Q2 2019 Earnings Call
I would now like to turn the presentation over to Mr., Andrew Hersom Senior Vice President of Investor Relations for People's United Financial Inc. Please proceed sir.
Good afternoon.
Thank you for joining us today here with me to review our second quarter 2019 results are Jack Barnes, <unk>, Chairman and Chief Executive Officer.
David resolve <unk> Chief Financial Officer.
Kirk Walters corporate development, and strategic planning and Jeff Tangle President.
Please remember to refer to our forward looking statements on slide one of this presentation, which is posted on our website People's Dotcom under Investor Relations with that I'll turn the call over to Jack.
Thank you Andrew good afternoon.
I appreciate everyone joining us today.
Let's begin by turning to the second quarter overview on slide two.
We are pleased with our second quarter performance operating earnings of $135 million increased 24% from a year ago.
And operating return on average tangible common equity of 14.6% improved 40 basis points.
On a per common share basis operating earnings were 34 cents up two cents year over year.
These strong results reflect continued success of our strategy balancing organic growth with thoughtful M&A.
Higher revenues and our continued emphasis on controlling costs and generated a second quarter efficiency ratio of 55.8% an improvement of 260 basis points from the prior year quarter, and 150 basis points linked quarter.
Total revenues of $454 million grew 15% from a year ago due to increases in both net interest income and non interest income.
We experienced particularly strong noninterest income results highlighted by a record quarter for customer interest rate swap income.
The net interest margin of three point, 12%.
Improved two basis points from a year ago, but declined eight basis points from the first quarter, while new business yields remain higher than the total loan portfolio yield.
The margin contracted primarily due to increased deposit cost and the acquisition of Belmont.
Period end loans and deposits increased 9% and 7% respectively.
From March 30, Onest, driven by the addition of Belmont and organic growth.
Excluding Belmont loan and deposit balances increased 1% and 2% respectively.
Our organic loan growth continue to highlight the importance of our diversified business mix.
Strong production in mortgage warehouse lending core middle market, Cnine healthcare and equipment finance more than offset the continued headwinds in commercial real estate.
And planned reductions in residential mortgage balances.
We continue to see good levels of business activity across our markets and remain optimistic about the growth opportunities in the second half of the year.
We're also encouraged by our continued success gathering deposits results this quarter benefited from higher than expected municipal balances.
And the large short term deposit from the commercial customer.
Despite observing some recent modest easing in deposit pricing.
We still view the market as highly competitive.
As we have previously indicated we expected deposit cost increases to continue for two to four quarters. Following the end of the fed tightening.
As such our deposit costs were up 10 basis points for the quarter.
However, we remain focused on controlling pricing and recently made our second move.
In the last two months to lower CD deposit costs.
As I'm sure you're all know earlier this week, we announced the acquisition of United Financial Bancorp.
The holding company for United Bank.
We are excited about this financially attractive transaction that further deepens the bank presence in Connecticut, our largest and most profitable market.
And also enhances our franchise in Western Massachusetts.
We look forward to working closely with the United team to integrate the companies to best serve our combined customer basis.
With the closing of the Belmont acquisition in April we have begun to leverage our expanded customer and employee base to build upon our strong organic growth in Massachusetts, particularly in the greater Boston area.
We are especially pleased with Belmont commercial real estate team, which is generating good production.
Integration continues to go extremely well the core system conversion will take place later this month.
And we remain confident in achieving the transactions attractive returns.
Adding to the momentum our franchise is generating in the greater Boston area, We opened a new branch in the Seaport district of the city earlier this week.
We are excited to have a location in this vibrant and growing part of Boston to serve our customers.
We're also pleased to announce the board of directors approved the repurchase of up to 20 million common shares, which reflects our strong capital position and commitment to returning capital to shareholders. It is important to note the share repurchases will be made at the discretion of the company following the close of the United acquisition.
With that here's David.
Thank you Jack.
Turning to slide three net interest income of 340.1 million was up 13 was up $15.3 million or 5% from the first quarter. The loan portfolio contributed $30.8 million of the increase to net interest income and benefited from higher yields on new business.
Net interest income also benefited $2.1 million from an additional calendar day in the second quarter.
The primary offset to these increases were higher deposit costs, which reduced net interest income by 14.4 million.
In addition, lower balances in the securities portfolio and increased borrowing costs lowered net interest income by 1.8 and $1.4 million respectively.
As displayed on slide four.
Net interest margin of 312 declined eight basis points linked quarter.
The loan portfolio had a six basis point favorable impact on the margin as new business yields remained higher than the total portfolio yield however increased deposit costs caused the margin to contract 14 basis points.
Consistent with the projection we provided in April . The addition of Belmont negatively affected the margin by six basis points for the quarter before purchase accounting adjustments. However, the net effect of Belmont purchase accounting adjustments served to offset offset this impact by approximately four basis points.
Turning to loans on slide five average balances of 38.2 billion increased by $3.2 billion or 9% from the first quarter.
On a period end basis loans ended the quarter at 38.6 billion.
Up 3 billion or 9% from March 30 Onest.
These increases were driven by the addition of Belmont and organic growth.
Excluding the acquisition average and period end balances increased $490 million and $383 million respectively.
Or 1% on each basis.
Organic growth was primarily driven by mortgage warehouse lending middle market CNO high across the franchise and equipment finance.
Mortgage warehouse balances ended the quarter at 1.2 billion.
Up $340 million linked quarter.
CNR growth also benefited from good results in our health health care vertical and equipment finance continued to experience has experienced strong production by Lee.
The largest offsets to these increases were lower balances. Excluding the addition of Belmont and commercial real estate and residential mortgage.
Commercial real estate continued to be impacted by the headwinds we have discussed previously including elevated competition and continued higher pay offs.
The reduction in residential mortgage balances was planned as we remix the balance sheet given recent recent acquisitions, having a higher percentage of lower yielding residential mortgages than our standalone portfolio.
Balances in the transactional portion of the New York multifamily portfolio, which is in runoff mode ended the quarter at 881 million.
Down $59 million from March 30 Onest.
The portfolio has run off less than anticipated as balances have only declined $86 million since year end.
As such we now expect the run off to be 200 million to $300 million for the full year a decrease from our expectation in January a 400 million to $500 million.
Moving onto deposits on slide six average balances of 39.2 billion.
Increased 2.8 billion or 8% linked quarter.
While period end balances of 39.5 billion were up 2.6 billion or 7%.
These results were driven by both the addition of Belmont and organic growth.
Excluding the acquisition average and period end balances increased $713 million and $600 million, respectively, or 2% on each basis.
Deposits benefited from higher than expected municipal balances and a $500 million short term deposit from a commercial customer.
Our interest bearing deposit beta is 37% since the beginning of the current cycle of increasing interest rates.
Up five percentage points from 32% at the end of the first quarter.
In comparison.
Our loan yield data is 41% during the same period, a decline of one percentage point linked quarter from 42%.
Looking at slide seven non interest income had a very strong quarter at 106.3 million, an increase of nearly $12 million or 12% on a linked quarter basis.
The result was primarily driven by a record quarter of customer interest rate swap income, which increased noninterest income by $4.6 million.
$2.4 million in higher commercial banking lending fees.
Reflecting higher prepayment income and loan syndication fees.
At $1.2 million increase in bank service charges, primarily resulting from an additional calendar day in the second quarter.
And higher investment management, and cash management fees, which collectively improved non interest income by $1 million.
Conversely insurance revenue was down $1.8 million in the quarter, reflecting the seasonality of commercial insurance renewals.
On slide eight noninterest expense of 278.4 million increased $1.2 million linked quarter.
Included in the second quarter were six and a half million dollars of merger related costs in the following categories.
$4.7 million in professional and outside services.
$1.5 million in compensation and benefits and the remaining 300000 in occupancy and equipment and other.
In comparison, the first quarter incurred $15 million of merger related costs.
With nearly $12 million in other non interest expense, primarily reflecting the cost 15 branch closures associated with the Farmington Bank acquisition.
Excluding merger related costs noninterest expenses of 271.9 million were up $9.7 million or 4% linked quarter.
The largest drivers of the increase was $5.9 million and higher compensation and benefit costs, primarily reflecting the addition of bell bought at $1.4 million in increased professional and outside expenses.
Overall Belmont added approximately 7.2 million to operating expenses in the quarter.
Turning to slide nine the efficiency ratio of 55.8% improved 150 basis points from the first quarter and 260 basis points from a year ago.
We are very pleased with the significant progress we have made and remain focused on seeking ways to improve operating leverage.
Asset quality was once again exceptional across each of our portfolios as demonstrated on slide 10.
Originated nonperforming assets as a percentage of originated loans and Oreo at 50 56 basis points were up modestly linked quarter, but remained below our peer group and top 50 banks.
A single Cnine count drove the increase in nonperforming assets for the quarter.
Net charge offs of five basis points improved from an already low level and continue to reflect the minimal loss content in our nonperforming assets.
As we have previously said sustaining excellent asset quality is an important lever and building long term value at a hallmark of peoples United.
As such even though the credit environment continues to be benign and has for an extended period, we remain committed to our conservative and well defined underwriting process that has served us well for so many years.
Briefly on slides 11 and 12.
Return on average assets improved eight basis points linked quarter to 104 basis points, while return on average tangible common equity increased 110 basis points to 14.1%.
On an operating basis return on average assets was 106 basis points, while return on average tangible common equity was 14.4%.
As you can see on slide 12 capital ratios remain strong.
Given our diversified business mix and long history of exceptional risk.
Before opening the call up for questions I want to draw your attention to slide 13.
As we have provided an update to our full year 2019 goals.
As a reminder, the goals updated in April simply reflected the addition of Belmont as People's United Stand alone goals were unchanged.
Given the current interest rate environment, and the expectation of monetary policy easing by the Federal Reserve, we have adjusted our full year goals for net interest income and net interest margin.
Please note these goals do not include United Financial.
Our updated full year 2019 goals are as follows.
Net interest margin is expected to be in the range of Rio five to 315 compared to the previous range of 310 to 320.
Embedded in this expectation is the assumption of 225 basis point decreases in the fed funds rate.
Our prior assumption was for no change in the fed funds rate during the year.
As a result of our lower NIM expectation, we anticipate net interest income growth.
To be in the range of 11% to 13% down from 13% to 15%.
Importantly, the full year goals loans deposits noninterest income noninterest expense provision effective tax rate and capital remain unchanged.
Now, we'll be happy to answer any questions. You may have operator, we're ready for questions.
Ladies and gentlemen, we are ready to open the lines up for your questions. If you wish to ask a question. Please press star followed by one on your Touchtone telephone.
Is your question has been answered or you wish to withdraw your question, Chris Patten again press Star one to ask a question. Please standby for your first question.
Your first question comes from Casey Haire from Jefferies. Your line is now open.
Thanks, Good evening guys.
Hey, Dave question for you.
On the NIM guide.
The the two cuts is that July September and then.
What does that assume you guys are able to do on the deposit side to offset the yes.
Pressure.
What weve what the guidance is based on is July and December cuts Casey.
Okay. So so very limited and okay. So effectively one as it relates to 19 and then.
What does it what can you guys do on the on the on the deposit side, our liability side to offset that pressure.
Sure. So we've done that we've done a couple things.
Jack referenced a little bit.
Within the last week, we brought down.
Some of our promotional money market rates.
Getting ahead of what we expect from the fed.
So we're down about 20 basis points in money market and.
A couple of our larger markets.
The.
In the seat and our CD book, we've actually made two separate moves in the last two months. So cumulatively are.
Six months CD special that were running is down 30 basis points and our 11 month is down 60 basis points cumulatively and we actually have an inversion in RCD.
Rates now.
It'll take a little bit of time for that to roll through but.
With those moves and more that we expect post the fed actually moving on July 31st we will do our best to offset.
As much as the NIM pressure as we can.
Okay great.
Just switching on loan growth guide.
The 10 to 12 Im doing my math right, so that implies a pretty decent range.
I have about 700, a little less $700 million between the low and high points.
How our pipeline shaping up I know you had a very nice mortgage warehouse.
Quarter.
Can be seasonal just trying to get a.
Finer and finer point on the loan growth guidance.
Based on pipelines.
Cases, Jack I'll, let Jeff answer that.
And give you some color on what's going on in the different business lines and markets.
Yes, Hi, Casey this is Jeff tangle.
We think the pipelines are theres still pretty healthy that we havent seen a.
Material decline or decrease in the pipelines from what we've been moving through during the first half of the year. So our expectations are that the second half.
Hello, being equal look pretty similar to the first half.
Kind of setting aside that oftentimes, we'll see the second half have a little bit of increase.
As we move through the summer in particular, the equipment finance businesses tend to have a very strong end of the year.
We haven't seen any signs of slowdown in.
Any of the businesses that we've been highlighting here.
Acknowledging the headwinds in commercial real estate, but apart from that everything.
Seems to be in pretty good shape.
Okay, Great and just last from me the other income line.
And obviously the swaps were very strong this quarter, but the fee guide does imply.
Pretty pretty decent step down.
91, 95 in the back half of the quarter, if I'm doing my math right is that does that does that.
Jive with what you guys are thinking.
Yes, so Casey we.
Fee income is running better.
Than we expected and we really had a great second quarter.
There is some volatility as you know in some of those line items. So you know the way I think about it is that is that strong momentum continues we are going to be on the high end or maybe even above.
The guidance, but we just we didnt change it.
Just because of the volatility of some of those line items.
Gotcha. Thank you.
Thank you. Thank you.
Thank you. Your next question comes from Ken Zerbe from Morgan Stanley . Your line is now open.
Great. Thanks, good evening.
I was hoping you guys could talk about the 20 million shares that you had authorization for I understand Denise to wait until you guys closed but to talk about their after like how quickly would you like to purchase or try to finish the 20 million shares.
The way I would think about it Ken is.
And we.
It's important to have that in place we are looking at that at this point in time as an opera Opportunistically. So we're not putting out a timeframe and an expectation that all those shares will be will be bought.
Immediately it's really subject to market conditions post the close of the United transaction.
Got it okay. So it could be anywhere from a couple of quarters too few years.
Yes, thats reasonable expectation as we sit here today.
Understood and I guess, along the same lines. When you think about your capital ratios and using the 20 million shares of any real what's my calculations. It looks like it reduces your capital ratios. If you did it all one chunk by about 9100 basis points on CE tier one.
Is there a capital level or capital ratio that you're targeting that you don't want to go below that might be the most restrictive to help us think about the timing of the buybacks.
There is what I would say is.
Your number is directionally correct, we could.
By all those shares back in a relatively short period of time and still be fine from our capital target.
Okay.
Okay and then.
Switching gears, a little bit other fee income looks like it was one of the biggest I understand your guidance is for lower fee income going forward, but so what was in the other fee line thing is the $4.3 million in your slides.
There was.
Bunch of odds and ends one of the main driver was you will see on the balance sheet that we have equity securities.
We have one equity security position, which after the mark to market through the income statement.
That was about $800000.
We also had some a little over $400000 of only income in the quarter.
And after that it's pretty much odds and ends.
Gotcha, Okay, and then one last question if I could.
In terms of the transaction on New York City multifamily portfolio.
Just trying to reconcile obviously I heard your comments so that the payoffs are slower.
At the same time kind of you and many other banks talk about payoffs in their normal siri portfolio being.
Much faster.
Is there anything unusual about this portfolio like why wouldn't the payoffs effect this portfolio or is this more a little more multi.
Sorry rent stabilized stuff that might.
Stay on your books for a lot longer.
Yes.
This is.
New York broker originated multi family. It's it is certainly not all rent control, but there is some portion of that portfolio that does have rent control properties in it.
The we had a high level of maturities in that portfolio last year and then.
Refinancings away from us out of that portfolio the actual maturities.
This year, our came down quite a bit but when we gave our original guidance we were expecting.
The level of refinancing to remain elevated and I think what we've all learned now you know through the first six months of this year is the activity levels in that war that segment of the market.
Have really slowed down and that led to.
Quite a bit of.
Much larger portfolio at this point in the year than we originally expected.
All right. Thank you very much.
Thank you. Your next question comes from Jared Shaw from Wells Fargo Securities. Your line is now open.
Hi, guys good evening.
As there.
So first question on on the United deal with there.
Exposure to DC solar.
They took a $9 million write down this quarter is that in addition to the write down that you provided us on Monday or is that part of the.
The valuation that you put on there.
No our 41.7.
It was the full amount of the balance sheet exposure plus prior.
Tax credits received.
United's number is a subset of what we had.
Conservatively model.
Okay. So these these are these these are that $9 million is I guess the way to look at coming out of that are part of that 41.7 million total exposure rack not definitely in addition, good okay.
And then what's the.
Anticipated total goodwill from the deal.
They.
We.
I don't have that number handy hand, handy right now giving us.
And as you know, it's subject to quite a bit a change and as marks.
No sure yet.
We can follow up after that so yes.
That's easy to depreciate okay.
Sure and then just following up on Ken's question on the multifamily.
When you are saying that the pace of revise it sort of are you also seeing is driven by the peso just sale secondary market sales of those properties slowing.
And yet you know were in the past okay.
So it's not it's not that people are holding onto their loans past that reset date, it's just more that the the your anticipated.
Sales schedules has slowed down.
Yeah and just the.
Transaction activity in that market has slowed down as people react to the new legislation.
Okay got it those were a those are the questions I was looking for thanks a lot.
Thank you.
Thank you. Your next question comes from Brock Vandervliet from U V. S. Your line is now open.
Just following up on that last question on multifamily would you would you consider selling that portfolio since it now looks like it may be around for much longer than we'd.
Thought it would be.
We thought about it from time to time, and we certainly could but today you know as rates go down and its hanging around a little longer and that's a good thing from our perspective.
So yeah I would.
I never say never but I would guess, we will not wind up selling those assets.
Okay fair enough and.
What's your sense of your your rate sensitivity now relative to the you know the shock test results we saw in the in the queue.
Given Belmont has it changed.
Has that changed materially.
No it it Belmont was slightly liability sensitive.
But once they were aggregated into us remember they're only.
Roughly 5% of our asset size, they had a a very modest impact overall.
Okay, and do you appear to be using the forward curve.
Now as you look into.
Next year, and where the curve implies several more cuts are you are you comfortable with your rate positioning or are there things you would look to do.
In addition to to hedge that out I guess, United will help you in that regard because it is.
More liability sensitive.
Ah, yes, United will have a small positive impact small reduction in our asset sensitivity they.
Yes, I think the find the real question that we spend our time on is feeling pretty good about.
The asset side of our balance sheet from a rate sensitivity perspective credit spreads have held up have been steady the our securities portfolio is a longer duration and provides a nice hedge there they.
Hedging at where we are today is a pretty bullish statement because.
Any 10 year swap is immediately negative.
To carry perspective birth.
One month LIBOR three month LIBOR.
So we haven't rushed out to hedge.
And any.
Anything in the derivatives market right now that if we get substantially more constructive on rates going down and the curve Steepening. Our Alco Committee will continue to evaluate that.
But as we sit here today.
We're modestly asset sensitive and we're we're up we're comfortable with that for now.
As we told you we're actively moving now to manage our deposit cost and well continue to look at that as if the forward curve is right now what's going to happen when short rates.
Alright, Thank you great color.
Thank you. Your next question comes from Collyn Gilbert from KBW. Your line is now open.
Thanks, Good evening guys.
Mike I'll, maybe if we could just start David with with some margin on the margin guidance that you guys gave a three or five or 315.
I know you touched on some of this but just thinking about it in terms of the waterfall chart that you guys put in the slide deck and on slide four just for the.
Impact this quarter.
If we could maybe if you could kind of walk through how that would look like in your guidance.
You know I know you talked about a little bit on the on the deposit side and where you're seeing you know you're reducing some promotional rate. So that's helpful. But just also just thinking about the loan maybe how in the scenario you are thinking about loan yields.
I guess that that's really the big the big thing on the loan yields are now on the borrowing side too.
Sure.
The.
What I would say just.
Looking at slide for the Big number there is 14 basis points around deposit and what I would say is in the second quarter. What we were able to do to lower deposit cost was very modest right and the moves that I talked about a few minutes ago were later in the quarter and didn't impact the quarter.
When I think about the asset size side, we have about 43% of our loans are our prime or one month LIBOR. So that's where the headwind is and I think that those loans will continue to reprice down as one month LIBOR moves now if the forward curve is correct. We have a nice offset in our securities portfolio and our other in our equipment finance business, which is very nice yield great cash flow and is all fixed rate the as I think about the back half the year with the bad moving.
It deposit management that is where the work has to be done.
And I just generally speaking I think it's been hard for banks.
To be too aggressive in lowering deposit costs.
Until we get the call I'll cover up that making that first.
And I think we all collectively think thats right around four so our margin guidance of 305 to 315 is looking is assuming a step down in margin of approximately.
Three basis points, a quarter is kind of how I would term it.
Position that today.
Okay. Okay. That's helpful.
And then if we take that well, but then if we just transition sorry for a minute to you BNK.
So I believe you guys had said in your deal metrics that you were using consensus estimates for 2020, I think of a dollar nine it looks as if now having digested UBI encase quarter and speaking with them that that achieving that is going to be a big challenge on how how does that.
Come into play with your with your outlook in terms of your EPS accretion targets and the like.
They're using today for 2019 is not going to have a big impact on us just because of the.
The closing of the deal.
It is.
The way, we think about that is yes.
More.
How we what we do once we take once we merge with them and some of the balance sheet changes that we made.
At that point, it's obviously going to be dependent on time of closing and.
Well, how we feel and where interest rates are at that time.
Okay. I was it's really more of the 2020 number that I'm I'm honing in on.
You know like if it shakes out to be a dollar versus the dollar nine you know how do you think you still is what you're saying you still think you have enough sort of balance sheet.
Optionality there too.
Recover that whatever lost earnings May happen for the company between now and when you close the deal are now and when you integrate the deal.
Yeah, that's that's our position.
Okay, Okay, and then just on the buyback.
I'm, sorry, I think you said it David So you're if we look at your your capital.
Targets and not tier one you know the 10 to 10 and a half range.
And and you did you did I hear you correctly in saying that you. Even if you did execute on this buyback pro forma with few BNK you still would have still be within those targeted capital ranges.
Yeah, our operating.
Target for a CPT, one would allow us to buy that stock back in a relatively quick period of time, a quarter or two and still be above our operating targets.
Okay.
All right I guess I'm trying to figure that out I, we can maybe talk offline I guess just thinking conceptually.
You'd be in case, where your capital levels, you're not really going to be generating much capital just given the.
Probably the direction of earnings.
But you are saying you will.
Here's it's you're still optimistic.
Yes, well we are also the first thing we said.
On.
On the first question that came around about the buyback was we are positioning that as it's nice to have it in place we've lowered our dividend payout ratio quite a bit over the last couple of years, it's down around 50% today. It's are so we have another capital management tool, but we did position it as opportunistically. So we are not saying we will definitely by all those shares back in a predetermined amount of time.
Okay.
Okay.
Okay, and then just finally, tying this all together with kind of the NIM guide.
If we kind of assume that full year range.
That would mean in the fourth quarter, you could theoretically perhaps have a known as low as they to 95 or so so you're going into 2020.
With it to 95 Nam with continued pressure kind of assume still be coming in the first quarter, just because of that December rate cut that that would be factored in it's just that's it.
Hi, how are you thinking about that and just in the totality of still wanting to generate EPS growth.
Or or will 2020 be a year that maybe you don't generate EPS growth or you don't hit your financial targets I'm, just just trying to tie it all together just seems like it'd be it's going to be a meaningful drop in earnings per share in 2020 with him.
Hi, it's Jack and I I think that as we've described on lowering the NIM guidance, where we're looking at the high potential as the fed lowering rate right and that.
That's the primary driver of that change in the guidance.
And as we go into through the rest of the year and into 2020.
There's a lot of levers right to use to.
So kind of fight that headwind you know we've what we've described the work that we continue to do on re mixing the assets are on on the balance sheet and improving yields and changing.
The make up what percentage of book portfolios.
We continue to work on growing D. A's and we continue to work on on our deposit cost. So there's there's a lot of different ways that we can fight the pressure on rates coming down with the bat.
As you know none of us know, where that's going to go really and I think our challenge and our job is to react.
To what is going on in the market and externally and then manage what we can manage no.
So again.
If you would just assume that the December rate decline is going to kick in and then that maybe there is another one.
That's all that's in isolation, then it doesn't give us any credit for taking actions to fight that off.
Got it Okay, I would just add to that that.
The the 295, yeah that that you quoted.
Feels very aggressive to me.
As ware.
Much lower than where I think we'll wind up being you know I am I.
Yes, sorry, David might that also I have you BNK already in my model. So that include DB and Kay and next years does not.
But anyway I didn't mean to interrupt continue.
Well yeah. Okay. So I was just going to say if the interest rate environment that it gets crystal clear that we are going to substantially lower rates theres going to we're going to have to take substantial action.
To protect our NIM thats, both on the on hedging on the asset composition side as well as the liability side.
Okay.
Okay.
I will leave it there thanks guys.
Thank you.
Thank you.
Ladies and gentlemen, if you wish to ask a question. Please press star followed by one on your Touchtone telephone.
Your next question comes from Matthew Breese from Jaffrey. Your line is now open.
Hi, good evening everybody.
Hi, Matt.
Just want to continue the NIM discussion hop on the on the NIM pig pile so to speak.
Just curious are there any other drivers of compression and maybe you could just give us a sense for what accretable yield.
Amounted to this quarter for the NIM and where you expect it to go by the end of the year in terms of a headwind.
I'm really not much of a factor in the quarter.
You know the the real driver the positive around our NIM is we still have.
A nice differential between the new business, that's hitting the books and our current loan portfolio yield that's been going on for quite a few quarters now.
There's.
Benchmark interest rates are moving down but spreads are are staying constant and I think that.
Metric will continue.
You know in the back half of the year as well.
And what is the difference now between the incremental.
New loan and whats on the books.
It's a little over 50 basis points.
Okay.
Okay, and then is the I know you mentioned you had a rather large $500 million commercial deposit sounds short term in nature.
With the expectation that rolls off the balance sheet is that a driver of NIM compression as well and if so how much.
It was a modest driver.
NIM compression in the second quarter.
It it won't be here for too much of the third quarter and it was.
On the balance sheet for about half of the second quarter.
Okay, we just called it out more because it was large and it okay became and it will be done.
Okay.
Okay, and then you mentioned that some of the growth. This quarter came from the health care space could you just give us a sense for what your exposure is to the segment.
What types of loans, you're you're you're providing there and geographically where it's worth centered.
Sure Hi, this is jumping in the healthcare our healthcare business is mostly senior housing.
Theaters, if you think about it and it's mostly in our footprint. So we're providing.
Financing for.
Assisted living skilled nursing facilities will also do theres not much in the way of if you think about hospitals because so many of the hospitals have consolidated in the northeast.
So there is probably a bigger concentration in the senior housing and some of the.
Some of that.
Not for profit agencies.
And what's the size of that portfolio, how much of that growth this quarter.
This quarter the crew.
100 million.
Little over 100 million.
Okay on a balance of.
But.
750 ish.
Okay.
Okay and then my last question just in regards to see so we're getting pretty close to the deadline here I'm just curious if there's any.
Sort of additional commentary or expectations for day, one and then go forward provision.
Where.
I'm not prepared to talk about putting any numbers out there our expectation will be we'll be doing that.
In early October on our third quarter conference call as well as putting additional disclosure in the queue.
Comments are very similar to.
Last quarter, which is where we have a cross functional team across the bank has been working on C. So you now for over a year now we have.
Develops all of our models, we're just about ready to.
Start parallel testing on the back half of the year and we'll provide more.
More clarity in three months.
Understood all right. That's all I had thanks for taking my questions.
Sure Matt.
Thank you. Your next question comes from Brock Vandervliet from U.B.S. Your line is now open.
Hi, Thanks for the follow up just an accounting net.
Purchase purchase accretion for Q2 do you have that number.
I don't off the top of my head it was.
Similar to.
Somewhat similar to last quarter I can follow up with what the exact number.
Okay.
Okay. Yeah, I think it was spent 6 million last quarter.
Great I'll follow up offline.
Okay. Thanks.
Thank you.
Thank you, ladies and gentlemen, since there are no further questions in the queue I'd now like to turn the call over to Mr. Barnes for closing remarks.
Thank you [laughter]. Thank you in closing we are pleased with our strong second quarter performance, which was highlighted by a 24% increase in operating earnings from a year ago 260 basis point improvement year over year, and the efficiency ratio, reflecting higher revenue was particularly strong noninterest income growth and well controlled expenses.
Solid organic loan and deposit growth.
New business yields remaining higher than the total loan portfolio yield.
And sustained exceptional asset quality.
Thank you for your interest in People's United have a good night.
Thank you for your participation in today's conference. This concludes the presentation you may now disconnect good day.