EX-99.1 2 d572898dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

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

 

  •   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 100th 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:

 

($ in millions, except per common share data)              
     As of and for the Three Months Ended  
     Jun. 30, 2018     Mar. 31, 2018     Jun. 30, 2017  

Net income

    $ 110.2     $ 107.9     $ 69.3  

Net income available to common shareholders

      106.7       104.4       65.8  

Per common share

      0.31       0.30       0.19  

Operating earnings1

      109.0       104.4       82.6  

Per common share

      0.32       0.30       0.24  
  

 

 

    

 

 

    

 

 

  

Net interest income

    $ 301.2     $ 295.8     $ 274.9  

Net interest margin

      3.10 %      3.05 %      2.96 % 

Non-interest income

      94.9       90.4       91.6  
  

 

 

    

 

 

    

 

 

  

Non-interest expense

    $ 248.6     $ 243.5     $ 257.3  

Operating non-interest expense1

      245.7       243.5       232.5  

Efficiency ratio1

      58.4 %      59.4 %      58.4 % 
  

 

 

    

 

 

    

 

 

  

Average balances

       

Loans

    $ 32,116     $ 32,096     $ 31,400  

Deposits

      32,536       32,824       32,024  

End of period balances

       

Loans

      32,512       32,104       31,611  

Deposits

      32,468       32,894       31,815  
  

 

 

    

 

 

    

 

 

  

 

1  See Non-GAAP Financial Measures and Reconciliation to GAAP beginning on page 16.

“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.”

 

     As of and for the Three Months Ended  
     Jun. 30, 2018     Mar. 31, 2018     Jun. 30, 2017  

Asset Quality

       

Net loan charge-offs to average total loans

      0.06 %      0.06 %      0.09 % 

Originated non-performing loans as a percentage of originated loans

      0.56 %      0.52 %      0.60 % 
  

 

 

    

 

 

    

 

 

  

Returns

       

Return on average assets1

      1.00 %      0.98 %      0.65 % 

Return on average tangible common equity1

      13.9 %      13.8 %      8.7 % 
  

 

 

    

 

 

    

 

 

  

Capital Ratios

       

People’s United Financial, Inc.

       

Tangible common equity / tangible assets

      7.3 %      7.3 %      7.5 % 

Tier 1 leverage

      8.6 %      8.5 %      8.6 % 

Common equity tier 1

      10.0 %      10.1 %      10.1 % 

Tier 1 risk-based

      10.8 %      10.8 %      10.9 % 

Total risk-based

      12.5 %      12.6 %      12.6 % 

People’s United Bank, N.A.

       

Tier 1 leverage

      9.1 %      8.6 %      9.0 % 

Common equity tier 1

      11.4 %      11.0 %      11.3 % 

Tier 1 risk-based

      11.4 %      11.0 %      11.3 % 

Total risk-based

      13.4 %      12.9 %      13.3 % 
  

 

 

    

 

 

    

 

 

  

 

1  See Non-GAAP Financial Measures and Reconciliation to GAAP beginning on page 16.    

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.

 

Page 2

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).

 

  •   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).

 

  •   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).

 

  •   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.

 

Page 3

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.

 

Page 4

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.

INVESTOR CONTACT:

Andrew S. Hersom

Investor Relations

203.338.4581

Andrew.Hersom@peoples.com

MEDIA CONTACT:

Steven Bodakowski

Corporate Communications

203.338.4202

Steven.Bodakowski@peoples.com

 

Page 5

People’s United Financial, Inc.    

FINANCIAL HIGHLIGHTS    

 

 

    Three Months Ended  

(dollars in millions, except per common share data)

   June 30,
2018		     March 31,
2018		     Dec. 31,
2017		     Sept. 30,
2017		     June 30,
2017		  

Earnings Data:

          

Net interest income (fully taxable equivalent)

   $ 307.8     $ 302.1     $ 304.1     $ 295.8     $ 285.2  

Net interest income

     301.2       295.8       292.3       284.6       274.9  

Provision for loan losses

     6.5       5.4       7.5       7.0       7.1  

Non-interest income (1)

     94.9       90.4       87.3       89.3       91.6  

Non-interest expense (1)

     248.6       243.5       239.7       237.1       257.3  

Income before income tax expense

     141.0       137.3       132.4       129.8       102.1  

Net income

     110.2       107.9       106.2       90.8       69.3  

Net income available to common shareholders (1)

     106.7       104.4       102.7       87.3       65.8  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Selected Statistical Data:

          

Net interest margin (2)

     3.10 %      3.05 %      3.07 %      3.04 %      2.96 % 

Return on average assets (1), (2)

     1.00       0.98       0.96       0.84       0.65  

Return on average common equity (2)

     7.6       7.5       7.4       6.4       4.8  

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

     13.9       13.8       13.8       11.8       8.7  

Efficiency ratio (1)

     58.4       59.4       56.1       57.3       58.4  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Common Share Data:

          

Earnings per common share:

          

Basic

   $ 0.31     $ 0.31     $ 0.30     $ 0.26     $ 0.20  

Diluted (1)

     0.31       0.30       0.30       0.26       0.19  

Dividends paid per common share

     0.1750       0.1725       0.1725       0.1725       0.1725  

Common dividend payout ratio (1)

     56.2 %      56.3 %      57.1 %      66.8 %      88.6 % 

Book value per common share (end of period)

   $ 16.56     $ 16.43     $ 16.40     $ 16.29     $ 16.18  

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

     9.02       8.93       8.87       8.68       8.99  

Stock price:

          

High

     19.37       20.26       19.50       18.26       18.21  

Low

     18.00       18.18       17.58       15.97       16.44  

Close (end of period)

     18.09       18.66       18.70       18.14       17.66  

Common shares (end of period) (in millions)

     341.59       341.01       339.98       337.84       337.51  

Weighted average diluted common shares (in millions)

     344.47       344.00       341.11       338.82       338.51  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(1) See Non-GAAP Financial Measures and Reconciliation to GAAP beginning on page 16.
(2) Annualized.

 

6

People’s United Financial, Inc.    

FINANCIAL HIGHLIGHTS    

 

 

     Six Months Ended  
     June 30,  

(dollars in millions, except per common share data)

    2018     2017  

Earnings Data:

     

Net interest income (fully taxable equivalent)

    $ 609.9     $ 543.3  

Net interest income

      597.0       523.5  

Provision for loan losses

      11.9       11.5  

Non-interest income

      185.3       176.3  

Non-interest expense (1)

      492.1       483.4  

Income before income tax expense

      278.3       204.9  

Net income

      218.1       140.1  

Net income available to common shareholders (1)

      211.1       133.1  
  

 

 

    

 

 

  

Selected Statistical Data:

     

Net interest margin (2)

      3.07 %      2.90 % 

Return on average assets (1), (2)

      0.99       0.68  

Return on average common equity (2)

      7.5       5.1  

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

      13.9       9.1  

Efficiency ratio (1)

      58.9       58.9  
  

 

 

    

 

 

  

Common Share Data:

     

Earnings per common share:

     

Basic

    $ 0.62     $ 0.42  

Diluted (1)

      0.61       0.41  

Dividends paid per common share

      0.3475       0.3425  

Common dividend payout ratio (1)

      56.2 %      83.4 % 

Book value per common share (end of period)

    $ 16.56     $ 16.18  

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

      9.02       8.99  

Stock price:

     

High

      20.26       19.85  

Low

      18.00       16.44  

Close (end of period)

      18.09       17.66  

Common shares (end of period) (in millions)

      341.59       337.51  

Weighted average diluted common shares (in millions)

      344.23       324.89  
  

 

 

    

 

 

  

 

(1) See Non-GAAP Financial Measures and Reconciliation to GAAP beginning on page 16.    
(2) Annualized.    

 

7

People’s United Financial, Inc.

FINANCIAL HIGHLIGHTS - Continued

 

 

     As of and for the Three Months Ended  
     June 30,     March 31,     Dec. 31,     Sept. 30,     June 30,  

(dollars in millions)

    2018     2018     2017     2017     2017  

Financial Condition Data:

           

Total assets

    $ 44,575     $ 44,101     $ 44,453     $ 43,998     $ 43,023  

Loans

      32,512       32,104       32,575       32,384       31,611  

Securities

      7,324       7,173       7,043       6,914       6,880  

Short-term investments

      253       470       378       303       216  

Allowance for loan losses

      237       235       234       233       232  

Goodwill and other acquisition-related intangible assets

      2,574       2,555       2,560       2,568       2,426  

Deposits

      32,468       32,894       33,056       32,547       31,815  

Borrowings

      4,639       3,877       4,104       4,144       4,084  

Notes and debentures

      889       892       902       906       907  

Stockholders’ equity

      5,900       5,846       5,820       5,746       5,704  

Total risk-weighted assets (1):

           

People’s United Financial, Inc.

      33,371       32,833       33,256       33,029       32,095  

People’s United Bank, N.A.

      33,323       32,784       33,202       32,981       32,050  

Non-performing assets (2)

      187       174       168       191       198  

Net loan charge-offs

      5.0       4.5       6.5       5.2       6.8  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average Balances:

           

Loans

    $ 32,116     $ 32,096     $ 32,271     $ 31,994     $ 31,400  

Securities (3)

      7,302       7,186       7,023       6,559       6,728  

Short-term investments

      267       366       361       347       355  

Total earning assets

      39,685       39,648       39,654       38,900       38,483  

Total assets

      44,110       44,011       44,039       43,256       42,666  

Deposits

      32,536       32,824       32,879       32,065       32,024  

Borrowings

      4,031       3,752       3,836       4,010       3,498  

Notes and debentures

      890       895       904       909       907  

Total funding liabilities

      37,456       37,471       37,619       36,984       36,429  

Stockholders’ equity

      5,870       5,821       5,774       5,722       5,696  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ratios:

           

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

      0.06 %      0.06 %      0.08 %      0.06 %      0.09 % 

Non-performing assets to originated loans, real estate owned and repossessed assets (2)

      0.62       0.58       0.56       0.64       0.67  

Originated allowance for loan losses to:

           

Originated loans (2)

      0.77       0.78       0.77       0.77       0.77  

Originated non-performing loans (2)

      138.4       149.3       155.2       131.6       128.1  

Average stockholders’ equity to average total assets

      13.3       13.2       13.1       13.2       13.4  

Stockholders’ equity to total assets

      13.2       13.3       13.1       13.1       13.3  

Tangible common equity to tangible assets (4)

      7.3       7.3       7.2       7.1       7.5  

Total risk-based capital (1):

           

People’s United Financial, Inc.

      12.5       12.6       12.2       12.0       12.6  

People’s United Bank, N.A.

      13.4       12.9       12.6       12.6       13.3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(1) June 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 beginning on page 16.

 

8

People’s United Financial, Inc.

CONSOLIDATED STATEMENTS OF CONDITION

 

  

(in millions)

    June 30,
2018		     March 31,
2018		     Dec. 31,
2017		     June 30,
2017		  

Assets

         

Cash and due from banks

    $ 462.7     $ 402.2     $ 505.1     $ 455.9  

Short-term investments

      253.1       470.3       377.5       216.3  

Securities:

         

Trading debt securities, at fair value

      8.2       8.2       8.2       7.8  

Equity securities, at fair value

      9.9       9.5       8.7       9.0  

Debt securities available-for-sale, at fair value

      3,245.1       3,153.8       3,125.3       3,673.3  

Debt securities held-to-maturity, at amortized cost

      3,718.7       3,696.3       3,588.1       2,875.6  

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

      342.2       305.2       312.3       314.3  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total securities

      7,324.1       7,173.0       7,042.6       6,880.0  
  

 

 

    

 

 

    

 

 

    

 

 

  

Loans held-for-sale

      17.1       10.4       16.6       26.5  
  

 

 

    

 

 

    

 

 

    

 

 

  

Loans:

         

Commercial real estate

      10,761.1       10,810.4       11,068.7       11,164.2  

Commercial and industrial

      8,823.3       8,574.1       8,731.1       8,709.7  

Equipment financing

      4,103.9       3,887.9       3,905.4       2,918.3  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total Commercial Portfolio

      23,688.3       23,272.4       23,705.2       22,792.2  
  

 

 

    

 

 

    

 

 

    

 

 

  

Residential mortgage

      6,866.2       6,834.2       6,805.7       6,687.7  

Home equity and other consumer

      1,957.5       1,997.8       2,064.4       2,131.3  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total Retail Portfolio

      8,823.7       8,832.0       8,870.1       8,819.0  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total loans

      32,512.0       32,104.4       32,575.3       31,611.2  

Less allowance for loan losses

      (236.8 )      (235.3 )      (234.4 )      (231.6 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total loans, net

      32,275.2       31,869.1       32,340.9       31,379.6  
  

 

 

    

 

 

    

 

 

    

 

 

  

Goodwill and other acquisition-related intangible assets

      2,573.8       2,554.9       2,560.0       2,426.3  

Bank-owned life insurance

      407.2       406.0       405.0       404.7  

Premises and equipment, net

      246.3       250.0       253.0       270.2  

Other assets

      1,015.0       964.6       952.7       963.7  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

    $ 44,574.5     $ 44,100.5     $ 44,453.4     $ 43,023.2  
  

 

 

    

 

 

    

 

 

    

 

 

  

Liabilities

         

Deposits:

         

Non-interest-bearing

    $ 8,002.4     $ 7,938.6     $ 8,002.4     $ 7,566.4  

Savings

      4,184.9       4,442.1       4,410.5       4,668.6  

Interest-bearing checking and money market

      14,659.4       15,257.6       15,189.1       14,887.0  

Time

      5,621.5       5,255.5       5,454.3       4,692.7  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total deposits

      32,468.2       32,893.8       33,056.3       31,814.7  
  

 

 

    

 

 

    

 

 

    

 

 

  

Borrowings:

         

Federal Home Loan Bank advances

      3,510.1       2,610.7       2,774.4       3,130.8  

Federal funds purchased

      855.0       805.0       820.0       629.0  

Customer repurchase agreements

      254.9       265.8       301.6       324.0  

Other borrowings

      19.1       195.4       207.8       0.6  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total borrowings

      4,639.1       3,876.9       4,103.8       4,084.4  
  

 

 

    

 

 

    

 

 

    

 

 

  

Notes and debentures

      888.7       891.9       901.6       906.5  

Other liabilities

      678.3       592.4       571.8       514.1  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities

      38,674.3       38,255.0       38,633.5       37,319.7  
  

 

 

    

 

 

    

 

 

    

 

 

  

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

      6,040.3       6,029.0       6,012.3       5,965.0  

Retained earnings

      1,167.9       1,121.4       1,040.2       967.8  

Unallocated common stock of Employee Stock Ownership Plan, at cost

      (133.7 )      (135.5 )      (137.3 )      (141.0 ) 

Accumulated other comprehensive loss

      (260.7 )      (255.8 )      (181.7 )      (174.6 ) 

Treasury stock, at cost

      (1,162.1 )      (1,162.1 )      (1,162.1 )      (1,162.1 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total stockholders’ equity

      5,900.2       5,845.5       5,819.9       5,703.5  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities and stockholders’ equity

    $ 44,574.5     $ 44,100.5     $ 44,453.4     $ 43,023.2  
  

 

 

    

 

 

    

 

 

    

 

 

  

 

9

People’s United Financial, Inc.    

CONSOLIDATED STATEMENTS OF INCOME    

 

 

     Three Months Ended  
     June 30,      March 31,      Dec. 31,     Sept. 30,      June 30,  

(in millions, except per common share data)

    2018      2018      2017     2017      2017  

Interest and dividend income:

              

Commercial real estate

    $ 111.5      $ 107.0      $ 106.2     $ 105.6      $ 105.3  

Commercial and industrial

      90.1        82.3        80.1       80.0        74.1  

Equipment financing

      50.5        48.9        47.4       41.5        31.5  

Residential mortgage

      55.3        54.7        53.4       52.5        52.3  

Home equity and other consumer

      21.4        20.8        20.7       21.0        19.9  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

Total interest on loans

      328.8        313.7        307.8       300.6        283.1  

Securities

      45.1        44.0        41.6       37.2        37.9  

Short-term investments

      1.3        1.2        1.0       1.1        0.9  

Loans held-for-sale

      0.2        0.2        0.2       0.3        0.1  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

Total interest and dividend income

      375.4        359.1        350.6       339.2        322.0  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

Interest expense:

              

Deposits

      47.3        41.3        38.3       34.4        30.9  

Borrowings

      18.5        14.2        12.4       12.7        8.9  

Notes and debentures

      8.4        7.8        7.6       7.5        7.3  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

Total interest expense

      74.2        63.3        58.3       54.6        47.1  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

Net interest income

      301.2        295.8        292.3       284.6        274.9  

Provision for loan losses

      6.5        5.4        7.5       7.0        7.1  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

Net interest income after provision for loan losses

      294.7        290.4        284.8       277.6        267.8  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

Non-interest income:

              

Bank service charges

      24.3        23.8        24.7       25.3        25.0  

Investment management fees

      17.2        17.7        17.3       16.9        16.3  

Operating lease income

      11.2        10.7        11.7       10.9        11.0  

Commercial banking lending fees

      9.4        10.4        8.8       7.0        11.5  

Insurance revenue

      8.3        9.8        6.9       9.7        7.5  

Cash management fees

      7.0        6.6        6.5       6.8        6.5  

Brokerage commissions

      3.2        3.1        2.9       2.8        3.4  

Customer interest rate swap income, net

      4.0        1.5        5.2       1.9        2.4  

Net security gains (losses) (1)

      —          0.1        (9.8 )      —          0.1  

Other non-interest income

      10.3        6.7        13.1       8.0        7.9  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

Total non-interest income

      94.9        90.4        87.3       89.3        91.6  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

Non-interest expense:

              

Compensation and benefits (2)

      135.0        140.7        132.7       129.9        132.1  

Occupancy and equipment

      40.8        41.2        41.0       40.2        39.8  

Professional and outside services

      20.6        18.6        18.7       19.2        28.1  

Regulatory assessments

      9.9        10.6        11.9       10.3        9.9  

Operating lease expense

      8.7        9.0        8.9       8.8        8.7  

Amortization of other acquisition-related intangible assets

      4.9        5.1        7.9       7.9        7.9  

Other non-interest expense (2)

      28.7        18.3        18.6       20.8        30.8  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

Total non-interest expense (1)

      248.6        243.5        239.7       237.1        257.3  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

Income before income tax expense

      141.0        137.3        132.4       129.8        102.1  

Income tax expense (1)

      30.8        29.4        26.2       39.0        32.8  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

Net income

      110.2        107.9        106.2       90.8        69.3  

Preferred stock dividend

      3.5        3.5        3.5       3.5        3.5  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

Net income available to common shareholders

    $ 106.7      $ 104.4      $ 102.7     $ 87.3      $ 65.8  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

Earnings per common share:

              

Basic

    $ 0.31      $ 0.31      $ 0.30     $ 0.26      $ 0.20  

Diluted

      0.31        0.30        0.30       0.26        0.19  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

  

 

(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 $2.9 million, $1.6 million, $3.0 million and $24.8 million of non-operating expenses for the three months ended June 30, 2018, December 31, 2017, September 30, 2017 and June 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 beginning on page 16.
(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.

 

10

People’s United Financial, Inc.

CONSOLIDATED STATEMENTS OF INCOME

 

 

     Six Months Ended
June 30,		  

(in millions, except per common share data)

    2018      2017  

Interest and dividend income:

      

Commercial real estate

    $ 218.5      $ 193.9  

Commercial and industrial

      172.4        138.7  

Equipment financing

      99.4        63.1  

Residential mortgage

      110.0        101.6  

Home equity and other consumer

      42.2        38.3  
  

 

 

     

 

 

  

Total interest on loans

      642.5        535.6  

Securities

      89.1        74.9  

Short-term investments

      2.5        1.6  

Loans held for sale

      0.4        0.4  
  

 

 

     

 

 

  

Total interest and dividend income

      734.5        612.5  
  

 

 

     

 

 

  

Interest expense:

      

Deposits

      88.6        58.0  

Borrowings

      32.7        16.2  

Notes and debentures

      16.2        14.8  
  

 

 

     

 

 

  

Total interest expense

      137.5        89.0  
  

 

 

     

 

 

  

Net interest income

      597.0        523.5  

Provision for loan losses

      11.9        11.5  
  

 

 

     

 

 

  

Net interest income after provision for loan losses

      585.1        512.0  
  

 

 

     

 

 

  

Non-interest income:

      

Bank service charges

      48.1        48.5  

Investment management fees

      34.9        32.3  

Operating lease income

      21.9        21.2  

Commercial banking lending fees

      19.8        19.7  

Insurance revenue

      18.1        16.6  

Cash management fees

      13.6        12.8  

Brokerage commissions

      6.3        6.4  

Customer interest rate swap income, net

      5.5        5.2  

Net security gains (losses)

      0.1        (15.6 ) 

Other non-interest income

      17.0        29.2  
  

 

 

     

 

 

  

Total non-interest income

      185.3        176.3  
  

 

 

     

 

 

  

Non-interest expense:

      

Compensation and benefits (1)

      275.7        260.0  

Occupancy and equipment

      82.0        78.4  

Professional and outside services

      39.2        43.6  

Regulatory assessments

      20.5        19.5  

Operating lease expense

      17.7        17.5  

Amortization of other acquisition-related intangible assets

      10.0        14.2  

Other non-interest expense (1)

      47.0        50.2  
  

 

 

     

 

 

  

Total non-interest expense (2)

      492.1        483.4  
  

 

 

     

 

 

  

Income before income tax expense

      278.3        204.9  

Income tax expense

      60.2        64.8  
  

 

 

     

 

 

  

Net income

      218.1        140.1  

Preferred stock dividend

      7.0        7.0  
  

 

 

     

 

 

  

Net income available to common shareholders

    $ 211.1      $ 133.1  
  

 

 

     

 

 

  

Earnings per common share:

      

Basic

    $ 0.62      $ 0.42  

Diluted

      0.61        0.41  
  

 

 

     

 

 

  

 

(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 $2.9 million and $26.0 million of non-operating expenses for the six months ended June 30, 2018 and 2017, respectively. See Non-GAAP Financial Measures and Reconciliation to GAAP beginning on page 16.

 

11

People’s United Financial, Inc.    

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

 

 

     June 30, 2018     March 31, 2018     June 30, 2017  
     Average             Yield/     Average             Yield/     Average             Yield/  

Three months ended (dollars in millions)

    Balance      Interest      Rate     Balance      Interest      Rate     Balance      Interest      Rate  

Assets:

                         

Short-term investments

    $ 266.7      $ 1.3        2.02 %    $ 366.4      $ 1.2        1.35 %    $ 354.8      $ 0.9        0.97 % 

Securities (2)

      7,302.1        49.2        2.69       7,186.1        48.0        2.67       6,727.5        44.6        2.65  

Loans:

                         

Commercial real estate

      10,802.9        111.5        4.13       10,934.2        107.0        3.91       11,371.4        105.3        3.70  

Commercial and industrial

      8,558.3        92.6        4.32       8,418.6        84.6        4.02       8,276.1        77.7        3.75  

Equipment financing

      3,923.6        50.5        5.14       3,870.6        48.9        5.06       2,924.8        31.5        4.31  

Residential mortgage

      6,853.6        55.5        3.24       6,837.1        54.9        3.21       6,693.3        52.4        3.14  

Home equity and other consumer

      1,977.6        21.4        4.33       2,035.0        20.8        4.09       2,134.8        19.9        3.73  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Total loans

      32,116.0        331.5        4.13       32,095.5        316.2        3.94       31,400.4        286.8        3.65  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Total earning assets

      39,684.8      $ 382.0        3.85 %      39,648.0      $ 365.4        3.69 %      38,482.7      $ 332.3        3.45 % 
     

 

 

     

 

 

       

 

 

     

 

 

       

 

 

     

 

 

  

Other assets

      4,425.0             4,363.3             4,183.1        
  

 

 

          

 

 

          

 

 

        

Total assets

    $ 44,109.8           $ 44,011.3           $ 42,665.8        
  

 

 

          

 

 

          

 

 

        

Liabilities and stockholders’ equity:

                         

Deposits:

                         

Non-interest-bearing

    $ 7,872.7      $ —          —   %    $ 7,796.7      $ —          —   %    $ 7,399.5      $ —          —   % 

Savings, interest-bearing checking and money market

      19,220.6        28.2        0.59       19,642.6        24.9        0.51       19,895.8        19.6        0.39  

Time

      5,442.3        19.1        1.40       5,384.5        16.4        1.22       4,728.7        11.3        0.96  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Total deposits

      32,535.6        47.3        0.58       32,823.8        41.3        0.50       32,024.0        30.9        0.39  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Borrowings:

                         

Federal Home Loan Bank advances

      3,009.3        14.8        1.97       2,677.1        10.9        1.63       2,546.6        7.1        1.11  

Federal funds purchased

      634.5        3.0        1.86       608.3        2.3        1.53       625.2        1.6        1.04  

Customer repurchase agreements

      228.7        0.1        0.31       262.6        0.1        0.18       313.9        0.1        0.19  

Other borrowings

      158.5        0.6        1.45       203.7        0.9        1.65       11.8        0.1        1.94  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Total borrowings

      4,031.0        18.5        1.84       3,751.7        14.2        1.51       3,497.5        8.9        1.02  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Notes and debentures

      889.6        8.4        3.79       895.2        7.8        3.48       907.2        7.3        3.24  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Total funding liabilities

      37,456.2      $ 74.2        0.79 %      37,470.7      $ 63.3        0.68 %      36,428.7      $ 47.1        0.52 % 
     

 

 

     

 

 

       

 

 

     

 

 

       

 

 

     

 

 

  

Other liabilities

      784.0             720.1             541.0        
  

 

 

          

 

 

          

 

 

        

Total liabilities

      38,240.2             38,190.8             36,969.7        

Stockholders’ equity

      5,869.6             5,820.5             5,696.1        
  

 

 

          

 

 

          

 

 

        

Total liabilities and stockholders’ equity

    $ 44,109.8           $ 44,011.3           $ 42,665.8        
  

 

 

          

 

 

          

 

 

        

Net interest income/spread (3)

       $ 307.8        3.06 %       $ 302.1        3.01 %       $ 285.2        2.93 % 
     

 

 

     

 

 

       

 

 

     

 

 

       

 

 

     

 

 

  

Net interest margin

            3.10 %            3.05 %            2.96 % 
        

 

 

          

 

 

          

 

 

  

 

(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, $6.3 million and $10.3 million for the three months ended June 30, 2018, March 31, 2018 and June 30, 2017, respectively.    

 

12

People’s United Financial, Inc.

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

 

 

     June 30, 2018     June 30, 2017  

Six months ended (dollars in millions)

    Average
Balance		      Interest      Yield/
Rate		     Average
Balance		      Interest      Yield/
Rate		  

Assets:

                 

Short-term investments

    $ 316.3      $ 2.5        1.63 %    $ 362.6      $ 1.6        0.89 % 

Securities (2)

      7,244.4        97.2        2.68       6,779.2        87.8        2.59  

Loans:

                 

Commercial real estate

      10,868.2        218.5        4.02       10,783.8        193.9        3.60  

Commercial and industrial

      8,488.8        177.2        4.18       7,996.0        145.6        3.64  

Equipment financing

      3,897.3        99.4        5.10       2,948.5        63.1        4.28  

Residential mortgage

      6,845.4        110.4        3.22       6,534.9        102.0        3.12  

Home equity and other consumer

      2,006.2        42.2        4.20       2,120.2        38.3        3.62  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Total loans

      32,105.9        647.7        4.03       30,383.4        542.9        3.57  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Total earning assets

      39,666.6      $ 747.4        3.77 %      37,525.2      $ 632.3        3.37 % 
     

 

 

     

 

 

       

 

 

     

 

 

  

Other assets

      4,394.2             3,972.8        
  

 

 

          

 

 

        

Total assets

    $ 44,060.8           $ 41,498.0        
  

 

 

          

 

 

        

Liabilities and stockholders’ equity:

                 

Deposits:

                 

Non-interest-bearing

    $ 7,834.9      $ —          —   %    $ 6,919.9      $ —          —   % 

Savings, interest-bearing checking and money market

      19,430.4        53.1        0.55       19,404.6        36.0        0.37  

Time

      5,413.6        35.5        1.31       4,654.9        22.0        0.95  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Total deposits

      32,678.9        88.6        0.54       30,979.4        58.0        0.37  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Borrowings:

                 

Federal Home Loan Bank advances

      2,844.1        25.7        1.81       2,628.7        12.9        0.98  

Federal funds purchased

      621.5        5.3        1.70       616.4        2.8        0.91  

Customer repurchase agreements

      245.5        0.3        0.24       311.7        0.2        0.19  

Other borrowings

      181.0        1.4        1.57       45.7        0.3        0.79  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Total borrowings

      3,892.1        32.7        1.68       3,602.5        16.2        0.90  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Notes and debentures

      892.5        16.2        3.63       936.3        14.8        3.17  
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Total funding liabilities

      37,463.5      $ 137.5        0.73 %      35,518.2      $ 89.0        0.50 % 
     

 

 

     

 

 

       

 

 

     

 

 

  

Other liabilities

      752.1             547.4        
  

 

 

          

 

 

        

Total liabilities

      38,215.6             36,065.6        

Stockholders’ equity

      5,845.2             5,432.4        
  

 

 

          

 

 

        

Total liabilities and stockholders’ equity

    $ 44,060.8           $ 41,498.0        
  

 

 

          

 

 

        

Net interest income/spread (3)

       $ 609.9        3.04 %       $ 543.3        2.87 % 
     

 

 

     

 

 

       

 

 

     

 

 

  

Net interest margin

            3.07 %            2.90 % 
        

 

 

          

 

 

  

 

(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 $12.9 million and $19.8 million for the six months ended June 30, 2018 and 2017, respectively.

 

13

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

 

 

(dollars in millions)

    June 30,
2018		     March 31,
2018		     Dec. 31,
2017		     Sept. 30,
2017		     June 30,
2017		  

Originated non-performing loans:

           

Commercial:

           

Commercial real estate

    $ 20.3     $ 21.0     $ 23.7     $ 36.7     $ 42.9  

Commercial and industrial

      50.1       34.6       32.6       34.9       40.2  

Equipment financing

      49.2       47.7       44.3       54.1       48.2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

      119.6       103.3       100.6       125.7       131.3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Retail:

           

Residential mortgage

      33.5       35.4       32.7       33.8       30.8  

Home equity

      15.1       16.1       15.4       14.8       15.8  

Other consumer

      —         —         —         —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

      48.6       51.5       48.1       48.6       46.6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total originated non-performing loans (1)

      168.2       154.8       148.7       174.3       177.9  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

REO:

           

Commercial

      9.3       10.6       9.3       6.3       4.3  

Residential

      5.8       6.8       7.6       4.7       6.7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total REO

      15.1       17.4       16.9       11.0       11.0  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Repossessed assets

      3.7       1.8       2.5       5.4       9.2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total non-performing assets

    $ 187.0     $ 174.0     $ 168.1     $ 190.7     $ 198.1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Acquired non-performing loans (contractual amount)

    $ 26.7     $ 30.1     $ 29.7     $ 26.6     $ 26.4  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Originated non-performing loans as a percentage of originated loans

      0.56 %      0.52 %      0.49 %      0.59 %      0.60 % 

Non-performing assets as a percentage of:

           

Originated loans, REO and repossessed assets

      0.62       0.58       0.56       0.64       0.67  

Tangible stockholders’ equity and originated allowance for loan losses

      5.25       4.94       4.81       5.60       5.65  

 

(1) Reported net of government guarantees totaling $2.6 million at June 30, 2018, $3.0 million at March 31, 2018, $3.1 million at December 31, 2017, $4.0 million at September 30, 2017 and $4.2 million at June 30, 2017.

 

14

People’s United Financial, Inc.

PROVISION AND ALLOWANCE FOR LOAN LOSSES

 

 

     Three Months Ended  
     June 30,     March 31,     Dec. 31,     Sept. 30,     June 30,  

(dollars in millions)

    2018     2018     2017     2017     2017  

Allowance for loan losses on originated loans:

 

        

Balance at beginning of period

    $ 231.3     $ 230.8     $ 229.2     $ 227.9     $ 225.0  

Charge-offs

      (4.7 )      (4.4 )      (6.4 )      (5.8 )      (6.7 ) 

Recoveries

      1.9       1.4       1.2       1.5       1.8  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net loan charge-offs

      (2.8 )      (3.0 )      (5.2 )      (4.3 )      (4.9 ) 

Provision for loan losses

      4.3       3.5       6.8       5.6       7.8  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance at end of period

      232.8       231.3       230.8       229.2       227.9  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Allowance for loan losses on acquired loans:

           

Balance at beginning of period

      4.0       3.6       4.2       3.7       6.3  

Charge-offs

      (2.5 )      (1.8 )      (1.5 )      (1.0 )      (1.9 ) 

Recoveries

      0.3       0.3       0.2       0.1       —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net loan charge-offs

      (2.2 )      (1.5 )      (1.3 )      (0.9 )      (1.9 ) 

Provision for loan losses

      2.2       1.9       0.7       1.4       (0.7 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance at end of period

      4.0       4.0       3.6       4.2       3.7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total allowance for loan losses

    $ 236.8     $ 235.3     $ 234.4     $ 233.4     $ 231.6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Originated commercial allowance for loan losses as a percentage of originated commercial loans

      0.93 %      0.94 %      0.93 %      0.94 %      0.94 % 

Originated retail allowance for loan losses as a percentage of originated retail loans

      0.36       0.36       0.35       0.35       0.35  

Total originated allowance for loan losses as a percentage of:

           

Originated loans

      0.77       0.78       0.77       0.77       0.77  

Originated non-performing loans

      138.4       149.3       155.2       131.6       128.1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

NET LOAN CHARGE-OFFS (RECOVERIES)

 

 

 

  

     Three Months Ended  
     June 30,     March 31,     Dec. 31,     Sept. 30,     June 30,  

(dollars in millions)

    2018     2018     2017     2017     2017  

Commercial:

           

Commercial real estate

    $ 0.7     $ 0.5     $ 1.5     $ 1.5     $ 1.2  

Commercial and industrial

      1.7       1.7       2.1       2.0       1.8  

Equipment financing

      2.6       1.6       2.0       0.5       2.7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

      5.0       3.8       5.6       4.0       5.7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Retail:

           

Residential mortgage

      (0.1 )      0.2       0.2       0.1       0.1  

Home equity

      —         0.4       0.5       0.9       0.7  

Other consumer

      0.1       0.1       0.2       0.2       0.3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

      —         0.7       0.9       1.2       1.1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total net loan charge-offs

    $ 5.0     $ 4.5     $ 6.5     $ 5.2     $ 6.8  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

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

      0.06 %      0.06 %      0.08 %      0.06 %      0.09 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

15

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.

 

16

People’s United Financial, Inc.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP - Continued

OPERATING NON-INTEREST EXPENSE AND EFFICIENCY RATIO

 

 

     Three Months Ended     Six Months Ended  

(dollars in millions)

    June 30,
2018		     March 31,
2018		     Dec. 31,
2017		     Sept. 30,
2017		     June 30,
2017		     June 30,
2018		     June 30,
2017		  

Total non-interest expense

    $ 248.6     $ 243.5     $ 239.7     $ 237.1     $ 257.3     $ 492.1     $ 483.4  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjustments to arrive at operating non-interest expense:

               

Merger-related expenses

      (2.9 )      —         (1.6 )      (3.0 )      (24.8 )      (2.9 )      (26.0 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

      (2.9 )      —         (1.6 )      (3.0 )      (24.8 )      (2.9 )      (26.0 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating non-interest expense

      245.7       243.5       238.1       234.1       232.5       489.2       457.4  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating lease expense

      (8.7 )      (9.0 )      (8.9 )      (8.8 )      (8.7 )      (17.7 )      (17.5 ) 

Amortization of other acquisition-related intangible assets

      (4.9 )      (5.1 )      (7.9 )      (7.9 )      (7.9 )      (10.0 )      (14.2 ) 

Other (1)

      (1.7 )      (1.3 )      (1.4 )      (1.5 )      (0.4 )      (3.0 )      (2.2 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total non-interest expense for efficiency ratio

    $ 230.4     $ 228.1     $ 219.9     $ 215.9     $ 215.5     $ 458.5     $ 423.5  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net interest income (FTE basis)

    $ 307.8     $ 302.1     $ 304.1     $ 295.8     $ 285.2     $ 609.9     $ 543.3  

Total non-interest income

      94.9       90.4       87.3       89.3       91.6       185.3       176.3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

      402.7       392.5       391.4       385.1       376.8       795.2       719.6  

Adjustments:

               

Operating lease expense

      (8.7 )      (9.0 )      (8.9 )      (8.8 )      (8.7 )      (17.7 )      (17.5 ) 

BOLI FTE adjustment

      0.4       0.4       0.8       1.2       1.0       0.8       1.4  

Net security (gains) losses

      —         (0.1 )      9.8       —         (0.1 )      (0.1 )      15.6  

Other (2)

      —         —         (1.3 )      (0.2 )      —         —         0.2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues for efficiency ratio

    $ 394.4     $ 383.8     $ 391.8     $ 377.3     $ 369.0     $ 778.2     $ 719.3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Efficiency ratio

      58.4 %      59.4 %      56.1 %      57.3 %      58.4 %      58.9 %      58.9 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(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.

 

17

People’s United Financial, Inc.    

NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP - Continued    

OPERATING EARNINGS    

 

 

     Three Months Ended     Six Months Ended  

(dollars in millions, except per common share data)

    June 30,
2018		     March 31,
2018		     Dec. 31,
2017		     Sept. 30,
2017		     June 30,
2017		     June 30,
2018		     June 30,
2017		  

Net income available to common shareholders

    $ 106.7     $ 104.4     $ 102.7     $ 87.3     $ 65.8     $ 211.1     $ 133.1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjustments to arrive at operating earnings:

 

            

Merger-related expenses

      2.9       —         1.6       3.0       24.8       2.9       26.0  

Security losses associated with tax reform (1)

      —         —         10.0       —         —         —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total pre-tax adjustments

      2.9       —         11.6       3.0       24.8       2.9       26.0  

Tax effect (2)

      (0.6 )      —         (9.8 )      (1.0 )      (8.0 )      (0.6 )      (8.4 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total adjustments, net of tax

      2.3       —         1.8       2.0       16.8       2.3       17.6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating earnings

    $ 109.0     $ 104.4     $ 104.5     $ 89.3     $ 82.6     $ 213.4     $ 150.7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Diluted EPS, as reported

    $ 0.31     $ 0.30     $ 0.30     $ 0.26     $ 0.19     $ 0.61     $ 0.41  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjustments to arrive at operating EPS:

               

Merger-related expenses

      0.01       —         0.01       —         0.05       0.01       0.05  

Security losses associated with tax reform

      —         —         0.02       —         —        

Tax benefit associated with tax reform

      —         —         (0.02 )      —         —         —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total adjustments per common share

      0.01       —         0.01       —         0.05       0.01       0.05  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating EPS

    $ 0.32     $ 0.30     $ 0.31     $ 0.26     $ 0.24     $ 0.62     $ 0.46  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average total assets

    $ 44,110     $ 44,011     $ 44,039     $ 43,256     $ 42,666     $ 44,061     $ 41,498  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating return on average assets (annualized)

      0.99 %      0.95 %      0.95 %      0.83 %      0.77 %      0.97 %      0.73 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(1) Security losses incurred as a tax planning strategy in response to tax reform enacted on December 22, 2017 are considered non-operating.
(2) Includes a $6.5 million benefit realized in connection with tax reform enacted on December 22, 2017.

 

 

OPERATING RETURN ON AVERAGE TANGIBLE COMMON EQUITY    

 

 

     Three Months Ended     Six Months Ended  

(dollars in millions)

    June 30,
2018		     March 31,
2018		     Dec. 31,
2017		     Sept. 30,
2017		     June 30,
2017		     June 30,
2018		     June 30,
2017		  

Operating earnings

    $ 109.0     $ 104.4     $ 104.5     $ 89.3     $ 82.6     $ 213.4     $ 150.7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average stockholders’ equity

    $ 5,870     $ 5,820     $ 5,774     $ 5,722     $ 5,696     $ 5,845     $ 5,432  

Less: Average preferred stock

      244       244       244       244       244       244       244  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average common equity

      5,626       5,576       5,530       5,478       5,452       5,601       5,188  

Less: Average goodwill and average other acquisition-related intangible assets

      2,554       2,558       2,564       2,524       2,415       2,556       2,275  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average tangible common equity

    $ 3,072     $ 3,018     $ 2,966     $ 2,954     $ 3,037     $ 3,045     $ 2,913  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating return on average tangible common equity (annualized)

      14.2 %      13.8 %      14.1 %      12.1 %      10.9 %      14.0 %      10.3 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

18

People’s United Financial, Inc.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP - Continued

 

OPERATING COMMON DIVIDEND PAYOUT RATIO

 

 

     Three Months Ended     Six Months Ended  

(dollars in millions)

    June 30,
2018		     March 31,
2018		     Dec. 31,
2017		     Sept. 30,
2017		     June 30,
2017		     June 30,
2018		     June 30,
2017		  

Common dividends paid

    $ 59.9     $ 58.8     $ 58.6     $ 58.3     $ 58.3     $ 118.7     $ 111.0  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating earnings

    $ 109.0     $ 104.4     $ 104.5     $ 89.3     $ 82.6     $ 213.4     $ 150.7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating common dividend payout ratio

      55.0 %      56.3 %      56.1 %      65.3 %      70.6 %      55.6 %      73.7 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

TANGIBLE COMMON EQUITY RATIO

 

 

(dollars in millions)

    June 30,
2018		     March 31,
2018		     Dec. 31,
2017		     Sept. 30,
2017		     June 30,
2017		        

Total stockholders’ equity

    $ 5,900     $ 5,845     $ 5,820     $ 5,746     $ 5,704    

Less: Preferred stock

      244       244       244       244       244    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Common equity

      5,656       5,601       5,576       5,502       5,460    

Less: Goodwill and other acquisition-related intangible assets

      2,574       2,555       2,560       2,568       2,426    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Tangible common equity

    $ 3,082     $ 3,046     $ 3,016     $ 2,934     $ 3,034    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total assets

    $ 44,575     $ 44,101     $ 44,453     $ 43,998     $ 43,023    

Less: Goodwill and other acquisition-related intangible assets

      2,574       2,555       2,560       2,568       2,426    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Tangible assets

    $ 42,001     $ 41,546     $ 41,893     $ 41,430     $ 40,597    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Tangible common equity ratio

      7.3 %      7.3 %      7.2 %      7.1 %      7.5 %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

TANGIBLE BOOK VALUE PER COMMON SHARE

 

 

(in millions, except per common share data)

    June 30,
2018		     March 31,
2018		     Dec. 31,
2017		     Sept. 30,
2017		     June 30,
2017		        

Tangible common equity

    $ 3,082     $ 3,046     $ 3,016     $ 2,934     $ 3,034    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Common shares issued

      437.06       436.56       435.64       433.59       433.34    

Less: Shares classified as treasury shares

      89.02       89.02       89.04       89.04       89.04    

Unallocated ESOP shares

      6.45       6.53       6.62       6.71       6.79    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Common shares

      341.59       341.01       339.98       337.84       337.51    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Tangible book value per common share

    $ 9.02     $ 8.93     $ 8.87     $ 8.68     $ 8.99    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

19