Hartford Business Journal

8 Hartford Business Journal • October 16, 2017 • www.HartfordBusiness.com FOCUS: Banking & Finance By Gregory Seay gseay@HartfordBusiness.com A s he prepares to cede day-to-day operations of the Waterbury bank his father launched 85 years ago, Jim Smith reflected recently about that day 30 years ago when he of- ficially took the CEO reins from his father, Harold Webster Smith. "What was going through my mind was whether I was worthy,'' Smith said of New Year's Eve in 1987, his first day as CEO of the predecessors to Webster Bank and its then newly formed holding company. "I had a heightened sense of responsibility to the organization.'' On that day, James C. Smith became the second generation banker to lead the sav- ings bank his father launched to collect de- posits and redistribute them into thousands of Waterbury-area home mortgages amid the Great Depression. Now, Smith, 68, has formally set New Year's Eve, 2017, as the day he will step aside as CEO and into his role as the regional lender's non-executive board chairman. Smith, who occasionally has been outspo- ken about the state's fiscal and economic policies, was mum about his next chapter in life, including whether he's considering a run for elected office. "I'll step back and consider all the pos- sibilities,'' he said. Smith's successor on Jan. 1, 2018, Webster Financial President John R. Ciulla, 52, will be the first person outside the Smith family to run the financial enterprise. But both share in their banking DNA, Smith said, a respect and appreciation for the core values that propelled Webster from a stock-market capitalization of $30 million when Jim Smith took over to just under $5 billion today. Profitable, Webster Financial's assets, too, have mushroomed during Smith's tenure from $592 million in 1987 to $26 billion as of June 30. Webster is the state's second largest banks by deposits, only behind Bank of America. By Smith's count, since Webster's regu- lator-orchestrated buyout of New Haven's then failing First Constitution Bank in 1987, one in four Connecticut banks around at that time were acquired by Webster. Indeed, Smith credits his parents as the biggest influencers on his life and banking career that began at Webster in 1975, "be- cause of what they instilled in me … and that they had that level of confidence in me … to be a reliable steward of the values that my father had laid down from the beginning.'' Those include, he said, knowing their cus- tomers and being responsive to their needs. He expects Ciulla to uphold that standard. "That's what John and I have in common,'' Smith said. "John demonstrates those val- ues every day. That's what matters most." From community to regional lender Even though Webster's mission has evolved, Smith said in an interview inside Webster's boardroom atop its downtown Waterbury headquarters at 145 Bank St., "from helping folks buy homes and being the best bank on the block to a regional lender … ,'' its guiding values are unchanged. On Smith's watch, bank analysts said, Webster, through acquisitions and prescient tweaks to its business model, moved beyond tra- ditional residential- commercial real estate lending and commercial bank- ing into capital- equipment financ- ing and wealth management. Smith also oversaw Webster's 2015 purchase of one of the world's larg- est health-savings account fiduciaries, Wisconsin-based HSA Bank, with $6 billion in assets. "That's a business that's growing 20 percent a year" in deposits, said Mark T. Fitzgibbon, prin- cipal and research director for New York bank-industry analysts Sandler O'Neill + Partners. HSA Bank's great- er value, Fitzgib- bon said, is that it provides a steady stream of low-cost funds that Webster uses to make home and commercial loans in its core Northeast market. Despite previous calls from some Webster investors and bank analysts that it consider spinning off HSA Bank, to unlock more value to Web- ster stockholders, Smith and Ciulla both made it clear Webster sees greater value with HSA in its portfolio. They also said Webster, whose stock lately has ranged from $36.96 to $57.50 a share in the past 52 weeks, is not for sale. Smith and Ciulla unabashedly note that much of Webster's asset growth and profitability of late has come "organically,'' or without acquisitions. Webster also can boast, they and Fitzgibbon said, that its upward trek, as of the second quarter, to 13 percent return on equity — a key measure of profitability — outpaces its peers. Smith, too, deserves credit, Fitzgibbon said, for the one move he never made: Relocating Webster's headquarters out of Waterbury. "Most banks, once they get to a certain size,'' the analyst said, "want to relocate to a bigger headquarters in a larger city. That's rare for a $26 billion bank to be headquar- tered in a small, sort of out-of-the-way city.'' William Pizzuto, chair of the Waterbury Regional Chamber, said Webster Bank has only deepened its ties to the Naugatuck Val- ley region under Smith's leadership. "Jim's been outstanding for the community with his outreach and engagement,'' said Piz- zuto, who heads UConn's Waterbury campus. Tough calls Smith is respected among his Con- necticut banking peers for engaging with Webster's customers and employees and nonprofit and community groups in the Greater Waterbury community "with pas- sion and with resolve,'' said John Patrick Jr., chairman and CEO of First Connecticut Bancorp and its flagship Farmington Bank. "He's a fair competitor,'' Patrick said. Smith, too, is prized, Patrick said, for voicing his and Connecticut Inc.'s concerns about high taxes, over-regulation and the state's inability to tighten its belt when many businesses are being forced to. "Some people are afraid to speak up,'' Patrick said. Smith has made key decisions over the years. In 2009, amid the Great Recession, Webster entered Massachusetts, plant- ing its flag in the lucrative Boston mar- ket. Later, it opened an office to serve the wealthy enclaves of Fairfield County and Westchester County, N.Y. In 2002, Webster opened an office in New York City's bustling Manhattan borough. The recessionary period, however, wasn't all roses for Webster and Smith. Like much of the financial industry, Webster suffered significant losses from bad loans and investments, includ- ing a bundle of Florida loans that soured, ana- Family Legacy Thirty years later, Smith-led Webster Bank a regional force PHOTO | STEVE LASCHEVER Outgoing Webster Financial CEO James C. Smith credits values instilled in him by his mother and father, Harold Webster Smith, whose portrait is overhead, for his 30-year guidance of his family's financial legacy.

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