Webster Reports 2014 Second Quarter Earnings

Diluted Earnings per Share of $0.50 for the Quarter Compared to $0.48 a Year Ago

PR Newswire

WATERBURY, Conn., July 17, 2014 /PRNewswire/ -- Webster Financial Corporation (WBS), the holding company for Webster Bank, N.A., today announced net income available to common shareholders of $45.2 million, or $0.50 per diluted share, for the quarter ended June 30, 2014 compared to $43.7 million, or $0.48 per diluted share, for the quarter ended June 30, 2013.

Highlights for the quarter or at June 30 include:

  • Combined growth in commercial and commercial real estate loans of $985.2 million, or 15.5 percent, from a year ago. Overall loan growth of $1.0 billion, or 8.4 percent, from a year ago.
  • Deposit growth of $367.3 million, or 2.5 percent, from a year ago.
  • Core revenue improved 1.9 percent from a year ago, while expenses remained flat leading to core pre-provision net revenue growth of 5.1 percent.
  • Continued improvement in asset quality: annualized net charge-off rate at 24 basis points of total loans; nonperforming loans as a percentage of total loans at the lowest level since the end of 2007.
  • Efficiency ratio of 59.26 percent, an improvement of 72 basis points from a year ago. Positive operating leverage of 2.0 percent year-over-year.
  • Return on average tangible common shareholders' equity of 11.52 percent.

"We are pleased to report another solid quarterly performance, marked by a 3 percent increase in net income over prior year, as Webster bankers continue to excel in service to our customers and communities," said James C. Smith, chairman and chief executive officer. "Loans grew across all categories with especially strong performance once again by Commercial Banking. Credit quality continues to improve as the economy gathers strength, and disciplined expense management contributed to Webster's thirteenth consecutive quarter of positive operating leverage."

Net interest income (compared to prior year)

  • Net interest income was $155.1 million compared to $147.1 million.
  • Net interest margin was 3.19 percent compared to 3.23 percent. The yield on interest-earning assets declined by 9 basis points, while the cost of funds declined by 5 basis points.
  • Average interest-earning assets totaled $19.7 billion and grew by $1.2 billion, or 6.2 percent. 
  • Average loans grew by $1.1 billion, or 8.9 percent.

Provision for loan losses

  • The Company recorded a provision for loan losses of $9.25 million compared to $9.0 million in the prior quarter and $8.5 million a year earlier.
  • Net charge-offs were $8.0 million, flat to the first quarter, and $12.9 million in the year-ago period. The ratio of net charge-offs to average loans on an annualized basis was 0.24 percent compared to 0.25 percent in the first quarter and 0.43 percent a year ago.
  • The allowance for loan losses represented 1.17 percent of total loans at June 30, 2014 compared to 1.18 percent at March 31, 2014 and 1.33 percent at June 30, 2013. The allowance for loan losses represented 107 percent of nonperforming loans at June 30 compared to 106 percent at March 31 and 88 percent a year ago.

Non-interest income (compared to prior year)

  • Total non-interest income was $47.6 million compared to $52.3 million, a decrease of $4.7 million. Excluding securities gains and a nominal other-than-temporary impairment charge, a $4.3 million year-over-year decrease in core non-interest income reflects a decrease of $5.4 million in mortgage banking activities and $0.6 million in loan related fees, offset by increases of $1.7 million in deposit service fees and $0.3 million in other income.

Non-interest expense (compared to prior year)

  • Total non-interest expense of $122.6 million compared to $123.6 million, a decrease of $1.0 million. Included in non-interest expense are $0.5 million of net one-time costs. These costs primarily consisted of branch and facility optimization and severance expenses. There were $0.9 million of net one-time costs in the year-ago quarter.
  • Foreclosed and repossessed asset expenses were $0.1 million compared to $0.3 million, while net gains on foreclosed and repossessed assets were $0.6 million compared $0.3 million in the year-ago quarter.

"Once again, Webster demonstrated a disciplined approach to business investment as evidenced by positive operating leverage and a lower efficiency ratio," said Glenn MacInnes, executive vice president and chief financial officer. "In addition, our commitment to managing risk is reflected in continued improvement in our key asset quality metrics."

Income taxes

  • The Company recorded $23.0 million of income tax expense in the second quarter. The effective tax rate was 32.5 percent compared to 31.0 percent a year ago and reflects primarily the effects of increased pre-tax income and decreased benefits from tax-exempt interest income, and a $0.2 million net tax expense specific to the quarter.

Investment securities

  • Total investment securities were $6.5 billion at both June 30 and March 31, 2014 and $6.4 billion a year ago. The carrying value of the available-for-sale portfolio included $33.6 million in net unrealized gains compared to $8.8 million at March 31 and $4.4 million a year ago, while the carrying value of the held-to-maturity portfolio does not reflect $73.7 million in net unrealized gains compared to $30.2 million at March 31 and $44.3 million a year ago.

Loans

  • Total loans were $13.3 billion at June 30, 2014 compared to $13.0 billion at March 31, 2014 and $12.2 billion at June 30, 2013. In the quarter, commercial, commercial real estate, residential mortgage, and consumer loans increased by $98.6 million, $148.3 million, $9.6 million, and $24.2 million, respectively.
  • Compared to a year ago, commercial, commercial real estate, and residential mortgage loans increased by $560.2 million, $425.1 million, and $52.3 million, respectively. Consumer loans decreased by $8.4 million.
  • Loan originations for portfolio in the second quarter were $1,069 million compared to $879 million in the first quarter and $1,204 million a year ago. In addition, $73 million of residential loans were originated for sale in the quarter compared to $59 million in the prior quarter and $206 million a year ago.

Asset quality

  • Past due loans were $46.9 million at June 30, 2014 compared to $48.0 million at March 31, 2014 and $49.8 million a year ago. Compared to March 31, past due commercial non-mortgage, residential mortgage, commercial real estate, and equipment finance loans decreased $2.9 million, $1.1 million, $1.1 million, and $0.4 million respectively, while past due consumer loans increased $4.2 million. Loans past due 90 days and still accruing increased $0.3 million. Compared to a year ago, all loan categories contributed to the decrease except for consumer and residential mortgage loans, which increased $3.2 million and $1.8 million, respectively.
  • Past due loans represented 0.35 percent of total loans at quarter end, 0.37 percent at March 31, and 0.41 percent a year ago. Past due loans for the continuing portfolio were $44.8 million at quarter end compared to $45.7 million at March 31 and $47.9 million a year ago. Past due loans for the liquidating portfolio were $2.1 million at June 30 compared to $2.3 million at March 31 and $1.9 million a year ago.
  • Total nonperforming loans decreased to $144.5 million, or 1.09 percent of total loans, at quarter end compared to $145.1 million, or 1.12 percent, at March 31, and $186.7 million, or 1.52 percent, a year ago. Total paying nonperforming loans at June 30 were $37.6 million compared to $35.7 million at March 31 and $61.9 million a year ago.

Deposits and borrowings

  • Total deposits were $15.2 billion at June 30, 2014 compared to $15.0 billion at March 31, 2014 and $14.8 billion a year ago. Compared to March 31, increases of $221.4 million in demand deposits, $150.7 million in interest-bearing checking, $52.9 million in savings, and $52.4 million in brokered certificates of deposit were offset by declines of $289.0 million in money market deposits, and $25.5 million in certificates of deposit. Compared to a year ago, increases of $440.1 million in interest-bearing checking, $293.7 million in demand deposits, $128.7 million in brokered certificates of deposit, and $90.4 million in savings were offset by declines of $423.4 million in money market deposits and $162.2 million in certificates of deposit.
  • Core to total deposits were consistent with March 31 at 84.8 percent compared to 84.2 percent a year ago. Loans to deposits were 87.3 percent compared to 86.4 percent at March 31 and 82.6 percent a year ago.
  • Total borrowings were $3.8 billion at quarter end compared to $3.7 billion at March 31 and $3.1 billion a year ago.

Capital (compared to prior year)

  • The return on average tangible common shareholders' equity and the return on average common shareholders' equity were 11.52 percent and 8.54 percent, respectively, at quarter end compared to 12.26 percent and 8.78 percent, respectively.
  • The tangible equity and tangible common equity ratios were 8.34 percent and 7.62 percent, respectively, at quarter end compared to 8.03 percent and 7.27 percent, respectively. The Tier 1 common equity to risk-weighted assets ratio was 11.37 percent at quarter end compared to 11.24 percent.
  • Book value and tangible book value per common share were $23.63 and $17.72, respectively, at quarter end compared to $21.88 and $15.93, respectively.

Webster Financial Corporation is the holding company for Webster Bank, National Association. With $22 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust and investment services through 166 banking centers, 311 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 2014 second quarter earnings announcement will be held today, Thursday, July 17, 2014 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 nonperforming 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,
2014


March 31,
2014


December 31,
2013


September 30,
2013


June 30,
2013













Income and performance ratios (annualized):











Net income attributable to Webster Financial Corp.

$           47,856


$           50,423


$           43,754


$           47,305


$           46,373


Net income available to common shareholders

45,217


47,784


41,115


44,666


43,734


Net income per diluted common share

0.50


0.53


0.45


0.49


0.48


Return on average assets

0.90 %


0.96 %


0.85 %


0.93 %


0.92 %


Return on average tangible common shareholders' equity

11.52


12.51


11.14


12.43


12.26


Return on average common shareholders' equity

8.54


9.16


8.06


8.93


8.78


Non-interest income as a percentage of total revenue

23.48


24.29


22.34


23.57


26.22


Efficiency ratio

59.26


60.34


59.30


60.07


59.98













Asset quality:











Allowance for loan losses

$         154,868


$         153,600


$         152,573


$         157,545


$         163,442


Nonperforming assets

151,207


152,900


171,607


185,566


190,539


Allowance for loan losses / total loans

1.17 %


1.18 %


1.20 %


1.26 %


1.33 %


Net charge-offs / average loans (annualized)

0.24


0.25


0.45


0.47


0.43


Nonperforming loans / total loans

1.09


1.12


1.28


1.42


1.52


Nonperforming assets / total loans plus OREO

1.14


1.18


1.35


1.49


1.56


Allowance for loan losses / nonperforming loans

107.19


105.84


93.65


88.73


87.55













Other ratios (annualized):











Tangible equity ratio

8.34 %


8.26 %


8.24 %


8.13 %


8.03 %


Tangible common equity ratio

7.62


7.53


7.49


7.37


7.27


Tier 1 risk-based capital ratio(a)

12.94


13.07


13.07


13.05


12.93


Total risk-based capital(a)

14.05


14.20


14.21


14.25


14.19


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

11.37


11.45


11.43


11.38


11.24


Shareholders' equity / total assets

10.61


10.58


10.59


10.52


10.47


Net interest margin

3.19


3.26


3.27


3.23


3.23













Share and equity related:











Common equity

$      2,132,829


$      2,087,980


$      2,057,539


$      2,016,010


$      1,975,826


Book value per common share

23.63


23.13


22.77


22.34


21.88


Tangible book value per common share

17.72


17.21


16.85


16.40


15.93


Common stock closing price

31.54


31.06


31.18


25.53


25.68


Dividends declared per common share

0.20


0.15


0.15


0.15


0.15













Common shares issued and outstanding

90,246


90,269


90,367


90,245


90,289


Basic shares (weighted average)

89,776


89,880


89,887


89,759


89,645


Diluted shares (weighted average)

90,528


90,658


90,602


90,423


90,087


 

(a) The ratios presented are projected for June 30, 2014 and actual for the remaining periods presented.


 

 

WEBSTER FINANCIAL CORPORATION
Consolidated Balance Sheets (unaudited)

(In thousands)

June 30,
2014


March 31,
2014


June 30,
2013

Assets:






Cash and due from banks

$         287,917


$         251,886


$         179,068

Interest-bearing deposits

18,620


29,893


32,601

Investment securities:






Available for sale, at fair value

2,980,031


3,008,856


3,257,360

Held to maturity

3,478,803


3,448,195


3,129,864

Total securities

6,458,834


6,457,051


6,387,224

Loans held for sale

31,671


14,631


81,161

Loans:






Commercial

4,068,089


3,969,508


3,507,927

Commercial real estate

3,291,892


3,143,612


2,866,814

Residential mortgages

3,366,092


3,356,539


3,313,833

Consumer

2,549,307


2,525,083


2,557,719

Total loans

13,275,380


12,994,742


12,246,293

Allowance for loan losses

(154,868)


(153,600)


(163,442)

Loans, net

13,120,512


12,841,142


12,082,851

Federal Home Loan Bank and Federal Reserve Bank stock

168,595


166,133


158,878

Premises and equipment, net

119,840


121,473


122,704

Goodwill and other intangible assets, net

533,402


534,070


537,673

Cash surrender value of life insurance policies

436,445


433,793


423,598

Deferred tax asset, net

57,671


55,316


73,166

Accrued interest receivable and other assets

290,830


270,357


250,314

Total Assets

$    21,524,337


$    21,175,745


$    20,329,238







Liabilities and Equity:






Deposits:






Demand

$      3,249,996


$      3,028,625


$      2,956,320

Interest-bearing checking

3,828,638


3,677,917


3,388,505

Money market

1,844,014


2,133,036


2,267,463

Savings

3,973,109


3,920,171


3,882,691

Certificates of deposit

2,029,008


2,054,541


2,191,188

Brokered certificates of deposit

278,080


225,699


149,408

Total deposits

15,202,845


15,039,989


14,835,575

Securities sold under agreements to repurchase and other borrowings

1,401,259


1,147,882


1,213,349

Federal Home Loan Bank advances

2,217,324


2,203,606


1,627,517

Long-term debt

226,178


376,412


229,928

Accrued expenses and other liabilities

192,253


168,227


295,394

Total liabilities

19,239,859


18,936,116


18,201,763







Preferred stock

151,649


151,649


151,649

Common shareholders' equity

2,132,829


2,087,980


1,975,826

Webster Financial Corporation shareholders' equity

2,284,478


2,239,629


2,127,475

Total Liabilities and Equity

$    21,524,337


$    21,175,745


$    20,329,238







 

WEBSTER FINANCIAL CORPORATION
Consolidated Statements of Income (unaudited)



Three Months Ended June 30,


Six Months Ended June 30,


(In thousands, except per share data)

2014


2013


2014


2013


Interest income:









Interest and fees on loans and leases

$         125,771


$         121,313


$         249,781


$         242,005


Interest and dividends on securities

51,511


48,229


105,103


96,983


Loans held for sale

215


551


392


1,188


   Total interest income

177,497


170,093


355,276


340,176


    Interest expense:









Deposits

10,851


12,024


21,495


24,874


Borrowings

11,524


11,008


23,358


22,445


   Total interest expense

22,375


23,032


44,853


47,319


   Net interest income

155,122


147,061


310,423


292,857


Provision for loan losses

9,250


8,500


18,250


16,000


   Net interest income after provision for loan losses

145,872


138,561


292,173


276,857


Non-interest income:









Deposit service fees

26,302


24,622


51,014


48,616


Loan related fees

4,890


5,505


9,372


10,090


Wealth and investment services

8,829


8,920


17,667


16,686


Mortgage banking activities

513


5,888


1,288


12,919


Increase in cash surrender value of life insurance policies

3,296


3,448


6,554


6,832


Net gain on investment securities


333


4,336


439


Other income

3,839


3,535


7,354


4,947



47,669


52,251


97,585


100,529


Loss on write-down of investment securities to fair value

(73)



(161)



   Total non-interest income

47,596


52,251


97,424


100,529


Non-interest expense:









Compensation and benefits

65,711


65,768


132,082


131,818


Occupancy

11,491


11,837


24,250


24,716


Technology and equipment expense

15,737


15,495


30,747


30,848


Marketing

4,249


3,817


7,429


8,628


Professional and outside services

1,269


1,527


3,971


3,677


Intangible assets amortization

669


1,242


1,837


2,484


Foreclosed and repossessed asset expenses

134


331


592


506


Foreclosed and repossessed asset gains

(574)


(250)


(834)


(534)


Loan workout expenses

801


1,576


1,853


3,550


Deposit insurance

5,565


5,524


10,876


10,698


Other expenses

17,008


15,800


33,662


30,175



122,060


122,667


246,465


246,566


Debt prepayment penalties




43


Severance, contract, and other

267


919


289


2,413


Branch and facility optimization

258


18


448


117


   Total non-interest expense

122,585


123,604


247,202


249,139


Income before income taxes

70,883


67,208


142,395


128,247


Income tax expense

23,027


20,835


44,116


39,757


   Net income attributable to Webster Financial Corp.

47,856


46,373


98,279


88,490


Preferred stock dividends

(2,639)


(2,639)


(5,278)


(5,525)


   Net income available to common shareholders

$           45,217


$           43,734


$           93,001


$           82,965











   Diluted shares (average)

90,528


90,087


90,584


89,953











Net income per common share available to common shareholders:









   Basic

$               0.50


$               0.49


$               1.03


$               0.94


   Diluted

0.50


0.48


1.02


0.92











 

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








Three Months Ended

(In thousands, except per share data)

June 30,
2014


March 31,
2014


December 31,
2013


September 30,
2013


June 30,
2013

Interest income:










Interest and fees on loans and leases

$         125,771


$         124,010


$         124,110


$         123,257


$         121,313

Interest and dividends on securities

51,511


53,592


51,294


47,923


48,229

Loans held for sale

215


177


307


573


551

   Total interest income

177,497


177,779


175,711


171,753


170,093

Interest expense:










Deposits

10,851


10,644


10,800


10,908


12,024

Borrowings

11,524


11,834


11,027


10,858


11,008

   Total interest expense

22,375


22,478


21,827


21,766


23,032

   Net interest income

155,122


155,301


153,884


149,987


147,061

Provision for loan losses

9,250


9,000


9,000


8,500


8,500

   Net interest income after provision for loan losses

145,872


146,301


144,884


141,487


138,561

Non-interest income:










Deposit service fees

26,302


24,712


25,182


25,170


24,622

Loan related fees

4,890


4,482


5,930


5,840


5,505

Wealth and investment services

8,829


8,838


9,990


8,095


8,920

Mortgage banking activities

513


775


2,775


665


5,888

Increase in cash surrender value of life insurance policies

3,296


3,258


3,422


3,516


3,448

Net gain on investment securities


4,336


4


269


333

Other income

3,839


3,515


4,238


2,702


3,535


47,669


49,916


51,541


46,257


52,251

Loss on write-down of investment securities to fair value

(73)


(88)


(7,277)



   Total non-interest income

47,596


49,828


44,264


46,257


52,251

Non-interest expense:










Compensation and benefits

65,711


66,371


68,155


64,862


65,768

Occupancy

11,491


12,759


12,084


11,994


11,837

Technology and equipment expense

15,737


15,010


14,583


14,895


15,495

Marketing

4,249


3,180


3,225


3,649


3,817

Professional and outside services

1,269


2,702


3,601


2,254


1,527

Intangible assets amortization

669


1,168


1,193


1,242


1,242

Foreclosed and repossessed asset expenses

134


458


400


432


331

Foreclosed and repossessed asset gains

(574)


(260)


(229)


(532)


(250)

Loan workout expenses

801


1,052


1,370


1,296


1,576

Deposit insurance

5,565


5,311


5,116


5,300


5,524

Other expenses

17,008


16,654


15,547


15,407


15,800


122,060


124,405


125,045


120,799


122,667

Severance, contract, and other

267


22


389


1,482


919

Branch and facility optimization

258


190


1,205



18

   Total non-interest expense

122,585


124,617


126,639


122,281


123,604

Income before income taxes

70,883


71,512


62,509


65,463


67,208

Income tax expense

23,027


21,089


18,755


18,158


20,835

   Net income attributable to Webster Financial Corp.

47,856


50,423


43,754


47,305


46,373

Preferred stock dividends

(2,639)


(2,639)


(2,639)


(2,639)


(2,639)

   Net income available to common shareholders

$           45,217


$           47,784


$           41,115


$           44,666


$           43,734











Diluted shares (average)

90,528


90,658


90,602


90,423


90,087











Net income per common share available to common shareholders:










   Basic

$               0.50


$               0.53


$               0.46


$               0.50


$               0.49

   Diluted

0.50


0.53


0.45


0.49


0.48











 

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


Three Months Ended June 30,




2014






2013



(Dollars in thousands)

Average
balance


Interest


Fully tax-
equivalent
yield/rate


Average
balance


Interest


Fully tax-
equivalent
yield/rate

Assets:












   Interest-earning assets:












   Loans

$    13,129,865


$         126,292


3.83 %


$    12,061,551


$         121,720


4.02 %

   Investment securities(a)

6,411,407


52,604


3.29


6,257,923


50,277


3.24

   Federal Home Loan and Federal Reserve Bank stock

166,350


1,158


2.79


158,878


865


2.18

   Interest-bearing deposits

16,792


11


0.27


41,499


17


0.16

   Loans held for sale

20,099


215


4.27


70,922


551


3.10

    Total interest-earning assets

19,744,513


$         180,280


3.64 %


18,590,773


$         173,430


3.73 %

   Non-interest-earning assets

1,506,934






1,483,394





    Total assets

$    21,251,447






$    20,074,167

















Liabilities and Shareholders' Equity:












   Interest-bearing liabilities:












     Deposits:












    Demand

$      3,099,114


$                   —


—%


$      2,879,745


$                   —


—%

    Savings, interest checking, and money market

9,752,872


4,413


0.18


9,413,301


4,506


0.19

    Certificates of deposit

2,280,571


6,438


1.13


2,397,519


7,518


1.26

  Total deposits

15,132,557


10,851


0.29


14,690,565


12,024


0.33













Securities sold under agreements to repurchase and other borrowings

1,412,820


5,082


1.42


1,203,442


5,184


1.70

Federal Home Loan Bank advances

2,035,813


4,002


0.78


1,623,489


4,007


0.98

Long-term debt

249,276


2,440


3.91


230,305


1,817


3.16

  Total borrowings

3,697,909


11,524


1.24


3,057,236


11,008


1.43

  Total interest-bearing liabilities

18,830,466


$           22,375


0.47 %


17,747,801


$           23,032


0.52 %

Non-interest-bearing liabilities

150,316






183,117





  Total liabilities

18,980,782






17,930,918

















Preferred stock

151,649






151,649





Common shareholders' equity

2,119,016






1,991,600





Webster Financial Corp. shareholders' equity

2,270,665






2,143,249





  Total liabilities and equity

$    21,251,447






$    20,074,167





Tax-equivalent net interest income



157,905






150,398



Less: tax-equivalent adjustment



(2,783)






(3,337)



  Net interest income



$         155,122






$         147,061



  Net interest margin





3.19 %






3.23 %




(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,




2014






2013



(Dollars in thousands)

Average
balance


Interest


Fully tax-
equivalent
yield/rate


Average
balance


Interest


Fully tax-
equivalent
yield/rate

Assets:












  Interest-earning assets:












  Loans

$    12,992,371


$         250,804


3.85 %


$    12,043,172


$         242,781


4.03 %

  Investment securities(a)

6,416,165


107,529


3.36


6,226,578


101,292


3.28

  Federal Home Loan and Federal Reserve Bank stock

162,675


2,325


2.88


157,577


1,712


2.19

  Interest-bearing deposits

16,373


22


0.27


61,744


63


0.20

  Loans held for sale

19,119


392


4.10


80,077


1,188


2.97

   Total interest-earning assets

19,606,703


$         361,072


3.68 %


18,569,148


$         347,036


3.75 %

  Non-interest-earning assets

1,509,269






1,493,738





   Total assets

$    21,115,972






$    20,062,886

















Liabilities and Shareholders' Equity:












  Interest-bearing liabilities:












   Deposits:












 Demand

$      3,098,058


$                   —


—%


$      2,858,018


$                   —


—%

 Savings, interest checking, and money market

9,798,648


8,932


0.18


9,366,063


9,128


0.20

 Certificates of deposit

2,265,510


12,563


1.12


2,448,700


15,746


1.30

Total deposits

15,162,216


21,495


0.29


14,672,781


24,874


0.34













Securities sold under agreements to repurchase and other borrowings

1,382,301


10,287


1.48


1,147,749


10,239


1.77

Federal Home Loan Bank advances

1,879,609


7,849


0.83


1,685,330


8,546


1.01

Long-term debt

278,966


5,222


3.74


238,645


3,660


3.07

  Total borrowings

3,540,876


23,358


1.31


3,071,724


22,445


1.45

  Total interest-bearing liabilities

18,703,092


$           44,853


0.48 %


17,744,505


$           47,319


0.53 %

Non-interest-bearing liabilities

158,046






191,198





  Total liabilities

18,861,138






17,935,703

















Preferred stock

151,649






151,649





Common shareholders' equity

2,103,185






1,975,534





Webster Financial Corp. shareholders' equity

2,254,834






2,127,183





  Total liabilities and equity

$    21,115,972






$    20,062,886





Tax-equivalent net interest income



316,219






299,717



Less: tax-equivalent adjustment



(5,796)






(6,860)



  Net interest income



$         310,423






$         292,857



  Net interest margin





3.22 %






3.23 %




(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,
2014


March 31,
2014


December 31,
2013


September 30,
2013


June 30,
2013

Loan Balances (actuals):










Continuing Portfolio:










 Commercial non-mortgage

$      2,978,576


$      2,926,223


$      2,723,566


$      2,573,293


$      2,515,288

 Equipment financing

464,948


457,670


460,450


425,827


400,658

 Asset-based lending

624,565


585,615


559,285


612,106


591,981

 Commercial real estate

3,291,892


3,143,612


3,058,362


2,983,863


2,866,814

 Residential mortgages

3,366,091


3,356,538


3,361,424


3,350,576


3,313,832

 Consumer

2,449,730


2,422,377


2,431,786


2,423,829


2,445,792

Total continuing portfolio

13,175,802


12,892,035


12,594,873


12,369,494


12,134,365

Allowance for loan losses

(143,440)


(141,352)


(137,821)


(139,734)


(142,402)

Total continuing portfolio, net

13,032,362


12,750,683


12,457,052


12,229,760


11,991,963

Liquidating Portfolio:










 National Construction Lending Center (NCLC)

1


1


1


1


1

 Consumer

99,577


102,706


104,902


108,470


111,927

Total liquidating portfolio

99,578


102,707


104,903


108,471


111,928

Allowance for loan losses

(11,428)


(12,248)


(14,752)


(17,811)


(21,040)

Total liquidating portfolio, net

88,150


90,459


90,151


90,660


90,888

Total Loan Balances (actuals)

13,275,380


12,994,742


12,699,776


12,477,965


12,246,293

Allowance for loan losses

(154,868)


(153,600)


(152,573)


(157,545)


(163,442)

Loans, net

$    13,120,512


$    12,841,142


$    12,547,203


$    12,320,420


$    12,082,851











Loan Balances (average):










Continuing Portfolio:










 Commercial non-mortgage

$      2,963,150


$      2,853,516


$      2,625,654


$      2,517,496


$      2,422,156

 Equipment financing

459,140


456,391


436,328


413,975


398,084

 Asset-based lending

612,170


562,443


587,039


599,387


566,623

 Commercial real estate

3,195,746


3,080,575


3,003,837


2,885,767


2,811,583

 Residential mortgages

3,361,276


3,364,746


3,359,186


3,342,516


3,295,192

 Consumer

2,437,452


2,431,900


2,429,354


2,433,705


2,454,041

Total continuing portfolio

13,028,934


12,749,571


12,441,398


12,192,846


11,947,679

Allowance for loan losses

(143,811)


(143,676)


(141,460)


(145,849)


(148,037)

Total continuing portfolio, net

12,885,123


12,605,895


12,299,938


12,046,997


11,799,642

Liquidating Portfolio:










 NCLC

53


1


1


1


1

 Consumer

100,878


103,777


106,794


109,620


113,871

Total liquidating portfolio

100,931


103,778


106,795


109,621


113,872

Allowance for loan losses

(11,428)


(12,248)


(14,752)


(17,811)


(21,040)

Total liquidating portfolio, net

89,503


91,530


92,043


91,810


92,832

Total Loan Balances (average)

13,129,865


12,853,349


12,548,193


12,302,467


12,061,551

Allowance for loan losses

(155,239)


(155,924)


(156,212)


(163,660)


(169,077)

Loans, net

$    12,974,626


$    12,697,425


$    12,391,981


$    12,138,807


$    11,892,474











 

 

WEBSTER FINANCIAL CORPORATION
Five Quarter Nonperforming Assets  (unaudited)

(Dollars in thousands)

June 30,
2014


March 31,
2014(a)


December 31,
2013


September 30,
2013


June 30,
2013

Nonperforming loans:










Continuing Portfolio:










Commercial non-mortgage

$           14,152


$           12,869


$           10,933


$           17,471


$           17,285

Equipment financing

863


1,325


1,141


1,669


1,852

Asset-based lending





Commercial real estate

19,023


20,009


17,663


20,215


21,035

Residential mortgages

68,439


66,373


81,370


86,099


94,208

Consumer

36,526


38,670


45,573


45,587


44,717

 Nonperforming loans - continuing portfolio

139,003


139,246


156,680


171,041


179,097

Liquidating Portfolio:










Consumer

5,475


5,875


6,245


6,517


7,594

Total nonperforming loans

$         144,478


$         145,121


$         162,925


$         177,558


$         186,691











Other real estate owned and repossessed assets:










Continuing Portfolio:










Commercial

$             3,238


$             3,466


$             3,618


$             3,728


$                404

Repossessed equipment

100


123


134


193


505

Residential

2,748


3,721


4,648


3,601


2,485

Consumer

643


469


282


486


454

  Total continuing portfolio

6,729


7,779


8,682


8,008


3,848

Liquidating Portfolio:










  Total liquidating portfolio





Total other real estate owned and repossessed assets

$             6,729


$             7,779


$             8,682


$             8,008


$             3,848

Total nonperforming assets

$         151,207


$         152,900


$         171,607


$         185,566


$         190,539


(a) The decreases reflect the reclassification of $17.6 million of residential and consumer loans as accruing in the quarter under regulatory guidance.











 

WEBSTER FINANCIAL CORPORATION
Five Quarter Past Due Loans  (unaudited)


(Dollars in thousands)

June 30,
2014


March 31,
2014


December 31,
2013


September 30,
2013


June 30,
2013


Past due 30-89 days:











Continuing Portfolio:











Commercial non-mortgage

$             5,045


$             7,913


$             4,100


$             2,982


$           10,891


Equipment financing

290


698


362


455


783


Asset-based lending






Commercial real estate

1,610


2,680


4,897


547


2,722


Residential mortgages

17,826


18,966


18,285


20,803


16,056


Consumer

18,956


14,552


18,926


15,966


15,976


 Past due 30-89 days - continuing portfolio

43,727


44,809


46,570


40,753


46,428


Liquidating Portfolio:











Consumer

2,105


2,325


1,806


2,726


1,902


Total past due 30-89 days

45,832


47,134


48,376


43,479


48,330


Loans past due 90 days or more and accruing

1,111


850


4,501


4,811


1,498


Total past due loans

$           46,943


$           47,984


$           52,877


$           48,290


$           49,828













 

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


For the Three Months Ended

(Dollars in thousands)

June 30,
2014


March 31,
2014


December 31,
2013


September 30,
2013


June 30,
2013

Beginning balance

$         153,600


$         152,573


$         157,545


$         163,442


$         167,840

  Provision

9,250


9,000


9,000


8,500


8,500

Charge-offs continuing portfolio:










Commercial non-mortgage

3,685


3,148


5,383


3,245


6,156

Equipment financing

20



178


10


4

Asset-based lending



3



Commercial real estate

447


2,405


5,086


4,069


2,510

Residential mortgages

1,840


1,158


2,744


3,800


2,112

Consumer

4,075


4,517


4,402


4,525


5,374

Charge-offs continuing portfolio

10,067


11,228


17,796


15,649


16,156

Charge-offs liquidating portfolio:










NCLC





Consumer

1,211


369


1,070


1,302


1,957

Charge-offs liquidating portfolio

1,211


369


1,070


1,302


1,957

Total charge-offs

11,278


11,597


18,866


16,951


18,113

Recoveries continuing portfolio:










Commercial non-mortgage

1,121


950


2,029


424


998

Equipment financing

397


799


630


683


904

Asset-based lending


23


11


2


60

Commercial real estate

69


479


750


105


552

Residential mortgages

495


108


445


141


435

Consumer

923


865


769


1,002


1,571

Recoveries continuing portfolio

3,005


3,224


4,634


2,357


4,520

Recoveries liquidating portfolio:










NCLC

12


152


115


11


5

Consumer

279


248


145


186


690

Recoveries liquidating portfolio

291


400


260


197


695

Total recoveries

3,296


3,624


4,894


2,554


5,215

Total net charge-offs

7,982


7,973


13,972


14,397


12,898

Ending balance

$         154,868


$         153,600


$         152,573


$         157,545


$         163,442


 

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, 2014, March 31, 2014, December 31, 2013, September 30, 2013, and June 30, 2013. 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,
2014


March 31,
2014


December 31,
2013


September 30,
2013


June 30,
2013

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

$           45,217


$           47,784


$           41,115


$           44,666


$           43,734

Amortization of intangibles (tax-affected @ 35%)

435


759


775


807


807

  Quarterly net income adjusted for amortization of intangibles

45,652


48,543


41,890


45,473


44,541

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

$         182,608


$         194,172


$         167,560


$         181,982


$         178,164











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










Average common shareholders' equity

$      2,119,016


$      2,087,179


$      2,040,435


$      2,000,018


$      1,991,600

Average goodwill

(529,887)


(529,887)


(529,887)


(529,887)


(529,887)

Average intangible assets (excluding mortgage servicing rights)

(3,762)


(4,754)


(5,922)


(7,151)


(8,391)

  Average tangible common shareholders' equity

$      1,585,367


$      1,552,538


$      1,504,626


$      1,462,980


$      1,453,322











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










Shareholders' equity

$      2,284,478


$      2,239,629


$      2,209,188


$      2,167,659


$      2,127,475

Goodwill

(529,887)


(529,887)


(529,887)


(529,887)


(529,887)

Intangible assets (excluding mortgage servicing rights)

(3,515)


(4,183)


(5,351)


(6,544)


(7,786)

  Tangible shareholders' equity

$      1,751,076


$      1,705,559


$      1,673,950


$      1,631,228


$      1,589,802











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










Shareholders' equity

$      2,284,478


$      2,239,629


$      2,209,188


$      2,167,659


$      2,127,475

Preferred stock

(151,649)


(151,649)


(151,649)


(151,649)


(151,649)

Common shareholders' equity

2,132,829


2,087,980


2,057,539


2,016,010


1,975,826

Goodwill

(529,887)


(529,887)


(529,887)


(529,887)


(529,887)

Intangible assets (excluding mortgage servicing rights)

(3,515)


(4,183)


(5,351)


(6,544)


(7,786)

  Tangible common shareholders' equity

$      1,599,427


$      1,553,910


$      1,522,301


$      1,479,579


$      1,438,153











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










Assets

$    21,524,337


$    21,175,745


$    20,852,999


$    20,609,554


$    20,329,238

Goodwill

(529,887)


(529,887)


(529,887)


(529,887)


(529,887)

Intangible assets (excluding mortgage servicing rights)

(3,515)


(4,183)


(5,351)


(6,544)


(7,786)

  Tangible assets

$    20,990,935


$    20,641,675


$    20,317,761


$    20,073,123


$    19,791,565











Book value per common share










Common shareholders' equity

$      2,132,829


$      2,087,980


$      2,057,539


$      2,016,010


$      1,975,826

Ending common shares issued and outstanding (in thousands)

90,246


90,269


90,367


90,245


90,289

  Book value per share of common stock

$             23.63


$             23.13


$             22.77


$             22.34


$             21.88











Tangible book value per common share










Tangible common shareholders' equity

$      1,599,427


$      1,553,910


$      1,522,301


$      1,479,579


$      1,438,153

Ending common shares issued and outstanding (in thousands)

90,246


90,269


90,367


90,245


90,289

  Tangible book value per common share

$             17.72


$             17.21


$             16.85


$             16.40


$             15.93











Reconciliation of non-interest expense to non-interest expense used in the efficiency ratio










Non-interest expense

$         122,585


$         124,617


$         126,639


$         122,281


$         123,604

Foreclosed property expense

(134)


(458)


(400)


(432)


(331)

Intangible assets amortization

(669)


(1,168)


(1,193)


(1,242)


(1,242)

Other expense

49


48


(1,365)


(950)


(687)

  Non-interest expense used in the efficiency ratio

$         121,831


$         123,039


$         123,681


$         119,657


$         121,344











Reconciliation of income to income used in the efficiency ratio










Net interest income before provision for loan losses

$         155,122


$         155,301


$         153,884


$         149,987


$         147,061

Fully taxable-equivalent adjustment

2,783


3,013


3,150


3,211


3,337

Non-interest income

47,596


49,828


44,264


46,257


52,251

Net gain on investment securities


(4,336)


(4)


(269)


(333)

Other

73


88


7,277



  Income used in the efficiency ratio

$         205,574


$         203,894


$         208,571


$         199,186


$         202,316











 

 

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