Webster Financial (US:WBS)2021-04-20 17:09Financial Data and Key Metrics Changes - Webster reported net income of $106 million or $1.17 per share, up from $0.64 per share in the prior quarter, with adjusted net income at $112 million or $1.25 per share, resulting in a 14.6% return on average common equity and a 17.9% return on tangible common equity [39][40] - Tangible book value grew 1.3% linked quarter and 7.4% from the prior year [40] - Adjusted net interest income increased by $3 million linked quarter, driven largely by PPP fee accretion [40] Business Line Data and Key Metrics Changes - Adjusted NIM improved by four basis points linked quarter to 2.92%, attributed to lower funding costs and PPP fee accretion [41] - Loan originations, excluding PPP loans, totaled $1.3 billion, increasing $100 million from the prior year [41] - HSA Bank opened 264,000 new accounts and crossed the $10 billion mark in total footings [47] Market Data and Key Metrics Changes - Average loans declined $250 million or 1% from Q4, while average deposits grew $1 billion from Q4 or 4% [46] - Sterling reported adjusted EPS of $0.51, up from $0.49 in the fourth quarter, with tangible book value per share growing to $14.08 from $13.87 [49] Company Strategy and Development Direction - The merger aims to create a differentiated, commercially focused, high-performing franchise with strong market share from metro New York to metro Boston [7][10] - The combined company will focus on enhancing HSA Bank's proprietary technology and product offerings, leveraging scale for growth [16][30] - The strategy includes significant investments in technology solutions and risk management systems to support growth [9][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving high single-digit to 10% loan growth in a normalized demand environment, emphasizing the strength of the commercial loan portfolio [61][70] - The combined entity is well-positioned for rising interest rates, with 80% of the loan portfolio being commercial and 60% floating [65][66] - Management highlighted the importance of maintaining a strong culture and accountability within the combined organization to drive performance [22][36] Other Important Information - The merger is structured as a 100% stock merger of equals, with Sterling shareholders receiving a fixed exchange ratio of 0.463 shares of Webster for each share they own [23][26] - The transaction is expected to close in the fourth quarter of the year, with significant cost savings identified at $120 million pre-tax [27][28] Q&A Session Summary Question: Growth pro forma and combined growth rate - Management indicated that they expect high single-digit to 10% loan growth on an organic basis, with no significant repositioning required [61][62] Question: Rate positioning pro forma - The combined company is well-positioned for rising rates, with a significant portion of the loan portfolio being floating and adjustable [65][66] Question: Consumer portfolio impact on growth - Management clarified that while the consumer portfolio may not grow as quickly, the strong commercial bank portfolio will support overall loan growth [70] Question: HSA growth outlook - Management expressed optimism about HSA growth, anticipating normalized account growth as the pandemic settles [75] Question: Technology platforms and synergies - Management discussed the potential for significant IT synergies and the opportunity to enhance technology offerings through the merger [84][85]