Net income of $9.0 million or $.17 per share for the quarter
WATERBURY, Conn., Oct. 17 /PRNewswire-FirstCall/ -- Webster Financial
Corporation (NYSE: WBS), the holding company for Webster Bank, N.A., today
announced net income of $9.0 million in the third quarter, reflecting a $31.8
million charge from an available for sale securities portfolio repositioning.
Net income per diluted share before this charge was $.77 and is $.17 inclusive
of this charge.
Following an evaluation of its available for sale securities portfolio in
light of changing market conditions and other factors, management has
determined to sell all of its mortgage-backed securities classified as
available for sale (approximately $1.9 billion as of September 30, 2006).
Approximately $1.25 billion of proceeds from the sale of securities will
be used to pay off wholesale funding (short term borrowings), and the
remaining $650 million of proceeds is expected to be used to purchase
different securities to extend duration and improve the overall portfolio
yield.
The repositioning of Webster's securities portfolio is expected to improve
Webster's tangible capital ratio as a result of the net reduction in total
assets. Webster expects that net interest income will improve relative to
current estimates by approximately $15 million in 2007 and that the net
interest margin will improve as a result of an improved yield on the portfolio
and the reduction in high-cost, short-term borrowings.
At September 30, 2006, the available for sale mortgage-backed securities
portfolio had net unrealized losses of $48.9 million ($31.8 million after tax
or $.60 per common share), which will be recognized as part of the third
quarter results of operations. At current market levels, the sale of these
securities is estimated to result in an additional aggregate pretax loss of
approximately $6.0 million, which will be recognized in the fourth quarter.
The third quarter loss on the write-down of available for sale securities
to fair value was previously reflected as net unrealized securities losses
within "accumulated other comprehensive loss" in the shareholders' equity
section of Webster's Consolidated Balance Sheet. Accordingly, total
shareholders' equity will not change as a result of the third quarter charge.
Management focused on several key factors in making its determination
regarding the securities portfolio, including overall interest rate risk as
well as the future earnings and capital position of the Bank. As part of this
process, management identified the securities where there is no longer the
intent to hold to recovery. Driving the determination to sell the affected
securities is Webster's belief that a significant portion of the securities
will likely continue to yield less than the cost of short-term borrowings.
"The actions we are taking with our securities portfolio are a major step
toward the completion of our balance sheet transformation to a full-service
commercial bank and are entirely consistent with our stated operating
principles" stated Webster Chairman and Chief Executive Officer James C.
Smith. "Our focus is on completing this transformation swiftly to position
ourselves to become New England's bank."
Excluding the impact of this portfolio repositioning, results for the
quarter and the first nine months of 2006 reflect net interest margin
compression resulting from the continued consumer preference for higher
yielding MMDA and certificates of deposit and the impact of the inverted yield
curve on net interest income. The net interest margin in the third quarter
includes the benefit of the payment of the equivalent of two dividends from
the Federal Home Loan Bank of Boston (FHLB Boston) during the quarter, as a
result of its change in the timing of dividends.
Commercial loans, including commercial real estate loans, were $5.1
billion at September 30, 2006, up 11 percent from a year ago. Commercial and
industrial loans were $3.3 billion, up 13 percent, and commercial real estate
loans were $1.8 billion, up 6 percent. Consumer loans, primarily home equity
loans and lines, increased 11 percent to $3.0 billion compared to $2.7 billion
a year ago. Commercial and consumer loans grew at a combined rate of 11
percent from a year ago while residential loans, which totaled $4.8 billion,
grew by 1 percent as most mortgage originations are sold into the secondary
market. Commercial and consumer loans now represent 63 percent of total loans
compared to 61 percent a year ago.
"We are pleased with the consistent growth and contribution we see from
our commercial and retail lines of business. We have significant positive
momentum in core franchise growth as we pursue our vision to be New England's
bank," stated Mr. Smith. "Webster is fundamentally stronger than ever."
Revenues
Total revenues, which consist of net interest income plus total
noninterest income, were $178.2 million in the third quarter apart from the
securities portfolio repositioning charge compared to $183.9 million in the
second quarter and $185.6 million a year ago. Net interest income was $122.4
million in the third quarter compared to $126.8 million in the second quarter
and $129.6 million in the year-ago period. Continued strong growth in higher
yielding commercial and consumer loans was more than offset by an increase in
the cost of deposits and borrowings and reduced contributions from the
residential mortgage and securities portfolios.
Webster's net interest margin (annualized tax-equivalent net interest
income as a percentage of average earning assets) was 3.01 percent compared to
3.13 percent in the second quarter and 3.26 percent in the third quarter of
2005. The net interest margin decline compared to a year ago primarily
reflects loan and securities portfolio yields increasing 84 basis points and
38 basis points, respectively, compared to increases of 100 basis points in
the cost of deposits and 147 basis points in the cost of borrowings.
Total noninterest income was $55.7 million in the third quarter apart from
the securities portfolio repositioning charge compared to $57.1 million in the
prior quarter and $56.0 million a year ago. Deposit service fees totaled $25.3
million compared to $24.2 million in the second quarter and $22.2 million a
year ago. Wealth management fees totaled $6.7 million compared to $6.9 million
in the second quarter and $5.6 million a year ago. Insurance revenue was $9.8
million in the quarter compared to $10.0 million in the second quarter and
$11.0 million a year ago. Gains on the sale of loans were ($0.2) million as a
result of a lower of cost or market adjustment compared to $2.5 million in the
second quarter and $3.7 million a year ago. A portion of the decline in gain
on the sale of loans was offset by higher gains on the sale of securities,
which totaled $2.3 million compared to $0.7 million in the second quarter and
$1.1 million a year ago.
The provision for credit losses was $3.0 million in the third quarter,
same as in the second quarter, and $2.0 million in the third quarter of 2005.
Net loan charge-offs were $3.1 million compared to $2.5 million in the second
quarter and $1.8 million a year ago. The annualized net loan charge-off ratio
was 0.10 percent of average loans compared to 0.08 in the second quarter and
0.06 percent a year ago.
Expenses
Total noninterest expenses were $115.9 million in the third quarter
compared to $117.3 million in the second quarter and $114.9 million a year
ago. Expenses were flat to a year ago excluding $0.9 million of non-recurring
acquisition costs from the recently completed NewMil Bancorp acquisition. An
additional $2.4 million of NewMil acquisition costs are expected to be
incurred in the fourth quarter, consistent with our earlier estimates.
Increases over the past year in compensation and benefits, furniture and
equipment, occupancy, marketing and professional services were offset by
declines in IT conversion and infrastructure costs, intangible amortization
and other expenses.
NewMil Acquisition
As previously announced, Webster closed its acquisition of NewMil Bancorp
on October 6, 2006. NewMil brings $506 million in loans and $614 million in
deposits to Webster. "We are pleased to have successfully completed this
transaction, which significantly bolsters our western Connecticut franchise,"
stated Mr. Smith. "We welcome our new colleagues to Webster and thank them for
their partnership and specifically for their capable assistance during the
integration."
Balance Sheet Trends
Total assets were $18.1 billion at September 30, 2006 compared with $17.8
billion at September 30, 2005. Total loans were $13.0 billion and increased
$0.8 billion, or 7 percent, from a year ago while securities totaled $3.3
billion and declined by $0.5 billion, or 13 percent. Deposits were $12.3
billion and increased $0.6 billion, or 6 percent, with contributions from de
novo branching and growth in health savings account deposits at HSA Bank.
Demand and NOW deposits combined declined by 1 percent compared to a year
ago while certificates of deposit balances grew by 11 percent as customer
preference continued for this higher yielding product category. The $0.5
billion reduction in securities compared to a year ago funded $0.2 billion of
loan growth in excess of deposit growth and contributed to a $0.4 billion
reduction in wholesale borrowings over the past year. As a result, wholesale
borrowings declined to 22 percent of total assets at September 30 compared to
25 percent a year ago.
"The portfolio rebalancing actions we are undertaking will result in a
stronger balance sheet and an improved interest rate risk position," stated
Webster Chief Financial Officer Jerry Plush. "We will now have a higher
yielding securities portfolio, a significantly reduced level of high-cost,
short-term borrowings and an improved tangible capital ratio. We are focused
on improving our performance against key peer group metrics and believe this
is a significant step toward achieving this goal."
Book value per common share of $32.07 at September 30, 2006 increased from
$30.41 a year ago. Tangible book value per share of $19.16 at September 30
increased from $17.71 last year. The ratio of tangible equity to tangible
assets increased to 5.68 percent at September 30 compared to 5.45 percent a
year ago. Return on average tangible equity was 16.6 percent in the third
quarter apart from the securities portfolio repositioning charge compared to
19.6 percent a year ago while the cash return on average tangible equity was
17.9 percent and 21.6 percent in the respective periods.
Asset Quality
Nonperforming assets totaled $61.4 million, or 0.34 percent of total
assets, at September 30, 2006 compared to $61.8 million, or 0.34 percent, at
June 30 and $58.1 million, or 0.33 percent, a year ago.
The allowance for credit losses, which consists of the allowance for loan
losses and the reserve for unfunded commitments, was $156.3 million, or 1.20
percent of total loans, at September 30 compared to $155.1 million, or 1.27
percent, a year ago. The ratio of the allowance to nonperforming loans was 264
percent at September 30 compared to 275 percent a year ago.
Webster Financial Corporation is the holding company for Webster Bank,
National Association and Webster Insurance. With $18.1 billion in assets,
Webster provides business and consumer banking, mortgage, insurance, financial
planning, trust and investment services through 175 banking offices, 328 ATMs,
telephone banking and the Internet. Webster Bank owns the asset-based lending
firm Webster Business Credit Corporation, the insurance premium finance
company Budget Installment Corp., Center Capital Corporation, an equipment
finance company headquartered in Farmington, Connecticut and provides health
savings account trustee and administrative services through HSA Bank, a
division of Webster Bank.
For more information about Webster, including past press releases and the
latest Annual Report, visit the Webster website at www.websteronline.com.
***
Conference Call
A conference call covering Webster's 2006 third quarter earnings
announcement will be held today, Tuesday, October 17, at 11:00 a.m. Eastern
Time and may be heard through Webster's investor relations website at
www.wbst.com, or in listen-only mode by calling 1-877-407-8293 or 201-689-8349
internationally. The call will be archived on the website and available for
future retrieval.
Forward-looking Statements
Statements in this press release regarding Webster Financial Corporation's
business that are not historical facts are "forward-looking statements" that
involve risks and uncertainties. For a discussion of such risks and
uncertainties that could cause actual results to differ from those contained
in the forward-looking statement, see "Forward Looking Statements" in
Webster's Annual Report for 2005. Except as required by law, Webster does not
undertake to update any such forward looking information.
Non-GAAP Financial Measures
In addition to results presented in accordance with GAAP, this press
release contains certain non-GAAP financial measures. We believe that
providing certain non-GAAP financial measures, such net income before giving
effect to the sale of securities from a repositioning of the balance sheet,
provides investors with information useful in understanding our financial
performance, our performance trends and financial position. A reconciliation
of net income and other performance ratios before the sale of those securities
to net income is included in the accompanying financial tables, elsewhere in
this report. We also provide a reconciliation of cash basis net income to net
income in those accompanying financial tables.
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 excluding non-cash items which affect the GAAP reporting of results of
operations. Additionally, this quarter we show net income excluding the
effect of the determination to sell our available for sale securities
portfolio because we believe these items are not reflective of on-going
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
Clark Finley 203-578-2287
cfinley@websterbank.com
Investor Contact
Terry Mangan 203-578-2318
tmangan@websterbank.com
WEBSTER FINANCIAL CORPORATION
Selected Financial Highlights (unaudited)
At or for the Three At or for the Nine
Months Ended Months Ended
(In thousands, except per September 30, September 30,
share data) 2006 2005 2006 2005
Net income and performance ratios before loss on
write-down of AFS securities to fair value
(annualized):
Net income $8,997 $46,602 $95,992 $140,355
Recognition of loss on AFS
securities, net of tax 31,768 - 31,768 -
Net income before recognition
of loss on AFS securities 40,765 46,602 127,760 140,355
Net income per diluted
common share 0.77 0.86 2.40 2.59
Return on average
shareholders' equity 9.80% 11.39% 10.23% 11.69%
Return on average
tangible equity 16.55 19.59 17.27 20.34
Return on average assets 0.91 1.06 0.95 1.08
Noninterest income as a
percentage of total revenue 31.28 30.16 30.69 29.56
Efficiency ratio (a,e) 65.03 61.93 64.37 61.09
Net income and performance
ratios (annualized):
Net income $8,997 $46,602 $95,992 $140,355
Net income per diluted
common share 0.17 0.86 1.80 2.59
Return on average
shareholders' equity 2.16% 11.39% 7.69% 11.69%
Return on average
tangible equity 3.65 19.59 12.98 20.34
Return on average assets 0.20 1.06 0.72 1.08
Noninterest income as a
percentage of total revenue 5.30 30.16 23.89 29.56
Efficiency ratio (a,d) 89.61 61.93 70.68 61.09
Cash income and performance ratios before loss
on write-down of AFS securities to fair value
(annualized) (b):
Net income before recognition
of loss on AFS securities $40,765 $46,602 $127,760 $140,355
Stock-based compensation,
net of tax 1,330 1,470 4,125 4,493
Intangible amortization,
net of tax 2,001 3,251 7,150 9,693
Cash income 44,096 51,323 139,035 154,541
Cash income per diluted
common share 0.83 0.95 2.61 2.85
Cash return on average
shareholders' equity 10.61% 12.55% 11.13% 12.87%
Cash return on average
tangible equity 17.91 21.57 18.80 22.39
Cash return on average assets 0.98 1.16 1.04 1.19
Cash income and performance ratios
(annualized) (b):
Net income $8,997 $46,602 $95,992 $140,355
Stock-based compensation,
net of tax 1,330 1,470 4,125 4,493
Intangible amortization,
net of tax 2,001 3,251 7,150 9,693
Cash income 12,328 51,323 107,267 154,541
Cash income per diluted
common share 0.23 0.95 2.01 2.85
Cash return on average
shareholders' equity 2.96% 12.55% 8.59% 12.87%
Cash return on average
tangible equity 5.01 21.57 14.50 22.39
Cash return on average assets 0.27 1.16 0.80 1.19
Asset quality:
Allowance for credit losses $156,331 $155,052 $156,331 $155,052
Nonperforming assets 61,416 58,132 61,416 58,132
Allowance for credit
losses / total loans 1.20% 1.27% 1.20% 1.27%
Net charge-offs (recoveries)
/ average loans (annualized) 0.10 0.06 0.08 0.03
Nonperforming loans /
total loans 0.45 0.46 0.45 0.46
Nonperforming assets /
total assets 0.34 0.33 0.34 0.33
Allowance for credit
losses / nonperforming loans 264.47 275.33 264.47 275.33
Other ratios (annualized):
Tangible capital ratio 5.68% 5.45% 5.68% 5.45%
Shareholders' equity /
total assets 9.28 9.19 9.28 9.19
Interest-rate spread 2.93 3.22 3.06 3.26
Net interest margin 3.01 3.26 3.13 3.30
Share related:
Book value per common share $32.07 $30.41 $32.07 30.41
Tangible book value per
common share 19.16 17.71 19.16 17.71
Common stock closing price 47.11 44.96 47.11 44.96
Dividends declared per
common share 0.27 0.25 0.79 0.73
Common shares issued and
outstanding 52,476 53,795 52,476 53,795
Basic shares (average) 52,241 53,648 52,654 53,612
Diluted shares (average) 52,871 54,310 53,276 54,269
Footnotes:
(a) Noninterest expense as a percentage of net interest income plus
noninterest income.
(b) Cash income represents net income excluding the after tax effects of
non-cash charges related to the amortization of intangible assets and
stock-based compensation, which includes stock options and restricted
stock.
(c) For purposes of this computation, unrealized gains (losses) are
excluded from the average balance for rate calculations.
(d) Excluding acquisition, conversion and infrastructure costs, the
efficiency ratio would have been 88.94% and 70.49% for the three and
nine months ended September 30, 2006, respectively, and 60.73% and
59.85% for the three and nine months ended September 30, 2005,
respectively.
(e) Excluding acquisition, conversion and infrastructure costs, the
efficiency ratio would have been 64.54% and 64.20% for the three and
nine months ended September 30, 2006, respectively, and 60.73% and
59.85% for the three and nine months ended September 30, 2005,
respectively.
(f) Effective December 31, 2005, Webster transferred the portion of the
allowance for loan losses related to commercial and consumer lending
commitments and letters of credit to the reserve for unfunded credit
commitments.
(g) The recording of the FHLB dividend of $1.8 million, related to the
second quarter of 2006, in the third quarter of 2006 increased the
yield on securities by 21 basis points (bp). Excluding the recording
of this dividend the yield on securities would have been 4.85 and the
wholesale spread would have been (.46) in the third quarter of 2006.
The recording of the FHLB dividend of $1.8 million in the second
quarter of 2006 would have increased the yield by 19 bp and improved
the wholesale spread from (24) bp to (5) bp.
(h) Cost of borrowings includes long-term debt such as Trust Preferred
Securities and subordinated debt.
(i) Amounts were previously shown as a component of nonperforming loans.
Consolidated Statements of Condition (unaudited)
September 30, June 30, September 30,
(In thousands) 2006 2006 2005
Assets:
Cash and due from depository
institutions $243,434 $327,622 $269,859
Short-term investments 9,562 59,666 9,224
Securities:
Trading, at fair value 2,848 2,698 1,901
Available for sale, at fair value 2,249,935 2,317,645 2,668,226
Held-to-maturity securities 1,064,188 1,088,206 1,161,507
Total securities 3,316,971 3,408,549 3,831,634
Loans held for sale 309,149 275,240 247,365
Loans:
Residential mortgages 4,845,198 4,875,134 4,812,298
Commercial 3,368,164 3,160,200 2,978,537
Commercial real estate 1,770,674 1,819,635 1,666,384
Consumer 3,037,674 2,855,558 2,740,019
Total loans 13,021,710 12,710,527 12,197,238
Allowance for loan losses (147,446) (147,401) (155,052)
Loans, net 12,874,264 12,563,126 12,042,186
Accrued interest receivable 93,844 85,719 73,253
Premises and equipment, net 189,562 188,125 179,463
Goodwill and intangible assets 692,388 695,014 703,740
Cash surrender value of life insurance 245,108 242,740 235,467
Prepaid expenses and other assets 164,532 176,341 214,865
Total Assets $18,138,814 $18,022,142 $17,807,056
Liabilities and Shareholders' Equity:
Deposits:
Demand deposits $1,453,317 $1,549,051 $1,431,642
NOW accounts 1,559,584 1,687,297 1,600,481
Money market deposit accounts 2,078,797 1,888,179 1,971,075
Savings accounts 1,838,494 1,954,298 2,032,927
Certificates of deposit 4,583,508 4,447,504 4,118,765
Treasury deposits 790,353 690,136 507,302
Total deposits 12,304,053 12,216,465 11,662,192
Federal Home Loan Bank advances 1,867,393 1,804,140 2,064,963
Securities sold under agreements
to repurchase and other
short-term debt 1,466,845 1,528,224 1,633,906
Other long-term debt 636,028 622,267 673,999
Reserve for unfunded commitments (f) 8,885 9,070 -
Accrued expenses and other liabilities 163,192 187,445 126,537
Total liabilities 16,446,396 16,367,611 16,161,597
Preferred stock of subsidiary
corporation 9,577 9,577 9,577
Shareholders' equity 1,682,841 1,644,954 1,635,882
Total Liabilities and
Shareholders' Equity $18,138,814 $18,022,142 $17,807,056
See Selected Financial Highlights for footnotes.
Consolidated Statements of Income (unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
(In thousands, except per
share data) 2006 2005 2006 2005
Interest income:
Loans $215,094 $175,680 $617,765 $501,434
Securities and short-term
investments 40,883 43,775 121,612 127,358
Loans held for sale 4,366 3,686 11,022 9,382
Total interest income 260,343 223,141 750,399 638,174
Interest expense:
Deposits 85,058 51,338 220,005 131,305
Borrowings 52,849 42,191 150,994 119,190
Total interest expense 137,907 93,529 370,999 250,495
Net interest income 122,436 129,612 379,400 387,679
Provision for credit losses 3,000 2,000 8,000 7,500
Net interest income after
provision for credit losses 119,436 127,612 371,400 380,179
Noninterest income:
Deposit service fees 25,252 22,182 71,271 63,058
Insurance revenue 9,793 10,973 30,505 33,337
Loan and loan servicing fees 7,760 7,739 24,746 23,942
Wealth and investment services 6,738 5,554 20,022 16,977
Gain (loss) on sale of loans
and loan servicing, net (185) 3,703 5,626 9,251
Increase in cash surrender
value of life insurance 2,368 2,341 7,053 6,881
Other 1,693 2,347 4,752 6,603
53,419 54,839 163,975 160,049
Loss on write-down of AFS
securities to fair value (48,879) - (48,879) -
Gain on sale of securities, net 2,307 1,141 4,021 2,607
Total noninterest income 6,847 55,980 119,117 162,656
Noninterest expenses:
Compensation and benefits 62,050 60,808 191,638 176,564
Occupancy 11,977 10,482 35,983 32,151
Furniture and equipment 13,840 13,009 41,397 35,418
Intangible amortization 3,079 5,001 11,000 14,912
Marketing 4,211 3,339 12,127 10,286
Professional services 4,302 3,626 11,310 11,368
Conversion and
infrastructure costs - 2,217 - 6,857
Acquisition costs 868 - 933 -
Other 15,523 16,450 47,951 48,655
Total noninterest expenses 115,850 114,932 352,339 336,211
Income before income taxes 10,433 68,660 138,178 206,624
Income taxes 1,436 22,058 42,186 66,269
Net income $8,997 $46,602 $95,992 $140,355
Diluted shares (average) 52,871 54,310 53,276 54,269
Net income per common share:
Basic $0.17 $0.87 $1.82 $2.62
Diluted 0.17 0.86 1.80 2.59
See Selected Financial Highlights for footnotes.
Consolidated Statements of Income (unaudited)
Three Months Ended
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
(In thousands, except
per share data) 2006 2006 2006 2005 2005
Interest income:
Loans $215,094 $207,097 $195,574 $187,607 $175,680
Securities and short-
term investments 40,883 39,134 41,595 42,503 43,775
Loans held for sale 4,366 3,317 3,339 3,563 3,686
Total interest income 260,343 249,548 240,508 233,673 223,141
Interest expense:
Deposits 85,058 72,593 62,354 57,132 51,338
Borrowings 52,849 50,150 47,995 46,879 42,191
Total interest expense 137,907 122,743 110,349 104,011 93,529
Net interest income 122,436 126,805 130,159 129,662 129,612
Provision for
credit losses 3,000 3,000 2,000 2,000 2,000
Net interest income
after provision for
credit losses 119,436 123,805 128,159 127,662 127,612
Noninterest income:
Deposit service fees 25,252 24,150 21,869 22,909 22,182
Insurance revenue 9,793 9,988 10,724 10,678 10,973
Loan and loan
servicing fees 7,760 9,162 7,824 9,290 7,739
Wealth and investment
services 6,738 6,930 6,354 6,174 5,554
Gain on sale of loans
and loan servicing, net (185) 2,538 3,273 2,322 3,703
Increase in cash surrender
value of life insurance 2,368 2,314 2,371 2,360 2,341
Other 1,693 1,284 1,775 3,470 2,347
53,419 56,366 54,190 57,203 54,839
Loss on write-down of AFS
securities to fair value (48,879) - - - -
Gain on sale of
securities, net 2,307 702 1,012 1,026 1,141
Total noninterest income 6,847 57,068 55,202 58,229 55,980
Noninterest expenses:
Compensation and benefits 62,050 64,585 65,003 64,905 60,808
Occupancy 11,977 11,824 12,182 11,141 10,482
Furniture and equipment 13,840 13,962 13,595 14,810 13,009
Intangible amortization 3,079 3,544 4,377 5,001 5,001
Marketing 4,211 4,292 3,624 3,981 3,339
Professional services 4,302 3,464 3,544 3,594 3,626
Conversion and
infrastructure costs - - - 1,281 2,217
Acquisition costs 868 65 - - -
Other 15,523 15,582 16,846 14,646 16,450
Total noninterest
expenses 115,850 117,318 119,171 119,359 114,932
Income before income
taxes 10,433 63,555 64,190 66,532 68,660
Income taxes 1,436 20,412 20,338 21,032 22,058
Net income $8,997 $43,143 $43,852 $45,500 $46,602
Diluted shares (average) 52,871 53,252 53,703 54,129 54,310
Net income per common
share:
Basic $0.17 $0.82 $0.83 $0.85 $0.87
Diluted 0.17 0.81 0.82 0.84 0.86
See Selected Financial Highlights for footnotes.
Retail and Wholesale Interest-Rate Spreads (unaudited)
Three Months Ended
September June March December September
2006 2006 2006 2005 2005
Interest-rate spread
Yield on interest-earning
assets 6.31% 6.11% 5.97% 5.73% 5.55%
Cost of interest-bearing
liabilities 3.38 3.05 2.78 2.55 2.33
Interest-rate spread 2.93% 3.06% 3.19% 3.18% 3.22%
Net interest margin 3.01 3.13 3.24 3.22 3.26
Retail interest-rate spread
Yield on loans and loans held
for sale 6.64% 6.52% 6.32% 6.02% 5.83%
Cost of deposits 2.76 2.43 2.16 1.94 1.76
Spread 3.88% 4.09% 4.16% 4.08% 4.07%
Wholesale interest-rate spread
Yield on securities and short-
term investments (g) 5.06% 4.61% 4.76% 4.75% 4.67%
Cost of borrowings (h) 5.31 4.85 4.44 4.19 3.84
Spread (g) (0.25)% (0.24)% 0.32% 0.56% 0.83%
Consolidated Average Statements of Condition (unaudited)
Three Months Ended September 30,
2006 2005
Fully tax- Fully tax-
equivalent equivalent
(Dollars in Average yield Average yield
thousands) balance Interest /rate balance Interest /rate
Assets:
Interest-earning
assets:
Loans $12,813,385 $215,094 6.65% $11,974,880 $175,685 5.81%
Securities 3,347,060 43,000 5.06(c) 3,906,118 45,997 4.68(c)
Loans held
for sale 277,181 4,366 6.30 223,002 3,686 6.61
Short-term
investments 18,484 190 4.02 20,044 117 2.28
Total interest
-earning
assets 16,456,110 262,650 6.31 16,124,044 225,485 5.55
Noninterest
-earning
assets 1,498,903 1,505,579
Total
assets $17,955,013 $17,629,623
Liabilities and
Shareholders' Equity:
Interest-bearing
liabilities:
Demand
deposits $1,451,171 $- -% $1,477,230 $- -%
Savings, NOW
and money
market deposit
accounts 5,445,159 28,258 2.06 5,679,259 18,021 1.26
Time deposits 5,308,496 56,800 4.23 4,413,329 33,317 3.00
Total
deposits 12,204,826 85,058 2.76 11,569,818 51,338 1.76
Federal Home
Loan Bank
advances 2,069,417 26,328 4.98 2,128,760 19,134 3.52
Repurchase
agreements
and other short
-term debt 1,215,371 13,764 4.43 1,518,921 11,859 3.06
Other long-term
debt 627,379 12,757 8.13 674,056 11,198 6.65
Total
borrowings 3,912,167 52,849 5.31 4,321,737 42,191 3.84
Total interest
-bearing
liabilities 16,116,993 137,907 3.38 15,891,555 93,529 2.33
Noninterest
-bearing
liabilities 165,301 92,381
Total
liabilities 16,282,294 15,983,936
Preferred stock
of subsidiary
corporation 9,577 9,577
Shareholders'
equity 1,663,142 1,636,110
Total
liabilities
and shareholders'
equity $17,955,013 $17,629,623
124,743 131,956
Less: tax-equivalent
adjustment (2,307) (2,344)
Net interest income $122,436 $129,612
Interest-rate spread 2.93% 3.22%
Net interest margin 3.01% 3.26%
See Selected Financial Highlights for footnotes.
Consolidated Average Statements of Condition (unaudited)
Nine Months Ended September 30
2006 2005
Fully tax- Fully tax-
equivalent equivalent
(Dollars in Average yield Average yield
thousands) balance Interest /rate balance Interest /rate
Assets:
Interest-
earning assets:
Loans $12,611,701 $617,765 6.51% $11,796,868 $501,440 5.65%
Securities 3,490,595 127,810 4.81 (c) 3,836,811 133,373 4.61(c)
Loans held
for sale 245,559 11,022 5.98 226,468 9,382 5.52
Short-term
investments 24,038 709 3.89 20,028 390 2.57
Total interest
-earning
assets 16,371,893 757,306 6.13 15,880,175 644,585 5.39
Noninterest
-earning
assets 1,502,282 1,467,085
Total
assets $17,874,175 $17,347,260
Liabilities
and Shareholders'
Equity:
Interest-bearing
liabilities:
Demand
deposits $1,453,435 $- -% $1,425,093 $- -%
Savings, NOW
and money market
deposit
accounts 5,375,789 70,555 1.75 5,678,099 47,161 1.11
Time deposits 5,122,366 149,450 3.89 4,064,228 84,144 2.77
Total
deposits 11,951,590 220,005 2.46 11,167,420 131,305 1.57
Federal Home
Loan Bank
advances 2,235,163 76,153 4.49 2,247,887 55,881 3.28
Repurchase
agreements
and other short
-term debt 1,244,686 38,200 4.05 1,542,111 31,274 2.67
Other long-term
debt 632,257 36,641 7.73 676,426 32,035 6.31
Total
borrowings 4,112,106 150,994 4.86 4,466,424 119,190 3.53
Total interest
-bearing
liabilities 16,063,696 370,999 3.07 15,633,844 250,495 2.13
Noninterest
-bearing
liabilities 135,496 102,981
Total
liabilities 16,199,192 15,736,825
Preferred stock
of subsidiary
corporation 9,577 9,577
Shareholders'
equity 1,665,406 1,600,858
Total
liabilities
and shareholders'
equity $17,874,175 $17,347,260
386,307 394,090
Less: tax-
equivalent
adjustment (6,907) (6,411)
Net interest
income $379,400 $387,679
Interest-rate spread 3.06% 3.26%
Net interest margin 3.13% 3.30%
See Selected Financial Highlights for footnotes.
At or for the Three Months Ended
(Unaudited) Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
(Dollars in thousands) 2006 2006 2006 2005 2005
Asset Quality
Nonperforming loans:
Commercial:
Commercial $29,321 $22,930 $19,719 $26,002 $25,321
Equipment financing 2,450 2,693 2,864 3,065 3,209
Total commercial 31,771 25,623 22,583 29,067 28,530
Commercial real estate 16,811 23,291 24,012 22,678 19,650
Residential 7,032 7,218 8,891 6,979 6,436
Consumer 3,496 3,065 2,875 1,829 1,699
Total nonperforming
loans 59,110 59,197 58,361 60,553 56,315
Loans held for sale - - - - 181
Other real estate owned
and repossessed assets:
Commercial 1,573 2,254 1,712 5,126 1,408
Residential 607 316 456 232 218
Consumer 126 10 361 427 10
Total other real
estate owned and
repossessed assets 2,306 2,580 2,529 5,785 1,636
Total nonperforming
assets $61,416 $61,777 $60,890 $66,338 $58,132
Accruing loans 90 or
more days past due (i) $4,609 2,542 1,002 6,676 2,223
Allowance for Credit Losses
Beginning balance $156,471 $155,957 $155,632 $155,052 $154,822
Provision 3,000 3,000 2,000 2,000 2,000
Charge-offs:
Commercial 3,369 2,775 1,629 3,272 2,204
Residential 46 65 75 110 378
Consumer 265 239 362 153 137
Total charge-offs 3,680 3,079 2,066 3,535 2,719
Recoveries (540) (593) (391) (2,115) (949)
Net loan charge-offs
(recoveries) 3,140 2,486 1,675 1,420 1,770
Ending balance $156,331 $156,471 $155,957 $155,632 $155,052
Components: (e)
Allowance for
loan losses $147,446 $147,401 $146,383 $146,486 $155,052
Reserve for unfunded
credit commitments 8,885 9,070 9,574 9,146 -
Allowance for
credit losses $156,331 $156,471 $155,957 $155,632 $155,052
Asset Quality Ratios:
Allowance for loan
losses/total loans 1.13% 1.16% 1.16% 1.19% 1.27%
Allowance for credit
losses/total loans 1.20 1.23 1.24 1.27 1.27
Net charge-offs
(recoveries)/average
loans (annualized) 0.10 0.08 0.05 0.05 0.06
Nonperforming loans
/total loans 0.45 0.47 0.46 0.49 0.46
Nonperforming assets
/total assets 0.34 0.34 0.34 0.37 0.33
Allowance for credit losses
/nonperforming loans 264.47 264.32 267.23 257.02 275.33
See Selected Financial Highlights for footnotes.
SOURCE Webster Financial Corporation
CONTACT: Media Contact
Clark Finley 203-578-2287
cfinley@websterbank.com
Investor Contact
Terry Mangan 203-578-2318
tmangan@websterbank.com
Web site: http://www.websteronline.com
(WBS)