PR Newswire | Jan 21, 2021 07:31AM EST

01/21 06:30 CST

Webster Reports Fourth Quarter 2020 Earnings of $0.64 Per Diluted Share WATERBURY, Conn., Jan. 21, 2021

WATERBURY, Conn., Jan. 21, 2021 /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 $57.7 million, or $0.64 per diluted share, for the quarter ended December 31, 2020, compared to $88.1 million, or $0.96 per diluted share, for the quarter ended December 31, 2019. Earnings per diluted share would have been $0.99 for the quarter ended December 31, 2020, adjusting for $42.0 million ($31.2 million after tax) of charges related to strategic optimization initiatives.

For the full year 2020, earnings applicable to common shareholders was $211.5 million, or $2.35 per diluted share, and includes $52.2 million ($38.8 million after tax) of adjustments.

"I am pleased with the results of the quarter as we continue to deliver for our customers and communities as evidenced, in part, by $1.9 billion of quarterly loan originations while maintaining solid credit quality," said John R. Ciulla, chairman and chief executive officer. "We remain focused on our strategic priorities and positioning ourselves for growth as the macro environment improves in 2021."

Highlights for the fourth quarter of 2020:

* Revenue of $293.7 million; $297.4 million excluding $3.7 million in hedge termination costs related to debt prepayments. * Loan growth of $1.6 billion, or 8.0 percent from a year ago, led by commercial and commercial real estate, which increased 16.1 percent. Excluding Paycheck Protection Program (PPP) loans, total loan growth was $348 million, or 1.7 percent. * Results include a Current Expected Credit Loss (CECL) provision of $(1.0) million with a reserve decrease of $10.4 million compared to the prior quarter, resulting in an allowance coverage of 1.66 percent, or 1.76 percent excluding $1.3 billion of PPP loans. * Deposit growth of $4.0 billion, or 17.2 percent from a year ago, with growth of $1.7 billion in demand deposits and $704 million in HSA deposits. * Results include $42.0 million of charges related to strategic optimization initiatives. * Net interest margin of 2.83 percent. * Efficiency ratio (non-GAAP) of 60.3 percent.

"Our continued strong liquidity enabled us to reduce borrowings by $608 million in the quarter and $1.8 billion from a year ago," said Glenn MacInnes, executive vice president and chief financial officer. "The strength of our balance sheet supports our future growth objectives."

Line of Business performance compared to the fourth 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 December 31, 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 December Favorable/ 31,

(In thousands) 2020 2019 (Unfavorable)

Net interest income $112,274 $100,151 12.1 %

Non-interest income 17,303 16,420 5.4

Operating revenue 129,577 116,571 11.2

Non-interest expense 48,724 45,505 (7.1)

Pre-tax, pre-provision net $80,853 $71,066 13.8 revenue



Percent

At December 31, Increase/

(In millions) 2020 2019 (Decrease)

Loans and leases $12,649 $11,500 10.0 %

Deposits 5,957 4,382 35.9

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 $9.8 million to $80.9 million in the quarter as compared to prior year. Net interest income increased $12.1 million to $112.3 million, primarily driven by loan and deposit growth. Non-interest income increased $0.9 million to $17.3 million as a result of higher loan related fees. Non-interest expense increased $3.2 million to $48.7 million, primarily due to compensation related expense.

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 December 31, 2020, HSA Bank had $10.0 billion in total footings comprising $7.1 billion in deposit balances and $2.9 billion in assets under administration through linked investment accounts.

HSA Bank Operating Results:

Percent

Three months ended December 31,Favorable/

(In thousands) 2020 2019 (Unfavorable)

Net interest income $40,495 $41,993 (3.6) %

Non-interest income 24,105 22,959 5.0

Operating revenue 64,600 64,952 (0.5)

Non-interest expense 34,750 34,893 0.4

Pre-tax, net revenue $29,850 $30,059 (0.7)



Percent

At December 31, Increase/

(Dollars in millions) 2020 2019 (Decrease)

Number of accounts (thousands) 2,953 2,974 (0.7) %



Deposits $7,120 $6,416 11.0

Linked investment accounts * 2,853 2,071 37.8

Total footings $9,973 $8,487 17.5

* 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 $0.2 million to $29.9 million in the quarter as compared to prior year. Net interest income decreased $1.5 million to $40.5 million, due to a decline in deposit spreads partially offset by an 11.0 percent growth in deposits. Non-interest income increased $1.1 million to $24.1 million, due primarily to account fees and increased interchange as a result of additional spending compared to the prior year. Non-interest expense decreased $0.1 million to $34.8 million, essentially flat to the prior year.

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 155 banking centers and 297 ATMs, a customer care center, and a full range of web and mobile-based banking services. As of December 31, 2020, Community Banking had $9.0 billion in loans and $14.3 billion in deposit balances.

Community Banking Operating Results:

Percent

Three months ended December Favorable/ 31,

(In thousands) 2020 2019 (Unfavorable)

Net interest income $110,421 $102,157 8.1 %

Non-interest income 26,284 28,098 (6.5)

Operating revenue 136,705 130,255 5.0

Non-interest expense 98,952 97,323 (1.7)

Pre-tax, pre-provision net $37,753 $32,932 14.6 revenue



Percent

At December 31, Increase/

(In millions) 2020 2019 (Decrease)

Loans $8,992 $8,537 5.3 %

Deposits 14,258 12,528 13.8

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 $4.8 million to $37.8 million in the quarter as compared to prior year. Net interest income increased $8.3 million to $110.4 million, driven by loan and deposit balance growth, partially offset by a decline in deposit spreads due to the lower interest rate environment. Non-interest income decreased $1.8 million resulting from lower deposit-related service charges, as well as lower loan servicing fees in the current quarter. This decrease was partially offset by fee income from mortgage banking activities. Non-interest expense increased $1.6 million to $99.0 million due to continued investments in technology and outside services.

Consolidated financial performance:

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

* Net interest income was $216.9 million compared to $231.3 million. * Net interest margin was 2.83 percent compared to 3.27 percent. The yield on interest-earning assets declined by 90 basis points, and the cost of interest-bearing liabilities declined by 49 basis points. * Average interest-earning assets totaled $30.9 billion and grew by $2.5 billion, or 8.9 percent. * Average loans totaled $21.7 billion and grew by $1.9 billion, or 9.7 percent. * Average deposits totaled $27.2 billion and grew by $3.9 billion, or 16.5 percent.

Quarterly provision for credit losses:

* The provision for credit losses was $(1.0) million in the quarter, contributing to a $10.4 million decrease in the allowance for credit losses on loans and leases. The decrease in the allowance reflects our current estimate of forecasted economic conditions. The provision for credit losses was $22.8 million in the prior quarter and $6.0 million a year ago. The reserve release reflects continued favorable credit trends. * Net charge-offs were $9.4 million, compared to $11.5 million in the prior quarter and $6.1 million a year ago. The ratio of net charge-offs to average loans on an annualized basis was 0.17 percent, compared to 0.21 percent in the prior quarter and 0.12 percent a year ago. * The allowance for credit losses on loans and leases represented 1.66 percent of total loans at December 31, 2020, compared to 1.69 percent at September 30, 2020 and 1.04 percent at December 31, 2019. Excluding $1.3 billion of risk free PPP loans, the coverage ratio was 1.76 percent at December 31, 2020, compared to 1.80 percent at September 30, 2020 after excluding $1.4 billion of risk free PPP loans. The allowance for credit losses at December 31 and September 30 was estimated in accordance with the CECL accounting standard. The allowance represented 214 percent of nonperforming loans at December 31, 2020 compared to 227 percent at September 30, 2020 and 139 percent at December 31, 2019.

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

* Total non-interest income was $76.8 million compared to $70.9 million, an increase of $5.8 million. This reflects an increase of $5.1 million due to direct investment income, mark to market on customer derivatives, and miscellaneous fee income; an increase of $1.8 million in mortgage banking activities primarily due to higher origination volume and spreads on loans originated for sale; and an increase of $1.1 million in HSA fee income driven primarily by higher account service fees. These increases were partially offset by a $3.0 decrease in deposit service fees driven by lower overdraft and service related fees.

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

* Total non-interest expense was $219.5 million compared to $179.7 million, an increase of $39.8 million. This reflects strategic optimization initiative charges of $38.3 million: $17.9 million in compensation and benefits; $14.0 million in occupancy; $5.5 million in professional and outside services; and $0.9 million in other expenses. Excluding these charges, non-interest expense increased $1.5 million. This reflects an increase in compensation and benefits of $4.4 million and an increase in technology and equipment of $1.4 million offset by a decrease in other expenses of $4.4 million primarily due to lower pension, travel, and OREO costs.

Quarterly income taxes compared to the fourth quarter of 2019:

* Income tax expense was $15.1 million compared to $26.0 million and the effective tax rate was 20.1 percent compared to 22.3 percent. * The lower effective tax rate in the quarter primarily reflects the effects of reduced pre-tax income in 2020 compared to 2019.

Investment securities:

* Total investment securities were $8.9 billion, compared to $9.0 billion at September 30, 2020 and $8.2 billion at December 31, 2019. The carrying value of the available-for-sale portfolio included $92.5 million of net unrealized gains, compared to $103.1 million at September 30, 2020 and $24.4 million of net unrealized gains at December 31, 2019. The carrying value of the held-to-maturity portfolio does not reflect $267.2 million of net unrealized gains, compared to $283.0 million at September 30, 2020 and $86.7 million of net unrealized gains at December 31, 2019.

Loans:

* Total loans were $21.6 billion, compared to $21.9 billion at September 30, 2020 and $20.0 billion at December 31, 2019. Compared to September 30, 2020, commercial loans increased by $34.7 million, commercial real estate loans increased by $15.1 million, while consumer loans decreased by $87.4 million and residential mortgages decreased by $103.8 million. * Compared to a year ago, commercial loans increased by $1.697 billion, with PPP loans representing $1.3 billion of the increase. Commercial real estate loans increased by $373.3 million and residential mortgages increased by $190.7 million, while consumer loans decreased by $275.5 million. * Loan originations for the portfolio were $1.804 billion, compared to $1.560 billion in the prior quarter ($1.525 billion excluding PPP loan originations), and $1.919 billion a year ago. In addition, $125 million of residential loans were originated for sale in the quarter, compared to $149 million in the prior quarter and $94 million a year ago.

Asset quality:

* Total nonperforming loans were $168.0 million, or 0.78 percent of total loans, compared to $162.6 million, or 0.74 percent of total loans, at September 30, 2020 and $150.9 million, or 0.75 percent of total loans, at December 31, 2019. Total paying nonperforming loans were $59.7 million, compared to $67.4 million at September 30, 2020 and $59.0 million at December 31, 2019. * Past due loans were $32.9 million, compared to $21.8 million at September 30, 2020 and $42.6 million at December 31, 2019.

Deposits and borrowings:

* Total deposits were $27.3 billion, compared to $26.9 billion at September 30, 2020 and $23.3 billion at December 31, 2019. Core deposits to total deposits were 90.9 percent, compared to 90.5 percent at September 30, 2020 and 86.7 percent at December 31, 2019. The loan to deposit ratio was 79.2 percent, compared to 81.2 percent at September 30, 2020 and 85.9 percent at December 31, 2019. * Total borrowings were $1.7 billion, compared to $2.3 billion at September 30, 2020 and $3.5 billion at December 31, 2019.

Capital:

* The return on average common shareholders' equity and the return on average tangible common shareholders' equity were 7.51 percent and 9.31 percent, respectively, compared to 11.60 percent and 14.34 percent, respectively, in the fourth quarter of 2019. * The tangible equity and tangible common equity ratios were 8.35 percent and 7.90 percent, respectively, compared to 8.88 percent and 8.39 percent, respectively, at December 31, 2019. The common equity tier 1 risk-based capital ratio was 11.35 percent, compared to 11.56 percent at December 31, 2019. * Book value and tangible book value per common share were $34.25 and $28.04, respectively, compared to $33.28 and $27.19, respectively, at December 31, 2019.

Webster Financial Corporation is the holding company for Webster Bank, National Association and its HSA Bank division. With $32.6 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust, and investment services through 155 banking centers and 297 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 fourth quarter 2020 earnings announcement will be held today, Thursday, January 21, 2021 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, including the deployment and efficacy of COVID-19 vaccines, or any 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) December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019

Income and performance ratios:

Net income $ 60,044 $ 69,281 $ 53,097 $ 38,199 $ 90,473

Earnings applicable to common shareholders 57,715 66,890 50,729 36,021 88,066

Earnings per diluted common share 0.64 0.75 0.57 0.39 0.96

Return on average assets 0.73 % 0.84 % 0.65 % 0.50 % 1.19 %

Return on average tangible common shareholders' equity (non-GAAP) 9.31 10.91 8.47 5.95 14.34

Return on average common shareholders' equity 7.51 8.80 6.79 4.75 11.60

Non-interest income as a percentage of total revenue 26.14 25.50 21.12 24.12 23.47

Asset quality:

Allowance for credit losses on loans and leases $ 359,431 $ 369,811 $ 358,522 $ 334,931 $ 209,096

Nonperforming assets 170,314 167,314 178,381 169,120 157,380

Allowance for credit losses on loans and leases / total loans and leases 1.66 % 1.69 % 1.64 % 1.60 % 1.04 %

Net charge-offs / average loans and leases (annualized) 0.17 0.21 0.30 0.15 0.12

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

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

Allowance for credit losses on loans and leases / nonperforming loans and 213.94 227.39 207.17 206.37 138.56leases

Other ratios:

Tangible equity (non-GAAP) 8.35 % 8.19 % 8.14 % 8.14 % 8.88 %

Tangible common equity (non-GAAP) 7.90 7.75 7.69 7.67 8.39

Tier 1 risk-based capital ^(a) 11.99 11.88 11.82 11.60 12.22

Total risk-based capital ^(a) 13.59 13.47 13.42 13.10 13.55

Common equity tier 1 risk-based capital ^(a) 11.35 11.23 11.17 10.95 11.56

Shareholders' equity / total assets 9.92 9.76 9.71 9.76 10.56

Net interest margin 2.83 2.88 2.99 3.23 3.27

Efficiency ratio (non-GAAP) 60.27 59.99 60.04 58.03 58.52

Equity and share related:

Common equity $ 3,089,588 $ 3,074,653 $ 3,029,742 $ 2,945,205 $ 3,062,733

Book value per common share 34.25 34.09 33.59 32.66 33.28

Tangible book value per common share (non-GAAP) 28.04 27.86 27.40 26.46 27.19

Common stock closing price 42.15 26.41 28.61 22.90 53.36

Dividends declared per common share 0.40 0.40 0.40 0.40 0.40

Common shares issued and outstanding 90,199 90,204 90,194 90,172 92,027

Weighted-average common shares outstanding - Basic 89,645 89,630 89,485 90,936 91,574

Weighted-average common shares outstanding - Diluted 89,915 89,738 89,570 91,206 91,916



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

WEBSTER FINANCIAL CORPORATIONConsolidated Balance Sheets (unaudited)

(In thousands) December 31, 2020 September 30, 2020 December 31, 2019

Assets:

Cash and due from banks $ 193,501 $ 181,524 $ 185,341

Interest-bearing deposits 69,603 60,276 72,554

Securities:

Available for sale 3,326,776 3,304,217 2,925,833

Held to maturity 5,568,188 5,723,434 5,293,918

Total securities 8,894,964 9,027,651 8,219,751

Allowance for credit losses on investment securities held-to-maturity (299) (306) -

Securities, net 8,894,665 9,027,345 8,219,751

Loans held for sale 14,012 29,018 36,053

Loans and Leases:

Commercial 8,577,898 8,612,549 6,880,838

Commercial real estate 6,322,637 6,307,567 5,949,339

Residential mortgages 4,782,016 4,885,821 4,972,685

Consumer 1,958,664 2,046,086 2,234,124

Total loans and leases 21,641,215 21,852,023 20,036,986

Allowance for credit losses on loans and leases (359,431) (369,811) (209,096)

Loans and leases, net 21,281,784 21,482,212 19,827,890

Federal Home Loan Bank and Federal Reserve Bank stock 77,594 89,611 149,046

Premises and equipment, net 226,743 250,535 270,413

Goodwill and other intangible assets, net 560,756 561,902 560,290

Cash surrender value of life insurance policies 564,195 561,021 550,651

Deferred tax asset, net 81,286 76,695 61,975

Accrued interest receivable and other assets 626,551 674,304 455,380

Total Assets $ 32,590,690 $ 32,994,443 $ 30,389,344

Liabilities and Shareholders' Equity:

Deposits:

Demand $ 6,155,592 $ 6,136,814 $ 4,446,463

Health savings accounts 7,120,017 6,976,280 6,416,135

Interest-bearing checking 3,652,763 3,390,921 2,689,734

Money market 2,940,215 3,069,098 2,312,840

Savings 4,979,031 4,777,000 4,354,809

Certificates of deposit 2,487,818 2,570,440 3,104,765

Total deposits 27,335,436 26,920,553 23,324,746

Securities sold under agreements to repurchase and other borrowings 995,355 1,301,822 1,040,431

Federal Home Loan Bank advances 133,164 433,243 1,948,476

Long-term debt 567,663 568,846 540,364

Accrued expenses and other liabilities 324,447 550,289 327,557

Total liabilities 29,356,065 29,774,753 27,181,574

Preferred stock 145,037 145,037 145,037

Common shareholders' equity 3,089,588 3,074,653 3,062,733

Total shareholders' equity 3,234,625 3,219,690 3,207,770

Total Liabilities and Shareholders' Equity $ 32,590,690 $ 32,994,443 $ 30,389,344

WEBSTER FINANCIAL CORPORATIONConsolidated Statements of Income (unaudited)

Three Months Ended December 31, Twelve Months Ended December 31,

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

Interest income:

Interest and fees on loans and leases $ 189,010 $ 223,527 $ 789,719 $ 924,693

Interest and dividends on securities 46,874 58,205 211,561 229,163

Loans held for sale 181 268 769 727

Total interest income 236,065 282,000 1,002,049 1,154,583

Interest expense:

Deposits 8,651 31,586 67,897 129,577

Borrowings 10,485 19,164 42,759 69,879

Total interest expense 19,136 50,750 110,656 199,456

Net interest income 216,929 231,250 891,393 955,127

Provision for credit losses (1,000) 6,000 137,750 37,800

Net interest income after provision for loan and lease losses 217,929 225,250 753,643 917,327

Non-interest income:

Deposit service fees 38,345 40,470 156,032 168,022

Loan and lease related fees 9,095 8,704 29,127 31,327

Wealth and investment services 8,820 8,476 32,916 32,932

Mortgage banking activities 4,110 2,286 18,295 6,115

Increase in cash surrender value of life insurance policies 3,662 3,670 14,561 14,612

Gain on investment securities, net - 29 8 29

Other income 12,731 7,284 34,338 32,278

Total non-interest income 76,763 70,919 285,277 285,315

Non-interest expense:

Compensation and benefits 122,754 100,467 428,391 395,402

Occupancy 28,024 14,379 71,029 57,181

Technology and equipment 29,122 27,639 112,273 105,283

Marketing 3,485 3,957 14,125 16,286

Professional and outside services 11,380 4,674 32,424 21,380

Intangible assets amortization 1,147 962 4,160 3,847

Loan workout expenses 261 474 1,758 2,952

Deposit insurance 4,372 4,662 18,316 17,954

Other expenses 18,985 22,516 76,470 95,665

Total non-interest expense 219,530 179,730 758,946 715,950

Income before income taxes 75,162 116,439 279,974 486,692

Income tax expense 15,118 25,966 59,353 103,969

Net income 60,044 90,473 220,621 382,723

Preferred stock dividends and other (2,329) (2,407) (9,147) (9,738)

Earnings applicable to common shareholders $ 57,715 $ 88,066 $ 211,474 $ 372,985

Weighted-average common shares outstanding - Diluted 89,915 91,916 90,151 91,882

Earnings per common share:

Basic $ 0.64 $ 0.96 $ 2.35 $ 4.07

Diluted 0.64 0.96 2.35 4.06

WEBSTER FINANCIAL CORPORATIONFive Quarter Consolidated Statements of Income (unaudited)

Three Months Ended

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

Interest income:

Interest and fees on loans and leases $ 189,010 $ 188,001 $ 196,521 $ 216,187 $ 223,527

Interest and dividends on securities 46,874 51,009 55,570 58,108 58,205

Loans held for sale 181 229 184 175 268

Total interest income 236,065 239,239 252,275 274,470 282,000

Interest expense:

Deposits 8,651 12,598 18,805 27,843 31,586

Borrowings 10,485 7,385 9,063 15,826 19,164

Total interest expense 19,136 19,983 27,868 43,669 50,750

Net interest income 216,929 219,256 224,407 230,801 231,250

Provision for credit losses (1,000) 22,750 40,000 76,000 6,000

Net interest income after provision for loan and lease losses 217,929 196,506 184,407 154,801 225,250

Non-interest income:

Deposit service fees 38,345 39,278 35,839 42,570 40,470

Loan and lease related fees 9,095 6,568 6,968 6,496 8,704

Wealth and investment services 8,820 8,255 7,102 8,739 8,476

Mortgage banking activities 4,110 7,087 4,205 2,893 2,286

Increase in cash surrender value of life insurance policies 3,662 3,695 3,624 3,580 3,670

Gain on investment securities, net - - - 8 29

Other income 12,731 10,177 2,338 9,092 7,284

Total non-interest income 76,763 75,060 60,076 73,378 70,919

Non-interest expense:

Compensation and benefits 122,754 104,019 99,731 101,887 100,467

Occupancy 28,024 14,275 14,245 14,485 14,379

Technology and equipment 29,122 27,846 27,468 27,837 27,639

Marketing 3,485 3,852 3,286 3,502 3,957

Professional and outside services 11,380 9,223 6,158 5,663 4,674

Intangible assets amortization 1,147 1,089 962 962 962

Loan workout expenses 261 612 392 493 474

Deposit insurance 4,372 4,204 5,015 4,725 4,662

Other expenses 18,985 18,876 19,327 19,282 22,516

Total non-interest expense 219,530 183,996 176,584 178,836 179,730

Income before income taxes 75,162 87,570 67,899 49,343 116,439

Income tax expense 15,118 18,289 14,802 11,144 25,966

Net income 60,044 69,281 53,097 38,199 90,473

Preferred stock dividends and other (2,329) (2,391) (2,368) (2,178) (2,407)

Earnings applicable to common shareholders $ 57,715 $ 66,890 $ 50,729 $ 36,021 $ 88,066

Weighted-average common shares outstanding - Diluted 89,915 89,738 89,570 91,206 91,916

Earnings per common share:

Basic $ 0.64 $ 0.75 $ 0.57 $ 0.40 $ 0.96

Diluted 0.64 0.75 0.57 0.39 0.96

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

Three Months Ended December 31,

2020 2019

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

Assets:

Interest-earning assets:

Loans and leases $ 21,729,250 $ 189,829 3.44 % $ 19,808,521 $ 224,259 4.46 %

Investment Securities ^(a) 8,923,336 48,124 2.22 8,323,512 58,724 2.86

Federal Home Loan and Federal Reserve Bank stock 85,535 484 2.25 127,770 1,007 3.13

Interest-bearing deposits 102,011 24 0.09 56,484 228 1.58

Loans held for sale 25,777 181 2.80 32,599 268 3.28

Total interest-earning assets 30,865,909 $ 238,642 3.08 % 28,348,886 $ 284,486 3.98 %

Non-interest-earning assets 2,000,217 1,969,620

Total Assets $ 32,866,126 $ 30,318,506

Liabilities and Shareholders' Equity:

Interest-bearing liabilities:

Demand deposits $ 6,213,119 $ - - % $ 4,417,167 $ - - %

Health savings accounts 7,012,813 1,557 0.09 6,320,475 3,166 0.20

Interest-bearing checking, money market and savings 11,469,937 2,400 0.08 9,420,738 13,944 0.59

Certificates of deposit 2,519,845 4,694 0.74 3,202,242 14,476 1.79

Total deposits 27,215,714 8,651 0.13 23,360,622 31,586 0.54

Securities sold under agreements to repurchase and other borrowings 1,073,014 623 0.23 1,275,293 4,726 1.45

Federal Home Loan Bank advances 313,354 5,622 7.02 1,550,528 8,932 2.25

Long-term debt ^(a) 568,237 4,240 3.24 547,584 5,506 4.21

Total borrowings 1,954,605 10,485 2.17 3,373,405 19,164 2.25

Total interest-bearing liabilities 29,170,319 $ 19,136 0.26 % 26,734,027 $ 50,750 0.75 %

Non-interest-bearing liabilities 456,586 387,916

Total liabilities 29,626,905 27,121,943

Preferred stock 145,037 145,037

Common shareholders' equity 3,094,184 3,051,526

Total shareholders' equity 3,239,221 3,196,563

Total Liabilities and Shareholders' Equity $ 32,866,126 $ 30,318,506

Tax-equivalent net interest income 219,506 233,736

Less: tax-equivalent adjustments (2,577) (2,486)

Net interest income $ 216,929 $ 231,250

Net interest margin 2.83 % 3.27 %

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

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

Twelve Months Ended December 31,

2020 2019

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

Assets:

Interest-earning assets:

Loans and leases $ 21,385,702 $ 792,929 3.71 % $ 19,209,611 $ 927,395 4.83 %

Investment Securities ^(a) 8,647,322 215,151 2.56 7,761,937 229,989 2.97

Federal Home Loan and Federal Reserve Bank stock 102,943 3,200 3.11 113,518 4,956 4.37

Interest-bearing deposits 93,011 246 0.26 56,458 1,211 2.14

Loans held for sale 25,902 769 2.97 22,437 727 3.24

Total interest-earning assets 30,254,880 $ 1,012,295 3.37 % 27,163,961 $ 1,164,278 4.29 %

Non-interest-earning assets 2,012,900 1,897,078

Total Assets $ 32,267,780 $ 29,061,039

Liabilities and Shareholders' Equity:

Interest-bearing liabilities:

Demand deposits $ 5,698,399 $ - - % $ 4,300,407 $ - - %

Health savings accounts 6,893,996 9,530 0.14 6,240,201 12,316 0.20

Interest-bearing checking, money market and savings 10,689,634 25,248 0.24 9,144,086 54,566 0.60

Certificates of deposit 2,760,561 33,119 1.20 3,267,913 62,695 1.92

Total deposits 26,042,590 67,897 0.26 22,952,607 129,577 0.56

Securities sold under agreements to repurchase and other borrowings 1,292,571 5,941 0.46 1,008,704 17,953 1.78

Federal Home Loan Bank advances 730,125 18,767 2.57 1,201,839 31,399 2.61

Long-term debt ^(a) 564,919 18,051 3.45 468,111 20,527 4.51

Total borrowings 2,587,615 42,759 1.68 2,678,654 69,879 2.62

Total interest-bearing liabilities 28,630,205 $ 110,656 0.39 % 25,631,261 $ 199,456 0.78 %

Non-interest-bearing liabilities 439,084 362,059

Total liabilities 29,069,289 25,993,320

Preferred stock 145,037 145,037

Common shareholders' equity 3,053,454 2,922,682

Total shareholders' equity 3,198,491 3,067,719

Total Liabilities and Shareholders' Equity $ 32,267,780 $ 29,061,039

Tax-equivalent net interest income 901,639 964,822

Less: tax-equivalent adjustments (10,246) (9,695)

Net interest income $ 891,393 $ 955,127

Net interest margin 3.00 % 3.55 %

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

WEBSTER FINANCIAL CORPORATIONFive Quarter Loan and Lease Balances (unaudited)

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

Loan and Lease Balances (actual):

Commercial non-mortgage $ 7,687,300 $ 7,722,838 $ 7,606,245 $ 6,385,619 $ 5,833,952

Asset-based lending 890,598 889,711 940,524 1,180,328 1,046,886

Commercial real estate 6,322,637 6,307,567 6,207,314 6,122,474 5,949,339

Residential mortgages 4,782,016 4,885,821 4,921,573 4,991,512 4,972,685

Consumer 1,958,664 2,046,086 2,126,861 2,211,591 2,234,124

Total Loan and Lease Balances 21,641,215 21,852,023 21,802,517 20,891,524 20,036,986

Allowance for credit losses on loans and leases (359,431) (369,811) (358,522) (334,931) (209,096)

Loans and Leases, net $ 21,281,784 $ 21,482,212 $ 21,443,995 $ 20,556,593 $ 19,827,890

Loan and Lease Balances (average):

Commercial non-mortgage $ 7,662,828 $ 7,683,879 $ 7,318,814 $ 6,005,501 $ 5,879,600

Asset-based lending 874,221 922,653 1,030,928 1,085,624 1,087,537

Commercial real estate 6,363,776 6,260,114 6,136,091 5,996,728 5,667,764

Residential mortgages 4,821,199 4,914,368 4,946,746 5,013,888 4,917,365

Consumer 2,007,226 2,089,726 2,176,335 2,223,058 2,256,255

Total Loan and Lease Balances 21,729,250 21,870,740 21,608,914 20,324,799 19,808,521

Allowance for credit losses on loans and leases (375,080) (363,552) (340,050) (269,273) (211,460)

Loans and Leases, net $ 21,354,170 $ 21,507,188 $ 21,268,864 $ 20,055,526 $ 19,597,061

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

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

Nonperforming loans and leases:

Commercial non-mortgage $ 71,499 75,080 75,340 74,077 64,793

Asset-based lending 2,622 3,789 138 137 139

Commercial real estate 21,222 8,784 15,889 12,901 11,554

Residential mortgages 41,033 41,498 46,500 42,393 43,100

Consumer 31,629 33,485 35,187 32,785 31,320

Total nonperforming loans and leases $ 168,005 $ 162,636 $ 173,054 $ 162,293 $ 150,906

Other real estate owned and repossessed assets:

Commercial non-mortgage $ 175 175 272 121 271

Residential mortgages 1,544 3,899 3,081 4,480 4,247

Consumer 590 604 1,974 2,226 1,956

Total other real estate owned and repossessed assets $ 2,309 $ 4,678 $ 5,327 $ 6,827 $ 6,474

Total nonperforming assets $ 170,314 $ 167,314 $ 178,381 $ 169,120 $ 157,380

Past due 30-89 days:

Commercial non-mortgage $ 8,918 $ 3,821 $ 13,959 $ 8,200 $ 8,482

Asset-based lending 1,175 - - - -

Commercial real estate 3,003 329 2,363 2,217 1,700

Residential mortgages 10,623 9,291 15,445 11,814 13,598

Consumer 8,720 8,349 7,857 14,666 18,835

Total past due 30-89 days 32,439 21,790 39,624 36,897 42,615

Past due 90 days or more and accruing 445 - 198 75 -

Total past due loans and leases $ 32,884 $ 21,790 $ 39,822 $ 36,972 $ 42,615

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

For the Three Months Ended

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

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

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

Provision (992) 22,753 40,003 76,085 6,000

Charge-offs:

Commercial non-mortgage 7,876 12,085 15,294 5,544 5,041

Asset-based lending - 10 - - -

Commercial real estate 688 1,399 - 30 23

Residential mortgages 105 546 194 1,511 876

Consumer 2,673 1,717 2,586 3,076 3,165

Total charge-offs 11,342 15,757 18,074 10,161 9,105

Recoveries:

Commercial non-mortgage 232 1,978 271 558 236

Asset-based lending 33 - 10 3 33

Commercial real estate 3 47 2 3 3

Residential mortgages 190 521 83 235 534

Consumer 1,496 1,747 1,296 1,544 2,243

Total recoveries 1,954 4,293 1,662 2,343 3,049

Total net charge-offs 9,388 11,464 16,412 7,818 6,056

Ending balance $ 359,431 $ 369,811 $ 358,522 $ 334,931 $ 209,096

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-GAAPfinancialmeasures provides additional clarity in assessing the results and financialposition of the Company. Other companies may define or calculate supplementalfinancialdata 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 forthe tax-effected amortization of intangible assets, as a percentage of averageshareholders' equity less average preferred stock and average goodwill andintangible assets. The tangible equity ratio represents shareholders' equityless goodwill and intangible assets divided by total assetsless goodwill and intangible assets. The tangible common equity ratiorepresents shareholders' equity less preferred stock and goodwill andintangible assets divided by total assets less goodwill and intangible assets.Tangible book value per common share represents shareholders'equity less preferred stock and goodwill and intangible assets divided bycommon shares outstanding at the end of the period. Core deposits express totaldeposits less time deposits, including brokered time deposits. Adjusted dilutedearnings per share (EPS) for the quarter endedDecember 31, 2020 is calculated by excluding after tax non-operational itemsfrom reported earnings applicable to common shareholders. See the tables belowfor reconciliations of these non-GAAP financial measures with financialmeasures defined by GAAP.

At or for the Three Months Ended

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

Efficiency ratio:

Non-interest expense (GAAP) $ 219,530 $ 183,996 $ 176,584 $ 178,836 $ 179,730

Less: Foreclosed property activity (GAAP) (836) (201) (217) (250) 263

Intangible assets amortization (GAAP) 1,147 1,089 962 962 962

Strategic initiatives (non-GAAP) 38,265 4,786 - - -

Non-interest expense (non-GAAP) $ 180,954 $ 178,322 $ 175,839 $ 178,124 $ 178,505

Net interest income (GAAP) $ 216,929 $ 219,256 $ 224,407 $ 230,801 $ 231,250

Add: Tax-equivalent adjustment (non-GAAP) 2,577 2,635 2,561 2,473 2,486

Non-interest income (GAAP) 76,763 75,060 60,076 73,378 70,919

Other (non-GAAP) 291 297 293 299 402

Loss on hedge terminations (GAAP) 3,680 - - - -

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

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

Income (non-GAAP) $ 300,240 $ 297,248 $ 292,848 $ 306,943 $ 305,028

Efficiency ratio (non-GAAP) 60.27 % 59.99 % 60.04 % 58.03 % 58.52 %

Return on average tangible common shareholders' equity:

Net income (GAAP) $ 60,044 $ 69,281 $ 53,097 $ 38,199 $ 90,473

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

Add: Intangible assets amortization, tax-effected (GAAP) 906 860 760 760 760

Income adjusted for preferred stock dividends and intangible assets $ 58,981 $ 68,173 $ 51,888 $ 36,990 $ 89,264amortization (non-GAAP)

Income adjusted for preferred stock dividends and intangible assets $ 235,924 $ 272,692 $ 207,552 $ 147,960 $ 357,056amortization, annualized basis (non-GAAP)

Average shareholders' equity (non-GAAP) $ 3,239,221 $ 3,205,330 $ 3,155,368 $ 3,193,525 $ 3,196,563

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

Average goodwill and other intangible assets (non-GAAP) 561,303 560,959 558,835 559,786 560,750

Average tangible common shareholders' equity (non-GAAP) $ 2,532,881 $ 2,499,334 $ 2,451,496 $ 2,488,702 $ 2,490,776

Return on average tangible common shareholders' equity (non-GAAP) 9.31 % 10.91 % 8.47 % 5.95 % 14.34 %

Tangible equity:

Shareholders' equity (GAAP) $ 3,234,625 $ 3,219,690 $ 3,174,779 $ 3,090,242 $ 3,207,770

Less: Goodwill and other intangible assets (GAAP) 560,756 561,902 558,367 559,328 560,290

Tangible shareholders' equity (non-GAAP) $ 2,673,869 $ 2,657,788 $ 2,616,412 $ 2,530,914 $ 2,647,480

Total assets (GAAP) $ 32,590,690 $ 32,994,443 $ 32,708,617 $ 31,654,874 $ 30,389,344

Less: Goodwill and other intangible assets (GAAP) 560,756 561,902 558,367 559,328 560,290

Tangible assets (non-GAAP) $ 32,029,934 $ 32,432,541 $ 32,150,250 $ 31,095,546 $ 29,829,054

Tangible equity (non-GAAP) 8.35 % 8.19 % 8.14 % 8.14 % 8.88 %

Tangible common equity:

Tangible shareholders' equity (non-GAAP) $ 2,673,869 $ 2,657,788 $ 2,616,412 $ 2,530,914 $ 2,647,480

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

Tangible common shareholders' equity (non-GAAP) $ 2,528,832 $ 2,512,751 $ 2,471,375 $ 2,385,877 $ 2,502,443

Tangible assets (non-GAAP) $ 32,029,934 $ 32,432,541 $ 32,150,250 $ 31,095,546 $ 29,829,054

Tangible common equity (non-GAAP) 7.90 % 7.75 % 7.69 % 7.67 % 8.39 %

Tangible book value per common share:

Tangible common shareholders' equity (non-GAAP) $ 2,528,832 $ 2,512,751 $ 2,471,375 $ 2,385,877 $ 2,502,443

Common shares outstanding 90,199 90,204 90,194 90,172 92,027

Tangible book value per common share (non-GAAP) $ 28.04 $ 27.86 $ 27.40 $ 26.46 $ 27.19

Core deposits:

Total deposits $ 27,335,436 $ 26,920,553 $ 26,355,997 $ 24,513,837 $ 23,324,746

Less: Certificates of deposit 2,487,818 2,570,440 2,666,047 2,891,161 3,104,765

Brokered certificates of deposit - - - 100,000 -

Core deposits (non-GAAP) $ 24,847,618 $ 24,350,113 $ 23,689,950 $ 21,522,676 $ 20,219,981

(In millions, except per share data)

GAAP earnings adjusted for strategic Pre-Tax After Dilutedoptimization initiatives: Tax EPS

Reported net income (GAAP) $ 75.2 $ 60.0 $ 0.64

Severance 17.9 13.2 0.15

Facilities optimization 14.5 10.7 0.12

Project costs 5.5 4.0 0.04

Dept prepayment costs 4.1 3.3 0.04

Adjusted net income (non-GAAP) $ 117.2 $ 91.2 $ 0.99

Media Contact Investor Contact

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

acferreira@websterbank.com tmangan@websterbank.com

Kristen Manginelli, 203-578-2307

kmanginelli@websterbank.com

View original content: http://www.prnewswire.com/news-releases/webster-reports-fourth-quarter-2020-earnings-of-0-64-per-diluted-share-301212489.html

SOURCE Webster Financial Corporation