Attached files
| file | filename |
|---|---|
| 8-K - 8-K - People's United Financial, Inc. | d555527d8k.htm |
| EX-99.2 - EX-99.2 - People's United Financial, Inc. | d555527dex992.htm |
 Investor Presentation
June 2013
Investor Contact:
Peter Goulding, CFA
203-338-6799
peter.goulding@peoples.com
Exhibit 99.1
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 1
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, 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; (10) the successful integration of acquisitions; and (11) 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.
Forward-Looking Statement |
 2
Table of Contents
1.
Strategic Position
2.
Income Statement Improvements
3.
Balance Sheet Management
4.
Summary
5.
Appendix |
 Strategic Position
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 4
Corporate Overview
Snapshot as of March 31, 2013
People’s United Financial, Inc.
NASDAQ (PBCT)
Headquarters:
Bridgeport, CT
Chief Executive Officer:
Jack Barnes
Chief Financial Officer:
Kirk Walters
Market Capitalization (6/11/13):
$4.6 billion
Assets:
$30.6 billion
Loans:
$22.2 billion
Deposits:
$21.8 billion
Branches:
417
ATMs:
633
Standalone ATMs:*
106
Founded:
1842
* Includes 20 ATMs in Stop & Shop locations where a branch is not
present |
 5
Compelling Investment Opportunity
High quality Northeast footprint characterized by wealth and population density
Leading
market
position
in
the
best
commercial
banking
market
in
the
US
Significant
growth
runway
within
existing
markets
–
expanding
in
two
of
the
largest MSAs in the US (New York City, #1, Boston, #10)
Dividend yield of ~5%
Ability
to
maintain
pristine
credit
quality
–
no
credit
“events”
Improving profitability
High levels of liquidity
Capital deployment (organic growth, dividends, share repurchases, M&A)
– TCE/TA 9.6% vs. ~8.0% for peers |
 6
Retail & Business Banking Franchise
Distribution
–
400+ branches over 6 states
•
~33% of branches are in-store
—
600+ ATMs
Online & mobile banking
Call center operations located in Bridgeport,
CT and Burlington, VT
Scale
5
in
deposit
market
share
in
New
England
Customer base
Approximately 800,000 commercial, business
banking and consumer relationships
th |
 7
Strategic Focus of Deposit Franchise
Growth
Core customers and deposits
Multiple product households
Leverage employee expertise to drive sales
Brand execution
Employee expertise
Superior customer experience
In-store supermarket strategy
Leveraging the Citizen’s branch acquisition
Navigating a low rate environment
Balancing growth, retention and cost of funds
Constant evaluation of branch-level profitability
•
Consolidated 18 branches in 2011 and 2012, or ~5% of our franchise, which is
in-line with peers •
Selective de novo branches in key markets: Prudential Center in Boston, MA;
Lexington, MA; Wellesley, MA; and Park Ave in Manhattan
|
 8
Deepening Market Presence
Connecticut
Massachusetts
Vermont
New York
New Hampshire
Maine
Leading
market
position
in
the
best
commercial
banking
market
in
the
US
#1 in Fairfield County, CT, 65 branches, $6.1BN, 18.2% market share
Source: SNL Financial
Branches
$BN
%
1
B of A
155
24.5
24.0
2
Webster
124
12.1
11.8
3
People's United
165
10.9
10.7
4
Wells Fargo
76
7.3
7.2
5
TD Bank
81
5.9
5.8
6
First Niagara
86
4.6
4.5
7
JPM Chase
52
4.5
4.4
8
Citi
20
3.0
2.9
9
Liberty
48
2.9
2.8
10
RBS
50
2.6
2.5
Branches
$BN
%
1
B of A
262
54.6
25.0
2
RBS
254
30.9
14.1
3
Santander
229
18.9
8.6
4
TD Bank
157
10.8
5.0
5
Eastern Bank
99
6.8
3.1
6
Independent Bank
78
4.5
2.0
7
Middlesex
30
3.5
1.6
8
People's United
56
3.2
1.5
9
Boston Private
11
2.9
1.3
10
Century
28
2.4
1.1
Branches
$BN
%
1
People's United
42
2.6
22.4
2
TD Bank
34
2.6
22.0
3
Merchants
33
1.2
10.6
4
RBS
21
0.9
7.3
5
KeyCorp
13
0.8
6.7
6
Northfield
13
0.5
4.3
7
Community
14
0.4
3.7
8
Union
13
0.4
3.4
9
Passumpsic
7
0.3
2.9
10
Berkshire Hills
7
0.3
2.8
Branches
$BN
%
1
JPM Chase
804
393.1
38.3
2
Citi
268
69.6
6.8
3
B of A
365
60.6
5.9
4
HSBC
164
57.3
5.6
5
Capital One
277
39.0
3.8
6
M&T
299
33.3
3.3
7
TD Bank
222
22.4
2.2
8
KeyCorp
269
18.3
1.8
9
Wells Fargo
87
18.0
1.8
10
First Niagara
212
16.1
1.6
35
People's United
97
2.5
0.2
Branches
$BN
%
1
RBS
80
6.8
24.3
2
TD Bank
72
5.4
19.3
3
B of A
29
4.9
17.5
4
People's United
29
1.4
4.9
5
Merrimack
18
1.0
3.6
6
BNH
23
0.9
3.2
7
Santander
20
0.8
2.9
8
NH Thrift
20
0.8
2.8
9
Northway
17
0.7
2.4
10
Centrix
6
0.7
2.3
Branches
$BN
%
1
TD Bank
55
3.7
16.4
2
KeyCorp
60
2.7
11.7
3
Bangor Bancorp
58
2.0
8.9
4
Camden National
50
1.8
8.1
5
B of A
19
1.4
6.0
6
First Bancorp
15
1.0
4.6
7
Machias
14
0.8
3.6
8
People's United
28
0.8
3.5
9
Bar Harbor
16
0.8
3.4
10
Norway
21
0.7
3.2 |
 9
Large and Attractive Markets
NYC-Northern NJ-LI
Population: 19.0MM
Median HH Income: $60,512
Businesses: 781,444
Population Density (#/sq miles): 2,847
Unemployment Rate (%): 8.1
$100K+ Households (%): 30.8
Boston, MA
Population: 4.6MM
Median HH Income: $67,700
Businesses: 203,770
Population Density (#/sq miles): 1,319
Unemployment Rate (%): 5.9
$100K+ Households (%): 33.8
Hartford, CT
Population: 1.2MM
Median HH Income: $63,997
Businesses: 52,315
Population Density (#/sq miles): 803
Unemployment Rate (%): 8.2
$100K+ Households (%): 30.4
Bridgeport-Stamford, CT
Population: 922,000
Median HH Income: $80,342
Businesses: 49,392
Population Density (#/sq miles): 1,476
Unemployment Rate (%): 7.7
$100K+ Households (%): 41.5
New Haven, CT
Population: 863,000
Median HH Income: $58,598
Businesses: 36,800
Population Density (#/sq miles): 1,427
Unemployment Rate (%): 8.5
$100K+ Households (%): 28.1
Burlington, VT
Population: 215,000
Median HH Income: $55,875
Businesses: 10,846
Population Density (#/sq miles): 171
Unemployment Rate (%): 3.6
$100K+ Households (%): 21.9
Notes: The current national unemployment rate is 7.5%
The current national population density is 89 (#/sq miles)
The population densities of NYC, Boston, Bridgeport and New Haven MSAs are over
ten times the national average |
 10
Strong Market Demographic Profile
Source: SNL Financial, US Census data for 2012
Weighted Average Median Household Income |
 11
Total Deposits ($MM)
6,053
2,926
2,479
2,063
1,970
1,241
Market Total Deposits ($MM)
33,334
117,089
556,863
25,508
17,111
4,499
Branch Count
65
51
91
45
34
12
18.2
2.5
0.5
8.1
11.5
27.6
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Bridgeport-
Stamford, CT
Boston, MA
NYC-Northern
NJ-LI
Hartford, CT
New Haven,
CT
Burlington, VT
Deposit Market Share by MSA (%) *
We hold significant market share in several key northeast MSAs and are building our
presence
in
areas
with
substantial
growth
potential,
such
as
the
Boston
and
New
York City MSAs
Source: SNL Financial
* Excludes deposits from trust institutions and branches with over $750MM
deposits ** Excludes six of the acquired Citizens branches located outside
the NYC MSA **
**
Large New Markets |
 Income Statement Improvements
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 13
-1.34%
0.58%
1.03%
1.90%
0.75%
1.38%
1.31%
1.69%
-0.48%
0.75%
1.04%
1.52%
0.21%
0.57%
2.20%
3.38%
1.82%
-2%
-1%
0%
1%
2%
3%
4%
2011Q1
2011Q2
2011Q3
2011Q4
2012Q1
2012Q2
2012Q3
2012Q4
2013Q1
Top 50 Median
PBCT
13.86%
2
Consistent Loan Growth
Since the end of 2010, People’s United is one of only six banks within the top 50
by assets that have grown loans in each quarter
¹ Source:
SNL Financial. Excludes trust banks. Statements based on Total Gross Loans and
Finance Leases, as reported, net of unearned discounts and gross of loss
reserves. Does not include accrued interest on loans Notes:
1
Includes People’s United, First Niagara, First Republic, Signature, UMB and
Prosperity 2
Reflects completion of Danvers Bancorp acquisition in 2Q 2011
Quarterly Loan Growth Since 1Q 2011
PBCT Median = 1.52%
Top 50 Median = 1.03% |
 14
Revenue Opportunities
Continue to deepen our presence in heritage markets such as Connecticut and
Vermont
Substantial growth prospects in larger markets such as New York metro and
Boston Total New York 1Q 2013 loan originations run-rate ~$1.9BN
represents a +560% CAGR since 1Q 2010
•
Increased New York relationship managers to 13 from zero since 1Q 2010
•
Significant branch expansion in New York with 97 branches up from 5 in 1Q 2010;
~55% of branches are in- store locations
Total Massachusetts 1Q 2013 loan originations run-rate ~$660MM represents a
+40% CAGR since 1Q 2010
•
Increased Massachusetts relationship managers to 27 from 14 since 2010
•
Solid branch foundation in Massachusetts with 56 branches up from 19 in 1Q
2010 •
Currently 3 de novo branches over $40MM deposits: Prudential Center in Boston
(opened Nov. 2010); Milk Street in Boston (opened Dec. 2010); Lexington, MA
(opened Jul. 2011) |
 15
Revenue Opportunities
Under-represented asset classes ramping up
Asset-based lending: focused on in-footprint companies with sales of
$15MM-$250MM; credit needs range from $5MM-$35MM; $600BN market,
70% of which is located in the Northeast Mortgage Warehouse lending: $1.2BN
in commitments and $659MM in outstandings; estimated market size is over
$28BN in outstandings New York Commercial Real Estate: hiring talent in the
New York metro area, which is a $30BN annual market with a population of
19.0MM, 6.9MM housing units and 3.4MM rental units Private Banking: hired
senior executive from mega-cap bank with ~20 years managing private
banking in the Northeast with initial focus on CT, metro New York and metro
Boston Enhancing wealth management offering
Proprietary asset allocation and risk management strategies are implemented with a
suite of external managers who represent our "best in class"
recommendations •
Proprietary
asset
allocation
allows
us
to
“rent”
intellectual
capital
–
no
customer
funds
leave
the
bank
Hired executive from PNC as Senior Vice President and Chief Investment
Officer Increasing momentum in other fee income businesses with a focus on
cross-sell Commercial
insurance:
revamped
systems
and
combined
all
agencies
into
a
single
entity;
focused
on
our deep commercial customer base as well as the education sector
Hired executive from TD to lead cash management business
Growing merchant and payroll services |
 16
Growing Future Earnings Per Share
Loans and Deposits per Share
Loans
Deposits
Over the past two years, loans per share and deposits per share have grown at
compound annual rates of 16% and 13% |
 17
Efficiency Ratio
Peer Group Comparison, Last Twelve Months Ending 1Q 2013
Low cost producers tend to yield the best returns to shareholders.
Efficiency
progress
requires
both
revenue
growth
AND
expense
discipline
Source: SNL Financial |
 18
EMOC has been fully operational since November 2011
Three person committee comprised of the CFO, Chief Administrative Officer and
Chief HR Officer EMOC oversees PBCT’s noninterest expense management,
implements strategies to ensure attainment of expense management targets and
oversees revenue initiatives that require expenditures
Provides a horizontal view of the organization
Expense Management Units (EMUs) established to facilitate EMOC functions
Defined EMUs include:
•
Technology
•
Operations
•
Real Estate Services
Spending requests above $25,000 are submitted by EMU owners for approval
Staffing models, staffing replacements and additions for mid-level positions and
above require approval by the Committee
Introduction to EMOC
Expense Management Oversight Committee (EMOC)
•
Employment/Benefits
•
Marketing
•
Regulatory/Institutional
•
Depreciation/Equipment
•
Decentralized
•
Intangible Amortization |
 19
Expense Progress
Estimated Cost Savings Analysis
Our 1Q 2013 operating expense base of $204MM reflects $29MM (~$114MM annualized)
savings from successfully-executed expense initiatives
Source: SNL Financial
Note: “Pro Forma / Actual”
represents PBCT operating noninterest expense and the actual expenses at the
acquired institutions. Acquisition target costs fall away as the
acquisitions are completed. “Without Expense Initiatives”
represents PBCT operating noninterest expense and the actual expenses at the
acquired institutions in 4Q09, and then applies the peer median expense
growth rate in each subsequent quarter. |
 20
Expense Progress
Estimated Cost Savings Analysis
The $29MM in quarterly cost reductions is attributable to efforts related to
acquisition cost savings and other initiatives
Source: SNL Financial
Note: “Pro Forma / Actual”
represents PBCT operating noninterest expense and the actual expenses at the
acquired institutions. Acquisition target costs fall away as the
acquisitions are completed “Without Expense Initiatives”
represents PBCT operating noninterest expense and the actual expenses at the
acquired institutions in 4Q09, and then applies the peer median expense
growth rate in each subsequent quarter |
 21
Average Annual Net Charge Offs / Average Loans (%)
Peer Group Comparison, 2008-2012
Conservative underwriting is a hallmark of this institution
Source: SNL Financial |
 22
P/TBV vs. ROATE
Peer Group Regression Analysis
Improved profitability, enhanced predictability of earnings and transparent capital
allocation will create additional shareholder value
PBCT
Source: SNL Financial
Note: Analysis utilizes Bloomberg 3 Year Adjusted Betas, as of June 11, 2013
R²
= 0.79
0
50
100
150
200
250
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2014E Return on Average Tangible Equity Less Cost of Equity
|
 Balance Sheet Management
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 24
Securities Portfolio Summary
The duration of the securities portfolio as of 3/31/13 is approximately 3.7 years,
up
slightly
from
prior
quarters
in
conjunction
with
the
addition
of
municipal
bonds to the portfolio
In 3Q 2011, we took action to reduce the premium on our books and protect
against prepayment exposure
82% of the securities portfolio is in MBS and CMOs with a book price of $100.71
An additional 12% of the securities portfolio is invested in municipal bonds with a
book price of $111.90. While the book price is well above par, these bonds do
not have
pre-payment
risk
and
represent
attractive
value
with
a
book
yield
of
3.78%
on a tax-equivalent basis |
 25
Strong Sources of Liquidity
PBCT maintains high levels of liquidity and is over 90% funded by deposits, retail
repurchase agreements, senior debt and common equity
Strong branch franchise and commercial customer base predominantly funds loan
base Citizens transaction provides a significant long-term opportunity to
grow deposits and customer relationships in southern New York, specifically on
Long Island and in Westchester County
Additional liquidity of $2.5BN exists in the form of unpledged U.S. Agency MBS &
CMO’s
Federal Home Loan Bank (FHLB) relationship enables up to $2.4BN of additional
borrowings |
 26
For 1Q 2013 we were twice as asset sensitive as the estimated median of our peer
group Currently for an immediate parallel increase of 100bps, our net interest
income is projected to increase by ~$47MM on an annualized basis
Yield curve twist scenarios confirm that we are reasonably well protected from bull
flattener (short rates are unchanged, long rates fall) and benefit
considerably from bear flattener environments (short rates rise, long rates
are unchanged) Notes:
1.
Analysis is as of 03/31/13 filings
2.
Data as of 03/31/13 SEC filings; where exact +100bps shock up scenario data was
not provided, PBCT interpolated based on data disclosed 3.
Data as of 03/31/13 SEC filings; where exact +200bps shock up scenario data was
not provided, PBCT interpolated based on data disclosed Current Asset
Sensitivity Net Interest Income at Risk ¹
Analysis involves PBCT estimates, see notes below
Change in Net Interest Income
Scenario
Lowest
Amongst Peers
Highest
Amongst Peers
Peer Median
PBCT Multiple to
Peer Median
Shock Up
100bps ²
-2.5%
7.9%
2.7%
1.8x
Shock Up
200bps ³
-4.0%
15.8%
5.2%
2.1x |
 27
Share Repurchase Activity
Current prolonged period of near zero short-term interest rates and above average
capital levels presents us the opportunity to repurchase shares at a discount
to earnings power in a normalized rate environment
Share
repurchases
also
help
normalize
both
dividend
payout
ratio
and
ROATE
Repurchased 11.1 million shares, or $144 million, at a weighted average price of
$12.96 per share in 1Q 2013
Increased share repurchase activity from 4.7 million shares in 4Q 2012
Expect
to
complete
latest
share
repurchase
authorization
(10%
of
shares
outstanding)
within
2013
Over the last five years PBCT has repurchased over $800 million of shares
Share repurchases at the current stock price have a tangible book value dilution
earnback period of ~5 years and no execution risk
Year to date through May 6, 2013, 14.3 million shares, or $186 million, have been
repurchased |
 Summary
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 29
Summary
Sustainable Competitive Advantage
Premium brand built over 170 years
High quality Northeast footprint characterized by wealth, density and
commercial activity
Strong leadership team
Solid net interest margin
Superior asset quality
Focus on relationship-based banking
Growing
loans
and
deposits
within
footprint
-
in
two
of
the
largest
MSAs
in
the country (New York City, #1 and Boston, #10)
Improving profitability
Returning capital to shareholders
Strong capital base |
 Appendix
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 31
Allowance for Loan Losses
Originated Portfolio Coverage Detail as of 3/31/13
(in $ millions)
1.13%
1.11%
0.00%
0.50%
1.00%
1.50%
2.00%
NPLs:Loans
ALLL:Loans
Commercial
Banking
1.57%
0.32%
0.00%
0.50%
1.00%
1.50%
2.00%
NPLs:Loans
ALLL:Loans
Retail Banking
Commercial ALLL -
$159.5 million
98% of Commercial NPLs
Retail ALLL -
$18.0 million
20% of Retail NPLs
Total ALLL -
$177.5 million
71% of Total NPLs
1.25%
0.88%
0.00%
0.50%
1.00%
1.50%
2.00%
NPLs:Loans
ALLL:Loans
Total |
 32
Notes:
1.
Leverage (core) Capital represents Tier 1 Capital (total stockholder’s equity,
excluding: (i) after-tax net unrealized gains (losses) on certain securities classified as available
for sale; (ii) goodwill and other acquisition-related intangibles; and (iii)
the amount recorded in accumulated other comprehensive income (loss) relating to pension and other
postretirement benefits), divided by Adjusted Total Assets (period end total assets
less goodwill and other acquisition-related intangibles) 2.
Tier
1
Common
represents
total
stockholder’s
equity,
excluding
goodwill
and
other
acquisition-related
intangibles,
divided
by
Total
Risk-Weighted
Assets
3.
Tier
1
Risk-Based
Capital
represents
Tier
1
Capital
divided
by
Total
Risk-Weighted
Assets
4.
Total
Risk-Based
Capital
represents
Tier
1
Capital
plus
subordinated
notes
and
debentures,
up
to
certain
limits,
and
the
allowance
for
loan
losses,
up
to
1.25%
of
total
risk
weighted
assets,
divided
by
Total
Risk-Weighted
Assets
5.
Well
capitalized
limits
for
the
Bank
are:
Leverage
Ratio,
5%;
Tier
1
Risk-Based
Capital,
6%;
and
Total
Risk-Based
Capital,
10%
Capital Ratios
Since 1Q 2010
1Q 2010
1Q 2011
1Q 2012
2Q 2012
3Q 2012
4Q 2012
1Q 2013
People’s United Financial
Tang.
Com.
Equity/Tang.
Assets
18.7%
13.9%
11.7%
11.4%
11.2%
10.2%
9.6%
Leverage Ratio
1, 5
19.2%
14.5%
12.1%
11.8%
11.5%
10.6%
10.0%
Tier 1 Common ²
23.1%
17.1%
13.9%
13.6%
13.6%
12.7%
12.0%
Tier 1 Risk-Based Capital
3, 5
23.9%
17.9%
14.4%
14.1%
14.1%
13.2%
12.5%
Total Risk-Based Capital
4, 5
25.6%
19.4%
16.0%
15.6%
15.6%
14.7%
13.7%
People’s United Bank
Leverage Ratio
1, 5
12.3%
11.4%
11.0%
10.9%
10.8%
9.8%
9.7%
Tier 1 Risk-Based Capital
3, 5
15.4%
13.9%
13.1%
13.0%
13.2%
12.2%
12.1%
Total Risk-Based Capital
4,5
16.3%
14.8%
14.0%
14.0%
14.1%
13.1%
13.5% |
 33
Name
Position
Years in
Banking
Professional
Experience
Jack Barnes
President & CEO, Director
30+
People’s United Bank (SEVP, CAO),
Chittenden, FDIC
Kirk Walters
SEVP & CFO, Director
25+
People’s United Bank, Santander, Sovereign,
Chittenden, Northeast Financial
Jeff Tengel
SEVP Commercial Banking
30+
People’s United Bank, PNC, National City
Bob D’Amore
SEVP Retail & Business Banking
30+
People’s United Bank
Louise Sandberg
SEVP Wealth Management
30+
People’s United Bank, Chittenden
Lee Powlus
SEVP & Chief Administrative Officer
25+
People’s United Bank, Chittenden, Alltel
Chantal Simon
SEVP & Chief Risk Officer
20+
People’s United Bank, Merrill Lynch US Bank,
Lazard Freres & Co.
Dave Norton
SEVP & Chief HR Officer
3+
People’s United Bank, New York Times,
Starwood, PepsiCo
Bob Trautmann
SEVP & General Counsel
20+
People’s United Bank, Tyler Cooper & Alcorn
Management Committee |
 34
Peer Group
Firm
Ticker
City
State
1
Associated
ASBC
Green Bay
WI
2
BancorpSouth
BXS
Tupelo
MS
3
City National
CYN
Los Angeles
CA
4
Comerica
CMA
Dallas
TX
5
Commerce
CBSH
Kansas City
MO
6
Cullen/Frost
CFR
San Antonio
TX
7
East West
EWBC
Pasadena
CA
8
First Niagara
FNFG
Buffalo
NY
9
FirstMerit
FMER
Akron
OH
10
Fulton
FULT
Lancaster
PA
11
Huntington
HBAN
Columbus
OH
12
M&T
MTB
Buffalo
NY
13
New York Community
NYCB
Westbury
NY
14
Signature
SBNY
New York
NY
15
Susquehanna
SUSQ
Lititz
PA
16
Synovus
SNV
Columbus
GA
17
Valley National
VLY
Wayne
NJ
18
Webster
WBS
Waterbury
CT
19
Wintrust
WTFC
Lake Forest
IL
20
Zions
ZION
Salt Lake City
UT |
 35
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, tangible book value per share and operating earnings metrics.
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 and operating earnings metrics are used by management in its assessment of
financial performance, including 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 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, and excluding gains
and losses on sales of assets other than residential mortgage loans, and non-
recurring income) (the denominator). People’s United Financial 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.
Non-GAAP Financial Measures and Reconciliation to GAAP
|
 36
Operating earnings exclude from net income 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 Financial’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, merger-related
expenses, charges related to executive-level management separation
costs, severance-related costs and writedowns of banking house assets,
are generally also excluded when calculating the efficiency ratio. Operating earnings per share is
derived by determining the per share impact of the respective adjustments to arrive
at operating earnings and adding (subtracting) such amounts to (from) GAAP
earnings per share. Operating return on average assets is calculated by
dividing operating earnings (annualized) by average assets. Operating return on average
tangible stockholders' equity is calculated by dividing operating earnings
(annualized) by average tangible stockholders' equity. The operating
dividend payout ratio is calculated by dividing dividends paid by operating
earnings for the respective period.
Operating net interest margin excludes from the net interest margin those items
that management considers to be of such a discrete nature that, by excluding
such items, People’s United Financial’s net interest margin can be
measured and assessed on a more consistent basis from period to period. Items excluded from operating
net interest margin include cost recovery income on acquired loans and changes in
the accretable yield on acquired loans stemming from periodic cash flow
reassessments. Operating net interest margin is calculated by dividing
operating net interest income (annualized) by average earning assets.
Non-GAAP Financial Measures and Reconciliation to GAAP
|
 37
The
tangible
equity
ratio
is
the
ratio
of
(i)
tangible
stockholders’
equity
(total
stockholders’
equity
less
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 share is calculated by dividing tangible
stockholders’ 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 Financial for determining the
non-GAAP financial measures discussed above may differ from those used by
other financial institutions. Please refer to People’s United Financial’s
latest Form 10-Q regulatory filing for detailed reconciliations to GAAP
figures. Non-GAAP Financial Measures and Reconciliation to GAAP
|
 For
more information, investors may contact: Peter Goulding, CFA
203-338-6799
peter.goulding@peoples.com
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