People's United reports 4Q2019 net income of $137.5 million

• Operating Earnings of $0.37 per Common Share
• Completed the acquisition of United Financial on November 1st.
• Return on average assets of 0.98 percent, or 1.13 percent on an operating basis, and return on average tangible common equity of 12.8 percent, or 15.2 percent on an operating basis.
• Net interest margin of 3.14 percent, expanded two basis points linked-quarter and benefited from a 13 basis point reduction in deposit costs.
• Efficiency ratio of 53.7 percent, improved 310 basis points linked-quarter, reflecting well-controlled expenses and higher revenues, particularly continued strong non-interest income results.
• Period-end loans increased 12 percent linked-quarter driven by the United Financial acquisition and solid commercial organic growth, partially offset by a planned reduction of residential mortgage balances.

Vermont Business Magazine People's United Financial, Inc. (NASDAQ: PBCT) today reported results for the fourth quarter and full year 2019. They also 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 March 15, 2020 to shareholders of record at the close of business on March 1, 2020. The financial results along with comparison periods are summarized below:

"We are very pleased with the Company's financial and operating performance in 2019," said Jack Barnes, Chairman and Chief Executive Officer. "It was another noteworthy year for People's United as we acquired two banks and a specialty finance company, enhanced our suite of banking technology and further strengthened core capabilities. As a result, we continued to build the earnings power of the Company as evidenced by a 20 percent increase in full year operating earnings from a year ago and an operating return on average tangible common equity of 14.7 percent. In addition, operating earnings per common share of $1.39 increased for the tenth consecutive year. While we have almost tripled total assets to nearly $60 billion over the last ten years, we have remained true to our roots of delivering superior service at a local level, maintaining exceptional asset quality and supporting our communities. As we start a new decade already filled with economic and competitive uncertainties, we are confident our long-term approach to managing the business will enable us to generate value for customers and shareholders regardless of the operating environment. "

"We concluded 2019 with a strong financial performance as demonstrated by another record quarter of earnings," stated David Rosato, Senior Executive Vice President and Chief Financial Officer. "Operating earnings of $158.8 million increased 17 percent linked-quarter and reflected the acquisition of United, improved net interest margin and positive operating leverage. The fourth quarter margin of 3.14 percent benefited from continued remixing of the loan portfolio, disciplined management of deposit costs and the net effect of purchase accounting adjustments related to the United transaction. Excluding these purchase accounting adjustments, the margin was 3.09 percent. On an organic basis, period-end loan balances were essentially flat compared to September 30th, while period-end deposits declined one percent. Commercial loan growth of $314 million was driven by solid results in commercial real estate, equipment finance and our specialized industry verticals within C&I. These increases were offset by a $343 million decline in retail loans mostly due to our planned reduction of residential mortgages as we continue to remix the balance sheet with a focus on higher yielding portfolios. The decline in period-end deposits of $287 million was primarily attributable to lower brokered deposit balances."

The Board of Directors declared a $0.1775 per common share quarterly dividend payable February 15, 2020 to shareholders of record on February 1, 2020. Based on the closing stock price on January 15, 2020, 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 approximately $59 billion in assets. Founded in 1842, People's United Bank offers commercial and retail banking through a network of over 400 retail locations in Connecticut, New York, Massachusetts, Vermont, New Hampshire and Maine, as well as wealth management and insurance solutions. The company also provides specialized commercial services to customers nationwide.

4Q 2019 Financial Highlights

Summary

• Net income totaled $137.5 million, or $0.31 per common share.
  • Net income available to common shareholders totaled $134.0 million.
  • Operating earnings totaled $158.8 million, or $0.37 per common share (see Non-GAAP Financial Measures and Reconciliation to GAAP).
• Net interest income totaled $382.7 million in 4Q19 compared to $348.7 million in 3Q19.
• Net interest margin increased two basis points from 3Q19 to 3.14% reflecting:
  • Lower rates on deposits (increase of four basis points).
  • Lower rates on borrowings (increase of two basis points).
  • Lower yields on the loan portfolio (decrease of four basis points).
• Provision for loan losses totaled $7.3 million.
  • Net loan charge-offs totaled $6.7 million.
  • Net loan charge-off ratio of 0.06% in 4Q19.
• Non-interest income totaled $124.2 million in 4Q19 compared to $106.0 million in 3Q19.
  • Customer interest rate swap income increased $3.3 million.
  • Bank service charges increased $1.9 million.
  • Commercial banking lending fees increased $1.1 million.
  • Insurance revenue decreased $2.8 million.
  • Included in other non-interest income is a $7.6 million net gain on the sale of branches (see Non-GAAP Financial Measures and Reconciliation to GAAP).
  • At December 31, 2019, assets under discretionary management totaled $9.2 billion.
• Non-interest expense totaled $325.7 million in 4Q19 compared to $281.4 million in 3Q19.
  • Operating non-interest expense totaled $286.6 million in 4Q19 (see Non-GAAP Financial Measures and Reconciliation to GAAP).
  • Compensation and benefits expense, excluding $7.5 million and $0.8 million of merger-related expenses in 4Q19 and 3Q19, respectively, increased $6.6 million, primarily reflecting additional employees resulting from the United Financial acquisition.
  • Professional and outside services expense, excluding $5.6 million and $3.7 million of merger-related expenses in 4Q19 and 3Q19, respectively, increased $4.0 million.
  • Regulatory assessment expense increased $2.0 million.
  • Included in other non-interest expense in 4Q19 is a $16.5 million charge relating to the write-off of an intangible asset and $8.9 million of merger-related expenses (see Non-GAAP Financial Measures and Reconciliation to GAAP).
  • The efficiency ratio was 53.7% for 4Q19 compared to 56.8% for 3Q19 and 55.1% for 4Q18 (see Non-GAAP Financial Measures and Reconciliation to GAAP).
• The effective income tax rate was 21.0% for 4Q19 and 20.2% for the full-year of 2019, compared to 18.8% for the full-year of 2018.
  • The rate in 2018 reflects a $9.2 million benefit recognized in connection with tax reform.

Commercial Banking

• Commercial loans totaled $30.7 billion at December 31, 2019, an increase of $3.2 billion from September 30, 2019.
  • Organic growth of $314 million.
  • The equipment financing portfolio increased $175 million.
  • The mortgage warehouse portfolio decreased $180 million.
  • The New York multifamily portfolio decreased $55 million.
• Average commercial loans totaled $29.4 billion in 4Q19, an increase of $2.5 billion from 3Q19.
  • The average equipment financing portfolio increased $144 million.
  • The average mortgage warehouse portfolio increased $138 million.
  • The average New York multifamily portfolio decreased $73 million.
• Commercial deposits totaled $16.6 billion at December 31, 2019 compared to $14.9 billion at September 30, 2019.
• The ratio of originated non-performing commercial loans to originated commercial loans was 0.44% at both December 31, 2019 and September 30, 2019.
• Non-performing commercial assets, excluding acquired non-performing loans, totaled $119.2 million at December 31, 2019 compared to $118.3 million at September 30, 2019.
• For the originated commercial loan portfolio, the allowance for loan losses as a percentage of loans was 0.89% at both December 31, 2019 and September 30, 2019.
• The originated commercial allowance for loan losses represented 201% of originated non-performing commercial loans at December 31, 2019 compared to 205% at September 30, 2019.

Retail Banking

• Residential mortgage loans totaled $10.3 billion at December 31, 2019, an increase of $1.0 billion from September 30, 2019.
  • Average residential mortgage loans totaled $10.0 billion in 4Q19, an increase of $626 million from 3Q19.
• Home equity loans totaled $2.4 billion at December 31, 2019, an increase of $450 million from September 30, 2019.
  • Average home equity loans totaled $2.3 billion in 4Q19, an increase of $279 million from 3Q19.
• Retail deposits totaled $27.0 billion at December 31, 2019 compared to $23.7 billion at September 30, 2019.
• The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 0.55% at both December 31, 2019 and September 30, 2019.
• The ratio of originated non-performing home equity loans to originated home equity loans was 0.78% at December 31, 2019 compared to 0.85% at September 30, 2019.
• For the originated retail loan portfolio, the allowance for loan losses as a percentage of loans was 0.35% at both December 31, 2019 and September 30, 2019.
• The originated retail allowance for loan losses represented 59% of originated non-performing retail loans at December 31, 2019 compared to 57% at September 30, 2019.

Conference Call

On January 16, 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; 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.

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