UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Fiscal Year Ended December 31, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _________ to
________________.
Commission File Number: 0-15213
WEBSTER FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 06-1187536
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Webster Plaza, Waterbury, Connecticut 06702
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 753-2921
Securities registered pursuant to Section 12(b) of the Act:
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 per value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Based upon the closing price of the registrant's common stock as of
March 21, 1997, the aggregate market value of the voting stock held by
non-affiliates of the registrant is $426,293,171. Solely for purposes of this
calculation, the shares held by directors and executive officers of the
registrant have been excluded because such persons may be deemed to be
affiliates. This reference to affiliate status is not necessarily a conclusive
determination for other purposes.
The number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date is:
Class: Common Stock, par value $.01 per share
Issued and Outstanding at March 27, 1997: 11,949,991
DOCUMENTS INCORPORATED BY REFERENCE
Part I and II: Portions of the Annual Report to Shareholders for fiscal year
ended December 31, 1996
Part III: Portions of the Definitive Proxy Statement for the Annual
Meeting of Shareholders to be held on April 17, 1997.
WEBSTER FINANCIAL CORPORATION
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
PART I
Item 1. Business.................................................. 3
General................................................ 3
Recent Acquisitions.................................... 4
FDIC Assisted Acquisitions............................. 5
Lending Activities..................................... 5
Segregated Assets...................................... 13
Investment Activities.................................. 15
Sources of Funds....................................... 18
Bank Subsidiaries...................................... 21
Employees.............................................. 21
Market Area and Competition............................ 21
Regulation............................................. 22
Taxation............................................... 23
Item 2. Properties................................................ 24
Item 3. Legal Proceedings......................................... 26
Item 4. Submission of Matters to a Vote of Security Holders....... 26
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters............................... 26
Item 6. Selected Financial Data................................... 27
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition........................ 27
Item 8. Financial Statements and Supplementary Data............... 27
Item 9. Disagreements on Accounting
and Financial Disclosures................................. 27
PART III
Item 10. Directors and Executive Officers of the Registrant........ 28
Item 11. Executive Compensation.................................... 28
Item 12. Security Ownership of Certain Beneficial Owners
and Management............................................ 28
Item 13. Certain Relationships and Related Transactions............ 28
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K............................................... 28
2
PART I
Item 1. Business
General
Webster Financial Corporation, ("Webster" or the "Corporation"),
through its subsidiary, Webster Bank, (the "Bank") delivers financial services
to individuals, families and businesses located throughout Connecticut. Webster
Bank emphasizes three business lines consumer, business and mortgage banking,
each supported by centralized administration and operations. The Corporation has
grown significantly in recent years, primarily through a series of acquisitions
which have expanded and strengthened its franchise.
Assets at December 31, 1996 were $3.9 billion compared to $3.2
billion a year earlier. Net loans receivable amounted to $2.5 billion at
December 31, 1996 compared to $1.9 billion a year ago. Deposits were $3.1
billion at December 31, 1996 compared to $2.4 billion at December 31, 1995.
Webster expanded its banking operations by acquiring DS Bancor,
Inc. ("Derby") in January 1997, and 20 former Shawmut Bank Connecticut National
Association ("Shawmut") branch banking offices in the Hartford banking market in
February 1996. See "Recent Acquisitions". In preceding years, Webster expanded
its operations through the acquisitions of Shelton Bancorp, Inc. ("Shelton") in
1995, Bristol Savings Bank ("Bristol") in 1994 and Shoreline Bank and Trust
("Shoreline") in 1994 (see "Recent Acquisitions") and the FDIC-assisted
acquisitions of First Constitution Bank ("First Constitution") in 1992 and
Suffield Bank ("Suffield") in 1991. See "FDIC Assisted Acquisitions." These
acquisitions have significantly expanded the market areas served by the
Corporation.
On an unconsolidated basis at December 31, 1996, the assets of
Webster consisted primarily of its investment in the Bank and $25.9 million of
cash and other investments. The principal sources of Webster's revenues on an
unconsolidated basis are dividends from the Bank and interest and dividend
income from other investments. See Note 20 to Webster's Consolidated Financial
Statements for parent-only financial statements.
The Bank's deposits are federally insured by the Federal Deposit
Insurance Corporation ("FDIC"). The Bank is a Bank Insurance Fund ("BIF") member
institution and at December 31, 1996 approximately 72% of the Bank's deposits
were subject to BIF assessment rates and 38% to Savings Association Insurance
Fund ("SAIF") assessment rates. After giving effect to the Derby acquisition,
approximately 79% of the Bank's deposits are subject to BIF assessment rates and
21% to SAIF assessment rates. See "Regulation."
Webster, as a holding company, and the Bank are subject to
comprehensive regulation, examination and supervision by the OTS, as the primary
federal regulator. The bank is also subject to regulation, examination and
supervision by the FDIC as to certain matters. Webster's executive offices are
located at Webster Plaza, Waterbury, Connecticut, 06702. Its telephone number is
(203) 753-2921
3
Recent Acquisitions
The Derby Acquisition. On January 31, 1997, Webster acquired DS
Bancor and its subsidiary, Derby Savings Bank, a $1.2 billion savings bank in
Derby, Connecticut. In connection with the merger with Derby, Webster issued
3,501,370 shares of its common stock for all the outstanding shares of Derby
common stock. Under the terms of the merger agreement each outstanding share of
Derby common stock was converted into 1.14158 shares of Webster common stock.
This acquisition was accounted for as a pooling of interests and as such future
Consolidated Financial Statements will include Derby's financial data as if
Derby had been combined at the beginning of the earliest period presented. The
1996 Financial Statements do not include Derby financial data.
The Shawmut Transaction. On February 16, 1996, Webster Bank
acquired 20 branches in the Greater Hartford market from Shawmut Bank
Connecticut National Association (the "Shawmut Transaction"), as part of a
divesture in connection with the merger of Shawmut and Fleet Bank. In the branch
purchase, Webster Bank acquired approximately $845 million in deposits, and $586
million in loans. As a result of this transaction, Webster recorded $44.2
million as a core deposit intangible asset. In connection with the Shawmut
Transaction, Webster raised net proceeds of $32.1 million through the sale of
1,249,600 shares of its common stock in an underwritten public offering in
December 1995. The Shawmut Transaction was accounted for as a purchase,
therefore transaction results are reported only for the periods subsequent to
the consummation of the Shawmut Transaction.
The Shelton Bancorp, Inc. Acquisition. On November 1, 1995, Webster
acquired Shelton and its subsidiary, Shelton Savings Bank, a $295 million asset
savings bank in Shelton, Connecticut, with $273 million in BIF insured deposits.
In connection with the merger with Shelton, Webster issued 1,292,549 shares of
its common stock for all the outstanding shares of Shelton common stock. Under
the terms of the agreement, Shelton shareholders received .92 of a share of
Webster common stock in a tax free exchange for each of their Shelton common
shares. This acquisition was accounted for as a pooling of interests. The
Corporation's Consolidated Financial Statements include Shelton's financial data
as if Shelton had been combined at the beginning of the earliest period
presented.
Shoreline Bank and Trust Company. On December 16, 1994, Webster
acquired Shoreline, a $51.0 million asset commercial bank based in Madison,
Connecticut, with $47.0 million in BIF insured deposits. To effect the
acquisition, Shoreline was merged into Webster Bank and its Madison banking
office became a full service office of Webster Bank. In connection with the
merger, the Corporation issued 266,500 shares of its common stock for all of the
outstanding shares of Shoreline common stock. This acquisition was accounted for
as a pooling of interests. The Corporation's Consolidated Financial Statements
include Shoreline's financial data as if Shoreline had been combined at the
beginning of the earliest period presented.
Bristol Savings Bank. On March 3, 1994, Webster acquired Bristol, a
state chartered savings bank with $486 million in assets which became a
wholly-owned subsidiary of Webster. In connection with the conversion of Bristol
from a mutual to a stock charter concurrently with the acquisition, Webster
completed the sale of 1,150,000 shares of its common stock in related
subscription and public offerings. Webster invested in Bristol a total of $31.0
million, including the net proceeds of approximately $21.9 million from
subscription and public offerings plus existing funds from the holding company.
As a result of this investment, Bristol met all ratios required by the FDIC for
a "well-capitalized" savings bank. The Bristol acquisition was accounted for as
a purchase. Results of operations relating to Bristol are included in the
4
Corporation's Consolidated Financial Statements only for the period subsequent
to the effective date of the acquisition. Webster maintained Bristol as a
separate savings bank subsidiary until November 1, 1995, when First Federal and
Bristol were merged and renamed as Webster Bank.
FDIC Assisted Acquisitions
Webster Bank significantly expanded its retail banking operations
through assisted acquisitions of First Constitution Bank ("First Constitution")
in October 1992 and Suffield Bank ("Suffield") in September 1991 from the
Federal Deposit Insurance Corporation ("FDIC"). These acquisitions, which were
accounted for as purchases, involved financial assistance from the FDIC and
extended Webster Bank's retail banking operations into new market areas by
adding 21 branch offices, $1.5 billion in retail deposits and approximately
150,000 customer accounts.
Lending Activities
General. Webster originates residential, consumer, and business
loans. Total loans receivable were $2.5 billion at December 31, 1996 and $1.9
billion at December 31, 1995. All references to loan and allowance for loan loss
balances and ratios in the Lending Activities section exclude Segregated Assets,
which are discussed immediately after this section. At December 31, 1996, first
mortgage loans secured by one-to-four family properties comprised 72.1% of the
Corporation's loan portfolio, before net items. The allowance for losses on
residential loans was $9.1 million at December 31, 1996.
Nonaccrual loans, which include loans delinquent 90 days or more,
were $21.8 million at December 31, 1996, compared to $37.8 million at December
31, 1995, out of a total loan portfolio, before net items, of approximately
$2.54 billion at December 31, 1996 and $1.94 billion at December 31, 1995. The
ratio of nonaccrual loans to total loans before net items was 0.8% and 1.9% at
December 31, 1996 and 1995, respectively. Nonaccrual assets, which incudes
nonaccrual loans and real estate owned were $31.3 million and $55.0 million at
December 31, 1996 and 1995 respectively.
One-to-Four Family First Mortgage Loans. Webster originates both
fixed-rate and adjustable-rate mortgage loans. At December 31, 1996, 58% of
Webster's total mortgage loans before net items were adjustable-rate loans.
Webster offers adjustable-rate mortgage loans at initial interest rates
discounted from the fully indexed rate. Loans originated during 1996, when fully
indexed, will be 2.75% above the constant maturity one-year U.S. Treasury yield
index. There are no prepayment penalties on any of Webster's adjustable-rate
loans.
At December 31, 1996, $765.4 million or 42% of Webster's total
residential mortgage loans before net items had fixed rates. Webster sells
mortgage loans in the secondary market when such sales are consistent with its
asset/liability management objectives. At December 31, 1996, Webster had $3.7
million of adjustable and fixed-rate mortgage loans held for sale.
Commercial and Commercial Real Estate Mortgage Loans. Webster had
$382.7 million, or 15.0% of its total loans receivable before net items, in
commercial and commercial real estate loans outstanding as of December 31, 1996,
excluding Segregated Assets. At December 31, 1996, $19.6 million of Webster's
$33.5 million allowance for loan losses was allocated to commercial and
commercial real estate loans. See "Management's Discussion and Analysis and
Results of Operations" contained in the annual report to shareholders and
incorporated herein by reference. The annual report is filed as an exhibit
hereto. Also see "Business -- Lending Activities -- Nonaccrual Loans and
Delinquencies" for more information about Webster's asset quality, allowance for
loan losses and provisions for loan losses.
5
Consumer Loans. At December 31, 1996, consumer loans were $249.2
million or 9.8% of Webster's total loans receivable before net items. Consumer
loans consist primarily of home equity credit lines, home improvement loans,
passbook loans and other consumer loans. The allowance for losses on consumer
loans was $4.7 million at December 31, 1996.
6
The following table sets forth the composition of Webster's loan portfolio,
excluding Segregated Assets, in dollar amounts and in percentages at the dates
shown, and a reconciliation of loans receivable, net.
At December 31,
---------------------------------------------------------------
1996 1995 1994
-------------------- ------------------ -----------------
Amount % Amount % Amount %
(Dollars in thousands)
Residential mortgage loans:
1-4 family units............................... $ 1,832,262 72.6% $ 1,498,024 79.2% $ 1,465,419 78.4%
Multi-family units............................. 4,729 0.2 13,198 0.7 5,931 0.3
Construction................................... 84,442 3.3 54,410 2.9 53,779 2.9
Land........................................... 12,249 0.5 2,652 0.1 26,712 1.4
------------ ----- ----------- ----- ----------- -----
Total residential mortgage loans............. 1,933,682 76.6 1,568,284 82.9 1,551,841 83.0
Residential loans held for sale................. 3,705 0.1 2,872 0.2 24,735 1.3
Commercial mortgage loans:
Income producing properties.................... -- -- -- -- -- --
Land........................................... 57,444 2.3 19,867 1.1 5,607 0.3
Construction................................... 6,297 0.2 8,887 0.5 4,237 0.2
Other commercial real estate................... 141,190 5.6 115,976 6.1 130,248 7.0
------------ ----- ----------- ----- ----------- -----
Total commercial mortgage loans.............. 204,930 8.1 144,730 7.7 140,092 7.5
------------ ----- ----------- ----- ----------- -----
Total mortgage loans........................... 2,142,318 84.8 1,715,886 90.8 1,716,668 91.8
------------ ---- ----------- ----- ----------- -----
Less mortgage loans net items:
Residential loans in process................. 28,871 1.1 20,642 1.1 25,523 1.4
Commercial loans in process.................. (105) 0.0 -- -- 1,174 0.1
Allowance for loan losses.................... 18,866 0.7 30,799 1.6 36,252 1.9
Unearned (premiums) discounts and
deferred loan fees, net.................... 16,339 (0.6) ( 12,207) (0.5) (13,906) (0.8)
------------ ---- ------------- ---- --------- -----
Net mortgage loans........................... 2,111,025 83.6 1,676,652 88.6 1,667,625 89.2
------------ ----- ----------- ----- ----------- -----
Consumer loans:
Home improvement............................... 22,247 0.9 6,980 0.4 4,718 0.3
Home equity credit lines....................... 155,935 6.2 122,737 6.5 128,828 6.9
Credit Card.................................... 13,675 0.6 -- -- -- --
Education...................................... 21 0.0 135 0.0 483 0.0
Personal....................................... 45,172 1.8 31,653 1.7 23,231 1.3
Marine......................................... 436 0.0 462 0.0 226 0.0
Automobile..................................... 3,322 0.1 2,195 0.1 2,399 0.1
Secured by deposits............................ 8,376 0.3 8,121 0.4 7,171 0.4
------------ ----- ----------- ----- ----------- -----
Total consumer loans......................... 249,184 9.9 172,283 9.1 167,056 9.0
Less:
Allowance for loan losses..................... 4,735 0.2 7,865 0.4 7,312 0.4
Deferred loan costs, (net).................... (2,669) (0.1) (1,255) (0.1) -- --
------------ ---- ------------- ---- ---------- -----
Net consumer loans........................... 247,118 9.8 165,673 8.8 159,744 8.6
------------ ----- ----------- ----- ------------- -----
Consumer loans held for sale, net............ -- -- -- -- -- --
Commercial non-mortgage loans.................. 177,766 7.0 53,194 2.8 45,055 2.4
Less:
Allowance for loan losses...................... 9,853 0.4 3,133 0.2 3,208 0.2
Unearned (premiums) discounts and deferred
loan fees, net............................... 513 0.0 430 0.0 -- --
------------ ----- ----------- ----- ----------- -----
Net commercial non-mortgage loans............. 167,400 6.6 49,631 2.6 41,847 2.2
------------ ----- ------------ ----- ----------- -----
Loans receivable, net ........................ $ 2,525,543 100.0% $1,891,956 100.0% $ 1,869,216 100.0%
=========== ===== ========== ===== =========== =====
At December 31,
----------------------------------
1993 1992
------------------ ------------
Amount % Amount %
(Dollars in thousands)
Residential mortgage loans:
1-4 family units............................... $1,263,618 86.1% $1,321,825 86.9%
Multi-family units............................. -- -- 5,320 0.3
Construction................................... 28,930 2.0 15,033 1.0
Land........................................... 29,464 2.0 12,045 0.8
---------- ----- --------- -----
Total residential mortgage loans............. 1,322,012 90.1 1,354,223 89.0
Residential loans held for sale................. 11,505 0.8 7,240 0.5
Commercial mortgage loans:
Income producing properties.................... 135 0.0 348 0.0
Land........................................... -- -- -- --
Construction................................... 2,083 0.1 5,735 0.4
Other commercial real estate................... 40,306 2.7 41,636 2.7
---------- ----- --------- -----
Total commercial mortgage loans.............. 42,524 2.8 47,719 3.1
---------- ----- --------- -----
Total mortgage loans........................... 1,376,041 93.7 1,409,182 92.6
---------- ----- --------- -----
Less mortgage loans net items:
Residential loans in process................. 16,994 1.2 3,295 0.2
Commercial loans in process.................. 487 0.0 508 0.0
Allowance for loan losses.................... 38,477 2.6 44,384 2.9
Unearned (premiums) discounts and
deferred loan fees, net.................... (10,318) (0.8) 2,091 0.1
-------------- ----- -----
Net mortgage loans........................... 1,330,401 90.7 1,358,904 89.4
---------- ----- --------- -----
Consumer loans:
Home improvement............................... 4,413 0.3 6,274 0.4
Home equity credit lines....................... 103,523 7.1 100,821 6.6
Credit Card.................................... -- -- -- --
Education...................................... 684 0.0 451 0.0
Personal....................................... 13,928 0.9 14,553 1.0
Marine......................................... 246 0.0 1,160 0.1
Automobile..................................... 2,584 0.2 2,604 0.2
Secured by deposits............................ 7,207 0.5 8,277 0.5
---------- ----- --------- -----
Total consumer loans......................... 132,585 9.0 134,140 8.8
Less:
Allowance for loan losses..................... 5,955 0.4 4,626 0.3
Deferred loan costs, (net).................... -- -- -- --
---------- ------- --------- --------
Net consumer loans........................... 126,630 8.6 129,514 8.5
---------- ----- --------- -----
Consumer loans held for sale, net............ -- -- 23,116 1.5
Commercial non-mortgage loans.................. 11,640 0.8 11,404 0.7
Less:
Allowance for loan losses...................... 736 0.1 770 0.1
Unearned (premiums) discounts and deferred
loan fees, net............................... -- -- -- --
---------- ------- --------- -----
Net commercial non-mortgage loans............. 10,904 0.7 10,634 0.6
---------- ----- --------- -----
Loans receivable, net ........................ $ 1,467,935 100.0% $1,522,168 100.0%
========== ===== =========== =====
7
The following table sets forth the contractual maturity and interest-rate
sensitivity of residential and commercial real estate construction loans and
commercial loans at December 31, 1996.
Contractual Maturity
--------------------------------------------------
One Year One to Over
or Less Five Years Five Years Total
-------- ---------- ---------- -----
(In thousands)
Contractual Maturity:
Construction loans:
Residential mortgage.................................. $ 625 $ 220 $ 83,597 $ 84,442
Commercial mortgage................................... 1,381 4,508 408 6,297
Commercial non-mortgage loans........................... 66,578 74,371 36,817 177,766
---------- ---------- ---------- ----------
Total................................................ $ 68,584 $ 79,099 $ 120,822 $ 268,505
========== ======== ========== ==========
Interest-Rate Sensitivity:
Fixed rate.............................................. $ 3,892 $ 23,850 $ 31,820 $ 59,562
Variable rate........................................... 64,692 55,249 89,002 208,943
---------- ---------- ---------- ----------
Total................................................ $ 68,584 $ 79,099 $ 120,822 $ 268,505
========== ========== ========== ==========
Purchase and Sale of Loans and Loan Servicing. Webster has been a
seller and purchaser of whole loans and participations in the secondary market.
During 1996 and 1995, Webster originated residential mortgages that were
transferred primarily to the Federal National Mortgage Association ("FNMA") for
conversion into mortgage-backed securities. Webster generally retains the right
to service the underlying loans for these securities.
The following table sets forth information as to Webster's mortgage
loan servicing portfolio at the dates shown. The increase of total loans
serviced for 1996 is primarily due to the loans acquired with the Shawmut
transaction and purchased mortgage loan servicing, while the 1995 decrease is
primarily due to the sale of mortgage loan servicing rights on both owned and
non-owned loans.
At December 31,
--------------------------------------------------------------------------
1996 1995 1994
---------------------- -------------------- -----------------------
Amount % Amount % Amount %
(Dollars in thousands)
Loans owned and serviced................ $1,713,797 63.8% $1,324,257 63.7% $1,509,219 61.5%
Loans serviced for others............... 974,152 36.2 753,053 36.3 944,547 38.5
----------- ------ --------- ------- ---------- -------
Total loans serviced by Webster $2,687,949 100.0% $2,077,310 100.0% $2,453,766 100.0%
========== ====== ========== ===== ========== ========
8
The table below shows mortgage loan origination, purchase, sale and repayment
activities of Webster for the periods indicated.
At December 31,
-------------------------------------
1996 1995 1994
---- ---- ----
(In thousands)
First mortgage loan originations and purchases:
- -----------------------------------------------
Permanent:
Mortgage loans originated..................................... $ 307,799 $ 271,997 $ 665,108
Construction:
1-4 family units.............................................. 50,267 50,445 44,491
----------- ------------ ------------
Total permanent and construction loans originated 358,066 322,442 709,599
Loans and participations purchased.............................. 10,000 2,123 37,158
Loans acquired in the Bristol acquisition....................... -- -- 255,562
Loans acquired in Shawmut Transaction .......................... 344,036 -- --
----------- ------------ -----------
Total loans originated and purchased....................... 712,102 324,565 1,002,319
----------- ------------ ------------
First mortgage loan sales and principal reductions:
- ---------------------------------------------------
Loans securitized and sold...................................... 63,198 109,787 495,135
Loan principal reductions....................................... 209,871 204,314 119,507
Reclassified to REO............................................. 12,602 11,246 47,050
----------- ------------ ------------
Total loans sold and principal reductions 285,671 325,347 661,692
------------ ------------ ------------
Increase (Decrease) in mortgage loans
receivable before net items................................... $ 426,431 $ (782) $ 340,627
=========== ============= ============
Nonaccrual Assets and Delinquencies. When an insured institution
classifies problem assets as either "substandard" or "doubtful," it is required
to establish general allowances for loan losses in an amount deemed prudent by
management. General allowances represent loss allowances which have been
established to recognize the inherent risk associated with lending activities,
but which, unlike specific allowances, have not been allocated to particular
problem assets. When an insured institution classifies problem assets as "loss,"
it is required either to establish a specific allowance for losses equal to 100%
of the amount of the asset so classified or to charge-off such amount. An
institution's determination as to the classification of its assets and the
amount of its valuation allowances is subject to review by the OTS which can
order the establishment of additional valuation allowances. See "Classification
of Assets" below.
The following table sets forth certain information regarding Webster's
loans (excluding Segregated Assets) accounted for on a nonaccrual basis and real
estate acquired through foreclosure at the dates indicated.
At December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(In thousands)
Loans accounted for on a nonaccrual basis:
Residential real estate......................... $ 11,272 $ 20,560 $ 18,390 $ 27,995 $ 39,633
Commercial...................................... 9,051 15,296 15,268 4,132 1,846
Consumer........................................ 1,491 1,987 1,237 1,137 4,311
Real estate acquired through foreclosure:
Residential and consumer...................... 3,445 6,368 9,296 18,753 11,674
Commercial.................................... 6,044 10,808 17,292 6,711 7,744
---------- --------- --------- ---------- ----------
Total......................................... $31,303 $ 55,019 $ 61,483 $ 58,728 $ 65,208
======= ========= ========= ========== ==========
9
Interest on nonaccrual loans that would have been recorded as
additional income for the years ended December 31, 1996, 1995 and 1994 had the
loans been current in accordance with their original terms approximated
$2,615,000, $2,984,000, and $2,784,000, respectively.
See Note 1(e) to the Consolidated Financial Statements contained in the
annual report to shareholders and incorporated herein by reference for a
description of Webster's nonaccrual loan policy.
The following table sets forth information as to delinquent loans,
excluding Segregated Assets, in Webster's loans receivable portfolio before net
items.
At December 31,
--------------------------------------------------------------
1996 1995
---- ----
Percentage Percentage
Principal of Loans Principal of Loans
Balances Receivable Balances Receivable
-------- ---------- -------- ----------
(Dollars in thousands)
Past due 30-89 days and still accruing:
Residential real estate.................... $ 25,524 1.00% $ 28,396 1.46%
Commercial................................. 4,507 0.18 11,099 0.57
Consumer................................... 3,624 0.14 2,640 0.14
---------- ------ ---------- ----
Total.................................. $ 33,655 1.32% $ 42,135 2.17%
========== ===== ========== ====
Classification of Assets. Under the OTS' problem assets classification
system, a savings institution's problem assets are classified as "substandard,"
"doubtful" or "loss" (collectively "classified assets"), depending on the
presence of certain characteristics. An asset is considered "substandard" if
inadequately protected by the current net worth and paying capacity of the
obligor or of the collateral pledged, if any. "Substandard" assets include those
characterized by the "distinct possibility" that the institution will sustain
"some loss" if the deficiencies are not corrected. Assets classified as
"doubtful" have all of the weaknesses inherent in those classified "substandard"
with the added characteristic that the weaknesses present make "collection or
liquidation in full," on the basis of currently existing facts, conditions and
values, "highly questionable and improbable." Assets classified "loss" are those
considered "uncollectible" and of such little value that their continuance as
assets without the establishment of a specific loss reserve is not warranted. In
addition, assets that do not currently warrant classification in one of the
foregoing categories but which are deserving of management's close attention are
designated as "special mention" assets.
At December 31, 1996, the Bank's classified assets totaled $71.8
million, consisting of $70.5 million in loans classified as "substandard," $1.3
million in loans classified as "doubtful" and $0 classified as "loss". At
December 31, 1995, the Bank's classified loans totaled $82.6 million, consisting
of $75.8 million in loans classified as "substandard" and $6.8 million in loans
classified as "doubtful." In addition, at December 31, 1996 and 1995, the Bank
had $12.6 million and $29.8 million, respectively, of special mention loans.
Allowance for Loan Losses. Webster's allowance for loan losses at
December 31, 1996 totalled $33.5 million. See "Management's Discussion and
Analysis -- Results of Operations Asset Quality and Comparison of Years ended
December 31, 1996 and 1995," contained in the annual report to shareholders and
incorporated herein by reference. In assessing the specific risks inherent in
the portfolio, management takes into consideration the risk of loss on
10
Webster's nonaccrual loans, classified loans and watch list loans including an
analysis of the collateral for the loans. Other factors considered are Webster's
loss experience, loan concentrations, local economic conditions and other
factors.
The following is a summary of activity in the allowance for loan losses
for the periods indicated:
Years Ended December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ -------
(Dollars in thousands)
Balance at beginning of period........................... $ 41,797 $ 46,772 $ 45,168 $ 49,780 $ 11,055
Charge-offs:
Residential real estate................................ (12,628) (6,952) (12,761) (8,208) (1,027)
Consumer............................................... (670) (418) (760) (1,236) (706)
Commercial............................................. (6,348) (3,490) (3,578) (2,223) (1,424)
--------- --------- --------- ---------- ----------
(19,646) (10,860) (17,099) (11,667) (3,157)
Recoveries:
Residential real estate................................ 386 657 388 205 10
Consumer............................................... 162 943 1,701 749 558
Commercial............................................. 1,755 1,185 1,015 114 9
--------- --------- --------- ---------- ----------
2,303 2,785 3,104 1,068 577
Net charge-offs...................................... (17,343) (8,075) (13,995) (10,599) (2,580)
Acquired allowance for purchased loans................... 5,000 -- 12,819 -- 35,731
Transfer from allowance for losses
for loans held for sale.............................. -- -- -- 2,390 --
Provisions charged to operations........................ 4,000 3,100 2,780 3,597 5,574
--------- --------- ---------- ---------- ----------
Balance at end of period................................. $ 33,454 $ 41,797 $ 46,772 $ 45,168 $ 49,780
========= ========= ========== ========= ======
Ratio of net charge-offs to average loans
outstanding............................................ 0.7% 0.4% 0.8% 0.7% 0.3%
11
The following table presents an allocation of Webster's allowance for
loan losses at the dates indicated and the related percentage of loans in each
category to Webster's gross loan portfolio.
December 31,
--------------------------------------------------------------------------------------------
1996 1995 1994 1993
--------------------- ------------------- -------------------- -------------------
Amount % Amount % Amount % Amount %
------ ------- ------ ------- ------ ------- ------ -------
(Dollars in thousands)
Balance at End of Period
Applicable to:
Residential mortgage loans............ $ 9,079 75.40% $ 19,013 80.93% $ 25,399 81.74% $ 35,473 87.71%
Commercial mortgage loans............. 9,787 7.98 11,786 7.46 10,853 7.26 3,004 2.80
Commercial non-mortgage loans......... 9,853 6.92 3,133 8.87 3,208 2.34 736 .77
Consumer loans........................ 4,735 9.70 7,865 2.74 7,312 8.66 5,955 8.72
--------- ------ --------- ------ --------- ----- --------- ------
Total............................. $ 33,454 100.0% $ 41,797 100.00% $ 46,772 100.00% $ 45,168 100.00%
========= ====== ======== ====== ========= ====== ========= ======
December 31,
-----------------
1992
-----------------
Amount %
------ ------
Balance at End of Period
Applicable to:
Residential mortgage loans.............. $ 39,888 86.29%
Commercial mortgage loans............... 4,496 3.02
Commercial non-mortgage loans........... 770 .72
Consumer loans.......................... 4,626 9.97
--------- ------
Total............................... $ 49,780 100.00%
========= ======
During 1996, Webster sold $18.0 million of nonaccrual residential and foreclosed
properties in a bulk sale, and incurred charge-offs of $6.3 million related to
the sale. Approximately 50% of the assets sold were secured by two-four family
properties, condominiums or non-owner occupied single family properties.
Charge-offs of $6.3 million reduced the allowance for residential mortgage loans
and had no impact on 1996 earnings.
The increase in the allowance for commercial non-mortgage loans was primarily a
result of acquired allowances for purchased loans related to the Shawmut
Transaction.
12
Segregated Assets
Segregated Assets at December 31, 1996 and 1995 consist of the
following assets purchased from the FDIC in the First Constitution acquisition
which are subject to a loss-sharing arrangement with the FDIC:
At December 31,
---------------------------------------------
1996 1995
---- ----
Amount % Amount %
------ ----- ------ -----
(Dollars in thousands)
Commercial real estate loans........................... $ 58,745 74.8% $ 79,995 74.0%
Commercial non-mortgage loans.......................... 6,606 8.4 10,439 9.7
Multi-family mortgage loans............................ 12,772 16.3 16,341 15.1
Other real estate owned................................ 406 0.5 1,299 1.2
----------- ----- ----------- ------
78,529 100.0% 108,074 100.0%
===== =====
Less allowance for segregated assets................... 2,859 3,235
----------- -----------
Segregated Assets, net................................. $ 75,670 $ 104,839
=========== ===========
Under the Purchase and Assumption Agreement with the FDIC, during the
first five years after October 2, 1992 (the "Acquisition Date") the FDIC is
required to reimburse the Bank quarterly for 80% of all net charge-offs (i.e.,
the excess of charge-offs over recoveries) and certain permitted expenses
related to the commercial non-mortgage loans, commercial real estate loans and
multi-family loans acquired by the Bank.
During the sixth and seventh years following the Acquisition Date, the
Bank is required to pay quarterly to the FDIC an amount equal to 80% of the
recoveries during such years on Segregated Assets that were previously charged
off after deducting certain permitted expenses related to those assets. The Bank
is entitled to retain 20% of such recoveries during the sixth and seventh years
and 100% thereafter.
Upon termination of the seven-year period after the First Constitution
acquisition (December 1999), if the sum of Webster's 20% share of net
charge-offs on Segregated Assets for the first five years after the acquisition
date plus permitted expenses during the entire seven-year period, less any
recoveries during the sixth and seventh year on Segregated Assets charged off
during the first five years, exceeds $49.2 million, the FDIC is required to pay
the Bank an additional 15% of any such excess over $49.2 million at the end of
the seventh year. At December 31, 1996, cumulative net charge-offs and expenses
aggregated $53.9 million. During the first quarter of 1996, Webster began
recording the additional 15% reimbursement as a receivable from the FDIC. As of
December 31, 1996, Webster has received $42.2 million in reimbursements for net
charge-offs and permitted expenses from the FDIC. At December 31, 1996 and 1995,
Webster had allowances for segregated assets of $2.9 million and $3.2 million,
respectively.
13
A detail of changes in the allowance for the Bank's share of losses for
Segregated Assets follows:
Years Ended December 31,
------------------------
1996 1995
---- ----
(In thousands)
Balance at beginning of period .............. $ 3,235 $ 4,420
Charge-offs.................................. (621) (1,772)
Recoveries................................... 245 587
--------- ---------
Balance at end of period................. $ 2,859 $ 3,235
========= =======
The following table sets forth information regarding Segregated Assets
delinquencies and nonaccruals at December 31, 1996 and 1995:
At December 31,
---------------------
1996 1995
---- ----
(In thousands)
Past due 30-89 days and still accruing:
Commercial real estate loans.............. $ 1,318 $ 1,042
Commercial non-mortgage loans............. -- 79
Multi-family loans........................ 769 386
--------- ---------
2,087 1,507
Loans accounted for on a nonaccrual basis:
Commercial real estate loans.............. 3,337 2,604
Commercial non-mortgage loans............. 192 1,203
Multi-family real estate loans............ 495 1,432
--------- ---------
4,024 5,239
--------- ---------
Total.................................. $ 6,111 $ 6,746
========= =========
Interest on nonaccrual Segregated Assets that would have been recorded
as additional income had the loans been current in accordance with their
original terms approximated $433,000, $1,207,000 and $2,047,000 for the years
ended December 31, 1996, 1995 and 1994 respectively.
The following table sets forth the contractual maturity and interest
rate sensitivity of commercial loans contained in the Segregated Assets
portfolio at December 31, 1996.
Contractual Maturity
--------------------------------------------------
One Year One to Over
or Less Five Years Five Years Total
-------- ---------- ---------- -----
(In thousands)
Contractual Maturity:
Commercial loans.............. $ 735 $ 3,694 $ 2,177 $ 6,606
---------- ---------- ---------- ----------
Total..................... $ 735 $ 3,694 $ 2,177 $ 6,606
========== ========== ========== ==========
Interest Rate Sensitivity:
Fixed Rates................... $ 208 $ 213 $ -- $ 421
Variable Rates................ 527 3,481 2,177 6,185
---------- ---------- ---------- ----------
Total..................... $ 735 $ 3,694 $ 2,177 $ 6,606
========== ========== ========== ==========
14
Investment Activities
The Bank has authority to invest in various types of liquid assets,
including United States Treasury obligations, securities of federal agencies,
certificates of deposit of federally insured banks and savings institutions,
federal funds and mortgage backed securities and collateralized mortgage
obligations. Subject to various restrictions, the Bank may also invest a portion
of its assets in commercial paper, corporate debt securities, and mutual funds
whose assets conform to the investments that a federally chartered savings
institution is otherwise authorized to make directly. The Bank also is required
to maintain liquid assets at minimum levels which vary from time to time.
See "Regulation."
Webster, as a Delaware corporation, has authority to invest in any type
of investment permitted under Delaware law. As a unitary holding company,
however, its investment activities are subject to certain regulatory
restrictions described under "Holding Company Regulation."
Webster, directly or through the Bank, maintains an investment
portfolio that provides not only a source of income but also, due to staggered
maturity dates, a source of liquidity to meet lending demands and fluctuations
in deposit flows. The securities constituting Webster's investments in corporate
bonds and notes generally are publicly traded and are considered investment
grade quality by a nationally recognized rating firm. The commercial paper and
collateralized mortgage obligations ("CMOs") in Webster's investment portfolio
are all rated in at least the top two rating categories by at least one of the
major rating agencies at time of purchase. One of the inherent risks of
investing in mortgage-backed securities, including CMOs, is the ability of such
instruments to incur prepayments of principal prior to maturity at prepayment
rates different than those estimated at the time of purchase. This generally
occurs because of changes in market interest rates. The market values of
fixed-rate mortgage-backed securities are sensitive to fluctuations in market
interest rates, declining in value as interest rates rise. If interest rates
increase, as had been the case during 1996, the market value of loans and
mortgage-backed securities generally will decrease causing the level of
prepayments to decrease. Webster also utilizes interest rate financial
instruments to hedge mismatches in interest rate maturities to reduce exposure
to movements in interest rates. The objectives of interest rate financial
instruments is to offset the change in value of the available for sale
securities portfolio. See Note 3 and 11 contained in the annual report to
shareholders and incorporated herein by reference. Except for $24.1 million
invested by Webster at the holding company level at December 31, 1996 in the
common stock of certain entities, Webster's investments, directly and through
the Bank, were investments of the type permitted federally chartered savings
institutions. Webster's investment portfolio is managed by its Treasurer in
accordance with a written investment policy approved by the Board of Directors.
A report on investment activities is presented to the Board of Directors
monthly.
15
The following table sets forth Webster's interest-bearing deposits and
the composition of its securities portfolio at the dates indicated.
At December 31,
----------------------------------------------------------------
1996 1995 1994
------------------ ------------------ --------------------
% of % of % of
Book Port- Book Port- Book Port-
Value folio Value folio Value folio
----- ----- ----- ----- ----- -----
(Dollars in thousands)
Interest-bearing Deposits...................... $ 27 100.0% $26,017 100.0% $54,318 100.0%
========== ===== ======= ===== ======= =====
Trading Securities:
Mortgage Backed Securities:
GNMA..................................... $ 31,537 2.9% $14,766 1.4% $13,706 1.7%
Collateralized Mortgage Obligations -- -- -- -- 9,311 1.1
FHLMC.................................... 27,794 2.6 29,838 2.9 -- --
Equity Securities.............................. -- -- -- -- 78 0.0
----------- ----- ----------- ---- ------ ---
59,331 5.5 44,604 4.3 23,095 2.8
---------- ---- ---------- ---- -------- ---
Available for Sale Portfolio:
U.S. Treasury Notes:
Matures within 1 year..................... -- -- 1,000 0.1 6,416 0.8
Matures over 1 within 5 years............. 2,508 0.2 -- -- 7,530 0.9
U.S. Government Agency:
Matures within 1 year..................... -- -- -- -- 100 0.0
Matures over 1 within 5 years............. 12,883 1.2 12,901 1.2 33,480 4.0
Corporate Bonds and Notes:
Matures over 1 within 5 years............. -- -- 23,005 2.2 -- --
Matures over 5 through 10 years 2,492 0.2 2,737 0.2 2,985 0.4
Mutual Funds................................. 7,216 0.7 34,077 3.2 20,146 2.4
Stock in Federal Home Loan Bank of Boston 30,039 2.8 30,039 2.9 26,269 3.2
Other Equity Securities...................... 19,361 1.8 9,195 0.9 13,619 1.6
Mortgage Backed Securities:
FNMA....................................... 127,908 12.0 139,860 13.4 11,316 1.4
FHLMC...................................... 15,369 1.4 62,572 6.0 -- --
GNMA....................................... 236,393 22.1 20,443 2.0 -- --
Collateralized Mortgage Obligations 107,684 10.1 155,321 14.9 57,121 6.9
Unamortized Hedge............................ 5,460 0.5 816 0.1 -- --
Unrealized Securities Gains (Losses), Net.... 6,303 0.6 6,122 0.6 (3,768) (0.5)
-------- ------- ----- ---- ---------- ------
573,616 53.6 498,088 47.7 175,214 21.1
-------- ------- ----- ---- ---------- ------
Held to Maturity Portfolio:
U.S. Treasury notes:
Matures within 1 year...................... 944 0.1 1,577 0.2 3,318 0.4
Matures over 1 within 5 years.............. -- -- 8,262 0.8 19,567 2.4
U.S. Government Agency:
Matures within 1 year...................... 6,867 0.6 1,003 0.1 -- --
Matures over 1 within 5 years........... 28,089 2.6 39,868 3.8 61,822 7.5
Matures over 5 through 10 years............ 499 0.1 999 0.1 1,000 0.1
Corporate Bonds and Notes:
Matures within 1 year. . . . .............. 301 0.0 -- -- 702 0.1
Matures over 1 within 5 years.............. 1,176 0.1 2,555 0.2 2,564 0.3
Matures over 5 through 10 years............ -- -- 330 0.0 418 0.1
Matures over 10 years...................... 100 0.0 -- -- -- --
Mortgage Backed Securities:
FHLMC...................................... 31,013 2.1 42,877 4.1 87,650 10.6
FNMA ...................................... 22,180 2.9 31,785 3.0 167,254 20.2
GNMA....................................... 1,309 0.1 1,622 0.2 1,919 0.2
Collateralized Mortgage Obligations 345,153 32.3 370,762 35.5 283,861 34.2
Other Mortgage Backed Securities -- -- 308 0.0 374 0.0
------- ------- ---------- ------ ------- ------
437,631 40.9 501,948 48.0 630,449 76.1
-------- ------- ---------- ----- ------- ------
Total.................................... $1,070,578 100.0% 1,044,640 100.0% 828,758 100.0%
========= ======= ========== ===== ======= ======
16
The average remaining life of the securities portfolio, exclusive of
equity securities with no maturity, is 22.6 and 14.8 years at December 31, 1996
and 1995, respectively. Although the stated final maturity of these obligations
are long-term, the weighted average life generally is much shorter due to
prepayments of principal.
The following table sets forth the contractual maturities of Webster's
securities and mortgage-backed securities at December 31, 1996 and the weighted
average yields of such securities.
Due Due
Due After One, But After Five, But Due
Within One Year Within Five Years Within 10 Years After 10 Years
------------------ ------------------ ------------------ -----------------
Weighted Weighted Weighted Weighted
Average Average Average Average
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
(Dollars in thousands)
Interest-Bearing Deposits (a) $ 27 5.15% $ -- -- % $ -- --% $ -- -- %
Trading Portfolio:
Mortgaged-Backed Securities
and Collateralized Mortage
Obligations (b)............ 27,849 7.32 -- -- -- -- 31,482 6.45
Available For Sale Portfolio:
U.S. Government Agency..... -- -- 12,974 5.73 -- -- -- --
Mutual Funds. . . ......... -- -- -- -- -- -- 7,236 5.92
Equity Securities.......... -- -- -- -- -- -- 25,225 --
Corporate Bonds and Notes -- -- -- -- 2,489 6.08 -- --
U.S. Treasury Notes........ -- -- 2,544 7.01 -- -- -- --
Mortgaged-Backed Securities
and Collateralized Mortgage
Obligations (b).......... -- -- 43,064 5.72 4,714 8.50 445,331 6.57
Held to Maturity Portfolio:
U.S. Treasury Notes ...... 944 3.38 -- -- -- -- -- --
U.S. Government Agencies 6,867 9.29 28,089 5.64 499 6.40 -- --
Corporate Bonds and Notes 301 7.39 1,176 5.87 -- -- 100 7.98
FHL Bank Stock................ -- -- -- -- -- -- 30,039 6.40
Mortgage-Backed Securities
and Collateralized Mortgage
Obligations (b)............. 4,285 7.51 10,450 5.63 2,075 7.96 382,845 7.35
-------- ---- -------- ---- ------ ---- ---------- ----
Totals................... $ 40,273 5.99% $ 98,297 5.72% $ 9,777 6.11% $ 922,258 6.74%
======== ==== ======== ==== ======= ==== ========== ====
(a) Adjusted to a fully taxable equivalent basis.
(b) Although the stated final maturity of these obligations are long-term, the
weighted average life generally is much shorter due to prepayments of
principal.
17
Sources of Funds
Deposits, loan repayments, securities maturities as well as earnings
are the primary sources of the Bank's funds for use in its lending and
investment activities. While scheduled loan repayments and securities payments
are a relatively stable source of funds, deposit flows and loan prepayments are
influenced by prevailing interest rates, money market and local economic
conditions. The Bank also derives funds from FHL Bank advances and other
borrowings as necessary when the cost of these alternative sources of funds are
favorable.
Webster's main sources of liquidity are dividends from the Bank and net
proceeds from capital offerings and borrowings, while the main outflows are the
payments of dividends to preferred and common stockholders, the payment of
interest to holders of Webster's 8 3/4% Senior Notes and repurchases of
Webster's common stock.
Webster attempts to control the flow of funds in its deposit accounts
according to its need for funds and the cost of alternative sources of funds.
Webster controls the flow of funds primarily by the pricing of deposits, which
is influenced to a large extent by competitive factors in its market area while
adhering to overall asset-liability management strategies.
Deposit Activities. Webster has developed a variety of innovative
deposit programs that are designed to meet depositors needs and attract both
short-term and long-term deposits from the general public. Webster's checking
account programs offer a full line of accounts with varying features that
include both regular non-interest bearing accounts and interest bearing account
types. The Webster's savings account programs includes both statement and
passbook accounts, money market savings, special goal savings, club accounts and
certificate of deposit accounts for both regular and IRA savings purposes that
offer a range of short and long term maturities options. Webster's checking and
savings deposit accounts have several features that include: ATM Card and Check
Card use, direct deposit, combined statements, 24 hour automated telephone
banking services and overdraft protection.
Webster receives retail and commercial deposits through its 78 full
service banking offices. Webster relies primarily on competitive pricing
policies and effective advertising to attract and retain deposits while
emphasizing the objectives of quality customer service and customer convenience.
The WebsterOne Account is a banking relationship that affords customers the
opportunity to avoid fees, earn premium rates on savings and simplify their
bookkeeping with one combined account statement that links account balances.
Webster's Check Card can be used at over twelve million Visa merchants worldwide
to pay for purchases with money in a linked checking account. The Check Card
also serves as a ATM Card for receiving cash, for deposits and processing
transfers, and to obtain account balances 24 hours per day. Customer services
also include ATM facilities that use state-of-the-art technology with membership
in NYCE and PLUS networks and provide 24 hour access to linked accounts. The
Bank's First Call telephone banking service provides automated customer access
to account information 24 hours per day, seven days per week and also to service
representatives at certain established hours. Customers can transfer account
balances, process stop payments and address changes, place check reorders, open
deposit accounts, inquire about account transactions and request general
information about Webster's products and services. Webster's services provide
for automatic loan payment features from its accounts as well as for direct
deposit of Social Security, payroll, and other retirement benefits. Webster has
not used brokers to obtain deposits.
18
The following table sets forth the deposit accounts of Webster in
dollar amounts and as percentages of total deposits at the dates indicated.
At December 31,
--------------------------------------------------------------------
1996 1995
-------------------------------- -------------------------------
Weighted % of Weighted % of
average total average total
rate Amount deposits rate Amount deposits
--------- ------ -------- --------- ------ --------
(Dollars in thousands)
Balance by account type:
Demand deposits and NOW accounts.................. .93% $606,716 19.6% 1.18% $351,189 14.6
Regular savings................................... 2.49 652,175 21.1 2.09 471,588 19.6
Money market accounts............................. 3.76 101,552 3.3 4.03 87,371 3.6
Certificate accounts.............................. 5.37 1,735,433 56.0 5.59 1,490,054 62.2
---- --------- ---- ------ ------------ -------
Total deposits................................. 3.84% $3,095,876 100.0% 4.20% $2,400,202 100.0%
==== ========== ===== ====== ============ =======
At December 31,
--------------------------------
1994
--------------------------------
Weighted % of
average total
rate Amount deposits
--------- ------ --------
Balance by account type:
Demand deposits and NOW accounts................. .98% $327,094 13.4%
Regular savings.................................. 2.09 561,196 23.1
Money market accounts............................ 4.89 125,987 5.2
Certificate accounts............................. 4.62 1,417,668 58.3
------ ----------- -------
Total deposits................................ 3.56% $2,431,945 100.0%
====== =========== =======
19
Maturity information regarding Webster's deposit accounts of $100,000
or more at December 31, 1996 is shown below.
Total
Deposits Over Over
of Three Months Six Months
$100,000 Three Months through through Over % of Total
or more or less Six Months One Year One Year Deposits
----------- ------------ ------------ ---------- -------- ---------
(Dollars in thousands)
$153,709 $37,697 $41,701 $39,387 $34,924 4.96%
Additional information concerning the deposits of Webster is included
in Note 8 of the Consolidated Financial Statements contained in the annual
report to shareholders and incorporated herein by reference.
Borrowings. The FHL Bank System functions in a reserve credit capacity
for savings institutions and certain other home financing institutions. Members
of the FHL Bank System are required to own capital stock in the FHL Bank.
Members are authorized to apply for advances on the security of such stock and
certain of their home mortgages and other assets (principally securities which
are obligations of, or guaranteed by, the United States) provided certain
creditworthiness standards have been met. See "Federal Home Loan Bank System."
Under its current credit policies, the FHL Bank limits advances based on a
member's assets, total borrowings and net worth.
The Bank used FHL Bank advances as an alternative source of funds to
deposits in order to fund its lending activities when it determines that it can
profitably invest the borrowed funds over their term. At December 31, 1996, the
Bank had outstanding FHL Bank advances of $407.7 million and other borrowings in
the amount of $170.0 million at December 31, 1995.
The following table sets forth certain information as to the Bank's FHL
Bank short-term borrowings at the dates and for the years indicated.
At December 31,
1996 1995 1994
---- ---- ----
(Dollars in thousands)
Average amount outstanding during the period:
FHL Bank short-term advances..................................... $274,596 $ 268,563 $ 261,133
Amount outstanding at end of period:
FHL Bank short-term advances..................................... 247,034 209,401 232,000
Highest month end balance of short-term FHL Bank
borrowings....................................................... 366,000 379,713 387,887
Weighted average interest rate of short-term FHL Bank
borrowings at end of period...................................... 5.77% 6.09% 5.92%
Weighted average interest rate of short-term FHL Bank
borrowings during the period..................................... 5.61% 6.13% 4.69%
During 1996, reverse repurchase agreement transactions were also used as a
source of short-term borrowings. The Bank uses reverse repurchase agreements
when the cost of such borrowings is favorable as compared to other funding
sources.
20
The following table sets forth certain information as to the Bank's reverse
repurchase agreement short-term borrowings at the dates and for the years
indicated.
At December 31,
1996 1995 1994
---- ---- ----
(Dollars in thousands)
Average amount outstanding during the period:
reverse repurchase short-term agreements......................... $129,166 $ 37,830 N/A
Amount outstanding at end of period:
reverse repurchase short-term agreements......................... 77,585 126,884 N/A
Highest month end balance of short-term
borrowings....................................................... 180,704 126,884 N/A
Weighted average interest rate of reverse repurchase
agreement short-term borrowings at end of period................. 5.51% 5.80% N/A
Weighted average interest rate of repurchase
agreement short-term borrowings during the period................ 5.52% 5.91% N/A
There were no reverse repurchase agreements transacted in 1994.
Bank Subsidiaries
At December 31, 1996, the Bank's direct investment in its service
corporation subsidiary totaled $462,000. As of December 31, 1996, the activities
of such service corporation subsidiary consisted primarily of the selling of
mutual funds and annuities through a third party provider. The service
corporation receives a portion of the sales commissions generated and rental
income for the office space leased to the provider. The Bank also has an
operating subsidiary, the primary function of which is to dispose of other real
estate owned. At December 31, 1996 the Bank's direct investment in the operating
subsidiary was $1.3 million.
Employees
At December 31, 1996, Webster had 1,057 employees (including 192
part-time employees), none of whom were represented by a collective bargaining
group. Webster maintains a comprehensive employee benefit program providing,
among other benefits, group medical and dental insurance, life insurance,
disability insurance, a pension plan, an employee investment plan and an
employee stock ownership plan. Management considers Webster's relations with its
employees to be good.
Market Area And Competition
The Bank is headquartered in Waterbury, Connecticut (New Haven County)
and conducts business from its home office in downtown Waterbury and 78 branch
offices in Waterbury, Southbury, Ansonia, Bethany, Oxford, Cheshire, Prospect,
Branford, Derby, East Haven, Hamden, Madison, Milford, Naugatuck, New Haven,
North Haven, Orange and West Haven (New Haven County), Watertown (Litchfield
County), Fairfield, Southbury, Stratford, Trumbull and Shelton (Fairfield
County), and Avon, Suffield, East Windsor, Bristol, Plainville, Terryville,
Enfield, Windsor Locks, Berlin, East Hartford, Farmington, Glastonbury,
Hartford, Manchester, New Britain, Newington, Simsbury, West Hartford, Rocky
Hill, Seymour, Wethersfield and Southington (Hartford County) and Cromwell and
Middletown (Middlesex County). Waterbury
21
is approximately 30 miles southwest of Hartford and is located on Route 8 midway
between Torrington and the New Haven and Bridgeport metropolitan areas. Most of
the Bank's depositors live, and most of the properties securing its mortgage
loans are located, in the same area or the adjoining counties. The Bank's market
area has a diversified economy with the workforce employed primarily in
manufacturing, financial services, health care, industrial and technology
companies.
The Bank faces substantial competition for deposits and loans
throughout its market areas. The primary factors stressed by the Bank in
competing for deposits are interest rates, personalized services, the quality
and range of financial services, convenience of office locations, automated
services and office hours. Competition for deposits comes primarily from other
savings institutions, commercial banks, credit unions, money market funds and
other investment alternatives. The primary factors in competing for loans are
interest rates, loan origination fees, the quality and range of lending services
and personalized service. Competition for origination of first mortgage loans
comes primarily from other savings institutions, mortgage banking firms,
mortgage brokers, commercial banks and insurance companies. The Bank faces
competition for deposits and loans throughout its market area not only from
local institutions but also from out-of-state financial institutions which have
opened loan production offices or which solicit deposits in its market area.
Regulation
Webster, as a savings and loan holding company, and Webster bank, as a
federally chartered savings bank, are subject to extensive regulation,
supervision and examination by the OTS as their primary federal regulator.
Webster Bank is also subject to regulation, supervision and examination by the
FDIC and as to certain matters by the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"). See "Management's Discussion and Analysis"
and "Notes to Consolidated Financial Statements" as to the impact of certain
laws, rules and regulations on the operations of the Corporation and Webster
Bank. Set forth below is a description of certain regulatory developments.
As discussed in Management's Discussion and Analysis, legislation was
enacted in September 1996 to address the undercapitalization of the SAIF of the
FDIC (the "SAIF Recapitalization Legislation"). Legislation also was enacted in
1996 which repeals Section 593 of the Internal Revenue Code of 1986, as amended
(the "IRC") under which qualified savings institutions calculated their bad debt
deduction for federal income tax purposes.
The SAIF Recapitalization Legislation, in addition to providing for a
special assessment to recapitalize the insurance fund, also contemplated the
merger of the SAIF with the BIF of which Webster Bank is a member, and which
generally insures deposits in national and state-chartered banks. The combined
deposit insurance fund, which would be formed no earlier than January 1, 1999,
would insure deposits at all FDIC insured depository institutions. As a
condition to the combined insurance fund, however, no insured depository
institution can be chartered as a savings association (such as Webster Bank).
The Secretary of the Treasury is required to report to the Congress no later
than March 31, 1997 with respect to the development of a common charter for all
insured depository institutions. If legislation with respect to the development
of a common charter is enacted, Webster Bank may be required to convert its
federal charter to either a new federal type of bank charter or state depository
institution charter. Such future legislation also may result in the Corporation
becoming regulated as a bank holding company by the Federal Reserve board rather
than a savings and loan holding company regulated by the OTS. Regulation by the
Federal Reserve Board could
22
subject the Corporation to capital requirements that are not currently
applicable to the Corporation as a holding company under OTS regulation and may
result in statutory limitations on the type of business activities in which the
Corporation may engage at the holding company level, which business activities
currently are not restricted. The Corporation and Webster Bank are unable to
predict whether such legislation will be enacted.
The SAIF Recapitalization Legislation also contains several provisions
augmenting the Bank's commercial lending authority, provided that any loans in
excess of 10% of assets are used for small business loans. The qualified thrift
lender test that Webster bank must comply with was amended to provide that small
business, credit card and student loans can be included without any limit, and
that the Bank can qualify as a qualified thrift lender by meeting either the
test set forth in the Home Owners' Loan Act or under the definition of a
domestic building and loan association as defined under the IRC. Webster Bank
does not expect such provisions to materially impact its operations.
During 1996, the OTS continued its comprehensive review of its
regulations to eliminate duplicative, unduly burdensome and unnecessary
regulation. Revised lending and investments regulations impose general safety
and soundness standards, and also provide that commercial loans made by a
service corporation of a savings association will be exempted from an
institutions's overall 10% limit on commercial loans. The OTS revised subsidiary
and equity investment regulations to include an expanded list of pre-approved
service corporation activities. The revised corporate governance regulation is
intended to provide greater flexibility with respect to corporate governance of
federal savings institutions, such as Webster Bank.
The OTS also converted its policy statement on conflicts of interest to
a regulation that is intended to be based upon common law principles of "duty of
loyalty" and "duty of care". The new conflicts regulation provides that
directors, officers, employees, persons having the power to control the
management or policies of savings associations, and other persons who owe
fiduciary duties to savings institutions will be prohibited from advancing their
own personal or business interests, or those of others, at the expense of the
institutions they serve. The OTS also clarified that "persons having the power
to control the management or policies of savings associations" includes holding
companies such as the Corporation. The OTS corporate opportunity regulations and
policy statements also were eliminated and replaced with a standard similar to
common law standards governing usurpation of corporate opportunity.
Taxation
Federal. Webster, on behalf of itself and its subsidiaries, files a
calendar tax year consolidated federal income tax return. Webster and its
subsidiaries report their income and expenses using the accrual method of
accounting. Tax law changes were enacted in August 1996 to eliminate the "thrift
bad debt" method of calculating bad debt deductions for tax years after 1995 and
to impose a requirement to recapture into taxable income (over a six-year
period) all bad debt reserves accumulated after 1987. Since Webster previously
recorded a deferred tax liability with respect to these post 1987 reserves, its
total tax expense for financial reporting purposes will not be affected by the
recapture requirement. The tax law changes also provide that taxes associated
with the recapture of pre-1988 bad debt reserves would become payable under more
limited circumstances than under prior law. Under the tax laws, as amended,
events that would result in recapture of the pre-1988 bad debt reserves include
stock and cash distributions to the holding campany from the Bank in excess of
specified amounts. Webster does not expect such reserves
23
recaptured to be into taxable income. At December 31, 1996 Webster had pre-1988
reserves of approximately $16.4 million.
Depending on the composition of its items of income and expense, a
savings institution may be subject to the alternative minimum tax. For tax years
beginning after 1986, a savings institution must pay an alternative minimum tax
equal to the amount (if any) by which 20% of alternative minimum taxable income
("AMTI"), as reduced by an exemption varying with AMTI, exceeds the regular tax
due. AMTI equals regular taxable income increased or decreased by certain
adjustments and increased by certain tax preferences, including depreciation
deductions in excess of those allowable for alternative minimum tax purposes,
tax-exempt interest on most private activity bonds issued after August 7, 1986
(reduced by any related interest expense disallowed for regular tax purposes),
the amount of the bad debt reserve deduction claimed in excess of the deduction
based on the experience method and, for tax years after 1989, 75% of the excess
of adjusted current earnings over AMTI. AMTI may be reduced only up to 90% by
net operating loss carryovers, but the payment of alternative minimum tax will
give rise to a minimum tax credit which will be available with an indefinite
carryforward period, to reduce federal income taxes of the institution in future
years (but not below the level of alternative minimum tax arising in each of the
carryforward years).
Webster's federal income tax returns have been examined by the Internal
Revenue Service for tax years through 1993.
State. State income taxation is in accordance with the corporate income
tax laws of the State of Connecticut and other states on an apportioned basis.
For the State of Connecticut, the Bank and its subsidiaries are required to pay
taxes under the larger of two methods but no less than the minimum tax of $250
per entity. Method one is 10.75% (scheduled to decrease to 7.5% by 2000) of the
year's taxable income (which, with certain exceptions, is equal to taxable
income for federal purposes) or method two, (additional tax on capital) an
amount equal to 3 and 1/10 mills per dollar on its average capital and a special
rule for banks to calculate its additional tax base is an amount equal to 4% of
the amount of interest or dividends credited by the Bank on savings accounts of
depositors or account holders during the preceding taxable year, provided that,
in determining such amount, interest or dividends credited to the savings
account of a depositor or account holder are deemed to be the lesser of the
actual interest or dividends credited or the interest or dividend that would
have been credited if it had been computed and credited at the rate of
one-eighth of 1% per annum.
Item 2. Properties At December 31, 1996, Webster had 28 banking offices in New
Haven County, 29 banking offices in Hartford County, three banking offices in
Fairfield County, two banking offices in Litchfield County and two banking
offices in Middlesex County.
24
The following table sets forth certain information concerning the
banking offices of Webster at December 31, 1996.
Lease Lease
Year Owned or Expiration Renewal
Location Opened Leased Date Option
Webster Plaza, Waterbury, CT 1978 Owned -- --
Naugatuck Valley Mall, Waterbury, CT 1969 Leased 2000 --
Chase Avenue at Wigwam Ave, Waterbury, CT 1976 Owned -- --
364 Reidville Drive, Waterbury, CT 1976 Building-Owned -- --
Land-Leased 1997 --
670 Wolcott Street, Mattatuck Plaza, 1984 Building-Owned -- --
Waterbury, CT Land-Leased 2004 One 10-year option
656 Main Street, Watertown, CT 1959 Owned -- --
544 Straits Turnpike, Watertown, CT 1985 Leased 1998 Three 5-year options
Southbury Plaza, Southbury, CT 1979 Leased 2004 One 10-year option
45 Waterbury Road, Prospect, CT 1988 Owned -- --
359 Queen Street, Southington, CT 1989 Leased 1997 One 5-year option
145 Highland Avenue, Cheshire, CT 1990 Leased 2005 One 5-year option
66 North Main Street, Suffield, CT 1991 Owned -- --
6 National Drive, Windsor Locks, CT 1991 Leased 1999 One 3-year option
24 Dexter Plaza, Windsor Locks, CT 1991 Leased 1998 One 5-year option
561 Hazard Avenue, Enfield, CT 1991 Owned -- --
Route 140, East Windsor, CT 1991 Leased -- Monthly Negotiated
1 South Main Street, Branford, CT 1992 Owned -- --
922 South Main St., Cheshire, CT 1992 Building-Owned -- --
Land-Leased 2013 Two 33-year options
630 New Haven, Ave., Derby, CT 1992 Leased 2001 Five 5-year options
260 Main Street, East Haven, CT 1992 Owned -- --
1177 Post Road, Fairfield, CT 1992 Owned -- --
2290 Whitney Ave., Hamden, CT 1992 Owned -- --
5 Helen St., Hamden, CT 1992 Owned -- --
1227 Whitney Ave., Hamden, CT 1992 Owned -- --
100 Broad St., Milford, CT 1992 Owned -- --
314 Merwin Ave., Milford, CT 1992 Owned -- --
80 Elm St., New Haven, CT 1992 Owned -- --
894 Whalley Ave., New Haven, CT 1992 Owned -- --
70 Washington Ave., North Haven, CT 1992 Leased 2009 Three 5-year options
247 Boston Post Rd., Orange, CT 1992 Owned -- --
534 Campbell Ave., West Haven, CT 1992 Owned -- --
28 Durham Rd., Madison, CT 1995 Leased 2000 One 5-year option
733 Rubber Avenue, Naugatuck, CT 1994 Building-Owned -- --
Land-Leased 2087 --
575 Farmington Ave., Bristol, CT* 1994 Leased 2001 One 5-year option
647 Farmington Ave., Bristol, CT 1994 Leased 2007 One 10-year option
761 Pine St., Forestville, CT 1994 Leased -- Monthly Negotiated
150 Main St., Bristol, CT 1994 Owned -- --
51 East Main Street, Plainville, CT 1994 Owned -- --
North Riverside Avenue, Terryville, CT 1994 Owned -- --
375 Bridgeport, Shelton, CT 1995 Owned -- --
75 Tremont Street, Ansonia, CT 1995 Owned -- --
200 Division Street, Ansonia, CT 1995 Owned -- --
696 Amity Road, Bethany, CT 1995 Owned -- --
60 Oxford Road, Oxford, CT 1995 Owned -- --
427 Howe Avenue, Shelton, CT 1995 Owned -- --
40 Webster Square, Berlin CT 1996 Owned -- --
5 Coles Road, Cromwell, CT 1996 Leased 2004 --
1085 Main Street, East Hartford, CT 1996 Owned -- --
50 Freshwater Blvd., Enfield, CT 1996 Leased 2009 One 6-year option
High Street, Farmington, CT 1996 Leased 1999 --
25
141 Hebron Avenue, Glastonbury, CT 1996 Owned -- --
185 Asylum Avenue, Hartford, CT 1996 Leased 1998 Two 5-year options
410 Homestead Avenue, Hartford, CT 1996 Owned -- --
655 Wethersfield Avenue, Hartford, CT 1996 Leased 1997 One 5-year option
320 Middle Turnpike, Manchester, CT 1996 Leased 2002 One 5-year option
363 Main Street, Middletown, CT 1996 Owned -- --
741 West Main Street, New Britain, CT 1996 Owned -- --
3180 Berlin Turnpike, Newington, CT 1996 Leased 1999 --
690 Hopmeadow Street, Simsbury, CT 1996 Owned -- --
132 Main Street, Southington, CT 1996 Owned -- --
1114 New Britain Ave., West Hartford, CT 1996 Leased 2000 Three 3-year options
65 La Salle Road, West Hartford, CT 1996 Leased 2002 --
1039 Silas Deane Hwy., Wethersfield, CT 1996 Leased 2000 One 5-year option
270 Broad Street, Windsor, CT 1996 Owned -- --
371 East Main Street, Middletown, CT * 1996 Leased 2021 One 10-year option
* Drive thru facility only
The total net book value of properties and furniture and fixtures owned and
used for offices at December 31, 1996 was $33.5 million, which includes the
aggregate net book value of leasehold improvements on properties used for
offices of $2.0 million at that date.
Item 3. Legal Proceedings
At December 31, 1996, there were no material pending legal proceedings,
other than ordinary routine litigation to its business, to which Webster was a
party or to which any of its property was subject.
Item 4. Submission Of Matters To A Vote Of Security Holders
Not Applicable
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
The common stock of Webster is traded over-the-counter on the Nasdaq
National Market System under the symbol "WBST."
The following table shows dividends declared and the market price per
share by quarter for 1996 and 1995. Webster increased its quarterly dividend to
$.18 per share in August 1996.
26
Common Stock (Per Share)
Cash Market Price
Dividends End of
Declared Low High Period
1996:
Fourth................................... $ .18 $ 33 1/2 $ 38 1/4 $ 36 3/4
Third.................................... .18 28 35 3/4 35 1/4
Second................................... .16 26 3/4 29 3/8 28
First.................................... .16 27 1/2 30 1/4 28
1995:
Fourth................................... $ .16 $ 24 1/2 $ 29 1/2 $ 29 1/2
Third.................................... .16 23 31 26 1/4
Second................................... .16 21 1/4 26 23 7/8
First.................................... .16 18 22 1/4 21 1/4
Payment of dividends from Webster Bank to Webster is subject to certain
regulatory and other restrictions. Payment of dividends by Webster on its stock
is subject to various restrictions, none of which is expected to limit any
dividend policy which the Board of Directors may in the future decide to adopt.
Under Delaware law, Webster may pay dividends out of surplus or, in the event
there is no surplus, out of net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. Dividends may not be paid
out of net profits, however, if the capital of Webster has been diminished to an
amount less than the aggregate amount of capital represented by all classes of
preferred stock.
Item 6. Selected Financial Data
Selected financial data for the five years ended December 31, 1996,
consisting of data captioned "Selected Consolidated Financial and Other Data" on
Page 2 of the Corporation's 1996 Annual Report to Shareholders, is incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" on Pages 15 to 25 of the Corporation's 1996 Annual Report
to Shareholders is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The required information is incorporated herein by reference from Pages
26 to 58 of the Corporation's 1996 Annual Report to Shareholders.
Item 9. Disagreements on Accounting and Financial Disclosures.
Not Applicable.
27
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding the directors and executive officers of the
Corporation is omitted from this report as the Corporation has filed its
definitive proxy statement within 120 days after the end of the fiscal year
covered by this Report, and the information included therein is incorporated
herein by reference.
Item 11. Executive Compensation
Information regarding compensation of executive officers and directors
is omitted from this Report as the Corporation has filed a definitive proxy
statement within 120 days after the end of the fiscal year covered by this
report, and the information included therein (excluding the Personnel Resources
Committee Report on Executive Compensation and the Comparative Company
Performance information) is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information required by this Item is omitted from this Report as the
Corporation has filed a definitive proxy statement within 120 days after the end
of the fiscal year covered by this Report, and the information included therein
is incorporated by reference.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related transactions is
omitted from this Report as the Corporation has filed a definitive proxy
statement within 120 days after the end of the fiscal year covered by this
Report, and the information included therein is incorporated herein by
reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) The following consolidated financial statements of the
Registrant and its subsidiary included in its Annual Report to Shareholders for
the year ended December 31, 1996, are incorporated herein by reference in Item
8. The remaining information appearing in the Annual Report to Shareholders is
not deemed to be filed as part of this Report, except as expressly provided
herein.
Consolidated Statements of Condition - December 31, 1996 and 1995
Consolidated Statements of Income - Years Ended December 31, 1996, 1995 and
1994
Consolidated Statements of Cash Flows -Years Ended December 31, 1996, 1995
and 1994
Consolidated Statements of Shareholders' Equity - Years Ended December 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
28
Report of Independent Auditors
(a)(2) All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have
been omitted.
(a)(3) The following exhibits are either filed as part of this Report
or are incorporated herein by reference; references herein to First Federal Bank
now mean Webster Bank:
Exhibit No. 3. Certificate of Incorporation and Bylaws.
3.1 Restated Certificate of Incorporation.
3.2 Certificate of Amendment of Restated Certificate of
Incorporation.
3.3 Certificate of Designation for the Series A Cumulative
Perpetual Preferred Stock.
3.4 Certificate of Designation for the Series B 7 1/2% Cumulative
Convertible Preferred Stock.
3.5 Certificate of Designation for the Series C Participating
Preferred Stock.
3.6 Certificate of Amendment to Restated Certificate of
Incorporation.
3.7 Bylaws of Registrant (incorporated by reference to Exhibit 3.5
to the Corporation's Form 10-K filed on March 31, 1995).
Exhibit No. 10. Material Contracts.
10.1 1986 Stock Option Plan of Webster Financial Corporation
(incorporated herein by reference to Exhibit 10(a) to the
Corporation's Form 10-K filed on March 27, 1987).
10.2 1992 Stock Option Plan of Webster Financial Corporation
(incorporated by reference to Exhibit 10.2 to the
Corporation's Form 10-K filed on March 31, 1994).
10.3 Amendment No. 1 to 1992 Stock Option Plan (incorporated by
reference to Exhibit 10.3 to the Corporation's Form 10-K filed
on March 31, 1994).
10.4 Short-term Incentive Compensation Plan (incorporated by
reference to Exhibit 10.4 to the Corporation's Form 10-K filed
on March 31, 1995).
10.5 Long-Term Incentive Compensation Plan (incorporated by
reference to Exhibit 99.6 to the Corporation's Form 8-K/A
filed on November 10, 1993).
10.6 Performance Incentive Plan (incorporated by reference to
Exhibit 10.6 to the Corporation's Form 10-K filed on March 31,
1995)
10.7 Amended and Restated Employee Stock Ownership Plan, effective
as of January 1, 1989 (incorporated by reference to Exhibit
10.7 to the Corporation's Form 10-K filed on March 31, 1995)
29
10.8 First Federal Bank Deferred Compensation Plan for Directors
and Officers, effective December 7, 1987 (incorporated herein
by reference to Exhibit 10(1) to the Corporation's Form 10-K
filed on March 29, 1988).
10.9 Form of Supplemental Retirement Plan for Harold W. Smith
(incorporated herein by reference to Exhibit 10(j) to the
Corporation's Form 10-K filed on March 29, 1988).
10.10 Form of Stock Option Agreement for Harold W. Smith (Initial)
(incorporated herein by reference to Exhibit 10(k) to the
Corporation's Form 10-K filed on March 29, 1988).
10.11 Form of Stock Option Agreement for Executive Officers
(Initial) (incorporated herein by reference to Exhibit 10(l)
to the Corporation's Form 10-K filed on March 29, 1988).
10.12 Form of Stock Option Agreement for Directors (Initial)
(incorporated herein by reference to Exhibit 10(m) to the
Corporation's Form 10-K filed on March 29, 1988).
10.13 Form of Stock Option Agreement for Employees (1987)
(incorporated herein by reference to Exhibit 10(n) to the
Corporation's Form 10-K filed on March 29, 1988).
10.14 Form of Incentive Stock Option Agreement (for employees with
employment agreements) (incorporated by reference to Exhibit
10.15 to the Corporation's Form 10-K filed on March 31, 1994).
10.15 Form of Incentive Stock Option Agreement (for employees with
severance agreements) (incorporated by reference to Exhibit
10.16 to the Corporation's Form 10-K filed on March 31, 1994).
10.16 Form of Incentive Stock Option Agreement (for employees with
no employment or severance agreements) (incorporated by
reference to Exhibit 10.17 to the Corporation's Form 10-K
filed on March 31, 1994).
10.17 Form of Nonqualified Stock Option Agreement (for employees
with employment agreements) (incorporated by reference to
Exhibit 10.18 to the Corporation's Form 10-K filed on March
31, 1994).
10.18 Form of Non-Incentive Stock Option Agreement (for non-employee
directors).(incorporated by reference to Exhibit 10.19 to the
Corporation's Form 10-K filed on March 31, 1994).
10.19 Form of Non-Incentive Stock Option Agreement (for employees
with employment agreements) (incorporated by reference to
Exhibit 10.20 to the Corporation's Form 10-K filed on March
31, 1994).
10.20 Form of Non-Incentive Stock Option Agreement (for employees
with severance agreements) (incorporated by reference to
Exhibit 10.21 to the Corporation's Form 10-K filed on March
31, 1994).
10.21 Form of Non-Incentive Stock Option Agreement (for employees
with no employment or severance agreements) (incorporated by
reference to Exhibit 10.22 to the Corporation's Form 10-K
filed on March 31, 1994).
30
10.22 Form of Incentive Stock Option Agreement (for employees)
(revised)(incorporated by reference to Exhibit 10.22 to the
Corporation's Form 10-K filed on March 31, 1995)
.
10.23 Form of Nonqualified Stock Option Agreement (for employees
with employment agreements) (revised) (incorporated by
reference to Exhibit 10.23 to the Corporation's Form 10-K
filed on March 31, 1995).
10.24 Form of Nonqualified Stock Option Agreement (immediate
vesting) (incorporated by reference to Exhibit 10.24 to the
Corporation's Form 10-K filed on March 31, 1995.
10.25 Form of Nonqualified Stock Option Agreement (for senior
officers of Bristol Mortgage) (incorporated by reference to
Exhibit 10.25 to the Corporation's Form 10-K filed on March
31, 1995).
10.26 Supplemental Retirement Plan for Employees of First Federal
Bank, as amended and restated effective as of October 1, 1994
(incorporated by reference to Exhibit 10.26 to the
Corporation's Form 10-K filed on March 31, 1995).
10.27 Consulting Agreement between First Federal Bank and Harold W.
Smith, Jr., dated as of January 1, 1994 (incorporated herein
by reference to Exhibit 10.12 to the Corporation's Form 8-K/A
filed on January 13, 1994).
10.28 Amendment to Consulting Agreement, dated as of January 1,
1997, among Webster Bank, the Corporation and Harold W. Smith.
10.29 Employment Agreement among Webster Bank, the Corporation and
James C. Smith, dated as of January 1, 1997.
10.30 Employment Agreement among Webster Bank, the Corporation and
Lee A. Gagnon, dated as of January 1, 1997.
10.31 Employment Agreement among Webster Bank, the Corporation and
John V. Brennan, dated as of January 1, 1997.
10.32 Employment Agreement among Webster Bank, the Corporation and
Ross M. Strickland, dated as of January 1, 1997.
10.33 Employment Agreement among Webster Bank, the Corporation and
Peter K. Mulligan.
10.34 Employment Agreement between the Corporation, First Federal
Bank and Gary M. MacElhiney, dated as of January 1, 1995
(incorporated by reference to Exhibit 10.32 to the
Corporation's Form 10-K filed on March 31, 1995).
10.35 Severance Payment Agreement among the Corporation, First
Federal Bank and Peter K. Mulligan, dated as of April 17, 1995
(incorporated herein by reference to Exhibit 10.38 from the
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995).
10.36 Purchase and Assumption Agreement among FDIC, Receiver of
Suffield Bank, FDIC and First Federal Bank, dated September 6,
1991 (incorporated herein by reference to Exhibit 10(m) from
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992).
10.37 Indemnity Agreement between FDIC and First Federal Bank dated
as of September 6, 1991 (incorporated herein by reference to
Exhibit 10(n) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1991).
31
10.38 Purchase and Assumption Agreement among the FDIC, in its
corporate capacity as receiver of First Constitution Bank,
First Federal Bank and the FDIC, dated as of October 2, 1992
(incorporated herein by reference from the Registrant's Form
8-K filed on October 19, 1992).
10.39 Amendment No. 1 to Purchase and Assumption Agreement, dated as
of August 8, 1994, between the FDIC and First Federal
(incorporated by reference to Exhibit 10.36 to the
Corporation's Form 10-K filed on March 31, 1995).
10.40 Indenture, dated as of June 15, 1993, between the Corporation
and Chemical Bank, as Trustee, relating to the Corporation's
Senior Notes due 2000 (incorporated herein by reference to
Exhibit 99.5 to the Corporation's Form 8-K/A filed on November
10, 1993).
10.41 Junior Subordinated Indenture, dated January 29, 1997 between
the Corporation and the Bank of New York as Trustee, relating
to the Corporation's Junior Subordinated Deferrable Interest
Debentures.
Exhibit No. 13. Annual Report to Shareholders.
Exhibit No. 21. Subsidiaries.
Exhibit No. 24. Consent of KPMG Peat Marwick LLP.
Exhibit No. 27. Financial Data Schedule.
(b) The following current reports on Form 8-K or amendments thereto
on Form 8 were filed by the Registrar during the last quarter of
fiscal year 1996
(i) Current Report on Form 8-K dated October 10, 1996 (ii)
Current Report on Form 8-K dated November 26, 1996
(c) Exhibits to this Form 10-K are attached or incorporated by
reference as stated above.
(d) Not applicable.
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WEBSTER FINANCIAL CORPORATION
Registrant
BY: /s/ James C. Smith
----------------------------
James C. Smith, Chairman
and Chief Executive Officer
Date: March 27, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities noted as of March 27, 1996.
By: /s/ John V. Brennan
--------------------------------------
John V. Brennan, Executive Vice President,
Chief Financial Officer and Treasurer
By: /s/ Peter J. Swiatek
--------------------------------------
Peter J. Swiatek
Controller
By: /s/ Harold W. Smith
--------------------------------------
Harold W. Smith
Director
By: /s/ Joel S. Becker
--------------------------------------
Joel S. Becker
Director
By: /s/ O. Joseph Bizzozero, Jr.
--------------------------------------
O. Joseph Bizzozero, Jr.
Director
33
By: /s/ Walter R. Griffin
--------------------------------------
Walter R. Griffin
Director
By: /s/ Robert A. Finkenzeller
--------------------------------------
Robert A. Finkenzeller
Director
By: /s/ Marguerite F. Waite
--------------------------------------
Marguerite F. Waite
Director
By: /s/ J. Gregory Hickey
--------------------------------------
J. Gregory Hickey
Director
By: /s/ John. J. Crawford
--------------------------------------
John J. Crawford
Director
By: /s/ Harry P. DiAdamo, Jr.
--------------------------------------
Harry P. DiAdamo, Jr.
Director
By: /s/ C. Michael Jacobi
--------------------------------------
C. Michael Jacobi
Director
By: /s/ Achille Apicella
--------------------------------------
Achille Apicella
Director
34
EXHIBIT INDEX*
Number Description
3.1 Restated Certificate of Incorporation.
3.2 Certificate of Amendment of Restated Certificate of
Incorporation.
3.3 Certificate of Designation for the Series A Cumulative
Perpetual Preferred Stock.
3.4 Certificate of Designation for the Series B 7 1/2% Cumulative
Convertible Preferred Stock.
3.5 Certificate of Designation for the Series C Participating
Preferred Stock.
3.6 Certificate of Amendment to Restated Certificate of
Incorporation.
3.7 Bylaws of Registrant (incorporated by reference to Exhibit 3.5
to the Corporation's Form 10-K filed on March 31, 1995).
10.1 1986 Stock Option Plan of Webster Financial Corporation
(incorporated herein by reference to Exhibit 10(a) to the
Corporation's Form 10-K filed on March 27, 1987).
10.2 1992 Stock Option Plan of Webster Financial Corporation
(incorporated by reference to Exhibit 10.2 to the
Corporation's Form 10-K filed on March 31, 1994).
10.3 Amendment No. 1 to 1992 Stock Option Plan (incorporated by
reference to Exhibit 10.3 to the Corporation's Form 10-K filed
on March 31, 1994).
10.4 Short-term Incentive Compensation Plan (incorporated by
reference to Exhibit 10.4 to the Corporation's Form 10-K filed
on March 31, 1995).
10.5 Long-Term Incentive Compensation Plan (incorporated by
reference to Exhibit 99.6 to the Corporation's Form 8-K/A
filed on November 10, 1993).
10.6 Performance Incentive Plan (incorporated by reference to
Exhibit 10.6 to the Corporation's Form 10-K filed on March 31,
1995).
10.7 Amended and Restated Employee Stock Ownership Plan, effective
as of January 1, 1989 (incorporated by reference to Exhibit
10.7 to the Corporation's Form 10- K filed on March 31, 1995).
10.8 First Federal Bank Deferred Compensation Plan for Directors
and Officers, effective December 7, 1987 (incorporated herein
by reference to Exhibit 10(1) to the Corporation's Form 10-K
filed on March 29, 1988).
10.9 Form of Supplemental Retirement Plan for Harold W. Smith
(incorporated herein by reference to Exhibit 10(j) to the
Corporation's Form 10-K filed on March 29, 1988).
35
10.10 Form of Stock Option Agreement for Harold W. Smith (Initial)
(incorporated herein by reference to Exhibit 10(k) to the
Corporation's Form 10-K filed on March 29, 1988).
10.11 Form of Stock Option Agreement for Executive Officers
(Initial) (incorporated herein by reference to Exhibit 10(l)
to the Corporation's Form 10-K filed on March 29, 1988).
10.12 Form of Stock Option Agreement for Directors (Initial)
(incorporated herein by reference to Exhibit 10(m) to the
Corporation's Form 10-K filed on March 29, 1988).
10.13 Form of Stock Option Agreement for Employees (1987)
(incorporated herein by reference to Exhibit 10(n) to the
Corporation's Form 10-K filed on March 29, 1988).
10.14 Form of Incentive Stock Option Agreement (for employees with
employment agreements).(incorporated by reference to Exhibit
10.15 to the Corporation's Form 10-K filed on March 31, 1994).
10.15 Form of Incentive Stock Option Agreement (for employees with
severance agreements)(incorporated by reference to Exhibit
10.16 to the Corporation's Form 10-K filed on March 31, 1994).
10.16 Form of Incentive Stock Option Agreement (for employees with
no employment or severance agreements) (incorporated by
reference to Exhibit 10.17 to the Corporation's Form 10-K
filed on March 31, 1994).
10.17 Form of Nonqualified Stock Option Agreement (for employees
with employment agreements) (incorporated by reference to
Exhibit 10.18 to the Corporation's Form 10-K filed on March
31, 1994).
10.18 Form of Non-Incentive Stock Option Agreement (for non-employee
directors).(incorporated by reference to Exhibit 10.19 to the
Corporation's Form 10-K filed on March 31, 1994).
10.19 Form of Non-Incentive Stock Option Agreement (for employees
with employment agreements) (incorporated by reference to
Exhibit 10.20 to the Corporation's Form 10-K filed on March
31, 1994).
10.20 Form of Non-Incentive Stock Option Agreement (for employees
with severance agreements) (incorporated by reference to
Exhibit 10.21 to the Corporation's Form 10-K filed on March
31, 1994).
10.21 Form of Non-Incentive Stock Option Agreement (for employees
with no employment or severance agreements)(incorporated by
reference to Exhibit 10.22 to the Corporation's Form 10-K
filed on March 31, 1994).
10.22 Form of Incentive Stock Option Agreement (for employees)
(revised) (incorporated by reference to Exhibit 10.22 to the
Corporation's Form 10-K filed on March 31, 1995).
36
10.23 Form of Nonqualified Stock Option Agreement (for employees
with employment agreements) (revised) (incorporated by
reference to Exhibit 10.23 to the Corporation's Form 10-K
filed on March 31, 1995).
10.24 Form of Nonqualified Stock Option Agreement (immediate
vesting) (incorporated by reference to Exhibit 10.24 to the
Corporation's Form 10-K filed on March 31, 1995.
10.25 Form of Nonqualified Stock Option Agreement (for senior
officers of Bristol Mortgage) (incorporated by reference to
Exhibit 10.25 to the Corporation's Form 10-K filed on March
31, 1995).
10.26 Supplemental Retirement Plan for Employees of First Federal
Bank, as amended and restated effective as of October 1, 1994
(incorporated by reference to Exhibit 10.26 to the
Corporation's Form 10-K filed on March 31, 1995).
10.27 Consulting Agreement between First Federal Bank and Harold W.
Smith, Jr., dated as of January 1, 1994 (incorporated herein
by reference to Exhibit 10.12 to the Corporation's Form 8-K/A
filed on January 13, 1994).
10.28 Amendment to Consulting Agreement, dated as of January 1,
1997, among Webster Bank, the Corporation and Harold W. Smith.
10.29 Employment Agreement among Webster Bank, the Corporation and
James C. Smith, dated as of January 1, 1997.
10.30 Employment Agreement among Webster Bank, the Corporation and
Lee A. Gagnon, dated as of January 1, 1997.
10.31 Employment Agreement among Webster Bank, the Corporation and
John V. Brennan, dated as of January 1, 1997.
10.32 Employment Agreement among Webster Bank, the Corporation and
Ross M. Strickland, dated as of January 1, 1997.
10.33 Employment Agreement among Webster Bank, the Corporation and
Peter K. Mulligan.
10.34 Employment Agreement among the Corporation, First Federal
Bank and Gary M. MacElhiney, dated as of January 1, 1995
(incorporated by reference to Exhibit 10.32 to the
Corporation's Form 10-K filed on March 31, 1995).
10.35 Severance Payment Agreement among the Corporation, First
Federal Bank and Peter K. Mulligan, dated as of April 17,
1995(incorporated herein by reference to Exhibit 10.38 from
the Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995).
10.36 Purchase and Assumption Agreement among FDIC, Receiver of
Suffield Bank, FDIC and First Federal Bank, dated September 6,
1991 (incorporated herein by reference to Exhibit 10(m) from
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992).
10.37 Indemnity Agreement between FDIC and First Federal Bank dated
as of September 6, 1991 (incorporated herein by reference to
Exhibit 10(n) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1991).
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10.38 Purchase and Assumption Agreement among the FDIC, in its
corporate capacity as receiver of First Constitution Bank,
First Federal Bank and the FDIC, dated as of October 2, 1992
(incorporated herein by reference from the Registrant's Form
8-K filed on October 19, 1992).
10.39 Amendment No. 1 to Purchase and Assumption Agreement, dated as
of August 8, 1994, between the FDIC and First Federal
(incorporated by reference to Exhibit 10.36 to the
Corporation's Form 10-K filed on March 31, 1995).
10.40 Indenture, dated as of June 15, 1993, between the Corporation
and Chemical Bank, as Trustee, relating to the Corporation's
Senior Notes due 2000 (incorporated herein by reference to
Exhibit 99.5 to the Corporation's Form 8-K/A filed on November
10, 1993).
10.41 Junior Subordinated Indenture, dated January 29, 1997 between
the Corporation and the Bank of New York as Trustee, relating
to the Corporation's Junior Subordinated Deferrable Interest
Debentures.
13. Annual Report to Shareholders.
21. Subsidiaries.
24. Consent of KPMG Peat Marwick LLP.
27. Financial Data Schedule.
* References herein to First Federal Bank now mean Webster Bank.
38