Loan and deposit growth drove earnings gains at several small Northeast regional banks in the second quarter.
Analysts who follow the region said a number of New England institutions in particular basked in the warm glow of an improving economy.
"The New England economy is strengthening," said Michael Mayo, an analyst at Credit Suisse First Boston, "and that means loan growth is improving."
Commercial loan business was particularly strong, but demand for consumer finance products like home equity loans also picked up, analysts said.
And deposits swelled, analysts said, largely because smaller regional banks took advantage of consolidation activity in the Northeast by luring customers away from bigger banks with the promise of better, more personalized service.
The banks, including Bridgeport, Conn.-based People's Bank and Wyomissing, Pa.-based Sovereign Bancorp, generally met Wall Street's consensus estimates.
And analysts said the strength of second-quarter earnings should carry through the fall. "The momentum we've seen through the first half of this year will certainly continue," said James Moynihan, an analyst at Advest in Hartford, Conn.
Evidence of the strengthening New England marketplace could be seen at People's Bank, a $7.8 billion-asset institution. The bank had net income of $21.9 million, up 20.3% from last year.
Net interest income was $53.5 million, up 7.4%. Noninterest income was $57.2 million, up 22%.
People's Bank's credit card portfolio topped the $3 billion-mark during the quarter and is the bank's principal driver of earnings, said analysts. Revenues from cards increased 33%, to $764 million.
Commercial loans grew 12%, and commercial mortgages grew 13%. Consumer loans jumped 30%, to $256 million, on the strength in demand for home equity loans, the bank said.
Deposit growth was fueled by People's Bank's expansion into convenience stores. Thirty-one Stop and Shop branches gathered an average of $210,000 in new deposits each week during the quarter. Total deposits were up 10%, to $5.6 billion.
Expenses of $77.5 million, a 26.8% increase, were driven by the expansion of the bank's credit card business and by its efforts to open 45 in-store branches this year, the bank said.
Sovereign, a $10.8 billion-asset institution, had net income of $21.5 million, up 26%. Earnings per share were 27 cents, on target with analysts' consensus.
Again, deposit and loan growth fueled earnings, the bank said. Deposits grew 3.5%, to $5.8 billion.
During the quarter, Sovereign announced it would acquire the automobile finance division of Fleet Financial Group and its $2 billion portfolio of loans and leases. The transaction is scheduled to be completed in the third quarter.
In the New York metropolitan area, Astoria Financial Corp. reported net income of $15.2 million, or 72 cents a share, up 29.9%. But analysts had expected 73 cents per share.
Income from mortgage loans contributed to a 5.5% rise in net interest income, to $49.4 million. Mortgage loans grew 11.1% from the first quarter.
Noninterest income was $4.6 million, boosted 35% by a 13.6% gain in customer service and loan fees and a 120% gain from the sale of securities and loans. Deposits were stable at $4.5 billion, but core deposits were up 2.6%. Expenses fell 2.5%, to $26.5/
The $7.7 billion-asset institution, based in Queens, N.Y., said it would acquire $2.6 billion-asset The Greater New York Savings Bank at the end of the third quarter.
In Portland, Maine, People's Heritage Financial Group, a $5.6 billion- asset bank, reported net income of $17.8 million, or 64 cents a share, a 75% gain from last year. Analysts had expected 63 cents. Excluding expenses incurred last year from mergers, net income rose 31%.
The bank said loan growth fueled the increase. Net loans surged $100 million during the quarter, with commercial loans growing 8% and consumer loans growing 6%. Net interest income was $59.9 million, a 27.9% jump. Net interest margin widened slightly, to 4.76% from 4.73%.
Noninterest income of $24.7 million was up 32%, driven by a 61% gain in fees from customer services, a 19% gain in fees from mortgage banking, and a 40% gain from sales of securities. Expenses rose 18%, to $87 million.
In Albany, N.Y., 3.6 billion-asset Albank Financial Corp. reported net income of $9.4 million, or 68 cents, up 20.5% on the strength of mortgage and other loans. The consensus was 67 cents.
Noninterest income rose 12.9%, to $3.5 million, driven higher by fees from deposit accounts, up 15%, to $1.5 million. Expenses rose 2.5%, to $20.2 million. +++
Albank Financial Albany, N.Y. Dollar amounts in millions (except per share) Second Quarter 2Q97 2Q96 Net income $9.4 $7.8 Per share 0.68 0.54 Year to Date 1997 1996 Net income $18.8 $15.5 Per share 1.35 1.07 Balance Sheet 6/30/97 6/30/96 Assets $3,602.2 $3,325.6 Deposits 2,986.5 2,872.4 Loans 2,586.9 2,258.9
Astoria Financial Corp. Lake Success, N.Y. Dollar amounts in millions (except per share) Second Quarter 2Q97 2Q96 Net income $15.2 $11.7 Per share 0.72 0.55 Year to Date 1997 1996 Net income $30.6 $26.4 Per share 1.44 1.23 Balance Sheet 6/30/97 6/30/96 Assets $7,664.5 $7,078.4 Deposits 4,545.2 4,478.1 Loans 3,070.4 2,392.9
People's Bank Bridgeport, Conn. Dollar amounts in millions (except per share) Second Quarter 2Q97 2Q96 Net income $21.9 $18.2 Per share 0.36 0.30 Year to Date 1997 1996 Net income $43.9 $39.0 Per share 0.71 0.64 Balance Sheet 6/30/97 6/30/96 Assets $7,870.0 $7,441.5 Deposits 5,591.5 5,058.8 Loans 5,274.7 4,455.6
Peoples Heritage Financial Group Portland, Me. Dollar amounts in millions (except per share) Second Quarter 2Q97 2Q96 Net income $17.8 $10.1 Per share 0.64 0.40(a) Year to Date 1997 1996 Net income $34.8 $22.7 Per share 1.24 0.90(a) Balance Sheet 6/30/97 6/30/96 Assets $5,591.2 $4,371.7 Deposits 4,213.9 3,383.1 Loans 3,690.0 3,051.4
(a) includes pre-tax charges of $4.7 million and $5.1 million for the 1996 three- and six-month periods, from merger expenses.
Sovereign Bancorp Wyomissing, Pa. Dollar amounts in millions (except per share) Second Quarter 2Q97 2Q96 Net income $21.5 $17.1 Per share 0.27 0.23 Year to Date 1997 1996 Net income $30.7(a) $34.3 Per share 0.39 0.45 Balance Sheet 6/30/97 6/30/96 Assets $10,898.6 $9,812.1 Deposits 5,856.7 5,499.4 Loans 6,817.5 6,220.0
(a) includes one-time merger related cost ===
