NewAlliance Bancshares, Inc. (
Q3 2010 Earnings Conference Call
October 26, 2010 9 AM ET
Judith Falango – VP, IR
Peyton Patterson – Chairman, President and CEO
Glen MacInnes – EVP and CFO
Don Chaffee – Chief Credit Officer
Bob Ramsey – FBR Capital Markets
Collyn Gilbert – Stifel Nicolaus
Matthew Kelley – Stern, Agee
Damon Delmonte – KBW
Frank Schiraldi – Sandler O’Neill
Previous Statements by NAL
» NewAlliance Bancshares, Inc. Q2 2010 Earnings Call Transcript
» NewAlliance Bancshares, Inc. Q1 2010 Earnings Call Transcript
» NewAlliance Bancshares, Inc. Q1 2009 Earnings Call Transcript
» New Alliance Bancshares Inc. Q4 2008 Earnings Call Transcript
Good morning and welcome to the New Alliance 2010 third quarter earnings conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
After today’s presentation there will be an opportunity to ask questions. (Operator Instructions). Please note this event is being recorded. I would now like to turn the conference over to Judith Falango, First Vice President, Investor Relations. Please go ahead.
Good morning. I’d like to remind you to read the safe harbor advisement on forward-looking statements on slide two of the earnings call presentation that can be found in the investor relations area of our website. Our comments today are intended to qualify for the safe harbor afforded by that advisement. Now I’d like to introduce Peyton R. Patterson, Chairman, President and CEO.
Good morning and thank you for joining New Alliance’s third quarter earnings call. With me today are Glenn MacInnes, our Chief Financial Officer and Don Chaffee, our Chief Credit Officer. We will be happy to take your questions at the end of our remarks.
First, I’ll provide an overview of the quarter. Glenn will discuss the details, and then I will come back to speak with you regarding our perspective on the regional economy, our outlook for year end and a brief update on our merger with First Niagara.
Once again, New Alliance reported an outstanding quarter. On each of our calls, we have reviewed our 2010 priorities and in every quarter this year, we have demonstrated our progress on attaining these goals. This quarter, I am especially pleased to report that we broke several records in growing net income, sustaining revenue momentum and originating loans.
As you see on slide three, building revenue streams has been our number one priority and once again, we produced top line growth with three consecutive quarters of revenue increases. Contributing significantly was excellent commercial and retail loan growth, coupled with a drop in our cost of funds.
Total deposits increased slightly for the quarter. While the pace of deposit growth slowed as we continued to manage down our cost of deposits, we are still pleased with the increase in checking deposits, a proxy of consumers and small businesses satisfaction with the New Alliance brand.
We continue to increase revenues at a greater rate than expenses to improve our operating leverage year over year. And lastly, as we partner with First Niagara, another outstanding regional banking organization, we will ultimately be expanding our footprint, creating a preeminent franchise in four states in the Northeast.
Now if you turn to slide four, you will see our results on the linked quarter basis. Record net income was nearly $17 million, excluding merger related charges. Record revenues improved $75 million. This is the third consecutive quarterly increase in revenues.
We grew the net interest margin to 3.08 percent, up from 3.02 percent in the prior quarter by lowering deposit costs as well as the cost of borrowing, and we have continued to improve upon the NIM guidance we provided to you earlier this year of reaching three percent by the end of the second quarter.
For the second consecutive quarter, we are very pleased that we posted our best loan originations and this was an increase of 12 percent over the linked quarter. The increase came from both commercial and residential loans and we are especially gratified that our commercial originations grew to 38 percent of total originations versus just 26 percent of the originations a year ago.
And unlike many of our competitors, this is the third consecutive quarter we are reporting overall loan portfolio growth, a 2.9 percent increase over last quarter, and we expect that trend to continue.
Looking at our progress on slide five, year over year is even more encouraging. Net income excluding merger related charges jumped 34 percent. Our revenues are up 10 percent and our net interest margin increased 37 basis points.
Core deposits are up even more than seven percent over last year’s third quarter with total deposits up 3.3 percent and DDA balances were up nearly 10 percent. Loan originations are setting records and are 32 percent better than a year ago. This has resulted in our total loan portfolio growth of 5.5 percent. Importantly, our commercial loan portfolio was up over 11 percent from a year ago.
Net charge offs are down to 34 basis points from 43 basis points of the total loan portfolio, better than most of our peers.
Before turning the discussion over to Glenn, I’d like to take a moment to thank the employees of New Alliance for continuing to execute on our 2010 priorities with their keen focus on revenue growth, high quality loan generation and a commitment to maintaining credit quality.
And now Glenn, I’d like to turn it over to you.
Thank you Peyton. Good morning. We had another terrific quarter. Let me begin on slide seven, which summarizes our consolidated statement of income for the third quarter and provides comparative information to prior quarter as well as prior year.