July 17, 2009


1
Forward Looking Statement
 This presentation contains forward-looking statements within the meaning of the Private Securit...
Capital Enhancement - Outcomes of
Exchange Offers
 Convertible preferred exchanged at 76% participation and 62% offer
 pri...
Capital Position at June 30, 2009
$ in millions

                                                Required Regulatory
     ...
Second Quarter 2009
 In line with our key 2009 initiatives, we continue to
 focus on capital, credit, deposits and OneWebs...
2Q09 Core Earnings
$ in millions



     Net Pre-tax loss                                            $   (60.4)
     Gain ...
Income Statement
$ in thousands except per share amounts

                                              2Q09              ...
Net Interest Margin
$ in millions

                                         2Q09       1Q09       2Q08
  Avg. Interest Ear...
Noninterest Income
$ in thousands

                                                              2Q09           1Q09      ...
Noninterest Expense
$ in thousands

                                                      2Q09          1Q09          2Q08...
OneWebster
Continuous Improvement Process

        Expected Outcomes                      Progress (as of 6/30/09)

   Imp...
Selected Balances
End of period balances $ in millions

                                           2Q09         1Q09      ...
Investment Portfolio
•Carrying value of $4.2 billion at 6/30/09
                                                       Mun...
Investment Portfolio Actions in 2Q09

  Purchased $618 million in agency mortgage-backed securities
  Securitized $203 mil...
Loans
$11.6 Billion as of June 30, 2009
                                    Disc./Liq.
                                   ...
Loan Mix and Yield
End of period balances $ in millions



                                  2Q09                      1Q0...
Residential                                                                     Continuing portfolio

30-89 Day delinquenc...
Commercial Non-Mortgage
30-89 Day delinquency trend                                 Portfolio Statistics
                 ...
Equipment Finance
30-89 Day delinquency trend                                  Portfolio Statistics
                      ...
Asset Based Lending
30-89 Day delinquency trend                                  Portfolio Statistics
                    ...
Commercial Real Estate
30-89 Day delinquency trend                                                   Portfolio Statistics
...
Residential Development
30-89 Day delinquency trend                                Portfolio Statistics
                  ...
Consumer                                                                      Continuing portfolio

30-89 Day delinquency ...
Discontinued Liquidating
30-89 Day delinquency trend                                   Portfolio Statistics
              ...
Asset Quality – Key Ratios
Ratios as of June 30, 2009 (March ratios in parentheses)


                                    ...
Deposits
$13.2 Billion as of June 30, 2009
                                    Brokered
                                  ...
Deposit Mix and Cost
End of period balances $ in millions
                                        2Q09                    ...
Sources of Liquidity
At or as of June 30, 2009

Wide array of sources provide a strong competitive advantage

   Diverse d...
Concluding Comments
 Substantially improved Tier 1 common and tangible
 common equity levels; continue to be very well
 ca...
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Q2 2009 Earning Report of Webster Financial Corp.

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Transcript of "Q2 2009 Earning Report of Webster Financial Corp."

  1. 1. July 17, 2009 1
  2. 2. Forward Looking Statement This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about Webster Financial Corporation’s ("Webster" or "WBS") future financial condition, operating results, cost savings, management’s expectations regarding future growth opportunities and business strategy and other statements contained in this presentation that are not historical facts, as well as other statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" or words of similar meaning. These forward-looking statements are based upon the current beliefs and expectations of Webster’s management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed in these forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) changes in general economic conditions, either nationally or locally in the areas in which we conduct or will conduct our business; (2) the interest rate environment may compress margins and adversely affect net interest income; (3) increases in competitive pressures among financial institutions and businesses offering similar products and services; (4) higher defaults on our loan portfolio than we expect; (5) changes in management’s estimate of the adequacy of the allowance for loan losses; (6) the risks associated with continued diversification of assets and adverse changes to credit quality; (7) difficulties associated with achieving expected future financial results; (8) legislative or regulatory changes or changes in accounting principles, policies or guidelines; (9) management’s estimates and projections of interest rates and interest rate policy; and (10) cost savings and accretion to earnings from mergers and acquisitions may not be fully realized or may take longer to realize than expected. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in Webster’ reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission and available at the SEC’s Internet site (http://www.sec.gov). Webster cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they were made. Except as required by law, Webster does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statement is made. 2
  3. 3. Capital Enhancement - Outcomes of Exchange Offers Convertible preferred exchanged at 76% participation and 62% offer price with $168.5 million accepted (75% maximum) Trust Preferred exchanged at 32% participation and 65% offer price The $173 million of new Tier 1 common equity was raised at more than double Webster’s pre-exchange stock price and represents 45% of pre- exchange market capitalization Effective cost of common stock issuance of $14.68 per share compared to tangible book value per share of $13.02 at March 31, 2009 Interest and preferred dividend expense reduced by $19.2 million annually ($17.5 million after-tax) 3
  4. 4. Capital Position at June 30, 2009 $ in millions Required Regulatory Well 2Q09 Capitalized Minimum 1Q09 Tier 1 Common (1) 6.40% na na 5.26% Tangible Common Equity 4.92% na na 4.05% Tangible Equity 7.58% na na 7.75% Leverage (1) 9.00% 5.0% 4.0% 9.49% Tier 1 Risk Based (1) 11.70% 6.0% 4.0% 11.99% Total Risk Based (1) 13.80% 10.0% 8.0% 14.03% Excess Over Well Capital Capitalized Minimum Leverage $1,520 $676 $844 Tier 1 Risk Based $1,520 $741 $1,000 Total Risk Based $1,791 $492 $752 (1) – Estimated at 6/30/09 4
  5. 5. Second Quarter 2009 In line with our key 2009 initiatives, we continue to focus on capital, credit, deposits and OneWebster: Exchange of convertible preferred and trust preferred securities contributed to 114 bp improvement in Tier 1 common ratio and 87 bp improvement in tangible common equity ratio Capital ratios remain well in excess of regulatory requirements Increased Allowance for Credit Losses to Total Loans at quarter end to 2.72%; provision in excess of net charge-offs Continued strong deposit growth of $480 million; all in core deposits and from multiple channels Operating expenses are 6.4% lower year over year (excluding FDIC assessments, foreclosed property expenses and related write- downs, severance and other costs, and goodwill impairment in 2Q08) 5
  6. 6. 2Q09 Core Earnings $ in millions Net Pre-tax loss $ (60.4) Gain on the exchange of trust preferreds for common stock (24.3) Loss on sale of investment securities 13.6 Loss on write-down of investments to fair value 27.1 VISA share transaction (1.9) FDIC special assessment 8.0 OneWebster-related charges 1.3 Foreclosure write-downs 2.8 Provision for loan losses (Net charge-offs of $50.0) 85.0 Pre-tax, pre-provision earnings $ 51.2 Q2 core earnings also impacted by increased ongoing FDIC premium expense 6
  7. 7. Income Statement $ in thousands except per share amounts 2Q09 1Q09 2Q08 Net interest income $ 119,288 $ 118,197 $ 125,686 Provision for credit losses 85,000 66,000 25,000 Non-interest income 49,838 45,289 49,049 Non-interest expense 116,136 113,149 118,087 Non core items (28,401) 3,957 (74,218) Loss from continuing ops before income taxes (60,411) (11,706) (42,570) Consolidated net loss (31,562) (11,113) (28,724) extinguishment gain, non- controlling interests 48,361 (10,443) (216) Net income (loss) for common 16,799 (21,556) (28,940) EPS - Diluted $ 0.31 $ (0.41) $ (0.56) 7
  8. 8. Net Interest Margin $ in millions 2Q09 1Q09 2Q08 Avg. Interest Earning Assets $ 16,036 $ 16,138 $ 15,707 Yield on Loans 4.57% 4.65% 5.52% Yield on Investment Securities 5.32% 5.36% 5.48% Yield on Interest Earning Assets 4.72% 4.82% 5.51% Cost of Deposits 1.53% 1.75% 2.01% Cost of Borrowings 3.02% 2.54% 3.38% Cost of Funds 1.76% 1.91% 2.31% Net Interest Margin 3.04% 2.99% 3.26% 8
  9. 9. Noninterest Income $ in thousands 2Q09 1Q09 2Q08 Deposit service fees $ 29,984 $ 27,959 $ 29,943 Loan related fees 6,350 6,482 7,891 Wealth and investment services 6,081 5,750 7,634 Mortgage banking activities 3,433 606 104 Increase in cash surrender value of life insurance 2,665 2,592 2,623 Other income 1,325 1,900 854 Subtotal $ 49,838 $ 45,289 $ 49,049 Net (loss) gain on sale of investment securities (13,593) 4,458 126 Gain on the exchange of trust preferreds for common stock 24,336 Gain on early extinguishment of debt and swaps - 5,993 - Loss on write-down of investments to fair value (27,110) - (54,924) Write-down of direct invesments - (1,625) - VISA share transaction 1,907 - - Total noninterest income $ 35,378 $ 54,115 $ (5,749) 9
  10. 10. Noninterest Expense $ in thousands 2Q09 1Q09 2Q08 Compensation and benefits $ 59,189 $ 56,469 $ 62,866 Occupancy 13,594 14,295 13,128 Furniture and equipment 15,288 15,140 15,634 Marketing 3,196 3,106 4,940 Outside services 3,394 3,784 3,706 Intangible amortization 1,450 1,463 1,464 Other expenses 14,066 14,302 16,005 Subtotal $ 110,177 $ 108,559 $ 117,743 FDIC deposit insurance assessment 5,959 4,590 344 Subtotal $ 116,136 $ 113,149 $ 118,087 FDIC Special assessment 8,000 - - Foreclosed and repossessed property expenses and write-downs 4,628 4,629 1,552 Severance and other costs 1,313 240 9,368 Goodwill impairment - - 8,500 Total noninterest expenses $ 130,077 $ 118,018 $ 137,507 10
  11. 11. OneWebster Continuous Improvement Process Expected Outcomes Progress (as of 6/30/09) Implementation of 1,600 Completed ideas represent approved ideas under approximately $49 million in continuous improvement annual run-rate benefit process $66.5 million of annualized run- Ideas generating about 78% of rate benefit (net of expected run-rate benefits investments): $56.5 million implemented by 6/30/09; 94% from expense reduction and expected to be implemented by $10.0 million from revenue / year-end 2009; full growth initiatives implementation by mid-year 2010 OneWebster: making Webster a better, more efficient bank 11
  12. 12. Selected Balances End of period balances $ in millions 2Q09 1Q09 2Q08 Securities $ 4,174 $ 3,527 $ 2,917 Loans 11,611 12,095 12,766 Allowance for Loan Losses (306) (271) (185) Intangibles 561 562 757 Total Assets 17,453 17,257 17,479 Deposits 13,175 12,695 12,077 Borrowings 2,269 2,480 3,349 Shareholder's Equity 1,842 1,855 1,892 Tangible Equity / Tangible Assets 7.58% 7.75% 6.79% Loans / Deposits 88% 95% 106% 12
  13. 13. Investment Portfolio •Carrying value of $4.2 billion at 6/30/09 Municipals •Excludes unrealized gains of $33 million in HTM •Includes $49 million of unrealized losses in AFS $ millions 30 Yr Agency MBS 83 32 12 3 691 61 81 15 Yr Agency MBS Agency Hybrid ARMS AAA CMBS 1094 AAA Whole Loan Pass Throughs Pooled Trust Preferred 1564 Single Issuer Trust Preferred Common Stock 553 Preferred Stock 13
  14. 14. Investment Portfolio Actions in 2Q09 Purchased $618 million in agency mortgage-backed securities Securitized $203 million in conforming residential loans Sold $7 million in common stock at a net loss of $1.7 million Sold $12.3 million book value (par value of $104.1 million) of pooled trust preferred securities at a net loss of $11.9 million; generated tax loss of $75 million which reduces the deferred tax asset Recognized OTTI charges of $23.6 million on pooled trust preferred securities and $3.5 million on a preferred stock 14
  15. 15. Loans $11.6 Billion as of June 30, 2009 Disc./Liq. $.256 2.2% Residential Mtg CRE $2,875 $2.236 24.8% 19.3% Consumer Commercial $2.910 $3.334 25.0% 28.7% 15
  16. 16. Loan Mix and Yield End of period balances $ in millions 2Q09 1Q09 Balance Yield Balance Yield Residential $2,882 5.26% $3,184 5.46% Commercial 3,334 4.31% 3,415 4.31% CRE 2,236 4.62% 2,250 4.64% Consumer 3,159 4.17% 3,246 4.24% Total $11,611 4.57% $12,095 4.65% 16
  17. 17. Residential Continuing portfolio 30-89 Day delinquency trend Portfolio Statistics 2Q09 1Q09 2Q08 1.60% Average portfolio ($m) $3,113 $3,092 $3,564 1.40% Ending Balance 2,876 3,171 3,548 1.20% Net Charge-offs ($m) 4.7 2.9 0.8 1.00% Net Charge-offs (%) 0.60% 0.38% 0.10% 0.80% NPLs ($m) $ 93.6 $ 66.8 $ 27.1 0.60% Portion of paying NPLs ($) 33.0 10.8 - 0.40% 0.20% 0.00% Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 80% of portfolio is in footprint (CT, MA, RI, NY) Portfolio updated weighted average FICO of 723 Portfolio updated weighted average LTV of 59% 47% Jumbo, 51% Conforming No Option ARMs, minimal Alt-A (under $40 million) Permanent NCLC declined to $45 million at 6/30/09 down from $50 million at 3/31/09 Permanent NCLC accounts for $19.5 million of $93.6 million NPLs at 06/30/09 and $1.9 million of the $4.2 million in net charge-offs in 2Q09 17
  18. 18. Commercial Non-Mortgage 30-89 Day delinquency trend Portfolio Statistics 2Q09 1Q09 2Q08 1.00% 0.90% Average portfolio ($m) $1,751 $1,784 $1,778 0.80% Ending Balance 1,712 1,739 1,793 0.70% Net Charge-offs ($m) 8.8 5.0 0.8 0.60% Net Charge-offs (%) 2.00% 1.12% 0.20% 0.50% NPLs ($m) $ 69.0 $ 65.1 $ 36.8 0.40% 0.30% 0.20% 0.10% 0.00% Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Consists of Middle Market, Small Business, Insurance Premium Finance and Segment Banking Net charge-offs in 2Q09 consisted primarily of $5.3 million in Small Business charge- offs and a $2.8 million single credit charge in Segment Lending Improved NPL trends in core Middle Market and Small Business portfolios evidenced by a marginal increase in 2Q09 18
  19. 19. Equipment Finance 30-89 Day delinquency trend Portfolio Statistics 2Q09 1Q09 2Q08 1.80% 1.60% Average portfolio ($m) $1,012 $1,026 $1,001 Ending Balance 998 1,017 1,003 1.40% Net Charge-offs ($m) 6.1 1.9 0.4 1.20% Net Charge-offs (%) 2.42% 0.76% 0.17% 1.00% NPLs ($m) $ 35.7 $ 16.1 $ 6.7 0.80% 0.60% 0.40% 0.20% 0.00% Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Five industry segments: Transportation, Construction, Environmental, Manufacturing, Aviation. Increase in net charge-offs related to weakness across all sectors as each Equipment Finance segment experienced higher NCOs compared to 1Q09 Aviation contributed 50% of 2Q09 charge-offs Increase in NPLs related to weakness across all sectors; each Equipment Finance segment had higher NPLs compared to 1Q09 Portfolio remains granular as no single borrower represents greater than 1% of the overall portfolio 19
  20. 20. Asset Based Lending 30-89 Day delinquency trend Portfolio Statistics 2Q09 1Q09 2Q08 0.60% Average portfolio ($m) $ 652 $ 701 $ 837 0.50% Ending Balance 623 660 842 Net Charge-offs ($m) 5.3 3.0 1.2 0.40% Net Charge-offs (%) 3.25% 1.70% 0.60% NPLs ($m) $ 24.5 $ 29.4 $ 19.0 0.30% 0.20% 0.10% 0.00% Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Significant reductions in commitments and outstanding balances in all periods shown Strong portfolio and problem asset management Lower working capital levels resulting from general economic conditions Strong collateral base – proactively monitoring collateral values and advance rates 20
  21. 21. Commercial Real Estate 30-89 Day delinquency trend Portfolio Statistics 2Q09 1Q09 2Q08 1.20% Average portfolio ($m) $2,091 $2,084 $2,016 Ending Balance 2,092 2,095 2,084 1.00% (1) Net Charge-offs ($m) - - 1.5 0.80% Net Charge-offs (%) 0.00% 0.00% 0.30% NPLs ($m) $ 16.7 $ 12.6 $ 9.7 0.60% 0.40% 0.20% 0.00% Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 (1) Increase in delinquency due to $13 million loan maturity that has been resolved since quarter-end Consists of Investor CRE and Owner-occupied Diversified portfolio by product, geography and property type Institutional quality portfolio with strong sponsors; modest retail and hospitality exposure Proactive credit management – monitoring maturities, vacancy trends and leasing activity Use PPR to evaluate portfolio through market data overlay on Investor CRE portfolio 21
  22. 22. Residential Development 30-89 Day delinquency trend Portfolio Statistics 2Q09 1Q09 2Q08 3.00% Average portfolio ($m) $ 151 $ 159 $ 231 2.50% Ending Balance 144 155 231 Net Charge-offs ($m) 2.3 0.1 3.7 2.00% Net Charge-offs (%) 6.21% 0.12% 6.43% NPLs ($m) $ 46.8 $ 54.1 $ 48.1 1.50% 1.00% 0.50% 0.00% Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Continued challenging environment resulting in slower absorption and higher delinquencies Recent appraisals on non-accruing residential development loans resulted in charge- offs of $30 million in 4Q08 2Q09 charges primarily driven by nonaccrual resolution and updated valuations on new NPLs 22
  23. 23. Consumer Continuing portfolio 30-89 Day delinquency trend Portfolio Statistics 2Q09 1Q09 2Q08 1.20% Average portfolio ($m) $2,952 $3,012 $2,891 1.00% Ending Balance 2,910 2,979 2,910 Net Charge-offs ($m) 9.5 5.8 2.5 0.80% Net Charge-offs (%) 1.29% 0.77% 0.35% 0.60% NPLs ($m) $ 38.4 $ 40.2 $ 20.7 Portion of paying NPLs ($) 4.5 2.7 - 0.40% 0.20% 0.00% Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 99% home equity of which 36% is home equity loans; 64% home equity lines Line utilization of 51% compared to 50% at 3/31/09 82% of portfolio is in footprint (CT, MA, RI, NY) 19% of Home Equity is in 1st lien position Portfolio updated weighted average FICO of 724 Portfolio updated weighted average CLTV of 74% $2.2 billion retail originated portfolio has 0.34% annualized charge-off rate at 06/30/09 23
  24. 24. Discontinued Liquidating 30-89 Day delinquency trend Portfolio Statistics 2Q09 1Q09 2Q08 7.00% Average portfolio ($m) $ 282 $ 292 $ 368 6.00% Ending Balance 256 280 357 5.00% Net Charge-offs ($m) 13.2 11.4 9.2 Net Charge-offs (%) 18.69% 15.62% 10.10% 4.00% NPLs ($m) $ 25.8 $ 32.0 $ 38.9 3.00% Portion of paying NPLs ($) 0.7 0.2 - 2.00% 1.00% 0.00% Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Consists of $249.1 million of home equity and $6.5 million of national construction loans $24 million decline in 2Q09 includes $8.4 million of net payoff activity Reserves of $41.8 million ($40.3 million for home equity and $1.5 million for national construction) provide coverage of 16.4% at 6/30/09 70% of Liquidating Home Equity charge-offs year-to-date generated from $105 million of NIV loans/lines; NIV loans represent 42% of Liquidating HE portfolio 24
  25. 25. Asset Quality – Key Ratios Ratios as of June 30, 2009 (March ratios in parentheses) Discontinued Continuing TOTAL Liquidating Allowance for Credit 2.41% / (2.01%) 16.37% / (15.84%) 2.72% / (2.33%) Losses to Total Loans Allowance for Credit Losses to Nonperforming 84% / (84%) 162% / (139%) 90% / (89%) Loans 30+ Delinquent to Total 0.99% / (0.96%) 3.87% / (4.37%) 1.06% / (1.03%) Loans Nonperforming Loans to 2.86% / (2.41%) 10.10% / (11.41%) 3.02% / (2.61%) Total Loans Net Charge-offs to 1.25% / (0.63%) 18.74% / (16.51%) 1.66% / 0.99%) Average Loans 25
  26. 26. Deposits $13.2 Billion as of June 30, 2009 Brokered $.168 Demand 1.3% $1.595 12.1% CDs $4.422 33.6% NOW $2.592 19.6% Savings $2.779 Money Market 21.1% $1.619 12.3% 26
  27. 27. Deposit Mix and Cost End of period balances $ in millions 2Q09 1Q09 Balance Cost Balance Cost Demand $1,595 - $1,530 - NOW 2,592 0.55% 1,936 0.71% Money market 1,619 1.11% 1,795 1.39% Savings 2,779 0.99% 2,576 1.14% CDs 4,422 2.97% 4,639 3.17% Brokered 168 2.84% 219 3.23% Total $13,175 1.53% $12,695 1.75% $480 million of deposit growth; continued reduction in the cost of total deposits of 22 basis points Retail CD maturities of $1.7 billion in Q309 Core deposit ratio improved to 65% compared to 62% for 1Q09 Loan/Deposit ratio improved to 88% compared to 95% for 1Q09 27
  28. 28. Sources of Liquidity At or as of June 30, 2009 Wide array of sources provide a strong competitive advantage Diverse deposit gathering capabilities include: Q2 Growth Retail $206 million Government finance $149 million $480 Health savings accounts through HSA Bank $ 25 million million Small business $ 69 million Commercial $ 31 million Additional capacity available from wholesale sources include: $2.0 billion with the FHLB $2.0 billion of other secured sources $4.9 $0.3 billion of FDIC backed debt billion $0.6 billion of other unsecured sources Strong holding company liquidity position; over 7 years of cash flow needs on hand 28
  29. 29. Concluding Comments Substantially improved Tier 1 common and tangible common equity levels; continue to be very well capitalized measured by regulatory capital ratios Proactively identifying and addressing credit issues and further strengthening credit loss coverage given economic environment Continued strong deposit growth in the quarter reflects shift to a deposit first culture; significant improvement in loan to deposit and core deposit ratios OneWebster earnings optimization program on-track with original expectations Improved pre-tax, pre-provision core operating earnings 29

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