Good morning and welcome to Webster Financial Corporation's Third Quarter 2014 Results Conference Call. This conference is being recorded. Also, this presentation includes forward-looking statements within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to Webster's financial condition, results of operations, and business and financial performance. Webster has based these forward-looking statements on current expectations and projections about future events. Actual results might differ materially from those projected in the forward-looking statements. Additional information concerning risks, uncertainties, assumptions and other factors that could cause actual results to materially differ from those in the forward-looking statements is contained in Webster Financial's public filings with the Securities and Exchange Commission, including our Form 8-K containing our earnings release for the third quarter of 2014. I will now introduce your host, Jim Smith, Chairman and CEO of Webster. Please go ahead, sir.

Thank you, Jessy. Good morning, everyone. Welcome to Webster's third quarter earnings call and webcast. I'll discuss highlights of the quarter and LOB performance, and CFO, Glenn MacInnes, will review financial performance, after which President Joe Savage, Glenn and I will take questions. I would best describe Webster's results for the third quarter as more and better. Solid loan growth, funded primarily by deposit growth produced revenue growth in excess of expense growth resulting in the 14th straight quarter of positive year-over-year operating leverage. Credit quality trends remained favorable, reflecting the improving economy and vigilant risk management. Beginning on Slide 2, net income increased 7% year-over-year to a record $50.5 million. While earnings per share increased 8% to $0.53. Return on average common equity improved linked quarter and declined slightly year-over-year due to higher capital levels. All my further comments will be based on core operating earnings. Looking at Slide 3 and 4, loans grew in all key categories, both linked quarter and year-over-year, with notable continuing strength in commercial banking. Overall loan balances grew 2% linked quarter and over 8% year-over-year. That solid loan growth 85% of which came in the commercial bank, once again offset margin compression from lower earning asset yield and helped produced record net interest income. Noninterest income grew 7% linked quarter and 11% year-over-year, including the first favorable year-over-year comparison from mortgage banking revenue in some time. Total core revenue grew 2.8% linked quarter and 6% year-over-year to a record. We've now reported 20 consecutive quarters of year-over-year revenue growth dating back to 2009. Expenses grew significantly less than revenues both linked quarter and year-over-year, even as we continually invest in high economic profit businesses and risk infrastructure. The net result is an efficiency ratio below 59% for the first time, pushing core pretax,…

Thanks, Jim. I'll begin on Slide 11 which summarizes our core earnings drivers. Our average interest-earning assets grew $295 million compared to second quarter, almost 90% of what was attributable to our loan portfolio. Net interest margin was 317 basis points in Q3, combined with our loan growth this resulted in a net interest income of $157.4 million, up over 1% from prior quarter and almost 5% from prior year. Core non-interest income increased by $3.3 million or 7% on a linked quarter basis with the primary driver being the expected rebound in mortgage banking. Core expenses were $2.4 million higher than Q2 with the majority of the increase related to our investment in our HSA Bank platform and client-facing staff adds. Taken together, our core, our record core pre-tax pre-provision earnings totaled $83.5 million and were up 4% linked quarter and over 11% from prior year. Our pretax GAAP reported income totaled $74.1 million for the quarter and our reported net income of $50.5 million includes an effective tax rate of 31.9%. Slide 12 compares the drivers of net interest margin to prior quarter. As highlighted, we achieved quarterly growth and average interest earning assets of $295 million. The yield on securities decreased by eight basis points and interest income from the portfolio was $1.2 million lower. This resulted from higher premium amortization of $628,000 as well as lower reinvestment rates. Cash flow of securities totaled $264 million with a yield of 315 basis points. We also sold $42 million of securities including our last two TruPs. Security purchases totaled $389 million with an average yield of 257 basis points and duration of 3.8 years. Average loan balances grew $262 million and a portfolio yield of 383 basis points was flat to Q2 resulting in an increase in interest…

Thanks, Glenn. Our third quarter results demonstrate continued success in growing our businesses and improving profitability in pursuit of economic profits. We are excited about the special opportunities that expansion of our HSA Bank present and we continue to make good progress in our quest to be a high performing regional bank. We're now happy to take your comments and questions.

(Operator Instructions) Our first question is coming from the line of Mark Fitzgibbon with Sandler O'Neill. Please proceed with your question. Mark Fitzgibbon - Sandler O'Neill & Partners, L.P: Good morning. First question I had for you Jim was on a standalone basis, what does the HSA Bank’s core profitability look like? And will that change a lot with the acquisition in there?

So actually we roll the HSA Bank into the other segments for segment reporting. But what I will say is that HSA Bank earns well in excess of its cost of capital. And as it grows its unit profitability increases. So we see it contributing at a higher level. There will be investment required as we build out our platforms and as we make the transition including the JPM platform and the CIGNA platform. So the rate of EP growth will slow in 2015 and then amplify thereafter.

The only thing I would add Mark, it's Glenn, is that this is a business as we've highlighted in the past, the fee revenue from this business pretty much covers the direct expense in this business. So the spread is all earnings for both the HSA business and for the bank.

Right, right now the fees cover between 80% and 85% I think of the expenses. Mark Fitzgibbon - Sandler O'Neill & Partners, L.P: So standalone today, it is a double digit ROE business?

Yes. It is. Mark Fitzgibbon - Sandler O'Neill & Partners, L.P: Okay. And then secondly on the expense front. You guys have done a great job of driving down cost. I wondered how much room you think might be left to drive cost lower and if so what areas might those cost synergies come from?

So we are happy where we are with our efficiency ratio. I think we look at it from an operating leverage standpoint. So there are really two constraints as we go forward or two targets. One is to be below 60% and the other is to achieve positive operating leverage. That being said Mark, we continue to as you see in this quarter, $2.4 million increase quarter-over-quarter in expenses, we are not limiting the investment in the business for future revenue. So that's our model. So we don't give guidance to say 55% or 56%, we just keep operating with positive operating leverage quarter-over-quarter and staying below the 60%.

Thank you. Our next question is coming from the line of Bob Ramsey with FBR Capital Markets. Please proceed with your question.

Hey, good morning, guys. Wanted to talk a little bit about interest rate. I know Glenn in your guidance you mentioned a couple times the NIM outlook is based on sort of where rates are today and as you think about sort of some of the rate shift movements, that's based on rates, obviously rates are very dynamic and where they are today is not where they were two days ago and so I am just kind of curious, when you talk about where rates are is it with the 10 year at 2% or 2.40%?

So if we are -- we are talking -- if we are looking out Bob and we are looking at the 10 year swap and we are looking at the forward curve which implies a 2.30% around 2.30% at yearend or 2.60% at the end of 2015 and close to a 2.90% at the end of 2016. That's the curve that we are looking at. And we would look to bottom out on NIM sometime in mid to late 2015.

Okay. And over the interim, is the expectation that you’ll continue to see the kind of the same pace of compression. I know you gave guidance for next quarter but continue to be 2 to 4 bps if you will per quarter from now until that point.

I think that's probably about right. The only thing I would highlight and we have charts on this. And when we look back at where NIMs been even prior year third quarter, NIM was at 3.23%, go back two years it was at 3.28%, and yet when you look at our net interest income, it continues to grow. So in this quarter NIM being at 3.17%, compression of two basis points, and here we are at $157.4 million which is a record for the organization. My point being that, we've been very successful on all lines of business in outrunning lot of the NIM compression. And most of what you see when you are looking at the 10 year and you are following it out as far as when do we bottom out, is going to be attributable to our investment portfolio, right, just by the way it's structured. And that being said our investment portfolio is 80-85 basis points higher than the peer group.

Yes. And then last question and I will hop out. But sort of maybe looking at it from another angle, with rates falling it could prompt more refi activity and help the mortgage bank. I know another bank this morning said they have seen application surge in the last couple of days. So just curious what if anything you have seen on the mortgage side in the last couple of days and how are you thinking about that business?

Our app volume rates now on the mortgage side is basically flat going into Q4. On the mortgage banking side it is actually down 20 basis points or 20%. So maybe the last two days but we haven't seen that is early in the quarter but that's what we are seeing right now.

If we are making the trade we will take the higher rates.

Yes.

Thank you. Our next question is coming from the line of David Darst with Guggenheim Securities. Please proceed with your question.

Hi, good morning. So could you comment on maybe the size of investment that you are going to be making in the HSA Bank and kind of what the timing of the conversion is and then at what point do we begin to see the earnings accretion that you are expecting?

Sure. First of all the transaction is subject to regulatory approval. And it's hard - handicap that it takes it long as it does but let's just say maybe we will get that done sometime in Q1 you might say. At that point the deposits would come on to our balance sheet and then we would have a transition period over multiple quarters where JPM will continue to do processing and then we would gradually take that on and accordance with the agreement, but we would actually have the deposits on the balance sheet at the time of the transaction closes. So we would then be investing in the conversion to our systems. We also would be investing in converting CIGNA directly into our program as well. So over a period of several quarters we will be making investment of multiple millions. I think it's hard to put a cap on it but you could say even $10 million or so over 12 to 18 months for that purpose. So that's why I made the comment that the rate of EP may slow a little in 2015 and then it would amplify again in the out years.

David, the only thing I would add is and I don't if you heard my opening comments but a $1.3 billion about 40% of that will be invested in securities with the yield of somewhere between 250 and 275 basis points at duration of five years. And in the borrowings we would be paying -- with the remainder would be paying down at 20 to 25 basis points. So that gives you an indication of how the JPM HSA business is priced.

Right. So the accretion would begin in the first year, so within a couple of quarter it would have a positive impact and then it would increase thereafter.

The only other color I'll add is that if you look at our pricing, we are at 28 basis points on our portfolio. We have higher balances in our portfolio. And as you know these businesses are tiered, right. So the higher the balance typically more higher the rate so there is generally lower balances with the acquisition.

Right. So our blended rate will decline.

Okay. I understand. And then, looking at your CRE originations this quarter and then the growth in the originations and asset-based lending, are you trying to kind of manage the duration of the balance sheet and kind of avoid putting on too much various asset classes at lower rates today?

David, this is Joe. No, we are always seeking the best available transaction at the time and then we put it to our treasury folk to price it as best it fits for the opco strategy, the institution, so we like to give optionality to the client, we will go for best transaction. So whether it's a float or fix or it's swap, we let the client decide on that; probably the interesting dynamic is that the CRE business saw more pay off activity which we had been predicating, which had the tendency to drive up yields and spreads because that has been probably the -- the area with the lowest spread business; on the ABL side, that’s just, it's 100% a float book and it's a great mix of direct business and great participation with our middle market folks, so we will take any piece of good commercial business that we can get. They all have their attributes. The thing we love about CRE is the usually the swap comes with it, what we love about ABL is the strong noninterest income items that come with it. So it's really -- we give it to the guys in treasury and they figure out how they want to leverage it.

Okay. And, Glenn, one more question. Would you -- or could you quantify the number or dollar volume of loans that are at or below floors?

It's about $1.8 billion and I think they are out about 66 basis points.

Thank you. Our next question is coming from the line of Jared Shaw with Wells Fargo Securities. Please proceed with your question.

Hi, good morning. Just a couple of questions. One, could you talk a little bit about the growth in trends you are seeing in the asset-based lending and equipment finance book and how that plays into the growth in overall commercial lending?

Sure, Jared. This is Joe again. And thanks for the question on asset based lending. I think the story in asset base is a very, very good story and really there is two dynamics at work that's making it I think performed so well. Well, I guess the first thing you would have to -- you can't miss, take a look at the asset quality statistics. So it kind of took the team a little bit of time to deal with the box that we were putting them in. And that box was going to be -- we just wanted higher credit quality transactions, more emphasis on creating sticky relationships with clients. And so the first thing that happen in ABL is as we seize the attrition, there was a maturation on the part of the relationship managers and the story what I mentioned to David earlier and the really wonderful story that's really evolving here is the partnership under John Ciulla's leadership between asset based lending and the middle market, the give-get is pretty impressive. We had a meeting just yesterday and we swap this year some $30 million of origination that came from the middle market to asset based lending. And this year we moved over about $50 million or $60 million from asset based lending as it has matured into better transaction within the middle market. And that's kind of new for us. So you put it all together and this thing is really doing what we always all along thought it could doing, I just got to mention again it's really one of the great sources of noninterest income for our institution and so we are really happy there. When you get to the equipment finance business, again that was a story of -- we had to re-find -- we had to find our footing again. We did the same thing with respect to stabilizing the credit book. I mean you take a look at those statistics, they are spectacular, and they have been in a net recovery position for probably a couple of years now. And understand Hannah's leadership that group, Stan was very deliberate with respect to the RMs we brought on, we expanded the territory to get into some of the areas where the particular class of asset was more prevalent and you think of where transports are. You are not going to see transports in New England. And so you get that going, he brought new BDOs in and the result is a sustained steady upward client. So we are delighted to have it in our portfolio. And I think it tells that story of that slow but steady growth that we are seeing in the commercial bank in Webster overall.

Would you say that the growth in those categories is similar to the growth in the overall commercial side, or would that outpace the other commercial growth at this time?

No. I would say the other commercial side then I am going to just keep by clearly away from this for just a second, but on the C&I side, they are doing fine but I think middle market segment, they are really there. They are really the ones that are driving -- it's basically everybody contributing but the rate at which the middle market grew is at a slightly greater rate.

ABL has some seasonal elements to it. And generally Q4, there is some pay down, so this trajectory is not straight line.

Okay. Great. Thank you. And then, just shifting gears a little bit, on the securities portfolio, probably for Glenn. When you look at the growth in HTM versus AFS, is that a shift? Are you reallocating into HTM or is that primarily the new purchases coming in through HTM?

Yes. It's the latter. It's the new purchases coming in.

Okay. And is that more -- you are putting a little more structure in there and you want sort of the protection in the higher rate environment? Or what are your thoughts in terms of -

It is in part the protection in the higher rate environment

Okay. And then, finally, could you let us know what the prepayment penalty component of interest income was this quarter?

Prepayment, it was probably -- I have to come back to you with Jared.

Thank you. Our next question is coming from the line of Jason O'Donnell with Merion Capital Group. Please proceed with your question.

Good morning. With respect to the NIM guidance of two to four basis points of compression and then your comments about longer-term margin performance, what are you all assuming in terms of deposit costs? Does your guidance assume that deposit costs remain relatively stable or begin to tick higher due to market forces or shift to the duration strategy?

I think it's relatively stable, Jason.

Okay. That is helpful. And then just thinking about the funding strategy, how should we think about the size of the securities portfolio going forward, excluding the impact of the HSA's acquisition? Do you expect the securities book to remain flat or continue to maybe come down a little bit as it did this quarter?

It should remain relatively flat.

Okay. And then my last question is on the -- just kind of thinking about your lending activities outside of the New England market, what is the size of the loan portfolio at this point that is situated in the greater New York City market? And can you talk a little bit about the dynamic there and whether or not you are seeing any additional growth in the multifamily space this quarter, given what is happening with rates?

Sure. Jason, couple of things. When we think of the New York market, we capture Westchester in those analytics and of course it has preponderance of asset based lending and there is also a nice CRE penetration and so if you think about our total book, it's at $6 billion in change book and it's a billion plus that sits in the New York, that New York Westchester county market so and it's an area that has been -- actually all of our regions are growing. Probably the only one that's kept flattish over the last year has been the providence, Rhode Island area. But it's a nice grower for us not surprising and it's a nice mix of assets, CRE middle market asset based even some equipment finance in that area. So and then the second part I missed the second part of your question.

I was asking about multifamily lending in particular, just if you talk a little bit about what you are seeing in the market given the shift in rates and so on.

Yes. I mean New York multifamily, we are not participating and we can't get yield since spreads and return on capital but that we want, but we are broadly doing -- we are broadly doing multifamily -- it still represents a favored asset class for us. So think of it and are rightly booked at about 26%, 27% of the total book. We like it. I mean our story and Bill Wrang talks about, our Head of Commercial Real Estate talks about that a lot. We still like the multifamily. You think about the Northeast and you think about really it's very difficult to get those into portfolio. There is just not lot geography to get to play with. And so we continue to believe in it. We like to construction. We like it when it is stabilized and we will continue to do more. We do have to get a return on capital. I mean that's really the basis that we see, and probably the other thing that's most important for everybody; we are always going to work with those sponsors that have track record in these respective spaces. So I hope that answers your question on the multifamily side. It's something we like; we will continue to do in major fashion.

It does. Thanks, guys.

Thank you. The next question is coming from the line of Collyn Gilbert with Keefe, Bruyette & Woods. Please proceed with your question. Collyn Gilbert - Keefe, Bruyette & Woods: Thanks. Good morning, gentlemen. Just three sort of quick questions. One, Glenn, for you, on the brokered CDs and the retail CDs that you put on this quarter, you said for 200 bps, I think if I heard you correctly, what was the duration on those?

Five years. Collyn Gilbert - Keefe, Bruyette & Woods: Okay. And then second question on the pipelines within your buckets, the linked quarter growth was really strong in your pipeline. Is that mostly typical, just what you see is going from Q2 to Q3 or are you seeing acceleration trends in general there?

Hi, Collyn, Joe. I will speak -- I could speak with respect to the private bank and the commercial pipeline. So you are absolutely right. It is a seasonal pop, I looked at, I am getting prepared for this, and I looked at the last three years. And it's -- that pipeline feels about right I want to say it's three, seven years. That's perfect for getting us and probably the really good story is on the private bank side where after the things that Jim had articulated earlier, once we stabilize the book, we are now seeing a nice pop in that pipeline. So I would say that's a good one. That's a good story there. Collyn Gilbert - Keefe, Bruyette & Woods: Okay. That's helpful. And then just finally, Glenn, in your comments when you were talking about capital and stress testing and you had mentioned that you are in a position now where you have flexibility to pursue acquisitions, can you guys talk about that and also maybe put that in context of your ability to, as you said, consistently grow through this NIM pressure? Could we -- how do you think about acquisitions over the trajectory if we stay in this sort of flat curve environment?

Yes. Collyn, Jim. I will respond that what we are focused on, I know it sounds like a broken record on this is continually improving our performance, growing revenue, having positive operating leverage with the idea that as the world gets tougher, people may decide that they want to take a partner. And we want to be in the best possible position when a seller chooses a buyer to be in that considered set and to be the like minded partner that they would think about. But as far as how we are looking at it as a prong of the business that we need in order to generate growth. That's not how we see it at all. So we are going to continue to focus on improving ourselves, bifurcating our valuation based on the quality of our performance, so our currency will have more value if the opportunity were to arise. Collyn Gilbert - Keefe, Bruyette & Woods: Okay. So no real change then in your position on this?

No.

Our next question is coming from the line of Matthew Kelley with Sterne Agee. Please proceed with your question. Matthew Kelley – Sterne Agee: : Hi. Joe, I was wondering if you can give us -- what was the yield on the $195 million of commercial real estate originations in the quarter. Just CRE originations, specifically.

The yield on the origination -- you know what Matthew, I am going have to look for that.

We have the funded yield.

3.20% sorry about that. Matthew Kelley – Sterne Agee: 3.20%. Got you. And then what was the origination yield on the ABL -- the $122 million there?

People with faster eyes and me are scanning quickly. And yields on the ABL were 3.75%. Matthew Kelley – Sterne Agee: Got it. And, Joe, when you drive around the metro Boston market, obviously, a lot of development. Some higher end type stuff. How would you characterize the risk rating for the Boston market today versus a year ago? And any thoughts on that -- the supply side of the market and residential?

You are making a good point. One of the -- we looked at a couple of things. I made a comment earlier, we like multifamily, we do vary when multifamily goes too high end, when price per square foot goes up and so when you get into some of these major market, we are going to look at askance at transactions where we don't think there is going to be wide acceptance with respect to the product. The other area that we are little bit concern that about and I think you are probably getting to this is we are little bit worried about proceeds as these assets flip and trade and everybody thinks they can add more value to that product. That puts pressure on a bank to augment the proceeds. So we are always careful about the DSCRs and the LTVs when we are entering it to these transactions. And we tried to be realistic about how we run our discounted cash flows on these. So very, very careful and hot markets like that. You heard me made the comment earlier with respect to New York City; we are really worried about it, multifamily market down there. And we are just not seeing a lot of activity that would meet our risk return criteria. I hope -- is that what you are getting at.

Yes. Absolutely. And a question for Glenn. In the guidance on fee income of up 2% to 3% core, can you just go through again what your thoughts are on mortgage banking? I mean obviously rate is down a lot. I think the expectation was that would improve, but talk us through the sequential change from $500,000 to $1.8 million, what drove that and then what you expect in Q4?

So $500,000 to $1.8 million is about $300,000 which was low comp from the prior quarter so that was as we said all we got to realize the value of those assets. And then it was 50% increase in settlement volume, right, quarter-over-quarter. So settlement volume went from a number of -- in the second quarter $56 million say to $83 million. What we see right now going through fourth quarter, settlement volume drop in 20%. So that's pretty much driving, that's driving the reduction quarter-over-quarter. Of course the other thing is the rate. So we've seen that about 1.43% to 1.54% and we think that's about flattish thing about flat. So those are the key drivers there.

Got you. And then just questions on the HSA deal. Can you remind us again core deposit intangibles and just the amortization we should be adding there?

We can't remind you. We haven't first publicized or talked about that yet. We are still-- you will get more information after I guess --

So that information was not disclosed. We did indicate we have about 3% tangible book value dilution and that we have earnings accretion beginning in year one.

And we see thereafter

After close we will be able to share all that information.

Thank you. Our next question is coming from the line of Casey Haire with Jefferies. Please proceed with your question. Casey Haire - Jefferies & Company: Hi, good morning, guys. Wanted to follow up on the asset sensitivity profile. Obviously, the HSA deal will improve that. I'm just curious why wouldn't -- I mean as of 6/30, you guys were kind of, I would say, at the lower end in terms of a parallel shift, 200 bps, and this may put you a little bit closer to the middle of the pack. I am just curious what is holding you back, given this HSA concentration certainly is a leg up versus peers? And on the asset side, 67% loans floating, it seems like you guys are better positioned than most, yet still showing pretty conservative. I'm just curious, what is holding you back? Is it the securities book concentration or just conservative assumptions elsewhere?

I think it in part is securities book but it is driven by rate at the end of the day, right. And the rate environment. We have as you know parallel shift 200, I think our asset sensitivity is almost 4%. So we have improved it over the last five quarters and I can lay that out for you but we definitely taken steps that have made us more asset sensitive over the last couple of quarters. Casey Haire - Jefferies & Company: That is 4% on NII or 4% PPNR?

PPNR Casey Haire - Jefferies & Company: Okay, got you.

I think that's improve. I mean it was -- if you go back four quarters ago, five quarters ago, it was actually negative. And so we are more liability sensitive or neutral at that point. And so we've definitely taken steps to become more assets sensitive. Casey Haire - Jefferies & Company: Okay, understood. And apologies if I missed this. Do we have a close date for the HSA deal?

No. We indicated, we do not have close -- it is subject to regulatory approval, so however long that takes, I made the comment that you might -- I don't want to assume anything but let's think in terms of maybe Q1 but we are not going to predict that.

Thank you. The next question is coming from the line of Matt Schultheis with Boenning & Scattergood. Please proceed with your question. Matt Schultheis - Boenning & Scattergood Inc.: Hi, good morning. Just a quick follow-up on the HSA expenditures for conversions and what have you. How much of those expenditures are likely to be capitalized and how much of those are to be realized as the cash flows out?

Yes. I think that so in our core platform, meaning our existing business as we move to a new platform expanded platform, there is probably, Jim highlighted a couple million, I know probably about $1 million of what you saw in this quarter again for our core business was project management consulting health in the conversion of the platform as well as higher service charges as we move to the platform. We sort of run two platforms at once. And so I think that going forward the bulk of that -- the consulting will obviously follow say 40%, 50% of that number and then the remaining will go -- will become part of our run rate. Matt Schultheis - Boenning & Scattergood Inc.: Okay. It's not going to just be --

We are not buying or developing a software platform. We are buying a platform.

Thank you. We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Mr. Smith for any additional concluding comments.

Thank you, everybody for being with us today. Thank you, Jessy. Good day.