Webster Financial (WBS) 8-K Webster Reports 2006 Third Quarter Earnings; Announces Portfolio Repositioning

Exhibit 99.1

Exhibit 99.1

Media Contact	Investor Contact
Clark Finley 203-578-2287	Terry Mangan 203-578-2318
cfinley@websterbank.com	tmangan@websterbank.com

WEBSTER REPORTS 2006 THIRD QUARTER EARNINGS;
ANNOUNCES PORTFOLIO REPOSITIONING

• Net income of $40.8 million ($.77 per share) before available for sale portfolio repositioning

• Available for sale portfolio repositioning charge of $31.8 million or $.60 per share

• Net income of $9.0 million or $.17 per share for the quarter

WATERBURY, Conn., October 17, 2006 – Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A., today announced net income of $9.0 million in the third quarter, reflecting a $31.8 million charge from an available for sale securities portfolio repositioning. Net income per diluted share before this charge was $.77 and is $.17 inclusive of this charge.

Following an evaluation of its available for sale securities portfolio in light of changing market conditions and other factors, management has determined to sell all of its mortgage-backed securities classified as available for sale (approximately $1.9 billion as of September 30, 2006).

Approximately $1.25 billion of proceeds from the sale of securities will be used to pay off wholesale funding (short term borrowings), and the remaining $650 million of proceeds is expected to be used to purchase different securities to extend duration and improve the overall portfolio yield.

The repositioning of Webster’s securities portfolio is expected to improve Webster’s tangible capital ratio as a result of the net reduction in total assets. Webster expects that net interest income will improve relative to current estimates by approximately $15 million in 2007 and that the net interest margin will improve as a result of an improved yield on the portfolio and the reduction in high-cost, short-term borrowings.

At September 30, 2006, the available for sale mortgage-backed securities portfolio had net unrealized losses of $48.9 million ($31.8 million after tax or $.60 per common share), which will be recognized as part of the third quarter results of operations. At current market levels, the sale of these securities is estimated to result in an additional aggregate pretax loss of approximately $6.0 million, which will be recognized in the fourth quarter.

The third quarter loss on the write-down of available for sale securities to fair value was previously reflected as net unrealized securities losses within “accumulated other comprehensive loss” in the shareholders’ equity section of Webster’s Consolidated Balance Sheet. Accordingly, total shareholders’ equity will not change as a result of the third quarter charge.

Management focused on several key factors in making its determination regarding the securities portfolio, including overall interest rate risk as well as the future earnings and capital position of the Bank. As part of this process, management identified the securities where there is no longer the intent to hold to recovery. Driving the determination to sell the affected securities is Webster’s belief that a significant portion of the securities will likely continue to yield less than the cost of short-term borrowings.

“The actions we are taking with our securities portfolio are a major step toward the completion of our balance sheet transformation to a full-service commercial bank and are entirely consistent with our stated operating principles” stated Webster Chairman and Chief Executive Officer James C. Smith. “Our focus is on completing this transformation swiftly to position ourselves to become New England’s bank.”

Excluding the impact of this portfolio repositioning, results for the quarter and the first nine months of 2006 reflect net interest margin compression resulting from the continued consumer preference for higher yielding MMDA and certificates of deposit and the impact of the inverted yield curve on net interest income. The net interest margin in the third quarter includes the benefit of the payment of the equivalent of two dividends from the Federal Home Loan Bank of Boston (FHLB Boston) during the quarter, as a result of its change in the timing of dividends.

Commercial loans, including commercial real estate loans, were $5.1 billion at September 30, 2006, up 11 percent from a year ago. Commercial and industrial loans were $3.3 billion, up 13 percent, and commercial real estate loans were $1.8 billion, up 6 percent. Consumer loans, primarily home equity loans and lines, increased 11 percent to $3.0 billion compared to $2.7 billion a year ago. Commercial and consumer loans grew at a combined rate of 11 percent from a year ago while residential loans, which totaled $4.8 billion, grew by 1 percent as most mortgage originations are sold into the secondary market. Commercial and consumer loans now represent 63 percent of total loans compared to 61 percent a year ago.

“We are pleased with the consistent growth and contribution we see from our commercial and retail lines of business. We have significant positive momentum in core franchise growth as we pursue our vision to be New England’s bank,” stated Mr. Smith. “Webster is fundamentally stronger than ever.”

Revenues

Total revenues, which consist of net interest income plus total noninterest income, were $178.2 million in the third quarter apart from the securities portfolio repositioning charge compared to $183.9 million in the second quarter and $185.6 million a year ago. Net interest income was $122.4 million in the third quarter compared to $126.8 million in the second quarter and $129.6 million in the year-ago period. Continued strong growth in higher yielding commercial and consumer loans was more than offset by an increase in the cost of deposits and borrowings and reduced contributions from the residential mortgage and securities portfolios.

Webster’s net interest margin (annualized tax-equivalent net interest income as a percentage of average earning assets) was 3.01 percent compared to 3.13 percent in the second quarter and 3.26 percent in the third quarter of 2005. The net interest margin decline compared to a year ago primarily reflects loan and securities portfolio yields increasing 84 basis points and 38 basis points, respectively, compared to increases of 100 basis points in the cost of deposits and 147 basis points in the cost of borrowings.

Total noninterest income was $55.7 million in the third quarter apart from the securities portfolio repositioning charge compared to $57.1 million in the prior quarter and $56.0 million a year ago. Deposit service fees totaled $25.3 million compared to $24.2 million in the second quarter and $22.2 million a year ago. Wealth management fees totaled $6.7 million compared to $6.9 million in the second quarter and $5.6 million a year ago. Insurance revenue was $9.8 million in the quarter compared to $10.0 million in the second quarter and $11.0 million a year ago. Gains on the sale of loans were ($0.2) million as a result of a lower of cost or market adjustment compared to $2.5 million in the second quarter and $3.7 million a year ago. A portion of the decline in gain on the sale of loans was offset by higher gains on the sale of securities, which totaled $2.3 million compared to $0.7 million in the second quarter and $1.1 million a year ago.

The provision for credit losses was $3.0 million in the third quarter, same as in the second quarter, and $2.0 million in the third quarter of 2005. Net loan charge-offs were $3.1 million compared to $2.5 million in the second quarter and $1.8 million a year ago. The annualized net loan charge-off ratio was 0.10 percent of average loans compared to 0.08 in the second quarter and 0.06 percent a year ago.

Expenses

Total noninterest expenses were $115.9 million in the third quarter compared to $117.3 million in the second quarter and $114.9 million a year ago. Expenses were flat to a year ago excluding $0.9 million of non-recurring acquisition costs from the recently completed NewMil Bancorp acquisition. An additional $2.4 million of NewMil acquisition costs are expected to be incurred in the fourth quarter, consistent with our earlier estimates. Increases over the past year in compensation and benefits, furniture and equipment, occupancy, marketing and professional services were offset by declines in IT conversion and infrastructure costs, intangible amortization and other expenses.

NewMil Acquisition

As previously announced, Webster closed its acquisition of NewMil Bancorp on October 6, 2006. NewMil brings $506 million in loans and $614 million in deposits to Webster. “We are pleased to have successfully completed this transaction, which significantly bolsters our western Connecticut franchise,” stated Mr. Smith. “We welcome our new colleagues to Webster and thank them for their partnership and specifically for their capable assistance during the integration.”

Balance Sheet Trends

Total assets were $18.1 billion at September 30, 2006 compared with $17.8 billion at September 30, 2005. Total loans were $13.0 billion and increased $0.8 billion, or 7 percent, from a year ago while securities totaled $3.3 billion and declined by $0.5 billion, or 13 percent. Deposits were $12.3 billion and increased $0.6 billion, or 6 percent, with contributions fromde novo branching and growth in health savings account deposits at HSA Bank.

Demand and NOW deposits combined declined by 1 percent compared to a year ago while certificates of deposit balances grew by 11 percent as customer preference continued for this higher yielding product category. The $0.5 billion reduction in securities compared to a year ago funded $0.2 billion of loan growth in excess of deposit growth and contributed to a $0.4 billion reduction in wholesale borrowings over the past year. As a result, wholesale borrowings declined to 22 percent of total assets at September 30 compared to 25 percent a year ago.

“The portfolio rebalancing actions we are undertaking will result in a stronger balance sheet and an improved interest rate risk position,” stated Webster Chief Financial Officer Jerry Plush. “We will now have a higher yielding securities portfolio, a significantly reduced level of high-cost, short-term borrowings and an improved tangible capital ratio. We are focused on improving our performance against key peer group metrics and believe this is a significant step toward achieving this goal.”

Book value per common share of $32.07 at September 30, 2006 increased from $30.41 a year ago. Tangible book value per share of $19.16 at September 30 increased from $17.71 last year. The ratio of tangible equity to tangible assets increased to 5.68 percent at September 30 compared to 5.45 percent a year ago. Return on average tangible equity was 16.6 percent in the third quarter apart from the securities portfolio repositioning charge compared to 19.6 percent a year ago while the cash return on average tangible equity was 17.9 percent and 21.6 percent in the respective periods.

Asset Quality

Nonperforming assets totaled $61.4 million, or 0.34 percent of total assets, at September 30, 2006 compared to $61.8 million, or 0.34 percent, at June 30 and $58.1 million, or 0.33 percent, a year ago.

The allowance for credit losses, which consists of the allowance for loan losses and the reserve for unfunded commitments, was $156.3 million, or 1.20 percent of total loans, at September 30 compared to $155.1 million, or 1.27 percent, a year ago. The ratio of the allowance to nonperforming loans was 264 percent at September 30 compared to 275 percent a year ago.

***

Webster Financial Corporation is the holding company for Webster Bank, National Association and Webster Insurance. With $18.1 billion in assets, Webster provides business and consumer banking, mortgage, insurance, financial planning, trust and investment services through 175 banking offices, 328 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 atwww.websteronline.com.

***

Conference Call

A conference call covering Webster’s 2006 third quarter earnings announcement will be held today, Tuesday, October 17, 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 1-877-407-8293 or 201-689-8349 internationally. The call will be archived on the website and available for future retrieval.

Forward-looking Statements

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 2005. Except as required by law, Webster does not undertake to update any such forward looking information.

Non-GAAP Financial Measures

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 net income before giving effect to the sale of securities from a repositioning of the balance sheet, provides investors with information useful in understanding our financial performance, our performance trends and financial position. A reconciliation of net income and other performance ratios before the sale of those securities to net income is included in the accompanying financial tables, elsewhere in this report. We also provide a reconciliation of cash basis net income to net income in those accompanying financial tables.

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. Specifically, we provide measures based on what we believe are our operating earnings on a consistent basis excluding non-cash items which affect the GAAP reporting of results of operations. Additionally, this quarter we show net income excluding the effect of the determination to sell our available for sale securities portfolio because we believe these items are not reflective of on-going operations. 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.

—30—

WEBSTER FINANCIAL CORPORATION

Selected Financial Highlights (unaudited)

	At or for the Three						At or for the Nine
	Months Ended September 30,						Months Ended September 30,
(In thousands, except per share data)	2006			2005			2006			2005
Net income and performance ratios before loss on write-down of AFS securities to fair value (annualized):
Net income	$	8,997		$	46,602		$	95,992		$	140,355
Recognition of loss on AFS securities, net of tax		31,768			—			31,768			—
Net income before recognition of loss on AFS securities		40,765			46,602			127,760			140,355
Net income per diluted common share		0.77			0.86			2.40			2.59
Return on average shareholders’ equity		9.80	%		11.39	%		10.23	%		11.69	%
Return on average tangible equity		16.55			19.59			17.27			20.34
Return on average assets		0.91			1.06			0.95			1.08
Noninterest income as a percentage of total revenue		31.28			30.16			30.69			29.56
Efficiency ratio (a,e)		65.03			61.93			64.37			61.09
Net income and performance ratios (annualized):
Net income	$	8,997		$	46,602		$	95,992		$	140,355
Net income per diluted common share		0.17			0.86			1.80			2.59
Return on average shareholders’ equity		2.16	%		11.39	%		7.69	%		11.69	%
Return on average tangible equity		3.65			19.59			12.98			20.34
Return on average assets		0.20			1.06			0.72			1.08
Noninterest income as a percentage of total revenue		5.30			30.16			23.89			29.56
Efficiency ratio (a,d)		89.61			61.93			70.68			61.09
Cash income and performance ratios before loss on write-down of AFS securities to fair value (annualized) (b):
Net income before recognition of loss on AFS securities	$	40,765		$	46,602		$	127,760		$	140,355
Stock-based compensation, net of tax		1,330			1,470			4,125			4,493
Intangible amortization, net of tax		2,001			3,251			7,150			9,693
Cash income		44,096			51,323			139,035			154,541
Cash income per diluted common share		0.83			0.95			2.61			2.85
Cash return on average shareholders’ equity		10.61	%		12.55	%		11.13	%		12.87	%
Cash return on average tangible equity		17.91			21.57			18.80			22.39
Cash return on average assets		0.98			1.16			1.04			1.19
Cash income and performance ratios (annualized) (b):
Net income	$	8,997		$	46,602		$	95,992		$	140,355
Stock-based compensation, net of tax		1,330			1,470			4,125			4,493
Intangible amortization, net of tax		2,001			3,251			7,150			9,693
Cash income		12,328			51,323			107,267			154,541
Cash income per diluted common share		0.23			0.95			2.01			2.85
Cash return on average shareholders’ equity		2.96	%		12.55	%		8.59	%		12.87	%
Cash return on average tangible equity		5.01			21.57			14.50			22.39
Cash return on average assets		0.27			1.16			0.80			1.19
Asset quality:
Allowance for credit losses	$	156,331		$	155,052		$	156,331		$	155,052
Nonperforming assets		61,416			58,132			61,416			58,132
Allowance for credit losses / total loans		1.20	%		1.27	%		1.20	%		1.27	%
Net charge-offs (recoveries) / average loans (annualized)		0.10			0.06			0.08			0.03
Nonperforming loans / total loans		0.45			0.46			0.45			0.46
Nonperforming assets / total assets		0.34			0.33			0.34			0.33
Allowance for credit losses / nonperforming loans		264.47			275.33			264.47			275.33

WEBSTER FINANCIAL CORPORATION

Selected Financial Highlights (unaudited)

	At or for the Three						At or for the Nine
	Months Ended September 30,						Months Ended September 30,
(In thousands, except per share data)	2006			2005			2006			2005
Other ratios (annualized):
Tangible capital ratio		5.68	%		5.45	%		5.68	%		5.45	%
Shareholders’ equity / total assets		9.28			9.19			9.28			9.19
Interest-rate spread		2.93			3.22			3.06			3.26
Net interest margin		3.01			3.26			3.13			3.30
Share related:
Book value per common share	$	32.07		$	30.41		$	32.07			30.41
Tangible book value per common share		19.16			17.71			19.16			17.71
Common stock closing price		47.11			44.96			47.11			44.96
Dividends declared per common share		0.27			0.25			0.79			0.73
Common shares issued and outstanding		52,476			53,795			52,476			53,795
Basic shares (average)		52,241			53,648			52,654			53,612
Diluted shares (average)		52,871			54,310			53,276			54,269

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.
(d)	Excluding acquisition, conversion and infrastructure costs, the efficiency ratio would have been 88.94% and 70.49% for the three and nine months ended September 30, 2006, respectively, and 60.73% and 59.85% for the three and nine months ended September 30, 2005, respectively.
(e)	Excluding acquisition, conversion and infrastructure costs, the efficiency ratio would have been 64.54% and 64.20% for the three and nine months ended September 30, 2006, respectively, and 60.73% and 59.85% for the three and nine months ended September 30, 2005, respectively.
(f)	Effective December 31, 2005, Webster transferred the portion of the allowance for loan losses related to commercial and consumer lending commitments and letters of credit to the reserve for unfunded credit commitments.
(g)	The recording of the FHLB dividend of $1.8 million, related to the second quarter of 2006, in the third quarter of 2006 increased the yield on securities by 21 basis points (bp). Excluding the recording of this dividend the yield on securities would have been 4.85 and the wholesale spread would have been (.46) in the third quarter of 2006. The recording of the FHLB dividend of $1.8 million in the second quarter of 2006 would have increased the yield by 19 bp and improved the wholesale spread from (24) bp to (5) bp.
(h)	Cost of borrowings includes long-term debt such as Trust Preferred Securities and subordinated debt.
(i)	Amounts were previously shown as a component of nonperforming loans.

Consolidated Statements of Condition (unaudited)

	September 30,			June 30,			September 30,
(In thousands)	2006			2006			2005
Assets:
Cash and due from depository institutions	$	243,434		$	327,622		$	269,859
Short-term investments		9,562			59,666			9,224
Securities:
Trading, at fair value		2,848			2,698			1,901
Available for sale, at fair value		2,249,935			2,317,645			2,668,226
Held-to-maturity securities		1,064,188			1,088,206			1,161,507
Total securities		3,316,971			3,408,549			3,831,634
Loans held for sale		309,149			275,240			247,365
Loans:
Residential mortgages		4,845,198			4,875,134			4,812,298
Commercial		3,368,164			3,160,200			2,978,537
Commercial real estate		1,770,674			1,819,635			1,666,384
Consumer		3,037,674			2,855,558			2,740,019
Total loans		13,021,710			12,710,527			12,197,238
Allowance for loan losses		(147,446	)		(147,401	)		(155,052	)
Loans, net		12,874,264			12,563,126			12,042,186
Accrued interest receivable		93,844			85,719			73,253
Premises and equipment, net		189,562			188,125			179,463
Goodwill and intangible assets		692,388			695,014			703,740
Cash surrender value of life insurance		245,108			242,740			235,467
Prepaid expenses and other assets		164,532			176,341			214,865
Total Assets	$	18,138,814		$	18,022,142		$	17,807,056
Liabilities and Shareholders’ Equity:
Deposits:
Demand deposits	$	1,453,317		$	1,549,051		$	1,431,642
NOW accounts		1,559,584			1,687,297			1,600,481
Money market deposit accounts		2,078,797			1,888,179			1,971,075
Savings accounts		1,838,494			1,954,298			2,032,927
Certificates of deposit		4,583,508			4,447,504			4,118,765
Treasury deposits		790,353			690,136			507,302
Total deposits		12,304,053			12,216,465			11,662,192
Federal Home Loan Bank advances		1,867,393			1,804,140			2,064,963
Securities sold under agreements to repurchase and other short-term debt		1,466,845			1,528,224			1,633,906
Other long-term debt		636,028			622,267			673,999
Reserve for unfunded commitments (f)		8,885			9,070			—
Accrued expenses and other liabilities		163,192			187,445			126,537
Total liabilities		16,446,396			16,367,611			16,161,597
Preferred stock of subsidiary corporation		9,577			9,577			9,577
Shareholders’ equity		1,682,841			1,644,954			1,635,882
Total Liabilities and Shareholders’ Equity	$	18,138,814		$	18,022,142		$	17,807,056

See Selected Financial Highlights for footnotes.

Consolidated Statements of Income (unaudited)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(In thousands, except per share data)	2006			2005		2006			2005
Interest income:
Loans	$	215,094		$	175,680	$	617,765		$	501,434
Securities and short-term investments		40,883			43,775		121,612			127,358
Loans held for sale		4,366			3,686		11,022			9,382
Total interest income		260,343			223,141		750,399			638,174
Interest expense:
Deposits		85,058			51,338		220,005			131,305
Borrowings		52,849			42,191		150,994			119,190
Total interest expense		137,907			93,529		370,999			250,495
Net interest income		122,436			129,612		379,400			387,679
Provision for credit losses		3,000			2,000		8,000			7,500
Net interest income after provision for credit losses		119,436			127,612		371,400			380,179
Noninterest income:
Deposit service fees		25,252			22,182		71,271			63,058
Insurance revenue		9,793			10,973		30,505			33,337
Loan and loan servicing fees		7,760			7,739		24,746			23,942
Wealth and investment services		6,738			5,554		20,022			16,977
Gain (loss) on sale of loans and loan servicing, net		(185	)		3,703		5,626			9,251
Increase in cash surrender value of life insurance		2,368			2,341		7,053			6,881
Other		1,693			2,347		4,752			6,603
		53,419			54,839		163,975			160,049
Loss on write-down of AFS securities to fair value		(48,879	)		—		(48,879	)		—
Gain on sale of securities, net		2,307			1,141		4,021			2,607
Total noninterest income		6,847			55,980		119,117			162,656
Noninterest expenses:
Compensation and benefits		62,050			60,808		191,638			176,564
Occupancy		11,977			10,482		35,983			32,151
Furniture and equipment		13,840			13,009		41,397			35,418
Intangible amortization		3,079			5,001		11,000			14,912
Marketing		4,211			3,339		12,127			10,286
Professional services		4,302			3,626		11,310			11,368
Conversion and infrastructure costs		—			2,217		—			6,857
Acquisition costs		868			—		933			—
Other		15,523			16,450		47,951			48,655
Total noninterest expenses		115,850			114,932		352,339			336,211
Income before income taxes		10,433			68,660		138,178			206,624
Income taxes		1,436			22,058		42,186			66,269
Net income	$	8,997		$	46,602	$	95,992		$	140,355
Diluted shares (average)		52,871			54,310		53,276			54,269
Net income per common share:
Basic	$	0.17		$	0.87	$	1.82		$	2.62
Diluted		0.17			0.86		1.80			2.59

See Selected Financial Highlights for footnotes.

Consolidated Statements of Income (unaudited)

	Three Months Ended
	Sept. 30,			June 30,		March 31,		Dec. 31,		Sept. 30,
(In thousands, except per share data)	2006			2006		2006		2005		2005
Interest income:
Loans	$	215,094		$	207,097	$	195,574	$	187,607	$	175,680
Securities and short-term investments		40,883			39,134		41,595		42,503		43,775
Loans held for sale		4,366			3,317		3,339		3,563		3,686
Total interest income		260,343			249,548		240,508		233,673		223,141
Interest expense:
Deposits		85,058			72,593		62,354		57,132		51,338
Borrowings		52,849			50,150		47,995		46,879		42,191
Total interest expense		137,907			122,743		110,349		104,011		93,529
Net interest income		122,436			126,805		130,159		129,662		129,612
Provision for credit losses		3,000			3,000		2,000		2,000		2,000
Net interest income after provision for credit losses		119,436			123,805		128,159		127,662		127,612
Noninterest income:
Deposit service fees		25,252			24,150		21,869		22,909		22,182
Insurance revenue		9,793			9,988		10,724		10,678		10,973
Loan and loan servicing fees		7,760			9,162		7,824		9,290		7,739
Wealth and investment services		6,738			6,930		6,354		6,174		5,554
Gain on sale of loans and loan servicing, net		(185	)		2,538		3,273		2,322		3,703
Increase in cash surrender value of life insurance		2,368			2,314		2,371		2,360		2,341
Other		1,693			1,284		1,775		3,470		2,347
		53,419			56,366		54,190		57,203		54,839
Loss on write-down of AFS securities to fair value		(48,879	)		—		—		—		—
Gain on sale of securities, net		2,307			702		1,012		1,026		1,141
Total noninterest income		6,847			57,068		55,202		58,229		55,980
Noninterest expenses:
Compensation and benefits		62,050			64,585		65,003		64,905		60,808
Occupancy		11,977			11,824		12,182		11,141		10,482
Furniture and equipment		13,840			13,962		13,595		14,810		13,009
Intangible amortization		3,079			3,544		4,377		5,001		5,001
Marketing		4,211			4,292		3,624		3,981		3,339
Professional services		4,302			3,464		3,544		3,594		3,626
Conversion and infrastructure costs		—			—		—		1,281		2,217
Acquisition costs		868			65		—		—		—
Other		15,523			15,582		16,846		14,646		16,450
Total noninterest expenses		115,850			117,318		119,171		119,359		114,932
Income before income taxes		10,433			63,555		64,190		66,532		68,660
Income taxes		1,436			20,412		20,338		21,032		22,058
Net income	$	8,997		$	43,143	$	43,852	$	45,500	$	46,602
Diluted shares (average)		52,871			53,252		53,703		54,129		54,310
Net income per common share:
Basic	$	0.17		$	0.82	$	0.83	$	0.85	$	0.87
Diluted		0.17			0.81		0.82		0.84		0.86

See Selected Financial Highlights for footnotes.

Retail and Wholesale Interest-Rate Spreads (unaudited)

	Three Months Ended
	September			June			March			December			September
	2006			2006			2006			2005			2005
Interest-rate spread
Yield on interest-earning assets		6.31	%		6.11	%		5.97	%		5.73	%		5.55	%
Cost of interest-bearing liabilities		3.38			3.05			2.78			2.55			2.33
Interest-rate spread		2.93	%		3.06	%		3.19	%		3.18	%		3.22	%
Net interest margin		3.01			3.13			3.24			3.22			3.26
Retail interest-rate spread
Yield on loans and loans held for sale		6.64	%		6.52	%		6.32	%		6.02	%		5.83	%
Cost of deposits		2.76			2.43			2.16			1.94			1.76
Spread		3.88	%		4.09	%		4.16	%		4.08	%		4.07	%
Wholesale interest-rate spread
Yield on securities and short-term investments (g)		5.06	%		4.61	%		4.76	%		4.75	%		4.67	%
Cost of borrowings (h)		5.31			4.85			4.44			4.19			3.84
Spread (g)		(0.25	)%		(0.24	)%		0.32	%		0.56	%		0.83	%

Consolidated Average Statements of Condition (unaudited)

Three Months Ended September 30,	2006								2005
						Fully tax-								Fully tax-
	Average					equivalent			Average					equivalent
(Dollars in thousands)	balance		Interest			yield/rate			balance		Interest			yield/rate
Assets:
Interest-earning assets:
Loans	$	12,813,385	$	215,094			6.65	%	$	11,974,880	$	175,685			5.81	%
Securities		3,347,060		43,000			5.06	(c)		3,906,118		45,997			4.68	(c)
Loans held for sale		277,181		4,366			6.30			223,002		3,686			6.61
Short-term investments		18,484		190			4.02			20,044		117			2.28
Total interest-earning assets		16,456,110		262,650			6.31			16,124,044		225,485			5.55
Noninterest-earning assets		1,498,903								1,505,579
Total assets	$	17,955,013							$	17,629,623
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Demand deposits	$	1,451,171	$	—			—	%	$	1,477,230	$	—			—	%
Savings, NOW and money market deposit accounts		5,445,159		28,258			2.06			5,679,259		18,021			1.26
Time deposits		5,308,496		56,800			4.23			4,413,329		33,317			3.00
Total deposits		12,204,826		85,058			2.76			11,569,818		51,338			1.76
Federal Home Loan Bank advances		2,069,417		26,328			4.98			2,128,760		19,134			3.52
Repurchase agreements and other short-term debt		1,215,371		13,764			4.43			1,518,921		11,859			3.06
Other long-term debt		627,379		12,757			8.13			674,056		11,198			6.65
Total borrowings		3,912,167		52,849			5.31			4,321,737		42,191			3.84
Total interest-bearing liabilities		16,116,993		137,907			3.38			15,891,555		93,529			2.33
Noninterest-bearing liabilities		165,301								92,381
Total liabilities		16,282,294								15,983,936
Preferred stock of subsidiary corporation		9,577								9,577
Shareholders’ equity		1,663,142								1,636,110
Total liabilities and shareholders’ equity	$	17,955,013							$	17,629,623
				124,743								131,956
Less: tax-equivalent adjustment				(2,307	)							(2,344	)
Net interest income			$	122,436							$	129,612
Interest-rate spread							2.93	%							3.22	%
Net interest margin							3.01	%							3.26	%

See Selected Financial Highlights for footnotes.

Consolidated Average Statements of Condition (unaudited)

Nine Months Ended September 30,	2006										2005
						Fully tax-								Fully tax-
	Average					equivalent			Average					equivalent
(Dollars in thousands)	balance		Interest			yield/rate			balance		Interest			yield/rate
Assets:
Interest-earning assets:
Loans	$	12,611,701	$	617,765			6.51	%	$	11,796,868	$	501,440			5.65	%
Securities		3,490,595		127,810			4.81	(c)		3,836,811		133,373			4.61	(c)
Loans held for sale		245,559		11,022			5.98			226,468		9,382			5.52
Short-term investments		24,038		709			3.89			20,028		390			2.57
Total interest-earning assets		16,371,893		757,306			6.13			15,880,175		644,585			5.39
Noninterest-earning assets		1,502,282								1,467,085
Total assets	$	17,874,175							$	17,347,260
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Demand deposits	$	1,453,435	$	—			—	%	$	1,425,093	$	—			—	%
Savings, NOW and money market deposit accounts		5,375,789		70,555			1.75			5,678,099		47,161			1.11
Time deposits		5,122,366		149,450			3.89			4,064,228		84,144			2.77
Total deposits		11,951,590		220,005			2.46			11,167,420		131,305			1.57
Federal Home Loan Bank advances		2,235,163		76,153			4.49			2,247,887		55,881			3.28
Repurchase agreements and other short-term debt		1,244,686		38,200			4.05			1,542,111		31,274			2.67
Other long-term debt		632,257		36,641			7.73			676,426		32,035			6.31
Total borrowings		4,112,106		150,994			4.86			4,466,424		119,190			3.53
Total interest-bearing liabilities		16,063,696		370,999			3.07			15,633,844		250,495			2.13
Noninterest-bearing liabilities		135,496								102,981
Total liabilities		16,199,192								15,736,825
Preferred stock of subsidiary corporation		9,577								9,577
Shareholders’ equity		1,665,406								1,600,858
Total liabilities and shareholders’ equity	$	17,874,175							$	17,347,260
				386,307								394,090
Less: tax-equivalent adjustment				(6,907	)							(6,411	)
Net interest income			$	379,400							$	387,679
Interest-rate spread							3.06	%							3.26	%
Net interest margin							3.13	%							3.30	%

See Selected Financial Highlights for footnotes.

	At or for the Three Months Ended
(Unaudited)	Sept. 30,			June 30,			March 31,			Dec. 31,			Sept. 30,
(Dollars in thousands)	2006			2006			2006			2005			2005
Asset Quality
Nonperforming loans:
Commercial:
Commercial	$	29,321		$	22,930		$	19,719		$	26,002		$	25,321
Equipment financing		2,450			2,693			2,864			3,065			3,209
Total commercial		31,771			25,623			22,583			29,067			28,530
Commercial real estate		16,811			23,291			24,012			22,678			19,650
Residential		7,032			7,218			8,891			6,979			6,436
Consumer		3,496			3,065			2,875			1,829			1,699
Total nonperforming loans		59,110			59,197			58,361			60,553			56,315
Loans held for sale		—			—			—			—			181
Other real estate owned and repossessed assets:
Commercial		1,573			2,254			1,712			5,126			1,408
Residential		607			316			456			232			218
Consumer		126			10			361			427			10
Total other real estate owned and repossessed assets		2,306			2,580			2,529			5,785			1,636
Total nonperforming assets	$	61,416		$	61,777		$	60,890		$	66,338		$	58,132
Accruing loans 90 or more days past due (i)	$	4,609			2,542			1,002			6,676			2,223
Allowance for Credit Losses
Beginning balance	$	156,471		$	155,957		$	155,632		$	155,052		$	154,822
Provision		3,000			3,000			2,000			2,000			2,000
Charge-offs:
Commercial		3,369			2,775			1,629			3,272			2,204
Residential		46			65			75			110			378
Consumer		265			239			362			153			137
Total charge-offs		3,680			3,079			2,066			3,535			2,719
Recoveries		(540	)		(593	)		(391	)		(2,115	)		(949	)
Net loan charge-offs (recoveries)		3,140			2,486			1,675			1,420			1,770
Ending balance	$	156,331		$	156,471		$	155,957		$	155,632		$	155,052
Components: (e)
Allowance for loan losses	$	147,446		$	147,401		$	146,383		$	146,486		$	155,052
Reserve for unfunded credit commitments		8,885			9,070			9,574			9,146			—
Allowance for credit losses	$	156,331		$	156,471		$	155,957		$	155,632		$	155,052
Asset Quality Ratios:
Allowance for loan losses / total loans		1.13	%		1.16	%		1.16	%		1.19	%		1.27	%
Allowance for credit losses / total loans		1.20			1.23			1.24			1.27			1.27
Net charge-offs (recoveries)/ average loans (annualized)		0.10			0.08			0.05			0.05			0.06
Nonperforming loans / total loans		0.45			0.47			0.46			0.49			0.46
Nonperforming assets / total assets		0.34			0.34			0.34			0.37			0.33
Allowance for credit losses / nonperforming loans		264.47			264.32			267.23			257.02			275.33

See Selected Financial Highlights for footnotes.