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Webster Reports 2013 Second Quarter Earnings
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Diluted Earnings per Share of $0.48 for the Quarter - an Increase of 9 Percent over Prior Year

WATERBURY, Conn., July 12, 2013 /PRNewswire/ -- Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A., today announced net income available to common shareholders of $43.7 million, or $0.48 per diluted share, for the quarter ended June 30, 2013 compared to $40.6 million, or $0.44 per diluted share, for the quarter ended June 30, 2012. 

Highlights for the quarter or at June 30 include:

Combined growth in commercial and commercial real estate loans of $837.3 million, or 15.1 percent, from a year ago.

Deposit growth of $861.6 million, or 6.2 percent, from a year ago.

Positive operating leverage of 6.6 percent compared to a year ago as core revenue grew by 5.2 percent and core expenses declined by 1.4 percent; as a result, the efficiency ratio improved by 377 basis points to 59.98% from a year ago.

Continued improvement in asset quality as evidenced by a reduction of $155 million, or 34.8 percent, in commercial classified loans from a year ago, while past due loans declined $16.0 million, or 24.4 percent, from a year ago. Nonperforming assets increased $16.9 million, or 9.7 percent, from a year ago and otherwise would have decreased by $26.0 million, or 14.9%, had $42.9 million of residential and consumer loans not been required to be classified as nonaccrual under regulatory guidance that took effect in the fourth quarter of 2012.

Return on average assets and return on average tangible common equity were 0.92 percent and 12.26 percent, respectively, in the quarter compared to 0.86 percent and 12.38 percent, respectively, in the year ago quarter.

"Webster delivered another solid quarterly performance, marked by higher loan originations, strong revenue growth, further gains in operating efficiency and improved asset quality," James C. Smith, Chairman and Chief Executive Officer, said.  "Core revenue growth exceeded 5% as net interest income reached its highest level ever, and expenses declined year over year.  Looking ahead, our loan pipeline remains strong and is a positive indicator for the region's economic prospects." 

Net interest income

  • Net interest income was $147.1 million in the second quarter of 2013 compared to $144.4 million a year ago.
  • Net interest margin was 3.23 percent compared to 3.32 percent a year ago. The yield on interest-earning assets declined 27 basis points, and the cost of funds declined 19 basis points from the year ago quarter.  
  • Average interest-earning assets totaled $18.6 billion in the quarter and grew by $769 million, or 4.3 percent, from the year ago quarter. 
  • Average loans grew by $640.8 million, or 5.6 percent, from the year ago quarter.

Provision for loan losses

  • The Company recorded a provision for loan losses of $8.5 million in the second quarter of 2013 compared to $7.5 million in the first quarter of 2013 and $5.0 million in the year ago period.
  • Net charge-offs were $12.9 million in the quarter compared to $16.8 in the first quarter of 2013 and $16.5 million in the year ago period. The ratio of net charge-offs to average loans on an annualized basis was 0.43 percent in the quarter compared to 0.58 percent a year ago.
  • The allowance for loan losses represented 1.33 percent of total loans at June 30, 2013 compared to 1.40 percent at March 31, 2013 and 1.72 percent at June 30, 2012.

Noninterest income

  • Total noninterest income of $52.3 million in the second quarter of 2013 increased $4.9 million compared to a year ago; there were $0.3 million of securities gains in the quarter compared to the year ago quarter which had $2.5 million of securities gains.
  • Excluding securities gains, the $7.1 million increase in core noninterest income compared to a year ago reflects increases of $2.3 million in mortgage banking activities, $1.9 million in loan related fees, $1.7 million from wealth and investment services, $0.9 million in deposit service fees, and $0.9 million from an increase in the cash surrender value of life insurance policies. Other income was $0.6 million lower than in the year ago quarter.

Webster President and Chief Operating Officer Jerry Plush noted, "Stronger core non interest income this quarter included record results from our Webster Investment Services division, which posted $6.4 million in fee income. Higher revenue, along with lower non interest expense, contributed to a positive operating leverage of 6.6% versus prior year."

Noninterest expense

  • Total noninterest expense of $123.6 million in the second quarter of 2013 decreased $3.6 million compared to the year ago period. Included in noninterest expense in the second quarter of 2013 are $0.9 million of net one-time costs that amounted to $0.01 per diluted share on an after-tax basis. These costs consisted primarily of stock registration costs, contract termination, and severance expenses. There were $3.2 million of net one-time costs in the year ago quarter that amounted to $0.02 per diluted share.
  • Total noninterest expense excluding one-time costs decreased $1.3 million from the second quarter of 2012. The decrease reflects declines of $1.9 million in professional and outside services, $1.3 million in marketing, $0.7 million in occupancy expenses, $0.6 million in loan workout expense, and $0.5 million in technology and equipment expense.  These decreases were partially offset by increases of $2.2 million in compensation and benefits and $1.4 million in other expenses.
  • Foreclosed and repossessed asset expenses were $0.3 million in the quarter compared to $0.2 million a year ago, while gains on foreclosed and repossessed assets were $0.3 million and $0.7 million in the respective periods.

Income taxes

  • The Company recorded $20.8 million of income tax expense in the second quarter of 2013 on the $67.2 million of pre-tax income in the period. The effective tax rate was 31.0 percent compared to 30.8 percent a year ago.

Investment securities

  • Total investment securities were $6.4 billion at June 30, 2013 and $6.2 billion a year ago. The carrying value of the available for sale portfolio included $4.4 million in net unrealized gains compared to net unrealized gains of $46.7 million a year ago, while the carrying value of the held to maturity portfolio does not reflect $44.3 million in net unrealized gains compared to net unrealized gains of $158.4 million a year ago.

Loans

  • Total loans were $12.2 billion at June 30, 2013 compared to $12.0 billion at March 31, 2013 and $11.5 billion at June 30, 2012. In the quarter, commercial, commercial real estate, and residential mortgage loans increased by $161.4 million, $75.9 million, and $26.8 million, respectively.  Consumer loans decreased by $19.8 million.
  • Compared to a year ago, commercial, commercial real estate, and residential mortgage loans increased by $521.9 million, $315.4 million, and $13.2 million, respectively. Consumer loans decreased by $144.2 million.
  • Loan originations for portfolio in the second quarter were $1,204 million compared to $690 million in the first quarter and $973 million a year ago. In addition, $206 million of residential loans were originated and sold with servicing retained in the quarter compared to $229 million in the first quarter and $198 million a year ago.

Asset quality

  • Past due loans were $49.8 million at June 30, 2013 compared to $40.0 million at March 31, 2013 and $65.9 million at June 30, 2012. Compared to March 31, 2013, past due commercial non-mortgage and consumer loans increased by $7.1 million and $1.4 million, respectively. Compared to June 30, 2012, all loan categories contributed to the decline except commercial non-mortgage and residential development, which totaled $11.6 million compared to $6.5 million a year ago.
  • Past due loans represented 0.41 percent of total loans at June 30, 2013, 0.33 percent at March 31, 2013, and 0.57 percent at June 30, 2012. Past due loans for the continuing portfolios were $46.4 million at June 30 compared to $37.2 million at March 31 and $60.4 million a year ago. Past due loans for the liquidating portfolio were $1.9 million at June 30 compared to $2.8 million at March 31 and $4.4 million a year ago.
  • Total nonperforming loans decreased to $186.7 million, or 1.52 percent of total loans, at June 30, 2013 compared to $198.8 million, or 1.66 percent, at March 31, 2013 and $169.2 million, or 1.47 percent, at June 30, 2012. Included in nonperforming loans at June 30 and March 31 are $42.9 million and $44.0 million, respectively, of residential and consumer loans classified as nonaccrual under regulatory guidance that took effect in the fourth quarter of 2012. Total paying nonperforming loans at June 30 were $61.9 million compared to $55.3 million at March 31 and $17.0 million a year ago, with the increase consisting primarily of the loans classified as such due to the regulatory guidance.

Deposits and borrowings

  • Total deposits were $14.8 billion at June 30, 2013 compared to $14.6 billion at March 31, 2013 and $14.0 billion at June 30, 2012. Compared to March 31, increases of $107.0 million in demand deposits, $102.0 million in interest-bearing checking deposits, and $101.7 million in money market deposits were offset by a decline of $101.3 million in certificates of deposit.  Compared to a year ago, increases of $525.4 million in interest-bearing checking, $345.0 in demand deposits, and $333.3 million in money market deposits were offset by a decline of $404.6 million in certificates of deposit.
  • Core to total deposits and loans to deposits were 84.2 percent and 82.6 percent, respectively, compared to 83.3 percent and 82.1 percent at March 31, and 80.6 percent and 82.6 percent a year ago.
  • Total borrowings were $3.1 billion at June 30 compared to $3.2 billion at both March 31 and a year ago.

Capital

  • The tangible equity and tangible common equity ratios were 8.03 percent and 7.27 percent, respectively, at June 30, 2013 compared to 7.35 percent and 7.20 percent, respectively, a year ago. The Tier 1 common equity to risk-weighted assets ratio was 11.22 percent at June 30 compared to 10.97 percent a year ago.
  • Book value and tangible book value per common share were $21.88 and $15.93, respectively, at June 30, 2013 compared to $21.65 and $15.47, respectively a year ago.
  • Return on average tangible common shareholders' equity and return on average common shareholders' equity were 12.26 percent and 8.78 percent, respectively, in the second quarter compared to 12.38 percent and 8.62 percent, respectively, a year ago.

Webster Financial Corporation is the holding company for Webster Bank, National Association. With $20 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust and investment services through 168 banking centers, 296 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 HSA Bank, a division of Webster Bank, which provides health savings account trustee and administrative services. Webster Bank is a member of the FDIC and an 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 2013 second quarter earnings announcement will be held today, Friday, July 12, 2013 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.

Media Contact 

Investor Contact

Bob Guenther, 203-578-2391 

Terry Mangan, 203-578-2318

rguenther@websterbank.com  

tmangan@websterbank.com

 

 

WEBSTER FINANCIAL CORPORATION
Selected Financial Highlights (unaudited)




At or for the Three Months Ended



(In thousands, except per share data)

June 30,
2013


March 31,
2013


December 31,
2012


September 30,
2012


June 30,
2012











Income and performance ratios (annualized):










Net income attributable to Webster Financial Corp.

$           46,373


$         42,117


$         48,526


$         44,993


$         41,240

Net income available to common shareholders

43,734


39,231


47,911


44,378


40,625

Net income per diluted common share

0.48


0.44


0.52


0.48


0.44

Return on average assets

0.92 %


0.84 %


0.98 %


0.92 %


0.86 %

Return on average tangible common shareholders' equity

12.26


11.28


13.66


13.03


12.38

Return on average common shareholders' equity

8.78


8.01


9.74


9.19


8.62

Noninterest income as a percentage of total revenue

26.22


24.88


26.57


25.07


24.70

Efficiency ratio

59.98


62.16


59.68


62.25


63.75











Asset quality:










Allowance for loan losses

$         163,442


$       167,840


$       177,129


$       186,089


$       198,757

Nonperforming assets

190,539


203,355


198,181


167,524


173,621

Allowance for loan losses / total loans

1.33 %


1.40 %


1.47 %


1.59 %


1.72 %

Net charge-offs / average loans (annualized)

0.43


0.56


0.56


0.61


0.58

Nonperforming loans / total loans

1.52


1.66


1.62


1.39


1.47

Nonperforming assets / total loans plus OREO

1.56


1.69


1.65


1.43


1.50

Allowance for loan losses / nonperforming loans

87.55


84.42


90.93


114.44


117.44











Other ratios (annualized):










Tangible equity ratio

8.03 %


8.12 %


7.92 %


7.52 %


7.35 %

Tangible common equity ratio

7.27


7.35


7.15


7.37


7.20

Tier 1 risk-based capital ratio (a)

12.90


12.75


12.47


11.90


12.82

Total risk-based capital (a)

14.15


14.01


13.73


13.16


14.08

Tier 1 common equity / risk-weighted assets (a)

11.22


11.06


10.78


11.10


10.97

Shareholders' equity / total assets

10.47


10.58


10.39


10.05


9.94

Net interest margin

3.23


3.23


3.27


3.28


3.32











Share and equity related:










Common equity

$      1,975,826


$    1,976,482


$    1,941,881


$    1,954,739


$    1,902,609

Book value per common share

21.88


21.90


22.75


22.24


21.65

Tangible book value per common share

15.93


15.93


16.42


16.08


15.47

Common stock closing price

25.68


24.26


20.55


23.70


21.66

Dividends declared per common share

0.15


0.10


0.10


0.10


0.10











Common shares issued and outstanding

90,289


90,237


85,341


87,899


87,885

Basic shares (weighted average)

89,645


85,501


86,949


87,394


87,291

Diluted shares (weighted average)

90,087


89,662


91,315


91,884


91,543


(a) The ratios presented are projected for June 30, 2013 and actual for the remaining periods presented.

 

WEBSTER FINANCIAL CORPORATION
Consolidated Balance Sheets (unaudited)

(In thousands)

June 30,
2013


March 31,
2013


June 30,
2012

Assets:






Cash and due from banks

$         179,068


$       118,657


$       197,229

Interest-bearing deposits

32,601


51,352


73,598

Investment securities:






 Available for sale, at fair value

3,257,360


3,318,238


3,153,580

 Held to maturity

3,129,864


3,111,169


3,076,226

Total securities

6,387,224


6,429,407


6,229,806

Loans held for sale

81,161


96,706


89,228

Loans:






 Commercial

3,507,927


3,346,483


2,985,993

 Commercial real estate

2,866,814


2,790,954


2,551,427

 Residential mortgages

3,313,833


3,287,072


3,300,617

 Consumer

2,557,719


2,577,523


2,701,960

Total loans

12,246,293


12,002,032


11,539,997

Allowance for loan losses

(163,442)


(167,840)


(198,757)

Loans, net

12,082,851


11,834,192


11,341,240

Prepaid FDIC premiums


16,644


27,062

Federal Home Loan Bank and Federal Reserve Bank stock

158,878


158,878


142,595

Premises and equipment, net

122,704


127,609


137,420

Goodwill and other intangible assets, net

537,673


538,915


542,783

Cash surrender value of life insurance policies

423,598


420,562


312,117

Deferred tax asset, net

73,166


55,656


79,011

Accrued interest receivable and other assets

250,314


261,960


257,660

Total Assets

$    20,329,238


$  20,110,538


$  19,429,749







Liabilities and Equity:






 Deposits:






 Demand

$      2,956,320


$    2,849,355


$    2,611,297

 Interest-bearing checking

3,388,505


3,286,540


2,863,076

 Money market

2,267,463


2,165,744


1,934,137

 Savings

3,882,691


3,885,394


3,850,549

 Certificates of deposit

2,191,188


2,292,441


2,595,816

 Brokered certificates of deposit

149,408


144,408


119,052

Total deposits

14,835,575


14,623,882


13,973,927

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

1,213,349


1,033,767


1,203,378

Federal Home Loan Bank advances

1,627,517


1,902,563


1,529,102

Long-term debt

229,928


230,709


472,928

Accrued expenses and other liabilities

295,394


191,486


318,866

Total liabilities

18,201,763


17,982,407


17,498,201







Preferred stock

151,649


151,649


28,939

Common shareholders' equity

1,975,826


1,976,482


1,902,609

Webster Financial Corporation shareholders' equity

2,127,475


2,128,131


1,931,548

Total Liabilities and Equity

$    20,329,238


$  20,110,538


$  19,429,749

 

WEBSTER FINANCIAL CORPORATION
Consolidated Statements of Income (unaudited)

(In thousands, except per share data)

Three Months Ended June 30,


Six Months Ended June 30,


2013


2012


2013


2012

Interest income:








Interest and fees on loans and leases

$         121,720


$       121,379


$       242,781


$       242,120

Interest and dividends on securities

47,822


52,597


96,207


105,465

Loans held for sale

551


657


1,188


1,155

  Total interest income

170,093


174,633


340,176


348,740

Interest expense:








Deposits

12,024


15,102


24,874


31,158

Borrowings

11,008


15,153


22,445


29,836

  Total interest expense

23,032


30,255


47,319


60,994

  Net interest income

147,061


144,378


292,857


287,746

Provision for loan losses

8,500


5,000


16,000


9,000

  Net interest income after provision for loan losses

138,561


139,378


276,857


278,746

Noninterest income:








Deposit service fees

24,622


23,719


48,616


47,082

Loan related fees

5,505


3,565


10,090


8,434

Wealth and investment services

8,920


7,249


16,686


14,470

Mortgage banking activities

5,888


3,624


12,919


8,007

Increase in cash surrender value of life insurance policies

3,448


2,561


6,832


5,078

Net gain on investment securities

333


2,537


439


2,537

Other income

3,535


4,098


4,947


5,731

  Total noninterest income

52,251


47,353


100,529


91,339

Noninterest expense:








Compensation and benefits

65,768


63,587


131,818


132,206

Occupancy

11,837


12,578


24,716


25,460

Technology and equipment expense

15,495


16,021


30,848


31,603

Marketing

3,817


5,094


8,628


9,194

Professional and outside services

1,527


3,387


3,677


6,079

Intangible assets amortization

1,242


1,397


2,484


2,794

Foreclosed and repossessed asset expenses

331


176


506


643

Foreclosed and repossessed asset gains

(250)


(670)


(534)


(1,334)

Loan workout expenses

1,576


2,201


3,550


4,025

Deposit insurance

5,524


5,723


10,698


11,432

Other expenses

15,800


14,443


30,175


28,433


122,667


123,937


246,566


250,535

Debt prepayment penalties


2,515


43


3,649

Severance, contract, and other

937


727


2,530


808

  Total noninterest expense

123,604


127,179


249,139


254,992

Income before income taxes

67,208


59,552


128,247


115,093

Income tax expense

20,835


18,312


39,757


34,915

  Net income attributable to Webster Financial Corp.

46,373


41,240


88,490


80,178

Preferred stock dividends

(2,639)


(615)


(5,525)


(1,230)

  Net income available to common shareholders

$           43,734


$         40,625


$         82,965


$         78,948









  Diluted shares (average)

90,087


91,543


89,953


91,669









Net income per common share available to common shareholders:








  Basic

$               0.49


$             0.46


$             0.94


$             0.90

  Diluted

0.48


0.44


0.92


0.86

 

 

WEBSTER FINANCIAL CORPORATION
Five Quarter Consolidated Statements of Income (unaudited)


Three Months Ended

(In thousands, except per share data)

June 30,
2013


March 31,
2013


December 31,
2012


September 30,
2012


June 30,
2012

Interest income:










Interest and fees on loans and leases

$         121,720


$       121,061


$       122,179


$       121,367


$       121,379

Interest and dividends on securities

47,822


48,385


49,752


50,194


52,597

Loans held for sale

551


637


615


655


657

  Total interest income

170,093


170,083


172,546


172,216


174,633

Interest expense:










Deposits

12,024


12,850


13,885


14,543


15,102

Borrowings

11,008


11,437


12,389


12,783


15,153

  Total interest expense

23,032


24,287


26,274


27,326


30,255

  Net interest income

147,061


145,796


146,272


144,890


144,378

Provision for loan losses

8,500


7,500


7,500


5,000


5,000

  Net interest income after provision for loan losses

138,561


138,296


138,772


139,890


139,378

Noninterest income:










Deposit service fees

24,622


23,994


24,823


24,728


23,719

Loan related fees

5,505


4,585


5,570


4,039


3,565

Wealth and investment services

8,920


7,766


7,859


7,186


7,249

Mortgage banking activities

5,888


7,031


8,515


6,515


3,624

Increase in cash surrender value of life insurance policies

3,448


3,384


3,496


2,680


2,561

Net gain on investment securities

333


106



810


2,537

Other income

3,535


1,412


2,677


2,521


4,098

  Total noninterest income

52,251


48,278


52,940


48,479


47,353

Noninterest expense:










Compensation and benefits

65,768


66,050


65,769


66,126


63,587

Occupancy

11,837


12,879


12,209


12,462


12,578

Technology and equipment expense

15,495


15,353


15,489


15,118


16,021

Marketing

3,817


4,811


3,104


4,529


5,094

Professional and outside services

1,527


2,150


2,479


2,790


3,387

Intangible assets amortization

1,242


1,242


1,242


1,384


1,397

Foreclosed and repossessed asset expenses

331


175


267


118


176

Foreclosed and repossessed asset gains

(250)


(284)


(383)


(409)


(670)

Loan workout expenses

1,576


1,974


2,338


1,693


2,201

Deposit insurance

5,524


5,174


5,642


5,675


5,723

Other expenses

15,800


14,375


13,934


13,805


14,443


122,667


123,899


122,090


123,291


123,937

Debt prepayment penalties


43



391


2,515

Severance, contract, and other

937


1,593


835


205


727

  Total noninterest expense

123,604


125,535


122,925


123,887


127,179

Income before income taxes

67,208


61,039


68,787


64,482


59,552

Income tax expense

20,835


18,922


20,261


19,489


18,312

  Net income attributable to Webster Financial Corp.

46,373


42,117


48,526


44,993


41,240

Preferred stock dividends

(2,639)


(2,886)


(615)


(615)


(615)

  Net income available to common shareholders

$           43,734


$         39,231


$         47,911


$         44,378


$         40,625











  Diluted shares (average)

90,087


89,662


91,315


91,884


91,543











Net income per common share available to common shareholders:










  Basic

$               0.49


$             0.46


$             0.55


$             0.51


$             0.46

  Diluted

0.48


0.44


0.52


0.48


0.44

 

WEBSTER FINANCIAL CORPORATION
Consolidated Average Balances, Yields, and Rates Paid (unaudited)

Three Months Ended June 30,



2013






2012


(Dollars in thousands)

Average
balance


Interest


Fully tax-
equivalent
yield/rate


Average
balance


Interest

Fully tax-
equivalent
yield/rate

Assets:











Interest-earning assets:











Loans

$    12,061,551


$       121,720


4.02 %


$  11,420,721


$       121,379

4.23 %

Investment securities (a)

6,257,923


50,277


3.24


6,122,745


55,497

3.65

Loans held for sale

70,922


551


3.10


68,362


657

3.85

Federal Home Loan and Federal Reserve Bank stock

158,878


865


2.18


142,595


881

2.48

Interest-bearing deposits

41,499


17


0.16


67,480


32

0.19

Total interest-earning assets

18,590,773


173,430


3.73


17,821,903


178,446

4.00

Noninterest-earning assets

1,483,394






1,383,932




Total assets

$     20,074,167






$   19,205,835















Liabilities and Shareholders' Equity:











Interest-bearing liabilities:











Deposits:











Demand

$      2,879,745


$                  —


—%


$    2,554,873


$                  —

—%

Savings, interest checking, and money market

9,413,301


4,506


0.19


8,676,206


5,285

0.24

Certificates of deposit

2,397,519


7,518


1.26


2,732,024


9,817

1.45

Total deposits

14,690,565


12,024


0.33


13,963,103


15,102

0.43












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

1,203,442


5,184


1.70 %


1,210,234


5,360

1.75 %

Federal Home Loan Bank advances

1,623,489


4,007


0.98


1,447,347


4,426

1.21

Long-term debt

230,305


1,817


3.16


473,602


5,367

4.53

Total borrowings

3,057,236


11,008


1.43


3,131,183


15,153

1.92

Total interest-bearing liabilities

17,747,801


23,032


0.52


17,094,286


30,255

0.71

Noninterest-bearing liabilities

183,117






197,224




Total liabilities

17,930,918






17,291,510















Preferred stock

151,649






28,939




Common shareholders' equity

1,991,600






1,885,386




Webster Financial Corp. shareholders' equity

2,143,249






1,914,325




Total liabilities and equity

$    20,074,167






$  19,205,835




Tax-equivalent net interest income



150,398






148,191


Less: tax-equivalent adjustment



(3,337)






(3,813)


Net interest income



$       147,061






$       144,378


Net interest margin





3.23 %





3.32 %



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

 

WEBSTER FINANCIAL CORPORATION
Consolidated Average Balances, Yields, and Rates Paid (unaudited)

Six Months Ended June 30,



2013






2012


(Dollars in thousands)

Average
balance


Interest


Fully tax-
equivalent
yield/rate


Average
balance


Interest

Fully tax-
equivalent
yield/rate

Assets:











Interest-earning assets:











Loans

$    12,043,172


$       242,781


4.03 %


$  11,348,027


$       242,120

4.25 %

Investment securities (a)

6,226,578


101,292


3.28


6,042,040


111,177

3.71

Loans held for sale

80,077


1,188


2.97


60,034


1,155

3.85

Federal Home Loan and Federal Reserve Bank stock

157,577


1,712


2.19


143,073


1,757

2.47

Interest-bearing deposits

61,744


63


0.20


72,457


62

0.17

Total interest-earning assets

18,569,148


347,036


3.75


17,665,631


356,271

4.03

Noninterest-earning assets

1,493,738






1,389,005




Total assets

$     20,062,886






$   19,054,636















Liabilities and Shareholders' Equity:











Interest-bearing liabilities:











Deposits:











Demand

$      2,858,018


$                  —


—%


$    2,495,035


$                  —

—%

Savings, interest checking, and money market

9,366,063


9,128


0.20


8,652,127


11,079

0.26

Certificates of deposit

2,448,700


15,746


1.30


2,771,113


20,079

1.46

Total deposits

14,672,781


24,874


0.34


13,918,275


31,158

0.45












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

1,147,749


10,239


1.77 %


1,188,392


9,794

1.63 %

Federal Home Loan Bank advances

1,685,330


8,546


1.01


1,353,782


8,990

1.31

Long-term debt

238,645


3,660


3.07


490,359


11,052

4.51

Total borrowings

3,071,724


22,445


1.45


3,032,533


29,836

1.95

Total interest-bearing liabilities

17,744,505


47,319


0.53


16,950,808


60,994

0.72

Noninterest-bearing liabilities

191,198






208,279




Total liabilities

17,935,703






17,159,087















Preferred stock

151,649






28,939




Common shareholders' equity

1,975,534






1,866,610




Webster Financial Corp. shareholders' equity

2,127,183






1,895,549




Total liabilities and equity

$    20,062,886






$  19,054,636




Tax-equivalent net interest income



299,717






295,277


Less: tax-equivalent adjustment



(6,860)






(7,531)


Net interest income



$       292,857






$       287,746


Net interest margin





3.23 %





3.34 %



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

 

WEBSTER FINANCIAL CORPORATION
Five Quarter Loan Balances(unaudited)

(Dollars in thousands)

June 30,
2013


March 31,
2013


December 31,
2012


September 30,
2012


June 30,
2012

Loan Balances (actuals):










Continuing Portfolio:










Commercial non-mortgage

$      2,515,288


$    2,397,774


$    2,399,500


$    2,201,732


$    2,069,127

Equipment financing

400,658


404,597


419,311


401,748


417,654

Asset based lending

591,981


544,112


504,233


535,327


499,212

Commercial real estate

2,840,064


2,763,262


2,755,320


2,597,835


2,518,392

Residential development

26,750


27,692


27,741


30,058


33,035

Residential mortgages

3,313,832


3,287,071


3,291,723


3,292,947


3,300,616

Consumer

2,445,792


2,461,595


2,508,992


2,537,039


2,565,654

Total continuing portfolio

12,134,365


11,886,103


11,906,820


11,596,686


11,403,690

Allowance for loan losses

(142,402)


(146,020)


(152,495)


(156,214)


(168,882)

Total continuing portfolio, net

11,991,963


11,740,083


11,754,325


11,440,472


11,234,808

Liquidating Portfolio:










National Construction Lending Center (NCLC)

1


1


1


1


1

Consumer

111,927


115,928


121,875


130,965


136,306

Total liquidating portfolio

111,928


115,929


121,876


130,966


136,307

Allowance for loan losses

(21,040)


(21,820)


(24,634)


(29,875)


(29,875)

Total liquidating portfolio, net

90,888


94,109


97,242


101,091


106,432

Total Loan Balances (actuals)

12,246,293


12,002,032


12,028,696


11,727,652


11,539,997

Allowance for loan losses

(163,442)


(167,840)


(177,129)


(186,089)


(198,757)

Loans, net

$    12,082,851


$  11,834,192


$  11,851,567


$  11,541,563


$  11,341,240











Loan Balances (average):










Continuing Portfolio:










Commercial non-mortgage

$      2,422,156


$    2,422,372


$    2,238,557


$    2,137,882


$    2,008,778

Equipment financing

398,084


407,849


405,702


404,180


430,882

Asset based lending

566,623


528,797


516,749


520,100


480,574

Commercial real estate

2,784,859


2,744,101


2,653,749


2,528,394


2,453,430

Residential development

26,724


27,507


29,322


31,484


35,422

Residential mortgages

3,295,192


3,286,946


3,294,254


3,300,067


3,296,306

Consumer

2,454,041


2,488,154


2,526,656


2,552,660


2,576,521

Total continuing portfolio

11,947,679


11,905,726


11,664,989


11,474,767


11,281,913

Allowance for loan losses

(148,037)


(153,710)


(161,239)


(167,469)


(179,139)

Total continuing portfolio, net

11,799,642


11,752,016


11,503,750


11,307,298


11,102,774

Liquidating Portfolio:










NCLC

1


1


1


1


1

Consumer

113,871


118,861


127,701


133,566


138,807

Total liquidating portfolio

113,872


118,862


127,702


133,567


138,808

Allowance for loan losses

(21,040)


(21,820)


(24,634)


(29,875)


(29,875)

Total liquidating portfolio, net

92,832


97,042


103,068


103,692


108,933

Total Loan Balances (average)

12,061,551


12,024,588


11,792,691


11,608,334


11,420,721

Allowance for loan losses

(169,077)


(175,530)


(185,873)


(197,344)


(209,014)

Loans, net

$    11,892,474


$  11,849,058


$  11,606,818


$  11,410,990


$  11,211,707

 

 

 

WEBSTER FINANCIAL CORPORATION
Five Quarter Nonperforming Assets(unaudited)











(Dollars in thousands)

June 30,
2013


March 31,
2013


December 31,
2012 (a)


September 30,
2012


June 30,
2012

Nonperforming loans:










Continuing Portfolio:










Commercial non-mortgage

$           17,285


$         16,328


$         17,538


$         30,315


$         29,271

Equipment financing

1,852


2,801


3,325


3,052


5,862

Asset based lending




92


262

Commercial real estate

16,591


24,484


15,683


15,768


23,457

Residential development

4,444


4,793


5,043


5,431


5,982

Residential mortgages

94,208


94,711


95,540


79,736


77,336

Consumer 

44,717


48,370


49,537


23,602


22,616

Nonperforming loans - continuing portfolio

179,097


191,487


186,666


157,996


164,786

Liquidating Portfolio:










Consumer 

7,594


7,323


8,133


4,616


4,460

Nonperforming loans - liquidating portfolio

7,594


7,323


8,133


4,616


4,460

Total nonperforming loans

$         186,691


$       198,810


$       194,799


$       162,612


$       169,246











Other real estate owned and repossessed assets:










Continuing Portfolio:










Commercial

$                404


$              404


$              541


$              917


$              917

Repossessed equipment

505


995


182


1,840


721

Residential

2,485


2,629


2,369


1,705


2,271

Consumer

454


517


290


450


466

Total continuing portfolio

3,848


4,545


3,382


4,912


4,375

Liquidating Portfolio:










Total liquidating portfolio





Total other real estate owned and repossessed assets

$             3,848


$           4,545


$           3,382


$           4,912


$           4,375

Total nonperforming assets

$         190,539


$       203,355


$       198,181


$       167,524


$       173,621


(a) The increases in the residential and consumer categories during 4Q12 are related to an OCC requirement to reflect Chapter 7 bankruptcies as nonaccruing loans.

 

WEBSTER FINANCIAL CORPORATION
Five Quarter Past Due Loans(unaudited)











(Dollars in thousands)

June 30,
2013


March 31,
2013


December 31,
2012


September 30,
2012


June 30,
2012

Past due 30-89 days:










Accruing loans:










Continuing Portfolio:










Commercial non-mortgage

$           10,891


$           3,788


$           2,769


$           4,424


$           6,479

Equipment financing

783


1,000


1,926


3,524


1,665

Asset based lending





Commercial real estate

1,985


1,328


14,710


7,136


3,152

Residential development

737




317


Residential mortgages

16,056


16,571


25,182


22,230


26,966

Consumer

15,976


14,538


24,860


24,664


22,163

Past Due 30-89 days - continuing portfolio

46,428


37,225


69,447


62,295


60,425

Liquidating Portfolio:










Consumer

1,902


2,794


3,588


4,909


4,377

Past Due 30-89 days - liquidating portfolio

1,902


2,794


3,588


4,909


4,377

Accruing loans past due 90 days or more

1,498



1,237


205


1,074

Total past due loans

$           49,828


$         40,019


$         74,272


$         67,409


$         65,876

 

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


For the Three Months Ended

(Dollars in thousands)

June 30,
2013


March 31,
2013


December 31,
2012 (a)


September 30,
2012


June 30,
2012

Beginning balance

$         167,840


$       177,129


$       186,089


$       198,757


$       210,288

Provision

8,500


7,500


7,500


5,000


5,000

Charge-offs continuing portfolio:










Commercial non-mortgage

6,156


4,339


6,411


8,642


5,164

Equipment financing

4


87


682


187


165

Asset based lending



69



512

Commercial real estate

2,510


3,617


170


2,655


1,066

Residential development


143


156



Residential mortgages

2,112


2,936


2,597


3,234


3,948

Consumer

5,374


7,358


8,149


6,752


8,122

Charge-offs continuing portfolio

16,156


18,480


18,234


21,470


18,977

Charge-offs liquidating portfolio:










NCLC




28


4

Consumer

1,957


3,049


5,137


2,482


3,227

Charge-offs liquidating portfolio

1,957


3,049


5,137


2,510


3,231

Total charge-offs

18,113


21,529


23,371


23,980


22,208

Recoveries continuing portfolio:










Commercial non-mortgage

998


901


1,045


779


957

Equipment financing

904


828


2,899


3,111


1,115

Asset based lending

60


698


996


518


721

Commercial real estate

322


91


43


121


34

Residential development

229


150


721


181


12

Residential mortgages

435


205


99


318


126

Consumer

1,572


1,437


674


933


2,453

Recoveries continuing portfolio

4,520


4,310


6,477


5,961


5,418

Recoveries liquidating portfolio:










NCLC

5


45


74


35


10

Consumer

690


385


360


316


249

Recoveries liquidating portfolio

695


430


434


351


259

Total recoveries

5,215


4,740


6,911


6,312


5,677

Total net charge-offs

12,898


16,789


16,460


17,668


16,531

Ending balance

$         163,442


$       167,840


$       177,129


$       186,089


$       198,757











(a) Note: $5.3 million of net charge-offs in 4Q12 relate to an OCC requirement to reduce Chapter 7 bankruptcies to collateral value.

 

WEBSTER FINANCIAL CORPORATION
Reconciliations to GAAP Financial Measures


The Company evaluates its business based on the following ratios that utilize tangible equity, a non-GAAP financial measure. Return on average tangible common shareholders' equity measures the Company's net income available to common shareholders, adjusted for the tax-affected amortization of intangible assets, as a percentage of average common shareholders' equity less goodwill and intangible assets (excluding mortgage servicing rights). The tangible equity ratio represents total ending shareholders' equity less goodwill and intangible assets (excluding mortgage servicing rights) divided by total assets less goodwill and intangible assets (excluding mortgage servicing rights). The tangible common equity ratio represents ending common shareholders' equity less goodwill and intangible assets (excluding mortgage servicing rights) divided by total assets less goodwill and intangible assets (excluding mortgage servicing rights). Tangible book value per common share represents ending common shareholders' equity less goodwill and intangible assets (excluding mortgage servicing rights) divided by ending common shares outstanding.

 

The efficiency ratio, which measures the costs expended to generate a dollar of revenue, is calculated excluding foreclosed property expense, amortization of intangibles, gain or loss on securities, and other non-recurring items. Accordingly, this is also a non-GAAP financial measure.

 

See the tables below for reconciliations of these non-GAAP financial measures with financial measures defined by GAAP for the three months ended June 30, 2013, March 31, 2013, December 31, 2012, September 30, 2012, and June 30, 2012. The Company believes the use of these non-GAAP financial measures provides additional clarity in assessing the results of the Company. Other companies may define or calculate supplemental financial data differently.

 


At or for the Three Months Ended











(Dollars in thousands)

June 30,
2013


March 31,
2013


December 31,
2012


September 30,
2012


June 30,
2012

Reconciliation of net income available to common shareholders to net income used for computing the  return on average tangible common shareholders' equity ratio










Net income available to common shareholders

$           43,734


$         39,231


$         47,911


$         44,378


$         40,625

Amortization of intangibles (tax-affected @ 35%)

807


807


807


900


908

    Quarterly net income adjusted for amortization of intangibles

44,541


40,038


48,718


45,278


41,533

    Annualized net income used in the return on average tangible common shareholders' equity ratio

$         178,164


$       160,152


$       194,872


$       181,112


$       166,132











Reconciliation of average common shareholders' equity to average tangible common shareholders' equity










Average common shareholders' equity

$      1,991,600


$    1,959,288


$    1,967,312


$    1,931,544


$    1,885,386

Average goodwill

(529,887)


(529,887)


(529,887)


(529,887)


(529,887)

Average intangible assets (excluding mortgage servicing rights)

(8,391)


(9,635)


(10,873)


(12,188)


(13,576)

    Average tangible common shareholders' equity

$      1,453,322


$    1,419,766


$    1,426,552


$    1,389,469


$    1,341,923











Reconciliation of period-end shareholders' equity to period-end tangible shareholders' equity










Shareholders' equity

$      2,127,475


$    2,128,131


$    2,093,530


$    1,983,678


$    1,931,548

Goodwill

(529,887)


(529,887)


(529,887)


(529,887)


(529,887)

Intangible assets (excluding mortgage servicing rights)

(7,786)


(9,028)


(10,270)


(11,512)


(12,896)

    Tangible shareholders' equity

$      1,589,802


$    1,589,216


$    1,553,373


$    1,442,279


$    1,388,765











Reconciliation of period-end common shareholders' equity to period-end tangible common shareholders' equity










Shareholders' equity

$      2,127,475


$    2,128,131


$    2,093,530


$    1,983,678


$    1,931,548

Preferred stock

(151,649)


(151,649)


(151,649)


(28,939)


(28,939)

Common shareholders' equity

1,975,826


1,976,482


1,941,881


1,954,739


1,902,609

Goodwill

(529,887)


(529,887)


(529,887)


(529,887)


(529,887)

Intangible assets (excluding mortgage servicing rights)

(7,786)


(9,028)


(10,270)


(11,512)


(12,896)

    Tangible common shareholders' equity

$      1,438,153


$    1,437,567


$    1,401,724


$    1,413,340


$    1,359,826











Reconciliation of period-end assets to period-end tangible assets










Assets

$    20,329,238


$  20,110,538


$  20,146,765


$  19,729,662


$  19,429,749

Goodwill

(529,887)


(529,887)


(529,887)


(529,887)


(529,887)

Intangible assets (excluding mortgage servicing rights)

(7,786)


(9,028)


(10,270)


(11,512)


(12,896)

    Tangible assets

$    19,791,565


$  19,571,623


$  19,606,608


$  19,188,263


$  18,886,966











Book value per common share










Common shareholders' equity

$      1,975,826


$    1,976,482


$    1,941,881


$    1,954,739


$    1,902,609

Ending common shares issued and outstanding (in thousands)

90,289


90,237


85,341


87,899


87,885

    Book value per share of common stock

$             21.88


$           21.90


$           22.75


$           22.24


$           21.65











Tangible book value per common share










Tangible common shareholders' equity

$      1,438,153


$    1,437,567


$    1,401,724


$    1,413,340


$    1,359,826

Ending common shares issued and outstanding (in thousands)

90,289


90,237


85,341


87,899


87,885

    Tangible book value per common share

$             15.93


$           15.93


$           16.42


$           16.08


$           15.47











Reconciliation of noninterest expense to noninterest expense used in the efficiency ratio










Noninterest expense

$         123,604


$       125,535


$       122,925


$       123,887


$       127,179

Foreclosed property expense

(331)


(175)


(267)


(118)


(176)

Intangible assets amortization

(1,242)


(1,242)


(1,242)


(1,384)


(1,397)

Other expense

(687)


(1,352)


(452)


(187)


(2,572)

    Noninterest expense used in the efficiency ratio

$         121,344


$       122,766


$       120,964


$       122,198


$       123,034











Reconciliation of income to income used in the efficiency ratio










Net interest income before provision for loan losses

$         147,061


$       145,796


$       146,272


$       144,890


$       144,378

Fully taxable-equivalent adjustment

3,337


3,523


3,480


3,740


3,813

Noninterest income

52,251


48,278


52,940


48,479


47,353

Net gain on investment securities

(333)


(106)



(810)


(2,537)

    Income used in the efficiency ratio

$         202,316


$       197,491


$       202,692


$       196,299


$       193,007

 

 

SOURCE Webster Financial Corporation