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Webster Reports Third Quarter 2020 Earnings Of $0.75 Per Diluted Share

WATERBURY, Conn., Oct. 22, 2020 /PRNewswire/ -- Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A. and its HSA Bank division, today announced earnings applicable to common shareholders of $66.9 million, or $0.75 per diluted share, for the quarter ended September 30, 2020, compared to $91.4 million, or $1.00 per diluted share, for the quarter ended September 30, 2019.

"True to our heritage and our values, we are pleased to be able to do our part to help consumers and businesses manage through uncertainties brought on by the COVID-19 pandemic," said John R. Ciulla, chairman and chief executive officer. "Webster bankers have continued to distinguish themselves in supporting their customers and their communities."

Highlights for the third quarter of 2020:

  • Revenue of $294.3 million.
  • Loan growth of $2.3 billion, or 11.8 percent from a year ago, led by commercial and commercial real estate, which increased 20.2 percent. Excluding Paycheck Protection Program (PPP) loans, total loan growth was $946 million, or 4.8 percent.
  • Results include a Current Expected Credit Loss (CECL) provision of $22.8 million with a reserve build of $11.3 million, resulting in an allowance coverage of 1.69 percent, or 1.80 percent excluding $1.4 billion of PPP loans.
  • Deposit growth of $3.6 billion, or 15.6 percent from a year ago, with growth of $1.8 billion in demand deposits and $688 million in HSA deposits.
  • Net interest margin of 2.88 percent.
  • Efficiency ratio (non-GAAP) of 60.0 percent.

"Proactively working with our customers, payment deferral accommodations have declined from almost $1.4 billion at June 30 to less than $500 million at September 30," said Glenn MacInnes, executive vice president and chief financial officer. "Webster's capital and liquidity strength has enabled us to continue to support our customers and assist in the broader financial recovery."

Line of Business performance compared to the third quarter of 2019

Commercial Banking

Webster's Commercial Banking segment serves middle market, commercial real estate, asset-based lending, equipment finance, private banking, and treasury and payment solutions clients. As of September 30, 2020, Commercial Banking had $12.6 billion in loans and leases and $6.0 billion in deposit balances.

Commercial Banking Operating Results:






Percent


Three months ended September 30,


Favorable/

(In thousands)


2020

2019


(Unfavorable)

Net interest income


$107,417


$104,549




2.7

%


Non-interest income


13,099


13,987




(6.3)



Operating revenue


120,516


118,536




1.7



Non-interest expense


47,610


45,261




(5.2)



Pre-tax, pre-provision net revenue


$72,906


$73,275




(0.5)
















Percent



At September 30,


Increase/

(In millions)


2020

2019


(Decrease)

Loans and leases


$12,620


$11,121




13.5

%


Deposits


5,999


4,528




32.5




Note: In 1Q20, segment net interest income was updated to reflect changes in the funds transfer pricing methodology related to allocated capital. The prior period has been restated to reflect the change.

Pre-tax, pre-provision net revenue decreased $0.4 million to $72.9 million in the quarter as compared to prior year. Net interest income increased $2.9 million to $107.4 million, primarily driven by loan and deposit growth. Non-interest income decreased $0.9 million to $13.1 million as a result of lower loan fees. Non-interest expense increased $2.3 million to $47.6 million, primarily due to higher support costs and lower deferred loan origination costs.

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. As of September 30, 2020, HSA Bank had $9.4 billion in total footings comprising $7.0 billion in deposit balances and $2.4 billion in assets under administration through linked investment accounts.

HSA Bank Operating Results:






Percent


Three months ended September 30,


Favorable/

(In thousands)


2020

2019


(Unfavorable)

Net interest income


$39,861


$43,581




(8.5)

%


Non-interest income


27,235


23,526




15.8



Operating revenue


67,096


67,107






Non-interest expense


34,789


32,918




(5.7)



Pre-tax, net revenue


$32,307


$34,189




(5.5)
















Percent



At September 30,


Increase/

(Dollars in millions)


2020

2019


(Decrease)

Number of accounts (thousands)


2,968


2,992




(0.8)

%










Deposits


$6,976


$6,288




10.9



Linked investment accounts *


2,454


1,875




30.9



Total footings


$9,430


$8,163




15.5



* Linked investment accounts are held off balance sheet






Note: In 1Q20, segment net interest income was updated to reflect changes in the funds transfer pricing methodology related to allocated capital. The prior period has been restated to reflect the change.

Pre-tax net revenue decreased $1.9 million to $32.3 million in the quarter as compared to prior year. Net interest income decreased $3.7 million to $39.9 million, due to a decline in deposit spreads partially offset by a 10.9 percent growth in deposits. Non-interest income increased $3.7 million to $27.2 million, due primarily to fees related to third party administration (TPA) agreements and account closures in the quarter. Non-interest expense increased $1.9 million to $34.8 million, primarily due to merit increases, medical costs, and expenses to support the current enrollment season.

Community Banking

Community Banking serves consumer and business banking customers primarily throughout southern New England and into Westchester County, New York. Community Banking is comprised of the Personal Banking and Business Banking operating segments, as well as a distribution network consisting of 156 banking centers and 298 ATMs, a customer care center, and a full range of web and mobile-based banking services. As of September 30, 2020, Community Banking had $9.2 billion in loans and $14.0 billion in deposit balances.

Community Banking Operating Results:






Percent


Three months ended September 30,


Favorable/

(In thousands)


2020

2019


(Unfavorable)

Net interest income


$108,218


$104,613




3.4

%


Non-interest income


28,970


28,115




3.0



Operating revenue


137,188


132,728




3.4



Non-interest expense


98,991


99,835




0.8



Pre-tax, pre-provision net revenue


$38,197


$32,893




16.1
















Percent



At September 30,


Increase/

(In millions)


2020

2019


(Decrease)

Loans


$9,232


$8,430




9.5

%


Deposits


13,950


12,462




11.9




Note: In 1Q20, segment net interest income was updated to reflect changes in the funds transfer pricing methodology related to allocated capital. The prior period has been restated to reflect the change.

Pre-tax, pre-provision net revenue increased $5.3 million to $38.2 million in the quarter as compared to prior year. Net interest income increased $3.6 million to $108.2 million, due to balance growth in the loan and deposit portfolios, partially offset by a decline in deposit spreads. Non-interest income increased $0.9 million driven by increased fee income from mortgage banking activities in the current quarter. This increase was partially offset by lower deposit-related service charges, as well as lower loan servicing and investment services fees. Non-interest expense decreased $0.8 million to $99.0 million resulting from lower bank operations expense and charges taken in 2019 related to the suspension of two lending initiatives. These reductions more than offset increased employee-related expenses and continued investments in technology.

Consolidated financial performance:

Quarterly net interest income compared to the third quarter of 2019:

  • Net interest income was $219.3 million compared to $240.5 million.
  • Net interest margin was 2.88 percent compared to 3.49 percent. The yield on interest-earning assets declined by 112 basis points, and the cost of interest-bearing liabilities declined by 54 basis points.
  • Average interest-earning assets totaled $30.9 billion and grew by $3.3 billion, or 11.8 percent.
  • Average loans totaled $21.9 billion and grew by $2.4 billion, or 12.3 percent.
  • Average deposits totaled $26.9 billion and grew by $3.8 billion, or 16.3 percent.

Quarterly provision for credit losses:

  • The provision for credit losses was $22.8 million in the quarter, contributing to an $11.3 million increase in the allowance for credit losses on loans and leases. The increase in the allowance reflects our current estimate of forecasted economic conditions. The provision for credit losses was $40.0 million in the prior quarter and $11.3 million a year ago. The increase compared to a year ago is primarily due to the adoption of CECL and the impact of COVID-19.
  • Net charge-offs were $11.5 million, compared to $16.4 million in the prior quarter and $13.8 million a year ago. The ratio of net charge-offs to average loans on an annualized basis was 0.21 percent, compared to 0.30 percent in the prior quarter and 0.28 percent a year ago.
  • The allowance for credit losses on loans and leases represented 1.69 percent of total loans at September 30, 2020, compared to 1.64 percent at June 30, 2020 and 1.07 percent at September 30, 2019. Excluding $1.4 billion of PPP loans, the coverage ratio was 1.80 percent at September 30, 2020. The allowance for credit losses at September 30 and June 30 was estimated in accordance with the CECL accounting standard. The allowance represented 227 percent of nonperforming loans at September 30, 2020 compared to 207 percent at June 30, 2020 and 129 percent at September 30, 2019.

Quarterly non-interest income compared to the third quarter of 2019:

  • Total non-interest income was $75.1 million compared to $69.9 million, an increase of $5.1 million. This reflects an increase of $5.0 million in mortgage banking activities primarily due to a decline in mortgage interest rates driving higher origination volume, a $3.7 million increase in HSA fee income primarily driven by TPA account fees, and a $1.9 million increase in other income primarily due to customer derivatives. These increases were partially offset by a decrease of $3.5 million in deposit service fees driven by overdraft and service related fees and a $1.7 million decrease in loan related fees primarily due to lower syndication, prepayment penalties, and loan servicing fees.

Quarterly non-interest expense compared to the third quarter of 2019:

  • Total non-interest expense was $184.0 million compared to $179.9 million, an increase of $4.1 million. This reflects an increase in compensation and benefits of $5.4 million due to annual merit increases and other benefits, a $1.7 million increase in technology and equipment due to continued infrastructure investment, and $4.8 million in professional fees related to our strategic initiatives. This was partially offset by lower pension costs, travel expenses and a one-time business optimization cost recorded in the year ago period.

Quarterly income taxes compared to the third quarter of 2019:

  • Income tax expense was $18.3 million compared to $25.4 million and the effective tax rate was 20.9 percent compared to 21.3 percent.
  • The lower effective tax rate in the quarter primarily reflects the effects of reduced pre-tax income in 2020 compared to 2019, partially offset by net discrete tax benefits recognized during the period a year ago.

Investment securities:

  • Total investment securities were $9.0 billion, compared to $8.7 billion at June 30, 2020 and $8.2 billion at September 30, 2019. The carrying value of the available-for-sale portfolio included $103.1 million of net unrealized gains, compared to $87.2 million at June 30, 2020 and $20.9 million of net unrealized gains at September 30, 2019. The carrying value of the held-to-maturity portfolio does not reflect $283.0 million of net unrealized gains, compared to $268.4 million at June 30, 2020 and $92.2 million of net unrealized gains at September 30, 2019.

Loans:

  • Total loans were $21.9 billion, compared to $21.8 billion at June 30, 2020 and $19.6 billion at September 30, 2019. Compared to June 30, 2020, commercial loans increased by $65.8 million, commercial real estate loans increased by $100.3 million, while consumer loans decreased by $80.8 million and residential mortgages decreased by $35.8 million.
  • Compared to a year ago, commercial loans increased by $1.603 billion, with PPP loans representing $1.4 billion of the increase. Commercial real estate loans increased by $909.5 million and residential mortgages increased by $12.1 million, while consumer loans decreased by $223.9 million.
  • Loan originations for the portfolio were $1.560 billion, or $1.525 billion excluding PPP loan originations, compared to $2.817 billion in the prior quarter, or $1.413 billion excluding PPP loan originations, and $1.610 billion a year ago. In addition, $149 million of residential loans were originated for sale in the quarter, compared to $115 million in the prior quarter and $73 million a year ago.

Asset quality:

  • Total nonperforming loans were $162.6 million, or 0.74 percent of total loans, compared to $173.1 million, or 0.79 percent of total loans, at June 30, 2020 and $162.7 million, or 0.83 percent of total loans, at September 30, 2019. Total paying nonperforming loans were $67.4 million, compared to $58.0 million at June 30, 2020 and $71.9 million at September 30, 2019.
  • Past due loans were $21.8 million, compared to $39.8 million at June 30, 2020 and $35.6 million at September 30, 2019.

Deposits and borrowings:

  • Total deposits were $26.9 billion, compared to $26.4 billion at June 30, 2020 and $23.3 billion at September 30, 2019. Core deposits to total deposits were 90.5 percent, compared to 89.9 percent at June 30, 2020 and 86.0 percent at September 30, 2019. The loan to deposit ratio was 81.2 percent, compared to 82.7 percent at June 30, 2020 and 84.0 percent at September 30, 2019.
  • Total borrowings were $2.3 billion, compared to $2.8 billion at June 30, 2020 and $3.2 billion at September 30, 2019.

Capital:

  • The return on average common shareholders' equity and the return on average tangible common shareholders' equity were 8.80 percent and 10.91 percent, respectively, compared to 12.36 percent and 15.37 percent, respectively, in the third quarter of 2019.
  • The tangible equity and tangible common equity ratios were 8.19 percent and 7.75 percent, respectively, compared to 8.83 percent and 8.34 percent, respectively, at September 30, 2019. The common equity tier 1 risk-based capital ratio was 11.23 percent, compared to 11.63 percent at September 30, 2019.
  • Book value and tangible book value per common share were $34.09 and $27.86, respectively, compared to $32.68 and $26.58, respectively, at September 30, 2019.

Webster Financial Corporation is the holding company for Webster Bank, National Association and its HSA Bank division. With $33.0 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust, and investment services through 156 banking centers and 298 ATMs. Webster also provides mobile and Internet banking. Webster Bank owns the asset-based lending firm Webster Business Credit Corporation; the equipment finance firm Webster Capital Finance Corporation; and HSA Bank, a division of Webster Bank, which provides health savings account trustee and administrative services. Webster Bank is a member of the FDIC and an equal housing lender. For more information about Webster, including past press releases and the latest annual report, visit the Webster website at www.websterbank.com.  

Conference Call

A conference call covering Webster's third quarter 2020 earnings announcement will be held today, Thursday, October 22, 2020 at 9:00 a.m. (Eastern) and may be heard through Webster's Investor Relations website at www.wbst.com, or in listen-only mode by calling 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) our ability to successfully execute our business plan and manage our risks; (2) local, regional, national, and international economic conditions and the impact they may have on us and our customers; (3) volatility and disruption in national and international financial markets; (4) the potential adverse effects of the ongoing novel coronavirus (COVID-19) pandemic and any governmental or societal responses thereto, or other unusual and infrequently occurring events; (5) changes in the level of nonperforming assets and charge-offs; (6) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (7) adverse conditions in the securities markets that lead to impairment in the value of our investment securities; (8) inflation, changes in interest rate, and monetary fluctuations; (9) the timely development and acceptance of new products and services and the perceived value of those products and services by customers; (10) changes in deposit flows, consumer spending, borrowings, and savings habits; (11) our ability to implement new technologies and maintain secure and reliable technology systems; (12) performance by our counterparties and vendors; (13) our ability to increase market share and control expenses; (14) changes in the competitive environment among banks, financial holding companies, and other financial services providers; (15) changes in laws and regulations (including those concerning taxes, banking, securities, insurance, and healthcare) with which we and our subsidiaries must comply, including recent and potential legislative and regulatory changes in response to the COVID-19 pandemic such as the CARES Act and the rules and regulations that may be promulgated thereunder; (16) the effect of changes in accounting policies and practices applicable to us, including changes in our allowance for loan and lease losses and other impacts of recently adopted accounting guidance regarding the recognition of credit losses; (17) 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 (18) 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 Operation." 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. We utilize these measures for internal planning and forecasting purposes. We, as well as securities analysts, investors, and other interested parties, also use these measures to compare peer company operating performance. We believe that our presentation and discussion, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting our business and allows investors to view performance in a manner similar to management. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.  

Media Contact




Investor Contact

Alice Ferreira, 203-578-2610




Terry Mangan, 203-578-2318

acferreira@websterbank.com




tmangan@websterbank.com

 

  

WEBSTER FINANCIAL CORPORATION
Selected Financial Highlights (unaudited)




At or for the Three Months Ended


(In thousands, except per share data)


September 30, 2020




June 30, 2020




March 31, 2020




December 31, 2019




September 30, 2019






















Income and performance ratios:




















Net income

$

69,281



$

53,097



$

38,199



$

90,473



$

93,865


Earnings applicable to common shareholders


66,890




50,729




36,021




88,066




91,442


Earnings per diluted common share


0.75




0.57




0.39




0.96




1.00


Return on average assets


0.84

%



0.65

%



0.50

%



1.19

%



1.27

%

Return on average tangible common shareholders' equity (non-GAAP)


10.91




8.47




5.95




14.34




15.37


Return on average common shareholders' equity


8.80




6.79




4.75




11.60




12.36


Non-interest income as a percentage of total revenue


25.50




21.12




24.12




23.47




22.52






















Asset quality:




















Allowance for credit losses on loans and leases

$

369,811



$

358,522



$

334,931



$

209,096



$

209,152


Nonperforming assets


167,314




178,381




169,120




157,380




166,716


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


1.69

%



1.64

%



1.60

%



1.04

%



1.07

%

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


0.21




0.30




0.15




0.12




0.28


Nonperforming loans and leases / total loans and leases


0.74




0.79




0.78




0.75




0.83


Nonperforming assets / total loans and leases plus OREO


0.77




0.82




0.81




0.79




0.85


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


227.39




207.17




206.37




138.56




128.55






















Other ratios:




















Tangible equity (non-GAAP)


8.19

%



8.14

%



8.14

%



8.88

%



8.83

%

Tangible common equity (non-GAAP)


7.75




7.69




7.67




8.39




8.34


Tier 1 risk-based capital (a)


11.88




11.82




11.60




12.22




12.32


Total risk-based capital (a)


13.47




13.42




13.10




13.55




13.68


Common equity tier 1 risk-based capital (a)


11.23




11.17




10.95




11.56




11.63


Shareholders' equity / total assets


9.76




9.71




9.76




10.56




10.54


Net interest margin


2.88




2.99




3.23




3.27




3.49


Efficiency ratio (non-GAAP)


59.99




60.04




58.03




58.52




56.60






















Equity and share related:




















Common equity

$

3,074,653



$

3,029,742



$

2,945,205



$

3,062,733



$

3,007,357


Book value per common share


34.09




33.59




32.66




33.28




32.68


Tangible book value per common share (non-GAAP)


27.86




27.40




26.46




27.19




26.58


Common stock closing price


26.41




28.61




22.90




53.36




46.87


Dividends declared per common share


0.40




0.40




0.40




0.40




0.40






















Common shares issued and outstanding


90,204




90,194




90,172




92,027




92,034


Weighted-average common shares outstanding - Basic


89,630




89,485




90,936




91,574




91,559


Weighted-average common shares outstanding - Diluted


89,738




89,570




91,206




91,916




91,874



(a) Presented as projected for September 30, 2020 and actual for the remaining periods. In accordance with regulatory capital rules, the Company elected an option to delay the estimated impact of CECL on its regulatory capital over a five-year transition period ending December 31, 2024. As a result, capital ratios and amounts as of September 30, 2020 exclude the impact of the increased allowance for credit losses on loans, held-to-maturity debt securities and unfunded loan commitments attributed to the adoption of CECL.

 

WEBSTER FINANCIAL CORPORATION
Consolidated Balance Sheets (unaudited)

(In thousands)


September 30, 2020




June 30, 2020




September 30, 2019

Assets:











Cash and due from banks

$

181,524



$

198,680



$

227,966

Interest-bearing deposits


60,276




104,444




74,865

Securities:











Available for sale


3,304,217




3,183,624




2,960,103

Held to maturity


5,723,434




5,477,126




5,193,521

Total securities


9,027,651




8,660,750




8,153,624

Allowance for credit losses on investment securities held-to-maturity


(306)




(309)




-

Securities, net


9,027,345




8,660,441




8,153,624

Loans held for sale


29,018




46,446




27,061

Loans and Leases:











Commercial


8,612,549




8,546,769




7,009,884

Commercial real estate


6,307,567




6,207,314




5,398,084

Residential mortgages


4,885,821




4,921,573




4,873,726

Consumer


2,046,086




2,126,861




2,269,952

Total loans and leases


21,852,023




21,802,517




19,551,646

Allowance for credit losses on loans and leases


(369,811)




(358,522)




(209,152)

Loans and leases, net


21,482,212




21,443,995




19,342,494

Federal Home Loan Bank and Federal Reserve Bank stock


89,611




94,495




116,984

Premises and equipment, net


250,535




258,392




278,642

Goodwill and other intangible assets, net


561,902




558,367




561,252

Cash surrender value of life insurance policies


561,021




557,325




549,335

Deferred tax asset, net


76,695




77,145




59,956

Accrued interest receivable and other assets


674,304




708,887




502,921

Total Assets

$

32,994,443



$

32,708,617



$

29,895,100












Liabilities and Shareholders' Equity:











Deposits:











Demand

$

6,136,814



$

6,193,757



$

4,291,659

Health savings accounts


6,976,280




6,786,845




6,288,218

Interest-bearing checking


3,390,921




3,280,125




2,619,452

Money market


3,069,098




2,686,650




2,560,918

Savings


4,777,000




4,742,573




4,264,853

Certificates of deposit


2,570,440




2,666,047




3,249,860

Brokered certificates of deposit


-




-




5,705

Total deposits


26,920,553




26,355,997




23,280,665

Securities sold under agreements to repurchase and other borrowings


1,301,822




1,688,805




1,210,692

Federal Home Loan Bank advances


433,243




523,321




1,392,849

Long-term debt


568,846




570,029




549,158

Accrued expenses and other liabilities


550,289




395,686




309,342

Total liabilities


29,774,753




29,533,838




26,742,706

Preferred stock


145,037




145,037




145,037

Common shareholders' equity


3,074,653




3,029,742




3,007,357

Total shareholders' equity


3,219,690




3,174,779




3,152,394

Total Liabilities and Shareholders' Equity

$

32,994,443



$

32,708,617



$

29,895,100

 

WEBSTER FINANCIAL CORPORATION
Consolidated Statements of Income (unaudited)



Three Months Ended September 30,




Nine Months Ended September 30,

(In thousands, except per share data)


2020




2019




2020




2019

Interest income:















Interest and fees on loans and leases

$

188,001



$

236,453



$

600,709



$

701,166

Interest and dividends on securities


51,009




57,517




164,687




170,958

Loans held for sale


229




166




588




459

Total interest income


239,239




294,136




765,984




872,583

Interest expense:















Deposits


12,598




34,214




59,246




97,991

Borrowings


7,385




19,383




32,274




50,715

Total interest expense


19,983




53,597




91,520




148,706

Net interest income


219,256




240,539




674,464




723,877

Provision for credit losses


22,750




11,300




138,750




31,800

Net interest income after provision for loan and lease losses


196,506




229,239




535,714




692,077

Non-interest income:















Deposit service fees


39,278




41,410




117,687




127,552

Loan and lease related fees


6,568




8,246




20,032




22,623

Wealth and investment services


8,255




8,496




24,096




24,456

Mortgage banking activities


7,087




2,133




14,185




3,829

Increase in cash surrender value of life insurance policies


3,695




3,708




10,899




10,942

Gain on investment securities, net


-




-




8




-

Other income


10,177




5,938




21,607




24,994

Total non-interest income


75,060




69,931




208,514




214,396

Non-interest expense:















Compensation and benefits


104,019




98,623




305,637




294,935

Occupancy


14,275




14,087




43,005




42,802

Technology and equipment


27,846




26,180




83,151




77,644

Marketing


3,852




4,758




10,640




12,329

Professional and outside services


9,223




5,024




21,044




16,706

Intangible assets amortization


1,089




961




3,013




2,885

Loan workout expenses


612




986




1,497




2,478

Deposit insurance


4,204




4,409




13,944




13,292

Other expenses


18,876




24,866




57,485




73,149

Total non-interest expense


183,996




179,894




539,416




536,220

Income before income taxes


87,570




119,276




204,812




370,253

Income tax expense


18,289




25,411




44,235




78,003

Net income


69,281




93,865




160,577




292,250

Preferred stock dividends and other


(2,391)




(2,423)




(6,819)




(7,331)

Earnings applicable to common shareholders

$

66,890



$

91,442



$

153,758



$

284,919
















Weighted-average common shares outstanding - Diluted


89,738




91,874




90,235




91,883
















Earnings per common share:















Basic

$

0.75



$

1.00



$

1.71



$

3.11

Diluted


0.75




1.00




1.70




3.10

 

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



Three Months Ended

(In thousands, except per share data)


September 30, 2020




June 30, 2020




March 31, 2020




December 31, 2019




September 30, 2019

Interest income:



















Interest and fees on loans and leases

$

188,001



$

196,521



$

216,187



$

223,527



$

236,453

Interest and dividends on securities


51,009




55,570




58,108




58,205




57,517

Loans held for sale


229




184




175




268




166

Total interest income


239,239




252,275




274,470




282,000




294,136

Interest expense:



















Deposits


12,598




18,805




27,843




31,586




34,214

Borrowings


7,385




9,063




15,826




19,164




19,383

Total interest expense


19,983




27,868




43,669




50,750




53,597

Net interest income


219,256




224,407




230,801




231,250




240,539

Provision for credit losses


22,750




40,000




76,000




6,000




11,300

Net interest income after provision for loan and lease losses


196,506




184,407




154,801




225,250




229,239

Non-interest income:



















Deposit service fees


39,278




35,839




42,570




40,470




41,410

Loan and lease related fees


6,568




6,968




6,496




8,704




8,246

Wealth and investment services


8,255




7,102




8,739




8,476




8,496

Mortgage banking activities


7,087




4,205




2,893




2,286




2,133

Increase in cash surrender value of life insurance policies


3,695




3,624




3,580




3,670




3,708

Gain on investment securities, net


-




-




8




29




-

Other income


10,177




2,338




9,092




7,284




5,938

Total non-interest income


75,060




60,076




73,378




70,919




69,931

Non-interest expense:



















Compensation and benefits


104,019




99,731




101,887




100,467




98,623

Occupancy


14,275




14,245




14,485




14,379




14,087

Technology and equipment


27,846




27,468




27,837




27,639




26,180

Marketing


3,852




3,286




3,502




3,957




4,758

Professional and outside services


9,223




6,158




5,663




4,674




5,024

Intangible assets amortization


1,089




962




962




962




961

Loan workout expenses


612




392




493




474




986

Deposit insurance


4,204




5,015




4,725




4,662




4,409

Other expenses


18,876




19,327




19,282




22,516




24,866

Total non-interest expense


183,996




176,584




178,836




179,730




179,894

Income before income taxes


87,570




67,899




49,343




116,439




119,276

Income tax expense


18,289




14,802




11,144




25,966




25,411

Net income


69,281




53,097




38,199




90,473




93,865

Preferred stock dividends and other


(2,391)




(2,368)




(2,178)




(2,407)




(2,423)

Earnings applicable to common shareholders

$

66,890



$

50,729



$

36,021



$

88,066



$

91,442




















Weighted-average common shares outstanding - Diluted


89,738




89,570




91,206




91,916




91,874




















Earnings per common share:



















Basic

$

0.75



$

0.57



$

0.40



$

0.96



$

1.00

Diluted


0.75




0.57




0.39




0.96




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 September 30,




2020








2019


(Dollars in thousands)


Average balance




Interest




Yield/rate








Average balance



Interest


Yield/rate


Assets:

























Interest-earning assets:

























Loans and leases

$

21,870,740



$

188,865




3.40

%






$

19,473,293


$

237,131


4.80

%

Securities (a)


8,762,692




52,154




2.47








7,929,568



57,810


2.93


Federal Home Loan and Federal Reserve Bank stock


91,232




600




2.62








104,975



1,120


4.23


Interest-bearing deposits


102,059




26




0.10








63,751



345


2.12


Loans held for sale


31,211




229




2.94








20,301



166


3.29


Total interest-earning assets


30,857,934



$

241,874




3.13

%







27,591,888


$

296,572


4.25

%

Non-interest-earning assets


2,057,503
















1,965,521







Total Assets

$

32,915,437















$

29,557,409
































Liabilities and Shareholders' Equity:

























Interest-bearing liabilities:

























Demand deposits

$

6,228,436



$

-




-

%






$

4,322,932


$

-


-

%

Health savings accounts


6,953,641




2,073




0.12








6,274,341



3,135


0.20


Interest-bearing checking, money market and savings


11,167,653




3,983




0.14








9,256,189



14,697


0.63


Certificates of deposit


2,589,888




6,542




1.00








3,301,588



16,382


1.97


Total deposits


26,939,618




12,598




0.19








23,155,050



34,214


0.59



























Securities sold under agreements to repurchase and other borrowings


1,225,616




608




0.19








1,362,877



6,571


1.89


Federal Home Loan Bank advances


449,085




2,528




2.20








1,017,787



6,910


2.66


Long-term debt (a)


569,425




4,249




3.25








543,869



5,902


4.52


Total borrowings


2,244,126




7,385




1.33








2,924,533



19,383


2.63


Total interest-bearing liabilities


29,183,744



$

19,983




0.27

%







26,079,583


$

53,597


0.81

%

Non-interest-bearing liabilities


526,363
















359,135







Total liabilities


29,710,107
















26,438,718
































Preferred stock


145,037
















145,037







Common shareholders' equity


3,060,293
















2,973,654







Total shareholders' equity


3,205,330
















3,118,691







Total Liabilities and Shareholders' Equity

$

32,915,437















$

29,557,409







Tax-equivalent net interest income






221,891















242,975




Less: tax-equivalent adjustments






(2,635)















(2,436)




Net interest income





$

219,256














$

240,539




Net interest margin










2.88

%












3.49

%


(a) For purposes of the yield computation, 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)




Nine Months Ended September 30,




2020








2019


(Dollars in thousands)


Average balance




Interest




Yield/rate








Average balance



Interest


Yield/rate


Assets:

























Interest-earning assets:

























Loans and leases

$

21,270,350



$

603,100




3.75

%






$

19,007,780


$

703,136


4.90

%

Securities (a)


8,554,646




167,027




2.67








7,572,687



171,265


3.01


Federal Home Loan and Federal Reserve Bank stock


108,788




2,716




3.33








108,716



3,949


4.86


Interest-bearing deposits


89,989




222




0.32








56,449



983


2.30


Loans held for sale


25,944




588




3.02








19,013



459


3.22


Total interest-earning assets


30,049,717



$

773,653




3.43

%







26,764,645


$

879,792


4.36

%

Non-interest-earning assets


2,017,159
















1,872,632







Total Assets

$

32,066,876















$

28,637,277
































Liabilities and Shareholders' Equity:

























Interest-bearing liabilities:

























Demand deposits

$

5,525,573



$

-




-

%






$

4,261,060


$

-


-

%

Health savings accounts


6,854,101




7,973




0.16








6,213,150



9,150


0.20


Interest-bearing checking, money market and savings


10,427,634




22,848




0.29








9,050,853



40,622


0.60


Certificates of deposit


2,841,385




28,425




1.34








3,290,044



48,219


1.96


Total deposits


25,648,693




59,246




0.31








22,815,107



97,991


0.57



























Securities sold under agreements to repurchase and other borrowings


1,366,292




5,318




0.51








918,864



13,227


1.90


Federal Home Loan Bank advances


870,063




13,145




1.98








1,084,332



22,467


2.73


Long-term debt (a)


563,805




13,811




3.52








441,329



15,021


4.63


Total borrowings


2,800,160




32,274




1.55








2,444,525



50,715


2.75


Total interest-bearing liabilities


28,448,853



$

91,520




0.43

%







25,259,632


$

148,706


0.78

%

Non-interest-bearing liabilities


433,207
















353,346







Total liabilities


28,882,060
















25,612,978
































Preferred stock


145,037
















145,037







Common shareholders' equity


3,039,779
















2,879,262







Total shareholders' equity


3,184,816
















3,024,299







Total Liabilities and Shareholders' Equity

$

32,066,876















$

28,637,277







Tax-equivalent net interest income






682,133















731,086




Less: tax-equivalent adjustments






(7,669)















(7,209)




Net interest income





$

674,464














$

723,877




Net interest margin










3.03

%












3.62

%


(a) For purposes of the yield computation, unrealized gain (loss) balances on securities available for sale and senior fixed-rate notes hedges are excluded.

 

WEBSTER FINANCIAL CORPORATION
Five Quarter Loan and Lease Balances (unaudited)

(Dollars in thousands)


September 30, 2020




June 30, 2020




March 31, 2020




December 31, 2019




September 30, 2019

Loan and Lease Balances (actual):



















Commercial non-mortgage

$

7,722,838



$

7,606,245



$

6,385,619



$

5,833,952



$

5,887,119

Asset-based lending


889,711




940,524




1,180,328




1,046,886




1,122,765

Commercial real estate


6,307,567




6,207,314




6,122,474




5,949,339




5,398,084

Residential mortgages


4,885,821




4,921,573




4,991,512




4,972,685




4,873,726

Consumer


2,046,086




2,126,861




2,211,591




2,234,124




2,269,952

Total Loan and Lease Balances


21,852,023




21,802,517




20,891,524




20,036,986




19,551,646

Allowance for credit losses on loans and leases


(369,811)




(358,522)




(334,931)




(209,096)




(209,152)

Loans and Leases, net

$

21,482,212



$

21,443,995



$

20,556,593



$

19,827,890



$

19,342,494




















Loan and Lease Balances (average):



















Commercial non-mortgage

$

7,683,879



$

7,318,814



$

6,005,501



$

5,879,600



$

5,933,221

Asset-based lending


922,653




1,030,928




1,085,624




1,087,537




1,138,189

Commercial real estate


6,260,114




6,136,091




5,996,728




5,667,764




5,312,403

Residential mortgages


4,914,368




4,946,746




5,013,888




4,917,365




4,802,497

Consumer


2,089,726




2,176,335




2,223,058




2,256,255




2,286,983

Total Loan and Lease Balances


21,870,740




21,608,914




20,324,799




19,808,521




19,473,293

Allowance for credit losses on loans and leases


(363,552)




(340,050)




(269,273)




(211,460)




(213,130)

Loans and Leases, net

$

21,507,188



$

21,268,864



$

20,055,526



$

19,597,061



$

19,260,163


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

(Dollars in thousands)


September 30, 2020




June 30, 2020




March 31, 2020




December 31, 2019




September 30, 2019

Nonperforming loans and leases:



















Commercial non-mortgage

$

75,080




75,340




74,077




64,793




64,197

Asset-based lending


3,789




138




137




139




9,165

Commercial real estate


8,784




15,889




12,901




11,554




12,810

Residential mortgages


41,498




46,500




42,393




43,100




43,733

Consumer 


33,485




35,187




32,785




31,320




32,794

Total nonperforming loans and leases

$

162,636



$

173,054



$

162,293



$

150,906



$

162,699




















Other real estate owned and repossessed assets:



















Commercial non-mortgage

$

175




272




121




271




544

Residential mortgages


3,899




3,081




4,480




4,247




1,912

Consumer


604




1,974




2,226




1,956




1,561

Total other real estate owned and repossessed assets

$

4,678



$

5,327



$

6,827



$

6,474



$

4,017

Total nonperforming assets

$

167,314



$

178,381



$

169,120



$

157,380



$

166,716


Past due 30-89 days:



















Commercial non-mortgage

$

3,821



$

13,959



$

8,200



$

8,482



$

5,384

Asset-based lending


-




-




-




-




-

Commercial real estate


329




2,363




2,217




1,700




1,433

Residential mortgages


9,291




15,445




11,814




13,598




13,445

Consumer


8,349




7,857




14,666




18,835




15,217

Total past due 30-89 days


21,790




39,624




36,897




42,615




35,479

Past due 90 days or more and accruing


-




198




75




-




92

Total past due loans and leases

$

21,790



$

39,822



$

36,972



$

42,615



$

35,571

 

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)


September 30, 2020




June 30, 2020




March 31, 2020




December 31, 2019




September 30, 2019

Beginning balance

$

358,522



$

334,931



$

209,096



$

209,152



$

211,671

Adoption of ASU No. 2016-13


-




-




57,568




-




-

Provision


22,753




40,003




76,085




6,000




11,300

Charge-offs:



















Commercial non-mortgage


12,085




15,294




5,544




5,041




11,291

Asset-based lending


10




-




-




-




-

Commercial real estate


1,399




-




30




23




32

Residential mortgages


546




194




1,511




876




872

Consumer


1,717




2,586




3,076




3,165




3,765

Total charge-offs


15,757




18,074




10,161




9,105




15,960

Recoveries:



















Commercial non-mortgage


1,978




271




558




236




173

Asset-based lending


-




10




3




33




-

Commercial real estate


47




2




3




3




3

Residential mortgages


521




83




235




534




356

Consumer


1,747




1,296




1,544




2,243




1,609

Total recoveries


4,293




1,662




2,343




3,049




2,141

Total net charge-offs


11,464




16,412




7,818




6,056




13,819

Ending balance

$

369,811



$

358,522



$

334,931



$

209,096



$

209,152

 

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 shareholders' equity measures the Company's net income available to common shareholders, adjusted for the tax-effected amortization of intangible assets, as a percentage of average shareholders' equity less average preferred stock and average goodwill and intangible assets. The tangible equity ratio represents shareholders' equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets. The tangible common equity ratio represents shareholders' 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 shareholders' 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 time deposits. 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)


September 30, 2020




June 30, 2020




March 31, 2020




December 31, 2019




September 30, 2019


Efficiency ratio:




















Non-interest expense (GAAP)

$

183,996



$

176,584



$

178,836



$

179,730



$

179,894


Less: Foreclosed property activity (GAAP)


(201)




(217)




(250)




263




(128)


         Intangible assets amortization (GAAP)


1,089




962




962




962




961


         Other expenses (non-GAAP)


4,786




-




-




-




1,750


Non-interest expense (non-GAAP)

$

178,322



$

175,839



$

178,124



$

178,505



$

177,311


Net interest income (GAAP)

$

219,256



$

224,407



$

230,801



$

231,250



$

240,539


Add: Tax-equivalent adjustment (non-GAAP)


2,635




2,561




2,473




2,486




2,436


         Non-interest income (GAAP)


75,060




60,076




73,378




70,919




69,931


         Other (non-GAAP)


297




293




299




402




350


Customer derivative fair value adjustment (GAAP)


-




5,511




-




-




-


Less: Gain on investment securities, net (GAAP)


-




-




8




29




-


Income (non-GAAP)

$

297,248



$

292,848



$

306,943



$

305,028



$

313,256


Efficiency ratio (non-GAAP)


59.99

%



60.04

%



58.03

%



58.52

%



56.60

%





















Return on average tangible common shareholders' equity:




















Net income (GAAP)

$

69,281



$

53,097



$

38,199



$

90,473



$

93,865


Less: Preferred stock dividends (GAAP)


1,969




1,969




1,969




1,969




1,968


Add: Intangible assets amortization, tax-effected (GAAP)


860




760




760




760




759


Income adjusted for preferred stock dividends and intangible assets amortization (non-GAAP)

$

68,172



$

51,888



$

36,990



$

89,264



$

92,656


Income adjusted for preferred stock dividends and intangible assets amortization, annualized basis (non-GAAP)

$

272,688



$

207,552



$

147,960



$

357,056



$

370,624


Average shareholders' equity (non-GAAP)

$

3,205,330



$

3,155,368



$

3,193,525



$

3,196,563



$

3,118,691


Less: Average preferred stock (non-GAAP)


145,037




145,037




145,037




145,037




145,037


Average goodwill and other intangible assets (non-GAAP)


560,959




558,835




559,786




560,750




561,715


Average tangible common shareholders' equity (non-GAAP)

$

2,499,334



$

2,451,496



$

2,488,702



$

2,490,776



$

2,411,939


Return on average tangible common shareholders' equity (non-GAAP)


10.91

%



8.47

%



5.95

%



14.34

%



15.37

%





















Tangible equity:




















Shareholders' equity (GAAP)

$

3,219,690



$

3,174,779



$

3,090,242



$

3,207,770



$

3,152,394


Less: Goodwill and other intangible assets (GAAP)


561,902




558,367




559,328




560,290




561,252


Tangible shareholders' equity (non-GAAP)

$

2,657,788



$

2,616,412



$

2,530,914



$

2,647,480



$

2,591,142


Total assets (GAAP)

$

32,994,443



$

32,708,617



$

31,654,874



$

30,389,344



$

29,895,100


Less: Goodwill and other intangible assets (GAAP)


561,902




558,367




559,328




560,290




561,252


Tangible assets (non-GAAP)

$

32,432,541



$

32,150,250



$

31,095,546



$

29,829,054



$

29,333,848


Tangible equity (non-GAAP)


8.19

%



8.14

%



8.14

%



8.88

%



8.83

%





















Tangible common equity:




















Tangible shareholders' equity (non-GAAP)

$

2,657,788



$

2,616,412



$

2,530,914



$

2,647,480



$

2,591,142


Less: Preferred stock (GAAP)


145,037




145,037




145,037




145,037




145,037


Tangible common shareholders' equity (non-GAAP)

$

2,512,751



$

2,471,375



$

2,385,877



$

2,502,443



$

2,446,105


Tangible assets (non-GAAP)

$

32,432,541



$

32,150,250



$

31,095,546



$

29,829,054



$

29,333,848


Tangible common equity (non-GAAP)


7.75

%



7.69

%



7.67

%



8.39

%



8.34

%





















Tangible book value per common share:




















Tangible common shareholders' equity (non-GAAP)

$

2,512,751



$

2,471,375



$

2,385,877



$

2,502,443



$

2,446,105


Common shares outstanding


90,204




90,194




90,172




92,027




92,034


Tangible book value per common share (non-GAAP)

$

27.86



$

27.40



$

26.46



$

27.19



$

26.58






















Core deposits:




















Total deposits

$

26,920,553



$

26,355,997



$

24,513,837



$

23,324,746



$

23,280,665


Less: Certificates of deposit


2,570,440




2,666,047




2,891,161




3,104,765




3,249,860


 Brokered certificates of deposit


-




-




100,000




-




5,705


Core deposits (non-GAAP)

$

24,350,113



$

23,689,950



$

21,522,676



$

20,219,981



$

20,025,100


 

Cision View original content:http://www.prnewswire.com/news-releases/webster-reports-third-quarter-2020-earnings-of-0-75-per-diluted-share-301157897.html

SOURCE Webster Financial Corporation

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