Webster's 1Q profit climbs 35% as HSA revenues surge

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Webster Financial said Thursday that its first-quarter profits climbed 35% from the same period last year to $80.2 million as it benefited from strong revenue growth at its HSA Bank subsidiary and an expanding net interest margin.

Earnings per share at the $26.8 billion-asset company were 85 cents, 6 cents higher than the mean estimate of analysts polled by FactSet Research Systems.

“Webster’s first quarter results demonstrate the meaningful progress we are making on the execution of our strategic priorities,” President and CEO John Ciulla said in a press release. “Total revenues increased more than 10% from a year ago, driven by a 22-basis point increase in the net interest margin."

Those strategic priorities include continuing to build out HSA Bank, which holds deposits for health savings accounts, expansion of its commercial banking into new business lines and new markets and the continued pruning of its retail branch network.

Pretax net revenues from the HSA Bank increased 60% to $24.1 million from last year's first quarter. Deposits in that business grew by 14.5% over the past year to $5.5 billion.

Webster saw slower growth in those deposits on a quarterly basis, but company executives said they believed this was at least partly a result of increased spending on medical costs during what was a heavy flu season.

Total revenue climbed 10.6% to $282.9 million from the first quarter last year, as net interest income increased 11% to $214.2 million and noninterest income increased 9% to $68.7 million.

Interest income was bolstered by a 4% increase in loans and leases $17.8 billion. Commercial loans and leases increased nearly 7% year over year to $9.7 billion, residential mortgages increased by 4.6% while consumer loans declined by 3.8%. The net interest margin widened to 3.44%, from 3.22% in last year's first quarter.

Credit quality also improved, as nonperforming loans declined to $134.3 million, or 0.75% of total loans, from $173.8 million, or 1.02%, in the first quarter of 2017.

Fee-income growth was driven by gains in deposit service fees, wealth and investment services, and other noninterest income, all of which combined to offset a decline in fees from mortgage banking.

Noninterest expenses increased 5% to $171.6 million, driven mostly by increases in compensation and benefits.

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Earnings Regional banks Net interest margin Commercial lending Webster Bank