PR Newswire | Oct 21, 2021 07:31AM EDT

10/21 06:30 CDT

Webster Reports Third Quarter 2021 Earnings Of $1.03 Per Diluted Share WATERBURY, Conn., Oct. 21, 2021

WATERBURY, Conn., Oct. 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 $93.2 million, or $1.03 per diluted share, for the quarter ended September 30, 2021, compared to $66.9 million, or $0.75 per diluted share, for the quarter ended September 30, 2020. Earnings per diluted share would have been $1.08 for the quarter ended September 30, 2021, adjusting for a net $5.8 million ($4.3 million after tax) of merger related costs and strategic optimization initiatives.

"Webster delivered strong financial performance as evidenced by linked quarter loan growth of 2.7%, excluding PPP, and deposit growth of 4.1%," said John R. Ciulla, chairman and chief executive officer. "While we continue to deliver for clients, communities, colleagues and shareholders, integration plans for our merger with Sterling are well established and we are prepared to execute the transaction upon receipt of all regulatory approvals."

Highlights for the third quarter of 2021:

* Revenue of $313.5 million, an increase of 6.5 percent compared to a year ago. * Loan growth of 2.7 percent linked quarter, excluding Paycheck Protection Program (PPP) loans, led by commercial and residential which increased 3.3 percent. * Current Expected Credit Loss (CECL) provision of $7.8 million with a reserve increase of $7.0 million compared to the prior quarter primarily driven by loan growth, resulting in an allowance coverage of 1.46 percent, or 1.49 percent excluding $0.4 billion of PPP loans. * Deposit growth of $1.2 billion or 4.1 percent linked quarter, with growth of $741.6 million in demand and interest-bearing checking deposits and $516.4 million in money market deposits. * Charges related to merger and strategic optimization initiatives totaled $5.8 million. * Net interest margin of 2.80 percent. * Efficiency ratio (non-GAAP) of 54.8 percent.

"Credit quality and economic conditions continued to improve, supporting favorable trends for non-performing loans and net charge-offs in the quarter," said Glenn MacInnes, executive vice president and chief financial officer. "The strength of our balance sheet continues to position us well for the future."

Line of Business performance compared to the third quarter of 2020

Commercial Banking

Webster's Commercial Banking segment serves businesses that have more than $2 million of revenue through our business banking, middle market, asset-based lending, equipment finance, commercial real estate, sponsor finance, and treasury services business units. Additionally, our Wealth group provides wealth management solutions to business owners, operators, and consumers within our targeted markets and retail footprint. As of September 30, 2021, Commercial Banking had $14.7 billion in loans and leases and $10.2 billion in deposit balances.

Commercial Banking Operating Results:

Percent

Three months ended September Favorable/ 30,

(In thousands) 2021 2020 (Unfavorable)

Net interest income $152,556 $132,026 15.5 %

Non-interest income 30,076 20,710 45.2

Operating revenue 182,632 152,736 19.6

Non-interest expense 64,917 66,482 2.4

Pre-tax, pre-provision net $117,715 $86,254 36.5 revenue



Percent

At September 30, Increase/

(In millions) 2021 2020 (Decrease)

Loans and leases $14,655 $14,544 0.8 %

Deposits 10,219 8,326 22.7

AUA / AUM (off balance sheet) 7,041 6,000 17.4

Pre-tax, pre-provision net revenue increased $31.5 million to $117.7 million in the quarter as compared to prior year. Net interest income increased $20.5 million to $152.6 million, primarily driven by PPP loan fee acceleration associated with PPP loan forgiveness, loan rates, and deposit growth. Non-interest income increased $9.4 million to $30.1 million, driven by higher syndication fees, fair value adjustments on direct investments, and trust and investment service fees. Non-interest expense decreased $1.6 million to $64.9 million, primarily driven by lower support 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, 2021, HSA Bank had $10.7 billion in total footings comprising $7.3 billion in deposit balances and $3.4 billion in assets under administration through linked investment accounts.

HSA Bank Operating Results:

Percent

Three months ended Favorable/ September 30,

(In thousands) 2021 2020 (Unfavorable)

Net interest income $42,074 $39,861 5.6 %

Non-interest income 24,756 27,235 (9.1)

Operating revenue 66,830 67,096 (0.4)

Non-interest expense 32,800 34,789 5.7

Pre-tax, net revenue $34,030 $32,307 5.3



Percent

At September 30, Increase/

(Dollars in millions) 2021 2020 (Decrease)

Number of accounts (thousands) 3,003 2,968 1.2 %



Deposits $7,329 $6,976 5.1

Linked investment accounts (off 3,427 2,454 39.6 balance sheet)

Total footings $10,756 $9,430 14.1

Pre-tax net revenue increased $1.7 million to $34.0 million in the quarter as compared to prior year. Net interest income increased $2.2 million to $42.1 million, due to growth in deposits. Non-interest income decreased $2.5 million to $24.8 million, primarily due to decreases in third-party administrator closure fees. Non-interest expense decreased $2.0 million to $32.8 million, primarily due to reduced compensation and benefits expenses.

Retail Banking

Retail Banking serves consumer and business banking customers primarily throughout southern New England and into Westchester County, New York. Retail Banking is comprised of the Consumer Lending and Small Business Banking (businesses that have less than $2 million of revenue) business units, as well as a distribution network consisting of 130 banking centers and 254 ATMs, a customer care center, and a full range of web and mobile-based banking services. As of September 30, 2021, Retail Banking had $6.9 billion in loans and $12.5 billion in deposit balances.

Retail Banking Operating Results:

Percent

Three months ended September Favorable/ 30,

(In thousands) 2021 2020 (Unfavorable)

Net interest income $98,028 $83,609 17.2 %

Non-interest income 16,998 21,359 (20.4)

Operating revenue 115,026 104,968 9.6

Non-interest expense 73,480 80,119 8.3

Pre-tax, pre-provision net $41,546 $24,849 67.2 revenue



Percent

At September 30, Increase/

(In millions) 2021 2020 (Decrease)

Loans $6,925 $7,308 (5.2) %

Deposits 12,475 11,623 7.3

Pre-tax, pre-provision net revenue increased $16.7 million to $41.5 million in the quarter as compared to prior year. Net interest income increased $14.4 million to $98.0 million, driven by PPP loan fee acceleration associated with PPP loan forgiveness, deposit balance growth, and lower interest paid on deposits, partially offset by lower consumer loan balances. Non-interest income decreased $4.4 million to $17.0 million, resulting from lower mortgage banking fee income, partially offset by higher deposit service fees. Non-interest expense decreased $6.6 million to $73.5 million, driven by lower employee-related, occupancy, technology and equipment, and marketing expenses.

Consolidated financial performance:

Quarterly net interest income compared to the third quarter of 2020:

* Net interest income was $229.7 million compared to $219.3 million. * Net interest margin was 2.80 percent compared to 2.88 percent. The yield on interest-earning assets declined by 21 basis points, and the cost of interest-bearing liabilities declined by 14 basis points. * Average interest-earning assets totaled $32.9 billion and grew by $2.0 billion, or 6.5 percent. * Average loans totaled $21.5 billion and declined by $0.3 billion, or 1.5 percent. * Average deposits totaled $29.8 billion and grew by $2.9 billion, or 10.8 percent.

Quarterly provision for credit losses:

* The provision for credit losses reflects a $7.8 million provision in the quarter, contributing to a $7.0 million increase in the allowance for credit losses on loans and leases. The increase in the allowance is based primarily on loan growth. The provision for credit losses reflected a $21.5 million benefit in the prior quarter compared to an expense of $22.8 million a year ago. * Net charge-offs (recoveries) were $0.9 million, compared to $(1.2) million in the prior quarter and $11.5 million a year ago. The ratio of net charge-offs (recoveries) to average loans on an annualized basis was 0.02 percent, compared to (0.02) percent in the prior quarter and 0.21 percent a year ago. * The allowance for credit losses on loans and leases represented 1.46 percent of total loans at September 30, 2021, compared to 1.43 percent at June 30, 2021 and 1.69 percent at September 30, 2020. Excluding $0.4 billion of risk free PPP loans, the coverage ratio was 1.49 percent at September 30, 2021, compared to 1.49 percent at June 30, 2021 excluding $0.8 billion of risk free PPP loans, and 1.80 percent at September 30, 2020 excluding $1.4 billion of risk free PPP loans. The allowance represented 309 percent of nonperforming loans at September 30, 2021 compared to 255 percent at June 30, 2021 and 227 percent at September 30, 2020.

Quarterly non-interest income compared to the third quarter of 2020:

* Total non-interest income was $83.8 million compared to $75.1 million, an increase of $8.7 million. This primarily reflects an increase of $9.0 million in other due to fair value adjustments on direct investments; $4.3 million in loan related fees driven by higher syndication and prepayment fees; $1.8 million in deposit service fees driven by higher overdraft and cash management fees; and $1.7 million primarily due to increased investment activity. These increases were partially offset by a $5.6 million decrease in mortgage banking activities which is in line with our strategic choice to originate loans for portfolio along with lower spreads on loans originated for sale and a $2.5 million decrease in HSA fee income due to prior year closure fees from third-party administrator custodial accounts and lower account service related charges.

Quarterly non-interest expense compared to the third quarter of 2020:

* Total non-interest expense was $180.2 million compared to $184.0 million, a decrease of $3.8 million. Total non-interest expense includes a net $5.8 million of merger and strategic initiative related charges compared to $4.8 million of strategic initiatives a year ago. Excluding those charges, total non-interest expense decreased $4.8 million reflecting a $2.5 million decrease in compensation and benefits, a $1.8 million decrease in occupancy, and a $0.9 million decrease in the reserve for unfunded lines.

Quarterly income taxes compared to the third quarter of 2020:

* Income tax expense was $29.8 million compared to $18.3 million, and the effective tax rate was 23.7 percent compared to 20.9 percent. The higher effective tax rate in the quarter primarily reflects the effects of increased pre-tax income in 2021 compared to 2020.

Investment securities:

* Total investment securities were $9.4 billion, compared to $8.9 billion at June 30, 2021 and $9.0 billion at September 30, 2020. The carrying value of the available-for-sale portfolio included $44.7 million of net unrealized gains, compared to $49.3 million at June 30, 2021 and $103.1 million at September 30, 2020. The carrying value of the held-to-maturity portfolio does not reflect $152.9 million of net unrealized gains, compared to $170.5 million at June 30, 2021 and $283.0 million at September 30, 2020.

Loans:

* Total loans were $21.6 billion, compared to $21.5 billion at June 30, 2021 and $21.9 billion at September 30, 2020. Compared to June 30, 2021, commercial real estate loans increased by $112.0 million while commercial loans (excluding PPP loans) increased by $189.0 million, residential mortgages increased by $311.2 million, consumer loans decreased by $59.3 million, and PPP loans decreased by $447.5 million. * Compared to a year ago, commercial real estate loans increased by $215.1 million and commercial loans (excluding PPP loans) increased by $502.5 million, while consumer loans decreased by $315.1 million and residential mortgages increased by $281.7 million. PPP loans totaled $0.4 billion at September 30, 2021. * Loan originations for the portfolio were $1.987 billion, compared to $2.333 billion ($2.269 billion excluding PPP loan originations) in the prior quarter and $1.560 billion ($1.525 billion excluding PPP loan originations) a year ago. In addition, $57 million of residential loans were originated for sale in the quarter, compared to $55 million in the prior quarter and $149 million a year ago.

Asset quality:

* Total nonperforming loans were $101.8 million, or 0.47 percent of total loans, compared to $120.7 million, or 0.56 percent of total loans, at June 30, 2021 and $162.6 million, or 0.74 percent of total loans, at September 30, 2020. As of September 30, 2021, $40.3 million of nonperforming loans were contractually current. * Past due loans were $17.1 million, compared to $18.4 million at June 30, 2021 and $21.8 million at September 30, 2020.

Deposits and borrowings:

* Total deposits were $30.0 billion, compared to $28.8 billion at June 30, 2021 and $26.9 billion at September 30, 2020. Core deposits to total deposits were 93.7 percent, compared to 93.0 percent at June 30, 2021 and 90.5 percent at September 30, 2020. The loan to deposit ratio was 71.9 percent, compared to 74.4 percent at June 30, 2021 and 81.2 percent at September 30, 2020. * Total borrowings were $1.3 billion, compared to $1.2 billion at June 30, 2021 and $2.3 billion at September 30, 2020.

Capital:

* The return on average common shareholders' equity and the return on average tangible common shareholders' equity were 11.61 percent and 14.16 percent, respectively, compared to 8.80 percent and 10.91 percent, respectively, in the third quarter of 2020. * The tangible equity and tangible common equity ratios were 8.12 percent and 7.71 percent, respectively, compared to 8.19 percent and 7.75 percent, respectively, at September 30, 2020. The common equity tier 1 risk-based capital ratio was 11.77 percent, compared to 11.23 percent at September 30, 2020. * Book value and tangible book value per common share were $35.78 and $29.63, respectively, compared to $34.09 and $27.86, respectively, at September 30, 2020.

Webster Financial Corporation is the holding company for Webster Bank, National Association and its HSA Bank division. With $35.4 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust, and investment services through 130 banking centers and 254 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 2021 earnings announcement will be held today, Thursday, October 21, 2021 at 9:00 a.m. Eastern Time. To listen to the live call, please dial 877-407-8289, or 201-689-8341 for international callers. The webcast, along with related slides, will be available on the Webster website (www.wbst.com). A replay of the conference call will be available for one week via the website listed above, beginning at approximately 11:00 a.m. (Eastern) on October 21, 2021. To access the replay, dial 877-660-6853, or 201-612-7415 for international callers. The replay conference ID number is 13723032.

Media ContactAlice Ferreira, 203-578-2610acferreira@websterbank.com

Investor ContactKristen Manginelli, 203-578-2307kmanginelli@websterbank.com

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 complete the merger with Sterling Bancorp and realize the anticipated benefits of the merger; (2) our ability to successfully execute our business plan and strategic initiatives, and manage any risks or uncertainties; (3) our ability to successfully achieve the anticipated cost reductions and operating efficiencies from our completed branch consolidations and other strategic initiatives, including process automation, organization simplification, and spending reductions, and avoid any higher than anticipated costs or delays in the ongoing implementation; (4) local, regional, national, and international economic conditions and the impact they may have on us and our customers; (5) volatility and disruption in national and international financial markets; (6) 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; (7) changes in the level of nonperforming assets and charge-offs; (8) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (9) adverse conditions in the securities markets that lead to impairment in the value of our investment securities; (10) inflation, changes in interest rates (including the replacement of LIBOR as an interest rate benchmark), and monetary fluctuations; (11) the timely development and acceptance of new products and services and the perceived value of those products and services by customers; (12) changes in deposit flows, consumer spending, borrowings, and savings habits; (13) our ability to implement new technologies and maintain secure and reliable technology systems; (14) the effects of any cyber threats, attacks or events or fraudulent activity; (15) performance by our counterparties and vendors; (16) our ability to increase market share and control expenses; (17) changes in the competitive environment among banks, financial holding companies, and other financial services providers; (18) changes in laws and regulations (including those concerning banking, taxes, dividends, securities, insurance, and healthcare) with which we and our subsidiaries must comply; (19) the effect of changes in accounting policies and practices applicable to us, including impacts of recently adopted accounting guidance; (20) legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; (21) our ability to appropriately address social, environmental, and sustainability concerns that may arise from our business activities; and (22) 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) September June 30, March 31, December September 30, 2021 2021 2021 31, 2020 30, 2020

Income and performance ratios:

Net income $ 95,713 $ 94,035 $ 108,078 $ 60,044 $ 69,281

Earnings applicable to common shareholders 93,171 91,555 105,530 57,715 66,890

Earnings per diluted common share 1.03 1.01 1.17 0.64 0.75

Return on average assets 1.10 % 1.12 % 1.31 % 0.73 % 0.84 %

Return on average tangible common shareholders' equity (non-GAAP) 14.16 14.26 16.79 9.31 10.91

Return on average common shareholders' equity 11.61 11.63 13.65 7.51 8.80

Non-interest income as a percentage of total revenue 26.73 24.77 25.54 26.14 25.50

Asset quality:

Allowance for credit losses on loans and leases $ 314,922 $ 307,945 $ 328,351 $ 359,431 $ 369,811

Nonperforming assets 104,209 123,497 152,808 170,314 167,314

Allowance for credit losses on loans and leases / total loans and leases 1.46 % 1.43 % 1.54 % 1.66 % 1.69 %

Net charge-offs (recoveries) / average loans and leases (annualized) 0.02 (0.02) 0.10 0.17 0.21

Nonperforming loans and leases / total loans and leases 0.47 0.56 0.71 0.78 0.74

Nonperforming assets / total loans and leases plus OREO 0.48 0.57 0.72 0.79 0.77

Allowance for credit losses on loans and leases / nonperforming loans and 309.44 255.05 218.29 213.94 227.39leases

Other ratios:

Tangible equity (non-GAAP) 8.12 % 8.35 % 8.30 % 8.35 % 8.19 %

Tangible common equity (non-GAAP) 7.71 7.91 7.85 7.90 7.75

Tier 1 risk-based capital ^(a) 12.39 12.30 12.55 11.99 11.88

Total risk-based capital ^(a) 13.79 13.70 14.08 13.59 13.47

Common equity tier 1 risk-based capital ^(a) 11.77 11.66 11.89 11.35 11.23

Shareholders' equity / total assets 9.57 9.86 9.84 9.92 9.76

Net interest margin 2.80 2.82 2.92 2.83 2.88

Efficiency ratio (non-GAAP) 54.84 56.64 58.46 60.27 59.99

Equity and share related:

Common equity $ 3,241,152 $ 3,184,668 $ 3,127,891 $ 3,089,588 $ 3,074,653

Book value per common share 35.78 35.15 34.60 34.25 34.09

Tangible book value per common share (non-GAAP) 29.63 28.99 28.41 28.04 27.86

Common stock closing price 54.46 53.34 55.11 42.15 26.41

Dividends declared per common share 0.40 0.40 0.40 0.40 0.40

Common shares issued and outstanding 90,588 90,594 90,410 90,199 90,204

Weighted-average common shares outstanding - Basic 90,038 90,027 89,809 89,645 89,630

Weighted-average common shares outstanding - Diluted 90,232 90,221 90,108 89,915 89,738

(a) Presented as preliminary for September 30, 2021 and actual for theremaining periods. In accordance with regulatory capital rules, theCompany elected an option to delay the estimated impact of CECL on itsregulatory capital for two years followed by a three year transitionperiod ending December 31, 2024. As a result, capital ratios and amountsas of September 30, 2021 exclude the impact of the increased allowance forcredit losses on loans, held-to-maturity debt securities and unfunded loancommitments attributed to the adoption of CECL.

WEBSTER FINANCIAL CORPORATIONConsolidated Balance Sheets (unaudited)

(In thousands) September June 30, September 30, 2021 2021 30, 2020

Assets:

Cash and due from banks $ 161,369 $ 193,430 $ 181,524

Interest-bearing deposits 2,442,790 1,386,463 60,276

Securities:

Available for sale 3,410,443 3,262,893 3,304,217

Held to maturity, net 5,986,308 5,623,243 5,723,128

Total securities, net 9,396,751 8,886,136 9,027,345

Loans held for sale 24,969 4,335 29,018

Loans and Leases:

Commercial 8,159,127 8,417,719 8,612,549

Commercial real estate 6,522,679 6,410,672 6,307,567

Residential mortgages 5,167,527 4,856,302 4,885,821

Consumer 1,731,002 1,790,308 2,046,086

Total loans and leases 21,580,335 21,475,001 21,852,023

Allowance for credit losses on loans and leases (314,922) (307,945) (369,811)

Loans and leases, net 21,265,413 21,167,056 21,482,212

Federal Home Loan Bank and Federal Reserve Bank stock 75,936 76,874 89,611

Premises and equipment, net 209,573 215,716 250,535

Goodwill and other intangible assets, net 557,360 558,485 561,902

Cash surrender value of life insurance policies 572,368 570,380 561,021

Deferred tax asset, net 96,489 78,268 76,695

Accrued interest receivable and other assets 571,240 616,609 674,304

Total Assets $ 35,374,258 $ 33,753,752 $ 32,994,443

Liabilities and Shareholders' Equity:

Deposits:

Demand $ 7,154,835 $ 6,751,373 $ 6,136,814

Health savings accounts 7,329,405 7,323,421 6,976,280

Interest-bearing checking 4,181,825 3,843,725 3,390,921

Money market 3,958,700 3,442,319 3,069,098

Savings 5,517,189 5,471,584 4,777,000

Certificates of deposit 1,884,373 2,014,544 2,570,440

Total deposits 30,026,327 28,846,966 26,920,553

Securities sold under agreements to repurchase and other borrowings 655,871 507,124 1,301,822

Federal Home Loan Bank advances 113,334 138,444 433,243

Long-term debt 564,114 565,297 568,846

Accrued expenses and other liabilities 628,423 366,216 550,289

Total liabilities 31,988,069 30,424,047 29,774,753

Preferred stock 145,037 145,037 145,037

Common shareholders' equity 3,241,152 3,184,668 3,074,653

Total shareholders' equity 3,386,189 3,329,705 3,219,690

Total Liabilities and Shareholders' Equity $ 35,374,258 $ 33,753,752 $ 32,994,443

WEBSTER FINANCIAL CORPORATIONConsolidated Statements of Income (unaudited)

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

(In thousands, except per share data) 2021 2020 2021 2020

Interest income:

Interest and fees on loans and leases $ 196,273 $ 188,001 $ 572,728 $ 600,709

Interest and dividends on securities 43,362 51,009 133,895 164,687

Loans held for sale 57 229 201 588

Total interest income 239,692 239,239 706,824 765,984

Interest expense:

Deposits 4,571 12,598 16,104 59,246

Borrowings 5,430 7,385 16,413 32,274

Total interest expense 10,001 19,983 32,517 91,520

Net interest income 229,691 219,256 674,307 674,464

Provision for credit losses 7,750 22,750 (39,500) 138,750

Net interest income after provision for loan and lease losses 221,941 196,506 713,807 535,714

Non-interest income:

Deposit service fees 40,258 39,278 122,166 117,687

Loan and lease related fees 10,881 6,568 27,056 20,032

Wealth and investment services 9,985 8,255 29,475 24,096

Mortgage banking activities 1,525 7,087 5,486 14,185

Increase in cash surrender value of life insurance policies 3,666 3,695 10,802 10,899

Gain on investment securities, net - - - 8

Other income 17,460 10,177 38,249 21,607

Total non-interest income 83,775 75,060 233,234 208,514

Non-interest expense:

Compensation and benefits 105,352 104,019 310,706 305,637

Occupancy 12,430 14,275 42,090 43,005

Technology and equipment 28,441 27,846 84,081 83,151

Marketing 3,721 3,852 9,452 10,640

Professional and outside services 7,074 9,223 37,875 21,044

Intangible assets amortization 1,124 1,089 3,395 3,013

Loan workout expenses 203 612 924 1,497

Deposit insurance 3,855 4,204 11,560 13,944

Other expenses 18,037 18,876 55,164 57,485

Total non-interest expense 180,237 183,996 555,247 539,416

Income before income taxes 125,479 87,570 391,794 204,812

Income tax expense 29,766 18,289 93,968 44,235

Net income 95,713 69,281 297,826 160,577

Preferred stock dividends and other (2,542) (2,391) (7,567) (6,819)

Earnings applicable to common shareholders $ 93,171 $ 66,890 $ 290,259 $ 153,758

Weighted-average common shares outstanding - Diluted 90,232 89,738 90,186 90,235

Earnings per common share:

Basic $ 1.03 $ 0.75 $ 3.23 $ 1.71

Diluted 1.03 0.75 3.22 1.70

WEBSTER FINANCIAL CORPORATIONFive Quarter Consolidated Statements of Income (unaudited)

Three Months Ended

(In thousands, except per share data) September June 30, March December September 30, 2021 2021 31, 2021 31, 2020 30, 2020

Interest income:

Interest and fees on loans and leases $ 196,273 $ 185,919 $ 190,536 $ 189,010 $ 188,001

Interest and dividends on securities 43,362 45,586 44,947 46,874 51,009

Loans held for sale 57 53 91 181 229

Total interest income 239,692 231,558 235,574 236,065 239,239

Interest expense:

Deposits 4,571 5,094 6,439 8,651 12,598

Borrowings 5,430 5,612 5,371 10,485 7,385

Total interest expense 10,001 10,706 11,810 19,136 19,983

Net interest income 229,691 220,852 223,764 216,929 219,256

Provision for credit losses 7,750 (21,500) (25,750) (1,000) 22,750

Net interest income after provision for loan and lease losses 221,941 242,352 249,514 217,929 196,506

Non-interest income:

Deposit service fees 40,258 41,439 40,469 38,345 39,278

Loan and lease related fees 10,881 7,862 8,313 9,095 6,568

Wealth and investment services 9,985 10,087 9,403 8,820 8,255

Mortgage banking activities 1,525 1,319 2,642 4,110 7,087

Increase in cash surrender value of life insurance policies 3,666 3,603 3,533 3,662 3,695

Other income 17,460 8,392 12,397 12,731 10,177

Total non-interest income 83,775 72,702 76,757 76,763 75,060

Non-interest expense:

Compensation and benefits 105,352 97,754 107,600 122,754 104,019

Occupancy 12,430 14,010 15,650 28,024 14,275

Technology and equipment 28,441 27,124 28,516 29,122 27,846

Marketing 3,721 3,227 2,504 3,485 3,852

Professional and outside services 7,074 21,025 9,776 11,380 9,223

Intangible assets amortization 1,124 1,132 1,139 1,147 1,089

Loan workout expenses 203 327 394 261 612

Deposit insurance 3,855 3,749 3,956 4,372 4,204

Other expenses 18,037 18,680 18,447 18,985 18,876

Total non-interest expense 180,237 187,028 187,982 219,530 183,996

Income before income taxes 125,479 128,026 138,289 75,162 87,570

Income tax expense 29,766 33,991 30,211 15,118 18,289

Net income 95,713 94,035 108,078 60,044 69,281

Preferred stock dividends and other (2,542) (2,480) (2,548) (2,329) (2,391)

Earnings applicable to common shareholders $ 93,171 $ 91,555 $ 105,530 $ 57,715 $ 66,890

Weighted-average common shares outstanding - Diluted 90,232 90,221 90,108 89,915 89,738

Earnings per common share:

Basic $ 1.03 $ 1.02 $ 1.18 $ 0.64 $ 0.75

Diluted 1.03 1.01 1.17 0.64 0.75

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

Three Months Ended September 30,

2021 2020

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

Assets:

Interest-earning assets:

Loans and leases $ 21,538,513 $ 197,015 3.60 % $ 21,870,740 $ 188,865 3.40 %

Investment securities ^(a) 8,911,291 43,868 2.01 8,762,692 52,154 2.47

Federal Home Loan and Federal 76,212 290 1.51 91,232 600 2.62Reserve Bank stock

Interest-bearing deposits ^(b) 2,334,986 896 0.15 102,059 26 0.10

Loans held for sale 11,328 57 2.03 31,211 229 2.94

Total interest-earning assets 32,872,330 $ 242,126 2.92 % 30,857,934 $ 241,874 3.13 %

Non-interest-earning assets 2,021,962 2,057,503

Total Assets $ 34,894,292 $ 32,915,437

Liabilities and Shareholders' Equity:

Interest-bearing liabilities:

Demand deposits $ 7,182,116 $ - - % $ 6,228,436 $ - - %

Health savings accounts 7,346,239 1,463 0.08 6,953,641 2,073 0.12

Interest-bearing checking, money 13,363,703 1,794 0.05 11,167,653 3,983 0.14market and savings

Certificates of deposit 1,957,286 1,314 0.27 2,589,888 6,542 1.00

Total deposits 29,849,344 4,571 0.06 26,939,618 12,598 0.19

Securities sold under agreements to 544,311 721 0.52 1,225,616 608 0.19repurchase and other borrowings

Federal Home Loan Bank advances 120,714 492 1.59 449,085 2,528 2.20

Long-term debt ^(a) 564,692 4,217 3.22 569,425 4,249 3.25

Total borrowings 1,229,717 5,430 1.82 2,244,126 7,385 1.33

Total interest-bearing liabilities 31,079,061 $ 10,001 0.13 % 29,183,744 $ 19,983 0.27 %

Non-interest-bearing liabilities 439,830 526,363

Total liabilities 31,518,891 29,710,107

Preferred stock 145,037 145,037

Common shareholders' equity 3,230,364 3,060,293

Total shareholders' equity 3,375,401 3,205,330

Total Liabilities and Shareholders' Equity $ 34,894,292 $ 32,915,437

Tax-equivalent net interest income 232,125 221,891

Less: tax-equivalent adjustments (2,434) (2,635)

Net interest income $ 229,691 $ 219,256

Net interest margin 2.80 % 2.88 %

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

(b) Interest-bearing deposits is a component of cash and cash equivalents.

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

Nine Months Ended September 30,

2021 2020

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

Assets:

Interest-earning assets:

Loans and leases $ 21,477,967 $ 574,984 3.54 % $ 21,270,350 $ 603,100 3.75 %

Investment securities ^(a) 8,878,820 136,727 2.09 8,554,646 167,027 2.67

Federal Home Loan and Federal Reserve Bank stock 77,040 909 1.58 108,788 2,716 3.33

Interest-bearing deposits ^(b) 1,434,552 1,419 0.13 89,989 222 0.32

Loans held for sale 11,515 201 2.33 25,944 588 3.02

Total interest-earning assets 31,879,894 $ 714,240 2.98 % 30,049,717 $ 773,653 3.43 %

Non-interest-earning assets 1,968,707 2,017,159

Total Assets $ 33,848,601 $ 32,066,876

Liabilities and Shareholders' Equity:

Interest-bearing liabilities:

Demand deposits $ 6,800,456 $ - - % $ 5,525,573 $ - - %

Health savings accounts 7,414,332 4,720 0.09 6,854,101 7,973 0.16

Interest-bearing checking, money market and savings 12,579,762 5,117 0.05 10,427,634 22,848 0.29

Certificates of deposit 2,146,218 6,267 0.39 2,841,385 28,425 1.34

Total deposits 28,940,768 16,104 0.07 25,648,693 59,246 0.31

Securities sold under agreements to repurchase and other borrowings 522,638 2,216 0.56 1,366,292 5,318 0.51

Federal Home Loan Bank advances 131,606 1,539 1.54 870,063 13,145 1.98

Long-term debt ^(a) 565,866 12,658 3.22 563,805 13,811 3.52

Total borrowings 1,220,110 16,413 1.85 2,800,160 32,274 1.55

Total interest-bearing liabilities 30,160,878 $ 32,517 0.14 % 28,448,853 $ 91,520 0.43 %

Non-interest-bearing liabilities 373,609 433,207

Total liabilities 30,534,487 28,882,060

Preferred stock 145,037 145,037

Common shareholders' equity 3,169,077 3,039,779

Total shareholders' equity 3,314,114 3,184,816

Total Liabilities and Shareholders' Equity $ 33,848,601 $ 32,066,876

Tax-equivalent net interest income 681,723 682,133

Less: tax-equivalent adjustments (7,416) (7,669)

Net interest income $ 674,307 $ 674,464

Net interest margin 2.85 % 3.03 %

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

(b) Interest-bearing deposits is a component of cash and cash equivalents.

WEBSTER FINANCIAL CORPORATIONFive Quarter Loan and Lease Balances (unaudited)

(Dollars in thousands) September June 30, March 31, December September 30, 2021 2021 2021 31, 2020 30, 2020

Loan and Lease Balances (actual):

Commercial non-mortgage $ 7,172,345 $ 7,473,758 $ 7,530,066 $ 7,687,300 $ 7,722,838

Asset-based lending 986,782 943,961 907,421 890,598 889,711

Commercial real estate 6,522,679 6,410,672 6,338,056 6,322,637 6,307,567

Residential mortgages 5,167,527 4,856,302 4,668,945 4,782,016 4,885,821

Consumer 1,731,002 1,790,308 1,856,895 1,958,664 2,046,086

Total Loan and Lease Balances 21,580,335 21,475,001 21,301,383 21,641,215 21,852,023

Allowance for credit losses on loans and leases (314,922) (307,945) (328,351) (359,431) (369,811)

Loans and Leases, net $ 21,265,413 $ 21,167,056 $ 20,973,032 $ 21,281,784 $ 21,482,212

Loan and Lease Balances (average):

Commercial non-mortgage $ 7,280,258 $ 7,545,398 $ 7,650,367 $ 7,662,828 $ 7,683,879

Asset-based lending 956,535 937,580 896,093 874,221 922,653

Commercial real estate 6,510,100 6,365,830 6,303,765 6,363,776 6,260,114

Residential mortgages 5,036,329 4,738,859 4,720,703 4,821,199 4,914,368

Consumer 1,755,291 1,825,772 1,910,392 2,007,226 2,089,726

Total Loan and Lease Balances 21,538,513 21,413,439 21,481,320 21,729,250 21,870,740

Allowance for credit losses on loans and leases (308,279) (332,522) (364,358) (375,080) (363,552)

Loans and Leases, net $ 21,230,234 $ 21,080,917 $ 21,116,962 $ 21,354,170 $ 21,507,188

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

September June March December September(Dollars in thousands) 30, 2021 30, 31, 31, 2020 30, 2020 2021 2021

Nonperforming loans and leases:

Commercial non-mortgage $ 40,774 $ 57,831 $ 60,103 $ 71,499 $ 75,080

Asset-based lending 2,139 2,403 2,430 2,622 3,789

Commercial real estate 15,972 12,687 13,743 21,222 8,784

Residential mortgages 19,327 21,467 42,708 41,033 41,498

Consumer 23,558 26,353 31,437 31,629 33,485

Total nonperforming loans and leases $ 101,770 $ 120,741 $ 150,421 $ 168,005 $ 162,636

Other real estate owned and repossessed assets:

Commercial non-mortgage $ - $ - $ 102 $ 175 $ 175

Residential mortgages 1,759 1,934 1,695 1,544 3,899

Consumer 680 822 590 590 604

Total other real estate owned and repossessed assets $ 2,439 $ 2,756 $ 2,387 $ 2,309 $ 4,678

Total nonperforming assets $ 104,209 $ 123,497 $ 152,808 $ 170,314 $ 167,314

Past due 30-89 days:

Commercial non-mortgage $ 5,537 $ 3,154 $ 7,395 $ 8,918 $ 3,821

Asset-based lending - - - 1,175 -

Commercial real estate 821 1,679 699 3,003 329

Residential mortgages 3,447 4,690 5,241 10,623 9,291

Consumer 7,158 8,829 7,036 8,720 8,349

Total past due 30-89 days 16,963 18,352 20,371 32,439 21,790

Past due 90 days or more and accruing 107 25 50 445 -

Total past due loans and leases $ 17,070 $ 18,377 $ 20,421 $ 32,884 $ 21,790

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 June 30, March December September 30, 2021 2021 31, 2021 31, 2020 30, 2020

Beginning balance $ 307,945 $ 328,351 $ 359,431 $ 369,811 $ 358,522

Provision 7,898 (21,574) (25,759) (992) 22,753

Charge-offs:

Commercial non-mortgage 1,706 431 1,164 7,876 12,085

Asset-based lending - - - - 10

Commercial real estate 17 163 5,157 688 1,399

Residential mortgages 88 1,105 380 105 546

Consumer 1,965 1,703 2,594 2,673 1,717

Total charge-offs 3,776 3,402 9,295 11,342 15,757

Recoveries:

Commercial non-mortgage 137 824 209 232 1,978

Asset-based lending - 2 1,424 33 -

Commercial real estate 5 10 3 3 47

Residential mortgages 672 782 1,158 190 521

Consumer 2,041 2,952 1,180 1,496 1,747

Total recoveries 2,855 4,570 3,974 1,954 4,293

Total net charge-offs (recoveries) 921 (1,168) 5,321 9,388 11,464

Ending balance $ 314,922 $ 307,945 $ 328,351 $ 359,431 $ 369,811

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 adollar of revenue, is calculated excluding certain non-operational items.Return on average tangible common shareholders' equity measures theCompany's net income available to common shareholders, adjusted for thetax-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'equity less goodwill and intangible assets divided by total assets lessgoodwill and intangible assets. The tangible common equity ratio representsshareholders' equity less preferred stock and goodwill and intangibleassets divided by total assets less goodwill and intangible assets.Tangible book value per common share represents shareholders' equity lesspreferred stock and goodwill and intangible assets divided by common sharesoutstanding at the end of the period. Core deposits express total depositsless time deposits, including brokered time deposits. Adjusted dilutedearnings per share (EPS) is calculated by excluding after taxnon-operational items from reported earnings applicable to commonshareholders. See the tables below for reconciliations of these non-GAAPfinancial measures with financial measures defined by GAAP.

At or for the Three Months Ended

(In thousands, except per share data) September June 30, March 31, December September 30, 2021 2021 2021 31, 2020 30, 2020

Efficiency ratio:

Non-interest expense (GAAP) $ 180,237 $ 187,028 $ 187,982 $ 219,530 $ 183,996

Less: Foreclosed property activity (GAAP) (142) (137) 91 (836) (201)

Intangible assets amortization (GAAP) 1,124 1,132 1,139 1,147 1,089

Strategic initiatives (non-GAAP) (4,011) 1,138 9,441 38,265 4,786

Merger related (non-GAAP) 9,847 17,047 - - -

Non-interest expense (non-GAAP) $ 173,419 $ 167,848 $ 177,311 $ 180,954 $ 178,322

Net interest income (GAAP) $ 229,691 $ 220,852 $ 223,764 $ 216,929 $ 219,256

Add: Tax-equivalent adjustment (non-GAAP) 2,434 2,487 2,495 2,577 2,635

Non-interest income (GAAP) 83,775 72,702 76,757 76,763 75,060

Other (non-GAAP) 327 309 277 291 297

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

Income (non-GAAP) $ 316,227 $ 296,350 $ 303,293 $ 300,240 $ 297,248

Efficiency ratio (non-GAAP) 54.84 % 56.64 % 58.46 % 60.27 % 59.99 %

Return on average tangible common shareholders' equity:

Net income (GAAP) $ 95,713 $ 94,035 $ 108,078 $ 60,044 $ 69,281

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

Add: Intangible assets amortization, tax-effected (GAAP) 888 894 900 906 860

Income adjusted for preferred stock dividends and intangible assets $ 94,633 $ 92,960 $ 107,009 $ 58,981 $ 68,173amortization (non-GAAP)

Income adjusted for preferred stock dividends and intangible assets $ 378,532 $ 371,840 $ 428,036 $ 235,924 $ 272,692amortization, annualized basis (non-GAAP)

Average shareholders' equity (non-GAAP) $ 3,375,401 $ 3,311,406 $ 3,254,203 $ 3,239,221 $ 3,205,330

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

Average goodwill and other intangible assets (non-GAAP) 557,902 559,032 560,173 561,303 560,959

Average tangible common shareholders' equity (non-GAAP) $ 2,672,462 $ 2,607,337 $ 2,548,993 $ 2,532,881 $ 2,499,334

Return on average tangible common shareholders' equity (non-GAAP) 14.16 % 14.26 % 16.79 % 9.31 % 10.91 %

Tangible equity:

Shareholders' equity (GAAP) $ 3,386,189 $ 3,329,705 $ 3,272,928 $ 3,234,625 $ 3,219,690

Less: Goodwill and other intangible assets (GAAP) 557,360 558,485 559,617 560,756 561,902

Tangible shareholders' equity (non-GAAP) $ 2,828,829 $ 2,771,220 $ 2,713,311 $ 2,673,869 $ 2,657,788

Total assets (GAAP) $ 35,374,258 $ 33,753,752 $ 33,259,037 $ 32,590,690 $ 32,994,443

Less: Goodwill and other intangible assets (GAAP) 557,360 558,485 559,617 560,756 561,902

Tangible assets (non-GAAP) $ 34,816,898 $ 33,195,267 $ 32,699,420 $ 32,029,934 $ 32,432,541

Tangible equity (non-GAAP) 8.12 % 8.35 % 8.30 % 8.35 % 8.19 %

Tangible common equity:

Tangible shareholders' equity (non-GAAP) $ 2,828,829 $ 2,771,220 $ 2,713,311 $ 2,673,869 $ 2,657,788

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

Tangible common shareholders' equity (non-GAAP) $ 2,683,792 $ 2,626,183 $ 2,568,274 $ 2,528,832 $ 2,512,751

Tangible assets (non-GAAP) $ 34,816,898 $ 33,195,267 $ 32,699,420 $ 32,029,934 $ 32,432,541

Tangible common equity (non-GAAP) 7.71 % 7.91 % 7.85 % 7.90 % 7.75 %

Tangible book value per common share:

Tangible common shareholders' equity (non-GAAP) $ 2,683,792 $ 2,626,183 $ 2,568,274 $ 2,528,832 $ 2,512,751

Common shares outstanding 90,588 90,594 90,410 90,199 90,204

Tangible book value per common share (non-GAAP) $ 29.63 $ 28.99 $ 28.41 $ 28.04 $ 27.86

Core deposits:

Total deposits $ 30,026,327 $ 28,846,966 $ 28,481,834 $ 27,335,436 $ 26,920,553

Less: Certificates of deposit 1,884,373 2,014,544 2,234,133 2,487,818 2,570,440

Core deposits (non-GAAP) $ 28,141,954 $ 26,832,422 $ 26,247,701 $ 24,847,618 $ 24,350,113

(In millions, except per share data)

GAAP earnings adjusted for strategic optimization initiatives and mergerrelated costs:

Three months ended September 30, 2021

Earnings Pre-Tax Applicable Diluted Income to Common EPS Shareholders

Reported (GAAP) $ 125.5 $ 93.2 $ 1.03

Strategic initiatives (4.0) (3.0) (0.03)

Merger related 9.8 7.3 0.08

Adjusted (non-GAAP) $ 131.3 $ 97.5 $ 1.08

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SOURCE Webster Financial Corporation