Expenses associated with its acquisition early this year of 17 Boston-area branches took a nibble out of Webster Financial Corp.’s second quarter earnings, but double-digit loan growth buoyed the company’s bottom line.
The Waterbury-based holding company for Webster Bank posted net income totaling $50.6 million for the period ended June 30, a decrease of about 2.8 percent from $52 million in the same quarter last year. Earnings applicable to common shareholders totaled $48.4 million, or 53 cents per share, compared with $49.8 million, or 55 cents per share, in the year-ago period. Webster noted in its earnings release that last year’s second quarter included a $3.7 million net tax benefit.
Webster’s leadership said late last year that it expected the Boston acquisition of 17 branches vacated by Citi to break even in 2017. In a statement, Chairman and CEO James C. Smith touted double-digit loan growth and strong credit metrics in spite of the small dip in earnings.
Compared with the same period last year, Webster increased revenue 8.6 percent to $242 million, and it posted a record level of net interest income totaling $176.9 million, up 8.2 percent from last year.
Total loans increased 10 percent year-over-year to $16.3 billion. Compared with the year ago period, commercial, commercial real estate, residential mortgage and consumer loans increased by $628.5 million (13.8 percent), $420.8 million (11.2 percent), $323.2 million (8.4 percent) and $122 million (4.7 percent), respectively.
Deposits increased 8.9 percent year-over-year to $18.8 billion. HSA accounts totaled $4.2 billion, representing a 13.4 percent increase from the year-ago period.
Non-interest expenses increased 11.1 percent from the year-ago period to $152.8 million. That $15.3 million increase included $5.5 million worth of expenses related to Webster’s Boston expansion earlier this year, $3.5 million related to growth in its HSA bank and $1.1 million in deposit insurance related expenses. The remaining $5.2 million went to higher compensation and other expenses.
Net interest margin was 3.08 percent, compared with 3.05 percent in the year-ago period. The yield on interest-earning assets increased by 4 basis points, while the cost of funds increased by 1 basis point.
Average interest-earning assets totaled $23.3 billion and grew by $1.5 billion, or 7.1 percent. Average loans totaled $16.1 billion and grew by $1.6 billion, or 10.8 percent.
Loan originations for portfolio were $1.314 billion compared to $900 million in the prior quarter and $1.363 billion a year ago. In addition, $109 million of residential loans were originated for sale in the quarter compared to $73 million in the prior quarter and $147 million a year ago.
The company recorded a provision for loan losses of $14 million compared with $15.6 million in the first quarter of 2016 and $12.8 million a year ago.
Net charge-offs totaled $7.8 million compared to $16.4 million in the prior quarter and $6.9 million a year ago. The company said the prior quarter increase in net charge-offs was primarily related to the commercial segment. The ratio of net charge-offs to average loans on an annualized basis was 0.19 percent compared with 0.41 percent in the prior quarter and 0.19 percent a year ago.
Webster’s allowance for loan losses represented 1.11 percent of total loans compared with 1.10 percent at March 31 and 1.14 percent a year ago. The allowance for loan losses represented 136 percent of nonperforming loans compared to 124 percent at March 31 and 100 percent a year ago.
Nonperforming loans totaled $132.9 million and represented 0.82 percent of total loans, compared with $140.7 million and 0.89 percent at March 31 and $167.9 million and 1.14 percent a year ago.
