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Net loss of $16.8 million or $.42 loss per diluted share includes:
WATERBURY, Conn., Oct. 21 /PRNewswire-FirstCall/ -- Webster Financial
Corporation (NYSE: WBS), the holding company for Webster Bank, N.A., today
announced a net loss of $16.8 million or $.42 loss per diluted share for the
third quarter of 2008, compared to a net loss of $28.9 million or $.56 loss
per diluted share for the second quarter of 2008 and $35.0 million in net
income or $.64 per diluted earnings per share for the third quarter of 2007.
As detailed below, results in the third quarter of 2008 reflect certain cash
and non-cash charges in the quarter aggregating to $.59 per share. Operating
income was $14.0 million or $.17 per diluted share adjusting for OTTI and
other charges.
For the first nine months of 2008, net loss totaled $21.3 million, or $.51
loss per diluted share, compared to net income of $105.5 million, or $1.89 per
diluted share in the year-ago period. Operating income was $61.2 million or
$1.08 per diluted share adjusting for OTTI and other charges.
Detail of Charges to Third Quarter 2008 Earnings (Loss) Per Share:
Reported loss / loss per diluted share $(16,754) $(0.42)
Adjustments (after-tax):
Write-down of certain investments to fair
value 28,791 0.55
Severance and other costs 998 0.02
Other charges 1,013 0.02
Operating income / diluted EPS $14,048 $0.17
Operating income and operating EPS, representing net income and EPS
determined in accordance with generally accepted accounting principles
("GAAP") excluding the effects of the after-tax, non-cash OTTI charge noted
above, provide a more meaningful comparison for effectively evaluating the
company's operating results.
Webster Chairman and Chief Executive Officer James C. Smith said,
"Webster's strong capital levels place us among the best capitalized bank
holding companies of our size. During this time of unprecedented economic
turmoil, we intend to use our capital strength to help our customers navigate
the challenges facing the regional economy. The improvement that Webster has
shown this quarter in core operating results would under more normal
circumstances be the focus of this report."
Webster will provide details on its third quarter performance in a
conference call at 9:00 a.m. today (refer to details for the conference call
at the end of this release). In addition, Webster has posted supplemental
information regarding its investment securities portfolio and other items.
Additional details are available on our website at www.wbst.com.
Charges taken in the third quarter included $33.5 million in write-downs
for OTTI for certain investment securities classified as available for sale
and $2.1 million in losses on the sale of equity securities. $24.5 million of
the OTTI charges were related to capital trust income notes and certain BBB
rated pooled capital trust securities. Of the remaining $9.0 million of OTTI
charges, $8.0 million were related to FNMA and FHLMC preferred stock and $1
million were related to common equity securities. The amount of tax benefit
recognized on the OTTI was based on the tax characteristics of each security
(capital or ordinary). Those securities that are treated as capital for tax
purposes have limited tax benefits recorded.
Subsequently, on October 3, 2008, the Emergency Economic Stabilization Act
was enacted which includes a provision permitting banks to recognize losses
relating to FNMA and FHLMC preferred stock as an ordinary loss, thereby
allowing the company to tax benefit the losses. Had the legislation been in
effect as of September 30, 2008, and had the company recognized the loss as an
ordinary loss for the quarter ended September 30, 2008, the positive impact
recorded would have been $3.5 million, or $0.07 per diluted share. The company
will recognize the additional tax benefit in the quarter ending December 31,
2008 totaling approximately $3.8 million, or $0.07 per diluted share.
Other charges in the quarter include $2.1 million of loss on sale of FNMA
and FHLMC preferred stock and $2.5 million in other pre-tax charges, primarily
related to the OneWebster earnings optimization initiative.
Webster Chief Financial Officer and Chief Risk Officer Jerry Plush stated,
"We are focused on identifying and managing risks during this credit cycle and
continue to be proactive in dealing with issues in investments and loans as
appropriate. We end the quarter with a solid tangible equity ratio of 6.34
percent."
Board Declares Quarterly Cash Dividend of $.30 per share
Webster also announced today that its Board of Directors, at its October
20, 2008 meeting, declared a regular quarterly cash dividend of $.30 per
common share. The dividend is payable on November 17, 2008 to shareholders of
record on November 3, 2008. This is the 85th consecutive quarterly dividend
since Webster first paid a dividend in 1987. Chairman and CEO Smith noted:
"The Board has elected to pay a $.30 dividend to our shareholders given
Webster's strong capital position and core operating results. As indicated
last quarter, our plan is to determine the appropriate dividend level based on
core operating results and Webster's capital needs in the quarters ahead."
Revenues
Total revenue, which consists of net interest income plus total
noninterest income, totaled $144.9 million in the third quarter of 2008
compared to $119.9 million in the second quarter of 2008 and $178.5 million a
year ago. The declines in the third and second quarters of 2008 compared to a
year ago reflect OTTI charges and losses on the sales of certain investment
securities.
Net interest income totaled $129.2 million in the third quarter compared
to $125.7 million in the second quarter and $127.1 million in the year-ago
period. The $3.5 million increase from the second quarter primarily reflects
an increase in the net interest margin as well as a higher level of interest-
earning assets while the $2.1 million increase from a year ago mostly reflects
a higher level of interest-earning assets. The net interest margin was 3.32
percent in the third quarter compared to 3.26 percent in the second quarter
and 3.38 percent a year ago. The spread between the yield on interest-earning
assets and the cost of interest-bearing liabilities in the third quarter of
2008 was 3.24 percent compared to 3.20 percent in the second quarter of 2008
and 3.29 percent in the third quarter of 2007.
Total noninterest income in the third quarter of 2008 was $15.7 million
compared to ($5.7) million in the second quarter of 2008. Noninterest income,
excluding OTTI and loss on sale of FNMA and FHLMC preferred stock, was $51.3
million in the third quarter of 2008 compared to $49.2 million in the second
quarter and $51.4 million in the year-ago period. Deposit service fees totaled
$31.7 million in the third quarter of 2008, an increase of $1.8 million and
$1.7 million, respectively compared to $29.9 million in the second quarter and
$30.0 million a year ago. Loan-related fees were $7.2 million for the third
quarter compared to $7.9 million in the second quarter and $7.7 million in the
year-ago period. Wealth and investment services revenues totaled $7.1 million
in the third quarter compared to $7.6 million in the second quarter and $7.1
million a year ago. Income from mortgage banking activities was $0.1 million
in each of the third and second quarters compared to $1.8 million a year ago.
The declines from a year ago reflect the decision to exit the national
wholesale mortgage business in the fourth quarter of 2007. Other noninterest
income was $2.7 million compared to $0.9 million in the second quarter and
$1.7 million a year ago.
Provision For Credit Losses
The total provision for credit losses was $45.5 million compared to $25.0
million in the second quarter and $15.25 million a year ago. $29.9 million of
the provision for credit losses was related to the company's continuing
portfolios, and $15.6 million was related to the liquidating portfolio. The
increase over the second quarter reflects higher levels of nonperforming and
delinquent loans, as well as management's decision to expedite the resolution
of the remaining liquidating national construction loan portfolio and to
provide for additional reserves for the liquidating home equity portfolio.
Net loan charge-offs from the continuing portfolios totaled $20.5 million
in the third quarter compared with $11.2 million in the second quarter.
Additional net charge-offs of $13.9 million and $6.8 million were recorded in
the third quarter against the remaining indirect national construction loans
and indirect, out-of-market home equity loans in the liquidating portfolio
respectively, compared with net charge-offs of $3.7 million and $5.5 million
in the second quarter.
The total allowance for credit losses, which consists of the allowance for
loan losses and the reserve for unfunded credit commitments, was $198.7
million or 1.54 percent of total loans at September 30, 2008, compared to 1.52
percent at June 30, 2008 and 1.32 percent at September 30, 2007. Of the total
allowance for credit losses as of September 30, 2008, $170.9 million was
allocated toward the continuing portfolios and unfunded credit commitments, or
1.36 percent of continuing loans, up from $161.5 million or 1.30 percent of
loans as of June 30, 2008 and $27.8 million was allocated to the liquidating
portfolio, or 14.0 percent and 7.5 percent of liquidating national
construction and home equity loans respectively, a decline from $32.9 million,
or 14.3 percent and 7.5 percent respectively, as of June 30, 2008.
Noninterest Expenses
Total noninterest expenses were $117.5 million in the third quarter
compared to $137.7 million in the second quarter of 2008 and $113.6 million a
year ago. Noninterest expenses excluding goodwill impairment and OneWebster
charges were $115.0 million in the third quarter compared to $120.0 million in
the second quarter of 2008 and $113.1 million a year ago. Total noninterest
expense in the third quarter of 2008 included a $1.0 million subsidiary
goodwill impairment charge and $1.5 million of previously disclosed severance
and other costs primarily related to the OneWebster earnings optimization
initiative while the second quarter of 2008 included a $8.5 million goodwill
impairment charge and $12.5 million of other costs consisting of $7.7 million
of previously disclosed amounts related to the OneWebster earnings
optimization initiative, $1.6 million in severance and other expenses related
to early retirement and other executive changes, and $3.2 million of other
charges. Plush stated, "As we outlined in previous releases regarding our
OneWebster initiative, the benefits of this program would begin to be realized
as early as the third quarter of this year. We recognize that showing
improvement in our core noninterest expenses, which reflects the early stages
of this program and other cost containment measures, is essential,
particularly in this uncertain economic environment and in light of higher
FDIC insurance premiums in future quarters."
Income Taxes
Due to the pre-tax loss, the effective tax rate for the third quarter was
not meaningful. The $1.9 million tax benefit in the quarter on the $18.1
million pre-tax loss applicable to continuing operations in the period was
impacted primarily by no tax benefit being available on $22.6 million of
securities losses ($7.9 million benefit). Webster's effective tax rate
applicable to continuing operations and excluding primarily the effects of the
securities losses, was 27 percent as compared to 29.5 percent in the second
quarter of 2008 and 31.5 percent a year ago.
Balance Sheet Trends
Total assets were $17.5 billion at September 30, 2008 compared to $17.5
billion at June 30, 2008 and $16.9 billion a year ago. Total loans were $12.9
billion at September 30, 2008 compared to $12.8 billion at June 30, 2008 and
$12.4 billion a year ago. In the third quarter, commercial real estate
increased by $51 million, while Commercial & Industrial loans grew by $40
million. Consumer loans grew by $36 million while residential mortgage loans
declined by $26 million. Securities totaled $3.0 billion at September 30, 2008
compared to $2.5 billion a year ago, which provided offset to a decline of
$208 million in loans held for sale.
Total deposits were $11.8 billion, a decrease of $0.7 billion or 6 percent
from a year ago, as Webster reduced higher costing brokered certificates of
deposits, which declined $107 million, other certificates of deposit, which
declined $354 million from a year ago, and money market deposit accounts,
which declined $474 million from a year ago. Somewhat offsetting these
declines was an increase in NOW and demand deposits of $106 million and a $107
million increase in savings accounts from a year ago. Core deposits as a
percent of total deposits was 60.5 percent at September 30, 2008 compared to
62.0 percent in the second quarter and 59.1 percent a year ago. Borrowings
totaled $3.7 billion or an increase of $1.4 billion, primarily in repurchase
agreements, FED funds purchased and FHLB borrowings, from a year ago. Short-
term borrowings continue to represent an attractive alternative to deposits,
primarily certificates of deposits, and correspondingly benefit the net
interest margin. The company has, given recent market conditions, begun to see
strong growth in and consumer preference for certificates of deposit.
Book value per common share of $30.19 at September 30, 2008 compared to
$33.73 a year ago. Tangible book value per share was $16.13 at September 30,
2008 compared to $19.62 a year ago. The ratio of tangible equity to tangible
assets was 6.34 percent at September 30, 2008 compared to 6.44 percent a year
ago. Webster's Tier 1 leverage ratio is 8.64 percent at September 30, 2008
compared to 8.37 percent a year ago, and projected total risk based capital
ratio is 13 percent at September 30, 2008 compared with 11.64 percent a year
ago.
Asset Quality
Total nonperforming assets were $250.5 million or 1.94 percent of total
loans and other real estate owned at September 30, 2008 compared to $224.1
million or 1.75 percent at June 30, 2008. The $26.4 million increase in
nonperforming assets was primarily comprised of $26.7 million in residential
development projects and $7.4 million in residential loans, $2.7 million in
consumer loans and $5.7 million in other real estate owned, somewhat offset by
declines in commercial loans of $4.0 million, commercial real estate of $0.7
million and liquidating portfolio of $11.4 million. Nonperforming loans in the
liquidating indirect national construction and indirect out of footprint home
equity portfolio totaled $17.5 million and $10.8 million at September 30,
2008, respectively compared to $29.0 million and $10.7 million at June 30,
2008 and $18.5 million and $4.2 million a year ago. The decline in liquidating
nonperforming loans was the result of management's decision to expedite
resolution of the NCLC portfolio.
Past due loans for the continuing portfolios totaled $102.1 million at
September 30, 2008, an increase of $34.4 million compared to $67.7 million at
June 30, 2008. The increase in past due loans in the continuing portfolio was
primarily related to increases of $15.5 million in commercial real estate,
$13.0 million in residential loans and $5.1 million in consumer loans. Past
due loans for the liquidating portfolio totaled $19.1 million at September 30,
2008 compared to $11.5 million at June 30, 2008.
Webster Financial Corporation is the holding company for Webster Bank,
National Association. With $17.5 billion in assets, Webster provides business
and consumer banking, mortgage, financial planning, trust and investment
services through 181 banking offices, 484 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, Conn., and provides health savings account trustee and
administrative services through HSA Bank, a division of Webster Bank. Member
FDIC and equal housing lender. For more information about Webster, including
past press releases and the latest annual report, visit the Webster website at
www.WebsterOnline.com.
Conference Call
A conference call covering Webster's third quarter earnings announcement
will be held today, Tuesday, October 21, at 9:00 a.m. EDT 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
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 2007. 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. 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.
WEBSTER FINANCIAL CORPORATION
Selected Financial Highlights (unaudited)
At or for the Three At or for the Nine
Months Ended Months Ended
September 30, September 30,
(In thousands, except per
share data) 2008 2007 (c) 2008 2007 (c)
Net income (loss) and
performance ratios
(annualized):
Net income (loss) $(16,754) $34,968 $(21,329) $105,471
Net income (loss) per
diluted common share (0.42) 0.64 (0.51) 1.89
Return on average
shareholders' equity (3.59) % 7.63 % (1.59) % 7.50 %
Return on average tangible
equity (5.96) 13.00 (2.74) 12.60
Return on average assets (0.39) 0.83 (0.16) 0.83
Income (loss) from
continuing operations and
performance ratios
(annualized):
Income (loss) from
continuing operations $(16,236) $34,575 $(18,248) $105,527
Net income (loss) from
continuing operations per
diluted common share (0.41) 0.64 (0.45) 1.89
Return on average
shareholders' equity (3.48) % 7.55 % (1.36) % 7.51 %
Return on average tangible
equity (5.78) 12.85 (2.34) 12.60
Return on average assets (0.37) 0.82 (0.14) 0.84
Noninterest income as a
percentage of total
revenue 10.87 28.80 13.22 28.58
Efficiency ratio (a) 59.73 61.31 63.64 61.68
Asset quality:
Allowance for credit
losses $198,669 $164,011 $198,669 $164,011
Nonperforming assets 250,466 104,174 250,466 104,174
Allowance for credit
losses / total loans 1.54 % 1.32 % 1.54 % 1.32 %
Net charge-offs / average
loans (annualized) 1.29 0.13 0.89 0.15
Nonperforming loans /
total loans 1.77 0.77 1.77 0.77
Nonperforming assets /
total loans plus OREO 1.94 0.84 1.94 0.84
Allowance for credit
losses / nonperforming
loans 87.25 172.06 87.25 172.06
Other ratios (annualized):
Tangible capital ratio 6.34 % 6.44 % 6.34 % 6.44 %
Total-risk based capital (e) 13.10 11.64 13.10 11.64
Shareholders' equity /
total assets 10.37 10.71 10.37 10.71
Interest-rate spread 3.24 3.29 3.21 3.32
Net interest margin 3.32 3.38 3.28 3.42
Share related:
Book value per common
share $30.19 $33.73 $30.19 $33.73
Tangible book value per
common share 16.13 19.62 16.13 19.62
Common stock closing price 25.25 42.12 25.25 42.12
Dividends declared per
common share 0.30 0.30 0.90 0.87
Common shares issued and
outstanding 52,711 53,520 52,711 53,520
Basic shares (average) 52,032 53,735 52,017 55,166
Diluted shares (average) 52,032 54,259 52,017 55,753
Footnotes:
(a) Calculated using SNL's methodology - noninterest expense (excluding
foreclosed property expenses, intangible amortization, goodwill
impairments and other charges) as a percentage of net interest income
(FTE basis) plus noninterest income (excluding gain/loss on
securities and other charges).
(b) For purposes of the yield computation, unrealized gains (losses) on
securities available for sale are excluded from the average balance.
(c) Certain previously reported information has been reclassified for the
effect of reporting Webster Insurance as discontinued operations.
(d) NCLC is defined as National Construction Lending Center
(e) The ratios presented are projected for the 2008 reporting periods and
actual for the 2007 reporting periods.
WEBSTER FINANCIAL CORPORATION
Consolidated Balance Sheet (unaudited)
Sept 30, June 30, Sept 30,
(In thousands) 2008 2008 2007
Assets:
Cash and due from depository
institutions $221,195 $323,480 $264,929
Short-term investments 6,449 2,996 80,270
Investment securities:
Trading, at fair value 1,197 2,280 635
Available for sale, at fair
value 824,118 849,591 344,546
Held-to-maturity 2,031,665 2,065,771 2,051,277
Other securities 134,874 132,210 110,962
Total securities 2,991,854 3,049,852 2,507,420
Loans held for sale 3,247 3,972 211,659
Loans:
Residential mortgages 3,567,825 3,594,100 3,677,682
Commercial 3,677,069 3,637,395 3,562,394
Commercial real estate 2,365,181 2,314,497 1,896,566
Consumer 3,256,314 3,220,462 3,283,914
Total loans 12,866,389 12,766,454 12,420,556
Allowance for loan losses (189,169) (184,868) (154,532)
Loans, net 12,677,220 12,581,586 12,266,024
Accrued interest receivable 75,830 73,060 86,654
Premises and equipment, net 188,443 190,273 192,880
Goodwill and other intangible
assets, net 754,026 756,503 769,893
Cash surrender value of life
insurance 277,176 274,570 266,729
Assets held for disposition 900 900 64,971
Unsettled trades 68,996 6,268 1,737
Deferred tax assets, net 127,628 94,823 41,904
Prepaid expenses and other assets 123,073 120,353 96,777
Total Assets $17,516,037 $17,478,636 $16,851,847
Liabilities and Shareholders'
Equity:
Deposits:
Demand deposits $1,509,319 $1,583,686 $1,479,503
NOW accounts 1,740,650 1,861,997 1,664,025
Money market deposit accounts 1,591,599 1,591,857 2,065,474
Savings accounts 2,318,014 2,452,831 2,211,125
Certificates of deposit 4,492,767 4,416,165 4,847,060
Brokered deposits 180,026 170,031 286,806
Total deposits 11,832,375 12,076,567 12,553,993
Securities sold under agreements
to repurchase and
other short-term debt 1,688,728 1,275,024 994,624
Federal Home Loan Bank advances 1,355,931 1,419,570 628,445
Long-term debt 657,004 653,995 666,236
Liabilities held for disposition - - 9,310
Accrued expenses and other
liabilities 155,853 152,198 184,619
Total liabilities 15,689,891 15,577,354 15,037,227
Preferred stock of subsidiary
corporation 9,577 9,577 9,577
Shareholders' equity 1,816,569 1,891,705 1,805,043
Total Liabilities and
Shareholders' Equity $17,516,037 $17,478,636 $16,851,847
See Selected Financial Highlights for footnotes.
WEBSTER FINANCIAL CORPORATION
Consolidated Statements of Operations (unaudited)
Three Months Ended Nine Months Ended
Sept 30, Sept 30,
(In thousands, except per
share data) 2008 2007 2008 2007
Interest income:
Loans $175,363 $212,847 $542,421 $632,348
Investment securities and
short-term investments 39,210 34,163 116,657 100,006
Loans held for sale 54 4,616 1,546 18,284
Total interest income 214,627 251,626 660,624 750,638
Interest expense:
Deposits 57,730 94,484 193,028 271,797
Borrowings 27,716 30,083 87,873 93,348
Total interest expense 85,446 124,567 280,901 365,145
Net interest income 129,181 127,059 379,723 385,493
Provision for credit losses 45,500 15,250 86,300 22,500
Net interest income after
provision for credit
losses 83,681 111,809 293,423 362,993
Noninterest income:
Deposit service fees 31,738 29,956 90,114 84,068
Loan related fees 7,171 7,661 21,920 23,502
Wealth and investment
services 7,070 7,142 21,660 21,657
Mortgage banking activities 50 1,849 894 8,040
Increase in cash surrender
value of life insurance 2,606 2,629 7,810 7,749
Gain (loss) on sale of
securities, net (50) 482 199 1,526
Other 2,731 1,688 5,369 5,591
51,316 51,407 147,966 152,133
Loss on write-down of
investments to fair value (33,507) - (89,684) -
Loss on sale of FNMA/FHLMC
preferred stock (2,060) - (2,060) -
Visa share redemption - - 1,625 -
Gain on Webster Capital
Trust I and II securities - - - 2,130
Total noninterest income 15,749 51,407 57,847 154,263
Noninterest expenses:
Compensation and benefits 61,314 61,171 187,623 183,605
Occupancy 12,827 11,932 39,637 36,557
Furniture and equipment 14,892 14,846 45,686 44,418
Intangible amortization 1,464 2,027 4,476 8,493
Marketing 2,478 4,123 11,061 12,486
Professional services 3,798 3,625 11,657 11,317
Foreclosed property expense 3,464 231 5,529 376
Other 14,759 15,146 45,943 47,189
114,996 113,101 351,612 344,441
Debt redemption premium - - - 8,940
Severance and other costs 1,535 452 10,253 10,265
Impairment of subsidiary
goodwill 1,013 - 9,513 -
Total noninterest expenses 117,544 113,553 371,378 363,646
Income (loss) from
continuing operations
before income taxes (18,114) 49,663 (20,108) 153,610
Income taxes (benefit) (1,878) 15,088 (1,860) 48,083
Income (loss) from
continuing operations (16,236) 34,575 (18,248) 105,527
Income (loss) from
discontinued operations,
net of tax (518) 393 (3,081) (56)
Net income (loss) $(16,754) $34,968 $(21,329) $105,471
Preferred stock dividends 4,994 - 4,994 -
Net income (loss)
available to common
shareholders $(21,748) $34,968 $(26,323) $105,471
Diluted shares (average) 52,032 54,259 52,017 55,753
Net income (loss) per common share:
Basic
Income (loss) from
continuing operations $(0.41) $0.64 $(0.45) $1.91
Net income (loss) (0.42) 0.65 (0.51) 1.91
Diluted
Income (loss) from
continuing operations (0.41) 0.64 (0.45) 1.89
Net income (loss) (0.42) 0.64 (0.51) 1.89
See Selected Financial Highlights for footnotes.
WEBSTER FINANCIAL CORPORATION
Five Quarter Consolidated Statements of Operations (unaudited)
Three Months Ended
(In thousands, except Sept 30, June 30, March 31, Dec. 31, Sept. 30,
per share data) 2008 2008 2008 2007 2007
Interest income:
Loans $175,363 $175,786 $191,272 $205,363 $212,847
Investment securities
and short-term
investments 39,210 38,115 39,332 36,318 34,163
Loans held for sale 54 92 1,400 3,276 4,616
Total interest income 214,627 213,993 232,004 244,957 251,626
Interest expense:
Deposits 57,730 60,056 75,242 89,510 94,484
Borrowings 27,716 28,251 31,906 32,748 30,083
Total interest expense 85,446 88,307 107,148 122,258 124,567
Net interest income 129,181 125,686 124,856 122,699 127,059
Provision for credit
losses 45,500 25,000 15,800 45,250 15,250
Net interest income
after provision for
credit losses 83,681 100,686 109,056 77,449 111,809
Noninterest income:
Deposit service fees 31,738 29,943 28,433 30,577 29,956
Loan related fees 7,171 7,891 6,858 7,328 7,661
Wealth and investment
services 7,070 7,634 6,956 7,507 7,142
Mortgage banking
activities 50 104 740 1,276 1,849
Increase in cash
surrender value of life
insurance 2,606 2,623 2,581 2,637 2,629
Gain (loss) on sale of
securities, net (50) 126 123 195 482
Other 2,731 854 1,784 2,094 1,688
51,316 49,175 47,475 51,614 51,407
Loss on write-down of
investments to fair
value (33,507) (54,924) (1,253) (3,565) -
Loss on sale of
FNMA/FHLMC preferred
stock (2,060) - - - -
VISA share redemption - - 1,625 - -
Total noninterest
income 15,749 (5,749) 47,847 48,049 51,407
Noninterest expenses:
Compensation and
benefits 61,314 62,866 63,443 59,910 61,171
Occupancy 12,827 13,128 13,682 12,321 11,932
Furniture and equipment 14,892 15,634 15,160 15,353 14,846
Intangible amortization 1,464 1,464 1,548 1,881 2,027
Marketing 2,478 4,940 3,643 1,727 4,123
Professional services 3,798 3,706 4,153 3,721 3,625
Foreclosed property
expense 3,464 1,552 513 1,634 231
Other 14,759 16,565 14,619 16,879 15,146
114,996 119,855 116,761 113,426 113,101
Severance and other
costs 1,535 9,368 (650) 6,898 452
Impairment of subsidiary
goodwill 1,013 8,500 - - -
Total noninterest
expenses 117,544 137,723 116,111 120,324 113,553
Income (loss) from
continuing operations
before income taxes (18,114) (42,786) 40,792 5,174 49,663
Income taxes (benefit) (1,878) (14,285) 14,303 5 15,088
Income (loss) from
continuing operations (16,236) (28,501) 26,489 5,169 34,575
Income (loss) from
discontinued
operations, net of tax (518) (439) (2,124) (13,867) 393
Net income (loss) $(16,754) $(28,940) $24,365 $(8,698) $34,968
Preferred stock
dividends 4,994 - - - -
Net income (loss)
available to common
shareholders $(21,748) $(28,940) $24,365 $(8,698) $34,968
Diluted shares
(average) 52,032 52,017 52,297 52,795 54,259
Net income (loss) per
common share:
Basic
Income (loss) from
continuing
operations $(0.41) $(0.55) $0.51 $0.10 $0.64
Net income (loss) (0.42) (0.56) 0.47 (0.17) 0.65
Diluted
Income (loss) from
continuing
operations (0.41) (0.55) 0.51 0.10 0.64
Net income (loss) (0.42) (0.56) 0.47 (0.16) 0.64
See Selected Financial Highlights for footnotes.
WEBSTER FINANCIAL CORPORATION
Five Quarter Interest-Rate Spreads (unaudited)
Three Months Ended
September June March December September
30, 30, 31, 31, 30,
2008 2008 2008 2007 2007
Interest-rate spread
Yield on interest-earning
assets 5.45 % 5.51 % 6.02 % 6.42 % 6.61 %
Cost of interest-bearing
liabilities 2.21 2.31 2.82 3.24 3.32
Interest-rate spread 3.24 % 3.20 % 3.20 % 3.18 % 3.29 %
Net interest margin 3.32 % 3.26 % 3.27 % 3.26 % 3.38 %
Consolidated Average Balances, Yields and Rates Paid (unaudited)
Three Months Ended September 30, 2008
Fully tax-
Average equivalent
(Dollars in thousands) balance Interest yield/rate
Assets:
Interest-earning assets:
Loans $12,805,398 $175,363 5.43 %
Investment securities (b) 2,992,722 42,926 5.54
Loans held for sale 3,810 54 5.62
Short-term investments 4,193 28 2.64
Total interest-earning assets 15,806,123 218,371 5.45
Noninterest-earning assets 1,537,759
Total assets $17,343,882
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand deposits $1,515,047 $- - %
Savings, NOW and money market
deposit accounts 5,869,948 19,660 1.33
Time deposits 4,670,268 38,070 3.23
Total deposits 12,055,263 57,730 1.90
Securities sold under agreements to
repurchase
and other short-term debt 1,332,097 8,517 2.50
Federal Home Loan Bank advances 1,291,583 10,181 3.08
Long-term debt 655,760 9,018 5.50
Total borrowings 3,279,440 27,716 3.33
Total interest-bearing liabilities 15,334,703 85,446 2.21
Noninterest-bearing liabilities 132,799
Total liabilities 15,467,502
Preferred stock of subsidiary
corporation 9,577
Shareholders' equity 1,866,803
Total liabilities and
shareholders' equity $17,343,882
Tax-equivalent net interest income 132,925
Less: tax-equivalent adjustment (3,744)
Net interest income $129,181
Interest-rate spread 3.24 %
Net interest margin 3.32 %
2007
Fully tax-
Average equivalent
(Dollars in thousands) balance Interest yield/rate
Assets:
Interest-earning assets:
Loans $12,390,191 $212,847 6.80 %
Investment securities (b) 2,470,938 35,783 5.79
Loans held for sale 297,330 4,616 6.21
Short-term investments 91,362 1,185 5.08
Total interest-earning assets 15,249,821 254,431 6.61
Noninterest-earning assets 1,597,950
Total assets $16,847,771
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand deposits $1,512,450 $- - %
Savings, NOW and money market
deposit accounts 5,909,836 34,832 2.34
Time deposits 5,224,511 59,652 4.53
Total deposits 12,646,797 94,484 2.96
Securities sold under agreements to
repurchase
and other short-term debt 949,452 10,733 4.42
Federal Home Loan Bank advances 589,427 6,906 4.58
Long-term debt 661,075 12,444 7.53
Total borrowings 2,199,954 30,083 5.40
Total interest-bearing liabilities 14,846,751 124,567 3.32
Noninterest-bearing liabilities 159,375
Total liabilities 15,006,126
Preferred stock of subsidiary
corporation 9,577
Shareholders' equity 1,832,068
Total liabilities and
shareholders' equity $16,847,771
Tax-equivalent net interest income 129,864
Less: tax-equivalent adjustment (2,805)
Net interest income $127,059
Interest-rate spread 3.29 %
Net interest margin 3.38 %
See Selected Financial Highlights for footnotes.
WEBSTER FINANCIAL CORPORATION
Consolidated Average Balances, Yields and Rates Paid (unaudited)
Nine Months Ended September 30, 2008
Fully tax-
Average equivalent
(Dollars in thousands) balance Interest yield/rate
Assets:
Interest-earning assets:
Loans $12,677,899 $542,421 5.67 %
Investment securities (b) 2,985,423 127,699 5.57
Loans held for sale 35,181 1,546 5.86
Short-term investments 4,750 106 2.93
Total interest-earning assets 15,703,253 671,772 5.65
Noninterest-earning assets 1,538,806
Total assets $17,242,059
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand deposits $1,480,139 $- - %
Savings, NOW and money market
deposit accounts 5,852,690 63,145 1.44
Time deposits 4,744,594 129,883 3.65
Total deposits 12,077,423 193,028 2.13
Securities sold under agreements
to repurchase
and other short-term debt 1,330,197 28,298 2.80
Federal Home Loan Bank advances 1,230,280 30,607 3.27
Long-term debt 658,387 28,968 5.87
Total borrowings 3,218,864 87,873 3.60
Total interest-bearing
liabilities 15,296,287 280,901 2.44
Noninterest-bearing liabilities 147,620
Total liabilities 15,443,907
Preferred stock of subsidiary
corporation 9,577
Shareholders' equity 1,788,575
Total liabilities and
shareholders' equity $17,242,059
390,871
Less: tax-equivalent adjustment (11,148)
Net interest income $379,723
Interest-rate spread 3.21 %
Net interest margin 3.28 %
2007
Fully tax-
Average equivalent
(Dollars in thousands) balance Interest yield/rate
Assets:
Interest-earning assets:
Loans $12,380,468 $632,348 6.78 %
Investment securities (b) 2,402,321 105,023 5.84
Loans held for sale 390,651 18,284 6.24
Short-term investments 73,122 2,913 5.25
Total interest-earning assets 15,246,562 758,568 6.61
Noninterest-earning assets 1,598,840
Total assets $16,845,402
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand deposits $1,511,333 $- - %
Savings, NOW and money market
deposit accounts 5,733,793 93,982 2.19
Time deposits 5,256,838 177,815 4.52
Total deposits 12,501,964 271,797 2.91
Securities sold under agreements
to repurchase
and other short-term debt 970,515 33,208 4.51
Federal Home Loan Bank advances 743,770 26,490 4.70
Long-term debt 591,331 33,650 7.59
Total borrowings 2,305,616 93,348 5.36
Total interest-bearing
liabilities 14,807,580 365,145 3.29
Noninterest-bearing liabilities 154,169
Total liabilities 14,961,749
Preferred stock of subsidiary
corporation 9,577
Shareholders' equity 1,874,076
Total liabilities and
shareholders' equity $16,845,402
393,423
Less: tax-equivalent adjustment (7,930)
Net interest income $385,493
Interest-rate spread 3.32 %
Net interest margin 3.42 %
See Selected Financial Highlights for footnotes.
WEBSTER FINANCIAL CORPORATION
Five Quarter Nonperforming Assets (unaudited)
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
(Dollars in thousands) 2008 2008 2008 2007 2007
Nonperforming loans:
Continuing Portfolio:
Commercial:
Commercial $51,081 $55,788 $30,264 $26,804 $25,845
Equipment financing 7,462 6,718 5,719 6,473 5,054
Total commercial 58,543 62,506 35,983 33,277 30,899
Commercial real estate 8,971 9,710 7,809 8,523 10,116
Residential
development 74,808 48,130 13,402 4,373 4,122
Residential:
Residential
construction to
permanent 8,189 6,660 4,200 2,820 -
All other 25,474 19,633 22,042 19,532 14,811
Total residential 33,663 26,293 26,242 22,352 14,811
Consumer 23,427 20,745 17,084 14,455 12,688
Nonperforming loans -
continuing portfolio 199,412 167,384 100,520 82,980 72,636
Liquidating Portfolio:
NCLC (d) 17,491 29,025 29,804 22,797 18,486
Consumer 10,801 10,651 9,378 7,126 4,199
Nonperforming loans -
liquidating portfolio 28,292 39,676 39,182 29,923 22,685
Total nonperforming
loans 227,704 207,060 139,702 112,903 95,321
Other real estate owned
and repossessed assets:
Commercial 13,287 6,776 6,590 2,211 5,233
Residential 6,014 4,071 1,820 1,062 985
Consumer 3,461 6,193 5,872 4,896 2,635
Total other real estate
owned and repossessed
assets 22,762 17,040 14,282 8,169 8,853
Total nonperforming
assets $250,466 $224,100 $153,984 $121,072 $104,174
Accruing loans 90 or
more days past due $708 $1,380 $1,032 $1,891 $1,286
See Selected Financial Highlights for footnotes.
WEBSTER FINANCIAL CORPORATION
Five Quarter Past Due Loans (unaudited)
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
(Dollars in thousands) 2008 2008 2008 2007 2007
Past Due 30-89 days:
Continuing Portfolio:
Commercial:
Commercial $7,196 $8,337 $10,229 $13,291 $4,237
Equipment financing 8,102 9,414 10,269 5,644 3,057
Total commercial 15,298 17,751 20,498 18,935 7,294
Commercial real estate 18,241 2,756 24,655 8,178 13,369
Residential development 5,832 2,485 5,999 3,876 7,648
Residential:
Residential
construction to
permanent 4,156 1,914 3,339 3,743 1,656
All other 35,341 24,621 22,295 19,967 22,501
Total residential 39,497 26,535 25,634 23,710 24,157
Consumer 23,279 18,137 20,721 22,347 17,836
Past Due 30-89 days -
continuing portfolio 102,147 67,664 97,507 77,046 70,304
Liquidating Portfolio:
NCLC (d) 3,758 3,486 4,983 13,143 10,209
Consumer 15,370 8,063 10,473 8,793 7,815
Past Due 30-89 days -
liquidating portfolio 19,128 11,549 15,456 21,936 18,024
Past Due 90 days or more:
Commercial 534 1,380 596 1,141 1,031
Commercial real estate 174 - - 550 -
Residential development - - 436 200 255
Past Due 90 days or more 708 1,380 1,032 1,891 1,286
Total $121,983 $80,593 $113,995 $100,873 $89,614
See Selected Financial Highlights for footnotes.
WEBSTER FINANCIAL CORPORATION
Five Quarter Changes in the Allowance for Credit Losses (unaudited)
For the Three Months Ended
Sept. 30, June 30, March 31,
(Dollars in thousands) 2008 2008 2008
Beginning balance $194,368 $189,808 $197,586
Provision 45,500 25,000 15,800
Charge-offs continuing portfolio:
Commercial 13,837 3,903 10,949
Equipment financing 998 672 490
Commercial real estate - 378 -
Residential development 161 3,711 -
Residential 1,624 1,036 1,480
Consumer 4,643 2,784 3,697
Charge-offs continuing portfolio: 21,263 12,484 16,616
Recoveries (714) (1,290) (827)
Net loan charge-offs 20,549 11,194 15,789
Charge-offs liquidating portfolio:
NCLC (d) 14,025 4,203 4,341
Consumer 6,767 5,450 3,448
Charge-offs liquidating portfolio: 20,792 9,653 7,789
Recoveries (142) (407) -
Net loan charge-offs 20,650 9,246 7,789
Total net charge-offs 41,199 20,440 23,578
Ending balance $198,669 $194,368 $189,808
Components:
Allowance for loan losses $189,169 $184,868 $180,308
Reserve for unfunded credit
commitments 9,500 9,500 9,500
Allowance for credit losses $198,669 $194,368 $189,808
Asset Quality Ratios:
Allowance for loan losses / total loans 1.47 % 1.45 % 1.43 %
Allowance for credit losses / total loans 1.54 1.52 1.51
Net charge-offs / average loans
(annualized) 1.29 0.64 0.75
Nonperforming loans / total loans 1.77 1.62 1.11
Nonperforming assets / total loans
plus OREO 1.94 1.75 1.22
Allowance for credit losses /
nonperforming loans 87.25 93.87 135.87
Continuing Portfolio
Allowance for loan losses / total loans 1.29 % 1.23 % 1.13 %
Allowance for credit losses / total loans 1.36 1.30 1.21
Net charge-offs / average loans
(annualized) 0.66 0.36 0.52
Nonperforming loans / total loans 1.59 1.35 0.82
Nonperforming assets / total loans
plus OREO 1.74 1.47 0.93
Allowance for credit losses /
nonperforming loans 85.66 96.48 146.92
Liquidating Portfolio
NCLC
Allowance for loan losses / total loans 14.01 % 14.26 % 18.77 %
Net charge-offs / average loans
(annualized) 92.69 23.00 25.78
Nonperforming loans / total loans 42.20 45.68 43.49
Allowance for loan losses /
nonperforming loans 33.19 31.22 43.15
Consumer
Allowance for loan losses / total loans 7.45 % 7.53 % 8.96 %
Net charge-offs / average loans
(annualized) 8.81 6.75 4.20
Nonperforming loans / total loans 3.65 3.37 2.87
Allowance for loan losses /
nonperforming loans 204.08 223.63 312.09
For the Three Months Ended
Dec. 31, Sept. 30,
(Dollars in thousands) 2007 2007
Beginning balance $164,011 $152,750
Provision 45,250 15,250
Charge-offs continuing portfolio:
Commercial 2,182 1,609
Equipment financing 303 266
Commercial real estate - 117
Residential development - -
Residential 71 364
Consumer 1,833 1,613
Charge-offs continuing
portfolio: 4,389 3,969
Recoveries (1,611) (1,018)
Net loan charge-offs 2,778 2,951
Charge-offs liquidating portfolio:
NCLC (d) 7,051 69
Consumer 1,846 969
Charge-offs liquidating
portfolio: 8,897 1,038
Recoveries - -
Net loan charge-offs 8,897 1,038
Total net charge-offs 11,675 3,989
Ending balance $197,586 $164,011
Components:
Allowance for loan losses $188,086 $154,532
Reserve for unfunded credit commitments 9,500 9,479
Allowance for credit losses $197,586 $164,011
Asset Quality Ratios:
Allowance for loan losses / total loans 1.51 % 1.24 %
Allowance for credit losses / total loans 1.58 1.32
Net charge-offs / average loans
(annualized) 0.38 0.13
Nonperforming loans / total loans 0.90 0.77
Nonperforming assets / total loans plus OREO 0.97 0.84
Allowance for credit losses /
nonperforming loans 175.01 172.06
Continuing Portfolio
Allowance for loan losses / total loans 1.15 % n/a
Allowance for credit losses / total loans 1.23 n/a
Net charge-offs / average loans
(annualized) 0.09 n/a
Nonperforming loans / total loans 0.69 n/a
Nonperforming assets / total loans plus OREO 0.76 n/a
Allowance for credit losses /
nonperforming loans 177.98 n/a
Liquidating Portfolio
NCLC
Allowance for loan losses / total loans 20.65 % n/a
Net charge-offs / average loans (annualized) 25.43 n/a
Nonperforming loans / total loans 27.37 n/a
Allowance for loan losses /
nonperforming loans 75.45 n/a
Consumer
Allowance for loan losses / total loans 9.60 % n/a
Net charge-offs / average loans (annualized) 2.17 n/a
Nonperforming loans / total loans 2.09 n/a
Allowance for loan losses /
nonperforming loans 458.88 n/a
See Selected Financial Highlights for footnotes.
SOURCE Webster Financial Corporation