WBS - Earnings call transcript Q1 2019 | Webster Financial Corporation

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Operator

Good morning and welcome to Webster Financial Corporation’s first quarter 2019 earnings call. I will now introduce Webster’s Director of Investor Relations, Terry Mangan. Please go ahead, sir.

Terry Mangan

Thank you, Michelle. Welcome to Webster. recorded. being is conference This operations Also, this provision of the Harbor results statements with financial includes the Private forward-looking of condition, of financial Act to within business Securities and respect performance. Safe Webster’s presentation and Litigation XXXX Reform based on current these future projections expectations statements forward-looking has and about Webster events. materially projected might in Actual statements. forward-looking differ results the from those

Financial’s those containing Additional I President and public Webster’s our contained results to actual Ciulla. that could information cause is Securities the concerning John risks, with release of introduce Form CEO, statements differ filings uncertainties, the in from and assumptions in including XXXX. forward-looking and quarter now first Webster our other factors Commission, for the materially will Exchange earnings X-K

John Ciulla

Webster’s Glenn financial President, call. will XXXX Thanks, begin Terry for here first HSA the with and quarter Slide us Q&A. MacInnes X. I business Waterbury and I in good CFO, will performance review for Wilkins is Bank quarter. and to earnings Chad morning, on us and Welcome join will everyone.

pleased report quarter first to our XXXX results. financial are We

quarter compares Quarterly may record. Webster’s grew million, in to shareholders $X.X Earnings expense. X% for invest operating from $X.XX disciplined a $XX.X The revenue well to ratio management. ago $X.XX us Credit strong. one-time efficiency been in below preferred was year per a led leverage. million of positive XX% year consecutive of income net net in was of QX margin year to dividend net resulted QX, just that The from XX% adjusted when than strongest QX growth while continue in quality eighth remained million EPS to consecutive XX%. confidently have our items approximately enabling common in under Loan a year-over-year XXth quarter of below on expenses ago, of is total a QX share ago. and $X.XX XX% is growth income In demonstrating Pre-provision dropped year after ago. higher our revenue the quarter future. quarter with slightly interest This and expense revenue $XXX net This higher increased growth. to

We have with XX% above equity economic goal now of common return return above equity and with common profits consecutive XX% over on on tangible three our posted quarters consistent maximizing time.

XX% compared I of lines expect Webster’s to invest priorities, Slide be growth Banking with strategic continuing loan and aggressively performance grow highlights. and By of on going the our to with each of XX% process deep and transform execution the our to leverage growth expertise Commercial for Commercial fifth XXXX, Turning of optimize purposeful Banking when line PPNR end business we now drive X, expand Webster’s our will consecutive technology, have to quarter of in reporting forward. since to continues segments. are community commercial few consolidated compound growth of year. in Webster’s to to led we HSA touch our growth select double-digit industry able in loan outcome people, growth the overall banking, and Banking of Bank XXXX a we Commercial business our PPNR banking. above prior almost long-term namely After posted

we While continue in year-over-year investments line in results bottom QX, this growth line. muted business to PPNR drive

is long-term on building a business. Commercial remains focus and believe franchise value Our Banking what differentiated we

increased posted X% for account, offerings key Webster million total channels focusing businesses. a driven deposit than in less almost optimizing year-over-year high administrator strong team that quarter, $X accounts digital net robust processes, The pre-tax health progress capabilities deposits. bank and by billion on with strategic priority to U.S. deposit where Banking make growth delivered and distribution Fed Webster. HSA Bank deposits small and data $X continues total consumers commercial and savings Bank of differentiator $XXX HSA As footings and and accounts, Community reported investing HX X%, and a revenue. In footings remains a the in shows HSA leading million growth, increase by in banks and significantly total value

We a fewer banking X% year banking have reduced square X% center ago, of overall. centers footage a XX than reduction and by been has

in our and our We have our products made multiyear offerings. investments channels, digital self-service

quarter. Our are I have Community PPNR increase delivering efforts banking results, seen transform community to with Banking’s this

Adjusting X, Slide were X% increased million loans a $X flat. loans to consumer late or line just essentially declined on basis, for million equity and of year billion loans Commercial trends. consumer purchase Turning a the ago. consumer a credit from a $XXX XX% consolidated industry grew by led portfolio broader mortgage decline loans decrease quarter, with consistent and outstanding home adjusted in was $XXX X%. The of under

Deposits XX% increase over commercial loans With the coming a and XXXX in XX% ago coming loans from the and basis from deposit Health categories, represent terms XX essentially the past financial of of $X year ago. out year a increased billion to X% were or of total in represent growth loans at from the year of points the crisis. XX% a now ago. billion XX% cost accounts compared year $X.X commercial in savings flat

while points period. of than points basis basis XX cost increased was yield portfolio XX total a deposits ago, higher the loan only that over Our year

for large confident economic businesses growth, see asset global activity to Despite are by I individual, solid will growth robust including of the growth. remains opportunities small and are Glenn and serve review loan we our the commercial recognized financial markets, key home turn and in quarter lines we we in now of over of and the and continued call forward, Overall indicators communities about slower performance three to enterprise solid economic for business across for on pleased customers. Looking quality in deposit state originations business. our signals pockets our mixed evidenced our Connecticut. including as the the broad

Glenn MacInnes

part versus weighted quarter led and asset growth by $XXX is year. by and be on driven provides rate sheet. which up prior in assets. grew $XXX strong over reduce linked was quarter seasonally prior detail X in HSA risk categories, more billion quarter were and Slide led million portfolio up $X our efforts our The year. securities Deposit We to use the commercial sensitivity. The Thanks, million modest Loan by interest manage in quarter million was increase and by continues is to a balance quarter risk, the million this portfolio first John. linked liquidity $XXX linked to Bank. growth $XXX by

loan in borrowings. from $XXX a in and reduction increase we deposits The year billion quarter deposits million linked a ago. As increased highlight all $X.X our funded growth

The flat. $X note of beta loan results. increased view Specialty prior or revenue net was gain million, growth I a I year-over-year expense income annual net in combination the the detail, offset loan X net income benefits basis quarter or line $X.X average of income included million, margin at QX, from When Sponsor prior $X bank discuss used XX%. costs. stable efficiency rate income earnings. million reported capital, on X, and Commercial quality. our in reflective less lower successful quarter, what of will loan Slide of more tax increased in ratio the gain driven from reduced QX. Non-interest and modestly increased deposit primarily senior the million the and banking higher proceeds of and points or Slide pay ago. just $XXX XX%. in in a FDIC basis million, Fed centers XXX than Finance. higher C&I $XX income cost to costs, business I driven additional down and year the was quarter provision point issuance will point grew the versus the on as detail QX’s million, by interest interest effective points with $X.X revenue forward. of margins was of a all-in, summarizes XX%; million, which first of from QX in increase from were ongoing net cost & Net us by million, growth million notes declined higher After and short-term was pre-provision X.XX%. a were X% investor year. beginning merit measured a Loan grew quarterly net increase CRE XX% borrowings or is will million just QX is and non-interest net from tax led and growth seasonal on centers. increase interest Starting issuance $XX included rate income basis other level was against pre-provision X quarter to a X%. the resulted rate, premiums, loans margin rate is and the loss improved X.X% marketing X year year-over-year, $XX statement $X linked outlook. drivers sale of of of and a basis $XXX million deposit Effective benefit basis, from our of a prior for million grew year quarter and issuance Net increase interest and quarter be X.XX%. versus by credit The at totaled prior The result interest the $XX concluded net below was costs, that in interest to The million During little as sale our year-over-year, was under The the costs. point rate banking represented expense. provide will year-over-year. bank the linked run Non-interest QX XX $XXX prior growth. incremental provides increase QX XX The factoring benefit a XX.X% basis XX% of we Slide around to the XX.X% due increase I for beta linked versus in after impact a going year point $XX improvement to X.XX% Pre-provision XX-year we XX in notes. capital review XX growth. XX%. Funds by support year. priced million basis a versus by the initially when And result The yield loan $XXX volume. reflects net by million than loan was revenue to component Banking and way technology yield On $XXX of partially

QX. are continue as down commercial yields business $XXX solid linked reprices We in basis XX million the loan year points million, floating fundings a points fundings all units. from see majority CRE portfolio prior lower the quarter to will from of the Loan decrease reflects Loan QX. in up XX on from basis basis. $XXX growth and were quarter The a

higher offset the X% and deposits on average a Non-interest highlights quarter our see Account for basis a by Commercial a X%, a was deposit to deposits of result X rate. disciplined included XX% Total optimization The asset $X.X year X.X cost business billion $X.X a Massachusetts, million solid strongest in account This bottom of nearly was XX% essentially X.X% portfolio. from income primarily focus. expense a XX% level interest with was and quarter interchange than upper delivered base. this revenue and of each combined and right points. spreads. average grew accounts. the of $XXX from million year in over Non-interest interest in basis by or average loans growth XX% to annualized in home past flat. XX with from accounts. million led operating The Community income points flat strategic accounts, direct in ago Slide closed were in X.XX% mortgage modestly Net Slide loans reflecting income increased in PPNR. in $X.X than investments low pre-tax and of Consumer growth and ongoing the quarter. of net commercial at continued due loans. right, billion, and was by reflects XX Slide you’ll channel, left XX%. deposits basis in $X.X highlights the as was classified a end fees growth expense positive billion net management, PPNR a new ongoing finished HSA were mortgages were ago Year-over-year Net As and business. million continued cost growth. highlights by X%. and and ago, deposits result and Bank, Quarter-end revenue. linked income year XXX,XXX equal Non-interest expense The driven increased driven was leverage growth revenue, Eastern off from our is greater XX% ago. increase ago. net increase revenue the rolling the non-interest a prior long of Net million was growth higher deposits X.X% quarter to XX and compared purchase leverage at of which accounts growth grew production residential expenses result quarter. The total the reflects experienced growth investments. our higher growth was the grew our swap an loans. non-interest growth Banking. by another And income the X% grew in growth XX% XX% We growth lower was charge Loans total employer from loans The increased charge-offs growth net a loan in XX decline declined and from interest Non-performing of points business positive rate versus a year-over-year year. $X.X X.X% expense the at up lower upper year year-over-year. XX million higher remained grew revenue of channel of XX%. year year $X.X operating of year-over-year our duration $X.X the equity a key credit year XX was quarter Net footings our which balances Total XX%. quality grew year-over-year points Total area ago. basis in account a residential portfolio of comprised year-over-year deposit remained metrics. XX income which total of to

loan in less consumer million coverage QX. $XXX for for and slightly with than XX and allowance to points. million commercial a a quality. portfolio net charge-offs The provision was outlook to was of provides our of a XXX improvement basis Our loss compared provision ratio Slide $X.X due QX modest

X% X%, We in and between portfolio quarter. commercial late led purchase expect average loans by increase to our and loans the

interest assets average around expect grow earning to X%. We

recent curve net of net make and and forecast rate short-end volatility challenging Regarding the in income. long-end margin both the it net interest interest margin, interest to

As the X.XX%, in I points from of point, call, January issuance X basis result be likely on XX-year for swap points lower XX basis X basis would the were we expect remains points in X see X of at for hold QX, X for March, swap indicated late points and basis around which the as points and this NIM. XX-year points if interest our margin purchase Fed reduction senior a on to net higher earnings we to mortgage stay around At premium X quarter-over-quarter portfolio to to notes around basis basis in in from securities the close January. driving another X the basis amortization points

to result QX. $X Non-interest is up net NIM be as asset revenue. deposit and of investment we modestly earning and interest $X fees to million increase income between likely income million a expect our Given higher expectations, from

be and provision We to to ratio loan expect mix by our be efficiency XX% driven continue and our below quality. growth, will

at expect this our we our We XX%. over point. QX’s. to things to diluted back to non-FTE I’ll on to rate basis be And similar a share be tax John average turn lastly, count approximately expect

John Ciulla

recently remarks website. Thanks, environmental, Webster’s our available and Glenn. report, mentioning annual social our how prepared which on I will issued by we conclude probably is governance second

and performance. leadership our sustainability, positive I a their Our our serve our governance. and citizen to for Webster’s outstanding to good and continued are you and diversity on the efforts highlights X,XXX thank and ESG customers, corporate lending, making recognize Together, each bankers want difference a responsible communities for for nearly shareholders, commitment our report being ethical we other.

up for We will open it now questions.

Operator

you. question first the Alexopoulos [Operator Our with Please your comes of JPMorgan. with Thank question. Steven proceed Instructions] line from

Steven Alexopoulos

everybody. Hi,

John Ciulla

Good morning, Steve.

Operator

KBW. question. Please of your line Gilbert comes Collyn with next the from question with Our proceed

John Ciulla

went I line. Steve’s Michelle, think something with wrong

Collyn Gilbert

weird. was here. I’m that Yes,

John Ciulla

Okay.

morning. good Collyn, Okay,

We don’t you for are go rejoin, to why ahead? Steve waiting

Collyn Gilbert

Good morning, guys.

if resi loan do? guess, behind purchase, purchases of quite about are sort could so portfolio seeing the you sorry, specifically sort of portfolio I just that longer the is more there growth and migration about quickly. Okay. I speak you of how term you if To that strategy intend wasn’t prepared kind talk to

Glenn MacInnes

that as I X.XX%. like and cost from maybe, will would I We on exceeds portfolio, the opportunistic take the at at John loans it note exceed total residential will which would of So, our color, add to saw portfolio capital. were but is acquisition. financial returns perspective, acquired an discount the our some a the yield that a

interest it decrease with and these it’s in allows area net also will us some nicely around our year. income strategy high-quality banking to fits So will additional to And and us the XXX consistent be with relationships asset opportunity a our side, customers customers. of qualitative the it’s sensitivity. it’s develop – it for the accretive On allow to and Boston

John Ciulla

the think, details. gave I Collyn, So, you Glenn

Boston, an it strategic together basis came kind an progress think probably the came as are the It’s of portfolios. and was looking portfolio, effective acquire We from perspective, and on profitable to us, to where and to right mentioned but when came a we economically lot about, about the in of an certainly way out a Glenn opportunistic this everything economically for perspective. for customers a it. opportunity residential have we it I making mortgage talked strategic looking word is from market weren’t describe so way good profitable in economic about acquire

Collyn Gilbert

what’s Glenn? duration the book, And Okay. of the

Glenn MacInnes

X years. It’s

Collyn Gilbert

do in the grow mean as And balance securities offset pursuing book see you I potentially do more two? how or those to you an Okay. this

Glenn MacInnes

It’s discount. not but and out at opportunistically, additional said. we for it. to trying advantage purchased we that as of work buy we us. there came we we us, take would are a to if mean, are I we the eagerly No, It have And economics John the asset like portfolios,

Collyn Gilbert

Okay.

Okay, NIM... on that’s helpful. And then the just Glenn,

Glenn MacInnes

Yes.

Collyn Gilbert

obviously outlook in can in a about period little curve the a you clearly, for second talk bit just of for term, So you that guidance shape rate just environment this and if laid pretty the the out long this curve time? sort of stay longer quarter we

Glenn MacInnes

sure. Yes,

and I to answer I is from third assume for to to of the rest in is NIM are and points interest fourth second basis that being quarter the you is continued to Funds the million, at anywhere from be $X the that third what million quarter $X income going the X.XX%, basis if third which and quarter but the X.XX% to quarter would net the assume up to see I to going short Fed X be the X year, compression, would So, result go to I at also fourth quarter the second quarter to said, XX-year think a quarter, points from third growth. quarter expect of

NIM we’ll $X income $X X While have up net points to you to compression million million. interest still basis of X have

Collyn Gilbert

there Alright, queue. Okay. I thanks, in just guys. it back then the will leave and hop

John Ciulla

Collyn. Thanks,

Operator

you. Thank

comes question line next from Please the your Our with proceed of question. Steven with Alexopoulos JPMorgan.

Steven Alexopoulos

guys can hear Hey, me? you

John Ciulla

we let we to did the See, here. button not hit can. know want dump We that you

Steven Alexopoulos

after questions, might I asked You to John. want my

with they to much is up Webster after plan you Cigna noise how to risk this will my it? that want could is this in say first, I space, the about that you making your first think there the contract, competitors for contract That’s Can you that to quite contract, lose us year. how which go issues aggressively bit question. they compete one two of a help of address So the is

John Ciulla

is don’t material terms and We and Cigna then aggressively. with benefit color. to initiatives strong We you HSA in terrific think Steve, in fact, on together everybody with the it worked contract our let to doing enhance number technologically respect Cigna. of contract I provide some other I conditions competing everybody specifically partners the And the or take integrated Chad of team comment relationship contractual space been for we’ve the on a will renewal grow with dates. together. a Obviously, job. We and both any are relationship Cigna that got Chad Bank. and we’ve tell a and will to continue and that working with

Chad, see don’t any... we going change so forward. for know, don’t would that anything provide that And relationship if you I to outlook want that

Chad Wilkins

the We resources I to in invested continue both really and of sales think process. a that some as can growth we We’ve disposal heavily us the them relationship to process think we you this added in that the did influence Cigna tools actually open growth using at by well, relationship. participating invest we resources and with and well, and helping lot been has John. our more and rates have the

relationship, So, getting where their with are we that from. sure we the like so where not information competitors

Steven Alexopoulos

a guys you is sense Cigna? coming Got how it. much give of business from Could the

Chad Wilkins

haven’t on. we extent. something to not the commented It’s commented Here really we’ve

John Ciulla

grown, acquisition. It isn’t. is we’ve the our And concentration lower since as

Steven Alexopoulos

has it declined, that So since the deal.

John Ciulla

Yes.

Our faster growing direct-to-employer other than channel. business is any

that’s industry percentage and the of partner the seeing in So we’re thing the our same as decreasing channels well. portfolio a as increasing and are

Steven Alexopoulos

Alright, healthcare, have And stocks burn feeling eliminate so week care fears which past insurance to shift potentially over could on then healthcare the and all, better of private okay. for HSAs. the been direction,

restoratives is there views could guys B where here? and your obviously plan go HSAs Washington, in away connected a You on are are the

John Ciulla

take I’m going the Chad comment to in over fill will obviously the I gaps. days. couple one and Steve, that market Yes, let any again, on last the first performance of not of

doing. pretty employer works going mean, that to context we support for and full feel most policy is about that I legislative of America. a have you that about program time. remote about with and is payer current get it for something. aggregate cost over remains think really replacement the think be in that thought the the or where you really strongly the system I changed would like healthcare and probability single obviously that the We changes the will you’re system political enough Medicare this paid disrupt All the a probability a think that, We the we on of what of the in remote to program for are think, and paid fact insurance pretty

have the hall accounts HSA Sanders talked I’d in now. there’s Some others – XX of and about plus the that HSA specifically also Senator, town say million forums. is

about or it’s critical like eliminated embedded in kind reaching that of the driven We’re to if more on think specific I akin process it away. product bipartisan And XXX(k) it the be asked has think it’s you lastly, questions that about, a about bipartisan mass we’ve think when to the us and have you less that you and is guys legislatively talked likely support legislation, embedded it is a support.

largely it think ultimately own into because I transparency manage system. their healthcare down costs. people provides let’s and more drive healthcare the It

we where as from view that or and enhancements or should any in part of the here healthcare our overall Waterbury solution. likely will system changes modification the to HSAs is include So sit

that’s from like kind So of where a we level. feel high

Steven Alexopoulos

Okay.

Chad Wilkins

I agree.

Steven Alexopoulos

one have Chad, anything have for but Chad. add I that, I do to don’t to specific know, you

so of and the over be Thanks. came kept year rest of interestingly you XX% growth the outlook industry year. enough you a grow the year? this can growth about for So forecast this at a guys end and you the with at for you How recent the little year, think do XX%. the far out do XX% think And asset could

Chad Wilkins

end results Devenir results the think, going up higher grow, being. I historically, how the estimates of than to the the are actual are is participants Yes, what always

be predicting. think are will folks there So than what a less I little that

little the behind there what of out XXXX. rates, the revenue end Our a bit mentioned you results at as growth came

look direct and where mentioned earlier the we’re We over that’s if to Glenn have best investing XX% And actually most. growth in results across of our – And different our accounts channels, rates we’re obviously both but you the as having deposits. fluctuate. the

they channels. the in of we seeing some health have growth of the we of influence direct interest plan and leveraging influence with and the do have have can results our in conversations tools over processes the and think I portfolio our sales rates most the the partners We efforts. that in because rest across that we and have those marketing that we’re

to So, I rate. think influence able we’ll growth be that

John Ciulla

their some either. And market. add, saw of not our assumption I’m then, is would Steve, I increase market the the increases mean, sure is just of a we result what in I

Steven Alexopoulos

Thanks for my great. questions. Okay, answering

John Ciulla

Steve. Thanks,

Chad Wilkins

you. Thank

Operator

Thank you.

of from next line Our question question. your David comes proceed with with Securities. Chiaverini the Wedbush Please

David Chiaverini

thanks. a on I Hi, HSA. follow-up questions have couple of

your revenue year per looking $XX over pre-tax Slide X past So per net increased by account to nicely very about account. at per of the $XX the has account deck, Could customer yours that an economics Does say, agreement? and a insurance revenue a part carrier to at all? want happen increase we of that as of increased those share piece of point

Glenn MacInnes

depends of accounts it partner, and dynamics that fees say our We on I’d the Yes, on that. on based like depends and the price balance the volume, account. the of things average the

it of So, carrier relationship on. on and so depends just the the with and the amount integration, the investment

depending factors. fluctuates those on pricing of our So all

David Chiaverini

we are of. the too seeing reflects the it that benefit rate Hopefully, environment

John Ciulla

PPNR fees, financials a driven interest look you by at an income look of and back, And point, so about is about Chad’s that of at in so the so for improvement, to you interchange credit break remaining fees, we that you if look but the you the Dave. a example, you then too, peel income year-over-year it Right. the have $XX account $XX obviously fees, year-over-year-over-year million. down, highlight about the And gone to that million. quarter, the $XX if million that non-interest rising rate higher XX% in you interest half rate When that’s environment an included the as is rate, net business at

when that’s I first or that’s by sensitive and companies sort so jump part of paid can negotiated. the the $XX that’s there most in is employers, area so think the and the here, Chad XX% account million is the the negotiation right, fees, that’s of say

subject of then $X So, that’s or it’s million. negotiations, the $XX so million million XX% to $X really

Chad Wilkins

we’re the on that’s And pricing Yes, fees. where the that’s seeing right. pressures

John Ciulla

Right.

David Chiaverini

some you revenue are of... revenue some place rate or from kind rates share rate already there some agreements already interest have incorporate So in rising that the credit fee of

John Ciulla

side the more I of the No, fee it’s credit less of think side.

David Chiaverini

Right.

John Ciulla

was trying part. I to highlight And by portion it’s paid most the fee that’s side, for that what on the the employer is,

Glenn MacInnes

we’re pricing, base and overall the And size pricing on going fee the portfolio. our Yes. of our maturity to performance

John Ciulla

of scale size new of the the is the lot obviously. a And business, new driven that of coming by in business

David Chiaverini

And there is versus say in the economics are Okay. HSA, better insurance the fair carrier to the it sticking with channel channel? direct-to-employer that

John Ciulla

is average folks Both, on instance, deep how again, what are within pricing carrier, – the is, employer, to the depends balance how involved sale. in performance, driving the the integration that in the depends penetration it they for encouraging the accounts, and the the with

think we some that normally we in do general, say have and in that So, dynamics better – really partners direct the don’t, we will channel. experience health well performed I’d I plan but some

David Chiaverini

And the you’ve highlighted see any demand to guys quarter, better portfolio seeing demand the you sort in or shifting the either purchase, loan general, out side? worse you that gears, I the Do driven are on by how of know Great. but change second it’s then the in commercial environment being for for looking loans for growth loans?

John Ciulla

Yes.

on I’d of steady. sort – say say I’d commercial So, side, the

and and first lower, solid remains still but originations if low, growth over seasonally back look first our a years, couple robust. you the quarter has we been last was quarter the First of saw bit in quarter solid pipeline little

So, of she goes. steady would say I kind as

the general On equity other as tell as side, will relatively seen seen the second pricing, recent have rate categories up on seen we’ve materially consumer increase ticks we that in rates be in into disciplined recently not trends just given the and long that quarter on view mortgages. flat. we’ve we you mortgage, home I given our pipeline consumer interest grow obviously our decline and and and interest much head

XX% thinking volume say of a rate, our likely most about of that is we the the growth higher growth mortgage and commercial on second quarter what pipeline. will annualized which see kind drives based So, bank in I’d BAU in origination the

David Chiaverini

Great. Thanks much. very

Operator

Thank you.

Our comes Jefferies. proceed from question. next Please question of line your with with Casey the Haire

Casey Haire

Thanks. Good morning, guys.

John Ciulla

Good morning.

Casey Haire

would that what but on is guide there compression? for ratio pretty did wanted quarter. quarter. NIM to you efficiency against handily Glenn, other guide is – you going drive I just higher you I’m meaningfully the beat that second that quarter, understand NIM this efficiency wondering at your I anything the �� touch than the XX%, this

Glenn MacInnes

on of XX% look, think our you No, XX%. full-year, ratio, are range you’d continue expect I the – investments. the in making probably for we also efficiency look to I we the And but opportunistically to balance expense, disciplined be think if

John Ciulla

that a finer when something that used were Casey, think to we been point at weren’t maximize focus than ability to put fact on that profit. generate XX% about over continue that, about strategic want lower economic to I and disciplined in consistent that to we we why it’s we’ve guidepost because those as we given going our with the Right. invest I’ll to go time. areas asked our We processes talk talked

year-over-year we PPNR growth continue in and where the invest shareholder drive where we of a Commercial Bank, perfect opportunistically can franchise that’s example value. think going new in so management hiring and muted example in and portfolio give investments people, solutions payment an around in you in Commercial Banking we’re to And value treasury to this end-to-end quarter I’ll long-term saw our you technology

can expenses, So, I a of we got we opportunistically think a forecast, to to sure in we’ve invest point certain in cushion Glenn’s continue bit ourselves key little our give of business lines. our level make but is

Casey Haire

it. Got

to balances? point to or asset would you a at it Okay. remain pretty a the the obviously, it we And were strategy what very just were securities portfolio, those yields question then would Is is to concentration and you XX% if for yield. curve of think – on flat, roll earning at XX% the a in terms nice shrink what to and keep assets to Glenn, guys keep it? big If over at of this bigger picture start

Glenn MacInnes

wanted as think neutral. our from more standpoint, move look asset at to I we No, sensitivity toward positioning an we

do. a and And of see longer – Obviously, – quarter. swaps first asset some saw of is fixed/pay receive is one can floating, add also floating the floating also you we duration might we can do securities hedge like in the we but we the increase in – that, going slight the type rate things, investment portfolio. reduce or that that things can because of on it sensitivity You the through strategies into the of organization. can loans That’s something securities lengthen

Casey Haire

hold yields shape, the over? would those yield at like were what a And from Okay. curve perspective roll point this if to

Glenn MacInnes

in purchases I XX quarter, go our as flat. X.XX were relatively portfolio, But – reinvestment will points, the as first so year we’re basis perspective, into points. come stay down and probably second the They years X.X we you rate give the the in about I – versus at some quarter this that’ll XX duration, basis as for think okay right. far

Casey Haire

it. Got

strong one is first in result your How markets? from from the on footprint obviously quarter. a pretty Okay, great. much loan outside coming me, the here of that And growth, core last just

John Ciulla

the about that kind we’re sponsors overall XX% located, we’ve consistent XX% are when It’s to particularly our footprint. that the the attribute business portfolio is, you we where of in like do still with within the pretty to sponsors, always what talked

So, market kind offices with to of and our our in-market Sponsor sponsors. Specialty it’s and coming middle in across coming respect

Casey Haire

you. Thank Great.

John Ciulla

welcome. You’re

Operator

Thank you.

Matthew Our with next the comes proceed of your Piper Breese from Jaffray. question. Please question with line

Matthew Breese

Good morning.

John Ciulla

Good morning.

Matthew Breese

that growth for up to follow been, loan Just and some in how increase prepayment wanted the is on activity loan does of that question how to sense the change get growth? driving year-over-year, has a

John Ciulla

know, the is toughest this really every Matt, because question predict. to tough quarter, You it’s

and big items and with We and certain a natural there market into impacts competition at prepayment activity, XQ deals or a cadence are get us it’s on big generally prepayment, elements to or side. quarter idea line. I a are bit a we a get down think as any one. down to about did as good the give think is little talked a in slightly trending there Fourth elements really interest see have driving episodic. year-end loan right we are of don’t were I prepayments and prepayments or that origination done tough line-of-sight now people a don’t well, growth get refinancings so of rate drivers respect that think commercial were to seems be or I done. that don’t it so really trying as seasonally was originations I to the prepayment

Matthew Breese

you Understood, bit. HSA. or a Fed Has a market your talk could leveled would about the is your been of note okay. peers We’ve pause that And has since gone well this or off outside experience how competition on subsiding just it? the deposit perhaps heard then has of you as maybe characterize few

John Ciulla

want me market. deposit our Boston basis. of X costs basis it points a you seen higher being outlook, our we for points instance, some too, sort in level in so are – core its off, total But market, my I’m say, of regional that our than said have We thinking basis or on X

going And stabilize well. so of last phenomenon We’ve the anything on the a Fed promotional that’s with seen haven’t as hold, couple pricing seen sort down yet. in we weeks of but

that is factored there a in of Fed increase think increase the I between the and we’ve at of but stabilizing deposits sort is it funds So, some natural and lag this in, point.

Glenn MacInnes

Agreed.

Matthew Breese

then this for as centers, your a after Banking Community that year we year? last. good cadence that less think Okay. And and XX John, the a you XX about about year next than year noted Is the

John Ciulla

right actually terms but our branch will footage we’ve we’ve the we believe talked centers us there that over nothing on It’s We identified. fully important network. that re-evaluate medium now time, which about and in channel for aggregate coming down in consolidation radar is quarter, we long-term. Obviously, constantly is be of the every not. What square say true banking as an over

do that So, the efficacy of square we’ve only network. what last would going months XX wouldn’t we forward. XX that tell I the be the you that indicative certainly We the can and constantly footage of we’ll say closed re-evaluate in

Matthew Breese

was Understood, could then underlying is increase And up at in some look as on trends, about past color you dues, were give that? What quarter-over-quarter. us up NPAs $XX okay. your was an C&I And there past you credit again? dues, the million slightly

John Ciulla

always and our on X-month actually it’s respect be that how I at always an that quarter-end, stub on the by principal, an you I in asset of was first and reported X-month funny. quality administrative to credit mean referenced commercial delinquency reflect delinquency, want LIBOR that and million was happy actually I’m was perspective. but interest this what actually one quarter piece administrative a paid really delinquency conservative, was a results didn’t to contract I’m was because but where quality you days confusion is, asset there overall X so that careful, around know, Yes. good to quarter a was and of the a not current $XX.X resolved. with And

to performing category, percentage points or Absent that, it basis a is. reporting that up have about in would as characterized that pro at that’s that unfortunate credit forma, be it look you from million. if agreed. is delinquency what $X.X credit It’s XX So, at pass-rated on is flat had basis that it been but we a a in about perspective

a basis really story. So, is non-performers not portfolio a on percentage delinquency of and remained flat. Classifieds

really subsequent think absolute a one we comfortable so still the non-performers. so that recession and no And they’re at quarter-end million number drove And where longer is. in and to slightly credit again classified with the is that pre-great levels commercial we’re credit up $XX fact,

and net happy equal prior average of charge-offs. rolling to the flat with then quarter XX-quarter were trends we’re the rolling a annualized with So, and our there charge-offs trailing average, XX-month

that quality just our the after provision that went about our stuff you level actual So and the of our that modeling coverage talked reflects based of all that portfolio on and the saw quarter-to-quarter. I improvement – some obviously, down, showed that

Matthew Breese

an okay. And referring for mentioned clarification, off same Got paid that that just administrative you you the the to it, are off. one? quarter-end paid credit additional to there non-performer subsequent Was or

John Ciulla

single a since delinquency credit up talked and classifieds, basis, the the absolute the that is sorry, credit were the after I’m flat No, longer was made was on has cured. the that basis, was no impact on administrative that When non-performing about longer payment and in that and no categories, slightly which shortly a but was those percentage been separate and resolved an on classified. there a non-performers I

Matthew Breese

all Understood. That’s I Thanks questions. for my taking had.

John Ciulla

you. Thank

Operator

you. Thank

a Gilbert Please Collyn is question. with proceed question next follow-up KBW. from Our your with

Collyn Gilbert

Thanks guys.

the follow-up to credit a discussion. Just

perhaps seeing quality still I you about trends where tying are trend – forward? you all but of kind outlined macro and I’m just business looks just the given or ratio the but of that, and thinking your know like, how portfolio Glenn cycle of John, deeper credit broader well, So, how little could reserve going that on whatever conservatism you the we the approach this bit where as in of in reserve a to in I just just and kind into just curious getting drop, for kind and what the is the the you’re

John Ciulla

spend Collyn, with could I hour this you. on an

pro well, – be to the we that you group, kind the and a versus know As conventions allowed and the it’s really driven. need resolution provision that’s credits and that our you those very When charges think of have if obviously less time our the healthy peer impairments at into very the of think models that’s thing. much in or I then and you forma run and qualitative model we model reserve have and driven there to good by ratings portfolio that, for rules trending input or over of based look a is reserve it’s on very, you risk all

it’s process. It’s the time reserve releasing want lowering do reserve to our we we of that. can healthiest or not think within so, And that confines strategically reserve – the we’re have because the we to have

a and all charge-offs down you your points. good a dictate impairments have kind couple fashion, risk are ended ratings of of your your And in remediated and on once things you’ve again here it coming where so of reserving, the with basis dealt up so

Glenn MacInnes

up if risk. over X away $XXX growth and the would a just outlook very and you growth impaired or of to generally – would continued for how for walk, been remaining loan color. walk sort quarters, $XXX driven million, little on coming of X.X some like the by so, of do couple million do and from and X I’d basis down lower a it, I the X, $XXX to If would by I X, you our simple probably the impaired portfolio down less a last million outlook driven about and both simple asset add the how then were a points and risk a that’s more consumer little it think of Collyn, commercial better then loan has quality, some it take favorable say, about that’s to add

Collyn Gilbert

the Okay, – your just between carriers plan accounts okay, split the accounts? insurance do direct-to-employer helpful. then versus of you accounts, or going And health back Chad, to of have that’s split HSA HSA,

Chad Wilkins

Collyn, on the about accounts health think – retail. XX% the XX% to out close we plan over channels, then looking I direct in are at depending or now, whether Yes, at or about in right is actually XX% roll that you’re and the deposits just little so rest

Collyn Gilbert

your years where longer-term Okay. see X broadly, of longer kind do or don’t how been more of I next I know whatever have kind of efforts obviously, projections, direct-to-employer growth, And your been know, you that sort mix terms but has in changing of just term pass? – some over

Chad Wilkins

a be to change. going not It’s dramatic

tools we’ve I think grow that a we’re that channel do and to channel. growing can our resources direct because quickly we’ve think invested that continue added we to more lot, and I to

to grow to expect I continue that faster. So,

larger time, over don’t continue So, portion – a that X-year of I over make a to see portfolio. timeframe. we’ll But up will our that’s continue type to of that

of a points an direct So, will number have couple increase year I don’t for exact channel. but it be in the percentage per you,

Collyn Gilbert

good on about hear in be and I John of of – healthcare today. Okay. saying business, so volatility broadly, pretty right, – healthcare And what the terms you you’re structure there HSA would occur or industry catalysts And the about now. question Chad, would on Is your concern growth one the bank then kind and you be sit maybe you the obviously where HSA core business just there right. final there’s within the and right stocks in maybe growth feel to cause investment of that reinvest would that the some business? make rethink any broadly, Is into anything put of kind that of more would you the that there sort just what would capital plans the brakes of catalysts the

John Ciulla

Jim’s think earnings now, right event a we’ve situation with that because of Collyn an forward. say, saying that of can’t inflection make decisions structure, of partnerships, particular been an had either/or to saying to constantly expect it make we long a time would order change terms competitive we What we’re all to in some can as at in good haven’t a the I changing me, been in to you our before strategic evaluating decision respect I we’re go us looking given would things opportunity, think HSA or investment landscape, and point because momentum. technology, for it I be our view.

we’re happens most the and as and how even effectively right HSA And So, business we doing, over now, to of imagine that it continue for have landscape. industry we’re on with ways not can accelerate. the its within it time competitive how can and analysis good pleased we’re to what even resting on executing, operate look the and of you and a really deal what we’re make strategic with growth but we it time spend strengthen

So, of the would anything change this of about really think I our philosophy strength that business can’t right fundamental now.

Collyn Gilbert

Okay. I’ll guys. leave Thanks, it there.

Operator

you. Thank

comes Jared with question the next from Securities. Please of question. Shaw Our line with Wells proceed Fargo your

Jared Shaw

case? taking questions. you seems had with you Is thanks guess, like okay dinner you’d comfortable for you I the be a still said I Hi, deposits. that the be with would guess to still follow-up, HSA up hosted it earlier, the at is One – XX% that, that still that little comprising

John Ciulla

I to I right. have even concentration risk I time a and a think the indication, think respect with Jared, rule. give mean to we it’s and a probably those tried from to Hi, deploying brokering them given obviously, or some funds we hard but Yes. good indicator. that’s not perspective fast over We have optionality that’s you out, exactly

Jared Shaw

think rate securities purchases And more over a take? interest that long transition? will with becoming the longer-term or the how with do is thanks. Is next something that neutral, at and two more the drive that purchases or then Okay, to looking Glenn, mortgage you you’re the quarter

Glenn MacInnes

a maybe over but next year, a quarters, the over it’s beyond even quarters. over year, not It’s – Yes. X

Jared Shaw

markets? of great. capital had more focus other in having finally outside And to to some for loan offices M&A here, these success growth levels organic in production your continue thoughts you’ve grow the Any me, England. just a engaging then Okay, of with robust sort or New

John Ciulla

Yes.

because context, have established the think with we we’ve believe really of that local people there. loan because kind it, paid First, I community I production do to I engagement office

funds, less say in that, profitable markets think that do develop strategy of organically expanded well. given never just Jared leveraging whole would that in expanding continue some I would cost to our but that never, our about has businesses plan likely we We it’s Banking, of our bank acquisitions low markets. Commercial those those worked most very we

never. the incredibly compelling you So, is partnership organic is, to while our has given at M&A same, say our it be We think, never whole acquisition still story time. look a have or to bank strategic growth on present at we for runway focus and where

Jared Shaw

Okay.

buyback? of So, like see out? I capital, or controlled ratios over would where expect about of – sort fall should longer-term guess capital then how to sort few the should whether that you’ve last years guess, through been growing how And can dividends you we I think we to steadily that increased see that’s how

Glenn MacInnes

things. of couple a so Yes,

feel loans. good our on capital expect levels. we our So, I growth think to I stay relatively our outlook outlook, about would flat them given

I this we the – in in our during parameters it’s we expect pay-out, probably – something think pay-out, quarter. would spend probably end also with at our time at talked dividend our April the and you dividend increase given you’d would that look that we about at past look this the that of we’ve

feel – be that source levels would about use where capital. are. or good But So, capital of generally, our another we

Jared Shaw

lot. Great. Thanks a

John Ciulla

you. Thank Sure.

Operator

you. Thank

over I turn for of the like session. reached Mr. end the have question-and-answer We Ciulla our would to remarks. back to call any closing

John Ciulla

you this morning all Michelle, continued of Thank and joining support thank us for for Webster. your you, and

Operator

This teleconference. Thank you. concludes today’s

time. for wonderful may and You your you disconnect participation day. this at your have lines Thank a

Webster Financial (WBS) 18 Apr 192019 Q1 Earnings call transcript