People United Financial : Reports Third Quarter Net Income of $144.6 Million, or $0.34 per Common Share

View Q3 2020 Financial Schedule

• Pre-provision net revenue of $198.9 million, increased 4 percent linked-quarter and 15 percent from a year ago.
• Efficiency ratio of 53.8 percent, improved 300 basis points year-over-year, reflecting continued thoughtful expense management and realization of projected cost savings from acquisitions.
• Provision for credit losses on loans of $27.1 million, decreased $53.7 million linked-quarter, and further strengthens the allowance for credit losses to total loans by 3 basis points to 0.94 percent, or 0.99 percent excluding PPP loans.
• Sale of People's United Insurance Agency to AssuredPartners announced; expected to close in the fourth quarter.

BRIDGEPORT, CT., October 22, 2020 - People's United Financial, Inc. (NASDAQ: PBCT) today reported results for the third quarter 2020. These results along with comparison periods are summarized below:

'We are pleased with the Company's third quarter financial and operating performance, which is reflective of strong execution throughout the franchise,' said Jack Barnes, Chairman and Chief Executive Officer. 'Our employees have successfully adapted to the pandemic-driven environment and its many challenges. This has enabled them to effectively meet customer needs, introduce AlwaysChecking our new free digital identity protection service, and advance strategic initiatives. Specifically, we remain focused on investing in digital capabilities and we strengthened this commitment with the recent creation of the Business Transformation Office. This specialized unit will lead our efforts related to digitization, process automation, and Fintech relationships. We are excited about the enhancements and efficiencies this team will deliver moving forward.'

Barnes continued, 'The total impact of the pandemic on the long-term economy is unknown. However, improvements in economic activity during the quarter provide us a level of cautious optimism as we look ahead. We are particularly pleased with the significant reduction in customers needing relief as total loan deferrals were approximately $1.6 billion at September 30, down from more than $7.1 billion at the end of June. Our relationship managers have continued to maintain a high level of contact to help borrowers navigate their specific situations. We remain confident the strength of our long-held, conservative underwriting philosophy and approach to supporting customers will continue to serve the Company well.'

'Third quarter operating earnings of $144.7 million, increased 43 percent linked-quarter and benefited from higher fee income, well-maintained expenses, reduced provision, and a lower effective tax rate,' stated David Rosato, Senior Executive Vice President and Chief Financial Officer. 'We remain disciplined managing deposit costs, which were down for the fifth consecutive quarter. Our net interest margin of 3.00%, excluding the unfavorable impact of PPP loans, was approximately five basis points lower from the second quarter, primarily due to downward pressure on loan yields. Commercial period-end loans grew $422 million or one percent from June 30 as a result of record mortgage warehouse balances and solid growth by LEAF. Conversely, retail period-end loans decreased $643 million or five percent mostly attributable to our planned reduction of residential mortgages. Period-end deposits were down $298 million or one percent linked-quarter as strong commercial growth was more than offset by runoff of higher cost wholesale funding and a decline in municipal balances.'

The Board of Directors declared a $0.18 per common share quarterly dividend payable November 15, 2020 to shareholders of record on November 2, 2020. Based on the closing stock price on October 21, 2020, the dividend yield on People's United Financial common stock is 6.8 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 approximately $61 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.

3Q 2020 Financial Highlights

Summary

• Net income totaled $144.6 million, or $0.34 per common share.
  • Net income available to common shareholders totaled $141.1 million.
  • Operating earnings totaled $144.7 million, or $0.34 per common share (see page 16 of the Financial Schedule).
• Net interest income totaled $391.4 million in 3Q20 compared to $405.6 million in 2Q20.
• Net interest margin decreased eight basis points from 2Q20 to 2.97% reflecting:
  • Lower yields on the loan portfolio (decrease of 15 basis points).
  • Lower rates on deposits (increase of four basis points).
  • Lower rates on borrowings (increase of one basis point).
  • One additional calendar day in 3Q20 (increase of two basis points).
• Provision for credit losses on loans totaled $27.1 million.
  • Allowance for credit losses on loans increased $9.8 million.
  • Net loan charge-offs totaled $17.3 million.
  • Net loan charge-off ratio of 0.15% in 3Q20.
• Non-interest income totaled $101.1 million in 3Q20 compared to $89.6 million in 2Q20.
  • Bank service charges increased $4.2 million.
  • Commercial banking lending fees increased $2.1 million.
  • Investment management fees increased $1.4 million.
  • Customer interest rate swap income decreased $1.5 million.
  • At September 30, 2020, assets under discretionary management totaled $8.9 billion.
• Non-interest expense totaled $293.6 million in 3Q20 compared to $304.0 million in 2Q20.
  • Operating non-interest expense totaled $289.0 million in 3Q20 and $285.5 million in 2Q20 (see page 16 of the Financial Schedule).
  • Compensation and benefits expense, excluding $0.3 million and $1.0 million of merger-related expenses in 3Q20 and 2Q20, respectively, decreased $0.6 million.
  • Occupancy and equipment expense, excluding $0.9 million and $0.2 million of merger-related expenses in 3Q20 and 2Q20, respectively, increased $0.4 million.
  • Professional and outside services expense, excluding $1.4 million and $3.6 million of merger-related expenses in 3Q20 and 2Q20, respectively, increased $0.6 million.
  • Other non-interest expense includes merger-related expenses of $2.0 million in 3Q20 and $13.7 million in 2Q20.
  • The efficiency ratio was 53.8% for 3Q20 compared to 53.5% for 2Q20 and 56.8% for 3Q19 (see page 16 of the Financial Schedule).
• The effective income tax rate was 16.0% for 3Q20 and 18.7% for the first nine months of 2020, compared to 20.2% for the full-year of 2019.

• Commercial Banking

• Commercial loans totaled $33.9 billion at September 30, 2020, a $422 million increase from June 30, 2020.
  • Paycheck Protection Plan loans totaled $2.6 billion at September 30, 2020.
  • The mortgage warehouse portfolio increased $768 million.
  • The equipment financing portfolio increased $7 million.
  • The New York multifamily portfolio decreased $62 million.
• Average commercial loans totaled $33.1 billion in 3Q20, a $225 million increase from 2Q20.
  • Paycheck Protection Plan loans averaged $2.5 billion in 3Q20.
  • The average mortgage warehouse portfolio increased $344 million.
  • The average equipment financing portfolio decreased $57 million.
  • The average New York multifamily portfolio decreased $62 million.
• Commercial deposits totaled $21.6 billion at September 30, 2020 compared to $21.0 billion at June 30, 2020.
• The ratio of non-accrual commercial loans to total commercial loans was 0.65% at September 30, 2020 compared to 0.63% at June 30, 2020.
• Non-performing commercial assets totaled $234.1 million at September 30, 2020 compared to $224.4 million at June 30, 2020.
• For the commercial loan portfolio, the allowance for credit losses as a percentage of commercial loans was 0.86% at September 30, 2020 compared to 0.83% at June 30, 2020.
• The commercial allowance for credit losses represented 132% of non-accrual commercial loans at September 30, 2020 compared to 131% at June 30, 2020.

Retail Banking

• Residential mortgage loans totaled $9.1 billion at September 30, 2020, a $528 million decrease from June 30, 2020.
  • Average residential mortgage loans totaled $9.4 billion in 3Q20, a $413 million decrease from 2Q20.
• Home equity loans totaled $2.1 billion at September 30, 2020, a $103 million decrease from June 30, 2020.
  • Average home equity loans totaled $2.2 billion in 3Q20, a $101 million decrease from 2Q20.
• Retail deposits totaled $28.0 billion at September 30, 2020 compared to $28.9 billion at June 30, 2020.
• The ratio of non-accrual residential mortgage loans to residential mortgage loans was 0.69% at September 30, 2020 compared to 0.65% at June 30, 2020.
• The ratio of non-accrual home equity loans to home equity loans was 1.04% at September 30, 2020 compared to 1.01% at June 30, 2020.
• For the retail loan portfolio, the allowance for credit losses as a percentage of retail loans was 1.17% at September 30, 2020 compared to 1.14% at June 30, 2020.
• The retail allowance for credit losses represented 155% of non-accrual retail loans at September 30, 2020 compared to 160% at June 30, 2020.

Conference Call

On October 22, 2020, 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; and (11) 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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