October 16, 2014

PEOPLE'S UNITED FINANCIAL REPORTS THIRD QUARTER NET INCOME AND OPERATING EARNINGS OF $0.21 PER SHARE

Click here to see the third quarter Financial Schedule.

BRIDGEPORT, CT – People's United Financial, Inc. (NASDAQ: PBCT) today reported net income of $61.6 million, or $0.21 per share, for the third quarter of 2014, compared to $58.5 million, or $0.19 per share, for the third quarter of 2013, and $72.3 million, or $0.24 per share, for the second quarter of 2014. Included in the second quarter's results is a net after-tax gain of $13.4 million ($0.04 per share) resulting from the formation of a merchant services joint venture. Operating earnings were $63.0 million, or $0.21 per share, for the third quarter of 2014, compared to $60.8 million, or $0.20 per share, for the third quarter of 2013, and $59.9 million, or $0.20 per share, for the second quarter of 2014.

The Company's Board of Directors declared a $0.165 per share quarterly dividend, payable November 15, 2014 to shareholders of record on November 1, 2014. Based on the closing stock price on October 15, 2014, the dividend yield on People's United Financial common stock is 4.7 percent.

"Strong business fundamentals, ongoing ability to leverage our brand in attractive markets, and prospects for growth continue to be the foundations of our operating strength," said Jack Barnes, President and Chief Executive Officer. "This quarter's performance reflects annualized loan growth of eight percent and organic deposit growth of five percent, driven by ongoing strategic investments in people, products, services and our strong commitment to fostering customer relationships across the franchise. At the same time we continue to maintain superior asset quality metrics. The increase in net interest income over the past several quarters primarily reflects growth in the loan portfolio despite a challenging rate environment and declining income on acquired loans."

"Results this quarter reflect ongoing revenue growth and effective expense control," stated Kirk W. Walters, Senior Executive Vice President and Chief Financial Officer. "The net interest margin continues to be impacted by strong loan originations at rates lower than our existing portfolio. We certainly are pleased with our ability to manage operating expenses over the past several quarters, considering the number of strategic investments we continue to make in people and services, and in the face of increasing regulatory compliance costs."

Net loan charge-offs as a percentage of average total loans on an annualized basis were 0.13 percent in the third quarter of 2014, compared to 0.10 percent in the second quarter of 2014 and 0.17 percent in the third quarter of 2013. For the originated loan portfolio, non-performing loans equaled 0.79 percent of loans at September 30, 2014, compared to 0.82 percent at June 30, 2014 and 1.10 percent at September 30, 2013.

Operating return on average assets was 0.74 percent for the third quarter of 2014, compared to 0.72 percent for the second quarter of 2014 and 0.78 percent for the third quarter of 2013. Operating return on average tangible stockholders' equity was 9.9 percent for the third quarter of 2014, compared to 9.6 percent for the second quarter of 2014 and 9.8 percent for the third quarter of 2013.

At September 30, 2014, People's United Financial's tier 1 common and total risk-based capital ratios were 9.9 percent and 12.3 percent, respectively, and the tangible equity ratio stood at 7.8 percent. People's United Bank's tier 1 and total risk-based capital ratios were 10.7 percent and 13.3 percent, respectively, at September 30, 2014.

People's United Financial, a diversified financial services company with $35 billion in assets, provides commercial and retail banking, as well as wealth management services through a network of 407 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. Assets managed and administered, which are not reported as assets of People's United Financial, totaled $16.2 billion at both September 30, 2014 and June 30, 2014.

3Q 2014 Financial Highlights

Summary

  • Net income was $61.6 million, or $0.21 per share.
    • Operating earnings were $63.0 million, or $0.21 per share.
  • Net interest income on a fully taxable equivalent basis increased $0.5 million from 2Q14 and totaled $233.3 million in 3Q14.
    • Interest income on acquired loans decreased $2.8 million to $18.9 million.
    • 3Q14 includes a full quarter of interest expense on subordinated notes issued in June 2014 ($1.4 million).
  • Net interest margin decreased eight basis points from 2Q14 to 3.05%.
    • The effect of one more calendar day in 3Q14 benefitted the margin by two basis points.
    • The effect of new loan volume at rates lower than the existing portfolio reduced the margin by six basis points.
    • The impact from a full quarter of subordinated notes interest expense reduced the margin by two basis points.
  • Provision for loan losses totaled $12.4 million.
    • Net loan charge-offs totaled $8.1 million, of which $3.9 million related to loans with previously-established specific reserves (includes one commercial real estate charge-off totaling $3.3 million).
    • Net loan charge-off ratio of 0.13% in 3Q14 (0.08% excluding the commercial real estate charge-off).
    • Reflects a $6.2 million increase in the originated allowance for loan losses due to loan growth.
    • Includes a provision for loan losses on acquired loans of $2.0 million.
  • Non-interest income was $84.0 million in 3Q14 compared to $79.5 million in 2Q14 excluding the gain on the merchant services joint venture ($20.6 million in 2Q14).
    • Insurance revenue increased $2.0 million, primarily reflecting the seasonal nature of insurance renewals.
    • Commercial banking lending fees increased $1.2 million.
    • Net gains on sales of residential mortgage loans increased $1.1 million.
    • Bank service charges increased $0.5 million.
    • Assets under administration and those under full discretionary management, neither of which are reported as assets of People's United Financial, totaled $10.7 billion and $5.5 billion, respectively, at both September 30, 2014 and at June 30, 2014.
  • Non-interest expense totaled $208.8 million in 3Q14 compared to $208.3 million in 2Q14.
    • Operating non-interest expense was $206.7 million in both 3Q14 and 2Q14.
    • Compensation and benefits expense decreased $1.2 million, primarily reflecting lower severance, payroll and benefit-related costs in 3Q14.
    • The efficiency ratio in 3Q14 improved to 61.4% from 61.8% in 2Q14, reflecting an increase in adjusted total revenues.
    • Non-operating expenses totaled $2.1 million in 3Q14 compared to $1.6 million in 2Q14.
  • Effective income tax rate was 32.5% for 3Q14 and 34.0% for the first nine months of 2014, compared to 33.1% for the full-year of 2013 (31.2% for 3Q13).

Commercial Banking

  • Commercial banking loans increased $284 million, or 6% annualized, from June 30, 2014.
  • Average commercial banking loans totaled $18.8 billion in 3Q14, an increase of $636 million, or 14% annualized, from 2Q14.
  • The ratio of originated non-performing commercial banking loans to originated commercial banking loans was 0.76% at September 30, 2014 compared to 0.77% at June 30, 2014.
    • Non-performing commercial banking assets, excluding acquired non-performing loans, totaled $154.0 million at September 30, 2014 compared to $154.9 million at June 30, 2014.
  • Net loan charge-offs totaled $5.9 million, or 0.13% annualized, of average commercial banking loans in 3Q14, compared to $4.9 million, or 0.11% annualized, in 2Q14.
  • For the originated commercial banking portfolio, the allowance for loan losses as a percentage of loans was 0.92% at both September 30, 2014 and June 30, 2014.
  • The commercial banking originated allowance for loan losses represented 120% of originated non-performing commercial banking loans at both September 30, 2014 and June 30, 2014.
  • Commercial deposits totaled $7.0 billion at September 30, 2014 compared to $6.6 billion at
    June 30, 2014.

Retail Banking

  • Residential mortgage loans increased $188 million, or 17% annualized, from June 30, 2014.
    • Average residential mortgage loans totaled $4.6 billion in 3Q14, an increase of $94 million, or 8% annualized, from 2Q14.
    • The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 0.93% at September 30, 2014 compared to 1.04% at June 30, 2014.
    • Net loan charge-offs totaled $0.7 million, or 0.06% annualized, of average residential mortgage loans in 3Q14, compared to $0.5 million, or 0.05% annualized, in 2Q14.
  • Home equity loans increased $31 million, or 6% annualized, from June 30, 2014.
    • Average home equity loans totaled $2.1 billion in 3Q14, unchanged from 2Q14.
    • The ratio of originated non-performing home equity loans to originated home equity loans was 0.80% at September 30, 2014 compared to 0.88% at June 30, 2014.
    • Net loan charge-offs totaled $1.2 million, or 0.24% annualized, of average home equity loans in 3Q14, compared to $0.8 million, or 0.14% annualized, in 2Q14.
  • Retail deposits (excluding brokered deposits) totaled $16.0 billion at September 30, 2014 compared to $16.2 billion at June 30, 2014.

Conference Call

On October 16, 2014, 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; 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.

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