The stock price of
Webster Financial Corp.
) rose 2.6% since the company reported third-quarter 2013
earnings of 49 cents per share on Friday. Results were in line
with the Zacks Consensus Estimate and compared favorably with 48
cents earned in the year-ago quarter.
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Results benefited from a rise in net interest income and a fall
in operating expenses, partially offset by a decline in
non-interest income. Loan and deposit balances showed continued
improvement. However, profitability and capital ratios as well as
asset quality depicted mixed results.
Net income available to shareholders came in at $44.7 million,
marginally up year over year.
Performance in Detail
Webster's total revenue was down 1.2% from the prior-year quarter
to $218.0 million. However, revenues surpassed the Zacks
Consensus Estimate of $201.0 million.
Net interest income rose 3.5% year over year to $150.0 million.
The rise was mainly attributable to lower interest expenses.
However, net interest margin fell 5 basis points (bps) from the
prior-year quarter to 3.23%. The decline was mainly due to a drop
in yields on interest-earning assets, partially offset by decline
in funding costs.
Non-interest income decreased 4.6% year over year to $46.3
million. The fall was primarily due to a decline in mortgage
banking activities and net gain on investment securities.
Non-interest expense was $122.3 million, down 1.3% from the
prior-year quarter. All categories of expense reduced, apart from
foreclosed and repossessed assets expenses and other expenses.
The efficiency ratio for Webster Financial improved to 60.07%
from 62.25% in the prior-year quarter. A reduction in efficiency
ratio indicates increase in profitability.
Webster Financial's asset quality was a mixed bag in the quarter.
The ratio of net charge-offs to annualized average loans came in
at 0.47%, down 14 bps from the prior-year quarter.
On the other hand, total nonperforming assets were $185.6
million, up 10.8% from the year-ago quarter. The ratio of
nonperforming loans to total loans rose 3 bps year over year to
1.42%. Further, provision for loan losses rose 70% from the
year-ago quarter to $8.5 million.
Loans and Deposits
Webster Financial's total loans as of Sep 30, 2013 were $12.5
billion, rising 6.4% from the year-ago quarter. The improvement
was mainly driven by increase in commercial loans, commercial
real estate loans as well as residential mortgages, partly offset
by limited growth in consumer loans.
Webster's total deposits for the quarter climbed 4.2% year over
year to $15.0 billion. This was primarily due to an increase in
demand deposits as well as interest-bearing checking and money
market instruments, partly mitigated by a decline in certificates
Capital and Profitability Ratios
Webster's profitability and capital ratios were decent. As of Sep
30, 2013, Tier 1 risk-based capital ratio was 12.99%, compared
with 12.93% as of Jun 30, 2013 and 11.90% as of Sep 30, 2012.
Total risk-based capital ratio came in at 14.19%, in line with
the prior quarter. In the prior-year quarter, total risk-based
capital ratio was 13.16%. Tangible common equity ratio was 7.37%,
up from 7.27% as of Jun 30, 2013 and in line with the ratio as of
Sep 30, 2012.
The return on average assets was 0.93% in the reported quarter,
compared with 0.92% as of Jun 30, 2013 and 0.92% as of Sep 30,
2012. As of Sep 30, 2013, return on average stockholders' equity
came in at 8.93%, up from 8.78% as of Jun 30, 2013 but down from
9.19% as of Sep 30, 2012.
Book value per common share was recorded at $22.34, up from
$21.88 in the prior quarter and $22.24 in the year-ago period.
Improvement in net interest income and disciplined expense
management are expected to drive the company's growth going
forward. Moreover, a stable credit quality and strong balance
sheet will likely benefit the company's overall expansion.
However, we are concerned about the still low interest rate
environment and stringent regulations, which might act as
headwinds in the coming quarters.
Webster currently carries a Zacks Rank #3 (Hold).
Among other regional banks,
Hancock Holding Company
) are expected to report third-quarter 2013 earnings on Oct 16
and Oct 24, respectively.
Washington Federal Inc.
) will likely post its fiscal fourth-quarter 2013 earnings on Oct