Despite strong earnings in the fourth quarter of 2017 and on an annual basis at Webster Financial Corp., investors had a flurry of questions after executives said enrollment in the company’s health savings account division was tracking behind in the first quarter of 2018.
“We’re really pleased with the number of employers and the size of employer groups,” Chad Wilkins, president of Webster’s HSA Bank, said during a recent earnings call. “We are a little disappointed with enrollment in accounts … but it is still very early in the quarter.”
Wilkins said he has heard rumors that there might be a slowdown in consumer-driven health plans associated with HSAs, as more employers move to full replacement plans, but he stressed it is still too early to tell.
When one investor asked whether the HSA bank is losing overall market share or if growth is simply slowing, Wilkins said because the bank has added more employers, he doesn’t think it is losing market share, but more likely there is a shift in enrollment percentages.
Still, the HSA bank in the fourth quarter of 2017 reported close to $18.5 million in pre-tax net revenue, up from about $12.5 million in the fourth quarter of 2016. On the year, total accounts were 2.46 million, up from 2.09 million at the end of 2016.
According to Webster’s CEO and President John Ciulla, 1.8 million of those HSA accounts have an average deposit balance of less than $500 in them, which “underscores the potential growth of the HSA bank as deposit balances grow over time.”
On the whole, Webster Bank’s parent company had a strong year, reporting net income of $67.7 million, or $0.73 per diluted share, for the quarter ended Dec. 31, 2017, compared to $55.5 million, or $0.60 per diluted share, for the quarter ended Dec. 31, 2016.
Net income for the year was over $255 million, up from about $207 million at the end of 2016. Net interest income was up almost $20 million from 2016, totaling nearly $205 million in 2017. Total revenue was over $1 billion in 2017 for the first time in history, according to Ciulla. The net interest margin increased from 3.11 percent at the end of 2016 t0 3.33 percent at the end of 2017.
Total loans at the $26.5 billion asset company reached past $17.5 billion, up nearly $500 million year-over-year, mainly due to strong growth in commercial loans.
The bank also closed nine branches in 2017, a trend that could continue in 2017. Ciulla said the bank is always looking for more opportunities to be more efficient and make sure all the branches are in the right location, of the appropriate size and density. He said there are a handful more branches that may be altered or close in the first half of 2018.
Ciulla also said the bank saw strong growth in its metro markets, particularly in Boston, New York, Philadelphia and Washington D.C.
The company has a loan-to-deposit ratio of 83.5 percent, which is favorable compared to its regional peers. It also decreased non-performing loans by $37 million primarily due to resolutions with three commercial accounts.
