Webster Reports Second Quarter 2020 Earnings Of $0.57 Per Diluted Share

Rhea-AI Summary

Webster Financial Corporation (NYSE: WBS) reported a Q2 2020 net income of $50.7 million, down from $96.2 million in Q2 2019. Earnings per share were $0.57, compared to $1.05 a year ago. The provision for credit losses surged to $40 million, reflecting economic uncertainties. Revenue reached $284.5 million, supported by a 13.1% loan growth of $2.5 billion, particularly in commercial banking. Notably, deposit growth was 16.6%, totaling $3.8 billion. The Common Equity Tier 1 capital ratio now exceeds 11%, demonstrating solid capital management amid challenges.

Positive

• Revenue growth of 13.1%, totaling $284.5 million.
• Loan growth of $2.5 billion, driven by commercial and commercial real estate.
• Deposit increase of $3.8 billion, or 16.6%, bolstering liquidity.
• Common Equity Tier 1 capital ratio exceeds 11%, indicating strong capital position.

Negative

• Net income decreased to $50.7 million from $96.2 million year-over-year.
• Earnings per share fell to $0.57 from $1.05 a year ago.
• Provision for credit losses rose to $40 million, significantly impacting net income.
• Net interest income declined from $241.8 million to $224.4 million.

WATERBURY, Conn., July 23, 2020 /PRNewswire/ -- Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A. and its HSA Bank division, today announced earnings applicable to common shareholders of $50.7 million, or $0.57 per diluted share, for the quarter ended June 30, 2020, compared to $96.2 million, or $1.05 per diluted share, for the quarter ended June 30, 2019. Results in the quarter reflect a provision for credit losses of $40.0 million under the Current Expected Credit Loss (CECL) accounting standard compared to a provision for credit losses of $11.9 million in prior year. Adjusting for a $5.5 million discrete negative adjustment related to customer derivatives, earnings would have been $0.61 per diluted share.

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

Highlights for the second quarter of 2020:

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

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

Line of Business performance compared to the second quarter of 2019

Commercial Banking

Webster's Commercial Banking segment serves middle market, commercial real estate, asset-based lending, equipment finance, private banking, and treasury and payment solutions clients. As of June 30, 2020, Commercial Banking had $12.5 billion in loans and leases and $5.4 billion in deposit balances.

Commercial Banking Operating Results:

					Percent
	Three months ended June 30,		Favorable/
(In thousands)		2020	2019		(Unfavorable)
Net interest income		$104,862		$100,216				4.6	%
Non-interest income		14,725		14,645				0.5
Operating revenue		119,587		114,861				4.1
Non-interest expense		44,694		46,196				3.3
Pre-tax, pre-provision net revenue		$74,893		$68,665				9.1
					Percent
		At June 30,		Increase/
(In millions)		2020	2019		(Decrease)
Loans and leases		$12,485		$11,005				13.4	%
Deposits		5,400		3,870				39.5

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

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

HSA Bank

Webster's HSA Bank division offers a comprehensive consumer-directed healthcare solution that includes health savings accounts, health reimbursement arrangements, flexible spending accounts and commuter benefits. Health savings accounts are distributed nationwide directly to employers and individual consumers, as well as through national and regional insurance carriers, benefit consultants and financial advisors. As of June 30, 2020, HSA Bank had $9.0 billion in total footings comprising $6.8 billion in deposit balances and $2.2 billion in assets under administration through linked investment accounts.

HSA Bank Operating Results:

					Percent
	Three months ended June 30,		Favorable/
(In thousands)		2020	2019		(Unfavorable)
Net interest income		$39,334		$44,013				(10.6)	%
Non-interest income		23,103		24,979				(7.5)
Operating revenue		62,437		68,992				(9.5)
Non-interest expense		34,020		34,253				0.7
Pre-tax, net revenue		$28,417		$34,739				(18.2)
					Percent
		At June 30,		Increase/
(Dollars in millions)		2020	2019		(Decrease)
Number of accounts (thousands)		2,996		2,964				1.1	%
Deposits		$6,787		$6,212				9.2
Linked investment accounts *		2,249		1,817				23.8
Total footings		$9,036		$8,029				12.5
* Linked investment accounts are held off balance sheet
Note: In 1Q20, segment net Interest income was updated to reflect changes in the funds transfer pricing methodology related to allocated capital. The prior period has been restated to reflect the change.

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

Community Banking

Community Banking serves consumer and business banking customers primarily throughout southern New England and into Westchester County, New York. Community Banking is comprised of the Personal Banking and Business Banking operating segments, as well as a distribution network consisting of 157 banking centers and 306 ATMs, a customer care center, and a full range of web and mobile-based banking services. As of June 30, 2020, Community Banking had $9.3 billion in loans and $14.2 billion in deposit balances.

Community Banking Operating Results:

					Percent
	Three months ended June 30,		Favorable/
(In thousands)		2020	2019		(Unfavorable)
Net interest income		$104,870		$107,838				(2.8)	%
Non-interest income		23,405		27,675				(15.4)
Operating revenue		128,275		135,513				(5.3)
Non-interest expense		93,686		96,166				2.6
Pre-tax, pre-provision net revenue		$34,589		$39,347				(12.1)
					Percent
		At June 30,		Increase/
(In millions)		2020	2019		(Decrease)
Loans		$9,317		$8,265				12.7	%
Deposits		14,173		12,480				13.6

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

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

Consolidated financial performance:

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

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

Quarterly provision for credit losses:

• The provision for credit losses was $40.0 million in the quarter, contributing to a $23.6 million increase in the allowance for credit losses on loans and leases. The increase in the allowance reflects our revised estimate of forecasted economic conditions. The provision for credit losses was $76.0 million in the prior quarter and $11.9 million a year ago. The increase compared to a year ago is primarily due to the adoption of CECL and the impact of COVID-19.
• Net charge-offs were $16.4 million, compared to $7.8 million in the prior quarter and $11.6 million a year ago. The ratio of net charge-offs to average loans on an annualized basis was 0.30 percent, compared to 0.15 percent in the prior quarter and 0.24 percent a year ago.
• The allowance for credit losses on loans and leases represented 1.64 percent of total loans at June 30, 2020, compared to 1.60 percent at March 31, 2020 and 1.10 percent at June 30, 2019. Excluding $1.4 billion of PPP loans, the coverage ratio was 1.75 percent at June 30, 2020. The allowance for credit losses at June 30 and March 31 was estimated in accordance with the CECL accounting standard. The allowance represented 207 percent of nonperforming loans at June 30, 2020 compared to 206 percent at March 31, 2020 and 143 percent at June 30, 2019.

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

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

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

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

Quarterly income taxes compared to the second quarter of 2019:

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

Investment securities:

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

Loans:

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

Asset quality:

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

Deposits and borrowings:

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

Capital:

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

***

About Webster

Webster Financial Corporation is the holding company for Webster Bank, National Association and its HSA Bank division. With $32.7 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust, and investment services through 157 banking centers and 306 ATMs. Webster also provides mobile and Internet banking. Webster Bank owns the asset-based lending firm Webster Business Credit Corporation; the equipment finance firm Webster Capital Finance Corporation; and HSA Bank, a division of Webster Bank, which provides health savings account trustee and administrative services. Webster Bank is a member of the FDIC and an equal housing lender. For more information about Webster, including past press releases and the latest annual report, visit the Webster website at www.websterbank.com.  

Conference Call

A conference call covering Webster's second quarter 2020 earnings announcement will be held today, Thursday, July 23, 2020 at 9:00 a.m. (Eastern) and may be heard through Webster's Investor Relations website at www.wbst.com, or in listen-only mode by calling 877-407-8289 or 201-689-8341 internationally. The call will be archived on the website and available for future retrieval.

Forward-Looking Statements

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

Non-GAAP Financial Measures

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

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

 

WEBSTER FINANCIAL CORPORATION Selected Financial Highlights (unaudited)
		At or for the Three Months Ended
(In thousands, except per share data)		June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019				June 30, 2019
Income and performance ratios:
Net income	$	53,097			$	38,199			$	90,473			$	93,865			$	98,649
Earnings applicable to common shareholders		50,729				36,021				88,066				91,442				96,193
Earnings per diluted common share		0.57				0.39				0.96				1.00				1.05
Return on average assets		0.65	%			0.50	%			1.19	%			1.27	%			1.38	%
Return on average tangible common shareholders' equity (non-GAAP)		8.47				5.95				14.34				15.37				16.88
Return on average common shareholders' equity		6.79				4.75				11.60				12.36				13.47
Non-interest income as a percentage of total revenue		21.12				24.12				23.47				22.52				23.88
Asset quality:
Allowance for credit losses on loans and leases	$	358,522			$	334,931			$	209,096			$	209,152			$	211,671
Nonperforming assets		178,381				169,120				157,380				166,716				153,247
Allowance for credit losses on loans and leases / total loans and leases		1.64	%			1.60	%			1.04	%			1.07	%			1.10	%
Net charge-offs / average loans and leases (annualized)		0.30				0.15				0.12				0.28				0.24
Nonperforming loans and leases / total loans and leases		0.79				0.78				0.75				0.83				0.77
Nonperforming assets / total loans and leases plus OREO		0.82				0.81				0.79				0.85				0.80
Allowance for credit losses on loans and leases / nonperforming loans and leases		207.17				206.37				138.56				128.55				142.97
Other ratios:
Tangible equity (non-GAAP)		8.14	%			8.14	%			8.88	%			8.83	%			8.82	%
Tangible common equity (non-GAAP)		7.69				7.67				8.39				8.34				8.31
Tier 1 risk-based capital (a)		11.84				11.60				12.22				12.32				12.09
Total risk-based capital (a)		13.44				13.10				13.55				13.68				13.48
Common equity tier 1 risk-based capital (a)		11.19				10.95				11.56				11.63				11.41
Shareholders' equity / total assets		9.71				9.76				10.56				10.54				10.59
Net interest margin		2.99				3.23				3.27				3.49				3.63
Efficiency ratio (non-GAAP)		60.04				58.03				58.52				56.60				56.09
Equity and share related:
Common equity	$	3,029,742			$	2,945,205			$	3,062,733			$	3,007,357			$	2,920,180
Book value per common share		33.59				32.66				33.28				32.68				31.74
Tangible book value per common share (non-GAAP)		27.40				26.46				27.19				26.58				25.63
Common stock closing price		28.61				22.90				53.36				46.87				47.77
Dividends declared per common share		0.40				0.40				0.40				0.40				0.40
Common shares issued and outstanding		90,194				90,172				92,027				92,034				92,007
Weighted-average common shares outstanding - Basic		89,485				90,936				91,574				91,559				91,534
Weighted-average common shares outstanding - Diluted		89,570				91,206				91,916				91,874				91,855

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

 

WEBSTER FINANCIAL CORPORATION Consolidated Balance Sheets (unaudited)
(In thousands)		June 30, 2020			March 31, 2020			June 30, 2019
Assets:
Cash and due from banks	$	198,680		$	198,458		$	190,828
Interest-bearing deposits		104,444			69,482			26,652
Securities:
Available for sale		3,183,624			3,016,631			2,978,657
Held to maturity		5,477,126			5,486,206			4,636,707
Total securities		8,660,750			8,502,837			7,615,364
Allowance for credit losses on investment securities held-to-maturity		(309)			(312)			-
Securities, net		8,660,441			8,502,525			7,615,364
Loans held for sale		46,446			22,448			19,249
Loans and Leases:
Commercial		8,546,769			7,565,947			7,025,506
Commercial real estate		6,207,314			6,122,474			5,224,382
Residential mortgages		4,921,573			4,991,512			4,718,704
Consumer		2,126,861			2,211,591			2,301,291
Total loans and leases		21,802,517			20,891,524			19,269,883
Allowance for credit losses on loans and leases		(358,522)			(334,931)			(211,671)
Loans and leases, net		21,443,995			20,556,593			19,058,212
Federal Home Loan Bank and Federal Reserve Bank stock		94,495			141,327			118,371
Premises and equipment, net		258,392			268,420			278,227
Goodwill and other intangible assets, net		558,367			559,328			562,214
Cash surrender value of life insurance policies		557,325			554,231			546,963
Deferred tax asset, net		77,145			80,318			73,462
Accrued interest receivable and other assets		708,887			701,744			452,501
Total Assets	$	32,708,617		$	31,654,874		$	28,942,043
Liabilities and Shareholders' Equity:
Deposits:
Demand	$	6,193,757		$	4,883,436		$	4,174,806
Health savings accounts		6,786,845			6,736,178			6,212,372
Interest-bearing checking		3,280,125			3,007,069			2,636,109
Money market		2,686,650			2,477,304			2,073,006
Savings		4,742,573			4,418,689			4,169,492
Certificates of deposit		2,666,047			2,891,161			3,291,617
Brokered certificates of deposit		-			100,000			41,376
Total deposits		26,355,997			24,513,837			22,598,778
Securities sold under agreements to repurchase and other borrowings		1,688,805			1,262,749			956,920
Federal Home Loan Bank advances		523,321			1,773,399			1,426,656
Long-term debt		570,029			571,212			538,379
Accrued expenses and other liabilities		395,686			443,435			356,093
Total liabilities		29,533,838			28,564,632			25,876,826
Preferred stock		145,037			145,037			145,037
Common shareholders' equity		3,029,742			2,945,205			2,920,180
Total shareholders' equity		3,174,779			3,090,242			3,065,217
Total Liabilities and Shareholders' Equity	$	32,708,617		$	31,654,874		$	28,942,043

 

WEBSTER FINANCIAL CORPORATION Consolidated Statements of Income (unaudited)
		Three Months Ended June 30,			Six Months Ended June 30,
(In thousands, except per share data)		2020			2019			2020			2019
Interest income:
Interest and fees on loans and leases	$	196,521		$	235,949		$	412,708		$	464,713
Interest and dividends on securities		55,570			56,163			113,678			113,441
Loans held for sale		184			145			359			293
Total interest income		252,275			292,257			526,745			578,447
Interest expense:
Deposits		18,805			32,757			46,648			63,777
Borrowings		9,063			17,713			24,889			31,332
Total interest expense		27,868			50,470			71,537			95,109
Net interest income		224,407			241,787			455,208			483,338
Provision for credit losses		40,000			11,900			116,000			20,500
Net interest income after provision for loan and lease losses		184,407			229,887			339,208			462,838
Non-interest income:
Deposit service fees		35,839			43,118			78,409			86,142
Loan and lease related fees		6,968			6,558			13,464			14,377
Wealth and investment services		7,102			8,309			15,841			15,960
Mortgage banking activities		4,205			932			7,098			1,696
Increase in cash surrender value of life insurance policies		3,624			3,650			7,204			7,234
Gain on investment securities, net		-			-			8			-
Other income		2,338			13,286			11,430			19,056
Total non-interest income		60,076			75,853			133,454			144,465
Non-interest expense:
Compensation and benefits		99,731			98,527			201,618			196,312
Occupancy		14,245			14,019			28,730			28,715
Technology and equipment		27,468			25,767			55,305			51,464
Marketing		3,286			4,243			6,788			7,571
Professional and outside services		6,158			5,634			11,821			11,682
Intangible assets amortization		962			962			1,924			1,924
Loan workout expenses		392			832			885			1,492
Deposit insurance		5,015			4,453			9,740			8,883
Other expenses		19,327			26,203			38,609			48,283
Total non-interest expense		176,584			180,640			355,420			356,326
Income before income taxes		67,899			125,100			117,242			250,977
Income tax expense		14,802			26,451			25,946			52,592
Net income		53,097			98,649			91,296			198,385
Preferred stock dividends and other		(2,368)			(2,456)			(4,530)			(4,902)
Earnings applicable to common shareholders	$	50,729		$	96,193		$	86,766		$	193,483
Weighted-average common shares outstanding - Diluted		89,570			91,855			90,391			91,898
Earnings per common share:
Basic	$	0.57		$	1.05		$	0.96		$	2.11
Diluted		0.57			1.05			0.96			2.11

 

WEBSTER FINANCIAL CORPORATION Five Quarter Consolidated Statements of Income (unaudited)
		Three Months Ended
(In thousands, except per share data)		June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019			June 30, 2019
Interest income:
Interest and fees on loans and leases	$	196,521		$	216,187		$	223,527		$	236,453		$	235,949
Interest and dividends on securities		55,570			58,108			58,205			57,517			56,163
Loans held for sale		184			175			268			166			145
Total interest income		252,275			274,470			282,000			294,136			292,257
Interest expense:
Deposits		18,805			27,843			31,586			34,214			32,757
Borrowings		9,063			15,826			19,164			19,383			17,713
Total interest expense		27,868			43,669			50,750			53,597			50,470
Net interest income		224,407			230,801			231,250			240,539			241,787
Provision for credit losses		40,000			76,000			6,000			11,300			11,900
Net interest income after provision for loan and lease losses		184,407			154,801			225,250			229,239			229,887
Non-interest income:
Deposit service fees		35,839			42,570			40,470			41,410			43,118
Loan and lease related fees		6,968			6,496			8,704			8,246			6,558
Wealth and investment services		7,102			8,739			8,476			8,496			8,309
Mortgage banking activities		4,205			2,893			2,286			2,133			932
Increase in cash surrender value of life insurance policies		3,624			3,580			3,670			3,708			3,650
Gain on investment securities, net		-			8			29			-			-
Other income		2,338			9,092			7,284			5,938			13,286
Total non-interest income		60,076			73,378			70,919			69,931			75,853
Non-interest expense:
Compensation and benefits		99,731			101,887			100,467			98,623			98,527
Occupancy		14,245			14,485			14,379			14,087			14,019
Technology and equipment		27,468			27,837			27,639			26,180			25,767
Marketing		3,286			3,502			3,957			4,758			4,243
Professional and outside services		6,158			5,663			4,674			5,024			5,634
Intangible assets amortization		962			962			962			961			962
Loan workout expenses		392			493			474			986			832
Deposit insurance		5,015			4,725			4,662			4,409			4,453
Other expenses		19,327			19,282			22,516			24,866			26,203
Total non-interest expense		176,584			178,836			179,730			179,894			180,640
Income before income taxes		67,899			49,343			116,439			119,276			125,100
Income tax expense		14,802			11,144			25,966			25,411			26,451
Net income		53,097			38,199			90,473			93,865			98,649
Preferred stock dividends and other		(2,368)			(2,178)			(2,407)			(2,423)			(2,456)
Earnings applicable to common shareholders	$	50,729		$	36,021		$	88,066		$	91,442		$	96,193
Weighted-average common shares outstanding - Diluted		89,570			91,206			91,916			91,874			91,855
Earnings per common share:
Basic	$	0.57		$	0.40		$	0.96		$	1.00		$	1.05
Diluted		0.57			0.39			0.96			1.00			1.05

 

WEBSTER FINANCIAL CORPORATION Consolidated Average Balances, Interest, Yields and Rates, and Net Interest Margin on a Fully Tax-equivalent Basis (unaudited)
		Three Months Ended June 30,
		2020				2019
(Dollars in thousands)		Average balance			Interest		Yield/rate				Average balance			Interest		Yield/rate
Assets:
Interest-earning assets:
Loans and leases	$	21,608,914		$	197,317		3.63	%		$	19,030,278		$	236,620		4.94	%
Securities (a)		8,579,213			56,465		2.69				7,472,731			56,501		3.01
Federal Home Loan and Federal Reserve Bank stock		108,962			865		3.19				108,244			1,117		4.14
Interest-bearing deposits		99,467			5		0.02				50,131			309		2.44
Loans held for sale		24,266			184		3.03				23,210			145		2.49
Total interest-earning assets		30,420,822		$	254,836		3.35	%			26,684,594		$	294,692		4.39	%
Non-interest-earning assets		2,062,534									1,855,077
Total Assets	$	32,483,356								$	28,539,671
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand deposits	$	5,823,655		$	-		-	%		$	4,266,938		$	-		-	%
Health savings accounts		6,846,210			2,604		0.15				6,223,570			3,066		0.20
Interest-bearing checking, money market and savings		10,390,143			6,462		0.25				8,934,579			13,132		0.59
Certificates of deposit		2,869,471			9,739		1.36				3,323,203			16,559		2.00
Total deposits		25,929,479			18,805		0.29				22,748,290			32,757		0.58
Securities sold under agreements to repurchase and other borrowings		1,577,881			980		0.25				788,194			3,904		1.96
Federal Home Loan Bank advances		839,830			3,748		1.77				1,117,285			7,772		2.75
Long-term debt (a)		570,679			4,335		3.31				527,713			6,037		4.62
Total borrowings		2,988,390			9,063		1.23				2,433,192			17,713		2.90
Total interest-bearing liabilities		28,917,869		$	27,868		0.39	%			25,181,482		$	50,470		0.80	%
Non-interest-bearing liabilities		410,119									341,648
Total liabilities		29,327,988									25,523,130
Preferred stock		145,037									145,037
Common shareholders' equity		3,010,331									2,871,504
Total shareholders' equity		3,155,368									3,016,541
Total Liabilities and Shareholders' Equity	$	32,483,356								$	28,539,671
Tax-equivalent net interest income					226,968									244,222
Less: tax-equivalent adjustments					(2,561)									(2,435)
Net interest income				$	224,407								$	241,787
Net interest margin							2.99	%								3.63	%

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

 

WEBSTER FINANCIAL CORPORATION Consolidated Average Balances, Interest, Yields and Rates, and Net Interest Margin on a Fully Tax-equivalent Basis (unaudited)
		Six Months Ended June 30,
		2020				2019
(Dollars in thousands)		Average balance			Interest		Yield/rate				Average balance			Interest		Yield/rate
Assets:
Interest-earning assets:
Loans and leases	$	20,966,857		$	414,235		3.93	%		$	18,771,166		$	466,005		4.95	%
Securities (a)		8,449,480			114,873		2.77				7,391,290			113,455		3.05
Federal Home Loan and Federal Reserve Bank stock		117,663			2,116		3.62				110,617			2,829		5.16
Interest-bearing deposits		83,887			196		0.46				52,737			638		2.41
Loans held for sale		23,281			359		3.08				18,358			293		3.19
Total interest-earning assets		29,641,168		$	531,779		3.59	%			26,344,168		$	583,220		4.41	%
Non-interest-earning assets		1,996,765									1,825,418
Total Assets	$	31,637,933								$	28,169,586
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand deposits	$	5,170,280		$	-		-	%		$	4,229,611		$	-		-	%
Health savings accounts		6,803,784			5,900		0.17				6,182,047			6,015		0.20
Interest-bearing checking, money market and savings		10,053,559			18,865		0.38				8,946,484			25,925		0.58
Certificates of deposit		2,968,514			21,883		1.48				3,284,176			31,837		1.95
Total deposits		24,996,137			46,648		0.38				22,642,318			63,777		0.57
Securities sold under agreements to repurchase and other borrowings		1,437,403			4,710		0.65				693,178			6,656		1.91
Federal Home Loan Bank advances		1,082,865			10,617		1.94				1,118,155			15,557		2.77
Long-term debt (a)		560,964			9,562		3.66				389,210			9,119		4.72
Total borrowings		3,081,232			24,889		1.62				2,200,543			31,332		2.84
Total interest-bearing liabilities		28,077,369		$	71,537		0.51	%			24,842,861		$	95,109		0.77	%
Non-interest-bearing liabilities		386,118									350,404
Total liabilities		28,463,487									25,193,265
Preferred stock		145,037									145,037
Common shareholders' equity		3,029,409									2,831,284
Total shareholders' equity		3,174,446									2,976,321
Total Liabilities and Shareholders' Equity	$	31,637,933								$	28,169,586
Tax-equivalent net interest income					460,242									488,111
Less: tax-equivalent adjustments					(5,034)									(4,773)
Net interest income				$	455,208								$	483,338
Net interest margin							3.11	%								3.69	%

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

 

WEBSTER FINANCIAL CORPORATION Five Quarter Loan and Lease Balances (unaudited)
(Dollars in thousands)		June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019			June 30, 2019
Loan and Lease Balances (actual):
Commercial non-mortgage	$	7,606,245		$	6,385,619		$	5,833,952		$	5,887,119		$	5,948,388
Asset-based lending		940,524			1,180,328			1,046,886			1,122,765			1,077,118
Commercial real estate		6,207,314			6,122,474			5,949,339			5,398,084			5,224,382
Residential mortgages		4,921,573			4,991,512			4,972,685			4,873,726			4,718,704
Consumer		2,126,861			2,211,591			2,234,124			2,269,952			2,301,291
Total Loan and Lease Balances		21,802,517			20,891,524			20,036,986			19,551,646			19,269,883
Allowance for credit losses on loans and leases		(358,522)			(334,931)			(209,096)			(209,152)			(211,671)
Loans and Leases, net	$	21,443,995		$	20,556,593		$	19,827,890		$	19,342,494		$	19,058,212
Loan and Lease Balances (average):
Commercial non-mortgage	$	7,318,814		$	6,005,501		$	5,879,600		$	5,933,221		$	5,914,710
Asset-based lending		1,030,928			1,085,624			1,087,537			1,138,189			1,049,403
Commercial real estate		6,136,091			5,996,728			5,667,764			5,312,403			5,079,415
Residential mortgages		4,946,746			5,013,888			4,917,365			4,802,497			4,662,033
Consumer		2,176,335			2,223,058			2,256,255			2,286,983			2,324,717
Total Loan and Lease Balances		21,608,914			20,324,799			19,808,521			19,473,293			19,030,278
Allowance for credit losses on loans and leases		(340,050)			(269,273)			(211,460)			(213,130)			(210,719)
Loans and Leases, net	$	21,268,864		$	20,055,526		$	19,597,061		$	19,260,163		$	18,819,559

 

WEBSTER FINANCIAL CORPORATION Five Quarter Past Due Loans and Leases (unaudited)
(Dollars in thousands)		June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019			June 30, 2019
Nonperforming loans and leases:
Commercial non-mortgage	$	75,340			74,077			64,793			64,197			56,340
Asset-based lending		138			137			139			9,165			184
Commercial real estate		15,889			12,901			11,554			12,810			10,413
Residential mortgages		46,500			42,393			43,100			43,733			48,104
Consumer		35,187			32,785			31,320			32,794			33,015
Total nonperforming loans and leases	$	173,054		$	162,293		$	150,906		$	162,699		$	148,056
Other real estate owned and repossessed assets:
Commercial non-mortgage	$	272			121			271			544			1,307
Residential mortgages		3,081			4,480			4,247			1,912			2,012
Consumer		1,974			2,226			1,956			1,561			1,872
Total other real estate owned and repossessed assets	$	5,327		$	6,827		$	6,474		$	4,017		$	5,191
Total nonperforming assets	$	178,381		$	169,120		$	157,380		$	166,716		$	153,247
Past due 30-89 days:
Commercial non-mortgage	$	13,959		$	8,200		$	8,482		$	5,384		$	4,438
Asset-based lending		-			-			-			-			-
Commercial real estate		2,363			2,217			1,700			1,433			2,665
Residential mortgages		15,445			11,814			13,598			13,445			10,844
Consumer		7,857			14,666			18,835			15,217			13,949
Total past due 30-89 days		39,624			36,897			42,615			35,479			31,896
Past due 90 days or more and accruing		198			75			-			92			410
Total past due loans and leases	$	39,822		$	36,972		$	42,615		$	35,571		$	32,306

 

WEBSTER FINANCIAL CORPORATION Five Quarter Changes in the Allowance for Credit Losses on Loans and Leases (unaudited)
		For the Three Months Ended
(Dollars in thousands)		June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019			June 30, 2019
Beginning balance	$	334,931		$	209,096		$	209,152		$	211,671		$	211,389
Adoption of ASU No. 2016-13		-			57,568			-			-			-
Provision		40,003			76,085			6,000			11,300			11,900
Charge-offs:
Commercial non-mortgage		15,294			5,544			5,041			11,291			5,657
Asset-based lending		-			-			-			-			-
Commercial real estate		-			30			23			32			2,473
Residential mortgages		194			1,511			876			872			2,154
Consumer		2,586			3,076			3,165			3,765			4,098
Total charge-offs		18,074			10,161			9,105			15,960			14,382
Recoveries:
Commercial non-mortgage		271			558			236			173			464
Asset-based lending		10			3			33			-			-
Commercial real estate		2			3			3			3			33
Residential mortgages		83			235			534			356			295
Consumer		1,296			1,544			2,243			1,609			1,972
Total recoveries		1,662			2,343			3,049			2,141			2,764
Total net charge-offs		16,412			7,818			6,056			13,819			11,618
Ending balance	$	358,522		$	334,931		$	209,096		$	209,152		$	211,671

 

WEBSTER FINANCIAL 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 time deposits. 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)		June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019				June 30, 2019
Efficiency ratio:
Non-interest expense (GAAP)	$	176,584			$	178,836			$	179,730			$	179,894			$	180,640
Less: Foreclosed property activity (GAAP)		(217)				(250)				263				(128)				(55)
Intangible assets amortization (GAAP)		962				962				962				961				962
Other expenses (non-GAAP)		-				-				-				1,750				-
Non-interest expense (non-GAAP)	$	175,839			$	178,124			$	178,505			$	177,311			$	179,733
Net interest income (GAAP)	$	224,407			$	230,801			$	231,250			$	240,539			$	241,787
Add: Tax-equivalent adjustment (non-GAAP)		2,561				2,473				2,486				2,436				2,435
Non-interest income (GAAP)		60,076				73,378				70,919				69,931				75,853
Other (non-GAAP)		293				299				402				350				354
Customer derivative fair value adjustment (GAAP)		5,511				-				-				-				-
Less: Gain on investment securities, net (GAAP)		-				8				29				-				-
Income (non-GAAP)	$	292,848			$	306,943			$	305,028			$	313,256			$	320,429
Efficiency ratio (non-GAAP)		60.04	%			58.03	%			58.52	%			56.60	%			56.09	%
Return on average tangible common shareholders' equity:
Net income (GAAP)	$	53,097			$	38,199			$	90,473			$	93,865			$	98,649
Less: Preferred stock dividends (GAAP)		1,969				1,969				1,969				1,968				1,969
Add: Intangible assets amortization, tax-effected (GAAP)		760				760				760				759				760
Income adjusted for preferred stock dividends and intangible assets amortization (non-GAAP)	$	51,888			$	36,990			$	89,264			$	92,656			$	97,440
Income adjusted for preferred stock dividends and intangible assets amortization, annualized basis (non-GAAP)	$	207,552			$	147,960			$	357,056			$	370,624			$	389,760
Average shareholders' equity (non-GAAP)	$	3,155,368			$	3,193,525			$	3,196,563			$	3,118,691			$	3,016,541
Less: Average preferred stock (non-GAAP)		145,037				145,037				145,037				145,037				145,037
Average goodwill and other intangible assets (non-GAAP)		558,835				559,786				560,750				561,715				562,679
Average tangible common shareholders' equity (non-GAAP)	$	2,451,496			$	2,488,702			$	2,490,776			$	2,411,939			$	2,308,825
Return on average tangible common shareholders' equity (non-GAAP)		8.47	%			5.95	%			14.34	%			15.37	%			16.88	%
Tangible equity:
Shareholders' equity (GAAP)	$	3,174,779			$	3,090,242			$	3,207,770			$	3,152,394			$	3,065,217
Less: Goodwill and other intangible assets (GAAP)		558,367				559,328				560,290				561,252				562,214
Tangible shareholders' equity (non-GAAP)	$	2,616,412			$	2,530,914			$	2,647,480			$	2,591,142			$	2,503,003
Total assets (GAAP)	$	32,708,617			$	31,654,874			$	30,389,344			$	29,895,100			$	28,942,043
Less: Goodwill and other intangible assets (GAAP)		558,367				559,328				560,290				561,252				562,214
Tangible assets (non-GAAP)	$	32,150,250			$	31,095,546			$	29,829,054			$	29,333,848			$	28,379,829
Tangible equity (non-GAAP)		8.14	%			8.14	%			8.88	%			8.83	%			8.82	%
Tangible common equity:
Tangible shareholders' equity (non-GAAP)	$	2,616,412			$	2,530,914			$	2,647,480			$	2,591,142			$	2,503,003
Less: Preferred stock (GAAP)		145,037				145,037				145,037				145,037				145,037
Tangible common shareholders' equity (non-GAAP)	$	2,471,375			$	2,385,877			$	2,502,443			$	2,446,105			$	2,357,966
Tangible assets (non-GAAP)	$	32,150,250			$	31,095,546			$	29,829,054			$	29,333,848			$	28,379,829
Tangible common equity (non-GAAP)		7.69	%			7.67	%			8.39	%			8.34	%			8.31	%
Tangible book value per common share:
Tangible common shareholders' equity (non-GAAP)	$	2,471,375			$	2,385,877			$	2,502,443			$	2,446,105			$	2,357,966
Common shares outstanding		90,194				90,172				92,027				92,034				92,007
Tangible book value per common share (non-GAAP)	$	27.40			$	26.46			$	27.19			$	26.58			$	25.63
Core deposits:
Total deposits	$	26,355,997			$	24,513,837			$	23,324,746			$	23,280,665			$	22,598,778
Less: Certificates of deposit		2,666,047				2,891,161				3,104,765				3,249,860				3,291,617
Brokered certificates of deposit		-				100,000				-				5,705				41,376
Core deposits (non-GAAP)	$	23,689,950			$	21,522,676			$	20,219,981			$	20,025,100			$	19,265,785

 

Media Contact				Investor Contact
Alice Ferreira, 203-578-2610				Terry Mangan, 203-578-2318
acferreira@websterbank.com				tmangan@websterbank.com

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SOURCE Webster Financial Corporation

FAQ

What were Webster Financial Corporation's earnings for Q2 2020?

Webster Financial Corporation reported earnings of $50.7 million, or $0.57 per diluted share, for Q2 2020.

How did Webster Financial's revenue perform in Q2 2020?

Webster Financial achieved revenue of $284.5 million in Q2 2020, reflecting a growth of 13.1% from the previous year.

What is the status of Webster Financial Corporation's loan growth?

In Q2 2020, Webster Financial reported a loan growth of $2.5 billion, equating to an increase of 13.1%.

What is the current Common Equity Tier 1 capital ratio for WBS?

Webster Financial's Common Equity Tier 1 capital ratio exceeds 11%, indicating a strong capital base.

How much did Webster Financial allocate for credit losses in Q2 2020?

The provision for credit losses for Webster Financial in Q2 2020 was $40 million.