People's United Financial Reports Fourth Quarter Earnings of $25 Million or $0.07 Per Share

Expects to Complete Acquisition of Financial Federal in mid-February

Jan 21, 2010, 16:10 ET from People's United Financial, Inc.

BRIDGEPORT, Conn., Jan. 21 /PRNewswire-FirstCall/ -- People's United Financial, Inc. (Nasdaq: PBCT) today announced net income of $24.9 million, or $0.07 per share, for the fourth quarter of 2009, compared to $26.8 million, or $0.08 per share, for the third quarter of 2009, and $33.7 million, or $0.10 per share, for the fourth quarter of 2008.  Fourth quarter 2009 earnings reflect a 3.19 percent net interest margin, unchanged from the third quarter of 2009, despite continued pressure associated with the historically low interest rate environment and the company's asset sensitive balance sheet, and a modest increase in non-interest expenses.  For the year ended December 31, 2009, net income totaled $101.2 million, or $0.30 per share, compared to $137.8 million, or $0.42 per share, for 2008.

Included in fourth quarter 2009 results are system conversion and merger-related expenses totaling $4.5 million (included in non-interest expense).  After taxes, these expenses reduced 2009 fourth quarter net income by $3.1 million, or $0.01 per share.  Excluding the effect of these expenses, net income would have been $28.0 million, or $0.08 per share, for the fourth quarter of 2009.

The Board of Directors of People's United Financial declared a $0.1525 per share quarterly dividend, payable February 15, 2010 to shareholders of record on February 1, 2010.  Based on the closing stock price on January 20, 2010, the dividend yield on People's United Financial common stock is 3.7 percent.

"Our pending acquisition of Financial Federal reflects our strategic focus on expansion through opportunistic acquisitions," stated Philip R. Sherringham, President and Chief Executive Officer.  "At the same time, we remain committed to organic growth throughout our franchise.  Our performance during 2009 reflects continued growth in our core loan portfolios as well as deposits in spite of a clearly very challenging economic environment.  Year-over-year core commercial and home equity lending portfolios increased five percent and deposits grew eight percent.  In addition, the pillars of our financial position – strong asset quality and prudent management of our excess capital – have served us well in these challenging times."

Sherringham added, "We feel our asset quality has held up very well on both a relative and absolute basis through the recent recessionary cycle and continue to believe that most of the bad news is substantially behind us.  The strength of our capital and liquidity, asset quality and earnings, as well as the fact that our balance sheet remains funded almost entirely by deposits and stockholders' equity, continue to set us apart from most in the industry."

"On an operating basis, excluding system conversion and merger-related costs, earnings were $28 million, or 8 cents per share this quarter," said Paul D. Burner, Senior Executive Vice President and Chief Financial Officer.  "Significant drivers of the company's performance this quarter were a stable net interest margin, modest loan growth across our strategic lending businesses, and lower net loan charge-offs.  In spite of a 19 basis point reduction in our cost of deposits, the net interest margin was unchanged from the third quarter due to the combined effects of a 15 basis point decline in the yield on average earning assets and a 6 percent annualized increase in average deposits."

Commenting on asset quality, Burner stated, "Non-performing loans decreased $7 million this quarter, a further sign of what we believe is stabilization across the loan portfolio.  Our continued modest level of net loan charge-offs in this current economic environment remains a testament to our disciplined underwriting standards."

Fourth quarter net loan charge-offs totaled $13.6 million compared to $16.0 million in the third quarter of 2009.  Net loan charge-offs as a percent of average loans on an annualized basis were 0.38 percent in the fourth quarter of 2009 compared to 0.44 percent in this year's third quarter.  For the full year, net loan charge-offs as a percent of average loans were 0.29 percent compared to 0.10 percent in 2008.  The level of the allowance for loan losses is unchanged from September 30, 2009.

At December 31, 2009, non-performing loans totaled $168.8 million and the ratio of non-performing loans to total loans was 1.19 percent, compared to $175.7 million and 1.23 percent, respectively, at September 30, 2009.  Non-performing assets totaled $205.6 million at December 31, 2009, a $12.9 million increase from September 30, 2009.  Non-performing assets equaled 1.44 percent of total loans, REO and repossessed assets at December 31, 2009 compared to 1.35 percent at September 30, 2009.  At December 31, 2009, the allowance for loan losses as a percentage of total loans was 1.21 percent and as a percentage of non-performing loans was 102 percent, compared to 1.21 percent and 98 percent, respectively, at September 30, 2009.

For the fourth quarter of 2009, return on average tangible assets was 0.51 percent and return on average tangible stockholders' equity was 2.8 percent, compared to 0.55 percent and 3.0 percent, respectively, for the third quarter of 2009.  At December 31, 2009, People's United Financial's tangible equity ratio stood at 18.2 percent.

Conference Call

On January 22, 2010, at 11 a.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 People's" 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.

Selected Financial Terms

In addition to evaluating People's United Financial's results of operations in accordance with U.S. generally accepted accounting principles ("GAAP"), management routinely supplements this evaluation with an analysis of certain non-GAAP financial measures, such as the efficiency and tangible equity ratios, and tangible book value per share.  Management believes these non-GAAP financial measures provide information useful to investors in understanding People's United Financial's underlying operating performance and trends, and facilitates comparisons with the performance of other banks and thrifts.  Further, the efficiency ratio is used by management in its assessment of financial performance specifically as it relates to non-interest expense control, while the tangible equity ratio and tangible book value per share are used to analyze the relative strength of People's United Financial's capital position.

The efficiency ratio, which represents an approximate measure of the cost required by People's United Financial to generate a dollar of revenue, is the ratio of (i) total non-interest expense (excluding goodwill impairment charges, amortization of acquisition-related intangibles and fair value adjustments, losses on real estate assets and nonrecurring expenses) (the numerator) to (ii) net interest income on a fully taxable equivalent basis (excluding fair value adjustments) plus total non-interest income (including the fully taxable equivalent adjustment on bank-owned life insurance income, and excluding gains and losses on sales of assets, other than residential mortgage loans, and nonrecurring income) (the denominator).  People's United Financial generally considers an item of income or expense to be nonrecurring 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.

The tangible equity ratio is the ratio of (i) tangible stockholders' equity (total stockholders' equity less goodwill and other acquisition-related intangibles) (the numerator) to (ii) tangible assets (total assets less goodwill and other acquisition-related intangibles) (the denominator).  Tangible book value per share is calculated by dividing tangible stockholders' equity by common shares outstanding (total common shares issued, less common shares classified as treasury shares and unallocated ESOP common shares).

4Q 2009 Financial Highlights

Summary

  • Net income totaled $24.9 million, or $0.07 per share.
  • Net interest income totaled $147.5 million.
    • Net interest margin unchanged from 3Q09 at 3.19%.
    • Average short-term investments and securities purchased under agreements to resell totaled $3.5 billion, or 19% of average earning assets, and yielded 0.24% in 4Q09.
    • Average deposits increased $236 million, or 6% annualized, from 3Q09.
  • Provision for loan losses totaled $13.6 million.
    • Net loan charge-offs totaled $13.6 million in 4Q09.
  • Non-interest income totaled $71.7 million in 4Q09, compared to $75.5 million (excluding $4.7 million of security gains) in 3Q09.
    • Total wealth management income decreased $1.3 million from 3Q09.
    • Net gains on sales of residential mortgage loans decreased $2.2 million from 3Q09.
  • Non-interest expense totaled $172.2 million in 4Q09 compared to $165.1 million in 3Q09.
    • 4Q09 includes $4.5 million of system conversion and merger-related costs.
  • Effective income tax rate was 25.5% in 4Q09.
    • Reflects a $2.0 million deferred tax benefit due to a reduction in the combined state income tax rate following the charter consolidations of the former Chittenden banks.

Commercial Banking

  • Average commercial banking loans, excluding shared national credits, increased $41 million from 3Q09 to $8.8 billion.
  • Shared national credits totaled $566.8 million (4% of total loans) at December 31, 2009, a $47.4 million decrease from September 30, 2009.
  • Non-performing commercial banking assets totaled $142.4 million at December 31, 2009, an $11.1 million increase from September 30, 2009.
    • Includes two previously disclosed non-performing shared national credits ($16.3 million in non-performing loans and $9.8 million in real estate owned).  
  • The ratio of non-performing commercial banking loans to total commercial banking loans was 1.17% at December 31, 2009 compared to 1.28% at September 30, 2009.
  • Net loan charge-offs totaled $9.8 million, or 0.42% annualized, of average commercial banking loans in 4Q09, compared to $11.2 million, or 0.48% annualized, in 3Q09.

Retail & Small Business Banking

  • Average residential mortgage loans totaled $2.6 billion, a $200 million decrease from 3Q09, reflecting People's United Financial's strategy to sell essentially all newly-originated loans.
    • Net loan charge-offs totaled $1.2 million, or 0.19% annualized, of average residential mortgage loans.
    • The ratio of non-performing residential mortgage loans to total residential mortgage loans was 2.07% at December 31, 2009 compared to 1.88% at September 30, 2009.
  • Average home equity loans totaled $2.0 billion, unchanged from 3Q09.
    • Net loan charge-offs totaled $1.3 million, or 0.26% annualized, of average home equity loans.
  • Average indirect auto loans totaled $0.2 billion, unchanged from 3Q09.
    • Net loan charge-offs totaled $0.7 million, or 1.38% annualized, of average indirect auto loans.

Wealth Management

  • Wealth Management income decreased $1.3 million from 3Q09.
    • Insurance revenue decreased $0.9 million, reflecting the seasonal nature of insurance renewals.
  • Assets managed and administered, which are not reported as assets of People's United Financial, totaled $16.1 billion at December 31, 2009 compared to $16.4 billion at September 30, 2009, primarily reflecting a decline in the market value of fixed-income assets due to an increase in interest rates.

People's United Financial, a diversified financial services company with $21 billion in assets, provides commercial banking, retail and small business banking, and wealth management services through a network of nearly 300 branches in Connecticut, Vermont, New Hampshire, Maine, Massachusetts and New York. Through its subsidiaries, People's United Financial provides equipment financing, asset management, brokerage and financial advisory services, and insurance services.

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" 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, 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) residential mortgage and secondary market activity; (7) changes in accounting and regulatory guidance applicable to banks; (8) price levels and conditions in the public securities markets generally; (9) competition and its effect on pricing, spending, third-party relationships and revenues; and (10) the successful integration of acquired companies. 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 on the World Wide Web at www.peoples.com.

People's United Financial, Inc.

FINANCIAL HIGHLIGHTS

Three Months Ended

Dec. 31,

Sept. 30,

June 30,

March 31,

Dec. 31,

(dollars in millions, except per share data)

2009

2009

2009 (1)

2009 (1)

2008 (1)

Operating Data:

 Net interest income

$   147.5   

$    145.3   

$     141.2   

$    142.8   

$    153.3   

 Provision for loan losses

13.6   

21.5   

14.0   

7.9   

8.7   

 Non-interest income (2)

71.7   

80.2   

85.0   

72.2   

73.7   

 Non-interest expense (3)

172.2   

165.1   

176.2   

171.1   

168.2   

 Income before income tax expense

33.4   

38.9   

36.0   

36.0   

50.1   

 Net income

24.9   

26.8   

25.3   

24.2   

33.7   

Selected Statistical Data:

 Net interest margin (4)

3.19%

3.19%

3.12%

3.25%

3.55%

 Return on average assets (4)

0.47   

0.51   

0.49   

0.48   

0.67   

 Return on average tangible assets (4)

0.51   

0.55   

0.53   

0.52   

0.73   

 Return on average stockholders' equity (4)

2.0   

2.1   

2.0   

1.9   

2.6   

 Return on average tangible stockholders' equity (4)

2.8   

3.0   

2.8   

2.7   

3.6   

 Efficiency ratio

73.7   

71.3   

73.9   

75.3   

70.3   

Per Common Share Data:

 Diluted earnings per share

$     0.07   

$      0.08   

$          0.08   

$      0.07   

$      0.10   

 Dividends paid per share

0.15   

0.15   

0.15   

0.15   

0.15   

 Dividend payout ratio

204.7%

191.3%

202.0%

207.3%

149.1%

 Book value (end of period)

$   15.19   

$    15.24   

$        15.29   

$    15.38   

$    15.44   

 Tangible book value (end of period)

10.68   

10.71   

10.75   

10.81   

10.86   

 Stock price:

   High

17.16   

17.41   

18.54   

18.18   

20.15   

   Low

15.15   

14.84   

14.72   

15.61   

14.75   

   Close (end of period)

16.70   

15.56   

15.07   

17.97   

17.83   

 Average diluted common shares outstanding (in millions)

333.64   

333.38   

332.97   

332.78   

332.33   

(1)  As previously disclosed, reported amounts for the three months ended June 30, 2009, March 31, 2009 and

      December 31, 2008 were revised to reflect the recognition of additional non-interest expense, which, after taxes,

      reduced net income by $2.1 million, $2.5 million and $1.7 million, respectively.  Diluted earnings per share were

      reduced by $0.01 in both the three months ended March 31, 2009 and December 31, 2008 (no impact on the three

      months ended June 30, 2009).  The revision of fourth quarter 2008 results also increased other liabilities and

      reduced retained earnings by $1.7 million at December 31, 2008.  Certain statistical data and other per common

      share data was revised as necessary.

(2)  Includes net security gains of $4.7 million, $12.0 million and $5.4 million for the three months ended

      September 30, 2009, June 30, 2009 and March 31, 2009, respectively.

(3)  Includes $4.5 million of system conversion and merger-related expenses for the three months ended

      December 31, 2009, and an FDIC special assessment charge of $8.4 million for the three months ended

      June 30, 2009.

(4)  Annualized.

People's United Financial, Inc.

FINANCIAL HIGHLIGHTS - Continued

Twelve Months Ended

Dec. 31,

Dec. 31,

(dollars in millions, except per share data)

2009 (1)

2008 (1)

Operating Data:

 Net interest income

$        576.8   

$        636.4   

 Provision for loan losses

57.0   

26.2   

 Non-interest income (2)

309.1   

303.6   

 Non-interest expense (3)

684.6   

709.0   

 Income before income tax expense

144.3   

204.8   

 Net income

101.2   

137.8   

Selected Statistical Data:

 Net interest margin

3.19%

3.62%

 Return on average assets

0.49   

0.68   

 Return on average tangible assets

0.53   

0.73   

 Return on average stockholders' equity

2.0   

2.6   

 Return on average tangible stockholders' equity

2.8   

3.7   

 Efficiency ratio

73.5   

66.6   

Per Common Share Data:

 Diluted earnings per share

$          0.30   

$          0.42   

 Dividends paid per share

0.61   

0.58   

 Dividend payout ratio

201.1%

141.1%

 Book value (end of period)

$        15.19   

$        15.44   

 Tangible book value (end of period)

10.68   

10.86   

 Stock price:

   High

18.54   

21.76   

   Low

14.72   

13.92   

   Close (end of period)

16.70   

17.83   

 Average diluted common shares outstanding (in millions)

333.17   

330.75   

(1)  See Financial Highlights footnote (1).

(2)  Includes net security gains of $22.0 million and $8.3 million for the twelve months ended  

      December 31, 2009 and 2008, respectively.

(3)  Includes $4.5 million of system conversion and merger-related expenses and an FDIC

      special assessment charge of $8.4 million for the twelve months ended December 31, 2009,

      and merger-related expenses of $36.5 million and other one-time charges of $14.8 million for

      the twelve months ended December 31, 2008.

People's United Financial, Inc.

FINANCIAL HIGHLIGHTS - Continued

As of and for the Three Months Ended

Dec. 31,

Sept. 30,

June 30,

March 31,

Dec. 31,

(dollars in millions)

2009

2009

2009

2009

2008

Financial Condition Data:

 General:

   Total assets

$   21,256

$    20,810

$    20,812

$    20,681

$    20,168

   Loans

14,234

14,302

14,553

14,648

14,566

   Short-term investments (1)

3,492

3,077

3,073

2,756

1,139

   Securities

902

550

491

806

1,902

   Allowance for loan losses

173

173

167

159

158

   Goodwill and other acquisition-related intangibles

1,515

1,520

1,525

1,531

1,536

   Deposits

15,446

15,050

15,023

14,846

14,269

   Borrowings

159

154

160

185

188

   Subordinated notes

182

182

181

181

181

   Stockholders' equity

5,100

5,115

5,130

5,156

5,174

   Non-performing assets

206

193

182

142

94

   Net loan charge-offs

13.6

16.0

6.0

6.4

5.7

 Average Balances:

   Loans

$   14,231

$    14,454

$    14,595

$    14,603

$    14,371

   Short-term investments (1)

3,463

3,105

2,816

1,824

1,610

   Securities

887

782

799

1,275

1,393

   Total earning assets

18,582

18,341

18,210

17,702

17,374

   Total assets

21,132

20,870

20,759

20,258

20,057

   Deposits

15,273

15,037

14,886

14,346

14,117

   Total funding liabilities

15,616

15,365

15,237

14,721

14,479

   Stockholders' equity

5,106

5,135

5,162

5,164

5,230

 Ratios:

   Net loan charge-offs to

     average loans (annualized)

0.38%

0.44%

0.16%

0.18%

0.16%

   Non-performing assets to total loans,

     REO and repossessed assets

1.44

1.35

1.25

0.97

0.64

   Allowance for loan losses to non-performing loans

102.2

98.2

99.4

126.1

186.8

   Allowance for loan losses to total loans

1.21

1.21

1.15

1.09

1.08

   Average stockholders' equity to average total assets

24.2

24.6

24.9

25.5

26.1

   Stockholders' equity to total assets

24.0

24.6

24.7

24.9

25.7

   Tangible stockholders' equity to tangible assets

18.2

18.6

18.7

18.9

19.5

   Total risk-based capital (2)

14.1

14.0

13.7

13.5

13.4

(1)  Includes securities purchased under agreements to resell.

(2)  Total risk-based capital ratios are for People's United Bank and, as such, do not reflect the additional capital residing

     at People's United Financial, Inc. People's United Bank's December 31, 2009 total risk-based capital ratio is preliminary.

People's United Financial, Inc.

CONSOLIDATED STATEMENTS OF CONDITION

Dec. 31,

Sept. 30,

Dec. 31,

(in millions)

2009

2009

2008 (1)

Assets

Cash and due from banks

$        326.0 

$        410.9 

$        345.1 

Short-term investments

3,092.0 

1,933.0 

1,138.8 

   Total cash and cash equivalents

3,418.0 

2,343.9 

1,483.9 

Securities:

 Trading account securities, at fair value

75.7 

10.3 

21.4 

 Securities available for sale, at fair value

739.7 

453.4 

1,848.3 

 Securities held to maturity, at amortized cost

55.3 

55.3 

0.9 

 Federal Home Loan Bank stock, at cost

31.1 

31.1 

31.1 

   Total securities

901.8 

550.1 

1,901.7 

Securities purchased under agreements to resell

400.0 

1,144.0 

Loans:

 Commercial real estate

5,399.4 

5,365.8 

4,967.3 

 Commercial

4,042.5 

4,011.4 

4,226.4 

 Residential mortgage

2,546.9 

2,654.0 

3,144.6 

 Consumer

2,245.0 

2,270.4 

2,227.4 

   Total loans

14,233.8 

14,301.6 

14,565.7 

 Less allowance for loan losses

(172.5)

(172.5)

(157.5)

   Total loans, net

14,061.3 

14,129.1 

14,408.2 

Goodwill and other acquisition-related intangibles

1,515.2 

1,520.2 

1,535.8 

Premises and equipment

264.5 

261.7 

262.4 

Bank-owned life insurance

235.1 

235.2 

228.6 

Other assets

459.6 

625.9 

347.1 

   Total assets

$   21,255.5 

$   20,810.1 

$   20,167.7 

Liabilities

Deposits:

 Non-interest-bearing

$     3,509.0 

$     3,192.8 

$     3,173.4 

 Savings, interest-bearing checking and money market

7,327.9 

6,926.0 

6,214.7 

 Time

4,608.7 

4,931.6 

4,881.3 

   Total deposits

15,445.6 

15,050.4 

14,269.4 

Borrowings:

 Repurchase agreements

144.1 

139.0 

156.7 

 Federal Home Loan Bank advances

14.8 

15.0 

15.1 

 Other

16.1 

   Total borrowings

158.9 

154.0 

187.9 

Subordinated notes

181.8 

181.5 

180.5 

Other liabilities

369.5 

309.0 

356.1 

   Total liabilities

16,155.8 

15,694.9 

14,993.9 

Stockholders' Equity

Common stock ($0.01 par value; 1.95 billion shares authorized;

348.2 million shares, 348.4 million shares and 347.9 million shares issued)

3.5 

3.5 

3.5 

Additional paid-in capital

4,511.3 

4,506.3 

4,485.1 

Retained earnings

914.5 

943.4 

1,020.9 

Treasury stock, at cost (3.2 million shares, 3.3 million shares and 3.2 million shares)

(58.6)

(59.6)

(57.9)

Accumulated other comprehensive loss

(75.8)

(81.4)

(75.4)

Unallocated common stock of Employee Stock Ownership Plan

(195.2)

(197.0)

(202.4)

   Total stockholders' equity

5,099.7 

5,115.2 

5,173.8 

   Total liabilities and stockholders' equity

$   21,255.5 

$   20,810.1 

$   20,167.7 

(1)  See Financial Highlights footnote (1).

People's United Financial, Inc.

CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

Dec. 31,

Sept. 30,

June 30,

March 31,

Dec. 31,

(in millions, except per share data)

2009

2009

2009 (1)

2009 (1)

2008 (1)

Interest and dividend income:

 Commercial real estate

$            74.1 

$            73.9 

$            70.8 

$            69.0 

$            73.9 

 Commercial

48.1 

49.6 

50.6 

50.6 

54.9 

 Residential mortgage

31.4 

35.1 

37.8 

40.7 

43.2 

 Consumer

23.5 

24.0 

24.0 

23.9 

25.8 

   Total interest on loans

177.1 

182.6 

183.2 

184.2 

197.8 

 Securities

8.4 

7.5 

7.2 

9.3 

8.5 

 Short-term investments

1.8 

1.4 

1.6 

1.7 

6.1 

 Securities purchased under agreements to resell

0.2 

0.4 

0.2 

   Total interest and dividend income

187.5 

191.9 

192.2 

195.2 

212.4 

Interest expense:

 Deposits

35.9 

42.5 

46.8 

48.2 

54.6 

 Borrowings

0.4 

0.3 

0.4 

0.4 

0.7 

 Subordinated notes

3.7 

3.8 

3.8 

3.8 

3.8 

   Total interest expense

40.0 

46.6 

51.0 

52.4 

59.1 

   Net interest income

147.5 

145.3 

141.2 

142.8 

153.3 

Provision for loan losses

13.6 

21.5 

14.0 

7.9 

8.7 

   Net interest income after provision for loan losses

133.9 

123.8 

127.2 

134.9 

144.6 

Non-interest income:

 Investment management fees

7.9 

8.4 

8.6 

7.5 

9.6 

 Insurance revenue

7.0 

7.9 

6.8 

8.3 

7.3 

 Brokerage commissions

2.9 

2.8 

3.2 

3.3 

3.2 

   Total wealth management income

17.8 

19.1 

18.6 

19.1 

20.1 

 Bank service charges

32.2 

33.3 

32.9 

30.4 

31.5 

 Merchant services income

6.3 

6.7 

6.1 

5.8 

6.6 

 Bank-owned life insurance

1.9 

2.2 

2.7 

1.6 

1.5 

 Net security gains (losses)

(0.1)

4.7 

12.0 

5.4 

0.2 

 Net gains on sales of residential mortgage loans

3.0 

5.2 

3.8 

1.9 

0.8 

 Other non-interest income

10.6 

9.0 

8.9 

8.0 

13.0 

   Total non-interest income

71.7 

80.2 

85.0 

72.2 

73.7 

Non-interest expense:

 Compensation and benefits

89.2 

86.0 

86.6 

88.7 

83.2 

 Occupancy and equipment

28.0 

27.5 

26.3 

28.0 

26.5 

 Professional and outside service fees

10.0 

11.6 

11.7 

10.7 

12.8 

 Amortization of other acquisition-related intangibles

5.0 

5.1 

5.3 

5.2 

5.5 

 Merchant services expense

5.2 

5.7 

5.2 

4.9 

5.6 

 Merger-related expenses

2.0 

 Other non-interest expense

32.8 

29.2 

41.1 

33.6 

34.6 

   Total non-interest expense

172.2 

165.1 

176.2 

171.1 

168.2 

   Income before income tax expense

33.4

38.9

36.0

36.0

50.1

Income tax expense

8.5

12.1

10.7

11.8

16.4

   Net income

$            24.9

$            26.8

$            25.3

$            24.2

$            33.7

Basic and diluted earnings per common share

$            0.07

$            0.08

$            0.08

$            0.07

$            0.10

(1)  See Financial Highlights footnote (1).

People's United Financial, Inc.

CONSOLIDATED STATEMENTS OF INCOME

Twelve Months Ended

Dec. 31,

Dec. 31,

(in millions, except per share data)

2009 (1)

2008 (1)

Interest and dividend income:

 Commercial real estate

$          287.8

$          301.4

 Commercial

198.9

229.8

 Residential mortgage

145.0

189.9

 Consumer

95.4

110.9

   Total interest on loans

727.1

832.0

 Securities

32.4

30.8

 Short-term investments

6.5

46.9

 Securities purchased under agreements to resell

0.8

7.5

   Total interest and dividend income

766.8

917.2

Interest expense:

 Deposits

173.4

262.1

 Borrowings

1.5

3.5

 Subordinated notes

15.1

15.2

   Total interest expense

190.0

280.8

   Net interest income

576.8

636.4

Provision for loan losses

57.0

26.2

   Net interest income after provision for loan losses

519.8

610.2

Non-interest income:

 Investment management fees

32.4

36.8

 Insurance revenue

30.0

33.3

 Brokerage commissions

12.2

16.0

   Total wealth management

74.6

86.1

 Bank service charges

128.8

127.7

 Merchant services income

24.9

27.6

 Bank-owned life insurance

8.4

8.3

 Net security gains

22.0

8.3

 Net gains on sales of residential mortgage loans

13.9

6.5

 Other non-interest income

36.5

39.1

   Total non-interest income

309.1

303.6

Non-interest expense:

 Compensation and benefits

350.5

344.6

 Occupancy and equipment

109.8

110.3

 Professional and outside service fees

44.0

48.0

 Amortization of other acquisition-related intangibles

20.6

21.3

 Merchant services expense

21.0

23.9

 Merger-related expenses

2.0

36.5

 Other non-interest expense

136.7

124.4

   Total non-interest expense

684.6

709.0

   Income before income tax expense

144.3

204.8

Income tax expense

43.1

67.0

   Net income

$          101.2

$          137.8

Basic and diluted earnings per common share

$            0.30

$            0.42

(1)  See Financial Highlights footnote (1).

People's United Financial, Inc.

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

December 31, 2009

September 30, 2009

Three months ended

Average

Yield/

Average

Yield/

(dollars in millions)

Balance

Interest

Rate

Balance

Interest

Rate

Assets:

Short-term investments

$   2,822.4   

$              1.8   

0.26%

$   2,344.7   

$          1.4   

0.23%

Securities purchased under

 agreements to resell

641.2   

0.2   

0.17   

760.0   

0.4   

0.19   

Securities (2)

887.1   

8.4   

3.76   

782.5   

7.5   

3.84   

Loans:

 Commercial real estate

5,352.0   

74.1   

5.53   

5,302.3   

73.9   

5.58   

 Commercial

4,010.8   

48.9   

4.88   

4,072.8   

50.4   

4.94   

 Residential mortgage

2,609.4   

31.4   

4.81   

2,808.9   

35.1   

5.00   

 Consumer

2,258.9   

23.5   

4.16   

2,269.9   

24.0   

4.24   

   Total loans

14,231.1   

177.9   

5.00   

14,453.9   

183.4   

5.08   

   Total earning assets

18,581.8   

$          188.3   

4.05%

18,341.1   

$      192.7   

4.20%

Other assets

2,550.3   

2,529.0   

   Total assets

$ 21,132.1   

$ 20,870.1   

Liabilities and stockholders' equity:

Deposits:

 Non-interest-bearing

$   3,320.4   

$                 -   

-   %

$   3,222.4   

$             -   

-   %

 Savings, interest-bearing checking

   and money market

7,145.4   

11.9   

0.66   

6,798.0   

11.6   

0.68   

 Time

4,807.2   

24.0   

2.00   

5,016.4   

30.9   

2.47   

   Total deposits

15,273.0   

35.9   

0.94   

15,036.8   

42.5   

1.13   

Borrowings:

 Repurchase agreements

146.3   

0.2   

0.49   

132.1   

0.1   

0.47   

 Federal Home Loan Bank advances

14.9   

0.2   

5.25   

14.6   

0.2   

5.30   

 Other

-   

-   

-   

-   

-   

-   

   Total borrowings

161.2   

0.4   

0.93   

146.7   

0.3   

0.95   

Subordinated notes

181.7   

3.7   

8.32   

181.3   

3.8   

8.34   

   Total funding liabilities

15,615.9   

$            40.0   

1.03%

15,364.8   

$        46.6   

1.21%

Other liabilities

410.3   

370.8   

   Total liabilities

16,026.2   

15,735.6   

Stockholders' equity

5,105.9   

5,134.5   

   Total liabilities and stockholders' equity

$ 21,132.1   

$ 20,870.1   

Net interest income/spread (3)

$          148.3   

3.02%

$      146.1   

2.99%

Net interest margin

3.19%

3.19%

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

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

(3)  The FTE adjustment was $0.8 million, $0.8 million and $1.0 million for the three months ended December 31, 2009,

      September 30, 2009, and December 31, 2008, respectively.

People's United Financial, Inc.

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

December 31, 2008

Three months ended

Average

Yield/

(dollars in millions)

Balance

Interest

Rate

Assets:

Short-term investments

$   1,610.0   

$              6.1   

1.52%

Securities purchased under

 agreements to resell

-   

-   

-   

Securities (2)

1,393.1   

8.5   

2.43   

Loans:

 Commercial real estate

4,897.3   

74.7   

6.11   

 Commercial

4,105.9   

55.1   

5.37   

 Residential mortgage

3,189.7   

43.2   

5.42   

 Consumer

2,177.6   

25.8   

4.73   

   Total loans

14,370.5   

198.8   

5.53   

   Total earning assets

17,373.6   

$          213.4   

4.91%

Other assets

2,682.9   

   Total assets

$ 20,056.5   

Liabilities and stockholders' equity:

Deposits:

 Non-interest-bearing

$   3,096.1   

$                 -   

-   %

 Savings, interest-bearing checking

   and money market

6,143.6   

16.6   

1.08   

 Time

4,877.1   

38.0   

3.11   

   Total deposits

14,116.8   

54.6   

1.55   

Borrowings:

 Repurchase agreements

151.1   

0.4   

1.11   

 Federal Home Loan Bank advances

15.1   

0.2   

5.32   

 Other

15.8   

0.1   

2.93   

   Total borrowings

182.0   

0.7   

1.62   

Subordinated notes

180.3   

3.8   

8.39   

   Total funding liabilities

14,479.1   

$            59.1   

1.63%

Other liabilities

347.5   

   Total liabilities

14,826.6   

Stockholders' equity

5,229.9   

   Total liabilities and stockholders' equity

$ 20,056.5   

Net interest income/spread (3)

$          154.3   

3.28%

Net interest margin

3.55%

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

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

(3)  The FTE adjustment was $0.8 million, $0.8 million and $1.0 million for the three months ended December 31, 2009,

      September 30, 2009, and December 31, 2008, respectively.

People's United Financial, Inc.

AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE ANALYSIS

December 31, 2009

December 31, 2008

Twelve months ended

Average

Yield/

Average

Yield/

(dollars in millions)

Balance

Interest

Rate

Balance

Interest

Rate

Assets:

Short-term investments

$   2,386.5   

$          6.5   

0.27%

$   1,946.7   

$        46.9   

2.41%

Securities purchased under agreements to resell

421.1   

0.8   

0.19   

310.2   

7.5   

2.43   

Securities (1)

934.2   

32.4   

3.47   

1,009.1   

30.8   

3.05   

Loans:

 Commercial real estate

5,208.5   

287.8   

5.52   

4,820.8   

301.4   

6.27   

 Commercial

4,116.7   

202.3   

4.91   

4,011.1   

233.7   

5.81   

 Residential mortgage

2,880.1   

145.0   

5.04   

3,519.9   

189.9   

5.40   

 Consumer

2,264.4   

95.4   

4.21   

2,058.4   

110.9   

5.39   

   Total loans

14,469.7   

730.5   

5.05   

14,410.2   

835.9   

5.80   

   Total earning assets

18,211.5   

$      770.2   

4.23%

17,676.2   

$      921.1   

5.21%

Other assets

2,546.0   

2,696.8   

   Total assets

$ 20,757.5   

$ 20,373.0   

Liabilities and stockholders' equity:

Deposits:

 Non-interest-bearing

$   3,210.8   

$             -   

-   %

$   3,137.9   

$             -   

-   %

 Savings, interest-bearing checking and money  

  market

6,710.6   

48.2   

0.72   

6,203.9   

78.5   

1.27   

 Time

4,966.9   

125.2   

2.52   

5,125.0   

183.6   

3.58   

   Total deposits

14,888.3   

173.4   

1.16   

14,466.8   

262.1   

1.81   

Borrowings:

 Repurchase agreements

151.2   

0.7   

0.46   

123.0   

2.1   

1.72   

 Federal Home Loan Bank advances

14.8   

0.8   

5.28   

16.2   

0.8   

5.16   

 Other  

2.1   

-   

1.92   

19.1   

0.6   

3.01   

   Total borrowings

168.1   

1.5   

0.90   

158.3   

3.5   

2.23   

Subordinated notes

181.2   

15.1   

8.35   

181.4   

15.2   

8.34   

   Total funding liabilities

15,237.6   

$      190.0   

1.25%

14,806.5   

$      280.8   

1.90%

Other liabilities

378.5   

353.9   

   Total liabilities

15,616.1   

15,160.4   

Stockholders' equity

5,141.4   

5,212.6   

   Total liabilities and stockholders' equity

$ 20,757.5   

$ 20,373.0   

Net interest income/spread (2)

$      580.2   

2.98%

$      640.3   

3.31%

Net interest margin

3.19%

3.62%

(1)  Average balances and yields for securities available for sale are based on amortized cost.

(2)  The FTE adjustment was $3.4 million and $3.9 million for the twelve months ended December 31, 2009 and 2008,

      respectively.

People's United Financial, Inc.

NON-PERFORMING ASSETS

Dec. 31,

Sept. 30,

June 30,

March 31,

Dec. 31,

(dollars in millions)

2009

2009

2009

2009

2008

Non-accrual loans:

 Commercial real estate

$        72.4   

$        80.2   

$        75.0   

$        53.8   

$        29.8   

 Residential mortgage

52.7   

49.8   

51.4   

42.3   

24.2   

 PCLC

20.6   

18.6   

16.5   

9.0   

5.8   

 Commercial

17.4   

21.0   

21.3   

16.3   

21.1   

 Consumer

5.7   

6.1   

3.8   

4.6   

3.3   

 Indirect auto

-   

-   

-   

0.1   

0.1   

   Total non-accrual loans (1)

168.8   

175.7   

168.0   

126.1   

84.3   

Real estate owned ("REO") and repossessed assets, net

36.8   

17.0   

14.0   

15.9   

9.4   

   Total non-performing assets

$      205.6   

$      192.7   

$      182.0   

$      142.0   

$        93.7   

Non-performing loans as a percentage of total loans

1.19%

1.23%

1.15%

0.86%

0.58%

Non-performing assets as a percentage of:

Total loans, REO and repossessed assets

1.44   

1.35   

1.25   

0.97   

0.64   

Tangible stockholders' equity and allowance for loan losses

5.47   

5.11   

4.82   

3.75   

2.47   

(1) Reported net of government guarantees totaling $8.3 million at December 31, 2009, $7.2 million at September 30, 2009,

    $7.1 million at June 30, 2009, $7.2 million at March 31, 2009 and $6.5 million at December 31, 2008.

PROVISION AND ALLOWANCE FOR LOAN LOSSES

Three Months Ended

Dec. 31,

Sept. 30,

June 30,

March 31,

Dec. 31,

(dollars in millions)

2009

2009

2009

2009

2008

Balance at beginning of period

$      172.5   

$      167.0   

$      159.0   

$      157.5   

$      154.5   

Charge-offs

(14.5)  

(17.2)  

(6.9)  

(6.9)  

(6.9)  

Recoveries

0.9   

1.2   

0.9   

0.5   

1.2   

   Net loan charge-offs

(13.6)  

(16.0)  

(6.0)  

(6.4)  

(5.7)  

Provision for loan losses

13.6   

21.5   

14.0   

7.9   

8.7   

Balance at end of period

$      172.5   

$      172.5   

$      167.0   

$      159.0   

$      157.5   

Allowance for loan losses as a percentage of:

Total loans

1.21%

1.21%

1.15%

1.09%

1.08%

Non-performing loans

102.2   

98.2   

99.4   

126.1   

186.8   

NET LOAN CHARGE-OFFS

Three Months Ended

Dec. 31,

Sept. 30,

June 30,

March 31,

Dec. 31,

(dollars in millions)

2009   

2009   

2009   

2009   

2008   

Commercial

$          4.3   

$          1.5   

$          1.1   

$          1.9   

$          1.2   

PCLC

4.0   

2.0   

1.8   

0.8   

0.5   

Consumer

1.9   

1.3   

1.2   

1.2   

0.9   

Commercial real estate

1.5   

7.7   

0.4   

1.0   

1.5   

Residential mortgage

1.2   

2.6   

0.8   

0.5   

0.8   

Indirect auto

0.7   

0.9   

0.7   

1.0   

0.8   

 Total

$        13.6   

$        16.0   

$          6.0   

$          6.4   

$          5.7   

Net loan charge-offs to average loans (annualized)

0.38%

0.44%

0.16%

0.18%

0.16%

SOURCE People's United Financial, Inc.



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