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Commercial lending and its HSA Bank business benefitted Webster Financial Corp. in the third quarter, while customer preferences for mobile transactions are also pushing Webster to consolidate its footprint, the company said today in a conference call discussing its latest quarterly earnings.
Net income increased a little more than 2 percent year-over-year to $51.5 million, compared with $50.5 million in the year-ago period.
Compared with the year-ago quarter, loans grew $1.7 billion, or 12.6 percent, to $15.2 billion. Year over year, commercial, commercial real estate, residential mortgages and consumer loans increased by $570.7 million, $503.1 million, $560.5 million and $68.8 million, respectively.
In particular, the company was seeing opportunities in its middle-market and segment specialty business, said President Joseph J. Savage.
“We’re continuing to see nice opportunities in that marketplace. The team’s bullish and our specialty segment guys and gals are particularly bullish,” he said on the earnings call.
In step with its loan growth, Webster also boosted its allowance for loan losses to $173 million, compared with $156.5 million last year. This represented 1.14 percent of its total loans and 108.8 percent of nonperforming loans. Nonperforming loans accounted for 1.04 percent of total loans.
Net charge-offs totaled $7.9 million compared with $6.9 million in the prior quarter and $7.9 million a year ago. The ratio of net charge-offs to average loans on an annualized basis was 0.21 percent compared to 0.19 percent in the prior quarter and 0.24 percent a year ago.
Total assets increased 10 percent year-over-year to just over $24 billion.
Deposits increased $2 billion, or 13 percent, year-over-year to $17.6 billion, which the company primarily attributed to HSA Bank. Health savings accounts increased a little more than 1 percent, while HSA deposits actually ticked down slightly (0.6 percent) from the linked quarter.
Chairman and CEO James C. Smith explained this as a seasonal phenomenon. Enrollment season happens in the fourth and first quarters, and although customers do add to their accounts as the year progresses, they also start to accumulate medical expenses – accounting for the decline in HSA deposits.
Smith said, “We are anticipating a very robust enrollment season which gets underway in the fourth quarter. We expect the growth trends to be very strong there.”
The company also recorded an efficiency ratio of 59.55 percent, representing the 10th consecutive quarter it had maintained an efficiency ratio below 60 percent.
Finally, the company’s executive team discussed how Webster is closing branches as customer preferences shift to conducting day-to-day transactions via mobile platforms.
Responding to an investor’s question during the company’s third quarter earnings call, Smith finally said that Webster had closed about 20 branches over the last four or five years, although it had added a few as well. He said he would not expect to close more than three or four branches in a year and added that the company was also sometimes reducing its physical footprint within buildings it occupied.
