Webster Reports Third Quarter 2020 Earnings Of $0.75 Per Diluted Share

Rhea-AI Summary

Webster Financial Corporation (NYSE: WBS) reported Q3 2020 earnings of $66.9 million, or $0.75 per diluted share, down from $91.4 million, or $1.00 per diluted share in Q3 2019. Revenue stood at $294.3 million with a loan growth of 11.8%, driven primarily by commercial real estate. Total deposits grew 15.6% to $26.9 billion. The company reported a provision for credit losses of $22.8 million, with nonperforming loans at 0.74%. Despite a decline in net interest margin to 2.88%, efficiency ratio improved to 60.0%. Management highlighted the ongoing support for customers amid COVID-19 challenges.

Positive

• Loan growth of $2.3 billion, or 11.8%, with a 20.2% increase in commercial and commercial real estate loans.
• Deposit growth of $3.6 billion, or 15.6%, with significant demand deposits increase.
• Non-interest income rose to $75.1 million, up from $69.9 million, primarily due to increased mortgage banking activities.
• Pre-tax, pre-provision net revenue increased in Community Banking by 16.1% to $38.2 million.

Negative

• Earnings declined by 27% year-over-year, from $1.00 to $0.75 per diluted share.
• Net interest income fell 8.8% year-over-year to $219.3 million due to reduced interest margins.
• Non-interest expenses increased by 2.3% to $184.0 million, driven by higher compensation and professional fees.
• Provision for credit losses of $22.8 million reflects ongoing economic uncertainties.

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

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

Highlights for the third quarter of 2020:

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

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

Line of Business performance compared to the third quarter of 2019

Commercial Banking

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

Commercial Banking Operating Results:

							Percent
	Three months ended September 30,						Favorable/
(In thousands)		2020		2019			(Unfavorable)
Net interest income		$107,417		$104,549				2.7	%
Non-interest income		13,099		13,987				(6.3)
Operating revenue		120,516		118,536				1.7
Non-interest expense		47,610		45,261				(5.2)
Pre-tax, pre-provision net revenue		$72,906		$73,275				(0.5)
							Percent
		At September 30,					Increase/
(In millions)		2020		2019			(Decrease)
Loans and leases		$12,620		$11,121				13.5	%
Deposits		5,999		4,528				32.5

Note: In 1Q20, segment net interest income was updated to reflect changes 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 $0.4 million to $72.9 million in the quarter as compared to prior year. Net interest income increased $2.9 million to $107.4 million, primarily driven by loan and deposit growth. Non-interest income decreased $0.9 million to $13.1 million as a result of lower loan fees. Non-interest expense increased $2.3 million to $47.6 million, primarily due to higher support costs and lower deferred loan origination costs.

HSA Bank

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

HSA Bank Operating Results:

							Percent
	Three months ended September 30,						Favorable/
(In thousands)		2020		2019			(Unfavorable)
Net interest income		$39,861		$43,581				(8.5)	%
Non-interest income		27,235		23,526				15.8
Operating revenue		67,096		67,107				—
Non-interest expense		34,789		32,918				(5.7)
Pre-tax, net revenue		$32,307		$34,189				(5.5)
							Percent
		At September 30,					Increase/
(Dollars in millions)		2020		2019			(Decrease)
Number of accounts (thousands)		2,968		2,992				(0.8)	%
Deposits		$6,976		$6,288				10.9
Linked investment accounts *		2,454		1,875				30.9
Total footings		$9,430		$8,163				15.5
* Linked investment accounts are held off balance sheet

Note: In 1Q20, segment net interest income was updated to reflect changes 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 $1.9 million to $32.3 million in the quarter as compared to prior year. Net interest income decreased $3.7 million to $39.9 million, due to a decline in deposit spreads partially offset by a 10.9 percent growth in deposits. Non-interest income increased $3.7 million to $27.2 million, due primarily to fees related to third party administration (TPA) agreements and account closures in the quarter. Non-interest expense increased $1.9 million to $34.8 million, primarily due to merit increases, medical costs, and expenses to support the current enrollment season.

Community Banking

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

Community Banking Operating Results:

							Percent
	Three months ended September 30,						Favorable/
(In thousands)		2020		2019			(Unfavorable)
Net interest income		$108,218		$104,613				3.4	%
Non-interest income		28,970		28,115				3.0
Operating revenue		137,188		132,728				3.4
Non-interest expense		98,991		99,835				0.8
Pre-tax, pre-provision net revenue		$38,197		$32,893				16.1
							Percent
		At September 30,					Increase/
(In millions)		2020		2019			(Decrease)
Loans		$9,232		$8,430				9.5	%
Deposits		13,950		12,462				11.9

Note: In 1Q20, segment net interest income was updated to reflect changes 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 $5.3 million to $38.2 million in the quarter as compared to prior year. Net interest income increased $3.6 million to $108.2 million, due to balance growth in the loan and deposit portfolios, partially offset by a decline in deposit spreads. Non-interest income increased $0.9 million driven by increased fee income from mortgage banking activities in the current quarter. This increase was partially offset by lower deposit-related service charges, as well as lower loan servicing and investment services fees. Non-interest expense decreased $0.8 million to $99.0 million resulting from lower bank operations expense and charges taken in 2019 related to the suspension of two lending initiatives. These reductions more than offset increased employee-related expenses and continued investments in technology.

Consolidated financial performance:

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

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

Quarterly provision for credit losses:

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

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

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

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

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

Quarterly income taxes compared to the third quarter of 2019:

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

Investment securities:

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

Loans:

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

Asset quality:

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

Deposits and borrowings:

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

Capital:

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

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

Conference Call

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

Forward-Looking Statements

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

Non-GAAP Financial Measures

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

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

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

 

  

WEBSTER FINANCIAL CORPORATION Selected Financial Highlights (unaudited)
		At or for the Three Months Ended
(In thousands, except per share data)		September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
Income and performance ratios:
Net income	$	69,281			$	53,097			$	38,199			$	90,473			$	93,865
Earnings applicable to common shareholders		66,890				50,729				36,021				88,066				91,442
Earnings per diluted common share		0.75				0.57				0.39				0.96				1.00
Return on average assets		0.84	%			0.65	%			0.50	%			1.19	%			1.27	%
Return on average tangible common shareholders' equity (non-GAAP)		10.91				8.47				5.95				14.34				15.37
Return on average common shareholders' equity		8.80				6.79				4.75				11.60				12.36
Non-interest income as a percentage of total revenue		25.50				21.12				24.12				23.47				22.52
Asset quality:
Allowance for credit losses on loans and leases	$	369,811			$	358,522			$	334,931			$	209,096			$	209,152
Nonperforming assets		167,314				178,381				169,120				157,380				166,716
Allowance for credit losses on loans and leases / total loans and leases		1.69	%			1.64	%			1.60	%			1.04	%			1.07	%
Net charge-offs / average loans and leases (annualized)		0.21				0.30				0.15				0.12				0.28
Nonperforming loans and leases / total loans and leases		0.74				0.79				0.78				0.75				0.83
Nonperforming assets / total loans and leases plus OREO		0.77				0.82				0.81				0.79				0.85
Allowance for credit losses on loans and leases / nonperforming loans and leases		227.39				207.17				206.37				138.56				128.55
Other ratios:
Tangible equity (non-GAAP)		8.19	%			8.14	%			8.14	%			8.88	%			8.83	%
Tangible common equity (non-GAAP)		7.75				7.69				7.67				8.39				8.34
Tier 1 risk-based capital (a)		11.88				11.82				11.60				12.22				12.32
Total risk-based capital (a)		13.47				13.42				13.10				13.55				13.68
Common equity tier 1 risk-based capital (a)		11.23				11.17				10.95				11.56				11.63
Shareholders' equity / total assets		9.76				9.71				9.76				10.56				10.54
Net interest margin		2.88				2.99				3.23				3.27				3.49
Efficiency ratio (non-GAAP)		59.99				60.04				58.03				58.52				56.60
Equity and share related:
Common equity	$	3,074,653			$	3,029,742			$	2,945,205			$	3,062,733			$	3,007,357
Book value per common share		34.09				33.59				32.66				33.28				32.68
Tangible book value per common share (non-GAAP)		27.86				27.40				26.46				27.19				26.58
Common stock closing price		26.41				28.61				22.90				53.36				46.87
Dividends declared per common share		0.40				0.40				0.40				0.40				0.40
Common shares issued and outstanding		90,204				90,194				90,172				92,027				92,034
Weighted-average common shares outstanding - Basic		89,630				89,485				90,936				91,574				91,559
Weighted-average common shares outstanding - Diluted		89,738				89,570				91,206				91,916				91,874

(a) Presented as projected for September 30, 2020 and actual for 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 September 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)		September 30, 2020				June 30, 2020				September 30, 2019
Assets:
Cash and due from banks	$	181,524			$	198,680			$	227,966
Interest-bearing deposits		60,276				104,444				74,865
Securities:
Available for sale		3,304,217				3,183,624				2,960,103
Held to maturity		5,723,434				5,477,126				5,193,521
Total securities		9,027,651				8,660,750				8,153,624
Allowance for credit losses on investment securities held-to-maturity		(306)				(309)				-
Securities, net		9,027,345				8,660,441				8,153,624
Loans held for sale		29,018				46,446				27,061
Loans and Leases:
Commercial		8,612,549				8,546,769				7,009,884
Commercial real estate		6,307,567				6,207,314				5,398,084
Residential mortgages		4,885,821				4,921,573				4,873,726
Consumer		2,046,086				2,126,861				2,269,952
Total loans and leases		21,852,023				21,802,517				19,551,646
Allowance for credit losses on loans and leases		(369,811)				(358,522)				(209,152)
Loans and leases, net		21,482,212				21,443,995				19,342,494
Federal Home Loan Bank and Federal Reserve Bank stock		89,611				94,495				116,984
Premises and equipment, net		250,535				258,392				278,642
Goodwill and other intangible assets, net		561,902				558,367				561,252
Cash surrender value of life insurance policies		561,021				557,325				549,335
Deferred tax asset, net		76,695				77,145				59,956
Accrued interest receivable and other assets		674,304				708,887				502,921
Total Assets	$	32,994,443			$	32,708,617			$	29,895,100
Liabilities and Shareholders' Equity:
Deposits:
Demand	$	6,136,814			$	6,193,757			$	4,291,659
Health savings accounts		6,976,280				6,786,845				6,288,218
Interest-bearing checking		3,390,921				3,280,125				2,619,452
Money market		3,069,098				2,686,650				2,560,918
Savings		4,777,000				4,742,573				4,264,853
Certificates of deposit		2,570,440				2,666,047				3,249,860
Brokered certificates of deposit		-				-				5,705
Total deposits		26,920,553				26,355,997				23,280,665
Securities sold under agreements to repurchase and other borrowings		1,301,822				1,688,805				1,210,692
Federal Home Loan Bank advances		433,243				523,321				1,392,849
Long-term debt		568,846				570,029				549,158
Accrued expenses and other liabilities		550,289				395,686				309,342
Total liabilities		29,774,753				29,533,838				26,742,706
Preferred stock		145,037				145,037				145,037
Common shareholders' equity		3,074,653				3,029,742				3,007,357
Total shareholders' equity		3,219,690				3,174,779				3,152,394
Total Liabilities and Shareholders' Equity	$	32,994,443			$	32,708,617			$	29,895,100

 

WEBSTER FINANCIAL CORPORATION Consolidated Statements of Income (unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
(In thousands, except per share data)		2020				2019				2020				2019
Interest income:
Interest and fees on loans and leases	$	188,001			$	236,453			$	600,709			$	701,166
Interest and dividends on securities		51,009				57,517				164,687				170,958
Loans held for sale		229				166				588				459
Total interest income		239,239				294,136				765,984				872,583
Interest expense:
Deposits		12,598				34,214				59,246				97,991
Borrowings		7,385				19,383				32,274				50,715
Total interest expense		19,983				53,597				91,520				148,706
Net interest income		219,256				240,539				674,464				723,877
Provision for credit losses		22,750				11,300				138,750				31,800
Net interest income after provision for loan and lease losses		196,506				229,239				535,714				692,077
Non-interest income:
Deposit service fees		39,278				41,410				117,687				127,552
Loan and lease related fees		6,568				8,246				20,032				22,623
Wealth and investment services		8,255				8,496				24,096				24,456
Mortgage banking activities		7,087				2,133				14,185				3,829
Increase in cash surrender value of life insurance policies		3,695				3,708				10,899				10,942
Gain on investment securities, net		-				-				8				-
Other income		10,177				5,938				21,607				24,994
Total non-interest income		75,060				69,931				208,514				214,396
Non-interest expense:
Compensation and benefits		104,019				98,623				305,637				294,935
Occupancy		14,275				14,087				43,005				42,802
Technology and equipment		27,846				26,180				83,151				77,644
Marketing		3,852				4,758				10,640				12,329
Professional and outside services		9,223				5,024				21,044				16,706
Intangible assets amortization		1,089				961				3,013				2,885
Loan workout expenses		612				986				1,497				2,478
Deposit insurance		4,204				4,409				13,944				13,292
Other expenses		18,876				24,866				57,485				73,149
Total non-interest expense		183,996				179,894				539,416				536,220
Income before income taxes		87,570				119,276				204,812				370,253
Income tax expense		18,289				25,411				44,235				78,003
Net income		69,281				93,865				160,577				292,250
Preferred stock dividends and other		(2,391)				(2,423)				(6,819)				(7,331)
Earnings applicable to common shareholders	$	66,890			$	91,442			$	153,758			$	284,919
Weighted-average common shares outstanding - Diluted		89,738				91,874				90,235				91,883
Earnings per common share:
Basic	$	0.75			$	1.00			$	1.71			$	3.11
Diluted		0.75				1.00				1.70				3.10

 

WEBSTER FINANCIAL CORPORATION Five Quarter Consolidated Statements of Income (unaudited)
		Three Months Ended
(In thousands, except per share data)		September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
Interest income:
Interest and fees on loans and leases	$	188,001			$	196,521			$	216,187			$	223,527			$	236,453
Interest and dividends on securities		51,009				55,570				58,108				58,205				57,517
Loans held for sale		229				184				175				268				166
Total interest income		239,239				252,275				274,470				282,000				294,136
Interest expense:
Deposits		12,598				18,805				27,843				31,586				34,214
Borrowings		7,385				9,063				15,826				19,164				19,383
Total interest expense		19,983				27,868				43,669				50,750				53,597
Net interest income		219,256				224,407				230,801				231,250				240,539
Provision for credit losses		22,750				40,000				76,000				6,000				11,300
Net interest income after provision for loan and lease losses		196,506				184,407				154,801				225,250				229,239
Non-interest income:
Deposit service fees		39,278				35,839				42,570				40,470				41,410
Loan and lease related fees		6,568				6,968				6,496				8,704				8,246
Wealth and investment services		8,255				7,102				8,739				8,476				8,496
Mortgage banking activities		7,087				4,205				2,893				2,286				2,133
Increase in cash surrender value of life insurance policies		3,695				3,624				3,580				3,670				3,708
Gain on investment securities, net		-				-				8				29				-
Other income		10,177				2,338				9,092				7,284				5,938
Total non-interest income		75,060				60,076				73,378				70,919				69,931
Non-interest expense:
Compensation and benefits		104,019				99,731				101,887				100,467				98,623
Occupancy		14,275				14,245				14,485				14,379				14,087
Technology and equipment		27,846				27,468				27,837				27,639				26,180
Marketing		3,852				3,286				3,502				3,957				4,758
Professional and outside services		9,223				6,158				5,663				4,674				5,024
Intangible assets amortization		1,089				962				962				962				961
Loan workout expenses		612				392				493				474				986
Deposit insurance		4,204				5,015				4,725				4,662				4,409
Other expenses		18,876				19,327				19,282				22,516				24,866
Total non-interest expense		183,996				176,584				178,836				179,730				179,894
Income before income taxes		87,570				67,899				49,343				116,439				119,276
Income tax expense		18,289				14,802				11,144				25,966				25,411
Net income		69,281				53,097				38,199				90,473				93,865
Preferred stock dividends and other		(2,391)				(2,368)				(2,178)				(2,407)				(2,423)
Earnings applicable to common shareholders	$	66,890			$	50,729			$	36,021			$	88,066			$	91,442
Weighted-average common shares outstanding - Diluted		89,738				89,570				91,206				91,916				91,874
Earnings per common share:
Basic	$	0.75			$	0.57			$	0.40			$	0.96			$	1.00
Diluted		0.75				0.57				0.39				0.96				1.00

 

WEBSTER FINANCIAL CORPORATION Consolidated Average Balances, Interest, Yields and Rates, and Net Interest Margin on a Fully Tax-equivalent Basis (unaudited)
		Three Months Ended September 30,
		2020																2019
(Dollars in thousands)		Average balance				Interest				Yield/rate								Average balance			Interest		Yield/rate
Assets:
Interest-earning assets:
Loans and leases	$	21,870,740			$	188,865				3.40	%						$	19,473,293		$	237,131		4.80	%
Securities (a)		8,762,692				52,154				2.47								7,929,568			57,810		2.93
Federal Home Loan and Federal Reserve Bank stock		91,232				600				2.62								104,975			1,120		4.23
Interest-bearing deposits		102,059				26				0.10								63,751			345		2.12
Loans held for sale		31,211				229				2.94								20,301			166		3.29
Total interest-earning assets		30,857,934			$	241,874				3.13	%							27,591,888		$	296,572		4.25	%
Non-interest-earning assets		2,057,503																1,965,521
Total Assets	$	32,915,437															$	29,557,409
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand deposits	$	6,228,436			$	-				-	%						$	4,322,932		$	-		-	%
Health savings accounts		6,953,641				2,073				0.12								6,274,341			3,135		0.20
Interest-bearing checking, money market and savings		11,167,653				3,983				0.14								9,256,189			14,697		0.63
Certificates of deposit		2,589,888				6,542				1.00								3,301,588			16,382		1.97
Total deposits		26,939,618				12,598				0.19								23,155,050			34,214		0.59
Securities sold under agreements to repurchase and other borrowings		1,225,616				608				0.19								1,362,877			6,571		1.89
Federal Home Loan Bank advances		449,085				2,528				2.20								1,017,787			6,910		2.66
Long-term debt (a)		569,425				4,249				3.25								543,869			5,902		4.52
Total borrowings		2,244,126				7,385				1.33								2,924,533			19,383		2.63
Total interest-bearing liabilities		29,183,744			$	19,983				0.27	%							26,079,583		$	53,597		0.81	%
Non-interest-bearing liabilities		526,363																359,135
Total liabilities		29,710,107																26,438,718
Preferred stock		145,037																145,037
Common shareholders' equity		3,060,293																2,973,654
Total shareholders' equity		3,205,330																3,118,691
Total Liabilities and Shareholders' Equity	$	32,915,437															$	29,557,409
Tax-equivalent net interest income						221,891															242,975
Less: tax-equivalent adjustments						(2,635)															(2,436)
Net interest income					$	219,256														$	240,539
Net interest margin										2.88	%												3.49	%

(a) For purposes of the yield computation, unrealized gain (loss) balances on securities available for sale and senior fixed-rate 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)
		Nine Months Ended September 30,
		2020																2019
(Dollars in thousands)		Average balance				Interest				Yield/rate								Average balance			Interest		Yield/rate
Assets:
Interest-earning assets:
Loans and leases	$	21,270,350			$	603,100				3.75	%						$	19,007,780		$	703,136		4.90	%
Securities (a)		8,554,646				167,027				2.67								7,572,687			171,265		3.01
Federal Home Loan and Federal Reserve Bank stock		108,788				2,716				3.33								108,716			3,949		4.86
Interest-bearing deposits		89,989				222				0.32								56,449			983		2.30
Loans held for sale		25,944				588				3.02								19,013			459		3.22
Total interest-earning assets		30,049,717			$	773,653				3.43	%							26,764,645		$	879,792		4.36	%
Non-interest-earning assets		2,017,159																1,872,632
Total Assets	$	32,066,876															$	28,637,277
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand deposits	$	5,525,573			$	-				-	%						$	4,261,060		$	-		-	%
Health savings accounts		6,854,101				7,973				0.16								6,213,150			9,150		0.20
Interest-bearing checking, money market and savings		10,427,634				22,848				0.29								9,050,853			40,622		0.60
Certificates of deposit		2,841,385				28,425				1.34								3,290,044			48,219		1.96
Total deposits		25,648,693				59,246				0.31								22,815,107			97,991		0.57
Securities sold under agreements to repurchase and other borrowings		1,366,292				5,318				0.51								918,864			13,227		1.90
Federal Home Loan Bank advances		870,063				13,145				1.98								1,084,332			22,467		2.73
Long-term debt (a)		563,805				13,811				3.52								441,329			15,021		4.63
Total borrowings		2,800,160				32,274				1.55								2,444,525			50,715		2.75
Total interest-bearing liabilities		28,448,853			$	91,520				0.43	%							25,259,632		$	148,706		0.78	%
Non-interest-bearing liabilities		433,207																353,346
Total liabilities		28,882,060																25,612,978
Preferred stock		145,037																145,037
Common shareholders' equity		3,039,779																2,879,262
Total shareholders' equity		3,184,816																3,024,299
Total Liabilities and Shareholders' Equity	$	32,066,876															$	28,637,277
Tax-equivalent net interest income						682,133															731,086
Less: tax-equivalent adjustments						(7,669)															(7,209)
Net interest income					$	674,464														$	723,877
Net interest margin										3.03	%												3.62	%

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

 

WEBSTER FINANCIAL CORPORATION Five Quarter Loan and Lease Balances (unaudited)
(Dollars in thousands)		September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
Loan and Lease Balances (actual):
Commercial non-mortgage	$	7,722,838			$	7,606,245			$	6,385,619			$	5,833,952			$	5,887,119
Asset-based lending		889,711				940,524				1,180,328				1,046,886				1,122,765
Commercial real estate		6,307,567				6,207,314				6,122,474				5,949,339				5,398,084
Residential mortgages		4,885,821				4,921,573				4,991,512				4,972,685				4,873,726
Consumer		2,046,086				2,126,861				2,211,591				2,234,124				2,269,952
Total Loan and Lease Balances		21,852,023				21,802,517				20,891,524				20,036,986				19,551,646
Allowance for credit losses on loans and leases		(369,811)				(358,522)				(334,931)				(209,096)				(209,152)
Loans and Leases, net	$	21,482,212			$	21,443,995			$	20,556,593			$	19,827,890			$	19,342,494
Loan and Lease Balances (average):
Commercial non-mortgage	$	7,683,879			$	7,318,814			$	6,005,501			$	5,879,600			$	5,933,221
Asset-based lending		922,653				1,030,928				1,085,624				1,087,537				1,138,189
Commercial real estate		6,260,114				6,136,091				5,996,728				5,667,764				5,312,403
Residential mortgages		4,914,368				4,946,746				5,013,888				4,917,365				4,802,497
Consumer		2,089,726				2,176,335				2,223,058				2,256,255				2,286,983
Total Loan and Lease Balances		21,870,740				21,608,914				20,324,799				19,808,521				19,473,293
Allowance for credit losses on loans and leases		(363,552)				(340,050)				(269,273)				(211,460)				(213,130)
Loans and Leases, net	$	21,507,188			$	21,268,864			$	20,055,526			$	19,597,061			$	19,260,163
WEBSTER FINANCIAL CORPORATION Five Quarter Past Due Loans and Leases (unaudited)
(Dollars in thousands)		September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
Nonperforming loans and leases:
Commercial non-mortgage	$	75,080				75,340				74,077				64,793				64,197
Asset-based lending		3,789				138				137				139				9,165
Commercial real estate		8,784				15,889				12,901				11,554				12,810
Residential mortgages		41,498				46,500				42,393				43,100				43,733
Consumer		33,485				35,187				32,785				31,320				32,794
Total nonperforming loans and leases	$	162,636			$	173,054			$	162,293			$	150,906			$	162,699
Other real estate owned and repossessed assets:
Commercial non-mortgage	$	175				272				121				271				544
Residential mortgages		3,899				3,081				4,480				4,247				1,912
Consumer		604				1,974				2,226				1,956				1,561
Total other real estate owned and repossessed assets	$	4,678			$	5,327			$	6,827			$	6,474			$	4,017
Total nonperforming assets	$	167,314			$	178,381			$	169,120			$	157,380			$	166,716
Past due 30-89 days:
Commercial non-mortgage	$	3,821			$	13,959			$	8,200			$	8,482			$	5,384
Asset-based lending		-				-				-				-				-
Commercial real estate		329				2,363				2,217				1,700				1,433
Residential mortgages		9,291				15,445				11,814				13,598				13,445
Consumer		8,349				7,857				14,666				18,835				15,217
Total past due 30-89 days		21,790				39,624				36,897				42,615				35,479
Past due 90 days or more and accruing		-				198				75				-				92
Total past due loans and leases	$	21,790			$	39,822			$	36,972			$	42,615			$	35,571

 

WEBSTER FINANCIAL CORPORATION Five Quarter Changes in the Allowance for Credit Losses on Loans and Leases (unaudited)
		For the Three Months Ended
(Dollars in thousands)		September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
Beginning balance	$	358,522			$	334,931			$	209,096			$	209,152			$	211,671
Adoption of ASU No. 2016-13		-				-				57,568				-				-
Provision		22,753				40,003				76,085				6,000				11,300
Charge-offs:
Commercial non-mortgage		12,085				15,294				5,544				5,041				11,291
Asset-based lending		10				-				-				-				-
Commercial real estate		1,399				-				30				23				32
Residential mortgages		546				194				1,511				876				872
Consumer		1,717				2,586				3,076				3,165				3,765
Total charge-offs		15,757				18,074				10,161				9,105				15,960
Recoveries:
Commercial non-mortgage		1,978				271				558				236				173
Asset-based lending		-				10				3				33				-
Commercial real estate		47				2				3				3				3
Residential mortgages		521				83				235				534				356
Consumer		1,747				1,296				1,544				2,243				1,609
Total recoveries		4,293				1,662				2,343				3,049				2,141
Total net charge-offs		11,464				16,412				7,818				6,056				13,819
Ending balance	$	369,811			$	358,522			$	334,931			$	209,096			$	209,152

 

WEBSTER FINANCIAL 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)		September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
Efficiency ratio:
Non-interest expense (GAAP)	$	183,996			$	176,584			$	178,836			$	179,730			$	179,894
Less: Foreclosed property activity (GAAP)		(201)				(217)				(250)				263				(128)
Intangible assets amortization (GAAP)		1,089				962				962				962				961
Other expenses (non-GAAP)		4,786				-				-				-				1,750
Non-interest expense (non-GAAP)	$	178,322			$	175,839			$	178,124			$	178,505			$	177,311
Net interest income (GAAP)	$	219,256			$	224,407			$	230,801			$	231,250			$	240,539
Add: Tax-equivalent adjustment (non-GAAP)		2,635				2,561				2,473				2,486				2,436
Non-interest income (GAAP)		75,060				60,076				73,378				70,919				69,931
Other (non-GAAP)		297				293				299				402				350
Customer derivative fair value adjustment (GAAP)		-				5,511				-				-				-
Less: Gain on investment securities, net (GAAP)		-				-				8				29				-
Income (non-GAAP)	$	297,248			$	292,848			$	306,943			$	305,028			$	313,256
Efficiency ratio (non-GAAP)		59.99	%			60.04	%			58.03	%			58.52	%			56.60	%
Return on average tangible common shareholders' equity:
Net income (GAAP)	$	69,281			$	53,097			$	38,199			$	90,473			$	93,865
Less: Preferred stock dividends (GAAP)		1,969				1,969				1,969				1,969				1,968
Add: Intangible assets amortization, tax-effected (GAAP)		860				760				760				760				759
Income adjusted for preferred stock dividends and intangible assets amortization (non-GAAP)	$	68,172			$	51,888			$	36,990			$	89,264			$	92,656
Income adjusted for preferred stock dividends and intangible assets amortization, annualized basis (non-GAAP)	$	272,688			$	207,552			$	147,960			$	357,056			$	370,624
Average shareholders' equity (non-GAAP)	$	3,205,330			$	3,155,368			$	3,193,525			$	3,196,563			$	3,118,691
Less: Average preferred stock (non-GAAP)		145,037				145,037				145,037				145,037				145,037
Average goodwill and other intangible assets (non-GAAP)		560,959				558,835				559,786				560,750				561,715
Average tangible common shareholders' equity (non-GAAP)	$	2,499,334			$	2,451,496			$	2,488,702			$	2,490,776			$	2,411,939
Return on average tangible common shareholders' equity (non-GAAP)		10.91	%			8.47	%			5.95	%			14.34	%			15.37	%
Tangible equity:
Shareholders' equity (GAAP)	$	3,219,690			$	3,174,779			$	3,090,242			$	3,207,770			$	3,152,394
Less: Goodwill and other intangible assets (GAAP)		561,902				558,367				559,328				560,290				561,252
Tangible shareholders' equity (non-GAAP)	$	2,657,788			$	2,616,412			$	2,530,914			$	2,647,480			$	2,591,142
Total assets (GAAP)	$	32,994,443			$	32,708,617			$	31,654,874			$	30,389,344			$	29,895,100
Less: Goodwill and other intangible assets (GAAP)		561,902				558,367				559,328				560,290				561,252
Tangible assets (non-GAAP)	$	32,432,541			$	32,150,250			$	31,095,546			$	29,829,054			$	29,333,848
Tangible equity (non-GAAP)		8.19	%			8.14	%			8.14	%			8.88	%			8.83	%
Tangible common equity:
Tangible shareholders' equity (non-GAAP)	$	2,657,788			$	2,616,412			$	2,530,914			$	2,647,480			$	2,591,142
Less: Preferred stock (GAAP)		145,037				145,037				145,037				145,037				145,037
Tangible common shareholders' equity (non-GAAP)	$	2,512,751			$	2,471,375			$	2,385,877			$	2,502,443			$	2,446,105
Tangible assets (non-GAAP)	$	32,432,541			$	32,150,250			$	31,095,546			$	29,829,054			$	29,333,848
Tangible common equity (non-GAAP)		7.75	%			7.69	%			7.67	%			8.39	%			8.34	%
Tangible book value per common share:
Tangible common shareholders' equity (non-GAAP)	$	2,512,751			$	2,471,375			$	2,385,877			$	2,502,443			$	2,446,105
Common shares outstanding		90,204				90,194				90,172				92,027				92,034
Tangible book value per common share (non-GAAP)	$	27.86			$	27.40			$	26.46			$	27.19			$	26.58
Core deposits:
Total deposits	$	26,920,553			$	26,355,997			$	24,513,837			$	23,324,746			$	23,280,665
Less: Certificates of deposit		2,570,440				2,666,047				2,891,161				3,104,765				3,249,860
Brokered certificates of deposit		-				-				100,000				-				5,705
Core deposits (non-GAAP)	$	24,350,113			$	23,689,950			$	21,522,676			$	20,219,981			$	20,025,100

 

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SOURCE Webster Financial Corporation

FAQ

What were Webster Financial Corporation's earnings for Q3 2020?

Webster Financial Corporation reported earnings of $66.9 million, or $0.75 per diluted share for Q3 2020.

How much did Webster's total revenue increase in Q3 2020?

Total revenue for Webster Financial Corporation stood at $294.3 million in Q3 2020.

What is the current loan growth percentage for Webster Financial Corporation?

Webster Financial Corporation experienced loan growth of 11.8% year-over-year.

What was the provision for credit losses reported by Webster in Q3 2020?

The provision for credit losses for Q3 2020 was $22.8 million.

How did Webster Financial's non-interest income change in Q3 2020?

Non-interest income increased to $75.1 million, up from $69.9 million in Q3 2019.