Webster Reports Second Quarter 2023 EPS of $1.32; Adjusted EPS of $1.50

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STAMFORD, Conn., July 20, 2023--(BUSINESS WIRE)--Webster Financial Corporation ("Webster") (NYSE: WBS), the holding company for Webster Bank, N.A. and its HSA Bank division, today announced net income available to common stockholders of $230.8 million, or $1.32 per diluted share, for the quarter ended June 30, 2023, compared to $178.1 million, or $1.00 per diluted share, for the quarter ended June 30, 2022.

Second quarter 2023 results include $40.8 million pre-tax ($29.9 million after tax), or $0.181 per diluted share, of charges related to the merger with Sterling Bancorp on January 31, 2022 ("the merger"). Excluding these charges, adjusted earnings per diluted share would have been $1.501 for the quarter ended June 30, 2023.

"We are proud to deliver consistent earnings during a challenging period for the banking industry," said John R. Ciulla, president and chief executive officer. "Our unique and resilient funding profile, robust capital position, and talented colleagues enabled our performance in the quarter and position us well for the future. Consistent with our conservative risk-management approach, we increased on balance sheet liquidity during the quarter given the events of March. This had a temporary 12 basis point impact on the net interest margin, but was neutral to net interest income."

Highlights for the second quarter of 2023:

  • Revenue of $673.2 million.

  • Period end loans and leases balance of $51.6 billion, up $0.7 billion or 1.4 percent linked quarter; 81.1 percent commercial loans and leases, 18.9 percent consumer loans, and a loan to deposit ratio of 87.9 percent.

  • Period end deposits balance of $58.7 billion, up $3.5 billion or 6.2 percent linked quarter.

  • Provision for credit losses totaled $31.5 million.

  • Return on average assets of 1.23 percent; adjusted 1.39 percent1.

  • Return on average tangible common equity of 18.12 percent1; adjusted 20.40 percent1.

  • Net interest margin of 3.35 percent, down 31 basis points from prior quarter.

  • Common equity tier 1 ratio of 10.66 percent.

  • Efficiency ratio of 42.20 percent1.

  • Tangible common equity ratio of 7.23 percent1.

"Webster’s unique funding profile continues to be a differentiator, as we grew our deposits 6% over the prior quarter and increased our available liquidity," said Glenn MacInnes, executive vice president and chief financial officer. "A resilient and flexible balance sheet should allow us to consistently deliver strong returns."

1 See "Reconciliations to GAAP Financial Measures" section beginning on page 19.

Line of Business performance compared to the second quarter of 2022

Commercial Banking

Webster’s Commercial Banking segment serves businesses that have more than $2 million of revenue through its business banking, middle market, asset-based lending, equipment finance, commercial real estate, sponsor finance, private banking, and treasury services business units. At June 30, 2023, Commercial Banking had $41.9 billion in loans and leases and $18.3 billion in deposits, as well as a combined $2.8 billion in assets under administration and management.

Commercial Banking Operating Results:

Percent

Three months ended June 30,

Favorable/

(In thousands)

2023

2022

(Unfavorable)

Net interest income

$383,606

$333,421

15.1

%

Non-interest income

32,255

49,430

(34.7

)

Operating revenue

415,861

382,851

8.6

Non-interest expense

110,582

102,720

(7.7

)

Pre-tax, pre-provision net revenue

$305,279

$280,131

9.0

Percent

At June 30,

Increase/

(In millions)

2023

2022

(Decrease)

Loans and leases

$41,862

$36,635

14.3

%

Deposits

18,349

20,501

(10.5

)

AUA / AUM (off balance sheet)

2,757

2,266

21.7

Pre-tax, pre-provision net revenue increased $25.1 million, to $305.3 million, in the quarter as compared to prior year. Net interest income increased $50.2 million, to $383.6 million, primarily driven by organic loan growth and the impact of the higher rate environment. Non-interest income decreased $17.2 million, to $32.3 million, driven by decreases in fees from interest rate hedging activities, loan servicing related income, cash management fees, prepayment penalties, and syndication fees. Non-interest expense increased $7.9 million, to $110.6 million, primarily resulting from continued investments in technology and talent to support balance sheet growth.

HSA Bank

Webster’s HSA Bank division offers a comprehensive consumer-directed healthcare solution that includes health savings accounts, health reimbursement arrangements, flexible spending accounts and commuter benefits. Health savings accounts are distributed nationwide directly to employers and individual consumers, as well as through national and regional insurance carriers, benefit consultants, and financial advisors. At June 30, 2023, HSA Bank had $12.3 billion in total footings comprising $8.2 billion in deposits and $4.1 billion in assets under administration through linked investment accounts.

HSA Bank Operating Results:

Percent

Three months ended June 30,

Favorable/

(In thousands)

2023

2022

(Unfavorable)

Net interest income

$75,421

$49,558

52.2

%

Non-interest income

23,023

26,552

(13.3

)

Operating revenue

98,444

76,110

29.3

Non-interest expense

42,643

37,540

(13.6

)

Pre-tax, net revenue

$55,801

$38,570

44.7

Percent

  • At June 30,

Increase/

(Dollars in millions)

2023

2022

(Decrease)

Number of accounts (thousands)

3,177

3,077

3.2

%

Deposits

$8,208

$7,778

5.5

Linked investment accounts (off balance sheet)

4,123

3,277

25.8

Total footings

$12,331

$11,055

11.5

Pre-tax net revenue increased $17.2 million, to $55.8 million, in the quarter as compared to prior year. Net interest income increased $25.9 million, to $75.4 million, primarily due to an increase in net deposit spread and growth in deposits. Non-interest income decreased $3.5 million, to $23.0 million, primarily due to lower client account fees. Non-interest expense increased $5.1 million, to $42.6 million, primarily due to higher compensation and benefits expense, service contract expense related to account growth, and the continued investment in our user experience build out.

Consumer Banking

Webster's Consumer Banking segment serves consumer and business banking customers primarily throughout southern New England and the New York Metro and Suburban markets. Consumer Banking is comprised of the Consumer Lending and Small Business Banking business units, as well as a distribution network consisting of 199 banking centers and 350 ATMs, a customer care center, and a full range of web and mobile-based banking services. Additionally, the Webster Investment Services group provides investment services to consumers and small business owners within Webster's targeted markets and retail footprint. At June 30, 2023, Consumer Banking had $9.7 billion in loans and $23.9 billion in deposits, as well as $7.8 billion in assets under administration.

Consumer Banking Operating Results:

Percent

Three months ended June 30,

Favorable/

(In thousands)

2023

2022

(Unfavorable)

Net interest income

$204,455

$179,287

14.0

%

Non-interest income

28,877

30,798

(6.2

)

Operating revenue

233,332

210,085

11.1

Non-interest expense

108,880

107,366

(1.4

)

Pre-tax, pre-provision net revenue

$124,452

$102,719

21.2

At June 30,

Percent

(In millions)

2023

2022

Increase

Loans

$9,739

$8,965

8.6

%

Deposits

23,875

23,873

—

AUA (off balance sheet)

7,848

7,536

4.1

Pre-tax, pre-provision net revenue increased $21.7 million, to $124.5 million, in the quarter as compared to prior year. Net interest income increased $25.2 million, to $204.5 million, primarily driven by organic loan growth and the impact of the higher rate environment. Non-interest income decreased $1.9 million, to $28.9 million, driven by lower net investment services income, which was attributable to the new outsourcing model adopted in 2022, partially offset by higher deposit and loan servicing related fee income and other miscellaneous income. Non-interest expense increased $1.5 million, to $108.9 million, primarily driven by higher marketing costs to support deposit growth initiatives, partially offset by the impact of outsourcing the consumer investment services platform.

Consolidated financial performance:

Quarterly net interest income compared to the second quarter of 2022:

  • Net interest income was $583.8 million compared to $486.7 million.

  • Net interest margin was 3.35 percent compared to 3.28 percent. The yield on interest-earning assets increased by 186 basis points, and the cost of interest-bearing liabilities increased by 191 basis points.

  • Average interest-earning assets totaled $70.1 billion and increased by $10.0 billion, or 16.7 percent.

  • Average loans and leases totaled $51.2 billion and increased by $7.1 billion, or 16.0 percent.

  • Average deposits totaled $58.6 billion and increased by $5.2 billion, or 9.7 percent.

Quarterly provision for credit losses:

  • The provision for credit losses was $31.5 million in the quarter, contributing to a $15.0 million increase in the allowance for credit losses on loans and leases. The provision also reflects a decrease in the reserves on unfunded loan commitments of $3.7 million. The provision for credit losses was $46.7 million in the prior quarter, and $12.2 million a year ago.

  • Net charge-offs were $20.3 million, compared to $24.5 million in the prior quarter, and $9.6 million a year ago. The ratio of net charge-offs to average loans and leases was 0.16 percent, compared to 0.20 percent in the prior quarter, and 0.09 percent a year ago.

  • The allowance for credit losses on loans and leases represented 1.22 percent of total loans and leases, compared to 1.21 percent at March 31, 2023, and 1.25 percent at June 30, 2022. The allowance represented 287 percent of nonperforming loans and leases at June 30, 2023, compared to 332 percent at March 31, 2023, and 231 percent at June 30, 2022.

Quarterly non-interest income compared to the second quarter of 2022:

  • Total non-interest income was $89.4 million compared to $120.9 million, a decrease of $31.5 million. The decrease primarily reflects lower client hedging activity, lower prepayment and other loan related servicing fees, lower client deposit fees, and the outsourcing of the consumer investment services platform.

Quarterly non-interest expense compared to the second quarter of 2022:

  • Total non-interest expense was $344.1 million compared to $358.2 million, a decrease of $14.1 million. Total non-interest expense includes a net $40.8 million of merger charges, compared to a net $66.5 million of merger and strategic initiatives charges a year ago. Excluding those charges, total non-interest expense increased $11.6 million. The increase reflects increases in deposit insurance, investments in technology, including the HSA and interLINK acquisitions, and employee benefits related to medical claims, offset by expense benefits from the merger and outsourcing of the consumer investments services platform.

Quarterly income taxes compared to the second quarter of 2022:

  • Income tax expense was $62.6 million compared to $54.8 million, and the effective tax rate was 21.0 percent compared to 23.1 percent. The lower effective tax rate in the current period reflects higher levels of tax-exempt interest income and tax credits and lower state and local tax, partially offset by the effects of higher pre-tax income and nondeductible FDIC premiums in 2023 compared to 2022.

Investment securities:

  • Total investment securities, net were $14.7 billion, compared to $14.9 billion at March 31, 2023, and $15.2 billion at June 30, 2022. The carrying value of the available-for-sale portfolio included $883.0 million of net unrealized losses, compared to $766.4 million at March 31, 2023, and $609.8 million at June 30, 2022. The carrying value of the held-to-maturity portfolio does not reflect $877.3 million of net unrealized losses, compared to $742.8 million at March 31, 2023, and $539.4 million at June 30, 2022.

Loans and leases:

  • Total loans and leases were $51.6 billion, compared to $50.9 billion at March 31, 2023, and $45.6 billion at June 30, 2022. Compared to March 31, 2023, commercial loans and leases increased by $442.1 million, commercial real estate loans increased by $147.3 million, residential mortgages increased by $138.6 million, while consumer loans decreased by $28.5 million.

  • Compared to a year ago, commercial loans and leases increased by $2.7 billion, commercial real estate loans increased by $2.5 billion, residential mortgages increased by $916.5 million, while consumer loans decreased by $153.4 million.

  • Loan originations for the portfolio were $2.5 billion, compared to $3.3 billion in the prior quarter, and $5.0 billion a year ago. In addition, $5.7 million of residential loans were originated for sale in the quarter, compared to $2.5 million in the prior quarter, and $5.0 million a year ago.

Asset quality:

  • Total nonperforming loans and leases were $218.9 million, or 0.42 percent of total loans and leases, compared to $185.0 million, or 0.36 percent of total loans and leases, at March 31, 2023, and $247.5 million, or 0.54 percent of total loans and leases, at June 30, 2022.

  • Past due loans and leases were $51.4 million, compared to $44.2 million at March 31, 2023, and $51.7 million at June 30, 2022.

Deposits and borrowings:

  • Total deposits were $58.7 billion, compared to $55.3 billion at March 31, 2023, and $53.1 billion at June 30, 2022. Core deposits to total deposits1 were 87.6 percent, compared to 91.8 percent at March 31, 2023, and 95.2 percent at June 30, 2022. The loan to deposit ratio was 87.9 percent, compared to 92.1 percent at March 31, 2023, and 86.0 percent at June 30, 2022.

  • Total borrowings were $5.6 billion, compared to $9.9 billion at March 31, 2023, and $5.3 billion at June 30, 2022.

Capital:

  • The return on average common stockholders’ equity and the return on average tangible common stockholders’ equity1 were 11.38 percent and 18.12 percent, respectively, compared to 9.09 percent and 14.50 percent, respectively, in the second quarter of 2022.

  • The tangible equity1 and tangible common equity1 ratios were 7.62 percent and 7.23 percent, respectively, compared to 8.12 percent and 7.68 percent, respectively, at June 30, 2022. The common equity tier 1 ratio was 10.66 percent, compared to 11.09 percent at June 30, 2022.

  • Book value and tangible book value per common share1 were $46.15 and $29.69, respectively, compared to $43.82 and $28.31, respectively, at June 30, 2022.

1 See reconciliations to GAAP financial measures beginning on page 19.

***

Webster Financial Corporation (NYSE:WBS) is the holding company for Webster Bank, N.A. and its HSA Bank Division. Webster is a leading commercial bank in the Northeast that provides a wide range of digital and traditional financial solutions across three differentiated lines of business: Commercial Banking, Consumer Banking and its HSA Bank division, one of the country's largest providers of employee benefits solutions. Headquartered in Stamford, CT, Webster is a values-driven organization with $74 billion in assets. Its core footprint spans the northeastern U.S. from New York to Massachusetts, with certain businesses operating in extended geographies. 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 second quarter 2023 earnings announcement will be held today, Thursday, July 20, 2023 at 9:00 a.m. Eastern Time. To listen to the live call, please dial 888-330-2446, or 240-789-2732 for international callers. The passcode is 8607257. The webcast, along with related slides, will be available via Webster's Investor Relations website at investors.websterbank.com. A replay of the conference call will be available for one week via the website listed above, beginning at approximately 12:00 noon (Eastern) on July 20, 2023. To access the replay, dial 800-770-2030, or 647-362-9199 for international callers. The replay conference ID number is 8607257.

Forward-Looking Statements

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 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) Webster's ability to successfully integrate the operations of Webster and Sterling Bancorp and realize the anticipated benefits of the merger, including our ability to successfully complete our core conversion in the anticipated timeframe; (2) Webster's ability to successfully execute its business plan and strategic initiatives, and manage any risks or uncertainties; (3) volatility in our stock price due to investor sentiment, including following bank failures during the first fiscal quarter of 2023, and the acquisition of such failed banks (or their assets), by stronger banks within the U.S. Banking system; (4) local, regional, national, and international economic conditions, and the impact they may have on Webster or its customers; (5) volatility and disruption in national and international financial markets, including as a result of geopolitical conflict, such as the war between Russia and Ukraine; (6) unforeseen events, such as natural disasters; (7) changes in laws and regulations, or existing laws and regulations that Webster becomes subject to, including those concerning banking, taxes, dividends, securities, insurance, and healthcare, with which Webster and its subsidiaries must comply; (8) adverse conditions in the securities markets that could lead to impairment in the value of Webster's securities portfolio; (9) inflation, monetary fluctuations, the possibility of a recession, and changes in interest rates, including the impact of such changes on economic conditions, customer behavior, funding costs, and Webster's loans and leases and securities portfolios; (10) the replacement of, and transition from, the London Interbank Offered Rate (LIBOR) to the Secured Overnight Financing Rate (SOFR) as the primary interest rate benchmark; (11) the timely development and acceptance of new products and services, and the perceived value of those products and services by customers; (12) changes in deposit flows, consumer spending, borrowings, and savings habits; (13) Webster's ability to implement new technologies and maintain secure and reliable technology systems; (14) the effects of any cyber threats, attacks or events or fraudulent activity, including those that involve Webster's third-party vendors and service providers; (15) performance by Webster's counterparties and third-party vendors; (16) Webster's ability to increase market share and control expenses; (17) changes in the competitive environment among banks, financial holding companies, and other traditional and non-traditional financial service providers; (18) Webster's ability to maintain adequate sources of funding and liquidity; (19) changes in the level of non-performing assets and charge-offs; (20) changes in estimates of future reserve requirements based upon periodic review under relevant regulatory and accounting requirements; (21) the effect of changes in accounting policies and practices applicable to Webster, including the impacts of recently adopted accounting guidance; (22) Webster's inability to remediate the material weaknesses in its internal control related to ineffective ITGCs; (23) legal and regulatory developments, including the resolution of legal proceedings or regulatory or other governmental inquiries, and the results of regulatory examinations or reviews; (24) Webster's ability to appropriately address any environmental, social, governmental, and sustainability concerns that may arise from its business activities; and (25) 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 headings "Risk Factors" and "Management Discussion and Analysis of Financial Condition and Results of Operations." 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, ROATCE, and other performance ratios, in each case as adjusted, is included in the accompanying selected financial highlights table.

Webster believes that providing certain non-GAAP financial measures provides investors with information useful in understanding its financial performance, performance trends, and financial position. Webster utilizes these measures for internal planning and forecasting purposes. Webster, as well as securities analysts, investors, and other interested parties, also use these measures to compare peer company operating performance. Webster believes that its presentation and discussion, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting its 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 Webster strongly encourages investors to review its 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.

WEBSTER FINANCIAL CORPORATION
Selected Financial Highlights (unaudited)

At or for the Three Months Ended

(In thousands, except per share data)

June 30,
2023

March 31,
2023

December 31,
2022

September 30,
2022

June 30,
2022

Income and performance ratios:

Net income

$

234,968

$

221,004

$

244,751

$

233,968

$

182,311

Net income available to common stockholders

230,806

216,841

240,588

229,806

178,148

Earnings per diluted common share

1.32

1.24

1.38

1.31

1.00

Return on average assets (annualized)

1.23

%

1.22

%

1.40

%

1.38

%

1.10

%

Return on average tangible common stockholders' equity (annualized) (1)

18.12

17.66

19.93

18.62

14.50

Return on average common stockholders’ equity (annualized)

11.38

10.94

12.54

11.78

9.09

Non-interest income as a percentage of total revenue

13.28

10.62

14.50

17.10

19.90

Asset quality:

Allowance for credit losses on loans and leases

$

628,911

$

613,914

$

594,741

$

574,325

$

571,499

Nonperforming assets

222,215

186,551

206,136

211,627

250,242

Allowance for credit losses on loans and leases / total loans and leases

1.22

%

1.21

%

1.20

%

1.20

%

1.25

%

Net charge-offs / average loans and leases (annualized)

0.16

0.20

0.17

0.25

0.09

Nonperforming loans and leases / total loans and leases

0.42

0.36

0.41

0.44

0.54

Nonperforming assets / total loans and leases plus OREO

0.43

0.37

0.41

0.44

0.55

Allowance for credit losses on loans and leases / nonperforming loans and leases

287.35

331.81

291.84

274.12

230.88

Other ratios:

Tangible equity (1)

7.62

%

7.55

%

7.79

%

7.70

%

8.12

%

Tangible common equity (1)

7.23

7.15

7.38

7.27

7.68

Tier 1 risk-based capital (2)

11.17

10.93

11.23

11.35

11.65

Total risk-based capital (2)

13.26

12.99

13.25

13.38

13.91

Common equity tier 1 risk-based capital (2)

10.66

10.42

10.71

10.80

11.09

Stockholders’ equity / total assets

11.18

11.08

11.30

11.33

11.83

Net interest margin

3.35

3.66

3.74

3.54

3.28

Efficiency ratio (1)

42.20

41.64

40.27

41.17

45.25

Equity and share related:

Common equity

$

7,995,747

$

8,010,315

$

7,772,207

$

7,542,431

$

7,713,809

Book value per common share

46.15

45.85

44.67

43.32

43.82

Tangible book value per common share (1)

29.69

29.47

29.07

27.69

28.31

Common stock closing price

37.75

39.42

47.34

45.20

42.15

Dividends declared per common share

0.40

0.40

0.40

0.40

0.40

Common shares issued and outstanding

173,261

174,712

174,008

174,116

176,041

Weighted-average common shares outstanding - Basic

172,739

172,766

172,522

173,868

175,845

Weighted-average common shares outstanding - Diluted

172,803

172,883

172,699

173,944

175,895

(1) See "Reconciliations to GAAP Financial Measures" section beginning on page 19.

(2) Presented as preliminary for June 30, 2023, and actual for the remaining periods.

WEBSTER FINANCIAL CORPORATION
Consolidated Balance Sheets (unaudited)

(In thousands)

June 30,
2023

March 31,
2023

June 30,
2022

Assets:

Cash and due from banks

$

283,623

$

201,683

$

294,482

Interest-bearing deposits

1,077,136

2,232,388

607,323

Securities:

Available for sale

7,759,341

7,798,977

8,638,358

Held to maturity, net

6,943,784

7,063,223

6,547,998

Total securities, net

14,703,125

14,862,200

15,186,356

Loans held for sale

10,963

210,724

388

Loans and Leases:

Commercial

21,217,411

20,775,337

18,520,595

Commercial real estate

20,661,071

20,513,738

18,141,670

Residential mortgages

8,140,182

8,001,563

7,223,728

Consumer

1,607,384

1,635,885

1,760,750

Total loans and leases

51,626,048

50,926,523

45,646,743

Allowance for credit losses on loans and leases

(628,911)

(613,914)

(571,499)

Loans and leases, net

50,997,137

50,312,609

45,075,244

Federal Home Loan Bank and Federal Reserve Bank stock

407,968

584,724

329,424

Premises and equipment, net

426,310

431,432

449,578

Goodwill and other intangible assets, net

2,852,117

2,861,310

2,729,551

Cash surrender value of life insurance policies

1,239,077

1,233,994

1,228,484

Deferred tax asset, net

377,588

315,525

269,790

Accrued interest receivable and other assets

1,663,199

1,597,806

1,424,401

Total Assets

$

74,038,243

$

74,844,395

$

67,595,021

Liabilities and Stockholders' Equity:

Deposits:

Demand

$

11,157,390

$

12,007,387

$

13,576,152

Health savings accounts

8,206,844

8,272,507

7,777,786

Interest-bearing checking

8,775,975

8,560,750

9,547,749

Money market

16,189,678

14,203,858

10,884,656

Savings

7,131,587

7,723,198

8,736,712

Certificates of deposit

4,743,204

3,855,406

2,554,102

Brokered certificates of deposit

2,542,854

674,373

-

Total deposits

58,747,532

55,297,479

53,077,157

Securities sold under agreements to repurchase and other borrowings

243,580

306,154

1,743,782

Federal Home Loan Bank advances

4,310,371

8,560,461

2,510,810

Long-term debt (1)

1,052,258

1,071,413

1,076,559

Accrued expenses and other liabilities

1,404,776

1,314,594

1,188,925

Total liabilities

65,758,517

66,550,101

59,597,233

Preferred stock

283,979

283,979

283,979

Common stockholders' equity

7,995,747

8,010,315

7,713,809

Total stockholders’ equity

8,279,726

8,294,294

7,997,788

Total Liabilities and Stockholders' Equity

$

74,038,243

$

74,844,395

$

67,595,021

(1) The classification of debt as long-term is based on the initial terms of greater than one year as of the date of issuance.

WEBSTER FINANCIAL CORPORATION
Consolidated Statements of Income (unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands, except per share data)

2023

2022

2023

2022

Interest income:

Interest and fees on loans and leases

$

771,973

$

431,538

$

1,488,329

$

777,814

Interest and dividends on securities

161,002

82,202

275,558

145,728

Loans held for sale

421

7

437

33

Total interest income

933,396

513,747

1,764,324

923,575

Interest expense:

Deposits

251,466

12,459

401,670

19,858

Borrowings

98,101

14,628

183,542

22,809

Total interest expense

349,567

27,087

585,212

42,667

Net interest income

583,829

486,660

1,179,112

880,908

Provision for credit losses

31,498

12,243

78,247

201,088

Net interest income after provision for loan and lease losses

552,331

474,417

1,100,865

679,820

Non-interest income:

Deposit service fees

45,418

51,385

90,854

99,212

Loan and lease related fees

20,528

27,907

43,533

50,586

Wealth and investment services

7,391

11,244

13,978

21,841

Mortgage banking activities

129

102

188

530

Increase in cash surrender value of life insurance policies

6,293

8,244

13,021

14,976

(Loss) on sale of investment securities, net

(48)

-

(16,795)

-

Other income

9,663

22,051

15,361

37,823

Total non-interest income

89,374

120,933

160,140

224,968

Non-interest expense:

Compensation and benefits

173,305

187,656

346,505

371,658

Occupancy

20,254

51,593

40,425

70,208

Technology and equipment

51,815

41,498

96,181

96,899

Marketing

5,160

3,441

8,636

6,950

Professional and outside services

29,385

15,332

61,819

69,423

Intangible assets amortization

9,193

8,802

18,690

15,189

Loan workout expenses

574

732

1,180

1,412

Deposit insurance

13,723

6,748

26,046

11,970

Other expenses

40,680

42,425

77,074

74,303

Total non-interest expense

344,089

358,227

676,556

718,012

Income before income taxes

297,616

237,123

584,449

186,776

Income tax expense

62,648

54,812

128,477

21,212

Net income

234,968

182,311

455,972

165,564

Preferred stock dividends

(4,162)

(4,163)

(8,325)

(7,594)

Net income available to common stockholders

$

230,806

$

178,148

$

447,647

$

157,970

Weighted-average common shares outstanding - Diluted

172,803

175,895

172,839

161,785

Earnings per common share:

Basic

$

1.32

$

1.00

$

2.57

$

0.97

Diluted

1.32

1.00

2.57

0.97

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

Three Months Ended

(In thousands, except per share data)

June 30,
2023

March 31,
2023

December 31,
2022

September 30,
2022

June 30,
2022

Interest income:

Interest and fees on loans and leases

$

771,973

$

716,356

$

642,784

$

525,960

$

431,538

Interest and dividends on securities

161,002

114,556

100,804

91,569

82,202

Loans held for sale

421

16

5

40

7

Total interest income

933,396

830,928

743,593

617,569

513,747

Interest expense:

Deposits

251,466

150,204

81,202

37,492

12,459

Borrowings

98,101

85,441

60,016

29,074

14,628

Total interest expense

349,567

235,645

141,218

66,566

27,087

Net interest income

583,829

595,283

602,375

551,003

486,660

Provision for credit losses

31,498

46,749

43,000

36,531

12,243

Net interest income after provision for loan and lease losses

552,331

548,534

559,375

514,472

474,417

Non-interest income:

Deposit service fees

45,418

45,436

48,453

50,807

51,385

Loan and lease related fees

20,528

23,005

25,632

26,769

27,907

Wealth and investment services

7,391

6,587

7,017

11,419

11,244

Mortgage banking activities

129

59

89

86

102

Increase in cash surrender value of life insurance policies

6,293

6,728

6,543

7,718

8,244

(Loss) on sale of investment securities, net

(48)

(16,747)

(4,517)

(2,234)

-

Other income

9,663

5,698

18,962

19,071

22,051

Total non-interest income

89,374

70,766

102,179

113,636

120,933

Non-interest expense:

Compensation and benefits

173,305

173,200

177,979

173,983

187,656

Occupancy

20,254

20,171

20,174

23,517

51,593

Technology and equipment

51,815

44,366

44,202

45,283

41,498

Marketing

5,160

3,476

5,570

3,918

3,441

Professional and outside services

29,385

32,434

26,489

21,618

15,332

Intangible assets amortization

9,193

9,497

8,240

8,511

8,802

Loan workout expenses

574

606

606

580

732

Deposit insurance

13,723

12,323

6,578

8,026

6,748

Other expenses

40,680

36,394

58,552

44,635

42,425

Total non-interest expense

344,089

332,467

348,390

330,071

358,227

Income before income taxes

297,616

286,833

313,164

298,037

237,123

Income tax expense

62,648

65,829

68,413

64,069

54,812

Net income

234,968

221,004

244,751

233,968

182,311

Preferred stock dividends

(4,162)

(4,163)

(4,163)

(4,162)

(4,163)

Net income available to common stockholders

$

230,806

$

216,841

$

240,588

$

229,806

$

178,148

Weighted-average common shares outstanding - Diluted

172,803

172,883

172,699

173,944

175,895

Earnings per common share:

Basic

$

1.32

$

1.24

$

1.38

$

1.31

$

1.00

Diluted

1.32

1.24

1.38

1.31

1.00

WEBSTER FINANCIAL CORPORATION
Consolidated Average Balances, Interest, Yields and Rates, and Net Interest Margin on a Fully Tax-equivalent Basis (unaudited)

Three Months Ended June 30,

2023

2022

(Dollars in thousands)

Average
balance

Interest

Yield/rate

Average
balance

Interest

Yield/rate

Assets:

Interest-earning assets:

Loans and leases

$

51,184,715

$

782,557

6.06

%

$

44,120,698

$

436,462

3.92

%

Investment securities (1)

14,780,257

116,027

2.99

15,165,514

85,958

2.22

Federal Home Loan and Federal Reserve Bank stock

513,559

6,675

5.21

262,695

2,072

3.16

Interest-bearing deposits

3,528,824

45,008

5.05

488,870

980

0.79

Loans held for sale

96,537

421

1.74

18,172

7

0.15

Total interest-earning assets

70,103,892

$

950,688

5.32

%

60,055,949

$

525,479

3.46

%

Non-interest-earning assets

6,128,636

6,016,193

Total Assets

$

76,232,528

$

66,072,142

Liabilities and Stockholders' Equity:

Interest-bearing liabilities:

Demand deposits

$

11,375,059

$

-

-

%

$

13,395,942

$

-

-

%

Health savings accounts

8,250,766

3,090

0.15

7,812,313

1,125

0.06

Interest-bearing checking, money market and savings

31,768,511

178,707

2.26

29,486,846

10,165

0.14

Certificates of deposit and brokered deposits

7,173,552

69,669

3.90

2,684,914

1,169

0.17

Total deposits

58,567,888

251,466

1.72

53,380,015

12,459

0.09

Securities sold under agreements to repurchase and other borrowings

215,874

63

0.11

1,064,304

2,677

1.00

Federal Home Loan Bank advances

6,724,139

88,556

5.21

1,156,449

3,164

1.08

Long-term debt (1)

1,061,526

9,482

3.68

1,077,395

8,787

3.38

Total borrowings

8,001,539

98,101

4.87

3,298,148

14,628

1.79

Total interest-bearing liabilities

66,569,427

$

349,567

2.10

%

56,678,163

$

27,087

0.19

%

Non-interest-bearing liabilities

1,267,803

1,268,461

Total liabilities

67,837,230

57,946,624

Preferred stock

283,979

283,979

Common stockholders' equity

8,111,319

7,841,539

Total stockholders' equity

8,395,298

8,125,518

Total Liabilities and Stockholders' Equity

$

76,232,528

$

66,072,142

Tax-equivalent net interest income

601,121

498,392

Less: tax-equivalent adjustments

(17,292)

(11,732)

Net interest income

$

583,829

$

486,660

Net interest margin

3.35

%

3.28

%

(1) For the purposes of average yield/rate and margin computations, unsettled trades on investment securities and unrealized gain (loss) balances on securities available-for-sale and senior fixed-rate notes hedges are excluded.

WEBSTER FINANCIAL CORPORATION
Consolidated Average Balances, Interest, Yields and Rates, and Net Interest Margin on a Fully Tax-equivalent Basis (unaudited)

Six Months Ended June 30,

2023

2022

(Dollars in thousands)

Average
balance

Interest

Yield/rate

Average
balance

Interest

Yield/rate

Assets:

Interest-earning assets:

Loans and leases

$

50,642,963

$

1,508,100

5.93

%

$

40,039,437

$

785,879

3.91

%

Investment securities (1)

14,707,157

222,001

2.89

14,298,347

153,227

2.12

Federal Home Loan and Federal Reserve Bank stock

486,617

11,585

4.80

214,792

2,893

2.72

Interest-bearing deposits

2,221,119

55,404

4.96

643,210

1,433

0.44

Loans held for sale

50,838

437

1.72

18,046

33

0.36

Total interest-earning assets

68,108,694

$

1,797,527

5.21

%

55,213,832

$

943,465

3.40

%

Non-interest-earning assets

6,176,650

5,257,642

Total Assets

$

74,285,344

$

60,471,474

Liabilities and Stockholders' Equity:

Interest-bearing liabilities:

Demand deposits

$

11,999,028

$

-

-

%

$

12,335,504

$

-

-

%

Health savings accounts

8,271,493

6,117

0.15

7,786,035

2,212

0.06

Interest-bearing checking, money market and savings

30,816,229

301,755

1.97

26,915,923

15,184

0.11

Certificates of deposit and brokered deposits

5,607,711

93,798

3.37

2,614,989

2,462

0.19

Total deposits

56,694,461

401,670

1.43

49,652,451

19,858

0.08

Securities sold under agreements to repurchase and other borrowings

563,517

7,890

2.78

822,017

3,634

0.88

Federal Home Loan Bank advances

6,201,884

156,682

5.02

586,857

3,220

1.09

Long-term debt (1)

1,066,859

18,970

3.67

987,353

15,955

3.36

Total borrowings

7,832,260

183,542

4.68

2,396,227

22,809

1.93

Total interest-bearing liabilities

64,526,721

$

585,212

1.82

%

52,048,678

$

42,667

0.16

%

Non-interest-bearing liabilities

1,452,640

1,010,331

Total liabilities

65,979,361

53,059,009

Preferred stock

283,979

260,183

Common stockholders' equity

8,022,004

7,152,282

Total stockholders' equity

8,305,983

7,412,465

Total Liabilities and Stockholders' Equity

$

74,285,344

$

60,471,474

Tax-equivalent net interest income

1,212,315

900,798

Less: tax-equivalent adjustments

(33,203)

(19,890)

Net interest income

$

1,179,112

$

880,908

Net interest margin

3.50

%

3.24

%

(1) For the purposes of average yield/rate and margin computations, unsettled trades on investment securities and unrealized gain (loss) balances on securities available-for-sale and senior fixed-rate notes hedges are excluded.

WEBSTER FINANCIAL CORPORATION
Five Quarter Loans and Leases (unaudited)

(Dollars in thousands)

June 30,
2023

March 31,
2023

December 31,
2022

September 30,
2022

June 30,
2022

Loans and Leases (actual):

Commercial non-mortgage

$

19,499,160

$

19,014,810

$

18,663,164

$

17,807,234

$

16,628,317

Asset-based lending

1,718,251

1,760,527

1,821,642

1,803,719

1,892,278

Commercial real estate

20,661,071

20,513,738

19,619,145

18,862,619

18,141,670

Residential mortgages

8,140,182

8,001,563

7,963,420

7,617,955

7,223,728

Consumer

1,607,384

1,635,885

1,697,055

1,732,348

1,760,750

Loans and Leases

51,626,048

50,926,523

49,764,426

47,823,875

45,646,743

Allowance for credit losses on loans and leases

(628,911)

(613,914)

(594,741)

(574,325)

(571,499)

Loans and Leases, net

$

50,997,137

$

50,312,609

$

49,169,685

$

47,249,550

$

45,075,244

Loans and Leases (average):

Commercial non-mortgage

$

19,220,435

$

18,670,917

$

18,024,771

$

16,780,780

$

15,850,507

Asset-based lending

1,756,051

1,790,992

1,780,874

1,811,073

1,851,956

Commercial real estate

20,518,355

19,970,326

19,234,292

18,503,077

17,756,151

Residential mortgages

8,067,349

7,995,327

7,819,415

7,384,704

6,905,509

Consumer

1,622,525

1,667,630

1,715,513

1,750,044

1,756,575

Loans and Leases

$

51,184,715

$

50,095,192

$

48,574,865

$

46,229,678

$

44,120,698

WEBSTER FINANCIAL CORPORATION
Five Quarter Nonperforming Assets and Past Due Loans and Leases (unaudited)

(Dollars in thousands)

June 30,
2023

March 31,
2023

December 31,
2022

September 30,
2022

June 30,
2022

Nonperforming loans and leases:

Commercial non-mortgage

$

109,279

$

86,537

$

89,416

$

80,002

$

112,006

Asset-based lending

9,450

9,450

20,046

25,115

25,862

Commercial real estate

47,972

35,832

41,580

49,054

49,935

Residential mortgages

26,751

25,096

25,613

25,563

27,213

Consumer

25,417

28,105

27,136

29,782

32,514

Total nonperforming loans and leases

$

218,869

$

185,020

$

203,791

$

209,516

$

247,530

Other real estate owned and repossessed assets:

Commercial non-mortgage

$

2,152

$

153

$

78

$

-

$

-

Residential mortgages

662

662

2,024

2,024

2,558

Consumer

532

716

243

87

154

Total other real estate owned and repossessed assets

$

3,346

$

1,531

$

2,345

$

2,111

$

2,712

Total nonperforming assets

$

222,215

$

186,551

$

206,136

$

211,627

$

250,242

Past due 30-89 days:

Commercial non-mortgage

$

32,074

$

9,645

$

20,248

$

17,440

$

6,006

Asset-based lending

-

-

5,921

-

-

Commercial real estate

1,970

17,115

26,147

6,050

25,587

Residential mortgages

10,583

10,710

11,385

12,577

10,781

Consumer

6,718

6,110

9,194

9,656

9,275

Total past due 30-89 days

$

51,345

$

43,580

$

72,895

$

45,723

$

51,649

Past due 90 days or more and accruing

29

602

770

711

8

Total past due loans and leases

$

51,374

$

44,182

$

73,665

$

46,434

$

51,657

WEBSTER FINANCIAL CORPORATION
Five Quarter Changes in the Allowance for Credit Losses on Loans and Leases (unaudited)

For the Three Months Ended

(Dollars in thousands)

June 30,
2023

March 31,
2023

December 31,
2022

September 30,
2022

June 30,
2022

ACL on loans and leases, beginning balance

$

613,914

$

594,741

$

574,325

$

571,499

$

569,371

Adoption of ASU No. 2022-02

-

5,873

-

-

-

Provision

35,249

37,821

40,649

31,352

11,728

Charge-offs:

Commercial portfolio

21,945

26,410

21,499

31,356

18,757

Consumer portfolio

1,085

1,098

1,193

1,453

896

Total charge-offs

23,030

27,508

22,692

32,809

19,653

Recoveries:

Commercial portfolio

1,024

1,574

895

1,413

7,765

Consumer portfolio

1,754

1,413

1,564

2,870

2,288

Total recoveries

2,778

2,987

2,459

4,283

10,053

Total net charge-offs

20,252

24,521

20,233

28,526

9,600

ACL on loans and leases, ending balance

$

628,911

$

613,914

$

594,741

$

574,325

$

571,499

ACL on unfunded loan commitments, ending balance

22,366

26,051

27,707

25,329

20,149

Total ACL, ending balance

$

651,277

$

639,965

$

622,448

$

599,654

$

591,648

WEBSTER FINANCIAL CORPORATION
Reconciliations to GAAP Financial Measures

The Company evaluates its business based on certain ratios that utilize non-GAAP financial measures. The Company believes the use of these non-GAAP financial measures provides additional clarity in assessing the results and financial position of the Company. Other companies may define or calculate supplemental financial data differently.

The efficiency ratio, which measures the costs expended to generate a dollar of revenue, is calculated excluding certain non-operational items. Return on average tangible common stockholders' equity (ROATCE) measures the Company’s net income available to common stockholders, adjusted for the tax-effected amortization of intangible assets, as a percentage of average stockholders’ equity less average preferred stock and average goodwill and intangible assets. The tangible equity ratio represents stockholders’ equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets. The tangible common equity ratio represents stockholders’ equity less preferred stock and goodwill and intangible assets divided by total assets less goodwill and intangible assets. Tangible book value per common share represents stockholders’ equity less preferred stock and goodwill and intangible assets divided by common shares outstanding at the end of the period. Core deposits express total deposits less certificates of deposit and brokered certificates of deposit. Adjusted net income available to common stockholders, adjusted diluted earnings per share (EPS), adjusted ROATCE, and adjusted return on average assets (ROAA) are calculated by excluding after tax merger-related expenses.

See the tables below for reconciliations of these non-GAAP financial measures with financial measures defined by GAAP.

At or for the Three Months Ended

(In thousands, except per share data)

June 30,
2023

March 31,
2023

December 31,
2022

September 30,
2022

June 30,
2022

Efficiency ratio:

Non-interest expense

$

344,089

$

332,467

$

348,390

$

330,071

$

358,227

Less: Foreclosed property activity

(432)

(262)

(80)

(393)

(358)

Intangible assets amortization

9,193

9,497

8,240

8,511

8,802

Operating lease depreciation

1,639

1,884

2,021

2,115

2,425

Strategic initiatives and other (1)

-

-

143

11,617

(152)

Merger related

40,840

29,373

45,790

25,536

66,640

Non-interest expense

$

292,849

$

291,975

$

292,276

$

282,685

$

280,870

Net interest income

$

583,829

$

595,283

$

602,375

$

551,003

$

486,660

Add: Tax-equivalent adjustment

17,292

15,911

13,991

13,247

11,732

Non-interest income

89,374

70,766

102,179

113,636

120,933

Other income (2)

5,035

4,311

4,814

11,186

3,805

Less: Operating lease depreciation

1,639

1,884

2,021

2,115

2,425

(Loss) on sale of investment securities, net

(48)

(16,747)

(4,517)

(2,234)

-

Other (3)

-

-

-

2,548

-

Income

$

693,939

$

701,134

$

725,855

$

686,643

$

620,705

Efficiency ratio

42.20

%

41.64

%

40.27

%

41.17

%

45.25

%

Return on average tangible common stockholders' equity:

Net income

$

234,968

$

221,004

$

244,751

$

233,968

$

182,311

Less: Preferred stock dividends

4,162

4,163

4,163

4,162

4,163

Add: Intangible assets amortization, tax-effected

7,262

7,503

6,510

6,724

6,954

Adjusted income

$

238,068

$

224,344

$

247,098

$

236,530

$

185,102

Adjusted income, annualized basis

$

952,272

$

897,376

$

988,392

$

946,120

$

740,408

Average stockholders' equity

$

8,395,298

$

8,215,676

$

7,960,900

$

8,090,044

$

8,125,518

Less: Average preferred stock

283,979

283,979

283,979

283,979

283,979

Average goodwill and other intangible assets

2,856,581

2,849,673

2,716,981

2,725,200

2,733,827

Average tangible common stockholders' equity

$

5,254,738

$

5,082,024

$

4,959,940

$

5,080,865

$

5,107,712

Return on average tangible common stockholders' equity

18.12

%

17.66

%

19.93

%

18.62

%

14.50

%

(1) Strategic initiatives and other for the three months ended September 30, 2022, primarily includes a contribution to the Webster foundation of $10.5 million (presented within Other non-interest expense on the Consolidated Statements of Income).

(2) Other income includes the taxable equivalent of net income generated from low income housing tax-credit investments.

(3) Other for the three months ended September 30, 2022, includes of a gain related to the early termination of repurchase agreements.

WEBSTER FINANCIAL CORPORATION
Reconciliations to GAAP Financial Measures (continued)

At or for the Three Months Ended

(In thousands, except per share data)

June 30,
2023

March 31,
2023

December 31,
2022

September 30,
2022

June 30,
2022

Tangible equity:

Stockholders' equity

$

8,279,726

$

8,294,294

$

8,056,186

$

7,826,410

$

7,997,788

Less: Goodwill and other intangible assets

2,852,117

2,861,310

2,713,446

2,721,040

2,729,551

Tangible stockholders' equity

$

5,427,609

$

5,432,984

$

5,342,740

$

5,105,370

$

5,268,237

Total assets

$

74,038,243

$

74,844,395

$

71,277,521

$

69,052,566

$

67,595,021

Less: Goodwill and other intangible assets

2,852,117

2,861,310

2,713,446

2,721,040

2,729,551

Tangible assets

$

71,186,126

$

71,983,085

$

68,564,075

$

66,331,526

$

64,865,470

Tangible equity

7.62

%

7.55

%

7.79

%

7.70

%

8.12

%

Tangible common equity:

Tangible stockholders' equity

$

5,427,609

$

5,432,984

$

5,342,740

$

5,105,370

$

5,268,237

Less: Preferred stock

283,979

283,979

283,979

283,979

283,979

Tangible common stockholders' equity

$

5,143,630

$

5,149,005

$

5,058,761

$

4,821,391

$

4,984,258

Tangible assets

$

71,186,126

$

71,983,085

$

68,564,075

$

66,331,526

$

64,865,470

Tangible common equity

7.23

%

7.15

%

7.38

%

7.27

%

7.68

%

Tangible book value per common share:

Tangible common stockholders' equity

$

5,143,630

$

5,149,005

$

5,058,761

$

4,821,391

$

4,984,258

Common shares outstanding

173,261

174,712

174,008

174,116

176,041

Tangible book value per common share

$

29.69

$

29.47

$

29.07

$

27.69

$

28.31

Core deposits:

Total deposits

$

58,747,532

$

55,297,479

$

54,054,340

$

54,008,887

$

53,077,157

Less: Certificates of deposit

4,743,204

3,855,406

2,729,332

2,311,484

2,554,102

Brokered certificates of deposit

2,542,854

674,373

1,431,617

258,110

-

Core deposits

$

51,461,474

$

50,767,700

$

49,893,391

$

51,439,293

$

50,523,055

Three months
ended June 30,
2023

Adjusted ROATCE:

Net income

$

234,968

Less: Preferred stock dividends

4,162

Add: Intangible assets amortization, tax-effected

7,262

Merger related, tax-effected

29,947

Adjusted income

$

268,015

Adjusted income, annualized basis

$

1,072,060

Average stockholders' equity

$

8,395,298

Less: Average preferred stock

283,979

Average goodwill and other intangible assets

2,856,581

Average tangible common stockholders' equity

$

5,254,738

Adjusted return on average tangible common stockholders' equity

20.40

%

Adjusted ROAA:

Net income

$

234,968

Add: Merger related, tax-effected

29,947

Adjusted income

$

264,915

Adjusted income, annualized basis

$

1,059,660

Average assets

$

76,232,528

Adjusted return on average assets

1.39

%

GAAP to adjusted reconciliation:

Three months ended June 30, 2023

(In millions, except per share data)

Pre-Tax Income

Net Income
Available to
Common
Stockholders

Diluted EPS

Reported (GAAP)

$

297.6

$

230.8

$

1.32

Merger related expenses

40.8

29.9

0.18

Adjusted (non-GAAP)

$

338.4

$

260.7

$

1.50

View source version on businesswire.com: https://www.businesswire.com/news/home/20230719140986/en/

Contacts

Media Contact
Alice Ferreira, 203-578-2610
acferreira@websterbank.com

Investor Contact
Emlen Harmon, 212-309-7646
eharmon@websterbank.com

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