People’s United Financial Earnings Call Nuggets: Loan Growth Guidance and Repurchasing Shares
Loan Growth Guidance
Steven Alexopoulos – JPMorgan: I wanted to start in terms of the loan growth guidance for 2013. Maybe first, how much of a headwind should we expect from the acquired loans. Is $800 million, a reasonable rate, which is annualizing 4Q?
Kirk W. Walters – SEVP and CFO: In terms of the run-off of acquired loans 4Q was $400 million (itself), but we do expect that to slowdown, by an appreciable amount probably a range of around 40% to somewhere around there. So, $200 million to $250 million in that range on a quarterly basis annualizing would be some general guidance on that.
Steven Alexopoulos – JPMorgan: Kirk, looking at required growth you would need to drive total loans in the high single-digit to mid-teens, can you help us think about the sources of that growth and then what gives you comfort at this stage that that will materialize at that level in the backdrop of pretty difficult environment still being painted by most of your peers?
Kirk W. Walters – SEVP and CFO: I’m going to take an initial crack and then have Jack add on to this. I mean the first part is that we do expect not only in the acquired loans but in some of our other portfolios that the level of reductions that we’ve experienced will in fact slow a bit, and so that is embedded in there, particularly on the acquired loans. And secondarily I would say that one of the reasons that we are encouraged is we continue to have good strong pipelines across all of our different portfolios going into the year, in spite of a very strong fourth quarter. So with that let me just turn it over to Jack and he could maybe talk a little more business by business.
John P. Barnes – President and CEO: Well, I think we have been talking through the year Steve about the very nice progress that we’ve made in businesses like ABL, mortgage warehouse lending, and I’ve also I know I’ve mentioned before and we’ve certainly ended the year strong across pieces of our core geography, particularly Connecticut C&I even had a very strong 15% growth than New Hampshire C&I, for instance. So across our geographies our core commercial businesses are doing very nicely, and we had an excellent performance in our equipment finance and the other businesses that I mentioned, so we’re feeling just very good about all of our business lines and our presence and the relationship building in the core franchise. I know I mentioned during the year, our work around building C&I in our Long Island market in New York, we had a 33% growth rate there this year. So, when you start to break it down by how are we doing in different business lines across the footprint, we’re getting very, very good momentum and traction. We actually would have done much better this year if we didn’t have the payoffs that we experienced — that slowed the rate of growth, and we don’t expect that pace to be the same this year.
Steven Alexopoulos – JPMorgan: Maybe just one final one on the expense guidance. I guess the run rate of operating expense is around $818 million and you’re guiding it $815 million to $825 million. Does this imply that the bulk of the cost cutting initiatives are now behind you essentially?
Kirk W. Walters – SEVP and CFO: I think as far as what it implies is if we think about that number in the range that we’ve given, effectively that is assuming that we are taking out additional costs as we go forward into 2013 because we would have had a full year of expenses on the branches that we acquired from Citizens, with that couple other things would have added about $20 million on to our run rate. Then in fact, what we’re implying is that we’d be holding the run rate constant. So, there are continuing initiatives underway to – in this case hold expenses at this level and we will be continue to be very focused on the expense number and working of ways to bring the absolute level of expenses down.
Collyn Gilbert – Stifel Nicolaus: Just wanted to kind of ask a big picture question. It seems as if I understand the commentary obviously about the portfolios that the route is slowing, and the momentum that you’ve been carrying as years gone on, but it still seems like there has been a bit of a maybe strategic change, and how you’re looking at the environment. I mean, with kind of your guided growth rates to be twice the level of pretty much what we saw in 2012. Is that the case? Do you see something here that’s causing you to accelerate your growth plans? Then also, two, just thinking about the funding of it because with the guidance terms you gave for 2013 it looks like you’re going to utilize (indiscernible) in a much better, in a much more aggressive way. Then I guess part B of this question would be, how does this sort of fit in with the share repurchase authorization of the 30 million shares, again, at that point it seem like you maybe were going to pursue a more conservative growth path utilizing the capital to buy back stock. So, just – sorry it’s long wind, it’s a little all over the place, but just trying to reconcile the moving parts of this, which seems like a pretty aggressive growth plan for you all in coming forth.
Kirk W. Walters – SEVP and CFO: I’ll take the first crack at it, and then Jack will chime in. In terms of the three embedded questions you had there. As far as loan growth, I think part of our encouragement and more bullishness really is from what occurred in the third and fourth quarter. In the third quarter, towards the end of the third quarter, we did have a good solid loan growth that continued into the fourth quarter in terms of seeing loan growth across all of our portfolios and continued progress. I think we also are seeing the results of the additional people we’ve hired, the new bigger markets we’re operating in, the different branches and such that we’ve either de-novo’d or acquired, getting up and operating in a larger presence in those. So I think it’s a variety of factors that we’re feeling more confidence in our ability to really grow and realize on those, including the various initiatives we’ve taken, the fact that now on all those initiatives people are there clearly up and operating and by year-end pretty well at full speed. In terms of funding, certainly this could require some more wholesale funding. As you know, we have very little wholesale funding on our books that actually comes on at a rate lower than where deposits are. And assuming the high end of the loan growth, you would have some modest additional borrowings that we would put on. As far as repurchasing shares, we don’t believe the guidance here changes the game plan there. We raised the $500 million to use at the holding company as liquidity to fund the repurchase. We have historically performed on our repurchases in terms of buying the shares in pretty well ratably over the year, and obviously from a pure economic standpoint the debt we issued was 10-year debt, which on an after-tax basis is round 2.2%, 2.3%, and we’d be retiring shares or paying dividends on that has a yield of over five and we’re still even with this buyback, continue to have a strong capital ratios. With that, let me turn it to Jack for a minute.
John P. Barnes – President and CEO: Just to circle on the beginning of it Collyn, regarding strategy, if you really step back and you think about the acquisitions we made that included getting ourselves into larger markets in New York and Boston. We’ve hired a lot of talent there to help us and now that momentum is paying off. We announced things like the commercial real estate initiative and a number of other initiatives through the period all tied to that strategy of allowing the Company to grow at a faster rate than the industry if you will averages and putting ourselves in a position to take advantage of our – the way we operate and the opportunity we have in the Northeast corridor, so it very much ties to the strategy.
A Closer Look: People’s United Financial Earnings Cheat Sheet>>