Market Overview

People's United Financial Reports Third Quarter Net Income of $117.0 Million, or $0.33 per Common Share

Share:

People's United Financial Reports Third Quarter Net Income of $117.0 Million, or $0.33 per Common Share

- Completed the acquisition of First Connecticut Bancorp on October 1st.

- Return on average assets of 1.06 percent and return on average tangible common equity of 14.5 percent.

- Efficiency ratio of 56.7 percent, an improvement of 170 basis points linked-quarter reflecting continued emphasis on enhancing operating leverage.

- Net interest margin of 3.15 percent, expanded five basis points linked-quarter and benefited from an increase in loan yields that continue to outpace the rise in deposit costs.

- Strong deposit growth as end of period balances increased $742 million or two percent from June 30th.

PR Newswire


BRIDGEPORT, Conn., Oct. 18, 2018 /PRNewswire/ -- People's United Financial, Inc. (NASDAQ:PBCT) today reported results for the third quarter 2018. Results for the third quarter and comparison periods are summarized below:


($ in millions, except per common share data)








 As of and for the Three Months Ended




Sep. 30, 2018


Jun. 30, 2018


Sep. 30, 2017

Net income


$          117.0


$          110.2


$             90.8

Net income available


113.5


106.7


87.3


to common shareholders






Per common share



0.33



0.31



0.26









Operating earnings1


113.8


109.0


89.3



Per common share



0.33



0.32



0.26

















Net interest income


$          306.4


$          301.2


$          284.6



Net interest margin



3.15%



3.10%



3.04%









Non-interest income


92.3


94.9


89.3

















Non-interest expense


$          241.3


$          248.6


$          237.1

Operating non-interest expense1

240.8


245.7


234.1









Efficiency ratio


56.7%


58.4%


57.3%


















Average balances







Loans


$        32,166


$        32,116


$        31,994

Deposits


33,058


32,536


32,065










End of period balances







Loans


32,199


32,512


32,384

Deposits


33,210


32,468


32,547










1See Non-GAAP Financial Measures and Reconciliation to GAAP.

 

"Third quarter results reflect our consistent focus on improving relationship profitability across the Company's diverse mix of businesses," said Jack Barnes, Chairman and Chief Executive Officer. "Another quarter of record earnings generated a return on average tangible common equity of 14.5 percent, up 270 basis points from the prior year quarter. The addition of First Connecticut further strengthens the franchise's earnings power as we are confident in achieving the transaction's attractive financial returns. Integration has progressed well and the core system conversion will take place in January. Experienced teams at both companies have worked closely together to ensure a seamless transition for clients who will benefit from our full suite of products and services as well as enhanced digital capabilities. We are excited about executing in the market as one team and deepening our well-established presence in the central Connecticut and western Massachusetts regions."

"Operating earnings of $113.8 million for the third quarter increased 27 percent year-over-year and benefited from higher revenues and well-controlled expenses," said David Rosato, Senior Executive Vice President and Chief Financial Officer. "Total revenues of $399 million grew seven percent due to increases in both net interest income and non-interest income. Net interest margin expanded 11 basis points from a year ago and five basis points linked-quarter highlighting the asset sensitivity of the balance sheet. As expected, deposits rebounded in the third quarter with average balances rising $522 million or two percent from the second quarter, while average loans were flat over the same period. Loan growth has been below our expectations this year primarily due to heightened competition, lower demand and above average payoffs. In this environment, we continue to emphasize the importance of improving operating leverage as evidenced by a third quarter efficiency ratio of 56.7 percent. We are particularly pleased with our ability to control costs, especially as we further invest in revenue producing talent and enhanced technology."

























 As of and for the Three Months Ended






Sep. 30, 2018


Jun. 30, 2018


Sep. 30, 2017



Asset Quality









Net loan charge-offs 


0.09%


0.06%


0.06%



     to average total loans






Originated non-performing loans


0.53%


0.56%


0.59%



     as a percentage of originated loans


























Returns









Return on average assets1


1.06%


1.00%


0.84%



Return on average tangible common equity1

14.5%


13.9%


11.8%























Capital Ratios









People's United Financial, Inc.









Tangible common equity / tangible assets

7.6%


7.3%


7.1%



Tier 1 leverage


8.7%


8.6%


8.3%



Common equity tier 1 


10.3%


10.0%


9.5%



Tier 1 risk-based


11.1%


10.8%


10.2%



Total risk-based 


12.8%


12.5%


12.0%













People's United Bank, N.A.









Tier 1 leverage



9.2%


9.1%


8.6%



Common equity tier 1 



11.6%


11.4%


10.6%



Tier 1 risk-based



11.6%


11.4%


10.6%



Total risk-based 



13.6%


13.4%


12.6%













1See Non-GAAP Financial Measures and Reconciliation to GAAP.





The Company's Board of Directors declared a $0.1750 per common share quarterly dividend payable November 15, 2018 to shareholders of record on November 1, 2018. Based on the closing stock price on October 17, 2018, the dividend yield on People's United Financial common stock is 4.3 percent.

People's United Financial, Inc., a diversified financial services company with $47 billion in total assets, provides commercial and retail banking, as well as wealth management services through a network of over 400 branches in Connecticut, New York, Massachusetts, Vermont, New Hampshire and Maine.

3Q 2018 Financial Highlights

Summary

  • Net income totaled $117.0 million, or $0.33 per common share.
    • Net income available to common shareholders totaled $113.5 million.
  • Operating earnings totaled $113.8 million, or $0.33 per common share (see Non-GAAP Financial Measures and Reconciliation to GAAP).
  • Net interest income totaled $306.4 million in 3Q18 compared to $301.2 million in 2Q18.
  • Net interest margin increased five basis points from 2Q18 to 3.15% reflecting:
    • Higher yields on the loan portfolio (increase of ten basis points).
    • One additional calendar day in 3Q18 (increase of two basis points).
    • Higher yields on the securities portfolio (increase of one basis point).
    • A decrease in average borrowing balances (increase of one basis point).
    • Higher rates on deposits (decrease of nine basis points).
  • Provision for loan losses totaled $8.2 million.
    • Net loan charge-offs totaled $7.0 million.
    • Net loan charge-off ratio of 0.09% in 3Q18.
  • Non-interest income totaled $92.3 million in 3Q18 compared to $94.9 million in 2Q18.
    • Insurance revenue increased $1.5 million, reflecting the seasonality of commercial insurance renewals.
    • Bank service charges increased $0.6 million.
    • Commercial banking lending fees decreased $1.5 million.
    • Customer interest rate swap income decreased $1.2 million.
    • Other non-interest income in 2Q18 includes $2.0 million in gains related to certain legacy investments.
    • At September 30, 2018, assets under administration, which are not reported as assets of People's United Financial, totaled $23.8 billion, of which $9.3 billion are under discretionary management, compared to $23.6 billion and $9.0 billion, respectively, at June 30, 2018.
  • Non-interest expense totaled $241.3 million in 3Q18 compared to $248.6 million in 2Q18.
  • Operating non-interest expense totaled $240.8 million in 3Q18 (see Non-GAAP Financial Measures and Reconciliation to GAAP).
    • Compensation and benefits expense increased $0.7 million, primarily reflecting additional employees resulting from the Vend Lease acquisition.
    • Professional and outside services expense, excluding $0.4 million and $2.1 million of merger-related expenses in 3Q18 and 2Q18, respectively, decreased $1.9 million.
    • Other non-interest expense includes merger-related expenses of $0.1 million in 3Q18 and $0.8 million in 2Q18. Also included in 2Q18 is a $4.1 million charge relating to the closing of 10 branches.
    • The efficiency ratio was 56.7% for 3Q18 compared to 58.4% for 2Q18 and 57.3% for 3Q17 (see Non-GAAP Financial Measures and Reconciliation to GAAP).
  • The effective income tax rate was 21.6% for both 3Q18 and the first nine 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 $23.4 billion at September 30, 2018, a decrease of $315 million from June 30, 2018.
    • The equipment financing portfolio increased $105 million from June 30, 2018.
    • The mortgage warehouse portfolio decreased $201 million from June 30, 2018.
    • The New York multi-family portfolio decreased $128 million from June 30, 2018.
  • Average commercial loans totaled $23.3 billion in 3Q18, an increase of $62 million from 2Q18.
    • The average equipment financing portfolio increased $197 million from 2Q18, reflecting in part loans and leases acquired in connection with the Vend Lease acquisition in June.
    • The average New York multi-family portfolio decreased $108 million from 2Q18.
    • The average mortgage warehouse portfolio decreased $24 million from 2Q18.
  • Commercial deposits totaled $11.9 billion at September 30, 2018 compared to $11.4 billion at June 30, 2018.
  • The ratio of originated non-performing commercial loans to originated commercial loans was 0.52% at September 30, 2018 compared to 0.55% at June 30, 2018.
  • Non-performing commercial assets, excluding acquired non-performing loans, totaled $122.1 million at September 30, 2018 compared to $132.6 million at June 30, 2018.
  • For the originated commercial loan portfolio, the allowance for loan losses as a percentage of loans was 0.94% at September 30, 2018 compared to 0.93% at June 30, 2018.
  • The originated commercial allowance for loan losses represented 182% of originated non-performing commercial loans at September 30, 2018 compared to 169% at June 30, 2018.

Retail Banking

  • Residential mortgage loans totaled $6.9 billion at September 30, 2018, an increase of $46 million from June 30, 2018.
    • Average residential mortgage loans totaled $6.9 billion in 3Q18, an increase of $34 million from 2Q18.
  • Home equity loans totaled $1.9 billion at September 30, 2018, a decrease of $42 million from June 30, 2018.
    • Average home equity loans totaled $1.9 billion in 3Q18, a decrease of $46 million from 2Q18.
  • Retail deposits totaled $21.3 billion at September 30, 2018 compared to $21.1 billion at June 30, 2018.
  • The ratio of originated non-performing residential mortgage loans to originated residential mortgage loans was 0.48% at September 30, 2018 compared to 0.50% at June 30, 2018.
  • The ratio of originated non-performing home equity loans to originated home equity loans was 0.80% at September 30, 2018 compared to 0.81% at June 30, 2018.

Conference Call
On October 18, 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.

###

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

 

 


People's United Financial, Inc.












FINANCIAL HIGHLIGHTS

























Three Months Ended



Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,


(dollars in millions, except per common share data)


2018


2018


2018


2017


2017


Earnings Data:












  Net interest income (fully taxable equivalent)

$

313.0

$

307.8

$

302.1

$

304.1

$

295.8


  Net interest income 


306.4


301.2


295.8


292.3


284.6


  Provision for loan losses


8.2


6.5


5.4


7.5


7.0


  Non-interest income (1)


92.3


94.9


90.4


87.3


89.3


  Non-interest expense (1)


241.3


248.6


243.5


239.7


237.1


  Income before income tax expense


149.2


141.0


137.3


132.4


129.8


  Net income


117.0


110.2


107.9


106.2


90.8


  Net income available to common shareholders (1)


113.5


106.7


104.4


102.7


87.3














Selected Statistical Data:












  Net interest margin (2)


3.15

%

3.10

%

3.05

%

3.07

%

3.04

%

  Return on average assets (1), (2)


1.06


1.00


0.98


0.96


0.84


  Return on average common equity (2)


8.0


7.6


7.5


7.4


6.4


  Return on average tangible common equity (1), (2)


14.5


13.9


13.8


13.8


11.8


  Efficiency ratio (1)


56.7


58.4


59.4


56.1


57.3














Common Share Data:












  Earnings per common share: 












    Basic

$

0.33

$

0.31

$

0.31

$

0.30

$

0.26


    Diluted (1)


0.33


0.31


0.30


0.30


0.26


  Dividends paid per common share


0.1750


0.1750


0.1725


0.1725


0.1725


  Common dividend payout ratio (1)


52.9

%

56.2

%

56.3

%

57.1

%

66.8

%

  Book value per common share (end of period)

$

16.69

$

16.56

$

16.43

$

16.40

$

16.29


  Tangible book value per common share (end of period) (1)


9.19


9.02


8.93


8.87


8.68


  Stock price:












    High


19.00


19.37


20.26


19.50


18.26


    Low


16.95


18.00


18.18


17.58


15.97


    Close (end of period)


17.12


18.09


18.66


18.70


18.14


  Common shares (end of period) (in millions)


342.36


341.59


341.01


339.98


337.84


  Weighted average diluted common shares (in millions)

345.04


344.47


344.00


341.11


338.82














(1) See Non-GAAP Financial Measures and Reconciliation to GAAP.










(2) Annualized.












 

 


People's United Financial, Inc.






FINANCIAL HIGHLIGHTS













Nine Months Ended


September 30,

(dollars in millions, except per common share data)


2018


2017


Earnings Data:






  Net interest income (fully taxable equivalent)

$

922.9

$

839.1


  Net interest income 


903.4


808.1


  Provision for loan losses


20.1


18.5


  Non-interest income


277.6


265.6


  Non-interest expense (1)


733.4


720.5


  Income before income tax expense


427.5


334.7


  Net income


335.1


230.9


  Net income available to common shareholders (1)


324.6


220.4








Selected Statistical Data:






  Net interest margin (2)


3.10

%

2.94

%

  Return on average assets (1), (2)


1.01


0.73


  Return on average common equity (2)


7.7


5.6


  Return on average tangible common equity (1), (2)


14.1


10.0


  Efficiency ratio (1)


58.2


58.3








Common Share Data:






  Earnings per common share:






    Basic

$

0.95

$

0.67


    Diluted (1)


0.94


0.67


  Dividends paid per common share


0.5225


0.5150


  Common dividend payout ratio (1)


55.1

%

76.8

%

  Book value per common share (end of period)

$

16.69

$

16.29


  Tangible book value per common share (end of period) (1)


9.19


8.68


  Stock price:






    High


20.26


19.85


    Low


16.95


15.97


    Close (end of period)


17.12


18.14


  Common shares (end of period) (in millions)


342.36


337.84


  Weighted average diluted common shares (in millions)


344.50


329.59








(1) See Non-GAAP Financial Measures and Reconciliation to GAAP.






(2) Annualized.






 

 


People's United Financial, Inc.












FINANCIAL HIGHLIGHTS - Continued

























As of and for the Three Months Ended



Sept. 30,


June 30,


March 31, 


Dec. 31,


Sept. 30,


(dollars in millions)


2018


2018


2018


2017


2017


Financial Condition Data:












    Total assets

$

44,133

$

44,575

$

44,101

$

44,453

$

43,998


    Loans 


32,199


32,512


32,104


32,575


32,384


    Securities


7,385


7,324


7,173


7,043


6,914


    Short-term investments


128


253


470


378


303


    Allowance for loan losses


238


237


235


234


233


    Goodwill and other acquisition-related intangible assets


2,569


2,574


2,555


2,560


2,568


    Deposits


33,210


32,468


32,894


33,056


32,547


    Borrowings


3,392


4,639


3,877


4,104


4,144


    Notes and debentures


886


889


892


902


906


    Stockholders' equity


5,959


5,900


5,845


5,820


5,746


    Total risk-weighted assets (1):












       People's United Financial, Inc.


33,165


33,369


32,833


33,256


33,029


       People's United Bank, N.A.


33,116


33,317


32,784


33,202


32,981


    Non-performing assets (2)


173


187


174


168


191


    Net loan charge-offs


7.0


5.0


4.5


6.5


5.2














Average Balances:












    Loans

$

32,166

$

32,116

$

32,096

$

32,271

$

31,994


    Securities (3)


7,404


7,302


7,186


7,022


6,559


    Short-term investments


193


267


366


361


347


    Total earning assets


39,763


39,685


39,648


39,654


38,900


    Total assets


44,245


44,110


44,011


44,039


43,256


    Deposits


33,058


32,536


32,824


32,879


32,065


    Borrowings


3,539


4,031


3,752


3,836


4,010


    Notes and debentures


888


890


895


904


909


    Total funding liabilities


37,485


37,456


37,471


37,619


36,984


    Stockholders' equity


5,937


5,870


5,820


5,774


5,722














Ratios:












    Net loan charge-offs to average total loans (annualized)


0.09

%

0.06

%

0.06

%

0.08

%

0.06

%

    Non-performing assets to originated loans,












      real estate owned and repossessed assets (2)


0.57


0.62


0.58


0.56


0.64


    Originated allowance for loan losses to:












      Originated loans (2)


0.78


0.77


0.78


0.77


0.77


      Originated non-performing loans (2)


147.9


138.4


149.3


155.2


131.6


    Average stockholders' equity to average total assets


13.4


13.3


13.2


13.1


13.2


    Stockholders' equity to total assets


13.5


13.2


13.3


13.1


13.1


    Tangible common equity to tangible assets (4)


7.6


7.3


7.3


7.2


7.1


    Total risk-based capital (1):












       People's United Financial, Inc.


12.8


12.5


12.6


12.2


12.0


       People's United Bank, N.A.


13.6


13.4


12.9


12.6


12.6














(1) September 30, 2018 amounts and ratios are preliminary.










(2) Excludes acquired loans.












(3) Average balances for securities are based on amortized cost.










(4) See Non-GAAP Financial Measures and Reconciliation to GAAP.










 

 


People's United Financial, Inc.





CONSOLIDATED STATEMENTS OF CONDITION











Sept. 30,

June 30,

Dec. 31,

Sept. 30,

(in millions)

2018

2018

2017

2017

Assets





Cash and due from banks

$        410.5

$        462.7

$        505.1

$        414.1

Short-term investments

127.5

253.1

377.5

302.5

Securities:





  Trading debt securities, at fair value

8.3

8.2

8.2

8.3

  Equity securities, at fair value

8.9

9.9

8.7

9.0

  Debt securities available-for-sale, at fair value 

3,312.1

3,245.1

3,125.3

3,188.5

  Debt securities held-to-maturity, at amortized cost

3,742.9

3,718.7

3,588.1

3,387.6

  Federal Home Loan Bank and Federal Reserve Bank stock, at cost

312.4

342.2

312.3

320.9

    Total securities

7,384.6

7,324.1

7,042.6

6,914.3

Loans held-for-sale

15.2

17.1

16.6

15.0

Loans: 





  Commercial real estate

10,595.5

10,761.1

11,068.7

11,180.5

  Commercial and industrial

8,568.6

8,823.3

8,731.1

8,624.7

  Equipment financing

4,209.3

4,103.9

3,905.4

3,705.6

    Total Commercial Portfolio

23,373.4

23,688.3

23,705.2

23,510.8

  Residential mortgage

6,911.9

6,866.2

6,805.7

6,781.0

  Home equity and other consumer

1,914.0

1,957.5

2,064.4

2,092.7

    Total Retail Portfolio

8,825.9

8,823.7

8,870.1

8,873.7

    Total loans

32,199.3

32,512.0

32,575.3

32,384.5

  Less allowance for loan losses

(238.0)

(236.8)

(234.4)

(233.4)

    Total loans, net

31,961.3

32,275.2

32,340.9

32,151.1

Goodwill and other acquisition-related intangible assets

2,568.9

2,573.8

2,560.0

2,567.9

Bank-owned life insurance

407.7

407.2

405.0

405.6

Premises and equipment, net

243.8

246.3

253.0

264.7

Other assets

1,013.7

1,015.0

952.7

963.0

    Total assets

$  44,133.2

$  44,574.5

$  44,453.4

$  43,998.2






Liabilities





Deposits: 





  Non-interest-bearing

$    8,060.2

$    8,002.4

$    8,002.4

$    7,655.3

  Savings

4,048.8

4,184.9

4,410.5

4,513.1

  Interest-bearing checking and money market

15,065.3

14,659.4

15,189.1

15,143.1

  Time

6,035.9

5,621.5

5,454.3

5,235.8

    Total deposits

33,210.2

32,468.2

33,056.3

32,547.3

Borrowings:





  Federal Home Loan Bank advances

2,369.7

3,510.1

2,774.4

3,074.1

  Federal funds purchased

735.0

855.0

820.0

543.0

  Customer repurchase agreements

261.3

254.9

301.6

295.8

  Other borrowings

26.0

19.1

207.8

231.1

    Total borrowings

3,392.0

4,639.1

4,103.8

4,144.0

Notes and debentures

885.6

888.7

901.6

906.2

Other liabilities

686.5

678.3

571.8

654.6

    Total liabilities

38,174.3

38,674.3

38,633.5

38,252.1






Stockholders' Equity





Preferred stock

244.1

244.1

244.1

244.1

Common stock

4.4

4.4

4.4

4.3

Additional paid-in capital 

6,054.3

6,040.3

6,012.3

5,972.2

Retained earnings

1,220.9

1,167.9

1,040.2

996.4

Unallocated common stock of Employee Stock Ownership Plan, at cost

(131.9)

(133.7)

(137.3)

(139.1)

Accumulated other comprehensive loss

(270.8)

(260.7)

(181.7)

(169.7)

Treasury stock, at cost

(1,162.1)

(1,162.1)

(1,162.1)

(1,162.1)

    Total stockholders' equity

5,958.9

5,900.2

5,819.9

5,746.1

    Total liabilities and stockholders' equity

$  44,133.2

$  44,574.5

$  44,453.4

$  43,998.2

 

 


People's United Financial, Inc.










CONSOLIDATED STATEMENTS OF INCOME





















Three Months Ended


Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,

(in millions, except per common share data)

2018


2018


2018


2017


2017

Interest and dividend income:










  Commercial real estate

$  114.7


$  111.5


$  107.0


$  106.2


$  105.6

  Commercial and industrial

93.2


90.1


82.3


80.1


80.0

  Equipment financing

56.2


50.5


48.9


47.4


41.5

  Residential mortgage

56.0


55.3


54.7


53.4


52.5

  Home equity and other consumer

22.0


21.4


20.8


20.7


21.0

    Total interest on loans

342.1


328.8


313.7


307.8


300.6

  Securities

46.6


45.1


44.0


41.6


37.2

  Short-term investments

1.1


1.3


1.2


1.0


1.1

  Loans held-for-sale

0.2


0.2


0.2


0.2


0.3

    Total interest and dividend income

390.0


375.4


359.1


350.6


339.2

Interest expense:










  Deposits 

56.9


47.3


41.3


38.3


34.4

  Borrowings 

18.2


18.5


14.2


12.4


12.7

  Notes and debentures

8.5


8.4


7.8


7.6


7.5

    Total interest expense

83.6


74.2


63.3


58.3


54.6

    Net interest income

306.4


301.2


295.8


292.3


284.6

Provision for loan losses 

8.2


6.5


5.4


7.5


7.0

    Net interest income after provision for loan losses

298.2


294.7


290.4


284.8


277.6

Non-interest income:










  Bank service charges

24.9


24.3


23.8


24.7


25.3

  Investment management fees

17.4


17.2


17.7


17.3


16.9

  Operating lease income

11.0


11.2


10.7


11.7


10.9

  Insurance revenue

9.8


8.3


9.8


6.9


9.7

  Commercial banking lending fees

7.9


9.4


10.4


8.8


7.0

  Cash management fees

7.0


7.0


6.6


6.5


6.8

  Brokerage commissions

3.2


3.2


3.1


2.9


2.8

  Customer interest rate swap income, net

2.8


4.0


1.5


5.2


1.9

  Net security gains (losses) (1)

0.1


-


0.1


(9.8)


-

  Other non-interest income

8.2


10.3


6.7


13.1


8.0

    Total non-interest income

92.3


94.9


90.4


87.3


89.3

Non-interest expense:










  Compensation and benefits (2)

135.7


135.0


140.7


132.7


129.9

  Occupancy and equipment 

41.6


40.8


41.2


41.0


40.2

  Professional and outside services

17.0


20.6


18.6


18.7


19.2

  Regulatory assessments

10.0


9.9


10.6


11.9


10.3

  Operating lease expense

8.9


8.7


9.0


8.9


8.8

  Amortization of other acquisition-related intangible assets

4.9


4.9


5.1


7.9


7.9

  Other non-interest expense (2)

23.2


28.7


18.3


18.6


20.8

    Total non-interest expense (1)

241.3


248.6


243.5


239.7


237.1

    Income before income tax expense

149.2


141.0


137.3


132.4


129.8

Income tax expense (1)

32.2


30.8


29.4


26.2


39.0

    Net income

117.0


110.2


107.9


106.2


90.8

Preferred stock dividend

3.5


3.5


3.5


3.5


3.5

    Net income available to common shareholders

$  113.5


$  106.7


$  104.4


$  102.7


$     87.3











Earnings per common share:










  Basic

$     0.33


$     0.31


$     0.31


$     0.30


$     0.26

  Diluted

0.33


0.31


0.30


0.30


0.26


(1) Includes $10.0 million of security losses incurred as a tax planning strategy in response to tax reform enacted on December 22, 2017,

     which are considered non-operating, for the three months ended December 31, 2017. Total non-interest expense includes 


     $0.5 million, $2.9 million, $1.6 million and $3.0 million of non-operating expenses for the three months ended September 30, 2018, 

     June 30, 2018, December 31, 2017 and September 30, 2017, respectively. Income tax expense includes a $6.5 million benefit realized 

     in connection with tax reform, which is considered non-operating, for the three months ended December 31, 2017. See Non-GAAP 

     Financial Measures and Reconciliation to GAAP.












(2) In accordance with GAAP, effective January 1, 2018, net periodic pension and postretirement benefit costs are reported within other

     non-interest expense rather than compensation and benefits. Prior period amounts have been reclassified to conform to this

     presentation.












 

 


People's United Financial, Inc.




CONSOLIDATED STATEMENTS OF INCOME









Nine Months Ended


September 30,

(in millions, except per common share data)

2018


2017

Interest and dividend income:




  Commercial real estate

$   333.2


$   299.5

  Commercial and industrial

265.6


218.7

  Equipment financing

155.6


104.6

  Residential mortgage

166.0


154.1

  Home equity and other consumer

64.2


59.3

    Total interest on loans

984.6


836.2

  Securities

135.7


112.1

  Short-term investments

3.6


2.7

  Loans held for sale

0.6


0.7

    Total interest and dividend income

1,124.5


951.7

Interest expense:




  Deposits 

145.5


92.4

  Borrowings 

50.9


28.9

  Notes and debentures

24.7


22.3

    Total interest expense

221.1


143.6

    Net interest income

903.4


808.1

Provision for loan losses 

20.1


18.5

    Net interest income after provision for loan losses

883.3


789.6

Non-interest income:




  Bank service charges

73.0


73.8

  Investment management fees

52.3


49.2

  Operating lease income

32.9


32.1

  Insurance revenue

27.9


26.3

  Commercial banking lending fees

27.7


26.7

  Cash management fees

20.6


19.6

  Brokerage commissions

9.5


9.2

  Customer interest rate swap income, net

8.3


7.1

  Net security gains (losses)

0.2


(15.6)

  Other non-interest income

25.2


37.2

    Total non-interest income

277.6


265.6

Non-interest expense:




  Compensation and benefits (1)

411.4


389.9

  Occupancy and equipment 

123.6


118.6

  Professional and outside services

56.2


62.8

  Regulatory assessments

30.5


29.8

  Operating lease expense

26.6


26.3

  Amortization of other acquisition-related intangible assets

14.9


22.1

  Other non-interest expense (1)

70.2


71.0

    Total non-interest expense (2)

733.4


720.5

    Income before income tax expense

427.5


334.7

Income tax expense

92.4


103.8

    Net income

335.1


230.9

Preferred stock dividend

10.5


10.5

    Net income available to common shareholders

$   324.6


$   220.4





Earnings per common share:




   Basic

$      0.95


$      0.67

   Diluted 

0.94


0.67


(1) In accordance with GAAP, effective January 1, 2018, net periodic pension and postretirement benefit

     costs are reported within other non-interest expense rather than compensation and benefits. Prior 


     period amounts have been reclassified to conform to this presentation.





(2) Total non-interest expense includes $3.4 million and $29.0 million of non-operating expenses for the nine

     months ended September 30, 2018 and 2017, respectively. See Non-GAAP Financial Measures and


     Reconcilioation to GAAP.






 

 


People's United Financial, Inc.












AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE ANALYSIS (1)




















September 30, 2018


June 30, 2018


September 30, 2017

Three months ended

Average


Yield/


Average


Yield/


Average


Yield/

(dollars in millions)

Balance

Interest

Rate


Balance

Interest

Rate


Balance

Interest

Rate

Assets:












Short-term investments

$        192.5

$      1.1

2.06%


$        266.7

$      1.3

2.02%


$        347.3

$      1.1

1.25%

Securities (2)

7,404.2

50.8

2.75


7,302.1

49.2

2.69


6,558.8

44.4

2.71

Loans:












  Commercial real estate

10,641.4

114.7

4.31


10,802.9

111.5

4.13


11,169.8

105.6

3.78

  Commercial and industrial

8,584.8

95.6

4.45


8,558.3

92.6

4.32


8,580.0

84.0

3.91

  Equipment financing

4,120.8

56.2

5.47


3,923.6

50.5

5.14


3,399.5

41.5

4.89

  Residential mortgage

6,887.3

56.2

3.27


6,853.6

55.5

3.24


6,731.7

52.8

3.13

  Home equity and other consumer

1,931.8

22.0

4.55


1,977.6

21.4

4.33


2,112.6

21.0

3.97

    Total loans

32,166.1

344.7

4.29


32,116.0

331.5

4.13


31,993.6

304.9

3.81

    Total earning assets

39,762.8

$ 396.6

3.99%


39,684.8

$ 382.0

3.85%


38,899.7

$ 350.4

3.60%

Other assets

4,481.8




4,425.0




4,356.7



    Total assets

$  44,244.6




$  44,109.8




$  43,256.4















Liabilities and stockholders' equity:












Deposits:












  Non-interest-bearing

$    8,025.2

$         -

-   %


$    7,872.7

$         -

-   %


$    7,609.1

$         -

-   %

  Savings, interest-bearing checking












    and money market

19,031.4

32.6

0.68


19,220.6

28.2

0.59


19,529.1

21.4

0.44

  Time

6,001.3

24.3

1.62


5,442.3

19.1

1.40


4,926.8

13.0

1.06

    Total deposits

33,057.9

56.9

0.69


32,535.6

47.3

0.58


32,065.0

34.4

0.43

Borrowings:












  Federal Home Loan Bank advances

2,560.6

14.0

2.18


3,009.3

14.8

1.97


2,834.3

9.4

1.33

  Federal funds purchased

722.7

3.8

2.11


634.5

3.0

1.86


649.9

2.1

1.26

  Customer repurchase agreements

234.3

0.3

0.53


228.7

0.1

0.31


311.3

0.1

0.19

  Other borrowings

20.9

0.1

2.05


158.5

0.6

1.45


214.2

1.1

2.06

    Total borrowings

3,538.5

18.2

2.05


4,031.0

18.5

1.84


4,009.7

12.7

1.27

Notes and debentures

888.3

8.5

3.83


889.6

8.4

3.79


908.9

7.5

3.29

    Total funding liabilities

37,484.7

$   83.6

0.89%


37,456.2

$   74.2

0.79%


36,983.6

$   54.6

0.59%

Other liabilities

823.3




784.0




550.6



    Total liabilities

38,308.0




38,240.2




37,534.2



Stockholders' equity

5,936.6




5,869.6




5,722.2



    Total liabilities and












      stockholders' equity

$  44,244.6




$  44,109.8




$  43,256.4















Net interest income/spread (3)


$ 313.0

3.10%



$ 307.8

3.06%



$ 295.8

3.01%













Net interest margin



3.15%




3.10%




3.04%













(1) Average yields earned and rates paid are annualized.










(2) Average balances and yields for securities are based on amortized cost.







(3) The fully taxable equivalent adjustment was $6.6 million, $6.6 million and $11.2 million for the three months ended 

      September 30, 2018, June 30, 2018 and September 30, 2017, respectively.







 

 


People's United Financial, Inc.








AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE ANALYSIS (1)












September 30, 2018


September 30, 2017

Nine months ended

Average


Yield/


Average


Yield/

(dollars in millions)

Balance

Interest

Rate


Balance

Interest

Rate

Assets:








Short-term investments

$        274.6

$          3.6

1.74%


$        357.4

$      2.7

1.01%

Securities (2)

7,298.3

148.0

2.70


6,704.9

132.2

2.63

Loans:








  Commercial real estate

10,791.8

333.2

4.12


10,913.9

299.5

3.66

  Commercial and industrial

8,521.2

272.8

4.27


8,192.8

229.6

3.74

  Equipment financing

3,972.6

155.6

5.22


3,100.5

104.6

4.50

  Residential mortgage

6,859.5

166.6

3.24


6,601.2

154.8

3.13

  Home equity and other consumer

1,981.1

64.2

4.32


2,117.6

59.3

3.73

    Total loans

32,126.2

992.4

4.12


30,926.0

847.8

3.66

    Total earning assets

39,699.1

$ 1,144.0

3.84%


37,988.3

$ 982.7

3.45%

Other assets

4,423.6




4,102.3



    Total assets

$  44,122.7




$  42,090.6











Liabilities and stockholders' equity:








Deposits:








  Non-interest-bearing

$    7,899.0

$             -

-   %


$    7,152.2

$         -

-   %

  Savings, interest-bearing checking








    and money market

19,296.0

85.7

0.59


19,446.5

57.4

0.39

  Time

5,611.6

59.8

1.42


4,746.5

35.0

0.98

    Total deposits

32,806.6

145.5

0.59


31,345.2

92.4

0.39

Borrowings:








  Federal Home Loan Bank advances

2,748.6

39.7

1.92


2,698.0

22.3

1.10

  Federal funds purchased

655.6

9.1

1.85


627.6

4.9

1.03

  Customer repurchase agreements

241.7

0.6

0.34


311.6

0.4

0.19

  Other borrowings

127.1

1.5

1.60


102.5

1.3

1.71

    Total borrowings

3,773.0

50.9

1.80


3,739.7

28.9

1.03

Notes and debentures

891.0

24.7

3.70


927.1

22.3

3.21

    Total funding liabilities

37,470.6

$     221.1

0.79%


36,012.0

$ 143.6

0.53%

Other liabilities

776.1




548.5



    Total liabilities

38,246.7




36,560.5



Stockholders' equity

5,876.0




5,530.1



    Total liabilities and








      stockholders' equity

$  44,122.7




$  42,090.6











Net interest income/spread (3)


$     922.9

3.05%



$ 839.1

2.92%









Net interest margin



3.10%




2.94%


(1) Average yields earned and rates paid are annualized.







(2) Average balances and yields for securities are based on amortized cost.




(3) The fully taxable equivalent adjustment was $19.5 million and $31.0 million for the nine months ended

      September 30, 2018 and 2017, respectively.







 

 


People's United Financial, Inc.


























Loans acquired in a business combination are initially recorded at fair value with no carryover of an acquired entity's previous

established allowance for loan losses. Accordingly, selected asset quality metrics have been highlighted to distinguish between

the 'originated' portfolio and the 'acquired' portfolio.

























NON-PERFORMING ASSETS




























Sept. 30,


June 30, 


March 31,


Dec. 31,


Sept. 30,



(dollars in millions)


2018


2018


2018


2017


2017



Originated non-performing loans:













Commercial:













  Commercial real estate

$

17.2

$

20.3

$

21.0

$

23.7

$

36.7



  Commercial and industrial


44.9


50.1


34.6


32.6


34.9



  Equipment financing


49.3


49.2


47.7


44.3


54.1



    Total


111.4


119.6


103.3


100.6


125.7



Retail:













  Residential mortgage


32.0


33.5


35.4


32.7


33.8



  Home equity


14.6


15.1


16.1


15.4


14.8



  Other consumer


0.1


-


-


-


-



    Total


46.7


48.6


51.5


48.1


48.6



    Total originated non-performing loans (1)


158.1


168.2


154.8


148.7


174.3



REO:













  Commercial


8.7


9.3


10.6


9.3


6.3



  Residential


4.4


5.8


6.8


7.6


4.7



    Total REO


13.1


15.1


17.4


16.9


11.0



Repossessed assets


2.0


3.7


1.8


2.5


5.4



    Total non-performing assets

$

173.2

$

187.0

$

174.0

$

168.1

$

190.7
















Acquired non-performing loans (contractual amount)

$

32.3

$

26.7

$

30.1

$

29.7

$

26.6
















Originated non-performing loans as a percentage













  of originated loans


0.53

%

0.56

%

0.52

%

0.49

%

0.59

%


Non-performing assets as a percentage of:













  Originated loans, REO and repossessed assets


0.57


0.62


0.58


0.56


0.64



  Tangible stockholders' equity and originated













     allowance for loan losses


4.78


5.25


4.94


4.81


5.60
















(1) Reported net of government guarantees totaling $2.5 million at September 30, 2018, $2.6 million at June 30, 2018,  


     $3.0 million at March 31, 2018, $3.1 million at December 31, 2017 and $4.0 million at September 30, 2017.



 


People's United Financial, Inc.












PROVISION AND ALLOWANCE FOR LOAN LOSSES























Three Months Ended



Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,


(dollars in millions)


2018


2018


2018


2017


2017


Allowance for loan losses on originated loans:












  Balance at beginning of period

$

232.8

$

231.3

$

230.8

$

229.2

$

227.9


  Charge-offs


(6.4)


(4.7)


(4.4)


(6.4)


(5.8)


  Recoveries


1.0


1.9


1.4


1.2


1.5


    Net loan charge-offs


(5.4)


(2.8)


(3.0)


(5.2)


(4.3)


  Provision for loan losses


6.5


4.3


3.5


6.8


5.6


    Balance at end of period


233.9


232.8


231.3


230.8


229.2














Allowance for loan losses on acquired loans:












  Balance at beginning of period


4.0


4.0


3.6


4.2


3.7


  Charge-offs


(2.0)


(2.5)


(1.8)


(1.5)


(1.0)


  Recoveries


0.4


0.3


0.3


0.2


0.1


    Net loan charge-offs


(1.6)


(2.2)


(1.5)


(1.3)


(0.9)


  Provision for loan losses


1.7


2.2


1.9


0.7


1.4


    Balance at end of period


4.1


4.0


4.0


3.6


4.2


    Total allowance for loan losses

$

238.0

$

236.8

$

235.3

$

234.4

$

233.4














Originated commercial allowance for loan losses












  as a percentage of originated commercial loans


0.94

%

0.93

%

0.94

%

0.93

%

0.94

%

Originated retail allowance for loan losses












  as a percentage of originated retail loans


0.36


0.36


0.36


0.35


0.35


Total originated allowance for loan losses












  as a percentage of:












    Originated loans


0.78


0.77


0.78


0.77


0.77


    Originated non-performing loans


147.9


138.4


149.3


155.2


131.6














NET LOAN CHARGE-OFFS (RECOVERIES)

























Three Months Ended



Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,


(dollars in millions)


2018


2018


2018


2017


2017


Commercial:












  Commercial real estate

$

1.7

$

0.7

$

0.5

$

1.5

$

1.5


  Commercial and industrial


2.2


1.7


1.7


2.1


2.0


  Equipment financing


2.9


2.6


1.6


2.0


0.5


    Total


6.8


5.0


3.8


5.6


4.0


Retail:












  Residential mortgage


0.1


(0.1)


0.2


0.2


0.1


  Home equity


(0.1)


-


0.4


0.5


0.9


  Other consumer


0.2


0.1


0.1


0.2


0.2


    Total


0.2


-


0.7


0.9


1.2


    Total net loan charge-offs

$

7.0

$

5.0

$

4.5

$

6.5

$

5.2














Net loan charge-offs to












  average total loans (annualized)


0.09

%

0.06

%

0.06

%

0.08

%

0.06

%

 


People's United Financial, Inc.










NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP
































    In addition to evaluating People's United Financial Inc. ("People's United") results of operations in accordance with

U.S. generally accepted accounting principles ("GAAP"), management routinely supplements its evaluation with an analysis

of certain non-GAAP financial measures, such as the efficiency and tangible common equity ratios, tangible book value per

common share and operating earnings metrics. Management believes these non-GAAP financial measures provide


information useful to investors in understanding People's United's underlying operating performance and trends, and

facilitates comparisons with the performance of other financial institutions. Further, the efficiency ratio and operating

earnings metrics are used by management in its assessment of financial performance, including non-interest expense

control, while the tangible common equity ratio and tangible book value per common share are used to analyze the 


relative strength of People's United's capital position. 





















    The efficiency ratio, which represents an approximate measure of the cost required by People's United to generate a

dollar of revenue, is the ratio of (i) total non-interest expense (excluding operating lease expense, goodwill impairment 

charges, amortization of other acquisition-related intangible assets, losses on real estate assets and non-recurring


expenses) (the numerator) to (ii) net interest income on a fully taxable equivalent ("FTE") basis plus total non-interest

income (including the FTE adjustment on bank-owned life insurance ("BOLI") income, the netting of operating lease 

expense and excluding gains and losses on sales of assets other than residential mortgage loans and acquired loans, and

non-recurring income) (the denominator). People's United generally considers an item of income or expense to be


non-recurring if it is not similar to an item of income or expense of a type incurred within the last two years and is not

similar to an item of income or expense of a type reasonably expected to be incurred within the following two years.














     Operating earnings exclude from net income available to common shareholders those items that management considers

to be of such a non-recurring or infrequent nature that, by excluding such items (net of income taxes), People's United's

results can be measured and assessed on a more consistent basis from period to period. Items excluded from operating

earnings, which include, but are not limited to: (i) non-recurring gains/losses; (ii) merger-related expenses, including

acquisition integration and other costs; (iii) writedowns of banking house assets and related lease termination costs; 

(iv) severance-related costs; and (v) charges related to executive-level management separation costs, are generally also

excluded when calculating the efficiency ratio. Operating earnings per common share ("EPS") is derived by determining the

per common share impact of the respective adjustments to arrive at operating earnings and adding (subtracting) such

amounts to (from) diluted EPS, as reported. Operating return on average assets is calculated by dividing operating earnings

(annualized) by average total assets. Operating return on average tangible common equity is calculated by dividing


operating earnings (annualized) by average tangible common equity. The operating common dividend payout ratio is

calculated by dividing common dividends paid by operating earnings for the respective period.

















    The tangible common equity ratio is the ratio of (i) tangible common equity (total stockholders' equity less preferred

stock, goodwill and other acquisition-related intangible assets) (the numerator) to (ii) tangible assets (total assets less

goodwill and other acquisition-related intangible assets) (the denominator). Tangible book value per common share is

calculated by dividing tangible common equity by common shares (total common shares issued, less common shares

classified as treasury shares and unallocated Employee Stock Ownership Plan ("ESOP") common shares).
















    In light of diversity in presentation among financial institutions, the methodologies used by People's United for


determining the non-GAAP financial measures discussed above may differ from those used by other financial



institutions.












 

 


People's United Financial, Inc.















NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP - Continued







OPERATING NON-INTEREST EXPENSE AND EFFICIENCY RATIO











Three Months Ended


Nine Months Ended


Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,


Sept. 30,


Sept. 30,

(dollars in millions)


2018


2018


2018


2017


2017


2018


2017

Total non-interest expense 


$   241.3


$   248.6


$   243.5


$   239.7


$   237.1


$     733.4


$      720.5

Adjustments to arrive at operating















  non-interest expense:















  Merger-related expenses


(0.5)


(2.9)


-


(1.6)


(3.0)


(3.4)


(29.0)

    Total


(0.5)


(2.9)


-


(1.6)


(3.0)


(3.4)


(29.0)

    Operating non-interest expense


240.8


245.7


243.5


238.1


234.1


730.0


691.5
















Operating lease expense


(8.9)


(8.7)


(9.0)


(8.9)


(8.8)


(26.6)


(26.3)

Amortization of other acquisition-related















    intangible assets


(4.9)


(4.9)


(5.1)


(7.9)


(7.9)


(14.9)


(22.1)

Other (1)


(1.8)


(1.7)


(1.3)


(1.4)


(1.5)


(4.8)


(3.7)

    Total non-interest expense for















      efficiency ratio


$   225.2


$   230.4


$   228.1


$   219.9


$   215.9


$     683.7


$      639.4
















Net interest income (FTE basis)


$   313.0


$   307.8


$   302.1


$   304.1


$   295.8


$     922.9


$      839.1

Total non-interest income


92.3


94.9


90.4


87.3


89.3


277.6


265.6

    Total revenues


405.3


402.7


392.5


391.4


385.1


1,200.5


1,104.7

Adjustments:















  Operating lease expense


(8.9)


(8.7)


(9.0)


(8.9)


(8.8)


(26.6)


(26.3)

  BOLI FTE adjustment


0.6


0.4


0.4


0.8


1.2


1.4


2.6

  Net security (gains) losses


(0.1)


-


(0.1)


9.8


-


(0.2)


15.6

  Other (2)


-


-


-


(1.3)


(0.2)


-


-

    Total revenues for efficiency ratio


$   396.9


$   394.4


$   383.8


$   391.8


$   377.3


$  1,175.1


$   1,096.6

    Efficiency ratio


56.7%


58.4%


59.4%


56.1%


57.3%


58.2%


58.3%
















(1)  Items classified as "other" and deducted from non-interest expense for purposes of calculating the efficiency ratio include

       certain franchise taxes and real estate owned expenses.











(2)  Items classified as "other" and (deducted from) added to total revenues for purposes of calculating the  efficiency ratio

       include, as applicable, asset write-offs and gains associated with the sale of branch locations.





 


People's United Financial, Inc.















NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP - Continued







OPERATING EARNINGS

















Three Months Ended


Nine Months Ended



Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,


Sept. 30,


Sept. 30,

(dollars in millions, except per common share data)


2018


2018


2018


2017


2017


2018


2017

Net income available to common shareholders


$   113.5


$   106.7


$   104.4


$   102.7


$        87.3


$   324.6


$   220.4

Adjustments to arrive at operating earnings:















  Merger-related expenses


0.5


2.9


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