People’s Bank, whose headquarters are located at 850 Main St. in Bridgeport, has enjoyed a considerable increase in earnings over the first quarter of last year despite a challenging environment that included a struggling economy and the nation’s war with Iraq.
Bridgeport-based People’s Bank reports significant earnings increases for the first quarter of 2003 despite the struggling, wartime economy.
The bank, whose assets total $12 billion, recently announced a net income of $16 million, or 26 cents per share, for the first quarter of 2003. That compares to $11.2 million, or 18 cents per share, for the first quarter of 2002.
“We are pleased to report a 44 percent increase in earnings per share in a challenging economic environment,” said John A. Klein, president and chief executive officer. “The year-over-year increase in earnings reflects improvements in credit card services’ asset quality, strong growth in non-credit-card fee-based revenues and continued high levels of residential mortgage originations.”
During a speech to stockholders during the bank’s Annual Meeting on April 24, Klein said, “Let’s put that into perspective. An investor with $10,000 in the Nasdaq on Jan. 1, 2002, ended the year with $6,876 – a loss of over $3,100. That same investor with $10,000 in People’s stock ended the year with over $12,500. That’s a total difference between the two results of nearly $5,700, or almost 57 percent of the original investment. The total return on People’s stock exceeded the KBW Index, Dow Jones and S&P 500 by 37, 41 and 48 percentage points, respectively.”
Klein added that since the bank’s inception as a public company in 1988, its shareholders have earned a total compounded annual return of 15.6 percent. “During the quarter, we also benefited from the favorable resolution of a federal tax audit and took several steps to improve the bank’s financial position for the future,” he said.
According to statements from the bank, other line-of-business highlights included growth in average commercial banking loans of $178 million, or 7 percent; growth in average Connecticut consumer loans of $131 million, or 24 percent; and an increase in average residential mortgage loans of $218 million, or 8 percent. Those increases are compared to the first quarter of 2002.
The increase in residential mortgages reflects $128 million from newly originated loans and $90 million from purchased loans. The growth in Connecticut consumer loans reflects the bank’s focus on home equity lending in response to consumer preferences in the current low-interest-rate environment.
‘Three Tough Years’
During the first quarter of 2003, People’s also continued to grow core deposits and the overall cost of deposits declined through a combination of lower market interest rates and shifting customer preferences toward more liquid deposit products from certificates of deposit. Average non-interest-bearing deposits increased $134 million, or 8 percent, compared to the first quarter of 2002, while average savings and money market deposits grew $471 million, or 14 percent.
Additionally, results for the first quarter of 2003 included a $60 million income tax benefit and $4.3 million of related interest, resulting from the completion of an Internal Revenue Service audit covering the years 1988 through 1995.
Growth in credit card receivables continues to be challenged by the economic environment and competitive pressures. Managed credit card receivables averaged $1.95 billion for the first quarter of 2003, down slightly from $1.98 billion for the fourth quarter of 2002 and down $393 million from the first quarter of 2002.
Commenting on asset quality, Philip R. Sherringham, executive vice president and chief financial officer at People’s, said, “Asset quality in the credit card and national consumer loan portfolios continues to show signs of improvement and asset quality in the Connecticut loan portfolios remains strong, particularly in light of today’s economic environment. Net charge-offs in the commercial banking and residential mortgage loan portfolios equaled 0.01 percent of the combined portfolios for the first quarter of 2003.”
According to Sherringham, non-performing assets as a percentage of loans and real estate owned equaled 0.64 percent at March 31, 2003, equal to year-end 2002 and up slightly from March 31, 2002.
Sherringham, a seasoned executive who has more than two decades of banking experience, joined People’s Bank in his current position on March 31. Sherringham most recently was executive vice president and chief financial officer of United California Bank. The $11 billion institution, then the largest Los Angeles-based bank with 117 branches – primarily in the southern and central regions of California – was acquired last year by BancWest Corp.
Also in the first quarter of 2003, People’s Bank announced it earned another “Outstanding” Community Reinvestment Act rating from the Federal Deposit Insurance Corporation. The FDIC report cited the bank’s excellent responsiveness to the credit needs of individuals and businesses and its high level of community development loans. The extensive branch system and community involvement of People’s also were noted.
During his speech before stockholders, Klein said, “I know that I’ve stood up here for the past three years and talked about the challenges ahead. But, quite frankly, these have been three tough years. Since the market’s peak in March 2000, we are in the fourth year of a bear market. That’s something this country hasn’t experienced since the Great Depression.”
He added, “And since last fall, the buildup to – and the war itself in Iraq –exacerbated an already sluggish economy. Until very recently, the nation has been focused on the war; that has driven the financial markets. With the war now won, we expect the markets to be more closely aligned with business fundamentals, which remain relatively weak, and with the continued softness in the economy.”
Klein also noted that the bank has plans to fortify its Connecticut franchise, particularly in Fairfield County. Those include the strengthening of existing partnerships with the Stop & Shop supermarket chain and the University of Connecticut.
