Webster Financial WBS reported adjusted third-quarter 2024 earnings per share (EPS) of $1.34, which missed Zacks Consensus Estimate of $1.35. This compares unfavorably with earnings of $1.55 reported a year ago.

Find the latest earnings estimates and surprises on the Zacks Earnings Calendar.

Results were affected by a fall in non-interest income and higher provisions. However, lower expenses and increased net interest income (NII) offered some support.

Net income applicable to common shareholders (GAAP basis) was $188.8 million, down 15.1% from the prior-year quarter.

Webster Financial’s Revenues & Expenses Decline Y/Y

WBS’ total revenues in the quarter dropped 4.4% year over year to $647.6 million. The top line lagged the Zacks Consensus Estimate by 3.8%.

NII increased marginally year over year to $589.9 million. The net interest margin was 3.36%, down 13 basis points (bps).

Non-interest income was $57.7 million, down 36.1% year over year. This includes a $19.6-million net loss on the sale of investment securities and a $16-million loss on the exit of non-core operations, including the write-off of a related customer intangible.

Excluding this, non-interest income rose 3.2% from the previous-year quarter to $93.3 million. The increase is primarily attributable to the addition of Ametros and higher investment services income.

Non-interest expenses were $349 million, down 3.8% from the year-ago quarter. This includes a net $20.6 million related to restructuring costs and other adjustments, partially offset by a benefit on the FDIC special assessment, compared with a net $61.6 million of Sterling merger charges a year ago.

Excluding these charges, non-interest expenses would have been $390 million, up 7.8% year over year. The increase is primarily attributable to the addition of Ametros and related intangible amortization expenses, along with investments in technology.

The efficiency ratio was 45.49% compared with 41.75% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.

WBS’ Loans & Deposit Balance Rises Sequentially

As of Sept. 30, 2024, total loans and leases increased marginally on a sequential basis to $51.9 billion. However, total deposits increased 3.6% from the prior quarter to $64.5 billion.

Webster Financial’s Credit Quality Deteriorates

Total non-performing assets were $427.3 million as of Sept. 30, 2024, up 95.6% from the year-ago quarter. Allowance for loan losses was 1.32% of the total loans, which increased from 1.27% in the third quarter of 2023.

The ratio of net charge-offs to annualized average loans was 0.27%, up from 0.23% year over year.