Record revenue and profits provide a strong coda for Webster CEO Smith

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Robust growth in net interest income, combined with a lower provision for loan losses, helped boost Webster Financial Corp.'s profits to a record $62.4 million in the third quarter, 26% higher than a year earlier.

The period was the 32nd consecutive quarter of year-over-year earnings growth, according to James Smith, the chairman and CEO of the Waterbury, Conn-based Webster,

Those results are helping Smith end his career on a strong note. Smith, who has served as CEO since 1987, announced plans last month to retire at the end of the year. John R. Ciulla, who was appointed president of the company in 2015, is slated to take over as CEO on Jan. 1.

“I’m excited for Webster’s future and proud of our senior management team,” said Smith, who will continue to serve as nonexecutive chairman, on a conference call.

Webster saw year-over-year revenues grow across all its major business lines, but growth was especially strong in its health savings account bank, where income jumped 22% to $46.1 million.

In all, Webster’s revenues reached a record $266.7 million, up 8% from a year ago.

Webster finished the quarter with a net interest margin of 3.30%, up 20 basis points from the same period a year earlier and the highest level in five years, as loan yields outpaced the increase in the cost of funds.

Loans grew by $823 million to $17.4 billion on Sept. 30, up 5% year-over-year. Overall loan growth was tempered by a slowdown in commercial real estate. CRE loans grew 5% year-over-year but declined slightly from the second quarter. Ciulla acknowledged the $26.4 billion-asset company was winning fewer deals as competitors loosened their credit standards.

“We’ve really been sticking to our underwriting guidelines,” Ciulla said.

The slower CRE growth was offset by stronger commercial-and-industrial loan growth, which jumped 10% from the same period in 2016.

Deposits increased 9% year-over-year to $19.2 billion, powered by growth in HSA deposits, which jumped 16% to $4.9 billion.

Nonperforming loans jumped 28% from the Sept. 30, 2016 level to $164 million, but still amounted to less than 1% of total assets. At the same time, past-due loans fell 15% to $33.5 billion. Net chargeoffs of $7.9 million amounted to just 0.18% of total loans. Webster recorded a provision of $10.2 million for the quarter, down from $14.2 million for the 2016 third quarter.

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