EX-99.1 2 d634544dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

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.

BRIDGEPORT, CT., October 18, 2018 – 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 to common shareholders

     113.5       106.7       87.3  

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  
  

 

 

   

 

 

   

 

 

 

 

1

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

“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 to average total loans

     0.09     0.06     0.06

Originated non-performing loans as a percentage of originated loans

     0.53     0.56     0.59
  

 

 

   

 

 

   

 

 

 

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
  

 

 

   

 

 

   

 

 

 

 

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 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.

 

Page 2


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 page 16).

 

   

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 page 16).

 

   

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 page 16).

 

   

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.

 

Page 3


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.

 

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  
     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 beginning on page 16.    

(2)

Annualized.    

 

6


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 beginning on page 16.

(2)

Annualized.

 

7


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 beginning on page 16.

 

8


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  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

9


People’s United Financial, Inc.    

CONSOLIDATED STATEMENTS OF INCOME    

 

 

     Three Months Ended  

(in millions, except per common share data)

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

 

 

     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 beginning on page 16.

 

11


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

(dollars in millions)

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

 

12


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.

 

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

 

 

     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.

 

14


People’s United Financial, Inc.    

PROVISION AND ALLOWANCE FOR LOAN LOSSES    

 

 

     Three Months Ended  

(dollars in millions)

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

(dollars in millions)

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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     Nine Months Ended  

(dollars in millions)

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

 

17


People’s United Financial, Inc.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP - Continued

OPERATING EARNINGS

 

 

     Three Months Ended     Nine Months Ended  

(dollars in millions, except per common share data)

   Sept. 30,
2018
    June 30,
2018
    March 31,
2018
    Dec. 31,
2017
    Sept. 30,
2017
    Sept. 30,
2018
    Sept. 30,
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       —         1.6       3.0       3.4       29.0  

Security losses associated with tax reform (1)

     —         —         —         10.0       —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total pre-tax adjustments

     0.5       2.9       —         11.6       3.0       3.4       29.0  

Tax effect (2)

     (0.2     (0.6     —         (9.8     (1.0     (0.8     (9.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments, net of tax

     0.3       2.3       —         1.8       2.0       2.6       19.8  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating earnings

   $ 113.8     $ 109.0     $ 104.4     $ 104.5     $ 89.3     $ 327.2     $ 240.2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted EPS, as reported

   $ 0.33     $ 0.31     $ 0.30     $ 0.30     $ 0.26     $ 0.94     $ 0.67  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjustments to arrive at operating EPS:

              

Merger-related expenses

     —         0.01       —         0.01       —         0.01       0.06  

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       —         0.01       0.06  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating EPS

   $ 0.33     $ 0.32     $ 0.30     $ 0.31     $ 0.26     $ 0.95     $ 0.73  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average total assets

   $ 44,245     $ 44,110     $ 44,011     $ 44,039     $ 43,256     $ 44,123     $ 42,091  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating return on average assets (annualized)

     1.03     0.99     0.95     0.95     0.83     0.99     0.76
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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     Nine Months Ended  

(dollars in millions)

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

Operating earnings

   $ 113.8     $ 109.0     $ 104.4     $ 104.5     $ 89.3     $ 327.2     $ 240.2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average stockholders’ equity

   $ 5,937     $ 5,870     $ 5,820     $ 5,774     $ 5,722     $ 5,876     $ 5,530  

Less: Average preferred stock

     244       244       244       244       244       244       244  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average common equity

     5,693       5,626       5,576       5,530       5,478       5,632       5,286  

Less: Average goodwill and average other acquisition-related

         intangible assets

     2,572       2,554       2,558       2,564       2,524       2,561       2,359  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average tangible common equity

   $ 3,121     $ 3,072     $ 3,018     $ 2,966     $ 2,954     $ 3,071     $ 2,927  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating return on average tangible common equity (annualized)

     14.6     14.2     13.8     14.1     12.1     14.2     10.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

18


People’s United Financial, Inc.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP - Continued

OPERATING COMMON DIVIDEND PAYOUT RATIO

 

 

     Three Months Ended     Nine Months Ended  

(dollars in millions)

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

Common dividends paid

   $ 60.0     $ 59.9     $ 58.8     $ 58.6     $ 58.3     $ 178.7     $ 169.3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating earnings

   $ 113.8     $ 109.0     $ 104.4     $ 104.5     $ 89.3     $ 327.2     $ 240.2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating common dividend payout ratio

     52.7     55.0     56.3     56.1     65.3     54.6     70.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TANGIBLE COMMON EQUITY RATIO

 

 

(dollars in millions)

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

Total stockholders’ equity

   $ 5,959     $ 5,900     $ 5,845     $ 5,820     $ 5,746  

Less: Preferred stock

     244       244       244       244       244  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Common equity

     5,715       5,656       5,601       5,576       5,502  

Less: Goodwill and other acquisition-related intangible assets

     2,569       2,574       2,555       2,560       2,568  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible common equity

   $ 3,146     $ 3,082     $ 3,046     $ 3,016     $ 2,934  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 44,133     $ 44,575     $ 44,101     $ 44,453     $ 43,998  

Less: Goodwill and other acquisition-related intangible assets

     2,569       2,574       2,555       2,560       2,568  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible assets

   $ 41,564     $ 42,001     $ 41,546     $ 41,893     $ 41,430  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible common equity ratio

     7.6     7.3     7.3     7.2     7.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TANGIBLE BOOK VALUE PER COMMON SHARE

 

 

(in millions, except per common share data)

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

Tangible common equity

   $ 3,146      $ 3,082      $ 3,046      $ 3,016      $ 2,934  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Common shares issued

     437.74        437.06        436.56        435.64        433.59  

Less: Shares classified as treasury shares

     89.02        89.02        89.02        89.04        89.04  

         Unallocated ESOP shares

     6.36        6.45        6.53        6.62        6.71  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Common shares

     342.36        341.59        341.01        339.98        337.84  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Tangible book value per common share

   $ 9.19      $ 9.02      $ 8.93      $ 8.87      $ 8.68  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

19