PR Newswire | Jul 23, 2020 07:31AM EDT

07/23 06:30 CDT

Webster Reports Second Quarter 2020 Earnings Of $0.57 Per Diluted Share WATERBURY, Conn., July 23, 2020

WATERBURY, Conn., July 23, 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 $50.7 million, or $0.57 per diluted share, for the quarter ended June 30, 2020, compared to $96.2 million, or $1.05 per diluted share, for the quarter ended June 30, 2019. Results in the quarter reflect a provision for credit losses of $40.0 million under the Current Expected Credit Loss (CECL) accounting standard compared to a provision for credit losses of $11.9 million in prior year. Adjusting for a $5.5 million discrete negative adjustment related to customer derivatives, earnings would have been $0.61 per diluted share.

"We continue to focus on prudently managing capital, credit and liquidity during these uncertain times, while also supporting our customers, employees, and communities," said John R. Ciulla, chairman and chief executive officer. "We are pleased with our performance in the quarter given the challenging environment."

Highlights for the second quarter of 2020:

* Revenue of $284.5 million. * Loan growth of $2.5 billion, or 13.1 percent from a year ago, led by commercial and commercial real estate, which increased 20.4 percent. Excluding Paycheck Protection Program (PPP) loans, total loan growth was $1.2 billion, or 6.1 percent. * Results include a reserve build of $23.6 million resulting in an allowance coverage of 1.64 percent, or 1.75 percent excluding $1.4 billion of PPP loans. * Deposit growth of $3.8 billion, or 16.6 percent from a year ago, with growth of $2.0 billion in demand deposits and $574 million in HSA deposits. * Net interest margin of 2.99 percent. * Efficiency ratio (non-GAAP) of 60.0 percent.

"We are proud to have efficiently funded $1.4 billion in loans to businesses under the Paycheck Protection Program during the quarter given our strong capital and liquidity positions," said Glenn MacInnes, executive vice president and chief financial officer. "Our Common Equity Tier 1 capital ratio now exceeds 11 percent and the loan-to-deposit ratio improved to 83 percent."

Line of Business performance compared to the second 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 June 30, 2020, Commercial Banking had $12.5 billion in loans and leases and $5.4 billion in deposit balances.

Commercial Banking Operating Results:

Percent

Three months ended June 30,Favorable/

(In thousands) 2020 2019 (Unfavorable)

Net interest income $104,862 $100,216 4.6 %

Non-interest income 14,725 14,645 0.5

Operating revenue 119,587 114,861 4.1

Non-interest expense 44,694 46,196 3.3

Pre-tax, pre-provision net revenue$74,893 $68,665 9.1



Percent

At June 30, Increase/

(In millions) 2020 2019 (Decrease)

Loans and leases $12,485 $11,005 13.4 %

Deposits 5,400 3,870 39.5

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 increased $6.2 million to $74.9 million in the quarter as compared to prior year. Net interest income increased $4.6 million to $104.9 million, primarily due to loan and deposit growth. Non-interest income increased $0.1 million to $14.7 million. Non-interest expense decreased $1.5 million to $44.7 million, primarily due to a significant reduction in travel and entertainment spend.

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 June 30, 2020, HSA Bank had $9.0 billion in total footings comprising $6.8 billion in deposit balances and $2.2 billion in assets under administration through linked investment accounts.

HSA Bank Operating Results:

Percent

Three months ended June 30, Favorable/

(In thousands) 2020 2019 (Unfavorable)

Net interest income $39,334 $44,013 (10.6) %

Non-interest income 23,103 24,979 (7.5)

Operating revenue 62,437 68,992 (9.5)

Non-interest expense 34,020 34,253 0.7

Pre-tax, net revenue $28,417 $34,739 (18.2)



Percent

At June 30, Increase/

(Dollars in millions) 2020 2019 (Decrease)

Number of accounts (thousands) 2,996 2,964 1.1 %



Deposits $6,787 $6,212 9.2

Linked investment accounts * 2,249 1,817 23.8

Total footings $9,036 $8,029 12.5

* 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 $6.3 million to $28.4 million in the quarter as compared to prior year. Net interest income decreased $4.7 million to $39.3 million, due to a decline in deposit spreads partially offset by 9.2 percent growth in deposits. Non-interest income decreased $1.9 million to $23.1 million, primarily due to a decline in interchange revenue as a result of COVID-19. Non-interest expense decreased $0.2 million to $34.0 million, primarily due to reduced travel expenses as a result of COVID-19, partially offset by account growth.

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 157 banking centers and 306 ATMs, a customer care center, and a full range of web and mobile-based banking services. As of June 30, 2020, Community Banking had $9.3 billion in loans and $14.2 billion in deposit balances.

Community Banking Operating Results:

Percent

Three months ended June 30,Favorable/

(In thousands) 2020 2019 (Unfavorable)

Net interest income $104,870 $107,838 (2.8) %

Non-interest income 23,405 27,675 (15.4)

Operating revenue 128,275 135,513 (5.3)

Non-interest expense 93,686 96,166 2.6

Pre-tax, pre-provision net revenue$34,589 $39,347 (12.1)



Percent

At June 30, Increase/

(In millions) 2020 2019 (Decrease)

Loans $9,317 $8,265 12.7 %

Deposits 14,173 12,480 13.6

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 $4.8 million to $34.6 million in the quarter as compared to prior year. Net interest income decreased $3.0 million to $104.9 million, due to the decreasing credit value of deposits, partially offset by balance growth in the loan and deposit portfolios. Non-interest income decreased $4.3 million driven by lower deposit-related service charges which were partially offset by higher deposit balances. Non-interest expense decreased $2.5 million to $93.7 million resulting from lower loan operations and other costs.

Consolidated financial performance:

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

* Net interest income was $224.4 million compared to $241.8 million. * Net interest margin was 2.99 percent compared to 3.63 percent. The yield on interest-earning assets declined by 104 basis points, and the cost of interest-bearing liabilities declined by 41 basis points. * Average interest-earning assets totaled $30.4 billion and grew by $3.7 billion, or 14.0 percent. * Average loans totaled $21.6 billion and grew by $2.6 billion, or 13.6 percent. * Average deposits totaled $25.9 billion and grew by $3.2 billion, or 14.0 percent.

Quarterly provision for credit losses:

* The provision for credit losses was $40.0 million in the quarter, contributing to a $23.6 million increase in the allowance for credit losses on loans and leases. The increase in the allowance reflects our revised estimate of forecasted economic conditions. The provision for credit losses was $76.0 million in the prior quarter and $11.9 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 $16.4 million, compared to $7.8 million in the prior quarter and $11.6 million a year ago. The ratio of net charge-offs to average loans on an annualized basis was 0.30 percent, compared to 0.15 percent in the prior quarter and 0.24 percent a year ago. * The allowance for credit losses on loans and leases represented 1.64 percent of total loans at June 30, 2020, compared to 1.60 percent at March 31, 2020 and 1.10 percent at June 30, 2019. Excluding $1.4 billion of PPP loans, the coverage ratio was 1.75 percent at June 30, 2020. The allowance for credit losses at June 30 and March 31 was estimated in accordance with the CECL accounting standard. The allowance represented 207 percent of nonperforming loans at June 30, 2020 compared to 206 percent at March 31, 2020 and 143 percent at June 30, 2019.

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

* Total non-interest income was $60.1 million compared to $75.9 million, a decrease of $15.8 million. This reflects a decrease of $11.0 million in other income primarily due to a $5.5 million discrete fair value adjustment related to customer derivatives and a $7.3 million decrease in deposit service fees due to lower NSF, account related, and interchange fees. These decreases were partially offset by an increase of $3.3 million in mortgage banking activities due to higher origination volume.

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

* Total non-interest expense was $176.6 million compared to $180.6 million, a decrease of $4.1 million. This reflects decreases of $6.8 million in other expenses due to lower pension, legal, and other variable operating expenses. Offsetting this were increases of $1.7 million in technology and equipment due to infrastructure investment and $1.2 million in compensation and benefits due to annual merit increases and other benefits.

Quarterly income taxes compared to the second quarter of 2019:

* Income tax expense was $14.8 million compared to $26.5 million and the effective tax rate was 21.8 percent compared to 21.1 percent. * The higher effective tax rate in the quarter primarily reflects a higher level of net discrete tax benefits recognized during the a year ago period, partially offset by the effects of lower pre-tax income in 2020 compared to 2019.

Investment securities:

* Total investment securities were $8.7 billion, compared to $8.5 billion at March 31, 2020 and $7.6 billion at June 30, 2019. The carrying value of the available-for-sale portfolio included $87.2 million of net unrealized gains, compared to $3.1 million at March 31, 2020 and $12.0 million of net unrealized losses at June 30, 2019. The carrying value of the held-to-maturity portfolio does not reflect $268.4 million of net unrealized gains, compared to $156.3 million at March 31, 2020 and $37.8 million of net unrealized losses at June 30, 2019.

Loans:

* Total loans were $21.8 billion, compared to $20.9 billion at March 31, 2020 and $19.3 billion at June 30, 2019. Compared to March 31, 2020, commercial loans increased by $980.8 million, commercial real estate loans increased by $84.8 million, while consumer loans decreased by $84.7 million and residential mortgages decreased by $69.9 million. * Compared to a year ago, commercial loans increased by $1.521 billion, with PPP loans representing $1.356 billion of the increase. Commercial real estate loans increased by $982.9 million and residential mortgages increased by $202.9 million, while consumer loans decreased by $174.4 million. * Loan originations for portfolio were $2.817 billion, or $1.413 billion excluding PPP loan originations, compared to $1.195 billion in the prior quarter and $1.382 billion a year ago. In addition, $115 million of residential loans were originated for sale in the quarter, compared to $60 million in the prior quarter and $41 million a year ago.

Asset quality:

* Total nonperforming loans were $173.1 million, or 0.79 percent of total loans, compared to $162.3 million, or 0.78 percent of total loans, at March 31, 2020 and $148.1 million, or 0.77 percent of total loans, at June 30, 2019. Total paying nonperforming loans were $58.0 million, compared to $61.9 million at March 31, 2020 and $52.9 million at June 30, 2019. * Past due loans were $39.8 million, compared to $37.0 million at March 31, 2020 and $32.3 million at June 30, 2019.

Deposits and borrowings:

* Total deposits were $26.4 billion, compared to $24.5 billion at March 31, 2020 and $22.6 billion at June 30, 2019. Core deposits to total deposits were 89.9 percent, compared to 87.8 percent at March 31, 2020 and 85.3 percent at June 30, 2019. The loan to deposit ratio was 82.7 percent, compared to 85.2 percent at March 31, 2020 and 85.3 percent at June 30, 2019. * Total borrowings were $2.8 billion, compared to $3.6 billion at March 31, 2020 and $2.9 billion at June 30, 2019.

Capital:

* The return on average common shareholders' equity and the return on average tangible common shareholders' equity were 6.79 percent and 8.47 percent, respectively, compared to 13.47 percent and 16.88 percent, respectively, in the second quarter of 2019. * The tangible equity and tangible common equity ratios were 8.14 percent and 7.69 percent, respectively, compared to 8.82 percent and 8.31 percent, respectively, at June 30, 2019. The common equity tier 1 risk-based capital ratio was 11.19 percent, compared to 11.41 percent at June 30, 2019. * Book value and tangible book value per common share were $33.59 and $27.40, respectively, compared to $31.74 and $25.63, respectively, at June 30, 2019.

***

About Webster

Webster Financial Corporation is the holding company for Webster Bank, National Association and its HSA Bank division. With $32.7 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust, and investment services through 157 banking centers and 306 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 second quarter 2020 earnings announcement will be held today, Thursday, July 23, 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.

WEBSTER FINANCIAL CORPORATIONSelected Financial Highlights (unaudited)

At or for the Three Months Ended

(In thousands, except per share data) June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019

Income and performance ratios:

Net income $ 53,097 $ 38,199 $ 90,473 $ 93,865 $ 98,649

Earnings applicable to common shareholders 50,729 36,021 88,066 91,442 96,193

Earnings per diluted common share 0.57 0.39 0.96 1.00 1.05

Return on average assets 0.65 % 0.50 % 1.19 % 1.27 % 1.38 %

Return on average tangible common shareholders' equity (non-GAAP) 8.47 5.95 14.34 15.37 16.88

Return on average common shareholders' equity 6.79 4.75 11.60 12.36 13.47

Non-interest income as a percentage of total revenue 21.12 24.12 23.47 22.52 23.88

Asset quality:

Allowance for credit losses on loans and leases $ 358,522 $ 334,931 $ 209,096 $ 209,152 $ 211,671

Nonperforming assets 178,381 169,120 157,380 166,716 153,247

Allowance for credit losses on loans and leases / total loans and leases 1.64 % 1.60 % 1.04 % 1.07 % 1.10 %

Net charge-offs / average loans and leases (annualized) 0.30 0.15 0.12 0.28 0.24

Nonperforming loans and leases / total loans and leases 0.79 0.78 0.75 0.83 0.77

Nonperforming assets / total loans and leases plus OREO 0.82 0.81 0.79 0.85 0.80

Allowance for credit losses on loans and leases / nonperforming loans and 207.17 206.37 138.56 128.55 142.97leases

Other ratios:

Tangible equity (non-GAAP) 8.14 % 8.14 % 8.88 % 8.83 % 8.82 %

Tangible common equity (non-GAAP) 7.69 7.67 8.39 8.34 8.31

Tier 1 risk-based capital ^(a) 11.84 11.60 12.22 12.32 12.09

Total risk-based capital ^(a) 13.44 13.10 13.55 13.68 13.48

Common equity tier 1 risk-based capital ^(a) 11.19 10.95 11.56 11.63 11.41

Shareholders' equity / total assets 9.71 9.76 10.56 10.54 10.59

Net interest margin 2.99 3.23 3.27 3.49 3.63

Efficiency ratio (non-GAAP) 60.04 58.03 58.52 56.60 56.09

Equity and share related:

Common equity $ 3,029,742 $ 2,945,205 $ 3,062,733 $ 3,007,357 $ 2,920,180

Book value per common share 33.59 32.66 33.28 32.68 31.74

Tangible book value per common share (non-GAAP) 27.40 26.46 27.19 26.58 25.63

Common stock closing price 28.61 22.90 53.36 46.87 47.77

Dividends declared per common share 0.40 0.40 0.40 0.40 0.40

Common shares issued and outstanding 90,194 90,172 92,027 92,034 92,007

Weighted-average common shares outstanding - Basic 89,485 90,936 91,574 91,559 91,534

Weighted-average common shares outstanding - Diluted 89,570 91,206 91,916 91,874 91,855

(a) Presented as projected for June 30, 2020 and actual for the remainingperiods. In accordance with regulatory capital rules, the Company electedan option to delay the estimated impact of CECL on its regulatory capitalover a five-year transition period ending December 31, 2024. As a result,capital ratios and amounts as of June 30, 2020 exclude the impact of theincreased allowance for credit losses on loans, held-to-maturity debtsecurities and unfunded loan commitments attributed to the adoption ofCECL.

WEBSTER FINANCIAL CORPORATIONConsolidated Balance Sheets (unaudited)

(In thousands) June 30, 2020 March 31, 2020 June 30, 2019

Assets:

Cash and due from banks $ 198,680 $ 198,458 $ 190,828

Interest-bearing deposits 104,444 69,482 26,652

Securities:

Available for sale 3,183,624 3,016,631 2,978,657

Held to maturity 5,477,126 5,486,206 4,636,707

Total securities 8,660,750 8,502,837 7,615,364

Allowance for credit losses on investment securities held-to-maturity (309) (312) -

Securities, net 8,660,441 8,502,525 7,615,364

Loans held for sale 46,446 22,448 19,249

Loans and Leases:

Commercial 8,546,769 7,565,947 7,025,506

Commercial real estate 6,207,314 6,122,474 5,224,382

Residential mortgages 4,921,573 4,991,512 4,718,704

Consumer 2,126,861 2,211,591 2,301,291

Total loans and leases 21,802,517 20,891,524 19,269,883

Allowance for credit losses on loans and leases (358,522) (334,931) (211,671)

Loans and leases, net 21,443,995 20,556,593 19,058,212

Federal Home Loan Bank and Federal Reserve Bank stock 94,495 141,327 118,371

Premises and equipment, net 258,392 268,420 278,227

Goodwill and other intangible assets, net 558,367 559,328 562,214

Cash surrender value of life insurance policies 557,325 554,231 546,963

Deferred tax asset, net 77,145 80,318 73,462

Accrued interest receivable and other assets 708,887 701,744 452,501

Total Assets $ 32,708,617 $ 31,654,874 $ 28,942,043

Liabilities and Shareholders' Equity:

Deposits:

Demand $ 6,193,757 $ 4,883,436 $ 4,174,806

Health savings accounts 6,786,845 6,736,178 6,212,372

Interest-bearing checking 3,280,125 3,007,069 2,636,109

Money market 2,686,650 2,477,304 2,073,006

Savings 4,742,573 4,418,689 4,169,492

Certificates of deposit 2,666,047 2,891,161 3,291,617

Brokered certificates of deposit - 100,000 41,376

Total deposits 26,355,997 24,513,837 22,598,778

Securities sold under agreements to repurchase and other borrowings 1,688,805 1,262,749 956,920

Federal Home Loan Bank advances 523,321 1,773,399 1,426,656

Long-term debt 570,029 571,212 538,379

Accrued expenses and other liabilities 395,686 443,435 356,093

Total liabilities 29,533,838 28,564,632 25,876,826

Preferred stock 145,037 145,037 145,037

Common shareholders' equity 3,029,742 2,945,205 2,920,180

Total shareholders' equity 3,174,779 3,090,242 3,065,217

Total Liabilities and Shareholders' Equity $ 32,708,617 $ 31,654,874 $ 28,942,043

WEBSTER FINANCIAL CORPORATIONConsolidated Statements of Income (unaudited)

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except per share data) 2020 2019 2020 2019

Interest income:

Interest and fees on loans and leases $ 196,521 $ 235,949 $ 412,708 $ 464,713

Interest and dividends on securities 55,570 56,163 113,678 113,441

Loans held for sale 184 145 359 293

Total interest income 252,275 292,257 526,745 578,447

Interest expense:

Deposits 18,805 32,757 46,648 63,777

Borrowings 9,063 17,713 24,889 31,332

Total interest expense 27,868 50,470 71,537 95,109

Net interest income 224,407 241,787 455,208 483,338

Provision for credit losses 40,000 11,900 116,000 20,500

Net interest income after provision for loan and lease losses 184,407 229,887 339,208 462,838

Non-interest income:

Deposit service fees 35,839 43,118 78,409 86,142

Loan and lease related fees 6,968 6,558 13,464 14,377

Wealth and investment services 7,102 8,309 15,841 15,960

Mortgage banking activities 4,205 932 7,098 1,696

Increase in cash surrender value of life insurance policies 3,624 3,650 7,204 7,234

Gain on investment securities, net - - 8 -

Other income 2,338 13,286 11,430 19,056

Total non-interest income 60,076 75,853 133,454 144,465

Non-interest expense:

Compensation and benefits 99,731 98,527 201,618 196,312

Occupancy 14,245 14,019 28,730 28,715

Technology and equipment 27,468 25,767 55,305 51,464

Marketing 3,286 4,243 6,788 7,571

Professional and outside services 6,158 5,634 11,821 11,682

Intangible assets amortization 962 962 1,924 1,924

Loan workout expenses 392 832 885 1,492

Deposit insurance 5,015 4,453 9,740 8,883

Other expenses 19,327 26,203 38,609 48,283

Total non-interest expense 176,584 180,640 355,420 356,326

Income before income taxes 67,899 125,100 117,242 250,977

Income tax expense 14,802 26,451 25,946 52,592

Net income 53,097 98,649 91,296 198,385

Preferred stock dividends and other (2,368) (2,456) (4,530) (4,902)

Earnings applicable to common shareholders $ 50,729 $ 96,193 $ 86,766 $ 193,483

Weighted-average common shares outstanding - Diluted 89,570 91,855 90,391 91,898

Earnings per common share:

Basic $ 0.57 $ 1.05 $ 0.96 $ 2.11

Diluted 0.57 1.05 0.96 2.11

WEBSTER FINANCIAL CORPORATIONFive Quarter Consolidated Statements of Income (unaudited)

Three Months Ended

(In thousands, except per share data) June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019

Interest income:

Interest and fees on loans and leases $ 196,521 $ 216,187 $ 223,527 $ 236,453 $ 235,949

Interest and dividends on securities 55,570 58,108 58,205 57,517 56,163

Loans held for sale 184 175 268 166 145

Total interest income 252,275 274,470 282,000 294,136 292,257

Interest expense:

Deposits 18,805 27,843 31,586 34,214 32,757

Borrowings 9,063 15,826 19,164 19,383 17,713

Total interest expense 27,868 43,669 50,750 53,597 50,470

Net interest income 224,407 230,801 231,250 240,539 241,787

Provision for credit losses 40,000 76,000 6,000 11,300 11,900

Net interest income after provision for loan and lease 184,407 154,801 225,250 229,239 229,887losses

Non-interest income:

Deposit service fees 35,839 42,570 40,470 41,410 43,118

Loan and lease related fees 6,968 6,496 8,704 8,246 6,558

Wealth and investment services 7,102 8,739 8,476 8,496 8,309

Mortgage banking activities 4,205 2,893 2,286 2,133 932

Increase in cash surrender value of life insurance policies 3,624 3,580 3,670 3,708 3,650

Gain on investment securities, net - 8 29 - -

Other income 2,338 9,092 7,284 5,938 13,286

Total non-interest income 60,076 73,378 70,919 69,931 75,853

Non-interest expense:

Compensation and benefits 99,731 101,887 100,467 98,623 98,527

Occupancy 14,245 14,485 14,379 14,087 14,019

Technology and equipment 27,468 27,837 27,639 26,180 25,767

Marketing 3,286 3,502 3,957 4,758 4,243

Professional and outside services 6,158 5,663 4,674 5,024 5,634

Intangible assets amortization 962 962 962 961 962

Loan workout expenses 392 493 474 986 832

Deposit insurance 5,015 4,725 4,662 4,409 4,453

Other expenses 19,327 19,282 22,516 24,866 26,203

Total non-interest expense 176,584 178,836 179,730 179,894 180,640

Income before income taxes 67,899 49,343 116,439 119,276 125,100

Income tax expense 14,802 11,144 25,966 25,411 26,451

Net income 53,097 38,199 90,473 93,865 98,649

Preferred stock dividends and other (2,368) (2,178) (2,407) (2,423) (2,456)

Earnings applicable to common shareholders $ 50,729 $ 36,021 $ 88,066 $ 91,442 $ 96,193

Weighted-average common shares outstanding - Diluted 89,570 91,206 91,916 91,874 91,855

Earnings per common share:

Basic $ 0.57 $ 0.40 $ 0.96 $ 1.00 $ 1.05

Diluted 0.57 0.39 0.96 1.00 1.05

WEBSTER FINANCIAL CORPORATIONConsolidated Average Balances, Interest, Yields and Rates, and Net InterestMargin on a Fully Tax-equivalent Basis (unaudited)

Three Months Ended June 30,

2020 2019

(Dollars in thousands) Average balance Interest Yield/rate Average balance Interest Yield/rate

Assets:

Interest-earning assets:

Loans and leases $ 21,608,914 $ 197,317 3.63 % $ 19,030,278 $ 236,620 4.94 %

Securities ^(a) 8,579,213 56,465 2.69 7,472,731 56,501 3.01

Federal Home Loan and Federal Reserve Bank stock 108,962 865 3.19 108,244 1,117 4.14

Interest-bearing deposits 99,467 5 0.02 50,131 309 2.44

Loans held for sale 24,266 184 3.03 23,210 145 2.49

Total interest-earning assets 30,420,822 $ 254,836 3.35 % 26,684,594 $ 294,692 4.39 %

Non-interest-earning assets 2,062,534 1,855,077

Total Assets $ 32,483,356 $ 28,539,671

Liabilities and Shareholders' Equity:

Interest-bearing liabilities:

Demand deposits $ 5,823,655 $ - - % $ 4,266,938 $ - - %

Health savings accounts 6,846,210 2,604 0.15 6,223,570 3,066 0.20

Interest-bearing checking, money market and savings 10,390,143 6,462 0.25 8,934,579 13,132 0.59

Certificates of deposit 2,869,471 9,739 1.36 3,323,203 16,559 2.00

Total deposits 25,929,479 18,805 0.29 22,748,290 32,757 0.58

Securities sold under agreements to repurchase and 1,577,881 980 0.25 788,194 3,904 1.96other borrowings

Federal Home Loan Bank advances 839,830 3,748 1.77 1,117,285 7,772 2.75

Long-term debt ^(a) 570,679 4,335 3.31 527,713 6,037 4.62

Total borrowings 2,988,390 9,063 1.23 2,433,192 17,713 2.90

Total interest-bearing liabilities 28,917,869 $ 27,868 0.39 % 25,181,482 $ 50,470 0.80 %

Non-interest-bearing liabilities 410,119 341,648

Total liabilities 29,327,988 25,523,130

Preferred stock 145,037 145,037

Common shareholders' equity 3,010,331 2,871,504

Total shareholders' equity 3,155,368 3,016,541

Total Liabilities and Shareholders' Equity $ 32,483,356 $ 28,539,671

Tax-equivalent net interest income 226,968 244,222

Less: tax-equivalent adjustments (2,561) (2,435)

Net interest income $ 224,407 $ 241,787

Net interest margin 2.99 % 3.63 %

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

WEBSTER FINANCIAL CORPORATIONConsolidated Average Balances, Interest, Yields and Rates, and Net InterestMargin on a Fully Tax-equivalent Basis (unaudited)

Six Months Ended June 30,

2020 2019

(Dollars in thousands) Average Interest Yield/ Average Interest Yield/ balance rate balance rate

Assets:

Interest-earning assets:

Loans and leases $ 20,966,857 $ 414,235 3.93 % $ 18,771,166 $ 466,005 4.95 %

Securities ^(a) 8,449,480 114,873 2.77 7,391,290 113,455 3.05

Federal Home Loan and Federal Reserve Bank stock 117,663 2,116 3.62 110,617 2,829 5.16

Interest-bearing deposits 83,887 196 0.46 52,737 638 2.41

Loans held for sale 23,281 359 3.08 18,358 293 3.19

Total interest-earning assets 29,641,168 $ 531,779 3.59 % 26,344,168 $ 583,220 4.41 %

Non-interest-earning assets 1,996,765 1,825,418

Total Assets $ 31,637,933 $ 28,169,586

Liabilities and Shareholders' Equity:

Interest-bearing liabilities:

Demand deposits $ 5,170,280 $ - - % $ 4,229,611 $ - - %

Health savings accounts 6,803,784 5,900 0.17 6,182,047 6,015 0.20

Interest-bearing checking, money market and savings 10,053,559 18,865 0.38 8,946,484 25,925 0.58

Certificates of deposit 2,968,514 21,883 1.48 3,284,176 31,837 1.95

Total deposits 24,996,137 46,648 0.38 22,642,318 63,777 0.57

Securities sold under agreements to repurchase and 1,437,403 4,710 0.65 693,178 6,656 1.91other borrowings

Federal Home Loan Bank advances 1,082,865 10,617 1.94 1,118,155 15,557 2.77

Long-term debt ^(a) 560,964 9,562 3.66 389,210 9,119 4.72

Total borrowings 3,081,232 24,889 1.62 2,200,543 31,332 2.84

Total interest-bearing liabilities 28,077,369 $ 71,537 0.51 % 24,842,861 $ 95,109 0.77 %

Non-interest-bearing liabilities 386,118 350,404

Total liabilities 28,463,487 25,193,265

Preferred stock 145,037 145,037

Common shareholders' equity 3,029,409 2,831,284

Total shareholders' equity 3,174,446 2,976,321

Total Liabilities and Shareholders' Equity $ 31,637,933 $ 28,169,586

Tax-equivalent net interest income 460,242 488,111

Less: tax-equivalent adjustments (5,034) (4,773)

Net interest income $ 455,208 $ 483,338

Net interest margin 3.11 % 3.69 %

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

WEBSTER FINANCIAL CORPORATIONFive Quarter Loan and Lease Balances (unaudited)

(Dollars in thousands) June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019

Loan and Lease Balances (actual):

Commercial non-mortgage $ 7,606,245 $ 6,385,619 $ 5,833,952 $ 5,887,119 $ 5,948,388

Asset-based lending 940,524 1,180,328 1,046,886 1,122,765 1,077,118

Commercial real estate 6,207,314 6,122,474 5,949,339 5,398,084 5,224,382

Residential mortgages 4,921,573 4,991,512 4,972,685 4,873,726 4,718,704

Consumer 2,126,861 2,211,591 2,234,124 2,269,952 2,301,291

Total Loan and Lease Balances 21,802,517 20,891,524 20,036,986 19,551,646 19,269,883

Allowance for credit losses on loans and leases (358,522) (334,931) (209,096) (209,152) (211,671)

Loans and Leases, net $ 21,443,995 $ 20,556,593 $ 19,827,890 $ 19,342,494 $ 19,058,212

Loan and Lease Balances (average):

Commercial non-mortgage $ 7,318,814 $ 6,005,501 $ 5,879,600 $ 5,933,221 $ 5,914,710

Asset-based lending 1,030,928 1,085,624 1,087,537 1,138,189 1,049,403

Commercial real estate 6,136,091 5,996,728 5,667,764 5,312,403 5,079,415

Residential mortgages 4,946,746 5,013,888 4,917,365 4,802,497 4,662,033

Consumer 2,176,335 2,223,058 2,256,255 2,286,983 2,324,717

Total Loan and Lease Balances 21,608,914 20,324,799 19,808,521 19,473,293 19,030,278

Allowance for credit losses on loans and leases (340,050) (269,273) (211,460) (213,130) (210,719)

Loans and Leases, net $ 21,268,864 $ 20,055,526 $ 19,597,061 $ 19,260,163 $ 18,819,559

WEBSTER FINANCIAL CORPORATIONFive Quarter Past Due Loans and Leases (unaudited)

(Dollars in thousands) June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019

Nonperforming loans and leases:

Commercial non-mortgage $ 75,340 74,077 64,793 64,197 56,340

Asset-based lending 138 137 139 9,165 184

Commercial real estate 15,889 12,901 11,554 12,810 10,413

Residential mortgages 46,500 42,393 43,100 43,733 48,104

Consumer 35,187 32,785 31,320 32,794 33,015

Total nonperforming loans and leases $ 173,054 $ 162,293 $ 150,906 $ 162,699 $ 148,056

Other real estate owned and repossessed assets:

Commercial non-mortgage $ 272 121 271 544 1,307

Residential mortgages 3,081 4,480 4,247 1,912 2,012

Consumer 1,974 2,226 1,956 1,561 1,872

Total other real estate owned and repossessed assets $ 5,327 $ 6,827 $ 6,474 $ 4,017 $ 5,191

Total nonperforming assets $ 178,381 $ 169,120 $ 157,380 $ 166,716 $ 153,247

Past due 30-89 days:

Commercial non-mortgage $ 13,959 $ 8,200 $ 8,482 $ 5,384 $ 4,438

Asset-based lending - - - - -

Commercial real estate 2,363 2,217 1,700 1,433 2,665

Residential mortgages 15,445 11,814 13,598 13,445 10,844

Consumer 7,857 14,666 18,835 15,217 13,949

Total past due 30-89 days 39,624 36,897 42,615 35,479 31,896

Past due 90 days or more and accruing 198 75 - 92 410

Total past due loans and leases $ 39,822 $ 36,972 $ 42,615 $ 35,571 $ 32,306

WEBSTER FINANCIAL CORPORATIONFive Quarter Changes in the Allowance for Credit Losses on Loans and Leases(unaudited)

For the Three Months Ended

(Dollars in thousands) June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019

Beginning balance $ 334,931 $ 209,096 $ 209,152 $ 211,671 $ 211,389

Adoption of ASU No. 2016-13 - 57,568 - - -

Provision 40,003 76,085 6,000 11,300 11,900

Charge-offs:

Commercial non-mortgage 15,294 5,544 5,041 11,291 5,657

Asset-based lending - - - - -

Commercial real estate - 30 23 32 2,473

Residential mortgages 194 1,511 876 872 2,154

Consumer 2,586 3,076 3,165 3,765 4,098

Total charge-offs 18,074 10,161 9,105 15,960 14,382

Recoveries:

Commercial non-mortgage 271 558 236 173 464

Asset-based lending 10 3 33 - -

Commercial real estate 2 3 3 3 33

Residential mortgages 83 235 534 356 295

Consumer 1,296 1,544 2,243 1,609 1,972

Total recoveries 1,662 2,343 3,049 2,141 2,764

Total net charge-offs 16,412 7,818 6,056 13,819 11,618

Ending balance $ 358,522 $ 334,931 $ 209,096 $ 209,152 $ 211,671

WEBSTER FINANCIAL CORPORATIONReconciliations to GAAP Financial Measures

The Company evaluates its business based on certain ratios that utilizenon-GAAP financial measures. The Company believes the use of these non-GAAPfinancial measures provides additional clarity in assessing the results andfinancial position of the Company. Other companies may define or calculatesupplemental financial data differently.

The efficiency ratio, which measures the costs expended to generate a dollar ofrevenue, is calculated excluding certain non-operational items. Return onaverage tangible common shareholders' equity measures the Company's net incomeavailable to common shareholders, adjusted for the tax-effected amortization ofintangible assets, as a percentage of average shareholders' equity less averagepreferred stock and average goodwill and intangible assets. The tangible equityratio represents shareholders' equity less goodwill and intangible assetsdivided by total assets less goodwill and intangible assets. The tangiblecommon equity ratio represents shareholders' equity less preferred stock andgoodwill and intangible assets divided by total assets less goodwill andintangible assets. Tangible book value per common share representsshareholders' equity less preferred stock and goodwill and intangible assetsdivided by common shares outstanding at the end of the period. Core depositsexpress total deposits less time deposits. See the tables below forreconciliations of these non-GAAP financial measures with financial measuresdefined by GAAP.

At or for the Three Months Ended

(In thousands, except per share data) June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019

Efficiency ratio:

Non-interest expense (GAAP) $ 176,584 $ 178,836 $ 179,730 $ 179,894 $ 180,640

Less: Foreclosed property activity (GAAP) (217) (250) 263 (128) (55)

Intangible assets amortization (GAAP) 962 962 962 961 962

Other expenses (non-GAAP) - - - 1,750 -

Non-interest expense (non-GAAP) $ 175,839 $ 178,124 $ 178,505 $ 177,311 $ 179,733

Net interest income (GAAP) $ 224,407 $ 230,801 $ 231,250 $ 240,539 $ 241,787

Add: Tax-equivalent adjustment (non-GAAP) 2,561 2,473 2,486 2,436 2,435

Non-interest income (GAAP) 60,076 73,378 70,919 69,931 75,853

Other (non-GAAP) 293 299 402 350 354

Customer derivative fair value adjustment (GAAP) 5,511 - - - -

Less: Gain on investment securities, net (GAAP) - 8 29 - -

Income (non-GAAP) $ 292,848 $ 306,943 $ 305,028 $ 313,256 $ 320,429

Efficiency ratio (non-GAAP) 60.04 % 58.03 % 58.52 % 56.60 % 56.09 %

Return on average tangible common shareholders' equity:

Net income (GAAP) $ 53,097 $ 38,199 $ 90,473 $ 93,865 $ 98,649

Less: Preferred stock dividends (GAAP) 1,969 1,969 1,969 1,968 1,969

Add: Intangible assets amortization, tax-effected (GAAP) 760 760 760 759 760

Income adjusted for preferred stock dividends and intangible assets $ 51,888 $ 36,990 $ 89,264 $ 92,656 $ 97,440amortization (non-GAAP)

Income adjusted for preferred stock dividends and intangible assets $ 207,552 $ 147,960 $ 357,056 $ 370,624 $ 389,760amortization, annualized basis (non-GAAP)

Average shareholders' equity (non-GAAP) $ 3,155,368 $ 3,193,525 $ 3,196,563 $ 3,118,691 $ 3,016,541

Less: Average preferred stock (non-GAAP) 145,037 145,037 145,037 145,037 145,037

Average goodwill and other intangible assets (non-GAAP) 558,835 559,786 560,750 561,715 562,679

Average tangible common shareholders' equity (non-GAAP) $ 2,451,496 $ 2,488,702 $ 2,490,776 $ 2,411,939 $ 2,308,825

Return on average tangible common shareholders' equity (non-GAAP) 8.47 % 5.95 % 14.34 % 15.37 % 16.88 %

Tangible equity:

Shareholders' equity (GAAP) $ 3,174,779 $ 3,090,242 $ 3,207,770 $ 3,152,394 $ 3,065,217

Less: Goodwill and other intangible assets (GAAP) 558,367 559,328 560,290 561,252 562,214

Tangible shareholders' equity (non-GAAP) $ 2,616,412 $ 2,530,914 $ 2,647,480 $ 2,591,142 $ 2,503,003

Total assets (GAAP) $ 32,708,617 $ 31,654,874 $ 30,389,344 $ 29,895,100 $ 28,942,043

Less: Goodwill and other intangible assets (GAAP) 558,367 559,328 560,290 561,252 562,214

Tangible assets (non-GAAP) $ 32,150,250 $ 31,095,546 $ 29,829,054 $ 29,333,848 $ 28,379,829

Tangible equity (non-GAAP) 8.14 % 8.14 % 8.88 % 8.83 % 8.82 %

Tangible common equity:

Tangible shareholders' equity (non-GAAP) $ 2,616,412 $ 2,530,914 $ 2,647,480 $ 2,591,142 $ 2,503,003

Less: Preferred stock (GAAP) 145,037 145,037 145,037 145,037 145,037

Tangible common shareholders' equity (non-GAAP) $ 2,471,375 $ 2,385,877 $ 2,502,443 $ 2,446,105 $ 2,357,966

Tangible assets (non-GAAP) $ 32,150,250 $ 31,095,546 $ 29,829,054 $ 29,333,848 $ 28,379,829

Tangible common equity (non-GAAP) 7.69 % 7.67 % 8.39 % 8.34 % 8.31 %

Tangible book value per common share:

Tangible common shareholders' equity (non-GAAP) $ 2,471,375 $ 2,385,877 $ 2,502,443 $ 2,446,105 $ 2,357,966

Common shares outstanding 90,194 90,172 92,027 92,034 92,007

Tangible book value per common share (non-GAAP) $ 27.40 $ 26.46 $ 27.19 $ 26.58 $ 25.63

Core deposits:

Total deposits $ 26,355,997 $ 24,513,837 $ 23,324,746 $ 23,280,665 $ 22,598,778

Less: Certificates of deposit 2,666,047 2,891,161 3,104,765 3,249,860 3,291,617

Brokered certificates of deposit - 100,000 - 5,705 41,376

Core deposits (non-GAAP) $ 23,689,950 $ 21,522,676 $ 20,219,981 $ 20,025,100 $ 19,265,785

Media Contact Investor Contact

Alice Ferreira, 203-578-2610Terry Mangan, 203-578-2318

acferreira@websterbank.com tmangan@websterbank.com

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SOURCE Webster Financial Corporation