Webster Reports First Quarter 2023 EPS of $1.24; Adjusted EPS of $1.49

Webster Financial Corporation ("Webster") (NYSE: WBS), the holding company for Webster Bank, N.A. and its HSA Bank division, today announced net income available to common stockholders of $216.8 million, or $1.24 per diluted share, for the quarter ended March 31, 2023, compared to net (loss) available to common stockholders of $(20.2) million, or $(0.14) per diluted share, for the quarter ended March 31, 2022.

First quarter 2023 results include $56.6 million pre-tax ($42.3 million after tax), or $0.251 per diluted share, of charges related to the merger with Sterling Bancorp on January 31, 2022 ("the merger") and balance sheet repositioning. Excluding these charges, adjusted earnings per diluted share would have been $1.491 for the quarter ended March 31, 2023.

"Webster generated solid results during a challenging time for the banking industry," said John R. Ciulla, president and chief executive officer. "Our diverse businesses, strong capital position, unique deposit profile, and solid risk management framework, allow our company to deliver for our clients in all operating environments."

Highlights for the first quarter of 2023:

  • Revenue of $666.0 million.
  • Period end loans and leases balance of $50.9 billion, up $1.2 billion or 2.3 percent linked quarter; 81 percent commercial loans and leases, 19 percent consumer loans, and a loan to deposit ratio of 92 percent.
  • Period end deposits balance of $55.3 billion, up $1.2 billion or 2.3 percent linked quarter.
  • Provision for credit losses totaled $46.7 million.
  • Charges related to the merger and balance sheet repositioning totaled $56.6 million.
  • Return on average assets of 1.22 percent; adjusted 1.46 percent1.
  • Return on average tangible common equity of 17.66 percent1; adjusted 20.98 percent1.
  • Net interest margin of 3.66 percent, down 8 basis points from prior quarter.
  • Common equity tier 1 ratio of 10.40 percent.
  • Efficiency ratio of 41.64 percent1.
  • Tangible common equity ratio of 7.15 percent1.

"Webster’s financial prospects remain strong," said Glenn MacInnes, executive vice president and chief financial officer. "Along with core deposit growth, we took actions that provided ample liquidity and funding optionality going forward."

1 See Reconciliation to GAAP Financial Measures beginning on page 18.

Line of Business performance compared to the first quarter of 2022

Commercial Banking

Webster’s Commercial Banking segment serves businesses that have more than $2 million of revenue through its business banking, middle market, asset-based lending, equipment finance, commercial real estate, sponsor finance, private banking, and treasury services business units. At March 31, 2023, Commercial Banking had $41.3 billion in loans and leases and $18.3 billion in deposits.

Commercial Banking Operating Results:

 

 

 

 

 

Percent

 

Three months ended March 31,

 

Favorable/

(In thousands)

 

2023

2022

 

(Unfavorable)

Net interest income

 

$384,314

$287,069

 

 

33.9 %

 

Non-interest income

 

35,397

38,743

 

 

(8.6)

 

Operating revenue

 

419,711

325,812

 

 

28.8

 

Non-interest expense

 

108,509

89,240

 

 

(21.6)

 

Pre-tax, pre-provision net revenue

 

$311,202

$236,572

 

 

31.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent

 

 

At March 31,

 

Increase/

(In millions)

 

2023

2022

 

(Decrease)

Loans and leases

 

$41,287

$34,928

 

 

18.2 %

 

Deposits

 

18,298

21,528

 

 

(15.0)

 

AUA / AUM (off balance sheet)

 

2,670

2,692

 

 

(0.8)

 

Pre-tax, pre-provision net revenue increased $74.6 million, to $311.2 million, in the quarter as compared to prior year. The increase in pre-tax, pre-provision net revenue was partially attributable to the timing of the merger in the first quarter 2022. Net interest income increased $97.2 million, to $384.3 million, primarily driven by the merger, organic loan growth since the merger, and the impact of the higher rate environment. Non-interest income decreased $3.3 million, to $35.4 million, driven by decreases of $3.5 million in prepayment penalties, $1.2 million in cash management fees, and $0.6 million in fees from interest rate hedging activities; partially offset by $1.9 million of higher syndication fees. Non-interest expense increased $19.3 million, to $108.5 million, primarily resulting from $19.0 million of higher expenses due to the timing of the merger in the first quarter of 2022.

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. At March 31, 2023, HSA Bank had $12.1 billion in total footings comprising $8.3 billion in deposits and $3.8 billion in assets under administration through linked investment accounts.

HSA Bank Operating Results:

 

 

 

 

 

Percent

 

Three months ended March 31,

 

Favorable/

(In thousands)

 

2023

2022

 

(Unfavorable)

Net interest income

 

$71,730

$44,577

 

 

60.9 %

 

Non-interest income

 

24,067

26,958

 

 

(10.7)

 

Operating revenue

 

95,797

71,535

 

 

33.9

 

Non-interest expense

 

43,700

36,409

 

 

(20.0)

 

Pre-tax, net revenue

 

$52,097

$35,126

 

 

48.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent

 

 

At March 31,

 

Increase/

(Dollars in millions)

 

2023

2022

 

(Decrease)

Number of accounts (thousands)

 

3,172

3,067

 

 

3.4 %

 

 

 

 

 

 

 

 

 

Deposits

 

$8,273

$7,805

 

 

6.0

 

Linked investment accounts (off balance sheet)

 

3,776

3,761

 

 

0.4

 

Total footings

 

$12,049

$11,566

 

 

4.2

 

Pre-tax net revenue increased $17.0 million, to $52.1 million, in the quarter as compared to prior year. Net interest income increased $27.2 million, to $71.7 million, primarily due to an increase in net deposit spread and growth in deposits. Non-interest income decreased $2.9 million, to $24.1 million, primarily due to lower client account fees. Non-interest expense increased $7.3 million, to $43.7 million, primarily due to higher compensation and service contract expense related to account growth and the continued investment in our user experience build out.

Consumer Banking

Webster's Consumer Banking segment 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 business units, as well as a distribution network consisting of 201 banking centers and 351 ATMs, a customer care center, and a full range of web and mobile-based banking services. Additionally, the Webster Investment Services group provides investment services to consumers and small business owners within Webster's targeted markets and retail footprint. At March 31, 2023, Consumer Banking had $9.6 billion in loans and $23.7 billion in deposits, as well as $7.8 billion in assets under administration.

Consumer Banking Operating Results:

 

 

 

 

 

Percent

 

Three months ended March 31,

 

Favorable/

(In thousands)

 

2023

2022

 

(Unfavorable)

Net interest income

 

$210,583

$136,677

 

 

54.1 %

 

Non-interest income

 

25,959

27,901

 

 

(7.0)

 

Operating revenue

 

236,542

164,578

 

 

43.7

 

Non-interest expense

 

106,879

95,510

 

 

(11.9)

 

Pre-tax, pre-provision net revenue

 

$129,663

$69,068

 

 

87.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At March 31,

 

Percent

(In millions)

 

2023

2022

 

Increase

Loans

 

$9,617

$8,595

 

 

11.9 %

 

Deposits

 

23,698

24,150

 

 

(1.9)

 

AUA (off balance sheet)

 

7,750

8,096

 

 

(4.3)

 

Pre-tax, pre-provision net revenue increased $60.6 million, to $129.7 million, in the quarter as compared to prior year. The increase in balances and income was partially attributable to the merger in the first quarter of 2022. Net interest income increased $73.9 million, to $210.6 million, primarily driven by the merger and the impact of a higher rate environment on the value of deposits. Non-interest income decreased $1.9 million, to $26.0 million, driven by $3.6 million in lower net investment services income, which was attributable to the new outsourcing model adopted in 2022, partially offset by higher deposit related fee income. Non-interest expense increased $11.4 million, to $106.9 million, primarily driven by $12.9 million of incremental expenses due to the timing of the merger, partially offset by lower compensation-related expenses.

Consolidated financial performance:

Current period performance, when compared to the first quarter of 2022, is impacted by the timing of the merger with Sterling Bancorp occurring on January 31, 2022 as the first quarter of 2022 does not represent a full quarter of combined earnings.

Quarterly net interest income compared to the first quarter of 2022:

  • Net interest income was $595.3 million compared to $394.2 million.
  • Net interest margin was 3.66 percent compared to 3.21 percent. The yield on interest-earning assets increased by 175 basis points, and the cost of interest-bearing liabilities increased by 139 basis points.
  • Average interest-earning assets totaled $66.1 billion and increased by $15.8 billion, or 31.3 percent.
  • Average loans and leases totaled $50.1 billion and increased by $14.2 billion, or 39.5 percent.
  • Average deposits totaled $54.8 billion and increased by $8.9 billion, or 19.4 percent.

Quarterly provision for credit losses:

  • The provision for credit losses reflects a $46.7 million expense in the quarter, contributing to a $19.2 million increase in the allowance for credit losses on loans and leases. The provision also reflects a decrease in the reserves on unfunded commitments of $1.7 million. The provision for credit losses also reflected an expense of $43.0 million in the prior quarter, and $188.8 million a year ago.
  • Net charge-offs were $24.5 million, compared to $20.2 million in the prior quarter, and $8.9 million a year ago. The ratio of net charge-offs to average loans and leases on an annualized basis was 0.20 percent, compared to 0.17 percent in the prior quarter, and 0.10 percent a year ago.
  • The allowance for credit losses on loans and leases represented 1.21 percent of total loans and leases at March 31, 2023, compared to 1.20 percent at December 31, 2022, and 1.31 percent at March 31, 2022. The allowance represented 332 percent of nonperforming loans and leases at March 31, 2023, compared to 292 percent at December 31, 2022, and 229 percent at March 31, 2022.

Quarterly non-interest income compared to the first quarter of 2022:

  • Total non-interest income was $70.8 million compared to $104.0 million, a decrease of $33.2 million. The decrease primarily reflects losses on the sale of securities, lower client hedging income and valuation marks, the outsourcing of the consumer investment services platform, lower client account fees, and lower prepayment and other loan related fees.

Quarterly non-interest expense compared to the first quarter of 2022:

  • Total non-interest expense was $332.5 million compared to $359.8 million, a decrease of $27.3 million. Total non-interest expense includes a net $29.4 million of merger and strategic initiatives charges, compared to a net $104.4 million a year ago. Excluding those charges, total non-interest expense increased $47.7 million, which reflects a full quarter impact of the merger compared to two thirds impact a year ago. After adjusting for merger and strategic initiative charges and the full quarter impact of the merger, expenses increased modestly year-over-year. The modest increase reflects expense benefits from the merger and outsourcing of the consumer investments services platform, which were offset by an increase in intangible amortization and strategic investments including operating expenses associated with the Bend and interLINK acquisitions.

Quarterly income taxes compared to the first quarter of 2022:

  • Income tax expense (benefit) was $65.8 million compared to $(33.6) million, and the effective tax rate was 23.0 percent compared to an effective tax benefit rate of (66.7) percent. The tax benefit and effective tax benefit rate a year ago reflected the pre-tax loss recognized in that period.

Investment securities:

  • Total investment securities, net were $14.9 billion, compared to $14.5 billion at December 31, 2022, and $15.1 billion at March 31, 2022. The carrying value of the available-for-sale portfolio included $766.4 million of net unrealized losses, compared to $864.5 million at December 31, 2022, and $328.4 million at March 31, 2022. The carrying value of the held-to-maturity portfolio does not reflect $742.8 million of net unrealized losses, compared to $803.4 million at December 31, 2022, and $270.8 million at March 31, 2022.

Loans and leases:

  • Total loans and leases were $50.9 billion, compared to $49.8 billion at December 31, 2022, and $43.5 billion at March 31, 2022. Compared to December 31, 2022, commercial loans and leases increased by $0.3 billion, commercial real estate loans increased by $0.9 billion, residential mortgages increased by $38.1 million, while consumer loans decreased by $61.2 million.
  • Compared to a year ago, commercial loans and leases increased by $3.4 billion, commercial real estate loans increased by $2.9 billion, residential mortgages increased by $1.2 billion, while consumer loans decreased by $131.3 million.
  • Loan originations for the portfolio were $3.3 billion, compared to $4.7 billion in the prior quarter, and $2.6 billion a year ago. In addition, $2.5 million of residential loans were originated for sale in the quarter, compared to $3.5 million in the prior quarter, and $23.1 million a year ago.

Asset quality:

  • Total nonperforming loans and leases were $185.0 million, or 0.36 percent of total loans and leases, compared to $203.8 million, or 0.41 percent of total loans and leases, at December 31, 2022, and $248.1 million, or 0.57 percent of total loans and leases, at March 31, 2022.
  • Past due loans and leases were $44.2 million, compared to $73.7 million at December 31, 2022, and $71.5 million at March 31, 2022.

Deposits and borrowings:

  • Total deposits were $55.3 billion, compared to $54.1 billion at December 31, 2022, and $54.4 billion at March 31, 2022. Core deposits to total deposits1 were 91.8 percent, compared to 92.3 percent at December 31, 2022, and 94.8 percent at March 31, 2022. The loan to deposit ratio was 92.1 percent at both March 31, 2023, and December 31, 2022, and 80.1 percent at March 31, 2022.
  • Total borrowings were $9.9 billion, compared to $7.7 billion at December 31, 2022, and $1.6 billion at March 31, 2022.

Capital:

  • The return on average common stockholders’ equity and the return on average tangible common stockholders’ equity1 were 10.94 percent and 17.66 percent, respectively, compared to (1.25) percent and (1.36) percent, respectively, in the first quarter of 2022.
  • The tangible equity1 and tangible common equity1 ratios were 7.55 percent and 7.15 percent, respectively, compared to 8.72 percent and 8.26 percent, respectively, at March 31, 2022. The common equity tier 1 ratio was 10.40 percent, compared to 11.46 percent at March 31, 2022.
  • Book value and tangible book value per common share1 were $45.85 and $29.47, respectively, compared to $44.32 and $28.94, respectively, at March 31, 2022.

1 See Reconciliation to GAAP Financial Measures beginning on page 18.

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 $75 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 first quarter 2023 earnings announcement will be held today, Thursday, April 20, 2023 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 April 20, 2023. To access the replay, dial 800-770-2030, or 647-362-9199 for international callers. The replay conference ID number is 8607257.

Forward-Looking Statements

This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. 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) Webster's ability to successfully integrate the operations of Webster and Sterling Bancorp and realize the anticipated benefits of the merger; (2) Webster's ability to successfully execute its business plan and strategic initiatives, and manage any risks or uncertainties; (3) Webster's 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 Webster and its 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 Webster and its subsidiaries must comply; (8) adverse conditions in the securities markets that lead to impairment in the value of Webster's 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) Webster's 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 Webster's counterparties and vendors; (16) Webster's 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 Webster, 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) Webster's ability to appropriately address social, environmental, and sustainability concerns that may arise from its 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.

Webster believes that providing certain non-GAAP financial measures provides investors with information useful in understanding its financial performance, performance trends, and financial position. Webster utilizes these measures for internal planning and forecasting purposes. Webster, as well as securities analysts, investors, and other interested parties, also use these measures to compare peer company operating performance. Webster believes that its presentation and discussion, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting its 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 Webster strongly encourages investors to review its 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) March 31,

2023
December 31,

2022
September 30,

2022
June 30,

2022
March 31,

2022
 
Income and performance ratios:
Net income (loss) $

221,004

$

244,751

$

233,968

$

182,311

$

(16,747)

Net income (loss) available to common stockholders

216,841

240,588

229,806

178,148

(20,178)

Earnings (loss) per diluted common share

1.24

1.38

1.31

1.00

(0.14)

Return on average assets

1.22

%

1.40

%

1.38

%

1.10

%

(0.12)

%

Return on average tangible common stockholders' equity (1)

17.66

19.93

18.62

14.50

(1.36)

Return on average common stockholders’ equity

10.94

12.54

11.78

9.09

(1.25)

Non-interest income as a percentage of total revenue

10.62

14.50

17.10

19.90

20.88

 
Asset quality:
Allowance for credit losses on loans and leases $

613,914

$

594,741

$

574,325

$

571,499

$

569,371

Nonperforming assets

186,551

206,136

211,627

250,242

251,206

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

1.21

%

1.20

%

1.20

%

1.25

%

1.31

%

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

0.20

0.17

0.25

0.09

0.10

Nonperforming loans and leases / total loans and leases

0.36

0.41

0.44

0.54

0.57

Nonperforming assets / total loans and leases plus OREO

0.37

0.41

0.44

0.55

0.58

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

331.81

291.84

274.12

230.88

229.48

 
Other ratios:
Tangible equity (1)

7.55

%

7.79

%

7.70

%

8.12

%

8.72

%

Tangible common equity (1)

7.15

7.38

7.27

7.68

8.26

Tier 1 risk-based capital (2)

10.91

11.23

11.35

11.65

12.05

Total risk-based capital (2)

12.94

13.25

13.38

13.91

14.41

Common equity tier 1 risk-based capital (2)

10.40

10.71

10.80

11.09

11.46

Stockholders’ equity / total assets

11.08

11.30

11.33

11.83

12.55

Net interest margin

3.66

3.74

3.54

3.28

3.21

Efficiency ratio (1)

41.64

40.27

41.17

45.25

48.73

 
Equity and share related:
Common equity $

8,010,315

$

7,772,207

$

7,542,431

$

7,713,809

$

7,893,156

Book value per common share

45.85

44.67

43.32

43.82

44.32

Tangible book value per common share (1)

29.47

29.07

27.69

28.31

28.94

Common stock closing price

39.42

47.34

45.20

42.15

56.12

Dividends declared per common share

0.40

0.40

0.40

0.40

0.40

Common shares issued and outstanding

174,712

174,008

174,116

176,041

178,102

Weighted-average common shares outstanding - Basic

172,766

172,522

173,868

175,845

147,394

Weighted-average common shares outstanding - Diluted

172,883

172,699

173,944

175,895

147,533

 
(1) See Reconciliation to GAAP Financial Measures beginning on page 18.
(2) Presented as preliminary for March 31, 2023, and actual for the remaining periods.
WEBSTER FINANCIAL CORPORATION

Consolidated Balance Sheets (unaudited)
(In thousands) March 31,

2023
December 31,

2022
March 31,

2022
Assets:
Cash and due from banks $

201,683

$

264,118

$

240,435

Interest-bearing deposits

2,232,388

575,825

552,778

Securities:
Available for sale

7,798,977

7,892,697

8,744,897

Held to maturity, net

7,063,223

6,564,697

6,362,254

Total securities, net

14,862,200

14,457,394

15,107,151

Loans held for sale

210,724

1,991

17,970

Loans and Leases:
Commercial

20,775,893

20,484,806

17,386,139

Commercial real estate

20,513,182

19,619,145

17,584,947

Residential mortgages

8,001,563

7,963,420

6,798,199

Consumer

1,635,885

1,697,055

1,767,200

Total loans and leases

50,926,523

49,764,426

43,536,485

Allowance for credit losses on loans and leases

(613,914)

(594,741)

(569,371)

Loans and leases, net

50,312,609

49,169,685

42,967,114

Federal Home Loan Bank and Federal Reserve Bank stock

584,724

445,900

206,123

Premises and equipment, net

431,432

430,184

490,004

Goodwill and other intangible assets, net

2,861,310

2,713,446

2,738,353

Cash surrender value of life insurance policies

1,233,994

1,229,169

1,222,898

Deferred tax asset, net

315,525

371,634

178,042

Accrued interest receivable and other assets

1,597,806

1,618,175

1,410,616

Total Assets $

74,844,395

$

71,277,521

$

65,131,484

 
Liabilities and Stockholders' Equity:
Deposits:
Demand $

12,007,387

$

12,974,975

$

13,570,702

Health savings accounts

8,272,507

7,944,892

7,804,858

Interest-bearing checking

8,560,750

9,237,529

9,579,839

Money market

14,203,858

11,062,652

11,964,649

Savings

7,723,198

8,673,343

8,615,138

Certificates of deposit

3,855,406

2,729,332

2,821,097

Brokered certificates of deposit

674,373

1,431,617

-

Total deposits

55,297,479

54,054,340

54,356,283

Securities sold under agreements to repurchase and other borrowings

306,154

1,151,830

518,733

Federal Home Loan Bank advances

8,560,461

5,460,552

10,903

Long-term debt

1,071,413

1,073,128

1,078,274

Accrued expenses and other liabilities

1,314,594

1,481,485

990,156

Total liabilities

66,550,101

63,221,335

56,954,349

Preferred stock

283,979

283,979

283,979

Common stockholders' equity

8,010,315

7,772,207

7,893,156

Total stockholders’ equity

8,294,294

8,056,186

8,177,135

Total Liabilities and Stockholders' Equity $

74,844,395

$

71,277,521

$

65,131,484

 
 
WEBSTER FINANCIAL CORPORATION

Consolidated Statements of Income (unaudited)

Three Months Ended March 31,

(In thousands, except per share data)

2023

 

 

 

2022

Interest income:
Interest and fees on loans and leases $

716,356

$

346,276

Interest and dividends on securities

114,556

63,526

Loans held for sale

16

26

Total interest income

830,928

409,828

Interest expense:
Deposits

150,204

7,399

Borrowings

85,441

8,181

Total interest expense

235,645

15,580

Net interest income

595,283

394,248

Provision for credit losses

46,749

188,845

Net interest income after provision for loan and lease losses

548,534

205,403

Non-interest income:
Deposit service fees

45,436

47,827

Loan and lease related fees

23,005

22,679

Wealth and investment services

6,587

10,597

Mortgage banking activities

59

428

Increase in cash surrender value of life insurance policies

6,728

6,732

(Loss) on sale of investment securities, net

(16,747)

-

Other income

5,698

15,772

Total non-interest income

70,766

104,035

Non-interest expense:
Compensation and benefits

173,200

184,002

Occupancy

20,171

18,615

Technology and equipment

44,366

55,401

Marketing

3,476

3,509

Professional and outside services

32,434

54,091

Intangible assets amortization

9,497

6,387

Loan workout expenses

606

680

Deposit insurance

12,323

5,222

Other expenses

36,394

31,878

Total non-interest expense

332,467

359,785

Income (loss) before income taxes

286,833

(50,347)

Income tax expense (benefit)

65,829

(33,600)

Net income (loss)

221,004

(16,747)

Preferred stock dividends

(4,163)

(3,431)

Net income (loss) available to common stockholders $

216,841

$

(20,178)

 
Weighted-average common shares outstanding - Diluted

172,883

147,533

 
Earnings (loss) per common share:
Basic $

1.24

$

(0.14)

Diluted

1.24

(0.14)

 
WEBSTER FINANCIAL CORPORATION

Five Quarter Consolidated Statements of Income (unaudited)
Three Months Ended
(In thousands, except per share data) March 31,

2023
December 31,

2022
September 30,

2022
June 30,

2022
March 31,

2022
Interest income:
Interest and fees on loans and leases $

716,356

$

642,784

$

525,960

$

431,538

$

346,276

Interest and dividends on securities

114,556

100,804

91,569

82,202

63,526

Loans held for sale

16

5

40

7

26

Total interest income

830,928

743,593

617,569

513,747

409,828

Interest expense:
Deposits

150,204

81,202

37,492

12,459

7,399

Borrowings

85,441

60,016

29,074

14,628

8,181

Total interest expense

235,645

141,218

66,566

27,087

15,580

Net interest income

595,283

602,375

551,003

486,660

394,248

Provision for credit losses

46,749

43,000

36,531

12,243

188,845

Net interest income after provision for loan and lease losses

548,534

559,375

514,472

474,417

205,403

Non-interest income:
Deposit service fees

45,436

48,453

50,807

51,385

47,827

Loan and lease related fees

23,005

25,632

26,769

27,907

22,679

Wealth and investment services

6,587

7,017

11,419

11,244

10,597

Mortgage banking activities

59

89

86

102

428

Increase in cash surrender value of life insurance policies

6,728

6,543

7,718

8,244

6,732

(Loss) on sale of investment securities, net

(16,747)

(4,517)

(2,234)

-

-

Other income

5,698

18,962

19,071

22,051

15,772

Total non-interest income

70,766

102,179

113,636

120,933

104,035

Non-interest expense:
Compensation and benefits

173,200

177,979

173,983

187,656

184,002

Occupancy

20,171

20,174

23,517

51,593

18,615

Technology and equipment

44,366

44,202

45,283

41,498

55,401

Marketing

3,476

5,570

3,918

3,441

3,509

Professional and outside services

32,434

26,489

21,618

15,332

54,091

Intangible assets amortization

9,497

8,240

8,511

8,802

6,387

Loan workout expenses

606

606

580

732

680

Deposit insurance

12,323

6,578

8,026

6,748

5,222

Other expenses

36,394

58,552

44,635

42,425

31,878

Total non-interest expense

332,467

348,390

330,071

358,227

359,785

Income (loss) before income taxes

286,833

313,164

298,037

237,123

(50,347)

Income tax expense (benefit)

65,829

68,413

64,069

54,812

(33,600)

Net income (loss)

221,004

244,751

233,968

182,311

(16,747)

Preferred stock dividends

(4,163)

(4,163)

(4,162)

(4,163)

(3,431)

Net income (loss) available to common stockholders $

216,841

$

240,588

$

229,806

$

178,148

$

(20,178)

 
Weighted-average common shares outstanding - Diluted

172,883

172,699

173,944

175,895

147,533

 
Earnings (loss) per common share:
Basic $

1.24

$

1.38

$

1.31

$

1.00

$

(0.14)

Diluted

1.24

1.38

1.31

1.00

(0.14)

 
WEBSTER FINANCIAL CORPORATION

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

Three Months Ended March 31,

2023

 

 

 

 

 

 

 

2022

(Dollars in thousands)

Average balance

 

 

 

Interest

 

 

 

Yield/rate

 

 

 

 

 

 

 

Average balance

 

 

Interest

 

Yield/rate

Assets:
Interest-earning assets:
Loans and leases $

50,095,192

$

725,543

5.80

%

$

35,912,829

$

349,417

3.90

%

Investment securities (1)

14,633,245

105,974

2.79

13,421,543

67,269

2.02

Federal Home Loan and Federal Reserve Bank stock

459,375

4,910

4.34

166,357

821

2.00

Interest-bearing deposits (2)

898,884

10,396

4.63

799,265

453

0.23

Loans held for sale

4,630

16

1.39

17,918

26

0.58

Total interest-earning assets

66,091,326

$

846,839

5.08

%

50,317,912

$

417,986

3.33

%

Non-interest-earning assets

6,225,199

4,490,665

Total Assets $

72,316,525

$

54,808,577

 
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Demand deposits $

12,629,928

$

-

-

%

$

11,263,282

$

-

-

%

Health savings accounts

8,292,450

3,027

0.15

7,759,465

1,087

0.06

Interest-bearing checking, money market and savings

29,853,370

123,048

1.67

24,316,436

5,019

0.08

Certificates of deposit and brokered deposits

4,024,472

24,129

2.43

2,544,286

1,293

0.21

Total deposits

54,800,220

150,204

1.11

45,883,469

7,399

0.07

 
Securities sold under agreements to repurchase and other borrowings

915,023

7,827

3.42

577,039

957

0.66

Federal Home Loan Bank advances

5,673,826

68,126

4.80

10,936

56

2.03

Long-term debt (1)

1,072,252

9,488

3.65

896,310

7,168

3.34

Total borrowings

7,661,101

85,441

4.48

1,484,285

8,181

2.26

Total interest-bearing liabilities

62,461,321

$

235,645

1.52

%

47,367,754

$

15,580

0.13

%

Non-interest-bearing liabilities

1,639,528

749,333

Total liabilities

64,100,849

48,117,087

 
Preferred stock

283,979

236,121

Common stockholders' equity

7,931,697

6,455,369

Total stockholders' equity

8,215,676

6,691,490

Total Liabilities and Stockholders' Equity $

72,316,525

$

54,808,577

Tax-equivalent net interest income

611,194

402,406

Less: tax-equivalent adjustments

(15,911)

(8,158)

Net interest income $

595,283

$

394,248

Net interest margin

3.66

%

3.21

%

 
(1) For the purposes of 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.
(2) Interest-bearing deposits is a component of cash and cash equivalents on the Consolidated Balance Sheets.
 
WEBSTER FINANCIAL CORPORATION

Five Quarter Loan and Lease Balances (unaudited)
(Dollars in thousands) March 31,

2023
December 31,

2022
September 30,

2022
June 30,

2022
March 31,

2022
Loan and Lease Balances (actual):
Commercial non-mortgage $

19,015,366

$

18,663,164

$

17,807,234

$

16,628,317

$

15,578,594

Asset-based lending

1,760,527

1,821,642

1,803,719

1,892,278

1,807,545

Commercial real estate

20,513,182

19,619,145

18,862,619

18,141,670

17,584,947

Residential mortgages

8,001,563

7,963,420

7,617,955

7,223,728

6,798,199

Consumer

1,635,885

1,697,055

1,732,348

1,760,750

1,767,200

Total Loan and Lease Balances

50,926,523

49,764,426

47,823,875

45,646,743

43,536,485

Allowance for credit losses on loans and leases

(613,914)

(594,741)

(574,325)

(571,499)

(569,371)

Loans and Leases, net $

50,312,609

$

49,169,685

$

47,249,550

$

45,075,244

$

42,967,114

 
Loan and Lease Balances (average):
Commercial non-mortgage $

18,670,917

$

18,024,771

$

16,780,780

$

15,850,507

$

12,568,454

Asset-based lending

1,790,992

1,780,874

1,811,073

1,851,956

1,540,301

Commercial real estate

19,970,326

19,234,292

18,503,077

17,756,151

13,732,925

Residential mortgages

7,995,327

7,819,415

7,384,704

6,905,509

6,322,495

Consumer

1,667,630

1,715,513

1,750,044

1,756,575

1,748,654

Total Loan and Lease Balances $

50,095,192

$

48,574,865

$

46,229,678

$

44,120,698

$

35,912,829

 
WEBSTER FINANCIAL CORPORATION

Five Quarter Nonperforming Assets and Past Due Loans and Leases (unaudited)
(Dollars in thousands) March 31,

2023
December 31,

2022
September 30,

2022
June 30,

2022
March 31,

2022
Nonperforming loans and leases:
Commercial non-mortgage $

86,537

$

89,416

$

80,002

$

112,006

$

108,460

Asset-based lending

9,450

20,046

25,115

25,862

5,494

Commercial real estate

35,832

41,580

49,054

49,935

74,581

Residential mortgages

25,096

25,613

25,563

27,213

27,318

Consumer

28,105

27,136

29,782

32,514

32,258

Total nonperforming loans and leases $

185,020

$

203,791

$

209,516

$

247,530

$

248,111

 
Other real estate owned and repossessed assets:
Commercial non-mortgage $

153

$

78

$

-

$

-

$

-

Residential mortgages

662

2,024

2,024

2,558

2,582

Consumer

716

243

87

154

513

Total other real estate owned and repossessed assets $

1,531

$

2,345

$

2,111

$

2,712

$

3,095

Total nonperforming assets $

186,551

$

206,136

$

211,627

$

250,242

$

251,206

 
Past due 30-89 days:
Commercial non-mortgage $

9,645

$

20,248

$

17,440

$

6,006

$

8,025

Asset-based lending

-

5,921

-

-

24,103

Commercial real estate

17,115

26,147

6,050

25,587

20,533

Residential mortgages

10,710

11,385

12,577

10,781

9,307

Consumer

6,110

9,194

9,656

9,275

9,379

Total past due 30-89 days $

43,580

$

72,895

$

45,723

$

51,649

$

71,347

Past due 90 days or more and accruing

602

770

711

8

124

Total past due loans and leases $

44,182

$

73,665

$

46,434

$

51,657

$

71,471

 
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) March 31,

2023
December 31,

2022
September 30,

2022
June 30,

2022
March 31,

2022
ACL on loans and leases, beginning balance $

594,741

$

574,325

$

571,499

$

569,371

$

301,187

Adoption of ASU No. 2022-02

5,873

-

-

-

-

Initial allowance on PCD loans and leases (1)

-

-

-

-

88,045

Provision

37,821

40,649

31,352

11,728

189,068

Charge-offs:
Commercial portfolio

26,410

21,499

31,356

18,757

11,248

Consumer portfolio

1,098

1,193

1,453

896

1,120

Total charge-offs

27,508

22,692

32,809

19,653

12,368

Recoveries:
Commercial portfolio

1,574

895

1,413

7,765

1,364

Consumer portfolio

1,413

1,564

2,870

2,288

2,075

Total recoveries

2,987

2,459

4,283

10,053

3,439

Total net charge-offs

24,521

20,233

28,526

9,600

8,929

ACL on loans and leases, ending balance $

613,914

$

594,741

$

574,325

$

571,499

$

569,371

ACL on unfunded loan commitments, ending balance

26,051

27,707

25,329

20,149

19,640

Total ACL, ending balance $

639,965

$

622,448

$

599,654

$

591,648

$

589,011

(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 with Sterling in accordance with GAAP.
 
WEBSTER FINANCIAL CORPORATION

Reconciliations to GAAP Financial Measures1
 
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 stockholders' equity (ROATCE) measures the Company’s net income available to common stockholders, adjusted for the tax-effected amortization of intangible assets, as a percentage of average stockholders’ equity less average preferred stock and average goodwill and intangible assets. The tangible equity ratio represents stockholders’ equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets. The tangible common equity ratio represents stockholders’ 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 stockholders’ 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 stockholders, 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) March 31,

2023
December 31,

2022
September 30,

2022
June 30,

2022
March 31,

2022
Efficiency ratio:
Non-interest expense $

332,467

$

348,390

$

330,071

$

358,227

$

359,785

Less: Foreclosed property activity

(262)

(80)

(393)

(358)

(75)

Intangible assets amortization

9,497

8,240

8,511

8,802

6,387

Operating lease depreciation

1,884

2,021

2,115

2,425

1,632

Strategic initiatives and other (1)

-

143

11,617

(152)

(4,140)

Merger related

29,373

45,790

25,536

66,640

108,495

Non-interest expense $

291,975

$

292,276

$

282,685

$

280,870

$

247,486

Net interest income $

595,283

$

602,375

$

551,003

$

486,660

$

394,248

Add: Tax-equivalent adjustment

15,911

13,991

13,247

11,732

8,158

Non-interest income

70,766

102,179

113,636

120,933

104,035

Other income (2)

4,311

4,814

11,186

3,805

3,082

Less: Operating lease depreciation

1,884

2,021

2,115

2,425

1,632

(Loss) on sale of investment securities, net

(16,747)

(4,517)

(2,234)

-

-

Other (3)

-

-

2,548

-

-

Income $

701,134

$

725,855

$

686,643

$

620,705

$

507,891

Efficiency ratio

41.64

%

40.27

%

41.17

%

45.25

%

48.73

%

 
Return on average tangible common stockholders' equity:
Net income (loss) $

221,004

$

244,751

$

233,968

$

182,311

$

(16,747)

Less: Preferred stock dividends

4,163

4,163

4,162

4,163

3,431

Add: Intangible assets amortization, tax-effected

7,503

6,510

6,724

6,954

5,046

Adjusted income (loss) $

224,344

$

247,098

$

236,530

$

185,102

$

(15,132)

Adjusted income (loss), annualized basis $

897,376

$

988,392

$

946,120

$

740,408

$

(60,528)

Average stockholders' equity $

8,215,676

$

7,960,900

$

8,090,044

$

8,125,518

$

6,691,490

Less: Average preferred stock

283,979

283,979

283,979

283,979

236,121

Average goodwill and other intangible assets

2,849,673

2,716,981

2,725,200

2,733,827

2,007,266

Average tangible common stockholders' equity $

5,082,024

$

4,959,940

$

5,080,865

$

5,107,712

$

4,448,103

Return on average tangible common stockholders' equity

17.66

%

19.93

%

18.62

%

14.50

%

(1.36)

%

(1) The three months ended September 30, 2022, primarily includes a contribution to the Webster foundation of $10.5 million (included within other non-interest expense).
(2) Other income includes the taxable equivalent of net income generated from low income housing tax-credit investments.
(3) The three months ended September 30, 2022, is comprised of a gain related to the early termination of repurchase agreements.
 
WEBSTER FINANCIAL CORPORATION

Reconciliations to GAAP Financial Measures (continued)
 
At or for the Three Months Ended
(In thousands, except per share data) March 31,

2023
December 31,

2022
September 30,

2022
June 30,

2022
March 31,

2022
Tangible equity:
Stockholders' equity $

8,294,294

$

8,056,186

$

7,826,410

$

7,997,788

$

8,177,135

Less: Goodwill and other intangible assets

2,861,310

2,713,446

2,721,040

2,729,551

2,738,353

Tangible stockholders' equity $

5,432,984

$

5,342,740

$

5,105,370

$

5,268,237

$

5,438,782

Total assets $

74,844,395

$

71,277,521

$

69,052,566

$

67,595,021

$

65,131,484

Less: Goodwill and other intangible assets

2,861,310

2,713,446

2,721,040

2,729,551

2,738,353

Tangible assets $

71,983,085

$

68,564,075

$

66,331,526

$

64,865,470

$

62,393,131

Tangible equity

7.55

%

7.79

%

7.70

%

8.12

%

8.72

%

 
Tangible common equity:
Tangible stockholders' equity $

5,432,984

$

5,342,740

$

5,105,370

$

5,268,237

$

5,438,782

Less: Preferred stock

283,979

283,979

283,979

283,979

283,979

Tangible common stockholders' equity $

5,149,005

$

5,058,761

$

4,821,391

$

4,984,258

$

5,154,803

Tangible assets $

71,983,085

$

68,564,075

$

66,331,526

$

64,865,470

$

62,393,131

Tangible common equity

7.15

%

7.38

%

7.27

%

7.68

%

8.26

%

 
Tangible book value per common share:
Tangible common stockholders' equity $

5,149,005

$

5,058,761

$

4,821,391

$

4,984,258

$

5,154,803

Common shares outstanding

174,712

174,008

174,116

176,041

178,102

Tangible book value per common share $

29.47

$

29.07

$

27.69

$

28.31

$

28.94

 
Core deposits:
Total deposits $

55,297,479

$

54,054,340

$

54,008,887

$

53,077,157

$

54,356,283

Less: Certificates of deposit

3,855,406

2,729,332

2,311,484

2,554,102

2,821,097

Brokered certificates of deposit

674,373

1,431,617

258,110

-

-

Core deposits $

50,767,700

$

49,893,391

$

51,439,293

$

50,523,055

$

51,535,186

 
 

Three months

ended

March 31, 2023

Adjusted ROATCE:
Net income $

221,004

Less: Preferred stock dividends

4,163

Add: Intangible assets amortization, tax-effected

7,503

Strategic initiatives and other, tax-effected

15,288

Merger related, tax-effected

26,956

Adjusted income $

266,588

Adjusted income, annualized basis $

1,066,352

Average stockholders' equity $

8,215,676

Less: Average preferred stock

283,979

Average goodwill and other intangible assets

2,849,673

Average tangible common stockholders' equity $

5,082,024

Adjusted return on average tangible common stockholders' equity

20.98

%

 
 
Adjusted ROAA:
Net income $

221,004

Add: Strategic initiatives and other, tax-effected

15,288

Merger related, tax-effected

26,956

Adjusted income $

263,248

Adjusted income, annualized basis $

1,052,992

Average assets $

72,316,525

Adjusted return on average assets

1.46

%

 
GAAP to adjusted reconciliation:
Three months ended March 31, 2023
(In millions, except per share data) Pre-Tax Income Net Income Available

to Common

Stockholders
Diluted EPS
Reported (GAAP) $

286.8

$

216.8

$

1.24

Merger related expenses

36.1

27.0

0.16

Strategic initiatives and other

20.5

15.3

0.09

Adjusted (non-GAAP) $

343.4

$

259.1

$

1.49

 

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