Webster Reports Fourth Quarter 2020 Earnings of $0.64 Per Diluted Share
01/21/2021 - 07:30 AM
WATERBURY, Conn. , Jan. 21, 2021 /PRNewswire/ -- Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank , N.A. and its HSA Bank division, today announced earnings applicable to common shareholders of $57.7 million , or $0.64 per diluted share, for the quarter ended December 31, 2020, compared to $88.1 million , or $0.96 per diluted share, for the quarter ended December 31, 2019. Earnings per diluted share would have been $0.99 for the quarter ended December 31, 2020 , adjusting for $42.0 million ($31.2 million after tax) of charges related to strategic optimization initiatives.
For the full year 2020, earnings applicable to common shareholders was $211.5 million , or $2.35 per diluted share, and includes $52.2 million ($38.8 million after tax) of adjustments.
"I am pleased with the results of the quarter as we continue to deliver for our customers and communities as evidenced, in part, by $1.9 billion of quarterly loan originations while maintaining solid credit quality," said John R. Ciulla , chairman and chief executive officer. "We remain focused on our strategic priorities and positioning ourselves for growth as the macro environment improves in 2021."
Highlights for the fourth quarter of 2020:
Revenue of $293.7 million ; $297.4 million excluding $3.7 million in hedge termination costs related to debt prepayments. Loan growth of $1.6 billion , or 8.0 percent from a year ago, led by commercial and commercial real estate, which increased 16.1 percent. Excluding Paycheck Protection Program (PPP) loans, total loan growth was $348 million , or 1.7 percent. Results include a Current Expected Credit Loss (CECL) provision of $(1.0) million with a reserve decrease of $10.4 million compared to the prior quarter, resulting in an allowance coverage of 1.66 percent, or 1.76 percent excluding $1.3 billion of PPP loans. Deposit growth of $4.0 billion , or 17.2 percent from a year ago, with growth of $1.7 billion in demand deposits and $704 million in HSA deposits. Results include $42.0 million of charges related to strategic optimization initiatives. Net interest margin of 2.83 percent. Efficiency ratio (non-GAAP) of 60.3 percent. "Our continued strong liquidity enabled us to reduce borrowings by $608 million in the quarter and $1.8 billion from a year ago," said Glenn MacInnes , executive vice president and chief financial officer. "The strength of our balance sheet supports our future growth objectives."
Line of Business performance compared to the fourth quarter of 2019
Commercial Banking
Webster's Commercial Banking segment serves middle market, commercial real estate, asset-based lending, equipment finance, private banking, and treasury and payment solutions clients. As of December 31, 2020, Commercial Banking had $12.6 billion in loans and leases and $6.0 billion in deposit balances.
Commercial Banking Operating Results:
Percent
Three months ended December 31,
Favorable/
(In thousands)
2020
2019
(Unfavorable)
Net interest income
$112,274
$100,151
12.1
%
Non-interest income
17,303
16,420
5.4
Operating revenue
129,577
116,571
11.2
Non-interest expense
48,724
45,505
(7.1)
Pre-tax, pre-provision net revenue
$80,853
$71,066
13.8
Percent
At December 31,
Increase/
(In millions)
2020
2019
(Decrease)
Loans and leases
$12,649
$11,500
10.0
%
Deposits
5,957
4,382
35.9
Note: In 1Q20, segment net interest income was updated to reflect changes in the funds transfer pricing methodology related to allocated capital. The prior period has been restated to reflect the change.
Pre-tax, pre-provision net revenue increased $9.8 million to $80.9 million in the quarter as compared to prior year. Net interest income increased $12.1 million to $112.3 million , primarily driven by loan and deposit growth. Non-interest income increased $0.9 million to $17.3 million as a result of higher loan related fees. Non-interest expense increased $3.2 million to $48.7 million , primarily due to compensation related expense.
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 December 31, 2020, HSA Bank had $10.0 billion in total footings comprising $7.1 billion in deposit balances and $2.9 billion in assets under administration through linked investment accounts.
HSA Bank Operating Results:
Percent
Three months ended December 31,
Favorable/
(In thousands)
2020
2019
(Unfavorable)
Net interest income
$40,495
$41,993
(3.6)
%
Non-interest income
24,105
22,959
5.0
Operating revenue
64,600
64,952
(0.5)
Non-interest expense
34,750
34,893
0.4
Pre-tax, net revenue
$29,850
$30,059
(0.7)
Percent
At December 31,
Increase/
(Dollars in millions)
2020
2019
(Decrease)
Number of accounts (thousands)
2,953
2,974
(0.7)
%
Deposits
$7,120
$6,416
11.0
Linked investment accounts *
2,853
2,071
37.8
Total footings
$9,973
$8,487
17.5
* Linked investment accounts are held off balance sheet
Note: In 1Q20, segment net interest income was updated to reflect changes in the funds transfer pricing methodology related to allocated capital. The prior period has been restated to reflect the change.
Pre-tax net revenue decreased $0.2 million to $29.9 million in the quarter as compared to prior year. Net interest income decreased $1.5 million to $40.5 million , due to a decline in deposit spreads partially offset by an 11.0 percent growth in deposits. Non-interest income increased $1.1 million to $24.1 million , due primarily to account fees and increased interchange as a result of additional spending compared to the prior year. Non-interest expense decreased $0.1 million to $34.8 million , essentially flat to the prior year.
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 155 banking centers and 297 ATMs, a customer care center, and a full range of web and mobile-based banking services. As of December 31, 2020, Community Banking had $9.0 billion in loans and $14.3 billion in deposit balances.
Community Banking Operating Results:
Percent
Three months ended December 31,
Favorable/
(In thousands)
2020
2019
(Unfavorable)
Net interest income
$110,421
$102,157
8.1
%
Non-interest income
26,284
28,098
(6.5)
Operating revenue
136,705
130,255
5.0
Non-interest expense
98,952
97,323
(1.7)
Pre-tax, pre-provision net revenue
$37,753
$32,932
14.6
Percent
At December 31,
Increase/
(In millions)
2020
2019
(Decrease)
Loans
$8,992
$8,537
5.3
%
Deposits
14,258
12,528
13.8
Note: In 1Q20, segment net interest income was updated to reflect changes in the funds transfer pricing methodology related to allocated capital. The prior period has been restated to reflect the change.
Pre-tax, pre-provision net revenue increased $4.8 million to $37.8 million in the quarter as compared to prior year. Net interest income increased $8.3 million to $110.4 million , driven by loan and deposit balance growth, partially offset by a decline in deposit spreads due to the lower interest rate environment. Non-interest income decreased $1.8 million resulting from lower deposit-related service charges, as well as lower loan servicing fees in the current quarter. This decrease was partially offset by fee income from mortgage banking activities. Non-interest expense increased $1.6 million to $99.0 million due to continued investments in technology and outside services.
Consolidated financial performance:
Quarterly net interest income compared to the fourth quarter of 2019:
Net interest income was $216.9 million compared to $231.3 million . Net interest margin was 2.83 percent compared to 3.27 percent. The yield on interest-earning assets declined by 90 basis points, and the cost of interest-bearing liabilities declined by 49 basis points. Average interest-earning assets totaled $30.9 billion and grew by $2.5 billion , or 8.9 percent. Average loans totaled $21.7 billion and grew by $1.9 billion , or 9.7 percent. Average deposits totaled $27.2 billion and grew by $3.9 billion , or 16.5 percent. Quarterly provision for credit losses:
The provision for credit losses was $(1.0) million in the quarter, contributing to a $10.4 million decrease in the allowance for credit losses on loans and leases. The decrease in the allowance reflects our current estimate of forecasted economic conditions. The provision for credit losses was $22.8 million in the prior quarter and $6.0 million a year ago. The reserve release reflects continued favorable credit trends. Net charge-offs were $9.4 million , compared to $11.5 million in the prior quarter and $6.1 million a year ago. The ratio of net charge-offs to average loans on an annualized basis was 0.17 percent, compared to 0.21 percent in the prior quarter and 0.12 percent a year ago. The allowance for credit losses on loans and leases represented 1.66 percent of total loans at December 31, 2020 , compared to 1.69 percent at September 30, 2020 and 1.04 percent at December 31, 2019 . Excluding $1.3 billion of risk free PPP loans, the coverage ratio was 1.76 percent at December 31, 2020 , compared to 1.80 percent at September 30, 2020 after excluding $1.4 billion of risk free PPP loans. The allowance for credit losses at December 31 and September 30 was estimated in accordance with the CECL accounting standard. The allowance represented 214 percent of nonperforming loans at December 31, 2020 compared to 227 percent at September 30, 2020 and 139 percent at December 31, 2019 . Quarterly non-interest income compared to the fourth quarter of 2019:
Total non-interest income was $76.8 million compared to $70.9 million , an increase of $5.8 million . This reflects an increase of $5.1 million due to direct investment income, mark to market on customer derivatives, and miscellaneous fee income; an increase of $1.8 million in mortgage banking activities primarily due to higher origination volume and spreads on loans originated for sale; and an increase of $1.1 million in HSA fee income driven primarily by higher account service fees. These increases were partially offset by a $3.0 decrease in deposit service fees driven by lower overdraft and service related fees. Quarterly non-interest expense compared to the fourth quarter of 2019:
Total non-interest expense was $219.5 million compared to $179.7 million , an increase of $39.8 million . This reflects strategic optimization initiative charges of $38.3 million : $17.9 million in compensation and benefits; $14.0 million in occupancy; $5.5 million in professional and outside services; and $0.9 million in other expenses. Excluding these charges, non-interest expense increased $1.5 million . This reflects an increase in compensation and benefits of $4.4 million and an increase in technology and equipment of $1.4 million offset by a decrease in other expenses of $4.4 million primarily due to lower pension, travel, and OREO costs. Quarterly income taxes compared to the fourth quarter of 2019:
Income tax expense was $15.1 million compared to $26.0 million and the effective tax rate was 20.1 percent compared to 22.3 percent. The lower effective tax rate in the quarter primarily reflects the effects of reduced pre-tax income in 2020 compared to 2019. Investment securities:
Total investment securities were $8.9 billion , compared to $9.0 billion at September 30, 2020 and $8.2 billion at December 31, 2019 . The carrying value of the available-for-sale portfolio included $92.5 million of net unrealized gains, compared to $103.1 million at September 30, 2020 and $24.4 million of net unrealized gains at December 31, 2019 . The carrying value of the held-to-maturity portfolio does not reflect $267.2 million of net unrealized gains, compared to $283.0 million at September 30, 2020 and $86.7 million of net unrealized gains at December 31, 2019 . Loans:
Total loans were $21.6 billion , compared to $21.9 billion at September 30, 2020 and $20.0 billion at December 31, 2019 . Compared to September 30, 2020 , commercial loans increased by $34.7 million , commercial real estate loans increased by $15.1 million , while consumer loans decreased by $87.4 million and residential mortgages decreased by $103.8 million . Compared to a year ago, commercial loans increased by $1.69 7 billion , with PPP loans representing $1.3 billion of the increase. Commercial real estate loans increased by $373.3 million and residential mortgages increased by $190.7 million , while consumer loans decreased by $275.5 million . Loan originations for the portfolio were $1.80 4 billion , compared to $1.56 0 billion in the prior quarter ($1.52 5 billion excluding PPP loan originations), and $1.91 9 billion a year ago. In addition, $125 million of residential loans were originated for sale in the quarter, compared to $149 million in the prior quarter and $94 million a year ago. Asset quality:
Total nonperforming loans were $168.0 million , or 0.78 percent of total loans, compared to $162.6 million , or 0.74 percent of total loans, at September 30, 2020 and $150.9 million , or 0.75 percent of total loans, at December 31, 2019 . Total paying nonperforming loans were $59.7 million , compared to $67.4 million at September 30, 2020 and $59.0 million at December 31, 2019 . Past due loans were $32.9 million , compared to $21.8 million at September 30, 2020 and $42.6 million at December 31, 2019 . Deposits and borrowings:
Total deposits were $27.3 billion , compared to $26.9 billion at September 30, 2020 and $23.3 billion at December 31, 2019 . Core deposits to total deposits were 90.9 percent, compared to 90.5 percent at September 30, 2020 and 86.7 percent at December 31, 2019 . The loan to deposit ratio was 79.2 percent, compared to 81.2 percent at September 30, 2020 and 85.9 percent at December 31, 2019 . Total borrowings were $1.7 billion , compared to $2.3 billion at September 30, 2020 and $3.5 billion at December 31, 2019 . Capital:
The return on average common shareholders' equity and the return on average tangible common shareholders' equity were 7.51 percent and 9.31 percent, respectively, compared to 11.60 percent and 14.34 percent, respectively, in the fourth quarter of 2019. The tangible equity and tangible common equity ratios were 8.35 percent and 7.90 percent, respectively, compared to 8.88 percent and 8.39 percent, respectively, at December 31, 2019 . The common equity tier 1 risk-based capital ratio was 11.35 percent, compared to 11.56 percent at December 31, 2019 . Book value and tangible book value per common share were $34.25 and $28.04 , respectively, compared to $33.28 and $27.19 , respectively, at December 31, 2019 . Webster Financial Corporation is the holding company for Webster Bank , National Association and its HSA Bank division. With $32.6 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust, and investment services through 155 banking centers and 297 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 fourth quarter 2020 earnings announcement will be held today, Thursday, January 21, 2021 at 9:00 a.m. (Eastern) and may be heard through Webster's Investor Relations website at www.wbst.com , or in listen-only mode by calling 877-407-8289 or 201-689-8341 internationally. The call will be archived on the website and available for future retrieval.
Forward-Looking Statements
This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking statements can be identified by words such as "believes," "anticipates," "expects," "intends," "targeted," "continue," "remain," "will," "should," "may," "plans," "estimates," and similar references to future periods; however, such words are not the exclusive means of identifying such statements. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items; (ii) statements of plans, objectives, and expectations of Webster or its management or Board of Directors; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Forward-looking statements are based on Webster's current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Webster's actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: (1) our ability to successfully execute our business plan and manage our risks; (2) local, regional, national, and international economic conditions and the impact they may have on us and our customers; (3) volatility and disruption in national and international financial markets; (4) the potential adverse effects of the ongoing novel coronavirus (COVID-19) pandemic and any governmental or societal responses thereto, including the deployment and efficacy of COVID-19 vaccines, or any other unusual and infrequently occurring events; (5) changes in the level of nonperforming assets and charge-offs; (6) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (7) adverse conditions in the securities markets that lead to impairment in the value of our investment securities; (8) inflation, changes in interest rate, and monetary fluctuations; (9) the timely development and acceptance of new products and services and the perceived value of those products and services by customers; (10) changes in deposit flows, consumer spending, borrowings, and savings habits; (11) our ability to implement new technologies and maintain secure and reliable technology systems; (12) performance by our counterparties and vendors; (13) our ability to increase market share and control expenses; (14) changes in the competitive environment among banks, financial holding companies, and other financial services providers; (15) changes in laws and regulations (including those concerning taxes, banking, securities, insurance, and healthcare) with which we and our subsidiaries must comply, including recent and potential legislative and regulatory changes in response to the COVID-19 pandemic such as the CARES Act and the rules and regulations that may be promulgated thereunder; (16) the effect of changes in accounting policies and practices applicable to us, including changes in our allowance for loan and lease losses and other impacts of recently adopted accounting guidance regarding the recognition of credit losses; (17) legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; and (18) the other factors that are described in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q under the headings "Risk Factors" and "Management Discussion and Analysis of Financial Condition and Results of Operation." Any forward-looking statement made by the Company in this release speaks only as of the date on which it is made. Factors or events that could cause the Company's actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
Non-GAAP Financial Measures
In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. A reconciliation of net income and other performance ratios, as adjusted, is included in the accompanying selected financial highlights table.
We believe that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends and financial position. We utilize these measures for internal planning and forecasting purposes. We, as well as securities analysts, investors, and other interested parties, also use these measures to compare peer company operating performance. We believe that our presentation and discussion, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting our business and allows investors to view performance in a manner similar to management. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.
WEBSTER FINANCIAL CORPORATION Selected Financial Highlights (unaudited)
At or for the Three Months Ended
(In thousands, except per share data)
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
December 31, 2019
Income and performance ratios:
Net income
$
60,044
$
69,281
$
53,097
$
38,199
$
90,473
Earnings applicable to common shareholders
57,715
66,890
50,729
36,021
88,066
Earnings per diluted common share
0.64
0.75
0.57
0.39
0.96
Return on average assets
0.73
%
0.84
%
0.65
%
0.50
%
1.19
%
Return on average tangible common shareholders' equity (non-GAAP)
9.31
10.91
8.47
5.95
14.34
Return on average common shareholders' equity
7.51
8.80
6.79
4.75
11.60
Non-interest income as a percentage of total revenue
26.14
25.50
21.12
24.12
23.47
Asset quality:
Allowance for credit losses on loans and leases
$
359,431
$
369,811
$
358,522
$
334,931
$
209,096
Nonperforming assets
170,314
167,314
178,381
169,120
157,380
Allowance for credit losses on loans and leases / total loans and leases
1.66
%
1.69
%
1.64
%
1.60
%
1.04
%
Net charge-offs / average loans and leases (annualized)
0.17
0.21
0.30
0.15
0.12
Nonperforming loans and leases / total loans and leases
0.78
0.74
0.79
0.78
0.75
Nonperforming assets / total loans and leases plus OREO
0.79
0.77
0.82
0.81
0.79
Allowance for credit losses on loans and leases / nonperforming loans and leases
213.94
227.39
207.17
206.37
138.56
Other ratios:
Tangible equity (non-GAAP)
8.35
%
8.19
%
8.14
%
8.14
%
8.88
%
Tangible common equity (non-GAAP)
7.90
7.75
7.69
7.67
8.39
Tier 1 risk-based capital (a)
11.99
11.88
11.82
11.60
12.22
Total risk-based capital (a)
13.59
13.47
13.42
13.10
13.55
Common equity tier 1 risk-based capital (a)
11.35
11.23
11.17
10.95
11.56
Shareholders' equity / total assets
9.92
9.76
9.71
9.76
10.56
Net interest margin
2.83
2.88
2.99
3.23
3.27
Efficiency ratio (non-GAAP)
60.27
59.99
60.04
58.03
58.52
Equity and share related:
Common equity
$
3,089,588
$
3,074,653
$
3,029,742
$
2,945,205
$
3,062,733
Book value per common share
34.25
34.09
33.59
32.66
33.28
Tangible book value per common share (non-GAAP)
28.04
27.86
27.40
26.46
27.19
Common stock closing price
42.15
26.41
28.61
22.90
53.36
Dividends declared per common share
0.40
0.40
0.40
0.40
0.40
Common shares issued and outstanding
90,199
90,204
90,194
90,172
92,027
Weighted-average common shares outstanding - Basic
89,645
89,630
89,485
90,936
91,574
Weighted-average common shares outstanding - Diluted
89,915
89,738
89,570
91,206
91,916
(a)
Presented as preliminary for December 31, 2020 and actual for the remaining periods. In accordance with regulatory capital rules, the Company elected an option to delay the estimated impact of CECL on its regulatory capital over a five-year transition period ending December 31, 2024. As a result, capital ratios and amounts as of December 31, 2020 exclude the impact of the increased allowance for credit losses on loans, held-to-maturity debt securities and unfunded loan commitments attributed to the adoption of CECL.
WEBSTER FINANCIAL CORPORATION Consolidated Balance Sheets (unaudited)
(In thousands)
December 31, 2020
September 30, 2020
December 31, 2019
Assets:
Cash and due from banks
$
193,501
$
181,524
$
185,341
Interest-bearing deposits
69,603
60,276
72,554
Securities:
Available for sale
3,326,776
3,304,217
2,925,833
Held to maturity
5,568,188
5,723,434
5,293,918
Total securities
8,894,964
9,027,651
8,219,751
Allowance for credit losses on investment securities held-to-maturity
(299)
(306)
-
Securities, net
8,894,665
9,027,345
8,219,751
Loans held for sale
14,012
29,018
36,053
Loans and Leases:
Commercial
8,577,898
8,612,549
6,880,838
Commercial real estate
6,322,637
6,307,567
5,949,339
Residential mortgages
4,782,016
4,885,821
4,972,685
Consumer
1,958,664
2,046,086
2,234,124
Total loans and leases
21,641,215
21,852,023
20,036,986
Allowance for credit losses on loans and leases
(359,431)
(369,811)
(209,096)
Loans and leases, net
21,281,784
21,482,212
19,827,890
Federal Home Loan Bank and Federal Reserve Bank stock
77,594
89,611
149,046
Premises and equipment, net
226,743
250,535
270,413
Goodwill and other intangible assets, net
560,756
561,902
560,290
Cash surrender value of life insurance policies
564,195
561,021
550,651
Deferred tax asset, net
81,286
76,695
61,975
Accrued interest receivable and other assets
626,551
674,304
455,380
Total Assets
$
32,590,690
$
32,994,443
$
30,389,344
Liabilities and Shareholders' Equity:
Deposits:
Demand
$
6,155,592
$
6,136,814
$
4,446,463
Health savings accounts
7,120,017
6,976,280
6,416,135
Interest-bearing checking
3,652,763
3,390,921
2,689,734
Money market
2,940,215
3,069,098
2,312,840
Savings
4,979,031
4,777,000
4,354,809
Certificates of deposit
2,487,818
2,570,440
3,104,765
Total deposits
27,335,436
26,920,553
23,324,746
Securities sold under agreements to repurchase and other borrowings
995,355
1,301,822
1,040,431
Federal Home Loan Bank advances
133,164
433,243
1,948,476
Long-term debt
567,663
568,846
540,364
Accrued expenses and other liabilities
324,447
550,289
327,557
Total liabilities
29,356,065
29,774,753
27,181,574
Preferred stock
145,037
145,037
145,037
Common shareholders' equity
3,089,588
3,074,653
3,062,733
Total shareholders' equity
3,234,625
3,219,690
3,207,770
Total Liabilities and Shareholders' Equity
$
32,590,690
$
32,994,443
$
30,389,344
WEBSTER FINANCIAL CORPORATION Consolidated Statements of Income (unaudited)
Three Months Ended December 31,
Twelve Months Ended December 31,
(In thousands, except per share data)
2020
2019
2020
2019
Interest income:
Interest and fees on loans and leases
$
189,010
$
223,527
$
789,719
$
924,693
Interest and dividends on securities
46,874
58,205
211,561
229,163
Loans held for sale
181
268
769
727
Total interest income
236,065
282,000
1,002,049
1,154,583
Interest expense:
Deposits
8,651
31,586
67,897
129,577
Borrowings
10,485
19,164
42,759
69,879
Total interest expense
19,136
50,750
110,656
199,456
Net interest income
216,929
231,250
891,393
955,127
Provision for credit losses
(1,000)
6,000
137,750
37,800
Net interest income after provision for loan and lease losses
217,929
225,250
753,643
917,327
Non-interest income:
Deposit service fees
38,345
40,470
156,032
168,022
Loan and lease related fees
9,095
8,704
29,127
31,327
Wealth and investment services
8,820
8,476
32,916
32,932
Mortgage banking activities
4,110
2,286
18,295
6,115
Increase in cash surrender value of life insurance policies
3,662
3,670
14,561
14,612
Gain on investment securities, net
-
29
8
29
Other income
12,731
7,284
34,338
32,278
Total non-interest income
76,763
70,919
285,277
285,315
Non-interest expense:
Compensation and benefits
122,754
100,467
428,391
395,402
Occupancy
28,024
14,379
71,029
57,181
Technology and equipment
29,122
27,639
112,273
105,283
Marketing
3,485
3,957
14,125
16,286
Professional and outside services
11,380
4,674
32,424
21,380
Intangible assets amortization
1,147
962
4,160
3,847
Loan workout expenses
261
474
1,758
2,952
Deposit insurance
4,372
4,662
18,316
17,954
Other expenses
18,985
22,516
76,470
95,665
Total non-interest expense
219,530
179,730
758,946
715,950
Income before income taxes
75,162
116,439
279,974
486,692
Income tax expense
15,118
25,966
59,353
103,969
Net income
60,044
90,473
220,621
382,723
Preferred stock dividends and other
(2,329)
(2,407)
(9,147)
(9,738)
Earnings applicable to common shareholders
$
57,715
$
88,066
$
211,474
$
372,985
Weighted-average common shares outstanding - Diluted
89,915
91,916
90,151
91,882
Earnings per common share:
Basic
$
0.64
$
0.96
$
2.35
$
4.07
Diluted
0.64
0.96
2.35
4.06
WEBSTER FINANCIAL CORPORATION Five Quarter Consolidated Statements of Income (unaudited)
Three Months Ended
(In thousands, except per share data)
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
December 31, 2019
Interest income:
Interest and fees on loans and leases
$
189,010
$
188,001
$
196,521
$
216,187
$
223,527
Interest and dividends on securities
46,874
51,009
55,570
58,108
58,205
Loans held for sale
181
229
184
175
268
Total interest income
236,065
239,239
252,275
274,470
282,000
Interest expense:
Deposits
8,651
12,598
18,805
27,843
31,586
Borrowings
10,485
7,385
9,063
15,826
19,164
Total interest expense
19,136
19,983
27,868
43,669
50,750
Net interest income
216,929
219,256
224,407
230,801
231,250
Provision for credit losses
(1,000)
22,750
40,000
76,000
6,000
Net interest income after provision for loan and lease losses
217,929
196,506
184,407
154,801
225,250
Non-interest income:
Deposit service fees
38,345
39,278
35,839
42,570
40,470
Loan and lease related fees
9,095
6,568
6,968
6,496
8,704
Wealth and investment services
8,820
8,255
7,102
8,739
8,476
Mortgage banking activities
4,110
7,087
4,205
2,893
2,286
Increase in cash surrender value of life insurance policies
3,662
3,695
3,624
3,580
3,670
Gain on investment securities, net
-
-
-
8
29
Other income
12,731
10,177
2,338
9,092
7,284
Total non-interest income
76,763
75,060
60,076
73,378
70,919
Non-interest expense:
Compensation and benefits
122,754
104,019
99,731
101,887
100,467
Occupancy
28,024
14,275
14,245
14,485
14,379
Technology and equipment
29,122
27,846
27,468
27,837
27,639
Marketing
3,485
3,852
3,286
3,502
3,957
Professional and outside services
11,380
9,223
6,158
5,663
4,674
Intangible assets amortization
1,147
1,089
962
962
962
Loan workout expenses
261
612
392
493
474
Deposit insurance
4,372
4,204
5,015
4,725
4,662
Other expenses
18,985
18,876
19,327
19,282
22,516
Total non-interest expense
219,530
183,996
176,584
178,836
179,730
Income before income taxes
75,162
87,570
67,899
49,343
116,439
Income tax expense
15,118
18,289
14,802
11,144
25,966
Net income
60,044
69,281
53,097
38,199
90,473
Preferred stock dividends and other
(2,329)
(2,391)
(2,368)
(2,178)
(2,407)
Earnings applicable to common shareholders
$
57,715
$
66,890
$
50,729
$
36,021
$
88,066
Weighted-average common shares outstanding - Diluted
89,915
89,738
89,570
91,206
91,916
Earnings per common share:
Basic
$
0.64
$
0.75
$
0.57
$
0.40
$
0.96
Diluted
0.64
0.75
0.57
0.39
0.96
WEBSTER FINANCIAL CORPORATION Consolidated Average Balances, Interest, Yields and Rates, and Net Interest Margin on a Fully Tax-equivalent Basis (unaudited)
Three Months Ended December 31,
2020
2019
(Dollars in thousands)
Average balance
Interest
Yield/rate
Average balance
Interest
Yield/rate
Assets:
Interest-earning assets:
Loans and leases
$
21,729,250
$
189,829
3.44
%
$
19,808,521
$
224,259
4.46
%
Investment Securities (a)
8,923,336
48,124
2.22
8,323,512
58,724
2.86
Federal Home Loan and Federal Reserve Bank stock
85,535
484
2.25
127,770
1,007
3.13
Interest-bearing deposits
102,011
24
0.09
56,484
228
1.58
Loans held for sale
25,777
181
2.80
32,599
268
3.28
Total interest-earning assets
30,865,909
$
238,642
3.08
%
28,348,886
$
284,486
3.98
%
Non-interest-earning assets
2,000,217
1,969,620
Total Assets
$
32,866,126
$
30,318,506
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand deposits
$
6,213,119
$
-
-
%
$
4,417,167
$
-
-
%
Health savings accounts
7,012,813
1,557
0.09
6,320,475
3,166
0.20
Interest-bearing checking, money market and savings
11,469,937
2,400
0.08
9,420,738
13,944
0.59
Certificates of deposit
2,519,845
4,694
0.74
3,202,242
14,476
1.79
Total deposits
27,215,714
8,651
0.13
23,360,622
31,586
0.54
Securities sold under agreements to repurchase and other borrowings
1,073,014
623
0.23
1,275,293
4,726
1.45
Federal Home Loan Bank advances
313,354
5,622
7.02
1,550,528
8,932
2.25
Long-term debt (a)
568,237
4,240
3.24
547,584
5,506
4.21
Total borrowings
1,954,605
10,485
2.17
3,373,405
19,164
2.25
Total interest-bearing liabilities
29,170,319
$
19,136
0.26
%
26,734,027
$
50,750
0.75
%
Non-interest-bearing liabilities
456,586
387,916
Total liabilities
29,626,905
27,121,943
Preferred stock
145,037
145,037
Common shareholders' equity
3,094,184
3,051,526
Total shareholders' equity
3,239,221
3,196,563
Total Liabilities and Shareholders' Equity
$
32,866,126
$
30,318,506
Tax-equivalent net interest income
219,506
233,736
Less: tax-equivalent adjustments
(2,577)
(2,486)
Net interest income
$
216,929
$
231,250
Net interest margin
2.83
%
3.27
%
(a)
For purposes of the yield/rate computation, unrealized gain (loss) balances on securities available for sale and senior fixed-rate notes hedges are excluded.
WEBSTER FINANCIAL CORPORATION Consolidated Average Balances, Interest, Yields and Rates, and Net Interest Margin on a Fully Tax-equivalent Basis (unaudited)
Twelve Months Ended December 31,
2020
2019
(Dollars in thousands)
Average balance
Interest
Yield/rate
Average balance
Interest
Yield/rate
Assets:
Interest-earning assets:
Loans and leases
$
21,385,702
$
792,929
3.71
%
$
19,209,611
$
927,395
4.83
%
Investment Securities (a)
8,647,322
215,151
2.56
7,761,937
229,989
2.97
Federal Home Loan and Federal Reserve Bank stock
102,943
3,200
3.11
113,518
4,956
4.37
Interest-bearing deposits
93,011
246
0.26
56,458
1,211
2.14
Loans held for sale
25,902
769
2.97
22,437
727
3.24
Total interest-earning assets
30,254,880
$
1,012,295
3.37
%
27,163,961
$
1,164,278
4.29
%
Non-interest-earning assets
2,012,900
1,897,078
Total Assets
$
32,267,780
$
29,061,039
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand deposits
$
5,698,399
$
-
-
%
$
4,300,407
$
-
-
%
Health savings accounts
6,893,996
9,530
0.14
6,240,201
12,316
0.20
Interest-bearing checking, money market and savings
10,689,634
25,248
0.24
9,144,086
54,566
0.60
Certificates of deposit
2,760,561
33,119
1.20
3,267,913
62,695
1.92
Total deposits
26,042,590
67,897
0.26
22,952,607
129,577
0.56
Securities sold under agreements to repurchase and other borrowings
1,292,571
5,941
0.46
1,008,704
17,953
1.78
Federal Home Loan Bank advances
730,125
18,767
2.57
1,201,839
31,399
2.61
Long-term debt (a)
564,919
18,051
3.45
468,111
20,527
4.51
Total borrowings
2,587,615
42,759
1.68
2,678,654
69,879
2.62
Total interest-bearing liabilities
28,630,205
$
110,656
0.39
%
25,631,261
$
199,456
0.78
%
Non-interest-bearing liabilities
439,084
362,059
Total liabilities
29,069,289
25,993,320
Preferred stock
145,037
145,037
Common shareholders' equity
3,053,454
2,922,682
Total shareholders' equity
3,198,491
3,067,719
Total Liabilities and Shareholders' Equity
$
32,267,780
$
29,061,039
Tax-equivalent net interest income
901,639
964,822
Less: tax-equivalent adjustments
(10,246)
(9,695)
Net interest income
$
891,393
$
955,127
Net interest margin
3.00
%
3.55
%
(a)
For purposes of the yield/rate computation, unrealized gain (loss) balances on securities available for sale and senior fixed-rate notes hedges are excluded.
WEBSTER FINANCIAL CORPORATION Five Quarter Loan and Lease Balances (unaudited)
(Dollars in thousands)
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
December 31, 2019
Loan and Lease Balances (actual):
Commercial non-mortgage
$
7,687,300
$
7,722,838
$
7,606,245
$
6,385,619
$
5,833,952
Asset-based lending
890,598
889,711
940,524
1,180,328
1,046,886
Commercial real estate
6,322,637
6,307,567
6,207,314
6,122,474
5,949,339
Residential mortgages
4,782,016
4,885,821
4,921,573
4,991,512
4,972,685
Consumer
1,958,664
2,046,086
2,126,861
2,211,591
2,234,124
Total Loan and Lease Balances
21,641,215
21,852,023
21,802,517
20,891,524
20,036,986
Allowance for credit losses on loans and leases
(359,431)
(369,811)
(358,522)
(334,931)
(209,096)
Loans and Leases, net
$
21,281,784
$
21,482,212
$
21,443,995
$
20,556,593
$
19,827,890
Loan and Lease Balances (average):
Commercial non-mortgage
$
7,662,828
$
7,683,879
$
7,318,814
$
6,005,501
$
5,879,600
Asset-based lending
874,221
922,653
1,030,928
1,085,624
1,087,537
Commercial real estate
6,363,776
6,260,114
6,136,091
5,996,728
5,667,764
Residential mortgages
4,821,199
4,914,368
4,946,746
5,013,888
4,917,365
Consumer
2,007,226
2,089,726
2,176,335
2,223,058
2,256,255
Total Loan and Lease Balances
21,729,250
21,870,740
21,608,914
20,324,799
19,808,521
Allowance for credit losses on loans and leases
(375,080)
(363,552)
(340,050)
(269,273)
(211,460)
Loans and Leases, net
$
21,354,170
$
21,507,188
$
21,268,864
$
20,055,526
$
19,597,061
WEBSTER FINANCIAL CORPORATION Five Quarter Nonperforming Assets and Past Due Loans and Leases (unaudited)
(Dollars in thousands)
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
December 31, 2019
Nonperforming loans and leases:
Commercial non-mortgage
$
71,499
75,080
75,340
74,077
64,793
Asset-based lending
2,622
3,789
138
137
139
Commercial real estate
21,222
8,784
15,889
12,901
11,554
Residential mortgages
41,033
41,498
46,500
42,393
43,100
Consumer
31,629
33,485
35,187
32,785
31,320
Total nonperforming loans and leases
$
168,005
$
162,636
$
173,054
$
162,293
$
150,906
Other real estate owned and repossessed assets:
Commercial non-mortgage
$
175
175
272
121
271
Residential mortgages
1,544
3,899
3,081
4,480
4,247
Consumer
590
604
1,974
2,226
1,956
Total other real estate owned and repossessed assets
$
2,309
$
4,678
$
5,327
$
6,827
$
6,474
Total nonperforming assets
$
170,314
$
167,314
$
178,381
$
169,120
$
157,380
Past due 30-89 days:
Commercial non-mortgage
$
8,918
$
3,821
$
13,959
$
8,200
$
8,482
Asset-based lending
1,175
-
-
-
-
Commercial real estate
3,003
329
2,363
2,217
1,700
Residential mortgages
10,623
9,291
15,445
11,814
13,598
Consumer
8,720
8,349
7,857
14,666
18,835
Total past due 30-89 days
32,439
21,790
39,624
36,897
42,615
Past due 90 days or more and accruing
445
-
198
75
-
Total past due loans and leases
$
32,884
$
21,790
$
39,822
$
36,972
$
42,615
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)
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
December 31, 2019
Beginning balance
$
369,811
$
358,522
$
334,931
$
209,096
$
209,152
Adoption of ASU No. 2016-13
-
-
-
57,568
-
Provision
(992)
22,753
40,003
76,085
6,000
Charge-offs:
Commercial non-mortgage
7,876
12,085
15,294
5,544
5,041
Asset-based lending
-
10
-
-
-
Commercial real estate
688
1,399
-
30
23
Residential mortgages
105
546
194
1,511
876
Consumer
2,673
1,717
2,586
3,076
3,165
Total charge-offs
11,342
15,757
18,074
10,161
9,105
Recoveries:
Commercial non-mortgage
232
1,978
271
558
236
Asset-based lending
33
-
10
3
33
Commercial real estate
3
47
2
3
3
Residential mortgages
190
521
83
235
534
Consumer
1,496
1,747
1,296
1,544
2,243
Total recoveries
1,954
4,293
1,662
2,343
3,049
Total net charge-offs
9,388
11,464
16,412
7,818
6,056
Ending balance
$
359,431
$
369,811
$
358,522
$
334,931
$
209,096
WEBSTER FINANCIAL CORPORATION Reconciliations to GAAP Financial Measures
The Company evaluates its business based on certain ratios that utilize non-GAAP financial measures. The Company believes the use of these non-GAAP financial measures provides additional clarity in assessing the results and financial position of the Company. Other companies may define or calculate supplemental financial data differently.
The efficiency ratio, which measures the costs expended to generate a dollar of revenue, is calculated excluding certain non-operational items. Return on average tangible common shareholders' equity measures the Company's net income available to common shareholders, adjusted for the tax-effected amortization of intangible assets, as a percentage of average shareholders' equity less average preferred stock and average goodwill and intangible assets. The tangible equity ratio represents shareholders' equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets. The tangible common equity ratio represents shareholders' equity less preferred stock and goodwill and intangible assets divided by total assets less goodwill and intangible assets. Tangible book value per common share represents shareholders' equity less preferred stock and goodwill and intangible assets divided by common shares outstanding at the end of the period. Core deposits express total deposits less time deposits, including brokered time deposits. Adjusted diluted earnings per share (EPS) for the quarter ended December 31, 2020 is calculated by excluding after tax non-operational items from reported earnings applicable to common shareholders. 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)
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
December 31, 2019
Efficiency ratio:
Non-interest expense (GAAP)
$
219,530
$
183,996
$
176,584
$
178,836
$
179,730
Less: Foreclosed property activity (GAAP)
(836)
(201)
(217)
(250)
263
Intangible assets amortization (GAAP)
1,147
1,089
962
962
962
Strategic initiatives (non-GAAP)
38,265
4,786
-
-
-
Non-interest expense (non-GAAP)
$
180,954
$
178,322
$
175,839
$
178,124
$
178,505
Net interest income (GAAP)
$
216,929
$
219,256
$
224,407
$
230,801
$
231,250
Add: Tax-equivalent adjustment (non-GAAP)
2,577
2,635
2,561
2,473
2,486
Non-interest income (GAAP)
76,763
75,060
60,076
73,378
70,919
Other (non-GAAP)
291
297
293
299
402
Loss on hedge terminations (GAAP)
3,680
-
-
-
-
Customer derivative fair value adjustment (GAAP)
-
-
5,511
-
-
Less: Gain on investment securities, net (GAAP)
-
-
-
8
29
Income (non-GAAP)
$
300,240
$
297,248
$
292,848
$
306,943
$
305,028
Efficiency ratio (non-GAAP)
60.27
%
59.99
%
60.04
%
58.03
%
58.52
%
Return on average tangible common shareholders' equity:
Net income (GAAP)
$
60,044
$
69,281
$
53,097
$
38,199
$
90,473
Less: Preferred stock dividends (GAAP)
1,969
1,968
1,969
1,969
1,969
Add: Intangible assets amortization, tax-effected (GAAP)
906
860
760
760
760
Income adjusted for preferred stock dividends and intangible assets amortization (non-GAAP)
$
58,981
$
68,173
$
51,888
$
36,990
$
89,264
Income adjusted for preferred stock dividends and intangible assets amortization, annualized basis (non-GAAP)
$
235,924
$
272,692
$
207,552
$
147,960
$
357,056
Average shareholders' equity (non-GAAP)
$
3,239,221
$
3,205,330
$
3,155,368
$
3,193,525
$
3,196,563
Less: Average preferred stock (non-GAAP)
145,037
145,037
145,037
145,037
145,037
Average goodwill and other intangible assets (non-GAAP)
561,303
560,959
558,835
559,786
560,750
Average tangible common shareholders' equity (non-GAAP)
$
2,532,881
$
2,499,334
$
2,451,496
$
2,488,702
$
2,490,776
Return on average tangible common shareholders' equity (non-GAAP)
9.31
%
10.91
%
8.47
%
5.95
%
14.34
%
Tangible equity:
Shareholders' equity (GAAP)
$
3,234,625
$
3,219,690
$
3,174,779
$
3,090,242
$
3,207,770
Less: Goodwill and other intangible assets (GAAP)
560,756
561,902
558,367
559,328
560,290
Tangible shareholders' equity (non-GAAP)
$
2,673,869
$
2,657,788
$
2,616,412
$
2,530,914
$
2,647,480
Total assets (GAAP)
$
32,590,690
$
32,994,443
$
32,708,617
$
31,654,874
$
30,389,344
Less: Goodwill and other intangible assets (GAAP)
560,756
561,902
558,367
559,328
560,290
Tangible assets (non-GAAP)
$
32,029,934
$
32,432,541
$
32,150,250
$
31,095,546
$
29,829,054
Tangible equity (non-GAAP)
8.35
%
8.19
%
8.14
%
8.14
%
8.88
%
Tangible common equity:
Tangible shareholders' equity (non-GAAP)
$
2,673,869
$
2,657,788
$
2,616,412
$
2,530,914
$
2,647,480
Less: Preferred stock (GAAP)
145,037
145,037
145,037
145,037
145,037
Tangible common shareholders' equity (non-GAAP)
$
2,528,832
$
2,512,751
$
2,471,375
$
2,385,877
$
2,502,443
Tangible assets (non-GAAP)
$
32,029,934
$
32,432,541
$
32,150,250
$
31,095,546
$
29,829,054
Tangible common equity (non-GAAP)
7.90
%
7.75
%
7.69
%
7.67
%
8.39
%
Tangible book value per common share:
Tangible common shareholders' equity (non-GAAP)
$
2,528,832
$
2,512,751
$
2,471,375
$
2,385,877
$
2,502,443
Common shares outstanding
90,199
90,204
90,194
90,172
92,027
Tangible book value per common share (non-GAAP)
$
28.04
$
27.86
$
27.40
$
26.46
$
27.19
Core deposits:
Total deposits
$
27,335,436
$
26,920,553
$
26,355,997
$
24,513,837
$
23,324,746
Less: Certificates of deposit
2,487,818
2,570,440
2,666,047
2,891,161
3,104,765
Brokered certificates of deposit
-
-
-
100,000
-
Core deposits (non-GAAP)
$
24,847,618
$
24,350,113
$
23,689,950
$
21,522,676
$
20,219,981
(In millions, except per share data)
GAAP earnings adjusted for strategic optimization initiatives:
Pre-Tax
After Tax
Diluted EPS
Reported net income (GAAP)
$
75.2
$
60.0
$
0.64
Severance
17.9
13.2
0.15
Facilities optimization
14.5
10.7
0.12
Project costs
5.5
4.0
0.04
Dept prepayment costs
4.1
3.3
0.04
Adjusted net income (non-GAAP)
$
117.2
$
91.2
$
0.99
Media Contact
Investor Contact
Alice Ferreira, 203-578-2610
Terry Mangan, 203-578-2318
acferreira@websterbank.com
tmangan@websterbank.com
Kristen Manginelli, 203-578-2307
kmanginelli@websterbank.com
View original content:http://www.prnewswire.com/news-releases/webster-reports-fourth-quarter-2020-earnings-of-0-64-per-diluted-share-301212489.html
SOURCE Webster Financial Corporation