PBCT Peoples United Financial Inc

BRIDGEPORT, Conn., Oct. 17, 2019 People's United Financial, Inc. (NASDAQ: PBCT) today reported results for the third quarter 2019. These results along with comparison periods are summarized below:

"Our performance in the third quarter further demonstrates our success in building a premier banking franchise for the long-term," said Jack Barnes, Chairman and Chief Executive Officer. "Strategic investments in talent and digital enhancements, along with thoughtful acquisitions, have broadened the Company's capabilities and continue to strengthen its earnings power. As such, we are pleased to report operating earnings of $135.5 million, an increase of 19 percent from a year ago and an operating return on average tangible common equity of 14.4 percent. The acquisition of United Financial is on track to close in the fourth quarter and we remain confident in achieving the transaction's attractive financial returns. The addition of United bolsters our already significant share of retail households and commercial clients across central Connecticut and western Massachusetts. We are excited for their long-tenured, well-established customer base to join People's United and benefit from our broader array of products, services and technology offerings."

"Third quarter financial results were highlighted by a stable net interest margin, continued strong fee income, well-maintained expenses and a lower effective tax rate," stated David Rosato, Senior Executive Vice President and Chief Financial Offer. "Net interest margin of 3.12 percent was unchanged linked-quarter despite declining interest rates. The margin benefited from our proactive management of deposit costs and new business yields remaining higher than the total loan portfolio yield. Commercial period-end loans grew $505 million or two percent from June 30^th primarily driven by mortgage warehouse lending, equipment finance and Boston commercial real estate. Conversely, retail period-end loans declined $281 million or two percent mostly due to our planned reduction of residential mortgages as we continue to remix the balance sheet with a focus on higher yielding portfolios. Period-end deposits declined $893 million or two percent partially due to second quarter ending balances including a $500 million short-term commercial deposit, which was withdrawn in July as expected. On an average basis, deposits were down one percent primarily driven by a reduction in savings and time balances, partially offset by an increase in non-interest bearing deposits."

The Board of Directors declared a $0.1775 per common share quarterly dividend payable November 15, 2019 to shareholders of record on October 31, 2019. Based on the closing stock price on October 16, 2019, the dividend yield on People's United Financial common stock is 4.5 percent.

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 $52 billion in assets. Founded in 1842, People's United Bank offers commercial and retail banking through a network of over 400 retail locations in Connecticut, New York, Massachusetts, Vermont, New Hampshire and Maine, as well as wealth management and insurance solutions. The company also provides specialized commercial services to customers nationwide.

3Q 2019 Financial Highlights

Summary

• Net income totaled $135.1 million, or $0.33 per common share.
• • Net income available to common shareholders totaled $131.6 million.
  • Operating earnings totaled $135.5 million, or $0.34 per common share (see Non-GAAP Financial Measures and Reconciliation to GAAP).
• Net interest income totaled $348.7 million in 3Q19 compared to $348.1 million in 2Q19.
• Net interest margin unchanged from 2Q19 at 3.12% reflecting:
• • Lower rates on deposits (increase of five basis points).
  • One additional calendar day in 3Q19 (increase of two basis points).
  • Lower yields on the loan and securities portfolios (decrease of five basis points).
  • Higher rates on borrowings (decrease of two basis points).
• Provision for loan losses totaled $7.8 million.
• • Net loan charge-offs totaled $5.8 million.
  • Net loan charge-off ratio of 0.06% in 3Q19.
• Non-interest income totaled $106.0 million in 3Q19 compared to $106.3 million in 2Q19.
• • Commercial banking lending fees increased $1.6 million.
  • Insurance revenue increased $1.6 million.
  • Bank service charges increased $0.6 million.
  • Customer interest rate swap income decreased $2.0 million.
  • At September 30, 2019, assets under discretionary management totaled $9.2 billion.
• Non-interest expense totaled $281.4 million in 3Q19 compared to $278.4 million in 2Q19.
• • Operating non-interest expense totaled $276.4 million in 3Q19 (see Non-GAAP Financial Measures and Reconciliation to GAAP).
  • Compensation and benefits expense, excluding $0.8 million and $1.5 million of merger-related expenses in 3Q19 and 2Q19, respectively, decreased $2.5 million, primarily reflecting lower payroll costs in 3Q19.
  • Regulatory assessment expense decreased $1.2 million.
  • Professional and outside services expense, excluding $3.7 million and $4.7 million of merger-related expenses in 3Q19 and 2Q19, respectively, decreased $0.2 million.
  • Other non-interest expense increased $8.0 million in 3Q19 compared to 2Q19, reflecting costs associated with certain legal and other one-time operational matters.
  • The efficiency ratio was 56.8% for 3Q19 compared to 55.8% for 2Q19 and 56.7% for 3Q18 (see Non-GAAP Financial Measures and Reconciliation to GAAP).
• The effective income tax rate was 18.4% for 3Q19 and 20.0% for the first nine months of 2019, compared to 18.8% for the full-year of 2018.
• • The rate in 2018 reflects a $9.2 million benefit recognized in connection with tax reform.

Commercial Banking

• Commercial loans totaled $27.5 billion at September 30, 2019, an increase of $505 million from June 30, 2019.
• • The mortgage warehouse portfolio increased $429 million.
  • The equipment financing portfolio increased $125 million.
  • The New York multifamily portfolio decreased $89 million.
• Average commercial loans totaled $26.9 billion in 3Q19, an increase of $422 million from 2Q19.
• • The average mortgage warehouse portfolio increased $270 million.
  • The average equipment financing portfolio increased $130 million.
  • The average New York multifamily portfolio decreased $73 million.
• Commercial deposits totaled $14.9 billion at September 30, 2019 compared to $15.1 billion at June 30, 2019.
• • A $500 million short-term deposit was withdrawn in July.
• The ratio of originated non-performing commercial loans to originated commercial loans was 0.44% at September 30, 2019 compared to 0.48% at June 30, 2019.
• Non-performing commercial assets, excluding acquired non-performing loans, totaled $118.3 million at September 30, 2019 compared to $117.6 million at June 30, 2019.
• For the originated commercial loan portfolio, the allowance for loan losses as a percentage of loans was 0.89% at September 30, 2019 compared to 0.91% at June 30, 2019.
• The originated commercial allowance for loan losses represented 205% of originated non-performing commercial loans at September 30, 2019 compared to 190% at June 30, 2019.

Retail Banking

• Residential mortgage loans totaled $9.3 billion at September 30, 2019, a decrease of $224 million from June 30, 2019.
• • Average residential mortgage loans totaled $9.4 billion in 3Q19, a decrease of $280 million from 2Q19.
• Home equity loans totaled $2.0 billion at September 30, 2019, a decrease of $53 million from June 30, 2019.
• • Average home equity loans totaled $2.0 billion in 3Q19, a decrease of $51 million from 2Q19.
• Retail deposits totaled $23.7 billion at September 30, 2019 compared to $24.4 billion at June 30, 2019.
• The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 0.55% at September 30, 2019 compared to 0.57% at June 30, 2019.
• The ratio of originated non-performing home equity loans to originated home equity loans was 0.85% at September 30, 2019 compared to 0.86% at June 30, 2019.
• For the originated retail loan portfolio, the allowance for loan losses as a percentage of loans was 0.35% at September 30, 2019 compared to 0.34% at June 30, 2019.
• The originated retail allowance for loan losses represented 57% of originated non-performing retail loans at September 30, 2019 compared to 55% at June 30, 2019.

Conference Call

On October 17, 2019, 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.