Webster Financial (WBS) 8-K Webster Net Income Increases 12 Percent In First Quarter

Exhibit 99.1

Media Contact
Meghan Thompson 203-578-2287
mthompson@websterbank.com
Investor Contact
Terry Mangan 203-578-2318
tmangan@websterbank.com

WEBSTER NET INCOME INCREASES 12 PERCENT IN FIRST QUARTER

WATERBURY, Conn., April 19, 2005 — Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A., today announced a 12 percent increase in net income to $47.5 million in the first quarter from $42.3 million a year ago. Net income per diluted share was $.88 in the first quarter compared to $.90 a year ago. Net income per share included $.01 from gains on the sale of securities in the first quarter while the year-ago period included $.08 of gains. Diluted shares outstanding in the first quarter include 6.7 million shares issued in last year’s second quarter acquisition of FIRSTFED AMERICA BANCORP, INC. (FIRSTFED).

Cash net income, which adds stock-based compensation and intangible amortization expenses back to net income, increased by 14 percent to $52.1 million from $45.6 million a year ago. Cash net income per share was $.96 in the first quarter compared to $.97 a year ago while the cash return on average tangible equity improved to 23.4 percent from 20.9 percent a year ago.

“We are pleased with the high quality of first quarter results and the measurable progress toward achieving our strategic and financial goals,” said Webster Chairman and Chief Executive Officer James C. Smith. “Strong performance included improvement in the net interest margin, solid asset quality and expense control even as we continue to invest in ourde novobranching initiative and our information technology platform. In addition, Webster entered the rapidly growing health savings account market with the acquisition of an established industry leader, HSA Bank.”

Revenues

Total revenues (net interest income plus total noninterest income) were $181.3 million in the first quarter, compared to $160.5 million a year ago, an increase of 13 percent. Adjusting for securities gains in both periods and for the sale of Duff & Phelps in the first quarter of 2004, total revenues would have grown by 19 percent.

Net interest income was $128.2 million in the first quarter of 2005, compared to $105.8 million in the year-ago period and $127.6 million in the fourth quarter. The increase over the prior year reflects double-digit growth in the loan portfolio and a higher net interest margin, while the increase over the fourth quarter is due to a higher net interest margin partially offset by lower earning assets attributable to the balance sheet de-leveraging in the fourth quarter.

Webster’s net interest margin (annualized tax-equivalent net interest income as a percentage of average earning assets) improved 23 basis points to 3.32 percent from 3.09 percent in the year-ago period and compares to 3.25 percent in the fourth quarter. The increases reflect the benefit of the de-leveraging and the impact of higher interest rates on earning asset yields.

The provision for loan losses totaled $3.5 million in the first quarter and exceeded net-charge-offs by $2.4 million. This compares to a provision of $5.0 million a year ago, which exceeded net charge-offs by $1.9 million. The reduction in the provision is due to Webster’s improved asset quality and the reduced level of net charge-offs. The annualized net charge-off ratio was 0.04 percent of average loans in the first quarter compared to 0.13 percent a year ago.

In the first quarter of 2005, total noninterest income was $53.0 million compared to $54.7 million in the year-ago period. Excluding securities gains and the sale of Duff & Phelps, noninterest income increased in the first quarter to $52.3 million from $45.4 million in the year-ago period.

Webster’s core fee revenues reflect growth in our businesses over the past year and the acquisition of FIRSTFED. Revenues from deposit service fees, insurance, loan and loan servicing and wealth management totaled $45.3 million in the first quarter and grew by 11 percent compared to a year ago. Deposit service fees totaled $19.1 million and grew by 11 percent from a year ago. Consistent with an industry trend, deposit service fees on a linked-quarter basis declined by $1.6 million, a larger than normal amount than in prior years. Gains on sales of loans and loan servicing totaled $2.5 million in the quarter and increased by $1.5 million from a year ago primarily as a result of increased volumes of mortgage loan originations through Webster’s People’s Mortgage Corporation subsidiary. Other income of $2.2 million in the first quarter included $1.2 million of non-recurring insurance proceeds.

Expenses

      Total noninterest expenses for the 2005 first quarter were $107.8 million, which includes $1.1 million of non-recurring charges under Webster’s core infrastructure conversion project, compared to $92.1 million in the year-ago period. Adjusting each period for acquisitions, Duff & Phelps, investments inde novobranch expansion and the core infrastructure conversion, total noninterest expenses were $90.8 million in the first quarter and $86.6 million a year ago for an increase of 5 percent.

      Further adjusting the $90.8 million for $12.0 million of FIRSTFED operating expenses in the first quarter, expenses totaled $102.8 million and were flat with the fourth quarter when $45.8 million in debt prepayment penalties and $3.4 million of non-recurring items are removed from that quarter. The deceleration of expense growth reflects Webster’s ongoing efforts to streamline processes and control discretionary costs while continuing to invest for the future.

Balance Sheet Trends

At March 31, 2005, total assets were $17.4 billion, up 15 percent from $15.1 billion a year ago. Total loans of $11.7 billion at March 31, 2005 increased 23 percent from $9.5 billion the prior year, while deposits were $11.0 billion, up 28 percent from $8.6 billion a year ago. Excluding the FIRSTFED and HSA Bank acquisitions, total loans increased by 7 percent over the past year while total deposits increased 8 percent.

“The acquisition of HSA Bank on March 1 brought Webster $155 million in deposits, and ourde novobranch expansion program generated $53 million in new deposits during the quarter,” stated Webster President and Chief Operating Officer William T. Bromage. “As a result, we are able to reduce our reliance on borrowed money at a time of rising interest rates and improve our overall balance sheet structure.”

At the end of the first quarter, commercial loans including commercial real estate were $4.4 billion, up 29 percent from $3.4 billion a year ago. Commercial real estate loans were $1.7 billion, up 31 percent from last year. Consumer loans, primarily home equity loans and lines, increased 20 percent to $2.6 billion compared to $2.2 billion a year ago. Excluding FIRSTFED, commercial loans including commercial real estate were up 13 percent, commercial real estate loans were up 16 percent, and consumer loans increased 9 percent. Commercial and consumer loans comprised 60 percent of total loans at March 31, 2005 compared to 58 percent a year ago.

Core deposits (consisting of checking, money market and savings accounts) of $7.1 billion at March 31, 2005 increased by 22 percent from a year ago and represented 65 percent of total deposits. Excluding FIRSTFED and HSA Bank, core deposits grew 10 percent. Webster’s overall growth in deposits has been driven in part by its High Performance Checking products and continued growth of itsde novobranches in Fairfield County, Connecticut and Westchester County, New York.

Book value per common share of $29.07 at March 31, 2005 increased from $26.18 a year ago. Tangible book value per share of $16.26 at March 31, 2005 decreased from $19.60 last year, principally reflecting an increase in intangible assets related to the FIRSTFED acquisition.

Asset Quality

Nonperforming assets totaled $49.1 million or 0.28 percent of total assets at March 31, 2005, compared to $41.3 million or 0.27 percent a year ago and $39.2 million or 0.23 percent at December 31, 2004.

“Webster’s disciplined approach to credit risk management has resulted in strong reserve coverage and a low net charge-off ratio that ranks among the best in our peer group,” stated Webster Chief Financial Officer William J. Healy. “Our adherence to consistent standards allows us to manage and control risk in the loan portfolio.”

The allowance for loan losses was $152.5 million, or 1.30 percent of total loans at March 31, 2005, compared to $123.6 million, or 1.30 percent, a year ago and $150.1 million, or 1.28 percent, at December 31, 2004. The ratio of the allowance to nonperforming loans at March 31, 2005 was 334 percent compared to 338 percent a year ago and 416 percent at December 31, 2004.

Strategic Actions

On March 1, 2005, Webster completed the acquisition of Eastern Wisconsin Bancshares, Inc., the holding company of State Bank of Howards Grove, which operates under the trade name HSA Bank. Webster is divesting State Bank’s retail branches and related loans and deposits and retaining the bank’s HSA operation and HSA deposits, which totaled $169 million at March 31, 2005 compared to $95 million when the acquisition was announced on September 7, 2004.

Webster completed the organizational phase of its integration of the former FIRSTFED division on April 5, 2005. The Webster brand was officially introduced to the Massachusetts and Rhode Island markets with a signage unveiling ceremony at its Swansea-based regional headquarters.

During the first quarter, Webster opened new branches in Norwalk and Bridgeport, Connecticut, increasing its presence in Fairfield County. Webster now operates 21 branch locations in 14 Fairfield County towns.

***

Webster Financial Corporation is the holding company for Webster Bank, National Association and Webster Insurance. With $17.4 billion in assets, Webster provides business and consumer banking, mortgage, insurance, financial planning, trust and investment services through 153 banking offices, 291 ATMs, telephone banking and the Internet. Webster Bank owns the asset-based lending firm Webster Business Credit Corporation, the insurance premium finance company Budget Installment Corp., Center Capital Corporation, an equipment finance company headquartered in Farmington, Connecticut and provides health savings account trustee and administrative services through HSA Bank, a division of Webster Bank.

For more information about Webster, including past press releases and the latest Annual Report, visit the Webster website at www.websteronline.com.

***

Conference Call

A conference call covering Webster’s 2005 first quarter earnings announcement will be held today, Tuesday, April 19, at 11:00 a.m. Eastern Time and may be heard through Webster’s investor relations website at www.wbst.com, or in listen-only mode by calling 1-877-407-8291 or 201-689-8345 internationally. The call will be archived on the website and available for future retrieval.

Statements in this press release regarding Webster Financial Corporation’s business that are not historical facts are “forward-looking statements” that involve risks and uncertainties. For a discussion of such risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statement, see “Forward Looking Statements” in Webster’s Annual Report for 2004.

For reconciliation of cash basis income to net income, see accompanying financial tables elsewhere in this report.

—30—

Webster Financial Corporation

Selected Financial Highlights (unaudited)

	At or for the Three
	Months Ended March 31,
(In thousands, except per share data)	2005			2004
Net income and performance ratios (annualized):
Net income	$	47,495		$	42,323
Net income per diluted common share		0.88			0.90
Return on average shareholders’ equity		12.13	%		14.28	%
Return on average tangible equity		21.37			19.34
Return on average assets		1.11			1.15
Noninterest income as a percentage of total revenue		29.26			34.09
Efficiency Ratio (a)		59.46			57.40
Cash income and performance ratios (annualized) (b):
Net income	$	47,495		$	42,323
Stock-based compensation, net of tax		1,420			647
Intangible amortization, net of tax		3,186			2,660
Cash income		52,101			45,630
Cash income per diluted common share		0.96			0.97
Cash return on average shareholders’ equity		13.31	%		15.40	%
Cash return on average tangible equity		23.44			20.85
Cash return on average assets		1.22			1.24
Asset quality:
Allowance for loan losses	$	152,519		$	123,613
Nonperforming assets		49,130			41,262
Allowance for loan losses / total loans		1.30	%		1.30	%
Net charge-offs/ average loans (annualized)		0.04			0.13
Nonperforming loans / total loans		0.39			0.38
Nonperforming assets / total assets		0.28			0.27
Allowance for loan losses / nonperforming loans		334.21			338.30
Other ratios (annualized):
Tangible capital ratio		5.08	%		6.02	%
Shareholders’ equity / total assets		8.98			8.03
Interest-rate spread		3.28			3.04
Net interest margin		3.32			3.09
Share related:
Book value per common share	$	29.07		$	26.18
Tangible book value per common share		16.26			19.60
Common stock closing price		45.41			50.71
Dividends declared per common share		0.23			0.21
Common shares issued and outstanding		53,787			46,299
Basic shares (average)		53,571			46,146
Diluted shares (average)		54,217			47,059

Footnotes:

(a)	Noninterest expense as a percentage of net interest income plus noninterest income.
(b)	Cash income represents net income excluding the after tax effects of non-cash charges related to the amortization of intangible assets and stock-based compensation, which includes stock options and restricted stock.
(c)	For purposes of this computation, unrealized gains (losses) are excluded from the average balance for rate calculations.

Consolidated Statements of Condition (unaudited)

	March 31,			December 31,			March 31,
(In thousands)	2005			2004			2004
Assets:
Cash and due from depository institutions	$	266,088		$	248,825		$	230,137
Short-term investments		79,676			17,629			22,130
Securities:
Trading, at fair value		1,038			—			2,845
Available for sale, at fair value		2,591,270			2,494,406			4,231,102
Held-to-maturity securities		1,212,934			1,229,613			200,531
Total securities		3,805,242			3,724,019			4,434,478
Loans held for sale		352,233			147,211			135,771
Loans:
Residential mortgages		4,722,897			4,775,344			3,972,123
Commercial		2,674,901			2,584,738			2,101,195
Commercial real estate		1,690,973			1,715,047			1,288,509
Consumer		2,608,303			2,637,646			2,169,011
Total loans		11,697,074			11,712,775			9,530,838
Allowance for loan losses		(152,519	)		(150,112	)		(123,613	)
Loans, net		11,544,555			11,562,663			9,407,225
Accrued interest receivable		67,953			63,406			51,297
Premises and equipment, net		161,635			149,069			99,866
Goodwill and intangible assets		714,490			694,165			322,483
Cash surrender value of life insurance		230,823			228,120			182,511
Prepaid expenses and other assets		190,133			185,490			204,372
Total Assets	$	17,412,828		$	17,020,597		$	15,090,270
Liabilities and Shareholders’ Equity:
Deposits:
Demand deposits	$	1,426,798		$	1,409,682		$	1,081,455
NOW accounts		1,535,595			1,368,213			1,098,972
Money market deposit accounts		1,904,158			1,996,918			1,779,468
Savings accounts		2,276,623			2,253,073			1,891,298
Certificates of deposit		3,545,287			3,376,718			2,676,910
Total retail deposits		10,688,461			10,404,604			8,528,103
Treasury deposits		295,073			166,684			109,979
Deposits held in divested branches		48,301			—			—
Total deposits		11,031,835			10,571,288			8,638,082
Federal Home Loan Bank advances		2,319,722			2,590,335			2,437,014
Securities sold under agreements to repurchase and other short-term debt		1,670,950			1,428,483			2,150,719
Other long-term debt		674,240			680,015			532,760
Accrued expenses and other liabilities		142,910			196,925			110,156
Total liabilities		15,839,657			15,467,046			13,868,731
Preferred stock of subsidiary corporation		9,577			9,577			9,577
Shareholders’ equity		1,563,594			1,543,974			1,211,962
Total Liabilities and Shareholders’ Equity	$	17,412,828		$	17,020,597		$	15,090,270

Consolidated Statements of Income (unaudited)

	Three Months Ended
	March 31,
(In thousands, except per share data)	2005		2004
Interest income:
Loans	$	158,787	$	118,591
Securities and short-term investments		40,899		44,608
Loans held for sale		2,732		1,070
Total interest income		202,418		164,269
Interest expense:
Deposits		35,868		25,830
Borrowings		38,318		32,633
Total interest expense		74,186		58,463
Net interest income		128,232		105,806
Provision for loan losses		3,500		5,000
Net interest income after provision for loan losses		124,732		100,806
Noninterest income:
Deposit service fees		19,129		17,185
Insurance revenue		11,802		11,638
Loan and loan servicing fees		8,929		6,649
Wealth and investment services		5,395		5,116
Financial advisory services		—		3,808
Gain on sale of loans and loan servicing, net		2,536		1,025
Increase in cash surrender value of life insurance		2,238		1,954
Other		2,243		1,848
		52,272		49,223
Gain on sale of securities		756		5,500
Total noninterest income		53,028		54,723
Noninterest expenses:
Compensation and benefits		57,902		53,127
Occupancy		10,859		8,365
Furniture and equipment		10,798		7,641
Intangible amortization		4,902		4,092
Marketing		3,283		2,984
Professional services		3,770		2,899
Conversion and infrastructure costs		1,134		—
Acquisition costs		178		—
Other		14,948		13,033
Total noninterest expenses		107,774		92,141
Income before income taxes		69,986		63,388
Income taxes		22,491		21,065
Net income	$	47,495	$	42,323
Diluted shares (average)		54,217		47,059
Net income per common share:
Basic	$	0.89	$	0.92
Diluted		0.88		0.90

Consolidated Statements of Income (unaudited)

	Three Months Ended
	March 31,		Dec. 31			Sept. 30,		June 30,		March 31,
(In thousands, except per share data)	2005		2004			2004		2004		2004
Interest income:
Loans	$	158,787	$	154,177		$	145,456	$	129,084	$	118,591
Securities and short-term investments		40,899		42,807			45,541		45,162		44,608
Loans held for sale		2,732		1,718			1,755		2,139		1,070
Total interest income		202,418		198,702			192,752		176,385		164,269
Interest expense:
Deposits		35,868		32,993			32,611		29,172		25,830
Borrowings		38,318		38,109			38,853		33,746		32,633
Total interest expense		74,186		71,102			71,464		62,918		58,463
Net interest income		128,232		127,600			121,288		113,467		105,806
Provision for loan losses		3,500		4,000			4,000		5,000		5,000
Net interest income after provision for loan losses		124,732		123,600			117,288		108,467		100,806
Noninterest income:
Deposit service fees		19,129		20,712			20,596		19,250		17,185
Insurance revenue		11,802		10,348			10,924		10,596		11,638
Loan and loan servicing fees		8,929		7,727			6,893		7,305		6,649
Wealth and investment services		5,395		5,198			6,044		5,849		5,116
Financial advisory services		—		—			—		—		3,808
Gain on sale of loans and loan servicing, net		2,536		2,492			4,467		5,321		1,025
Increase in cash surrender value of life insurance		2,238		2,283			2,421		2,177		1,954
Other		2,243		2,692			1,912		964		1,848
		52,272		51,452			53,257		51,462		49,223
Gain (loss) on sale of securities		756		(2,646	)		5,843		5,616		5,500
Total noninterest income		53,028		48,806			59,100		57,078		54,723
Noninterest expenses:
Compensation and benefits		57,902		57,128			55,406		53,659		53,127
Occupancy		10,859		9,909			9,144		8,402		8,365
Furniture and equipment		10,798		10,889			10,103		8,993		7,641
Intangible amortization		4,902		4,844			4,827		4,582		4,092
Marketing		3,283		2,533			4,233		3,630		2,984
Professional services		3,770		5,523			4,294		2,938		2,899
Conversion and infrastructure costs		1,134		300			200		—		—
Acquisition cost		178		426			—		265		—
Debt prepayment penalties		—		45,761			—		—		—
Other		14,948		16,735			15,562		14,710		13,033
Total noninterest expenses		107,774		154,048			103,769		97,179		92,141
Income before income taxes		69,986		18,358			72,619		68,366		63,388
Income taxes		22,491		2,052			23,258		22,523		21,065
Net income	$	47,495	$	16,306		$	49,361	$	45,843	$	42,323
Diluted shares (average)		54,217		54,045			53,767		50,475		47,059
Net income per common share:
Basic	$	0.89	$	0.31		$	0.93	$	0.92	$	0.92
Diluted		0.88		0.30			0.92		0.91		0.90

Retail and Wholesale Interest-Rate Spreads (unaudited)

	March			December			September			June			March
Three Months Ended,	2005			2004			2004			2004			2004
Interest-rate spread
Total interest-earning assets		5.22	%		5.02	%		4.82	%		4.68	%		4.78	%
Total interest-bearing liabilities		1.94			1.80			1.78			1.69			1.74
Interest-rate spread		3.28	%		3.22	%		3.04	%		2.99	%		3.04	%
Net interest margin		3.32			3.25			3.06			3.02			3.09
Retail interest-rate spread
Yield on loans and loans held for sale		5.44	%		5.25	%		5.07	%		4.93	%		5.05	%
Cost of deposits		1.37			1.25			1.25			1.23			1.24
Spread		4.07	%		4.00	%		3.82	%		3.70	%		3.81	%
Wholesale interest-rate spread
Yield on securities and short-term investments		4.52	%		4.37	%		4.18	%		4.09	%		4.19	%
Cost of borrowings		3.23			2.91			2.80			2.50			2.56
Spread		1.29	%		1.46	%		1.38	%		1.59	%		1.63	%

Consolidated Average Statements of Condition (unaudited)

Three Months Ended March 31,	2005								2004
						Fully tax-								Fully tax-
	Average					equivalent			Average					equivalent
(Dollars in thousands)	balance		Interest			yield/rate			balance		Interest			yield/rate
Assets:
Interest-earning assets:
Loans	$	11,685,261	$	158,787			5.45	%	$	9,368,169	$	118,591			5.05	%
Securities		3,750,867		42,690			4.54	(c)		4,331,501		45,161			4.22	(c)
Loans held for sale		213,952		2,732			5.11			85,276		1,070			5.02
Short-term investments		26,855		141			2.10			35,759		66			0.73
Total interest-earning assets		15,676,935		204,350			5.22			13,820,705		164,888			4.78
Noninterest-earning assets		1,401,298								889,392
Total assets	$	17,078,233							$	14,710,097
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Demand deposits	$	1,345,366		—			—		$	1,058,849		—			—
Savings, NOW and money market deposit accounts		5,604,282		12,959			0.94			4,539,038		8,984			0.80
Time deposits		3,692,642		22,909			2.52			2,789,750		16,846			2.43
Total deposits		10,642,290		35,868			1.37			8,387,637		25,830			1.24
Federal Home Loan Bank advances		2,407,150		18,587			3.09			2,428,829		19,004			3.10
Repurchase agreements and other short-term debt		1,659,605		9,543			2.30			2,093,519		5,431			1.03
Other long-term debt		681,120		10,188			5.98			532,760		8,198			6.16
Total borrowings		4,747,875		38,318			3.23			5,055,108		32,633			2.56
Total interest-bearing liabilities		15,390,165		74,186			1.94			13,442,745		58,463			1.74
Noninterest-bearing liabilities		112,679								72,405
Total liabilities		15,502,844								13,515,150
Preferred stock of subsidiary corporation		9,577								9,577
Shareholders’ equity		1,565,812								1,185,370
Total liabilities and shareholders’ equity	$	17,078,233							$	14,710,097
				130,164								106,425
Less: tax-equivalent adjustment				(1,932	)							(619	)
Net interest income			$	128,232							$	105,806
Interest-rate spread							3.28	%							3.04	%
Net interest margin							3.32	%							3.09	%

See Selected Financial Highlights for footnotes.

	At or for the Three Months Ended
	March 31,			Dec. 31,			Sept. 30,			June 30,			March 31,
( Dollars in thousands)	2005			2004			2004			2004			2004
Asset Quality
Nonperforming loans:
Commercial:
Commercial	$	17,112		$	14,624		$	12,407		$	15,895		$	16,851
Equipment financing		3,800			3,383			4,501			5,021			5,561
Total commercial		20,912			18,007			16,908			20,916			22,412
Commercial real estate		15,609			8,431			11,157			13,757			5,583
Residential		7,528			7,796			7,695			8,599			7,941
Consumer		1,586			1,894			1,204			826			604
Total nonperforming loans		45,635			36,128			36,964			44,098			36,540
Loans held for sale		492			—			—			—			—
Other real estate owned and repossessed assets:
Commercial		2,472			2,824			2,482			3,192			4,273
Residential		446			100			527			238			325
Consumer		85			114			20			130			124
Total other real estate owned and repossessed assets		3,003			3,038			3,029			3,560			4,722
Total nonperforming assets	$	49,130		$	39,166		$	39,993		$	47,658		$	41,262
Allowance for Loan Losses
Beginning balance	$	150,112		$	148,179		$	146,511		$	123,613		$	121,674
Allowance for purchased loans		—			617			—			20,081			—
Provision		3,500			4,000			4,000			5,000			5,000
Charge-offs:
Commercial		2,155			3,432			3,556			2,646			3,075
Residential		167			367			92			187			983
Consumer		142			147			195			174			97
Total charge-offs		2,464			3,946			3,843			3,007			4,155
Recoveries		(1,371	)		(1,262	)		(1,511	)		(824	)		(1,094	)
Net loan charge-offs		1,093			2,684			2,332			2,183			3,061
Ending balance	$	152,519		$	150,112		$	148,179		$	146,511		$	123,613
Asset Quality Ratios:
Allowance for loan losses / total loans		1.30	%		1.28	%		1.28	%		1.30	%		1.30	%
Net charge-offs/ average loans (annualized)		0.04			0.09			0.08			0.08			0.13
Nonperforming loans / total loans		0.39			0.31			0.32			0.39			0.38
Nonperforming assets / total assets		0.28			0.23			0.22			0.28			0.27
Allowance for loan losses / nonperforming loans		334.21			415.50			400.87			332.24			338.30