UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 15, 1998
NORWICH FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
34-0-17138 06-1226755
(Commission File Number) (IRS Employer Identification No.)
4 Broadway, Norwich, Connecticut 06360
(Address of principal executive offices)
(860) 889-2621
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
On January 23, 1998, Norwich Financial Corp. ("NFC") issued a press
release announcing financial results for the quarter and year ended
December 31, 1997. See Exhibit 99(1) hereto.
This Current Report on Form 8-K reproduces the Current Report on Form
8-K of People's Bank, dated January 15, 1998, with exhibits, as filed with
the Federal Deposit Insurance Corporation. See Exhibit 99(2). People's
Bank has agreed to acquire NFC in a merger transaction.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(c) The following Exhibits are filed herewith:
EXHIBIT NO. DESCRIPTION
99 (1)Press Release, dated January 23, 1998, of Norwich Financial
Corp.
99 (2)Current Report on Form 8-K of People's Bank, dated January 15,
1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
NORWICH FINANCIAL CORP.
Dated: February 2, 1998 By /s/ Daniel R. Dennis, Jr.
Daniel R. Dennis, Jr.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
99 (1)Press Release of Norwich Financial Corp.
99 (2)Current Report on Form 8-K of People's Bank, dated January 15,
1998.
FOR IMMEDIATE RELEASE
Contact: Richard A. Woerle
Norwich Financial Corp. Reports Earnings
For Year Ended 1997
Norwich, Connecticut, January 23, 1998. Norwich Financial Corp.
(NASDAQ-NSSB) (NFC or the Company) today announced net income of
$1,858,000 for the fourth quarter of 1997, compared to net income
of $1,941,000 for the fourth quarter of 1996. Diluted earnings
per share for the fourth quarter of 1997 were $0.33 per share,
compared with $0.35 per share for the fourth quarter of 1996. Net
income for the year ended December 31, 1997 was $7,928,000
compared to $6,651,000 for the year ended December 31, 1996.
Diluted earnings per share for the year ended December 31, 1997
were $1.44 compared to $1.20 for the year ended December 31,
1996.
On September 4, 1997 Norwich Financial Corp. and People's Bank of
Bridgeport, Connecticut announced that they had reached a
definitive agreement for NFC and its subsidiary bank to merge
with People's. If the merger is approved by the shareholders of
NFC and of People's and all required regulatory approvals are
received, it is currently anticipated that the merger will close
on or before March 2, 1998.
Daniel R. Dennis, Jr., Chairman, President and Chief Executive
Officer, remarked, "We are pleased to announce that Norwich
Financial Corp. achieved a record level of earnings in 1997.
Higher asset yields, lower funding costs, higher service fee
income and gains on securities and loans sold during 1997
contributed to the improvement in our overall results."
NFC's return on average assets and return on average equity were
1.05% and 8.88%, respectively, for the fourth quarter of 1997
compared with 1.12% and 10.18% for the fourth quarter of 1996.
NFC's return on average assets and return on average equity for
the year ended December 31, 1997 were 1.14% and 9.96%,
respectively, compared with 0.95% and 8.91% in 1996.
Net interest income for the fourth quarter of 1997 was $7,414,000
compared with $7,117,000 for the fourth quarter of 1996. Net
interest income for the year ended December 31, 1997 was
$29,325,000 compared to $26,947,000 for the year ended December
31, 1996. Net interest margin on a fully taxable equivalent basis
was 4.46% for the year ended December 31, 1997 compared to 4.04%
for 1996.
Noninterest income totaled $2,444,000 for the fourth quarter of
1997 compared with $999,000 for the fourth quarter of 1996.
Noninterest income for the year ended December 31, 1997 was
$5,910,000 compared with $3,867,000 for 1996. The increase in
noninterest income is due primarily to net pretax securities
gains amounting to $1,418,000 and $1,856,000, respectively, for
the fourth quarter and full year 1997, compared with $102,000 and
$366,000 for the fourth quarter and full year 1996. Higher
service fee income in 1997 and gains on loans sold or held for
sale also contributed to the increase in noninterest income.
Noninterest expense for the fourth quarter of 1997 was $5,825,000
compared with $4,539,000 for the fourth quarter of 1996.
Noninterest expense for the year ended December 31, 1997 was
$20,322,000 compared with $18,136,000 for 1996. During the fourth
quarter of 1997, NFC recorded a $500,000 writedown of the deposit
base premium associated with the prior acquisition of certain
branches. The $500,000 writedown was in addition to the Company's
normal scheduled amortization of intangibles. Expenses related to
the Company's pending merger with People's Bank of Bridgeport
amounted to $332,000 and $696,000, respectively, for the fourth
quarter and full year 1997.
NFC's 1997 fourth quarter results included a loan loss provision
of $800,000, compared with a year earlier fourth quarter
provision of $600,000. For the year ended December 31, 1997, the
Company recorded a loan loss provision of $1,400,000, unchanged
from $1,400,000 recorded in 1996.
During the fourth quarter of 1997, NFC sold $1,615,000 of loans
of which $1,125,000 were nonperforming. Proceeds of $1,083,000
were received, transaction expenses of $42,000 were charged to
earnings, and a loss on the sale of $532,000 was charged against
the allowance for loan losses. As of December 31, 1997, the
Company had entered into a contract to sell $1,221,000 of
additional nonperforming loans for $695,000, of which $104,000 in
proceeds was received in December. The loss of $526,000 on the
sale, which closed on January 5, 1998, was charged against the
allowance for loan losses as of December 31, 1997.
Total charge-offs of loans and foreclosed properties (net of
recoveries), for the quarters ended December 31, 1997 and 1996,
were $1,904,000 and $2,234,000, respectively. Total charge-offs
of loans and foreclosed properties (net of recoveries), for the
years ended December 31, 1997 and 1996 were $3,226,000 and
$3,164,000, respectively.
At December 31, 1997, nonperforming assets, inclusive of
"nonperforming loans held for sale", were $7,097,000 compared to
$6,993,000 at December 31, 1996. Nonperforming loans included in
these amounts were $5,184,000 and $5,826,000 respectively.
The allowance for loan losses was $12,425,000 at December 31,
1997 compared to $13,928,000 at the end of 1996. The allowance
for loan losses amounted to 271% of nonperforming loans,
exclusive of "nonperforming loans held for sale" at the end of
1997, as compared to 239% at the end of 1996.
NFC's equity to assets ratio was 12.03% at December 31, 1997,
compared to 11.20% at December 31, 1996. Book value per share
was $15.16 at December 31, 1997 compared to $14.17 at December
31, 1996.
Norwich Financial Corp. is a registered bank holding company with
total assets of $698,517,000 and total deposits of $586,803,000
at December 31, 1997. The Company's principal subsidiary is The
Norwich Savings Society, an FDIC-insured savings bank which
operates 17 banking offices throughout eastern Connecticut.
<PAGE>
NORWICH FINANCIAL CORP. AND SUBSIDIARY
Consolidated Financial Results
<TABLE>
CAPTION
Year Ended Three Months Ended
December 31, December 31,
(In thousands, except share data) 1997 1996 1997 1996
<S> <C> <C> <C> <C>
EARNINGS
Interest income $52,875 $52,289 $13,370 $13,148
Interest expense 23,550 25,342 5,956 6,031
Net interest income 29,325 26,947 7,414 7,117
Net income 7,928 6,651 1,858 1,941
Diluted earnings per share 1.44 1.20 0.33 0.35
Average common shares outstanding,
including common stock equivalents-
assuming dilution 5,522,140 5,553,762 5,611,873 5,508,155
RATIOS (annualized)
Return on average assets 1.14% 0.95% 1.05% 1.12%
Return on average stockholders' equity 9.96 8.91 8.88 10.18
Average stockholders' equity to average
assets 11.43 10.64 11.84 10.98
YIELD DATA
(taxable equivalent-annualized)
Net interest margin 4.46 4.04 4.49 4.36
Net interest spread 3.62 3.25 3.63 3.55
Asset yields
Loans 8.73 8.70 8.79 8.73
Investments 6.04 5.88 6.11 6.05
Earning assets 8.03 7.82 8.07 7.99
Cost of funds
Deposits 4.35 4.51 4.38 4.40
FHLB advances 6.45 6.43 6.51 6.28
Interest bearing liabilities 4.41 4.57 4.44 4.45
</TABLE>
<TABLE>
CAPTION
December 31,
(In thousands, except share data) 1997 1996
<S> <C> <C>
OUTSTANDING BALANCES
Total assets $698,517 $683,299
Net loans 463,612 463,183
Deposits 586,803 585,080
FHLB advances 15,581 11,928
Stockholders' equity 84,014 76,498
Stockholders' equity to total assets 12.03% 11.20%
Book value per share $15.16 $14.17
Shares of common stock 5,542,941 5,399,641
</TABLE>
<PAGE>
NORWICH FINANCIAL CORP. AND SUBSIDIARY
Nonperforming Assets Summary
<TABLE>
CAPTION
December 31,
(Dollars in thousands) 1997 1996
<S> <C> <C>
Nonperforming loans
Residential real estate $1,159 $ 1,476
Commercial real estate
Permanent 1,150 2,932
Land and construction 1,110 114
Commercial 1,044 1,176
Consumer 130 128
----- -----
Total nonperforming loans 4,593 5,826
Foreclosed properties 1,913 1,167
----- -----
Total nonperforming assets before
nonperforming assets held for sale 6,506 6,993
Nonperforming loans held for sale 591 -
----- -----
Total nonperforming assets $7,097 $6,993
====== ======
Performing restructured loans $3,128 $ 532
====== ======+
</TABLE>
SUMMARY OF IMPAIRED LOANS
At December 31, 1997, all loans classified as nonperforming in the above
table, as well as performing restructured loans of $3.1 million, are classified
as impaired. Impaired loans of $8.3 million as of December 31, 1997 had an
associated allowance for losses of $1.0 million.
<TABLE>
CAPTION
December 31,
(Dollars in thousands) 1997 1996
<S> <C> <C>
Net charge-offs year to date $3,226 $3,164
Net charge-offs to average loans and
foreclosed properties for the year 0.66% 0.69%
Allowance for loan losses $12,425 $13,928
Ratios (exclusive of nonperforming
assets held for sale)
Allowance for loan losses to:
Nonperforming loans 270.52% 239.07%
Total nonperforming assets 190.98 199.17
Total loans and foreclosed properties 2.59 2.91
Total nonperforming assets to:
Total loans and foreclosed properties 1.36 1.46
Total assets 0.93% 1.02%
</TABLE>
NORWICH FINANCIAL CORP. AND SUBSIDIARY
Consolidated Statements of Income
<TABLE>
CAPTION
Year Ended Three Months Ended
December 31, December 31,
(In thousands,
except share data) 1997 1996 1997 1996
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Mortgage loans $30,428 $29,108 $7,539 $7,539
Other loans 12,055 10,969 3,113 2,886
Federal funds sold 252 268 73 49
Money market instruments 3,329 1,379 968 463
U.S. Government and agency obligations 59 4,161 - 403
Mortgage-backed securities 5,830 5,966 1,414 1,644
Other bonds 549 65 143 20
Corporate stocks 373 373 120 144
------ ------ ------ ------
Total interest income 52,875 52,289 13,370 13,148
------ ------ ------ ------
INTEREST EXPENSE
Deposits 22,650 24,310 5,700 5,799
FHLB advances 900 1,032 256 232
------ ------ ------ ------
Total interest expense 23,550 25,342 5,956 6,031
------ ------ ------ ------
NET INTEREST INCOME 29,325 26,947 7,414 7,117
LOAN LOSS PROVISION 1,400 1,400 800 600
------ ------ ------ ------
NET INTEREST INCOME
AFTER LOAN LOSS PROVISION 27,925 25,547 6,614 6,517
------ ------ ------ ------
NONINTEREST INCOME
Mortgage servicing fees 672 639 170 157
Other service fee income 2,968 2,482 733 648
Net securities gains 1,856 366 1,418 102
Gains on loans sold or held for sale 483 18 144 30
Other (69) 362 (21) 62
------ ------ ------ ------
Total noninterest income 5,910 3,867 2,444 999
------ ------ ------ ------
NONINTEREST EXPENSE
Salaries and employee benefits 9,766 9,495 2,474 2,314
Furniture and equipment 1,223 1,219 298 325
Net occupancy 2,304 2,394 547 573
Data processing 798 682 245 183
Advertising and promotion 445 469 61 96
Legal 407 139 176 54
FDIC/State assessments 60 12 4 0
Amortization of intangibles 1,232 649 696 163
Nonperforming asset expenses 617 (72) 342 (95)
Other operating expenses 3,470 3,149 982 926
------ ------ ------ ------
Total noninterest expense 20,322 18,136 5,825 4,539
------ ------ ------ ------
INCOME BEFORE INCOME TAXES 13,513 11,278 3,233 2,977
INCOME TAX PROVISION 5,585 4,627 1,375 1,036
------ ------ ------ ------
NET INCOME $7,928 $6,651 $1,858 $1,941
====== ====== ====== ======
NET INCOME PER SHARE
BASIC $1.46 $ 1.22 $ 0.34 $ 0.36
DILUTED $1.44 $ 1.20 $ 0.33 $ 0.35
</TABLE>
NORWICH FINANCIAL CORP. AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
CAPTION
December 31,
(In thousands, except share data) 1997 1996
<S> <C> <C>
ASSETS
Cash and due from banks $18,627 $19,419
Investments
Federal funds sold 5,500 3,700
Money market instruments, held to maturity
(market value of $76,897 and $31,765 at
December 31, 1997 and 1996) 76,905 31,769
Mortgage-backed securities, available for
sale (amortized cost of $81,954 and
$100,844 at December 31, 1997 and 1996) 82,812 101,025
Investment securities
Held to maturity (market value of $20,941
at December 31, 1996) - 20,945
Available for sale (amortized cost of
$13,559 and $9,936 at December 31, 1997 and 1996) 14,667 10,556
Federal Home Loan Bank stock, at cost 3,715 3,715
------- -------
Total investments 183,599 171,710
Loans
Mortgage 344,765 350,781
Other 131,272 126,330
------- -------
Total loans 476,037 477,111
Less allowance for loan losses (12,425) (13,928)
------- -------
Net loans 463,612 463,183
Loans held for sale 2,170 172
Premises and equipment, at cost less
accumulated depreciation 5,800 6,216
Accrued income receivable 3,659 3,474
Foreclosed properties 1,913 1,167
Deferred tax asset, net 3,906 5,356
Acquisition related intangibles 6,845 4,924
Other assets 8,386 7,678
------- -------
Total assets $698,517 $683,299
======= =======
LIABILITIES
Total deposits $586,803 $585,080
Mortgagors' escrow accounts 3,708 3,654
FHLB advances 15,581 11,928
Other liabilities 8,411 6,139
------- -------
Total liabilities 614,503 606,801
------- -------
STOCKHOLDERS' EQUITY
Common stock 60 60
Additional paid-in capital 59,687 58,708
Retained income 27,849 23,869
Less Treasury stock, at cost (410,940 and
554,240 shares at December 31, 1997 and 1996) (4,741) (6,611)
Unrealized gain on securities available for sale,
net of tax effect 1,159 472
------- -------
Total stockholders' equity 84,014 76,498
------- -------
Total liabilities and stockholders' equity $698,517 $683,299
======= =======
BOOK VALUE PER SHARE $ 15.16 $ 14.17
------- -------
</TABLE>
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, DC 20429
_____________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) JANUARY 15, 1998
PEOPLE'S BANK
(Exact name of Registrant as Specified in Charter)
CONNECTICUT 27334 06-1213065
(State or Other Jurisdiction (FDIC (IRS Employer
of Incorporation) Certificate No.) Identification No.)
BRIDGEPORT CENTER, 850 MAIN STREET, BRIDGEPORT, CONNECTICUT 06604
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (203) 338-7171
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 5. Other Events.
Attached hereto as an exhibit is a copy of a press release disclosing the
operating results (unaudited) of People's Bank for the year ended
December 31, 1997.
ITEM 7. Financial Statements, Pro Forma Financial Information, and
Exhibits.
(c) The following Exhibit is filed herewith.
EXHIBIT NO. DESCRIPTION
99.1 Press release disclosing unaudited operating results of
People's Bank for the year ended December 31, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
PEOPLE'S BANK
(Registrant)
Date: January 29, 1998 By: /S/ Vincent J. Calabrese
(Signature)
Name: Vincent J. Calabrese
Title: Vice President
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
99.1 Press release disclosing unaudited operating 99.1-1
results of People's Bank for the year ended
December 31, 1997.
<PAGE>
FOR IMMEDIATE RELEASE
JANUARY 15, 1998
PEOPLE'S BANK EARNS $25.2 MILLION;
REPORTS RECORD PROFITS FOR FULL YEAR
BRIDGEPORT, CT -- People's Bank (NASDAQ: PBCT) today announced net income
of $25.2 million or $0.41 per share for the quarter ended December 31,
1997, up 22 percent compared to $20.6 million or $0.34 per share for the
fourth quarter of 1996. For the full year of 1997, net income totaled
$92.4 million or $1.51 per share, up 15 percent compared to $80.1 million
or $1.31 per share for 1996.
"This is our fifth consecutive year of record profits," said David E. A.
Carson, chairman and chief executive officer, "capping a year of many
accomplishments for People's Bank. During 1997, managed assets grew more
than $1 billion, driving us above the $10 billion mark. Stockholders were
also rewarded with two dividend increases, a 3-for-2 stock split and a
total return exceeding 100 percent, bringing our market capitalization to
more than $2 billion."
James P. Biggs, president, said, "The Stop & Shop initiative exceeded our
targets in 1997, as we ended the year with over $500 million in deposits,
contributing to the bank's double digit growth in consumer and commercial
deposits. We also expanded our market presence and basket of products and
services. In addition to the pending acquisition of Norwich Financial, we
acquired a money management firm and an equipment leasing company during
the fourth quarter. We also launched People's Online, linking our popular
PC Banking product with the ability to manage investment activities
through People's Securities."
While credit card growth in the fourth quarter was affected by a modest
Christmas season, the managed portfolio experienced year-over-year growth
of $679 million or 25 percent. People's also generated $143 million of
growth in its other lending businesses. Commercial lending was up 15
percent and commercial mortgage grew 5 percent. The consumer loan
portfolio increased 21 percent to $288 million, led by growth in home
equity loans.
Overall asset quality reached a new milestone since People's became a
public company in 1988, with non-performing assets down to $56 million or
0.68 percent of total assets. Credit card asset quality remains strong,
with net charge-offs, as a percent of average managed receivables, equal
to 3.83 percent, down from 4.10 percent for the third quarter of this
year and unchanged from the 1996 fourth quarter. Credit card
delinquencies equaled 3.37 percent of quarter-end managed receivables,
down significantly from 3.94 percent a year ago and up slightly from the
third quarter figure of 3.25 percent.
Commenting on results for the quarter, George W. Morriss, executive vice
president and chief financial officer, said, "We are pleased to report 22
percent growth in net income compared to the fourth quarter of 1996. As
we continued to invest in several initiatives, growth in operating income
more than funded the higher expenses."
Compared to the year-ago quarter, operating income reflects strong
increases in all fee-based revenue sources (27 percent), including credit
card (35 percent), brokerage commissions (26 percent), trust (19 percent)
and deposits (8 percent).
Morriss also said, "The managed net interest margin increased by 17 basis
points to 4.32 percent, compared to the third quarter of 1997, and
increased by 7 basis points compared to the fourth quarter of 1996. As
expected, this increase reflects the repricing of $600 million in credit
card receivables during September, in addition to normally scheduled
repricings. As a result, the managed credit card yield equaled 10.88
percent, up 46 and 71 basis points from the third and second quarters of
1997, respectively."
Expenses were driven by expansion of People's domestic and U.K. credit
card programs, the bank's Super Stop & Shop initiative and incentive-
based compensation tied to People's stock performance and operating
results. With 39 of the 45 planned supermarket branches open for
business at the end of December, a reduction in the growth rate of
expenses associated with this initiative is anticipated in 1998.
"Another major contributor to our fourth quarter results was net gains on
sales of securities and residential mortgage loans totaling $18.3
million," said Morriss. "While up substantially from $5.9 million for
the fourth quarter of 1996, the level of gains is down by $1.4 million
from the third quarter of 1997. Given the economic and currency turmoil
in the international markets, we felt it prudent to reduce our common
stock portfolio during the quarter by 14 percent to end the year at $260
million with $36.2 million in net unrealized gains."
People's Board of Directors declared a $0.19 quarterly dividend on its
common stock, payable February 15, 1998, to stockholders of record on
February 1, 1998. People's Mutual Holdings, which owns 36.5 million
shares of People's Bank common stock, will accept $225,000 in dividends,
representing payment on only three percent of its shares.
The largest bank in Connecticut, People's Bank is a diversified financial
services company providing consumer, commercial and investment services.
Its subsidiaries include brokerage services through People's Securities,
Inc., money management through Olsen Mobeck & Associates and equipment
leasing through People's Capital and Leasing Corp. Nationally, People's
Bank is the 25th largest issuer of MasterCard and Visa credit cards. The
bank also has an international credit card operation headquartered in
Northhampton, United Kingdom.
<PAGE>
PEOPLE'S BANK
FOURTH QUARTER AND FULL YEAR 1997 KEY PERFORMANCE INDICATORS
<TABLE>
<CAPTION>
(dollars in millions) 4Q97 4Q96 % Chg YTD 97 YTD 96 % Chg
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net income . . . . . . . . . . . . . . . . . $ 25.2 $ 20.6 22.3 $ 92.4 $ 80.1 15.4
Net interest income . . . . . . . . . . . . 60.5 62.4 (3.0) 253.0 234.5 7.9
Fee-based revenues. . . . . . . . . . . . . 51.5 40.6 26.8 185.2 148.8 24.5
Non-interest expense . . . . . . . . . . . . 86.1 67.1 28.3 319.0 261.1 22.2
Net interest margin-managed portfolio{1} . . 4.32% 4.25% 4.20% 4.18%
Efficiency ratio-managed portfolio . . . . . 59.9 53.9 56.8 54.9
FINANCIAL CONDITION DATA:
Managed credit card portfolio. . . . . . . . $3,397.9 $2,719.9 24.9%
Credit card (on-balance-sheet) . . . . . . . 1,442.2 1,386.6 4.0
Credit cards (off-balance-sheet) . . . . . . 1,955.7 1,333.3 46.7
Managed credit card net charge-offs as a
percentage of average managed credit card
receivables{1} . . . . . . . . . . . . . . 3.83% 3.83%
Managed credit card net charge-offs as a
percentage of average managed credit card
receivables on a three quarter lag basis{1} 4.46 5.01
Managed credit card delinquencies as a
percentage of quarter-end receivables. . . 3.37 3.94
Managed credit card delinquencies as a
percentage of quarter-end receivables
on a three quarter lag basis . . . . . . . 3.88 5.13
Managed loans. . . . . . . . . . . . . . . . $7,345.3 $ 6,522.7 12.6%
Commercial mortgage. . . . . . . . . . . . . 857.7 819.1 4.7
Commercial . . . . . . . . . . . . . . . . . 681.4 591.2 15.3
Other consumer . . . . . . . . . . . . . . . 287.5 237.6 21.0
Non-performing assets. . . . . . . . . . . . $ 55.7 101.3 (45.0%)
Non-performing assets to total assets. . . . 0.68% 1.32%
Total deposits . . . . . . . . . . . . . . . $5,818.4 $ 5,245.2 10.9%
Non-interest-bearing . . . . . . . . . . . . 1,061.7 930.2 14.1
Time . . . . . . . . . . . . . . . . . . . . 2,542.5 2,170.2 17.2
. . . . . . . .
</TABLE>
{1} Annualized.
<PAGE>
FOURTH QUARTER AND FULL YEAR 1997 KEY PERFORMANCE
INDICATORS (CONTINUED)
FOURTH QUARTER NET INCOME UP 22% YEAR-OVER-YEAR
o Higher net income reflects increases in fee-based revenues and net security
gains
o Provision for loan losses decreased $4.6 million year-over-year
o Partially offsetting these improvements were higher costs related to
compensation and benefits and advertising and promotion
FULL YEAR NET INCOME UP 15%
o Full year results reflect increases in net interest income ($18.5 million),
fee-based revenues ($36.4 million), net security gains ($30.3 million), gains
on residential mortgage sales ($8.8 million), as well as a decrease in
provisions for loan losses ($11.2 million)
o The growth in fee-based revenues includes a $10.8 million increase in credit
card securitization income from the adoption of SFAS No. 125.
o Partially offsetting these improvements were higher expenses, including
compensation and benefits ($21.5 million) and advertising and promotion
($14.7 million)
MANAGED ASSETS EXCEED $10 BILLION
o 13% growth, over $1 billion, in managed assets year-over-year
o Contributing to the growth were increases in the managed credit card
portfolio (25%), other consumer loans (21%), commercial loans (15%) and
commercial mortgage loans (5%)
o In its second year of operation, the UK credit card portfolio totaled $171
million, more than triple the balance at year-end 1996.
TOTAL DEPOSITS INCREASED 11% YEAR-OVER-YEAR; SUPER STOP & SHOP DEPOSITS
EXCEED $500 MILLION
o Non-interest-bearing deposits up 14%, providing additional low-cost funding
o Time deposits grew $372 million, or 17%
o 39 Super Stop & Shop branches open as of December 31, 1997, with average
deposits of $14 million per branch
o For the 21 supermarket branches open over 12 months, same-store deposits grew
$212 million year-over-year to $377 million, exhibiting consistent growth
trend
NON-PERFORMING ASSETS DECLINED 45% YEAR-OVER-YEAR
o NPAs totaled $55.7 million compared to $101.3 million a year ago
o As a percentage of total assets, NPAs declined 64 basis points to 0.68%
o NPAs decreased in all loan categories
NET CHARGE-OFFS AS A PERCENT OF TOTAL LOANS DECLINED 40 BASIS POINTS
o For the fourth quarter, net loan charge-offs decreased $4.6 million
year-over-year
o For the year, net loan charge-offs totaled $41.8 million, compared to $38.5
million in 1996
o Net recoveries were realized in 1997 for the commercial loan portfolio
FOURTH QUARTER AND FULL YEAR 1997 KEY PERFORMANCE INDICATORS (CONTINUED)
CREDIT CARD ASSET QUALITY REMAINS STRONG
o As a percentage of average managed receivables, credit card charge-offs were
stable for the fourth quarter (3.83%) and the full year
(3.99%), compared to the respective 1996
periods.
o Delinquencies as a percentage of managed receivables declined 57 basis points
from year-end 1996 to 3.37%.
FEE-BASED REVENUES UP 24% IN 1997; CONTRIBUTES TO 20% INCREASE IN OPERATING
INCOME
o Increase in fee-based revenues reflects continued focus on increasing the
amount of income from non-interest-rate-sensitive sources
o Every component increased for both the full year and fourth quarter of 1997,
compared to the same periods in 1996
o Fourth quarter growth of 27%, compared to fourth quarter 1996, primarily
reflects increases in credit-card-related fees (35%), net brokerage
commissions (26%), trust fees (19%) and service charges on deposit
accounts (8%)
$92 MILLION INCREASE IN OPERATING INCOME MORE THAN OFFSETS $58 MILLION
INCREASE IN NON-INTEREST EXPENSE FOR FULL YEAR 1997
o Non-interest expense increased $58 million or 22% for the full year,
primarily related to the following:
o U.S. credit card ($26 million), U.K. credit card ($7 million), Stop
& Shop ($10 million) and incentive compensation ($6 million)
o Higher expenses primarily relate to compensation and benefits,
marketing and credit card processing costs
o Efficiency ratio increased to 56.8% for the year, reflecting investment in
the above initiatives
o $22 million growth in operating income for the fourth quarter of 1997,
compared to the fourth quarter of 1996, more than offsets the $19 million
increase in expenses. Major contributors to the higher expenses were U.S.
credit card ($6.9 million), U.K. credit card ($3.4 million), Stop & Shop
($2.8 million) and incentive compensation ($1.8 million)
GAINS ON SALE OF SECURITIES AND RESIDENTIAL LOANS TOTALED $18 MILLION FOR
THE QUARTER AND $60 MILLION FOR THE FULL YEAR
o Net security gains totaled $17 million for the quarter, compared to $14
million for the third quarter of 1997 and $5 million for the fourth quarter
of 1996; net unrealized gains on the common stock portfolio totaled $36
million at year end 1997, compared to $51 million at September 30, 1997
and $20 million at December 31, 1996
o Common stock portfolio totaled $259 million at year end, compared to $302
million at September 30, 1997
o Net gains on sales of residential mortgages totaled $1.5 million for the
quarter, compared to $5.5 million for the third quarter of 1997 and $0.9
million for the fourth quarter of 1996
<PAGE>
<TABLE>
<CAPTION>
People's Bank and Subsidiaries
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------------------------------------------------
Quarters Ended Years Ended
---------------------------------------------------------- ----------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, Dec. 31, Dec. 31,
(dollars in millions, except 1997 1997 1997 1997 1996 1997 1996
per share data)
- --------------------------------------------------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Net income $25.2 $23.3 $21.9 $22.0 $20.6 $92.4 $80.1
Net interest income 60.5 66.0 60.8 65.7 62.4 253.0 234.5
Provision for loan losses 8.0 13.8 7.3 10.8 12.6 39.9 51.1
Fee-based revenues 51.5 48.1 43.1 42.5 40.6 185.2 148.8
Non-interest expense 86.1 82.7 78.4 71.8 67.1 319.0 261.1
- ----------------------------------------------------------------------------------------------------------------------------
Selected Statistical Data:
Net interest margin - managed 4.32% 4.15% 4.11% 4.22% 4.25% 4.20% 4.18%
portfolio (1), (2)
Net interest margin - owned 3.55 3.72 3.57 3.78 3.85 3.66 3.70
portfolio (1)
Interest rate spread - managed 4.24 4.05 4.05 4.13 4.18 4.12 4.11
portfolio (1), (2)
Interest rate spread - owned 3.46 3.62 3.50 3.68 3.77 3.57 3.63
portfolio (1)
Return on average assets (1) 1.28 1.16 1.13 1.14 1.13 1.18 1.13
Return on average stockholders' 14.4 13.7 13.5 14.0 13.6 13.9 13.8
equity (1)
Average stockholders' equity to 8.88 8.52 8.39 8.14 8.35 8.48 8.18
average assets
Net loan charge-offs to average 0.61 1.00 0.56 0.95 1.01 0.78 0.81
loans (1)
Non-interest expense to average 4.37 4.12 4.01 3.71 3.67 4.06 3.65
assets (1)
Efficiency ratio - managed portfolio 59.9 56.7 56.4 53.7 53.9 56.8 54.9
Efficiency ratio - owned portfolio 72.4 66.5 68.3 62.3 61.4 67.4 63.8
Net loan charge-offs $8.0 $13.8 $7.3 $12.7 $12.6 $41.8 $38.5
- ----------------------------------------------------------------------------------------------------------------------------
Per Share Data:
Net income per common share:
(3),(5)
Basic $0.41 $0.38 $0.36 $0.36 $0.34 $1.51 $1.33
Diluted 0.41 0.38 0.36 0.36 0.34 1.51 1.31
Common stock dividends paid (3) 0.19 0.17 0.16 0.15 0.15 0.48 0.38
Common book value (3) 11.61 11.41 10.93 10.39 10.16 11.61 10.16
Common stock price: (3)
High 39.13 32.62 28.38 24.33 20.08 39.13 20.08
Low 28.75 25.38 18.92 18.92 15.92 18.92 12.33
Close 38.00 32.06 25.88 21.67 19.25 38.00 19.25
Total dividend payout ratio (4) 19.5% 19.0% 19.8% 17.3% 18.4% 18.9% 17.1%
- ----------------------------------------------------------------------------------------------------------------------------
Financial Condition Data:
Total assets - managed portfolio (2) $10,140 $9,768 $9,522 $9,321 $8,979
Total assets - owned portfolio 8,184 7,731 7,870 7,538 7,645
Loans, net - managed portfolio (2) 7,345 7,099 6,927 6,796 6,523
Loans, net - owned portfolio 5,390 5,062 5,275 5,013 5,189
Securities, net 1,813 1,768 1,683 1,704 1,703
Deposits 5,818 5,615 5,591 5,415 5,245
Borrowings 1,556 1,274 1,501 1,389 1,695
Stockholders' equity 710 697 668 634 618
Non-performing assets 56 59 71 68 101
Non-performing assets to total 0.68% 0.76% 0.90% 0.91% 1.32%
assets
Ratio of allowance for loan losses 1.57% 1.66% 1.60% 1.68% 1.66%
to total loans
Stockholders' equity to total assets 8.7 9.0 8.5 8.4 8.1
Tier 1 leverage capital ratio 8.8 8.4 8.5 8.2 7.9
Tier 1 risk-based capital ratio 9.7 10.4 10.2 10.6 10.0
Total risk-based capital ratio 13.0 14.0 13.8 14.3 13.9
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Quarterly percentages are annualized.
(2) Managed portfolio represents the owned portfolio plus off-balance-sheet
credit card receivables.
(3) Restated to reflect the 3-for-2 stock split completed in May 1997.
(4) Reflects the waiver of common stock dividends on substantially all
of the shares owned by People's Mutual Holdings, and includes cash
dividends paid on noncumulative convertible preferred stock through
September 1996.
(5) Net income per share has been calculated in accordance with SFAS No.
128. Prior period data has been restated.
<PAGE>
<TABLE>
<CAPTION>
People's Bank and Subsidiaries
<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF CONDITION
- --------------------------------------------------------------------------------------------------------------------------
Dec. 31, Sept. 30, Dec. 31,
(dollars in millions) 1997 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
Assets
Cash and due from banks $241.5 $230.1 $196.2
Short-term investments 215.5 144.8 146.7
Securities:
Trading account securities, at estimated fair value - - 2.8
Securities available for sale, at estimated fair value
(amortized cost of $1,414.0, $1,323.7
and $1,214.4 at the respective dates) 1,446.6 1,373.3 1,227.6
Securities held to maturity, at amortized cost (estimated
fair value of $365.0, $392.8 and
$466.5 at the respective dates) 366.0 395.1 472.1
- --------------------------------------------------------------------------------------------------------------------------
Total securities, net 1,812.6 1,768.4 1,702.5
- --------------------------------------------------------------------------------------------------------------------------
Loans, net:
Residential mortgage 2,206.5 2,168.9 2,242.5
Commercial mortgage 857.7 860.8 819.1
Commercial 681.4 623.9 591.2
Credit card 1,442.2 1,217.1 1,386.6
Other consumer 287.5 276.7 237.6
- --------------------------------------------------------------------------------------------------------------------------
Total loans 5,475.3 5,147.4 5,277.0
Less allowance for loan losses (85.7) (85.7) (87.6)
- --------------------------------------------------------------------------------------------------------------------------
Total loans, net 5,389.6 5,061.7 5,189.4
- --------------------------------------------------------------------------------------------------------------------------
Premises and equipment, net 183.9 182.4 173.6
Other assets 340.9 343.8 236.8
- --------------------------------------------------------------------------------------------------------------------------
Total assets $8,184.0 $7,731.2 $7,645.2
====================================================
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Non-interest-bearing $1,061.7 $943.3 $930.2
Savings, NOW and money market 2,214.2 2,164.2 2,144.8
Time 2,542.5 2,507.0 2,170.2
- --------------------------------------------------------------------------------------------------------------------------
Total deposits 5,818.4 5,614.5 5,245.2
- --------------------------------------------------------------------------------------------------------------------------
Borrowings:
Federal Home Loan Bank advances 777.3 714.6 836.8
Repurchase agreements 192.8 237.2 452.7
Federal funds purchased 437.2 174.0 257.1
Subordinated notes 148.2 148.2 148.0
- --------------------------------------------------------------------------------------------------------------------------
Total borrowings 1,555.5 1,274.0 1,694.6
- --------------------------------------------------------------------------------------------------------------------------
Other liabilities 100.2 145.2 87.4
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities 7,474.1 7,033.7 7,027.2
- --------------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock (without par value; 100,000,000 shares authorized;
61,162,425 shares, 61,125,869 shares and 60,830,169 shares issued
and outstanding at the respective dates) (1) 61.2 61.1 60.8
Additional paid-in capital (1) 95.7 94.9 90.8
Retained earnings 541.0 520.1 465.8
Net unrealized gain (loss) on securities, net of tax 12.0 21.4 0.6
- --------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 709.9 697.5 618.0
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $8,184.0 $7,731.2 $7,645.2
====================================================
(1) Prior period common stock and additional paid-in capital
have been restated to reflect the 3-for-2 stock split completed
in May 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
People's Bank and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
- ------------------------------------------------------------------------------------------------------------------------------
Quarters Ended Years Ended
--------------------------------------------------- ----------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, Dec. 31, Dec. 31,
(in millions, except per share data) 1997 1997 1997 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest and dividend income:
Residential mortgage $41.3 $42.4 $42.8 $42.5 $41.9 $169.0 $164.0
Commercial mortgage 19.4 19.2 18.8 18.1 17.5 75.5 67.0
Commercial 14.6 14.4 14.9 13.5 13.4 57.4 52.2
Credit card 23.0 31.3 21.7 30.5 25.8 106.5 82.2
Otherconsumer 6.0 5.6 5.4 5.0 4.8 22.0 19.2
- ------------------------------------------------------------------------------------------------------------------------------
Total interest on loans 104.3 112.9 103.6 109.6 103.4 430.4 384.6
Securities 21.5 21.1 22.1 21.4 20.4 86.1 90.0
Short-term investments 2.1 2.2 2.3 1.7 1.4 8.3 5.4
- ------------------------------------------------------------------------------------------------------------------------------
Total interest and dividend income 127.9 136.2 128.0 132.7 125.2 524.8 480.0
- ------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Deposits 47.1 46.3 44.1 41.9 41.4 179.4 162.5
Borrowings 20.3 23.9 23.1 25.1 21.4 92.4 83.0
- ------------------------------------------------------------------------------------------------------------------------------
Total interest expense 67.4 70.2 67.2 67.0 62.8 271.8 245.5
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income 60.5 66.0 60.8 65.7 62.4 253.0 234.5
Provision for loan losses 8.0 13.8 7.3 10.8 12.6 39.9 51.1
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 52.5 52.2 53.5 54.9 49.8 213.1 183.4
- ------------------------------------------------------------------------------------------------------------------------------
Non-interest income:
Fee-based revenues:
Credit card securitization income 26.3 21.2 19.6 18.6 17.6 85.7 66.1
Credit card fees 9.6 10.6 8.4 9.4 8.9 38.0 29.1
Service charges on deposit accounts 8.1 8.1 7.9 7.4 7.5 31.5 27.6
Residential mortgage loan servicing fees 1.7 1.6 1.6 1.5 1.6 6.4 6.2
Net brokerage commissions 2.4 2.6 2.3 2.4 1.9 9.7 7.4
Other 3.4 4.0 3.3 3.2 3.1 13.9 12.4
- ------------------------------------------------------------------------------------------------------------------------------
Total fee-based revenues 51.5 48.1 43.1 42.5 40.6 185.2 148.8
Net security gains 16.8 14.2 9.0 5.5 5.0 45.5 15.2
Net gains on sales of residential mortgage
loans available for sale 1.5 5.5 4.8 2.4 0.9 14.2 5.4
Net gain on sale of other consumer loans - - - - - - 6.0
Other 1.9 0.7 1.2 1.3 0.7 5.1 3.4
- ------------------------------------------------------------------------------------------------------------------------------
Total non-interest income 71.7 68.5 58.1 51.7 47.2 250.0 178.8
- ------------------------------------------------------------------------------------------------------------------------------
Non-interest expense:
Compensation and benefits 39.2 38.1 34.3 34.1 31.8 145.7 124.2
Occupancy and equipment 13.6 12.8 12.4 11.7 11.6 50.5 43.2
Advertising and promotion 11.4 10.3 9.6 8.8 7.2 40.1 25.4
Professional and outside service fees 8.7 9.7 9.7 7.5 7.9 35.6 28.5
Stationery, printing and postage 3.9 4.0 3.4 3.3 2.1 14.6 11.3
Other 9.3 7.8 9.0 6.4 6.5 32.5 28.5
- ------------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 86.1 82.7 78.4 71.8 67.1 319.0 261.1
- ------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 38.1 38.0 33.2 34.8 29.9 144.1 101.1
Income tax expense 12.9 14.7 11.3 12.8 9.3 51.7 21.0
- ------------------------------------------------------------------------------------------------------------------------------
Net income $ 25.2 $ 23.3 $ 21.9 $ 22.0 $ 20.6 $ 92.4 $ 80.1
==============================================================================
Net income applicable to common stock $25.2 $23.3 $21.9 $22.0 $20.6 $ 92.4 $ 79.5
==============================================================================
Net income per common share: (1)
Basic $0.41 $0.38 $0.36 $0.36 $0.34 $1.51 $1.33
==============================================================================
Diluted $0.41 $0.38 $0.36 $0.36 $0.34 $1.51 $1.31
==============================================================================
Average common shares: (1)
Basic 61.14 61.11 61.03 60.94 60.80 61.05 59.66
==============================================================================
Diluted 61.45 61.44 61.37 61.32 61.21 61.40 61.13
==============================================================================
</TABLE>
(1) Restated to reflect the adoption of SFAS No. 128 and the 3-for-2 stock
split completed in May 1997.
<PAGE>
<TABLE>
<CAPTION>
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
December 31, 1997 September 30, 1997 December 31, 1996
------------------------------ ----------------------------- -----------------------------
Quarters Ended Average Yield/ Average Yield/ Average Yield/
(dollars in millions) (1) Balance Interest Rate Balance Interest Rate Balance Interest Rate
- ---------------------------------------------------------------------------------------------------------------------------------
On-Balance-Sheet
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earning assets: (2)
Short-term investments $ 141.3 $ 2.1 5.98% $ 148.1 $ 2.2 5.91% $ 97.2 $ 1.4 5.74%
Securities 1,806.7 24.7 5.46 1,744.1 23.9 5.48 1,633.3 22.6 5.53
Loans:
Residential mortgage 2,181.2 41.3 7.58 2,235.4 42.4 7.57 2,216.2 41.9 7.55
Commercial mortgage 855.0 19.4 9.13 856.3 19.3 8.98 802.5 17.5 8.71
Commercial 635.3 14.6 9.15 623.8 14.4 9.23 580.4 13.4 9.27
Credit card 1,275.8 23.0 7.22 1,518.1 31.3 8.27 1,151.3 25.8 8.96
Other consumer 282.9 6.0 8.49 264.9 5.6 8.51 230.8 4.8 8.36
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans 5,230.2 104.3 7.98 5,498.5 113.0 8.22 4,981.2 103.4 8.30
- ---------------------------------------------------------------------------------------------------------------------------------
Total earning assets 7,178.2 $131.1 7.31% 7,390.7 $139.1 7.53% 6,711.7 $127.4 7.59%
================= ================= =================
Other assets 698.4 611.0 564.5
- --------------------------------------- --------- --------
Total assets $7,876.6 $8,001.7 $7,276.2
======== ======== ========
Funding liabilities:
Deposits:
Non-interest-bearing
deposits $ 975.8 $ - - % $ 927.9 $ - -% $ 822.5 $ - - %
Savings, NOW and money 2,191.3 13.9 2.55 2,188.6 13.6 2.48 2,139.1 13.4 2.49
market
Time 2,515.6 33.2 5.28 2,488.5 32.7 5.25 2,160.8 28.0 5.18
- ---------------------------------------------------------------------------------------------------------------------------------
Total deposits 5,682.7 47.1 3.32 5,605.0 46.3 3.30 5,122.4 41.4 3.23
- ---------------------------------------------------------------------------------------------------------------------------------
Borrowings:
Federal Home Loan Bank
advances 727.9 10.5 5.74 874.6 12.5 5.72 742.5 10.7 5.74
Repurchase agreements 234.3 4.0 6.86 298.0 5.0 6.77 391.1 6.1 6.23
Federal funds purchased 212.9 3.0 5.67 263.3 3.7 5.66 267.2 3.5 5.41
Subordinated notes 148.2 2.8 7.42 148.2 2.7 7.42 58.1 1.1 7.34
- ---------------------------------------------------------------------------------------------------------------------------------
Total borrowings 1,323.3 20.3 6.12 1,584.1 23.9 6.07 1,458.9 21.4 5.87
- ---------------------------------------------------------------------------------------------------------------------------------
Total funding
liabilities 7,006.0 $ 67.4 3.85% 7,189.1 $ 70.2 3.91% 6,581.3 $ 62.8 3.82%
================== =================== ==================
Other liabilities 171.1 130.9 87.2
- --------------------------------------- ------- -------
Total liabilities 7,177.1 7,320.0 6,668.5
Stockholders' equity 699.5 681.7 607.7
- --------------------------------------- ------- -------
Total liabilites
and stockholders' equity $7,876.6 $8,001.7 $7,276.2
======== ======== ========
Excess of earning assets over
funding liabilities $172.2 $201.6 $ 130.4
======== ======== ========
Net interest income $ 63.7 $ 68.9 $ 64.6
====== ====== ======
Interest rate spread (3) 3.46% 3.62% 3.77%
Net interest margin 3.55% 3.72% 3.85%
Off-Balance-Sheet
Securitized credit card
receivables $1,995.8 $ 66.0 13.23% $1,625.7 $ 50.6 12.45% $1,382.3 $ 42.5 12.30%
Related securities issued 1,995.8 30.8 6.17 1,625.7 25.9 6.38 1,382.3 21.0 6.09
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income (4) $ 35.2 $ 24.7 $ 21.5
====== ====== ======
Managed Net Interest Margin
Analysis
Earning assets $9,174.0 $197.1 8.60% $9,016.4 $189.7 8.41% $8,094.0 $169.9 8.39%
Funding liabilities 9,001.8 98.2 4.36 8,814.8 96.1 4.36 7,963.6 83.8 4.21
- ---------------------------------------------------------------------------------------------------------------------------------
Excess of earning assets over
funding liabilities $172.2 $201.6 $130.4
======== ======== ========
Net interest income $ 98.9 $ 93.6 $ 86.1
====== ====== ======
Interest rate spread (5) 4.24% 4.05% 4.18%
Net interest margin 4.32% 4.15% 4.25%
</TABLE>
(1) Average yields earned and rates paid are annualized.
(2) The FTE adjustment for the fourth quarter of 1997, the third quarter
of 1997 and the fourth quarter of 1996 was $3.2 million, $2.9 million and
$2.2 million, respectively.
(3) Interest rate spread excluding non-interest-bearing deposits equaled
2.84%, 3.04% and 3.23% for the fourth quarter of 1997, the third quarter
of 1997 and the fourth quarter of 1996, respectively.
(4) Net interest income associated with the off-balance-sheet portfolio
is included in "credit card securitization income".
(5) Managed interest rate spread excluding non-interest-bearing deposits
equaled 3.71%, 3.53% and 3.69% for the fourth quarter of 1997, the third
quarter of 1997 and the fourth quarter of 1996, respectively.
<PAGE>
<TABLE>
<CAPTION>
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
- -----------------------------------------------------------------------------------------------------------------
December 31, 1997 December 31, 1996
------------------------------- ----------------------------------
Years Ended Average Yield/ Average Yield/
(dollars in millions) Balance Interest Rate Balance Interest Rate
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
On-Balance-Sheet
Earning assets: (1)
Short-term investments $ 142.8 $ 8.3 5.82% $ 94.4 $ 5.4 5.68%
Securities 1,739.6 96.9 5.57 1,735.1 97.4 5.61
Loans:
Residential mortgage 2,236.7 169.0 7.56 2,202.9 164.0 7.44
Commercial mortgage 841.9 75.6 8.98 769.6 67.2 8.73
Commercial 613.5 57.4 9.35 560.3 52.2 9.32
Credit card 1,380.5 106.5 7.72 962.0 82.2 8.54
Other consumer 259.2 22.0 8.50 222.2 19.2 8.63
- -----------------------------------------------------------------------------------------------------------------
Total loans 5,331.8 430.5 8.07 4,717.0 384.8 8.15
- -----------------------------------------------------------------------------------------------------------------
Total earning assets 7,214.2 $ 535.7 7.43% $6,546.5 $ 487.6 7.45%
================= ===================
Other assets 616.5 546.7
- ---------------------------------------------- --------
Total assets $7,830.7 $7,093.2
======== ========
Funding liabilities:
Deposits:
Non-interest-bearing deposits $ 909.8 $ - -% $ 772.2 $ - -%
Savings, NOW and money market 2,178.1 53.6 2.46 2,150.9 56.5 2.63
Time 2,424.4 125.8 5.19 2,056.1 106.0 5.15
- -----------------------------------------------------------------------------------------------------------------
Total deposits 5,512.3 179.4 3.25 4,979.2 162.5 3.26
- -----------------------------------------------------------------------------------------------------------------
Borrowings:
Federal Home Loan Bank 802.1 46.0 5.73 672.3 38.7 5.75
advances
Repurchase agreements 329.0 21.7 6.60 460.2 27.4 5.96
Federal funds purchased 246.1 13.7 5.58 297.3 15.8 5.34
Subordinated notes 148.1 11.0 7.43 14.6 1.1 7.30
- -----------------------------------------------------------------------------------------------------------------
Total borrowings 1,525.3 92.4 6.06 1,444.4 83.0 5.75
- -----------------------------------------------------------------------------------------------------------------
Total funding liabilities 7,037.6 $271.8 3.86% 6,423.6 $245.5 3.82%
================= ===================
Other liabilities 129.4 89.5
- ---------------------------------------------- --------
Total liabilities 7,167.0 6,513.1
Stockholders' equity 663.7 580.1
- ---------------------------------------------- --------
Total liabilities and
stockholders' equity $7,830.7 $7,093.2
======== ========
Excess of earning assets over
funding liabilities $ 176.6 $ 122.9
======== ========
Net interest income $263.9 $242.1
====== ======
Interest rate spread (2) 3.57% 3.63%
Net interest margin 3.66% 3.70%
Off-Balance-Sheet
Securitized credit card
receivables $1,670.2 $213.2 12.76% $1,295.1 $163.2 12.60%
Related securities issued 1,670.2 103.9 6.22 1,295.1 77.5 5.99
- -----------------------------------------------------------------------------------------------------------------
Net interest income (3) $109.3 $85.7
====== ======
Managed Net Interest Margin Analysis
Earning assets $8,884.4 $748.9 8.43% $7,841.6 $650.8 8.30%
Funding liabilities 8,707.8 375.7 4.31 7,718.7 323.0 4.19
- -----------------------------------------------------------------------------------------------------------------
Excess of earning assets over
funding liabilities $ 176.6 $ 122.9
======== ========
Net interest income $373.2 $327.8
====== ======
Interest rate spread (4) 4.12% 4.11%
Net interest margin 4.20% 4.18%
</TABLE>
(1) The FTE adjustment for 1997 and 1996 was $10.9 million and $7.6 million,
respectively.
(2) Interest rate spread excluding non-interest-bearing deposits equaled 2.99%
and 3.11% for the years ended December 31, 1997 and December 31, 1996,
respectively.
(3) Net interest income associated with the off-balance-sheet portfolio is
included in "credit card securitization income".
(4) Managed interest rate spread excluding non-interest-bearing deposits
equaled 3.61% and 3.65% for the years ended December 31, 1997 and December
31, 1996, respectively.
<PAGE>
<TABLE>
<CAPTION>
People's Bank and Subsidiaries
IMPACT OF CREDIT CARD SECURITIZATION
- ---------------------------------------------------------------------------------------------------------------------------------
December 31, 1997 December 31, 1996
---------------------------------------------- -------------------------------------------------
As of and for the quarters Excluding Impact Impact of Excluding Impact Impact of
ended (dollars in millions) of Securitization Securitization As Reported of Securitization Securitization As Reported
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest and dividend income $193.9 ($66.0) $127.9 $167.7 ($42.5) $125.2
Interest expense (98.2) 30.8 (67.4) (83.9) 21.1 (62.8)
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income 95.7 (35.2) 60.5 83.8 (21.4) 62.4
Provision for loan losses (32.7) 24.7 (8.0) (27.5) 14.9 (12.6)
Credit card securitization
income (1) - 26.3 26.3 - 17.6 17.6
Credit card fees 24.1 (14.5) 9.6 19.2 (10.3) 8.9
Other non-interest income 37.2 (1.4) 35.8 21.5 (0.8) 20.7
Non-interest expense (86.1) - (86.1) (67.1) - (67.1)
Income tax expense (12.9) 0.0 (12.9) (9.3) - (9.3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (1) $25.3 ($0.1) $25.2 $20.6 $- $20.6
=================================================================================================
Equity to assets 6.9% 1.8% 8.7% 6.9% 1.2% 8.1%
Tier 1 leverage capital
ratio(2) 7.6% 1.2% 8.8% 7.2% 0.7% 7.9%
Risk-based capital ratios (2):
Tier 1 8.3% 1.4% 9.7% 8.9% 1.1% 10.0%
Total 11.1% 1.9% 13.0% 12.2% 1.7% 13.9%
Credit card securitization income
as a percentage of average
securitized and sold
portfolio (3), (4) - - 5.27% - - 5.11%
Net interest margin (3) 4.32% (0.77%) 3.55% 4.25% (0.40%) 3.85%
Efficiency ratio 59.9% 12.5% 72.4% 53.9% 7.5% 61.4%
Credit card loans $3,397.9 ($1,955.7) $1,442.2 $2,719.9 ($1,333.3) $1,386.6
Total assets 10,139.7 (1,955.7) 8,184.0 8,978.5 (1,333.3) 7,645.2
Total average earning assets 9,174.0 (1,995.8) 7,178.2 8,094.0 (1,382.3) 6,711.7
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
December 31, 1997 December 31, 1996
---------------------------------------------- -------------------------------------------------
As of and for the years Excluding Impact Impact of Excluding Impact Impact of
ended (dollars in millions) of Securitization Securitization As Reported of Securitization Securitization As Reported
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest and dividend income $738.0 ($213.2) $524.8 $643.2 ($163.2) $480.0
Interest expense (375.7) 103.9 (271.8) (323.0) 77.5 (245.5)
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income 362.3 (109.3) 253.0 320.2 (85.7) 234.5
Provision for loan losses (127.7) 87.8 (39.9) (115.8) 64.7 (51.1)
Credit card securitization
income (1) - 85.7 85.7 - 66.1 66.1
Credit card fees 86.8 (48.8) 38.0 72.0 (42.9) 29.1
Other non-interest income 130.9 (4.6) 126.3 85.8 (2.2) 83.6
Non-interest expense (319.0) - (319.0) (261.1) - (261.1)
Income tax expense (47.8) (3.9) (51.7) (21.0) - (21.0)
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (1) $85.5 $6.9 $92.4 $80.1 $ - $80.1
=================================================================================================
Credit card securitization
income as a percentage
of average securitized and
sold portfolio (4) - - 5.13% - - 5.10%
Net interest margin 4.20% (0.54%) 3.66% 4.18% (0.48%) 3.70%
Efficiency ratio 56.8% 10.6% 67.4% 54.9% 8.9% 63.8%
Credit card loans $3,397.9 ($1,955.7) $1,442.2 $2,719.9 ($1,333.3) $1,386.6
Total assets 10,139.7 (1,955.7) 8,184.0 8,978.5 (1,333.3) 7,645.2
Total average earning assets 8,884.4 (1,670.2) 7,214.2 7,841.6 (1,295.1) 6,546.5
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</TABLE>
(1) The adoption of SFAS No. 125 decreased credit card securitization income
and net income by $0.1 million for the fourth quarter of 1997, and
increased credit card securitization income and net income by
$10.8 million and $6.9 million for the year ended December 31, 1997,
respectively.
(2) December 31, 1997 capital ratios are preliminary.
(3) Annualized.
(4) Percentages for the fourth quarter of 1997 and for the year ended
December 31, 1997 would have been 5.29% and 4.48%, respectively, without
the impact of SFAS 125
For securitized and sold receivables, amounts that would have been previously
reported as net interest income, credit card fees and provisions for loan losses
are instead combined and reported as credit card securitization income.
People's credit card securitization income may vary over the term of the
transactions depending upon the level of interest and fees charged on credit
card accounts, the interest rate environment and the credit performance of the
securitized receivables. Credit losses associated with credit card receivables
securitized and sold are not reflected in People's provision and allowance for
loan losses. Such credit losses are absorbed directly under the contractual
agreements of the credit card trust, thereby reducing credit card securitization
income rather than increasing the provision for loan losses.
The efficiency ratio for the owned portfolio represents non-interest expense
(excluding loss on REO and REI) divided by FTE net interest income plus
non-interest income (excluding net security gains and net gain on sale of other
consumer loans). The efficiency ratio for the managed portfolio is the same
calculation as for the owned portfolio, adjusted to increase credit card
securitization income by net charge-offs for the securitized and sold portfolio.
<PAGE>
<TABLE>
<CAPTION>
People's Bank and Subsidiaries
NON-PERFORMING ASSETS
- --------------------------------------------------------------------------------------------------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(dollars in millions) 1997 1997 1997 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-accrual loans:
Residential mortgage $26.8 $29.5 $29.3 $31.0 $30.2
Commercial mortgage 0.8 2.1 5.3 5.4 25.8
Commercial 7.1 7.4 10.5 10.8 11.2
Credit card (owned portfolio) 15.5 13.4 16.4 9.6 21.6
Other consumer 1.9 2.2 2.1 2.5 2.1
- --------------------------------------------------------------------------------------------------------------
Total non-accrual loans 52.1 54.6 63.6 59.3 90.9
- --------------------------------------------------------------------------------------------------------------
Restructured loans:
Commercial mortgage 0.1 0.4 0.9 2.1 2.5
Commercial 0.1 0.3 1.2 0.8 1.0
- --------------------------------------------------------------------------------------------------------------
Total restructured loans 0.2 0.7 2.1 2.9 3.5
- --------------------------------------------------------------------------------------------------------------
Total non-performing loans 52.3 55.3 65.7 62.2 94.4
Real estate owned, net 3.4 3.3 4.9 6.1 6.9
- --------------------------------------------------------------------------------------------------------------
Total non-performing assets $55.7 $58.6 $70.6 $68.3 $101.3
======================================================
- --------------------------------------------------------------------------------------------------------------
|Non-performing loans as a percentage of |
| total loans 0.96% 1.07% 1.23% 1.22% 1.79% |
|Non-performing assets as a percentage of total |
| assets 0.68% 0.76% 0.90% 0.91% 1.32% |
|Non-performing assets as a percentage of |
| stockholders' equity and allowance |
| for loan losses 6.99% 7.48% 9.38% 9.49% 14.35% |
|Allowance for loan losses as a percentage of |
| non-performing loans 163.79% 154.89% 130.40% 137.78% 92.86% |
|Allowance for loan losses as a percentage of |
| loans 1.57% 1.66% 1.60% 1.68% 1.66% |
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
|Managed credit card non-performing loans $57.4 $50.8 $52.7 $54.9 $51.7 |
|Managed credit card non-performing loans as a |
| percentage of total managed credit cards 1.69% 1.56% 1.72% 1.86% 1.90% |
- --------------------------------------------------------------------------------------------------------------
<.TABLE>
</TABLE>
<TABLE>
<CAPTION>
NET LOAN CHARGE-OFFS (RECOVERIES)
- --------------------------------------------------------------------------------------------------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
Quarters ended (in millions) 1997 1997 1997 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Residential mortgage $1.6 $1.9 $1.7 $2.1 $1.4
Commercial mortgage 0.4 0.9 (1.0) 1.1 0.8
Commercial (1.3) (0.7) (0.3) (0.8) 0.5
Credit card (owned portfolio) 6.6 11.0 6.4 10.0 9.4
Other consumer 0.7 0.7 0.5 0.3 0.5
- --------------------------------------------------------------------------------------------------------------
Total $8.0 $13.8 $7.3 $12.7 $12.6
======================================================
</TABLE>
