“When the economic downturn was at its worst, Webster was at our best,” said James C. Smith, chairman and CEO of Webster Financial Corp. [NYSE:WBS] and its holding company Webster Bank.
Smith was referring to the Waterbury-headquartered regional bank’s core values, which, he explained, enabled it to envisage a symbiotic relationship between customer well-being and balance sheet stability. At a time when home foreclosures were exerting downward pressure on the economy, Webster began working with homeowners on a case-by-case basis to help save their homes through an aggressive loan modification program. Loan officers received bonuses for prudently preventing foreclosures.
“We took care of our customers. We did the right thing. The Great Recession was a test of the principles that guide Webster and prove that our DNA is strong,” he said.
What was right for customers also proved to be smart for the business. For the second quarter of this fiscal year, non-performing assets dropped 30 percent compared to the corresponding quarter last year.
Doing the unexpected is something Smith learned from his dad, Harold Webster Smith, who at the age of 24, opened a bank during the Great Depression. He borrowed $25,000 from family and friends and opened First Federal Savings of Waterbury – later renamed Webster in 1995 in his honor. That startup bank – which opened in an 11-by-38 foot office – was born with the goal of enabling his neighbors to fulfill the American Dream of homeownership.
“It was a great pleasure and inspiration to work with my father for over 20 years, and to this day I think about him every day,” said Smith, who joined the bank in 1975.
Smith recalls how when his dad ran the bank, he needed to make most of the decisions on his own and delegate the execution to his trusted team of bankers. His advice to his son was different and reflected an understanding of the changes to come.
“He told me long ago that as the bank grew my role would be different,” Smith said. “That I would need to recruit executives who knew more about their area of expertise than I would know, and that my responsibility would be to develop them as leaders with authority to make decisions on behalf of Webster and to encourage a strong team dynamic that valued collaboration and teamwork.”
His dad’s advice of commitment to community and customer has stood Smith, 63, in good stead. Over a career spanning 35-years, Smith has held several key positions including serving as a member of the board of directors of the Federal Reserve Bank of Boston and member of the Federal Advisory Council, which advises the deliberations of the Federal Reserve Board of Governors. He is currently co-chairman of the American Bankers Council and serves on the executive committee of the Connecticut Bankers Association.
“Jim is a very seasoned banking executive and Webster’s approach to struggling customers differentiates it from large national banks,” said Damon DelMonte, banking analyst at Keefe, Bruyette & Woods in Hartford. “Webster does not push customers to foreclose and that’s very positive for its reputation.”
DelMonte said the bank, which has assets of over $17 billion, has emerged stronger from the financial crisis when its capital level and credit quality were under pressure.
“They’ve cleaned up credit risk issues,” he said. “They pulled back from national asset-based lending business and are not exposed to certain geographic areas. They’ve increased the scrutiny in underwriting processes.”
He further credits the bank for being innovative in generating new products and services that propped up revenue lost from products that were hit by the Dodd-Frank regulation.
“Jim’s more proactive than reactive when the operating environment changes,” DelMonte said.
The bank incurred net losses in 2008 and 2009, bounding back to black in 2010. Last fiscal, net income reached $148.1 million. Keefe, Bruyette & Woods estimates net income of $163.3 million for this fiscal year with earnings per share of $1.80 and $1.88 for 2013. The stock price rebounded to $23.98 (as of Sept. 18 2012) from a low of $3 at the onset of the financial crisis.
Smith’s goal is to earn a return that exceeds Webster’s cost of capital through investment strategies that create value for stakeholders and customers.
“One goal we have set is to spend no more than 60 cents to generate a dollar of revenue, consistent with the high performing regional banks that we admire,” Smith said.
And it’s working.
“Jim built a great regional financial institution that’s true to his father’s core values of serving the customer and the community,” said John Rathgeber, CEO of the Connecticut Business & Industry Association. “But Jim is equally passionate about public service and has been engaged in issues ranging from fiscal policy to affordable housing. As a former CBIA board member, I often reach out to Jim for advice on these matters.”
Kristen Jacoby, president, United Way of Greater Waterbury, said Smith is actively involved with the organization along with his wife Cathy and their children Haley and James.
“Jim’s uncle, Fran Smith, was the first campaign chair of the Waterbury Community Chest, Red Feather and, later, the United Way of Greater Waterbury. His parents, siblings and relatives always considered United Way as their primary philanthropy serving as the local safety net of human services that, as Jim says so well, ‘provided a hand up rather than a handout,'” she said.
Smith views organizations as having “personalities which are a reflection of the collective character of the people in them,” and an important part of that is community service. At the peak of the financial crisis, Webster maintained its community giving at pre-recession levels even as it cut back on shareholder dividend.
“Last year, our employees set a record by contributing $1.2 million across our footprint. We chose the United Way as our primary philanthropy because they efficiently and effectively support local organizations that in turn support local people in need,” Smith said. He added that the bank supports more than 1,000 nonprofit organizations across its operating regions and its bankers provide more than 110,000 hours of volunteer service.
In recognition of his contributions, Smith received the United Way of Greater Waterbury’s Spirit of Excellence Award in 2012, the Power of Giving Award from Connecticut Public Broadcasting network in 2010, and the Small Business Administration’s Veterans Champion award in 2009.
Smith is also a director on the board of the historic Palace Theater in Waterbury. He said he loves music, musing that if he were not a banker, he’d probably be “a not so good Broadway singer!”?
Executive profile — Jim Smith
The Basics
Name of organization: Webster Bank
Title: Chairman and CEO
Size of organization: Approximately 3,000 bankers.
Education: Bachelor’s degree from Dartmouth College
On the job
Guiding business principle: Take personal responsibility for meeting our customers’ needs; respect the dignity of every individual; earn trust through ethical behavior; give of ourselves in the communities we serve; work together to achieve outstanding results.
Best way to keep your competitive edge: Stay close to our customers and to our Webster bankers. Understand what the competition is up to as we’re always challenged to make ourselves better.
Proudest accomplishment: Webster Bank’s mortgage modification program was featured on ABC World News. Webster stepped up to that challenge with our mortgage modification program where we worked with families when the breadwinner lost a job to keep them in their homes.
Goal yet to be achieved: My full potential as a leader who makes a positive difference in the lives of people around him.
Favorite part of the job: I love the opportunity to take what my father built and make it bigger, stronger and better while staying focused on our mission to help people achieve their financial goals.
Least favorite part of the job: There is no least favorite part. I love what I do and the people I serve and work with.
Most influential business book: Good to Great by Jim Collins
Personal touch in your office: Framed photograph of me and my dad; “Remember Your Roots” needlepoint by my former executive assistant Pat Mellitt; lots of family pictures.
Judgment calls:
Best business decision: To stay strong to our customers during the Great Recession, to work with them and believe in them.
Worst business decision: We altered our strategy with a goal of exporting our core lending competencies to national platforms, with the belief that we would diversify our geographically concentrated loan portfolio. In hindsight, it diverted resources from our primary franchise investments and exposed us to additional risks.
Best place to network: Everywhere that there are people
Best way to spot trends: Pay attention to everyday life and to the challenges and opportunities around us
Next big thing: More and better
Your pet peeve: It’s important to pay attention to details
Personal side:
City of residence: Middlebury
Favorite way to relax: Morning workouts, music, romantic dinners with my wife
Last vacation: Hanging around my house for three or four days
Favorite movie: It’s a Wonderful Life
The car you drive: Audi, after five Buicks
Favorite communication device: Face to face
Currently reading: Four newspapers every day, lots of emails and an occasional book
Favorite cause: Helping people realize their full potential as I believe that every person has the ability to exceed expectations.
