Webster Financial (WBS) in Waterbury, Conn., reported higher quarterly earnings but missed its earnings targets as mortgage-banking fees declined more than expected.

The $21.5 billion-asset company said in a press release Thursday that its second-quarter profit rose 3% from a year earlier, to $45.2 million. Earnings per share of 50 cents were a penny below the average estimate of analysts polled by Bloomberg.

Weaker fee income was the main culprit. Webster's noninterest income dropped 9%, to $47.7 million, as mortgage-banking income fell to $513,000 from $5.9 million. Fees for loans and wealth-management also slipped slightly.

Bright spots in the quarter included strong loan growth and expense control. Net interest income rose 5%, to $155.1 million, as total loans grew by 8%, to $13.3 billion. Growth was particularly strong in commercial loans, which increased 16%, to $4.1 billion. The net interest margin compressed by 4 basis points, to 3.23%.

Noninterest expenses fell less than 1%, to $122.6 million, while Webster's efficiency ratio improved by 72 basis points, to 59.26%. Webster announced a plan last year to overhaul its retail network by cutting branches and improving its technological offerings. Chief Executive Jim Smith said in Thursday's release that those changes have mostly been made.

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