PBCT

People's United Financial, Inc. (PBCT)

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Exchange: NASDAQ
Industry: Finance
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People's United Financial (PBCT)

Q1 2011 Earnings Call

April 20, 2011 5:00 pm ET

Executives

Peter Goulding - VP, IR

Kirk Walters - Chief Financial Officer

John Barnes - Chief Executive Officer, President, Director, Member of Enterprise Risk Committee, Member of Executive Committee, Member of Treasury & Finance Committee, Chief Executive Officer of the People's United Bank, President of the People's United Bank and Director of the People's United Bank

Analysts

Frank Barkocy - Mendon Capital

Michael Turner - Compass Point Research & Trading, LLC

Collyn Gilbert - Stifel, Nicolaus & Co., Inc.

Christopher Nolan - CRT Capital Group LLC

Thomas Alonso - Macquarie Research

Richard Weiss - Janney Montgomery Scott LLC

Mark Fitzgibbon - Sandler O'Neill

Bob Ramsey - FBR Capital Markets & Co.

Damon DelMonte - Keefe, Bruyette, & Woods, Inc.

Steven Alexopoulos - JP Morgan Chase & Co

Ken Zerbe

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the People's United Financial Inc. First Quarter Earnings Conference Call. My name is Crystal, and I will be your operator for today. [Operator Instructions] I would now like to turn the presentation over to Mr. Peter Goulding, First Vice President of Investor Relations for People's United Financial Inc. Please proceed, sir.

Peter Goulding

Good afternoon, and thank you for joining us for today's call. Jack Barnes, President and Chief Executive Officer; Kirk Walters, our Chief Financial Officer; and other members of our management team are gathered for the call.

Before we get started, please remember to refer to our forward-looking statements on Slide 1 of our presentation, which is posted on our website, www.peoples.com, under Investor Relations.

With that, I'll turn the conference over to Jack.

John Barnes

Thank you, Peter. And good afternoon, everyone, and thank you for joining us today. We're very pleased to be able to share solid progress toward improved operating performance in the quarter which comes from everybody's hard work on executing to our plan.

Before we go through the slides, I'd like to remind you that our objectives have been and continue to be straightforward and twofold: One, to optimize the existing business; and two, efficiently deploy excess capital. I'm very happy to be able to provide the number of details regarding our continued progress against those objectives.

Here on Slide 2, we provide an overview of our first quarter results. Net income for the quarter was $51.7 million or $0.15 per share with operating net income of $53.8 million, which when rounded is still $0.15 per share. Net interest margin expanded by 29 basis points in the first quarter to 4.16% from 3.87% in the fourth quarter. Total loan growth was $195 million or 4.5% linked quarter annualized. Deposits grew at a 3.9% annualized rate. Notably, this growth occurred while deposit rates fell from 64 basis points to 59 basis points in the quarter.

Our non-interest income increased by $6.5 million, supported by a $5.5 million gain on nonperforming loan sales from the Smithtown portfolio and a full quarter of contributions from Smithtown and RiverBank. With expenses flat and revenue up, our efficiency ratio declined to 66.2%. This represents initial steps toward our ultimate goal. We would expect that as we deploy capital and rightsize our expense basis, our efficiency ratio will move in line with peer averages.

Asset quality improved with our nonperforming assets decreasing in the first quarter to 1.96% from 2.09% in the fourth quarter. Net charge-offs also declined to 22 basis points from 28 basis points in the prior quarter. Our Danvers transaction is on track with their shareholder vote set for May 13.

On Slide 3, we review recent initiatives. As you know, we named Kirk Walters as CFO, and he is now a member of the board of both the bank and the holding company. Kirk brings extraordinary competency and experience built over more than 30 years, 22 of those years in the Northeast markets. In particular, his experiences at Chittenden and Santander give him an outstanding perspective on the competitive landscape in which we operate.

Now turning to our operating initiatives, we've been expanding our Asset Base Lending business with a nice pick up in originations this quarter. As we mentioned at the time of the Danvers transaction announcement, we look forward to combining our Asset Base Lending business with theirs to deliver an excellent solution throughout our footprint. Additionally, this quarter, we've expanded our multifamily lending activities through the acquisition of Bank of Smithtown on Long Island and increased penetration into New York Metro area by our Connecticut-based commercial real estate lenders. At the end of the quarter, the deposits at the Prudential Center in Milk Street branches in Boston totaled $37 million, with growth of $29 million during the quarter. Approximately 70% of those deposits in the branches are non-time. The C&I lending effort in Boston has developed traction already with seasoned end-market lenders winning business.

On Long Island, we've seen 7% core deposit growth since the transaction closed on November 30. We attribute that growth to local management's excellent job at regaining customer loyalty and relationships. Our Long Island performance has been a pleasant surprise with solid home equity and mortgage origination in the first quarter. I'm pleased with our work to understand the acquired Smithtown portfolio and build our C&I lending capabilities on Long Island.

Since the quarter closed, we've booked our first C&I loan of $23 million to a local college. We're also pleased to announce earlier today another increase in our dividend, our 19th consecutive annual increase, which will result in a dividend yield of approximately 4.9%. During the first quarter, we repurchased $60.7 million of our common stock equal to 4.6 million shares through open market purchases at an average price of $13.09. We are currently prohibited from buying back stock as a result of our equity issuance in the pending Danvers Bancorp transaction, which as I mentioned earlier, I expect to close later this quarter.

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