PR Newswire | Oct 22, 2020 07:31AM EDT

10/22 06:30 CDT

Webster Reports Third Quarter 2020 Earnings Of $0.75 Per Diluted Share WATERBURY, Conn., Oct. 22, 2020

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

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

Highlights for the third quarter of 2020:

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

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

Line of Business performance compared to the third quarter of 2019

Commercial Banking

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

Commercial Banking Operating Results:

Percent

Three months ended September Favorable/ 30,

(In thousands) 2020 2019 (Unfavorable)

Net interest income $107,417 $104,549 2.7 %

Non-interest income 13,099 13,987 (6.3)

Operating revenue 120,516 118,536 1.7

Non-interest expense 47,610 45,261 (5.2)

Pre-tax, pre-provision net $72,906 $73,275 (0.5) revenue



Percent

At September 30, Increase/

(In millions) 2020 2019 (Decrease)

Loans and leases $12,620 $11,121 13.5 %

Deposits 5,999 4,528 32.5

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

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

HSA Bank

Webster's HSA Bank division offers a comprehensive consumer-directed healthcare solution that includes health savings accounts, health reimbursement arrangements, flexible spending accounts and commuter benefits. Health savings accounts are distributed nationwide directly to employers and individual consumers, as well as through national and regional insurance carriers, benefit consultants and financial advisors. As of September 30, 2020, HSA Bank had $9.4 billion in total footings comprising $7.0 billion in deposit balances and $2.4 billion in assets under administration through linked investment accounts.

HSA Bank Operating Results:

Percent

Three months ended September Favorable/ 30,

(In thousands) 2020 2019 (Unfavorable)

Net interest income $39,861 $43,581 (8.5) %

Non-interest income 27,235 23,526 15.8

Operating revenue 67,096 67,107 -

Non-interest expense 34,789 32,918 (5.7)

Pre-tax, net revenue $32,307 $34,189 (5.5)



Percent

At September 30, Increase/

(Dollars in millions) 2020 2019 (Decrease)

Number of accounts (thousands) 2,968 2,992 (0.8) %



Deposits $6,976 $6,288 10.9

Linked investment accounts * 2,454 1,875 30.9

Total footings $9,430 $8,163 15.5

* Linked investment accounts are held off balance sheet

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

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

Community Banking

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

Community Banking Operating Results:

Percent

Three months ended September Favorable/ 30,

(In thousands) 2020 2019 (Unfavorable)

Net interest income $108,218 $104,613 3.4 %

Non-interest income 28,970 28,115 3.0

Operating revenue 137,188 132,728 3.4

Non-interest expense 98,991 99,835 0.8

Pre-tax, pre-provision net $38,197 $32,893 16.1 revenue



Percent

At September 30, Increase/

(In millions) 2020 2019 (Decrease)

Loans $9,232 $8,430 9.5 %

Deposits 13,950 12,462 11.9

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

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

Consolidated financial performance:

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

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

Quarterly provision for credit losses:

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

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

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

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

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

Quarterly income taxes compared to the third quarter of 2019:

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

Investment securities:

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

Loans:

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

Asset quality:

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

Deposits and borrowings:

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

Capital:

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

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

Conference Call

A conference call covering Webster's third quarter 2020 earnings announcement will be held today, Thursday, October 22, 2020 at 9:00 a.m. (Eastern) and may be heard through Webster's Investor Relations website at www.wbst.com, or in listen-only mode by calling 877-407-8289 or 201-689-8341 internationally. The call will be archived on the website and available for future retrieval.

Forward-Looking Statements

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking statements can be identified by words such as "believes," "anticipates," "expects," "intends," "targeted," "continue," "remain," "will," "should," "may," "plans," "estimates," and similar references to future periods; however, such words are not the exclusive means of identifying such statements. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items; (ii) statements of plans, objectives, and expectations of Webster or its management or Board of Directors; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Forward-looking statements are based on Webster's current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Webster's actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: (1) our ability to successfully execute our business plan and manage our risks; (2) local, regional, national, and international economic conditions and the impact they may have on us and our customers; (3) volatility and disruption in national and international financial markets; (4) the potential adverse effects of the ongoing novel coronavirus (COVID-19) pandemic and any governmental or societal responses thereto, or other unusual and infrequently occurring events; (5) changes in the level of nonperforming assets and charge-offs; (6) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (7) adverse conditions in the securities markets that lead to impairment in the value of our investment securities; (8) inflation, changes in interest rate, and monetary fluctuations; (9) the timely development and acceptance of new products and services and the perceived value of those products and services by customers; (10) changes in deposit flows, consumer spending, borrowings, and savings habits; (11) our ability to implement new technologies and maintain secure and reliable technology systems; (12) performance by our counterparties and vendors; (13) our ability to increase market share and control expenses; (14) changes in the competitive environment among banks, financial holding companies, and other financial services providers; (15) changes in laws and regulations (including those concerning taxes, banking, securities, insurance, and healthcare) with which we and our subsidiaries must comply, including recent and potential legislative and regulatory changes in response to the COVID-19 pandemic such as the CARES Act and the rules and regulations that may be promulgated thereunder; (16) the effect of changes in accounting policies and practices applicable to us, including changes in our allowance for loan and lease losses and other impacts of recently adopted accounting guidance regarding the recognition of credit losses; (17) legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; and (18) the other factors that are described in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q under the headings "Risk Factors" and "Management Discussion and Analysis of Financial Condition and Results of Operation." Any forward-looking statement made by the Company in this release speaks only as of the date on which it is made. Factors or events that could cause the Company's actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Non-GAAP Financial Measures

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

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

Media Contact Investor Contact

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

acferreira@websterbank.com tmangan@websterbank.com

WEBSTER FINANCIAL CORPORATIONSelected Financial Highlights (unaudited)

At or for the Three Months Ended

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

Income and performance ratios:

Net income $ 69,281 $ 53,097 $ 38,199 $ 90,473 $ 93,865

Earnings applicable to common shareholders 66,890 50,729 36,021 88,066 91,442

Earnings per diluted common share 0.75 0.57 0.39 0.96 1.00

Return on average assets 0.84 % 0.65 % 0.50 % 1.19 % 1.27 %

Return on average tangible common shareholders' equity (non-GAAP) 10.91 8.47 5.95 14.34 15.37

Return on average common shareholders' equity 8.80 6.79 4.75 11.60 12.36

Non-interest income as a percentage of total revenue 25.50 21.12 24.12 23.47 22.52

Asset quality:

Allowance for credit losses on loans and leases $ 369,811 $ 358,522 $ 334,931 $ 209,096 $ 209,152

Nonperforming assets 167,314 178,381 169,120 157,380 166,716

Allowance for credit losses on loans and leases / total loans and leases 1.69 % 1.64 % 1.60 % 1.04 % 1.07 %

Net charge-offs / average loans and leases (annualized) 0.21 0.30 0.15 0.12 0.28

Nonperforming loans and leases / total loans and leases 0.74 0.79 0.78 0.75 0.83

Nonperforming assets / total loans and leases plus OREO 0.77 0.82 0.81 0.79 0.85

Allowance for credit losses on loans and leases / nonperforming loans and 227.39 207.17 206.37 138.56 128.55leases

Other ratios:

Tangible equity (non-GAAP) 8.19 % 8.14 % 8.14 % 8.88 % 8.83 %

Tangible common equity (non-GAAP) 7.75 7.69 7.67 8.39 8.34

Tier 1 risk-based capital ^(a) 11.88 11.82 11.60 12.22 12.32

Total risk-based capital ^(a) 13.47 13.42 13.10 13.55 13.68

Common equity tier 1 risk-based capital ^(a) 11.23 11.17 10.95 11.56 11.63

Shareholders' equity / total assets 9.76 9.71 9.76 10.56 10.54

Net interest margin 2.88 2.99 3.23 3.27 3.49

Efficiency ratio (non-GAAP) 59.99 60.04 58.03 58.52 56.60

Equity and share related:

Common equity $ 3,074,653 $ 3,029,742 $ 2,945,205 $ 3,062,733 $ 3,007,357

Book value per common share 34.09 33.59 32.66 33.28 32.68

Tangible book value per common share (non-GAAP) 27.86 27.40 26.46 27.19 26.58

Common stock closing price 26.41 28.61 22.90 53.36 46.87

Dividends declared per common share 0.40 0.40 0.40 0.40 0.40

Common shares issued and outstanding 90,204 90,194 90,172 92,027 92,034

Weighted-average common shares outstanding - Basic 89,630 89,485 90,936 91,574 91,559

Weighted-average common shares outstanding - Diluted 89,738 89,570 91,206 91,916 91,874

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

WEBSTER FINANCIAL CORPORATIONConsolidated Balance Sheets (unaudited)

(In thousands) September 30, 2020 June 30, 2020 September 30, 2019

Assets:

Cash and due from banks $ 181,524 $ 198,680 $ 227,966

Interest-bearing deposits 60,276 104,444 74,865

Securities:

Available for sale 3,304,217 3,183,624 2,960,103

Held to maturity 5,723,434 5,477,126 5,193,521

Total securities 9,027,651 8,660,750 8,153,624

Allowance for credit losses on investment securities held-to-maturity (306) (309) -

Securities, net 9,027,345 8,660,441 8,153,624

Loans held for sale 29,018 46,446 27,061

Loans and Leases:

Commercial 8,612,549 8,546,769 7,009,884

Commercial real estate 6,307,567 6,207,314 5,398,084

Residential mortgages 4,885,821 4,921,573 4,873,726

Consumer 2,046,086 2,126,861 2,269,952

Total loans and leases 21,852,023 21,802,517 19,551,646

Allowance for credit losses on loans and leases (369,811) (358,522) (209,152)

Loans and leases, net 21,482,212 21,443,995 19,342,494

Federal Home Loan Bank and Federal Reserve Bank stock 89,611 94,495 116,984

Premises and equipment, net 250,535 258,392 278,642

Goodwill and other intangible assets, net 561,902 558,367 561,252

Cash surrender value of life insurance policies 561,021 557,325 549,335

Deferred tax asset, net 76,695 77,145 59,956

Accrued interest receivable and other assets 674,304 708,887 502,921

Total Assets $ 32,994,443 $ 32,708,617 $ 29,895,100

Liabilities and Shareholders' Equity:

Deposits:

Demand $ 6,136,814 $ 6,193,757 $ 4,291,659

Health savings accounts 6,976,280 6,786,845 6,288,218

Interest-bearing checking 3,390,921 3,280,125 2,619,452

Money market 3,069,098 2,686,650 2,560,918

Savings 4,777,000 4,742,573 4,264,853

Certificates of deposit 2,570,440 2,666,047 3,249,860

Brokered certificates of deposit - - 5,705

Total deposits 26,920,553 26,355,997 23,280,665

Securities sold under agreements to repurchase and other borrowings 1,301,822 1,688,805 1,210,692

Federal Home Loan Bank advances 433,243 523,321 1,392,849

Long-term debt 568,846 570,029 549,158

Accrued expenses and other liabilities 550,289 395,686 309,342

Total liabilities 29,774,753 29,533,838 26,742,706

Preferred stock 145,037 145,037 145,037

Common shareholders' equity 3,074,653 3,029,742 3,007,357

Total shareholders' equity 3,219,690 3,174,779 3,152,394

Total Liabilities and Shareholders' Equity $ 32,994,443 $ 32,708,617 $ 29,895,100

WEBSTER FINANCIAL CORPORATIONConsolidated Statements of Income (unaudited)

Three Months Ended September 30, Nine Months Ended September 30,

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

Interest income:

Interest and fees on loans and leases $ 188,001 $ 236,453 $ 600,709 $ 701,166

Interest and dividends on securities 51,009 57,517 164,687 170,958

Loans held for sale 229 166 588 459

Total interest income 239,239 294,136 765,984 872,583

Interest expense:

Deposits 12,598 34,214 59,246 97,991

Borrowings 7,385 19,383 32,274 50,715

Total interest expense 19,983 53,597 91,520 148,706

Net interest income 219,256 240,539 674,464 723,877

Provision for credit losses 22,750 11,300 138,750 31,800

Net interest income after provision for loan and lease losses 196,506 229,239 535,714 692,077

Non-interest income:

Deposit service fees 39,278 41,410 117,687 127,552

Loan and lease related fees 6,568 8,246 20,032 22,623

Wealth and investment services 8,255 8,496 24,096 24,456

Mortgage banking activities 7,087 2,133 14,185 3,829

Increase in cash surrender value of life insurance policies 3,695 3,708 10,899 10,942

Gain on investment securities, net - - 8 -

Other income 10,177 5,938 21,607 24,994

Total non-interest income 75,060 69,931 208,514 214,396

Non-interest expense:

Compensation and benefits 104,019 98,623 305,637 294,935

Occupancy 14,275 14,087 43,005 42,802

Technology and equipment 27,846 26,180 83,151 77,644

Marketing 3,852 4,758 10,640 12,329

Professional and outside services 9,223 5,024 21,044 16,706

Intangible assets amortization 1,089 961 3,013 2,885

Loan workout expenses 612 986 1,497 2,478

Deposit insurance 4,204 4,409 13,944 13,292

Other expenses 18,876 24,866 57,485 73,149

Total non-interest expense 183,996 179,894 539,416 536,220

Income before income taxes 87,570 119,276 204,812 370,253

Income tax expense 18,289 25,411 44,235 78,003

Net income 69,281 93,865 160,577 292,250

Preferred stock dividends and other (2,391) (2,423) (6,819) (7,331)

Earnings applicable to common shareholders $ 66,890 $ 91,442 $ 153,758 $ 284,919

Weighted-average common shares outstanding - Diluted 89,738 91,874 90,235 91,883

Earnings per common share:

Basic $ 0.75 $ 1.00 $ 1.71 $ 3.11

Diluted 0.75 1.00 1.70 3.10

WEBSTER FINANCIAL CORPORATIONFive Quarter Consolidated Statements of Income (unaudited)

Three Months Ended

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

Interest income:

Interest and fees on loans and leases $ 188,001 $ 196,521 $ 216,187 $ 223,527 $ 236,453

Interest and dividends on securities 51,009 55,570 58,108 58,205 57,517

Loans held for sale 229 184 175 268 166

Total interest income 239,239 252,275 274,470 282,000 294,136

Interest expense:

Deposits 12,598 18,805 27,843 31,586 34,214

Borrowings 7,385 9,063 15,826 19,164 19,383

Total interest expense 19,983 27,868 43,669 50,750 53,597

Net interest income 219,256 224,407 230,801 231,250 240,539

Provision for credit losses 22,750 40,000 76,000 6,000 11,300

Net interest income after provision for loan and lease losses 196,506 184,407 154,801 225,250 229,239

Non-interest income:

Deposit service fees 39,278 35,839 42,570 40,470 41,410

Loan and lease related fees 6,568 6,968 6,496 8,704 8,246

Wealth and investment services 8,255 7,102 8,739 8,476 8,496

Mortgage banking activities 7,087 4,205 2,893 2,286 2,133

Increase in cash surrender value of life insurance policies 3,695 3,624 3,580 3,670 3,708

Gain on investment securities, net - - 8 29 -

Other income 10,177 2,338 9,092 7,284 5,938

Total non-interest income 75,060 60,076 73,378 70,919 69,931

Non-interest expense:

Compensation and benefits 104,019 99,731 101,887 100,467 98,623

Occupancy 14,275 14,245 14,485 14,379 14,087

Technology and equipment 27,846 27,468 27,837 27,639 26,180

Marketing 3,852 3,286 3,502 3,957 4,758

Professional and outside services 9,223 6,158 5,663 4,674 5,024

Intangible assets amortization 1,089 962 962 962 961

Loan workout expenses 612 392 493 474 986

Deposit insurance 4,204 5,015 4,725 4,662 4,409

Other expenses 18,876 19,327 19,282 22,516 24,866

Total non-interest expense 183,996 176,584 178,836 179,730 179,894

Income before income taxes 87,570 67,899 49,343 116,439 119,276

Income tax expense 18,289 14,802 11,144 25,966 25,411

Net income 69,281 53,097 38,199 90,473 93,865

Preferred stock dividends and other (2,391) (2,368) (2,178) (2,407) (2,423)

Earnings applicable to common shareholders $ 66,890 $ 50,729 $ 36,021 $ 88,066 $ 91,442

Weighted-average common shares outstanding - Diluted 89,738 89,570 91,206 91,916 91,874

Earnings per common share:

Basic $ 0.75 $ 0.57 $ 0.40 $ 0.96 $ 1.00

Diluted 0.75 0.57 0.39 0.96 1.00

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

Three Months Ended September 30,

2020 2019

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

Assets:

Interest-earning assets:

Loans and leases $ 21,870,740 $ 188,865 3.40 % $ 19,473,293 $ 237,131 4.80 %

Securities ^(a) 8,762,692 52,154 2.47 7,929,568 57,810 2.93

Federal Home Loan and Federal Reserve Bank stock 91,232 600 2.62 104,975 1,120 4.23

Interest-bearing deposits 102,059 26 0.10 63,751 345 2.12

Loans held for sale 31,211 229 2.94 20,301 166 3.29

Total interest-earning assets 30,857,934 $ 241,874 3.13 % 27,591,888 $ 296,572 4.25 %

Non-interest-earning assets 2,057,503 1,965,521

Total Assets $ 32,915,437 $ 29,557,409

Liabilities and Shareholders' Equity:

Interest-bearing liabilities:

Demand deposits $ 6,228,436 $ - - % $ 4,322,932 $ - - %

Health savings accounts 6,953,641 2,073 0.12 6,274,341 3,135 0.20

Interest-bearing checking, money market and savings 11,167,653 3,983 0.14 9,256,189 14,697 0.63

Certificates of deposit 2,589,888 6,542 1.00 3,301,588 16,382 1.97

Total deposits 26,939,618 12,598 0.19 23,155,050 34,214 0.59

Securities sold under agreements to repurchase and other borrowings 1,225,616 608 0.19 1,362,877 6,571 1.89

Federal Home Loan Bank advances 449,085 2,528 2.20 1,017,787 6,910 2.66

Long-term debt ^(a) 569,425 4,249 3.25 543,869 5,902 4.52

Total borrowings 2,244,126 7,385 1.33 2,924,533 19,383 2.63

Total interest-bearing liabilities 29,183,744 $ 19,983 0.27 % 26,079,583 $ 53,597 0.81 %

Non-interest-bearing liabilities 526,363 359,135

Total liabilities 29,710,107 26,438,718

Preferred stock 145,037 145,037

Common shareholders' equity 3,060,293 2,973,654

Total shareholders' equity 3,205,330 3,118,691

Total Liabilities and Shareholders' Equity $ 32,915,437 $ 29,557,409

Tax-equivalent net interest income 221,891 242,975

Less: tax-equivalent adjustments (2,635) (2,436)

Net interest income $ 219,256 $ 240,539

Net interest margin 2.88 % 3.49 %

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

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

Nine Months Ended September 30,

2020 2019

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

Assets:

Interest-earning assets:

Loans and leases $ 21,270,350 $ 603,100 3.75 % $ 19,007,780 $ 703,136 4.90 %

Securities ^(a) 8,554,646 167,027 2.67 7,572,687 171,265 3.01

Federal Home Loan and Federal Reserve Bank stock 108,788 2,716 3.33 108,716 3,949 4.86

Interest-bearing deposits 89,989 222 0.32 56,449 983 2.30

Loans held for sale 25,944 588 3.02 19,013 459 3.22

Total interest-earning assets 30,049,717 $ 773,653 3.43 % 26,764,645 $ 879,792 4.36 %

Non-interest-earning assets 2,017,159 1,872,632

Total Assets $ 32,066,876 $ 28,637,277

Liabilities and Shareholders' Equity:

Interest-bearing liabilities:

Demand deposits $ 5,525,573 $ - - % $ 4,261,060 $ - - %

Health savings accounts 6,854,101 7,973 0.16 6,213,150 9,150 0.20

Interest-bearing checking, money market and savings 10,427,634 22,848 0.29 9,050,853 40,622 0.60

Certificates of deposit 2,841,385 28,425 1.34 3,290,044 48,219 1.96

Total deposits 25,648,693 59,246 0.31 22,815,107 97,991 0.57

Securities sold under agreements to repurchase and other borrowings 1,366,292 5,318 0.51 918,864 13,227 1.90

Federal Home Loan Bank advances 870,063 13,145 1.98 1,084,332 22,467 2.73

Long-term debt ^(a) 563,805 13,811 3.52 441,329 15,021 4.63

Total borrowings 2,800,160 32,274 1.55 2,444,525 50,715 2.75

Total interest-bearing liabilities 28,448,853 $ 91,520 0.43 % 25,259,632 $ 148,706 0.78 %

Non-interest-bearing liabilities 433,207 353,346

Total liabilities 28,882,060 25,612,978

Preferred stock 145,037 145,037

Common shareholders' equity 3,039,779 2,879,262

Total shareholders' equity 3,184,816 3,024,299

Total Liabilities and Shareholders' Equity $ 32,066,876 $ 28,637,277

Tax-equivalent net interest income 682,133 731,086

Less: tax-equivalent adjustments (7,669) (7,209)

Net interest income $ 674,464 $ 723,877

Net interest margin 3.03 % 3.62 %

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

WEBSTER FINANCIAL CORPORATIONFive Quarter Loan and Lease Balances (unaudited)

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

Loan and Lease Balances (actual):

Commercial non-mortgage $ 7,722,838 $ 7,606,245 $ 6,385,619 $ 5,833,952 $ 5,887,119

Asset-based lending 889,711 940,524 1,180,328 1,046,886 1,122,765

Commercial real estate 6,307,567 6,207,314 6,122,474 5,949,339 5,398,084

Residential mortgages 4,885,821 4,921,573 4,991,512 4,972,685 4,873,726

Consumer 2,046,086 2,126,861 2,211,591 2,234,124 2,269,952

Total Loan and Lease Balances 21,852,023 21,802,517 20,891,524 20,036,986 19,551,646

Allowance for credit losses on loans and leases (369,811) (358,522) (334,931) (209,096) (209,152)

Loans and Leases, net $ 21,482,212 $ 21,443,995 $ 20,556,593 $ 19,827,890 $ 19,342,494

Loan and Lease Balances (average):

Commercial non-mortgage $ 7,683,879 $ 7,318,814 $ 6,005,501 $ 5,879,600 $ 5,933,221

Asset-based lending 922,653 1,030,928 1,085,624 1,087,537 1,138,189

Commercial real estate 6,260,114 6,136,091 5,996,728 5,667,764 5,312,403

Residential mortgages 4,914,368 4,946,746 5,013,888 4,917,365 4,802,497

Consumer 2,089,726 2,176,335 2,223,058 2,256,255 2,286,983

Total Loan and Lease Balances 21,870,740 21,608,914 20,324,799 19,808,521 19,473,293

Allowance for credit losses on loans and leases (363,552) (340,050) (269,273) (211,460) (213,130)

Loans and Leases, net $ 21,507,188 $ 21,268,864 $ 20,055,526 $ 19,597,061 $ 19,260,163

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

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

Nonperforming loans and leases:

Commercial non-mortgage $ 75,080 75,340 74,077 64,793 64,197

Asset-based lending 3,789 138 137 139 9,165

Commercial real estate 8,784 15,889 12,901 11,554 12,810

Residential mortgages 41,498 46,500 42,393 43,100 43,733

Consumer 33,485 35,187 32,785 31,320 32,794

Total nonperforming loans and leases $ 162,636 $ 173,054 $ 162,293 $ 150,906 $ 162,699

Other real estate owned and repossessed assets:

Commercial non-mortgage $ 175 272 121 271 544

Residential mortgages 3,899 3,081 4,480 4,247 1,912

Consumer 604 1,974 2,226 1,956 1,561

Total other real estate owned and repossessed assets $ 4,678 $ 5,327 $ 6,827 $ 6,474 $ 4,017

Total nonperforming assets $ 167,314 $ 178,381 $ 169,120 $ 157,380 $ 166,716

Past due 30-89 days:

Commercial non-mortgage $ 3,821 $ 13,959 $ 8,200 $ 8,482 $ 5,384

Asset-based lending - - - - -

Commercial real estate 329 2,363 2,217 1,700 1,433

Residential mortgages 9,291 15,445 11,814 13,598 13,445

Consumer 8,349 7,857 14,666 18,835 15,217

Total past due 30-89 days 21,790 39,624 36,897 42,615 35,479

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

Total past due loans and leases $ 21,790 $ 39,822 $ 36,972 $ 42,615 $ 35,571

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

For the Three Months Ended

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

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

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

Provision 22,753 40,003 76,085 6,000 11,300

Charge-offs:

Commercial non-mortgage 12,085 15,294 5,544 5,041 11,291

Asset-based lending 10 - - - -

Commercial real estate 1,399 - 30 23 32

Residential mortgages 546 194 1,511 876 872

Consumer 1,717 2,586 3,076 3,165 3,765

Total charge-offs 15,757 18,074 10,161 9,105 15,960

Recoveries:

Commercial non-mortgage 1,978 271 558 236 173

Asset-based lending - 10 3 33 -

Commercial real estate 47 2 3 3 3

Residential mortgages 521 83 235 534 356

Consumer 1,747 1,296 1,544 2,243 1,609

Total recoveries 4,293 1,662 2,343 3,049 2,141

Total net charge-offs 11,464 16,412 7,818 6,056 13,819

Ending balance $ 369,811 $ 358,522 $ 334,931 $ 209,096 $ 209,152

WEBSTER FINANCIAL 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) September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019

Efficiency ratio:

Non-interest expense (GAAP) $ 183,996 $ 176,584 $ 178,836 $ 179,730 $ 179,894

Less: Foreclosed property activity (GAAP) (201) (217) (250) 263 (128)

Intangible assets amortization (GAAP) 1,089 962 962 962 961

Other expenses (non-GAAP) 4,786 - - - 1,750

Non-interest expense (non-GAAP) $ 178,322 $ 175,839 $ 178,124 $ 178,505 $ 177,311

Net interest income (GAAP) $ 219,256 $ 224,407 $ 230,801 $ 231,250 $ 240,539

Add: Tax-equivalent adjustment (non-GAAP) 2,635 2,561 2,473 2,486 2,436

Non-interest income (GAAP) 75,060 60,076 73,378 70,919 69,931

Other (non-GAAP) 297 293 299 402 350

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

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

Income (non-GAAP) $ 297,248 $ 292,848 $ 306,943 $ 305,028 $ 313,256

Efficiency ratio (non-GAAP) 59.99 % 60.04 % 58.03 % 58.52 % 56.60 %

Return on average tangible common shareholders' equity:

Net income (GAAP) $ 69,281 $ 53,097 $ 38,199 $ 90,473 $ 93,865

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

Add: Intangible assets amortization, tax-effected (GAAP) 860 760 760 760 759

Income adjusted for preferred stock dividends and intangible $ 68,172 $ 51,888 $ 36,990 $ 89,264 $ 92,656assets amortization (non-GAAP)

Income adjusted for preferred stock dividends and intangible $ 272,688 $ 207,552 $ 147,960 $ 357,056 $ 370,624assets amortization, annualized basis (non-GAAP)

Average shareholders' equity (non-GAAP) $ 3,205,330 $ 3,155,368 $ 3,193,525 $ 3,196,563 $ 3,118,691

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

Average goodwill and other intangible assets (non-GAAP) 560,959 558,835 559,786 560,750 561,715

Average tangible common shareholders' equity (non-GAAP) $ 2,499,334 $ 2,451,496 $ 2,488,702 $ 2,490,776 $ 2,411,939

Return on average tangible common shareholders' equity (non-GAAP) 10.91 % 8.47 % 5.95 % 14.34 % 15.37 %

Tangible equity:

Shareholders' equity (GAAP) $ 3,219,690 $ 3,174,779 $ 3,090,242 $ 3,207,770 $ 3,152,394

Less: Goodwill and other intangible assets (GAAP) 561,902 558,367 559,328 560,290 561,252

Tangible shareholders' equity (non-GAAP) $ 2,657,788 $ 2,616,412 $ 2,530,914 $ 2,647,480 $ 2,591,142

Total assets (GAAP) $ 32,994,443 $ 32,708,617 $ 31,654,874 $ 30,389,344 $ 29,895,100

Less: Goodwill and other intangible assets (GAAP) 561,902 558,367 559,328 560,290 561,252

Tangible assets (non-GAAP) $ 32,432,541 $ 32,150,250 $ 31,095,546 $ 29,829,054 $ 29,333,848

Tangible equity (non-GAAP) 8.19 % 8.14 % 8.14 % 8.88 % 8.83 %

Tangible common equity:

Tangible shareholders' equity (non-GAAP) $ 2,657,788 $ 2,616,412 $ 2,530,914 $ 2,647,480 $ 2,591,142

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

Tangible common shareholders' equity (non-GAAP) $ 2,512,751 $ 2,471,375 $ 2,385,877 $ 2,502,443 $ 2,446,105

Tangible assets (non-GAAP) $ 32,432,541 $ 32,150,250 $ 31,095,546 $ 29,829,054 $ 29,333,848

Tangible common equity (non-GAAP) 7.75 % 7.69 % 7.67 % 8.39 % 8.34 %

Tangible book value per common share:

Tangible common shareholders' equity (non-GAAP) $ 2,512,751 $ 2,471,375 $ 2,385,877 $ 2,502,443 $ 2,446,105

Common shares outstanding 90,204 90,194 90,172 92,027 92,034

Tangible book value per common share (non-GAAP) $ 27.86 $ 27.40 $ 26.46 $ 27.19 $ 26.58

Core deposits:

Total deposits $ 26,920,553 $ 26,355,997 $ 24,513,837 $ 23,324,746 $ 23,280,665

Less: Certificates of deposit 2,570,440 2,666,047 2,891,161 3,104,765 3,249,860

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

Core deposits (non-GAAP) $ 24,350,113 $ 23,689,950 $ 21,522,676 $ 20,219,981 $ 20,025,100

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SOURCE Webster Financial Corporation