People's United Financial (PBCT) Q1 2012 Earnings Call April 19, 2012 8:00 am ET Executives Peter Goulding -
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John P. BarnesThank you, Peter. Good morning, everyone. We appreciate you joining us today. On Slide 2, we provide an overview of our first quarter results. For the quarter, operating earnings were $60.6 million or $0.18 per share with net income of $58.6 million or $0.17 per share. As was somewhat expected, the operating net interest margin declined to 4.01% compared to 4.07% operating margin in the fourth quarter. The decline in the margin is the result of lower loan yields due to continued repricing of the originated loan portfolio and deposit growth outstripping loan growth, which was partially offset by lower funding costs. Total loan growth, including runoff in the acquired portfolios amounted to 1.7% on an annualized basis, which was entirely funded by deposit growth. Originated loan growth was strong and amounted to 7.5% on an annualized basis. Deposit growth for the quarter reached 8.7% on an annualized basis. Deposit rates declined by another 6 basis points to 44 basis points in the quarter. Noninterest income improved compared to the fourth quarter due to growth in the gain on sale of residential loans, investment management fees, brokerage commissions and insurance, which was partially offset by decreases in loan prepayment fees and service charges. The efficiency ratio rose to 63.2% from 61.8% in the fourth quarter. This is a result of seasonally higher operating expenses and lower net interest income due to slower loan growth and a decline in the net interest margin. Capital ratios remained strong. We continue to deploy capital thoughtfully through organic growth, dividends, share repurchases and our acquisition strategy. The tangible equity ratio stands at 11.7% as of first quarter 2012, which is well in excess of our peers. On Slide 3, we discuss several recent initiatives. First, we launched our brand messaging, "What know-how can do," during the quarter and have received strong positive feedback throughout our footprint. We continue to roll out this messaging through various media channels including our website, billboards and television commercials. Second, as was announced in our press release, we increased our dividend for the 20th consecutive year. As of yesterday's closing price, and adjusting for the new dividend rate of $0.64 per share annually, the annual dividend yield on our common stock is 5%. Third, we repurchased 4.5 million shares, or $56 million, at a weighted average price of $12.54 per share. This results in approximately $3 million of annual dividend savings. We have 13.5 million shares remaining in our existing share repurchase authorization.
Next, we announced the acquisition of 56 Citizens branches in the New York metro area on February 28. 52 of the branches are situated in Stop & Shop supermarkets and 4 are traditional branches. 29 are located on Long Island, 8 are in Westchester County and 6 are in the boroughs of the New York City. All of which are key areas of focus for People's United. A substantial opportunity exists to expand the acquired deposit base as Citizens branches had average in-store deposits of $4 million. Our current Connecticut in-store franchise averages $29 million in deposits based on the location of the original account opening or $40 million in deposits if you account for where the customers conduct their banking activity. We look forward to closing this transaction in late June and begin to address in earnest the growth potential that exists in our New York metro franchise.Fifth, and perhaps most importantly, as we discussed and as demonstrated in our originated loan and deposit growth and certain fee income business lines, this franchise has momentum. We are particularly pleased with the momentum across wealth management, insurance, brokerage, cash management and payroll service product lines. We have every reason to believe that the momentum will continue as we attract and retain top talent while remaining completely focused on best serving our customers and maintaining our competitive, conservative credit culture. Read the rest of this transcript for free on seekingalpha.com