Good morning, and welcome to Webster Financial Corporation's Third Quarter 2016 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 may differ materially from those projected in those 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 2016. I will now introduce your host, Jim Smith, Chairman and CEO of Webster. Please go ahead sir.

Thank you, Michelle, and good morning, everyone. Thanks for joining Webster's third quarter earnings call. President, John Ciulla; CFO, Glenn MacInnes, and I will review the quarter and then Executive Vice Chairman, Joe Savage; and HSA Bank Head, Chad Wilkins will join us to take questions. Beginning on Slide 2, Q3 was another solid quarter marked by continuing strength and loan originations 7.5% year-over-year revenue growth and further improvement in our already strong credit metrics. Total revenue grew for the 28th straight quarter year-over-year. Record net interest income was driven by the 17th straight quarter of year-over-year double digit commercial loan growth, aided by a two basis point increase in the net interest margin. Commercial loans have grown by 14% compounded annually over that spend. Record non-interest income advanced on contributions from multiple categories including continued strength and commercial activities. Higher expenses reflect in part are continuing investment in fast growing high economic profit businesses which in turn helped push pre provision net revenue to a record $90 million. Putting our momentum into perspective, if we exclude for a moment the near term drag from the Boston expansion which produced net expense of $4.9 million or about $0.04 a share in the quarter we would have achieved record net income, a sub 60% efficiency ratio, a return on average common equity of just under 9% and a return on average tangible common equity of just 12%, a solid quarter indeed. I want to reiterate my strategic comments during the Barclays conference last month. We’ve got a couple of terrific differentiated businesses with strategies that have high economic profit potential, namely HSA Bank and Commercial banking. And the Boston expansion qualifies as having high EP potential as well. We are committed to investing in these businesses when the opportunity is right,…

Thanks Jim. Good morning everyone, I’ll begin on slide 3. You can see the solid quarterly growth trends for loans and deposits over the past year with both increasing more than 9% year-over-year. As a result, the loan to deposit ratio remains favorable at 87%. Commercial loans again led the way with year-over-year growth of 13% and now comprise over 58% of the loan portfolio. On the deposit side, transactional and HSA accounts grew by 12% and comprise over 55% of total deposits. On slide 4 loan growth is spread across key segments, with each again posting solid year-over-year growth. Each of the four commercial segments achieved double digit growth compared to a year ago. On slide 5, you can see the diverse sources of our 1.6 billion in deposit growth over the past year. The three transaction account categories on the top of the slide account for 76% of the growth with each posting double digit year-over-year increases. This provides a clear illustration of how Webster benefits from our multiple low cost deposit funding source. Slide 6 shows solid growth in net interest income and non-interest income both to record levels, reflecting revenue growth in all lines of business led by double digit total revenue growth in commercial banking. Non-interest expense growth reflects expenses related to the Boston expansion along with growth and investment in commercial banking and HSA Bank. The net result is 1% year-over-year growth in pre provision net revenue which excluding the Boston initiative would have been 6%. I’ll now turn to the line of business performance beginning on slide 7. Commercial banking continued to deliver strong results reporting solid loan growth of 3% in the quarter and 14% year-over-year. Deposits also grew nearly 14% when compared to last year. Strong loan and deposit growth augmented…

Thanks John and good morning, everyone. Slide 12 provides a financial backdrop for the business momentum Jim and John reviewed. Included are the key highlights of the quarter’s performance with comparative data for the four prior quarter. Starting at the top continued growth in average earning assets combined with an increase in net interest margin led to a record net interest income in the quarter. The two basis point increase in NIM primarily reflects the benefit of higher LIBOR rates. Non-interest income came in above our original estimate as a result the stronger than expected commercial activity. The expense quarter over quarter reflects both continued investments in our business which align with the strategic framework and expense related to the performance of Webster stock. Taken together, we achieved record pre provision net revenue of over 90 million. Further down you see the provision for loan loss increased modestly, primarily as a result of our commercial loan growth. Reported pre-tax income was 76.3 million in the quarter and reported net income of 51.8 million includes an effective tax rate of 32%. Slide 13 highlights our average balance sheet and drivers of net interest margin. Growth in average interest earning assets was driven by higher yielding commercial loans which benefitted from higher LIBOR rates. This was partially offset by decline in our securities portfolio. As a result, the yield on interest earning assets increased one basis point. Average deposits increased 526 million led by an increase of 283 million in demand deposits which fully funded the growth in interest earning assets. The strength and demand deposits reflects the seasonal increase of 182 million in our government banking business and an increase of 97 million in commercial banking. Overall deposit cost were one basis point lower driven by a two basis point reduction…

Thanks, Glenn. Our solid results reflect success investing capital and resources and strategies that maximize value to customers and shareholders, and we continue our progress toward our high performance [Indiscernible] measured by financial performance, growth in key customer segments and customer satisfaction. I will now open it for questions.

Thank you. We will now be conducting a question and answer session. [Operator Instructions] Our first question comes from the line of Steven Alexopoulos with JPMorgan. Please proceed with your question.

Hey, good morning everybody.

Good morning, Steve.

I want to start on HSA Bank. You guys obviously had nice growth in deposits. When we look at the account growth adjusting for the deals that was actually stronger than at least I was looking for at 27%. Can you give some color on what drove that and talk about expectations for account growth?

Hi, Steve. It's Chad. We've seen very positive growth coming from our channel partners, so carrier growth is up this year over the last year, that's represented more than 50% of our account growth year to-date, so that's really been the driver of – higher than expected account growth.

Okay. And do you expect that to continue Chad, at that higher pace?

Yes. We are – our focus Steve is really to make sure that we're generating and improving our production through our existing carrier partners and then obviously adding new partners as we go into 2017 and beyond. So, we're seeing positive trends on that front and we're also seeing positive trends in terms of our pipeline of carrier partners that we're in negotiation with. Obviously those take some time to develop. You've got to do your integrations and begin to drive the productivity so that will take a little longer for the new ones to produce, but we're seeing nothing right now that would lead us to believe anything contrary to what the guidance we've given of 20% plus account growth and deposit growth as we head into 2017 and beyond.

Okay. And it looks like fee income from HSA declined about 2% quarter over quarter. What drove that?

Chad, let me jump in there. Steve, it's Glenn. And so when you look linked quarter we did see and I think it's seasonal a drop-off in interchange revenue. If I look at transaction volume we were at $4.6 million in the third quarter versus $5.2 million in the second quarter, so we were down on transactions about 10%. So that's what you're seeing, interchange itself is down about 7% linked quarter.

Okay. That makes sense. Thanks. And then if I could shift the loan growth for a minute, you guys had really nice growth in commercial real estate in the quarter. Would you consider this an unusual quarter or you just see more opportunities as others pull out of the market?

Steve, its John, I don’t think it’s the fact that others are pulling out of the market in terms of they are having regulatory pressure in concentration. I just think we have so many levers and our commercial real estate activities across our Mid-Atlantic region, we continue to see with our existing sponsors and our relationship, high quality transactions across property types. And so, I would just say it’s kind of business as usual.

Okay. Thank you, John. Maybe just one last one. The commercial loan growth was also strong and many banks are putting up pretty weak commercial loan growth in the quarter. Can you give us a sense how much of that's coming from share gains versus this higher utilization of your existing clients? Thanks.

It’s a great question and we struggle with the definition of share gain versus transactional opportunity. What drives I think our outperformance. In this quarter is again our specialty areas and we've talked about it at various conferences. We've got a really robust industry specialty segment group, and so the universe of opportunities for us is broader and we're dealing with some of our private equity sponsors as well. Most of the outperformance I would say is attributable to transaction opportunities rather than a straight shares deal.

Okay. And is Boston helping it at this point on the commercial side?

Yes.

Okay. Thanks for all the color.

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

Hi, good morning.

Hi, Jared.

Good morning, Jared.

Just following up a little bit on the HSA, on the commentary you had mentioned that there were 113,000 new accounts this quarter, but then looking at the slide it looks like that was a little bit less. Did we still see some -- is there still some net outflow from the JPMorgan transition, and if so should we expect that to be done now or is there a little bit more of a tail on that?

So, Jared, its Glenn, and we're pretty much run through the transition at this point.

Okay. So now it should be – it should be all the net account growth going forward?

That's correct. And as you know, we anticipated a certain level of attrition given the early, that the deal was announced very early without a buyer. So we had fully accounted for that.

Okay. And then on the seasonality on the fee income from HAS, we should assume then I guess, that keep stays with us in fourth quarter as more and more people hit their high deductible?

Yes. That's exactly what happened in the second half of the year, people hit their deductible and their transaction volume goes down. so I think it will be relatively flattish going into Q4.

Okay. Thank you. And then on the – with 50% of the new account growth coming from the carrier channel and then with the new hiring going on for the direct sales channel, should we see as we look out over the next two years or so, what do you envision the new account growth coming from the direct sales channel versus the carrier referrals?

Hi, Jared, this is Chad. We'd expect to see, I'd love to see us maintain that ratio and see more direct-to-employer sales, so that we're really balancing the amount of accounts we see through partners and then in the direct channel. So, that's our goal has been to add more direct-to-employer sales reps as well some additional resource on our carrier side, so that we're growing both. But again we're having pretty good success driving productions through our carriers, so we're happy with that growth as well.

Very good. Thanks. And then just finally, what's the – can you give an update on the status of how the loan production offices in the Mid-Atlantic are doing and what the balances are out of those offices?

It's John. Good morning. It's continued to make steady progress and as we talked about our goal is not to be the market leader, we don't want to make credit mistakes there. I think we've done in our Philadelphia, Middle Market office, whereas you know we had commercial real estate for long time. We did a couple of more transactions in the quarter and we're up to between $60 million and $75 million in funded loans there. We also did another single transaction in Washington in our commercial real estate group and the balance is there around $100 million. So again steady slow progress and really adds to the overall pie with respect to how we can drive loan growth smartly and safely across our platform. Maybe DC is about $150 million now, let me correct that in terms of total commercial real estate outstanding.

Hey, Jared, this is Joe, and I just want to underscore the point that John has made, when we go into these markets and it gets to a question, Mark had asked a while back, we are really interested in establishing an appropriate foothold and we make it very, very clear to our bankers that we're with them for the long haul and we think there's enough power in the existing franchises for them to grow comfortably and smartly and you put together with the fact that we've known for an extended period of time. We're just not going to take chances with respect to being a new kid on the block that gets the loans that nobody else wants. So, I hope that helps.

Great. Thanks for the color.

Thank you. Our next question comes from the line of Collyn Gilbert with KBW. Please proceed with your questions.

Thanks. Good morning everyone.

Good morning, Collyn.

Could you guys talk a little bit about the syndication business, obviously good you had good strength this quarter; it was good in the second quarter as well. Just sort of talk about how that business is evolving and sort of where you see the potential growing from there – growing from here?

Sure Collyn. I think you use the right word, evolving, and in the 12 years I've been here, we've sort of slowly driven our capabilities in capital markets and in the last couple of years with the acquisition of some great talent from GE capital and other areas, we've really had much better access to transactions both with owner operators and with private equity sponsors of leading deals in those industry segments we know really well. So again to sort of jump off where Joe left off, risk management is the primary concern here and so we've gotten comfortable with certain industries. We've gotten comfortable with sponsors. We've gotten comfortable with the talent we've acquired and so over the last couple of years we've gone from a handful of transactions that we’ve led in the $50 million to $75 million range. Now, we're perfectly comfortable leading deals up to $200 million and successfully syndicating them which obviously allows us to do business with higher quality, larger companies allows us to drive fees and be confident that we can lay off the risk and not have outsize single point hold. So I would say we will continue to evolve it and like we do in most of these activities we're not going to try and triple the business next year, but we'll go from a dozen transactions to hopefully 12 to 18 transactions next year across all of our business lines. And we're obviously trying to look to apply our capital market activities into commercial real estate into the traditional middle market and other areas as well. So it will be a slow and steady process but we'll continue to add fees to the bottom line and continue to open up the universe of larger companies we can do business with.

Okay. That's helpful. And the growth that you saw this quarter was it kind of spread out among multiple transactions or did you just have a large deal that closed?

We had a couple of larger transactions, right. So that's the one thing that you can expect from an earnings perspective is as you know it can be lumpy, so the pipeline you work on a couple of transactions everybody is working on two deals at once and they hit and you can have a spike of couple of million dollars in fees in the quarter, so it was really centered. We had several transactions but the pop was really centered in two deals.

The only think Collyn, I'd add to that is that the John has nailed it. The pacings are such increasing the little bit. So while it will be episodic on a year-over-year basis we would expect to continue to see more frequency and success.

Okay. That's great. That's helpful. And then just in terms of kind of bigger picture on the lending side, are there areas where you guys are pulling back because of price or risk and you just not liking what you're seeing in the market?

Interesting question, I don't think anything that were sort of from a strategic perspective. I will tell you, we always go back to Bill Wrang in real estate. We've never been a market player in New York multifamily or other areas, so I would say we're being more careful and selective in the multifamily space just with some of our markets being heated. I think retail is a property type, it's never been one that we've aggressively gone after and its one that I think we're even more cautious about now. With respect to C&I businesses in general Collyn, we're not in the oil and gas business. We look at contractors, which is something that we historically and sort of been careful about putting a lot of exposure and concentrate exposure there, but other than that I don't think there are any strategic areas where we're looking to avoid.

Okay. That's helpful. And then just finally on the HSA front, can you just talk about maybe you guys have undergone a lot of changes in that business over the last couple of years, maybe Chad, you've just talks about the direct to employer and the carrier focus, but just give us a little bit more color as to what – where you see that momentum coming as we go into enrolment season, sort of where the efforts are being placed now in terms of kind of investment and energy and time and all those types of things?

Yes. Good morning, Collyn, great question. I'd say it's across the board, right. We've spend lot of time over the last two years with the conversion to the new platform and then the integration of the acquisition and while we've been doing that we've been making improvements along the way. Now we've got our entire focuses on making sure that we maintained our [Indiscernible] and grow our portfolio and all the current customers and we capture more and focus is really to keep moving up market to get larger and more larger employers and health plan partnerships. And to do that we've got to stay at the top of the industry in every aspect, the operational excellence, the customer service and customer experience, data analytics, targeted marketing, making sure that we've got – we grow our account management and sales staff putting sales methodology and training and tools to make sure that when we're out there selling, we have to put our people in best position to win. So we're really making investments across the entire business. And what's nice is that we would have a lot of resources that and we're focused on doing integrations and migrations and now 100% of our tension is on all of those activities. So, it’s not that anything broken needs to fixed, it is that we want to make sure we're continuing to lead the market and just to even to stay up with the 20% growth rate we have to continue to expand and excel in all those areas. So, good news is that's kind of 100% of our tension [Indiscernible].

Okay. And just one final sort of follow-up to that point, is there are certain geography where you're seeing more success coming out kind of new customer acquisition either on the employers, I mean, let's talk employers not the carriers, but on the employer side?

Yes. I think we're seeing areas that traditional weren’t strong for CDH growth, they're beginning to show more growth with the areas that we traditionally been strong on like Texas, and Illinois are great markets for us, but we're also seeing areas that were traditionally not great CDH states like in the East Coast for one, starting to head in that direct as well. So, that's we were continuously analyzing the market and where we have our people placed and as we see opportunities to capture more growth that's where we're placing individuals both in terms of segment and then geography.

Okay. That's great. Thank you very much for the color everybody.

Yes. If I may just add to what Chad is saying. This is Jim speaking. HSA is such an extraordinary opportunity for us to create value through this differentiated business that as I was noting and Chad has reinforce that as well that we've made the choice, because it’s so attractive that we will accelerate and increase the investment in the business and that's what's happening because the growth potential is so extraordinary.

Okay. Great. Thanks, Jim.

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

Hey, good morning. I think at the start of the call, Glenn, you were talking about a little bit slower of the reduction in drag coming out of Boston. I just want to be sure, did I understand you correctly that all reflects the rate environment? And if that's right, I'm curious if the Fed does move in December if that changes the view materially or whether it will take more than one rate hike to really change that?

Hey, Bob, this is Jim and it was in my comments that we indicated that the drag…

Sorry, Jim.

That's okay; the drag is about $0.04 a quarter. We originally thought we bring that down by about a penny a quarter, now we're saying it’s probably going to be half a penny a quarter, but the objectives are still solidly in place and Boston is going to be home run for us, there's no questions about that. So there were couple of things, one was lots of promotional activity in the market, at the same time if we were trying to make our way and at some level we said, let's not go crazy, just to get the balances, let’s be more careful and so while account production is actually higher than estimated and while the loan referrals are every bit of what we thought that they would be. Overall the deposit balances are little bit lower and the deposit mix is little bit different. And as a result to that plus the fact that rates are lower than we anticipated they would be when we originally making our projections a year or so ago. Those are the factors that come into play and are making that assessment. If rates move up a little at the end of the year, we don’t think that’s going to make a material difference in Boston.

Got it. All right. That’s helpful. Thank you. And then maybe you could just touch a little bit on the margin guidance. I know you guys are expecting a stable margin as we go into the fourth quarter here. I guess sort of, what is that outlook predicated on, what are the risk for opportunities around margin?

So, Bob, it is Glenn here. Good morning. We do expect or anticipated a fed rate hike on December 14 up to 75 basis points and really what’s driving the margins, so we are 310. We continue to see as the securities portfolio reprices, to give you an example of that, our purchases are coming on at say 256 with a 5.3 year duration. They are coming off still a little above three. So that’s going to continue to put pressure on the margin, about 2 basis points in NIM. On the other hand, as we've seen LIBOR increase, both on the CRE and C&I portfolio, we will clawback 2 basis points. To give you can example, CRE, 91% of the CRE portfolio is floating in periodic. So that benefit is LIBOR based, so that benefits from increase in LIBOR that we've seen over the last couple months. Likewise on C&I, 84% is floating in periodic and so we clawback another basis point. So, you have 2 basis points pressure from the securities portfolio and then you clawback to on the commercial portfolio and so you end up -- and that’s broad based. You end up about 310.

Okay. Okay. Got it. Thanks. Last question, I know you’ve talked about the commercial fees and how they were sort of particularly strong this quarter. What is the right way to think about that line maybe on an annualized basis? You all obviously had good growth over time. This quarter might have been unusually strong. But what is the right way to think about that?

Again, Bob, it is Glenn. Again, it’s a hard line to forecast. We had terrific swap revenue, record swap revenue in the second quarter, $4.6 million. And this quarter it was more like $2 million which is still pretty good. That was offset by some of the loan fees, the syndication fees that you saw. So it’s really a hard line to predict on an annual basis. And as John indicated it’s very lumpy. I don’t know if, John, if you want to add something?

Yes. I mean it is. It’s almost impossible to do it by category. I think we target along with our PPNR and loan growth, we target low double-digit growth year-over-year. So, we make our internal forecasts and we are aspirational to get a 10% to 12% increase in total non-interest income from the various categories.

Okay. Perfect. And is -- sorry, one other question on the tax rate, I know you said 32, is that a good rate for next year as things look today as well.

I would say within in the range of 32% to 33%.

Okay. Thanks.

Thank you. Our next question comes from the line of Casey Haire with Jefferies. Please proceed with your question.

Thanks. Good morning, guys.

Good morning.

Good morning.

Wanted to follow-up on the efficiency ratio, basically the Boston branch expansion sounds like we are looking at breakeven in the back half of 2018. Aside from any potential rate help, is a 62% efficiency ratio sort of the best that we can hope for until Boston breaks even?

No, I think -- Casey, it is Glenn. So there are things in the quarter. We've indicated that we are investing more aggressively in the HSA business. I won’t give guidance on a full year basis but I think in the fourth quarter, we expect it to be around 62%. I think a lot of the gains that we will get on the efficiency ratio will be on the revenue side as opposed to the expense side given our appetite for investing in strategic initiatives.

Yes. I want to add to that. It’s Jim. We’ve reiterated the comments that we’ve made about investing in our businesses, which will provide us higher revenue, better efficiency ratio over time. So the idea of having a sustainably lower efficiency ratio was a goal. In the meantime, we’ve done a very good job of managing our expenses. And so the point we are making is, as we invest in our highly differentiated businesses, particularly HSA Bank and Commercial Banking that there may be some investments sooner rather than later. And as a result of that you could get a little bit of lumpiness in the ratio but the trend is still very positive. So, when you look at it over the intermediate term, we are going to do better as a result of the investments that we make today by delivering a sustainably lower efficiency ratio over time and that's what we are focused on.

Okay. Said another way, I mean I don’t like P260, used to be the house religion for you guys. Is that until Boston breaks even? Is that unattainable?

Well, until -- what we are saying is you’ve got Boston, you’ve got investment in HSA, Commercial Banking. There may be some quarters where it's under 60 and others where it maybe a little bit over 60. Longer-term, we think it will be well under 60. So instead of trying to nail a prediction on efficiency ratio quarter-over-quarter, what we are saying is that expense discipline is ingrained in every decision we make here at Webster. But we also recognize there is an opportunity to invest and sometimes we want to invest now rather than trying to smooth that out over a longer period of time. So, I’m not trying to avoid your question. I'm saying we will manage our expenses tightly and we will invest in our businesses as appropriate and we will deliver better performance and a better sustainable lower efficiency ratio over time.

Got you. Okay. Understood. And just on the Boston breakeven metrics, I believe it was $0.5 billion in deposits and I can’t remember the loan amount. But just where do we stand today versus what the -- ?

It was a $1 billion in deposits over five years and $0.5 billion in loans. We have no doubt that we are going to be able to achieve those goals. We don’t want to predict it but clearly, we are on track to be able to achieve that. We originally had thought we’d be somewhere between $250 million and $300 million. At the end of 2016, we think that’s going to be closer to $200 million at this point.

$200 million deposits.

Yes, in deposit but over the five-year horizon where we had estimated what we thought we could achieve, we said a $1 billion in deposits and $500 million that we are holding.

Okay. Thanks very much.

Thanks, Casey.

Thank you. Our next question comes from the line of Mark Fitzgibbon with Sandler O'Neill & Partners. Please proceed with your question.

Good morning.

Good morning, Mark.

Hey Mark.

Just to follow-up on the HSA stuff, I was a little surprised to see HSA deposit costs go down by about 2 basis points this quarter. Just curious what drove that?

Chad?

Yes. Good morning. We had couple of opportunities as we looked across the portfolio. One, we originally anticipating rates would start to go up but given the current environment that we took a hard look at all of our peers and then some of our partner agreement and so we adjusted in just a few minor areas within our pricing structure. And that’s what drove the 2% or the 2 basis point decrease. And I think we don’t see any changes in near term. But as we see opportunities, we make those decisions and make those changes.

Okay. And then secondly on professional fees, Glenn, I was just curious what kind of drove that up this quarter? Was it stuff related to HSA or was it elsewhere in the organization?

It was elsewhere. It was spread around the organization. Some of that is more of annuity but some of it is one-time as well.

Thank you.

It was in the other areas as opposed to HSA.

Thank you.

Mark, I just want to say, too, that your question about the cost of the HSA deposits reinforces what's so important about those deposits is that they're stable, they are long-term and they are low-cost deposits with less elasticity than other deposit categories.

Thank you. Our next question comes from the line of Ken Zerbe with Morgan Stanley. Please proceed with your question.

Great. Thank you. Just a question about Boston and sort of the more muted outlook on that. Given that you are running behind in deposit growth versus your expectations previously, what gives you the confidence that you ultimately hit your five-year targets on deposit growth? And does that come with a risk that you end up, to get that deposit growth you end up pricing up deposits that Boston in general is just simply less profitable five years from now than you originally thought it would be?

No, we don't think we will be deciding that we should push rate to gain deposit share. In fact that's exactly what we are not doing and I want to be clear about that. We could have kept our promotional rates relatively high, extended the periods. We said no, we are not going to do that. That’s not the right call. But as we assess the market, we think the potential is as great or greater than initially estimated, which is why we still have confidence that we will make the goals we originally had estimated and not just for deposit or loan growth but for profitability as well.

Understood. I guess the reason why I ask is that, obviously, you go into Boston and as you said promotional activity across the entire market was just much stronger than expected. It sounds like there is an embedded assumption that that competition is going to get better or easier such that the environment gets better so you don't have to pay up for deposits to gain share.

The environment, Ken was such that, particularly when Citi deposits were in the minds of many up for grabs, that that was one of the developments that I think encouraged people to promote very heavily. And we think that is going to subside and so that was an unusual period. I think importantly is we noted, we actually have more accounts open than we had expected that we would at this point. We’ve got a great team of people in Boston that’s going to develop those relationships. In the end that's what it's all about. So for those reasons we remain highly confident we will achieve our goals.

And let me just add to that, Ken. It’s Glenn. That we also are just starting to get traction on things like small business banking and commercial where there is definitely some upside there. So those are -- that's not going to impact the pricing. But I think small business banking as an example I think they are just starting to get a lot more traction on that. The halo effect of this, of our expansion to Boston on the commercial, John can probably highlight. But I think we are definitely getting a lot more looks at things as a result of our presence being there.

Right. I mean part of it, Ken, is just timing. So, business banking, we’ve sort of hired our group of business bankers and we are starting to see a big pipeline for business deposits there. And it’s just taken a little bit longer on our initial assumptions. We are seeing activity in government banking around the municipalities where our branches are located, which will give us additional momentum. Commercial bankers are seeing a lot more momentum. Our private banker and wealth manager there who we really have a lot of confidence in is, are starting to gain significant traction. So, I think part of this is just timing. It’s why we remain confident but we are kind of in that blocking and tackling phase where we are fully staffed positioned and now we just have to continue to get it done.

Got it. And then just on the customer base, if I do my mental math on this, if the balances are lower but you are getting the right number of deposit customers presumably implies lower deposits per customer obviously. Is it -- have you had enough time to really examine? Are you getting the right types of customers, the customers that you want them to bank with you or is it just too early yet?

One thing about Boston is that they really have the right type of customers. When we think about emphasizing mass affluent focus there is no question about that being a very, very, the most attractive market. No question about it for us. So that holds. And we are assessing the quality of the deposit opportunity and we think it's as high as we originally had expected. And I think the points already made here is that it's not simply what's happening on consumer deposit side. It’s also what’s happening in business deposits and what's happening on the mortgage banking side and what's happening in Webster Investment Services and the private bank. And the commercial bank is benefiting as well, as is government banking. So, basically the totality of Webster is being delivered in the market. Our brand awareness is increasing every day. So, when we think about what’s happening over the longer term, there is no doubt that we are going to be able to achieve our goals and have the quality of relationships that we had envisioned.

All right. Perfect. Thank you very much.

Yes. And let me say the average balances are pretty good for these relationships as well.

Okay. Thank you.

Thank you. Our next question comes from the line of Matthew Breese with Piper Jaffray. Please proceed with your question.

Good morning, everybody.

Good morning.

Good morning, Matt.

I just had one quick one. In the 4Q margin guidance, absent a rate hike what would that do to your NIM guide?

Well, we are still getting the benefit of the LIBOR increases I highlighted. So, I think we’d be relatively flat going in just the fourth quarter. Maybe a half a basis point, assuming if they raise.

Yes. It is two weeks and it really it doesn’t. It gets us 300 grand at the end of the day. So it’s not a big number, so it’s about half a basis point.

Got it. Okay. That’s all I had. Thank you.

Thank you.

Thanks.

Thank you. There are no further questions at this time. I would like to turn the call back over to Mr. Jim Smith for any closing comments.

Thank you, Michelle. Thank you all for being with us today. Have a good day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.