Bulletin
Investor Alert

New York Markets Open in:

press release

April 21, 2020, 7:30 a.m. EDT

Webster Reports First Quarter 2020 Earnings Of $0.39 Per Diluted Share

WATERBURY, Conn., April 21, 2020 /PRNewswire/ -- Webster Financial Corporation /zigman2/quotes/207965570/composite WBS +0.71% , the holding company for Webster Bank, N.A. and its HSA Bank division, today announced earnings applicable to common shareholders of $36.0 million, or $0.39 per diluted share, for the quarter ended March 31, 2020, compared to $97.5 million, or $1.06 per diluted share, for the quarter ended March 31, 2019. Results in the quarter reflect a provision for credit losses of $76.0 million under the Current Expected Credit Loss (CECL) accounting standard effective January 1, 2020 compared to a provision for credit losses of $8.6 million in prior year.

"During these uncertain, challenging and unprecedented times, Webster bankers have once again stepped up to take care of our customers, our communities and, importantly, each other.  I am so proud of every one of our 3,400 bankers," said John R. Ciulla, president and chief executive officer. "We continue to take swift actions to keep our employees safe while effectively providing our customers with the banking services and financial assistance they need to navigate through the economic storm brought on by this pandemic."

Highlights for the first quarter of 2020:

  • Results include the adoption of CECL and the impact of COVID-19 resulting in a provision of $76.0 million; allowance coverage of 1.60 percent.

  • Revenue of $304.2 million.

  • Loan growth of $2.1 billion, or 11.0 percent from a year ago, led by commercial and commercial real estate, which increased 15.6 percent.

  • Deposit growth of $1.8 billion, or 7.7 percent from a year ago, with growth of $527 million, or 8.5 percent, in HSA deposits.

  • Net interest margin of 3.23 percent.

  • Efficiency ratio (non-GAAP) of 58.0 percent.

"Webster's strong capital and liquidity positions enable us to support our customers and communities during this trying time," said Glenn MacInnes, executive vice president and chief financial officer. "Our Common Equity Tier 1 capital ratio of 11 percent exceeds the regulatory well-capitalized level by $1 billion, and our loan-to-deposit ratio of 85 percent reflects our funding strength."

Webster has responded quickly with programs to support our Employees, Customers and the Communities where we live and work. These actions included:

Support for our Employees:

  • 75% of our bankers are currently working remotely

  • Special pay considerations and additional PTO for essential front line employees

  • No furloughs; bankers are at 100% pay

  • Zero-interest loans up to $5,000 are available to assist employees and their families facing unforeseen challenges due to COVID-19

Support for Individuals and Businesses:

  • Instituted a 90-day foreclosure moratorium on residential loans

  • Increased deposit limits; waiving penalties for early CD withdrawals

  • Waiving or reducing certain fees

  • Not reporting payment deferrals to credit bureaus

  • Participating in the SBA Paycheck Protection Program with the initial round resulting in approximately $650 million in SBA approved loans

  • Payment modifications (needs based / COVID related impact)

Support for the Communities we serve

  • More than $375,000 in donations for urgent basic needs including:

  • Additional re-targeting of existing sponsorships and grants to nonprofits to support COVID-19 related activities including:

Line of Business performance compared to the first quarter of 2019

Commercial Banking

Webster's Commercial Banking segment serves middle market, commercial real estate, asset-based lending, equipment finance, private banking, and treasury and payment solutions clients. As of March 31, 2020, Commercial Banking had $12.3 billion in loans and leases and $5.0 billion in deposit balances.

Commercial Banking Operating Results:






Percent

Three months ended March 31,
Favorable/
(In thousands)
2020 2019
(Unfavorable)
Net interest income
$99,316
$98,342


1.0 %
Non-interest income
13,239
14,011


(5.5)

Operating revenue
112,555
112,353


0.2

Non-interest expense
46,544
44,618


(4.3)

Pre-tax, pre-provision net revenue
$66,011
$67,735


(2.5)














Percent


At March 31,
Increase/
(In millions)
2020 2019
(Decrease)
Loans and leases
$12,282
$10,631


15.5 %
Deposits
5,041
4,191


20.3

Note: In 1Q20, segment net interest income was updated to reflect changes in the funds transfer pricing methodology related to allocated capital.  Prior periods were restated to reflect the change.

Pre-tax, pre-provision net revenue decreased $1.7 million to $66.0 million in the quarter as compared to prior year. Net interest income increased $1.0 million to $99.3 million, primarily due to loan growth. Non-interest income decreased $0.8 million to $13.2 million, primarily due to lower one-time fees in the quarter. Non-interest expense increased $1.9 million to $46.5 million, primarily due to investments in people, product enhancements, and infrastructure.

HSA Bank

Webster's HSA Bank division offers a comprehensive consumer-directed healthcare solution that includes health savings accounts, health reimbursement arrangements, flexible spending accounts and commuter benefits. Health savings accounts are distributed nationwide directly to employers and individual consumers, as well as through national and regional insurance carriers, benefit consultants and financial advisors. As of March 31, 2020, HSA Bank had $8.6 billion in total footings comprising $6.7 billion in deposit balances and $1.9 billion in assets under administration through linked investment accounts.

HSA Bank Operating Results:






Percent

Three months ended March 31,
Favorable/
(In thousands)
2020 2019
(Unfavorable)
Net interest income
$42,673
$43,098


(1.0) %
Non-interest income
26,383
25,577


3.2

Operating revenue
69,056
68,675


0.6

Non-interest expense
37,078
33,522


(10.6)

Pre-tax, net revenue
$31,978
$35,153


(9.0)














Percent


At March 31,
Increase/
(Dollars in millions)
2020 2019
(Decrease)
Number of accounts (thousands)
3,119
2,933


6.3 %








Deposits
$6,736
$6,209


8.5

Linked investment accounts *
1,855
1,703


8.9

Total footings
$8,591
$7,912


8.6

* Linked investment accounts are held off balance sheet



Note: In 1Q20, segment net Interest income was updated to reflect changes in the funds transfer pricing methodology related to allocated capital.  Prior periods were restated to reflect the change.

Pre-tax net revenue decreased $3.2 million to $32.0 million in the quarter as compared to prior year. Net interest income decreased $0.4 million to $42.7 million, due to 8.5 percent growth in deposits and a decline in deposit spreads. Non-interest income increased $0.8 million to $26.4 million, primarily due to 6.3 percent growth in accounts over the past year. Non-interest expense increased $3.6 million to $37.1 million, primarily due to account growth and expanded distribution.

Community Banking

Community Banking serves consumer and business banking customers primarily throughout southern New England and into Westchester County, New York. Community Banking is comprised of the Personal Banking and Business Banking operating segments, as well as a distribution network consisting of 157 banking centers and 308 ATMs, a customer care center, and a full range of web and mobile-based banking services. As of March 31, 2020, Community Banking had $8.6 billion in loans and $12.6 billion in deposit balances.

Community Banking Operating Results:






Percent

Three months ended March 31,
Favorable/
(In thousands)
2020 2019
(Unfavorable)
Net interest income
$99,470
$106,290


(6.4) %
Non-interest income
27,620
25,382


8.8

Operating revenue
127,090
131,672


(3.5)

Non-interest expense
98,967
95,075


(4.1)

Pre-tax, pre-provision net revenue
$28,123
$36,597


(23.2)














Percent


At March 31,
Increase/
(In millions)
2020 2019
(Decrease)
Loans
$8,610
$8,184


5.2 %
Deposits
12,640
12,271


3.0

Note: In 1Q20, segment net Interest income was updated to reflect changes in the funds transfer pricing methodology related to allocated capital.  Prior periods were restated to reflect the change.

Pre-tax, pre-provision net revenue decreased $8.5 million to $28.1 million in the quarter as compared to prior year. Net interest income decreased $6.8 million to $99.5 million, due to declining interest rates on loans coupled with decreasing credit value of deposits; partially offset by balance growth in the loan and deposit portfolios. Non-interest income increased $2.2 million driven by growth in fees from mortgage banking, investment services, and interest rate hedging activities. This growth was partially offset by reductions in deposit-related service charges and the impact of gains from asset sales that occurred in the prior year. Non-interest expense increased $3.9 million to $99.0 million resulting from higher employee-related expenses, continued investments in technology, and other corporate overhead; offset by lower occupancy, legal, and card processing costs.

Consolidated financial performance:

Quarterly net interest income compared to the first quarter of 2019:

  • Net interest income was $230.8 million compared to $241.6 million.

  • Net interest margin was 3.23 percent compared to 3.74 percent. The yield on interest-earning assets declined by 59 basis points, and the cost of interest-bearing liabilities declined by 10 basis points.

  • Average interest-earning assets totaled $28.9 billion and grew by $2.9 billion, or 11.0 percent.

  • Average loans totaled $20.3 billion and grew by $1.8 billion, or 9.8 percent.

  • Average deposits totaled $24.1 billion and grew by $1.5 billion, or 6.8 percent.

Quarterly provision for credit losses:

  • The provision for credit losses, which was calculated under the Current Expected Credit Loss (CECL) accounting standard effective January 1, 2020, was $76.0 million, compared to $6.0 million in the prior quarter and $8.6 million a year ago. The increase compared to the prior periods is primarily due to the adoption of CECL and the impact of COVID-19.

  • Net charge-offs were $7.8 million, compared to $6.1 million in the prior quarter and $9.6 million a year ago. The ratio of net charge-offs to average loans on an annualized basis was 0.15 percent, compared to 0.12 percent in the prior quarter and 0.21 percent a year ago.

  • The allowance for credit losses on loans and leases represented 1.60 percent of total loans at March 31, 2020, compared to 1.04 percent at December 31, 2019 and 1.12 percent at March 31, 2019. The allowance for credit losses on loans and leases reflects a January 1, 2020 transition adjustment of $57.6 million related to the adoption of the CECL accounting standard and represented 206 percent of nonperforming loans at March 31, 2020 compared to 139 percent at December 31, 2019 and 133 percent at March 31, 2019.

Quarterly non-interest income compared to the first quarter of 2019:

  • Total non-interest income was $73.4 million, compared to $68.6 million, an increase of $4.8 million. This reflects an increase of $2.8 million of other income primarily due to client hedging activity offset by losses on miscellaneous investments, an increase of $2.1 million in mortgage banking activities primarily due to a decline in mortgage interest rates driving higher origination volume and $1.1 million in wealth and investment services. These increases were offset by a decrease in loan related fees of $1.3 million primarily due to lower prepayment fees and higher mortgage servicing rights costs.

Quarterly non-interest expense compared to the first quarter of 2019:

  • Total non-interest expense was $178.8 million, compared to $175.7 million, an increase of $3.2 million. The increase reflects increases of $4.1 million in compensation and benefits due to annual merit increases and temporary help partially offset by lower variable based compensation and $2.1 million in technology and equipment due to continued infrastructure investment. Offsetting these increases was a decrease of $3.4 million in other expenses primarily due to decreased pension costs, and a reduction in the reserve for unfunded commitments.

Quarterly income taxes compared to the first quarter of 2019:

  • Income tax expense was $11.1 million compared to $26.1 million and the effective tax rate was 22.6 percent compared to 20.8 percent.

  • The higher effective tax rate in the quarter reflects a net discrete tax benefit recognized during the period a year ago.

Investment securities:

  • Total investment securities were $8.5 billion, compared to $8.2 billion at December 31, 2019 and $7.5 billion at March 31, 2019. The carrying value of the available-for-sale portfolio included $3.1 million of net unrealized gains, compared to $24.4 million at December 31, 2019 and $58.6 million of net unrealized losses at March 31, 2019. The carrying value of the held-to-maturity portfolio does not reflect $156.3 million of net unrealized gains, compared to $86.7 million at December 31, 2019 and $46.8 million of net unrealized losses at March 31, 2019.

Loans:

  • Total loans were $20.9 billion, compared to $20.0 billion at December 31, 2019 and $18.8 billion at March 31, 2019. Compared to December 31, 2019, commercial loans increased by $685.1 million, commercial real estate loans increased by $173.1 million, and residential mortgages increased by $18.8 million, while consumer loans decreased by $22.5 million.

  • Compared to a year ago, commercial real estate loans increased by $1.131 billion, commercial loans increased by $715.0 million, and residential mortgages increased by $359.7 million, while consumer loans decreased by $128.1 million.

  • Loan originations for portfolio were $1.195 billion, compared to $1.919 billion in the prior quarter and $1.132 billion a year ago. In addition, $60 million of residential loans were originated for sale in the quarter, compared to $94 million in the prior quarter and $33 million a year ago.

Asset quality:

  • Total nonperforming loans were $162.3 million, or 0.78 percent of total loans, compared to $150.9 million, or 0.75 percent of total loans, at December 31, 2019 and $158.9 million, or 0.84 percent of total loans, at March 31, 2019. Total paying nonperforming loans were $61.9 million, compared to $59.0 million at December 31, 2019 and $38.6 million at March 31, 2019.

  • Past due loans were $37.0 million, compared to $42.6 million at December 31, 2019 and $50.5 million at March 31, 2019.

Deposits and borrowings:

  • Total deposits were $24.5 billion, compared to $23.3 billion at December 31, 2019 and $22.8 billion at March 31, 2019. Core deposits to total deposits were 87.8 percent, compared to 86.7 percent at December 31, 2019 and 85.3 percent at March 31, 2019. The loan to deposit ratio was 85.2 percent, compared to 85.9 percent at December 31, 2019 and 82.7 percent at March 31, 2019.

  • Total borrowings were $3.6 billion, compared to $3.5 billion at December 31, 2019 and $2.2 billion at March 31, 2019.

Capital:

  • The return on average common shareholders' equity and the return on average tangible common shareholders' equity were 4.75 percent and 5.95 percent, respectively, compared to 14.01 percent and 17.70 percent, respectively, in the first quarter of 2019.

  • The tangible equity and tangible common equity ratios were 8.14 percent and 7.67 percent, respectively, compared to 8.68 percent and 8.16 percent, respectively, at March 31, 2019. The common equity tier 1 risk-based capital ratio was 10.96 percent, compared to 11.46 percent at March 31, 2019.

  • Book value and tangible book value per common share were $32.66 and $26.46, respectively, compared to $30.62 and $24.51, respectively, at March 31, 2019.

***

Webster Financial Corporation is the holding company for Webster Bank, National Association and its HSA Bank division. With $31.7 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust, and investment services through 157 banking centers and 308 ATMs. Webster also provides mobile and Internet banking. Webster Bank owns the asset-based lending firm Webster Business Credit Corporation; the equipment finance firm Webster Capital Finance Corporation; and HSA Bank, a division of Webster Bank, which provides health savings account trustee and administrative services. Webster Bank is a member of the FDIC and an equal housing lender. For more information about Webster, including past press releases and the latest annual report, visit the Webster website at www.websterbank.com.  

Conference Call

A conference call covering Webster's  first quarter 2020 earnings announcement will be held today, Tuesday, April 21, 2020 at 9:00 a.m. (Eastern) and may be heard through Webster's Investor Relations website at www.wbst.com, or in listen-only mode by calling 877-407-8289 or 201-689-8341 internationally. The call will be archived on the website and available for future retrieval.

Forward-Looking Statements

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking statements can be identified by words such as "believes," "anticipates," "expects," "intends," "targeted," "continue," "remain," "will," "should," "may," "plans," "estimates," and similar references to future periods; however, such words are not the exclusive means of identifying such statements. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items; (ii) statements of plans, objectives, and expectations of Webster or its management or Board of Directors; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Forward-looking statements are based on Webster's current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Webster's actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: (1) our ability to successfully execute our business  plan and manage our risks; (2) local, regional, national, and international economic conditions and the impact they may have on us and our customers; (3) volatility and disruption in national and international financial markets; (4) the potential adverse effects of the ongoing novel coronavirus (COVID-19) pandemic and any governmental or societal responses thereto, or other unusual and infrequently occurring events; (5) changes in the level of nonperforming assets and charge-offs; (6) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (7) adverse conditions in the securities markets that lead to impairment in the value of our investment securities; (8) inflation, changes in interest rate, and monetary fluctuations; (9) the timely development and acceptance of new products and services and the perceived value of those products and services by customers; (10) changes in deposit flows, consumer spending, borrowings, and savings habits; (11) our ability to implement new technologies and maintain secure and reliable technology systems; (12) performance by our counterparties and vendors; (13) our ability to increase market share and control expenses; (14) changes in the competitive environment among banks, financial holding companies, and other financial services providers; (15) changes in laws and regulations (including those concerning taxes, banking, securities, insurance, and healthcare) with which we and our subsidiaries must comply, including recent and potential legislative and regulatory changes in response to the COVID-19 pandemic such as the CARES Act and the rules and regulations that may be promulgated thereunder; (16) the effect of changes in accounting policies and practices applicable to us, including changes in our allowance for loan and lease losses and other impacts of recently adopted accounting guidance regarding the recognition of credit losses; (17) legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; and (18) the other factors that are described in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q under the headings "Risk Factors" and "Management Discussion and Analysis of Financial Condition and Results of Operation." Any forward-looking statement made by the Company in this release speaks only as of the date on which it is made. Factors or events that could cause the Company's actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. A reconciliation of net income and other performance ratios, as adjusted, is included in the accompanying selected financial highlights table.

We believe that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends and financial position. We utilize these measures for internal planning and forecasting purposes. We, as well as securities analysts, investors, and other interested parties, also use these measures to compare peer company operating performance. We believe that our presentation and discussion, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting our business and allows investors to view performance in a manner similar to management. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

 

WEBSTER FINANCIAL CORPORATIONSelected Financial Highlights (unaudited)



At or for the Three Months Ended

(In thousands, except per share data) March 31, 2020

December 31, 2019

September 30, 2019

June 30, 2019

March 31, 2019






















Income and performance ratios:



















Net income $ 38,199

$ 90,473

$ 93,865

$ 98,649

$ 99,736

Earnings applicable to common shareholders
36,021


88,066


91,442


96,193


97,549

Earnings per diluted common share
0.39


0.96


1.00


1.05


1.06

Return on average assets
0.50 %

1.19 %

1.27 %

1.38 %

1.44 %
Return on average tangible common shareholders' equity (non-GAAP)
5.95


14.34


15.37


16.88


17.70

Return on average common shareholders' equity
4.75


11.60


12.36


13.47


14.01

Non-interest income as a percentage of total revenue
24.12


23.47


22.52


23.88


22.12






















Asset quality:



















Allowance for credit losses on loans and leases $ 334,931

$ 209,096

$ 209,152

$ 211,671

$ 211,389

Nonperforming assets
169,120


157,380


166,716


153,247


164,431

Allowance for credit losses on loans and leases / total loans and leases
1.60 %

1.04 %

1.07 %

1.10 %

1.12 %
Net charge-offs / average loans and leases (annualized)
0.15


0.12


0.28


0.24


0.21

Nonperforming loans and leases / total loans and leases
0.78


0.75


0.83


0.77


0.84

Nonperforming assets / total loans and leases plus OREO
0.81


0.79


0.85


0.80


0.87

Allowance for credit losses on loans and leases / nonperforming loans and leases
206.37


138.56


128.55


142.97


133.01






















Other ratios:



















Tangible equity (non-GAAP)
8.14 %

8.88 %

8.83 %

8.82 %

8.68 %
Tangible common equity (non-GAAP)
7.67


8.39


8.34


8.31


8.16

Tier 1 risk-based capital (a)
11.60


12.22


12.32


12.09


12.17

Total risk-based capital (a)
13.11


13.55


13.68


13.48


13.60

Common equity tier 1 risk-based capital (a)
10.96


11.56


11.63


11.41


11.46

Shareholders' equity / total assets
9.76


10.56


10.54


10.59


10.50

Net interest margin
3.23


3.27


3.49


3.63


3.74

Efficiency ratio (non-GAAP)
58.03


58.52


56.60


56.09


55.93






















Equity and share related:



















Common equity $ 2,945,205

$ 3,062,733

$ 3,007,357

$ 2,920,180

$ 2,821,218

Book value per common share
32.66


33.28


32.68


31.74


30.62

Tangible book value per common share (non-GAAP)
26.46


27.19


26.58


25.63


24.51

Common stock closing price
22.90


53.36


46.87


47.77


50.67

Dividends declared per common share
0.40


0.40


0.40


0.40


0.33






















Common shares issued and outstanding
90,172


92,027


92,034


92,007


92,125

Weighted-average common shares outstanding - Basic
90,936


91,574


91,559


91,534


91,962

Weighted-average common shares outstanding - Diluted
91,206


91,916


91,874


91,855


92,225


(a) Presented as projected for March 31, 2020 and actual for the remaining periods. In accordance with regulatory capital rules, the Company elected an option to delay the estimated impact of CECL on its regulatory capital over a five-year transition period ending December 31, 2024. As a result, capital ratios and amounts as of March 31, 2020 exclude the impact of the increased allowance for credit losses on loans, held-to-maturity debt securities and unfunded loan commitments attributed to the adoption of CECL.

 

WEBSTER FINANCIAL CORPORATIONConsolidated Balance Sheets (unaudited)
(In thousands) March 31, 2020

December 31, 2019

March 31, 2019
Assets:









Cash and due from banks $ 198,458

$ 185,341

$ 167,587
Interest-bearing deposits
69,482


72,554


53,072
Securities:









Available for sale
3,016,631


2,925,833


2,977,316
Held to maturity
5,486,206


5,293,918


4,480,160
Total securities
8,502,837


8,219,751


7,457,476
Allowance for credit losses on investment securities held-to-maturity
(312)


-


-
Securities, net
8,502,525


8,219,751


7,457,476
Loans held for sale
22,448


36,053


20,615
Loans and Leases:









Commercial
7,565,947


6,880,838


6,850,942
Commercial real estate
6,122,474


5,949,339


4,991,825
Residential mortgages
4,991,512


4,972,685


4,631,787
Consumer
2,211,591


2,234,124


2,339,736
Total loans and leases
20,891,524


20,036,986


18,814,290
Allowance for credit losses on loans and leases
(334,931)


(209,096)


(211,389)
Loans and leases, net
20,556,593


19,827,890


18,602,901
Federal Home Loan Bank and Federal Reserve Bank stock
141,327


149,046


106,674
Premises and equipment, net
268,420


270,413


279,580
Goodwill and other intangible assets, net
559,328


560,290


563,176
Cash surrender value of life insurance policies
554,231


550,651


546,094
Deferred tax asset, net
80,318


61,975


76,576
Accrued interest receivable and other assets
701,744


455,380


364,378
Total Assets $ 31,654,874

$ 30,389,344

$ 28,238,129











Liabilities and Shareholders' Equity:









Deposits:









Demand $ 4,883,436

$ 4,446,463

$ 4,224,144
Health savings accounts
6,736,178


6,416,135


6,209,213
Interest-bearing checking
3,007,069


2,689,734


2,560,975
Money market
2,477,304


2,312,840


2,299,229
Savings
4,418,689


4,354,809


4,102,740
Certificates of deposit
2,891,161


3,104,765


3,273,120
Brokered certificates of deposit
100,000


-


81,507
Total deposits
24,513,837


23,324,746


22,750,928
Securities sold under agreements to repurchase and other borrowings
1,262,749


1,040,431


688,065
Federal Home Loan Bank advances
1,773,399


1,948,476


951,730
Long-term debt
571,212


540,364


524,303
Accrued expenses and other liabilities
443,435


327,557


356,848
Total liabilities
28,564,632


27,181,574


25,271,874
Preferred stock
145,037


145,037


145,037
Common shareholders' equity
2,945,205


3,062,733


2,821,218
Total shareholders' equity
3,090,242


3,207,770


2,966,255
Total Liabilities and Shareholders' Equity $ 31,654,874

$ 30,389,344

$ 28,238,129

 

WEBSTER FINANCIAL CORPORATIONConsolidated Statements of Income (unaudited)






Three Months Ended March 31,
(In thousands, except per share data) 2020

2019
Interest income:





Interest and fees on loans and leases $ 216,187

$ 228,764
Interest and dividends on securities
58,108


57,278
Loans held for sale
175


148
Total interest income
274,470


286,190
Interest expense:





Deposits
27,843


31,020
Borrowings
15,826


13,619
Total interest expense
43,669


44,639
Net interest income
230,801


241,551
Provision for credit losses
76,000


8,600
Net interest income after provision for loan and lease losses
154,801


232,951
Non-interest income:





Deposit service fees
42,570


43,024
Loan and lease related fees
6,496


7,819
Wealth and investment services
8,739


7,651
Mortgage banking activities
2,893


764
Increase in cash surrender value of life insurance policies
3,580


3,584
Gain on investment securities, net
8


-
Other income
9,092


5,770
Total non-interest income
73,378


68,612
Non-interest expense:





Compensation and benefits
101,887


97,785
Occupancy
14,485


14,696
Technology and equipment
27,837


25,697
Marketing
3,502


3,328
Professional and outside services
5,663


6,048
Intangible assets amortization
962


962
Loan workout expenses
493


660
Deposit insurance
4,725


4,430
Other expenses
19,282


22,080
Total non-interest expense
178,836


175,686
Income before income taxes
49,343


125,877
Income tax expense
11,144


26,141
Net income
38,199


99,736
Preferred stock dividends and other
(2,178)


(2,187)
Earnings applicable to common shareholders $ 36,021

$ 97,549







Weighted-average common shares outstanding - Diluted
91,206


92,225







Earnings per common share:





Basic $ 0.40

$ 1.06
Diluted
0.39


1.06

 

WEBSTER FINANCIAL CORPORATIONFive Quarter Consolidated Statements of Income (unaudited)


Three Months Ended
(In thousands, except per share data) March 31, 2020

December 31, 2019

September 30, 2019

June 30, 2019

March 31, 2019
Interest income:

















Interest and fees on loans and leases $ 216,187

$ 223,527

$ 236,453

$ 235,949

$ 228,764
Interest and dividends on securities
58,108


58,205


57,517


56,163


57,278
Loans held for sale
175


268


166


145


148
Total interest income
274,470


282,000


294,136


292,257


286,190
Interest expense:

















Deposits
27,843


31,586


34,214


32,757


31,020
Borrowings
15,826


19,164


19,383


17,713


13,619
Total interest expense
43,669


50,750


53,597


50,470


44,639
Net interest income
230,801


231,250


240,539


241,787


241,551
Provision for credit losses
76,000


6,000


11,300


11,900


8,600
Net interest income after provision for loan and lease losses
154,801


225,250


229,239


229,887


232,951
Non-interest income:

















Deposit service fees
42,570


40,470


41,410


43,118


43,024
Loan and lease related fees
6,496


8,704


8,246


6,558


7,819
Wealth and investment services
8,739


8,476


8,496


8,309


7,651
Mortgage banking activities
2,893


2,286


2,133


932


764
Increase in cash surrender value of life insurance policies
3,580


3,670


3,708


3,650


3,584
Gain on investment securities, net
8


29


-


-


-
Other income
9,092


7,284


5,938


13,286


5,770
Total non-interest income
73,378


70,919


69,931


75,853


68,612
Non-interest expense:

















Compensation and benefits
101,887


100,467


98,623


98,527


97,785
Occupancy
14,485


14,379


14,087


14,019


14,696
Technology and equipment
27,837


27,639


26,180


25,767


25,697
Marketing
3,502


3,957


4,758


4,243


3,328
Professional and outside services
5,663


4,674


5,024


5,634


6,048
Intangible assets amortization
962


962


961


962


962
Loan workout expenses
493


474


986


832


660
Deposit insurance
4,725


4,662


4,409


4,453


4,430
Other expenses
19,282


22,516


24,866


26,203


22,080
Total non-interest expense
178,836


179,730


179,894


180,640


175,686
Income before income taxes
49,343


116,439


119,276


125,100


125,877
Income tax expense
11,144


25,966


25,411


26,451


26,141
Net income
38,199


90,473


93,865


98,649


99,736
Preferred stock dividends and other
(2,178)


(2,407)


(2,423)


(2,456)


(2,187)
Earnings applicable to common shareholders $ 36,021

$ 88,066

$ 91,442

$ 96,193

$ 97,549



















Weighted-average common shares outstanding - Diluted
91,206


91,916


91,874


91,855


92,225



















Earnings per common share:

















Basic $ 0.40

$ 0.96

$ 1.00

$ 1.05

$ 1.06
Diluted
0.39


0.96


1.00


1.05


1.06

 

WEBSTER FINANCIAL CORPORATIONConsolidated Average Balances, Interest, Yields and Rates, and Net Interest Margin on a Fully Tax-equivalent Basis (unaudited)


Three Months Ended March 31,


2020






2019
(Dollars in thousands) Average balance

Interest


Yield/rate





Average balance
Interest
Yield/rate
Assets:























Interest-earning assets:























Loans and leases $ 20,324,799

$ 216,918


4.24 %




$ 18,509,174
$ 229,385
4.96 %
Securities (a)
8,319,747


58,408


2.85






7,308,946

56,954
3.09
Federal Home Loan and Federal Reserve Bank stock
126,364


1,251


3.98






113,016

1,712
6.14
Interest-bearing deposits
68,307


191


1.11






55,372

329
2.37
Loans held for sale
22,297


175


3.14






13,451

148
4.40
Total interest-earning assets
28,861,514

$ 276,943


3.84 %





25,999,959
$ 288,528
4.43 %
Non-interest-earning assets
1,930,996














1,795,430





Total Assets $ 30,792,510













$ 27,795,389






























Liabilities and Shareholders' Equity:























Interest-bearing liabilities:























Demand deposits $ 4,516,906

$ -


- %




$ 4,191,870
$ -
- %
Health savings accounts
6,761,358


3,296


0.20






6,140,062

2,949
0.19
Interest-bearing checking, money market and savings
9,716,974


12,403


0.51






8,958,522

12,793
0.58
Certificates of deposit
3,067,557


12,144


1.59






3,244,714

15,278
1.91
Total deposits
24,062,795


27,843


0.47






22,535,168

31,020
0.56

























Securities sold under agreements to repurchase and other borrowings
1,296,925


3,730


1.14






597,107

2,752
1.84
Federal Home Loan Bank advances
1,325,899


6,869


2.05






1,119,035

7,785
2.78
Long-term debt (a)
551,250


5,227


4.00






249,169

3,082
4.95
Total borrowings
3,174,074


15,826


2.00






1,965,311

13,619
2.77
Total interest-bearing liabilities
27,236,869

$ 43,669


0.64 %





24,500,479
$ 44,639
0.74 %
Non-interest-bearing liabilities
362,116














359,257





Total liabilities
27,598,985














24,859,736






























Preferred stock
145,037














145,037





Common shareholders' equity
3,048,488














2,790,616





Total shareholders' equity
3,193,525














2,935,653





Total Liabilities and Shareholders' Equity $ 30,792,510













$ 27,795,389





Tax-equivalent net interest income




233,274













243,889


Less: tax-equivalent adjustments




(2,473)













(2,338)


Net interest income



$ 230,801












$ 241,551


Net interest margin








3.23 %










3.74 %

























(a) For purposes of the yield computation, unrealized gain (loss) balances on securities available for sale and senior fixed-rate notes hedges are excluded.

 

WEBSTER FINANCIAL CORPORATIONFive Quarter Loan and Lease Balances (unaudited)
(Dollars in thousands) March 31, 2020

December 31, 2019

September 30, 2019

June 30, 2019

March 31, 2019
Loan and Lease Balances (actual):

















Commercial non-mortgage $ 6,385,619

$ 5,833,952

$ 5,887,119

$ 5,948,388

$ 5,811,309
Asset-based lending
1,180,328


1,046,886


1,122,765


1,077,118


1,039,633
Commercial real estate
6,122,474


5,949,339


5,398,084


5,224,382


4,991,825
Residential mortgages
4,991,512


4,972,685


4,873,726


4,718,704


4,631,787
Consumer
2,211,591


2,234,124


2,269,952


2,301,291


2,339,736
Total Loan and Lease Balances
20,891,524


20,036,986


19,551,646


19,269,883


18,814,290
Allowance for credit losses on loans and leases
(334,931)


(209,096)


(209,152)


(211,671)


(211,389)
Loans and Leases, net $ 20,556,593

$ 19,827,890

$ 19,342,494

$ 19,058,212

$ 18,602,901



















Loan and Lease Balances (average):

















Commercial non-mortgage $ 6,005,501

$ 5,879,600

$ 5,933,221

$ 5,914,710

$ 5,776,334
Asset-based lending
1,085,624


1,087,537


1,138,189


1,049,403


1,016,069
Commercial real estate
5,996,728


5,667,764


5,312,403


5,079,415


4,930,035
Residential mortgages
5,013,888


4,917,365


4,802,497


4,662,033


4,415,434
Consumer
2,223,058


2,256,255


2,286,983


2,324,717


2,371,302
Total Loan and Lease Balances
20,324,799


19,808,521


19,473,293


19,030,278


18,509,174
Allowance for credit losses on loans and leases
(269,273)


(211,460)


(213,130)


(210,719)


(214,966)
Loans and Leases, net $ 20,055,526

$ 19,597,061

$ 19,260,163

$ 18,819,559

$ 18,294,208

WEBSTER FINANCIAL CORPORATIONFive Quarter Past Due Loans and Leases (unaudited)
(Dollars in thousands) March 31, 2020

December 31, 2019

September 30, 2019

June 30, 2019


March 31, 2019
Nonperforming loans and leases:

















Commercial non-mortgage $ 74,077


64,793


64,197


56,340


66,754
Asset-based lending
137


139


9,165


184


218
Commercial real estate
12,901


11,554


12,810


10,413


7,449
Residential mortgages
42,393


43,100


43,733


48,104


49,267
Consumer 
32,785


31,320


32,794


33,015


35,245
Total nonperforming loans and leases $ 162,293

$ 150,906

$ 162,699

$ 148,056

$ 158,933



















Other real estate owned and repossessed assets:

















Commercial non-mortgage $ 121


271


544


1,307


861
Residential mortgages
4,480


4,247


1,912


2,012


2,769
Consumer
2,226


1,956


1,561


1,872


1,868
Total other real estate owned and repossessed assets $ 6,827

$ 6,474

$ 4,017

$ 5,191

$ 5,498
Total nonperforming assets $ 169,120

$ 157,380

$ 166,716

$ 153,247

$ 164,431

Past due 30-89 days:

















Commercial non-mortgage $ 8,200

$ 8,482

$ 5,384

$ 4,438

$ 19,152
Asset-based lending
-


-


-


-


-
Commercial real estate
2,217


1,700


1,433


2,665


2,283
Residential mortgages
11,814


13,598


13,445


10,844


12,865
Consumer
14,666


18,835


15,217


13,949


16,174
Total past due 30-89 days
36,897


42,615


35,479


31,896


50,474
Past due 90 days or more and accruing
75


-


92


410


-
Total past due loans and leases $ 36,972

$ 42,615

$ 35,571

$ 32,306

$ 50,474

WEBSTER FINANCIAL CORPORATIONFive Quarter Changes in the Allowance for Credit Losses on Loans and Leases (unaudited)


For the Three Months Ended
(Dollars in thousands) March 31, 2020

December 31, 2019

September 30, 2019

June 30, 2019

March 31, 2019
Beginning balance $ 209,096

$ 209,152

$ 211,671

$ 211,389

$ 212,353
Adoption of ASU No. 2016-13
57,568


-


-


-


-
Provision
76,085


6,000


11,300


11,900


8,600
Charge-offs:

















Commercial non-mortgage
5,544


5,041


11,291


5,657


7,837
Asset-based lending
-


-


-


-


-
Commercial real estate
30


23


32


2,473


973
Residential mortgages
1,511


876


872


2,154


251
Consumer
3,076


3,165


3,765


4,098


3,972
Total charge-offs
10,161


9,105


15,960


14,382


13,033
Recoveries:

















Commercial non-mortgage
558


236


173


464


569
Asset-based lending
3


33


-


-


229
Commercial real estate
3


3


3


33


6
Residential mortgages
235


534


356


295


178
Consumer
1,544


2,243


1,609


1,972


2,487
Total recoveries
2,343


3,049


2,141


2,764


3,469
Total net charge-offs
7,818


6,056


13,819


11,618


9,564
Ending balance $ 334,931

$ 209,096

$ 209,152

$ 211,671

$ 211,389

 

WEBSTER FINANCIAL CORPORATIONReconciliations to GAAP Financial Measures




















The Company evaluates its business based on certain ratios that utilize non-GAAP financial measures. The Company believes the use of these non-GAAP financial measures provides additional clarity in assessing the results and financial position of the Company. Other companies may define or calculate supplemental financial data differently.




















The efficiency ratio, which measures the costs expended to generate a dollar of revenue, is calculated excluding certain non-operational items. Return on average tangible common shareholders' equity measures the Company's net income available to common shareholders, adjusted for the tax-effected amortization of intangible assets, as a percentage of average shareholders' equity less average preferred stock and average goodwill and intangible assets. The tangible equity ratio represents shareholders' equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets. The tangible common equity ratio represents shareholders' equity less preferred stock and goodwill and intangible assets divided by total assets less goodwill and intangible assets. Tangible book value per common share represents shareholders' equity less preferred stock and goodwill and intangible assets divided by common shares outstanding at the end of the period. Core deposits express total deposits less time deposits, including brokered time deposits. See the tables below for reconciliations of these non-GAAP financial measures with financial measures defined by GAAP.






















At or for the Three Months Ended
(In thousands, except per share data) March 31, 2020

December 31, 2019

September 30, 2019

June 30, 2019

March 31, 2019
Efficiency ratio:


















Non-interest expense (GAAP) $ 178,836

$ 179,730

$ 179,894

$ 180,640

$ 175,686
Less: Foreclosed property activity (GAAP)
(250)


263


(128)


(55)


(253)
         Intangible assets amortization (GAAP)
962


962


961


962


962
         Other expenses (non-GAAP)
-


-


1,750


-


7
Non-interest expense (non-GAAP) $ 178,124

$ 178,505

$ 177,311

$ 179,733

$ 174,970
Net interest income (GAAP) $ 230,801

$ 231,250

$ 240,539

$ 241,787

$ 241,551
Add: Tax-equivalent adjustment (non-GAAP)
2,473


2,486


2,436


2,435


2,338
         Non-interest income (GAAP)
73,378


70,919


69,931


75,853


68,612
         Other (non-GAAP)
299


402


350


354


342
Less: Gain on investment securities, net (GAAP)
8


29


-


-


-
Income (non-GAAP) $ 306,943

$ 305,028

$ 313,256

$ 320,429

$ 312,843
Efficiency ratio (non-GAAP)
58.03 %

58.52 %

56.60 %

56.09 %

55.93 %




















Return on average tangible common shareholders' equity:


















Net income (GAAP) $ 38,199

$ 90,473

$