Webster Reports Higher 2011 Third Quarter Profit

WATERBURY, Conn., Oct. 14, 2011 /PRNewswire/ -- Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A., today announced net income available to common shareholders of $41.5 million, or $.45 per diluted share, for the quarter ended September 30, 2011 compared to $33.4 million, or $.36 per diluted share, for the quarter ended June 30, 2011.

Key points for the quarter or at September 30:

Webster Chairman and Chief Executive Officer James C. Smith said, “We are pleased to report improved performance in our operating results. Highlights include continued strong growth in business lending, a stable net interest margin, further improvement in credit metrics and reduction in expenses. Slow economic growth and margin pressures ahead require further management action to sustain earnings momentum. Recent events in consumer banking underscore the increasing competitive advantage we enjoy as a community focused bank which appeals to local customers seeking value and personal attention in their banking relationships.”

Net interest income

• Net interest margin was essentially unchanged at 3.45 percent compared to 3.46 percent in the second quarter; the yield on interest-earning assets and the cost of funds each declined seven basis points as compared to the second quarter.

• Average interest-earning assets totaled $16.6 billion, same as in the second quarter.  

Provision for loan losses

• The Company recorded a provision of $5.0 million in the quarter, same as in the second quarter and a decrease of $20 million as compared to a year ago.

• Net charge-offs were $28.9 million in the quarter compared to $21.7 million for the second quarter and $28.7 million a year ago.

• The allowance for loan losses represented 116 percent of nonperforming loans compared to 123 percent in the prior quarter.

Webster Vice Chairman and Chief Operating Officer Jerry Plush stated, “Asset quality continued to improve as evidenced by lower levels of past due loans, nonperforming loans, other real estate owned and classified assets compared to the end of the second quarter. Commercial classified loans declined 9 percent from the second quarter, the lowest level since June 2009. We continue to pursue ways to further expedite problem asset resolution.”

Noninterest income

• Total noninterest income decreased $0.8 million compared to the second quarter. Third quarter results include increases of $1.0 million in deposit services fees and $0.4 million in loan related fees, offset by a decline of $1.0 million in wealth and investment services, a reflection of market conditions in the quarter. Mortgage banking activities totaled $1.3 million compared to $1.2 million in the second quarter, and there were no net gains on investment securities compared to $1.6 million in the second quarter.

Noninterest expense

• Total noninterest expense decreased $8.8 million compared to the second quarter. Included in noninterest expense is $3.5 million of net one time costs in the third quarter and $6.1 million of such costs in the second quarter. The $6.2 million decline in noninterest expense, apart from one time costs in each quarter, primarily reflects reductions of $3.7 million in compensation and benefits of which $1.8 million is related to a decline in market based incentive plan expense and $1.4 million in deposit insurance. In addition, included in noninterest expense was $0.7 million in gains on foreclosed and repossessed assets compared to $0.8 million of write-downs in the second quarter.

Income taxes

• The Company recorded $16.0 million of income tax expense in the quarter on the $58.4 million of pre-tax income applicable to continuing operations in the period.  Income tax expense included $1.4 million of items discrete to the quarter. The effective tax rate for the quarter was 27.4 percent compared to 31.7 percent for the second quarter. Discrete items accounted for the majority of the decline in the effective tax rate for the quarter.

Investment securities

• Total investment securities were $5.6 billion at September 30, 2011 compared to $5.3 billion at June 30, 2011. The carrying value of the available for sale portfolio included $30.0 million in net unrealized gains compared to net unrealized gains of $45.4 million at June 30, while the carrying value of the held to maturity portfolio does not reflect $155.7 million in net unrealized gains compared to net unrealized gains of $115.6 million at June 30.

Loans

• Total loans were $11.1 billion at September 30, 2011 compared to $11.0 billion at June 30, 2011. Originations for the third quarter were $716.2 million compared to $643.5 million in the second quarter, an increase of 11.3 percent. Originations for the third quarter consisted of $212.9 million in commercial non-mortgage, $20.0 million in equipment finance, $80.7 million in asset based lending, $137.6 million in commercial real estate, $129.5 million in residential, and $135.5 million in consumer. In the quarter, commercial non-mortgage, asset based lending and commercial real estate loans increased by $24.8 million, $29.5 million and $53.0 million, respectively, while equipment finance loans declined by $59.7 million. Residential mortgage loans increased by $10.9 million, while consumer loans declined by $20.6 million.

Asset quality

• Total nonperforming loans were $221.0 million, or 2.00 percent of total loans, at September 30, 2011 compared to $228.2 million, or 2.07 percent, at June 30, 2011. Included in nonperforming loans were paying loans totaling $55.8 million at September 30 compared to $77.9 million at June 30. Also included in nonperforming loans are $5.5 million in consumer liquidating loans compared to $5.1 million at June 30.

• Past due loans totaled $64.1 million at September 30 compared to $66.1 million at June 30. Past due loans for the continuing portfolios were $59.5 million at September 30 compared to $59.9 million at June 30. Past due loans for the liquidating portfolio were $4.7 million at September 30 compared to $6.1 million at June 30.

Deposits and borrowings

• Total deposits were $13.6 billion at September 30, 2011 compared to $13.7 billion at June 30, 2011. An increase of $144.3 million in money market deposits was offset by declines of $123.1 million in certificates of deposit, $84.0 million in savings, $37.2 million in interest-bearing checking and $30.6 million in demand deposits. Core to total deposits and loans to deposits were 78 percent and 81 percent, respectively, compared to 78 percent and 80 percent at June 30.

• Total borrowings were $2.5 billion at September 30 compared to $2.0 billion at June 30. The increase in borrowings funded growth in loans and investment securities in the quarter. Borrowings represented 14 percent of total assets at September 30 compared to 12 percent at June 30.

Capital

• The tangible common equity and Tier 1 common equity to risk-weighted assets ratios were 7.15 percent and 11.06 percent, respectively, compared to 7.28 percent and 10.79 percent at June 30, 2011.

Webster Financial Corporation is the holding company for Webster Bank, National Association. With $18 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust and investment services through 171 banking offices, 485 ATMs, telephone banking, mobile banking, and the Internet. Webster Bank owns the asset based lending firm Webster Business Credit Corporation; the equipment finance firm Webster Capital Finance Corporation; 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 third quarter earnings announcement will be held today, Friday, October 14, 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.