Webster Financial 3Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“A stable net interest margin, unchanged once again linked-quarter at 3.32%, was aided by strong commercial loan originations and resulted in another quarterly record for net interest income”

“Commercial and commercial real estate loans grew at a 14% annualized rate from June 30, as well as 14% year-over-year.”

“Given linked-quarter loan growth of 2%, or 7.5% annualized, and improving loan quality, the loan loss provision was flat linked-quarter ”

“Return on assets reached 93 basis points and return on equity was 8.9%, still short of our goal to deliver economic profit”

“Our leading indicators of credit were encouraging during the quarter, and we continue to signal further improvement in asset quality. Given our outlook of Q4 loan growth, we could see a modest increase in the Q4 provision.”

“Commercial real estate in particular and the multifamily group got a bump coming toward the end of the quarter. But generally, it was stronger-than-anticipated closings on the commercial side.”

“At least in the upcoming quarter, we feel pretty good about the pipeline. And Joe and — Joe Savage’s team have built a pretty strong pipeline going into 2014 as well.”

“There has been competition on price, but we actually feel that our spreads have held up pretty well”

“in the commercial, the deals we don’t participate in, the ones we walk away and split now about 50/50 between price and structure. And that was if you go back 1 year, it was more structure. The last 2 quarters has been more price, so it’s sort of leveling out.”

“Not really at this point. I mean, we know that it’s tough to get an SBA loan and working hard with our clients to make that happen. So where the government is directly involved, some concern. I guess the question is whether it’s going to have a psychological impact at some point down the line.”

“So I think that when you look at reserve releases as a percent of earnings, it continues to come down, especially when you look at it versus prior year quarters. But really the driver there, Mark, is the portfolio quality, which, as you saw on our slide, continues to improve. So would it come down from the 1 27? Probably yes. I think that we’ve given guidance before saying that 1 20 was probably right, and we’re always reevaluating that whether that’s the right number. But that’s going to be driven by the portfolio quality…there is a lot of favorable indicators that we’re seeing both on the asset quality side and charge-offs side that lead us to evaluate our provision levels.”

“there is room for further modest reserve releases over the near term. But longer term, we’d expect that the provision would exceed the charge-offs.”

“I think a more normal charge-off number would be in the 30 basis point range.”

“we’re talking directly to carriers. We’re talking to large employers, TPAs, benefits administrators and the like, in addition to brokers and direct to individuals. But the health exchanges will be an increasingly important part of the business.”

Webster Financial 2Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Net interest margin, flat at 323 basis points”

“Commercial and commercial real estate loans grew at a 16% annualized rate in the quarter,”

“the value of our available-for-sale portfolio declined less than 2% during the quarter, and tangible book value was unchanged despite a 70 basis point rise in the 10-year treasury rate.”

“the FDIC proposed increasing the leverage ratio at large complex banks and holding companies to as high as 6%. For comparison purposes, our leverage ratios are 8.9% at the holding company and 8.2% at the bank. This proposed rule could have multiple positive competitive ramifications for well-capitalized regional bank like Webster, given the challenges it poses for the big banks, most of which will need to build capital.”

“Given the newness of the capital rules, we’ll be cautious regarding stock buybacks for now.”

“consumer loan balances have declined 2.5% over the past year from ongoing consumer deleveraging.”

“[In the business banking unit] The yield on originations in the quarter was 4.31% compared to 4.29% in Q1 and 4.43% a year ago. ”

“With the 70 basis point rise in the 10-year during the quarter, the unrealized gain in the AFS portfolio fell by 1.8% of the portfolio or $60 million. The duration of the AFS portfolio extended from 2.7 years to 3.2 years. Our longer duration investments in the held-to-maturity portfolio, which extends from 2.9 and 4.1 years.”

“Our AFS portfolio now contains $345 million of high-quality floating rate CMBS and CLOs yielding around 185 basis points.”

“We are also pleased the regulators have settled on capital rules, and particularly the exclusion of AOCI from regulatory capital.”

“I’d just say pricing has been firmed, and Jerry went over with some of the numbers where pricing was higher on, obviously, on the origination of mortgage loans, including those that went in the portfolio. Commercial pricing was firm. You saw it was up about 15 or 20 basis points in the quarter, also higher than last year. And I also made the comment that it feels as if the increase in loan rates has had an overall impact on the ability to hold pricing, pretty much across the board.”

“So I think what we’re — one of the big trends that we’re seeing is the reduction, obviously, in refinance volume where as it was 2/3 in the first quarter, it’s now shifted to like a 50-50 mix.”

“Generally, people still favor the fixed, but we expect that as rates or should rates continue to rise that, that will start to change. But if anything, those that we’re thinking about refinancing are moving more quickly to do so. So there really hasn’t been a significant shift toward ARMs yet.”

“when we look at business that we’ve passed on, is that about 2/3 of that, the business again we passed on is relative to structure and 1/3 pricing. And if you go back a year ago, it was almost the opposite.”

“it’s pretty consistent because most of the outflows that we’re experiencing continue to come from maturing CDs. We’re actually seeing a fair bit of that actually stay and transfer in the transaction balances or get reinvested.”

[loan growth] “was virtually all in terms of incremental originations.”

“I think it does create really more competitive opportunity than anything else for the mid-sized banks that significantly exceed the leverage capital ratios of today. So whether it drives additional M&A among them, I would doubt, except that they have some assurance that until they hit a certain size now, that they’re not going to be subject to the large complex bank rules and that they can — rest assured that they can be confident in their current leverage capital ratios. So to the extent that gives people more confidence to do things now that we have clarity, perhaps it would have an implication for M&A activity.”

Webster Bank 1Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

$WBS Earnings Call Notes

“Underlying asset quality trends remain favorable.”

“Return on tangible common shareholders’ equity was 11.3% compared to 12.04% a year ago due to a 9% increase in tangible common equity.”

“Commercial banking continues to surge as commercial loans grew 16% year-over-year and commercial real estate loans grew 15%.”

“Central to becoming a high-performing bank is identifying ways to be more efficient in everything we do.”

“We’re also very focused on growing our noninterest income.”

“The Commercial Bank pipeline was really depleted at year-end from all those record fourth quarter closings, in part that borrowers were motivated to close ahead of anticipated tax changes in 2013. It’s really important to note we’ve rebuilt pipeline up to $320 million as of March 31, and we expect it to continue to grow from there.”

“deposit trends…The top chart highlights the 5% growth from a year ago while we reduced expenses by 11 basis points.”

“Net interest margin pressure continues, although we think we’re nearing the bottom given the continuing loan rate environment and an MBS CPR in the mid-20s, we expect further compression in the range of 5 basis points in Q2, driven primarily by anticipated decline in the investment portfolio yields.”

“we think that most of [weak industry loan growth] was the pull forward into the fourth quarter, and we haven’t seen a material shift in attitude from our clients.”

[analyst comment] “do you guys feel that you’re giving up anything in terms of growth initiatives? [by focusing on cost cutting]”

[answer] “I think that, though your point is well taken, that you don’t want to deny future revenue growth because of what you’re doing in a particular period. But I think there’s got to be a balance here, and that’s what we’re keeping in mind. I think the beauty of what we’ve done so far is that we’ve been adding revenue-producing people while becoming more efficient in terms of how we deliver the services, which has allowed us to actually have core reduction in expenses over comparable periods. Once we get under 60% [efficiency ratio] sustainably, I think the answer is, yes, we will be able to invest more aggressively even than we are now in adding bankers that will produce more revenue that will help to drive the positive operating leverage that we see in the future periods.”