs totaled $13.4 million.
    • Net loan charge-off ratio of 0.12% in 4Q20.
  • Non-interest income totaled $178.2 million in 4Q20 compared to $101.1 million in 3Q20.
    • Commercial banking lending fees increased $2.8 million.
    • Customer interest rate swap income increased $1.0 million.
    • Insurance revenue decreased $5.6 million.
    • Included in non-interest income in 4Q20 is a $75.9 million net gain on the sale of People’s United Insurance Agency (see page 16).
    • At December 31, 2020, assets under discretionary management totaled $9.5 billion.
  • Non-interest expense totaled $293.4 million in 4Q20 compared to $293.6 million in 3Q20.
    • Operating non-interest expense totaled $288.5 million in 4Q20 and $289.0 million in 3Q20 (see page 16).
    • Compensation and benefits expense, excluding $0.3 million of merger-related expenses in 3Q20, increased $0.4 million.
    • Occupancy and equipment expense, excluding $0.3 million and $0.9 million of merger-related expenses in 4Q20 and 3Q20, respectively, increased $2.4 million.
    • Professional and outside services expense, excluding $0.8 million and $1.4 million of merger-related expenses in 4Q20 and 3Q20, respectively, increased $1.4 million.
    • Regulatory assessment expense decreased $1.5 million.
    • Other non-interest expense includes merger-related expenses of $3.8 million in 4Q20 and $2.0 million in 3Q20.
    • The efficiency ratio was 55.5% for 4Q20 compared to 53.8% for 3Q20 and 53.7% for 4Q19 (see page 16).
  • The effective income tax rate was 17.9% for 4Q20 and 18.4% for the full-year of 2020, compared to 20.2% for the full-year of 2019.
    • The 4Q20 and full-year 2020 effective tax rates reflect a $7.1 million benefit related to the revaluation of certain state deferred tax assets.
  • Commercial Banking

  • Commercial loans totaled $33.2 billion at December 31, 2020, a $647 million decrease from September 30, 2020.
    • Paycheck Protection Plan loans totaled $2.3 billion at December 31, 2020, a $289 million decrease from September 30, 2020.
    • The mortgage warehouse portfolio increased $161 million.
    • The New York multifamily portfolio decreased $47 million.
    • The equipment financing portfolio decreased $42 million.
  • Average commercial loans totaled $33.1 billion in 4Q20, an $86 million decrease from 3Q20.
    • Paycheck Protection Plan loans averaged $2.5 billion in 4Q20, a $69 million decrease from 3Q20.
    • The average mortgage warehouse portfolio increased $455 million.
    • The average New York multifamily portfolio decreased $53 million.
    • The average equipment financing portfolio decreased $9 million.
  • Commercial deposits totaled $22.9 billion at December 31, 2020 compared to $21.6 billion at September 30, 2020.
  • The ratio of non-accrual commercial loans to total commercial loans was 0.74% at December 31, 2020 compared to 0.65% at September 30, 2020.
  • Non-performing commercial assets totaled $255.2 million at December 31, 2020 compared to $234.1 million at September 30, 2020.
  • For the commercial loan portfolio, the allowance for credit losses as a percentage of commercial loans was 0.91% at December 31, 2020 compared to 0.86% at September 30, 2020.
  • The commercial allowance for credit losses represented 123% of non-accrual commercial loans at December 31, 2020 compared to 132% at September 30, 2020.

Retail Banking

  • Residential mortgage loans totaled $8.5 billion at December 31, 2020, a $577 million decrease from September 30, 2020.
    • Average residential mortgage loans totaled $8.8 billion in 4Q20, a $587 million decrease from 3Q20.
  • Home equity loans totaled $2.0 billion at December 31, 2020, a $128 million decrease from September 30, 2020.
    • Average home equity loans totaled $2.1 billion in 4Q20, a $110 million decrease from 3Q20.
  • Retail deposits totaled $29.2 billion at December 31, 2020 compared to $28.0 billion at September 30, 2020.
  • The ratio of non-accrual residential mortgage loans to residential mortgage loans was 0.73% at December 31, 2020 compared to 0.69% at September 30, 2020.
  • The ratio of non-accrual home equity loans to home equity loans was 1.03% at December 31, 2020 compared to 1.04% at September 30, 2020.
  • For the retail loan portfolio, the allowance for credit losses as a percentage of retail loans was 1.14% at December 31, 2020 compared to 1.17% at September 30, 2020.
  • The retail allowance for credit losses represented 146% of non-accrual retail loans at December 31, 2020 compared to 155% at September 30, 2020.

Conference Call

On January 21, 2021, 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; (10) changes in regulation resulting from or relating to financial reform legislation; (11) the outcome of the ongoing goodwill impairment analysis; and (12) the COVID-19 pandemic and its effect on the economic and business environment in which we operate. 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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