People's United reports 2Q2021 net income of $170.8 million, to be acquired by M&T

• Operating Earnings of $0.41 per Common Share
• Shareholder approval received for the announced merger with M&T Bank Corporation.
• Return on average assets of 1.07 percent, or 1.10 percent on an operating basis, and return on average tangible common equity of 14.7 percent, or 15.4 percent on an operating basis.
• Asset quality remained excellent as evidenced by net loan charge-offs to average total loans of 10 basis points, and provision for credit losses on loans resulting in a net benefit of $40.7 million.
• Non-interest income increased 5 percent linked-quarter and 10 percent year-over-year driven by broad-based growth.

Vermont Business Magazine People's United Financial, Inc. (NASDAQ: PBCT) today reported results for the second quarter of 2021. These results along with comparison periods are summarized below.

"We are pleased with the overwhelming shareholder approval received during the quarter for the announced merger with M&T," said Jack Barnes, Chairman and Chief Executive Officer. "The vote reflects investor confidence in the value of merging two market-leading financial institutions, and in the ability of the combined company to better serve clients across some of the most populated and attractive banking markets in the nation. While preparations for the transaction's close and integration move forward, our most important objective remains servicing the needs of customers, communities, and colleagues. Looking to the future, we are excited about executing on the growth opportunities ahead and building upon the extraordinary legacy of People's United."

M&T from Buffalo and Bridgeport, CT-based People's each received the necessary shareholder approvals for the consummation of the merger of People's United into M&T in May. Based on stock prices when the deal was announced in February 2021, the all-stock acquisition is valued at approximately $7.6 billion. People's acquired Burlington-based Chittenden Corp in 2008 for $1.8 billion. People's United Bank has branches across Vermont.

The merger is expected to close in the fourth quarter of 2021, subject to the satisfaction of customary closing conditions, including receipt of regulatory approvals.

The combined company will create the 11th largest bank in the United States, based on assets of approximately $200 billion, spanning 12 states from Maine to Virginia and the District of Columbia and with a network of more than 1,100 branches and over 2,000 ATMs.

Also today, People's United announced that its Board of Directors declared a quarterly cash dividend of $0.3515625 per share on the Company's Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock. The dividend is payable on September 15, 2021 to shareholders of record at the close of business on September 1, 2021.

M&T to acquire People's United Bank in $7.6 billion deal

"We are pleased with the overwhelming shareholder approval received during the quarter for the announced merger with M&T," said Jack Barnes, Chairman and Chief Executive Officer. "The vote reflects investor confidence in the value of merging two market-leading financial institutions, and in the ability of the combined company to better serve clients across some of the most populated and attractive banking markets in the nation. While preparations for the transaction's close and integration move forward, our most important objective remains servicing the needs of customers, communities, and colleagues. Looking to the future, we are excited about executing on the growth opportunities ahead and building upon the extraordinary legacy of People's United."

"We delivered another quarter of strong financial performance," stated David Rosato, Senior Executive Vice President and Chief Financial Officer. "Record quarterly operating income of $176.1 million, increased 12.5 percent linked-quarter and generated an operating return on average tangible equity of 15.4 percent. These results, which further highlight the strengths of the franchise, included higher fee revenues, well-controlled expenses, and a negative provision for credit losses primarily driven by further improvements in the economic outlook. The growth in fee revenues was broad-based with notable increases in swap income, and our wealth and cash management businesses. We are pleased with our ability to hold net interest margin relatively steady for the quarter considering the current economic environment. The margin of 2.70 percent was only four basis points below the first quarter as the unfavorable impact of lower yields in the securities portfolio and increased excess liquidity was largely offset by a reduction in deposit costs for the eighth consecutive quarter, an additional calendar day and continued stable loan yields."

Rosato continued, "Period-end loans and deposits decreased three percent and two percent, respectively, from the close of the first quarter. The $1.4 billion decline in period-end loans was driven by the forgiveness of $970 million in PPP balances, $530 million in lower retail balances, and a $130 million reduction in mortgage warehouse. Conversely, the loan portfolio benefited from strong results in our specialized industry verticals within C&I and LEAF. The $894 million decline in period-end deposits was equally attributable to lower brokered deposit balances and seasonal outflows in our municipal business. Importantly, non-interest-bearing deposits continued to grow, up three percent linked-quarter and now account for 32 percent of total period-end balances. Finally, capital ratios remain strong and improved linked-quarter for both the Bank and Holding Company."

The Board of Directors declared a $0.1825 per common share quarterly dividend payable August 15, 2021 to shareholders of record on August 1, 2021. Based on the closing stock price on July 14, 2021, the dividend yield on People's United Financial common stock is 4.4 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 over $63 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.

2Q 2021 Financial Highlights

Summary

• Net income totaled $170.8 million, or $0.39 per common share.
  • Net income available to common shareholders totaled $167.3 million.
  • Operating earnings totaled $176.1 million, or $0.41 per common share (See Non-GAAP Financial Measures and Reconciliation to GAAP).
• Net interest income totaled $380.9 million in 2Q21 compared to $385.9 million in 1Q21.
  • Includes $24.9 million associated with PPP loans in 2Q21 ($20.0 million in net fees and $4.9 million in net interest income).
• Net interest margin decreased four basis points from 1Q21 to 2.70% reflecting:
  • Lower rates on deposits (increase of four basis points).
  • One additional calendar day in 2Q21 (increase of two basis points).
  • Lower yields on the securities portfolio (decrease of six basis points).
  • Lower yields on the loan portfolio (decrease of four basis points).
  • Excess liquidity resulting from deposits at the Federal Reserve Bank (decrease of two basis points).
  • PPP loans had a seven basis point favorable impact on the net interest margin in 2Q21.
• Provision for credit losses on loans totaled $(40.7) million.
  • Allowance for credit losses on loans decreased $51.0 million.
  • Net loan charge-offs totaled $10.3 million.
  • Net loan charge-off ratio of 0.10%.
• Non-interest income totaled $99.0 million in 2Q21 compared to $94.6 million in 1Q21.
  • Customer interest rate swap income increased $2.3 million.
  • Investment management fees increased $1.6 million.
  • Bank service charges increased $1.4 million.
  • At June 30, 2021, assets under discretionary management totaled $10.1 billion.
• Non-interest expense totaled $305.0 million in 2Q21 compared to $311.9 million in 1Q21.
  • Operating non-interest expense totaled $293.8 million in 2Q21 and $292.3 million in 1Q21 (See Non-GAAP Financial Measures and Reconciliation to GAAP).
  • Compensation and benefits expense increased $4.8 million, primarily reflecting higher incentive-related accruals offset by lower payroll costs in 2Q21.
  • Amortization of other acquisition-related intangible assets decreased $2.2 million.
  • Professional and outside services expense, excluding $6.0 million and $9.4 million of non-operating expenses in 2Q21 and 1Q21, respectively, decreased $0.2 million.
  • Other non-interest expense includes non-operating expenses totaling $5.0 million in 2Q21 and $10.1 million in 1Q21.
  • The efficiency ratio was 57.4% for 2Q21 compared to 56.6% for 1Q21 and 53.5% for 2Q20 (See Non-GAAP Financial Measures and Reconciliation to GAAP).
• The effective income tax rate was 20.8% for both 2Q21 and the first six months of 2021, compared to 37.0% for the full-year of 2020.
  • The full-year 2020 effective income tax rate reflects the impact of a non-deductible goodwill impairment charge for which no tax benefit was realized. Excluding non-deductible goodwill impairment, the effective income tax rate was 18.4% for the full-year of 2020.

Commercial Banking

• Commercial loans totaled $31.9 billion at June 30, 2021, an $874 million decrease from March 31, 2021.
  • PPP loans decreased $884 million ($86 million in initial funding less $970 million in loan forgiveness).
  • The mortgage warehouse portfolio decreased $130 million.
  • The New York multifamily portfolio decreased $62 million.
  • The equipment financing portfolio increased $64 million.
• Average commercial loans totaled $31.9 billion in 2Q21, a $550 million decrease from 1Q21.
  • The average mortgage warehouse portfolio decreased $349 million.
  • Average PPP loans decreased $160 million.
  • The average New York multifamily portfolio decreased $49 million.
  • The average equipment financing portfolio increased $46 million.
• Commercial deposits totaled $24.9 billion at June 30, 2021 compared to $23.3 billion at March 31, 2021.
• The ratio of non-accrual commercial loans to total commercial loans was 0.82% at June 30, 2021 compared to 0.85% at March 31, 2021.
• Non-performing commercial assets totaled $269.2 million at June 30, 2021 compared to $286.1 million at March 31, 2021.
• For the commercial loan portfolio, the allowance for credit losses as a percentage of commercial loans was 0.76% at June 30, 2021 compared to 0.77% at March 31, 2021.
• The commercial allowance for credit losses represented 93% of non-accrual commercial loans at June 30, 2021 compared to 90% at March 31, 2021.

Retail Banking

• Residential mortgage loans totaled $7.6 billion at June 30, 2021, a $441 million decrease from March 31, 2021.
  • Average residential mortgage loans totaled $7.8 billion in 2Q21, a $500 million decrease from 1Q21.
• Home equity loans totaled $1.8 billion at June 30, 2021, an $84 million decrease from March 30, 2021.
  • Average home equity loans totaled $1.8 billion in 2Q21, a $112 million decrease from 1Q21.
• Retail deposits totaled $27.7 billion at June 30, 2021 compared to $30.2 billion at March 31, 2021.
• The ratio of non-accrual residential mortgage loans to residential mortgage loans was 0.65% at June 30, 2021 compared to 0.71% at March 31, 2021.
• The ratio of non-accrual home equity loans to home equity loans was 1.01% at June 30, 2021 compared to 1.00% at March 31, 2021.
• For the retail loan portfolio, the allowance for credit losses as a percentage of retail loans was 1.13% at June 30, 2021 compared to 1.48% at March 31, 2021.
• The retail allowance for credit losses represented 158% of non-accrual retail loans at June 30, 2021 compared to 195% at March 31, 2021.

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

SOURCE BRIDGEPORT, Conn., July 15, 2021 /PRNewswire/ -- People's United Financial

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 pending merger with M&T Bank Corporation; (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.