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, 1997 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
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(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. X
Based upon the closing price of the registrant's common stock as of
March 25, 1998, the aggregate market value of the voting stock held by
non-affiliates of the registrant is $916,700,397. 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 25, 1998: 13,701,649
DOCUMENTS INCORPORATED BY REFERENCE
Part I and II: Portions of the Annual Report to Shareholders for fiscal year
ended December 31, 1997
Part III: Portions of the Definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on April 23, 1998.
WEBSTER FINANCIAL CORPORATION
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. Business........................................................... 3
General......................................................... 3
Acquisition Pending Consummation................................ 4
Recent Acquisitions............................................. 4
FDIC Assisted Acquisitions...................................... 6
Lending Activities.............................................. 7
Segregated Assets .............................................. 13
Investment Activities........................................... 13
Trust Activities................................................ 14
Sources of Funds .............................................. 15
Bank Subsidiaries............................................... 17
Employees....................................................... 17
Market Area and Competition..................................... 18
Regulation...................................................... 18
Taxation........................................................ 19
ITEM 2. Properties......................................................... 20
ITEM 3. Legal Proceedings.................................................. 21
ITEM 4. Submission of Matters to a Vote of Security Holders................ 21
PART II
ITEM 5. Market for Registrant's Common Equity and
Related Stockholder Matters...................................... 21
ITEM 6. Selected Financial Data............................................ 22
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ........................................... 23
ITEM 7.a Quantitative and Qualitative Disclosures About Market Risk......... 23
ITEM 8. Financial Statements and Supplementary Data........................ 23
ITEM 9. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure ........................................ 24
PART III
ITEM 10. Directors and Executive Officers of the Registrant................ 24
ITEM 11. Executive Compensation............................................ 24
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.... 24
ITEM 13. Certain Relationships and Related Transactions.................... 24
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.. 24
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 is organized along four business lines: consumer, business, mortgage
banking and trust and investment management services, 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.
At December 31, 1997, total assets were $7.0 billion as compared to
$5.6 billion a year earlier. Net loans receivable amounted to $3.8 billion at
December 31, 1997 as compared to $3.6 billion a year ago. Deposits were $4.4
billion at December 31,1997 as compared to $4.5 billion at December 31, 1996.
Webster expanded its banking operations by acquiring Sachem Trust
National Association ("Sachem Trust") in August 1997, People's Savings Financial
Corp. ("People's") in July 1997 and DS Bancor, Inc. ("Derby") in January 1997.
(See "Recent Acquisitions"). In preceding years, Webster expanded its operations
through the acquisitions of 20 former Shawmut Bank Connecticut National
Association ("Shawmut") branch banking offices in the Greater Hartford banking
market in 1996, Shelton Bancorp, Inc. ("Shelton") in 1995, Bristol Savings Bank
("Bristol") in 1994 and Shoreline Bank & 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.
At December 31, 1997, the assets of the Corporation, on an
unconsolidated basis, consisted primarily of its investment in the Bank and
$87.6 million of cash and investment securities. 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 22 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, 1997, approximately 81% of the Bank's deposits
were subject to BIF assessment rates and 19% were subject to Savings Association
Insurance Fund ("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
ACQUISITION PENDING CONSUMMATION
The Eagle Acquisition. During the second quarter of 1998, Webster expects
to complete its acquisition of Eagle Financial Corp ("Eagle") and its
subsidiary, Eagle Bank, a $2.1 billion savings bank headquartered in Bristol,
Connecticut. In connection with the acquisition of Eagle, Webster had expected
to issue 5.1 million shares of its common stock for all the outstanding shares
of Eagle common stock. Under the original terms of the argeement, each
outstanding share of Eagle common stock was expected to be converted into .84
shares of Webster common stock. On March 17, 1998, Webster announced a
two-for-one stock split to shareholders of record as of April 6, 1998, subject
to shareholder approval of an amendment to the Corporation's Certificate of
Incorporation to increase the authorized number of shares of Webster common
stock from 30,000,000 to 50,000,000. Due to the stock split, and subject to
shareholder approval of the Eagle acquisition on April 2, 1998, the exchange
ratio will change to 1.68 shares and accordingly, approximately 10.2 million
shares of Webster common stock are expected to be issued for all of the
outstanding shares of Eagle common stock. This acquisition will be accounted for
as a pooling of interests, and as such, future Consolidated Financial Statements
of the Corporation will include Eagle's financial data as if Eagle had been
combined at the beginning of the earliest period presented.
RECENT ACQUISITIONS
The Sachem Acquisition. On August 1, 1997, Webster acquired Sachem Trust, a
trust company headquartered in Guilford, Connecticut with $300 million of assets
under management, in a tax-free stock-for-stock exchange. Under the terms of the
agreement, Webster issued 83,385 shares of Webster common stock for all 173,000
outstanding shares of Sachem Trust. This acquisition was accounted for as a
purchase, and as such, results are reported in the Corporation's Consolidated
Financial Statements only for the periods subsequent to the acquisition date.
The People's Acquisition. On July 31, 1997, Webster acquired People's and
its subsidiary, People's Savings Bank & Trust, headquartered in New Britain,
Connecticut, which had $482 million of assets. In connection with the
acquisition of People's, Webster issued 1,575,996 shares of its common stock for
all the outstanding shares of People's common stock. Under the terms of the
merger agreement each outstanding share of People's common stock was converted
into .85 shares of Webster common stock. This acquisition was accounted for as a
pooling of interests, and as such, the Corporation's Consolidated Financial
Statements include People's financial data as if People's had been combined at
the beginning of the earliest period presented.
The Derby Acquisition. On January 31, 1997, Webster acquired Derby and its
subsidiary, Derby Savings Bank, headquartered in Derby, Connecticut, which had
$1.2 billion of assets. In connection with the acquisition of 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, the Corporation's Consolidated Financial Statements include Derby's
financial data as if Derby had been combined at the beginning of the earliest
period presented.
4
The Shawmut Transaction. On February 16, 1996, Webster Bank acquired 20
branches in the Greater Hartford market from Shawmut (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, and as such, results are reported in the Corporation's Consolidated
Financial Statements 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, headquartered in
Shelton, Connecticut, which had $295 million of assets. In connection with the
acquisition of Shelton, Webster issued 1,292,549 shares of its common stock for
all the outstanding shares of Shelton common stock, based on an exchange ratio
of .92 shares of Webster common stock for each of Shelton's outstanding shares
of common stock. This acquisition was accounted for as a pooling of interests,
and as such, 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 commercial bank headquartered in Madison, Connecticut, which had
$51 million of assets. Shoreline was merged into Webster Bank and its Madison
banking office became a full service office of Webster Bank. In connection with
the acquisition, 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, and as such, 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
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 Bank
and Bristol were merged and concurrently renamed as Webster Bank.
5
FDIC ASSISTED ACQUISITIONS
Webster Bank significantly expanded its retail banking operations through
assisted acquisitions of First Constitution in October 1992 and Suffield in
September 1991 from the 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.
6
LENDING ACTIVITIES
General. Webster originates residential, consumer and business loans. Total
loans receivable, before the allowance for loan losses, were $3.8 billion at
December 31, 1997 and $3.6 billion at December 31, 1996. 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, 1997, first mortgage loans secured by one-to-four
family properties comprised 73.9% of the Corporation's loan portfolio. The
allowance for losses on residential mortgage loans was $22.0 million at December
31, 1997.
Nonaccrual loans, which include loans delinquent 90 days or more, were
$37.7 million at December 31, 1997, compared to $41.6 million at December 31,
1996, out of a total loan portfolio, before net items, of approximately $3.9
billion at December 31, 1997 and $3.7 billion at December 31, 1996. The ratio of
nonaccrual loans to total loans before net items was 1.0% and 1.1% at December
31, 1997 and 1996, respectively. Nonaccrual assets, which include nonaccrual
loans and foreclosed properties were $45.9 million and $54.8 million at December
31, 1997 and 1996, respectively.
One-to-Four Family First Mortgage Loans. Webster originates both fixed-rate
and adjustable-rate residential mortgage loans. At December 31, 1997,
approximately 55% of Webster's total residential 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. Adjustable-rate
loans originated during 1997, when fully indexed, will be 2.75% above the
constant maturity one-year U.S. Treasury yield index.
At December 31, 1997, $1.3 billion or approximately 45% 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, 1997, Webster had $1.7
million of adjustable and fixed-rate mortgage loans held for sale.
Commercial and Commercial Real Estate Mortgage Loans. Webster had $493.8
million, or 12.9% of its total loans receivable, net of fees and costs, in
commercial and commercial real estate loans outstanding as of December 31, 1997,
excluding Segregated Assets. At December 31, 1997, $19.2 million of Webster's
$49.8 million allowance for loan losses was allocated to commercial and
commercial real estate loans. See "Management's Discussion and Analysis of
Financial Condition & Results of Operations" ("MD&A") contained in the Annual
Report to Shareholders incorporated herein by reference. Portions of the Annual
Report are filed as an exhibit hereto. Also see "Business -- Lending Activities
- --Nonaccrual Assets and Delinquencies" for more information about Webster's
asset quality, allowance for loan losses and provisions for loan losses.
Consumer Loans. At December 31, 1997, consumer loans were $455.0 million or
11.9% of Webster's total loans receivable net of fees and costs. 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
$8.6 million at December 31, 1997.
7
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,
-------------------------------------------------------------------
1997 1996 1995
-------------------- ------------------ -----------------
AMOUNT % AMOUNT % AMOUNT %
(DOLLARS IN THOUSANDS)
Residential mortgage loans:
1-4 family units............................... $ 2,824,280 73.9% $ 2,686,792 73.8% $ 2,379,622 79.2%
Multi-family units............................. 787 0.0 21,151 0.5 28,226 0.9
Construction................................... 100,524 2.6 93,973 2.6 60,836 2.0
---------- ------ ----------- ------ ----------- ------
Total residential mortgage loans............. 2,925,591 76.5 2,801,916 76.9 2,468,684 82.1
--------- ----- ---------- ------ ---------- ------
Commercial loans:
Commercial real estate......................... 251,997 6.6 245,714 6.8 172,836 5.8
Commercial construction........................ 22,203 0.6 9,079 0.2 9,895 0.3
Commercial non-mortgage........................ 219,610 5.7 202,900 5.6 72,253 2.4
------------ ------ ----------- ------ ------------ ------
Total commercial loans....................... 493,810 12.9 457,693 12.6 254,984 8.5
------------ ------ ----------- ----- ----------- ------
Consumer loans:
Home equity credit lines....................... 384,274 10.1 343,112 9.4 262,634 8.8
Other consumer................................ 70,680 1.8 82,986 2.3 68,993 2.3
------------ ------ ----------- ------ ----------- ------
Total consumer loans......................... 454,954 11.9 426,098 11.7 331,627 11.1
------------ ------ ----------- ----- ----------- ------
Loans receivable (net of fees and costs)......... 3,874,355 101.3 3,685,707 101.2 3,055,295 101.7
Allowance for loan losses........................ 49,753 1.3 43,185 1.2 50,281 1.7
------------ ------ ----------- ------ --------- -----
Loans receivable, net ........................ $ 3,824,602 100.0% $ 3,642,522 100.0% $ 3,005,014 100.0%
============ ===== ============== ===== ============ =====
AT DECEMBER 31,
----------------------------------------
1994 1993
------------------ ------------------
AMOUNT % AMOUNT %
---------- ----- ---------- -----
(DOLLARS IN THOUSANDS)
Residential mortgage loans:
1-4 family units............................... $2,377,182 81.0% $2,098,920 85.3%
Multi-family units............................. 18,512 0.7 12,220 0.5
Construction................................... 59,252 2.0 33,930 1.4
---------- ----- ---------- -----
Total residential mortgage loans............. 2,454,946 83.7 2,145,070 87.2
---------- ----- --------- -----
Commercial loans:
Commercial real estate......................... 167,364 5.7 71,637 2.9
Commercial construction........................ 4,237 0.1 2,083 0.1
Commercial non-mortgage........................ 69,094 2.4 42,214 1.7
--------- ---- --------- ----
Total commercial loans....................... 240,695 8.2 115,934 4.7
--------- ---- ------- ----
Consumer loans:
Home equity credit lines....................... 243,097 8.3 212,059 8.6
Other consumer................................. 51,595 1.7 40,702 1.7
--------- ------ --------- ----
Total consumer loans......................... 294,692 10.0 252,761 10.3
-------- ----- --------- ------
Loans receivable (net of fees and costs)......... 2,990,333 101.9 2,513,765 102.2
Allowance for loan losses........................ 55,366 1.9 54,370 2.2
--------- ----- --------- ------
Loans receivable, net ........................ $2,934,967 100.0% $ 2,459,395 100.0%
========== ======= ============= =====
8
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, 1997.
CONTRACTUAL MATURITY
--------------------------------------------------
MORE THAN
ONE YEAR ONE TO MORE THAN
OR LESS FIVE YEARS FIVE YEARS TOTAL
------- ---------- ---------- -----
(IN THOUSANDS)
Contractual Maturity:
Construction loans:
Residential mortgage............... $ 100,378 $ 146 $ -- $ 100,524
Commercial mortgage................ 3,529 15,987 2,687 22,203
Commercial non-mortgage loans........ 93,688 84,533 41,389 219,610
---------- ---------- --------- --------
Total .......................... $ 197,595 $ 100,666 $ 44,076 $ 342,337
========== =========== ========== ========
Interest-Rate Sensitivity:
Fixed rates.......................... $ 23,120 $ 24,854 $ 8,510 $ 56,484
Variable rates....................... 174,475 75,812 35,566 285,853
---------- ---------- --------- ----------
Total .......................... $ 197,595 $ 100,666 $ 44,076 $ 342,337
========== =========== ========== ==========
Purchase and Sale of Loans and Loan Servicing. Webster has been a
seller and purchaser of whole loans and participations in the secondary market.
Webster, in general sells fixed-rate mortgage loans and retains servicing for
the loans sold whenever possible. During the 1997 period, Webster reduced its
level of mortgage loans sold as it retained both fixed and variable-rate loans
for its own loan portfolio. Loans purchased in the secondary market by Webster
are typically adjustable-rate mortgage loans and purchased, in most cases, with
serving retained by the seller.
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 in the Shawmut
Transaction and purchased mortgage loan servicing.
AT DECEMBER 31,
----------------------------------------------------------------
1997 1996 1995
-------------------- ------------------- -----------------
AMOUNT % AMOUNT % AMOUNT %
(DOLLARS IN THOUSANDS)
Loans owned and serviced............... $ 2,553,336 69.0% $ 2,571,474 68.5% $ 2,313,355 70.5%
Loans serviced for others.............. 1,146,853 31.0 1,184,713 31.5 967,008 29.5
--------- ------- ----------- ------- ------------- ------
Total loans serviced by Webster.... $3,700,189 100.0% $3,756,187 100.0% $ 3,280,363 100.0%
========== ======== ========== ========= ============= =======
9
The table below shows mortgage loan origination, purchase, sale and
repayment activities of Webster for the periods indicated.
AT DECEMBER 31 ,
--------------------------------------
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
First mortgage loan originations and purchases:
- -----------------------------------------------
Permanent:
Mortgage loans originated..................................... $ 406,870 $ 411,967 $ 338,122
Construction:
1-4 family units.............................................. 152,298 61,844 64,528
----------- ------------ ------------
Total permanent and construction loans originated............... 559,168 473,811 402,650
Loans and participations purchased.............................. 187,815 77,440 99,224
Loans acquired in the Shawmut Transaction. . . . . . ........... -- 344,036 --
------------ ------------ ------------
Total loans originated and purchased.......................... 746,983 895,287 501,874
----------- ------------ -----------
First mortgage loan sales and principal reductions:
- ---------------------------------------------------
Loans securitized and sold...................................... 56,649 84,838 145,655
Loan principal reductions....................................... 542,124 459,076 326,706
Reclassified to Foreclosed Properties........................... 24,535 18,141 15,775
----------- ------------ ------------
Total loans sold and principal reductions..................... 623,308 562,055 488,136
----------- ------------ ------------
Increase in mortgage loans receivable....................... $ 123,675 $ 333,232 $ 13,738
=========== ============ ============
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.
Interest on nonaccrual loans that would have been recorded as additional
income for the years ended December 31, 1997, 1996 and 1995 had the loans been
current in accordance with their original terms approximated $3,178,000,
$3,984,000, and $5,528,000, respectively.
See MD&A and Note 1(e) to the Consolidated Financial Statements contained
in the Annual Report to Shareholders incorporated herein by reference for
further nonaccrual loan information and a description of Webster's nonaccrual
loan policy.
10
The following table sets forth information as to delinquent loans in
Webster's loans receivable portfolio before net items. Delinquency information
for Segregated Assets has been excluded.
AT DECEMBER 31,
1997 1996
---------------------------------------------------------
PRINCIPAL PRINCIPAL
BALANCES % BALANCES %
-------- - -------- -
(DOLLARS IN THOUSANDS)
Past due 30-89 days and still accruing:
Residential real estate.................... $ 30,986 0.79% $ 54,260 1.47%
Commercial................................. 12,689 0.33 5,214 0.14
Consumer................................... 6,413 0.16 7,810 0.21
--------- ------ ---------- -----
Total................................... $ 50,088 1.28% $ 67,284 1.82%
======== ======= ========== ======
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 to continue to report
them 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, 1997, the Bank's classified assets totaled $72.9 million,
consisting of $70.8 million in loans classified as "substandard," $2.1 million
in loans classified as "doubtful" and none classified as "loss". At December 31,
1996, the Bank's classified loans totaled $91.7 million, consisting of $89.6
million in loans classified as "substandard," $1.4 million in loans classified
as "doubtful" and $700,000 classified as "loss." In addition, at December 31,
1997 and 1996, the Bank had $8.9 million and $13.2 million, respectively, of
special mention loans.
Allowance for Loan Losses. Webster's allowance for loan losses at December
31, 1997 totaled $49.8 million. See MD&A - "Asset Quality" and "Comparison of
1997 and 1996 Years" contained in the Annual Report to Shareholders incorporated
herein by reference. In assessing the specific risks inherent in the portfolio,
management takes into consideration the risk of loss on 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.
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 loan receivable portfolio.
DECEMBER 31,
---------------------------------------------------------------------
1997 1996 1995
---- ---- ----
(DOLLARS IN THOUSANDS)
AMOUNT % AMOUNT % AMOUNT %
------ ------- ------ ------- ------ -------
Balance at End of Period
Applicable to:
Residential mortgage loans.............. $ 21,979 75.51% $ 14,090 75.26% $ 23,898 80.43%
Commercial mortgage loans............... 10,711 7.08 10,549 7.65 12,385 6.47
Commercial non-mortgage loans........... 8,448 5.67 10,975 5.50 4,185 2.25
Consumer loans.......................... 8,615 11.74 7,571 11.59 9,813 10.85
--------- ------ ---------- ------ ---------- ------
Total............................... $ 49,753 100.00% $ 43,185 100.00% $ 50,281 100.00%
======== ====== ======== ======= ======= ======
DECEMBER 31,
-------------------------------------------------
1994 1993
---- ----
(DOLLARS IN THOUSANDS)
AMOUNT % AMOUNT %
------ ---- -------- ----
Balance at End of Period
Applicable to:
Residential mortgage loans.............. $ 30,787 81.81% $ 41,010 84.86%
Commercial mortgage loans............... 11,426 6.16 3,820 3.59
Commercial non-mortgage loans........... 4,325 2.18 1,992 1.52
Consumer loans.......................... 8,828 9.85 7,548 10.03
--------- -------- ------- -----
Total............................... $ 55,366 100.00% $ 54,370 100.00%
======== ======= ========= ======
During 1997, Webster recorded an additional $7.2 million to the provision
for loan losses related to the loans acquired in the Derby and People's
acquisitions in order to bring the allowance allocated to these loans into
conformity with Webster's allowance policy.
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 in 1996 was primarily a result of acquired
allowances for purchased loans related to the Shawmut Transaction.
12
SEGREGATED ASSETS
Segregated Assets consist of the assets purchased from the FDIC in the
First Constitution acquisition which are subject to a loss-sharing arrangement
with the FDIC.
The following table sets forth information regarding Segregated Assets
delinquencies and nonaccruals at December 31, 1997 and 1996:
AT DECEMBER 31,
---------------
1997 1996
------ ------
(IN THOUSANDS)
Past due 30-89 days and still accruing:
Commercial real estate loans................ $ 1,967 $ 1,318
Multi-family loans.......................... -- 769
--------- ---------
1,967 2,087
--------- ---------
Loans accounted for on a nonaccrual basis:
Commercial real estate loans................ 2,912 3,337
Commercial non-mortgage loans............... 500 192
Multi-family real estate loans.............. -- 495
--------- ---------
3,412 4,024
--------- ---------
Total.................................... $ 5,379 $ 6,111
======= =======
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 $374,000, $433,000 and $1,207,000 for the years ended
December 31, 1997, 1996 and 1995, 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, 1997.
CONTRACTUAL MATURITY
--------------------
MORE THAN
ONE YEAR ONE TO MORE THAN
OR LESS FIVE YEARS FIVE YEARS TOTAL
---------- ---------- ---------- ----------
(IN THOUSANDS)
Contractual Maturity:
Commercial loans................ $ 500 $ 1,914 $ 1,903 $ 4,317
---------- ---------- ---------- ----------
Interest Rate Sensitivity:
Fixed Rates..................... $ -- $ 198 $ -- $ 198
Variable Rates.................. 500 1,716 1,903 4,119
---------- ---------- ---------- ----------
Total....................... $ 500 $ 1,914 $ 1,903 $ 4,317
========== ========== ======= ==========
Additional information concerning Segregated Assets is included in the MD&A
and in Note 5 of the Consolidated Financial Statements contained in the 1997
Annual Report to Shareholders incorporated herein by reference.
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
13
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 regulatory 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.
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 the 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 and increasing in value as
interest rates decrease. If interest rates decrease, as had been the case during
1997, the market value of loans and mortgage-backed securities generally will
increase causing the level of prepayments to increase. Webster also utilizes
interest-rate financial instruments to hedge mismatches in interest rate
maturities to reduce exposure to movements in interest rates. The objective of
interest-rate financial instruments is to offset the change in value of the
available for sale securities and trading account portfolios. See Notes 3 and 11
contained in the Annual Report to Shareholders incorporated herein by reference.
Except for $85.8 million invested by Webster at the holding company level in
common and preferred stock of certain entities and mutual funds at December 31,
1997, Webster's investments, directly and through the Bank, were investments of
the type permitted by 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.
The average remaining life of the securities portfolio, exclusive of
equity securities with no maturity, is 23.4 and 22.6 years at December 31,1997
and 1996, 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. At December 31, 1997, the duration of the trading,
available for sale and held to maturity portfolios: were approximately less than
one month, 1.7 years and 1.6 years, respectively.
Additional information for Investments is included in Note 3 of the
Consolidated Financial Statements contained in the 1997 Annual Report to
Shareholders incorporated herein by reference.
TRUST ACTIVITIES
The Bank through its subsidiary trust company, manages the assets of
individuals, small to medium size companies, as well as non-profit
organizations. At December 31, 1997, approximately $646 million in trust assets
were under management.
14
SOURCES OF FUNDS
Deposits, loan repayments, securities payments and 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 Federal Home Loan Bank ("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 common stockholders, capital securities expense and the
payment of interest to holders of Webster's 8 3/4% Senior Notes.
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 and
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
non-interest-bearing and interest-bearing account types. Webster's savings
account programs includes statement and passbook accounts, money market savings
accounts, club accounts and certificate of deposit accounts that offer short and
long-term maturity options. Webster offers IRA savings and certificate of
deposit accounts that earn interest on a tax-deferred basis. Webster also offers
special rollover IRA accounts for individuals who have received lump-sum
distributions. 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, bank by mail services
and overdraft protection. Deposit customers can access their accounts in a
variety of ways including ATMs, PC banking, telephone banking or by visiting a
nearby branch. Webster had $25.0 million of brokered certificate of deposit
accounts at December 31, 1997.
Webster receives retail and commercial deposits through its 84 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, receive free checks, 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 processing deposits
and 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 PC Banking service allows customers the ability to transfer
money between accounts, review statements, check balances and pay bills through
personal computer use. 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
15
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.
Additional information concerning the deposits of Webster is included in
Note 8 of the Consolidated Financial Statements contained in the Annual Report
to Shareholders incorporated herein by reference.
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,
-----------------------------------------------------
1997 1996
---- ----
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... 1.36% $ 784,850 18.0% 1.66% $ 711,498 16.0%
Regular savings.................... 2.44 956,285 21.9 2.34 935,312 21.0
Money market accounts.............. 3.76 103,765 2.4 3.49 208,932 4.6
Time deposits...................... 5.35 2,520,856 57.7 5.39 2,601,819 58.4
---- ---------- ----- ----- ------------ -----
Total deposits.............................. 3.84% $ 4,365,756 100.0% 3.95% $ 4,457,561 100.0%
==== ========== ===== ==== ============ =====
AT DECEMBER 31,
-----------------------------------
1995
----
WEIGHTED % OF
AVERAGE TOTAL
RATE AMOUNT DEPOSITS
-------- ------ --------
(DOLLARS IN THOUSANDS)
Balance by account type:
Demand deposits and NOW accounts... 1.85% $ 451,733 11.9%
Regular savings.................... 2.06 766,413 20.2
Money market accounts.............. 5.12 300,636 7.9
Time deposits...................... 5.61 2,278,930 60.0
----- ---------- -----
Total deposits.............................. 4.33% $ 3,797,712 100.0%
==== ========== ======
16
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. Under its current credit policies, the
FHL Bank limits advances based on a member's assets, total borrowings and net
worth.
The Bank uses 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, 1997, the
Bank had outstanding FHL Bank advances of $1.1 billion and other borrowings of
$956.6 million compared with FHL Bank Advances of $559.9 million and other
borrowings of $166.1 million at December 31, 1996.
During 1997, reverse repurchase agreement transactions, federal funds
purchased and lines of credit with correspondent banks also were used as a
source of short-term borrowings. The Bank uses reverse repurchase agreements and
the aforementioned alternate sources of borrowed funds when the cost of such
borrowings are favorable as compared to other funding sources. The Bank's Money
Desk operation provided business and governmental customers short-term
investment services primarily through repurchase agreement and certificate of
deposit transactions.
Additional information concerning FHL Bank advances and other borrowings of
Webster is included in Notes 9 and 10 of the Consolidated Financial Statements
contained in the 1997 Annual Report to Shareholders incorporated herein by
reference.
BANK SUBSIDIARIES
At December 31, 1997, the Bank's direct investment in its service
subsidiary corporation, Webster Investment Services, Inc., totaled $496,000. As
of December 31, 1997, 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's direct investment in its trust subsidiary, Webster Trust
Company, N.A., totaled $9.7 million at December 31, 1997. The trust had
approximately $645.6 million in trust assets under management at December 31,
1997.
The Bank's direct investment in its operating subsidiary corporation, FCB
Properties, Inc., totaled $1.7 million at December 31, 1997. The primary
function of this operating subsidiary is the disposal of foreclosed properties.
The Bank also has a real estate investment trust ("REIT") operating
subsidiary corporation, Webster Preferred Capital Corporation. The primary
purpose of the REIT is to provide a cost effective means of raising funds,
including capital, on a consolidated basis for the Bank. The REIT's strategy is
to acquire, hold and manage real estate mortgage assets. At December 31, 1997,
the Bank's direct investment in this subsidiary totaled $737.1 million.
EMPLOYEES
At December 31, 1997, Webster had 1,449 employees (including 290 part-time
17
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 83 branch
offices in Waterbury, Ansonia, Bethany, Branford, Cheshire, Derby, East Haven,
Hamden, Madison, Milford, Naugatuck, New Haven, North Haven, Orange, Oxford,
Prospect, Seymour, Southbury and West Haven (New Haven County): Watertown
(Litchfield County); Fairfield, Shelton, Stratford and Trumbull (Fairfield
County); Avon, Berlin, Bristol, East Hartford, East Windsor, Enfield,
Farmington, Glastonbury, Hartford, Manchester, Meriden, New Britain, Newington,
Plainville, Rocky Hill, Simsbury, Southington, Suffield, Terryville, West
Hartford, Wethersfield, Windsor and Windsor Locks (Hartford County); and
Cromwell and Middletown (Middlesex County). Waterbury 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. Webster has trust
offices located in the towns of Guilford, Westport, Greenwich, New Britain and
Meriden.
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, mutual 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 "MD&A" and "Notes to Consolidated
Financial Statements," incorporated herein by reference in the 1997 Annual
Report to Shareholders, 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.
Legislation was enacted in September 1996 to address the
undercapitalization of the
18
SAIF of the FDIC (the "SAIF Recapitalization Legislation"). 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). Several proposals for
abolishing the federal thrift charter were introduced in Congress during 1997 in
bills addressing financial services modernization, including a proposal from the
Treasury Department developed pursuant to requirements of the SAIF
Recapitalization Legislation. While no legislation was passed in 1997, it is
anticipated that the issue will be taken up again by Congress in 1998. If
legislation is passed abolishing the federal thrift charter, 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 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.
Various proposals were introduced in Congress in 1997 to permit the payment
of interest on required reserve balances, and to permit savings institutions and
other regulated financial institutions to pay interest on business demand
accounts. While this legislation appears to have strong support from many
constituencies, Webster and Webster Bank are unable to predict whether such
legislation will be enacted.
During 1997, the OTS continued its comprehensive review of its regulations
to eliminate duplicative, unduly burdensome and unnecessary regulations. The OTS
revised or has proposed revising regulations addressing liquidity requirements,
capital distributions, deposit accounts and application processing. The recently
adopted revisions to the OTS liquidity requirements lowered the minimum
liquidity requirement for a federal savings institution from 5% to 4%, but made
clear that an institution must maintain sufficient liquidity to ensure its safe
and sound operation. The revisions also added certain mortgage-related
securities and mortgage loans to the types of assets that can be used to meet
liquidity requirements, and provided alternatives for measuring compliance with
the requirements.
The recently proposed revisions to the OTS capital distribution
regulation would conform the definition of "capital distribution" to the
definition used in the OTS prompt corrective action regulations, and would
delete the three classifications of institutions. Under the proposal, there
would be no specific limitation on the amount of permissible capital
distributions, but the OTS could disapprove a capital distribution if the
institution would not be at least adequately capitalized under the OTS prompt
correction action regulations following the distribution, if the distribution
raised safety or soundness concerns, or if the distribution violated a
prohibition contained in any statute, regulation, or agreement between the
institution and the OTS, or a condition imposed on the institution by the OTS.
The OTS would consider the amount of the distribution when determining whether
it raised safety or soundness concerns.
TAXATION
Federal. Webster, on behalf of itself and its subsidiaries, files a
calendar tax year
19
consolidated federal income tax return, except for the Bank's REIT subsidiary,
which files a stand alone 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 company from the Bank in excess of specified
amounts. Webster does not expect such reserves to be recaptured into taxable
income. At December 31, 1997, Webster had pre-1988 reserves of approximately
$27.2 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, exclusive of the REIT
Subsidiary, 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 10.50% (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, 1997, Webster had 31 banking offices in New Haven County,
41 banking offices in Hartford County, 7 banking offices in Fairfield County, 2
banking offices in
20
Litchfield County and 3 banking offices in Middlesex County. Of these, 46
offices are owned and 38 offices are leased. Lease expiration dates range from 1
to 24 years with renewal options of 3 to 10 years. Additionally, the Bank
maintains five trust offices: two in New Haven County, two in Fairfield County
and one in Hartford county.
The total net book value of properties and furniture and fixtures owned and
used for banking offices at December 31, 1997 was $39.9 million, which includes
the aggregate net book value of leasehold improvements on properties used for
offices of $2.3 million at that date.
ITEM 3. LEGAL PROCEEDINGS
At December 31, 1997, there were no material pending legal proceedings,
other than ordinary routine litigation incident 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 EQUITY 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 1997 and 1996. Webster increased its quarterly dividend to $.20
per share in 1997.
Common Stock (Per Share)
----------------------------------------------------------
Market Price
Cash ------------------------------------------
Dividends End of
Declared Low High Period
-------- --- ---- ------
1997:
Fourth.............. $ .20 $ 57 $ 67 3/4 $ 66 1/2
Third............... .20 43 3/8 59 3/4 58 3/4
Second.............. .20 34 5/8 45 3/4 45 1/2
First............... .20 35 1/8 41 3/8 35 1/8
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
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
21
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 issued
and outstanding preferred stock.
Other Events
Webster announced on March 17, 1998 that its Board of Directors declared a
two-for-one stock split. The stock split is subject to approval by Webster's
shareholders of an amendment to Webster's certificate of incorporation to
increase the authorized number of shares of Webster common stock from 30,000,000
to 50,000,000 shares, which will be considered by shareholders at a special
meeting to be held on April 2, 1998. Webster issued a press release on March 17,
1998 describing the stock split and providing additional information about
Webster.
ITEM 6. SELECTED FINANCIAL DATA
STATEMENT OF CONDITION DATA (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)*
- --------------------------------------------------------------------------------
AT DECEMBER 31,
--------------------------------------------------------------------
AT OR FOR YEAR ENDED: 1997 1996 1995 1994 1993
--------------------- ------------ ----------- ----------- ----------- -----------
Total assets $7,019,621 $5,607,210 $4,883,402 $4,677,859 $4,032,451
Loans receivable, net 3,824,602 3,642,522 3,005,014 2,934,967 2,459,395
Securities 2,787,240 1,577,702 1,505,919 1,300,793 1,135,168
Intangible assets 48,919 49,448 10,865 12,806 16,083
Deposits 4,365,756 4,457,561 3,797,712 3,781,393 3,272,262
Shareholders' equity 382,186 336,832 334,580 264,404 235,151
OPERATING DATA YEARS ENDED DECEMBER 31,
- -------------- ---------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ -------------- ------------- ------------- -----------
Net interest income $191,925 $ 169,037 $ 135,331 $ 140,612 $ 117,785
Provision for loan losses 15,835 9,788 5,726 5,609 8,082
Noninterest income 35,990 32,179 27,902 17,467 20,024
Noninterest expenses:
Merger and acquisition expenses (a) 27,058 500 4,271 700 --
Other noninterest expenses 131,489 130,055 108,465 112,599 89,001
-------- -------------- ------------- ----------- -------
Total noninterest expenses 158,547 130,555 112,736 113,299 89,001
-------- -------------- ------------- ------------- -----------
Income before taxes 53,533 60,873 44,771 39,171 40,726
Income taxes 19,735 22,372 15,450 11,211 17,033
--------- -------------- ------------- ------------- ------------
Net income before cumulative change 33,798 38,501 29,321 27,960 23,693
Cumulative effect of change in method
of accounting for income taxes -- -- -- -- 6,408
--------- -------------- ------------- ------------- -----------
NET INCOME 33,798 38,501 29,321 27,960 30,101
Preferred stock dividends -- 1,149 1,296 1,716 2,653
--------- -------------- ------------- ------------- -----------
Income available to common shareholders $ 33,798 $ 37,352 $ 28,025 $ 26,244 $ 27,448
========= ============== ============= ============= ===========
22
SIGNIFICANT STATISTICAL DATA
Interest-rate spread 3.02% 3.12% 2.80% 3.18% 3.03%
Net interest margin 3.17% 3.23% 2.96% 3.27% 3.14%
Return on average shareholders' equity 9.72% 11.20% 10.08% 10.76% 10.17%
Net income per common share (b)
Basic $ 2.51 $ 2.82 $ 2.35 $ 2.30 $ 2.04
Diluted $ 2.44 $ 2.66 $ 2.22 $ 2.17 $ 1.94
Dividends declared per common share (c) $ 0.80 $ 0.68 $ 0.64 $ 0.52 $ 0.50
Dividend payout ratio 32.79% 25.56% 28.83 23.96% 25.77%
Noninterest expenses to average assets 2.50% 2.38% 2.37% 2.47% 2.27%
Noninterest expenses (excluding foreclosed
property expenses and provisions, net)
to average assets 2.46% 2.32% 2.24% 2.25% 2.00%
Diluted weighted average shares 13,828 14,460 13,202 12,877 11,810
Book value per common share $ 27.99 $ 25.18 $ 24.41 $ 21.37 $ 20.74
Tangible book value per common share $ 24.41 $ 21.61 $ 23.57 $ 20.26 $ 19.16
Shareholders' equity to total assets 5.44% 6.01% 6.85% 5.65% 5.83%
* Information for all periods presented has been restated to reflect the
inclusion of the results of People's Savings Financial Corp., DS Bancor, Inc.,
Shelton Bancorp, Inc. and Shoreline Bank and Trust Company which were acquired
on July 31, 1997, January 31, 1997, November 1, 1995 and December 16, 1994,
respectively, and were accounted for using the pooling of interests method.
(a) See Management's Discussion and Analysis, Comparison of 1997 and 1996 Years
and 1996 and 1995 Years and Note 18 to the Consolidated Financial Statements in
the Corporation's 1997 Annual Report to Shareholders which is incorporated
herein by reference.
(b) Before cumulative change in the method of accounting for Income Taxes in
1993. After such cumulative change, basic net income per common share for 1993
was $2.72 and diluted net income per share was $2.48.
(c) Webster has continuously declared dividends since the third quarter of 1987.
All per share data and the number of outstanding shares of common stock have
been adjusted retroactively to give effect to the payment of stock dividends.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on Pages 19 to 28 of the Corporation's 1997 Annual Report to
Shareholders is incorporated herein by reference.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The required information is incorporated herein by reference from pages 22
to 24 of the Corporation's 1997 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The required information is incorporated herein by reference from Pages 29
to 60 of the Corporation's 1997 Annual Report to Shareholders.
23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
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, 1997, 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.
24
Consolidated Statements of Condition - December 31, 1997 and 1996
Consolidated Statements of Income - Years Ended December 31,
1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity - Years Ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows - Years Ended December 31,
1997, 1996 and 1995
Notes to Consolidated Financial Statements
Independent Auditor's Report
(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. 2. Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession.
2.1 Agreement and Plan of Merger, dated as of October 26, 1997, by
and between the Corporation and Eagle Financial Corp.
(incorporated herein by reference to Exhibit 2.1 to the
Corporation's Current Report on Form 8-K filed on November 24,
1997).
2.2 Stock Option Agreement, dated October 26, 1997, between Eagle
Financial Corp. and the Corporation (incorporated herein by
reference to Exhibit 2.2 to the Corporation's Current Report on
Form 8-K filed on November 24, 1997).
Exhibit No. 3. Certificate of Incorporation and Bylaws.
3.1 Restated Certificate of Incorporation (incorporated herein by
reference to Exhibit 3.1 to the Corporation's Form 10-K filed on
March 27, 1997).
3.2 Certificate of Amendment of Restated Certificate of Incorporation
(incorporated herein by reference to Exhibit 3.2 to the
Corporation's Form 10-K filed on March 27, 1997).
3.3 Certificate of Designation for the Series C Participating
Preferred Stock (incorporated herein by reference to Exhibit 3.5
to the Corporation's Form 10-K filed on March 27, 1997).
3.4 Certificate of Amendment to Restated Certificate of Incorporation
(incorporated herein by reference to Exhibit 3.6 to the
Corporation's Form 10-K filed on March 27, 1997).
3.5 Bylaws of Registrant.
25
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 Amendment No. 2 to 1992 Stock Option Plan.
10.5 Short-Term Incentive Compensation Plan (incorporated by reference
to Exhibit 10.4 to the Corporation's Form 10-K filed on March 31,
1995).
10.6 Economic Value Added Incentive Plan (the description of the plan
in the first full paragraph on page 15 of the Corporation's
definitive proxy materials for the 1998 Annual Meeting of
Shareholders is incorporated herein by reference).
10.7 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).
10.8 Performance Incentive Plan (incorporated by reference to Exhibit
A to the Corporation's definitive proxy materials for the
Corporation's 1996 Annual Meeting of Shareholders).
10.9 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).
10.10 Directors Retainer Fees Plan (incorporated herein by reference to
Exhibit B to the Corporation's definitive proxy materials for the
Corporation's 1996 Annual Meeting of Shareholders).
26
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).
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 Employment Agreement, dated as of January 1, 1998, among Webster
Bank, the Corporation and James C. Smith. See Schedule 10.27 for
a list of other executive officers of the Corporation and Webster
Bank who have an Employment Agreement substantially identical in
all material respects to the Employment Agreement of Mr. Smith,
except as to the name of the
27
executive who is a party to the agreement and as otherwise
indicated on Schedule 10.27.
10.28 Amendment To Employment Agreement, entered into as of March 17,
1998, by and among Webster Bank, the Corporation and James C.
Smith. See Schedule 10.28 for a list of other executive officers
of the Corporation and Webster Bank who have an Amendment To
Employment Agreement substantially identical in all material
respects to the Amendment To Employment Agreement of Mr. Smith,
except as to the name of the executive who is a party to the
agreement.
10.29 Change of Control Employment Agreement, dated as of December 15,
1997, by and between the Corporation and James C. Smith. See
Schedule 10.29 for a list of other executive officers of the
Corporation who have a Change of Control Employment Agreement
substantially identical in all material respects to the Change of
Control Employment Agreement of Mr. Smith, except as to the name
of the executive who is a party to the agreement.
10.30 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).
10.31 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).
10.32 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).
10.33 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
(incorporated herein by reference to Exhibit 10.44 to the
Corporation's Form 10-K filed on March 27, 1997).
Exhibit No. 13. Annual Report to Shareholders.
Exhibit No. 21. Subsidiaries.
Exhibit No. 23. Consent of KPMG Peat Marwick LLP.
28
Exhibit No. 27. Financial Data Schedule.
27.1 Financial Data Schedule.
27.2 Restated Financial Data Schedule.
27.3 Restated Financial Data Schedule.
(b) The following current reports on Form 8-K were filed by the Registrant
during the last quarter of the fiscal year 1997.
(i) Current Report on Form 8-K filed on November 7, 1997 (date
of report October 26, 1997) relating to the proposed
acquisition of Eagle Financial Corp. by the Corporation.
(ii) Current Report on Form 8-K filed on November 24, 1997 (date
of report October 26, 1997) attaching the Agreement and Plan
of Merger and Stock Option Agreement in connection with the
proposed acquisition of Eagle Financial Corp. by the
Corporation.
(iii) Current Report on Form 8-K filed on November 17, 1997 (date
of report November 17, 1997) attaching the consolidated
financial statements of the Corporation restated to reflect
the acquisition of People's Savings Financial Corp. (as
amended by the Form 8-K/As filed on January 26, 1998,
January 26, 1998 and February 6, 1998).
(c) Exhibits to this Form 10-K are attached or incorporated by reference as
stated above.
(d) Not applicable.
29
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, as of March 31, 1998.
WEBSTER FINANCIAL CORPORATION
-----------------------------
Registrant
BY: /s/ James C. Smith
---------------------------
James C. Smith, Chairman
and Chief Executive Officer
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 31, 1998.
By: /s/ James C. Smith
--------------------------------------------
James C. Smith, Chairman and
Chief Executive Officer
Principal Executive Officer
By: /s/ John V. Brennan
---------------------------------------------
John V. Brennan, Executive Vice President,
Chief Financial Officer and Treasurer
Principal Financial Officer
Principal Accounting Officer
By: /s/ Achille A. Apicella
---------------------------------------------
Achille A. Apicella
Director
By: /s/ Joel S. Becker
---------------------------------------------
Joel S. Becker
Director
By: /s/ O. Joseph Bizzozero, Jr.
---------------------------------------------
O. Joseph Bizzozero, Jr.
Director
30
By:
----------------------------------------------
John J. Crawford
Director
By: /s/ Harry P. DiAdamo, Jr.
---------------------------------------------
Harry P. DiAdamo, Jr.
Director
By: /s/ Robert A. Finkenzeller
----------------------------------------------
Robert A. Finkenzeller
Director
By: /s/ Walter R. Griffin
----------------------------------------------
Walter R. Griffin
Director
By: /s/ J. Gregory Hickey
----------------------------------------------
J. Gregory Hickey
Director
By:
----------------------------------------------
C. Michael Jacobi
Director
By: /s/ Marguerite F. Waite
----------------------------------------------
Marguerite F. Waite
Director
31
EXHIBIT INDEX*
NUMBER DESCRIPTION
- ------ -----------
2.1 Agreement and Plan of Merger, dated as of October 26, 1997, by and
between the Corporation and Eagle Financial Corp. (incorporated herein
by reference to Exhibit 2.1 to the Corporation's Current Report on
Form 8-K filed on November 24, 1997).
2.2 Stock Option Agreement, dated October 26, 1997, between Eagle
Financial Corp. and the Corporation (incorporated herein by reference
to Exhibit 2.2 to the Corporation's Current Report on Form 8-K filed
on November 24, 1997).
3.1 Restated Certificate of Incorporation (incorporated herein by
reference to Exhibit 3.1 to the Corporation's Form 10-K filed on March
27, 1997).
3.2 Certificate of Amendment of Restated Certificate of Incorporation
(incorporated herein by reference to Exhibit 3.2 to the Corporation's
Form 10-K filed on March 27, 1997).
3.3 Certificate of Designation for the Series C Participating Preferred
Stock (incorporated herein by reference to Exhibit 3.5 to the
Corporation's Form 10-K filed on March 27, 1997).
3.4 Certificate of Amendment to Restated Certificate of Incorporation
(incorporated herein by reference to Exhibit 3.6 to the Corporation's
Form 10-K filed on March 27, 1997).
3.5 Bylaws of Registrant.
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 Amendment No. 2 to 1992 Stock Option Plan.
10.5 Short-Term Incentive Compensation Plan (incorporated by reference to
Exhibit 10.4 to the Corporation's Form 10-K filed on March 31, 1995).
10.6 Economic Value Added Incentive Plan (the description of the plan in
the first full paragraph on page 15 of the Corporation's definitive
proxy materials for the 1998 Annual Meeting of Shareholders is
incorporated herein by reference).
10.7 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).
10.8 Performance Incentive Plan (incorporated by reference to Exhibit A to
the Corporation's definitive proxy materials for the Corporation's
1996 Annual Meeting of Shareholders).
10.9 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).
10.10 Directors Retainer Fees Plan (incorporated herein by reference to
Exhibit B to the Corporation's definitive proxy materials for the
Corporation's 1996 Annual Meeting of Shareholders).
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
32
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
33
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).
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 Employment Agreement, dated as of January 1, 1998, among Webster Bank,
the Corporation and James C. Smith. See Schedule 10.27 for a list of
other executive officers of the Corporation and Webster Bank who have
an Employment Agreement substantially identical in all material
respects to the Employment Agreement of Mr. Smith, except as to the
name of the executive who is a party to the agreement and otherwise
indicated on Schedule 10.27.
10.28 Amendment To Employment Agreement, entered into as of March 17, 1998,
by and among Webster Bank, the Corporation and James C. Smith. See
Schedule 10.28 for a list of other executive officers of the
Corporation and Webster Bank who have an Amendment To Employment
Agreement substantially identical in all material respects to the
Amendment To Employment Agreement of Mr. Smith, except as to the name
of the executive who is a party to the agreement.
10.29 Change of Control Employment Agreement, dated as of December 15, 1997,
by and between the Corporation and James C. Smith. See Schedule 10.29
for a list of other executive officers of the Corporation who have a
Change of Control Employment Agreement substantially identical in all
material respects to the Change of Control Employment Agreement of Mr.
Smith, except as to the name of the executive who is a party to the
agreement.
10.30 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).
34
10.31 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).
10.32 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).
10.33 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
(incorporated herein by reference to Exhibit 10.44 to the
Corporation's Form 10-K filed on March 27, 1997).
13. Annual Report to Shareholders.
21. Subsidiaries.
23. Consent of KPMG Peat Marwick LLP.
27.1 Financial Data Schedule.
27.2 Restated Financial Data Schedule.
27.3 Restated Financial Data Schedule.
* References herein to First Federal Bank now mean Webster Bank.
35