WBS - Earnings call transcript Q3 2019 | Webster Financial Corporation

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Operator

Good morning and welcome to Webster Financial Corporation’s Third Quarter 2019 Earnings Call. At this time, all participants are in a listen only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note this conference is being recorded.

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

Terry Mangan

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

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

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

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

John Ciulla

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

begin comments I'll Slide my X. on

sustained a are line financial certain consecutive We our for and performance quarter. economic top the year-over-year revenue posted of with quarter XX challenging be environment of rate growth. outlook, is financial Despite our strong. to years metrics interest XXth continue the Webster pleased less its that growth

new geographies. existing customers We continue deepening adding to lines execute and organically fundamental on across activities, all our relationships banking business and

to quarterly interest XX.X%. to Loan by loan growing the Total funded loan Despite growth compression, deposit flat loan with deposits balances strong our last deposits growth by almost grew net us of enabled was HSA average increased X% X% XX%. relatively average quarter. primarily commercial year-over-year Year-over-year led growth. income growth NIM maintain

discrete totaled period to QX items. as share for and for when is $X of XXXX, that expense in prior $X.X adjusted $X.X X% year's growth EPS or in in is compared quarter. onetime adjusted per from QX The QX adjusted Earnings items, $X.XX third

continues year. also grow million is and share Tangible year last is book and common higher equity per a than than XX% value ago. higher to grew by $XXX XX% Tangible

Total was quarter than expenses a positive X.X%, operating resulting adjusted XXth only increased ago, QX the year while revenue in X.X% of higher in consecutive leverage.

ratio common efficiency consecutive to X quarters if XX%, remained in businesses. and below common XX% equity Our We on XX%. equity even return invest above posted on we tangible above with return our now continue

Commercial aggressively by continues to Bank, HSA purposeful execution expand optimize Community the Banking. grow strategic of Our Banking, be priorities performance driven and to long term

solid, remained Credit continuing metrics quality with cycle key asset to quality near be lows.

seeing loans trends As not or non-accruals, industry delinquency sector. all material of are commercial classified cycle, year better portfolio, being at across Despite geography, economic or present, a than were we relatively correlated behaviors late to and a the in percentage flat negative any ago. any product

Turning of X, I'll for Commercial of our Banking's period portfolio lines Slide year increased growth X%. of to has million year past on $XXX loan over the end comment briefly business.

relationships by was strong our $XXX our segment strong year, We Commercial by grew continue also outperforming QX. over and deposits past pipeline X.X% developing heading underwriting or discipline expectations. our to into clients' to the while Banking adhere This million,

Bank in up new with segment. the respect large a strong to XX% over past in market its pipeline to a enrollment the by continues as months leader employer accounts this proposals, the new added opportunities, HSA We employer revenue net new far for relationships period deepen so year-over-year, Bank has to further be as growing penetrate XX we market. HSA differentiator accounts our QX all growth Webster, pretax account XXXX, XXX,XXX anticipate and and year. and particularly direct are

aggregate, represented X% in third our accounts as of third from end. total attrition footings our expect also less administrator of We than which of party quarter bucket

least accounts, Bank of our our revenue, As channel wholesale from for account balances contains book. XXXX, approximately you nominal, Investor HSA recall of receive We and are in of fees acts our Day are that the the only XX% interchange assets. this rest profitable don't may as custodian the

As a acquired related will and of clients that one result another and two our in attrite being these becoming years. anticipate the next custodian itself, accounts clients the custodial a non-bank over of assets QX we to

quarters, dynamics Bank's that transition the HSA be over of and materially given the account PTNR Importantly, lost six profitability accounts, interest and closing impacted the the should fact margin. help mitigate not next the fees

roadmap Webster. York transformational focus to on leading footprint. in respect net core recognized capabilities of to again This invest loans, Boston New X(a) its in lender were Connecticut continues retail loans. as We Banking grow line in deposits the to to and businesses. small New digital SBA all channels, across value with relationships England $X of Community provides business consumers Banking billion to funding and optimize and and our full Community distribution continues high on of

abroad, solid by Slide the of slowing optimistic. X, increased I event the in and Europe a growth global trade customers earlier. in markets, and highlight On tensions, healthy we Despite geopolitical outlook mentioned and and economic other that dynamics here deposit growth Webster's host uncertainty risks loan brought remained and on

our footprint business client commercial base. to throughout and across continue retail, activity small across our solid business geographic our and lines wealth, see of We

the I'll review. now over turn to it Glenn financial for

Glenn MacInnes

rate year-over-year, commercial million sheet. John. Thanks, quarter average securities. and portfolio balance been XXX X balance XXX has securities bank our million residential provides sheet linked and in repositioning. increased Growth due mortgage Slide to The agency on largely detail fixed agency primarily

continue home industry million see an residential year million increased balances. line to quarter of we to quarter offsetting to Linked XXX be downs in versus million in residential linked XX prior trends, increase over year. Partially linked Banking, in X.X mortgages million XXX Compared which reflects billion XX prior and growth million quarter XXX ago, of Commercial versus a banking Business loan mortgages. XXX grew pay million. grew by led and and consumer continued this with equity growth year. Loan

market million growth XXX X.X accounts, of with ago growth year was from as deposit the led a loan growth strength billion million a and grew funded money XX% health of year-over-year. by from public accounts. savings an linked growth Deposit linked Deposit Deposits result in of increase quarter funds. in coming seasonal XXX both quarter

includes The helped in asset increased increase borrowings floating, and the reduce Borrowings March, growth year part million XXX funding of from quarter is securities a linked in floating. swapped in bank's XX-year all short repositioning. sensitivity. from which million XXX senior as growth prior year, notes ago million which issued in the The or and XXX borrowings term we

favorable ratio our Our remains and remained loan levels deposit XX% capital at strong.

stable XQ. Slide statement income quarterly QX of income drivers to X summarizes Net interest XXX.X and million totaled our earnings.

points linked of repositioning The almost solid by basis of remaining represented growth was X to NIM interest balance quarter point no compression, on reduction Our The margin but offset XX line a asset interest compression in had was sheet X.X% X effect in basis X.XX%. earning points of basis expectations. net with income. net our

repositioning estate sheet floors and rate securities, of borrowings balance floating hedging of of by loans. month term billion purchase short commercial floating or LIBOR funded The rate real the rate fixed one X consisted increased

The decline or well rates a income The As a activity, quarter in fees. a commercial level loan lower year, million as syndication X.X reflects a year proceeds prior reflects decline quarter [indiscernible] from higher year. QX. of linked from of million ago as income future X.X%. interest income net level and interest if result, protected reduced linked XX X.X asset Versus Non-interest is grew net fall. prior was million decreased and sensitivity by

net revenue Reported non-interest expensive from and million XXX the QX's XXX pre of prior million declined flat level, increased linked from it year. quarter was year-over-year, X% provision while

XX.X%. basis our from of ratio and and XX.X%, efficiency Loan quarter coverage the And up QX for resulting loss in from points. XX.X improved provision the year effective million modestly rate was tax a was ago ratio was XXX

year. net Slide interest X which growth. retail by of pre includes Net additional million expense X a Strong an of business million. review This environment. decrease year-over-year drove detail in provides from lending. of from partially expense, million rate X.X increase million provision optimization XX by driven was assets by volume, million increased X.X XX from offset resulting lower Non-interest technology grew prior a long a on of growth income revenue

growth was income continued X, from prior X% of last year. versus grew business year, by Banking modest income, fees a X.X estate, Commercial higher X declined million results. offset million XX%. growth lower were real was Beginning which and increase growth and million loan year. business. balances quarter higher highlight by billion with grew from investments commercial led the Net in quarter of XX% I'll resulted loan a linked C&I or activity, the the primarily X.X linked result reflecting year's line from syndication prior increased interest Non-interesting from but which of Slide as flat loan benefited PPNR. grew as X% quarter ongoing income Combined, in in prior expenses X.X fee operating partially average in prepay

HSA highlights new Bank, led X by of which solid XXX,XXX accounts. the delivered production Slide quarter

a by ago, from growth net a have were income Non-interesting a XX%. XX% and in while interest a increase year reflecting pretax footings. in increased rate. XX% billion deposits higher accounts for higher grew ago, account modest Total for of prior total XXX year, accounts of resulting income X.X operating million in of points has higher revenue, and XX% cost increased XX remained expenses positive credit The increase revenue year prior in was than XX the while interchange growth were X in a deposits Our quarters. from and XX% flat or quarter revenue Footings average basis X%, was XX% million Net from XX% year leverage driven fees. net X% higher.

with X% X% to business overall prior Total was income by highlights last deposits year. deposit rate interest compared from growth adversely X%, year. impacted and declining residential loans from consumer XX a and X% year-over-year of Slide Business Banking. contributions grew interest mortgages. Net grew environment Community banking resulting and strong an

Non-interesting income however led by increased mortgage higher banking revenue. X%

revenue total a As flat. result, relatively was

grew investments of million from cost, onetime technology. X.X optimization X% business Excluding in continued expenses

our compares loans. portfolio increased quarter basis to XX.X million saw the partial left a basis of consumer with by and average risk. modestly now classifieds in loans was a on Net decrease the at XXX loans, fully charge to of asset a relates Non-performing left the loan million asset secured. ago. quarter Slide XX loans highlights we XX are in increase key linked NPLs upper that offs million. where an basis X upper now correlated of the quarter of from driven points. right were We total commercial confident linked offset based points a in no This The total quality two points year represent Commercial our are XXX quarter. increased lower to metrics. increase represent we the the XX in regional side. XX in flat

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

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

the of industry which is Xst, into losses, adoption standard As XXXX. accounting credit you new a for effect the know, will January approaching go

progress charged increase above of We to allowance. and This significant remain in will adoption impact have have and portfolio our XXXX economic and forecasted capital will a minimal approximately on initial current on above XX% based CECL XXXX. levels. well increase an of recorded as which made ratios, The balances estimate our September expectation implementation ALLL on continue expect as XX, of is will capitalized conditions XX% capital our and be plan to

QX our to provides compared XX outlook Slide QX. for

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

result assets earning sheet margin, X approximately With in repositioning grow to compression. This interest includes XX cut XX NIM QX. assuming of in net average basis expect around we to We the additional points interest anticipate basis rate October, one points to a balance regard as executed X.X%.

expect a to to decline net result, As million. we interest million X income X

that While well the loan and interest continued fed deposit out income would with forward. in X swap assumes rate remains along growth. and bottom of anticipate QX around from This we in point choppy, X.X% cuts, as one rate a March, one in net to environment and improve as October XX-year

to NIM be if stable perspective, are they basis income expect to we additional to remained XX For X interest today, points to decline QX. and net where rates would

be continues to by below loan X income quality without goal and be And our our asset net driven risk. higher, be to efficiency Our provision taking Reported we to non-interest X expect undue ratio to mix. million growth, will income XX%. likely to be maximize million and interest is

approximately be would be on the we expect level. basis lastly, expect any share rate We QX's average excluding tax a to non-FTE XX%. similar share diluted to our counts buybacks, And to

to I'll With that John. things turn back over

John Ciulla

and unwavering term economic execution an maximizing franchise on quarter on demonstrate focus value we Thanks results Glenn. building Webster's everything long profits third through strong control.

net laser confidently continue income, future. loans employees. deepening discipline, and income on will maximize fee are Webster at and relationships, expenses customer our continues the how staying is and controlling We its in and credit for shareholders and focused diligently same maintaining our investing growing to customers, deliver to interest time, deposits communities, This

I it all Luria pleased Thanks Congratulations to at Webster Service CEO, Webster this as entire said their ABA with should I'm XXXX engage making George was the that to how tangible for In difference. the often Kathy industry our community our Award it's winner. Kathy work serves. highlight make serves that Foundations is her bankers Community example in Webster's clear Bailey call “Kathy Head can President bankers. and people an Webster American Luria's words to communities”. of the Philanthropy, a that for Affairs Associations, the named and Distinguished difference to efforts, and of recently and the Nichols, Banker Rob on

to up With that, for questions. Sherry, I'm happy open

Operator

Thank first Alexopoulos is you. from [Operator Steven J.P. proceed. Instructions] Morgan. with question Our Please

Steven Alexopoulos

pushed Hi. savings deposit Start deposit see on guys lower, deposits. again cost pressure? you side, When to non-HSA really quarter help maybe expect being a the by some trend total bit start costs offset in to of higher and trended deposit the NIM and do the

John Ciulla

you. great a talk hello, to to question. that's Steve, good And

I do know, You think have room. we

relationships strong Boston's a latitude much talked the you to we're we know, continued grow be very the we about we But been and, we've we As deposit rates, given across often, bank, on of in know, have community do very got growth. material our continuing some think competitive to some our overall footprint. the focused also HSA will a our in reduction core in the going what's you think market. QX, and in see given opportunity deposit We given on market,

Steven Alexopoulos

rate Glenn. was out Okay, premium for And In where's I amortization declining, then X hedging the additional for cut, maybe NIM called the level? that's all to new you every helpful. without now, past, X that given think points basis

Glenn MacInnes

think I side is guidance So as into three XX that, gave I of QX, the the indicated as was hedging you of XX. About look it. I to

took to half October, another likely And a QX. it's a probably point in average in you point premium that that rate memorization, the is of worth into basis basis The out the going impact our lower primarily If rest rates. see XXX one fed is quarter. and go with down funds QX cut for outlook in the quarter fourth to XXX third an you'll the fed loan from

Steve, XX fed So know, loan that's basis our about to of book three or a in as point which or tied typically one funds. live month XX% month And is would follow either way drop. you one

Steven Alexopoulos

it? that lower the range, Okay. are below XXXX seven this range But Glenn, relative point? now the in even still Just looking to are we to at with even the still into that hedging maybe end, five but beyond Are in we we range?

Glenn MacInnes

compression? NIM seven to five the in on So

Steven Alexopoulos

Yeah.

Glenn MacInnes

that I I'm not understand, question. sure maybe just repeat

Steven Alexopoulos

basis is, range, now this for range So you My about every in still post hedging talked essentially? are X that we down X to question below cut. that NIM points past, in are or going we the for

Glenn MacInnes

So me the won't it. from hedging up back – let

growing NIM said, see we compression indicated, as on as a expect the then the next basis again, a year, would bottom out I into quarter. in XXth. cut quarter, assuming one fed year in So to to at income. in compression, the into and I interest we points look the I more fourth get in X at one and March XX income October, and being net X net interest XXX, NIM of I began assuming That

Steven Alexopoulos

Got it.

follow-up I comments want prepared for to out And then John's on season. XQ an helpful. that's healthy a calling HSA enrollment Bank. Okay,

Now plan that going annual high point? through employees are adoption health higher Are deductible of their plans selection. you this seeing at

Chad Wilkins

that and and Yeah, Steve. pipeline existing what said, on enrollment the the last enrollments. to we're XX% hi is expect support enrollments again well increasing if as having in we of go are in our their – above a That decision seeing education, they're what the to it things come year. of employers. know, Yeah, depends year, great you order definitely tools doing our into our And calves like using we seeing from influence, we we're end saw strong very we're enrollments our be employers in

depends a So through how lot on your enrollments point, go QX.

Glenn MacInnes

And Steve, of account pros all of as a spending the trying you our customers contributions and employer their employees funding to maximizing and know, been of we of on have lot accounts. time the opening educate

So there. hopefully influence some we'll see

can accounts levels. XX% we As Chad enrollment of come the our from existing that that hopefully influence our new said, customers, of

Steven Alexopoulos

And I continued account I do just the over pressure say. and under look a to the Chad, for expect you slowed growth, this If at Is it's to Thanks. a then income year. just final monthly fees it one need remain past downward pressure?

Chad Wilkins

thanks Steve. in by on Yeah, paper cost quarter fees in offset We eliminate actual $XXX,XXX paper in paper initiative statements. had of going a that about delivering about statements. impacted to That thing reduction had an fees. the one We've third $XXX,XXX statement reduction was the a being

So one-time the that's more the and of continue. a will savings cost but item,

that's employer of seeing isolated existing really on larger programs balances. more bit fees. We But that also are a have large little towards pressure account

market happy out on fees as existing to and compete for balances we accounts. trade large we're in So go the

Steven Alexopoulos

Okay. Terrific. Thanks taking my questions. for

Glenn MacInnes

Thanks, Steve.

Operator

with Our Gilbert question Please proceed. next Collyn KBW. is from

Collyn Gilbert

morning. Thanks, guys. Good

John Ciulla

Collyn. Hi

Collyn Gilbert

bottom sure leverage I But XX Q times ask just understand I through to you end added – probably what again? just drive and walk you you it I question. trying doing hedging to get what's you the could walk doing the why, to this added just the duration. you the make what know what just said through you you're my of exactly side guess that then this could going if here in before I security you the XQ, and to on want yield did and to had understand Glenn, let To quarter, the NII flush to out you're what I fix side of sorry

through of some you kind please? Just that would if walk again, math of

Glenn MacInnes

a yeah. if we bought repositioning to So that third and and does drop, it into that's protect the And the activity the pieces. on quarter, that I'll during downside, two about continue did we primarily break rates prudent. One us is think we $X,

an that we on The some purchased purchased income. And we activity assets is of and removes of is, it does actual to did what of securities other the interest The securities. XXX net million XXX was base, two about about those combination we sensitivity. neutral

have basis We XX one earning we're that FHLD on a spread they're by is points cost securities of month the funded and the because floors about the of similar. primarily

actions do drop, were were higher is to the our primarily downside rates neutral. those the of Likewise, commercial estate we regular are on we'd floor which a securities rates have on what And that we're would they drop, us protect have hedging. Xto purchased So a if real yield. they loans,

that's So one activity.

out I think rate the about environment. think I got of fourth dynamics you the the talk about bottoming quarter, in When to

third funds. And severe you saw the the more fed third basis fourth point to fed second quarter, the then reduction so XX in from XX funds. to from basis in And point reduction average quarter,

not an cut basis average imply be down that March you fed that If assume the quarter does points. funds of into quarter-over-quarter, XX again quarter fourth XX, would first would a fed that until

swap assume less. is So get XX-year significantly a XXX, number. of if that's and that rate rate around decline the how take And you you then your of you

pressure the have as have, reduction borrowing XXX reduction indicated, which a of I'm have three on thinking to inflow you less reduce your you further of of some of then advance of QX's the as quarter What you the fed, I of gets That reductions So in And quarter. costs. level, of to net an deposits, core first your fourth help HSA you from deposit you income, John cost. in fed in have, am beginning the five. guiding XXX interest to a range if million XXX.X of

in So we our core reduction. quarter, could points think a to on X we retail a X deposits get basis potentially

that's I – a said lot. So

we're how So looking it. at that's really the dynamics that

Collyn Gilbert

Okay.

John Ciulla

Hey point on Collyn, finer our to a just put strategy.

compression the You industry. NIM – know, the obviously we're question the is in big

are points And market you know, X.XX. significantly You were to great basis floating of been last asset peer about ago, three group we've looked obviously, know, points we back, loans group. we're we source XX a the very higher loans above rates. cost still compression, I proxy we're been growth able low not high apologetic our we our our absolute got proxy of rate. about you growing trailed peer we've in even And we've funds if sensitive, grow night, basis and And kind And for years with NIM, now XX we're look by the value. an on around being generally

start our So terms and we income don't to where more mortgage are in make sure organic of we're do are. about leverage want downside to in deposits where zero, aggressively what we our feel the good move level. try growth protected the that we're scenario strategies upside and time. to loan we best repositioning really rates of protecting deploying And all and over against our of we But towards

that specific So high the level terms in that of Glenn talks strategy execution. the give a of kind about just

Glenn MacInnes

maximize you environment deck interest as without sensitive page thing our John and on obviously, I how that add out, – is is to environment. goal income risk. our declining And that for see rate rising go undue if our our taking XX, pointed And would rate to the to back only both can you we

just any drop. continue So did take some to in prudent to actions rates event

Collyn Gilbert

Gotcha.

much risk if or we've Okay. just? a go know, other I way, if to mean, say back goes the NIM up is you seen, and then now then to let's if go Glenn, bottomed XX-year has XX-year And rates if up, here how they the two

Glenn MacInnes

rate see page as have that we far rising our scenario on XX So up in disclosure, a scenario. a rate and again, both as you can declining

upside. you've or actually up up basis long points, end your short you if know, increased still end You XX

floating the away the hedging downside but improved. loans has upside for on part, because your little most You've we're actually rate a taken

Collyn Gilbert

Okay.

then guidance yet, focused second know, it fourth kind I perhaps and helpful. know, great. Okay, under is, you of your you And guess, get know, with maybe consistent. of I haven't don't an done I the XX%, efficiency But you guide but so question. That's math quarter answers which my et et operating material If XXXX, in on for holds XXXX, about we structure and expense how always optimization the leverage should let's cetera, but XX% cetera. does assume guys any kind expense that are potentials? the change imply you efficiency of or in that think

John Ciulla

think it Yeah. we've have we calls. No, I opportunity, mentioned on the

I to is in environment let that You long in always rate ability said going goal to interest bank, commercial our boundary the our time. that impact that short in to drive Obviously, over term invest efficiencies we're down or investing know, term artificial the to an not and XX% efficiency for we've think ratio invest the technology in impacts HSA.

the And think of do had we year. we're an with what expenses stuff expense opportunity, really that's middle the all some back know, you time, discipline over reduce year-over-year actually Collyn, I to now nice right think doing this there I LRP, that's say. really we – but office, in like have I looking in So are I'd and really opportunities think, to the

Collyn Gilbert

Thanks, right. All will there. I guys. it Okay. leave

John Ciulla

Collyn. Thanks,

Operator

Please Our Chiaverini next with question is from proceed. Securities. Wedbush David

David Chiaverini

morning. Good Hi, thanks.

John Ciulla

morning. Good

David Chiaverini

said you commentary some with X% the and total. So starting that represented out the custodial quarter how were in relationships of acquired it about

X% curious, say total percentage HSA you heard represents? what that accounts. of was deposits think I I I

John Ciulla

deposits. to in than slight that than about X.X% Less X% less

confusion stay I'll we I want to and because the phone. don't on be there So

names, the was mention average those has custodial take So relationships are fees. balance, of on fees They're across not acquired the was deposits. accounts custodial other the less of one and two third to two license them acquired, one of customers, we're profitable and the going custodial no one the quarter, to XX% where now in nominal which interchange although account non-bank probably know, you'd a

accounts customers impacted all of expect eight sure so right, we make on or smooth. customers relationships large those not of of with will over it's that – both make underlying or and majority So a that sure that's course the all are quarters and that to the the deposits we're our those based contractual working to next customers

offset And the closing eight wanted between the key is that to course of net interest quarters, transition away offset will fees know, by point the financially and account us the and economics from that impact next over assets lose margin account those the those accounts, on and going receive us to make those is the we you by, as of I transaction closing we these fees.

David Chiaverini

then Or in the And this we balance you Was helpful. action sheet third onetime back to gears the that's Great, a repositioning. going additional can quarter? repositioning shifting expect, forward? sheet know, balance

Glenn MacInnes

evolving, we So, we view, Good Glenn. third morning. let the on Those that in hold depends we are back Dave, bank it's the want want rate is during very It But actions of quarter. it took our the positioned. But also and a to where down a think rate rising conscious environment. we be on environment. protecting to say to just me continue don't we're

within We're a strategy. So that's operating our that. band of

to on say. rate. your I hard So it it's view of the mean, depends

David Chiaverini

go But that I'd way. that out up. Yep, see them to work doesn't always yep. ideally, Well, like

you you're the gears based was asset NPLs loan. credit shifting that an that quality, fully So that mentioned industry was to was in you And to increase curious secured. what as believe in? I

John Ciulla

was dominion. fully it believe followed company. cash again, And a I distribution

episodic a not and of the of there asset – of there's time. it quality. we And as know, categories nature talked these think present look about some we risk at loss know, I it's did you So we

a a NPLs over look you you are know, as percentage If flat too. year, of portfolio total

in doesn't give us concerned significant David, So there, while it when concern. flows cause always we're something for

David Chiaverini

is on equity running CECL, and one could to off, that of for penalized the lending reserve be your CECL up thoughts actually that then XX% comment so that, under know, wanted what there? me is on up could could to get you EPS the given for Okay, tailwind home you but how last and Can thanks. go And ongoing impact hear a mentioned you, you you XX%. be about

Glenn MacInnes

to say right be driven now. hard too Yeah, so, volume. going by it's to It's

that, You're accounts. data banking when have bigger a it, said, higher also our have things being They purchase products we mortgage correct That customers look impact. or checking services. assets, we obviously in like mortgage at CECL longer more banking and like

product. So implications any it to say it's to soon too particular the

John Ciulla

I we CECL. think think mortgage through if I we a of make issue be that general two to kind as significant that about be meaning thought there'll short anticipate we extend one models CECL Dave, and know, I'm credit those term, by EPS a strategy know, right, right crisis, commercial our be longer aggressively look to concern results that will now, get that with to of of continue and impacted shifting our the there we consumers. or consumer. is dated you will – don't and loans the which impacted, the about mix, respect be that's shares think a may business downturn either our current credit banks We don't into procyclical third to a disincentive and you as our in rationale But thirds for

David Chiaverini

much. Got it. Thanks very

John Ciulla

talk to you. to Nice

Operator

Point. next from Laurie is question Please Our Hunsicker Compass proceed. with

Laurie Hunsicker

morning. Good Hi. Yeah.

John Ciulla

morning. you? How good Laurie, are

Laurie Hunsicker

just in non-performers book consumer an seeing balances credit. of and with with respect lending are and was loan give could within are leverage also what Great. terms there to update terms Thank with I just terms where saying then you're charge in us you of hoping I'm you your that you you. of specifically and off? where in

John Ciulla

know, question. happy like answering And those you quick to a I answer credit I'm questions.

leverage that leveraged, a call, you in and even to transparent when portfolio, were sort total years So X.X% has had back overall portfolio. a the we fact portfolio we've here, of the had of leveraged, perspective origination and perspective had good dynamic I'm of the XXXX from you the that as there, a percentage are if where exposure really it's And both the besides the about that go category. of and of and commercial that the as we've we Laurie, that leveraged moved and knock laid on loan know, And out last January we loans of wood none over from XX in in but not XX% on the we're charges bank funded were to success interesting before roughly amount bucket. so going year-to-date

loans have in or increase worth category. in watch We don't that classified and an also

really, status quo. So it's

on third What year. loans at that loans second are, not a was we're of I our mid-teens grow estate, we a up but It's strategic different And in year-over-year, level ABL in I know, take living in of price, of from will you categories. all. prior leveraged where our is And disciplined and the quarter, real our specialty Whereas down commercial XX% say in up leverage not interesting origination again, didn't both result the we result on that's those is interestingly structure. a think promise and shift. of to that sponsor stretch were our a actually most approach, to group to,

significantly, down our And commercial spread our average credit So are basis if the year-over-year points, XX look the at weighted rating. you result, across better net is XX risk a our actually almost originations bank points spreads. basis from

to have we loans, we're and But going not credit I'm way opportunities fact credit been trends because disciplined and we confidence great in the If in metrics those and going have them, the think sponsor that will So it. marketplace. have those leverage to view the I underscore continue great last. specialty underwrite to that we opportunities and we've say we in

Laurie Hunsicker

off sponsor your And what Okay, then great. rate is the running in right and specialty now charge book?

John Ciulla

point We I rolling sponsor it's to loans the commercial. points out our this basis and were loss. of none don't have basis and contributed well XX specialty quarter below XX average. that but well number our It's quarter below XX

Laurie Hunsicker

you then just this around What point? light book, covenant And of question consider perfect. do last your at that. percentage Okay,

John Ciulla

leverage something in I less think you gave back like than the of were X% January, light. loans I covenant

I of it's with in many even think to light the digits the know, you of our originations X%. I been BB X% that transactions, the probably transparent, be as because and that's single and quite transactions chasing and honest haven't I think been And to down some because been low reason Laurie, we sponsor market very be process. why disciplined we've special have covenant you, think, are so aggressively or

Laurie Hunsicker

an what big that on And the can Glenn. us update you that's balances then on thanks, just how running? off Okay, give club, and charge lending

John Ciulla

and John. Sure it's

Laurie Hunsicker

sorry. am I sorry, so so John. I'm

John Ciulla

exposure even doesn't XQ is end And profitable actually question, a its into with, strategy. charges, than overall okay. kidding. less I $XXX higher of will our That's Lending XXXX. us. funded down $XXX you tell interest, I know, coupons Glenn loan the you, critical million portfolio. in We've but higher versus a of and million our of answer it's And the credit element for It not But book the club of at it's is exposure is third am only quarter profitable. economically economically that running it been X% slowly.

to we're very, exit, of emphasizing whole. portion not the So anxious but and a very not it's small it we're

Laurie Hunsicker

then that just most in X at your lending charge the charge And club again, consumer book? of coming million off. offs, from or looking so Are Okay. those

John Ciulla

a It's portion. A mix.

Laurie Hunsicker

offline. you I make can to wanted Steven wanted want back to and great. I I David Okay, HSA, just to that. that I I – sure understand follow-up to with just just on where go were

So as is if close? relationship, September that also strongest custodial to expected like us just about and two then reflected X.XXX and in can at you choir, you words third quarter also relationships terms or XQ that the that to of gone, deposits of what of that we space that obviously I both in is a in realized about was look is other finished balances, when footings in that terms we're seasonally one at billion, any in the was help total those HSA investments? close specifically that in And number? how but of with fourth think thinking look HSA your maybe current going your quarter custodial are did

John Ciulla

It closed in quarter. third

attrition. numbers the reflect So quarter of any this third don't

we obviously have to that final to we the those. you But will try balances the likely, be know eight very those deposits take what accounts contracts We these than to bank in know over don't process the accounts. be up majority that or over more let quarters, up We the of the is That's in then and the begun it next and move have of existing fact and is impact the the quarter with HSA the the We details obviously wanted six schedule and quarters. to the why market working careful the mitigated come is next about wanted economic will terms quarter. process vast to our of two to eight to process under to know replace going customers to that all do the by those have quarter we transparent by years. with

start we're to and rate our of we channel, our quarter less growth organic employer the to But to this the we want be market. may to impacted. profitable work performance run look XQ to say wonderful and be we would give be off. have is will again, trading, schedule all exact are the when Chad you at accounts doing able versus in able these to the director reasons it fourth one absent we talk about to be as some don't do the insights whether wanted get And

fourth want So, insight the to be. as some will quarter don't what if think you impact Chad, you to I give know

Chad Wilkins

small the overall a percentage. still There's fourth but out. working year, of move in the before deposits it could that again, the the be a would of we're off chance very end that a percentage immaterial And quarter, small

Laurie Hunsicker

we about, year you look those like balances maybe now end help the if think incorporating And should forward all at within us your you about be changes fast a growth marketing, making footings, Okay. book cetera, from just XXXX, might a just of year, can Chad, what that thinking we How investments. for deposits push, Thanks. XXXX? know, as you're et HSA we the of think and

Chad Wilkins

exactly us are books to the working with estimate The the going in growth on of right we actually our we're XXXX, hard now. to the rates overall of in account as growth rates year-over-year in transition off and roll rates, particularly new we're with seeing partners it's we rest where portfolio saying, to that that increasing was production John up And of the can for account much book. focus the across to how as for the And our through custodial our Well, most instance influence. I growth a have in growth XX% in tell is decline continue channel. channels about you rates those new direct that consistent

you you accounts deposits our those able So, game we that know time – and to plan frame. expect over to, is know, be replace to

John Ciulla

April to we for accounts new account that pipeline will as shows you. January all of quarter talk and the hoping we're and you cycle one acquisition custodial these pipeline you shows Glenn as the exceed I call obviously we portion that openings. that fact reconcile is that's forth And after know the the so where right get sort able I enrollment year's and Laurie, think of our that new then Chad exceed to and guidance the last about gave underlying that was be when and the we know, our account call to this closer and will greatest and that hope

Laurie Hunsicker

Okay, thanks. I'll leave it there.

Operator

Our next question is Fargo from Jared Shaw with proceed. Please Securities. Wells

Unidentified Analyst

Jared. [indiscernible] is filling morning. actually This Hi. for in Good

John Ciulla

Hi. are How today? you

Unidentified Analyst

a total third that just party? third the back dead HSA, accounts horse, the is Not whole to of custodian deposits or two Thanks. party but beat getting and to X.X% accounts, that of is Good. the X%

Glenn MacInnes

two Those accounts of share up lion make that. the

is, million deposits are the customers not some if it's, you XX,XXX question and there, total So in around know, $XX footings other in and related. there but below accounts

really in the if material more is to So, there is, there come, left that a activity. amount question isn't

of know, know, activity in lion our know, was from client. focus over But And, something for not wouldn't that You not time it's to account our been. money that come as you the another our it's you direct it less where growth has made share for has we been, and us, profitable growth employer. do

John Ciulla

be of we custodial would with partners much than now. It's have Hi. maintain a will what smaller John. much those relationship be one may a right There's term, it longer chance we

Unidentified Analyst

heading are commercial traditional the then growth? it in you. at primarily to see may going fourth into that Okay, was that composition And balance to you said looking Thank helpful. be that's to commercial get the John, that, the strong quarter. is What's CRE pipeline or

John Ciulla

in the least board, at pipeline. the You been across know, it's

a the in far, slowdown perspective, commercial continue say there's origination pipeline perspective to you you points, know, deterioration wants pay and holding may in know, price, cap from price. particularly debt slightly that know, coverage lower explore I sellers, and where, just strong period-over-period what our interesting an we our a higher don't estate out so where buyers been and a we everything a price see real metrics, you and are. sellers And ratios know, the time can rates in LTVs point is look where want an not and And And really we period. buyers buyers you know, over period only for and lower were were on we any the underlying to you are, be service higher but data given actually and But higher higher there. the prepays if at as be the

there. outperformance throughout So dynamics footprint, I our and the the think just work the some with of existing in is sponsors doing great query generating we're our some

the commercial So estate It looks particular commercial but really, throughout bank, be like real growth we're getting seems to active. really in

Unidentified Analyst

one one And great. then me. Okay, for last just

note that's or primarily asset to class is that pretty linked commercial any the driving quarter classifieds, increase granular? that at in or that Looking anything

John Ciulla

we actually assets watch and look it migration, the because it of down. based actually say, credit know below couple there, sized all And are that want at but transactions asset the don't really but we which nothing. worth levels had are a dismiss risk as We I I to

if cycle not average Glenn our low. level you These we're were look of episodic. you in general several we're at mentioned, at So still flow. quarters rolling operating range, well as and our that still classified seeing X% a below know, real you know, And commercial of,

did anything So, we quarter, me. I concern in there I didn't see review that our this – after

Unidentified Analyst

that ABL there's popped the increasing classifieds, and so concentration. the in geographic non-performing like then up Okay, no

John Ciulla

No.

Unidentified Analyst

Okay.

you very Okay. Thank much.

John Ciulla

Thank you.

Operator

over to like the management closing for to our remarks. concludes back I turn conference session. That question-and-answer would

John Ciulla

you appreciate the much, in day. Thank interest getting Have I continued your so great on phone and a Sherry. everybody Webster.

Operator

Thank conclude conference. does you. today's This

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

Webster Financial (WBS) 22 Oct 192019 Q3 Earnings call transcript