WATERBURY, Conn., Jan. 24, 2019 /PRNewswire/ -- Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A. and its HSA Bank division, today announced earnings applicable to common shareholders of $96.7 million, or $1.05 per diluted share, for the quarter ended December 31, 2018 compared to $67.7 million, or $0.73 per diluted share, for the quarter ended December 31, 2017. Adjusting for $4.6 million related to a gain on the sale of six banking centers, earnings per diluted share would have been $1.01.

"Webster's results in the fourth quarter and in all of 2018 demonstrate the positive outcomes in executing our long-term strategy," said John R. Ciulla, president and chief executive officer. "Fourth quarter revenues grew more than 14 percent from a year ago while revenue growth was 13 percent for all of 2018, and we earned well in excess of our cost of capital."

Highlights for the fourth quarter of 2018 compared to prior year:

• Revenue of $310.3 million, an increase of 14.5 percent, including net interest income of $237.1 million, an increase of 15.7 percent.
• Loan growth of $942 million, or 5.4 percent, with growth of $1.2 billion, or 11.6 percent, in commercial and commercial real estate loans.
• Deposit growth of $865 million, or 4.1 percent, with growth of $702 million, or 13.9 percent at HSA Bank.
• Net interest margin of 3.66 percent, up 33 basis points.
• Pre-tax, pre-provision net revenue growth of $35.6 million, or 35.6 percent, led by HSA Bank's growth of 56.6 percent.
• Efficiency ratio of 56.2 percent (non-GAAP) compared to 59.5 percent.
• Annualized return on average common shareholders' equity of 14.31 percent compared to 10.66 percent; annualized return on average tangible common shareholders' equity (non-GAAP) of 18.22 percent compared to 13.85 percent.

"Continued investments in our businesses and disciplined expense control has generated positive operating leverage," said Glenn MacInnes, executive vice president and chief financial officer. "Revenue growth has exceeded expense growth over the past seven quarters, and our full year 2018 efficiency ratio of 57.7 percent improved more than 250 basis points from a year ago."

Line of Business performance compared to the fourth quarter of 2017:

Commercial Banking 
Webster's Commercial Banking segment serves middle market, commercial real estate, asset-based lending, equipment finance, private banking, and treasury and payment solutions clients. As of December 31, 2018, Commercial Banking had $10.4 billion in loans and leases and $4.0 billion in deposit balances.

Commercial Banking Operating Results:

Pre-tax, pre-provision net revenue increased $3.9 million to $62.9 million in the quarter as compared to prior year. Net interest income increased $8.9 million to $92.2 million, primarily due to loan growth and higher deposit margins.  Non-interest income was flat to prior year at $16.1 million. Non-interest expense increased $5.0 million to $45.3 million, primarily due to investments in people and technology.

HSA Bank 
Webster's HSA Bank division offers a comprehensive consumer-directed healthcare solution that includes health savings accounts, health reimbursement arrangements, flexible spending accounts and commuter benefits. Health savings accounts are distributed nationwide directly to employers and individual consumers, as well as through national and regional insurance carriers, benefit consultants and financial advisors. As of December 31, 2018, HSA Bank had $7.2 billion in total footings comprising $5.7 billion in deposit balances and $1.5 billion in assets under administration through linked investment accounts.

HSA Bank Operating Results:

Pre-tax net revenue increased $10.4 million to $28.8 million in the quarter as compared to prior year. Net interest income increased $10.0 million to $38.3 million, due to 14 percent growth in deposits and 18 percent improvement in deposit spreads. Non-interest income increased $2.6 million to $21.6 million, primarily due to 10.6 percent growth  in accounts over the past year. Non-interest expense increased $2.2 million to $31.1 million, primarily due to account growth and expanded distribution.

Community Banking 
Community Banking serves consumer and business banking customers primarily throughout southern New England and into Westchester County, New York. Community Banking is comprised of the Personal Banking and Business Banking operating segments, as well as a distribution network consisting of 157 banking centers and 316 ATMs, a customer care center, and a full range of web and mobile-based banking services.

As of December 31, 2018, Community Banking had $8.0 billion in loans and $11.9 billion in deposit balances.

Community Banking Operating Results:

Pre-tax, pre-provision net revenue increased $3.4 million to $36.5 million in the quarter as compared to prior year. Net interest income increased $4.7 million to $102.1 million, primarily due to growth in deposit balances, coupled with improved interest rate spreads on deposits. Non-interest income increased $4.4 million to $31.2 million resulting from net proceeds from the sale of six banking centers, coupled with growth in deposit and loan fees, partially offset by lower mortgage production and related returns on mortgage banking activities. Non-interest expense increased $5.7 million to $96.8 million as a result of higher compensation-related expenses and continued investments in technology.

Consolidated financial performance:

Quarterly net interest income compared to the fourth quarter of 2017:

• Net interest income was $237.1 million compared to $204.9 million.
• Net interest margin was 3.66 percent compared to 3.33 percent. The yield on interest-earning assets increased by 49 basis points, and the cost of funds increased by 18 basis points.
• Average interest-earning assets totaled $25.8 billion and grew by $952 million, or 3.8 percent.
• Average loans totaled $18.4 billion and grew by $922 million, or 5.3 percent.
• Average deposits totaled $21.9 billion and grew by $0.9 billion, or 4.1 percent.

Quarterly provision for loan losses:

• The provision for loan losses was $10.0 million, compared to $10.5 million in the prior quarter and $13.0 million a year ago.
• Net charge-offs were $9.5 million, compared to $6.0 million in the prior quarter and $14.8 million a year ago. The increase from prior quarter is primarily due to increased commercial non-mortgage charge-offs. The ratio of net charge-offs to average loans on an annualized basis was 0.21 percent, compared to 0.13 percent in the prior quarter and 0.34 percent a year ago.
• The allowance for loan losses represented 1.15 percent of total loans at December 31, 2018, compared to 1.16 percent at September 30, 2018 and 1.14 percent at December 31, 2017. The allowance for loan losses represented 137 percent of nonperforming loans compared to 139 percent at September 30, 2018 and 158 percent at December 31, 2017.

Quarterly non-interest income compared to the fourth quarter of 2017:

• Total non-interest income was $73.2 million, compared to $66.0 million, an increase of $7.1 million. This reflects an increase in other of $4.3 million driven by a $4.6 million gain related to the sale of six branches, $2.6 million in HSA fee income driven by account growth of 11 percent, and $1.4 million in loan related fees due to prepayment, line of credit and loan servicing fees, and is offset by a decrease of $1.2 million in mortgage banking activities driven by lower originations.

Quarterly non-interest expense compared to the fourth quarter of 2017:

• Total non-interest expense was $174.8 million, compared to $171.0 million, an increase of $3.8 million. This reflects an increase of $2.8 million in compensation and benefits due to strategic hires, annual merit increase and higher medical costs, $2.0 million in technology/equipment due to higher service contracts to support infrastructure and depreciation, and $1.0 million increase in marketing due to advertising and promotions, offset by a decrease of $1.3 million in deposit insurance primarily related to a surcharge assessment ending as of the end of the third quarter of 2018. Additionally, the prior year included $3.8 million in preferred stock redemption costs and $2.6 million for a one time cash bonus paid to employees.

Quarterly income taxes compared to the fourth quarter of 2017:

• Income tax expense was $26.7 million, compared to $17.0 million and the effective tax rate was 21.3 percent, compared to 19.6 percent.
• The higher effective tax rate in the quarter reflects discrete tax benefits recognized a year ago, including the $7.8 million net benefit related to the state deferred tax asset revaluations and the Tax Cuts and Jobs Act (TCJA) enacted during that period, partially offset by the reduction of the U.S. corporate tax rate in 2018 as a result of the TCJA.

Investment securities:

• Total investment securities were $7.2 billion, compared to $7.2 billion at September 30, 2018 and $7.1 billion at December 31, 2017. The carrying value of the available-for-sale portfolio included $95.9 million of net unrealized losses, compared to $105.1 million at September 30, 2018 and $37.1 million at December 31, 2017. The carrying value of the held-to-maturity portfolio does not reflect $116.3 million of net unrealized losses, compared to $168.1 million at September 30, 2018, and $31.0 million at December 31, 2017.

Loans:

• Total loans were $18.5 billion, compared to $18.3 billion at September 30, 2018 and $17.5 billion at December 31, 2017. Compared to September 30, 2018, commercial real estate loans increased by $155.8 million, commercial loans increased by $31.6 million, and residential mortgages increased by $1.6 million while consumer loans decreased by $44.5 million.
• Compared to a year ago, commercial loans increased by $806.1 million and commercial real estate loans increased by $403.3 million, while consumer loans decreased by $193.5 million and residential mortgages decreased by $74.2 million.
• Loan originations for portfolio were $1.611 billion, compared to $1.375 billion in the prior quarter and $1.302 billion a year ago. In addition, $30 million of residential loans were originated for sale in the quarter, compared to $55 million in the prior quarter and $60 million a year ago.

Asset quality:

• Total nonperforming loans were $154.8 million, or 0.84 percent of total loans, compared to $152.7 million, or 0.83 percent, at September 30, 2018 and $126.6 million, or 0.72 percent, at December 31, 2017. Total paying nonperforming loans were $42.5 million, compared to $28.9 million at September 30, 2018 and $33.2 million at December 31, 2017.
• Past due loans were $34.3 million, compared to $39.2 million at September 30, 2018 and $45.8 million at December 31, 2017.

Deposits and borrowings:

• Total deposits were $21.9 billion, compared to $22.0 billion at September 30, 2018 and $21.0 billion at December 31, 2017. Core deposits to total deposits were 85.4 percent, compared to 85.9 percent at September 30, 2018 and 88.2 percent at December 31, 2017. The loan to deposit ratio was 84.5 percent, compared to 83.3 percent at September 30, 2018 and 83.5 percent at December 31, 2017.
• Total borrowings were $2.6 billion, compared to $2.2 billion at September 30, 2018 and $2.5 billion at December 31, 2017.

Capital:

• The return on average common shareholders' equity and the return on average tangible common shareholders' equity were 14.31 percent and 18.22 percent, respectively, compared to 10.66 percent and 13.85 percent, respectively, in the fourth quarter of 2017.
• The tangible equity and tangible common equity ratios were 8.59 percent and 8.05 percent, respectively, compared to 8.23 percent and 7.67 percent, respectively, at December 31, 2017. The common equity tier 1 risk-based capital ratio was 11.44 percent, compared to 11.14 percent at December 31, 2017.
• Book value and tangible book value per common share were $29.72 and $23.60, respectively, compared to $27.76 and $21.59, respectively, at December 31, 2017.

 

Webster Financial Corporation is the holding company for Webster Bank, National Association and its HSA Bank division. With $27.6 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust, and investment services through 157 banking centers and 316 ATMs. Webster also provides mobile and Internet banking. Webster Bank owns the asset-based lending firm Webster Business Credit Corporation; the equipment finance firm Webster Capital Finance Corporation; and HSA Bank, a division of Webster Bank, which provides health savings account trustee and administrative services. Webster Bank is a member of the FDIC and an equal housing lender. For more information about Webster, including past press releases and the latest annual report, visit the Webster website at www.websterbank.com.

Conference Call

A conference call covering Webster's 2018 fourth quarter earnings announcement will be held today, Thursday, January 24, 2019 at 9:00 a.m. (Eastern) and may be heard through Webster's Investor Relations website at www.wbst.com, or in listen-only mode by calling 877-407-8289 or 201-689-8341 internationally. The call will be archived on the website and available for future retrieval.

Forward-Looking Statements

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking statements can be identified by words such as "believes," "anticipates," "expects," "intends," "targeted," "continue," "remain," "will," "should," "may," "plans," "estimates," and similar references to future periods; however, such words are not the exclusive means of identifying such statements. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items; (ii) statements of plans, objectives, and expectations of Webster or its management or Board of Directors; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Forward-looking statements are based on Webster's current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Webster's actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: (1) local, regional, national, and international economic conditions and the impact they may have on us and our customers and our assessment of that impact; (2) volatility and disruption in national and international financial markets; (3) government intervention in the U.S. financial system; (4) changes in the level of nonperforming assets and charge-offs; (5) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (6) adverse conditions in the securities markets that lead to impairment in the value of securities in our investment portfolio; (7) inflation, interest rate, securities market, and monetary fluctuations; (8) the timely development and acceptance of new products and services and perceived overall value of these products and services by customers; (9) changes in consumer spending, borrowings, and savings habits; (10) technological changes and cyber-security matters; (11) the ability to increase market share and control expenses; (12) changes in the competitive environment among banks, financial holding companies, and other financial services providers; (13) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and insurance) with which we and our subsidiaries must comply, including the impact of recent changes with respect to the recognition of credit losses; (14) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters; (15) the costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; (16) our success at managing the risks involved in the foregoing items and (17) the other factors that are described in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q under the headings "Risk Factors" and "Management Discussion and Analysis of Financial Condition and Results of Operation." Any forward-looking statement made by the Company in this release speaks only as of the date on which it is made. Factors or events that could cause the Company's actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. A reconciliation of net income and other performance ratios, as adjusted, is included in the accompanying selected financial highlights table.

We believe that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends and financial position. We utilize these measures for internal planning and forecasting purposes. We, as well as securities analysts, investors, and other interested parties, also use these measures to compare peer company operating performance. We believe that our presentation and discussion, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting our business and allows investors to view performance in a manner similar to management. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE Webster Financial Corporation