Webster Financial Corp. (NYSE:WBS) Q3 2016 Earnings Conference Call - Final Transcript
Oct 21, 2016 • 09:00 am ET
Good morning, and welcome to Webster Financial Corporation's Third Quarter 2016 Results Conference Call. [Operator Instructions].
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 may differ materially from those projected in those 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 third quarter of 2016.
I will now introduce your host, Jim Smith, Chairman and CEO of Webster. Please go ahead sir.
Thank you, Michelle, and good morning, everyone. Thanks for joining Webster's third quarter earnings call. President, John Ciulla, CFO, Glenn MacInnes, and I will review the quarter and then Executive Vice Chairman, Joe Savage, and HSA Bank Head, Chad Wilkins will join us to take questions.
Beginning on Slide 2, Q3 was another solid quarter marked by continuing strength and loan originations 7.5% year-over-year revenue growth and further improvement in our already strong credit metrics.
Total revenue grew for the 28th straight quarter year-over-year. Record net interest income was driven by the 17th straight quarter of year-over-year double digit commercial loan growth, aided by a two basis point increase in the net interest margin.
Commercial loans have grown by 14% compounded annually over that spend. Record non-interest income advanced on contributions from multiple categories including continued strength and commercial activities. Higher expenses reflect in part are continuing investment in fast growing high economic profit businesses which in turn helped push pre provision net revenue to a record $90 million.
Putting our momentum into perspective, if we exclude for a moment the near term drag from the Boston expansion which produced net expense of $4.9 million or about $0.04 a share in the quarter we would have achieved record net income, a sub 60% efficiency ratio, a return on average common equity of just under 9% and a return on average tangible common equity of just 12%, a solid quarter indeed.
I want to reiterate my strategic comments during the Barclays conference last month. We've got a couple of terrific differentiated businesses with strategies that have high economic profit potential, namely HSA Bank and Commercial banking. And the Boston expansion qualifies as having high EP potential as well.
We are committed to investing in these businesses when the opportunity is right, meaning now rather than trying to phase investments over the longer term in order to hit quarterly earnings targets. This will likely create some variability and period expenses, but in the intermediate term will drive our efficiency ratios sustainably lower.
HSA bank our rapidly growing highly differentiated health savings account business which provides stable long term low cost