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Webster Reports First Quarter 2022 EPS of $(0.14); Adjusted EPS OF $1.24

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Webster Financial Corporation (NYSE: WBS) reported a net loss of $20.2 million, or $0.14 per diluted share, for Q1 2022, a significant drop from a profit of $106.1 million, or $1.17 per share, in Q1 2021. The results were heavily impacted by $279.5 million in merger-related expenses due to the recent merger with Sterling Bancorp, which closed on January 31, 2022. Revenue reached $498.3 million, boosted by strong underlying business trends and expanded operations. The company announced an additional $600 million share repurchase authorization.

Positive
  • Completed merger with Sterling Bancorp, creating a $65 billion institution.
  • Revenue increased to $498.3 million, indicating growth despite merger costs.
  • Strong performance in Commercial Banking, with net interest income up 102.9%.
Negative
  • Reported net loss of $20.2 million, a stark contrast to prior year's profit.
  • Merger-related expenses totaled $279.5 million, significantly impacting earnings.
  • High provision for credit losses at $188.8 million, reflecting acquired loan risks.

STAMFORD, Conn., April 28, 2022 /PRNewswire/ -- Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A. and its HSA Bank division, today announced net (loss) income available to common shareholders of $(20.2) million, or $(0.14) per diluted share, for the quarter ended March 31, 2022, compared to $106.1 million, or $1.17 per diluted share, for the quarter ended March 31, 2021.

First quarter 2022 results reflect the impact of the January 31, 2022 merger with Sterling Bancorp ("Sterling") and include $279.5 million pre-tax, ($204.3 million after tax), or $1.38 per diluted share, of primarily merger-related expenses and initial non-purchase credit deteriorated (non-PCD) provision. Excluding these expenses, earnings per diluted share would have been $1.24 for the quarter ended March 31, 2022. Reported results prior to the first quarter of 2022 reflect legacy Webster Financial results only.

"This was a landmark quarter for Webster, as we closed our merger of equals with Sterling Bancorp," said John R. Ciulla, President and Chief Executive Officer. "We are excited about our future as a combined entity, as we are adding scale, talent, and capabilities that will enhance our client experience. I am equally proud we were able to produce strong underlying business trends while at the same time combining these complementary organizations."

Highlights for the first quarter of 2022:

  • Completed merger with Sterling Bancorp, the parent company of Sterling National Bank, which closed effective January 31, 2022, creating an approximately $65 billion institution.
  • Completed the acquisition of Bend Financial, Inc. which will advance our delivery of a differentiated modern approach to HSA management and engagement.
  • Charges related to the merger, strategic initiatives, and initial non-PCD provision totaled $279.5 million.
  • Revenue of $498.3 million.
  • Current period includes a state deferred tax asset revaluation benefit of $9.9 million.
  • Period end loan and lease balance of $43.5 billion; 80 percent commercial loans and leases, 20 percent consumer loans, and a loan to deposit ratio of 80 percent.
  • Period end deposit balance of $54.4 billion.
  • Provision totaled $188.8 million and included $175.1 million related to non-PCD loans and leases.
  • Return on average assets of (0.12) percent; adjusted 1.37 percent (non-GAAP).
  • Return on average tangible common equity of (1.36) percent; adjusted 17.01 percent (non-GAAP).
  • Net interest margin of 3.21 percent includes net accretion of 0.29 percent.
  • Common equity tier 1 ratio of 11.42 percent.
  • Efficiency ratio (non-GAAP) of 48.73 percent.
  • Tangible common equity ratio of 8.26 percent.
  • Authorized to repurchase an additional $600 million in shares under Webster's existing share repurchase program.

"The power of our combined entity is already evident in our financial performance," said Glenn MacInnes, Executive Vice President and Chief Financial Officer. "On an adjusted basis, we generated a return on assets of 1.37 percent and return on tangible common equity of 17 percent. We also exhibited meaningful growth in key product categories, and anticipate carrying this momentum into future periods."

The first quarter results do not represent a full quarter of comparable combined earnings given the merger with Sterling Bancorp on January 31, 2022. Additionally, the increases in the balance sheet and income statement during the quarter are largely attributable to the merger.

Line of Business performance compared to the first quarter of 2021

Webster realigned its investment services related operations from Commercial Banking to Consumer Banking to deliver operational efficiencies and better serve its customers.  As a result, effective January 1, 2022, $4.3 billion of assets under administration (off balance sheet) and $125 million of deposits were moved from Commercial Banking to Consumer Banking. In addition, the expense allocation approach was modified to exclude certain overhead and merger-related expenses that are not tied directly to segment performance. Prior period results have been recasted.

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 March 31, 2022, Commercial Banking had $34.9 billion in loans and leases and $21.5 billion in deposit balances.

Commercial Banking Operating Results:






Percent


Three months ended March 31,


Favorable/

(In thousands)


2022

2021


(Unfavorable)

Net interest income


$287,069

$141,486



102.9 %


Non-interest income


38,743

18,376



110.8


Operating revenue


325,812

159,862



103.8


Non-interest expense


89,240

46,284



(92.8)


Pre-tax, pre-provision net revenue


$236,572

$113,578



108.3















Percent



At March 31,


Increase/

(In millions)


2022

2021


(Decrease)

Loans and leases


$34,928

$14,413



142.3 %


Deposits


21,528

8,313



159.0


AUA / AUM (off balance sheet)


2,692

2,686



0.2


Pre-tax, pre-provision net revenue increased $123.0 million to $236.6 million in the quarter as compared to prior year. The increase in balances and income was largely attributable to the merger. Net interest income increased $145.6 million to $287.1 million, with $136.3 million driven by the merger, and $9.3 million due to loan and deposit growth in the legacy Webster portfolios. Non-interest income increased $20.4 million to $38.7 million, with $15.9 million driven by the merger, and $4.5 million driven by growth in loan related fees and client hedging activity. Non-interest expense increased $43.0 million to $89.2 million, with $37.9 million due to the merger, and $5.1 million driven by loan and deposit growth in the legacy Webster portfolios.

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 March 31, 2022, HSA Bank had $11.6 billion in total footings comprising $7.8 billion in deposit balances and $3.8 billion in assets under administration through linked investment accounts.

On February 18, 2022 Webster closed on the acquisition of Bend Financial, Inc. Leveraging Bend's cloud native technology, HSA Bank will accelerate our digital transformation and strengthen our technology to enhance customer experience.

HSA Bank Operating Results:






Percent


Three months ended March 31,


Favorable/

(In thousands)


2022

2021


(Unfavorable)

Net interest income


$44,577

$42,109



5.9 %


Non-interest income


26,958

27,005



(0.2)


Operating revenue


71,535

69,114



3.5


Non-interest expense


36,409

36,005



(1.1)


Pre-tax, net revenue


$35,126

$33,109



6.1















Percent



At March 31,


Increase/

(Dollars in millions)


2022

2021


(Decrease)

Number of accounts (thousands)


3,067

3,040



0.9 %










Deposits


$7,805

$7,455



4.7


Linked investment accounts (off balance sheet)


3,761

3,118



20.6


Total footings


$11,566

$10,573



9.4


Pre-tax net revenue increased $2.0 million to $35.1 million in the quarter as compared to prior year. Net interest income increased $2.5 million to $44.6 million, primarily due to an increase in net deposit spread and growth in deposits. Non-interest income was flat at $27.0 million. Non-interest expense increased $0.4 million to $36.4 million, primarily due to incremental expenses from Bend's acquired business, partially offset by lower compensation and benefits costs.

Consumer Banking

Consumer Banking serves consumer and business banking customers primarily throughout southern New England and the New York Metro and Suburban markets. Consumer 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 202 banking centers and 359 ATMs, a customer care center, and a full range of web and mobile-based banking services. Additionally, our Webster Investment Services group provides investment services to consumers and small business owners within our targeted markets and retail footprint. As of March 31, 2022, Consumer Banking had $8.6 billion in loans and $24.1 billion in deposit balances, as well as $7.9 billion in assets under administration.

Consumer Banking Operating Results:






Percent


Three months ended March 31,


Favorable/

(In thousands)


2022

2021


(Unfavorable)

Net interest income


$136,580

$89,365



52.8 %


Non-interest income


27,892

22,872



21.9


Operating revenue


164,472

112,237



46.5


Non-interest expense


95,747

75,311



(27.1)


Pre-tax, pre-provision net revenue


$68,725

$36,926



86.1















Percent



At March 31,


Increase/

(In millions)


2022

2021


(Decrease)

Loans


$8,589

$6,888



24.7 %


Deposits


24,115

12,715



89.7


AUA (off balance sheet)


7,929

4,008



97.9


Pre-tax, pre-provision net revenue increased $31.8 million to $68.7 million in the quarter as compared to prior year. The increase in balances and income was largely attributable to the merger. Net interest income increased $47.2 million to $136.6 million, with $42.3 million driven by the merger, and $4.9 million driven by deposit and loan growth coupled with lower interest paid on deposits. Non-interest income increased $5.0 million to $27.9 million, with $4.4 million driven by the merger and $0.6 million driven by higher deposit service fees. Non-interest expense increased $20.4 million to $95.7 million, primarily driven by the incremental expenses from the merger.

Consolidated financial performance:

Quarterly net interest income compared to the first quarter of 2021:

  • Net interest income was $394.2 million compared to $223.8 million.
  • Net interest margin was 3.21 percent compared to 2.92 percent. The yield on interest-earning assets increased by 25 basis points, and the cost of interest-bearing liabilities decreased by 3 basis points.
  • Average interest-earning assets totaled $50.3 billion and increased by $19.2 billion, or 61.6 percent.
  • Average loans and leases totaled $35.9 billion and grew by $14.4 billion, or 67.2 percent.
  • Average deposits totaled $45.9 billion and grew by $17.6 billion, or 62.4 percent.

Quarterly provision for credit losses:

  • The provision for credit losses reflects a $188.8 million provision in the quarter, contributing to a $268.2 million increase in the allowance for credit losses on loans and leases. The provision for the quarter includes $175.1 million associated with day one accounting provision required for loans and leases acquired during the quarter from the Sterling merger. The provision for credit losses reflected a benefit of $15.0 million in the prior quarter compared to a benefit of $25.8 million a year ago.
  • Net charge-offs were $8.9 million, compared to net recoveries of $(1.2) million in the prior quarter and net charge-offs of $5.3 million a year ago. The ratio of net charge-offs (recoveries) to average loans and leases on an annualized basis was 0.10 percent, compared to (0.02) percent in the prior quarter and 0.10 percent a year ago.
  • The allowance for credit losses on loans and leases represented 1.31 percent of total loans and leases at March 31, 2022, compared to 1.35 percent at December 31, 2021 and 1.54 percent at March 31, 2021. The allowance represented 229 percent of nonperforming loans and leases at March 31, 2022 compared to 274 percent at December 31, 2021 and 218 percent at March 31, 2021.

Quarterly non-interest income compared to the first quarter of 2021:

  • Total non-interest income was $104.0 million compared to $76.8 million, an increase of $27.2 million. The increase primarily reflects the two month impact of the merger with Sterling.

Quarterly non-interest expense compared to the first quarter of 2021:

  • Total non-interest expense was $359.8 million compared to $188.0 million, an increase of $171.8 million. Total non-interest expense includes a net $104.4 million of merger and strategic initiative charges compared to $9.4 million of strategic initiative charges a year ago. Excluding those charges, total non-interest expense increased $76.8 million which primarily reflects the two month impact of the merger with Sterling.

Quarterly income taxes compared to the first quarter of 2021:

  • Income tax (benefit) expense was $(33.6) million compared to $30.2 million, and the effective tax benefit rate was (66.7) percent compared to an effective tax rate of 21.8 percent. The income tax benefit in the current quarter reflects the pre-tax loss, coupled with the effects of tax-exempt income and tax credits, and includes $9.3 million of net tax benefits related to the merger.

Investment securities:

  • Total investment securities, net were $15.1 billion, compared to $10.4 billion at December 31, 2021 and $8.9 billion at March 31, 2021. All investment securities acquired from the merger were classified as available-for-sale. The carrying value of the available-for-sale portfolio included $328.4 million of net unrealized losses, compared to net unrealized gains of $7.2 million at December 31, 2021 and $51.3 million at March 31, 2021. The carrying value of the held-to-maturity portfolio does not reflect $270.8 million of net unrealized losses, compared to net unrealized gains of $82.6 million at December 31, 2021 and $162.6 million at March 31, 2021.

Loans and Leases:

  • Total loans and leases were $43.5 billion, compared to $22.3 billion at December 31, 2021 and $21.3 billion at March 31, 2021. Compared to December 31, 2021, commercial loans and leases increased by $8.8 billion, commercial real estate loans and leases increased by $11.0 billion, residential mortgages increased by $1.4 billion, and consumer loans increased by $88.3 million.
  • Compared to a year ago, commercial loans and leases increased by $8.9 billion, commercial real estate loans and leases increased by $11.2 billion, and residential mortgages increased by $2.1 billion, while consumer loans decreased by $89.7 million.
  • Loan originations for the portfolio were $2.570 billion, compared to $2.553 billion in the prior quarter and $1.807 billion a year ago. In addition, $23 million of residential loans were originated for sale in the quarter, compared to $42 million in the prior quarter and $81 million a year ago.

Asset quality:

  • Total nonperforming loans and leases were $248.1 million, or 0.57 percent of total loans and leases, compared to $109.8 million, or 0.49 percent of total loans and leases, at December 31, 2021 and $150.4 million, or 0.71 percent of total loans and leases, at March 31, 2021. As of March 31, 2022, $115.1 million of nonperforming loans and leases were contractually current.
  • Past due loans and leases were $73.0 million, compared to $21.9 million at December 31, 2021 and $20.4 million at March 31, 2021.

Deposits and borrowings:

  • Total deposits were $54.4 billion, compared to $29.8 billion at December 31, 2021 and $28.5 billion at March 31, 2021. Core deposits to total deposits were 94.8 percent, compared to 94.0 percent at December 31, 2021 and 92.2 percent at March 31, 2021. The loan to deposit ratio was 80.1 percent, compared to 74.6 percent at December 31, 2021 and 74.8 percent at March 31, 2021.
  • Total borrowings were $1.6 billion, compared to $1.2 billion at both December 31, 2021 and March 31, 2021.

Capital:

  • The return on average common shareholders' equity and the return on average tangible common shareholders' equity were (1.25) percent and (1.36) percent, respectively, compared to 13.65 percent and 16.79 percent, respectively, in the first quarter of 2021.
  • The tangible equity and tangible common equity ratios were 8.72 percent and 8.26 percent, respectively, compared to 8.30 percent and 7.85 percent, respectively, at March 31, 2021. The common equity tier 1 risk-based capital ratio was 11.42 percent, compared to 11.89 percent at March 31, 2021.
  • Book value and tangible book value per common share were $44.32 and $28.94, respectively, compared to $34.60 and $28.41, respectively, at March 31, 2021.

Webster Financial Corporation (NYSE:WBS) is the holding company for Webster Bank, N.A. and its HSA Bank Division. Webster is a leading commercial bank in the Northeast that provides a wide range of digital and traditional financial solutions across three differentiated lines of business: Commercial Banking, Consumer Banking and its HSA Bank division, one of the country's largest providers of employee benefits solutions. Headquartered in Stamford, CT, Webster is a values-driven organization with $65 billion in assets. Its core footprint spans the northeastern U.S. from New York to Massachusetts, with certain businesses operating in extended geographies. 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 first quarter 2022 earnings announcement will be held today, Thursday, April 28, 2022 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 April 28, 2022. To access the replay, dial 877-660-6853, or 201-612-7415 for international callers. The replay conference ID number is 13728411.

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

Investor Contact
Emlen Harmon, 212-309-7646
eharmon@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 successfully integrate the operations of Webster and 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 planned 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, including as a result of geopolitical conflict such as the war between Russia and Ukraine; (6) the potential adverse effects of the ongoing novel coronavirus (COVID-19) pandemic, or other unusual and infrequently occurring events, and any governmental or societal responses thereto; (7) changes in laws and regulations, including those concerning banking, taxes, dividends, securities, insurance, and healthcare, with which we and our subsidiaries must comply; (8) adverse conditions in the securities markets that lead to impairment in the value of our investment securities and goodwill; (9) inflation, changes in interest rates, and monetary fluctuations; (10) the replacement of and transition from the London Interbank Offered Rate (LIBOR) to the Secured Overnight Financing Rate (SOFR) as the primary interest rate benchmark; (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 the level of non-performing assets and charge-offs; (19) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (20) the effect of changes in accounting policies and practices applicable to us, including the impact of recently adopted accounting guidance; (21) legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; (22) our ability to appropriately address social, environmental, and sustainability concerns that may arise from our business activities; and (23) 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 Operations." 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, ROATCE, and other performance ratios, in each case 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 CORPORATION
Selected Financial Highlights (unaudited)





At or for the Three Months Ended



(In thousands, except per share data)


March 31,
2022




December 31,
2021




September 30,
2021




June 30,
2021




March 31,
2021
























Income and performance ratios:





















Net (loss) income

$

(16,747)



$

111,038



$

95,713



$

94,035



$

108,078



Net (loss) income available to common shareholders


(20,178)




109,069




93,745




92,066




106,109



Earnings (loss) per diluted common share


(0.14)




1.20




1.03




1.01




1.17



Return on average assets


(0.12)

%



1.26

%



1.10

%



1.12

%



1.31

%


Return on average tangible common shareholders' equity (non-GAAP)


(1.36)




16.23




14.16




14.26




16.79



Return on average common shareholders' equity


(1.25)




13.35




11.61




11.63




13.65



Non-interest income as a percentage of total revenue


20.88




28.44




26.73




24.77




25.54
























Asset quality:





















Allowance for credit losses on loans and leases

$

569,371



$

301,187



$

314,922



$

307,945



$

328,351



Nonperforming assets


251,206




112,590




104,209




123,497




152,808



Allowance for credit losses on loans and leases / total loans and leases


1.31

%



1.35

%



1.46

%



1.43

%



1.54

%


Net charge-offs (recoveries) / average loans and leases (annualized)


0.10




(0.02)




0.02




(0.02)




0.10



Nonperforming loans and leases / total loans and leases


0.57




0.49




0.47




0.56




0.71



Nonperforming assets / total loans and leases plus OREO


0.58




0.51




0.48




0.57




0.72



Allowance for credit losses on loans and leases / nonperforming loans and leases


229.48




274.36




309.44




255.05




218.29
























Other ratios:





















Tangible equity (non-GAAP)


8.72

%



8.39

%



8.12

%



8.35

%



8.30

%


Tangible common equity (non-GAAP)


8.26




7.97




7.71




7.91




7.85



Tier 1 risk-based capital (a)


12.01




12.32




12.39




12.30




12.55



Total risk-based capital (a)


14.37




13.64




13.79




13.70




14.08



Common equity tier 1 risk-based capital (a)


11.42




11.72




11.77




11.66




11.89



Shareholders' equity / total assets


12.55




9.85




9.57




9.86




9.84



Net interest margin


3.21




2.73




2.80




2.82




2.92



Efficiency ratio (non-GAAP)


48.73




54.85




54.84




56.64




58.46
























Equity and share related:





















Common equity

$

7,893,156



$

3,293,288



$

3,241,152



$

3,184,668



$

3,127,891



Book value per common share


44.32




36.36




35.78




35.15




34.60



Tangible book value per common share (non-GAAP)


28.94




30.22




29.63




28.99




28.41



Common stock closing price


56.12




55.84




54.46




53.34




55.11



Dividends declared per common share


0.40




0.40




0.40




0.40




0.40



Common shares issued and outstanding


178,102




90,584




90,588




90,594




90,410



Weighted-average common shares outstanding - Basic


147,394




90,052




90,038




90,027




89,809



Weighted-average common shares outstanding - Diluted


147,533




90,284




90,232




90,221




90,108




(a) Presented as preliminary for March 31st, 2022 and actual for the remaining periods.

 

 

WEBSTER FINANCIAL CORPORATION
Consolidated Balance Sheets (unaudited)

(In thousands)


March 31,
2022




December 31,
2021




March 31,
2021

Assets:











Cash and due from banks

$

240,435



$

137,385



$

160,703

Interest-bearing deposits


552,778




324,185




1,210,958

Securities:











Available for sale


8,744,897




4,234,854




3,313,980

Held to maturity, net


6,362,254




6,198,125




5,567,785

Total securities, net


15,107,151




10,432,979




8,881,765

Loans held for sale


17,970




4,694




17,262

Loans and Leases:











Commercial


17,386,139




8,576,786




8,437,487

Commercial real estate


17,584,947




6,603,180




6,338,056

Residential mortgages


6,798,199




5,412,905




4,668,945

Consumer


1,767,200




1,678,858




1,856,895

Total loans and leases


43,536,485




22,271,729




21,301,383

Allowance for credit losses on loans and leases


(569,371)




(301,187)




(328,351)

Loans and leases, net


42,967,114




21,970,542




20,973,032

Federal Home Loan Bank and Federal Reserve Bank stock


206,123




71,836




77,674

Premises and equipment, net


490,004




204,557




220,982

Goodwill and other intangible assets, net


2,738,353




556,242




559,617

Cash surrender value of life insurance policies


1,222,898




572,305




567,298

Deferred tax asset, net


178,042




109,405




80,235

Accrued interest receivable and other assets


1,410,616




531,469




509,511

Total Assets

$

65,131,484



$

34,915,599



$

33,259,037












Liabilities and Shareholders' Equity:











Deposits:











Demand

$

13,570,702



$

7,060,488



$

6,680,114

Health savings accounts


7,804,858




7,397,582




7,455,181

Interest-bearing checking


9,579,839




4,182,497




3,792,309

Money market


11,964,649




3,718,953




3,015,565

Savings


8,615,138




5,689,739




5,304,532

Certificates of deposit


2,821,097




1,797,770




2,234,133

Total deposits


54,356,283




29,847,029




28,481,834

Securities sold under agreements to repurchase and other borrowings


518,733




674,896




498,378

Federal Home Loan Bank advances


10,903




10,997




138,554

Long-term debt


1,078,274




562,931




566,480

Accrued expenses and other liabilities


990,156




381,421




300,863

Total liabilities


56,954,349




31,477,274




29,986,109

Preferred stock


283,979




145,037




145,037

Common shareholders' equity


7,893,156




3,293,288




3,127,891

Total shareholders' equity


8,177,135




3,438,325




3,272,928

Total Liabilities and Shareholders' Equity

$

65,131,484



$

34,915,599



$

33,259,037

 

 

 

WEBSTER FINANCIAL CORPORATION
Consolidated Statements of Income (unaudited)







Three Months Ended March 31,

(In thousands, except per share data)










2022




2021

Interest income:















Interest and fees on loans and leases









$

346,276



$

190,536

Interest and dividends on securities










63,526




44,947

Loans held for sale










26




91

Total interest income










409,828




235,574

Interest expense:















Deposits










7,399




6,439

Borrowings










8,181




5,371

Total interest expense










15,580




11,810

Net interest income










394,248




223,764

Provision for credit losses










188,845




(25,750)

Net interest income after provision for loan and lease losses










205,403




249,514

Non-interest income:















Deposit service fees










47,827




40,469

Loan and lease related fees










22,679




8,313

Wealth and investment services










10,597




9,403

Mortgage banking activities










428




2,642

Increase in cash surrender value of life insurance policies










6,732




3,533

Other income










15,772




12,397

Total non-interest income










104,035




76,757

Non-interest expense:















Compensation and benefits










184,002




107,600

Occupancy










18,615




15,650

Technology and equipment










55,401




28,516

Marketing










3,509




2,504

Professional and outside services










54,091




9,776

Intangible assets amortization










6,387




1,139

Loan workout expenses










680




394

Deposit insurance










5,222




3,956

Other expenses










31,878




18,447

Total non-interest expense










359,785




187,982

(Loss) income before income taxes










(50,347)




138,289

Income tax (benefit) expense










(33,600)




30,211

Net (loss) income










(16,747)




108,078

Preferred stock dividends










(3,431)




(1,969)

Net (loss) income available to common shareholders









$

(20,178)



$

106,109
















Weighted-average common shares outstanding - Diluted










147,533




90,108
















(Loss) Earnings per common share:















Basic









$

(0.14)



$

1.18

Diluted










(0.14)




1.17

 

 

 

WEBSTER FINANCIAL CORPORATION
Five Quarter Consolidated Statements of Income (unaudited)



Three Months Ended

(In thousands, except per share data)


March 31,
2022




December 31,
2021




September 30,
2021




June 30,
2021




March 31,
2021

Interest income:



















Interest and fees on loans and leases

$

346,276



$

189,985



$

196,273



$

185,919



$

190,536

Interest and dividends on securities


63,526




45,990




43,362




45,586




44,947

Loans held for sale


26




45




57




53




91

Total interest income


409,828




236,020




239,692




231,558




235,574

Interest expense:



















Deposits


7,399




4,027




4,571




5,094




6,439

Borrowings


8,181




5,211




5,430




5,612




5,371

Total interest expense


15,580




9,238




10,001




10,706




11,810

Net interest income


394,248




226,782




229,691




220,852




223,764

Provision for credit losses


188,845




(15,000)




7,750




(21,500)




(25,750)

Net interest income after provision for loan and lease losses


205,403




241,782




221,941




242,352




249,514

Non-interest income:



















Deposit service fees


47,827




40,544




40,258




41,439




40,469

Loan and lease related fees


22,679




9,602




10,881




7,862




8,313

Wealth and investment services


10,597




10,111




9,985




10,087




9,403

Mortgage banking activities


428




733




1,525




1,319




2,642

Increase in cash surrender value of life insurance policies


6,732




3,627




3,666




3,603




3,533

Other income


15,772




25,521




17,460




8,392




12,397

Total non-interest income


104,035




90,138




83,775




72,702




76,757

Non-interest expense:



















Compensation and benefits


184,002




109,283




105,352




97,754




107,600

Occupancy


18,615




13,256




12,430




14,010




15,650

Technology and equipment


55,401




28,750




28,441




27,124




28,516

Marketing


3,509




2,599




3,721




3,227




2,504

Professional and outside services


54,091




9,360




7,074




21,025




9,776

Intangible assets amortization


6,387




1,118




1,124




1,132




1,139

Loan workout expenses


680




244




203




327




394

Deposit insurance


5,222




4,234




3,855




3,749




3,956

Other expenses


31,878




21,009




18,037




18,680




18,447

Total non-interest expense


359,785




189,853




180,237




187,028




187,982

(Loss) income before income taxes


(50,347)




142,067




125,479




128,026




138,289

Income tax (benefit) expense


(33,600)




31,029




29,766




33,991




30,211

Net (loss) income


(16,747)




111,038




95,713




94,035




108,078

Preferred stock dividends


(3,431)




(1,969)




(1,968)




(1,969)




(1,969)

Net (loss) income available to common shareholders

$

(20,178)



$

109,069



$

93,745



$

92,066



$

106,109




















Weighted-average common shares outstanding - Diluted


147,533




90,284




90,232




90,221




90,108




















(Loss) Earnings per common share:



















Basic

$

(0.14)



$

1.20



$

1.03



$

1.02



$

1.18

Diluted


(0.14)




1.20




1.03




1.01




1.17

 

 

 

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




Three Months Ended March 31,




2022








2021


(Dollars in thousands)


Average balance




Interest




Yield/rate








Average balance



Interest


Yield/rate


Assets:

























Interest-earning assets:

























Loans and leases

$

35,912,829



$

349,417




3.90

%






$

21,481,320


$

191,288


3.57

%

Investment securities (a)


13,421,543




67,269




2.02








8,890,075



46,277


2.12


Federal Home Loan and Federal Reserve Bank stock


166,357




821




2.00








77,632



237


1.24


Interest-bearing deposits (b)


799,265




453




0.23








680,367



176


0.10


Loans held for sale


17,918




26




0.58








14,351



91


2.54


Total interest-earning assets


50,317,912



$

417,986




3.33

%







31,143,745


$

238,069


3.08

%

Non-interest-earning assets


4,490,665
















1,982,315







Total Assets

$

54,808,577















$

33,126,060
































Liabilities and Shareholders' Equity:

























Interest-bearing liabilities:

























Demand deposits

$

11,263,282



$

-




-

%






$

6,436,858


$

-


-

%

Health savings accounts


7,759,465




1,087




0.06








7,451,175



1,607


0.09


Interest-bearing checking, money market and savings


24,316,436




5,019




0.08








11,995,473



1,720


0.06


Certificates of deposit


2,544,286




1,293




0.21








2,371,026



3,112


0.53


Total deposits


45,883,469




7,399




0.07








28,254,532



6,439


0.09



























Securities sold under agreements to repurchase and other borrowings


577,039




957




0.66








522,728



635


0.49


Federal Home Loan Bank advances


10,936




56




2.03








135,787



513


1.51


Long-term debt (a)


896,310




7,168




3.34








567,058



4,223


3.23


Total borrowings


1,484,285




8,181




2.26








1,225,573



5,371


1.82


Total interest-bearing liabilities


47,367,754



$

15,580




0.13

%







29,480,105


$

11,810


0.16

%

Non-interest-bearing liabilities


749,333
















391,752







Total liabilities


48,117,087
















29,871,857
































Preferred stock


236,121
















145,037







Common shareholders' equity


6,455,369
















3,109,166







Total shareholders' equity


6,691,490
















3,254,203







Total Liabilities and Shareholders' Equity

$

54,808,577















$

33,126,060







Tax-equivalent net interest income






402,406















226,259




Less: tax-equivalent adjustments






(8,158)















(2,495)




Net interest income





$

394,248














$

223,764




Net interest margin










3.21

%












2.92

%


























(a) For the purposes of our average yield/rate and margin computations, unsettled trades on investment securities and unrealized gain (loss) balances on securities available-for-sale and senior fixed-rate notes hedges are excluded.


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


 

 

WEBSTER FINANCIAL CORPORATION
Five Quarter Loan and Lease Balances (unaudited)

(Dollars in thousands)


March 31,
2022




December 31,
2021




September 30,
2021




June 30,
2021




March 31,
2021

Loan and Lease Balances (actual):



















Commercial non-mortgage

$

15,578,594



$

7,509,538



$

7,172,345



$

7,473,758



$

7,530,066

Asset-based lending


1,807,545




1,067,248




986,782




943,961




907,421

Commercial real estate


17,584,947




6,603,180




6,522,679




6,410,672




6,338,056

Residential mortgages


6,798,199




5,412,905




5,167,527




4,856,302




4,668,945

Consumer


1,767,200




1,678,858




1,731,002




1,790,308




1,856,895

Total Loan and Lease Balances


43,536,485




22,271,729




21,580,335




21,475,001




21,301,383

Allowance for credit losses on loans and leases


(569,371)




(301,187)




(314,922)




(307,945)




(328,351)

Loans and Leases, net

$

42,967,114



$

21,970,542



$

21,265,413



$

21,167,056



$

20,973,032




















Loan and Lease Balances (average):



















Commercial non-mortgage

$

12,568,454



$

7,304,985



$

7,280,258



$

7,545,398



$

7,650,367

Asset-based lending


1,540,301




1,010,874




956,535




937,580




896,093

Commercial real estate


13,732,925




6,575,865




6,510,100




6,365,830




6,303,765

Residential mortgages


6,322,495




5,309,127




5,036,329




4,738,859




4,720,703

Consumer


1,748,654




1,701,250




1,755,291




1,825,772




1,910,392

Total Loan and Lease Balances

$

35,912,829



$

21,902,101



$

21,538,513



$

21,413,439



$

21,481,320


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

(Dollars in thousands)


March 31,
2022




December 31,
2021




September 30,
2021




June 30,
2021




March 31,
2021

Nonperforming loans and leases:



















Commercial non-mortgage

$

108,460



$

63,553



$

40,774



$

57,831



$

60,103

Asset-based lending


5,494




2,114




2,139




2,403




2,430

Commercial real estate


74,581




5,058




15,972




12,687




13,743

Residential mortgages


27,318




15,591




19,327




21,467




42,708

Consumer 


32,258




23,462




23,558




26,353




31,437

Total nonperforming loans and leases

$

248,111



$

109,778



$

101,770



$

120,741



$

150,421




















Other real estate owned and repossessed assets:



















Commercial non-mortgage

$

-



$

-



$

-



$

-



$

102

Residential mortgages


2,582




2,276




1,759




1,934




1,695

Consumer


513




536




680




822




590

Total other real estate owned and repossessed assets

$

3,095



$

2,812



$

2,439



$

2,756



$

2,387

Total nonperforming assets

$

251,206



$

112,590



$

104,209



$

123,497



$

152,808


Past due 30-89 days:



















Commercial non-mortgage

$

8,025



$

9,340



$

5,537



$

3,154



$

7,395

Asset-based lending


24,103




-




-




-




-

Commercial real estate


22,053




921




821




1,679




699

Residential mortgages


9,307




3,561




3,447




4,690




5,241

Consumer


9,379




5,576




7,158




8,829




7,036

Total past due 30-89 days


72,867




19,398




16,963




18,352




20,371

Past due 90 days or more and accruing


124




2,507




107




25




50

Total past due loans and leases

$

72,991



$

21,905



$

17,070



$

18,377



$

20,421


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



For the Three Months Ended

(Dollars in thousands)


March 31,
2022




December 31,
2021




September 30,
2021




June 30,
2021




March 31,
2021

ACL on loans and leases, beginning balance

$

301,187



$

314,922



$

307,945



$

328,351



$

359,431

Initial allowance on PCD loans and leases (1)


88,045




-




-




-




-

Provision


189,068




(14,980)




7,898




(21,574)




(25,759)

Charge-offs:



















Commercial portfolio


11,248




799




1,723




594




6,321

Consumer portfolio


1,120




1,382




2,053




2,808




2,974

Total charge-offs


12,368




2,181




3,776




3,402




9,295

Recoveries:



















Commercial portfolio


1,364




1,107




142




836




1,636

Consumer portfolio


2,075




2,319




2,713




3,734




2,338

Total recoveries


3,439




3,426




2,855




4,570




3,974

Total net charge-offs (recoveries)


8,929




(1,245)




921




(1,168)




5,321

ACL on loans and leases, ending balance

$

569,371



$

301,187



$

314,922



$

307,945



$

328,351




















ACL on unfunded loan commitments, beginning balance

$

13,104



$

12,170



$

11,974



$

12,800



$

12,755

Acquisition of Sterling


6,749




-




-




-




-

Provision


(213)




934




196




(826)




45

ACL on unfunded loan commitments, ending balance

$

19,640



$

13,104



$

12,170



$

11,974



$

12,800

Total ending balance

$

589,011



$

314,291



$

327,092



$

319,919



$

341,151




















(1) Represents the establishment of the initial reserve for PCD loans and leases net of $48 million in charge-offs recognized upon completion of the merger in accordance with GAAP.

 

 

WEBSTER FINANCIAL CORPORATION
Reconciliations to GAAP Financial Measures























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























The efficiency ratio, which measures the costs expended to generate a dollar of revenue, is calculated excluding certain non-operational items. Return on average tangible common shareholders' equity measures the Company's net income available to common shareholders, adjusted for the tax-effected amortization of intangible assets, as a percentage of average shareholders' equity less average preferred stock and average goodwill and intangible assets. The tangible equity ratio represents shareholders' equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets. The tangible common equity ratio represents shareholders' equity less preferred stock and goodwill and intangible 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 by common shares outstanding at the end of the period. Core deposits express total deposits less certificates of deposit and brokered time deposits. Adjusted net income (loss) available to common shareholders, adjusted diluted earnings per share (EPS), adjusted ROATCE, and adjusted ROAA are calculated by excluding after tax non-operational items including merger-related expenses and the initial non-PCD provision related to the merger. See the tables below for reconciliations of these non-GAAP financial measures with financial measures defined by GAAP.


























At or for the Three Months Ended


(In thousands, except per share data)



March 31,
2022




December 31,
2021




September 30,
2021




June 30,
2021




March 31,
2021


Efficiency ratio:





















Non-interest expense


$

359,785



$

189,853



$

180,237



$

187,028



$

187,982


Less: Foreclosed property activity



(75)




(347)




(142)




(137)




91


Intangible assets amortization



6,387




1,118




1,124




1,132




1,139


Operating lease depreciation



1,632




-




-




-




-


Strategic initiatives



(4,140)




600




(4,011)




1,138




9,441


Merger related



108,495




10,560




9,847




17,047




-


Debt prepayment costs



-




2,526




-




-




-


Non-interest expense


$

247,486



$

175,396



$

173,419



$

167,848



$

177,311


Net interest income


$

394,248



$

226,782



$

229,691



$

220,852



$

223,764


Add: Tax-equivalent adjustment



8,158




2,397




2,434




2,487




2,495


Non-interest income



104,035




90,138




83,775




72,702




76,757


Other



3,082




431




327




309




277


Less: Operating lease depreciation



1,632




-




-




-




-


Income


$

507,891



$

319,748



$

316,227



$

296,350



$

303,293


Efficiency ratio



48.73

%



54.85

%



54.84

%



56.64

%



58.46

%






















Return on average tangible common shareholders' equity:





















Net (loss) income 


$

(16,747)



$

111,038



$

95,713



$

94,035



$

108,078


Less: Preferred stock dividends



3,431




1,969




1,968




1,969




1,969


Add: Intangible assets amortization, tax-effected



5,046




883




888




894




900


(Loss) income adjusted for preferred stock dividends and intangible assets amortization


$

(15,132)



$

109,952



$

94,633



$

92,960



$

107,009


(Loss) income adjusted for preferred stock dividends and intangible assets amortization, annualized basis


$

(60,528)



$

439,808



$

378,532



$

371,840



$

428,036


Average shareholders' equity


$

6,691,490



$

3,411,911



$

3,375,401



$

3,311,406



$

3,254,203


Less: Average preferred stock



236,121




145,037




145,037




145,037




145,037


Average goodwill and other intangible assets



2,007,266




556,784




557,902




559,032




560,173


Average tangible common shareholders' equity


$

4,448,103



$

2,710,090



$

2,672,462



$

2,607,337



$

2,548,993


Return on average tangible common shareholders' equity



(1.36)

%



16.23

%



14.16

%



14.26

%



16.79

%






















Tangible equity:





















Shareholders' equity


$

8,177,135



$

3,438,325



$

3,386,189



$

3,329,705



$

3,272,928


Less: Goodwill and other intangible assets



2,738,353




556,242




557,360




558,485




559,617


Tangible shareholders' equity


$

5,438,782



$

2,882,083



$

2,828,829



$

2,771,220



$

2,713,311


Total assets


$

65,131,484



$

34,915,599



$

35,374,258



$

33,753,752



$

33,259,037


Less: Goodwill and other intangible assets



2,738,353




556,242




557,360




558,485




559,617


Tangible assets


$

62,393,131



$

34,359,357



$

34,816,898



$

33,195,267



$

32,699,420


Tangible equity



8.72

%



8.39

%



8.12

%



8.35

%



8.30

%






















Tangible common equity:





















Tangible shareholders' equity


$

5,438,782



$

2,882,083



$

2,828,829



$

2,771,220



$

2,713,311


Less: Preferred stock



283,979




145,037




145,037




145,037




145,037


Tangible common shareholders' equity


$

5,154,803



$

2,737,046



$

2,683,792



$

2,626,183



$

2,568,274


Tangible assets


$

62,393,131



$

34,359,357



$

34,816,898



$

33,195,267



$

32,699,420


Tangible common equity



8.26

%



7.97

%



7.71

%



7.91

%



7.85

%






















Tangible book value per common share:





















Tangible common shareholders' equity


$

5,154,803



$

2,737,046



$

2,683,792



$

2,626,183



$

2,568,274


Common shares outstanding



178,102




90,584




90,588




90,594




90,410


Tangible book value per common share


$

28.94



$

30.22



$

29.63



$

28.99



$

28.41























Core deposits:





















Total deposits


$

54,356,283



$

29,847,029



$

30,026,327



$

28,846,966



$

28,481,834


Less: Certificates of deposit



2,821,097




1,797,770




1,884,373




2,014,544




2,234,133


Core deposits


$

51,535,186



$

28,049,259



$

28,141,954



$

26,832,422



$

26,247,701


























Three months ended
March 31, 2022


















Adjusted ROATCE:





















Net (loss) income


$

(16,747)


















Less: Preferred stock dividends



3,431


















Add: Intangible assets amortization, tax-effected



5,046


















Strategic initiatives, tax-effected



(3,017)


















Merger related, tax-effected



79,698


















Initial non-PCD provision, tax-effected



127,585


















Income adjusted for preferred stock dividends, intangible assets amortization, and other


$

189,134


















Income adjusted for preferred stock dividends, intangible assets amortization, and other, annualized basis


$

756,536


















Average shareholders' equity


$

6,691,490


















Less: Average preferred stock



236,121


















Average goodwill and other intangible assets



2,007,266


















Average tangible common shareholders' equity


$

4,448,103


















Adjusted return on average tangible common shareholders' equity



17.01

%






































Adjusted ROAA:





















Net (loss) income


$

(16,747)


















Add: Strategic initiatives, tax-effected



(3,017)


















Merger related, tax-effected



79,698


















Initial non-PCD provision, tax-effected



127,585


















Income adjusted for strategic initiatives, merger related, and initial non-PCD provision


$

187,519


















Income adjusted for strategic initiatives, merger related, and initial non-PCD provision, annualized basis


$

750,076


















Average assets


$

54,808,577


















Adjusted return on average assets



1.37

%






































(In millions, except per share data)





















GAAP to adjusted reconciliation:























Three months ended March 31, 2022













Pre-Tax Income (Loss)




Net Income (Loss)
Available to Common
Shareholders




Diluted EPS










Reported (GAAP)


$

(50.3)



$

(20.2)



$

(0.14)










Strategic initiatives



(4.1)




(3.0)




(0.02)










Merger related expenses



108.5




79.7




0.54










Non-PCD provision



175.1




127.6




0.86










Adjusted (non-GAAP)


$

229.2



$

184.1



$

1.24










 

 

 

Cision View original content:https://www.prnewswire.com/news-releases/webster-reports-first-quarter-2022-eps-of-0-14-adjusted-eps-of-1-24--301535198.html

SOURCE Webster Financial Corporation

FAQ

What were Webster Financial's net earnings for Q1 2022?

Webster Financial Corporation reported a net loss of $20.2 million, or $0.14 per diluted share, for the first quarter of 2022.

How did Webster Financial's revenue perform in Q1 2022?

Webster Financial achieved revenue of $498.3 million in Q1 2022, despite substantial merger-related expenses.

What impact did the merger with Sterling Bancorp have on Webster Financial's Q1 2022 results?

The merger with Sterling Bancorp resulted in $279.5 million in merger-related expenses and positively influenced revenue growth.

What is the common equity tier 1 ratio for Webster Financial as of March 31, 2022?

Webster Financial's common equity tier 1 ratio stood at 11.42% as of March 31, 2022.

What is the impact of the merger on Webster Financial's provision for credit losses?

Webster Financial recorded a provision for credit losses of $188.8 million for Q1 2022, reflecting risks associated with loans acquired from the merger.

Webster Financial Corporation Waterbury

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