Webster Reports 2011 First Quarter Profit

WATERBURY, Conn., April 15, 2011 /PRNewswire/ -- Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A., today announced consolidated net income available to common shareholders of $33.5 million or $.36 per diluted share, for the quarter ended March 31, 2011, compared to $25 million or $.30 per diluted share, for the quarter ended December 31, 2010.  

Key points for the quarter compared to the fourth quarter of 2010 (unless otherwise noted):

Improved net interest margin of 3.44 percent compared to 3.40 percent, and compared to 3.28 percent for the first quarter a year ago.

Higher average interest-earning assets of $16.71 billion compared to $16.42 billion, and compared to $16.46 billion for the first quarter a year ago.

Growth in commercial non-mortgage loans of 3.3 percent and commercial real estate loans of 1.0 percent.

Continued improvement in asset quality as indicated by a 4.3 percent reduction in non-performing loans.

Reduced provision for loan losses of $10.0 million compared to $15.0 million, and compared to $43.0 million for the first quarter a year ago.

Deposit growth of $516 million, or 3.8 percent, primarily in retail, small business, government, and HSA Bank, combined.

Webster Chairman and Chief Executive Officer James C. Smith said, "Webster's operating performance continues to improve. Higher earnings for the quarter were driven primarily by further improvement in asset quality along with a higher net interest margin and higher level of interest-earning assets, including growth in business lending. The growth in deposits reflects our focus on expanding relationships in multiple lines of business."

Net interest income

• The net interest margin increased by 4 basis points to 3.44 percent, reflecting a 4 basis point decline in the cost of funds partially offset by a 1 basis point decline in the yield on interest-earning assets.

• Average interest-earning assets totaled $16.7 billion, up from $16.4 billion.

Provision for loan losses

• Of the $10.0 million provision for loan losses recorded in the quarter, $8.7 million was related to the Company's continuing portfolios, and $1.3 million was related to the liquidating portfolio. In the fourth quarter of 2010, of the $15.0 million provision for loan losses recorded, $12.5 million was related to the Company's continuing portfolios, and $2.5 million was related to the liquidating portfolio.

• Net charge-offs were $33.7 million for both quarters ended March 31, 2011 and December 31, 2010; $29.2 million was related to the continuing portfolios compared to $27.4 million for the previous quarter, and $4.5 million was related to the liquidating portfolio compared to $6.3 million for the previous quarter.

Webster Vice Chairman and Chief Operating Officer, Jerry Plush, stated, "Improvement in key asset quality indicators, including the fifth consecutive quarter of lower new non-accrual loans, continued strong coverage of the allowance for loan losses to non-performing loans, and further reduction in the level of classified loans, resulted in lower provision expense this quarter.  We also continue to explore opportunities to expedite further reductions in non-performing asset levels to minimize the impact carrying these assets has on ongoing operating results."

Non-interest income

• Total non-interest income declined $2.8 million compared to the fourth quarter, primarily from reduced net gains on investment securities of $377,000 compared to $2.3 million for the fourth quarter. First quarter results include higher deposit services fees of $314,000, higher wealth and investment services of $70,000, and increased other income of $1.6 million, which were offset by lower loan related fees of $1.7 million, due in part to lower origination volumes and to decreased income from mortgage banking activities, which were $969,000 lower compared to the fourth quarter.

Non-interest expenses

• Non-interest expenses increased $1.2 million from the fourth quarter. Compensation and benefits rose by $3.1 million compared to the fourth quarter, reflecting the seasonal increase in employer payroll taxes and benefit matches that reset in the first quarter of each year. Occupancy expense increased $864,000, primarily the result of higher snow removal expense, and marketing expense increased $1.2 million related to new campaigns and branding efforts compared to the fourth quarter. Offsetting these increases were a $2.1 million reduction in professional services and a $1.2 million reduction in other expense compared to the fourth quarter. Loan workout expenses were lower by $428,000, and foreclosed and repossessed asset expenses and write-downs were lower by $435,000 and $363,000, respectively, compared to the fourth quarter.

Income taxes

The Company recorded $12.3 million of income tax expense in the quarter on the $44.6 million of pre-tax income applicable to continuing operations in the period. The effective tax rate for the quarter was 27.6 percent.

Investment securities

• Total investment securities were $5.4 billion at March 31, 2011 compared to $5.5 billion at December 31, 2010. The carrying value of the available for sale portfolio included $35.9 million in net unrealized gains compared to net unrealized gains of $29.9 million at December 31, while the carrying value of the held to maturity portfolio does not reflect $73.7 million in net unrealized gains compared to net unrealized gains of $69.3 million at December 31.

Loans

• Total loans were $11.0 billion at both March 31, 2011 and December 31, 2010. Originations for the first quarter consisted of $135 million in residential, $175 million in commercial non-mortgage, $118 million in consumer, $19 million in equipment finance, $47 million in asset based lending, and $55 million in commercial real estate. In the quarter, residential mortgage loans increased by $2.8 million, while consumer loans declined by $47.7 million. Commercial non-mortgage loans and asset based lending increased $55.0 million and $28.6 million, respectively, while equipment finance declined $67.5 million.

Asset quality

• Total non-performing loans were $261.9 million, or 2.38 percent, of total loans at March 31, 2011 compared to $273.6 million, or 2.48 percent, at December 31, 2010. The decrease in non-performing loans reflects a combined decrease of $11.7 million, or 4.3 percent, in non-accrual loans. Paying non-performing loans totaled $76.9 million at March 31 compared to $95.7 million at December 31.

• Past due loans for the continuing portfolios increased to $78.0 million at March 31 compared to $67.4 million at December 31. Included in past due loans at March 31 is a $13.5 million commercial real estate loan that contractually matured during the first quarter, is paying interest, and is expected to refinance in the second quarter.  Past due loans for the liquidating portfolio were $6.0 million at March 31 compared to $6.1 million at December 31.

Deposits and borrowings

• Total deposits were $14.1 billion at March 31, 2011 compared to $13.6 billion at December 31, 2010.  Increases of $177.5 million in NOW, $235.2 million in money market, and $134.7 million in savings were offset by declines of $33.3 million and $40.3 million, in demand and certificates of deposits, respectively. Core to total deposits and loans to deposits were both 78 percent, compared to 77 percent and 81 percent, respectively, at December 31.

• Total borrowings were $1.8 billion at March 31 compared to $2.4 billion at December 31. Borrowings represented 10 percent of total assets at March 31 compared to 14 percent at December 31.

Capital

• The tangible common equity and Tier 1 common equity to risk weighted assets ratios increased to 7.10 percent and 10.50 percent, respectively, compared to 6.82 percent and 9.92 percent at December 31, 2010.

Webster Financial Corporation is the holding company for Webster Bank, National Association. With $18.0 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust and investment services through 176 banking offices, 488 ATMs, mobile and telephone banking, and the Internet. Webster Bank owns the asset based lending firm Webster Business Credit Corporation; 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 the Webster website at www.websterbank.com.

Conference Call

A conference call covering Webster's first quarter earnings announcement will be held today, Friday, April 15, at 9:00 a.m. (Eastern) 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 and the impact they may have on us and our customers and our assessment of that impact; (2) volatility and disruption in national and international financial markets; (3) government intervention in the U.S. financial system; (4) changes in the level of non-performing assets and charge-offs; (5) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (6) adverse conditions in the securities markets that lead to impairment in the value of securities in our investment portfolio; (7) inflation, interest rate, securities market, and monetary fluctuations; (8) the timely development and acceptance of new products and services and perceived overall value of these products and services by customers; (9) changes in consumer spending, borrowings, and savings habits; (10) technological changes; (11) the ability to increase market share and control expenses; (12) changes in the competitive environment among banks, financial holding companies, and other financial service providers; (13) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and insurance) with which we and our subsidiaries must comply, including those under the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act and the Basel III update to the Basel Accords that is under development; (14) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters; (15) the costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; and (16) our success at managing the risks involved in the foregoing items and (17) the other factors that are described in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q 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.

SOURCE Webster Financial Corporation