Webster Financial Corp. (NYSE:WBS.PRE) Q2 2016 Earnings Conference Call - Preliminary Transcript

Jul 20, 2016 • 09:00 am ET

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Webster Financial Corp. (NYSE:WBS.PRE) Q2 2016 Earnings Conference Call - Preliminary Transcript

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Presentation
Operator
Operator

Good morning, and welcome to Webster Financial Corporation's Second Quarter 2016 Results Conference Call. This conference is being recorded. Also, this presentation includes forward-looking statements within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to Webster's financial condition, results of operations, and business and financial performance.

Webster has based these forward-looking statements on current expectations and projections about future events. Actual results might differ materially from those projected in the forward-looking statements. Additional information concerning risks, uncertainties, assumptions, and other factors that could cause actual results to materially differ from those in the forward-looking statements is contained in Webster Financial's public filings with the Securities and Exchange Commission, including our Form 8-K containing our earnings release for the second quarter of 2016. I will now introduce your host, Jim Smith, Chairman and CEO of Webster. Please go ahead, sir.

Executive
James Smith

Thank you, Christine, and good morning, everyone. Thanks for joining Webster's second quarter earnings call. CFO, Glenn MacInnes, and I will review business and financial results and then take questions along with President, John Ciulla, Executive Vice Chairman, Joe Savage and HSA Bank Head, Chad Wilkins.

Beginning on Slide 2, this was a solid quarter overall for Webster with over $1.4 billion of loan originations, continued strong revenue growth of 9% year-over-year and key credit metrics at exceptionally strong levels. Record net interest income was driven by the fifth consecutive quarter of year-over-year double digit loan growth. Non-interest income also rose to a record and year-over-year revenue grew for the 27th consecutive quarter a signal accomplishment.

While the loan portfolio yield was unchanged from Q1 pressure on the securities portfolio yield from historically low interest rates led to a 3 basis point decline in the net interest margin. Record non-interest income reflected higher commercial activity in particular including higher revenue from assisting our clients in their interest rate hedging needs. I'll call your attention to a correction and reduction of prior period's net income relating to HSA Bank totaling 1.6 million in Q1 2016 and 1.6 million for full year 2015. While the corrections have no effect on Q2 results, they have the effect of reducing non-interest income and increasing non-interest expense over the previous five quarters. Glenn will provide more detail.

As in our second quarter earnings release posted this morning, we'll be speaking through the remainder of this presentation to the adjusted prior period information. Sustained strong loan originations which have now exceeded $1 billion in 8 of the past 10 quarters have overcome the effect of historically low interest rates and been a primary driver of revenue and pre-provision net revenue as PPNR and the pipelines remained robust even after Q2 strong performance. Had it not been for the strategically and financially compelling Boston expansion which has expected resulted in net expenses of 5.3 million in the quarter or roughly $0.04 a share, we would have achieved records for PPNR and net income, a sub 60% efficiency ratio and return on average