WEBSTER REPORTS SECOND QUARTER 2022 EPS OF $1.00; ADJUSTED EPS OF $1.29

STAMFORD, Conn., July 21, 2022 /PRNewswire/ — Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A. and its HSA Bank division, today announced net income available to common shareholders of $178.1 million, or $1.00 per diluted share, for the quarter ended June 30, 2022, compared to $92.1 million, or $1.01 per diluted share, for the quarter ended June 30, 2021.

Second quarter 2022 results include $66.5 million pre-tax, ($50.5 million after tax), or $0.29 per diluted share, of merger-related expenses. Excluding these expenses, earnings per diluted share would have been $1.29 for the quarter ended June 30, 2022. Reported results prior to the first quarter of 2022 reflect legacy Webster Financial results only.

“Our second quarter performance is a great reflection of the strength of Webster,” said John R. Ciulla, President and Chief Executive Officer. “We achieved strong and diverse loan growth, the quality of our core deposit franchise was evident in this rising rate environment, and we maintained our strong capital position, providing flexibility as we operate through a changing macro environment.”

Highlights for the second quarter of 2022:

  • Revenue of $607.6 million.
  • Period end loan and lease balance of $45.6 billion; 80 percent commercial loans and leases, 20 percent consumer loans, and a loan to deposit ratio of 86 percent.
  • Period end deposit balance of $53.1 billion.
  • Provision for credit losses totaled $12.2 million.
  • Charges related to the merger and strategic initiatives totaled $66.5 million.
  • Return on average assets of 1.10 percent; adjusted 1.41 percent (non-GAAP).
  • Return on average tangible common equity of 14.50 percent; adjusted 18.45 percent (non-GAAP).
  • Net interest margin of 3.28 percent includes net accretion of 0.19 percent.
  • Common equity tier 1 ratio of 11.04 percent.
  • Efficiency ratio (non-GAAP) of 45.25 percent.
  • Tangible common equity ratio of 7.68 percent.
  • Repurchased $100 million in shares under Webster’s share repurchase program.

“Our financial performance illustrates both merger synergies and the organic growth we anticipate our company will produce,” said Glenn MacInnes, Executive Vice President and Chief Financial Officer. “On an adjusted basis, we generated a return on assets of 1.41 percent and return on tangible common equity of 18.5 percent. Earnings improvement was broad, with interest income, fees and expenses all trending positively.”

Increases in the balance sheet and income statement, when compared to a year ago, are largely attributable to the merger with Sterling Bancorp on January 31, 2022.

Line of Business performance compared to the second quarter of 2021

Commercial Banking

Webster’s Commercial Banking segment serves businesses that have more than $2 million of revenue through our business banking, middle market, asset-based lending, equipment finance, commercial real estate, sponsor finance, and treasury services business units. Additionally, our Wealth group provides wealth management solutions to business owners, operators, and consumers within our targeted markets and retail footprint. As of June 30, 2022, Commercial Banking had $36.6 billion in loans and leases and $20.5 billion in deposit balances.

Commercial Banking Operating Results:






Percent


Three months ended June 30,


Favorable/

(In thousands)


2022

2021


(Unfavorable)

Net interest income


$333,421

$140,589



137.2 %


Non-interest income


49,430

18,378



169.0


Operating revenue


382,851

158,967



140.8


Non-interest expense


102,720

46,275



(122.0)


Pre-tax, pre-provision net revenue


$280,131

$112,692



148.6















Percent



At June 30,


Increase/

(In millions)


2022

2021


(Decrease)

Loans and leases


$36,634

$14,654



150.0 %


Deposits


20,501

8,729



134.9


AUA / AUM (off balance sheet)


2,266

2,863



(20.8)


Pre-tax, pre-provision net revenue increased $167.4 million to $280.1 million in the quarter as compared to prior year. The increase in balances and income was largely attributable to the merger. Net interest income increased $192.8 million to $333.4 million, with $177.1 million driven by the merger, and $15.7 million due to loan and deposit growth in the legacy Webster portfolios. Non-interest income increased $31.1 million to $49.4 million, with $27.6 million driven by the merger, and $3.5 million primarily driven by increased client hedging activity and growth in loan related fees. Non-interest expense increased $56.4 million to $102.7 million, with $50.6 million due to the merger, and $5.8 million primarily to support loan and deposit growth in the legacy Webster portfolios.

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 June 30, 2022, HSA Bank had $11.1 billion in total footings comprising $7.8 billion in deposit balances and $3.3 billion in assets under administration through linked investment accounts.

HSA Bank Operating Results:






Percent


Three months ended June 30,


Favorable/

(In thousands)


2022

2021


(Unfavorable)

Net interest income


$49,558

$42,193



17.5 %


Non-interest income


26,552

26,554




Operating revenue


76,110

68,747



10.7


Non-interest expense


37,540

32,423



(15.8)


Pre-tax, net revenue


$38,570

$36,324



6.2















Percent



At June 30,


Increase/

(Dollars in millions)


2022

2021


(Decrease)

Number of accounts (thousands)


3,077

2,995



2.7 %










Deposits


$7,778

$7,323



6.2


Linked investment accounts (off balance sheet)


3,277

3,384



(3.1)


Total footings


$11,055

$10,707



3.3


Pre-tax net revenue increased $2.2 million to $38.6 million in the quarter as compared to prior year. Net interest income increased $7.4 million to $49.6 million, primarily due to an increase in net deposit spread and growth in deposits. Non-interest income was flat at $26.6 million. Non-interest expense increased $5.1 million to $37.5 million, primarily due to incremental expenses from Bend’s acquired business and higher temporary help, consulting, and travel expenses.

Consumer Banking

Consumer Banking serves consumer and business banking customers primarily throughout southern New England and the New York Metro and Suburban markets. Consumer Banking is comprised of the Consumer Lending and Small Business Banking (businesses that have less than $2 million of revenue) business units, as well as a distribution network consisting of 202 banking centers and 359 ATMs, a customer care center, and a full range of web and mobile-based banking services. Additionally, our Webster Investment Services group provides investment services to consumers and small business owners within our targeted markets and retail footprint. As of June 30, 2022, Consumer Banking had $9.0 billion in loans and $23.8 billion in deposit balances, as well as $7.5 billion in assets under administration.

Consumer Banking Operating Results:






Percent


Three months ended June 30,


Favorable/

(In thousands)


2022

2021


(Unfavorable)

Net interest income


$179,067

$93,075



92.4 %


Non-interest income


30,784

24,098



27.7


Operating revenue


209,851

117,173



79.1


Non-interest expense


107,312

74,149



(44.7)


Pre-tax, pre-provision net revenue


$102,539

$43,024



138.3















Percent



At June 30,


Increase/

(In millions)


2022

2021


(Decrease)

Loans


$8,965

$6,821



31.4 %


Deposits


23,841

12,795



86.3


AUA (off balance sheet)


7,536

4,198



79.5


Pre-tax, pre-provision net revenue increased $59.5 million to $102.5 million in the quarter as compared to prior year. The increase in balances and income was largely attributable to the merger. Net interest income increased $86.0 million to $179.1 million, with $72.1 million driven by the merger, and $13.9 million driven by deposit and loan growth coupled with lower interest paid on deposits. Non-interest income increased $6.7 million to $30.8 million, with $6.4 million driven by the merger and $2.0 million from higher deposit and loan service fees, partially offset by $1.7 million in lower mortgage banking and investment services income. Non-interest expense increased $33.2 million to $107.3 million, primarily driven by the incremental expenses from the merger.

Consolidated financial performance:

Quarterly net interest income compared to the second quarter of 2021:

  • Net interest income was $486.7 million compared to $220.9 million.
  • Net interest margin was 3.28 percent compared to 2.82 percent. The yield on interest-earning assets increased by 51 basis points, and the cost of interest-bearing liabilities increased by 5 basis points.
  • Average interest-earning assets totaled $60.1 billion and increased by $28.5 billion, or 90.0 percent.
  • Average loans and leases totaled $44.1 billion and grew by $22.7 billion, or 106.0 percent.
  • Average deposits totaled $53.4 billion and grew by $24.7 billion, or 86.0 percent.

Quarterly provision for credit losses:

  • The provision for credit losses reflects a $12.2 million expense in the quarter, contributing to a $2.1 million increase in the allowance for credit losses on loans and leases. The provision for credit losses reflected an expense of $188.8 million in the prior quarter, which included $175.1 million associated with day one accounting provision required for loans and leases acquired during the quarter from the Sterling merger, compared to a benefit of $21.5 million a year ago.
  • Net charge-offs (recoveries) were $9.6 million, compared to $8.9 million in the prior quarter and $(1.2) million a year ago. The ratio of net charge-offs (recoveries) to average loans and leases on an annualized basis was 0.09 percent, compared to 0.10 percent in the prior quarter and (0.02) percent a year ago.
  • The allowance for credit losses on loans and leases represented 1.25 percent of total loans and leases at June 30, 2022, compared to 1.31 percent at March 31, 2022 and 1.43 percent at June 30, 2021. The allowance represented 231 percent of nonperforming loans and leases at June 30, 2022 compared to 229 percent at March 31, 2022 and 255 percent at June 30, 2021.

Quarterly non-interest income compared to the second quarter of 2021:

  • Total non-interest income was $120.9 million compared to $72.7 million, an increase of $48.2 million. The increase primarily reflects the impact of the merger with Sterling, along with higher deposit and loan related fees as a result of higher transactional activity.

Quarterly non-interest expense compared to the second quarter of 2021:

  • Total non-interest expense was $358.2 million compared to $187.0 million, an increase of $171.2 million. Total non-interest expense includes a net $66.5 million of merger and strategic initiative charges compared to $18.2 million a year ago. Excluding those charges, total non-interest expense increased $122.9 million which primarily reflects the impact of the merger with Sterling.

Quarterly income taxes compared to the second quarter of 2021:

  • Income tax expense was $54.8 million compared to $34.0 million, and the effective tax rate was 23.1 percent compared to 26.6 percent. The higher effective tax rate in the period a year ago reflects the effects of merger related expenses recognized during the period that were estimated to be largely nondeductible for tax purposes.

Investment securities:

  • Total investment securities, net were $15.2 billion, compared to $15.1 billion at March 31, 2022 and $8.9 billion at June 30, 2021. The carrying value of the available-for-sale portfolio included $609.8 million of net unrealized losses, compared to net unrealized losses of $328.4 million at March 31, 2022 and net unrealized gains of $49.3 million at June 30, 2021. The carrying value of the held-to-maturity portfolio does not reflect $539.4 million of net unrealized losses, compared to net unrealized losses of $270.8 million at March 31, 2022 and net unrealized gains of $170.5 million at June 30, 2021.

Loans and Leases:

  • Total loans and leases were $45.6 billion, compared to $43.5 billion at March 31, 2022 and $21.5 billion at June 30, 2021. Compared to March 31, 2022, commercial loans and leases increased by $1.1 billion, commercial real estate loans and leases increased by $0.6 billion, residential mortgages increased by $0.4 billion, and consumer loans decreased by $6.5 million.
  • Compared to a year ago, commercial loans and leases increased by $10.1 billion, commercial real estate loans and leases increased by $11.7 billion, and residential mortgages increased by $2.4 billion, while consumer loans decreased by $29.6 million.
  • Loan originations for the portfolio were $5.0 billion, compared to $2.6 billion in the prior quarter and $2.3 billion a year ago. In addition, $5.0 million of residential loans were originated for sale in the quarter, compared to $23.1 million in the prior quarter and $54.6 million a year ago.

Asset quality:

  • Total nonperforming loans and leases were $247.5 million, or 0.54 percent of total loans and leases, compared to $248.1 million, or 0.57 percent of total loans and leases, at March 31, 2022 and $120.7 million, or 0.56 percent of total loans and leases, at June 30, 2021. As of June 30, 2022, $90.3 million of nonperforming loans and leases were contractually current.
  • Past due loans and leases were $51.7 million, compared to $71.5 million at March 31, 2022 and $18.4 million at June 30, 2021.

Deposits and borrowings:

  • Total deposits were $53.1 billion, compared to $54.4 billion at March 31, 2022 and $28.8 billion at June 30, 2021. Core deposits to total deposits were 95.2 percent, compared to 94.8 percent at March 31, 2022 and 93.0 percent at June 30, 2021. The loan to deposit ratio was 86.0 percent, compared to 80.1 percent at March 31, 2022 and 74.4 percent at June 30, 2021.
  • Total borrowings were $5.3 billion, compared to $1.6 billion at March 31, 2022 and $1.2 billion at June 30, 2021.

Capital:

  • The return on average common shareholders’ equity and the return on average tangible common shareholders’ equity were 9.09 percent and 14.50 percent, respectively, compared to 11.63 percent and 14.26 percent, respectively, in the second quarter of 2021.
  • The tangible equity and tangible common equity ratios were 8.12 percent and 7.68 percent, respectively, compared to 8.35 percent and 7.91 percent, respectively, at June 30, 2021. The common equity tier 1 risk-based capital ratio was 11.04 percent, compared to 11.66 percent at June 30, 2021.
  • Book value and tangible book value per common share were $43.82 and $28.31, respectively, compared to $35.15 and $28.99, respectively, at June 30, 2021.
  • Repurchased $100 million in shares under Webster’s share repurchase program.

Webster Financial Corporation (NYSE:WBS) is the holding company for Webster Bank, N.A. and its HSA Bank Division. Webster is a leading commercial bank in the Northeast that provides a wide range of digital and traditional financial solutions across three differentiated lines of business: Commercial Banking, Consumer Banking and its HSA Bank division, one of the country’s largest providers of employee benefits solutions. Headquartered in Stamford, CT, Webster is a values-driven organization with $68 billion in assets. Its core footprint spans the northeastern U.S. from New York to Massachusetts, with certain businesses operating in extended geographies. 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 second quarter 2022 earnings announcement will be held today, Thursday, July 21, 2022 at 9:00 a.m. Eastern Time. To listen to the live call, please dial 888-330-2446, or 240-789-2732 for international callers. The passcode is 8607257. The webcast, along with related slides, will be available via Webster’s Investor Relations website at investors.websterbank.com. A replay of the conference call will be available for one week via the website listed above, beginning at approximately 12:00 noon (Eastern) on July 21, 2022. To access the replay, dial 800-770-2030, or 647-362-9199 for international callers. The replay conference ID number is 8607257.  

Media Contact
Alice Ferreira, 203-578-2610
[email protected]

Investor Contact
Emlen Harmon, 212-309-7646
[email protected]

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 integrate the operations of Webster and Sterling Bancorp and realize the anticipated benefits of the merger; (2) our ability to successfully execute our business plan and strategic initiatives, and manage any risks or uncertainties; (3) our ability to successfully achieve the anticipated cost reductions and operating efficiencies from planned strategic initiatives, including process automation, organization simplification, and spending reductions, and avoid any higher than anticipated costs or delays in the ongoing implementation; (4) local, regional, national, and international economic conditions and the impact they may have on us and our customers; (5) volatility and disruption in national and international financial markets, including as a result of geopolitical conflict such as the war between Russia and Ukraine; (6) the potential adverse effects of the ongoing novel coronavirus (COVID-19) pandemic, or other unusual and infrequently occurring events, and any governmental or societal responses thereto; (7) changes in laws and regulations, including those concerning banking, taxes, dividends, securities, insurance, and healthcare, with which we and our subsidiaries must comply; (8) adverse conditions in the securities markets that lead to impairment in the value of our investment securities and goodwill; (9) inflation, changes in interest rates, and monetary fluctuations; (10) the replacement of and transition from the London Interbank Offered Rate (LIBOR) to the Secured Overnight Financing Rate (SOFR) as the primary interest rate benchmark; (11) the timely development and acceptance of new products and services and the perceived value of those products and services by customers; (12) changes in deposit flows, consumer spending, borrowings, and savings habits; (13) our ability to implement new technologies and maintain secure and reliable technology systems; (14) the effects of any cyber threats, attacks or events or fraudulent activity; (15) performance by our counterparties and vendors; (16) our ability to increase market share and control expenses; (17) changes in the competitive environment among banks, financial holding companies, and other financial services providers; (18) changes in the level of non-performing assets and charge-offs; (19) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (20) the effect of changes in accounting policies and practices applicable to us, including the impact of recently adopted accounting guidance; (21) legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; (22) our ability to appropriately address social, environmental, and sustainability concerns that may arise from our business activities; and (23) 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 Operations.” 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, ROATCE, and other performance ratios, in each case 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 CORPORATION
Selected Financial Highlights (unaudited)



At or for the Three Months Ended

(In thousands, except per share data)


June 30,
2022




March 31,
2022




December 31,
2021




September 30,
2021




June 30,
2021




















Income and performance ratios:



















Net income (loss)

$

182,311



$

(16,747)



$

111,038



$

95,713



$

94,035

Net income (loss) available to common shareholders


178,148




(20,178)




109,069




93,745




92,066

Earnings (loss) per diluted common share


1.00




(0.14)




1.20




1.03




1.01

Return on average assets


1.10

%



(0.12)

%



1.26

%



1.10

%



1.12

Return on average tangible common shareholders’ equity (non-GAAP)


14.50




(1.36)




16.23




14.16




14.26

Return on average common shareholders’ equity


9.09




(1.25)




13.35




11.61




11.63

Non-interest income as a percentage of total revenue


19.90




20.88




28.44




26.73




24.77




















Asset quality:



















Allowance for credit losses on loans and leases

$

571,499



$

569,371



$

301,187



$

314,922



$

307,945

Nonperforming assets


250,242




251,206




112,590




104,209




123,497

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


1.25

%



1.31

%



1.35

%



1.46

%



1.43

Net charge-offs (recoveries) / average loans and leases (annualized)


0.09




0.10




(0.02)




0.02




(0.02)

Nonperforming loans and leases / total loans and leases


0.54




0.57




0.49




0.47




0.56

Nonperforming assets / total loans and leases plus OREO


0.55




0.58




0.51




0.48




0.57

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


230.88




229.48




274.36




309.44




255.05




















Other ratios:



















Tangible equity (non-GAAP)


8.12

%



8.72

%



8.39

%



8.12

%



8.35

Tangible common equity (non-GAAP)


7.68




8.26




7.97




7.71




7.91

Tier 1 risk-based capital (a)


11.61




12.05




12.32




12.39




12.30

Total risk-based capital (a)


13.86




14.41




13.64




13.79




13.70

Common equity tier 1 risk-based capital (a)


11.04




11.46




11.72




11.77




11.66

Shareholders’ equity / total assets


11.83




12.55




9.85




9.57




9.86

Net interest margin


3.28




3.21




2.73




2.80




2.82

Efficiency ratio (non-GAAP)


45.25




48.73




54.85




54.84




56.64




















Equity and share related:



















Common equity

$

7,713,809



$

7,893,156



$

3,293,288



$

3,241,152



$

3,184,668

Book value per common share


43.82




44.32




36.36




35.78




35.15

Tangible book value per common share (non-GAAP)


28.31




28.94




30.22




29.63




28.99

Common stock closing price


42.15




56.12




55.84




54.46




53.34

Dividends declared per common share


0.40




0.40




0.40




0.40




0.40

Common shares issued and outstanding


176,041




178,102




90,584




90,588




90,594

Weighted-average common shares outstanding – Basic


175,845




147,394




90,052




90,038




90,027

Weighted-average common shares outstanding – Diluted


175,895




147,533




90,284




90,232




90,221




















(a) Presented as preliminary for June 30, 2022 and actual for the remaining periods.

WEBSTER FINANCIAL CORPORATION
Consolidated Balance Sheets (unaudited)

(In thousands)


June 30,
2022




March 31,
2022




June 30,
2021

Assets:











Cash and due from banks

$

294,482



$

240,435



$

193,430

Interest-bearing deposits


607,323




552,778




1,386,463

Securities:











Available for sale


8,638,358




8,744,897




3,262,893

Held to maturity, net


6,547,998




6,362,254




5,623,243

Total securities, net


15,186,356




15,107,151




8,886,136

Loans held for sale


388




17,970




4,335

Loans and Leases:











Commercial


18,520,595




17,386,139




8,417,719

Commercial real estate


18,141,670




17,584,947




6,410,672

Residential mortgages


7,223,728




6,798,199




4,856,302

Consumer


1,760,750




1,767,200




1,790,308

Total loans and leases


45,646,743




43,536,485




21,475,001

Allowance for credit losses on loans and leases


(571,499)




(569,371)




(307,945)

Loans and leases, net


45,075,244




42,967,114




21,167,056

Federal Home Loan Bank and Federal Reserve Bank stock


329,424




206,123




76,874

Premises and equipment, net


449,578




490,004




215,716

Goodwill and other intangible assets, net


2,729,551




2,738,353




558,485

Cash surrender value of life insurance policies


1,228,484




1,222,898




570,380

Deferred tax asset, net


269,790




178,042




78,268

Accrued interest receivable and other assets


1,424,401




1,410,616




616,609

Total Assets

$

67,595,021



$

65,131,484



$

33,753,752












Liabilities and Shareholders’ Equity:











Deposits:











Demand

$

13,576,152



$

13,570,702



$

6,751,373

Health savings accounts


7,777,786




7,804,858




7,323,421

Interest-bearing checking


9,547,749




9,579,839




3,843,725

Money market


10,884,656




11,964,649




3,442,319

Savings


8,736,712




8,615,138




5,471,584

Certificates of deposit


2,554,102




2,821,097




2,014,544

Total deposits


53,077,157




54,356,283




28,846,966

Securities sold under agreements to repurchase and other borrowings


1,743,782




518,733




507,124

Federal Home Loan Bank advances


2,510,810




10,903




138,444

Long-term debt


1,076,559




1,078,274




565,297

Accrued expenses and other liabilities


1,188,925




990,156




366,216

Total liabilities


59,597,233




56,954,349




30,424,047

Preferred stock


283,979




283,979




145,037

Common shareholders’ equity


7,713,809




7,893,156




3,184,668

Total shareholders’ equity


7,997,788




8,177,135




3,329,705

Total Liabilities and Shareholders’ Equity

$

67,595,021



$

65,131,484



$

33,753,752

WEBSTER FINANCIAL CORPORATION
Consolidated Statements of Income (unaudited)



Three Months Ended June 30,




Six Months Ended June 30,

(In thousands, except per share data)


2022




2021




2022




2021

Interest income:















Interest and fees on loans and leases

$

431,538



$

185,919



$

777,814



$

376,455

Interest and dividends on securities


82,202




45,586




145,728




90,533

Loans held for sale


7




53




33




144

Total interest income


513,747




231,558




923,575




467,132

Interest expense:















Deposits


12,459




5,094




19,858




11,533

Borrowings


14,628




5,612




22,809




10,983

Total interest expense


27,087




10,706




42,667




22,516

Net interest income


486,660




220,852




880,908




444,616

Provision for credit losses


12,243




(21,500)




201,088




(47,250)

Net interest income after provision for loan and lease losses


474,417




242,352




679,820




491,866

Non-interest income:















Deposit service fees


51,385




41,439




99,212




81,908

Loan and lease related fees


27,907




7,862




50,586




16,175

Wealth and investment services


11,244




10,087




21,841




19,490

Mortgage banking activities


102




1,319




530




3,961

Increase in cash surrender value of life insurance policies


8,244




3,603




14,976




7,136

Other income


22,051




8,392




37,823




20,789

Total non-interest income


120,933




72,702




224,968




149,459

Non-interest expense:















Compensation and benefits


187,656




97,754




371,658




205,354

Occupancy


51,593




14,010




70,208




29,660

Technology and equipment


41,498




27,124




96,899




55,640

Marketing


3,441




3,227




6,950




5,731

Professional and outside services


15,332




21,025




69,423




30,801

Intangible assets amortization


8,802




1,132




15,189




2,271

Loan workout expenses


732




327




1,412




721

Deposit insurance


6,748




3,749




11,970




7,705

Other expenses


42,425




18,680




74,303




37,127

Total non-interest expense


358,227




187,028




718,012




375,010

Income before income taxes


237,123




128,026




186,776




266,315

Income tax expense


54,812




33,991




21,212




64,202

Net income


182,311




94,035




165,564




202,113

Preferred stock dividends


(4,163)




(1,969)




(7,594)




(3,938)

Net income available to common shareholders

$

178,148



$

92,066



$

157,970



$

198,175
















    Weighted-average common shares outstanding – Diluted


175,895




90,221




161,785




90,164
















Earnings per common share:















Basic

$

1.00



$

1.02



$

0.97



$

2.19

Diluted


1.00




1.01




0.97




2.19

WEBSTER FINANCIAL CORPORATION
Five Quarter Consolidated Statements of Income (unaudited)



Three Months Ended

(In thousands, except per share data)


June 30,
2022




March 31,
2022




December 31,
2021




September 30,
2021




June 30,
2021

Interest income:



















Interest and fees on loans and leases

$

431,538



$

346,276



$

189,985



$

196,273



$

185,919

Interest and dividends on securities


82,202




63,526




45,990




43,362




45,586

Loans held for sale


7




26




45




57




53

Total interest income


513,747




409,828




236,020




239,692




231,558

Interest expense:



















Deposits


12,459




7,399




4,027




4,571




5,094

Borrowings


14,628




8,181




5,211




5,430




5,612

Total interest expense


27,087




15,580




9,238




10,001




10,706

Net interest income


486,660




394,248




226,782




229,691




220,852

Provision for credit losses


12,243




188,845




(15,000)




7,750




(21,500)

Net interest income after provision for loan and lease losses


474,417




205,403




241,782




221,941




242,352

Non-interest income:



















Deposit service fees


51,385




47,827




40,544




40,258




41,439

Loan and lease related fees


27,907




22,679




9,602




10,881




7,862

Wealth and investment services


11,244




10,597




10,111




9,985




10,087

Mortgage banking activities


102




428




733




1,525




1,319

Increase in cash surrender value of life insurance policies


8,244




6,732




3,627




3,666




3,603

Other income


22,051




15,772




25,521




17,460




8,392

Total non-interest income


120,933




104,035




90,138




83,775




72,702

Non-interest expense:



















Compensation and benefits


187,656




184,002




109,283




105,352




97,754

Occupancy


51,593




18,615




13,256




12,430




14,010

Technology and equipment


41,498




55,401




28,750




28,441




27,124

Marketing


3,441




3,509




2,599




3,721




3,227

Professional and outside services


15,332




54,091




9,360




7,074




21,025

Intangible assets amortization


8,802




6,387




1,118




1,124




1,132

Loan workout expenses


732




680




244




203




327

Deposit insurance


6,748




5,222




4,234




3,855




3,749

Other expenses


42,425




31,878




21,009




18,037




18,680

Total non-interest expense


358,227




359,785




189,853




180,237




187,028

Income (loss) before income taxes


237,123




(50,347)




142,067




125,479




128,026

Income tax expense (benefit)


54,812




(33,600)




31,029




29,766




33,991

Net income (loss)


182,311




(16,747)




111,038




95,713




94,035

Preferred stock dividends


(4,163)




(3,431)




(1,969)




(1,968)




(1,969)

Net income (loss) available to common shareholders

$

178,148



$

(20,178)



$

109,069



$

93,745



$

92,066




















Weighted-average common shares outstanding – Diluted


175,895




147,533




90,284




90,232




90,221




















Earnings (loss) per common share:



















Basic

$

1.00



$

(0.14)



$

1.20



$

1.03



$

1.02

Diluted


1.00




(0.14)




1.20




1.03




1.01

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




Three Months Ended June 30,




2022








2021


(Dollars in thousands)


Average balance




Interest




Yield/rate








Average balance



Interest


Yield/rate


Assets:

























Interest-earning assets:

























Loans and leases

$

44,120,698



$

436,462




3.92

%






$

21,413,439


$

186,681


3.46

%

Investment securities (a)


15,165,514




85,958




2.22








8,834,859



46,582


2.13


Federal Home Loan and Federal Reserve Bank stock


262,695




2,072




3.16








77,292



382


1.98


Interest-bearing deposits (b)


488,870




980




0.79








1,270,121



347


0.11


Loans held for sale


18,172




7




0.15








8,898



53


2.37


Total interest-earning assets


60,055,949



$

525,479




3.46

%







31,604,609


$

234,045


2.95

%

Non-interest-earning assets


6,016,193
















1,901,412







Total Assets

$

66,072,142















$

33,506,021
































Liabilities and Shareholders’ Equity:

























Interest-bearing liabilities:

























Demand deposits

$

13,395,942



$




%






$

6,774,206


$


%

Health savings accounts


7,812,313




1,125




0.06








7,446,735



1,650


0.09


Interest-bearing checking, money market and savings


29,486,846




10,165




0.14








12,365,074



1,603


0.05


Certificates of deposit


2,684,914




1,169




0.17








2,114,889



1,841


0.35


Total deposits


53,380,015




12,459




0.09








28,700,904



5,094


0.07



























Securities sold under agreements to repurchase and other borrowings


1,064,304




2,677




1.00








500,638



860


0.68


Federal Home Loan Bank advances


1,156,449




3,164




1.08








138,483



534


1.52


Long-term debt (a)


1,077,395




8,787




3.38








565,874



4,218


3.22


Total borrowings


3,298,148




14,628




1.79








1,204,995



5,612


1.93


Total interest-bearing liabilities


56,678,163



$

27,087




0.19

%







29,905,899


$

10,706


0.14

%

Non-interest-bearing liabilities


1,268,461
















288,716







Total liabilities


57,946,624
















30,194,615
































Preferred stock


283,979
















145,037







Common shareholders’ equity


7,841,539
















3,166,369







Total shareholders’ equity


8,125,518
















3,311,406







Total Liabilities and Shareholders’ Equity

$

66,072,142















$

33,506,021







Tax-equivalent net interest income






498,392















223,339




Less: tax-equivalent adjustments






(11,732)















(2,487)




Net interest income





$

486,660














$

220,852




Net interest margin










3.28

%












2.82

%


























(a) For the purposes of our average yield/rate and margin computations, unsettled trades on investment securities and unrealized gain (loss) balances on securities available-for-sale and senior fixed-rate notes hedges are excluded.


(b) Interest-bearing deposits is a component of cash and cash equivalents.


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




Six Months Ended June 30,




2022








2021


(Dollars in thousands)


Average balance




Interest




Yield/rate








Average balance



Interest


Yield/rate


Assets:

























Interest-earning assets:

























Loans and leases

$

40,039,437



$

785,879




3.91

%






$

21,447,192


$

377,969


3.51

%

Investment securities (a)


14,298,347




153,227




2.12








8,862,314



92,859


2.13


Federal Home Loan and Federal Reserve Bank stock


214,792




2,893




2.72








77,461



619


1.61


Interest-bearing deposits (b)


643,210




1,433




0.44








976,873



523


0.11


Loans held for sale


18,046




33




0.36








11,610



144


2.48


Total interest-earning assets


55,213,832



$

943,465




3.40

%







31,375,450


$

472,114


3.01

%

Non-interest-earning assets


5,257,642
















1,941,640







Total Assets

$

60,471,474















$

33,317,090
































Liabilities and Shareholders’ Equity:

























Interest-bearing liabilities:

























Demand deposits

$

12,335,504



$




%






$

6,606,464


$


%

Health savings accounts


7,786,035




2,212




0.06








7,448,943



3,257


0.09


Interest-bearing checking, money market and savings


26,915,923




15,184




0.11








12,181,295



3,323


0.06


Certificates of deposit


2,614,989




2,462




0.19








2,242,250



4,953


0.45


Total deposits


49,652,451




19,858




0.08








28,478,952



11,533


0.08



























Securities sold under agreements to repurchase and other borrowings


822,017




3,634




0.88








511,622



1,495


0.58


Federal Home Loan Bank advances


586,857




3,220




1.09








137,143



1,047


1.52


Long-term debt (a)


987,353




15,955




3.36








566,462



8,441


3.22


Total borrowings


2,396,227




22,809




1.93








1,215,227



10,983


1.87


Total interest-bearing liabilities


52,048,678



$

42,667




0.16

%







29,694,179


$

22,516


0.15

%

Non-interest-bearing liabilities


1,010,331
















339,949







Total liabilities


53,059,009
















30,034,128
































Preferred stock


260,183
















145,037







Common shareholders’ equity


7,152,282
















3,137,925







Total shareholders’ equity


7,412,465
















3,282,962







Total Liabilities and Shareholders’ Equity

$

60,471,474















$

33,317,090







Tax-equivalent net interest income






900,798















449,598




Less: tax-equivalent adjustments






(19,890)















(4,982)




Net interest income





$

880,908














$

444,616




Net interest margin










3.24

%












2.87

%


























(a) For the purposes of our average yield/rate and margin computations, unsettled trades on investment securities and unrealized gain (loss) balances on securities available-for-sale and senior fixed-rate notes hedges are excluded.


(b) Interest-bearing deposits is a component of cash and cash equivalents.


WEBSTER FINANCIAL CORPORATION
Five Quarter Loan and Lease Balances (unaudited)

(Dollars in thousands)


June 30,
2022




March 31,
2022




December 31,
2021




September 30,
2021




June 30,
2021

Loan and Lease Balances (actual):



















Commercial non-mortgage

$

16,628,317



$

15,578,594



$

7,509,538



$

7,172,345



$

7,473,758

Asset-based lending


1,892,278




1,807,545




1,067,248




986,782




943,961

Commercial real estate


18,141,670




17,584,947




6,603,180




6,522,679




6,410,672

Residential mortgages


7,223,728




6,798,199




5,412,905




5,167,527




4,856,302

Consumer


1,760,750




1,767,200




1,678,858




1,731,002




1,790,308

Total Loan and Lease Balances


45,646,743




43,536,485




22,271,729




21,580,335




21,475,001

Allowance for credit losses on loans and leases


(571,499)




(569,371)




(301,187)




(314,922)




(307,945)

Loans and Leases, net

$

45,075,244



$

42,967,114



$

21,970,542



$

21,265,413



$

21,167,056




















Loan and Lease Balances (average):



















Commercial non-mortgage

$

15,850,507



$

12,568,454



$

7,304,985



$

7,280,258



$

7,545,398

Asset-based lending


1,851,956




1,540,301




1,010,874




956,535




937,580

Commercial real estate


17,756,151




13,732,925




6,575,865




6,510,100




6,365,830

Residential mortgages


6,905,509




6,322,495




5,309,127




5,036,329




4,738,859

Consumer


1,756,575




1,748,654




1,701,250




1,755,291




1,825,772

Total Loan and Lease Balances

$

44,120,698



$

35,912,829



$

21,902,101



$

21,538,513



$

21,413,439

WEBSTER FINANCIAL CORPORATION
Five Quarter Nonperforming Assets and Past Due Loans and Leases (unaudited)

(Dollars in thousands)


June 30,
2022




March 31,
2022




December 31,
2021




September 30,
2021




June 30,
2021

Nonperforming loans and leases:



















Commercial non-mortgage

$

112,006



$

108,460



$

63,553



$

40,774



$

57,831

Asset-based lending


25,862




5,494




2,114




2,139




2,403

Commercial real estate


49,935




74,581




5,058




15,972




12,687

Residential mortgages


27,213




27,318




15,591




19,327




21,467

Consumer 


32,514




32,258




23,462




23,558




26,353

Total nonperforming loans and leases

$

247,530



$

248,111



$

109,778



$

101,770



$

120,741




















Other real estate owned and repossessed assets:



















Residential mortgages

$

2,558



$

2,582



$

2,276



$

1,759



$

1,934

Consumer


154




513




536




680




822

Total other real estate owned and repossessed assets

$

2,712



$

3,095



$

2,812



$

2,439



$

2,756

Total nonperforming assets

$

250,242



$

251,206



$

112,590



$

104,209



$

123,497


Past due 30-89 days:



















Commercial non-mortgage

$

6,006



$

8,025



$

9,340



$

5,537



$

3,154

Asset-based lending





24,103










Commercial real estate


25,587




20,533




921




821




1,679

Residential mortgages


10,781




9,307




3,561




3,447




4,690

Consumer


9,275




9,379




5,576




7,158




8,829

Total past due 30-89 days

$

51,649



$

71,347



$

19,398



$

16,963



$

18,352

Past due 90 days or more and accruing


8




124




2,507




107




25

Total past due loans and leases

$

51,657



$

71,471



$

21,905



$

17,070



$

18,377

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








For the Three Months Ended






(Dollars in thousands)


June 30,
2022




March 31,
2022




December 31,
2021




September 30,
2021




June 30,
2021






ACL on loans and leases, beginning balance

$

569,371



$

301,187



$

314,922



$

307,945



$

328,351






Initial allowance on PCD loans and leases (1)





88,045















Provision


11,728




189,068




(14,980)




7,898




(21,574)






Charge-offs:
























Commercial portfolio


18,757




11,248




799




1,723




594






Consumer portfolio


896




1,120




1,382




2,053




2,808






Total charge-offs


19,653




12,368




2,181




3,776




3,402






Recoveries:
























Commercial portfolio


7,765




1,364




1,107




142




836






Consumer portfolio


2,288




2,075




2,319




2,713




3,734






Total recoveries


10,053




3,439




3,426




2,855




4,570






Total net charge-offs (recoveries)


9,600




8,929




(1,245)




921




(1,168)






ACL on loans and leases, ending balance

$

571,499



$

569,371



$

301,187



$

314,922



$

307,945






























ACL on unfunded loan commitments, beginning balance

$

19,640



$

13,104



$

12,170



$

11,974



$

12,800






Acquisition of Sterling





6,749















Provision


509




(213)




934




196




(826)






ACL on unfunded loan commitments, ending balance

$

20,149



$

19,640



$

13,104



$

12,170



$

11,974






Total ending balance

$

591,648



$

589,011



$

314,291



$

327,092



$

319,919






























(1) Represents the establishment of the initial reserve for PCD loans and leases net of $48 million in charge-offs recognized upon completion of the merger in accordance with GAAP.

WEBSTER FINANCIAL CORPORATION
Reconciliations 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 (ROATCE) 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 certificates of deposit and brokered time deposits. Adjusted net income (loss) available to common shareholders, adjusted diluted earnings per share (EPS), adjusted ROATCE, and adjusted return on average assets (ROAA) are calculated by excluding after tax non-operational items including merger-related expenses and the initial non-PCD provision related to the merger. 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)


June 30,
2022




March 31,
2022




December 31,
2021




September 30,
2021




June 30,
2021



Efficiency ratio:





















Non-interest expense

$

358,227



$

359,785



$

189,853



$

180,237



$

187,028



Less: Foreclosed property activity


(358)




(75)




(347)




(142)




(137)



Intangible assets amortization


8,802




6,387




1,118




1,124




1,132



Operating lease depreciation


2,425




1,632












Strategic initiatives


(152)




(4,140)




600




(4,011)




1,138



Merger related


66,640




108,495




10,560




9,847




17,047



Debt prepayment costs








2,526









Non-interest expense

$

280,870



$

247,486



$

175,396



$

173,419



$

167,848



Net interest income

$

486,660



$

394,248



$

226,782



$

229,691



$

220,852



Add: Tax-equivalent adjustment


11,732




8,158




2,397




2,434




2,487



Non-interest income


120,933




104,035




90,138




83,775




72,702



Other


3,805




3,082




431




327




309



Less: Operating lease depreciation


2,425




1,632












Income

$

620,705



$

507,891



$

319,748



$

316,227



$

296,350



Efficiency ratio


45.25

%



48.73

%



54.85

%



54.84

%



56.64

%























Return on average tangible common shareholders’ equity:





















Net income (loss)

$

182,311



$

(16,747)



$

111,038



$

95,713



$

94,035



Less: Preferred stock dividends


4,163




3,431




1,969




1,968




1,969



Add: Intangible assets amortization, tax-effected


6,954




5,046




883




888




894



Income (loss) adjusted for preferred stock dividends and intangible assets amortization

$

185,102



$

(15,132)



$

109,952



$

94,633



$

92,960



Income (loss) adjusted for preferred stock dividends and intangible assets amortization, annualized basis

$

740,408



$

(60,528)



$

439,808



$

378,532



$

371,840



Average shareholders’ equity

$

8,125,518



$

6,691,490



$

3,411,911



$

3,375,401



$

3,311,406



Less: Average preferred stock


283,979




236,121




145,037




145,037




145,037



Average goodwill and other intangible assets


2,733,827




2,007,266




556,784




557,902




559,032



Average tangible common shareholders’ equity

$

5,107,712



$

4,448,103



$

2,710,090



$

2,672,462



$

2,607,337



Return on average tangible common shareholders’ equity


14.50

%



(1.36)

%



16.23

%



14.16

%



14.26

%























Tangible equity:





















Shareholders’ equity

$

7,997,788



$

8,177,135



$

3,438,325



$

3,386,189



$

3,329,705



Less: Goodwill and other intangible assets


2,729,551




2,738,353




556,242




557,360




558,485



Tangible shareholders’ equity

$

5,268,237



$

5,438,782



$

2,882,083



$

2,828,829



$

2,771,220



Total assets

$

67,595,021



$

65,131,484



$

34,915,599



$

35,374,258



$

33,753,752



Less: Goodwill and other intangible assets


2,729,551




2,738,353




556,242




557,360




558,485



Tangible assets

$

64,865,470



$

62,393,131



$

34,359,357



$

34,816,898



$

33,195,267



Tangible equity


8.12

%



8.72

%



8.39

%



8.12

%



8.35

%























Tangible common equity:





















Tangible shareholders’ equity

$

5,268,237



$

5,438,782



$

2,882,083



$

2,828,829



$

2,771,220



Less: Preferred stock


283,979




283,979




145,037




145,037




145,037



Tangible common shareholders’ equity

$

4,984,258



$

5,154,803



$

2,737,046



$

2,683,792



$

2,626,183



Tangible assets

$

64,865,470



$

62,393,131



$

34,359,357



$

34,816,898



$

33,195,267



Tangible common equity


7.68

%



8.26

%



7.97

%



7.71

%



7.91

%























Tangible book value per common share:





















Tangible common shareholders’ equity

$

4,984,258



$

5,154,803



$

2,737,046



$

2,683,792



$

2,626,183



Common shares outstanding


176,041




178,102




90,584




90,588




90,594



Tangible book value per common share

$

28.31



$

28.94



$

30.22



$

29.63



$

28.99
























Core deposits:





















Total deposits

$

53,077,157



$

54,356,283



$

29,847,029



$

30,026,327



$

28,846,966



Less: Certificates of deposit


2,554,102




2,821,097




1,797,770




1,884,373




2,014,544



Core deposits

$

50,523,055



$

51,535,186



$

28,049,259



$

28,141,954



$

26,832,422


























Three months ended
June 30, 2022



















Adjusted ROATCE:





















Net income

$

182,311



















Less: Preferred stock dividends


4,163



















Add: Intangible assets amortization, tax-effected


6,954



















Strategic initiatives, tax-effected


(116)



















Merger related, tax-effected


50,583



















Income adjusted for preferred stock dividends, intangible assets amortization, and other

$

235,569



















Income adjusted for preferred stock dividends, intangible assets amortization, and other, annualized basis

$

942,276



















Average shareholders’ equity

$

8,125,518



















Less: Average preferred stock


283,979



















Average goodwill and other intangible assets


2,733,827



















Average tangible common shareholders’ equity

$

5,107,712



















Adjusted return on average tangible common shareholders’ equity


18.45

%







































Adjusted ROAA:





















Net income

$

182,311



















Add: Strategic initiatives, tax-effected


(116)



















Merger related, tax-effected


50,583



















Income adjusted for strategic initiatives and merger related

$

232,778



















Income adjusted for strategic initiatives and merger related, annualized basis

$

931,112



















Average assets

$

66,072,142



















Adjusted return on average assets


1.41

%







































(In millions, except per share data)





















GAAP to adjusted reconciliation:






















Three months ended June 30, 2022













Pre-Tax Income




Net Income Available
to Common
Shareholders




Diluted EPS











Reported (GAAP)

$

237.1



$

178.1



$

1.00











Strategic initiatives


(0.1)




(0.1)














Merger related expenses


66.6




50.6




0.29











Adjusted (non-GAAP)

$

303.6



$

228.6



$

1.29











SOURCE Webster Financial Corporation

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