Webster Reports Strong 2012 First Quarter Earnings

WATERBURY, Conn., April 17, 2012 /PRNewswire/ -- Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A., today announced net income available to common shareholders of $38.3 million, or $.42 per diluted share, for the quarter ended March 31, 2012 compared to $39.6 million, or $.43 per diluted share, for the quarter ended December 31, 2011 and $33.7 million, or $.36 per diluted share, for the quarter ended March 31, 2011.  

Highlights for the quarter or at March 31 include:

Combined growth in commercial non-mortgage and commercial real estate loans of $81 million or 2.0 percent from December 31, and $478 million or 12.2 percent from a year ago.

Growth of $246.2 million or 4.9 percent in transaction account deposits from December 31 and $743.0 million or 16.3 percent from a year ago, which represent 38.0 percent of total deposits compared to 37.0 percent at year end and 32.3 percent a year ago.

Net interest income increased $2.4 million compared to the fourth quarter, and net interest margin was 3.36 percent compared to 3.39 percent in the fourth quarter and 3.46 percent a year ago.

Core noninterest income increased $1.7 million in the quarter and $0.5 million from a year ago led by strength in mortgage banking and wealth and investment services.

Noninterest expense before one time costs of $126.6 million compared to $125.3 million in the fourth quarter and $128.6 million a year ago; positive operating leverage achieved as core revenue grew 2.3 percent compared to an increase of 1.7 percent in core expenses from the fourth quarter.

Continued improvement in asset quality as evidenced by a 4.6 percent reduction in nonperforming assets and a 9.5 percent decline in commercial classified loans, both from December 31, and reductions of 36.6 percent and 34.9 percent from a year ago.

Provision for loan losses of $4.0 million compared to $2.5 million in the fourth quarter and $10.0 million a year ago, reflective of overall asset quality and portfolio growth.

Webster Chairman and Chief Executive Officer James C. Smith said, "Our operating results continue to improve, reflecting solid execution of strategic initiatives and continuing improvement in credit quality.  Strong commercial and residential lending drove loan growth and higher non-interest income as we are winning new customers across our footprint.  By adapting well in a rapidly changing banking environment, Webster thrives as a strong, community-focused regional bank."

Net interest income

• Net interest income was $143.4 million for the quarter compared to $141.0 million in the fourth quarter.

• Net interest margin was 3.36 percent compared to 3.39 percent in the fourth quarter as the yield on interest-earning assets declined 7 basis points, primarily on securities, and the cost of funds declined 4 basis points.  

• Average interest-earning assets grew by 2.8 percent from December 31, 2011 and totaled $17.5 billion compared to $17.0 billion in the fourth quarter.  

Provision for loan losses

• The Company recorded a provision of $4.0 million in the quarter compared to $2.5 million in the fourth quarter and $10.0 million a year ago.

• Net charge-offs were $27.2 million in the quarter compared to $26.4 million for the fourth quarter and $33.7 million a year ago.

• The allowance for loan losses represented 118 percent of nonperforming loans compared to 124 percent in the prior quarter.

Webster President and Chief Operating Officer Jerry Plush noted, "We are pleased to report continued asset quality improvement, as nonperforming loans and classified assets fell six percent and nine percent, respectively.  Our allowance for loan losses over total loans ended the quarter at 1.86 percent and exceeded the level of nonperforming loans by 18 percent."

Noninterest income

• Total noninterest income increased $1.7 million compared to the fourth quarter. Wealth and investment services and mortgage banking increased $1.5 million and $3.3 million, respectively, while deposit service fees and other income decreased $0.9 million and $2.0 million, respectively.

Noninterest expense

• Total noninterest expense increased $1.2 million compared to the fourth quarter. Included in noninterest expense in each quarter is $1.2 million of net one time costs.

• The $1.9 million increase in noninterest expense apart from one time costs and gains on foreclosed and repossessed assets compared to the fourth quarter primarily reflects increases of $1.0 million in deposit insurance and $1.1 million in other expenses. Gains on foreclosed and repossessed assets were $0.7 million compared to $0.1 million in the fourth quarter.

Income taxes

• The Company recorded $16.6 million of income tax expense in the quarter on the $55.5 million of pre-tax income applicable to continuing operations in the period. The effective tax rate for the quarter was 29.9 percent compared to 25.5 percent for the fourth quarter. The lower rate in the fourth quarter reflects $1.9 million of tax benefits in that period.

Investment securities

• Total investment securities were $6.2 billion at March 31, 2012 compared to $5.8 billion at December 31, 2011. The carrying value of the available for sale portfolio included $43.4 million in net unrealized gains compared to net unrealized gains of $25.3 million at December 31, while the carrying value of the held to maturity portfolio does not reflect $154.9 million in net unrealized gains compared to net unrealized gains of $156.8 million at December 31.

Loans

• Total loans were $11.3 billion at March 31, 2012 compared to $11.2 billion at December 31, 2011 and are reflective of continued growth in commercial, commercial real estate and residential mortgages. In the quarter, commercial non-mortgage, asset based lending and commercial real estate loans increased by $39.7 million, $16.9 million and $44.0 million, respectively, while equipment finance and residential development loans declined by $28.2 million and $3.1 million, respectively. Residential mortgage loans increased by $50.3 million, while consumer loans in the continuing portfolio declined by $26.8 million and consumer loans in the liquidating portfolio declined by $6.1 million.

• Originations for the first quarter were $790.8 million compared to $971.7 million in the fourth quarter and $548.3 million a year ago. Originations for the first quarter consisted of $245.0 million in commercial non-mortgage, $35.8 million in equipment finance, $63.3 million in asset based lending, $150.5 million in commercial real estate, $0.9 million in residential development, $168.9 million in residential and $126.4 million in consumer.

Asset quality

• Total nonperforming loans declined to $178.3 million, or 1.58 percent of total loans, at March 31, 2012 compared to $188.1 million, or 1.68 percent, at December 31, 2011. Included in nonperforming loans were paying loans totaling $18.1 million at March 31 compared to $32.4 million at December 31. Also included in nonperforming loans are $3.9 million in consumer liquidating loans compared to $5.1 million at December 31.

• Past due loans declined to $60.0 million at March 31 compared to $61.7 million at December 31. Past due loans for the continuing portfolios were $54.7 million at March 31 compared to $57.1 million at December 31. Past due loans for the liquidating portfolio were $5.3 million at March 31 compared to $4.5 million at December 31.

• Other real estate owned (OREO) totaled $6.0 million compared to $5.0 million at December 31.

Deposits and borrowings

• Total deposits were $13.9 billion at March 31, 2012 compared to $13.7 billion at December 31, 2011. Increases of $17.7 million in demand, $228.4 million in interest-bearing checking, $24.0 million in money market and $87.1 million in savings deposits were offset by a decline of $68.8 million in certificates of deposit. Core to total deposits and loans to deposits were 80 percent and 81 percent, respectively, compared to 79 percent and 82 percent at December 31.

• Total borrowings were $3.1 billion at March 31 compared to $3.0 billion at December 31. Borrowings represented 16 percent of total assets at both March 31 and December 31.

Capital

• The tangible common equity and Tier 1 common equity to risk-weighted assets ratios were 7.14 percent and 10.89 percent, respectively, at March 31.

• Book value and tangible book value per common share were $21.24 and $15.10, respectively, at March 31.

• Return on average shareholders' equity was 8.30 percent and return on average tangible equity was 11.65 percent at March 31.

Webster Financial Corporation is the holding company for Webster Bank, National Association. With $19 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust and investment services through 168 banking offices, 466 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 first quarter earnings announcement will be held today, Tuesday, April 17, 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 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.