Webster Financial 2Q13 Earnings Call Notes

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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.”