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) October 16, 2003 People s Bank (Exact name of registrant as specified in its charter) Connecticut (State or other jurisdiction of incorporation) 27334 (FDIC Certificate Number) 06-1213065 (IRS Employer Identification No.) 850 Main Street, Bridgeport, CT (Address of principal executive offices) Registrant s telephone number, including area code 06604 (Zip Code) (203) 338-7171 Not Applicable (Former name or former address, if changed since last report)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (c) The following Exhibit is submitted herewith. Exhibit No. Description 99.1 Press Release dated October 16, 2003 Item 12. Results of Operations and Financial Condition. On October 16, 2003, People s Bank issued a press release, announcing its results of operations for the three- and nine-month periods ended September 30, 2003. A copy of that press release is attached hereto as Exhibit 99.1. The information contained in and accompanying this Form 8-K is being furnished to the Federal Deposit Insurance Corporation in accordance with General Instruction B.6 to Form 8-K.
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: October 16, 2003 By: /s/ Vincent J. Calabrese (Signature) Name: Vincent J. Calabrese Title: Senior Vice President and Controller
EXHIBIT INDEX Exhibit No. Description Page 99.1 Press Release dated October 16, 2003 99.1-1
EXHIBIT 99.1 Press Release dated October 16, 2003
NEWS RELEASE Vincent J. Calabrese Senior Vice President Controller 203.338.4114 Fax: 203.338.2362 vince.calabrese@peoples.com Valerie C. Carlson Corporate Communications 203.338.2351 Fax: 203.338.3461 valerie.carlson@peoples.com FOR IMMEDIATE RELEASE OCTOBER 16, 2003 PEOPLE'S BANK REPORTS THIRD QUARTER EARNINGS OF $15 MILLION OR $0.24 PER SHARE BRIDGEPORT, CONN. People's Bank (NASDAQ: PBCT), a $12 billion financial services company, today announced net income of $14.9 million, or $0.24 per share, for the third quarter of 2003, compared to $14.8 million, or $0.24 per share, for the third quarter of 2002. For the nine months ended Sept. 30, 2003, net income totaled $46.4 million, or $0.75 per share, compared to $38.3 million, or $0.62 per share, for the year-ago period, a 21 percent increase. People's Board of Directors declared a $0.39 per share quarterly dividend on People's common stock, payable Nov. 15, 2003, to stockholders of record on Nov. 1, 2003. People's Mutual Holdings, which owns 36.5 million shares of People's Bank common stock, will accept dividends on only 3 percent of its shares. Based on the closing stock price on Oct. 15, 2003, the dividend yield on People's common stock is 4.9 percent. "We are pleased to report strong growth in our lending businesses combined with continued solid growth in core deposits," said John A. Klein, president and chief executive officer. "Bottom-line results on a year-over-year basis continue to be affected by the low-interest rate environment as our net interest margin remains under pressure, thereby tempering the positive effect of loan and deposit growth on net income." Klein continued, "Our credit card business continued to make meaningful progress this quarter. Results for the quarter were characterized by year-over-year average portfolio growth of $350 million, or 18 percent, and continued improvement in asset quality." Net charge-offs for the current quarter improved by $10.7 million compared to the third quarter of 2002 and the net charge-off rate declined by 301 basis points to 4.76 percent. Delinquencies showed similar results with a decrease of $25.8 million on a year-over-year basis and an improvement in the delinquency rate of 185 basis points to 2.68 percent. "Our Connecticut franchise also exhibited significant growth, with average commercial and consumer non-interest-bearing deposits up 16 percent and 13 percent, respectively," said Klein. "Our residential mortgage operation in particular posted strong results in today's low-interest rate environment with record originations of over $1 billion, almost double the year-ago quarter, and gains from sales of fixed-rate loans of $4.9 million, three times the level generated a year ago." -- more --
People's Reports 3Q Earnings Page 2 People's continued to grow core deposits with average savings and money market deposits increasing $474 million, or 13 percent, compared to the third quarter of 2002, and average total non-interest-bearing deposits increasing $275 million, or 15 percent. Contributing to these results was an increase in supermarket branches' core deposits of $165 million, or 10 percent. Other line of business highlights included growth in average commercial banking loans of $228 million, or 8 percent, and growth in average Connecticut consumer loans of $85 million, or 13 percent; both as compared to the third quarter of 2002. Commenting further on asset quality, Philip R. Sherringham, executive vice president and chief financial officer, said, "Asset quality in the Connecticut loan portfolios remains strong, which is particularly important in this economic environment. Third quarter results for these portfolios reflected net charge-offs of $0.7 million. As a percent of the Connecticut portfolios, net chargeoffs represented only 4 basis points. "With respect to balance sheet management, the combined average securities and short-term investments portfolio was reduced by $395 million and $743 million compared to the second quarter of 2003 and third quarter of 2002, respectively," added Sherringham. "With interest rates at historically low levels, we decided not to fully reinvest proceeds from debt securities that matured given the current risk/reward relationship. While this decision reduced our near-term earnings outlook for 2003, it better positions the bank for a rising interest rate environment." A comprehensive review of People's credit card securitization program during the third quarter resulted in a technical reclassification that had no impact on net income. Results for the current quarter reflect a reclassification of $3 million of the allowance for loan losses to other assets in conjunction with the reclassification of certain balances from credit card receivables to other assets. To effect this reclassification, the provision for loan losses was reduced by $3 million and was offset by reductions of $2 million and $1 million in interest income on credit card receivables and credit card fees, respectively. Selected Financial Terms In addition to presenting financial information in accordance with generally accepted accounting principles ("GAAP"), certain non-gaap information is also presented. Items presented on a "managed" basis are one such example. Managed basis results include information relating to People's off-balance-sheet credit card securitization activities. This presentation is consistent with the manner in which management conducts operations and measures People's business performance; it also presents more complete information about the assets, revenues and expenses attributed to the Credit Card Services division. Financial information presented on a managed basis includes off-balance-sheet securitized and sold credit card receivables, and the related securities sold to third-party investors. Please refer to the page headed "Impact of Credit Card Securitizations" in the accompanying materials for more information. Other non-gaap measures are core deposits and purchased funds. Core deposits, a measure of stable funding sources, equal total deposits, other than brokered certificates of deposit (acquired in the wholesale market) and municipal deposits (which are seasonally variable by nature). Purchased funds include borrowings, brokered certificates of deposit and municipal deposits. -- more --
People's Reports 3Q Earnings Page 3 Finally, this release includes information about People's operating revenue (a non-gaap measure) and its efficiency ratio, which is derived in part from operating revenue. Operating revenue consists of the sum of net interest income and total non-interest income reduced by gains and losses other than from the sale of residential mortgage loans. Management considers this measure to be more representative of People's ongoing ability to generate revenues, as the excluded items are generally related to external market conditions and non-routine transactions. The efficiency ratio, which represents an approximate measure of how much it costs People's to generate a dollar of revenue, is the ratio of total adjusted non-interest expense to operating revenue. Total adjusted non-interest expense equals People's total non-interest expense, excluding amortization of acquisition-related intangibles and losses on real estate assets. In calculating the efficiency ratio on a managed basis, credit losses reflected in credit card securitization income are excluded from operating revenue. Conference Call On October 17, 2003, at 11 a.m., Eastern Time, People's will host a conference call to discuss this earnings announcement. The call may be heard through www.peoples.com by selecting Investor Relations, News and Events, Conference Calls. Additional materials relating to the call may also be accessed at People's Web site. The call will be archived on the Web site and available for approximately 90 days. 3Q Financial Highlights (3Q 2003 compared with 3Q 2002 unless otherwise indicated) Summary Net income totaled $14.9 million, or $0.24 per share. Reclassified $3.0 million of the allowance for loan losses to other assets relating to the reclassification of certain credit card receivables to other assets ("the reclassification") with no impact on net income. Provision for loan losses reduced $3.0 million. Credit card interest income reduced $2.0 million. Credit card fees reduced $1.0 million. Provision for loan losses decreased $9.8 million, excluding the reclassification. Managed net interest income decreased $18.4 million, excluding the reclassification. Managed net interest margin decreased 17 basis points from 2Q03 and 66 basis points from 3Q02 to 3.30%, excluding the reclassification. Non-interest income increased $1.5 million, excluding the reclassification. Net security gains totaled $0.8 million, compared to net security losses of $1.8 million. Credit card fees increased $2.7 million, excluding the reclassification. Net gains on sales of residential mortgage loans increased $3.1 million. Credit card securitization income declined $7.7 million. Total non-interest expense declined $2.6 million. Advertising and promotion expense decreased $1.4 million. Average total loans increased $1.2 billion, or 17%. Off-balance-sheet securitized and sold credit card receivables declined $280 million, thereby increasing, in part, the on-balance-sheet loan portfolio. Average total core deposits increased $0.6 billion, or 8%. -- more --
People's Reports 3Q Earnings Page 4 Commercial Banking Average commercial banking loans grew $228 million, or 8%. Average commercial non-interest-bearing deposits increased $129 million, or 16%. The ratio of non-performing loans to total loans was 0.74% at Sept. 30, 2003, compared to 0.67% at June 30, 2003. Non-performing loans increased $2.2 million, or 11%, from June 30, 2003. Net loan charge-offs as a percentage of average loans equaled 0.10% (annualized). Consumer Financial Services Average residential mortgage loans increased $336 million, or 12%. Adjustable-rate mortgages purchased during the first quarter contributed $208 million to the increase. Average consumer non-interest-bearing deposits grew $117 million, or 13%. Supermarket branch core deposits increased $165 million, or 10% annualized, averaging $28 million per branch. Residential mortgage originations surpassed $1 billion, almost double the volume compared to 3Q02. Credit Card Services Average managed loans for Credit Card Services increased $346 million, or 12%. Managed credit card receivables at Sept. 30, 2003 totaled $2.4 billion, an increase of $131 million, or 6%, from June 30, 2003. The yield on average managed credit card receivables was 7.56% for 3Q03, excluding the reclassification, compared to 8.72% for 2Q03 and 11.09% for 3Q02. Net charge-offs (annualized as a percentage of average managed loans) for Credit Card Services were 3.79%, compared to 4.47% for 2Q03 and 5.99% for 3Q02. Net charge-offs totaled $31 million in 3Q03, $33 million in 2Q03 and $43 million in 3Q02. Credit Card Services' delinquencies as a percentage of quarter-end managed loans were 2.15%, compared to 2.54% for 2Q03 and 3.41% for 3Q02. Capital Markets Securities and short-term investments totaled $2.8 billion at Sept. 30, 2003, a $194 million decrease from June 30, 2003. Debt securities increased $166 million. Short-term investments declined $291 million. Common stocks decreased $75 million. Common stock portfolio market value totaled $30 million at Sept. 30, 2003. Sales of common stocks totaled $90 million. Net unrealized loss of $4 million at Sept. 30, 2003. -- more --
People's Reports 3Q Earnings Page 5 People's Bank is a diversified financial services company providing consumer, commercial, insurance and financial advisory services. The bank is a leader in supermarket banking, with 64 of its 154 branches located in Super Stop & Shop stores. Through its subsidiaries, People's provides brokerage and financial advisory services, asset management, equipment leasing and financing, and insurance services. Nationally, People's is the 19 th -largest issuer of MasterCard and Visa credit cards. ### Certain statements contained in this release are forward-looking in nature. These include all statements about our 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 actual results or financial condition to differ materially from those expressed in or implied by such statements. Factors of particular importance to People's include (1) changes in general economic conditions, including interest rates; (2) potential improvements or deterioration in credit quality; (3) competition among providers of financial services; (4) residential mortgage and secondary market activity; (5) price levels and conditions in the public securities markets generally; and (6) changes in regulatory guidance applicable to banks. People's 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 People's Bank on the World Wide Web at www.peoples.com. People's Bank. It's Possible @ People's.