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WEBSTER REPORTS QUARTERLY EARNINGS PER SHARE OF
$.85 WITH STRONG INCREASES IN DEPOSITS AND
COMMERCIAL LOANS
WATERBURY, Conn., July 19, 2005 — Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A., today announced net income of $46.3 million in the second quarter compared to $45.8 million in the year-ago quarter. Net income per diluted share was $.85 compared to $.91 a year ago. For the first six months of 2005, net income was $93.8 million compared to $88.2 million a year ago. Net income per share was $1.73 and $1.81 in the respective periods. Average diluted shares outstanding are higher in 2005 as a result of shares issued in connection with the acquisition of FIRSTFED AMERICA BANCORP, INC. on May 14, 2004.
Gains on the sale of securities are included in all of the amounts above. These gains represented $.01 per share in the second quarter compared to $.07 in the year-ago quarter. For the first six months of 2005, securities gains were $.02 per share compared to $.15 a year ago. The reduced level of securities gains per share in 2005 is consistent with Webster’s emphasis on delivering high quality earnings. In addition, one-time expenses equivalent to $.04 in the second quarter were incurred in support of Webster’s core infrastructure conversion project.
Cash net income, which adds stock-based compensation and intangible amortization expenses back to net income, was $51.1 million compared to $50.0 million in the year-ago quarter. Cash net income per share was $.94 in the second quarter compared to $.99 a year ago. For the first six months of 2005, cash net income was $103.2 million compared to $95.8 million a year ago. Cash net income per share was $1.90 and $1.96 in the respective periods.
“The second quarter results show strong growth in deposits and commercial loans and ongoing progress toward achieving our strategic and financial goals,” said Webster Chairman and Chief Executive Officer James C. Smith. “We remain focused on a strong balance sheet, solid organic growth and high quality earnings as we continue to invest in our future.”
Revenues
Total revenues (net interest income plus total noninterest income) were $183.5 million in the second quarter, compared to $170.5 million a year ago, an increase of 8 percent. Adjusting both periods to exclude securities gains, total revenues grew by 11 percent.
Net interest income was $129.8 million in the second quarter of 2005 compared to $113.5 million in the year-ago period. The increase over the prior year reflects growth in the loan portfolio fully funded by deposit growth and a higher net interest margin.
Webster’s net interest margin (annualized tax-equivalent net interest income as a percentage of average earning assets) was 3.32 percent in the second quarter, an improvement of 30 basis points from 3.02 percent in the year-ago period. The net interest margin also was 3.32 percent in the first quarter of 2005. The increase from a year ago reflects the benefit of Webster’s de-leveraging in the fourth quarter of 2004 and the impact of higher interest rates on earning asset yields over the past year.
The provision for loan losses totaled $2.0 million in the second quarter. Recoveries on loans previously charged off exceeded loans charged off during the quarter by $0.3 million. As a result, the allowance for loan losses increased by $2.3 million during the quarter. This compares to a provision of $5.0 million a year ago, which exceeded net loan charge-offs by $2.8 million. The reduction in the provision from a year ago reflects Webster’s favorable asset quality and the net recovery in the quarter. The annualized net loan charge-off ratio was (0.01) percent of average loans in the second quarter compared to 0.08 percent a year ago.
In the second quarter of 2005, total noninterest income was $53.6 million compared to $57.1 million in the year-ago period. Excluding securities gains of $0.7 million and $5.6 million in the respective periods, noninterest income increased in the second quarter to $52.9 million from $51.5 million in the year-ago period.
Webster’s core fee revenues reflect growth in our businesses over the past year. They are revenues from deposit service fees, insurance, loan and loan servicing and wealth management, which totaled $45.6 million in the second quarter and grew by 6 percent compared to a year ago. Deposit service fees totaled $21.7 million and grew by 13 percent from a year ago aided by the FIRSTFED and HSA Bank acquisitions. Gains on sales of loans and loan servicing totaled $3.0 million in the quarter and decreased by $2.3 million from a year ago primarily as a result of lower mortgage origination volumes and sales into the secondary markets.
Expenses
Total noninterest expenses for the 2005 second quarter were $113.5 million, which includes $3.5 million of non-recurring charges under Webster’s core infrastructure conversion project, compared to $97.2 million in the year-ago period. Adjusting each period for acquisitions, investments inde novobranch expansion and the core infrastructure conversion, total noninterest expenses were $93.0 million in the second quarter and $89.3 million a year ago for an increase of approximately 4 percent. On this basis, total noninterest expenses were $183.8 million for the first six months of 2005 and $175.9 million a year ago and also increased by approximately 4 percent.
Balance Sheet Trends
At June 30, 2005, total assets were $17.5 billion, up 3 percent from $17.0 billion a year ago. Total loans of $11.8 billion at June 30, 2005 increased 5 percent from $11.3 billion the prior year, while deposits were $11.6 billion, up 12 percent from $10.4 billion a year ago.
“Strong deposit growth exceeding the growth in loans has enabled Webster to make a meaningful reduction in total wholesale borrowings,” stated Webster President and Chief Operating Officer William T. Bromage. “Commercial lending is a strategic focus which is reflected in our double-digit loan growth for this segment.”
At the end of the second quarter, commercial loans were $4.4 billion, including Commercial & Industrial loans at $2.8 billion, up 13 percent from a year ago, and commercial real estate loans at $1.6 billion, up 6 percent. Consumer loans, primarily home equity loans and lines, increased 6 percent to $2.7 billion compared to $2.5 billion a year ago. Commercial, commercial real estate and consumer loans comprised 60 percent of total loans at June 30, 2005 compared to 58 percent a year ago.
Demand and NOW deposits have grown by 11 percent and 15 percent, respectively, compared to a year ago while certificates of deposit balances have grown by 20 percent as consumer preferences have shifted to this product offering. Wholesale borrowings as a percent of total assets declined to 23.7 percent at June 30, 2005 compared to 29.9 percent a year ago as total deposit growth exceeded loan growth by $687 million over the past year.
“Webster’s performance has resulted in an improved tangible equity position,” stated Webster Chief Financial Officer William J. Healy. “Earnings retention and balance sheet management have contributed to substantial improvement in our tangible equity ratio over the past year.”
Book value per common share of $29.94 at June 30, 2005 increased from $27.37 a year ago. Tangible book value per share of $17.18 at June 30, 2005 increased from $15.02 last year. The ratio of tangible equity to tangible assets increased to 5.38 percent at June 30, 2005 compared to 4.71 percent a year ago. Return on average tangible equity was 20.2 percent in the second quarter compared to 22.1 percent a year ago while the cash return on average tangible equity was 22.3 percent and 24.1 percent in the respective periods.
Asset Quality
Nonperforming assets totaled $44.2 million or 0.25 percent of total assets at June 30, 2005, down from $47.7 million or 0.28 percent a year ago and $49.1 million or 0.28 percent at March 31, 2005.
The allowance for loan losses was $154.8 million, or 1.31 percent of total loans at June 30, 2005, compared to $146.5 million, or 1.30 percent, a year ago and $152.5 million, or 1.30 percent, at March 31, 2005. The ratio of the allowance to nonperforming loans at June 30, 2005 was 369 percent compared to 332 percent a year ago and 334 percent at March 31, 2005.
Strategic Actions
During the second quarter, Webster celebrated grand openings forde novobranches in Groton and Bridgeport, Conn., our first branches in these towns, bringing the total retail branch system to 153. The branches increase Webster’s presence in New London and Fairfield Counties.
In April, Webster unveiled a new corporate identity including a new logo with a contemporary look meant to capture Webster’s momentum and communicate the energy and approachability that are at the heart of Webster’sWe Find A Waybrand promise.
Also in April, Webster named Scott McBrair head of Retail Banking, including consumer and small business operations. He is responsible for Webster’s 153 branch system, the bank’s contact center and on-line banking capabilities and Webster’s full range of retail banking products including checking, money market funds, certificates of deposit and small business loans.
In June, Webster completed its acquisition of J. Bush & Co., an investment management business. J. Bush & Co. works closely with high-net worth individuals as well as institutions to provide them investment management advice. The company has retained its name and operates as a division of the Bank’s investment management group, Webster Financial Advisors (WFA).
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Webster Financial Corporation is the holding company for Webster Bank, National Association and Webster Insurance. With $17.5 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.
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Conference Call
A conference call covering Webster’s 2005 second quarter earnings announcement will be held today, Tuesday, July 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 1-877-407-3980 or 201-689-8475 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. Except as required by law, Webster does not undertake to update any such forward looking information.
In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. We believe that providing certain non-GAAP financial measures, such as cash basis net income, provides investors with information useful in understanding our financial performance, our performance trends and financial position. A reconciliation of cash basis net income to net income is included in the accompanying financial tables, elsewhere in this report.
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