Webster Financial Corp. Q1 2008 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ken Zerbe - Morgan Stanley - Analyst : If I understood correctly, your provision expense of $15.8 million matched your charge-offs for the continuing portfolio. Can you just talk about how you came to the decision not to increase the reserve ratio in your continuing portfolio, given that -- I guess, given the deterioration we're seeing in the credit environment and the fact that most of your peers have been increasing their ratios? Thanks.

Question: Ken Zerbe - Morgan Stanley - Analyst : Okay, great. And then the second question I have, could you just remind us quickly on the liquidating portfolio -- how fast is that running off? And also at what point would you consider increasing your special reserves? Like, what types of things would you be looking for that we could see?

Question: Andrea Jao - Lehman Brothers - Analyst : Andrea Jao from Lehman. I was hoping to get a little more detail on your outlook regarding loan growth. I know you're shifting your mix to a more 50/50 mix between consumer and commercial, but what are the conditions out there? What kind of competition and pricing are you facing?

Question: Andrea Jao - Lehman Brothers - Analyst : Great. How about on the profit side? Are you seeing [thermal and capital] markets driving more of your consumers to the safety of bank deposits? (multiple speakers) talk about your outlook there.

Question: Andrea Jao - Lehman Brothers - Analyst : That was helpful. Thank you so much.

Question: James Abbott - FBR Capital Markets - Analyst : I was wondering, on the home equity in your slide deck you have a really good detailed slide on some of the delinquency trends in the continuing portfolio based on loan to values. And I don't know if you mentioned it earlier in the call, but if you did, I apologize -- but do you have any updates on that table as to how -- especially, like in the 95% to 100% combined loan to value part of the portfolio -- what the non-accrual rates in the 30 to 89 days delinquency, are we seeing a lot of migration there or fairly stable?

Question: James Abbott - FBR Capital Markets - Analyst : Well, it's just I'm trying to understand a little bit about how things are developing. So, if the liquidating portfolio is a better indication of how -- of things to come, then I'd be interested in that, if you think that's --

Question: James Abbott - FBR Capital Markets - Analyst : Yes. So the short version is that you're seeing some modest improvement in the continuing portfolio's home equity, but further deterioration in the liquidating portfolio?

Question: James Abbott - FBR Capital Markets - Analyst : Okay. I appreciate that. And then another question and then I've got a housekeeping type of issue, I want to clarify a comment you made earlier -- but on the C&I credits that went in non-performing status or net charge-off status, were there any specific industries? Or can you give us some color as to what was behind the default on those? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: James Abbott - FBR Capital Markets - Analyst : It sounds like those both could be related to the housing industry? Is that --?

Question: James Abbott - FBR Capital Markets - Analyst : Okay.

Question: James Abbott - FBR Capital Markets - Analyst : Okay. And the last is a real quick a housekeeping. Just -- you mentioned that in the press release, there is some seasonal expenses I think of $5 million. But then you mentioned in the Q&A or later in the outlook, I guess, that expenses should go up in the second quarter. Am I interpreting that correctly? That the seasonal expenses will be offset by some decreases elsewhere?

Question: James Abbott - FBR Capital Markets - Analyst : Okay, thanks. Just wanted to make sure I interpreted it correctly. Thank you.

Question: James Abbott - FBR Capital Markets - Analyst : Super. Okay, thanks.

Question: Collyn Gilbert - Stifel Nicolaus - Analyst : Just a follow-up, actually, while we're on the discussion of expenses. Jerry, could you just give kind of an indication of where you think a quarterly run rate is on expenses over the next couple of quarters?

Question: Collyn Gilbert - Stifel Nicolaus - Analyst : Okay. So by you mentioning dramatic changes, is that how you're going to get to that 60% efficiency ratio? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Collyn Gilbert - Stifel Nicolaus - Analyst : Okay. And you're sticking to that goal by year-end?

Question: Collyn Gilbert - Stifel Nicolaus - Analyst : Okay. And then Jim, just to talk about credit for a second. Could you just give some color as to the life cycle of these three credits that were charged off? Because I thought that the guidance post the fourth quarter was that the provision, or at least the core provision, was going to be fairly comparable to fourth quarter. And I think at that time, you said too that you didn't necessarily see sort of systemic risks or significant deterioration of any outlook for credit, but yet we had a pretty sizable jump in the provision. And I'm just trying to quantify what you mean by no systemic problems.

Question: Collyn Gilbert - Stifel Nicolaus - Analyst : Okay. So were these on non-accrual status at the end of the year?

Question: Collyn Gilbert - Stifel Nicolaus - Analyst : Okay. And then just finally, Jim, if you could just sort of give some color as to how the executive team is laying out now with the pending departure of Bill and with Joe having left, and just how you see the management -- the executive management team structure going forward?

Question: Collyn Gilbert - Stifel Nicolaus - Analyst : Okay, great. Thank you very much, guys.

Question: Gerard Cassidy - RBC Capital Markets - Analyst : I apologize if you've answered some of these questions. I've been jumping on and off of your call, so I apologize if you have to repeat them.

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Regarding the Visa gain that you reported of about $0.03 a share, did that include the reversal of any expenses that you may have taken in the fourth quarter on the Visa litigations?

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Okay, it is in the $0.03.

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Good. The next question is on the loan to deposit ratio, is there any target that you guys would like to be at by the end of '08?

Question: Gerard Cassidy - RBC Capital Markets - Analyst : And then on the net charge-offs that you guys just addressed, the three commercial net charge-offs, I guess, were two of those in the asset-backed portfolio?

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Okay. And in the asset-backed portfolio, is there any degradation in the portfolio geographically? Are you seeing a stronger part of the portfolio in the Northeast, weaker in the West or something like that?

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Okay. And then finally, on the liquidating home equity portfolio that you guys mentioned, in a recent presentation you made in February, you gave a nice breakout of the loan to value, the consolidated loan to value. The portion of 95% to 100% -- are you seeing higher charge-offs in that, when they go delinquent? Are they showing higher charge-offs in the liquidating portfolio, that part of it, versus less than 80% or 80% to 85%?

Question: Gerard Cassidy - RBC Capital Markets - Analyst : And what kind of severity are you seeing in that 95% to 100% when it does go delinquent? Are you seeing [up with] the 100% type of charge-off?

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Okay.

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Okay. And then just finally, some of the larger banks are alluding to the fact that the consumer is having a behavioral change, in that when the house falls below the value of their first and second mortgage, they have the capability of paying but they're choosing not to pay. Are you seeing any of that? Or can you dig into that at all and see if you're being affected by that, if that's happening?

Question: Damon DelMonte - Keefe, Bruyette & Woods - Analyst : Pretty much all of my questions have been answered, but just one last one regarding the tax rate. I know that the rate this quarter was higher than yours -- it would have been 31%, but it was higher because of the FIN 48. What are you guys forecasting for a rate going forward?

Question: Damon DelMonte - Keefe, Bruyette & Woods - Analyst : 31%? Okay. That was it. Thank you.

Question: Andrea Jao - Lehman Brothers - Analyst : Just circling back on deposit service fees, I know those were seasonally weak this quarter, but if you are making an effort to bring in more deposits, are you more willing to waive fees and therefore the ramp-up in service fees should be slower going forward?

Question: Andrea Jao - Lehman Brothers - Analyst : Fantastic. Now, on page 14 of the press release, you did show 30 to 90 days past dues for the continuing portfolio. In those [mostly] pricing have gone up between year-end and March 31. What do you think that translates into with respect to the NPA ratio on the continuing portfolio?

Question: Andrea Jao - Lehman Brothers - Analyst : Yes.

Question: Andrea Jao - Lehman Brothers - Analyst : Okay, thank you so much. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Andrea Jao - Lehman Brothers - Analyst : Okay, fair enough. Thanks again.

Question: James Abbott - FBR Capital Markets - Analyst : Real quick question again. On the commercial business lending, wondering if you could take us -- as we kind of get into a weak economy here -- can you take us through what you do as a company that may be better than industry practices to help prevent losses there? What sort of policies and procedures do you have on that portfolio? It's something that most of us have taken for granted over the last few years as being just a performing portfolio. And maybe give us some detail on how you manage that business.

Question: James Abbott - FBR Capital Markets - Analyst : That helps. Can you maybe give us sense on what the loan to values you would do on equipment and then also on asset-based -- asset lending? And then also frequency of monitoring, how frequently you collect the financial statements of the companies?

Question: James Abbott - FBR Capital Markets - Analyst : Thank you for expounding on that. Thank you.