Eh. A mixed bag from my perspective. I was hoping to see two things in the report: steady progress on efficiency ratio, and solid loan growth. They only hit one out of two.
I was especially disappointed with mortgage loan growth, seeing how several other banks showed a big uptick in mortgage applications and pipeline this spring. PBCT had decent numbers, but they need to do better if they're going to find a place to put those Citizens deposits. Dumping it all in to low-yield securities isn't going to cut it.
At least the payout ratio continued to decline. A relatively safe 5.3% will probably keep me in, at least for a while.
Unbelievable. The stock price was already discounted to anticipate weak earnings, met or exceeded the analyst projections, and the price gets hammered. As an aside, the efficiency ratio improved. And most banks are not portfolioing residential mortgages, but selling them on the secondary market because the rates are so low. I know the yield is better than overnight deposits, but if you hold them because of the short term yield advantage, you get killed 3- 4 years down the line when rates increase to where they really should be if the fed was not flooding the market with liquidity. If you try to sell them at that point you take a big hit on the discount. These folks are in the northeast which does not have a robust growth economy so I respectfully disagree with the comment that thier growth is below expectations. Personally when I look at the missteps of the nationals with one outrageous revelation after another, am pleased to see these folks sticking to their comfort zone and making careful steady progress. You are not going to see them do anything real dramatic. Not their culture, but all in all I said it before and say it again, a great dividend with growth.
That's fair. My comment was probably as much a reaction to "keep the train rolling", which seemed a bit much to me. Further, looking back at the past few years of numbers, it's clear that management has this bank in a much, much better position than it has been. ROA up, efficiency ratio down, capital ratios down, all while maintaining outstanding credit quality.
That said, here's where I was coming from. Pulling a quote from the first quarter conference call, "In terms of the originated books, I think we continue to see good loan growth there, probably a little slower than what we did on the latter part of last year. We are optimistic with the pipelines we have as that kicks in to more of the seasonally stronger periods for us of the second and third quarter."
Then, I saw a series of banks post great mortgage numbers (admittedly, these were not necessarily representative of the northeast). This is followed by solid-if-unspectacular mortgage numbers. Finally, on the Q2 call an analyst asked about just this point, and the answer was, "Actually, the dynamic there is that we had a very good first quarter. And so I think activity was still very good in the quarter. Pipelines are at the same level and actually up a bit this quarter from where they were first. And so we, overall, have had good gains, good activity, and we would certainly expect to continue to see some strong quarters in the third and fourth in terms of activity there. But i think was more a function of first quarter being particularly strong and maybe a little better margins than anything in terms of this quarter."
So, in the first quarter loan growth is maybe a little slow, but will pick up in the second quarter. Then in the second quarter we have a tough compare because the first quarter was so good.
However, having laid this out, I'm now seeing that these statements are not necessarily contradictory as MORTGAGE growth was very strong Q1, while overall loan growth also picked up in Q2 even as mortgage growth slowed.
Overall agree with your bottom line, though I will still be looking at whether PBCT continues its steady improvement quarter after quarter.