Webster Reports 2015 Fourth Quarter Earnings

WATERBURY, Conn., Jan. 21, 2016 /PRNewswire/ -- Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A., today announced net income available to common shareholders of $50.6 million, or $0.55 per diluted share, for the quarter ended December 31, 2015 compared to $48.4 million, or $0.53 per diluted share, for the quarter ended December 31, 2014.

For the full year 2015, net income available to common shareholders was $197.6 million, or $2.15 per diluted share, compared to $189.2 million, or $2.08 per diluted share, for the full year 2014.

"Webster's record net income for the fourth quarter and full year 2015 showcase our sustained progress in executing growth strategies that maximize value to customers and shareholders," said James C. Smith, chairman and chief executive officer. "Record quarterly loan originations and net interest margin expansion helped produce our 25^th consecutive quarter of year-over-year core revenue growth. Record full year 2015 loan originations of $5.6 billion were 19 percent higher than a year ago, as Webster bankers excelled in service to our customers and communities."

Highlights for the fourth quarter of 2015 compared to the fourth quarter of 2014:

• Record quarterly pre-provision net revenue of $90.3 million, an increase of 4.2 percent.
• Loan growth of $1.8 billion, or 12.8 percent, with double-digit growth in commercial, commercial real estate and residential mortgage loans.
• Deposit growth of $2.3 billion, or 14.7 percent, primarily reflecting HSA Bank's strong organic growth and its January 2015 acquisition.
• Record core revenue of $233.6 million, an increase of 9.1 percent, including a record level of net interest income of $173.3 million.
• Efficiency ratio of 59.87 percent represents the eleventh consecutive quarter at or below 60 percent.
• Annualized return on average tangible common shareholders' equity of 11.99 percent.

"We've now achieved eleven consecutive quarters with the efficiency ratio at or below 60 percent," said Glenn MacInnes, executive vice president and chief financial officer. "We've accomplished this even as we continue to invest in our future."

Quarterly net interest income compared to the fourth quarter of 2014:

• Net interest income was $173.3 million compared to $160.6 million.
• Net interest margin was 3.08 percent compared to 3.17 percent. The yield on interest-earning assets declined by 10 basis points, while the cost of funds declined by 2 basis points.
• Net interest margin increased 4 basis points on a linked-quarter basis.
• Average interest-earning assets totaled $22.7 billion and grew by $2.2 billion, or 10.8 percent.
• Average loans grew by $1.7 billion, or 12.7 percent.

Quarterly provision for loan losses:

• The Company recorded a provision for loan losses of $13.8 million compared to $13.0 million in the third quarter and $9.5 million a year ago. The increase compared to each period primarily reflects continued growth in the loan portfolio.
• Net charge-offs were $11.8 million compared to $7.9 million in the prior quarter and $6.7 million a year ago. The ratio of net charge-offs to average loans on an annualized basis was 0.31 percent compared to 0.21 percent in the prior quarter and 0.20 percent a year ago. The increase in net charge-offs was primarily in the commercial segment.
• The allowance for loan losses represented 1.12 percent of total loans compared to 1.14 percent at September 30, 2015 and 1.15 percent at December 31, 2014. The allowance for loan losses represented 125 percent of nonperforming loans compared to 109 percent at September 30 and 123 percent a year ago.

Quarterly non-interest income compared to the fourth quarter of 2014:

• Total non-interest income was $60.3 million compared to $53.8 million, an increase of $6.6 million. Excluding securities gains and other-than-temporary impairment charges, a year-over-year increase of $6.7 million in core non-interest income reflects increases of $8.3 million in deposit service fees related to HSA Bank and $1.3 million in mortgage banking activities, offset by decreases of $2.5 million in loan related fees and $0.5 million in wealth and investment services.

Quarterly non-interest expense compared to the fourth quarter of 2014:

• Total non-interest expense was $143.2 million compared to $130.2 million, an increase of $13.0 million.
• Non-interest expense, excluding one-time costs, increased $15.8 million with $8.9 million of the increase related to HSA Bank. The remaining $6.9 million increase reflects higher compensation expense, professional and outside services, and other.

Quarterly income taxes compared to the fourth quarter of 2014:

• Income tax expense was $24.1 million compared to $23.8 million. The effective tax rate was 31.5 percent compared to 31.8 percent, and the current quarter included a $1.2 million net tax benefit specific to the period compared to $0.1 million a year ago.

Investment securities:

• Total investment securities were $6.9 billion compared to $7.0 billion at September 30, 2015 and $6.7 billion a year ago. The carrying value of the available-for-sale portfolio included $10.3 million of net unrealized losses compared to net unrealized gains of $16.0 million at September 30 and $25.9 million a year ago, while the carrying value of the held-to-maturity portfolio does not reflect $38.5 million of net unrealized gains compared to $72.3 million at September 30 and $75.8 million a year ago.

Loans:

• Total loans were $15.7 billion compared to $15.2 billion at September 30, 2015 and $13.9 billion a year ago. Compared to September 30, commercial, commercial real estate, consumer, and residential mortgage loans increased by $223.7 million, $134.5 million, $51.9 million, and $45.2 million, respectively.
• Compared to a year ago, commercial, residential mortgage, commercial real estate, and consumer loans increased by $629.5 million, $551.8 million, $437.2 million, and $153.2 million, respectively.
• Loan originations for portfolio were $1.534 billion compared to $1.207 billion in the third quarter and $1.378 billion a year ago. In addition, $98 million of residential loans were originated for sale in the quarter compared to $117 million in the prior quarter and $87 million a year ago.

Asset quality:

• Past due loans were $39.2 million compared to $41.3 million at September 30, 2015 and $42.3 million a year ago. Loans past due 90 days and still accruing decreased $0.2 million from the prior quarter and were flat to the prior year.
• Total nonperforming loans decreased to $139.9 million, or 0.89 percent of total loans, compared to $159.0 million, or 1.04 percent, at September 30 and $129.9 million, or 0.93 percent, a year ago. Total paying nonperforming loans were $48.7 million compared to $45.0 million at September 30 and $30.5 million a year ago.

Deposits and borrowings:

• Total deposits were $18.0 billion compared to $17.6 billion at September 30, 2015 and $15.7 billion a year ago. Core to total deposits were 88.4 percent compared to 88.3 percent at September 30 and 85.5 percent a year ago. Loans to deposits were 87.3 percent compared to 86.5 percent at September 30 and 88.8 percent a year ago.
• Total borrowings were $4.0 billion compared to $3.8 billion at September 30 and $4.3 billion a year ago.

Capital:

• The return on average tangible common shareholders' equity and the return on average common shareholders' equity were 11.99 percent and 8.79 percent, respectively, compared to 11.74 percent and 8.84 percent, respectively, in the fourth quarter of 2014.
• The tangible equity and tangible common equity ratios were 7.63 percent and 7.12 percent, respectively, compared to 8.14 percent and 7.45 percent, respectively, at December 31, 2014. The common equity tier 1 risk-based capital ratio was 10.71 percent compared to 11.43 percent a year ago.
• Book value and tangible book value per common share were $25.01 and $18.71, respectively, compared to $23.99 and $18.10, respectively, a year ago.
  

Webster Financial Corporation is the holding company for Webster Bank, National Association. With $24.7 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust, and investment services through 178 banking centers and 353 ATMs, with an additional 2 banking centers scheduled to open soon in greater Boston (subject to regulatory approval). Webster also provides telephone banking, mobile banking, 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 2015 fourth quarter earnings announcement will be held today, Thursday, January 21, 2016 at 9:00 a.m. (Eastern) and may be heard through Webster's Investor Relations website at www.wbst.com, or in listen-only mode by calling 877-407-8289 or 201-689-8341 internationally. The call will be archived on the website and available for future retrieval.

Forward-Looking Statements

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking statements can be identified by words such as "believes," "anticipates," "expects," "intends," "targeted," "continue," "remain," "will," "should," "may," "plans," "estimates," and similar references to future periods; however, such words are not the exclusive means of identifying such statements.  Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items; (ii) statements of plans, objectives, and expectations of Webster or its management or Board of Directors; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Forward-looking statements are based on Webster's current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Webster's actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: (1) local, regional, national, and international economic conditions and the impact they may have on us and our customers and our assessment of that impact; (2) volatility and disruption in national and international financial markets; (3) government intervention in the U.S. financial system; (4) changes in the level of nonperforming assets and charge-offs; (5) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (6) adverse conditions in the securities markets that lead to impairment in the value of securities in our investment portfolio; (7) inflation, interest rate, securities market, and monetary fluctuations; (8) the timely development and acceptance of new products and services and perceived overall value of these products and services by customers; (9) changes in consumer spending, borrowings, and savings habits; (10) technological changes and cyber-security matters; (11) the ability to increase market share and control expenses; (12) changes in the competitive environment among banks, financial holding companies, and other financial services providers; (13) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and insurance) with which we and our subsidiaries must comply, including the Dodd-Frank Wall Street Reform and Consumer Protection Act; (14) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters; (15) the costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; (16) our success at managing the risks involved in the foregoing items and (17) the other factors that are described in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q under the headings "Risk Factors" and 'Management Discussion and Analysis of Financial Condition and Results of Operation."  Any forward-looking statement made by the Company in this release speaks only as of the date on which it is made. Factors or events that could cause the Company's actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Non-GAAP Financial Measures

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

We believe that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends and financial position. Specifically, we provide measures based on what we believe are our operating earnings on a consistent basis and exclude non-core operating items which affect the GAAP reporting of results of operations. 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.