Webster Reports Second Quarter 2018 Earnings

Webster Reports Second Quarter 2018 Earnings

PR Newswire

WATERBURY, Conn., July 19, 2018 /PRNewswire/ -- Webster Financial Corporation WBS, the holding company for Webster Bank, N.A. and its HSA Bank division, today announced earnings applicable to common shareholders of $79.5 million, or $0.86 per diluted share, for the quarter ended June 30, 2018 compared to $59.5 million, or $0.64 per diluted share, for the quarter ended June 30, 2017. Adjusting for $7.2 million related to an accrual for deposit insurance assessments for periods prior to 2018 and $1.4 million of banking center optimization expenses, earnings per diluted share would have been $0.92.

"Webster's second quarter results reflect continued progress in executing on our strategic priorities," said John R. Ciulla, president and chief executive officer. "We achieved record levels of performance as a result of double-digit pre-provision net revenue growth in all three lines of business."

Highlights for the second quarter of 2018:

  • Revenue of $293.4 million, an increase of 11.8 percent from a year ago, including net interest income of $225.0 million, an increase of 13.8 percent from a year ago.
  • Loan growth of $752 million, or 4.4 percent from a year ago, with growth of $799 million, or 7.8 percent, in commercial and commercial real estate loans.
  • Deposit growth of $885 million, or 4.3 percent from a year ago, with growth of $690 million, or 14.3 percent, in health savings account deposits.
  • Net interest margin of 3.57 percent, up 30 basis points from a year ago.
  • Non-interest expense of $180.5 million includes $7.2 million related to an accrual for deposit insurance assessments prior to 2018. Excluding this amount, non-interest expense increased 5.4 percent from a year ago.
  • Efficiency ratio of 57.78 percent excludes the accrual for deposit insurance assessments for periods prior to 2018 and banking center optimization expenses.
  • Pre-tax, pre-provision net revenue growth of $14.9 million, or 15.2 percent from a year ago, led by HSA Bank's growth of 62.5 percent.
  • Annualized return on average common shareholders' equity of 12.22 percent compared to 9.63 percent a year ago; annualized return on average tangible common shareholders' equity (non-GAAP) of 15.76 percent compared to 12.65 percent a year ago.

"Year-over-year revenue growth exceeded 10 percent for the second consecutive quarter, led by a 30 basis point increase in the net interest margin," said Glenn MacInnes, executive vice president and chief financial officer. "Our balance sheet structure positions us well for future growth."

Line of Business performance compared to the second quarter of 2017:

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 June 30, 2018, Commercial Banking had $9.9 billion in loans and leases and $3.7 billion in deposit balances.

Commercial Banking Operating Results:





Three months ended June 30,

(In thousands)

2018

2017

Net interest income

$88,458

$78,946

Non-interest income

15,041

12,532

Operating revenue

103,499

91,478

Non-interest expense

42,979

37,304

Pre-tax, pre-provision net revenue

$60,520

$54,174









At June 30,

(In millions)

2018

2017

Loans and leases

$9,936

$9,215

Deposits

$3,681

$3,826

Pre-tax, pre-provision net revenue increased $6.3 million to $60.5 million in the quarter as compared to prior year. Net interest income increased $9.5 million to $88.5 million, primarily due to loan growth and higher loan and deposit margins.  Non-interest income increased $2.5 million to $15.0 million, primarily due to greater client interest rate hedging activity in the quarter as compared to prior year. Non-interest expense increased $5.7 million to $43.0 million, primarily due to investments in people and technology.

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, 2018, HSA Bank had $7.0 billion in total footings comprising $5.5 billion in deposit balances and $1.5 billion in assets under administration through linked investment accounts.

HSA Bank Operating Results:





Three months ended June 30,

(In thousands)

2018

2017

Net interest income

$35,265

$25,574

Non-interest income

22,882

19,750

Operating revenue

58,147

45,324

Non-interest expense

31,220

28,750

Pre-tax net revenue

$26,927

$16,574







At June 30,

(In millions)

2018

2017

Number of accounts

2,674

2,368

Deposits

$5,518

$4,828

Linked investment accounts*

1,476

1,076

Total footings

$6,994

$5,904

*Linked investment accounts are held off balance sheet

Pre-tax net revenue increased $10.4 million to $26.9 million in the quarter as compared to prior year. Net interest income increased $9.7 million to $35.3 million, due to a 14 percent growth in deposits and a 20 percent improvement in deposit spreads. Non-interest income increased $3.1 million to $22.9 million, primarily due to growth in accounts over the past year. Non-interest expense increased $2.5 million to $31.2 million, primarily due to account growth and continued investment in the business including 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 163 banking centers and 329 ATMs, a customer care center, and a full range of web and mobile-based banking services.

As of June 30, 2018, Community Banking had $8.1 billion in loans and $11.8 billion in deposit balances.

Community Banking Operating Results:





Three months ended June 30,

(In thousands)

2018

2017

Net interest income

$101,902

$95,902

Non-interest income

26,378

28,058

Operating revenue

128,280

123,960

Non-interest expense

95,197

94,322

Pre-tax, pre-provision net revenue

$33,083

$29,638









At June 30,

(In millions)

2018

2017

Loans

$8,090

$8,058

Deposits

$11,796

$11,423

Pre-tax, pre-provision net revenue increased $3.4 million to $33.1 million in the quarter as compared to prior year. Net interest income increased $6.0 million to $101.9 million, primarily due to growth in loan and deposit balances, coupled with improved interest rate spreads on deposits. Non-interest income decreased $1.7 million primarily driven by lower mortgage production and related returns on mortgage banking activities, offset by growth in fees from investment services and other miscellaneous fee income. Non-interest expense increased $0.9 million as a result of higher compensation-related expenses, investments in technology and risk management; partially offset by reductions in other expense categories.

Consolidated financial performance:

Quarterly net interest income compared to the second quarter of 2017:

  • Net interest income was $225.0 million compared to $197.8 million.
  • Net interest margin was 3.57 percent compared to 3.27 percent. The yield on interest-earning assets increased by 39 basis points, and the cost of funds increased by 10 basis points.
  • Average interest-earning assets totaled $25.2 billion and grew by $695 million, or 2.8 percent.
  • Average loans totaled $17.9 billion and grew by $620 million, or 3.6 percent.

Quarterly provision for loan losses:

  • The Company recorded a provision for loan losses of $10.5 million, compared to $11.0 million in the prior quarter and $7.3 million a year ago.
  • Net charge-offs were $8.5 million, compared to $5.6 million in the prior quarter and $6.8 million a year ago. The increase from prior quarter is primarily due to increased commercial non-mortgage charge-offs. The ratio of net charge-offs to average loans on an annualized basis was 0.19 percent, compared to 0.13 percent in the prior quarter and 0.16 percent a year ago.
  • The allowance for loan losses represented 1.15 percent of total loans at June 30, 2018, compared to 1.15 percent at March 31, 2018 and 1.16 percent at June 30, 2017. The allowance for loan losses represented 148 percent of nonperforming loans compared to 153 percent at March 31, 2018 and 120 percent at June 30, 2017.

Quarterly non-interest income compared to the second quarter of 2017:

  • Total non-interest income was $68.4 million, compared to $64.7 million, an increase of $3.7 million. This reflects an increase in HSA fee income of $3.1 million driven by account growth and $2.5 million related to additional client hedging income, offset by a decrease of $2.1 million in mortgage banking activities driven by lower originations.

Quarterly non-interest expense compared to the second quarter of 2017:

  • Total non-interest expense was $180.5 million compared, to $164.4 million, an increase of $16.1 million. This reflects a $7.2 million accrual for deposit insurance assessments for periods prior to 2018, $6.7 million in compensation due to strategic hires and annual merit increases, as well as an increase of $2.1 million in technology and equipment due to higher depreciation and service contracts to support infrastructure.

Quarterly income taxes compared to the second quarter of 2017:

  • Income tax expense was $20.7 million, compared to $29.1 million and the effective tax rate was 20.3 percent, compared to 32.1 percent.
  • The lower effective tax rate in the quarter primarily reflects the reduction of the U.S. corporate tax rate effective in 2018 as a result of the Tax Cuts and Jobs Act enacted in 2017, as well as discrete tax benefits in the quarter.

Investment securities:

  • Total investment securities were $7.1 billion, compared to $7.2 billion at March 31, 2018 and $7.0 billion at June 30, 2017. The carrying value of the available-for-sale portfolio included $86.5 million of net unrealized losses, compared to $74.0 million at March 31, 2018 and $23.1 million at June 30, 2017. The carrying value of the held-to-maturity portfolio does not reflect $130.2 million of net unrealized losses, compared to $111.3 million at March 31, 2018, and $21.8 million at June 30, 2017.

Loans:

  • Total loans were $18.0 billion, compared to $17.8 billion at March 31, 2018 and $17.3 billion at June 30, 2017. Compared to March 31, 2018, commercial loans increased by $226.0 million and commercial real estate loans increased by $35.4 million, while consumer loans decreased by $36.7 million and residential loans decreased by $4.3 million.
  • Compared to a year ago, commercial loans increased by $774.7 million, residential loans increased by $67.3 million, and commercial real estate loans increased by $24.0 million, while consumer loans decreased by $113.6 million.
  • Loan originations for portfolio were $1.509 billion, compared to $1.111 billion in the prior quarter and $1.374 billion a year ago. In addition, $44 million of residential loans were originated for sale in the quarter, compared to $43 million in the prior quarter and $74 million a year ago.

Asset quality:

  • Total nonperforming loans were $140.1 million, or 0.78 percent of total loans, compared to $134.3 million, or 0.75 percent, at March 31, 2018 and $166.4 million, or 0.96 percent, at June 30, 2017. Total paying nonperforming loans were $34.1 million, compared to $32.2 million at March 31, 2018 and $75.6 million at March 31, 2017.
  • Past due loans were $33.5 million, compared to $41.6 million at March 31, 2018 and $29.2 million at March 31, 2017.

Deposits and borrrowings:

  • Total deposits were $21.3 billion, compared to $21.4 billion at March 31, 2018 and $20.5 billion at June 30, 2017. Core deposits to total deposits were 86.7 percent, compared to 88.1 percent at March 31, 2018 and 89.8 percent at June 30, 2017. The loan to deposit ratio was 84.5 percent, compared to 83.3 percent at March 31, 2018 and 84.4 percent at June 30, 2017.
  • Total borrowings were $2.7 billion, compared to $2.4 billion at March 31, 2018 and $2.9 billion at June 30, 2017.

Capital:

  • The return on average common shareholders' equity and the return on average tangible common shareholders' equity were 12.22 percent and 15.76 percent, respectively, compared to 9.63 percent and 12.65 percent, respectively, in the second quarter of 2017.
  • The tangible equity and tangible common equity ratios were 8.29 percent and 7.75 percent, respectively, compared to 7.95 percent and 7.47 percent, respectively, at June 30, 2017. The common equity tier 1 risk-based capital ratio was 11.03 percent, compared to 10.84 percent at June 30, 2017.
  • Book value and tangible book value per common share were $28.40 and $22.25, respectively, compared to $26.93 and $20.74, respectively, at June 30, 2017.

 

***

 

Webster Financial Corporation is the holding company for Webster Bank, National Association and its HSA Bank division. With $27.0 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust, and investment services through 163 banking centers and 329 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 2018 second quarter earnings announcement will be held today, Thursday, July 19, 2018 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) local, regional, national, and international economic conditions and the impact they may have on us and our customers and our assessment of that impact; (2) volatility and disruption in national and international financial markets; (3) government intervention in the U.S. financial system; (4) changes in the level of nonperforming assets and charge-offs; (5) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (6) adverse conditions in the securities markets that lead to impairment in the value of securities in our investment portfolio; (7) inflation, interest rate, securities market, and monetary fluctuations; (8) the timely development and acceptance of new products and services and perceived overall value of these products and services by customers; (9) changes in consumer spending, borrowings, and savings habits; (10) technological changes and cyber-security matters; (11) the ability to increase market share and control expenses; (12) changes in the competitive environment among banks, financial holding companies, and other financial services providers; (13) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and insurance) with which we and our subsidiaries must comply, including the Dodd-Frank Wall Street Reform and Consumer Protection Act; (14) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters; (15) the costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; (16) our success at managing the risks involved in the foregoing items and (17) 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 CORPORATION

Selected Financial Highlights (unaudited)









At or for the Three Months Ended





(In thousands, except per share data)



June 30,

2018





March 31,

2018





December 31,

2017





September 30,

2017





June 30,

2017







































Income and performance ratios:

































Net income

$

81,682



$

80,225



$

69,893



$

64,496



$

61,579





Earnings applicable to common shareholders



79,489





78,083





67,710





62,426





59,485





Earnings per diluted common share



0.86





0.85





0.73





0.67





0.64





Return on average assets



1.22

%



1.20

%



1.05

%



0.98

%



0.94



%

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



15.76





15.73





13.85





12.99





12.65





Return on average common shareholders' equity



12.22





12.15





10.66





9.95





9.63





Non-interest income as a percentage of total revenue



23.31





24.30





24.37





24.68





24.61







































Asset quality:

































Allowance for loan and lease losses

$

207,322



$

205,349



$

199,994



$

201,803



$

199,578





Nonperforming assets



146,047





140,090





132,646





168,962





170,390





Allowance for loan and lease losses / total loans and leases



1.15

%



1.15

%



1.14

%



1.16

%



1.16



%

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



0.19





0.13





0.34





0.18





0.16





Nonperforming loans and leases / total loans and leases



0.78





0.75





0.72





0.94





0.96





Nonperforming assets / total loans and leases plus OREO



0.81





0.79





0.76





0.97





0.99





Allowance for loan and lease losses / nonperforming loans and leases



148.00





152.95





158.00





123.32





119.96







































Other ratios:

































Tangible equity (non-GAAP)



8.29

%



8.21

%



8.23

%



8.03

%



7.95



%

Tangible common equity (non-GAAP)



7.75





7.65





7.67





7.55





7.47





Tier 1 risk-based capital (a)



11.77





11.75





11.91





11.65





11.51





Total risk-based capital (a)



13.25





13.24





13.40





13.17





13.02





Common equity tier 1 risk-based capital (a)



11.03





10.99





11.14





10.99





10.84





Shareholders' equity / total assets



10.21





10.15





10.20





10.01





9.95





Net interest margin



3.57





3.44





3.33





3.30





3.27





Efficiency ratio (non-GAAP)



57.78





59.76





59.48





59.18





60.65







































Equity and share related:

































Common equity

$

2,616,686



$

2,571,105



$

2,556,902



$

2,516,077



$

2,482,416





Book value per common share



28.40





27.94





27.76





27.34





26.93





Tangible book value per common share (non-GAAP)



22.25





21.78





21.59





21.16





20.74





Common stock closing price



63.70





55.40





56.16





52.55





52.22





Dividends declared per common share



0.33





0.26





0.26





0.26





0.26







































Common shares issued and outstanding



92,151





92,016





92,101





92,034





92,195





Weighted-average common shares outstanding - Basic



91,893





91,921





92,058





92,125





92,092





Weighted-average common shares outstanding - Diluted



92,173





92,254





92,400





92,503





92,495







































(a) Presented as projected for June 30, 2018 and actual for the remaining periods.





 

 

WEBSTER FINANCIAL CORPORATION

Consolidated Balance Sheets (unaudited)

(In thousands)



June 30,

2018





March 31,

2018





June 30,

2017

Assets:

















Cash and due from banks

$

228,628



$

164,927



$

231,808

Interest-bearing deposits



70,654





45,899





33,662

Securities:

















 Available for sale



2,780,581





2,773,506





2,807,966

 Held to maturity



4,356,219





4,408,321





4,219,198

   Total securities



7,136,800





7,181,827





7,027,164

Loans held for sale



18,645





19,727





39,407

Loans and Leases:

















 Commercial



6,504,521





6,278,502





5,729,844

 Commercial real estate



4,580,200





4,544,831





4,556,208

 Residential mortgages



4,455,580





4,459,862





4,388,308

 Consumer



2,485,695





2,522,380





2,599,318

   Total loans and leases



18,025,996





17,805,575





17,273,678

Allowance for loan and lease losses



(207,322)





(205,349)





(199,578)

   Loans and leases, net



17,818,674





17,600,226





17,074,100

Federal Home Loan Bank and Federal Reserve Bank stock



141,293





125,328





155,505

Premises and equipment, net



127,973





127,196





131,833

Goodwill and other intangible assets, net



566,061





567,023





569,964

Cash surrender value of life insurance policies



537,431





535,391





524,674

Deferred tax asset, net



106,910





99,199





80,942

Accrued interest receivable and other assets



283,668





285,404





305,871

Total Assets

$

27,036,737



$

26,752,147



$

26,174,930



















Liabilities and Shareholders' Equity:

















Deposits:

















 Demand

$

4,151,259



$

4,074,992



$

4,074,819

 Health savings accounts



5,517,929





5,487,627





4,828,145

 Interest-bearing checking



2,637,346





2,624,885





2,669,207

 Money market



2,016,453





2,344,526





2,316,460

 Savings



4,180,666





4,299,759





4,473,925

 Certificates of deposit



2,478,589





2,275,897





1,795,871

 Brokered certificates of deposit



361,114





277,356





299,670

   Total deposits



21,343,356





21,385,042





20,458,097

Securities sold under agreements to repurchase and other borrowings



862,568





931,299





872,692

Federal Home Loan Bank advances



1,576,956





1,202,030





1,767,757

Long-term debt



225,894





225,830





225,640

Accrued expenses and other liabilities



266,240





291,804





245,618

Total liabilities



24,275,014





24,036,005





23,569,804

Preferred stock



145,037





145,037





122,710

Common shareholders' equity



2,616,686





2,571,105





2,482,416

   Total shareholders' equity



2,761,723





2,716,142





2,605,126

Total Liabilities and Shareholders' Equity

$

27,036,737



$

26,752,147



$

26,174,930

 

 

WEBSTER FINANCIAL CORPORATION

Consolidated Statements of Income (unaudited)





Three Months Ended June 30,





Six Months Ended June 30,

(In thousands, except per share data)



2018





2017





2018





2017

Interest income:























Interest and fees on loans and leases

$

207,820



$

174,456



$

401,040



$

342,264

Interest and dividends on securities



52,523





52,130





105,082





103,686

Loans held for sale



148





203





290





519

Total interest income



260,491





226,789





506,412





446,469

Interest expense:























Deposits



20,225





14,679





38,381





28,114

Borrowings



15,256





14,323





28,853





27,904

Total interest expense



35,481





29,002





67,234





56,018

Net interest income



225,010





197,787





439,178





390,451

Provision for loan and lease losses



10,500





7,250





21,500





17,750

Net interest income after provision for loan and lease losses



214,510





190,537





417,678





372,701

Non-interest income:























Deposit service fees



40,859





38,192





81,310





75,198

Loan and lease related fees



6,333





6,344





13,329





13,552

Wealth and investment services



8,456





7,877





16,326





15,150

Mortgage banking activities



1,235





3,351





2,379





5,617

Increase in cash surrender value of life insurance policies



3,643





3,648





7,215





7,223

Other income



7,848





5,265





16,562





10,979





68,374





64,677





137,121





127,719

Impairment loss on securities recognized in earnings







(126)









(126)

Total non-interest income



68,374





64,551





137,121





127,593

Non-interest expense:























Compensation and benefits



93,052





86,394





187,817





173,893

Occupancy



15,842





16,034





30,987





32,213

Technology and equipment



24,604





22,458





48,466





44,066

Marketing



4,889





4,615





8,441





10,056

Professional and outside services



4,381





3,507





9,169





7,783

Intangible assets amortization



962





1,028





1,924





2,083

Loan workout expenses



844





755





1,420





1,363

Deposit insurance



13,687





6,625





20,404





13,357

Other expenses



22,198





23,003





43,446





43,389

Total non-interest expense



180,459





164,419





352,074





328,203

Income before income taxes



102,425





90,669





202,725





172,091

Income tax expense



20,743





29,090





40,818





51,041

Net income



81,682





61,579





161,907





121,050

 Preferred stock dividends and other



(2,193)





(2,094)





(4,334)





(4,224)

 Earnings applicable to common shareholders

$

79,489



$

59,485



$

157,573



$

116,826

























Weighted-average common shares outstanding - Diluted



92,173





92,495





92,236





92,470

























Earnings per common share:























Basic

$

0.87



$

0.65



$

1.71



$

1.27

Diluted



0.86





0.64





1.71





1.26

 

 

WEBSTER FINANCIAL CORPORATION

Five Quarter Consolidated Statements of Income (unaudited)





Three Months Ended

(In thousands, except per share data)



June 30,

2018





March 31,

2018





December 31,

2017





September 30,

2017





June 30,

2017

Interest income:





























Interest and fees on loans and leases

$

207,820



$

193,220



$

185,172



$

181,130



$

174,456

Interest and dividends on securities



52,523





52,559





50,735





49,584





52,130

Loans held for sale



148





142





208





307





203

Total interest income



260,491





245,921





236,115





231,021





226,789

Interest expense:





























Deposits



20,225





18,156





17,379





16,760





14,679

Borrowings



15,256





13,597





13,804





13,357





14,323

Total interest expense



35,481





31,753





31,183





30,117





29,002

Net interest income



225,010





214,168





204,932





200,904





197,787

Provision for loan and lease losses



10,500





11,000





13,000





10,150





7,250

Net interest income after provision for loan and lease losses



214,510





203,168





191,932





190,754





190,537

Non-interest income:





























Deposit service fees



40,859





40,451





37,618





38,321





38,192

Loan and lease related fees



6,333





6,996





6,550





6,346





6,344

Wealth and investment services



8,456





7,870





8,155





7,750





7,877

Mortgage banking activities



1,235





1,144





1,899





2,421





3,351

Increase in cash surrender value of life insurance policies



3,643





3,572





3,684





3,720





3,648

Other income



7,848





8,714





8,133





7,288





5,265





68,374





68,747





66,039





65,846





64,677

Impairment loss on securities recognized in earnings



















(126)

Total non-interest income



68,374





68,747





66,039





65,846





64,551

Non-interest expense:





























Compensation and benefits



93,052





94,765





94,217





88,395





86,394

Occupancy



15,842





15,145





13,533





14,744





16,034

Technology and equipment



24,604





23,862





22,818





22,580





22,458

Marketing



4,889





3,552





3,320





4,045





4,615

Professional and outside services



4,381





4,788





5,045





4,030





3,507

Intangible assets amortization



962





962





977





1,002





1,028

Loan workout expenses



844





576





891





840





755

Deposit insurance



13,687





6,717





5,948





6,344





6,625

Other expenses



22,198





21,248





24,300





19,843





23,003

Total non-interest expense



180,459





171,615





171,049





161,823





164,419

Income before income taxes



102,425





100,300





86,922





94,777





90,669

Income tax expense



20,743





20,075





17,029





30,281





29,090

Net income



81,682





80,225





69,893





64,496





61,579

 Preferred stock dividends and other



(2,193)





(2,142)





(2,183)





(2,070)





(2,094)

 Earnings applicable to common shareholders

$

79,489



$

78,083



$

67,710



$

62,426



$

59,485































Weighted-average common shares outstanding - Diluted



92,173





92,254





92,400





92,503





92,495































Earnings per common share:





























Basic

$

0.87



$

0.85



$

0.74



$

0.68



$

0.65

Diluted



0.86





0.85





0.73





0.67





0.64



 

 

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,







2018











2017



(Dollars in thousands)



Average balance





Interest





Yield/rate











Average balance





Interest



Yield/rate



Assets:









































Interest-earning assets:









































Loans and leases

$

17,886,685



$

208,490





4.63

%







$

17,266,424



$

175,421



4.04

%

Securities (a)



7,142,572





52,277





2.90











7,030,120





53,569



3.04



Federal Home Loan and Federal Reserve Bank stock



133,114





1,546





4.66











165,087





1,563



3.80



Interest-bearing deposits



66,339





247





1.47











64,812





169



1.03



Loans held for sale



15,211





148





3.90











22,956





203



3.53



 Total interest-earning assets



25,243,921



$

262,708





4.13

%









24,549,399



$

230,925



3.74

%

Non-interest-earning assets



1,631,032























1,633,049













 Total Assets

$

26,874,953





















$

26,182,448























































Liabilities and Shareholders' Equity:









































Interest-bearing liabilities:









































Demand deposits

$

4,109,165



$





%







$

3,979,330



$



%

Health savings accounts



5,519,917





2,735





0.20











4,822,188





2,392



0.20



Interest-bearing checking, money market and savings



9,041,286





7,859





0.35











9,479,595





6,331



0.27



Certificates of deposit



2,732,709





9,631





1.41











2,057,335





5,956



1.16



 Total deposits



21,403,077





20,225





0.38











20,338,448





14,679



0.29













































Securities sold under agreements to repurchase and other borrowings



869,238





3,998





1.82











844,837





3,583



1.68



Federal Home Loan Bank advances



1,399,344





8,471





2.39











1,997,069





8,156



1.62



Long-term debt



225,863





2,787





4.94











225,604





2,584



4.58



 Total borrowings



2,494,445





15,256





2.42











3,067,510





14,323



1.85



 Total interest-bearing liabilities



23,897,522



$

35,481





0.59

%









23,405,958



$

29,002



0.49

%

Non-interest-bearing liabilities



223,076























179,268













 Total liabilities



24,120,598























23,585,226























































Preferred stock



145,037























122,710













Common shareholders' equity



2,609,318























2,474,512













Total shareholders' equity



2,754,355























2,597,222













 Total Liabilities and Shareholders' Equity

$

26,874,953





















$

26,182,448













Tax-equivalent net interest income









227,227























201,923







Less: tax-equivalent adjustments









(2,217)























(4,136)







 Net interest income







$

225,010





















$

197,787







 Net interest margin















3.57

%



















3.27

%











































(a) For purposes of the yield computation, unrealized gains (losses) on securities available for sale are excluded from the average balance.



 

 

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,







2018











2017



(Dollars in thousands)



Average balance





Interest





Yield/rate











Average balance





Interest



Yield/rate



Assets:









































Interest-earning assets:









































Loans and leases

$

17,821,094



$

402,354





4.50

%







$

17,154,412



$

344,150



4.00

%

Securities (a)



7,150,495





104,766





2.91











7,050,583





106,420



3.01



Federal Home Loan and Federal Reserve Bank stock



133,177





3,001





4.54











173,601





3,250



3.78



Interest-bearing deposits



59,563





448





1.50











66,476





299



0.89



Loans held for sale



15,768





290





3.68











29,560





519



3.51



 Total interest-earning assets



25,180,097



$

510,859





4.04

%









24,474,632



$

454,638



3.71

%

Non-interest-earning assets



1,636,345























1,637,865













 Total Assets

$

26,816,442





















$

26,112,497























































Liabilities and Shareholders' Equity:









































Interest-bearing liabilities:









































Demand deposits

$

4,136,115



$





%







$

3,957,403



$



%

Health savings accounts



5,473,715





5,359





0.20











4,779,245





4,684



0.20



Interest-bearing checking, money market and savings



9,191,181





15,572





0.34











9,402,581





11,819



0.25



Certificates of deposit



2,596,683





17,450





1.35











2,040,024





11,611



1.15



 Total deposits



21,397,694





38,381





0.36











20,179,253





28,114



0.28













































Securities sold under agreements to repurchase and other borrowings



872,516





7,638





1.74











874,871





7,123



1.62



Federal Home Loan Bank advances



1,355,830





15,752





2.31











2,066,551





15,649



1.51



Long-term debt



225,831





5,463





4.84











225,572





5,132



4.55



 Total borrowings



2,454,177





28,853





2.34











3,166,994





27,904



1.75



 Total interest-bearing liabilities



23,851,871



$

67,234





0.57

%









23,346,247



$

56,018



0.48

%

Non-interest-bearing liabilities



226,011























187,858













 Total liabilities



24,077,882























23,534,105























































Preferred stock



145,099























122,710













Common shareholders' equity



2,593,461























2,455,682













Total shareholders' equity



2,738,560























2,578,392













 Total Liabilities and Shareholders' Equity

$

26,816,442





















$

26,112,497













Tax-equivalent net interest income









443,625























398,620







Less: tax-equivalent adjustments









(4,447)























(8,169)







 Net interest income







$

439,178





















$

390,451







 Net interest margin















3.51

%



















3.25

%











































(a) For purposes of the yield computation, unrealized gains (losses) on securities available for sale are excluded from the average balance.



 

 

WEBSTER FINANCIAL CORPORATION

Five Quarter Loan and Lease Balances (unaudited)

(Dollars in thousands)



June 30,

2018





March 31,

2018





December 31,

2017





September 30,

2017





June 30,

2017

Loan and Lease Balances (actual):





























Commercial non-mortgage

$

5,544,685



$

5,404,231



$

5,084,148



$

5,031,481



$

4,868,641

Asset-based lending



959,836





874,271





834,779





883,599





861,203

Commercial real estate



4,580,200





4,544,831





4,523,828





4,464,917





4,556,208

Residential mortgages



4,455,580





4,459,862





4,490,878





4,499,441





4,388,308

Consumer



2,485,695





2,522,380





2,590,225





2,566,983





2,599,318

Total Loan and Lease Balances



18,025,996





17,805,575





17,523,858





17,446,421





17,273,678

Allowance for loan and lease losses



(207,322)





(205,349)





(199,994)





(201,803)





(199,578)

Loans and Leases, net

$

17,818,674



$

17,600,226



$

17,323,864



$

17,244,618



$

17,074,100































Loan and Lease Balances (average):





























Commercial non-mortgage

$

5,470,677



$

5,306,412



$

5,080,267



$

4,990,146



$

4,891,446

Asset-based lending



897,564





864,895





876,070





859,289





864,247

Commercial real estate



4,549,969





4,538,429





4,446,162





4,475,207





4,550,595

Residential mortgages



4,460,904





4,476,057





4,498,707





4,455,932





4,340,656

Consumer



2,507,571





2,568,980





2,600,970





2,583,945





2,619,480

Total Loan and Lease Balances



17,886,685





17,754,773





17,502,176





17,364,519





17,266,424

Allowance for loan and lease losses



(207,718)





(201,575)





(202,632)





(202,628)





(201,852)

Loans and Leases, net

$

17,678,967



$

17,553,198



$

17,299,544



$

17,161,891



$

17,064,572





WEBSTER FINANCIAL CORPORATION

Five Quarter Nonperforming Assets (unaudited)

(Dollars in thousands)



June 30,

2018





March 31,

2018





December 31,

2017





September 30,

2017





June 30,

2017

Nonperforming loans and leases:





























Commercial non-mortgage

$

40,240



$

46,843



$

39,795



$

59,512



$

68,977

Asset-based lending



1,197





1,571





589





8,558





Commercial real estate



9,606





3,884





4,484





11,066





11,168

Residential mortgages



50,654





44,496





44,407





45,597





46,018

Consumer



38,390





37,465





37,307





38,915





40,206

Total nonperforming loans and leases

$

140,087



$

134,259



$

126,582



$

163,648



$

166,369































Other real estate owned and repossessed assets:





























Commercial non-mortgage

$

148



$

218



$

305



$

328



$

33

Residential mortgages



3,271





2,785





3,110





2,843





2,513

Consumer



2,541





2,828





2,649





2,143





1,475

Total other real estate owned and repossessed assets

$

5,960



$

5,831



$

6,064



$

5,314



$

4,021

Total nonperforming assets

$

146,047



$

140,090



$

132,646



$

168,962



$

170,390





WEBSTER FINANCIAL CORPORATION

Five Quarter Past Due Loans and Leases (unaudited)

(Dollars in thousands)



June 30,

2018





March 31,

2018





December 31,

2017





September 30,

2017





June 30,

2017

Past due 30-89 days:





























Commercial non-mortgage

$

7,508



$

4,749



$

8,167



$

3,169



$

2,793

Asset-based lending



















Commercial real estate



719





1,103





551





1,783





1,013

Residential mortgages



10,861





17,337





13,771





11,700





9,831

Consumer



14,354





17,602





22,394





15,942





14,360

Total past due 30-89 days



33,442





40,791





44,883





32,594





27,997

Past due 90 days or more and accruing



62





845





887





934





1,185

Total past due loans and leases

$

33,504



$

41,636



$

45,770



$

33,528



$

29,182





WEBSTER FINANCIAL CORPORATION

Five Quarter Changes in the Allowance for Loan and Lease Losses (unaudited)





For the Three Months Ended

(Dollars in thousands)



June 30,

2018





March 31,

2018





December 31,

2017





September 30,

2017





June 30,

2017

Beginning balance

$

205,349



$

199,994



$

201,803



$

199,578



$

199,107

Provision



10,500





11,000





13,000





10,150





7,250

Charge-offs:





























Commercial non-mortgage



5,697





1,542





387





3,123





2,315

Asset-based lending











2,572









Commercial real estate



40





77





8,324





749





100

Residential mortgages



754





917





560





585





623

Consumer



4,907





5,074





6,174





6,197





5,602

Total charge-offs



11,398





7,610





18,017





10,654





8,640

Recoveries:





























Commercial non-mortgage



923





135





1,231





545





330

Asset-based lending











33









Commercial real estate



9





2





144





10





4

Residential mortgages



325





385





100





280





407

Consumer



1,614





1,443





1,700





1,894





1,120

Total recoveries



2,871





1,965





3,208





2,729





1,861

Total net charge-offs



8,527





5,645





14,809





7,925





6,779

Ending balance

$

207,322



$

205,349



$

199,994



$

201,803



$

199,578

 

 

WEBSTER FINANCIAL CORPORATION

Reconciliations to GAAP Financial Measures







































The Company evaluates its business based on certain ratios that utilize tangible equity, a non-GAAP financial measure. 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.







































The efficiency ratio, which measures the costs expended to generate a dollar of revenue, is calculated excluding foreclosed property expense, amortization of intangibles, gain or loss on securities, and other non-recurring items. Core deposits express total deposits less time deposits. Accordingly, these are also non-GAAP financial measures.







































The Company believes the use of these non-GAAP financial measures provides additional clarity in assessing the results of the Company. Other companies may define or calculate supplemental financial data differently. 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,

2018





March 31,

2018





December 31,

2017





September 30,

2017





June 30,

2017





Return on average tangible common shareholders' equity:

































Net income (GAAP)

$

81,682



$

80,225



$

69,893



$

64,496



$

61,579





Less: Preferred stock dividends (GAAP)



1,969





1,947





2,112





2,024





2,024





Add: Intangible assets amortization, tax-effected (GAAP)



760





760





635





651





668





Income adjusted for preferred stock dividends and intangible assets amortization (non-GAAP)

$

80,473



$

79,038



$

68,416



$

63,123



$

60,223





Income adjusted for preferred stock dividends and intangible assets amortization, annualized basis (non-GAAP)

$

321,892



$

316,152



$

273,664



$

252,492



$

240,892





Average shareholders' equity (non-GAAP)

$

2,754,355



$

2,722,591



$

2,675,733



$

2,635,312



$

2,597,222





Less: Average preferred stock (non-GAAP)



145,037





145,161





131,707





122,710





122,710





Average goodwill and other intangible assets (non-GAAP)



566,522





567,547





568,546





569,538





570,560





Average tangible common shareholders' equity (non-GAAP)

$

2,042,796



$

2,009,883



$

1,975,480



$

1,943,064



$

1,903,952





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



15.76

%



15.73

%



13.85

%



12.99

%



12.65

%





































Efficiency ratio:

































Non-interest expense (GAAP)

$

180,459



$

171,615



$

171,049



$

161,823



$

164,419





Less: Foreclosed property activity (GAAP)



(106)





85





(97)





(72)





(143)





Intangible assets amortization (GAAP)



962





962





977





1,002





1,028





Other expenses (non-GAAP)



8,599









6,106





213





1,587





Non-interest expense (non-GAAP)

$

171,004



$

170,568



$

164,063



$

160,680



$

161,947





Net interest income (GAAP)

$

225,010



$

214,168



$

204,932



$

200,904



$

197,787





Add: Tax-equivalent adjustment (non-GAAP)



2,217





2,230





4,444





4,340





4,136





Non-interest income (GAAP)



68,374





68,747





66,039





65,846





64,551





Other (non-GAAP)



359





295





421





431





555





Income (non-GAAP)

$

295,960



$

285,440



$

275,836



$

271,521



$

267,029





 Efficiency ratio (non-GAAP)



57.78

%



59.76

%



59.48

%



59.18

%



60.65

%





































Tangible equity:

































Shareholders' equity (GAAP)

$

2,761,723



$

2,716,142



$

2,701,958



$

2,638,787



$

2,605,126





Less: Goodwill and other intangible assets (GAAP)



566,061





567,023





567,984





568,962





569,964





Tangible shareholders' equity (non-GAAP)

$

2,195,662



$

2,149,119



$

2,133,974



$

2,069,825



$

2,035,162





Total assets (GAAP)

$

27,036,737



$

26,752,147



$

26,487,645



$

26,350,182



$

26,174,930





Less: Goodwill and other intangible assets (GAAP)



566,061





567,023





567,984





568,962





569,964





Tangible assets (non-GAAP)

$

26,470,676



$

26,185,124



$

25,919,661



$

25,781,220



$

25,604,966





Tangible equity (non-GAAP)



8.29

%



8.21

%



8.23

%



8.03

%



7.95

%





































Tangible common equity:

































Tangible shareholders' equity (non-GAAP)

$

2,195,662



$

2,149,119



$

2,133,974



$

2,069,825



$

2,035,162





Less: Preferred stock (GAAP)



145,037





145,037





145,056





122,710





122,710





Tangible common shareholders' equity (non-GAAP)

$

2,050,625



$

2,004,082



$

1,988,918



$

1,947,115



$

1,912,452





Tangible assets (non-GAAP)

$

26,470,676



$

26,185,124



$

25,919,661



$

25,781,220



$

25,604,966





Tangible common equity (non-GAAP)



7.75

%



7.65

%



7.67

%



7.55

%



7.47

%





































Tangible book value per common share:

































Tangible common shareholders' equity (non-GAAP)

$

2,050,625



$

2,004,082



$

1,988,918



$

1,947,115



$

1,912,452





Common shares outstanding



92,151





92,016





92,101





92,034





92,195





Tangible book value per common share (non-GAAP)

$

22.25



$

21.78



$

21.59



$

21.16



$

20.74







































Core deposits:

































Total deposits

$

21,343,356



$

21,385,042



$

20,993,729



$

20,855,235



$

20,458,097





Less: Certificates of deposit



2,478,589





2,275,897





2,187,756





1,918,817





1,795,871





Brokered certificates of deposit



361,114





277,356





280,652





299,674





299,670





Core deposits (non-GAAP)

$

18,503,653



$

18,831,789



$

18,525,321



$

18,636,744



$

18,362,556





 

Media Contact 

Investor Contact

Alice Ferreira, 203-578-2610

Terry Mangan, 203-578-2318

acferreira@websterbank.com 

tmangan@websterbank.com

 

 

Cision View original content:http://www.prnewswire.com/news-releases/webster-reports-second-quarter-2018-earnings-300683573.html

SOURCE Webster Financial Corporation

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