Media Contact | Investor Contact | |
| Clark Finley 203-578-2287 | James Sitro 203-578-2399 | |
cfinley@websterbank.com | jsitro@websterbank.com |
WEBSTER REPORTS 2007 SECOND QUARTER EARNINGS
Second Quarter Highlights:
| • | Diluted earnings per share of $.63 (includes the aggregate effect of $.15 per diluted share for the following items: $.07 of severance-related and other charges and $.08 of net charges in connection with the previously announced prepayment of capital trust securities). | ||
| • | Net interest income reached a record quarterly level of $130.4 million as the net interest margin improved to 3.47 percent, up from 3.41 percent in the first quarter and 3.13 percent in the second quarter of 2006. | ||
| • | Higher deposit service fees and mortgage banking revenues also contributed to a record quarterly level of total revenues. | ||
| • | Over $260 million of deposit growth during the second quarter; the loan to deposit ratio improved to 97 percent at June 30 compared to 98 percent at March 31 and 104 percent a year ago. | ||
| • | Completed the public offering of $200 million of enhanced trust preferred securities at a significantly lower interest rate (7.50% net cost pre-tax) than the $105 million in capital trust securities prepaid (9.57% net cost pre-tax) during the quarter. | ||
| • | Repurchased over 1.9 million shares of common stock during the second quarter as Webster’s strengthened tangible capital position provides capital management flexibility. The tangible capital ratio at June 30, 2007 was 6.32 percent compared to 6.72 percent at March 31, 2007 and 5.47 percent at June 30, 2006. | ||
| • | Completed the strategic and organizational reviews, which positions Webster to improve ongoing return on capital and operating margins with a heightened focus on its core franchise. |
WATERBURY, Conn., July 24, 2007 — Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A., today announced net income of $35.5 million or $.63 per diluted share for the second quarter of 2007, compared to $35.0 million or $.62 per share for the first quarter of 2007 and $43.1 million or $.81 per share for the second quarter of 2006. As shown in the earnings reconciliation below, second quarter 2007 net income includes charges of $13.0 million ($8.5 million, net of tax) or $.15 per diluted share while the first quarter includes charges of $5.2 million ($3.4 million, net of tax) or $.06 per share. For the first six months of 2007, net income totaled $70.5 million, or $1.25 per share, compared to $87.0 million, or $1.63 per share in the year-ago period.
| Earnings Reconciliation | ||||||||||||||||||||||||
| For the Three Months Ended | ||||||||||||||||||||||||
| June 30, 2007 | March 31, 2007 | |||||||||||||||||||||||
| (In thousands except | Pre- | Tax | Pre- | Tax | ||||||||||||||||||||
| per share data) | Tax | Effected | EPS | Tax | Effected | EPS | ||||||||||||||||||
Reported Net Income | $ | 51,997 | $ | 35,467 | $ | 0.63 | $ | 51,222 | $ | 35,036 | $ | 0.62 | ||||||||||||
Adjustments: | ||||||||||||||||||||||||
Gain on Webster Capital Trust I and II securities | (2,130 | ) | (1,384 | ) | (0.02 | ) | — | — | - | |||||||||||||||
Debt redemption premium | 8,940 | 5,811 | 0.10 | — | — | - | ||||||||||||||||||
Software development cost write-off | 3,403 | 2,212 | 0.04 | — | — | - | ||||||||||||||||||
Severance costs | 1,888 | 1,227 | 0.02 | 2,200 | 1,430 | 0.02 | ||||||||||||||||||
Write-down of construction loan(s) | ||||||||||||||||||||||||
held for sale | 948 | 616 | 0.01 | 700 | 455 | 0.01 | ||||||||||||||||||
Closure of Peoples Mortgage Company (PMC) | — | — | — | 2,322 | 1,509 | 0.03 | ||||||||||||||||||
Total adjustments | 13,049 | 8,482 | 0.15 | 5,222 | 3,394 | 0.06 | ||||||||||||||||||
Adjusted net income | $ | 65,046 | $ | 43,949 | $ | 0.78 | $ | 56,444 | $ | 38,430 | $ | 0.68 | (A) | |||||||||||
| (A) | Excludes $4.7 million pre-tax of seasonally higher expenses in the first quarter of 2007 primarily related to payroll taxes and 401(k) match. |
As previously disclosed, Webster prepaid its Capital Trust I and Capital Trust II securities on April 2, 2007, at call prices of 104.7 percent and 105.0 percent, respectively, plus accrued and unpaid interest. Webster recorded a net pre-tax charge to income in the second quarter of 2007 of $6.8 million ($8.9 million related to the redemption premiums and unamortized issuance costs, partially offset by a $2.1 million gain on Webster Capital Trust I and II securities held by Webster), or $4.4 million net of tax. Also, Webster incurred severance and other charges of $5.3 million, or $3.4 million net of tax, in connection with actions during the second quarter under the recently concluded strategic and organizational review process. In addition, residential construction loans previously held for sale were transferred into portfolio and were written down
in value by $0.9 million, or $0.6 million net of tax. This write-down is reflected in mortgage banking activities as a reduction in noninterest income in the second quarter.
Webster will provide a detailed update on its strategic and organizational reviews during its second quarter earnings conference call later today (refer to details for the conference call at the end of this release). Additional details regarding the strategic and organizational reviews are also available on our website athttp://www.wbst.com.
“We are pleased to announce solid results in a challenging operating environment. Additionally, we have completed our strategic review and have taken many steps to implement the decisions made over the last two quarters,” stated Webster Chairman and Chief Executive Officer James C. Smith. “Our recently completed organizational review will improve the execution of our business plans in a well structured, more efficient company as we pursue our vision to become New England’s bank.”
Commercial loans (consisting of commercial and industrial and commercial real estate loans) and consumer loans grew strongly year over year to $8.7 billion at June 30, 2007, up 11 percent from June 30, 2006. Commercial and consumer loans represent 70 percent of total loans at June 30, 2007 compared to 62 percent a year ago. Commercial and industrial loans increased by $110 million, or 13 percent annualized, from March 31, 2007. “We are seeing the focus on commercial and consumer lending positively affect our earnings,” stated Webster President and Chief Operating Officer William T. Bromage. “Going forward, we will increase our emphasis on growing small business relationships, which we believe have significant loan and deposit growth potential.”
Revenues
Total revenue, which consists of net interest income plus total non-interest income, reached a record quarterly level of $194.3 million in the second quarter, compared to $185.5 million in the first quarter and $183.9 million a year ago.
Net interest income also reached a record level of $130.4 million in the second quarter compared to $128.1 million in the first quarter and $126.8 million a year ago. Average interest-earning assets were lower in the second quarter of 2007 compared to a year ago as a result of Webster’s recent balance sheet repositioning actions; however, Webster’s net interest margin (annualized tax-equivalent net interest income as a percentage of average earning assets) increased to 3.47 percent compared to 3.41 percent in the first quarter and 3.13 percent a year ago. Webster’s balance sheet repositioning actions have positively impacted the net interest margin as proceeds from the sales of securities were used to pay down high-cost borrowings. Slightly offsetting the positive effect of the balance sheet restructuring is continued consumer preference for higher yielding certificates of deposit as
well as the impact of the inverted yield curve during much of the second quarter. The spread between the yield on loans and the cost of deposits was 3.93 percent in the second quarter compared to 3.87 percent in the first quarter and 4.11 percent a year ago.
Total noninterest income was $64.0 million in the second quarter, including the $2.1 million gain on Webster Capital Trust I and II securities held by Webster, compared to $57.4 million in the first quarter and $57.1 million a year ago. Deposit service fees totaled $28.8 million compared to $25.4 million in the first quarter and $24.2 million a year ago, with growth partly reflecting the growth in deposits and the recent implementation of a new consumer fee structure. Insurance revenue was $9.1 million in the quarter compared to $10.1 million in the first quarter and $10.0 million a year ago. Loan-related fees were $7.9 million in both the second and first quarters of 2007 compared to $9.2 million a year ago. Wealth management fees totaled $7.6 million compared to $6.9 million in both the first quarter and the comparable period a year ago. Income from mortgage banking activities increased to $4.0 million in the second quarter inclusive of a $948,000 write-down on $96.3 million of loans previously held for sale that were transferred into portfolio, compared to income of $2.2 million from mortgage banking activities in the first quarter, which reflected a $700,000 write-down in value of one construction loan held for sale, income of $2.5 million a year ago. Other non-interest income was $1.4 million compared to $1.8 million in the first quarter and $1.3 million a year ago.
Provision For Credit Losses
The provision for credit losses was $4.25 million in the second quarter compared to $3.0 million in both the first quarter of 2007 and the second quarter of 2006. Net loan charge-offs totaled $4.2 million compared to $5.3 million in the first quarter and $2.5 million a year ago. Included in charge-offs in the second quarter of 2007 were $0.6 million of consumer overdraft losses. Prior to the second quarter, overdraft losses were shown as a reduction of deposit fee income. Net charge-offs in the first quarter of 2007 reflected $2.1 million of previously-announced net charge-offs in connection with 13 residential construction loans in Florida. The allowance for credit losses, which consists of the allowance for loan losses and the reserve for unfunded credit commitments, was $152.8 million, or 1.23 percent of total loans at June 30, 2007 compared to $152.7 million, or 1.24 percent at March 31, 2007 and $156.5 million, or 1.23 percent at June 30, 2006.
Noninterest Expenses
Total noninterest expenses were $138.1 million in the second quarter including $8.9 million of debt redemption premium costs related to prepayment of the capital trust securities and $5.3 million of charges in connection with Webster’s recently completed strategic review
(consisting of a $3.4 million write-off of software development costs due to the cancellation of a technology project and $1.9 million in severance costs) compared to total noninterest expenses of $131.3 million in the first quarter and $117.3 million a year ago. The first quarter of 2007 included severance-related charges from ongoing restructuring in insurance and other lines of business of $2.2 million and closing costs of $2.3 million related to the remaining operations of PMC.
Balance Sheet Trends
Total assets were $16.9 billion at June 30, 2007 compared to $18.0 billion a year ago, with the decrease primarily related to balance sheet repositioning actions. Total loans were $12.4 billion, a decrease of $0.3 billion, or 2 percent, from a year ago, due primarily to the securitization of $371 million in residential loans, the sale of $250 million in residential loans in the fourth quarter of 2006 and the securitization of another $633 million in residential loans in the first quarter of 2007. Securities totaled $2.5 billion and declined by $0.9 billion, or 28 percent from a year ago. Total deposits were $12.8 billion, an increase of $0.6 billion, or 5 percent from a year ago which includes a $438 million decline in brokered deposits. Retail deposits increased $1.0 billion, with contributions from the branches acquired from the NewMil Bank acquisition, organic growth from our branch network and growth in health savings account deposits at HSA Bank.
The $0.9 billion reduction in securities and $0.6 billion of total deposit growth, each compared to a year ago, contributed to a $1.9 billion reduction in wholesale borrowings over the past year. Wholesale borrowings declined to 12 percent of total assets at June 30 compared to 22 percent a year ago.
The loan to deposit ratio improved to 97 percent at June 30, 2007 from 98 percent at March 31 and 104 percent a year ago. Improvement in this ratio reflects completion of balance sheet repositioning actions and the increase in deposits over the past year.
Book value per common share of $33.63 at June 30, 2007 increased from $31.22 a year ago. Tangible book value per share of $18.96 at June 30, 2007 increased from $18.31 last year. The ratio of tangible equity to tangible assets increased to 6.32 percent at June 30, 2007 compared to 5.47 percent a year ago.
Capital
Webster prepaid $105 million of its Capital Trust I and II securities that paid 9.57 percent pre-tax on April 2, 2007, at call prices of 104.68 percent and 105.0 percent, respectively, plus accrued and unpaid interest. As previously noted, Webster recorded a net pretax charge to income in the
second quarter of 2007 of $6.8 million ($8.9 million related to the redemption premiums and unamortized issuance costs, partially offset by a $2.1 million gain on Webster Capital Trust I and II securities held by Webster). On June 13, 2007, Webster issued $200 million of enhanced capital trust securities at an all-in cost of 7.50 percent pre-tax under Webster Capital Trust IV.
Also during the second quarter, Webster repurchased over 1.9 million shares of its common stock. Webster still has 1.8 million shares that can be purchased under the 2.8 million share repurchase authorization that was announced on June 5, 2007.
Webster Chief Financial Officer Jerry Plush noted: “Our intent now that the enhanced capital trust securities deal is complete is to focus on our leverage and risk-based capital ratios (which are 8.31 percent and 11.99 percent, respectively) and target a tangible capital ratio level of 6.00%. The enhanced capital trust issuance provides Webster with significant capital management flexibility to selectively buy back shares or to pursue growth opportunities including acquisitions. We believe repurchasing our stock has been an attractive opportunity, and as such we elected to re-initiate the share repurchase program in the second quarter.”
Asset Quality
Nonperforming assets totaled $78.7 million, or 0.63 percent of total loans and other real estate owned at June 30, 2007 compared to $64.8 million, or 0.53 percent, at March 31 and $61.8 million, or 0.49 percent, a year ago. The majority of the second quarter increase relates to Webster’s previous disclosure in its first quarter release and Form 10-Q that as of April 2007 it had placed on nonaccrual status $11 million in construction loans previously held for sale.
The allowance for credit losses, which consist of the allowance for loan losses and the reserve for unfunded credit commitments, was $152.8 million, or 1.23 percent of total loans, at June 30, 2007 compared to $152.7 million, or 1.24 percent at March 31, 2007 and $156.5 million, or 1.23 percent at June 30, 2006. The ratio of the allowance for credit losses to nonperforming loans was 211 percent at June 30, 2007 compared to 264 percent a year ago and 259 percent at March 31, 2007.
***
Webster Financial Corporation is the holding company for Webster Bank, National Association and Webster Insurance. With $16.9 billion in assets, Webster provides business and consumer banking, mortgage, insurance, financial planning, trust and investment services through 177 banking offices, 334 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 2007 second quarter earnings announcement will be held today, Tuesday, July 24, at 9:00 a.m. EDT and may be heard through Webster’s investor relations website atwww.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 2006. 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 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, as adjusted is included in the accompanying selected financial highlights table, elsewhere in this report.
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 and exclude non-core operating items which affect the GAAP reporting of results of 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 Six | |||||||||||||||
| Months Ended June 30, | Months Ended June 30, | |||||||||||||||
| (In thousands, except per share data) | 2007 | 2006 (c) | 2007 | 2006 (c) | ||||||||||||
Adjusted net income and performance ratios, net of tax (annualized): | ||||||||||||||||
| Net income | $ | 35,467 | $ | 43,143 | $ | 70,503 | $ | 86,995 | ||||||||
| Net debt prepayment expense | 4,427 | — | 4,427 | — | ||||||||||||
| Software development cost write-off | 2,212 | — | 2,212 | — | ||||||||||||
| Severance costs | 1,227 | — | 2,657 | — | ||||||||||||
| Closing costs-Peoples Mortgage Company | — | — | 1,509 | — | ||||||||||||
| Write-down of construction loans held for sale | 616 | — | 1,071 | — | ||||||||||||
| Adjusted net income | 43,949 | 43,143 | 82,379 | 86,995 | ||||||||||||
| Net income per diluted common share | 0.78 | 0.81 | 1.46 | 1.63 | ||||||||||||
| Return on average shareholders’ equity | 9.28 | % | 10.35 | % | 8.69 | % | 10.46 | % | ||||||||
| Return on average tangible equity | 16.13 | 17.48 | 15.10 | 17.68 | ||||||||||||
| Return on average assets | 1.04 | 0.96 | 0.98 | 0.98 | ||||||||||||
| Noninterest income as a percentage of total revenue | 32.51 | 31.04 | 31.88 | 30.41 | ||||||||||||
| Efficiency ratio (a) | 64.12 | 63.80 | 66.06 | 64.05 | ||||||||||||
Net income and performance ratios (annualized): | ||||||||||||||||
| Net income | $ | 35,467 | $ | 43,143 | $ | 70,503 | $ | 86,995 | ||||||||
| Net income per diluted common share | 0.63 | 0.81 | 1.25 | 1.63 | ||||||||||||
| Return on average shareholders’ equity | 7.49 | % | 10.35 | % | 7.44 | % | 10.46 | % | ||||||||
| Return on average tangible equity | 13.02 | 17.48 | 12.92 | 17.68 | ||||||||||||
| Return on average assets | 0.84 | 0.96 | 0.84 | 0.98 | ||||||||||||
| Noninterest income as a percentage of total revenue | 32.92 | 31.04 | 31.96 | 30.41 | ||||||||||||
| Efficiency ratio (a) | 71.06 | 63.80 | 70.92 | 64.05 | ||||||||||||
Asset quality: | ||||||||||||||||
| Allowance for credit losses | $ | 152,750 | $ | 156,471 | $ | 152,750 | $ | 156,471 | ||||||||
| Nonperforming assets | 78,654 | 61,777 | 78,654 | 61,777 | ||||||||||||
| Allowance for credit losses / total loans | 1.23 | % | 1.23 | % | 1.23 | % | 1.23 | % | ||||||||
| Net charge-offs / average loans (annualized) | 0.14 | 0.08 | 0.15 | 0.07 | ||||||||||||
| Nonperforming loans / total loans | 0.58 | 0.47 | 0.58 | 0.47 | ||||||||||||
| Nonperforming assets / total loans plus OREO | 0.63 | 0.49 | 0.63 | 0.49 | ||||||||||||
| Allowance for credit losses / nonperforming loans | 210.61 | 264.32 | 210.61 | 264.32 | ||||||||||||
Other ratios (annualized): | ||||||||||||||||
| Tangible capital ratio | 6.32 | % | 5.47 | % | 6.32 | % | 5.47 | % | ||||||||
| Shareholders’ equity / total assets | 10.84 | 9.11 | 10.84 | 9.11 | ||||||||||||
| Interest-rate spread | 3.37 | 3.06 | 3.34 | 3.13 | ||||||||||||
| Net interest margin | 3.47 | 3.13 | 3.44 | 3.18 | ||||||||||||
Share related: | ||||||||||||||||
| Book value per common share | $ | 33.63 | $ | 31.22 | $ | 33.63 | 31.22 | |||||||||
| Tangible book value per common share | 18.96 | 18.31 | 18.96 | 18.31 | ||||||||||||
| Common stock closing price | 42.67 | 47.44 | 42.67 | 47.44 | ||||||||||||
| Dividends declared per common share | 0.30 | 0.27 | 0.57 | 0.52 | ||||||||||||
| Common shares issued and outstanding | 54,643 | 52,610 | 54,643 | 52,610 | ||||||||||||
| Basic shares (average) | 55,677 | 52,637 | 55,894 | 52,864 | ||||||||||||
| Diluted shares (average) | 56,243 | 53,252 | 56,497 | 53,468 | ||||||||||||
Footnotes:
| (a) | Noninterest expense as a percentage of net interest income plus noninterest income. | |
| (b) | For purposes of the yield computation, unrealized gains (losses) are excluded from the average balance. | |
| (c) | Certain previously reported information has been revised for the effect of a $4.2 million reduction in insurance commissions receivable, including a $2.7 million after-tax reduction in shareholders’ equity. There was no effect on net income for the periods presented. |
Consolidated Statements of Condition (unaudited)
| June 30, | March 31, | June 30, | ||||||||||
| (In thousands) | 2007 | 2007 (c) | 2006 (c) | |||||||||
Assets: | ||||||||||||
| Cash and due from depository institutions | $ | 293,223 | $ | 269,061 | $ | 327,622 | ||||||
| Short-term investments | 8,222 | 6,161 | 59,666 | |||||||||
| Securities: | ||||||||||||
| Trading, at fair value | 5,935 | 14,076 | 2,698 | |||||||||
| Available for sale, at fair value | 411,309 | 395,668 | 2,317,645 | |||||||||
| Held-to-maturity | 2,046,891 | 2,066,763 | 1,088,206 | |||||||||
Total securities | 2,464,135 | 2,476,507 | 3,408,549 | |||||||||
| Loans held for sale | 372,891 | 456,033 | 275,240 | |||||||||
| Loans: | ||||||||||||
| Residential mortgages | 3,736,313 | 3,739,221 | 4,875,134 | |||||||||
| Commercial | 3,554,846 | 3,444,612 | 3,160,200 | |||||||||
| Commercial real estate | 1,938,656 | 1,936,650 | 1,819,635 | |||||||||
| Consumer | 3,210,457 | 3,182,765 | 2,855,558 | |||||||||
Total loans | 12,440,272 | 12,303,248 | 12,710,527 | |||||||||
| Allowance for loan losses | (144,974 | ) | (145,367 | ) | (147,401 | ) | ||||||
Loans, net | 12,295,298 | 12,157,881 | 12,563,126 | |||||||||
| Accrued interest receivable | 85,078 | 86,878 | 85,719 | |||||||||
| Premises and equipment, net | 194,412 | 196,232 | 188,125 | |||||||||
| Goodwill and other intangible assets | 818,422 | 823,200 | 695,014 | |||||||||
| Cash surrender value of life insurance | 264,100 | 261,852 | 242,740 | |||||||||
| Prepaid expenses and other assets | 151,475 | 141,196 | 172,142 | |||||||||
Total Assets | $ | 16,947,256 | $ | 16,875,001 | $ | 18,017,943 | ||||||
Liabilities and Shareholders’ Equity: | ||||||||||||
| Deposits: | ||||||||||||
| Demand deposits | $ | 1,544,695 | $ | 1,505,074 | $ | 1,549,051 | ||||||
| NOW accounts | 1,797,701 | 1,761,178 | 1,687,297 | |||||||||
| Money market deposit accounts | 1,916,097 | 1,887,602 | 1,888,179 | |||||||||
| Savings accounts | 2,194,215 | 2,109,866 | 1,954,298 | |||||||||
| Certificates of deposit | 4,965,140 | 4,834,440 | 4,298,367 | |||||||||
| Brokered deposits | 401,213 | 460,230 | 839,273 | |||||||||
Total deposits | 12,819,061 | 12,558,390 | 12,216,465 | |||||||||
| Federal Home Loan Bank advances | 531,117 | 655,709 | 1,804,140 | |||||||||
| Securities sold under agreements to repurchase and other short-term debt | 899,852 | 943,802 | 1,528,224 | |||||||||
| Long-term debt | 656,455 | 623,091 | 622,267 | |||||||||
| Reserve for unfunded credit commitments | 7,776 | 7,293 | 9,070 | |||||||||
| Accrued expenses and other liabilities | 185,767 | 174,854 | 185,975 | |||||||||
Total liabilities | 15,100,028 | 14,963,139 | 16,366,141 | |||||||||
| Preferred stock of subsidiary corporation | 9,577 | 9,577 | 9,577 | |||||||||
Shareholders’ equity | 1,837,651 | 1,902,285 | 1,642,225 | |||||||||
Total Liabilities and Shareholders’ Equity | $ | 16,947,256 | $ | 16,875,001 | $ | 18,017,943 | ||||||
See Selected Financial Highlights for footnotes.
Consolidated Statements of Income (unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (In thousands, except per share data) | 2007 | 2006 | 2007 | 2006 | ||||||||||||
Interest income: | ||||||||||||||||
| Loans | $ | 210,337 | $ | 207,097 | $ | 419,501 | $ | 402,671 | ||||||||
| Securities and short-term investments | 32,563 | 39,134 | 65,843 | 80,729 | ||||||||||||
| Loans held for sale | 7,419 | 3,317 | 13,668 | 6,656 | ||||||||||||
Total interest income | 250,319 | 249,548 | 499,012 | 490,056 | ||||||||||||
Interest expense: | ||||||||||||||||
| Deposits | 89,683 | 72,593 | 177,313 | 134,947 | ||||||||||||
| Borrowings | 30,283 | 50,150 | 63,265 | 98,145 | ||||||||||||
Total interest expense | 119,966 | 122,743 | 240,578 | 233,092 | ||||||||||||
Net interest income | 130,353 | 126,805 | 258,434 | 256,964 | ||||||||||||
| Provision for credit losses | 4,250 | 3,000 | 7,250 | 5,000 | ||||||||||||
Net interest income after provision for credit losses | 126,103 | 123,805 | 251,184 | 251,964 | ||||||||||||
Noninterest income: | ||||||||||||||||
| Deposit service fees | 28,758 | 24,150 | 54,112 | 46,019 | ||||||||||||
| Insurance revenue | 9,141 | 9,988 | 19,262 | 20,712 | ||||||||||||
| Loan related fees | 7,901 | 9,162 | 15,841 | 16,986 | ||||||||||||
| Wealth and investment services | 7,637 | 6,930 | 14,515 | 13,284 | ||||||||||||
| Mortgage banking activities | 3,962 | 2,538 | 6,191 | 5,811 | ||||||||||||
| Increase in cash surrender value of life insurance | 2,586 | 2,314 | 5,120 | 4,685 | ||||||||||||
| Gain on sale of securities, net | 503 | 702 | 1,044 | 1,714 | ||||||||||||
| Other | 1,367 | 1,284 | 3,191 | 3,059 | ||||||||||||
| 61,855 | 57,068 | 119,276 | 112,270 | |||||||||||||
| Gain on Webster Capital Trust I and II securities | 2,130 | — | 2,130 | — | ||||||||||||
Total noninterest income | 63,985 | 57,068 | 121,406 | 112,270 | ||||||||||||
Noninterest expenses: | ||||||||||||||||
| Compensation and benefits | 66,888 | 64,585 | 135,279 | 129,588 | ||||||||||||
| Occupancy | 13,200 | 11,824 | 26,583 | 24,006 | ||||||||||||
| Furniture and equipment | 15,389 | 13,962 | 30,358 | 27,557 | ||||||||||||
| Intangible amortization | 3,344 | 3,544 | 6,817 | 7,921 | ||||||||||||
| Marketing | 4,209 | 4,292 | 8,420 | 7,916 | ||||||||||||
| Professional services | 3,432 | 3,464 | 8,234 | 7,008 | ||||||||||||
| Other | 17,398 | 15,582 | 34,927 | 32,428 | ||||||||||||
| 123,860 | 117,253 | 250,618 | 236,424 | |||||||||||||
| Debt redemption premium | 8,940 | — | 8,940 | — | ||||||||||||
| Severance and other costs | 5,291 | — | 9,813 | — | ||||||||||||
| Acquistion costs | — | 65 | — | 65 | ||||||||||||
Total noninterest expenses | 138,091 | 117,318 | 269,371 | 236,489 | ||||||||||||
| Income before income taxes | 51,997 | 63,555 | 103,219 | 127,745 | ||||||||||||
| Income taxes | 16,530 | 20,412 | 32,716 | 40,750 | ||||||||||||
Net income | $ | 35,467 | $ | 43,143 | $ | 70,503 | $ | 86,995 | ||||||||
Diluted shares (average) | 56,243 | 53,252 | 56,497 | 53,468 | ||||||||||||
Net income per common share: | ||||||||||||||||
| Basic | $ | 0.64 | $ | 0.82 | $ | 1.26 | $ | 1.65 | ||||||||
| Diluted | 0.63 | 0.81 | 1.25 | 1.63 | ||||||||||||
See Selected Financial Highlights for footnotes.
Consolidated Statements of Income (unaudited)
| Three Months Ended | ||||||||||||||||||||
| June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | ||||||||||||||||
| (In thousands, except per share data) | 2007 | 2007 | 2006 | 2006 | 2006 | |||||||||||||||
Interest income: | ||||||||||||||||||||
| Loans | $ | 210,337 | $ | 209,164 | $ | 225,634 | $ | 215,094 | $ | 207,097 | ||||||||||
| Securities and short-term investments | 32,563 | 33,280 | 32,514 | 40,883 | 39,134 | |||||||||||||||
| Loans held for sale | 7,419 | 6,249 | 6,191 | 4,366 | 3,317 | |||||||||||||||
Total interest income | 250,319 | 248,693 | 264,339 | 260,343 | 249,548 | |||||||||||||||
Interest expense: | ||||||||||||||||||||
| Deposits | 89,683 | 87,630 | 90,195 | 85,058 | 72,593 | |||||||||||||||
| Borrowings | 30,283 | 32,982 | 44,994 | 52,849 | 50,150 | |||||||||||||||
Total interest expense | 119,966 | 120,612 | 135,189 | 137,907 | 122,743 | |||||||||||||||
Net interest income | 130,353 | 128,081 | 129,150 | 122,436 | 126,805 | |||||||||||||||
| Provision for credit losses | 4,250 | 3,000 | 3,000 | 3,000 | 3,000 | |||||||||||||||
Net interest income after provision for credit losses | 126,103 | 125,081 | 126,150 | 119,436 | 123,805 | |||||||||||||||
Noninterest income: | ||||||||||||||||||||
| Deposit service fees | 28,758 | 25,354 | 25,494 | 25,252 | 24,150 | |||||||||||||||
| Insurance revenue | 9,141 | 10,121 | 8,301 | 9,793 | 9,988 | |||||||||||||||
| Loan related fees | 7,901 | 7,940 | 9,643 | 7,760 | 9,162 | |||||||||||||||
| Wealth and investment services | 7,637 | 6,878 | 7,161 | 6,738 | 6,930 | |||||||||||||||
| Mortgage banking activities | 3,962 | 2,229 | 2,917 | (185 | ) | 2,538 | ||||||||||||||
| Increase in cash surrender value of life insurance | 2,586 | 2,534 | 2,550 | 2,368 | 2,314 | |||||||||||||||
| Gain (loss) on sale of securities, net | 503 | 541 | (2,732 | ) | 2,307 | 702 | ||||||||||||||
| Other | 1,367 | 1,824 | 3,733 | 1,693 | 1,284 | |||||||||||||||
| 61,855 | 57,421 | 57,067 | 55,726 | 57,068 | ||||||||||||||||
| Gain on Webster Capital Trust I and II securities | 2,130 | — | — | — | — | |||||||||||||||
| Loss on write-down of AFS securities to fair value | — | — | — | (48,879 | ) | — | ||||||||||||||
| Loss on sale of mortgage loans | — | — | (5,713 | ) | — | — | ||||||||||||||
Total noninterest income | 63,985 | 57,421 | 51,354 | 6,847 | 57,068 | |||||||||||||||
Noninterest expenses: | ||||||||||||||||||||
| Compensation and benefits | 66,888 | 68,391 | 64,142 | 62,050 | 64,585 | |||||||||||||||
| Occupancy | 13,200 | 13,383 | 13,403 | 11,977 | 11,824 | |||||||||||||||
| Furniture and equipment | 15,389 | 14,969 | 14,637 | 13,840 | 13,962 | |||||||||||||||
| Intangible amortization | 3,344 | 3,473 | 3,473 | 3,079 | 3,544 | |||||||||||||||
| Marketing | 4,209 | 4,211 | 3,350 | 4,211 | 4,292 | |||||||||||||||
| Professional services | 3,432 | 4,802 | 5,457 | 4,302 | 3,464 | |||||||||||||||
| Other | 17,398 | 17,529 | 16,129 | 15,523 | 15,582 | |||||||||||||||
| 123,860 | 126,758 | 120,591 | 114,982 | 117,253 | ||||||||||||||||
| Debt redemption premium | 8,940 | — | — | — | — | |||||||||||||||
| Severance and other costs | 5,291 | 4,522 | — | — | — | |||||||||||||||
| Acquisition costs | — | — | 2,018 | 868 | 65 | |||||||||||||||
Total noninterest expenses | 138,091 | 131,280 | 122,609 | 115,850 | 117,318 | |||||||||||||||
| Income before income taxes | 51,997 | 51,222 | 54,895 | 10,433 | 63,555 | |||||||||||||||
| Income taxes | 16,530 | 16,186 | 17,097 | 1,436 | 20,412 | |||||||||||||||
Net income | $ | 35,467 | $ | 35,036 | $ | 37,798 | $ | 8,997 | $ | 43,143 | ||||||||||
Diluted shares (average) | 56,243 | 56,762 | 56,452 | 52,871 | 53,252 | |||||||||||||||
Net income per common share: | ||||||||||||||||||||
| Basic | $ | 0.64 | $ | 0.62 | $ | 0.68 | $ | 0.17 | $ | 0.82 | ||||||||||
| Diluted | 0.63 | 0.62 | 0.67 | 0.17 | 0.81 | |||||||||||||||
See Selected Financial Highlights for footnotes.
Interest-Rate Spread (unaudited)
| Three Months Ended | ||||||||||||||||||||
| June | March | December | September | June | ||||||||||||||||
| 2007 | 2007 | 2006 | 2006 | 2006 | ||||||||||||||||
Interest-rate spread | ||||||||||||||||||||
| Yield on interest-earning assets | 6.62 | % | 6.61 | % | 6.52 | % | 6.31 | % | 6.11 | % | ||||||||||
| Cost of interest-bearing liabilities | 3.25 | 3.29 | 3.38 | 3.38 | 3.05 | |||||||||||||||
| Interest-rate spread | 3.37 | % | 3.32 | % | 3.14 | % | 2.93 | % | 3.06 | % | ||||||||||
| Net interest margin | 3.47 | % | 3.41 | % | 3.23 | % | 3.01 | % | 3.13 | % | ||||||||||
Consolidated Average Statements of Condition (unaudited)
| Three Months Ended June 30, | 2007 | 2006 | |||||||||||||||||||||||
| Fully tax- | Fully tax- | ||||||||||||||||||||||||
| Average | equivalent | Average | equivalent | ||||||||||||||||||||||
| (Dollars in thousands) | balance | Interest | yield/rate | balance (c) | Interest | yield/rate | |||||||||||||||||||
Assets: | |||||||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||||||
| Loans | $ | 12,306,789 | $ | 210,337 | 6.81 | % | $ | 12,625,061 | $ | 207,097 | 6.54 | % | |||||||||||||
| Securities (b) | 2,430,989 | 35,035 | 5.78 | 3,496,863 | 40,991 | 4.61 | |||||||||||||||||||
| Loans held for sale | 481,583 | 7,419 | 6.16 | 230,268 | 3,317 | 5.76 | |||||||||||||||||||
| Short-term investments | 10,708 | 145 | 5.36 | 38,412 | 407 | 4.19 | |||||||||||||||||||
Total interest-earning assets | 15,230,069 | 252,936 | 6.62 | 16,390,604 | 251,812 | 6.11 | |||||||||||||||||||
| Noninterest-earning assets | 1,597,103 | 1,503,138 | |||||||||||||||||||||||
Total assets | $ | 16,827,172 | $ | 17,893,742 | |||||||||||||||||||||
Liabilities and Shareholders’ Equity: | |||||||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||||
| Demand deposits | $ | 1,515,877 | $ | — | — | % | $ | 1,457,462 | $ | — | — | % | |||||||||||||
| Savings, NOW and money market deposit accounts | 5,720,081 | 30,388 | 2.13 | 5,371,432 | 22,489 | 1.68 | |||||||||||||||||||
| Time deposits | 5,243,115 | 59,295 | 4.53 | 5,147,276 | 50,104 | 3.90 | |||||||||||||||||||
Total deposits | 12,479,073 | 89,683 | 2.88 | 11,976,170 | 72,593 | 2.43 | |||||||||||||||||||
| Federal Home Loan Bank advances | 727,371 | 8,675 | 4.72 | 2,241,811 | 25,329 | 4.47 | |||||||||||||||||||
| Repurchase agreements and other short-term debt | 1,078,192 | 12,596 | 4.62 | 1,230,394 | 12,606 | 4.05 | |||||||||||||||||||
| Long-term debt | 492,020 | 9,012 | 7.33 | 628,735 | 12,215 | 7.77 | |||||||||||||||||||
Total borrowings | 2,297,583 | 30,283 | 5.23 | 4,100,940 | 50,150 | 4.85 | |||||||||||||||||||
Total interest-bearing liabilities | 14,776,656 | 119,966 | 3.25 | 16,077,110 | 122,743 | 3.05 | |||||||||||||||||||
| Noninterest-bearing liabilities | 147,312 | 139,999 | |||||||||||||||||||||||
Total liabilities | 14,923,968 | 16,217,109 | |||||||||||||||||||||||
| Preferred stock of subsidiary corporation | 9,577 | 9,577 | |||||||||||||||||||||||
| Shareholders’ equity | 1,893,627 | 1,667,056 | |||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 16,827,172 | $ | 17,893,742 | |||||||||||||||||||||
| 132,970 | 129,069 | ||||||||||||||||||||||||
Less: tax-equivalent adjustment | (2,617 | ) | (2,264 | ) | |||||||||||||||||||||
Net interest income | $ | 130,353 | $ | 126,805 | |||||||||||||||||||||
Interest-rate spread | 3.37 | % | 3.06 | % | |||||||||||||||||||||
Net interest margin | 3.47 | % | 3.13 | % | |||||||||||||||||||||
See Selected Financial Highlights for footnotes.
Consolidated Average Statements of Condition (unaudited)
| Six Months Ended June 30, | 2007 | 2006 | ||||||||||||||||||||||
| Fully tax- | Fully tax- | |||||||||||||||||||||||
| Average | equivalent | Average | equivalent | |||||||||||||||||||||
| (Dollars in thousands) | balance | Interest | yield/rate | balance (c) | Interest | yield/rate | ||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
| Loans | $ | 12,375,526 | $ | 419,501 | 6.78 | % | $ | 12,509,184 | $ | 402,671 | 6.44 | % | ||||||||||||
| Securities (b) | 2,367,443 | 69,238 | 5.87 | 3,563,554 | 84,810 | 4.70 | ||||||||||||||||||
| Loans held for sale | 438,084 | 13,668 | 6.24 | 229,486 | 6,656 | 5.80 | ||||||||||||||||||
| Short-term investments | 63,851 | 1,729 | 5.39 | 26,861 | 519 | 3.84 | ||||||||||||||||||
Total interest-earning assets | 15,244,904 | 504,136 | 6.61 | 16,329,085 | 494,656 | 6.04 | ||||||||||||||||||
| Noninterest-earning assets | 1,599,293 | 1,499,802 | ||||||||||||||||||||||
Total assets | $ | 16,844,197 | $ | 17,828,887 | ||||||||||||||||||||
Liabilities and Shareholders’ Equity: | ||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
| Demand deposits | $ | 1,510,766 | $ | — | — | % | $ | 1,454,585 | $ | — | — | % | ||||||||||||
| Savings, NOW and money market deposit accounts | 5,644,312 | 59,150 | 2.11 | 5,340,529 | 42,297 | 1.60 | ||||||||||||||||||
| Time deposits | 5,273,269 | 118,163 | 4.52 | 5,027,758 | 92,650 | 3.72 | ||||||||||||||||||
Total deposits | 12,428,347 | 177,313 | 2.88 | 11,822,872 | 134,947 | 2.30 | ||||||||||||||||||
| Federal Home Loan Bank advances | 822,221 | 19,584 | 4.74 | 2,319,410 | 49,825 | 4.27 | ||||||||||||||||||
| Repurchase agreements and other short-term debt | 981,222 | 22,475 | 4.56 | 1,259,585 | 24,436 | 3.86 | ||||||||||||||||||
| Long-term debt | 555,881 | 21,206 | 7.63 | 634,736 | 23,884 | 7.53 | ||||||||||||||||||
Total borrowings | 2,359,324 | 63,265 | 5.34 | 4,213,731 | 98,145 | 4.64 | ||||||||||||||||||
Total interest-bearing liabilities | 14,787,671 | 240,578 | 3.27 | 16,036,603 | 233,092 | 2.91 | ||||||||||||||||||
| Noninterest-bearing liabilities | 151,521 | 118,879 | ||||||||||||||||||||||
Total liabilities | 14,939,192 | 16,155,482 | ||||||||||||||||||||||
| Preferred stock of subsidiary corporation | 9,577 | 9,577 | ||||||||||||||||||||||
| Shareholders’ equity | 1,895,428 | 1,663,828 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 16,844,197 | $ | 17,828,887 | ||||||||||||||||||||
| 263,558 | 261,564 | |||||||||||||||||||||||
Less: tax-equivalent adjustment | (5,124 | ) | (4,600 | ) | ||||||||||||||||||||
Net interest income | $ | 258,434 | $ | 256,964 | ||||||||||||||||||||
Interest-rate spread | 3.34 | % | 3.13 | % | ||||||||||||||||||||
Net interest margin | 3.44 | % | 3.18 | % | ||||||||||||||||||||
See Selected Financial Highlights for footnotes.
| At or for the Three Months Ended | ||||||||||||||||||||
| (Unaudited) | June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| (Dollars in thousands) | 2007 | 2007 | 2006 | 2006 | 2006 | |||||||||||||||
Asset Quality | ||||||||||||||||||||
Nonperforming loans: | ||||||||||||||||||||
| Commercial: | ||||||||||||||||||||
| Commercial | $ | 20,142 | $ | 13,679 | $ | 21,105 | $ | 29,321 | $ | 22,930 | ||||||||||
| Equipment financing | 2,584 | 2,405 | 2,616 | 2,450 | 2,693 | |||||||||||||||
| Total commercial | 22,726 | 16,084 | 23,721 | 31,771 | 25,623 | |||||||||||||||
| Commercial real estate | 12,242 | 18,524 | 17,618 | 16,811 | 23,291 | |||||||||||||||
Residential(1) | 26,683 | 13,473 | 11,307 | 7,032 | 7,218 | |||||||||||||||
| Consumer | 10,875 | 10,808 | 6,266 | 3,496 | 3,065 | |||||||||||||||
| Total nonperforming loans | 72,526 | 58,889 | 58,912 | 59,110 | 59,197 | |||||||||||||||
Other real estate owned and repossessed assets: | ||||||||||||||||||||
| Commercial | 3,950 | 4,833 | 1,922 | 1,573 | 2,254 | |||||||||||||||
| Residential | 711 | 350 | 383 | 607 | 316 | |||||||||||||||
| Consumer | 1,467 | 758 | 608 | 126 | 10 | |||||||||||||||
| Total other real estate owned and repossessed assets | 6,128 | 5,941 | 2,913 | 2,306 | 2,580 | |||||||||||||||
Total nonperforming assets | $ | 78,654 | $ | 64,830 | $ | 61,825 | $ | 61,416 | $ | 61,777 | ||||||||||
| Accruing loans 90 or more days past due | $ | 2,088 | $ | 4,636 | $ | 1,490 | $ | 4,609 | $ | 2,542 | ||||||||||
| (1) | Balance at June 30, 2007 includes, as previously announced, $11 million of construction loans placed on non accrual status. |
Allowance for Credit Losses
Beginning balance | $ | 152,660 | $ | 154,994 | $ | 156,331 | $ | 156,471 | $ | 155,957 | ||||||||||
| Provision | 4,250 | 3,000 | 3,000 | 3,000 | 3,000 | |||||||||||||||
| Allowance for acquired loans | — | — | 4,724 | — | — | |||||||||||||||
| Charge-offs: | ||||||||||||||||||||
| Commercial | 2,034 | 2,293 | 9,352 | 3,369 | 2,775 | |||||||||||||||
| Residential | 286 | 2,581 | 199 | 46 | 65 | |||||||||||||||
| Consumer | 3,176 | 1,993 | 454 | 265 | 239 | |||||||||||||||
| Total charge-offs | 5,496 | 6,867 | 10,005 | 3,680 | 3,079 | |||||||||||||||
| Recoveries | (1,336 | ) | (1,533 | ) | (944 | ) | (540 | ) | (593 | ) | ||||||||||
| Net loan charge-offs | 4,160 | 5,334 | 9,061 | 3,140 | 2,486 | |||||||||||||||
Ending balance | $ | 152,750 | $ | 152,660 | $ | 154,994 | $ | 156,331 | $ | 156,471 | ||||||||||
| Components: | ||||||||||||||||||||
| Allowance for loan losses | $ | 144,974 | $ | 145,367 | $ | 147,719 | $ | 147,446 | $ | 147,401 | ||||||||||
| Reserve for unfunded credit commitments | 7,776 | 7,293 | 7,275 | 8,885 | 9,070 | |||||||||||||||
| Allowance for credit losses | $ | 152,750 | $ | 152,660 | $ | 154,994 | $ | 156,331 | $ | 156,471 | ||||||||||
Asset Quality Ratios: | ||||||||||||||||||||
| Allowance for loan losses / total loans | 1.17 | % | 1.18 | % | 1.14 | % | 1.13 | % | 1.16 | % | ||||||||||
| Allowance for credit losses / total loans | 1.23 | 1.24 | 1.20 | 1.20 | 1.23 | |||||||||||||||
| Net charge-offs / average loans (annualized) | 0.14 | 0.17 | 0.27 | 0.10 | 0.08 | |||||||||||||||
| Nonperforming loans / total loans | 0.58 | 0.48 | 0.46 | 0.45 | 0.47 | |||||||||||||||
| Nonperforming assets / total loans plus OREO | 0.63 | 0.53 | 0.48 | 0.47 | 0.49 | |||||||||||||||
| Allowance for credit losses / nonperforming loans | 210.61 | 259.23 | 263.09 | 264.47 | 264.32 | |||||||||||||||
See Selected Financial Highlights for footnotes.