April 21, 2016

People’s United Financial Reports First Quarter Net Income of $62.9 Million, or $0.21 Per Share, and Announces Dividend Increase

Click here for to see first quarter Financial Schedule

BRIDGEPORT, CT – People's United Financial, Inc. (NASDAQ: PBCT) today reported net income of $62.9 million, or $0.21 per share, for the first quarter of 2016, compared to $59.2 million, or $0.20 per share, for the first quarter of 2015, and $70.8 million, or $0.23 per share, for the fourth quarter of 2015. Included in the results for the fourth quarter of 2015 was a net after-tax gain of $6.1 million ($0.02 per share) resulting from the sale of the Company’s payroll services business.

The Company's Board of Directors voted to increase the common stock dividend to an annual rate of $0.68 per share.  Based on the closing stock price on April 20, 2016, the dividend yield on People's United Financial common stock is 4.1 percent. The quarterly dividend of $0.17 per share is payable May 15, 2016 to shareholders of record on May 1, 2016.

“Our performance this quarter reflects our continued focus on further improving profitability, while moving the company forward with a long-term view,” commented Jack Barnes, President and Chief Executive Officer. “Net income increased six percent from a year ago, driven by solid net interest income growth and effective expense management. In what is typically a seasonally slower quarter for loan growth, total period-end loans grew one percent annualized. Residential mortgage results remained strong with growth of 11 percent annualized, while commercial loan balances were slightly lower from year-end. However, on a quarterly average basis, commercial loans grew more than four percent annualized. We also experienced annualized organic deposit growth of 11 percent in the quarter, driven by our continued emphasis on franchise-wide cross-sell and deposit gathering efforts.”

Barnes continued, “We remain committed to making investments that create value for both customers and shareholders. As such, we are pleased to announce today the acquisition of Eagle Insurance Group, a full-service agency and customer-focused commercial insurance broker based in eastern Massachusetts. The acquisition deepens the Company’s presence in the region as well as expands our already strong relationships and expertise in commercial lines.”

Barnes concluded, “Finally, we are also pleased to announce our 23rd consecutive annual dividend increase, which demonstrates our commitment to deliver shareholder value through the consistent return of capital.”

“Ongoing efforts to improve operating leverage through revenue growth and proactively managing costs were evident in the quarter,” stated David Rosato, Senior Executive Vice President and Chief Financial Officer. “Revenues grew two percent from the prior year quarter due to higher net interest income, while total expenses were better than the first quarter expectations we set forth at year-end. Net interest income continued to benefit from loan growth as well as our decision to increase the securities portfolio in recent periods due to the prolonged low interest rate environment. Even with this increase, the securities portfolio as a percentage of total assets remains low relative to peers at 17 percent.”

Rosato concluded, “We maintained excellent asset quality across each portfolio, as net charge-offs as a percentage of average loans were only nine basis points for the quarter. Capital ratios were once again strong, especially given the Company’s diversified business mix and history of exceptional credit risk management.”

At March 31, 2016, People's United Financial’s common equity tier 1 capital and total risk-based capital ratios were 9.7 percent and 11.6 percent, respectively, and the tangible equity ratio stood at 7.3 percent.  For People's United Bank N.A., common equity tier 1 capital and total risk-based capital ratios were 10.9 percent and 13.0 percent, respectively, at March 31, 2016.

Net loan charge-offs as a percentage of average total loans on an annualized basis were 0.09 percent in the first quarter of 2016, consistent with the fourth quarter of 2015, and an improvement from 0.11 percent in the first quarter of 2015.  For the originated loan portfolio, non-performing loans equaled 0.61 percent of loans at March 31, 2016, compared to 0.58 percent at December 31, 2015 and 0.68 percent at March 31, 2015.

Return on average assets of 0.65 percent for the first quarter of 2016 declined from 0.75 percent in the fourth quarter of 2015 and 0.66 percent in the first quarter of 2015.  Return on average tangible stockholders' equity of 9.4 percent in the first quarter of 2016 declined from 10.7 percent in the fourth quarter of 2015, but increased from 9.2 percent in the first quarter of 2015.

People's United Financial, a diversified financial services company with over $39 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.

1Q 2016 Financial Highlights

Summary

  • Net income totaled $62.9 million, or $0.21 per share.
  • Net interest income totaled $240.1 million in 1Q16 compared to $238.8 million in 4Q15.
  • Net interest margin decreased four basis points from 4Q15 to 2.83% reflecting:
    • New loan volume at rates higher than the existing portfolio (increase of three basis points).
    • Increase in average investment, deposit and borrowing balances (decrease of five basis points).
    • One less calendar day in 1Q16 (decrease of two basis points).
  • Provision for loan losses totaled $10.5 million.
    • Net loan charge-offs totaled $6.0 million, of which $1.9 million related to loans with previously-established specific reserves.
    • Net loan charge-off ratio of 0.09% in 1Q16.
    • Reflects a $6.3 million increase in the originated allowance for loan losses.
  • Non-interest income was $82.3 million in 1Q16 compared to $93.3 million in 4Q15.
    • Gain on sale of the payroll services business totaled $9.2 million in 4Q15.
    • Insurance revenue increased $1.8 million.
    • Bank service charges decreased $1.2 million.
    • Commercial banking lending fees decreased $1.1 million.
    • Assets under administration and those under full discretionary management, neither of which are reported as assets of People's United Financial, totaled $10.4 billion and $5.6 billion, respectively, at March 31, 2016, compared to $9.9 billion and $5.6 billion, respectively, at December 31, 2015.
  • Non-interest expense totaled $217.3 million in 1Q16 compared to $217.0 million in 4Q15.
    • Compensation and benefits increased $2.1 million, primarily reflecting seasonally-higher payroll-related costs in 1Q16.
    • Regulatory assessments expense increased $0.9 million.
    • Professional and outside services expense decreased $0.5 million.
    • Other non-interest expense includes a $2.5 million charge for writedowns of banking house assets in 4Q15.
    • The efficiency ratio was 62.7% in 1Q16 compared to 61.0% in 4Q15 (see page 14).
  • The effective income tax rate was 33.5% for 1Q16 and 33.4% for the full-year of 2015.

Commercial Banking

  • Commercial loans decreased $19 million from December 31, 2015.
    • The mortgage warehouse portfolio increased $2 million from December 31, 2015.
  • Average commercial loans totaled $20.4 billion in 1Q16, an increase of $216 million,
    or 4% annualized, from 4Q15.
  • Commercial deposits totaled $9.4 billion at March 31, 2016 compared to $8.9 billion at
    December 31, 2015.
  • The ratio of originated non-performing commercial loans to originated commercial loans was 0.59% at March 31, 2016 compared to 0.51% at December 31, 2015.
  • Non-performing commercial assets, excluding acquired non-performing loans, totaled
    $131.2 million at March 31, 2016 compared to $117.6 million at December 31, 2015.
  • For the originated commercial portfolio, the allowance for loan losses as a percentage of loans was 0.92% at March 31, 2016 compared to 0.90% at December 31, 2015.
  • The commercial originated allowance for loan losses represented 156% of originated
    non-performing commercial loans at March 31, 2016 compared to 177% at
    December 31, 2015.

Retail Banking

  • Residential mortgage loans increased $144 million, or 11% annualized, from
    December 31, 2015.
    • Average residential mortgage loans totaled $5.5 billion in 1Q16, an increase of $101 million, or 7% annualized, from 4Q15.
  • Home equity loans decreased $24 million from December 31, 2015.
  • Average home equity loans totaled $2.1 billion in 1Q16, unchanged from 4Q15.
  • Retail deposits (excluding brokered deposits) totaled $17.1 billion at March 31, 2016 compared to $16.9 billion at December 31, 2015.
  • The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 0.57% at March 31, 2016 compared to 0.71% at December 31, 2015.
  • The ratio of originated non-performing home equity loans to originated home equity loans was 0.90% at March 31, 2016 compared to 0.92% at December 31, 2015.

Conference Call
On April 21, 2016, at 8 a.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; and (9) 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.