News Details

WATERBURY, Conn., July 15, 2011 /PRNewswire via COMTEX/ -- Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A., today announced net income available to common shareholders of $33.4 million, or $.36 per diluted share, for the quarter ended June 30, 2011 compared to $33.5 million, or $.36 per diluted share, for the quarter ended March 31, 2011. The quarter ended March 31, 2011 included $2.0 million of income from discontinued operations, net of tax, or $.02 per diluted share.

Key points for the quarter or at June 30:

Webster Chairman and Chief Executive Officer James C. Smith said, "Webster is pleased to report solid operating results for the quarter. Continued growth in core business lending coupled with a higher net interest margin contributed to modest revenue growth, while positive asset quality trends also contributed to our improved performance. Given the relatively slow economic recovery, our plans for improving operating efficiency will be essential to sustaining positive earnings momentum."

Net interest income

• Net interest margin increased by two basis points to 3.46 percent, reflecting a two basis point decline in the cost of funds from the first quarter.

• Average interest-earning assets totaled $16.6 billion compared to $16.7 billion for the first quarter.

Provision for loan losses

• Of the $5.0 million provision for loan losses recorded in the quarter, $2.3 million was related to the Company's continuing portfolios and $2.7 million was related to the liquidating portfolio. In the first quarter, of the $10.0 million provision for loan losses recorded, $8.7 million was related to the Company's continuing portfolios and $1.3 million was related to the liquidating portfolio.

• Net charge-offs were $21.7 million in the quarter compared to $33.7 million for the quarter ended March 31; $16.9 million was related to the continuing portfolios compared to $29.2 million for the previous quarter, and $4.8 million was related to the liquidating portfolio compared to $4.5 million for the previous quarter.

• The allowance for loan losses increased to 123 percent of nonperforming loans compared to 114 percent in the prior quarter.

Webster Vice Chairman and Chief Operating Officer Jerry Plush stated, "Significant reductions in past due loans, classified assets and nonperforming loans resulted in a reduced need for provision for loan losses compared to prior periods. We also took steps to further reduce the costs of carrying nonperforming assets with the write-downs recorded to expedite the sale of the existing inventory of real estate owned over the next several quarters."

Noninterest income

• Total noninterest income increased $2.7 million compared to the first quarter, primarily from increases of $1.6 million in loan related fees and $1.3 million of net gain on sales of investment securities. Second quarter results also include increases of $0.8 million in deposit services fees and $0.7 million from wealth and investment services, offset by a decline in other income of $1.7 million, primarily due to lower income on direct investments.

Noninterest expense

• Total noninterest expense increased $2.9 million from the first quarter. Included in noninterest expense is $5.1 million of write-downs of foreclosed assets to expedite sales of existing inventory over the next several quarters. Also included in the quarter were $0.8 million of net write-downs and losses on sales of other properties in the quarter, severance and other costs of $1.1 million, and $0.4 million in costs related to the registration of the warrants issued to the U.S. Treasury. Offsetting these increases were decreases in compensation and benefits of $1.4 million, occupancy expense of $1.9 million and marketing expense of $1.3 million.

Income taxes

• The Company recorded $15.9 million of income tax expense in the quarter on the $50.1 million of pre-tax income applicable to continuing operations in the period. The effective tax rate for the quarter was 31.7 percent.

Investment securities

• Total investment securities were $5.3 billion at June 30, 2011 compared to $5.4 billion at March 31, 2011. The carrying value of the available for sale portfolio included $45.4 million in net unrealized gains compared to net unrealized gains of $35.9 million at March 31, while the carrying value of the held to maturity portfolio does not reflect $115.6 million in net unrealized gains compared to net unrealized gains of $73.7 million at March 31.

Loans

• Total loans were $11.0 billion at both June 30, 2011 and March 31, 2011. Originations for the second quarter consisted of $227 million in commercial non-mortgage, $15 million in equipment finance, $41 million in asset based lending, $116 million in commercial real estate, $85 million in residential, and $160 million in consumer. In the quarter, commercial non-mortgage loans increased by $83.8 million and commercial real estate loans increased by $8.0 million, while equipment finance and asset based lending declined by $65.3 and $2.4 million, respectively. Residential mortgage and consumer loans declined by $10.9 million and $8.7 million, respectively.

Asset quality

• Total nonperforming loans were $228.2 million, or 2.07 percent, of total loans at June 30, 2011 compared to $261.9 million, or 2.38 percent, at March 31, 2011. Included in nonperforming loans are $5.1 million in consumer liquidating loans compared to $7.8 million at March 31. The $33.6 million decrease in total nonperforming loans, or 12.8 percent, primarily reflects a lower level of new nonaccrual loans in the quarter along with an increased level of loans returning to accrual status in the quarter. Included in nonperforming loans were paying loans totaling $77.9 million at June 30 compared to $76.9 million at March 31.

• Past due loans for the continuing portfolios decreased to $58.5 million, or 25.0 percent, at June 30 compared to $78.0 million at March 31. Past due loans for the liquidating portfolio were $6.1 million at June 30 compared to $6.0 million at March 31.

Deposits and borrowings

• Total deposits were $13.7 billion at June 30, 2011 compared to $14.1 billion at March 31, 2011. Increases of $139.6 million in demand deposits, $105.9 million in interest-bearing checking and $52.0 million in savings were offset by declines of $614.6 million in money market and $91.1 million in certificates of deposits. Core to total deposits and loans to deposits were 78 and 80 percent, respectively, compared to 78 percent for both at March 31.

• Total borrowings were $2.0 billion at June 30 compared to $1.8 billion at March 31. Borrowings represented 12 percent of total assets at June 30 compared to 10 percent at March 31.

Capital

• The tangible common equity and Tier 1 common equity to risk weighted assets ratios increased to 7.28 percent and 10.79 percent, respectively, compared to 7.10 percent and 10.53 percent at March 31, 2011.

Webster Financial Corporation is the holding company for Webster Bank, National Association. With $18 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust and investment services through 176 banking offices, 495 ATMs, telephone banking, mobile banking, and the Internet. Webster Bank owns the asset based lending firm Webster Business Credit Corporation; the equipment finance firm Webster Capital Finance Corporation; and 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.websterbank.com.

Conference Call

A conference call covering Webster's second quarter earnings announcement will be held today, Friday, July 15, at 9:00 a.m. (Eastern) and may be heard through Webster's investor relations website at http://www.websteronline.com/, or in listen-only mode by calling 1-877-407-8289 or 201-689-8341 internationally. The call will be archived on the website and available for future retrieval.

Forward-Looking Statements

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking statements can be identified by words such as "believes," "anticipates," "expects," "intends," "targeted," "continue," "remain," "will," "should," "may," "plans," "estimates," and similar references to future periods; however, such words are not the exclusive means of identifying such statements. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items; (ii) statements of plans, objectives, and expectations of Webster or its management or Board of Directors; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Forward-looking statements are based on Webster's current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Webster's actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: (1) local, regional, national, and international economic conditions and the impact they may have on us and our customers and our assessment of that impact; (2) volatility and disruption in national and international financial markets; (3) government intervention in the U.S. financial system; (4) changes in the level of non-performing assets and charge-offs; (5) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (6) adverse conditions in the securities markets that lead to impairment in the value of securities in our investment portfolio; (7) inflation, interest rate, securities market, and monetary fluctuations; (8) the timely development and acceptance of new products and services and perceived overall value of these products and services by customers; (9) changes in consumer spending, borrowings, and savings habits; (10) technological changes; (11) the ability to increase market share and control expenses; (12) changes in the competitive environment among banks, financial holding companies, and other financial service providers; (13) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and insurance) with which we and our subsidiaries must comply, including those under the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act and the Basel III update to the Basel Accords that is under development; (14) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters; (15) the costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; and (16) our success at managing the risks involved in the foregoing items and (17) the other factors that are described in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q under the heading "Risk Factors." Any forward-looking statement made by the Company in this release speaks only as of the date on which it is made. Factors or events that could cause the Company's actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. A reconciliation of net income and other performance ratios, as adjusted, is included in the accompanying selected financial highlights table.

We believe that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends and financial position. Specifically, we provide measures based on what we believe are our operating earnings on a consistent basis and exclude non-core operating items which affect the GAAP reporting of results of operations. We utilize these measures for internal planning and forecasting purposes. We, as well as securities analysts, investors, and other interested parties, also use these measures to compare peer company operating performance. We believe that our presentation and discussion, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting our business and allows investors to view performance in a manner similar to management. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.