Webster Reports Third Quarter 2021 Earnings Of $1.03 Per Diluted Share

Rhea-AI Summary

Webster Financial Corporation (NYSE: WBS) reported a strong financial performance for Q3 2021, with earnings of $93.2 million, or $1.03 per diluted share, a significant increase from $66.9 million, or $0.75 per diluted share, in Q3 2020. Revenue rose to $313.5 million, up 6.5% year-over-year. The company noted loan growth of 2.7% and deposit growth of 4.1% linked quarter. Current Expected Credit Loss (CECL) provision stood at $7.8 million. Webster is prepared for a merger with Sterling, pending regulatory approval.

Positive

• Earnings increased to $93.2 million, up 39.5% year-over-year.
• Revenue rose to $313.5 million, a 6.5% increase compared to the previous year.
• Loan growth of 2.7% linked quarter, excluding PPP loans.
• Deposit growth of $1.2 billion, or 4.1% linked quarter.
• Non-interest income rose to $83.8 million, up 11.6% year-over-year.

Negative

• Net interest margin decreased to 2.80%, down from 2.88% year-over-year.
• Average loans declined by $0.3 billion, or 1.5% compared to the previous year.

WATERBURY, Conn., Oct. 21, 2021 /PRNewswire/ -- Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A. and its HSA Bank division, today announced earnings applicable to common shareholders of $93.2 million, or $1.03 per diluted share, for the quarter ended September 30, 2021, compared to $66.9 million, or $0.75 per diluted share, for the quarter ended September 30, 2020. Earnings per diluted share would have been $1.08 for the quarter ended September 30, 2021, adjusting for a net $5.8 million ($4.3 million after tax) of merger related costs and strategic optimization initiatives.

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

Highlights for the third quarter of 2021:

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

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

Line of Business performance compared to the third quarter of 2020

Commercial Banking

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

Commercial Banking Operating Results:

							Percent
	Three months ended September 30,						Favorable/
(In thousands)		2021		2020			(Unfavorable)
Net interest income		$152,556		$132,026				15.5	%
Non-interest income		30,076		20,710				45.2
Operating revenue		182,632		152,736				19.6
Non-interest expense		64,917		66,482				2.4
Pre-tax, pre-provision net revenue		$117,715		$86,254				36.5
							Percent
		At September 30,					Increase/
(In millions)		2021		2020			(Decrease)
Loans and leases		$14,655		$14,544				0.8	%
Deposits		10,219		8,326				22.7
AUA / AUM (off balance sheet)		7,041		6,000				17.4

Pre-tax, pre-provision net revenue increased $31.5 million to $117.7 million in the quarter as compared to prior year. Net interest income increased $20.5 million to $152.6 million, primarily driven by PPP loan fee acceleration associated with PPP loan forgiveness, loan rates, and deposit growth. Non-interest income increased $9.4 million to $30.1 million, driven by higher syndication fees, fair value adjustments on direct investments, and trust and investment service fees. Non-interest expense decreased $1.6 million to $64.9 million, primarily driven by lower support costs.

HSA Bank

Webster's HSA Bank division offers a comprehensive consumer-directed healthcare solution that includes health savings accounts, health reimbursement arrangements, flexible spending accounts and commuter benefits. Health savings accounts are distributed nationwide directly to employers and individual consumers, as well as through national and regional insurance carriers, benefit consultants and financial advisors. As of September 30, 2021, HSA Bank had $10.7 billion in total footings comprising $7.3 billion in deposit balances and $3.4 billion in assets under administration through linked investment accounts.

HSA Bank Operating Results:

							Percent
	Three months ended September 30,						Favorable/
(In thousands)		2021		2020			(Unfavorable)
Net interest income		$42,074		$39,861				5.6	%
Non-interest income		24,756		27,235				(9.1)
Operating revenue		66,830		67,096				(0.4)
Non-interest expense		32,800		34,789				5.7
Pre-tax, net revenue		$34,030		$32,307				5.3
							Percent
		At September 30,					Increase/
(Dollars in millions)		2021		2020			(Decrease)
Number of accounts (thousands)		3,003		2,968				1.2	%
Deposits		$7,329		$6,976				5.1
Linked investment accounts (off balance sheet)		3,427		2,454				39.6
Total footings		$10,756		$9,430				14.1

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

Retail Banking

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

Retail Banking Operating Results:

							Percent
	Three months ended September 30,						Favorable/
(In thousands)		2021		2020			(Unfavorable)
Net interest income		$98,028		$83,609				17.2	%
Non-interest income		16,998		21,359				(20.4)
Operating revenue		115,026		104,968				9.6
Non-interest expense		73,480		80,119				8.3
Pre-tax, pre-provision net revenue		$41,546		$24,849				67.2
							Percent
		At September 30,					Increase/
(In millions)		2021		2020			(Decrease)
Loans		$6,925		$7,308				(5.2)	%
Deposits		12,475		11,623				7.3

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

Consolidated financial performance:

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

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

Quarterly provision for credit losses:

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

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

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

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

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

Quarterly income taxes compared to the third quarter of 2020:

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

Investment securities:

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

Loans:

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

Asset quality:

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

Deposits and borrowings:

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

Capital:

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

Webster Financial Corporation is the holding company for Webster Bank, National Association and its HSA Bank division. With $35.4 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust, and investment services through 130 banking centers and 254 ATMs. Webster also provides mobile and Internet banking. Webster Bank owns the asset-based lending firm Webster Business Credit Corporation; the equipment finance firm Webster Capital Finance Corporation; and HSA Bank, a division of Webster Bank, which provides health savings account trustee and administrative services. Webster Bank is a member of the FDIC and an equal housing lender. For more information about Webster, including past press releases and the latest annual report, visit the Webster website at www.websterbank.com.

Conference Call

A conference call covering Webster's third quarter 2021 earnings announcement will be held today, Thursday, October 21, 2021 at 9:00 a.m. Eastern Time. To listen to the live call, please dial 877-407-8289, or 201-689-8341 for international callers. The webcast, along with related slides, will be available on the Webster website (www.wbst.com). A replay of the conference call will be available for one week via the website listed above, beginning at approximately 11:00 a.m. (Eastern) on October 21, 2021. To access the replay, dial 877-660-6853, or 201-612-7415 for international callers. The replay conference ID number is 13723032.

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

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

Forward-Looking Statements

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking statements can be identified by words such as "believes," "anticipates," "expects," "intends," "targeted," "continue," "remain," "will," "should," "may," "plans," "estimates," and similar references to future periods; however, such words are not the exclusive means of identifying such statements. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items; (ii) statements of plans, objectives, and expectations of Webster or its management or Board of Directors; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Forward-looking statements are based on Webster's current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Webster's actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: (1) our ability to complete the merger with Sterling Bancorp and realize the anticipated benefits of the merger; (2) our ability to successfully execute our business plan and strategic initiatives, and manage any risks or uncertainties; (3) our ability to successfully achieve the anticipated cost reductions and operating efficiencies from our completed branch consolidations and other strategic initiatives, including process automation, organization simplification, and spending reductions, and avoid any higher than anticipated costs or delays in the ongoing implementation; (4) local, regional, national, and international economic conditions and the impact they may have on us and our customers; (5) volatility and disruption in national and international financial markets; (6) the potential adverse effects of the ongoing novel coronavirus (COVID-19) pandemic and any governmental or societal responses thereto, or other unusual and infrequently occurring events; (7) changes in the level of nonperforming assets and charge-offs; (8) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (9) adverse conditions in the securities markets that lead to impairment in the value of our investment securities; (10) inflation, changes in interest rates (including the replacement of LIBOR as an interest rate benchmark), and monetary fluctuations; (11) the timely development and acceptance of new products and services and the perceived value of those products and services by customers; (12) changes in deposit flows, consumer spending, borrowings, and savings habits; (13) our ability to implement new technologies and maintain secure and reliable technology systems; (14) the effects of any cyber threats, attacks or events or fraudulent activity; (15) performance by our counterparties and vendors; (16) our ability to increase market share and control expenses; (17) changes in the competitive environment among banks, financial holding companies, and other financial services providers; (18) changes in laws and regulations (including those concerning banking, taxes, dividends, securities, insurance, and healthcare) with which we and our subsidiaries must comply; (19) the effect of changes in accounting policies and practices applicable to us, including impacts of recently adopted accounting guidance; (20) legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; (21) our ability to appropriately address social, environmental, and sustainability concerns that may arise from our business activities; and (22) the other factors that are described in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q under the headings "Risk Factors" and "Management Discussion and Analysis of Financial Condition and Results of Operation." Any forward-looking statement made by the Company in this release speaks only as of the date on which it is made. Factors or events that could cause the Company's actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Non-GAAP Financial Measures

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

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

 

WEBSTER FINANCIAL CORPORATION Selected Financial Highlights (unaudited)
		At or for the Three Months Ended
(In thousands, except per share data)		September 30, 2021				June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020
Income and performance ratios:
Net income	$	95,713			$	94,035			$	108,078			$	60,044			$	69,281
Earnings applicable to common shareholders		93,171				91,555				105,530				57,715				66,890
Earnings per diluted common share		1.03				1.01				1.17				0.64				0.75
Return on average assets		1.10	%			1.12	%			1.31	%			0.73	%			0.84	%
Return on average tangible common shareholders' equity (non-GAAP)		14.16				14.26				16.79				9.31				10.91
Return on average common shareholders' equity		11.61				11.63				13.65				7.51				8.80
Non-interest income as a percentage of total revenue		26.73				24.77				25.54				26.14				25.50
Asset quality:
Allowance for credit losses on loans and leases	$	314,922			$	307,945			$	328,351			$	359,431			$	369,811
Nonperforming assets		104,209				123,497				152,808				170,314				167,314
Allowance for credit losses on loans and leases / total loans and leases		1.46	%			1.43	%			1.54	%			1.66	%			1.69	%
Net charge-offs (recoveries) / average loans and leases (annualized)		0.02				(0.02)				0.10				0.17				0.21
Nonperforming loans and leases / total loans and leases		0.47				0.56				0.71				0.78				0.74
Nonperforming assets / total loans and leases plus OREO		0.48				0.57				0.72				0.79				0.77
Allowance for credit losses on loans and leases / nonperforming loans and leases		309.44				255.05				218.29				213.94				227.39
Other ratios:
Tangible equity (non-GAAP)		8.12	%			8.35	%			8.30	%			8.35	%			8.19	%
Tangible common equity (non-GAAP)		7.71				7.91				7.85				7.90				7.75
Tier 1 risk-based capital (a)		12.39				12.30				12.55				11.99				11.88
Total risk-based capital (a)		13.79				13.70				14.08				13.59				13.47
Common equity tier 1 risk-based capital (a)		11.77				11.66				11.89				11.35				11.23
Shareholders' equity / total assets		9.57				9.86				9.84				9.92				9.76
Net interest margin		2.80				2.82				2.92				2.83				2.88
Efficiency ratio (non-GAAP)		54.84				56.64				58.46				60.27				59.99
Equity and share related:
Common equity	$	3,241,152			$	3,184,668			$	3,127,891			$	3,089,588			$	3,074,653
Book value per common share		35.78				35.15				34.60				34.25				34.09
Tangible book value per common share (non-GAAP)		29.63				28.99				28.41				28.04				27.86
Common stock closing price		54.46				53.34				55.11				42.15				26.41
Dividends declared per common share		0.40				0.40				0.40				0.40				0.40
Common shares issued and outstanding		90,588				90,594				90,410				90,199				90,204
Weighted-average common shares outstanding - Basic		90,038				90,027				89,809				89,645				89,630
Weighted-average common shares outstanding - Diluted		90,232				90,221				90,108				89,915				89,738

(a) Presented as preliminary for September 30, 2021 and actual for 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 for two years followed by a three year transition period ending December 31, 2024. As a result, capital ratios and amounts as of September 30, 2021 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, 2021				June 30, 2021				September 30, 2020
Assets:
Cash and due from banks	$	161,369			$	193,430			$	181,524
Interest-bearing deposits		2,442,790				1,386,463				60,276
Securities:
Available for sale		3,410,443				3,262,893				3,304,217
Held to maturity, net		5,986,308				5,623,243				5,723,128
Total securities, net		9,396,751				8,886,136				9,027,345
Loans held for sale		24,969				4,335				29,018
Loans and Leases:
Commercial		8,159,127				8,417,719				8,612,549
Commercial real estate		6,522,679				6,410,672				6,307,567
Residential mortgages		5,167,527				4,856,302				4,885,821
Consumer		1,731,002				1,790,308				2,046,086
Total loans and leases		21,580,335				21,475,001				21,852,023
Allowance for credit losses on loans and leases		(314,922)				(307,945)				(369,811)
Loans and leases, net		21,265,413				21,167,056				21,482,212
Federal Home Loan Bank and Federal Reserve Bank stock		75,936				76,874				89,611
Premises and equipment, net		209,573				215,716				250,535
Goodwill and other intangible assets, net		557,360				558,485				561,902
Cash surrender value of life insurance policies		572,368				570,380				561,021
Deferred tax asset, net		96,489				78,268				76,695
Accrued interest receivable and other assets		571,240				616,609				674,304
Total Assets	$	35,374,258			$	33,753,752			$	32,994,443
Liabilities and Shareholders' Equity:
Deposits:
Demand	$	7,154,835			$	6,751,373			$	6,136,814
Health savings accounts		7,329,405				7,323,421				6,976,280
Interest-bearing checking		4,181,825				3,843,725				3,390,921
Money market		3,958,700				3,442,319				3,069,098
Savings		5,517,189				5,471,584				4,777,000
Certificates of deposit		1,884,373				2,014,544				2,570,440
Total deposits		30,026,327				28,846,966				26,920,553
Securities sold under agreements to repurchase and other borrowings		655,871				507,124				1,301,822
Federal Home Loan Bank advances		113,334				138,444				433,243
Long-term debt		564,114				565,297				568,846
Accrued expenses and other liabilities		628,423				366,216				550,289
Total liabilities		31,988,069				30,424,047				29,774,753
Preferred stock		145,037				145,037				145,037
Common shareholders' equity		3,241,152				3,184,668				3,074,653
Total shareholders' equity		3,386,189				3,329,705				3,219,690
Total Liabilities and Shareholders' Equity	$	35,374,258			$	33,753,752			$	32,994,443

 

WEBSTER FINANCIAL CORPORATION Consolidated Statements of Income (unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
(In thousands, except per share data)		2021				2020				2021				2020
Interest income:
Interest and fees on loans and leases	$	196,273			$	188,001			$	572,728			$	600,709
Interest and dividends on securities		43,362				51,009				133,895				164,687
Loans held for sale		57				229				201				588
Total interest income		239,692				239,239				706,824				765,984
Interest expense:
Deposits		4,571				12,598				16,104				59,246
Borrowings		5,430				7,385				16,413				32,274
Total interest expense		10,001				19,983				32,517				91,520
Net interest income		229,691				219,256				674,307				674,464
Provision for credit losses		7,750				22,750				(39,500)				138,750
Net interest income after provision for loan and lease losses		221,941				196,506				713,807				535,714
Non-interest income:
Deposit service fees		40,258				39,278				122,166				117,687
Loan and lease related fees		10,881				6,568				27,056				20,032
Wealth and investment services		9,985				8,255				29,475				24,096
Mortgage banking activities		1,525				7,087				5,486				14,185
Increase in cash surrender value of life insurance policies		3,666				3,695				10,802				10,899
Gain on investment securities, net		-				-				-				8
Other income		17,460				10,177				38,249				21,607
Total non-interest income		83,775				75,060				233,234				208,514
Non-interest expense:
Compensation and benefits		105,352				104,019				310,706				305,637
Occupancy		12,430				14,275				42,090				43,005
Technology and equipment		28,441				27,846				84,081				83,151
Marketing		3,721				3,852				9,452				10,640
Professional and outside services		7,074				9,223				37,875				21,044
Intangible assets amortization		1,124				1,089				3,395				3,013
Loan workout expenses		203				612				924				1,497
Deposit insurance		3,855				4,204				11,560				13,944
Other expenses		18,037				18,876				55,164				57,485
Total non-interest expense		180,237				183,996				555,247				539,416
Income before income taxes		125,479				87,570				391,794				204,812
Income tax expense		29,766				18,289				93,968				44,235
Net income		95,713				69,281				297,826				160,577
Preferred stock dividends and other		(2,542)				(2,391)				(7,567)				(6,819)
Earnings applicable to common shareholders	$	93,171			$	66,890			$	290,259			$	153,758
Weighted-average common shares outstanding - Diluted		90,232				89,738				90,186				90,235
Earnings per common share:
Basic	$	1.03			$	0.75			$	3.23			$	1.71
Diluted		1.03				0.75				3.22				1.70

 

WEBSTER FINANCIAL CORPORATION Five Quarter Consolidated Statements of Income (unaudited)
		Three Months Ended
(In thousands, except per share data)		September 30, 2021				June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020
Interest income:
Interest and fees on loans and leases	$	196,273			$	185,919			$	190,536			$	189,010			$	188,001
Interest and dividends on securities		43,362				45,586				44,947				46,874				51,009
Loans held for sale		57				53				91				181				229
Total interest income		239,692				231,558				235,574				236,065				239,239
Interest expense:
Deposits		4,571				5,094				6,439				8,651				12,598
Borrowings		5,430				5,612				5,371				10,485				7,385
Total interest expense		10,001				10,706				11,810				19,136				19,983
Net interest income		229,691				220,852				223,764				216,929				219,256
Provision for credit losses		7,750				(21,500)				(25,750)				(1,000)				22,750
Net interest income after provision for loan and lease losses		221,941				242,352				249,514				217,929				196,506
Non-interest income:
Deposit service fees		40,258				41,439				40,469				38,345				39,278
Loan and lease related fees		10,881				7,862				8,313				9,095				6,568
Wealth and investment services		9,985				10,087				9,403				8,820				8,255
Mortgage banking activities		1,525				1,319				2,642				4,110				7,087
Increase in cash surrender value of life insurance policies		3,666				3,603				3,533				3,662				3,695
Other income		17,460				8,392				12,397				12,731				10,177
Total non-interest income		83,775				72,702				76,757				76,763				75,060
Non-interest expense:
Compensation and benefits		105,352				97,754				107,600				122,754				104,019
Occupancy		12,430				14,010				15,650				28,024				14,275
Technology and equipment		28,441				27,124				28,516				29,122				27,846
Marketing		3,721				3,227				2,504				3,485				3,852
Professional and outside services		7,074				21,025				9,776				11,380				9,223
Intangible assets amortization		1,124				1,132				1,139				1,147				1,089
Loan workout expenses		203				327				394				261				612
Deposit insurance		3,855				3,749				3,956				4,372				4,204
Other expenses		18,037				18,680				18,447				18,985				18,876
Total non-interest expense		180,237				187,028				187,982				219,530				183,996
Income before income taxes		125,479				128,026				138,289				75,162				87,570
Income tax expense		29,766				33,991				30,211				15,118				18,289
Net income		95,713				94,035				108,078				60,044				69,281
Preferred stock dividends and other		(2,542)				(2,480)				(2,548)				(2,329)				(2,391)
Earnings applicable to common shareholders	$	93,171			$	91,555			$	105,530			$	57,715			$	66,890
Weighted-average common shares outstanding - Diluted		90,232				90,221				90,108				89,915				89,738
Earnings per common share:
Basic	$	1.03			$	1.02			$	1.18			$	0.64			$	0.75
Diluted		1.03				1.01				1.17				0.64				0.75

 

WEBSTER FINANCIAL CORPORATION Consolidated Average Balances, Interest, Yields and Rates, and Net Interest Margin on a Fully Tax-equivalent Basis (unaudited)
		Three Months Ended September 30,
		2021																2020
(Dollars in thousands)		Average balance				Interest				Yield/rate								Average balance			Interest		Yield/rate
Assets:
Interest-earning assets:
Loans and leases	$	21,538,513			$	197,015				3.60	%						$	21,870,740		$	188,865		3.40	%
Investment securities (a)		8,911,291				43,868				2.01								8,762,692			52,154		2.47
Federal Home Loan and Federal Reserve Bank stock		76,212				290				1.51								91,232			600		2.62
Interest-bearing deposits (b)		2,334,986				896				0.15								102,059			26		0.10
Loans held for sale		11,328				57				2.03								31,211			229		2.94
Total interest-earning assets		32,872,330			$	242,126				2.92	%							30,857,934		$	241,874		3.13	%
Non-interest-earning assets		2,021,962																2,057,503
Total Assets	$	34,894,292															$	32,915,437
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand deposits	$	7,182,116			$	-				-	%						$	6,228,436		$	-		-	%
Health savings accounts		7,346,239				1,463				0.08								6,953,641			2,073		0.12
Interest-bearing checking, money market and savings		13,363,703				1,794				0.05								11,167,653			3,983		0.14
Certificates of deposit		1,957,286				1,314				0.27								2,589,888			6,542		1.00
Total deposits		29,849,344				4,571				0.06								26,939,618			12,598		0.19
Securities sold under agreements to repurchase and other borrowings		544,311				721				0.52								1,225,616			608		0.19
Federal Home Loan Bank advances		120,714				492				1.59								449,085			2,528		2.20
Long-term debt (a)		564,692				4,217				3.22								569,425			4,249		3.25
Total borrowings		1,229,717				5,430				1.82								2,244,126			7,385		1.33
Total interest-bearing liabilities		31,079,061			$	10,001				0.13	%							29,183,744		$	19,983		0.27	%
Non-interest-bearing liabilities		439,830																526,363
Total liabilities		31,518,891																29,710,107
Preferred stock		145,037																145,037
Common shareholders' equity		3,230,364																3,060,293
Total shareholders' equity		3,375,401																3,205,330
Total Liabilities and Shareholders' Equity	$	34,894,292															$	32,915,437
Tax-equivalent net interest income						232,125															221,891
Less: tax-equivalent adjustments						(2,434)															(2,635)
Net interest income					$	229,691														$	219,256
Net interest margin										2.80	%												2.88	%
(a) For purposes of the yield/rate computation, unrealized gain (loss) balances on securities available for sale and senior fixed-rate notes hedges are excluded.
(b) Interest-bearing deposits is a component of cash and cash equivalents.

 

WEBSTER FINANCIAL CORPORATION Consolidated Average Balances, Interest, Yields and Rates, and Net Interest Margin on a Fully Tax-equivalent Basis (unaudited)
		Nine Months Ended September 30,
		2021																2020
(Dollars in thousands)		Average balance				Interest				Yield/rate								Average balance			Interest		Yield/rate
Assets:
Interest-earning assets:
Loans and leases	$	21,477,967			$	574,984				3.54	%						$	21,270,350		$	603,100		3.75	%
Investment securities (a)		8,878,820				136,727				2.09								8,554,646			167,027		2.67
Federal Home Loan and Federal Reserve Bank stock		77,040				909				1.58								108,788			2,716		3.33
Interest-bearing deposits (b)		1,434,552				1,419				0.13								89,989			222		0.32
Loans held for sale		11,515				201				2.33								25,944			588		3.02
Total interest-earning assets		31,879,894			$	714,240				2.98	%							30,049,717		$	773,653		3.43	%
Non-interest-earning assets		1,968,707																2,017,159
Total Assets	$	33,848,601															$	32,066,876
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand deposits	$	6,800,456			$	-				-	%						$	5,525,573		$	-		-	%
Health savings accounts		7,414,332				4,720				0.09								6,854,101			7,973		0.16
Interest-bearing checking, money market and savings		12,579,762				5,117				0.05								10,427,634			22,848		0.29
Certificates of deposit		2,146,218				6,267				0.39								2,841,385			28,425		1.34
Total deposits		28,940,768				16,104				0.07								25,648,693			59,246		0.31
Securities sold under agreements to repurchase and other borrowings		522,638				2,216				0.56								1,366,292			5,318		0.51
Federal Home Loan Bank advances		131,606				1,539				1.54								870,063			13,145		1.98
Long-term debt (a)		565,866				12,658				3.22								563,805			13,811		3.52
Total borrowings		1,220,110				16,413				1.85								2,800,160			32,274		1.55
Total interest-bearing liabilities		30,160,878			$	32,517				0.14	%							28,448,853		$	91,520		0.43	%
Non-interest-bearing liabilities		373,609																433,207
Total liabilities		30,534,487																28,882,060
Preferred stock		145,037																145,037
Common shareholders' equity		3,169,077																3,039,779
Total shareholders' equity		3,314,114																3,184,816
Total Liabilities and Shareholders' Equity	$	33,848,601															$	32,066,876
Tax-equivalent net interest income						681,723															682,133
Less: tax-equivalent adjustments						(7,416)															(7,669)
Net interest income					$	674,307														$	674,464
Net interest margin										2.85	%												3.03	%

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

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

 

WEBSTER FINANCIAL CORPORATION Five Quarter Loan and Lease Balances (unaudited)
(Dollars in thousands)		September 30, 2021				June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020
Loan and Lease Balances (actual):
Commercial non-mortgage	$	7,172,345			$	7,473,758			$	7,530,066			$	7,687,300			$	7,722,838
Asset-based lending		986,782				943,961				907,421				890,598				889,711
Commercial real estate		6,522,679				6,410,672				6,338,056				6,322,637				6,307,567
Residential mortgages		5,167,527				4,856,302				4,668,945				4,782,016				4,885,821
Consumer		1,731,002				1,790,308				1,856,895				1,958,664				2,046,086
Total Loan and Lease Balances		21,580,335				21,475,001				21,301,383				21,641,215				21,852,023
Allowance for credit losses on loans and leases		(314,922)				(307,945)				(328,351)				(359,431)				(369,811)
Loans and Leases, net	$	21,265,413			$	21,167,056			$	20,973,032			$	21,281,784			$	21,482,212
Loan and Lease Balances (average):
Commercial non-mortgage	$	7,280,258			$	7,545,398			$	7,650,367			$	7,662,828			$	7,683,879
Asset-based lending		956,535				937,580				896,093				874,221				922,653
Commercial real estate		6,510,100				6,365,830				6,303,765				6,363,776				6,260,114
Residential mortgages		5,036,329				4,738,859				4,720,703				4,821,199				4,914,368
Consumer		1,755,291				1,825,772				1,910,392				2,007,226				2,089,726
Total Loan and Lease Balances		21,538,513				21,413,439				21,481,320				21,729,250				21,870,740
Allowance for credit losses on loans and leases		(308,279)				(332,522)				(364,358)				(375,080)				(363,552)
Loans and Leases, net	$	21,230,234			$	21,080,917			$	21,116,962			$	21,354,170			$	21,507,188

WEBSTER FINANCIAL CORPORATION Five Quarter Nonperforming Assets and Past Due Loans and Leases (unaudited)
(Dollars in thousands)		September 30, 2021				June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020
Nonperforming loans and leases:
Commercial non-mortgage	$	40,774			$	57,831			$	60,103			$	71,499			$	75,080
Asset-based lending		2,139				2,403				2,430				2,622				3,789
Commercial real estate		15,972				12,687				13,743				21,222				8,784
Residential mortgages		19,327				21,467				42,708				41,033				41,498
Consumer		23,558				26,353				31,437				31,629				33,485
Total nonperforming loans and leases	$	101,770			$	120,741			$	150,421			$	168,005			$	162,636
Other real estate owned and repossessed assets:
Commercial non-mortgage	$	-			$	-			$	102			$	175			$	175
Residential mortgages		1,759				1,934				1,695				1,544				3,899
Consumer		680				822				590				590				604
Total other real estate owned and repossessed assets	$	2,439			$	2,756			$	2,387			$	2,309			$	4,678
Total nonperforming assets	$	104,209			$	123,497			$	152,808			$	170,314			$	167,314
Past due 30-89 days:
Commercial non-mortgage	$	5,537			$	3,154			$	7,395			$	8,918			$	3,821
Asset-based lending		-				-				-				1,175				-
Commercial real estate		821				1,679				699				3,003				329
Residential mortgages		3,447				4,690				5,241				10,623				9,291
Consumer		7,158				8,829				7,036				8,720				8,349
Total past due 30-89 days		16,963				18,352				20,371				32,439				21,790
Past due 90 days or more and accruing		107				25				50				445				-
Total past due loans and leases	$	17,070			$	18,377			$	20,421			$	32,884			$	21,790

WEBSTER FINANCIAL 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, 2021				June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020
Beginning balance	$	307,945			$	328,351			$	359,431			$	369,811			$	358,522
Provision		7,898				(21,574)				(25,759)				(992)				22,753
Charge-offs:
Commercial non-mortgage		1,706				431				1,164				7,876				12,085
Asset-based lending		-				-				-				-				10
Commercial real estate		17				163				5,157				688				1,399
Residential mortgages		88				1,105				380				105				546
Consumer		1,965				1,703				2,594				2,673				1,717
Total charge-offs		3,776				3,402				9,295				11,342				15,757
Recoveries:
Commercial non-mortgage		137				824				209				232				1,978
Asset-based lending		-				2				1,424				33				-
Commercial real estate		5				10				3				3				47
Residential mortgages		672				782				1,158				190				521
Consumer		2,041				2,952				1,180				1,496				1,747
Total recoveries		2,855				4,570				3,974				1,954				4,293
Total net charge-offs (recoveries)		921				(1,168)				5,321				9,388				11,464
Ending balance	$	314,922			$	307,945			$	328,351			$	359,431			$	369,811

 

 

WEBSTER FINANCIAL 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, including brokered time deposits. Adjusted diluted earnings per share (EPS) is calculated by excluding after tax non-operational items from reported earnings applicable to common shareholders. 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, 2021				June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020
Efficiency ratio:
Non-interest expense (GAAP)	$	180,237			$	187,028			$	187,982			$	219,530			$	183,996
Less: Foreclosed property activity (GAAP)		(142)				(137)				91				(836)				(201)
Intangible assets amortization (GAAP)		1,124				1,132				1,139				1,147				1,089
Strategic initiatives (non-GAAP)		(4,011)				1,138				9,441				38,265				4,786
Merger related (non-GAAP)		9,847				17,047				-				-				-
Non-interest expense (non-GAAP)	$	173,419			$	167,848			$	177,311			$	180,954			$	178,322
Net interest income (GAAP)	$	229,691			$	220,852			$	223,764			$	216,929			$	219,256
Add: Tax-equivalent adjustment (non-GAAP)		2,434				2,487				2,495				2,577				2,635
Non-interest income (GAAP)		83,775				72,702				76,757				76,763				75,060
Other (non-GAAP)		327				309				277				291				297
Loss on hedge terminations (GAAP)		-				-				-				3,680				-
Income (non-GAAP)	$	316,227			$	296,350			$	303,293			$	300,240			$	297,248
Efficiency ratio (non-GAAP)		54.84	%			56.64	%			58.46	%			60.27	%			59.99	%
Return on average tangible common shareholders' equity:
Net income (GAAP)	$	95,713			$	94,035			$	108,078			$	60,044			$	69,281
Less: Preferred stock dividends (GAAP)		1,968				1,969				1,969				1,969				1,968
Add: Intangible assets amortization, tax-effected (GAAP)		888				894				900				906				860
Income adjusted for preferred stock dividends and intangible assets amortization (non-GAAP)	$	94,633			$	92,960			$	107,009			$	58,981			$	68,173
Income adjusted for preferred stock dividends and intangible assets amortization, annualized basis (non-GAAP)	$	378,532			$	371,840			$	428,036			$	235,924			$	272,692
Average shareholders' equity (non-GAAP)	$	3,375,401			$	3,311,406			$	3,254,203			$	3,239,221			$	3,205,330
Less: Average preferred stock (non-GAAP)		145,037				145,037				145,037				145,037				145,037
Average goodwill and other intangible assets (non-GAAP)		557,902				559,032				560,173				561,303				560,959
Average tangible common shareholders' equity (non-GAAP)	$	2,672,462			$	2,607,337			$	2,548,993			$	2,532,881			$	2,499,334
Return on average tangible common shareholders' equity (non-GAAP)		14.16	%			14.26	%			16.79	%			9.31	%			10.91	%
Tangible equity:
Shareholders' equity (GAAP)	$	3,386,189			$	3,329,705			$	3,272,928			$	3,234,625			$	3,219,690
Less: Goodwill and other intangible assets (GAAP)		557,360				558,485				559,617				560,756				561,902
Tangible shareholders' equity (non-GAAP)	$	2,828,829			$	2,771,220			$	2,713,311			$	2,673,869			$	2,657,788
Total assets (GAAP)	$	35,374,258			$	33,753,752			$	33,259,037			$	32,590,690			$	32,994,443
Less: Goodwill and other intangible assets (GAAP)		557,360				558,485				559,617				560,756				561,902
Tangible assets (non-GAAP)	$	34,816,898			$	33,195,267			$	32,699,420			$	32,029,934			$	32,432,541
Tangible equity (non-GAAP)		8.12	%			8.35	%			8.30	%			8.35	%			8.19	%
Tangible common equity:
Tangible shareholders' equity (non-GAAP)	$	2,828,829			$	2,771,220			$	2,713,311			$	2,673,869			$	2,657,788
Less: Preferred stock (GAAP)		145,037				145,037				145,037				145,037				145,037
Tangible common shareholders' equity (non-GAAP)	$	2,683,792			$	2,626,183			$	2,568,274			$	2,528,832			$	2,512,751
Tangible assets (non-GAAP)	$	34,816,898			$	33,195,267			$	32,699,420			$	32,029,934			$	32,432,541
Tangible common equity (non-GAAP)		7.71	%			7.91	%			7.85	%			7.90	%			7.75	%
Tangible book value per common share:
Tangible common shareholders' equity (non-GAAP)	$	2,683,792			$	2,626,183			$	2,568,274			$	2,528,832			$	2,512,751
Common shares outstanding		90,588				90,594				90,410				90,199				90,204
Tangible book value per common share (non-GAAP)	$	29.63			$	28.99			$	28.41			$	28.04			$	27.86
Core deposits:
Total deposits	$	30,026,327			$	28,846,966			$	28,481,834			$	27,335,436			$	26,920,553
Less: Certificates of deposit		1,884,373				2,014,544				2,234,133				2,487,818				2,570,440
Core deposits (non-GAAP)	$	28,141,954			$	26,832,422			$	26,247,701			$	24,847,618			$	24,350,113
(In millions, except per share data)
GAAP earnings adjusted for strategic optimization initiatives and merger related costs:
	Three months ended September 30, 2021
		Pre-Tax Income				Earnings Applicable to Common Shareholders				Diluted EPS
Reported (GAAP)	$	125.5			$	93.2			$	1.03
Strategic initiatives		(4.0)				(3.0)				(0.03)
Merger related		9.8				7.3				0.08
Adjusted (non-GAAP)	$	131.3			$	97.5			$	1.08

 

 

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SOURCE Webster Financial Corporation

FAQ

What are Webster Financial Corporation's earnings for Q3 2021?

Webster Financial Corporation reported earnings of $93.2 million, or $1.03 per diluted share.

How did Webster Financial's revenue perform in Q3 2021?

Revenue for Q3 2021 was $313.5 million, an increase of 6.5% from the previous year.

What was the loan growth for Webster Financial in Q3 2021?

Loan growth was 2.7% linked quarter, excluding PPP loans.

What is the current status of Webster Financial's merger with Sterling?

Webster Financial is prepared to execute the merger with Sterling pending regulatory approvals.

What is the provision for credit losses reported by Webster Financial?

Webster Financial reported a provision for credit losses of $7.8 million for Q3 2021.