Strong growth in commercial and industrial loans and health savings accounts continued to bear dividends for the parent company of Webster Bank, which reported a profitable third quarter.
Net income for the quarter was $97.5 million, or $1.06 per diluted share, compared to $62.4 million, or $0.67 per diluted share, for the same quarter last year. Net interest income was $230.4 million in the quarter, up about $30 million from last year.
The margin grew to 3.61 percent, with the yield on interest-earning assets increasing by 42 basis points and the cost of funds increasing by only 12 basis points.
“Webster’s third quarter results reflect the positive outcomes of our organizational commitment to key strategic priorities and strong execution by our bankers,” John R. Ciulla, president and CEO of Webster, said in a statement. “Record earnings were driven by the 36th consecutive quarter of year-over-year revenue growth led by double-digit commercial loan growth and a 31 basis point increase in the net interest margin.”
Total assets at the $27.35 billion asset company grew almost $1 billion year-over-year. Net loans were slightly over $18.1 billion, an increase of more than $850 million year-over-year. Commercial and industrial loans led the way, growing more than $690 million or 12 percent year-over-year.
Total deposits grew over $1.1 billion year-over-year, with the cost of deposits only rising 18 basis points in a rising rate environment.
Webster executives attributed this feat to the bank’s health savings account business and its low cost of funding. Webster’s HSA division now has 2.7 million accounts comprised of $5.6 billion in low cost, long duration deposits that helped fund Webster’s earning assets and an additional $1.6 billion in linked investment balances.
HSA quarterly revenue of $59 million is up 28 percent from the third quarter of 2017. Third quarter non-interest income also saw an increase this quarter, compared to this time last year, which the bank attributes to a rise in HSA fee income.
Chad Wilkins, president of Webster’s HSA division, also expects to see a big fourth quarter in terms of new HSA accounts, considering health care enrollment has begun.
“Proposal activity has been up significantly especially with large employers,” he said. “Our pipeline size is several times larger at this point this year than last, and both in terms of the number and size of opportunities, we have more wins than last year, significantly more wins than we had last year both in the number and size, and we’ve had more transfer groups this year.”
The bank also continues to reduce its branch network, slashing about 10 offices year-over-year, taking out roughly 40,000 square feet, with more reduction likely.
When asked about potential acquisition activity, Ciulla said it was unlikely considering the organic growth the bank has been able to generate.
