As the Dodd-Frank financial reform act nears implementation this summer, People”™s United Financial Inc. and other banks are already taking into account the stiffer oversight from regulators on the actions they are taking today ”“ including the dividends they issue to their own investors.
Bridgeport-based People”™s United increased its dividend in the first quarter, even as it reported a significant profit increase to $51.7 million, up from $32 million in the fourth quarter and $13.6 million a year ago.
On an annualized basis, both loans and deposits increased more than 4 percent in the first quarter, and People”™s United”™s net interest margin reached its highest level since the end of 2007. The bank”™s nonperforming assets ratio, meanwhile, declined to under 2 percent.
People”™s United pushed through the dividend increase even as it readies to come under the regulatory apparatus of the federal Office of the Comptroller of Currency, which is assuming oversight of People”™s United from the bank”™s current regulator, the Office of Thrift Supervision (OTS).
CEO Jack Barnes said People”™s United consulted with regulators before issuing the dividend increase, among a range of topics discussed in the bank”™s conference call.
“OTS is our regulator today, right?” Barnes said. “We, like others, are going through a discussion with our regulators regarding integration of the OTS into the OCC. The OTS is our regulator. I am not in a position ”¦ to speak for (OCC). Obviously, our step would indicate our confidence in being able to support the dividend.”
People”™s United”™s improved earnings arrive even as the bank continues to winnow out bad loans it assumed in its 2010 acquisition of Bank of Smithtown on Long Island, N.Y. In April, People”™s United completed a $23 million loan to a Long Island college and it said mortgage originations on Long Island are up 7 percent since it closed the Bank of Smithtown acquisition.
In Massachusetts, where the bank has expanded significantly in the past year through deals to acquire North Andover-based LSB Corp. and Danvers Bancorp, People”™s United piled up $29 million in deposits in a single quarter at a branch in downtown Boston. People”™s United is aiming to complete the nearly $500 million Danvers Bancorp deal in the current quarter.
The bank”™s rapid-fire expansion and consolidations have come under a new CFO with Kirk Walters replacing Paul Burner earlier this year. Walters hinted that the current regulatory environment could make additional acquisition opportunities available for People”™s United ”“ as one outlet for deploying its capital alongside dividends.
“It”™s worth pointing out here that the current banking environment is very similar in terms of regulatory response to that of the late 1980s and early 1990s ”¦ following the savings and loan crisis,” said Walters. “These acts had the equivalent impact on the industry as Dodd-Frank has today. As banks began to feel the impact of these regulatory requirements in the mid-1990s, we saw a number of weaker operators begin to face a fatigue factor, encouraging consolidation in the industry ”¦ A wave of consolidations over the past 20 years has created a void in relationship-based and customer-service-focused banking, which we are uniquely positioned to fill.”
