People United Financial : Reports Second Quarter Net Income of $110.2 Million, or $0.31 per Common Share

People's United Financial Reports Second Quarter Net Income of $110.2 Million, or $0.31 per Common Share

Operating Earnings of $0.32 per Common Share

Click here to see the second quarter Financial Schedule

• Announced the acquisition of First Connecticut Bancorp and acquired Vend Lease Company in the quarter.
• Return on average assets of 1.00 percent and return on average tangible common equity of 13.9 percent.
• Efficiency ratio of 58.4 percent, an improvement of 100 basis points linked quarter reflecting continued revenue growth and well-controlled expenses.
• Net interest margin of 3.10 percent, expanded five basis points linked quarter and benefited from an increase in loan yields that continue to outpace the rise in deposit costs.
• Board of Directors declared a common stock dividend for the 100^th consecutive quarter.

BRIDGEPORT, CT., July 19, 2018 - People's United Financial, Inc. (NASDAQ: PBCT) today reported results for the second quarter 2018. Results for the second quarter and comparison periods are summarized below:

'Our commitment to enhancing profitability was further demonstrated by reporting another quarter of record net income,' said Jack Barnes, Chairman and Chief Executive Officer. 'These results reflect the continued benefits of investments in revenue producing initiatives, sustained excellent asset quality and recent successful acquisitions. Consistent with our strategy of balancing organic growth with thoughtful M&A, we announced today the all-cash acquisition of Vend Lease, a Baltimore-based equipment finance company established in 1979 that operates primarily in the hospitality industry. Vend Lease shares our client-centric approach, has a highly specialized skill set and is a recognized brand in the markets it serves. The company will become a division of LEAF Commercial Capital, enabling it to leverage LEAF's leading automation capabilities to further accelerate growth. We are excited about the transaction as it deepens our network of specialty finance experts and bolsters our nationwide businesses.'

'Higher revenues and well-controlled expenses generated a second quarter efficiency ratio of 58.4 percent, an improvement of 100 basis points linked quarter,' said David Rosato, Senior Executive Vice President and Chief Financial Officer. 'Revenues of $396 million grew three percent due to increases in both net interest income and non-interest income. Net interest margin of 3.10 percent expanded five basis points and benefited from new business yields exceeding the total portfolio yield for the sixth consecutive quarter and the upward repricing of floating rate loans. Operating expenses of $246 million, which includes $4 million in costs related to ten branch closures, were up only one percent. Loan growth from the end of the first quarter was driven by solid results in middle market C&I, equipment financing and mortgage warehouse lending. These increases were partially offset by the ongoing run-off of the transactional portion of the New York multi-family portfolio. Deposit balances were lower as a result of seasonal declines in our municipal and retail businesses. However, we expect deposits to rebound in the third and fourth quarters in line with historical seasonal trends.'

The Company's Board of Directors declared a $0.1750 per common share quarterly dividend payable August 15, 2018 to shareholders of record on August 1, 2018. Based on the closing stock price on July 18, 2018, the dividend yield on People's United Financial common stock is 3.8 percent.

People's United Financial, Inc., a diversified financial services company with approximately $45 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.

2Q 2018 Financial Highlights

Summary

• Net income totaled $110.2 million, or $0.31 per common share.
  • Net income available to common shareholders totaled $106.7 million.
• Operating earnings totaled $109.0 million, or $0.32 per common share (see page 16 of the Financial Schedule).
• Net interest income totaled $301.2 million in 2Q18 compared to $295.8 million in 1Q18.
• Net interest margin increased five basis points from 1Q18 to 3.10% reflecting:
  • Higher yields on the loan portfolio (increase of 13 basis points).
  • Higher yields on the securities portfolio (increase of one basis point).
  • Higher rates on deposits and borrowings (decrease of 11 basis points).
  • One additional calendar day in 2Q18 (increase of two basis points).
• Provision for loan losses totaled $6.5 million.
  • Net loan charge-offs totaled $5.0 million.
  • Net loan charge-off ratio of 0.06% in 2Q18.
• Non-interest income totaled $94.9 million in 2Q18 compared to $90.4 million in 1Q18.
  • Customer interest rate swap income increased $2.5 million.
  • Bank service charges increased $0.5 million.
  • Other non-interest income in 2Q18 includes $2.0 million in gains related to certain legacy investments.
  • Insurance revenue decreased $1.5 million, reflecting the seasonality of commercial
    insurance renewals.
  • Commercial banking lending fees decreased $1.0 million.
  • At June 30, 2018, assets under administration, which are not reported as assets of People's United Financial, totaled $23.6 billion, of which $9.0 billion are under discretionary management, compared to $23.6 billion and $9.0 billion, respectively, at March 31, 2018.
• Non-interest expense totaled $248.6 million in 2Q18 compared to $243.5 million in 1Q18.
  • Operating non-interest expense totaled $245.7 million in 2Q18 (see page 16 of the Financial Schedule).
  • Compensation and benefits expense decreased $5.7 million, primarily reflecting lower payroll and benefit-related costs in 2Q18.
  • Professional and outside services expense, excluding $2.1 million of merger-related expenses in 2Q18, decreased $0.1 million.
  • Regulatory assessment expense decreased $0.7 million.
  • Other non-interest expense in 2Q18 includes a $4.1 million charge relating to the closing of
    10 branches and $0.8 million of merger-related expenses.
  • The efficiency ratio was 58.4% for 2Q18 compared to 59.4% for 1Q18 and 58.4% for 2Q17
    (see page 16 of the Financial Schedule).
• The effective income tax rate was 21.8% for 2Q18 and 21.6% for the first six months of 2018, compared to 27.8% for the full-year of 2017.
  • The lower rates in 2018 primarily reflect the benefit from a reduction in the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018.

Commercial Banking

• Commercial loans totaled $23.7 billion at June 30, 2018, an increase of $416 million from March 31, 2018.
  • The mortgage warehouse portfolio increased $95 million from March 31, 2018.
  • The New York multi-family portfolio decreased $79 million from March 31, 2018.
  • Equipment financing includes $68 million in loans and leases acquired in connection with the
    Vend Lease acquisition.
• Average commercial loans totaled $23.3 billion in 2Q18, an increase of $61 million from 1Q18.
  • The average mortgage warehouse portfolio increased $150 million from 1Q18.
  • The average New York multi-family portfolio decreased $154 million from 1Q18.
• Commercial deposits totaled $11.4 billion at June 30, 2018 compared to $12.0 billion at March 31, 2018.
• The ratio of originated non-performing commercial loans to originated commercial loans was 0.55% at June 30, 2018 compared to 0.49% at March 31, 2018.
• Non-performing commercial assets, excluding acquired non-performing loans, totaled $132.6 million at June 30, 2018 compared to $115.7 million at March 31, 2018.
• For the originated commercial loan portfolio, the allowance for loan losses as a percentage of loans was 0.93% at June 30, 2018 compared to 0.94% at March 31, 2018.
• The originated commercial allowance for loan losses represented 169% of originated non-performing commercial loans at June 30, 2018 compared to 194% at March 31, 2018.

Retail Banking

• Residential mortgage loans totaled $6.9 billion at June 30, 2018, an increase of $32 million from
  March 31, 2018.
  • Average residential mortgage loans totaled $6.8 billion in 2Q18, an increase of $17 million from 1Q18.
• Home equity loans totaled $1.9 billion at March 31, 2018, a decrease of $41 million from March 31, 2018.
  • Average home equity loans totaled $1.9 billion in 2Q18, a decrease of $56 million from 1Q18.
• Retail deposits totaled $21.1 billion at June 30, 2018 compared to $20.9 billion at March 31, 2018.
• The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 0.50% at June 30, 2018 compared to 0.54% at March 31, 2018.
• The ratio of originated non-performing home equity loans to originated home equity loans was 0.81% at June 30, 2018 compared to 0.85% at March 31, 2018.

Conference Call

On July 19, 2018, 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.

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