Webster Reports 2010 Third Quarter Profit

Oct 15, 2010, 08:00 ET from Webster Financial Corporation

WATERBURY, Conn., Oct. 15 /PRNewswire-FirstCall/ -- Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A., today announced consolidated net income of $22.7 million for the quarter ended September 30, 2010. Net income available to common shareholders after $4.9 million of preferred dividends was $17.8 million, or $.22 per diluted share, for the quarter ended September 30, 2010.  

Key points for the quarter:

  • Improved net interest margin of 3.36 percent compared to 3.27 percent for the second quarter.
  • Reduced levels of provision for loan losses and net charge-offs of $25.0 million and $28.7 million, respectively, compared to $32.0 million and $31.8 million in the second quarter.
  • Continued improvement in the level of non-performing loans and delinquencies, which declined by 1.9 percent and 11.9 percent, respectively, compared to the second quarter.
  • Improved core to total deposit ratio of 76 percent compared to 74 percent for the second quarter.

Webster Chairman and Chief Executive Officer James C. Smith said, "We are pleased to report higher earnings for the third quarter. Our operating fundamentals remained strong and credit trends showed further improvement. Expansion in the net interest margin was a key contributor to our performance, and we continued to build core deposit balances. The origination of $644 million in loans during the third quarter, which was up 11 percent from last quarter, shows our success in helping finance the economic recovery in our markets."

Net interest income

  • The net interest margin increased by 9 basis points to 3.36 percent in the quarter, reflecting a 10 basis point decline in the cost of funds offset by a 1 basis point decline in the yield on interest-earning assets.
  • Average interest-earning assets for the quarter totaled $16.5 billion, down from $16.6 billion last quarter.

Provision for loan losses

  • $22.4 million of the $25.0 million provision for loan losses recorded in the quarter was related to the Company's continuing portfolios, and $2.6 million was related to the liquidating portfolio. In the second quarter, $27.5 million of the $32.0 million provision for loan losses recorded in the quarter was related to the Company's continuing portfolios, and $4.5 million was related to the liquidating portfolio.
  • Net charge-offs were $28.7 million in the quarter compared to $31.8 million for the quarter ended June 30, 2010; $23.0 million was related to the continuing portfolios compared to $24.5 million for the previous quarter and $5.7 million was related to the liquidating portfolio compared to $7.3 million for the previous quarter.

"Given improvement in key asset quality indictors in the quarter, including the level of non-performing loans, charge-offs and delinquencies, we were able to report a lower provision for loan losses compared to the second quarter," noted Webster Senior Executive Vice President and Chief Financial Officer Jerry Plush. "If a continuation of such positive trends occurs in coming quarters, reduced provisioning is a likely outcome."

Non-interest income

  • Non-interest income reflects the impact of $2.4 million in reduced deposit service fees from the adoption of Regulation E compared to the second quarter. Other changes include a net gain on sale of investment securities of $1.0 million compared to a net gain of $4.4 million in the second quarter. Third quarter results also include a $1.2 million positive fair value adjustment on common stock classified as trading, and a $1.0 million credit related other-than-temporary impairment loss on the write-down of investments to fair value compared to a credit related impairment loss of $1.2 million in the second quarter.

Non-interest expenses

  • Non-interest expenses, inclusive of other costs, decreased $17.9 million from the second quarter. Included in non-interest expense in the third quarter was a $2.8 million expense related to the previously announced settlement of a class action lawsuit related to the assessment and collection of over draft fees on customer checking accounts, and $0.3 million of severance expenses, while second quarter results included $19.7 million in provision for litigation reserves. Also included in non-interest expenses in the third quarter were foreclosed and repossessed asset write-downs of $2.2 million compared to $0.9 million for the second quarter. Loan workout expenses were also higher in the third quarter by $1.3 million.

Income taxes

  • The Company recorded $4.6 million of income tax expense in the quarter on the $27.3 million of pre-tax income applicable to continuing operations in the period. Tax expense is based on an estimated 20 percent annual effective tax rate.

Investment securities

  • Total investment securities were $5.4 billion at both September 30, 2010 and June 30, 2010. The carrying value of the available for sale portfolio included $36.3 million in net unrealized gains compared to net unrealized gains of $28.2 million at June 30, while the carrying value of the held to maturity portfolio does not reflect $136.3 million in net unrealized gains compared to net unrealized gains of $134.3 million at June 30.

Loans

  • Total loans were $10.9 billion at both September 30, 2010 and June 30, 2010. Total originations for the quarter were $644 million compared to $579 million in the second quarter. Originations consisted of $304 million in residential, $178 million in commercial non-mortgage, $48 million in consumer, $42 million in equipment finance, $35 million in asset-based lending, and $37 million in commercial real estate. In the quarter, residential mortgage loans in the continuing portfolio increased by $115.0 million, while consumer, commercial, and commercial real estate loans declined by $19.4 million, $14.3 million, and $19.1 million, respectively. The decrease in commercial loans reflects a reduction of $45.5 million in equipment finance loans, net of increases in asset based loans and middle market loans of $7.5 million and $23.7 million, respectively. The decline in commercial real estate reflects reductions of $16.1 million in residential development and net payoffs in the core portfolio.
  • The liquidating portfolio of indirect home equity and national construction loans, included in the consumer and residential loan portfolios, declined by $9.7 million and $0.8 million from June 30 to $185.0 million and $1.6 million, respectively.
  • National construction loans that have converted to permanent financing and are included in the residential loan portfolio declined by $1.5 million from June 30 to $27.0 million.

Asset quality

  • Total non-performing loans were $311.1 million or 2.85 percent of total loans at September 30, 2010 compared to $317.3 million or 2.92 percent at June 30, 2010. The decrease in non-performing loans reflects a combined decrease of $22.6 million in nonaccrual loans in all loan categories except residential, consumer, and commercial real estate, which increased $4.4 million, $3.2 million, and $8.8 million, respectively. Paying non-performing loans totaled $111.0 million at September 30 compared to $105.3 million at June 30.
  • Past due loans for the continuing portfolios decreased to $75.8 million at September 30 compared to $86.8 million at June 30.  Past due loans for the liquidating portfolio were $8.1 million at September 30 compared to $6.5 million at June 30.

Deposits and borrowings

  • Total deposits were $13.6 billion at September 30, 2010 compared to $13.5 billion at June 30, 2010.  Increases of $77.1 million in non-interest bearing deposits and $420.5 million in money market deposit accounts were offset by declines of $155.0 million, $17.6 million, and $223.4 million in NOW accounts, savings accounts and certificates of deposits, respectively. Non-interest bearing deposits to total deposits increased to approximately 14 percent of total deposits at September 30 compared to 13 percent at June 30.
  • Total borrowings were $2.1 billion at September 30 compared to $2.2 billion at June 30. Borrowings represented 12 percent of total assets at both September 30 and June 30.

Capital

The tangible common equity and Tier 1 common equity to risk weighted assets ratios increased to 5.91 percent and 8.19 percent, respectively, compared to 5.79 percent and 8.12 percent at June 30, 2010.

Webster Financial Corporation is the holding company for Webster Bank, National Association. With $17.8 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust and investment services through 181 banking offices, 497 ATMs, mobile banking, the Customer Care Center, and the Internet. Webster Bank owns the asset-based lending firm Webster Business Credit Corporation, and the equipment finance firm Webster Capital Finance, and provides health savings account, trustee and administrative services through HSA Bank, a division of Webster Bank. Member FDIC and equal housing lender. For more information about Webster, including past press releases and the latest annual report, visit Webster's website at www.websterbank.com.

Conference Call

A conference call covering Webster's third quarter earnings announcement will be held today, Friday, October 15, at 9:00 a.m. EDT and may be heard through Webster's investor relations website at www.wbst.com, or in listen-only mode by calling 1-877-407-8289 or 201-689-8341 internationally. The call will be archived on the website and available for future retrieval.

Forward-Looking Statements

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking statements can be identified by words such as "believes", "anticipates", "expects", "intends", "targeted", "continue", "remain", "will", "should", "may", "plans", "estimates" and similar references to future periods, however such words are not the exclusive means of identifying such statements.  Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items; (ii) statements of plans, objectives and expectations of Webster or its management or Board of Directors; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Forward-looking statements are based on Webster's current expectations and assumptions regarding its business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Webster's actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: (1) local, regional, national and international economic conditions; (2) government intervention in the U.S. financial system; (3) changes in the level of non-performing assets and charge-offs; (4) inflation, interest rate, securities market and monetary fluctuations, and management's estimates and projections of such fluctuations; (5) the timely development and acceptance of new products and services and perceived overall value of these products and services by users; (6) changes in management's estimate of the adequacy of the allowance for loan losses; (7) the risks associated with the continued diversification of assets and adverse changes to credit quality; (8) technological changes; (9) the Company's ability to increase market share and control expenses; (10) changes in laws, regulations and policies (including tax, banking, securities and insurance laws, regulations and policies); (11) changes in applicable accounting policies and practice; (12) legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; (13) the Company's success at managing the risks involved in the foregoing items; and (14) the other factors that are described in the Company's Annual Report on Form 10-K under the heading "Risk Factors." Any forward-looking statement made by the Company in this release speaks only as of the date on which it is made. Factors or events that could cause the Company's actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. A reconciliation of net income and other performance ratios, as adjusted, is included in the accompanying selected financial highlights table.

We believe that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends and financial position. Specifically, we provide measures based on what we believe are our operating earnings on a consistent basis and exclude non-core operating items which affect the GAAP reporting of results of operations. We utilize these measures for internal planning and forecasting purposes. We, as well as securities analysts, investors and other interested parties, also use these measures to compare peer company operating performance. We believe that our presentation and discussion, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting our business and allows investors to view performance in a manner similar to management. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

Media Contact

Investor Contact

Ed Steadham 203-578-2287

Terry Mangan 203-578-2318

esteadham@websterbank.com

tmangan@websterbank.com

WEBSTER FINANCIAL CORPORATION

Selected Financial Highlights (unaudited)

At or for the Three

At or for the Nine

Months Ended September 30,

Months Ended September 30,

(In thousands, except per share data)

2010

2009

2010

2009

Net income (loss) and performance ratios (annualized):

Net income (loss) attributable to Webster Financial Corporation

$                   22,687

$                 (19,250)

$                 41,746

$                (61,936)

Net income (loss) available to common shareholders

17,779

(26,100)

24,441

(30,854)

Net income (loss) per diluted common share

0.22

(0.39)

0.30

(1.35)

Return on average shareholders' equity

4.80

%

(4.14)

%

2.95

%

(4.45)

%

Return on average tangible equity  

6.74

(5.88)

4.15

(6.32)

Return on average assets

0.51

(0.44)

0.31

(0.47)

Income (loss) and performance ratios, (annualized), attributable to Webster Financial Corporation from continuing operations:

Income (loss) from continuing operations

$                   22,687

$                 (19,250)

$                 41,746

$                (62,249)

Net income (loss) available to common shareholders

17,779

(26,100)

24,441

(31,167)

Net income (loss) from continuing operations per diluted common share

0.22

(0.39)

0.30

(1.36)

Return on average shareholders' equity

4.80

%

(4.14)

%

2.95

%

(4.47)

%

Return on average tangible equity

6.74

(5.88)

4.15

(6.35)

Return on average assets

0.51

(0.44)

0.31

(0.47)

Noninterest income as a percentage of total revenue

25.97

25.85

28.63

26.85

Efficiency ratio (a)

65.79

65.11

66.04

66.29

Asset quality:

Allowance for loan losses

$                 340,341

$                 326,406

$               340,341

$                326,406

Non-performing assets

343,991

393,593

343,991

393,593

Allowance for loan losses / total loans

3.12

%

2.88

%

3.12

%

2.88

%

Net charge-offs / average loans (annualized)

1.06

2.25

1.23

1.62

Non-performing loans / total loans

2.85

3.19

2.85

3.19

Non-performing assets / total loans plus OREO

3.14

3.47

3.14

3.47

Allowance for loan losses / non-performing loans

109.39

90.40

109.39

90.40

Other ratios (annualized):

Tangible capital ratio

7.79

%

7.70

%

7.79

%

7.70

%

Tangible common equity ratio

5.91

5.10

5.91

5.10

Tier 1 risk-based capital ratio (c)

12.94

11.77

12.94

11.77

Total-risk based capital (c)

14.81

13.89

14.81

13.89

Tier 1 common equity / risk weighted assets (c)

8.19

6.31

8.19

6.31

Shareholders' equity / total assets

10.66

10.60

10.66

10.60

Interest-rate spread

3.31

3.12

3.25

2.99

Net interest margin

3.36

3.18

3.30

3.07

Share and equity related:

Common equity

$              1,572,053

$              1,438,600

$            1,572,053

$             1,438,600

Book value per common share

20.02

21.11

20.02

21.11

Tangible book value per common share

13.09

13.05

13.09

13.05

Common stock closing price

17.56

12.47

17.56

12.47

Dividends declared per common share

0.01

0.01

0.03

0.03

Common shares issued and outstanding

78,505

68,140

78,505

68,140

Basic shares (average)

78,097

66,281

78,026

57,125

Diluted shares (average)

82,128

66,281

82,028

61,100

Footnotes:

(a) Calculated using SNL's methodology - noninterest expense (excluding foreclosed property expenses, intangible amortization, goodwill impairments and other charges) as a percentage of net interest income (FTE basis) plus noninterest income (excluding gain/loss on securities and other charges).

(b) For purposes of the yield computation, unrealized gains (losses) on securities available for sale are excluded from the average balance.

(c)The ratios presented are projected for the 2010 reporting periods and actual for the 2009 reporting periods.

WEBSTER FINANCIAL CORPORATION

Consolidated Balance Sheets  (unaudited)

September 30,

June 30,

September 30,

(In thousands)

2010

2010

2009

Assets:

Cash and due from banks

$              174,971

$              179,490

$              173,437

Short-term investments

65,255

40,041

360,618

Investment securities:

 Trading, at fair value

9,991

8,785

-

 Available for sale, at fair value

2,258,380

2,206,362

1,912,283

 Held-to-maturity

3,097,515

3,136,605

2,702,881

  Total securities

5,365,886

5,351,752

4,615,164

Loans held for sale

13,024

11,109

37,005

Loans:

 Commercial

2,817,366

2,831,637

3,169,425

 Commercial real estate

2,107,732

2,126,853

2,214,941

 Residential mortgages

3,095,139

2,980,984

2,843,066

 Consumer

2,887,946

2,917,086

3,094,927

  Total loans

10,908,183

10,856,560

11,322,359

Allowance for loan losses

(340,341)

(344,087)

(326,406)

  Loans, net

10,567,842

10,512,473

10,995,953

Prepaid FDIC premiums

62,813

68,257

-

Federal Home Loan Bank and Federal Reserve Bank stock

143,874

143,874

140,874

Premises and equipment, net

160,774

164,865

179,353

Goodwill and other intangible assets, net

552,561

553,958

559,592

Cash surrender value of life insurance policies

295,516

293,387

286,806

Deferred tax asset, net

113,145

101,855

139,458

Accrued interest receivable and other assets

284,597

322,087

320,026

Total Assets

$         17,800,258

$         17,743,148

$         17,808,286

Liabilities and Equity:

Deposits:

 Non-interest bearing deposits

$           1,840,937

$           1,763,819

$           1,571,980

 NOW accounts

2,349,683

2,504,659

2,544,260

 Money market deposit accounts

2,611,093

2,190,611

2,209,145

 Savings accounts

3,503,930

3,521,547

2,996,318

 Certificates of deposit

3,224,131

3,447,534

4,148,759

 Brokered deposits

44,261

51,375

130,268

  Total deposits

13,574,035

13,479,545

13,600,730

Securities sold under agreements to repurchase and other short-term debt

1,048,363

960,197

872,030

Federal Home Loan Bank advances

473,512

629,828

663,210

Long-term debt

584,727

586,617

589,600

Accrued expenses and other liabilities

213,125

203,222

185,342

   Total liabilities

15,893,762

15,859,409

15,910,912

Webster Financial Corporation shareholders' equity

1,896,851

1,874,091

1,887,734

Non controlling interests

9,645

9,648

9,640

   Total equity

1,906,496

1,883,739

1,897,374

Total Liabilities and Equity

$         17,800,258

$         17,743,148

$         17,808,286

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Consolidated Statements of Operations (unaudited

Three Months Ended

Nine Months Ended

September 30,

September 30,

(In thousands, except per share data)

2010

2009

2010

2009

Interest income:

Interest and fees on loans and leases

$       123,042

$     131,266

$      368,839

$      409,566

Investment securities

53,182

52,975

162,781

152,601

Loans held for sale

79

716

537

1,713

  Total interest income

176,303

184,957

532,157

563,880

Interest expense:

Deposits

26,409

41,977

88,842

144,867

Borrowings

15,160

16,308

44,855

54,856

  Total interest expense

41,569

58,285

133,697

199,723

  Net interest income

134,734

126,672

398,460

364,157

Provision for loan losses

25,000

85,000

100,000

236,000

  Net interest income after provision for loan losses

109,734

41,672

298,460

128,157

Non-interest income:

Deposit service fees

26,822

30,844

83,951

88,787

Loan related fees

6,119

5,557

19,349

18,389

Wealth and investment services

6,220

6,160

18,273

17,991

Mortgage banking activities

1,658

1,406

1,947

5,445

Increase in cash surrender value of life insurance policies

2,677

2,692

7,867

7,949

Net gain (loss) on sale of investment securities

1,027

(4,728)

9,709

(13,863)

Other income

2,510

3,517

8,325

5,117

47,033

45,448

149,421

129,815

Higher One - fair value adjustment and gain on sale

1,205

-

16,221

-

Loss on write-down of investment securities to fair value

(970)

(1,290)

(5,838)

(28,400)

Gain on the exchange of trust preferreds for common stock

-

-

-

24,336

Gain on early extinguishment of subordinated notes

-

-

-

5,993

Visa share transactions

-

-

-

1,907

   Total non-interest income

47,268

44,158

159,804

133,651

Non-interest expenses:

Compensation and benefits

60,231

59,772

181,894

175,430

Occupancy

13,777

13,572

41,763

41,461

Technology and equipment expense

15,886

15,199

46,811

45,627

Marketing

4,634

3,802

14,651

10,104

Professional and outside services

4,038

3,628

10,206

10,806

Intangible assets amortization

1,397

1,421

4,191

4,334

Foreclosed and repossessed asset expenses

1,596

1,733

4,297

4,868

Foreclosed and repossessed asset write-downs

2,157

2,232

5,109

8,354

Loan workout expenses

3,477

1,521

7,602

4,235

Deposit insurance

5,882

5,942

19,128

24,491

Other expenses

13,543

14,095

40,642

39,747

126,618

122,917

376,294

369,457

Provision for litigation reserve

-

-

19,676

-

Other, including fraud related costs

303

4,169

12,242

5,722

Legal settlement-overdraft fees

2,800

-

2,800

-

  Total non-interest expenses

129,721

127,086

411,012

375,179

Income (loss) from continuing operations before income taxes

27,281

(41,256)

47,252

(113,371)

Income tax expense (benefit)

4,597

(22,014)

5,502

(51,143)

   Income (loss) from continuing operations  

22,684

(19,242)

41,750

(62,228)

Income from discontinued operations, net of tax

-

-

-

313

   Consolidated net income (loss)

22,684

(19,242)

41,750

(61,915)

Less: Net income (loss) attributable to noncontrolling interests

(3)

8

4

21

   Net income (loss) attributable to Webster Financial Corp.

22,687

(19,250)

41,746

(61,936)

Preferred stock dividends, accretion and extinguishment gain

(4,908)

(6,850)

(17,305)

31,082

   Net income (loss) available to common shareholders

$         17,779

$      (26,100)

$        24,441

$      (30,854)

   Diluted shares (average)

82,128

66,281

82,028

61,100

Net income (loss) per common share available to common shareholders:

Basic

   Income (loss) from continuing operations

$             0.23

$          (0.39)

$            0.31

$          (0.55)

   Net income (loss)

0.23

(0.39)

0.31

(0.54)

Diluted

   Income (loss) from continuing operations

0.22

(0.39)

0.30

(1.36)

   Net income (loss)

0.22

(0.39)

0.30

(1.35)

See  Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Five Quarter Consolidated Statements of Operations (unaudited)

Three Months Ended

Sept. 30,

June 30,

March 31,

Dec. 31,

Sept. 30,

(In thousands, except per share data)

2010

2010

2010

2009

2009

Interest income:

Interest and fees on loans and leases

$        123,042

$        122,447

$        123,350

$          127,069

$        131,266

Investment securities

53,182

55,443

54,156

54,029

52,975

Loans held for sale

79

144

314

364

716

   Total interest income

176,303

178,034

177,820

181,462

184,957

Interest expense:

Deposits

26,409

30,482

31,951

35,937

41,977

Borrowings

15,160

15,210

14,485

15,044

16,308

   Total interest expense

41,569

45,692

46,436

50,981

58,285

   Net interest income

134,734

132,342

131,384

130,481

126,672

Provision for loan losses

25,000

32,000

43,000

67,000

85,000

   Net interest income after provision for loan losses

109,734

100,342

88,384

63,481

41,672

Non-interest income:

Deposit service fees

26,822

29,345

27,784

30,634

30,844

Loan related fees

6,119

7,225

6,005

6,501

5,557

Wealth and investment services

6,220

6,218

5,835

6,009

6,160

Mortgage banking activities

1,658

427

(138)

1,456

1,406

Increase in cash surrender value of life insurance policies

2,677

2,612

2,578

2,680

2,692

Net gain (loss) on sale of investment securities

1,027

4,364

4,318

54

(4,728)

Other income

2,510

1,501

4,314

2,648

3,517

47,033

51,692

50,696

49,982

45,448

Higher One - fair value adjustment and gain on sale

1,205

15,016

-

-

-

Loss on write-down of investment securities to fair value

(970)

(1,188)

(3,680)

(77)

(1,290)

Warrants - fair value adjustment

-

-

-

3,552

-

   Total non-interest income

47,268

65,520

47,016

53,457

44,158

Non-interest expenses:

Compensation and benefits

60,231

60,584

61,079

61,644

59,772

Occupancy

13,777

13,546

14,440

14,061

13,572

Technology and equipment expense

15,886

15,657

15,268

15,299

15,199

Marketing

4,634

5,226

4,791

4,365

3,802

Professional and outside services

4,038

3,566

2,602

4,209

3,628

Intangible assets amortization

1,397

1,397

1,397

1,408

1,421

Foreclosed and repossessed asset expenses

1,596

1,009

1,692

2,349

1,733

Foreclosed and repossessed asset write-downs

2,157

891

2,061

2,588

2,232

Loan workout expenses

3,477

2,200

1,925

1,582

1,521

Deposit insurance

5,882

7,161

6,085

5,565

5,942

Other expenses

13,543

15,878

11,221

12,610

14,095

126,618

127,115

122,561

125,680

122,917

Provision for litigation reserve

-

19,676

-

-

-

Other, including fraud related costs

303

876

11,063

6,533

4,169

Legal settlement-overdraft fees

2,800

-

-

-

-

   Total non-interest expenses

129,721

147,667

133,624

132,213

127,086

Income (loss) from continuing operations before income taxes

27,281

18,195

1,776

(15,275)

(41,256)

Income tax expense (benefit)

4,597

550

355

(1,593)

(22,014)

   Income (loss) from continuing operations  

22,684

17,645

1,421

(13,682)

(19,242)

Income (loss) from discontinued operations, net of tax

-

-

-

(11)

-

   Consolidated net income (loss)

22,684

17,645

1,421

(13,693)

(19,242)

Less: Net income (loss) attributable to noncontrolling interests

(3)

7

-

1

8

   Net income (loss) attributable to Webster Financial Corp.

22,687

17,638

1,421

(13,694)

(19,250)

Preferred stock dividends and accretion

(4,908)

(4,908)

(7,490)

(40,700)

(6,850)

   Net income (loss) available to common shareholders

$          17,779

$          12,730

$          (6,069)

$          (54,394)

$        (26,100)

   Diluted shares (average)

82,128

82,721

77,922

72,747

66,281

Net income (loss) per common share available to common shareholders:

Basic

   Income (loss) from continuing operations

$              0.23

$              0.16

$            (0.08)

$              (0.76)

$            (0.39)

   Net income (loss)

0.23

0.16

(0.08)

(0.76)

(0.39)

Diluted

   Income (loss) from continuing operations

0.22

0.15

(0.08)

(0.84)

(0.39)

   Net income (loss)

0.22

0.15

(0.08)

(0.84)

(0.39)

 See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Five Quarter Interest-Rate Spreads and Margin  (unaudited)

Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

2010

2010

2010

2009

2009

Interest-rate spread

Yield on interest-earning assets

4.36

%

4.37

%

4.42

%

4.50

%

4.60

%

Cost of interest-bearing liabilities

1.05

1.15

1.19

1.30

1.48

   Interest-rate spread

3.31

%

3.22

%

3.23

%

3.20

%

3.12

%

   Net interest margin

3.36

%

3.27

%

3.28

%

3.26

%

3.18

%

Consolidated Average Balances, Yields and Rates Paid   (unaudited)

Three Months Ended September 30,

2010

2009

Fully tax-

Fully tax-

Average

equivalent

Average

equivalent

(Dollars in thousands)

balance

Interest

yield/rate

balance

Interest

yield/rate

Assets:

   Interest-earning assets:

   Loans

$         10,886,020

$              123,042

4.48

%

$         11,465,068

$              131,266

4.54

%

   Investment securities (b)

5,304,990

56,240

4.27

4,303,155

55,777

5.14

   Loans held for sale

6,936

79

4.58

68,663

716

4.17

   Federal Home Loan and Federal Reserve Bank stock

143,874

761

2.10

138,070

674

1.94

   Short-term investments

113,833

70

0.24

272,222

187

0.27

      Total interest-earning assets

16,455,653

180,192

4.36

16,247,178

188,620

4.60

   Noninterest-earning assets

1,362,141

1,344,626

      Total assets

$         17,817,794

$         17,591,804

Liabilities and Shareholders' Equity:

   Interest-bearing liabilities:

   Demand deposits

$           1,810,270

$                        -

-

%

$           1,598,433

$                        -

-

%

   Savings, NOW and money market deposits

8,441,033

11,401

0.54

7,444,729

15,602

0.83

   Certificates of deposit

3,374,112

15,008

1.76

4,384,509

26,375

2.39

      Total deposits

13,625,415

26,409

0.77

13,427,671

41,977

1.24

   Securities sold under agreements to repurchase and other short-term debt

894,475

4,048

1.77

895,771

4,472

1.95

   Federal Home Loan Bank advances

603,639

4,682

3.04

662,367

6,514

3.85

   Long-term debt

585,825

6,430

4.39

589,384

5,322

3.61

      Total borrowings

2,083,939

15,160

2.87

2,147,522

16,308

2.99

       Total interest-bearing liabilities

15,709,354

41,569

1.05

15,575,193

58,285

1.48

   Noninterest-bearing liabilities

207,419

146,798

      Total liabilities

15,916,773

15,721,991

   Noncontrolling interests

9,645

9,636

   Webster Financial Corp. shareholders' equity

1,891,376

1,860,177

      Total liabilities and equity

$         17,817,794

$         17,591,804

   Tax-equivalent net interest income

138,623

130,335

   Less: tax-equivalent adjustment

(3,889)

(3,663)

   Net interest income

$              134,734

$              126,672

  Interest-rate spread

3.31

%

3.12

%

  Net interest margin

3.36

%

3.18

%

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Consolidated Average Balances, Yields and Rates Paid   (unaudited)

Nine Months Ended September 30,

2010

2009

Fully tax-

Fully tax-

Average

equivalent

Average

equivalent

(Dollars in thousands)

balance

Interest

yield/rate

balance

Interest

yield/rate

Assets:

   Interest-earning assets:

   Loans

$                   10,913,211

$            368,839

4.49

%

$               11,870,636

$            409,566

4.58

%

   Investment securities (b)

5,249,708

171,202

4.36

3,975,016

161,352

5.31

   Loans held for sale

15,639

537

4.58

55,798

1,713

4.09

    Federal Home Loan and Federal Reserve Bank stock

142,566

2,223

2.08

136,940

1,970

1.92

    Short-term investments

182,718

352

0.25

102,421

261

0.34

      Total interest-earning assets

16,503,842

543,153

4.38

16,140,811

574,862

4.71

  Noninterest-earning assets

1,380,951

1,417,635

      Total assets

$                   17,884,793

$               17,558,446

Liabilities and Shareholders' Equity:

   Interest-bearing liabilities:

   Demand deposits

$                     1,722,940

$                     -

-

%

$                 1,557,900

$                      -

-

%

   Savings, NOW and money market deposits

8,488,236

38,482

0.61

6,716,808

46,542

0.93

   Certificates of deposit

3,593,845

50,360

1.87

4,665,633

98,325

2.82

      Total deposits

13,805,021

88,842

0.86

12,940,341

144,867

1.50

   Securities sold under agreements to repurchase and other short-term debt

836,148

12,172

1.92

1,204,744

14,826

1.62

   Federal Home Loan Bank advances

585,830

13,847

3.12

732,351

20,028

3.61

   Long-term debt

587,431

18,836

4.28

641,152

20,002

4.16

      Total borrowings

2,009,409

44,855

2.96

2,578,247

54,856

2.82

      Total interest-bearing liabilities

15,814,430

133,697

1.13

15,518,588

199,723

1.72

   Noninterest-bearing liabilities

174,079

172,467

       Total liabilities

15,988,509

15,691,055

   Noncontrolling interests

9,641

9,629

   Webster Financial Corporation shareholders' equity

1,886,643

1,857,762

      Total liabilities and equity

$                   17,884,793

$               17,558,446

409,456

375,139

  Less: tax-equivalent adjustment

(10,996)

(10,982)

  Net interest income

$            398,460

$            364,157

  Interest-rate spread

3.25

%

2.99

%

   Net interest margin

3.30

%

3.07

%

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Five Quarter Loan Balances (unaudited)

Sept. 30,

June 30,

March 31,

Dec. 31,

Sept. 30,

(Dollars in thousands)

2010

2010

2010

2009

2009

Loan Balances (actuals):

  Continuing Portfolio:

    Commercial

$       1,562,633

$       1,538,924

$       1,539,975

$       1,505,956

$       1,619,284

    Equipment financing

759,416

804,871

846,562

897,802

951,500

    Asset based lending

495,317

487,842

503,816

526,481

598,641

    Commercial real estate

2,041,237

2,044,264

2,057,361

2,067,862

2,086,298

    Residential development

66,495

82,589

97,173

114,258

128,643

    Residential mortgages

3,093,581

2,978,601

2,890,982

2,898,820

2,837,240

    Consumer

2,702,920

2,722,348

2,750,084

2,801,588

2,863,622

       Total continuing

10,721,599

10,659,439

10,685,953

10,812,767

11,085,228

       Allowance for loan losses

(293,541)

(294,187)

(291,171)

(287,784)

(269,306)

       Total continuing, net

10,428,058

10,365,252

10,394,782

10,524,983

10,815,922

  Liquidating Portfolio:

     National Construction Lending Center (NCLC)

1,558

2,383

3,309

4,817

5,826

     Consumer

185,026

194,738

207,258

219,125

231,305

       Total liquidating portfolio

186,584

197,121

210,567

223,942

237,131

       Allowance for loan losses

(46,800)

(49,900)

(52,700)

(53,400)

(57,100)

       Total liquidating, net

139,784

147,221

157,867

170,542

180,031

Total Loan Balances (actuals)

10,908,183

10,856,560

10,896,520

11,036,709

11,322,359

Allowance for loan losses

(340,341)

(344,087)

(343,871)

(341,184)

(326,406)

Loans, (net)

$     10,567,842

$     10,512,473

$     10,552,649

$     10,695,525

$     10,995,953

Loan Balances (average):

  Continuing Portfolio:

    Commercial

$       1,555,430

$       1,542,994

$       1,520,157

$       1,548,470

$       1,675,289

    Equipment finance

784,215

825,581

871,972

930,050

975,552

    Asset based lending

496,871

497,673

523,938

577,330

622,472

    Commercial real estate

2,039,180

2,049,162

2,062,769

2,075,754

2,089,643

    Residential development

73,510

88,866

107,343

125,320

139,040

    Residential mortgages

3,029,900

2,932,305

2,892,797

2,860,204

2,831,440

    Consumer

2,714,835

2,737,076

2,780,063

2,834,923

2,884,543

       Total continuing

10,693,941

10,673,657

10,759,039

10,952,051

11,217,979

       Allowance for loan losses

(295,414)

(294,079)

(291,281)

(277,870)

(260,472)

       Total continuing, net

10,398,527

10,379,578

10,467,758

10,674,181

10,957,507

  Liquidating Portfolio:

     NCLC

1,975

2,574

4,558

5,661

6,414

     Consumer

190,104

201,766

213,013

224,351

240,675

       Total liquidating portfolio

192,079

204,340

217,571

230,012

247,089

       Allowance for loan losses

(46,800)

(49,900)

(52,700)

(53,400)

(57,100)

       Total liquidating, net

145,279

154,440

164,871

176,612

189,989

Total Loan Balances (average)

10,886,020

10,877,997

10,976,610

11,182,063

11,465,068

Allowance for loan losses

(342,214)

(343,979)

(343,981)

(331,270)

(317,572)

Loans, (net)

$     10,543,806

$     10,534,018

$     10,632,629

$     10,850,793

$     11,147,496

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Five Quarter Non-performing Assets (unaudited)

Sept. 30,

June 30,

March 31,

Dec. 31,

Sept. 30,

(Dollars in thousands)

2010

2010

2010

2009

2009

Non-performing loans:

  Continuing Portfolio:

       Commercial

$          45,877

$          48,533

$          46,486

$          56,632

$          61,746

       Equipment financing

23,300

28,271

32,985

30,152

31,784

       Asset based lending

15,779

21,903

28,647

13,982

5,064

       Commercial real estate

62,588

53,826

50,711

56,144

47,644

       Residential development

19,620

26,941

34,651

47,264

44,821

       Residential mortgages

55,517

60,512

70,908

70,311

66,180

       Performing non-accrual residential mortgages

42,472

33,112

34,699

39,256

43,581

       Consumer

24,129

23,290

27,832

31,299

33,837

       Performing non-accrual consumer

10,765

8,348

5,735

7,456

6,000

    Nonperforming loans - continuing portfolio

300,047

304,736

332,654

352,496

340,657

  Liquidating Portfolio:

       NCLC

1,557

1,557

2,483

3,408

4,089

       Performing non-accrual NCLC

-

825

825

825

825

       Consumer

7,784

8,549

10,895

13,915

14,030

       Performing non-accrual consumer

1,736

1,644

1,990

2,333

1,475

    Nonperforming loans - liquidating portfolio

11,077

12,575

16,193

20,481

20,419

Total non-performing loans

$        311,124

$        317,311

$        348,847

$        372,977

$        361,076

Other real estate owned and repossessed assets:

  Continuing Portfolio:

       Commercial

$          17,916

$          14,918

$          13,464

$          11,621

$          13,225

       Equipment financing

5,056

4,757

6,654

6,522

8,479

       Asset based lending

-

-

-

-

-

       Commercial real estate

-

-

-

-

-

       Residential development

-

-

-

-

-

       Residential mortgages

5,883

4,309

4,461

4,131

2,872

       Consumer

1,041

4,542

4,025

5,017

4,833

    Total continuing

29,896

28,526

28,604

27,291

29,409

  Liquidating Portfolio:

       NCLC

2,380

2,939

1,744

1,401

3,108

       Consumer

591

427

126

296

-

    Total liquidating

2,971

3,366

1,870

1,697

3,108

Total other real estate owned and repossessed assets

$          32,867

$          31,892

$          30,474

$          28,988

$          32,517

Total non-performing assets

$        343,991

$        349,203

$        379,321

$        401,965

$        393,593

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Five Quarter Past Due Loans (unaudited)

Sept. 30,

June 30,

March 31,

Dec. 31,

Sept. 30,

(Dollars in thousands)

2010

2010

2010

2009

2009

Past due 30-89 days:

Accruing loans:

  Continuing Portfolio:

       Commercial

$            9,026

$          11,295

$          17,124

$            7,871

$            9,735

       Equipment financing

6,043

8,818

11,030

10,642

10,407

       Asset based lending

-

-

-

-

-

       Commercial real estate

7,354

11,069

16,950

8,183

23,872

       Residential development

-

200

2,528

551

776

       Residential mortgages

27,821

28,015

30,843

36,086

38,927

       Consumer

25,546

27,378

27,099

27,214

31,178

    Past Due 30-89 days - continuing portfolio

75,790

86,775

105,574

90,547

114,895

  Liquidating Portfolio:

       NCLC

-

-

-

582

910

       Consumer

8,133

6,496

8,596

9,804

11,680

    Past Due 30-89 days - liquidating portfolio

8,133

6,496

8,596

10,386

12,590

Accruing loans past due 90 days or more:

       Commercial

150

366

350

50

2,685

       Equipment financing

-

-

-

-

-

       Asset based lending

-

-

-

-

-

       Commercial real estate

-

1,305

365

236

206

       Residential development

-

-

-

-

-

       Residential mortgages

-

407

-

-

-

       Consumer

-

60

-

-

-

    Accruing loans past due 90 days or more:

150

2,138

715

286

2,891

Total past due loans

$          84,073

$          95,409

$        114,885

$        101,219

$        130,376

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Five Quarter Changes in the Allowance for Loan Losses (unaudited)

For the Three Months Ended

Sept. 30,

June 30,

March 31,

Dec. 31,

Sept. 30,

(Dollars in thousands)

2010

2010

2010

2009

2009

Beginning balance

$        344,087

$        343,871

$        341,184

$        326,406

$        305,999

 Provision

25,000

32,000

43,000

67,000

85,000

 Allowance for sold loans

-

-

-

(469)

-

Charge-offs continuing portfolio:

       Commercial

4,069

4,101

5,271

6,094

13,729

       Equipment financing

3,972

3,601

5,108

13,302

7,939

       Asset based lending

4,686

5,200

2,447

1,099

15,926

       Commercial real estate

2,260

94

1,382

4,605

-

       Residential development

1,167

2,110

5,131

6,600

3,019

       Residential mortgages

2,666

3,067

4,455

2,858

2,721

       Consumer

9,472

10,166

9,896

10,723

10,237

    Charge-offs continuing portfolio

28,292

28,339

33,690

45,281

53,571

Charge-offs liquidating portfolio:

       NCLC

-

1,170

70

1,068

135

       Consumer

6,158

6,469

9,315

8,232

13,256

    Charge-offs liquidating portfolio

6,158

7,639

9,385

9,300

13,391

Total charge-offs

34,450

35,978

43,075

54,581

66,962

Recoveries continuing portfolio:

       Commercial

408

764

515

476

435

       Equipment financing

1,473

1,100

952

898

821

       Asset based lending

1,136

497

254

55

-

       Commercial real estate

-

-

-

-

-

       Residential development

616

172

-

-

-

       Residential mortgages

380

141

80

82

277

       Consumer

1,277

1,153

455

535

642

    Recoveries continuing portfolio

5,290

3,827

2,256

2,046

2,175

Recoveries liquidating portfolio:

       NCLC

73

217

302

614

62

       Consumer

341

150

204

168

132

    Recoveries liquidating portfolio

414

367

506

782

194

Total recoveries

5,704

4,194

2,762

2,828

2,369

Total net charge-offs

28,746

31,784

40,313

51,753

64,593

Ending balance

$        340,341

$        344,087

$        343,871

$        341,184

$        326,406

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Asset Quality Ratios

For the Three Months Ended

Sept. 30,

June 30,

March 31,

Dec. 31,

Sept. 30,

(Dollars in thousands)

2010

2010

2010

2009

2009

Total Portfolio

Allowance for loan losses / total loans

3.12

%

3.17

%

3.16

%

3.09

%

2.88

%

Net charge-offs / average loans (annualized)

1.06

1.17

1.47

1.85

2.25

Nonperforming loans / total loans

2.85

2.92

3.20

3.38

3.19

Nonperforming assets / total loans plus OREO

3.14

3.21

3.47

3.63

3.47

Allowance for loan losses / nonperforming loans

109.39

108.44

98.57

91.48

90.40

Continuing Portfolio

Allowance for loan losses / total loans

2.74

%

2.76

%

2.72

%

2.66

%

2.43

%

Net charge-offs / average loans (annualized)

0.86

0.92

1.17

1.58

1.83

Nonperforming loans / total loans

2.80

2.86

3.11

3.26

3.07

Nonperforming assets / total loans plus OREO

3.07

3.12

3.37

3.50

3.33

Allowance for loan losses / nonperforming loans

97.83

96.54

87.53

81.64

79.05

Liquidating Portfolio

NCLC

Allowance for loan losses / total loans

19.26

%

16.79

%

21.15

%

18.68

%

17.16

%

Net charge-offs (recoveries) / average loans (annualized)

(14.78)

148.10

(20.36)

32.08

4.55

Nonperforming loans / total loans

99.94

99.96

99.97

87.88

84.35

Allowance for loan losses / nonperforming loans

19.27

16.79

21.16

21.26

20.35

Consumer

Allowance for loan losses / total loans

25.13

%

25.42

%

25.09

%

23.96

%

24.25

%

Net charge-offs / average loans (annualized)

12.24

12.53

17.11

14.38

21.81

Nonperforming loans / total loans

5.15

5.23

6.22

7.41

6.70

Allowance for loan losses / nonperforming loans

488.45

485.63

403.57

323.12

361.82

See Selected Financial Highlights for footnotes.

SOURCE Webster Financial Corporation



RELATED LINKS

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