Revenue Grows, and So Do Expenses, as Webster Expands into Boston

Webster Financial's profits barely grew in the third quarter from a year earlier, as solid revenue gains were offset by increased costs from the Waterbury, Conn., lender's expansion into Boston.

The $25.6 billion-asset company made $51.8 million, up 1% from the same period in 2015. Revenues climbed 7.5% to $247 million.

James C. Smith, Webster's chairman and chief executive officer, said in a conference call with investment analysts Friday that the company's entry into the Boston market has served to inflate noninterest expenses by about 4 cents per share. Smith, though, added the move is well on the way to meeting the goal of $1 billion in new deposits and $500 million in new loans over five years.

Overall, noninterest expenses totaled $156.1 million during the quarter, up 12%.

Loans and deposits both increased 9.2% year-over-year, totaling $16.6 billion and $19.2 billion respectively. At the same time, nonperforming loans and leases, which totaled $128.2 million or 0.78% of total loans on Sept. 30, were down 19% from the same period in 2015.

Webster finished the third quarter with an efficiency ratio of 61.4%. In the near-term, Smith said the ratio would probably remain relatively high, but he added that the Boston expansion and growth in commercial lending and Webster's Health Savings Account bank would combine to lower it over time

"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," Smith said in the conference call.

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