WBS
#I want to add to that, that however, overall investments in the businesses will continue.
And the art of what we've been trying to achieve is to make those investments in support of our bankers and our businesses, and improving our technology at the same time as managing expenses in the disciplined way that we have to keep the ratio at 60% or better.
I think in ---+ it's not behind us.
We continue to rationalize the branch network, and in the third quarter I think you'll see another consolidation.
It's like a 3 to 1 type of deal, Mark.
But the team there continues to rationalize the branch network and reduce the footprint size.
Sure.
Mark, it's <UNK>.
I guess what I would say is more a return to a normalcy.
I think it would be ---+ we're ---+ inside the Bank, we see this as really a step coming perhaps closer to a normalized state, when you think about where our positions are.
So there isn't a concern that we have with respect to the portfolio.
We talk to the people about the flows.
There is really nothing there that would suggest that this is anything other than coming to a normalcy for our organization.
No, no.
If implicit in that question is oil and gas, or they have been implicit in that is Shared National Credit, everything is running within normal bands for our particular business.
So, yes it is within the middle-market bank, but again, we really like where the classified and NPL levels are in the book.
Could they go down and get better from here.
Absolutely.
Could they go up a tad from here.
So just ---+ but go ahead, <UNK>.
I think you covered it.
As I did in my comments, I think we are at historically low levels in there.
And so it will bounce around as things ---+ and you see the trend, the flow: things coming in, being cured, things coming in ---+ back and forth.
So I think you will see some lumpiness in there.
That's right, <UNK>.
We've got a couple of classifieds.
One is just paid off in full.
One significant one was ---+ got additional capitalization, already been upgraded and approved.
So again, just ---+ we'd love you to think about our portfolio as having $10 million to $20 million to $30 million exposures that move around.
And we're at such a low state right now that any one of those makes a basis point move for us that might appear, on its face, material.
But again, just working with the guys just the other day, and working with our Dan Bley, we just don't see it.
We don't see anything here that would suggest that there is anything other than a bump along for the foreseeable future.
Right.
And then you look at the days past due in the commercial or the consumer book, and those levels are still declining.
Yes, so I think ---+ let me start and I'll hand it over to <UNK>.
But with regard to loan growth on the consumer side, you saw a significant growth quarter-over-quarter, and that was ---+ some of that was a reflection of the market rates.
We had seen apps slow down a little since the first quarter, so that's factored into our thinking here on the residential side.
And on the commercial side, I'll let <UNK> touch ---+.
Hey, <UNK>.
Certainly the good news is that Webster has been investing in our people and our markets for some period of time.
So we like to think that we've got more good athletes in various markets helping us do well.
But in fact what happened in this particular quarter that we think will happen in the next quarter is some growth, which we had expected to see in Q2 quite frankly on the pre-pay side.
And I'll be even more specific with respect to our I-CRE book.
So, that should have happened in Q2.
It probably will happen in Q3, and so how <UNK> guided you is probably appropriate.
Now, we'd love to surprise a tad on the upside to that, but our guess is we think that's fair guidance for you.
Well, that's a ---+ we've run it through our model, so it's not ---+ it depends on each portfolio.
And that's where we are right now; once we get the loan growth, and we look at our existing portfolio.
And that's how we ended up being in the range of where we are today.
As we indicated in the past, we like to be anywhere from 1.10 coverage to 1.15, and the model informs us about where we are.
So it's going to depend on where the growth comes during the quarter, as well as the existing portfolio.
But he's right: we're guiding to the same, but it could be lower.
Could be higher, too, right.
Could be higher; could be lower.
Well, sure.
That would be the plan, would be that over time ---+ and we've talked about this ---+ we ought to be able to get it down.
What we're trying to be careful about is to continue to invest in our businesses, so it's not all a save.
It creates opportunity, that revenue growth, to not only manage efficiently but to invest in the businesses.
So we're just trying to achieve that balance.
And that's why we're saying at this point, on just a single forward quarter basis, that we think we can keep it under 60%.
Over time we think we can drive it down and invest in our businesses.
It's about $2 million a quarter, somewhere around there.
From a premium standpoint, we think it will be about flat quarter-over-quarter.
Yes.
No.
HSA is part of it, but we did add staff, a customer-facing staff.
And more significantly is we go through our annual incentive comp cycle at the beginning of the second quarter, so you get a full quarter of that.
So, if you look at base comp, all things being equal, you would expect that to go up about 2% on an annual basis.
That's driving it.
And then the last piece, which is worth a couple hundred thousand dollars as well to that number, as you saw, our stock price went up about $2.50 quarter-over-quarter, and the accounting for that probably is worth about $600,000 to $700,000 for the quarter.
The other income included ---+ I think as we highlighted in the first quarter call ---+ first quarter over second quarter, swap volume was about half of where it was in the second quarter.
And I think <UNK> just hit that.
Yes, that's correct.
We had less snow in the second quarter (laughter).
No, seriously, we had about $1.8 million in snow removal expense in the first quarter.
So you can call that seasonal, I guess.
That's all a driver.
Well, they could.
I think that, again, it's the balance there.
I would say that most providers of HSA accounts are less concerned with the deposit rate than they are with the quality of the service they're getting from their partner; and the technology, the platform, the experience that their employees are having.
So, we'll just have to see what happens in a rising rate environment.
But we believe that these purpose-driven, long-duration, low-cost deposits are not going to have a high elasticity going forward.
We'll just have to see, but that's our view.
And to the extent that that does become a competitive factor in terms of what the rates are that are paid, we'll be sensitive to that.
But at this point that hasn't been the driver.
We could, but we've tried to plan for that in our projections.
Well, you're saying where we're sweeping to the investment accounts.
No, we actually ---+ we have planned for that activity.
I think you probably know we have $1 billion right now that is managed in that fashion.
So there's trade-offs.
There's obviously less expense that's involved.
There could be nominally lower revenue as well, but we look at it as part of the overall program.
Yes, and <UNK>, they typically have higher balances, deposit balances, as well, those that sweep into investments.
(multiple speakers) we don't think it will have a meaningful impact.
Yes.
<UNK>, that's in the run rate for the quarter.
There will always be additional capital spends, particularly with respect to mobile banking and online expenditures like that, but the risk piece is all in our run rate.
So, it's primarily 30-year jumbos at about 4%.
And as far as projections, I think that's going to be subject to where the rate environment is.
Yes, it's the rate environment.
It's how we want to manage the balance sheet; interest rate sensitivity ---+ all those factors come together.
But it really is a great relationship development tool and very, very high quality with a decent return.
And our mortgage customers have six products with us.
It's not just about the mortgage loan.
It's about relationship development.
It's consistent with the mass affluent strategy.
This is all positive.
Not off the second quarter.
I think you'll see it taper down a little bit.
We see it staying relatively flat for the next year.
We have noticed a little bit of percolation.
Some of the community banks have been pushing rate a little bit.
Some of the larger banks have been having specials that they've provided, so we're tuned into it.
We have our own set of specials we could offer.
We haven't felt too much pressure at this point.
We haven't seen much uptick in overall cost of deposits.
In fact, in some cases, we have been able to continue to drive it down.
So we're alert to it; but, as yet, it has not created a major event.
Yes, it will stay around that.
Around that level.
Yes, I think we're good with that over ---+ as we look out over 12 months.
Thanks, Christine.
Thank you all for being with us today.
Have a good day.
