Fatter margins carry a lot of weight these days, Webster's 4Q shows

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Rising rates and modest loan growth lifted fourth-quarter earnings at Webster Financial in Waterbury, Conn., even though fee income declined.

Net income for the $26.5 billion-asset Webster totaled $69.9 million, a 21% year-over-year increase. Earnings per share were 73 cents, beating analysts’ expectations of 67 cents, according to FactSet Research Systems.

“We are pleased to report that our earnings have exceeded our cost of capital for the third consecutive quarter,” Chief Executive John Ciulla said. “In addition to this being our thirty-third consecutive quarter of year-over-year revenue growth, we exceeded $1 billion in annual total revenue for the first time in Webster’s history.”

Net interest income increased 10.6% to $204.9 million. The net interest margin expanded 22 basis points to 3.33%.

Total loans increased 3% to $17.5 billion. Commercial lending and residential mortgage lending grew, while commercial real estate lending remained relatively flat and consumer lending declined 3.5%.

Total deposits increased 8.3% to $20.9 billion. Deposits in Webster’s HSA Bank rose 15.5% to $5 billion, and its number of health savings accounts grew 17% to 2.5 billion.

Noninterest income declined 6.5% to $66 million. Webster said this was driven by a $7.4 million decline in other income and a $1.4 million decline in mortgage banking income, but offset by increases in deposit service charges and wealth management revenue.

Noninterest expenses increased 5.6% to $171 million.

Nonperforming loans made up 0.72% of total loans on Dec. 31, compared with 0.79% of total loans a year earlier. Webster charged off $14.8 million, mainly due to an increase in commercial chargeoffs, compared with $6.1 million in the fourth quarter of 2016.

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Earnings Commercial lending Consumer lending Non-interest income