DEFA14A 1 ddefa14a.htm SOLICITING MATERIAL Soliciting Material

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

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Webster Financial Corporation

 

 

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Media Contact       Investor Contact
Ed Steadham 203-578-2287       Terry Mangan 203-578-2318
esteadham@websterbank.com       tmangan@websterbank.com

WEBSTER REPORTS THIRD QUARTER RESULTS

WATERBURY, Conn., October 22, 2009 – Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A., today announced a consolidated net loss of $19.2 million and net loss available to common shareholders of $26.1 million for the quarter ended September 30, 2009. For the first nine months of 2009, the consolidated net loss was $61.9 million and net loss available to common shareholders was $30.9 million.

Key points for the quarter:

Strong deposit growth of $426 million in the quarter; up $1.7 billion year to date.

Improved loan-to-deposit ratio of 83 percent compared to 88 percent at June 30, 2009.

Improved core to total deposit ratio of 69 percent compared to 65 percent at June 30, 2009.

Improved net interest margin of 3.18 percent compared to 3.04 percent for the second quarter of 2009.

Increased the allowance for credit losses to 2.97 percent of total loans; recorded $85.0 million in provision for credit losses and net charge-offs of $64.6 million.

Higher core pre-tax, pre-provision earnings of $56 million compared to $51 million for the second quarter.

The Warburg Pincus investment announced on July 27, 2009 added $40 million of common equity during the quarter. The remaining $75 million investment in common equity, non-voting perpetual participating preferred stock, and warrants was completed on October 15, 2009 after receipt of regulatory approval.

Webster Chairman and Chief Executive Officer James C. Smith said, “Webster reported progress on several fronts in the quarter. Capital levels continue to improve and are well in excess of all regulatory requirements; earnings before credit provisions increased by 10 percent; and deposits and deposit market share are on the rise. We saw significant improvement in the net interest margin, loan delinquencies were flat for the third consecutive quarter and overall performance was solid considering the challenging environment”

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Warburg Pincus investment

 

  •  

During the third quarter, Webster announced that the global private equity firm, Warburg Pincus, would make a $115 million investment in Webster’s common stock. An initial amount of $40 million in the form of 4.0 million common shares was invested on July 27, 2009. The remaining $75 million was invested on October 15, 2009 with $30 million in the form of 3.0 million common shares and $45 million in junior non-voting preferred stock, which converts into an additional 4.5 million common shares, subject to the receipt of shareholder approval, 6.8 million seven-year A-Warrants, Series 2, which initially have a strike price of $10.00 per share, with the strike price increasing to $11.50 per share on October 15, 2011 and to $13.00 per share on October 15, 2013; and 4.3 million seven-year B-Warrants, Series 2 with a strike price of $2.50 per share which will only become exercisable and transferable if shareholder approval is not received by February 28, 2010. The B-Warrants, Series 2 will expire immediately upon receipt of shareholder approval. This investment, coupled with the successful exchange offer for convertible preferred stock and trust preferred securities completed during the second quarter, has allowed Webster to increase common equity by $285 million with minimal dilution to tangible book value.

 

  •  

Including the initial $40 million realized under the Warburg Pincus investment during the third quarter, Webster’s ratio of Tier 1 common to risk-weighted assets was 6.39 percent at September 30, 2009 and including the recently funded $75 million on a proforma basis, would have been 6.93 percent at September 30, 2009.

Smith said, “The recent approval by the Fed and funding of the balance of the Warburg Pincus investment has significantly boosted our capital position subsequent to the quarter end. We are pleased to have this transaction completed and to have Warburg as an investor in Webster”.

Net interest income

 

  •  

Net interest margin improved to 3.18 percent in the third quarter compared to 3.04 percent in the second quarter; the increase reflects a 28 basis point decline in the cost of funds offsetting a 12 basis point decline in the yield on interest-earning assets.

 

  •  

Average interest-earning assets totaled $16.2 billion, up from $16.0 billion last quarter.

 

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Provision for credit losses

 

  •  

$56.5 million of the provision for credit losses recorded in the quarter was related to the Company’s continuing portfolios and $28.5 million was related to the discontinued liquidating portfolio.

 

  •  

Net charge-offs were $64.6 million in the quarter compared to $49.9 million for the quarter ended June 30, 2009; $51.4 million was related to the continuing portfolios and $13.2 million was related to the discontinued liquidating portfolio.

Noninterest income

 

  •  

Deposit service fees increased by $0.9 million from last quarter, reflecting seasonality in account usage.

 

  •  

Wealth and investment services revenues increased by $0.1 million from the last quarter, primarily from an increase in the value of assets under management.

 

  •  

Loan related fees declined by $0.8 million from the last quarter, reflective of lower application volumes and amendment fees in the quarter.

 

  •  

Mortgage banking revenue declined by $2.0 million from the last quarter from decreased mortgage lending activity in the period.

 

  •  

Net loss on sale of investment securities totaled $4.7 million as $4.9 million of pooled trust preferred securities were sold for tax purposes.

 

  •  

Other income increased by $2.2 million primarily from higher credit card referral fees, direct investment income and receipt of insurance proceeds.

 

  •  

Loss of $1.3 million on the write-down of investments on certain pooled trust preferred securities to fair value based on credit deterioration in certain underlying issuers.

Noninterest expenses

 

  •  

Noninterest expenses, inclusive of severance and other one time costs and the special FDIC assessment, declined $3.0 million from the second quarter. The second quarter included $8.0 million in FDIC special assessment and $1.3 million in

 

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severance and other charges, while the third quarter included $4.1 million in such charges. Included in the third quarter charges is the establishment of a $3.1 million reserve for fraud which had no customer impact and excludes any consideration of recovery.

Income taxes

 

  •  

Due to the pre-tax loss, the effective tax rate for the third quarter was not meaningful. The Company recorded a $22.0 million tax benefit in the quarter on the $41.3 million pre-tax loss applicable to continuing operations in the period.

Investment securities

 

  •  

Total investment securities were $4.6 billion at September 30, 2009 compared to $4.2 billion at June 30, 2009. The carrying value of the available for sale portfolio included $4 million in net unrealized losses compared to $53 million at June 30, 2009, while the carrying value of the held to maturity portfolio does not reflect $103 million in net unrealized gains at September 30 compared to $33 million at June 30, 2009.

Loans

 

  •  

Total loans were $11.3 billion at September 30, 2009 compared to $11.6 billion at June 30, 2009. In the third quarter, residential mortgage, consumer, commercial and commercial real estate loans declined by $38.9 million, $64.4 million, $164.2 million and $20.8 million, respectively.

 

  •  

The discontinued liquidating portfolio of indirect home equity and national construction loans, included in the consumer and residential loan portfolios, declined by $18.5 million from June 30, 2009 to $231.3 million and $5.8 million, respectively.

Asset quality

 

  •  

Total nonperforming loans were $361.1 million or 3.19 percent of total loans at September 30, 2009 compared to $350.4 million or 3.02 percent at June 30, 2009. The increase in nonperforming loans reflects a combined increase of $12.9 million in performing non-accrual residential mortgages and consumer loans, an increase of $30.9 million in non-accrual commercial real estate loans and a combined decrease of $33.1 million in all other categories.

 

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  •  

Past due loans for the continuing portfolios increased to $114.9 million at September 30, 2009 compared to $112.5 million at June 30, 2009. Past due loans for the liquidating portfolio increased to $12.6 million at September 30, 2009 compared to $9.9 million at June 30, 2009.

Deposits and borrowings

 

  •  

Total deposits were $13.6 billion at September 30, 2009 compared to $13.2 billion at June 30, 2009. The core categories of demand, NOW, money market and savings increased by a combined amount of $737.3 million while certificates of deposit and brokered deposits decreased by $273.3 million and $37.9 million, respectively.

 

  •  

Core deposits, which exclude certificates of deposits and brokered deposits, represented 68.5 percent of total deposits at September 30, 2009 compared to 65.2 percent at June 30, 2009 and 60.5 percent a year ago.

 

  •  

Total borrowings were $2.1 billion, a decline of $0.2 billion from $2.3 billion at June 30, 2009. Borrowings represented 11.9 percent of total assets at September 30, 2009 compared to 13.0 percent at June 30, 2009.

***

Webster Financial Corporation is the holding company for Webster Bank, National Association. With $17.8 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust and investment services through 181 banking offices, 492 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, Thursday, October 22, 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.

 

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Forward-looking statements

This press release may contain forward looking statements within the meaning of the Securities Exchange Act of 1934, as amended. Actual results could differ materially from management expectations, projections and estimates. Factors that could cause future results to vary from current management expectations include, but are not limited to, general economic conditions, legislative and regulatory changes, monetary and fiscal policies of the federal government, any failure to receive the approval of Webster’s shareholders in connection with Warburg Pincus’ investment, changes in tax policies, rates and regulations of federal, state and local tax authorities, changes in interest rates, deposit flows, the cost of funds, demand for loan products, demand for financial services, competition, changes in the quality or composition of our loan and investment portfolios, changes in accounting principles, policies or guidelines, and other economic, competitive, governmental and technological factors affecting our operations, markets, products, services and prices. Some of these and other factors are discussed in the annual and quarterly reports of Webster Financial Corporation previously filed with the Securities and Exchange Commission. Such developments, or any combination thereof, could have an adverse impact on the company’s financial position and results of operations. Except as required by law, Webster does not undertake to update any such forward looking statements.

Additional Information

In connection with the Investment Agreement, Webster has filed with the Securities and Exchange Commission (the “SEC”) a preliminary proxy statement. Webster will mail the definitive proxy statement, when available, to its shareholders. Investors and security holders are urged to read the proxy statement regarding the investment when it becomes available because it will contain important information. You may obtain a free copy of the proxy statement (when available) and other related documents filed by Webster with the SEC at the SEC’s website at http://www.sec.gov. The definitive proxy statement (when available) and the other documents may also be obtained for free by accessing Webster’s website at http://www.websterbank.com under the heading “Investor Relations” and then under the heading “Financial Reports” and then under the heading “SEC Filings.”

Participants in the Solicitation

Webster and its directors, executive officers and certain other members of management and employees may be soliciting proxies from shareholders in favor of certain matters relating to Warburg Pincus’ investment. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of the shareholders in connection with such matters is filed with the SEC. Information about the directors and executive officers of Webster is set forth in Webster’s definitive proxy statement filed with the SEC on March 20, 2009. Additional information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the preliminary proxy statement filed with the SEC on September 21, 2009. You may obtain a free copy of the definitive proxy statement (when available) and other related documents filed by Webster with the SEC at the SEC’s website at http://www.sec.gov. The definitive proxy statement (when available) and the other documents may also be obtained for free by accessing Webster’s website at http://www.websterbank.com under the heading “Investor Relations” and then under the heading “Financial Reports” and then under the heading “SEC Filings.”

 

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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.

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WEBSTER FINANCIAL CORPORATION

Selected Financial Highlights (unaudited)

      At or for the Three
Months Ended September 30,		     At or for the Nine
Months Ended September 30,		  
(In thousands, except per share data)    2009     2008     2009     2008  

Net loss and performance ratios (annualized):

                                

Net loss

    $ (19,250 )    $ (16,539 )    $ (61,936 )    $ (20,683 ) 

Net loss per diluted common share

      (0.39 )      (0.42 )      (0.54 )      (0.51 ) 

Return on average shareholders’ equity

      (4.14 )%      (3.54 )%      (4.45 )%      (1.54 )% 

Return on average tangible equity

      (5.88 )      (5.89 )      (6.32 )      (2.65 ) 

Return on average assets

      (0.44 )      (0.38 )      (0.47 )      (0.16 ) 

Loss from continuing operations and performance ratios (annualized):

                                 

Loss from continuing operations

    $ (19,250 )    $ (16,021 )    $ (62,249 )    $ (17,602 ) 

Net loss from continuing operations per diluted common share

      (0.39 )      (0.41 )      (0.55 )      (0.45 ) 

Return on average shareholders’ equity

      (4.14 )%      (3.43 )%      (4.47 )%      (1.31 )% 

Return on average tangible equity

      (5.88 )      (5.70 )      (6.35 )      (2.26 ) 

Return on average assets

      (0.44 )      (0.37 )      (0.47 )      (0.14 ) 

Noninterest income as a percentage of total revenue

      25.85        10.87        26.85        13.22   

Efficiency ratio (a)

      65.11        59.60        66.29        63.52   

Asset quality:

                                

Allowance for credit losses

    $ 336,511      $ 198,669      $ 336,511      $ 198,669   

Nonperforming assets

      393,593        249,675        393,593        249,675   

Allowance for credit losses / total loans

      2.97 %      1.54 %      2.97 %      1.54 % 

Net charge-offs / average loans (annualized)

      2.25        1.29        1.62        0.89   

Nonperforming loans / total loans

      3.19        1.76        3.19        1.76   

Nonperforming assets / total loans plus OREO

      3.47        1.94        3.47        1.94   

Allowance for credit losses / nonperforming loans

      93.20        87.55        93.20        87.55   

Other ratios (annualized):

                                

Tangible capital ratio

      7.70 %      6.34 %      7.70 %      6.34 % 

Tangible common equity ratio

      5.10        5.00        5.10        5.00   

Total-risk based capital (d)

      14.05        13.10        14.05        13.10   

Tier 1 common equity / risk weighted assets (d)

      6.40        6.91        6.40        6.91   

Shareholders’ equity / total assets

      10.60        10.37        10.60        10.37   

Interest-rate spread

      3.12        3.24        2.99        3.21   

Net interest margin

      3.18        3.32        3.07        3.28   

Share related:

                                

Book value per common share

    $ 21.11      $ 30.19      $ 21.11      $ 30.19   

Tangible book value per common share

      13.05        16.13        13.05        16.13   

Common stock closing price

      12.47        25.25        12.47        25.25   

Dividends declared per common share

      0.01        0.30        0.03        0.90   

Common shares issued and outstanding

      68,140        52,711        68,140        52,711   

Basic shares (average)

      66,281        52,032        57,125        52,017   

Diluted shares (average)

      66,281        52,032        57,125        52,017   

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) NCLC is defined as National Construction Lending Center
(d) The ratios presented are projected for the 2009 reporting periods and actual for the 2008 reporting periods.

WEBSTER FINANCIAL CORPORATION

Consolidated Balance Sheet (unaudited)

(In thousands)    September 30,
2009		    

June 30,

2009

     September 30,
2008		  

Assets:

       

Cash and due from depository institutions

    $ 173,437      $ 254,638      $ 221,195   

Short-term investments

      360,618        8,216        6,449   

Investment securities:

       

Trading, at fair value

      —          —          1,197   

Available for sale, at fair value

      1,912,283        1,405,872        824,118   

Held-to-maturity

      2,702,881        2,767,965        2,031,665   
                        

Total securities

      4,615,164        4,173,837        2,856,980   

Loans held for sale

      37,005        113,936        3,247   

Loans:

       

Residential mortgages

      2,843,066        2,881,955        3,567,825   

Consumer

      3,094,927        3,159,361        3,256,314   

Commercial

      3,169,425        3,333,610        3,677,069   

Commercial real estate

      2,214,941        2,235,776        2,365,181   
                        

Total loans

      11,322,359        11,610,702        12,866,389   

Allowance for loan losses

      (326,406 )      (305,999 )      (189,169 ) 
                        

Loans, net

      10,995,953        11,304,703        12,677,220   

Assets held for disposition

      9,920        6,247        900   

Federal Home Loan Bank and Federal Reserve Bank stock

      140,874        137,874        134,874   

Accrued interest receivable

      70,007        69,317        75,830   

Premises and equipment, net

      179,353        179,625        188,443   

Goodwill and other intangible assets, net

      559,592        561,013        754,026   

Cash surrender value of life insurance

      286,806        285,064        277,176   

Deferred tax assets, net

      139,458        153,745        127,628   

Prepaid expenses and other assets

      240,099        204,361        192,069   
                        

Total Assets

    $ 17,808,286      $ 17,452,576      $ 17,516,037   
                        

Liabilities and Equity:

       

Deposits:

       

Demand deposits

    $ 1,571,980      $ 1,595,390      $ 1,509,319   

NOW accounts

      2,544,260        2,591,108        1,740,650   

Money market deposit accounts

      2,209,145        1,618,910        1,591,599   

Savings accounts

      2,996,318        2,778,970        2,318,014   

Certificates of deposit

      4,148,759        4,422,033        4,492,767   

Brokered deposits

      130,268        168,171        180,026   
                        

Total deposits

      13,600,730        13,174,582        11,832,375   

Securities sold under agreements to repurchase and other short-term debt

      872,030        1,015,099        1,688,728   

Federal Home Loan Bank advances

      663,210        663,123        1,355,931   

Long-term debt

      589,600        590,520        657,004   

Liabilities held for disposition

      15,075        —          —     

Accrued expenses and other liabilities

      170,267        158,102        155,810   
                        

Total liabilities

      15,910,912        15,601,426        15,689,848   

Shareholders’ equity

      1,887,734        1,841,518        1,816,569   

Noncontrolling interests

      9,640        9,632        9,620   
                        

Total equity

      1,897,374        1,851,150        1,826,189   
                        

Total Liabilities and Equity

    $ 17,808,286      $ 17,452,576      $ 17,516,037   
                        

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Consolidated Statements of Operations (unaudited)

      Three Months Ended
September 30,		     Nine Months Ended
September 30,		  
(In thousands, except per share data)    2009     2008     2009     2008  

Interest income:

         

Loans including fees

    $ 131,266      $ 175,363      $ 409,566      $ 542,421   

Investment securities

      52,975        39,210        152,601        116,657   

Loans held for sale

      716        54        1,713        1,546   
                                

Total interest income

      184,957        214,627        563,880        660,624   
                                

Interest expense:

         

Deposits

      41,977        57,731        144,867        193,028   

Borrowings

      16,308        27,715        54,856        87,873   
                                

Total interest expense

      58,285        85,446        199,723        280,901   
                                

Net interest income

      126,672        129,181        364,157        379,723   

Provision for credit losses

      85,000        45,500        236,000        86,300   
                                

Net interest income after provision for credit losses

      41,672        83,681        128,157        293,423   
                                

Non-interest income:

         

Deposit service fees

      30,844        31,738        88,787        90,114   

Loan related fees

      5,557        7,171        18,389        21,920   

Wealth and investment services

      6,160        7,070        17,991        21,660   

Mortgage banking activities

      1,406        50        5,445        894   

Increase in cash surrender value of life insurance

      2,692        2,606        7,949        7,810   

Net (loss) gain on sale of investment securities

      (4,728 )      (50 )      (13,863 )      199   

Other income

      3,517        2,731        5,117        5,369   
                                
     45,448        51,316        129,815        147,966   

Gain on the exchange of trust preferreds for common stock

      —          —          24,336        —     

Gain on early extinguishment of subordinated notes

      —          —          5,993        —     

Loss on write-down of investments to fair value

      (1,290 )      (33,507 )      (28,400 )      (89,684 ) 

Visa share transactions

      —          —          1,907        1,625   

Loss on sale of FNMA/FHLMC preferred stock

      —          (2,060 )      —          (2,060 ) 
                                

Total non-interest income

      44,158        15,749        133,651        57,847   
                                

Non-interest expenses:

         

Compensation and benefits

      59,772        61,314        175,430        187,623   

Occupancy

      13,572        12,827        41,461        39,637   

Furniture and equipment

      15,199        14,892        45,627        45,686   

Marketing

      3,802        2,478        10,104        11,061   

Outside services

      3,628        3,798        10,806        11,657   

Intangible amortization

      1,421        1,464        4,334        4,476   

Foreclosed and repossessed asset expenses

      1,733        1,496        4,868        2,844   

Foreclosed and repossessed asset write-downs

      2,232        1,968        8,354        2,685   

FDIC deposit insurance assessment

      5,942        532        16,491        1,230   

Other expenses

      15,616        13,998        43,982        44,061   
                                
     122,917        114,767        361,457        350,960   

Severance and other costs

      4,169        1,535        5,722        10,253   

Impairment of goodwill

      —          1,013        —          9,513   

FDIC special assessment

      —          —          8,000        —     
                                

Total non-interest expenses

      127,086        117,315        375,179        370,726   
                                

Loss from continuing operations before income taxes

      (41,256 )      (17,885 )      (113,371 )      (19,456 ) 

Income tax benefit

      (22,014 )      (1,878 )      (51,143 )      (1,860 ) 
                                

Loss from continuing operations

      (19,242 )      (16,007 )      (62,228 )      (17,596 ) 

(Loss) income from discontinued operations, net of tax

      —          (518 )      313        (3,081 ) 
                                

Consolidated net loss

    $ (19,242 )    $ (16,525 )    $ (61,915 )    $ (20,677 ) 

Less: Net income attributable to noncontrolling interests

      8        14        21        6   
                                

Net loss attributable to Webster Financial Corporation

      (19,250 )      (16,539 )      (61,936 )      (20,683 ) 

Preferred stock dividends, accretion and extinguishment gain

      (6,850 )      (5,209 )      31,082        (5,640 ) 
                                

Net loss available to common shareholders

    $ (26,100 )    $ (21,748 )    $ (30,854 )    $ (26,323 ) 
                                

Diluted shares (average)

      66,281        52,032        57,125        52,017   

Net loss per common share:

         

Basic

         

Loss from continuing operations

    $ (0.39 )    $ (0.41 )    $ (0.55 )    $ (0.45 ) 

Net loss

      (0.39 )      (0.42 )      (0.54 )      (0.51 ) 

Diluted

         

Loss from continuing operations

      (0.39 )      (0.41 )      (0.55 )      (0.45 ) 

Net loss

      (0.39 )      (0.42 )      (0.54 )      (0.51 ) 

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Five Quarter Consolidated Statements of Operations (unaudited)

      Three Months Ended  
(In thousands, except per share data)    Sept. 30,
2009		    

June 30,

2009

    

March 31,

2009

    

Dec. 31,

2008

    

Sept. 30,

2008

  

Interest income:

           

Loans including fees

    $ 131,266      $ 137,533      $ 140,767      $ 168,200      $ 175,363   

Investment securities

      52,975        48,799        50,827        40,398        39,210   

Loans held for sale

      716        833        164        51        54   
                                        

Total interest income

      184,957        187,165        191,758        208,649        214,627   
                                        

Interest expense:

           

Deposits

      41,977        49,982        52,908        57,154        57,731   

Borrowings

      16,308        17,895        20,653        25,427        27,715   
                                        

Total interest expense

      58,285        67,877        73,561        82,581        85,446   
                                        

Net interest income

      126,672        119,288        118,197        126,068        129,181   

Provision for credit losses

      85,000        85,000        66,000        100,000        45,500   
                                        

Net interest income after provision for credit losses

      41,672        34,288        52,197        26,068        83,681   
                                        

Noninterest income:

           

Deposit service fees

      30,844        29,984        27,959        30,018        31,738   

Loan related fees

      5,557        6,350        6,482        7,147        7,171   

Wealth and investment services

      6,160        6,081        5,750        6,480        7,070   

Mortgage banking activities

      1,406        3,433        606        336        50   

Increase in cash surrender value of life insurance

      2,692        2,665        2,592        2,631        2,606   

Net (loss) gain on sale of investment securities

      (4,728 )      (13,593 )      4,458        (4,233 )      (50 ) 

Other income

      3,517        1,325        275        1,315        2,731   
                                        
     45,448        36,245        48,122        43,694        51,316   

Gain on the exchange of trust preferreds for common stock

      —          24,336        —          —          —     

Gain on early extinguishment of debt and swaps

      —          —          5,993        —          —     

Loss on write-down of investments to fair value

      (1,290 )      (27,110 )      —          (129,593 )      (33,507 ) 

Loss on sale of FNMA/FHLMC preferred stock

      —          —          —          —          (2,060 ) 

Visa share transactions

      —          1,907        —          —          —     
                                        

Total noninterest income

      44,158        35,378        54,115        (85,899 )      15,749   
                                        

Noninterest expenses:

           

Compensation and benefits

      59,772        59,189        56,469        52,078        61,314   

Occupancy

      13,572        13,594        14,295        13,406        12,827   

Furniture and equipment

      15,199        15,288        15,140        15,469        14,892   

Marketing

      3,802        3,196        3,106        2,895        2,478   

Outside services

      3,628        3,394        3,784        4,101        3,798   

Intangible amortization

      1,421        1,450        1,463        1,463        1,464   

Foreclosed and repossessed asset expenses

      1,733        1,799        1,179        1,799        1,496   

Foreclosed and repossessed asset write-downs

      2,232        2,829        3,450        1,615        1,968   

FDIC deposit insurance assessment

      5,942        5,959        4,590        3,468        532   

Other expenses

      15,616        14,066        14,302        13,379        13,998   
                                        
     122,917        120,764        117,778        109,673        114,767   

Severance and other costs

      4,169        1,313        240        5,905        1,535   

FDIC special assessment

      —          8,000        —          —          —     

Goodwill impairment

      —          —          —          188,866        1,013   
                                        

Total noninterest expenses

      127,086        130,077        118,018        304,444        117,315   
                                        

Loss from continuing operations before income taxes

      (41,256 )      (60,411 )      (11,706 )      (364,275 )      (17,885 ) 

Income tax benefit

      (22,014 )      (28,536 )      (593 )      (63,980 )      (1,878 ) 
                                        

Loss from continuing operations

      (19,242 )      (31,875 )      (11,113 )      (300,295 )      (16,007 ) 

Income (loss) from discontinued operations, net of tax

      —          313        —          8        (518 ) 
                                        

Consolidated net loss

    $ (19,242 )    $ (31,562 )    $ (11,113 )    $ (300,287 )    $ (16,525 ) 

Less: Net income (loss) attributable to noncontrolling interests

      8        —          13        (1 )      14   
                                        

Net loss attributable to Webster Financial Corporation

      (19,250 )    $ (31,562 )    $ (11,126 )    $ (300,286 )    $ (16,539 ) 

Preferred stock dividends, accretion and extinguishment gain

      (6,850 )      48,361        (10,430 )      (7,308 )      (5,209 ) 
                                        

Net (loss) income available to common shareholders

    $ (26,100 )    $ 16,799      $ (21,556 )    $ (307,594 )    $ (21,748 ) 
                                        

Diluted shares (average)

      66,281        53,398        52,102        52,031        52,032   

Net income (loss) per common share:

           

Basic

           

(Loss) income from continuing operations

    $ (0.39 )    $ 0.31      $ (0.41 )    $ (5.91 )    $ (0.41 ) 

Net (loss) income

      (0.39 )      0.31        (0.41 )      (5.91 )      (0.42 ) 

Diluted

           

(Loss) income from continuing operations

      (0.39 )      0.31        (0.41 )      (5.91 )      (0.41 ) 

Net (loss) income

      (0.39 )      0.31        (0.41 )      (5.91 )      (0.42 ) 

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Five Quarter Interest-Rate Spreads (unaudited)

      Three Months Ended  
      September 30,
2009		     June 30,
2009		     March 31,
2009		     December 31,
2008		     September 30,
2008		  

Interest-rate spread

           

Yield on interest-earning assets

    4.60 %    4.72 %    4.82 %    5.24 %    5.45 % 

Cost of interest-bearing liabilities

    1.48      1.76      1.91      2.13      2.21   
                              

Interest-rate spread

    3.12 %    2.96 %    2.91 %    3.11 %    3.24 % 
                              

Net interest margin

    3.18 %    3.04 %    2.99 %    3.20 %    3.32 % 
                              

Consolidated Average Balances, Yields and Rates Paid (unaudited)

Three Months Ended September 30,   

2009

          

2008

  
(Dollars in thousands)    Average
balance		    Interest     Fully tax-
equivalent
yield/rate		          Average
balance		    Interest     Fully tax-
equivalent
yield/rate		  

Assets:

                  

Interest-earning assets:

                  

Loans

    $ 11,465,068    $ 131,266      4.54 %       $ 12,805,398    $ 175,363      5.43 % 

Investment securities (b)

      4,303,155      55,777      5.14           2,860,309      41,661      5.62   

Loans held for sale

      68,663      716      4.17           3,810      54      5.62   

Federal Home Loan and Federal Reserve Bank stock

      138,070      674      1.94           132,413      1,265      3.80   

Short-term investments

      272,222      187      0.27           4,193      28      2.64   
                                             

Total interest-earning assets

      16,247,178      188,620      4.60           15,806,123      218,371      5.45   
                                     

Noninterest-earning assets

      1,344,626             1,537,759     
                         

Total assets

    $ 17,591,804           $ 17,343,882     
                         

Liabilities and Shareholders' Equity:

                  

Interest-bearing liabilities:

                  

Demand deposits

    $ 1,598,433    $ —        —   %       $ 1,515,047    $ —        —   % 

Savings, NOW and money market deposit accounts

      7,444,729      15,602      0.83           5,869,948      19,660      1.33   

Time deposits

      4,384,509      26,375      2.39           4,670,268      38,070      3.23   
                                             

Total deposits

      13,427,671      41,977      1.24           12,055,263      57,730      1.90   
                                             

Securities sold under agreements to repurchase and other short-term debt

      895,771      4,472      1.95           1,332,097      8,517      2.50   

Federal Home Loan Bank advances

      662,367      6,514      3.85           1,291,583      10,181      3.08   

Long-term debt

      589,384      5,322      3.61           655,760      9,018      5.50   
                                             

Total borrowings

      2,147,522      16,308      2.99           3,279,440      27,716      3.33   
                                             

Total interest-bearing liabilities

      15,575,193      58,285      1.48           15,334,703      85,446      2.21   
                                     

Noninterest-bearing liabilities

      146,798             132,762     
                         

Total liabilities

      15,722,050             15,467,502     

Noncontrolling interests

      9,636             9,614     

Shareholders’ equity

      1,860,177             1,866,803     
                         

Total liabilities and shareholders’ equity

    $ 17,591,804           $ 17,343,882     
                         

Tax-equivalent net interest income

         130,335                132,925     

Less: tax-equivalent adjustment

         (3,663 )              (3,744 )   
                             

Net interest income

       $ 126,672              $ 129,181     
                             

Interest-rate spread

         3.12 %            3.24 % 
                         

Net interest margin

         3.18 %            3.32 % 
                         

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Consolidated Average Balances, Yields and Rates Paid (unaudited)

Nine Months Ended September 30,    2009           2008  
(Dollars in thousands)    Average
balance		    Interest     Fully tax-
equivalent
yield/rate		          Average
balance		    Interest     Fully tax-
equivalent
yield/rate		  

Assets:

                  

Interest-earning assets:

                  

Loans

    $ 11,870,636    $ 409,566      4.58 %       $ 12,677,899    $ 542,421      5.67 % 

Investment securities (b)

      3,975,016      161,352      5.31           2,860,501      123,394      5.62   

Loans held for sale

      55,798      1,713      4.09           35,181      1,546      5.86   

Federal Home Loan and Federal Reserve Bank stock

      136,940      1,970      1.92           124,922      4,305      4.60   

Short-term investments

      102,421      261      0.34           4,750      106      2.93   
                                             

Total interest-earning assets

      16,140,811      574,862      4.71           15,703,253      671,772      5.65   
                                     

Noninterest-earning assets

      1,417,635             1,538,806     
                         

Total assets

    $ 17,558,446           $ 17,242,059     
                         

Liabilities and Shareholders’ Equity:

                  

Interest-bearing liabilities:

                  

Demand deposits

    $ 1,557,900    $ —        —   %       $ 1,480,139    $ —        —   % 

Savings, NOW and money market deposit accounts

      6,716,808      46,542      0.93           5,852,690      63,145      1.44   

Time deposits

      4,665,633      98,325      2.82           4,744,594      129,883      3.65   
                                             

Total deposits

      12,940,341      144,867      1.50           12,077,423      193,028      2.13   
                                             

Securities sold under agreements to repurchase and other short-term debt

      1,204,744      14,826      1.62           1,330,197      28,298      2.80   

Federal Home Loan Bank advances

      732,351      20,028      3.61           1,230,280      30,607      3.27   

Long-term debt

      641,152      20,002      4.16           658,387      28,968      5.87   
                                             

Total borrowings

      2,578,247      54,856      2.82           3,218,864      87,873      3.60   
                                             

Total interest-bearing liabilities

      15,518,588      199,723      1.72           15,296,287      280,901      2.44   
                                     

Noninterest-bearing liabilities

      172,467             147,586     
                         

Total liabilities

      15,691,107             15,443,907     

Noncontrolling interests

      9,629             9,611     

Shareholders’ equity

      1,857,762             1,788,575     
                         

Total liabilities and shareholders’ equity

    $ 17,558,446           $ 17,242,059     
                         
        375,139                390,871     

Less: tax-equivalent adjustment

         (10,982 )              (11,148 )   
                             

Net interest income

       $ 364,157              $ 379,723     
                             

Interest-rate spread

         2.99 %            3.21 % 
                         

Net interest margin

         3.07 %            3.28 % 
                         

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Five Quarter Loan balances (unaudited)

(Dollars in thousands)   

Sep. 30,

2009

    

June 30,

2009

    

March 31,

2009

    

Dec. 31,

2008

    

Sept. 30,

2008

  

Loan Balances (actuals):

           

Continuing Portfolio:

           

Residential mortgages

    $ 2,837,240      $ 2,875,415      $ 3,170,908      $ 3,049,706      $ 3,542,416   

Consumer

      2,863,622        2,910,275        2,979,117        3,016,524        2,960,491   

Commercial

      1,619,284        1,711,995        1,738,640        1,797,135        1,803,321   

Equipment financing

      951,500        998,258        1,016,718        1,037,077        1,006,238   

Asset based lending

      598,641        623,357        659,694        752,595        867,510   

Commercial real estate

      2,086,298        2,091,811        2,094,751        2,070,641        2,147,617   

Residential development

      128,643        143,965        155,544        161,533        217,564   
                                        

Total continuing

      11,085,228        11,355,076        11,815,372        11,885,211        12,545,157   

Allowances for loan loss

      (269,306 )      (264,159 )      (226,562 )      (191,426 )      (161,331 ) 
                                        

Total continuing, net

      10,815,922        11,090,917        11,588,810        11,693,785        12,383,826   
                                        

Liquidating Portfolio:

           

NCLC (c)

      5,826        6,540        13,174        18,735        25,409   

Consumer

      231,305        249,086        266,913        283,645        295,823   
                                        

Total liquidating portfolio

      237,131        255,626        280,087        302,380        321,232   

Allowances for loan loss

      (57,100 )      (41,840 )      (44,367 )      (43,903 )      (27,838 ) 
                                        

Total liquidating, net

      180,031        213,786        235,720        258,477        293,394   
                                        

Total Loan Balances (actuals)

      11,322,359        11,610,702        12,095,459        12,187,591        12,866,389   

Allowances for loan loss

      (326,406 )      (305,999 )      (270,929 )      (235,329 )      (189,169 ) 
                                        

Loans (net)

    $ 10,995,953      $ 11,304,703      $ 11,824,530      $ 11,952,262      $ 12,677,220   
                                        

Loan Balances (average):

           

Continuing Portfolio:

           

Residential mortgages

    $ 2,831,440      $ 3,127,099      $ 3,092,512      $ 3,449,202      $ 3,542,938   

Consumer

      2,884,543        2,951,691        3,012,178        2,989,393        2,924,446   

Commercial

      1,675,289        1,750,996        1,784,062        1,811,527        1,796,598   

Equipment finance

      975,552        1,011,999        1,026,322        1,015,340        1,007,465   

Asset based lending

      622,472        652,197        701,263        842,148        844,518   

Commercial real estate

      2,089,643        2,090,615        2,083,861        2,182,228        2,120,589   

Residential development

      139,040        150,674        158,924        161,533        217,564   
                                        

Total continuing

      11,217,980        11,735,271        11,859,122        12,451,371        12,454,118   

Allowances for loan loss

      (260,472 )      (248,701 )      (204,619 )      (167,230 )      (162,420 ) 
                                        

Total continuing, net

      10,957,508        11,486,570        11,654,503        12,284,141        12,291,698   
                                        

Liquidating Portfolio:

           

NCLC (c)

      6,414        10,090        15,675        24,199        43,777   

Consumer

      240,675        258,001        276,219        293,964        307,503   
                                        

Total liquidating portfolio

      247,089        268,091        291,894        318,163        351,280   

Allowances for loan loss

      (57,100 )      (41,840 )      (44,367 )      (43,903 )      (27,838 ) 
                                        

Total liquidating, net

      189,989        226,251        247,527        274,260        323,442   
                                        

Total Loan Balances (average)

      11,465,068        12,003,362        12,151,016        12,769,534        12,805,398   

Allowances for loan loss

      (317,572 )      (290,541 )      (248,986 )      (211,133 )      (190,258 ) 
                                        

Loans (net)

    $ 11,147,496      $ 11,712,821      $ 11,902,030      $ 12,558,401      $ 12,615,140   
                                        

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Five Quarter Nonperforming Assets (unaudited)

(Dollars in thousands)    Sept. 30,
2009		    June 30,
2009		    March 31,
2009		    Dec. 31,
2008		    Sept. 30,
2008

Nonperforming loans:

               

Continuing Portfolio:

               

Residential mortgages

    $ 66,180    $ 59,775    $ 55,962    $ 48,731    $ 39,445

Performing non-accrual residential mortgages

      43,581      33,822      10,849      3,771      —  

Commercial

      61,746      68,979      65,073      32,915      33,842

Equipment financing

      31,784      35,675      16,056      13,138      7,462

Asset based lending

      5,064      24,456      29,353      17,072      17,239

Commercial real estate

      47,644      16,707      12,604      8,032      8,971

Residential development

      44,821      46,808      54,147      48,628      71,065

Consumer

      33,837      33,816      37,518      29,627      23,668

Performing non-accrual consumer

      6,000      4,534      2,652      312      —  
                                  

Nonperforming loans - continuing portfolio

      340,657      324,572      284,214      202,226      201,692
                                  

Liquidating Portfolio:

               

NCLC (c)

      4,089      5,628      12,259      12,821      14,227

Performing non-accrual NCLC

      825      —        —        581      —  

Consumer

      14,030      19,521      19,510      16,757      10,994

Performing non-accrual consumer

      1,475      674      185      181      —  
                                  

Nonperforming loans - liquidating portfolio

      20,419      25,823      31,954      30,340      25,221
                                  

Total nonperforming loans

    $ 361,076    $ 350,395    $ 316,168    $ 232,566    $ 226,913
                                  

Other real estate owned and repossessed assets:

               

Continuing Portfolio:

               

Residential mortgages

    $ 2,872    $ 1,808    $ 1,399    $ 1,863    $ 3,071

Commercial

      13,225      9,340      10,361      9,782      1,026

Equipment financing

      8,479      10,322      13,352      13,086      12,261

Asset based lending

      —        —        —        —        —  

Commercial real estate

      —        —        —        —        —  

Residential development

      —        —        —        —        —  

Consumer

      4,833      5,571      369      1,244      2,835
                                  

Total continuing

      29,409      27,041      25,481      25,975      19,193
                                  

Liquidating Portfolio:

               

NCLC (c)

      3,108      5,836      5,563      3,519      2,943

Consumer

      —        931      1,139      1,129      626
                                  

Nonperforming loans - liquidating portfolio

      3,108      6,767      6,702      4,648      3,569
                                  

Total other real estate owned and repossessed assets

    $ 32,517    $ 33,808    $ 32,183    $ 30,623    $ 22,762
                                  

Total nonperforming assets

    $ 393,593    $ 384,203    $ 348,351    $ 263,189    $ 249,675
                                  

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Five Quarter Past Due Loans (unaudited)

(Dollars in thousands)    Sept. 30,
2009		    June 30,
2009		    March 31,
2009		    Dec. 31,
2008		    Sept. 30,
2008

Past due 30-89 days:

               

Accruing loans:

               

Continuing Portfolio:

               

Residential mortgages

    $ 38,927    $ 39,955    $ 45,798    $ 45,909    $ 40,209

Commercial

      9,735      8,460      8,033      15,817      7,196

Equipment financing

      10,407      13,464      16,404      9,860      8,102

Asset based lending

      —        —        145      3,676      —  

Commercial real estate

      23,872      19,053      8,373      7,158      18,241

Residential development

      776      3,210      1,004      2,096      5,832

Consumer

      31,178      28,354      33,092      33,848      23,279
                                  

Past Due 30-89 days - continuing portfolio

      114,895      112,496      112,849      118,364      102,859
                                  

Liquidating Portfolio:

               

NCLC (c)

      910      1      1      4,487      3,046

Consumer

      11,680      9,880      12,244      15,621      15,370
                                  

Past Due 30-89 days - liquidating portfolio

      12,590      9,881      12,245      20,108      18,416
                                  

Accruing loans past due 90 days or more:

               

Residential mortgages

      —        —        —        —        —  

Commercial

      2,685      445      573      459      534

Equipment financing

      —        —        —        —        —  

Asset based lending

      —        —        —        —        —  

Commercial real estate

      206      475      —        450      174

Residential development

      —        —        150      201      —  

Consumer

      —        —        —        —        —  
                                  

Accruing loans past due 90 days or more:

      2,891      920      723      1,110      708
                                  

Total past due loans

    $ 130,376    $ 123,297    $ 125,817    $ 139,582    $ 121,983
                                  

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Five Quarter Changes in the Allowance for Credit Losses (unaudited)

 

     For the Three Months Ended  
(Dollars in thousands)    Sept. 30,
2009		    June 30,
2009		     March 31,
2009		    Dec. 31,
2008		    Sept. 30,
2008		  

Beginning balance

    $ 316,037    $ 281,729      $ 245,829    $ 198,669    $ 194,368   

Provision

      85,000      85,000        66,000      100,000      45,500   

Charge-offs continuing portfolio:

              

Residential mortgages

      2,721      4,793        2,964      3,778      1,623   

Commercial

      13,729      8,983        5,388      5,416      6,593   

Equipment financing

      7,939      6,324        2,236      1,222      998   

Asset based lending

      15,926      5,297        2,981      176      7,245   

Commercial real estate

      —        —          —        53      —     

Residential development

      3,019      2,350        48      30,158      161   

Consumer

      10,237      10,242        6,541      3,887      4,643   
                                     

Charge-offs continuing portfolio

      53,571      37,989        20,158      44,690      21,263   

Charge-offs liquidating portfolio:

              

NCLC (c)

      135      3,387        2,086      777      14,025   

Consumer

      13,256      10,825        9,911      8,779      6,767   
                                     

Charge-offs liquidating portfolio

      13,391      14,212        11,997      9,556      20,792   
                                     

Total charge-offs

      66,962      52,201        32,155      54,246      42,055   
                                     

Recoveries continuing portfolio:

              

Residential mortgages

      277      115        24      85      5   

Commercial

      435      230        378      225      89   

Equipment financing

      821      203        287      177      303   

Asset based lending

      —        —          5      129      61   

Commercial real estate

      —        —          —        —        —     

Residential development

      —        9        —        —        —     

Consumer

      642      702        766      180      256   
                                     

Recoveries continuing portfolio

      2,175      1,259        1,460      796      714   
                                     

Recoveries liquidating portfolio:

              

NCLC (c)

      62      825        528      595      151   

Consumer

      132      187        67      15      (9 ) 
                                     

Recoveries liquidating portfolio

      194      1,012        595      610      142   
                                     

Total recoveries

      2,369      2,271        2,055      1,406      856   
                                     

Total net charge-offs

      64,593      49,930        30,100      52,840      41,199   
                                     

Change in unfunded commitments

      67      (762 )      —        —        —     

Ending balance

    $ 336,511    $ 316,037      $ 281,729    $ 245,829    $ 198,669   
                                     

Components:

              

Allowance for loan losses

    $ 326,406    $ 305,999      $ 270,929    $ 235,329    $ 189,169   

Reserve for unfunded credit commitments

      10,105      10,038        10,800      10,500      9,500   
                                     

Allowance for credit losses

    $ 336,511    $ 316,037      $ 281,729    $ 245,829    $ 198,669   
                                     

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Asset Quality Ratios

 

     For the Three Months Ended  
(Dollars in thousands)    Sept. 30,
2009		     June 30,
2009		     March 31,
2009		     Dec. 31,
2008		     Sept. 30,
2008		  

Total Portfolio

           

Allowance for loan losses / total loans

    2.88 %    2.64 %    2.24 %    1.93 %    1.47 % 

Allowance for credit losses / total loans

    2.97      2.72      2.33      2.02      1.54   

Net charge-offs / average loans (annualized)

    2.25      1.66      0.99      1.66      1.29   

Nonperforming loans / total loans

    3.19      3.02      2.61      1.91      1.76   

Nonperforming assets / total loans plus OREO

    3.47      3.30      2.87      2.15      1.94   

Allowance for credit losses / nonperforming loans

    93.20      90.19      89.11      105.70      87.55   

Continuing Portfolio

           

Allowance for loan losses / total loans

    2.43 %    2.33 %    1.92 %    1.61 %    1.29 % 

Allowance for credit losses / total loans

    2.52      2.41      2.01      1.70      1.36   

Net charge-offs / average loans (annualized)

    1.83      1.25      0.63      1.41      0.66   

Nonperforming loans / total loans

    3.07      2.86      2.41      1.70      1.61   

Nonperforming assets / total loans plus OREO

    3.33      3.09      2.62      1.92      1.76   

Allowance for credit losses / nonperforming loans

    82.02      84.48      83.52      102.35      86.09   

Liquidating Portfolio

           

NCLC (C)

           

Allowance for loan losses / total loans

    17.16 %    23.00 %    30.86 %    30.01 %    22.85 % 

Net charge-offs / average loans (annualized)

    4.55      101.57      39.76      2.99      126.76   

Nonperforming loans / total loans

    84.35      86.06      93.05      71.53      55.99   

Allowance for loan losses / nonperforming loans

    20.35      26.72      33.16      41.96      40.8   

Consumer

           

Allowance for loan losses / total loans

    24.25 %    16.19 %    15.10 %    13.50 %    7.45 % 

Net charge-offs / average loans (annualized)

    21.81      16.49      14.26      11.93      8.81   

Nonperforming loans / total loans

    6.70      8.11      7.38      5.97      3.72   

Allowance for loan losses / nonperforming loans

    361.82      199.73      204.63      225.99      200.5   

See Selected Financial Highlights for footnotes.