WBS - Earnings call transcript Q2 2019 | Webster Financial Corporation

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Operator

Good morning. And welcome to Webster Financial Corporation’s Second Quarter 2019 Earnings Call.

I will now introduce Webster’s Director of Investor Relations, Terry Mangan. Please go ahead, sir.

Terry Mangan

Thank you, Melissa. Webster. to Welcome being is This recorded. conference financial Also, this performance. Harbor XXXX within operations Webster’s Safe forward-looking of includes with business the financial to of statements provision Act Private the Reform of presentation Securities and results condition, respect and Litigation

based statements statements. on results future Actual and about current forward-looking these forward-looking has in differ the materially expectations might events. from Webster projections those projected

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

I CEO, now will Webster’s President introduce and John Ciulla.

John Ciulla

you earnings available will quarter Thank is I Chad Webster’s Thanks, here for MacInnes financial and President, us morning, for call. and review Glenn quarter; in Terry. XXXX be business and the Wilkins during with will Q&A. performance everyone. second CFO, Bank joining HSA Good Waterbury

me strong, positive Let QX, ninth growth and were created we deposit managed with for pleased leverage and and loan performance really was solid efficiently are financial consecutive interest income our quarter. increased, in income we non-interest expenses by the operating net start saying

strong Our XX% to recently increase financial capital announce position and performance is a dividend. in consistent our enabled us the common

strong markets over drive creation are profits investing we to on relationships in maximize and We businesses to value long differentiated across a continue all view take and time. our economic customer to

shareholders of $X.X compares earnings preferred million. net share Net year’s QX when expense, rate expense in two. prior was to growth our from common one-time of QX, consecutive of million items, QX. under posted adjusted is and in XXXX, $X.XX fourth for per in resulting $XXX We at XX% in $X.X $X.X a I on of that period QX $X.X to after dividend income million million $XX.X slide will begin of quarter income just

share dividend. pre-provision continues even contributed per XX% and adjusted year-over-year value increase revenue. common than higher book last and we net consecutive our growth to is of net margin Loan quarter higher a to in XX% Tangible quarterly a grow revenue growth as and the XXth year, increase interest

In was while year, row. a positive resulting adjusted than leverage. QX, increased in ratio for X% quarter higher The total revenue last the in expenses efficiency was XX% operating third X%,

Credit quarter reductions quality in commercial noteworthy remained loans. solid linked past and classified nonperforming, with due

quarters return common with have XX% We common and tangible return equity consecutive on now XX%. above four above posted on equity

driven to purposeful is strategic commitment transform execution Banking, optimize priorities, our banking. and HSA aggressively Bank long-term by disciplined Webster’s a to and financial community of namely, performance expand Commercial grow

high a slide line to will XXXX delivering loan a on continued comments growth. business to Turning level, Banking execute half three, at Commercial our double-digit of year-over-year performance. few I make first

we continue deepening year, customers contributing growing discipline half all value are prior across build and up sacrificing estate. select Deposits new as our from underwriting to real growth. also first XXXX geographies in from loans the all We Commercial industry verticals our and in with and were revenue without in and benefiting Banking X% nicely execution our grew franchise relationships units differentiated of footprint. commercial acquiring by to business existing

$X of more billion excellence HSA and continue improved HSA bank’s HSA remains in operational drive initiatives. and our satisfaction surpassed accounts first quarter. the in excess to added administrator bank health half and as customer of new savings the PPNR in Bank footings leading levels XXX,XXX than XX%, accounts, through of we higher

in and Also other security, customer technology, Cigna, resources important in quarter, with the advance and our to experience. expanded we relationship and the investments grow extended marketing increasing

over process and small discipline continued modest year distribution revenue focusing PPNR and first on generated Community up year and from through high growth, capabilities digital optimizing We in expense investing Banking consumers channels, gains efficiencies. X% XXXX and progress value half is again the making of businesses.

grow York to loans, New continue our and core We deposits Boston full relationships footprint. retail across to

and basis sheet X% solid from increase. highlights loans XX% more or low as will dynamics. growth the loan billion business balance four accounts reviews the ago. he $X.X of a savings or X% the detail and $X.X consolidated last deposit increased On a increased health Deposits our cost year, of over with Glenn Slide line billion provide performance. year representing

solid geopolitical we growth, potential growing, of markets pace macro the a global despite handful environment and in economies and operate remain the more interest risks. uncertainty rate and regional Our of a in challenging

are Our maximize consumers remain to growth franchise confident to over profits on We consistently our economic ability in generally, healthy, the long-term positive and and of value businesses time. and customers both forward outlook. build

our maintaining returns. at while are growing high strategic penetration continually areas and with customer our realizing operating of the We executing our through loans improve gains in efficiency core a existing we level focus, differentiated base, and expense control, businesses in acquisition and revenue, new to further and managing risk, diligently credit investing drive discipline deposits leverage customer

a our taking culture our of customers care the while great Bank, and investing bankers, strong at a value our always And finally, maintaining in creating based environment communities. for

now I for call will financial over the to turn the Glenn review.

Glenn MacInnes

securities in our on $XXX up $XXX $XXX was Year-over-year average an follows million detail more by consistent linked sheet provides QX. five Slide balance This grew portfolio the balance million The growth. our portfolio John. quarter. million, of increase Thanks, sheet. with

balances by industry, we portfolio the end Similar million growth up versus equity home to of billion which million the continues QX. categories, $XXX quarter $X.X linked year. $XXX million $XXX pay that year. downs Linked consumer of led over to see mortgage the the commercial loan past purchase at growth continue of were prior be closed to and reflects quarter the Loan

demand deposits. from Deposits $XXX ago, was of billion HSA and HSA from three $X.X growth Deposit slightly in half with year low million than linked the cost of growth quarters coming deposits. more the grew a growth was quarter

XX-year to as floating. the includes growth out were swapped $XX of which million remainder of deposits down seasonality growth was $XXX in in and exceeded loans result in funds, versus securities. the the quarter. borrowings prior The linked public senior in year, million QX, increased issued increase Borrowings equity we $XXX and and late million This notes

our and modestly growth interest and income drivers quarterly QX second QX. quarter lower totaled were X.X%, which than of We Slide had offset of anticipated mid-April. from in rate asset earnings higher Net $XXX statement time as summarizes million linked six earning interest the compression QX call levels income at our of by NIM increased earnings. solid average was than anticipated quarter

XX swap rate lower points one points average LIBOR X and rate basis basis lower. the was was example, month For average the XX-year

interest our or million $X income commercial prior Non-interest of in due year increased net level income grew gains prior portfolio. our This Versus exceeded million increased both $XX by activity and and to year. expectation prior versus BOLI quarter X.X%. of excess in

ago. million flat other sales were one-time included reflects primarily a million compared and expense increases. fees expense flat outside linked $X.X higher seasonal sponsorships. merit deposit was year by which linked year, The insurance $X to Expenses increase quarter Reported non-interest a an prior $X.X offset and professional costs of to annual and of million. benefit charge and was increased quarter due to legal This

XX% revenue from year million of and revenue an net was Versus $XXX prior QX. a in million on quarterly up net adjusted $XXX increased Pre-provision new basis. million or pre-provision record represents $XX

XXX points. $XX.X resulting for million, the a basis in ratio quarter provision coverage was loss Loan of

was from in year tax Our was the XX%, a efficiency XX.X%. XX.X% ago QX ratio as effective same and rate and improved

is driven Slide seven in million million by yield net a the rate net revenue income million volume. grew or component X.X%, loan improvement $XX $XX costs. year-over-year XX-basis-point $X provides increase by deposit detail by driven additional and on pre-provision a interest of growth. in XX-basis-point rate result Net The and

interest This in and increase a the XX%. loan When funds fed in margin to beta X.XX%. a The rate. X-basis-point measured combination against deposit beta XX% resulted average in the increase resulted of XX-basis-point in of net

the I loan loans of prior quarter linked eight, on million results. million was year-over-year. million second quarter from $XXX year. growth C&I $XXX Banking $XXX business Commercial grew Starting Commercial quarter slide reported of linked X.X% from loan $XXX line estate and real and XX.X% review million year. growth linked prior and quarter will

X XX the increased linked portfolio a rates, ago. year LIBOR loan due lower declined to from basis yield points it points primarily basis While quarter,

PPNR see to year as compared non-interest was invest while you expenses year grew income on lower income $X.X interest from the bottom Net was flat of million operating ago. XX%, and a prior As the loan growth we right, to modestly in business. average reflecting continue increased

of solid led quarter Bank, nine reduction the new by highlights Slide accounts. XXX,XXX delivered which another HSA

new Over Bank HSA the has accounts. XX past opened months, XXX,XXX

quarter, noted just under $X As with total mark crossed footings, billion the John million accounts. X in during the we

duration long billion of and $X.X $X.X investments. billion cost Our in footings consist deposits linked and low

Total activities, total were a the channels in sales growth with higher accounts were the continue than XX% influence footings marketing $X we strong XX%. direct-to-employer. in and and ago greatest We account or where billion have including up year

interest higher each fees a higher Non-interest and deposits interchange a revenue, of in year average reflects XX was increase points, deposits income growth Net of flat X% increased The to higher income The from XX% year accounts. cost by XX% credit and driven a ago. was and net rate. high account a from from basis ago. growth

pretax resulted discipline net ago. a combined was for XX% was account in growth year result the as grew growth quarter of revenue revenue growth expense operating investments, expense of leverage XX% ongoing positive a Total this and from Year-over-year and XX%. targeted

Banking increase QX Slide QX The XX X%, in Business X% purchase the Banking. an Community equity continued had of our offset combined in year-over-year decline home mortgage highlights growth result loans. was portfolio. portfolio -- with net a of loan growth

income PPNR. resulting Consumer interest On side, modestly positive grew in growth and fee income the X%, X.X% while from year a swap-related year-over-year. income in year-over-year, and higher operating driven charges Business leverage growth each ago one X.X% was deposit deposit by Banking. non-interest grew grew expense X%, grew Net in business revenue non-interest and X% Total deposits

left our in XX-quarter charge-off of basis in This generally XX-quarter classified the loans. the commercial Slide net metrics. Nonperforming lower to in consistent with the XXX upper of our asset annualized points points. key basis total points. average a to XXX of loans. loans average XX XX XX compares The quality represent left now $XX.X in basis loans had Commercial Net $XX of rate the quarter. linked a quarter were right and charge-offs points decline total upper million highlights million basis is improved

loan of points. XXX for allowance million, with ratio coverage $XXX $XX.X loss Our a provision million a and of basis was

for commercial quality. and loss reflect continues stable consumer loan allowance Our asset to

outlook our provides QX QX. XX compared Slide to for

loans average to driven by expect We increase portfolios. our residential primarily commercial and X%, around

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

basis compression. With NIM margin, rate anticipate interest regard this X environment, points points we to to point, of basis the given at net XX

net expect income we to stable be result, levels. a QX As interest from

in included gains is be of to as non-interest Reported likely portfolio income a QX. down result BOLI

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

similar non-FTE we We expect And on be to expect count a be level. QX’s average rate the share our lastly, to XX%. to diluted basis tax approximately

With over I turn that, will to John. back things

John Ciulla

Glenn. Thank much, you very

Before income we context net and open up NIM on to guidance provide it like to Q&A, additional I’d for Glenn’s interest trends.

QX rate on sensitivity, given and Our which sensitivity, to steps asset to continue have our moves. will take in the of we outlook moderate, rate XXXX interest to and future manage continues peaked overall

as safely QX basis to levels. ability market-leading compression, linked overall interest to able our at quarter grow result we the despite of loans a income In NIM XX were points modestly grow net

purchased NIM portfolio, first Moreover, XQ of completed higher note the and and by impact full the the compression end in at driven securities the of amortization the the quarter importantly, QX. quarterly the premium we was issuance of loans in mortgage much

more in increased quarter-over-quarter, and points X net largely business HSA result Our broader only on deposit LIBOR. in our market of which And as only deposits increase contraction demand X despite our points a a quarter-over-quarter, we yield loans outperforms contracted believe basis basis differentiated costs a trends. significant

NIM we and the keep interest While third income sheet compression to quarter, allow actions asset in relatively balance net should us growth expect flat.

as will in to on Looking again net the out income. focus challenge QX the NIM and be to mitigate our well see interest we further, impact

beyond, and to we our QX XXXX will will execution As the seasonal lift from in of our continue the we into structure on and HSA further and deposits benefit sheet. we head balance our view refine

to continues growth view interest long and income economic profits. delivering a taking always net goal driving be in Our

for positive for performance. a our efforts nearly we again want the our XXXX are Together, I continued making thank customers, bankers their shareholders, our other. bankers and and serve communities our difference for to each

With it I happy for unless up am questions. that, to open

Operator

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

Steven Alexopoulos

Good Hey. everybody. morning,

John Ciulla

is going summer Hope your well. morning. good Steve,

Steven Alexopoulos

on that first your wanted So renewed? far that John, to I comments just saying so to you with are extended wanted you the contract I and relationship confirm, good. the was follow-up expanded Cigna.

John Ciulla

don’t we always a the specifically you, them. we we or since contractual that extended on years relationship began to and one. contracts relationship very But tell with as otherwise. expanded have Cigna that a me as we for five Steve, we and continue enjoyed we beneficial comment It’s view the with partnering relationship reiterate last with relationship QX let Cigna in a and mutually strong

Steven Alexopoulos

Okay. And to That’s shift helpful. want I margin. to then the

Glenn, does So, assume that XQ guidance, a cut? rate does the July

Glenn MacInnes

It does.

and have a basis have September we factored cut We rate cut XX July points. July each -- in rate

Steven Alexopoulos

Okay.

there or points about in to there So that’s elevating the basis what if bond X at quarter. expect amortization XX point something other look a cut XX some the points basis you NIM like factor from or we down that Is there? premium guidance is in third basis

Glenn MacInnes

I because XX-year X%. we There assuming I related a No. swap Yeah. around all also, No. it’s is say, rate of think are should and

that And points range, to X points. points basis XX and basis so basis in points I basis put between amortization somewhere X impact X the would

Steven Alexopoulos

Okay.

a X points less points basis be So a range? somewhere cut basis that might X in to response normal to

Glenn MacInnes

Yes.

there. Somewhere around

Steven Alexopoulos

Great.

you. following further But long-term. are an And your think guys what’s then thinking you on appetite, rating you comments this pressure growth, about you plan you NIM this think where offsetting so how offsets here? Got like, Okay. builds about expense do the what obviously do John’s

John Ciulla

certainly it long mean, in about, over expenses have market pull have what in we terms levers building and couple first. businesses I view on to got differentiating we we careful we talked a of take of continue make Yeah. will invest demonstrated time take We have Steve, we that I think reduction also franchise. to I will that and really the We our to we opportunity management a Obviously, but be our are our careful think of expenses, ratio. the sure efficiency in. of to we have

loans it’s think balance are we NIM It’s sheet I focus expense our why net and to balance trying growing a offset everyone line NIM that’s to actions. the rather interest headline to combination the growing number. combination and of So of than and income a compression management sheet the

Steven Alexopoulos

then paying, to opportunity, mean for what do on And you as Wage Okay. and maybe just have how you for think Chad, Thanks. the Bank, much flexibility an the do how stronger rates does that? finally business are about lower HSA deal HealthEquity, you competitor, deposit your

Chad Wilkins

Yeah. pressure said Thanks, rate Steve. the on I on way either side, had we rate. haven’t

to doesn’t we can might moved general I over the come and bottomline move. years. and So that right, through our this disruption change last the but of great smaller of couple pretty in them it ourselves they the don’t work other to the then to is the the happen the haven’t WageWorks I opposite, be I moving outside complicated think, done of take mean than advantage -- right? similar putting expensive, over rates And they deal, in transitions HealthEquity, any have not much slightly been to expect conversions transaction and we have that if as position through transition. wrong, quite and So years, focus down

Glenn MacInnes

you Steve, obviously, could of industry, as there leading can the strategic And kind of have are in player announced if as all number we transactions comment, a a a been around I higher of and the in make activity. level imagine,

industry make advantage going keep really around. and of position as Bank maintain We the consolidates obviously, continue we at our necessary investments to perspective player and in and execution the team, as provider with the moves a our pleased position And to, our leading to key competitive marketplace. from HSA are are Chad and his the a the

Steven Alexopoulos

questions. Thanks Terrific. for Okay. taking my

Operator

you. Thank

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

Collyn Gilbert

Thanks. Good morning, guys.

John Ciulla

Collyn. Good morning, Hey.

Collyn Gilbert

other back then, color maybe points great pricing drivers, seeing seeing John, strategy, on to kind of longer -- pricing those you you challenges. some inputs? are near-term are to some the had on NIM of this just, about So that related basis origination sort amortization And the of go yields to offering be basis these Glenn, the you bit could indicated certainly where X NIM. help on loan X and and -- offset points deposit to the are you of how of some just and a term then then Can market in little talk of trends you

John Ciulla

in. Yeah. but I just can will jump Glenn if I put let point, a finer Collyn,

really LIBOR you think, on loans. from seeing yields pretty LIBOR is, down loans, the so I are will, based think, the credit if the the on a are is I perspective reference pricing and spreads, we stable rate coming impacting where

And one deposit I what story rate of of Obviously, and here cost, will pricing you as things industry in up we going have the duration, and our environment peers our think, other is steady lot deposits the be advantage. in think, growing a will long we interest matter having folks higher. is, having said, an that, see HSA no the

have interest of talked pricing seen terms we about But think footprint, a last deposit I in in the of we little across as and particular, large in on bit metro So we pressure quarter the that areas. on consumer kind industry. seeing the seeing rate we market, in think with are broader of increases what consistent subside what’s I which is with going demand are pricing the in

deposit when a somewhat, at pretty the move and contraction. feel rate in because costs, to to a obviously, susceptible are LIBOR. you and large So ability we look our on manage of have we core deposits kind bullish we loans book NIM floating The effectively

that’s top core the contraction. view NIM of my of on house So kind

Glenn MacInnes

about the point, points, if talked at points that’s Yeah. X change rates. because I month think, amortization LIBOR based, look And basis a I that book more can lending you and a would one will add be John’s I our to sensitive X just in to We to little. basis maybe

book. We have little $X.X $X.X $X a billion, over on that about billion, billion

biggest the be the be offset us, then would, obviously, rate. general our fund, borrowings, for so well CDs, as headwind And FHLB public come like that with advances down would would deposit costs, the things and

So, range factor when the Collyn, you all would get in I are. to that we that you say,

Collyn Gilbert

Okay.

can And side, you this said, and on looks certainly you good good quarter. optimistically anticipating and loan are next quarter growth appetite for just spreads. obviously, you are the growth. That’s the are you that’s that, really type mean, demand sitting terms speaking decent bit and then But over of we growth that fed of a seeing I like in It credit Okay. little helpful. it John, just you cut. frame just ready about obviously, growth to are

am just sure see, So little performance loan talk favorable you about they showing. that I bit -- driving what on those not see But perhaps but what’s what can different your growth something, they is trends? a

John Ciulla

so conversation And I broken had record Collyn, I really have Sure. variety sound like this times. have it’s think many got of kind probably because I we levers. a a of

you if Chris haven’t a is and geographies finance, business look we geography, middle lending, through making the when traditional over some comment disproportionate any time. yesterday a in look to I not been was has go are our we verticals, we based nice lines contribution seeing asset place Motl. you and expanded estate one equipment across a and sponsor really which and commercial So market I kind plethora of real industry of and business, our got specialty across a have what’s

category, or any you industry any particular geographies. at risk supercharge geography. at its had if really if look We look to of the segment, additional at particular you those you in take look if haven’t So any leverage,

think nice been So the has spread growth really sectors. our and I across

on on you have one I we average true. sacrifice we come which over as our the at bit that risk call weighted they ratings will will well. said have I ratings that’s a lower over quality, on the before spreads period down believe tell also will that sacrifice price things our of is risk I last the structure. I trended credit lower better looked little that have means year and down, same risk and

are bit of on sacrificing me So, a quality. are on and that to quantitative I we that’s price little evidence necessary think, not we

our in Banking All Business of in are loan pipelines up and Commercial.

I bullish pretty So feel pretty, where do about are. we

Glenn MacInnes

you at is an good lot dangerous period. if this about that cycle quarter. originations the the and loan down I ago of we point fact, that been enough off weren’t from not to more people think disciplined. dramatically, during And high loan were And just growth were is fortunate make Collyn, they is important see not times, think growth in wanted We a of that go look really late point your I haven’t in is important being during to the from it lot significantly. payoffs down a if to I worrying have year means, but our, because a one been outsized originations worrying make, the were that’s in prepayments in chart to driving we quarter,

Collyn Gilbert

Okay. mean, you that you maintain stable this all like a well? That’s can should we I high of on -- kind guidance that this, ratio, what and do extended assume helpful. XXXX loan and growth this throughout efficiency growth, And you of target on then just said time one final, that’s objective on all thoughts be term as to be, the for single-digit loan can rate we ratio, just efficiency longer the near-term just are to again giving

John Ciulla

being, sure I transparent the we make we mean, to are challenges strategically interest try about goals assets. I are But of rate compression. is are and NIM the environment think, it and growing in right our

our We we too value growth are in assets much balance can not some of NIM compression. credit are offset and that through actions for earning sheet getting paid we taking the risk and

differentiated ourselves give has of room a as little Banking ratio. opportunity an longer kind migration over assets. downward on were noticed and in any confident Chad growing XX%. Commercial make if one there, achievable. sales wiggle efficiency But the if guided great or of or have we see over the we you know, bit the supercharge that continued quarter, long-term keep ratio because our again towards is to generally in is our we efficiency you feel investment HAS team And a an XX% We to We goal want

Collyn Gilbert

will I leave it Great. Okay. there.

Glenn MacInnes

[Inaudible]

Collyn Gilbert

Sorry. Glenn. very Go ahead, much. Oh! Thanks

Glenn MacInnes

I John’s maintain want point strategically business. to invest No. just, to our flexibility in we the to

set just lines you go XX middle of it head way the we If bank business, an XX. you HSA that’s the and and at standpoint XX up XX look in a look is of through from the it offset strategic reductions count in the year-over-year, and commercial you at examples and up year-over-year, up are by community as back office of

if the too, So we think it we about through way plays the you efficiency the that of businesses investing sort need to are businesses. in invest flexibility on but ratio the in

Collyn Gilbert

right. That’s All very guys. Thanks great. much,

John Ciulla

Collyn. you, Thank

Operator

Thank you.

Fitzgibbon next comes Mark the with proceed your with O’Neill. of Our from Please Sandler question. question line

Mark Fitzgibbon

adopt good I I Chad. guidance am Treasury morning. Department had recently Chad, question related by guess, should guess, you the curious guidance? the long before for, new IRS health in area. I I a HSA and am high-deductible how begin first I pretty the curious, to health issued be generation Guys, good for plans, you the business think new the plans to obviously

Chad Wilkins

been then care this, and we within that direct eligibility allowing with so and Medicare Medicare it’s on am HSAs, see things happy from question, Advantage a eligibility its front. we to the years. lobbying agreements that that primary perspective There and were we Mark, That’s I great on have successful Yeah. couple last for are three a aggressively over something of focus and and lobbying this HSA

And our going plans you opportunity don’t employers October. to how answer already long for what it’s motion consumers. both through it’s up going for open offer and take, year, think, I a target because are have opportunity, a in mean, be go will they for I as it set difficult, have of does lot I I our This to specific next

opportunity. I it to our think obstacles and as regard with will they does one of we larger work changes. eliminates the through really see open HSAs But next year, some up

Mark Fitzgibbon

Glenn, Great. miscellaneous And $X.X that? in referenced release. is you million income What then, the press exactly in other a

Glenn MacInnes

benefits probably bank insurance. you was so are life -- and that familiar think BOLI the I with yeah So, on

debt of return You have our we in seen sheet of per That a $XXX about million, million. a on balance quarter which event when is accelerated. is $X.X the get benefit

Mark Fitzgibbon

Yeah.

Glenn MacInnes

a quarter little benefits. we had $X during So over the in million accelerated

Mark Fitzgibbon

then, And if you branch optimization? I plans lastly, of sort additional could us update Okay. on for wondered

John Ciulla

Mark, it’s the Sandler-Piper by and Sure. John, way transaction. the on congratulations

Mark Fitzgibbon

you. Thank

John Ciulla

Yeah.

we that platform, I transactions targeted do technology. the anything premise We obviously, right all our starts and increase continue are now. expenses are households to to same. would think are really consumer fewer digitally the the estate our preferences our in it’s We working happening shift active the from from real focus is constantly changing, have not into Bank, and

number for quarter footprint, over of us the And goal so base, not it’s ultimate of branches, customer with every care we necessarily looking are our but reducing reducing taking at our making of sure an square footage time.

have any we will right but don’t now targeted We are year-over-year consolidations. continue down X% on we and that, footage square

Mark Fitzgibbon

you. Thank

John Ciulla

Thanks, Mark.

Operator

you. Thank

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

David Chiaverini

morning. for Good a you. Thanks. questions Got Hi. couple of

as so there I whether first account about per so what economics it the in drove rate net $X.XX it pretax average was looking nine, a First, at if net to curious decline, or this that from was at revenue roughly, was lower HAS, a again slide quarter. was change $XX in down with credit Cigna?

Glenn MacInnes

think Glenn, relatively that was flat. well, off, interchange I revenue first -- Dave, it’s

of charge I for, drivers were declined, fees that paper the so which account fees key fees and driven. lower closure we was lower think volume really it our account statement

David Chiaverini

higher from in sectors… those average accounts So

Glenn MacInnes

on on fees. that. statement the are expense saving We lower actually on say I’d

gain the a business. net So it’s to

David Chiaverini

that it about out, what’s five try, typical Cigna. extending Is for I Thanks congrats it. the on years? the length will with I of Got relationship I an figure and was and curious extension.

John Ciulla

are the we David, contract. Yeah. not the about typical length to going talk of

the say a relationship continue appreciate to just and a it long-term will I relationship. that question, our have expectation we long-term So be

David Chiaverini

decline gears to quarter, quality, this for nice what is and how drove a then shifting there Yeah. credit Fair And enough. outlook decline that quality? is the credit

John Ciulla

Yeah. and thing. the ask almost great same question turn around want and a to It’s I’d you

statistics where our pleased asset really are quality We now. are with

is lower that now than commercial are at classifieds We pre-financial a level crisis. on

the expenses And particular seen there driver, topline, be have healthy, our that grow we to for been just watch hasn’t except continue customers a so. really fact and

we well, the in but we or selecting pretty -- the have think portfolio choosing are I grown we credit XX significantly. so are pretty years nine last years

the part think are are most portfolio protectable, very for the but selection. I cash We the risk predictable, we drivers important industries that So flows. us in recurring is that, good monitor have well,

fortunate the in of areas and have gas be more some energy oil We been areas. to and and like cyclical construction, not

at right lows. we pleased just now where are we So are cycle with are we and

interesting. is outlook The

in had the small in rating down. we any charge-offs have risk We had have migration

We been haven’t themes risk industry to any or geography see or correlated any either product. in able

our cautiously outlook now optimistic. So right is

Every think goes how now but long close by, a record we this of to cycle, in cycle another there the the is about are time on nothing end U.S., quarter expansion we we and monitoring our Great. radar do pretty job think a to our need We screen concern. just forward us that portfolio I stay and looking gives a good particular of vigilant

David Chiaverini

then And deposit business? the Banking, decline Commercial seasonality, that to municipal Great. the was in perhaps, related in

Glenn MacInnes

all it’s Public Yeah. seasonality, Dave. funds,

David Chiaverini

as X X single-digit to NIM we alluded basis it. fourth more Got one And of the opposed in then assume it. compression, Got given amortization? mid the last should to basis high points points single-digit me, you to from quarter, the

Glenn MacInnes

of a not time continued the sense specific wanted over compression are of more think that we just so drill going doing. the are either macro I period so we of the on, to volatile we right get that a There fight give now more things and longer or we into sort that. not I it directionally will we are Dave, think, things down a trends, going but to environment to you statement are it to going than make number. many

David Chiaverini

Understood. Thanks very much.

Operator

you. Thank

Our Compass Please of Laurie comes with the Point. proceed next question. from your Hunsicker line question with

Laurie Hunsicker

Good morning. Thanks. Hi. Yeah.

John Ciulla

morning. good Laurie,

Laurie Hunsicker

just wonder other I start if we and this was I and income non-interest asking could the income Mark, about too. think,

So a is $X.X That’s million included in that $XX.X show? why BOLI that million that correct? debt benefit, is

Glenn MacInnes

yeah. the So --

quarter-over-quarter So year-over-year, a is… BOLI the $X of $X and is and the little increase over half million, that million half other of

Laurie Hunsicker

And yeah. -- what

Glenn MacInnes

swap other primarily The is activity. commercial half activity

Laurie Hunsicker

-- million gain running on not of really even line a I absent be how about good thinking number? $X closer then And in been is that mean about way should the be Okay. $X -- how sale to item to million, That’s quarter. gains thinking that we fourth branches that to some actually,

Glenn MacInnes

think can don’t example you forward. bring I Yeah. $X for the that million

Laurie Hunsicker

Right.

Glenn MacInnes

things income down that, activity, volume -- non-interest depends and being it depends it like quarter-over-quarter, on our are guidance on why commercial all likely considered That’s says transaction and that. things

Laurie Hunsicker

expense Okay. the And same within line. then, here question

Glenn MacInnes

Yeah.

Laurie Hunsicker

line I expense I other to right. million. want was heard The sure make up you just $X

that… said You

Glenn MacInnes

Yeah.

Laurie Hunsicker

due …$X.X expenses. higher million to was legal

Glenn MacInnes

Yeah.

we $X quarter million. settlements, the just during over a total little So had the

push And would either. those so I forward not

Laurie Hunsicker

All right.

Glenn MacInnes

that you income. gain non-interest They somewhat in saw the offset

Laurie Hunsicker

Perfect.

hey, mark of the when like then getting the little what’s are last about getting for have bit said, you in Okay. seen it Boston? also just expanded how looking you you to Thanks. M&A you a then you and marketplace, to, a by thinking bit more little And sort framework of the first looks some here, seems are are Boston, goal next how close Boston, at of stated of like that X.X you XXXX it be there. happen we And within question Boston macro, just we will you a M&A. a pretty that are into about Can talk you billion

just stock closer about Thanks. have You both [inaudible] currency that? Boston have thinking happened have some have and there a beyond you are in deals gone how that strong off marketplace your in that been got much

John Ciulla

will try and of both Sure. those Laurie. I hit

one as then breakeven deposit is of obviously our Bank You Boston we are a correct, contribution was goals breakeven, a perspective, loan the set positive now just we target from just to and Community growth are for out and with contribution past go did are are to respect four, confident through as year to we and deposits respect below loan we respect slightly with retail but to years. going hit numbers. we above with target five Again, which our

has macro it’s Our outside view kind Boston a economic Northeast the always market, drivers, York. been the view the the one of on of holistic economic in not that New if on of Boston driver

the a the loan that the and lending complement have of bank. before metro York, certainly, activity totality lot drivers in a business even established banking, and market, our had profitability have Philadelphia, of New at there and XXXX growth commercial, we office we retail full with for got wealth, we of three it’s, big of specialty look flagship know, if you you now as So,

from very, business. move financial pleased us of we we the So made both and the are perspective other helped with also helped it’s very direct very -- that contribution a lines and fact that it’s

is to M&A is From One continue but the we as perspective, hurdles a -- disciplined have and our financial, well. for view other two take a strategic approach really one is got M&A. we

whole a tuck-in because Boston do center us have to commercial a a unlikely of growing and Bank, It’s you to and I great is those we example HAS, stated about becoming bank which acquisition more us for doing Community get in of that. acquisition banking we our So expanding have, footprint. think think, optimizing strategy and a if markets, more

So footprint. far look us really we think a there hasn’t at obviously, and a But strategic are appealing opportunity stuff from being really never for we never, been of we I a disciplined say thus in perspective. lot

Laurie Hunsicker

then that in is are branches correct? And Okay. you just a now XX follow-up, so Boston,

Glenn MacInnes

two No. One less. or

John Ciulla

XX.

Glenn MacInnes

Yeah.

Laurie Hunsicker

XX.

XX. -- And Okay.

I sorry. Okay. thought also in to there stay doing how currently unlikely at the is am addition are you… that of you is levels, novo what’s any to these de going put And

John Ciulla

Yeah.

So, a I think, good and again, I to probably is unlikely hate boxes, word.

Laurie Hunsicker

Okay.

John Ciulla

our way the about retail distribution thinking are we But look.

was out centers for in for footage, a way thought right? Boston, So could for ones us they big better. you if was smaller efficient pretty have we reasonably for locations, us small one that to trade when what banking there we have have square one see That’s and If Citibank. that the were got over took instance more significant we two XX

of day. about at end estate really the it’s optimization the real So

Laurie Hunsicker

centers and you where maximized think down how non-interest an see we on all should to Okay. you all were the some or Boston, in know then have that? Great. area last some you footage that marketing in could And very continue we wanted had to on of or subleasing, large just I be is on expense that square done come question about that that

Glenn MacInnes

No. Yeah.

standards There we still effort and what square footages. have that much think are our will I are down square continues. some appropriate shrink think too to banking we these centers those footage that by

effort will continue. So that

Laurie Hunsicker

Great. Thanks so much.

John Ciulla

Laurie. Appreciate it. Thanks,

Operator

you. Thank

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

Jared Shaw

morning, Hi. guys. Good

John Ciulla

morning. good Jared,

Glenn MacInnes

Hi.

John Ciulla

Hope well. is all

Jared Shaw

Yeah. Good. you. with all Thanks. Hope as well

the success on of touch on Philly at commercial expanding wanted the base you And any other and markets? Just to in going the expansion DC strategy growth the markets? is heels and look markets that how of would to that

John Ciulla

we Great Philadelphia. in our question. been with so And expansion far I pleased very think, have

market. We middle well are doing in

commercial years. more had activity estate established have for an XX We than there real

have already new added he’s significant just terrific some We down actually lender a momentum. there and got

And so longer what kind know moves. taken we of approach a patience I from would have you we deliberate say expansion what these geographic to about, is, have this and talked term

ago got getting with, questions scale think we billion a few I there get in on great direct-to-customers of market. years and think, about would and New to lot York exposure York something and have now $X.X I a ever momentum New a great like whether we in middle really our

So Philadelphia with market ramp really the up started to middle in has curve.

to again, order we undue New lending the White we not markets in worked. that’s approach Philadelphia, in sure that Boston, York So and same make Providence, we have mute estate DC, Plains, in and taken we those in are risk expectations and growth asset-based taking City, have the Washington real

us So the do pause a macro has contiguous environment, last the years lot and market. been there a with has to kind I for to couple moving Jared. of next And geographic of it the think for

are end beginning the feel expansion do we of cycle. So cycle to of we this the this closer than like

market, So always it new is lot not a gets of to it get, into lot challenging go the and best it’s the in time of I more is a liquidity think there and well, market. there a competition

to profit circumstances have get not so far, office those open that up seen have we contiguous quickly, middle do market will we market. kind macro are while have evaluating given any opportunities constantly what to and near-term So XX-month we allow and of we the metro economic in moved not us another plans a to

Jared Shaw

changing light see Thanks. And rates, into expect this? we the to and broader in should Great. going expectation Okay. of any the then repositioning now balance for rate sheet lower environment

Glenn MacInnes

and earnings So, deck, rate of goal, made yeah, in know you environment. of and a ‘XX I we morning. Good is hi. see sensitivity, page our on against reducing which have that we can progress our as third Jared, quarter some of asset -- at as then We the in look the you asset since sensitivity think peaked XX the

reduce with note issuance the senior asset of shortens purchase fixed I QX which the like was things sensitivity. swapped, the mortgage We rate my comments, Obviously floating portfolio, indicated funded to borrowings as help short-term borrowings. from that in

million John $XXX we a so approximately continue during floors the downside. re-evaluate quarter. interest course ways to purchased on But indicated protect at look host evaluate and as also net we -- During is to we continue levers there protect that and the income of of to in to the

Jared Shaw

very Thanks Great. much.

John Ciulla

Thank you.

Operator

you. Thank

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

Casey Haire

Thanks. Good morning, guys.

John Ciulla

Good Casey. morning,

Casey Haire

existing, where if one missed yields the Just is securities versus environment this, NIM, XXX the a but I on of the reinvestment quick number that rate current and in couple the follow-ups apologies today?

Glenn MacInnes

is So reinvesting, XXX we in are coming XXX. off about about at rolling its

Casey Haire

And Great. Okay. then…

Glenn MacInnes

So -- yeah.

Casey Haire

ahead. Go Sorry.

Glenn MacInnes

No. ahead. Go

Casey Haire

we of you how we a on get the on us -- a can give the just then beta do cut, fed if borrowings, borrowings? kind could And expect sense what

John Ciulla

Sure. Yeah.

XX% FHLB primarily about We a beta. and are so it’s

Casey Haire

Okay.

John Ciulla

the market. of write-down Thos

Casey Haire

will that, All right. I in looking front, -- some and I tech, was Bank on And on advantage hires. the -- earning taking Was the is I expense we the and Commercial swaps decent there uptick ramp-up are spend… -- know expand just guys expense over just that a guess, Commercial mean, on last side just you of at or a the one, guys on and Banking you are front the to trying

John Ciulla

No.

Casey Haire

…reinvestment?

John Ciulla

right, customers, very of able one in Commercial increase, we to been the any funding so Banking sustained any careful we from back one at both quarter that. PPNR loans No. that CAGR to our in directly the obviously invest XX%, sustained cost management to attract look, going That Commercial we to some always you a we time given year-over-year do look are platform, get talent which a period opportunity in we PPNR. around are the or for year, if we or the of given technology opportunity say, have in be expenses if shouldn’t for, that to can are grow lower Banking, But our our cash even

about. and underwrite of It monitor end-to-end a portfolio be kind also last And to obviously, more it commercial I the of effectively loans. we more risk us portfolio, be couple efficient the digital we allows mentioned way all book of and an the only to happy calls, think, which, us that on also would allows not to approved we loan implemented system in

see lever dollars the do increase grow signal just in in the to million Commercial should all you time. right what efficiency in single of really now continue at So, is a a cycle sustained overall to expense base the reduction or that -- that of extra investment ratio that in It’s not investments we revenue can the couple Bank. over

Casey Haire

Understood. Thanks.

John Ciulla

you. Thank

Glenn MacInnes

Thanks, Casey.

Operator

Thank you.

line comes with next Our the Please Stanley. question. your Morgan Ken of from proceed with question Zerbe

Ken Zerbe

Hey. Thanks.

Just with…

John Ciulla

Good morning.

Ken Zerbe

all, just guys remind for -- the last Just you like XX year, offer not offer and basis costs, is even competitive basis so other not, if obviously. points rates fiduciary to Thanks. stable side or have go very, been pretty good very zero With why then any low? just deposit morning. XX do is, flip Can at duties HSA why has you points something the to HSA us in

Glenn MacInnes

are So, series It’s Glenn. tiers. And Ken, of XX points basis good that morning. within

all So is basis like like the basis way $X up the being XX lower points. goes points. a It to X a tier

of So rates. blended that’s average those the

Ken Zerbe

Yeah.

Okay.

for just someone the So I points balance basis could have. think XX like highest account possibly

Glenn MacInnes

Correct. Yeah.

Ken Zerbe

Yeah.

Okay.

Glenn MacInnes

Well.

Ken Zerbe

XXX back guess and and a like, currently. I it I money go question, or out the goes like buy same so is, And which market get to fund could

Glenn MacInnes

Yeah.

Ken Zerbe

let’s have on, Like, higher to rates any pay current even you obligation do amount? those say,

Glenn MacInnes

of more competition. about it before, middle to -- like things be what our have the rates as There’s competition up near-term. kind move of rates capabilities, it down, credit the it’s so are to over on. pressure on so keep that I we tends don’t not seen -- a investment within is And it’s do the we have specific materially of really or point capabilities obligation. getting really we But either on we expect talked with we pack And no and not not not

John Ciulla

that, kind balances $X low. been full are things old get the the of question seen over average an one billion, age the we pretty across an because still balances big as dollars, the this across Ken, because accounts X average are you there of time, is option the investment have is million has

So $XXX they people of particularly don’t their more it are have or sensitive like account, seem be in to rate if HRA. thinking XXX-k they and a

investment consumer. an to respect destiny And the been their on from that account with wait hey, a once losing, very get own can they say, am and I they financial sweep to minute, think control and are market we threshold the a where into starting then rates valve dollars of And they immediately kind I efficiently being has sort pressure and in got to have result. at real their here of cost that low the kept from

Glenn MacInnes

more Yeah. for does rates that I’d account like an a So savings as it that right? well. transaction also a account impact those holders, on than add acts checking account, it that XX% has are

Ken Zerbe

Yeah.

a actually, Okay. then second, comment certainly but welcome than respond. more have That to And a you helps. my can question,

but relationship, I like, that? about. contract I expanded whether all be extended you could kind on are risk involved this. else. talking the that know on you Cigna. feels of later out the have around you and there the just dancing extended just a we related something asked a but actually bit, worry of times just resigned guys that we the worried little refused I the not With know some if that you contract been was to all that couple It Cigna resigned, you issue to with like find said, comment expanded I and you

John Ciulla

Ken, I appreciate.

Ken Zerbe

that? I Am right with

John Ciulla

agreement. started with the the Ken five may with I being respect contractual it the the obviously, a disclosing have Cigna are acute, like with think, of -- terms them. And we but not have And partnership we little when both sides we relationship years ago a a reality I one, am we began appreciate I comment. it relationship Cigna, terms we in of is seem

relationship I and that answer. and have We clear a extended that’s expanded think

Ken Zerbe

Okay. Thank you.

John Ciulla

very you much. Thank

Operator

concludes and Ladies gentlemen, any the Mr. question-and-answer final will session. our to floor I Ciulla you. comments. back Thank that for turn

John Ciulla

very for much. day. Thank everyone has your No. a Thank hope you you terrific I in and interest continued Webster

Operator

you. teleconference. Thank today’s This concludes

this lines you at You your may time. for participation. disconnect Thank your

Webster Financial (WBS) 18 Jul 192019 Q2 Earnings call transcript