Deposit growth: grew 3.6% in the quarter, with significant growth in DDAs, commercial deposits, and HSAs.
Loan Growth: Increased 0.7% in the quarter, but excluding $300 million in securitizations, growth was 1.3%.
Net interest income: increased sequentially and in line with full-year expectations.
Efficiency Ratio: Maintain 45% to show that expenses are well controlled.
Return on average assets: 1.22% on a quarterly adjusted basis.
Return on tangible common equity: 17.3% on an adjusted basis for the quarter.
Adjusted EPS: $1.34 for the quarter.
Net income to common stockholders: $230 million on an adjusted basis.
Total assets: $79 billion at end of period, up $2.6 billion from Q2.
Common Equity Tier 1 Ratio: 11.23%, up 64 basis points from the previous quarter.
Tangible common stock ratio: 7.48%.
Loan-to-deposit ratio: 80.5%.
Net interest margin: increased 4 basis points to 336 basis points.
Allowance for credit losses: Increased $19 million to provide 132 basis points of loan coverage.
Net charge-offs: $36 million for the quarter.
Release date: October 17, 2024
For a complete record of financial statements, see Complete Record of Financial Statements.
good points
Webster Financial Corp. (NYSE:WBS) reported a 3.6% increase in deposits for the quarter, including increases in DDA, overall commercial deposits, and HSAs.
Net interest income increased sequentially, in line with full-year expectations, benefiting from asset growth and balance sheet realignment.
The company maintained strong capital levels, with a CET 1 ratio above the operating target of 11%, providing capital flexibility.
Webster Financial Corporation (NYSE:WBS) has an industry-leading efficiency ratio of 45%, demonstrating that its expenses are well controlled.
The company was successful in reducing its commercial real estate (CRE) concentration, with the percentage of advance balances in Tier 1 capital and reserves decreasing from 285% to approximately 265%.
Minus points
Webster Financial Corp. (NYSE:WBS) experienced continued negative risk rating migration, particularly in the office segment of its CRE portfolio.
Loans receivable increased $50 million in the quarter primarily due to the transition of the office portfolio.
The company faced pressure on core fee growth, with adjusted non-interest income increasing by just $1 million.
We incurred securities repositioning costs of $20 million, the impact of exiting our non-corporate factoring business of $16 million, and strategic restructuring costs of $22 million.
Webster Financial Corp. (NYSE:WBS) expects deposits to decline approximately 1% in the fourth quarter due to the seasonality of its public finance business.
story continues
Q&A highlights
Q: How should we think about the trajectory of net interest income (NII) towards 2025? Is Q4 a trough? A: CFO Neil Holland said NII was $336 million in the third quarter and expects it to be around $332 million in the fourth quarter due to more cash on the balance sheet. I explained. They expect stable net interest margin (NIM) to continue through 2025, with the potential for fluctuations of plus or minus 3 basis points.
Q: Can you talk about the flexibility of capital returns and the timing of potentially returning more capital to shareholders? A: CEO John Ciulla is focused on organic balance sheet growth and acquisition potential. He said it was a priority. However, given its current capital levels and expected credit improvement, it is likely to initiate share repurchases in the next or second quarter, absent other capital deployment opportunities.
Q: What do you expect loan growth to look like as we finish out 2024 and move into 2025, especially for commercial real estate (CRE)? A: John Ciulla said loan growth will slow and However, the company pointed out that the core C&I category showed good growth. They expect loan demand to be modest in 2025, with loan growth of around 5%. Supported by strategic customer relationships, CRE balances are likely to experience flat to moderate growth.
Q: Can you tell me more about the two large office loans that are in default in New Jersey? Are they not in forbearance? And are there any special provisions for them? A: Mr. John Ciulla confirmed that both loans are outstanding and have appropriate amortization and certain provisions. The financings were originated prior to the merger, and Webster’s exposure was less than $45 million and $25 million, respectively. These loans contributed to the increase in bad debts and charge-offs in the quarter.
Q: What are your expectations for deposit growth, especially for HSA banks, as enrollment season approaches? A: COO Luis Massiani cited investments in customer-facing technology and new investment management platforms to increase enrollment growth. He expressed optimism about the season. They expect deposit growth in 2025 to be similar to this year or slightly faster.
For a complete record of financial statements, see Complete Record of Financial Statements.
This article first appeared on GuruFocus.
