Webster Financial : Reports Fourth Quarter 2017 Earnings

WATERBURY, Conn., Jan. 23, 2018 /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 $67.7 million, or $0.73 per diluted share, for the quarter ended December 31, 2017 compared to $55.5 million, or $0.60 per diluted share, for the quarter ended December 31, 2016.

'Webster ended 2017 in a position of financial strength from which we continue to execute on our key strategic priorities. We are pleased to report that our earnings have exceeded our cost of capital for the third consecutive quarter,' said John Ciulla, president and chief executive officer. 'In addition to this being our thirty-third consecutive quarter of year-over-year revenue growth, we exceeded $1 billion in annual total revenue for the first time in Webster's history. These achievements were driven by the quality and dedication of our bankers.'

Highlights for the fourth quarter of 2017:

• Revenue of $271.0 million, an increase of 5.9 percent from a year ago, including net interest income of $204.9 million, a record level.
• Earnings applicable to common shareholders of $67.7 million includes the previously announced $7.8 million net tax benefit related to the new federal tax legislation and state deferred tax asset revaluations.
• Annualized return on average common shareholders' equity of 10.66 percent; annualized return on average tangible common shareholders' equity (non-GAAP) of 13.85 percent.
• Year-over-year pre-tax, pre-provision net revenue growth of 6.3 percent, led by HSA Bank's growth of 47.1 percent.
• Net interest margin of 3.33 percent, up 22 basis points from a year ago.
• Loan growth of $497 million, or 2.9 percent from a year ago, with growth of $355 million in commercial and commercial real estate loans.
• HSA Bank's deposits grew $676 million and total deposits grew $1.7 billion, or 8.8 percent from a year ago.

'Our balance sheet structure continues to provide a competitive advantage,' said Glenn MacInnes, executive vice president and chief financial officer. 'Webster's strong capital position, ample liquidity, and business momentum position us well for future growth.'

Line of Business performance compared to the fourth quarter of 2016:

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, 2017, Commercial Banking had $9.3 billion in loans and leases and $4.1 billion in deposit balances.

Commercial Banking Operating Results:

	Three months ended December 31,
(In thousands)	2017	2016
Net interest income	$83,275	$76,174
Non-interest income	16,031	15,434
Operating revenue	99,306	91,608
Non-interest expense	40,282	35,043
Pre-tax, pre-provision net revenue	$59,024	$56,565
	At December 31,
(In millions)	2017	2016
Loans and leases	$9,324	$9,069
Deposits	4,123	3,593

Pre-tax, pre-provision net revenue increased $2.5 million to $59.0 million in the quarter as compared to prior year. Net interest income increased $7.1 million to $83.3 million, primarily due to loan growth and higher loan spreads. Non-interest income increased $0.6 million to $16.0 million primarily due to greater syndication fees and trust fees in the quarter as compared to prior year. Non-interest expense increased $5.2 million to $40.3 million, primarily due to investments in people and product enhancements.

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, 2017, HSA Bank had $6.3 billion in total footings comprising $5.0 billion in deposit balances and $1.3 billion in assets under administration through linked investment accounts.

HSA Bank Operating Results:

	Three months ended December 31,
(In thousands)	2017	2016
Net interest income	$ 28,365	$20,967
Non-interest income	18,986	16,741
Operating revenue	47,351	37,708
Non-interest expense	28,932	25,186
Pre-tax net revenue	$18,419	$12,522
	At December 31,
(In millions)	2017	2016
Number of accounts	2,461	2,091
Deposits	$5,039	$4,363
Linked investment accounts*	1,268	878
Total footings	$6,307	$5,241
*Linked investment accounts are held off balance sheet

Pre-tax net revenue increased $5.9 million to $18.4 million in the quarter as compared to prior year. Net interest income increased $7.4 million to $28.4 million due primarily to growth in deposits and improved deposit spreads. Non-interest income increased $2.2 million to $19.0 million primarily due to growth in accounts over the past year. Non-interest expense increased $3.7 million to $28.9 million primarily due to costs associated with supporting the growth in total accounts and expanded distribution.

Community Banking
Community Banking serves consumer and business banking customers primarily throughout southern New England and into Westchester County, New York. Community Banking is comprised of the Personal Banking and Business Banking operating segments, as well as a distribution network consisting of 167 banking centers and 334 ATMs, a customer care center, and a full range of web and mobile-based banking services.

As of December 31, 2017, Community Banking had $8.2 billion in loans and $11.5 billion in deposit balances.

Community Banking Operating Results:

	Three months ended December 31,
(In thousands)	2017	2016
Net interest income	$97,349	$92,951
Non-interest income	26,852	26,949
Operating revenue	124,201	119,900
Non-interest expense	91,095	93,087
Pre-tax, pre-provision net revenue	$33,106	$26,813
	At December 31,
(In millions)	2017	2016
Loans	$8,200	$7,959
Deposits	11,476	10,971

Pre-tax, pre-provision net revenue increased $6.3 million to $33.1 million in the quarter as compared to prior year. Net interest income increased $4.4 million to $97.3 million primarily due to growth in loan and deposit balances as well as improved interest rate spreads. Non-interest income was flat at $26.9 million primarily driven by increases in fees from investment services offset by lower revenue in mortgage banking activities. Non-interest expense decreased $2.0 million as a result of lower net costs due to banking center optimization, coupled with lower direct marketing expenses.

Consolidated financial performance:

Quarterly net interest income compared to the fourth quarter of 2016:

• Net interest income was $204.9 million compared to $185.3 million.
• Net interest margin was 3.33 percent compared to 3.11 percent. The yield on interest-earning assets increased by 29 basis points, and the cost of funds increased by 7 basis points.
• Average interest-earning assets totaled $24.8 billion and grew by $0.7 billion, or 2.9 percent.
• Average loans totaled $17.5 billion and grew by $0.7 billion, or 4.5 percent.

Quarterly provision for loan losses:

• The Company recorded a provision for loan losses of $13.0 million compared to $10.2 million in the prior quarter and $12.5 million a year ago.
• Net charge-offs were $14.8 million compared to $7.9 million in the prior quarter and $6.1 million a year ago. The increase is primarily due to an increase in commercial charge-offs. The ratio of net charge-offs to average loans on an annualized basis was 0.34 percent compared to 0.18 percent in the prior quarter and 0.15 percent a year ago.
• The allowance for loan losses represented 1.14 percent of total loans at December 31, 2017 compared to 1.16 percent at September 30, 2017 and 1.14 percent at December 31, 2016. The allowance for loan losses represented 158 percent of nonperforming loans compared to 123 percent at September 30, 2017 and 145 percent at December 31, 2016.

Quarterly non-interest income compared to the fourth quarter of 2016:

• Total non-interest income was $66.0 million compared to $70.6 million, a decrease of $4.6 million. This reflects decreases of $7.4 million in other income and $1.4 million in mortgage banking activities, offset by increases of $2.5 million in deposit service fees and $1.2 million in wealth and investment services.

Quarterly non-interest expense compared to the fourth quarter of 2016:

• Total non-interest expense was $171.0 million compared to $161.9 million, an increase of $9.1 million. This reflects increases of $7.1 million in compensation and benefits, $3.4 million in other expenses and $2.0 million in technology and equipment, offset by decreases of $2.7 million in occupancy and $2.2 million in marketing.

Quarterly income taxes compared to the fourth quarter of 2016:

• Income tax expense was $17.0 million compared to $23.8 million and the effective tax rate was 19.6 percent compared to 29.3 percent.
• The 19.6 percent tax rate includes the $7.8 million net benefit related to the new federal tax legislation and state deferred tax asset revaluations, and a $2.1 million benefit specific to the period.

Investment securities:

• Total investment securities were $7.1 billion compared to $7.1 billion at September 30, 2017 and $7.2 billion at December 31, 2016. The carrying value of the available-for-sale portfolio included $37.1 million of net unrealized losses compared to $21.7 million of net unrealized losses at September 30, 2017 and $24.7 million of net unrealized losses at December 31, 2016. The carrying value of the held-to-maturity portfolio does not reflect $31.0 million of net unrealized losses compared to $15.6 million of net unrealized losses at September 30, 2017, and $35.5 million of net unrealized losses at December 31, 2016.

Loans:

• Total loans were $17.5 billion compared to $17.4 billion at September 30, 2017 and $17.0 billion at December 31, 2016. Compared to September 30, 2017, commercial loans increased by $3.8 million, commercial real estate loans increased by $58.9 million, and consumer loans increased by $23.2 million, while residential loans decreased by $8.6 million.
• Compared to a year ago, commercial loans increased by $342.4 million, residential loans increased by $236.2 million, and commercial real estate loans increased by $13.0 million, while consumer loans decreased by $94.3 million.
• Loan originations for portfolio were $1.302 billion compared to $1.085 billion in the prior quarter and $1.686 billion a year ago. In addition, $60 million of residential loans were originated for sale in the quarter compared to $80 million in the prior quarter and $132 million a year ago.

Asset quality:

• Total nonperforming loans were $126.6 million, or 0.72 percent of total loans, compared to $163.6 million, or 0.94 percent, at September 30, 2017 and $134.0 million, or 0.79 percent, at December 31, 2016. Total paying nonperforming loans were $33.2 million compared to $72.0 million at September 30, 2017 and $38.4 million at December 31, 2016.
• Past due loans were $45.8 million compared to $33.5 million at September 30, 2017 and $42.0 million at December 31, 2016.

Deposits and borrowings:

• Total deposits were $21.0 billion compared to $20.9 billion at September 30, 2017 and $19.3 billion at December 31, 2016. Core deposits to total deposits were 88.2 percent compared to 89.4 percent at September 30, 2017 and 89.5 percent at December 31, 2016. The loan to deposit ratio was 83.5 percent compared to 83.7 percent at September 30, 2017 and 88.2 percent at December 31, 2016.
• Total borrowings were $2.5 billion compared to $2.6 billion at September 30, 2017 and $4.0 billion at December 31, 2016.

Capital:

• The return on average common shareholders' equity and the return on average tangible common shareholders' equity were 10.66 percent and 13.85 percent, respectively, compared to 9.26 percent and 12.31 percent, respectively, in the fourth quarter of 2016.
• The tangible equity and tangible common equity ratios were 8.23 percent and 7.67 percent, respectively, compared to 7.67 percent and 7.19 percent, respectively, at December 31, 2016. The common equity tier 1 risk-based capital ratio was 11.14 percent compared to 10.52 percent at December 31, 2016.
• Book value and tangible book value per common share were $27.76 and $21.59 respectively, compared to $26.17 and $19.94, respectively, at December 31, 2016.

Webster Financial Corporation is the holding company for Webster Bank, National Association and its HSA Bank division. With $26.5 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust, and investment services through 167 banking centers and 334 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 atwww.websterbank.com.

Conference Call

A conference call covering Webster's 2017 fourth quarter earnings announcement will be held today, Tuesday, January 23, 2018 at 9:00 a.m. (Eastern) and may be heard through Webster's Investor Relations website atwww.wbst.com, or in listen-only mode by calling 877-407-8289 or 201-689-8341 internationally. The call will be archived on the website and available for future retrieval.

Forward-Looking Statements

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

Non-GAAP Financial Measures

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

We believe that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends and financial position. We utilize these measures for internal planning and forecasting purposes. We, as well as securities analysts, investors, and other interested parties, also use these measures to compare peer company operating performance. We believe that our presentation and discussion, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting our business and allows investors to view performance in a manner similar to management. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

WEBSTER FINANCIAL CORPORATION Selected Financial Highlights (unaudited)
		At or for the Three Months Ended
(In thousands, except per share data)		December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016
Income and performance ratios:
Net income	$	69,893		$	64,496		$	61,579		$	59,471		$	57,660
Earnings applicable to common shareholders		67,710			62,426			59,485			57,342			55,501
Earnings per diluted common share		0.73			0.67			0.64			0.62			0.60
Return on average assets		1.05	%		0.98	%		0.94	%		0.91	%		0.89		%
Return on average tangible common shareholders' equity (non-GAAP)		13.85			12.99			12.65			12.47			12.31
Return on average common shareholders' equity		10.66			9.95			9.63			9.43			9.26
Non-interest income as a percentage of total revenue		24.37			24.68			24.61			24.65			27.60
Asset quality:
Allowance for loan and lease losses	$	199,994		$	201,803		$	199,578		$	199,107		$	194,320
Nonperforming assets		132,646			168,962			170,390			177,935			137,946
Allowance for loan and lease losses / total loans and leases		1.14	%		1.16	%		1.16	%		1.16	%		1.14		%
Net charge-offs / average loans and leases (annualized)		0.34			0.18			0.16			0.13			0.15
Nonperforming loans and leases / total loans and leases		0.72			0.94			0.96			1.02			0.79
Nonperforming assets / total loans and leases plus OREO		0.76			0.97			0.99			1.04			0.81
Allowance for loan and lease losses / nonperforming loans and leases		158.00			123.32			119.96			114.54			144.98
Other ratios:
Tangible equity (non-GAAP)		8.23	%		8.03	%		7.95	%		7.82	%		7.67		%
Tangible common equity (non-GAAP)		7.67			7.55			7.47			7.34			7.19
Tier 1 risk-based capital (a)		11.91			11.65			11.51			11.42			11.19
Total risk-based capital (a)		13.40			13.17			13.02			12.95			12.68
Common equity tier 1 risk-based capital (a)		11.14			10.99			10.84			10.75			10.52
Shareholders' equity / total assets		10.20			10.01			9.95			9.85			9.69
Net interest margin		3.33			3.30			3.27			3.22			3.11
Efficiency ratio (non-GAAP)		59.48			59.18			60.65			62.10			63.13
Equity and share related:
Common equity	$	2,556,902		$	2,516,077		$	2,482,416		$	2,437,648		$	2,404,302
Book value per common share		27.76			27.34			26.93			26.45			26.17
Tangible book value per common share (non-GAAP)		21.59			21.16			20.74			20.26			19.94
Common stock closing price		56.16			52.55			52.22			50.04			54.28
Dividends declared per common share		0.26			0.26			0.26			0.25			0.25
Common shares issued and outstanding		92,101			92,034			92,195			92,154			91,868
Weighted-average common shares outstanding - Basic		92,058			92,125			92,092			91,886			91,572
Weighted-average common shares outstanding - Diluted		92,400			92,503			92,495			92,342			92,099
(a) Presented as projected for December 31, 2017 and actual for the remaining periods.

WEBSTER FINANCIAL CORPORATION Consolidated Balance Sheets (unaudited)
(In thousands)		December 31, 2017			September 30, 2017			December 31, 2016
Assets:
Cash and due from banks	$	231,158		$	215,244		$	190,663
Interest-bearing deposits		25,628			26,992			29,461
Securities:
Available for sale		2,638,037			2,591,162			2,991,091
Held to maturity		4,487,392			4,497,311			4,160,658
Total securities		7,125,429			7,088,473			7,151,749
Loans held for sale		20,888			32,855			67,577
Loans and Leases:
Commercial		5,918,927			5,915,080			5,576,560
Commercial real estate		4,523,828			4,464,917			4,510,846
Residential mortgages		4,490,878			4,499,441			4,254,682
Consumer		2,590,225			2,566,983			2,684,500
Total loans and leases		17,523,858			17,446,421			17,026,588
Allowance for loan and lease losses		(199,994)			(201,803)			(194,320)
Loans and leases, net		17,323,864			17,244,618			16,832,268
Federal Home Loan Bank and Federal Reserve Bank stock		151,566			136,340			194,646
Premises and equipment, net		130,001			130,358			137,413
Goodwill and other intangible assets, net		567,984			568,962			572,047
Cash surrender value of life insurance policies		531,820			528,136			517,852
Deferred tax asset, net		92,630			82,895			84,391
Accrued interest receivable and other assets		286,677			295,309			294,462
Total Assets	$	26,487,645		$	26,350,182		$	26,072,529
Liabilities and Shareholders' Equity:
Deposits:
Demand	$	4,191,496		$	4,138,206		$	4,021,061
Interest-bearing checking		2,736,952			2,581,266			2,528,274
Health savings accounts		5,038,681			4,891,024			4,362,503
Money market		2,209,492			2,598,187			2,047,121
Savings		4,348,700			4,428,061			4,320,090
Certificates of deposit		2,187,756			1,918,817			1,724,906
Brokered certificates of deposit		280,652			299,674			299,902
Total deposits		20,993,729			20,855,235			19,303,857
Securities sold under agreements to repurchase and other borrowings		643,269			902,902			949,526
Federal Home Loan Bank advances		1,677,105			1,507,681			2,842,908
Long-term debt		225,767			225,704			225,514
Accrued expenses and other liabilities		245,817			219,873			223,712
Total liabilities		23,785,687			23,711,395			23,545,517
Preferred stock		145,056			122,710			122,710
Common shareholders' equity		2,556,902			2,516,077			2,404,302
Total shareholders' equity		2,701,958			2,638,787			2,527,012
Total Liabilities and Shareholders' Equity	$	26,487,645		$	26,350,182		$	26,072,529

WEBSTER FINANCIAL CORPORATION Consolidated Statements of Income (unaudited)
		Three Months Ended December 31,						Twelve Months Ended December 31,
(In thousands, except per share data)		2017			2016			2017			2016
Interest income:
Interest and fees on loans and leases	$	185,172		$	161,978		$	708,566		$	621,028
Interest and dividends on securities		50,735			49,011			204,005			199,436
Loans held for sale		208			443			1,034			1,449
Total interest income		236,115			211,432			913,605			821,913
Interest expense:
Deposits		17,379			12,591			62,253			49,858
Borrowings		13,804			13,582			55,065			53,542
Total interest expense		31,183			26,173			117,318			103,400
Net interest income		204,932			185,259			796,287			718,513
Provision for loan and lease losses		13,000			12,500			40,900			56,350
Net interest income after provision for loan and lease losses		191,932			172,759			755,387			662,163
Non-interest income:
Deposit service fees		37,618			35,132			151,137			140,685
Loan and lease related fees		6,550			6,018			26,448			26,581
Wealth and investment services		8,155			6,970			31,055			28,962
Mortgage banking activities		1,899			3,300			9,937			14,635
Increase in cash surrender value of life insurance policies		3,684			3,699			14,627			14,759
Gain on investment securities, net		-			-			-			414
Other income		8,133			15,498			26,400			38,591
		66,039			70,617			259,604			264,627
Impairment loss on securities recognized in earnings		-			-			(126)			(149)
Total non-interest income		66,039			70,617			259,478			264,478
Non-interest expense:
Compensation and benefits		95,104			88,038			359,926			332,127
Occupancy		13,533			16,195			60,490			61,110
Technology and equipment		22,818			20,815			89,464			79,882
Marketing		3,320			5,488			17,421			19,703
Professional and outside services		5,045			3,441			16,858			14,801
Intangible assets amortization		977			1,082			4,062			5,652
Loan workout expenses		891			378			3,094			3,006
Deposit insurance		5,948			6,410			25,649			26,006
Other expenses		23,413			20,024			84,111			80,904
Total non-interest expense		171,049			161,871			661,075			623,191
Income before income taxes		86,922			81,505			353,790			303,450
Income tax expense		17,029			23,845			98,351			96,323
Net income		69,893			57,660			255,439			207,127
Preferred stock dividends and other		(2,183)			(2,159)			(8,608)			(8,704)
Earnings applicable to common shareholders	$	67,710		$	55,501		$	246,831		$	198,423
Weighted-average common shares outstanding - Diluted		92,400			92,099			92,356			91,856
Earnings per common share:
Basic	$	0.74		$	0.61		$	2.68		$	2.17
Diluted		0.73			0.60			2.67			2.16

WEBSTER FINANCIAL CORPORATION Five Quarter Consolidated Statements of Income (unaudited)
		Three Months Ended
(In thousands, except per share data)		December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016
Interest income:
Interest and fees on loans and leases	$	185,172		$	181,130		$	174,456		$	167,808		$	161,978
Interest and dividends on securities		50,735			49,584			52,130			51,556			49,011
Loans held for sale		208			307			203			316			443
Total interest income		236,115			231,021			226,789			219,680			211,432
Interest expense:
Deposits		17,379			16,760			14,679			13,435			12,591
Borrowings		13,804			13,357			14,323			13,581			13,582
Total interest expense		31,183			30,117			29,002			27,016			26,173
Net interest income		204,932			200,904			197,787			192,664			185,259
Provision for loan and lease losses		13,000			10,150			7,250			10,500			12,500
Net interest income after provision for loan and lease losses		191,932			190,754			190,537			182,164			172,759
Non-interest income:
Deposit service fees		37,618			38,321			38,192			37,006			35,132
Loan and lease related fees		6,550			6,346			6,344			7,208			6,018
Wealth and investment services		8,155			7,750			7,877			7,273			6,970
Mortgage banking activities		1,899			2,421			3,351			2,266			3,300
Increase in cash surrender value of life insurance policies		3,684			3,720			3,648			3,575			3,699
Gain on investment securities, net		-			-			-			-			-
Other income		8,133			7,288			5,265			5,714			15,498
		66,039			65,846			64,677			63,042			70,617
Impairment loss on securities recognized in earnings		-			-			(126)			-			-
Total non-interest income		66,039			65,846			64,551			63,042			70,617
Non-interest expense:
Compensation and benefits		95,104			89,192			87,354			88,276			88,038
Occupancy		13,533			14,744			16,034			16,179			16,195
Technology and equipment		22,818			22,580			22,458			21,608			20,815
Marketing		3,320			4,045			4,615			5,441			5,488
Professional and outside services		5,045			4,030			3,507			4,276			3,441
Intangible assets amortization		977			1,002			1,028			1,055			1,082
Loan workout expenses		891			840			755			608			378
Deposit insurance		5,948			6,344			6,625			6,732			6,410
Other expenses		23,413			19,046			22,043			19,609			20,024
Total non-interest expense		171,049			161,823			164,419			163,784			161,871
Income before income taxes		86,922			94,777			90,669			81,422			81,505
Income tax expense		17,029			30,281			29,090			21,951			23,845
Net income		69,893			64,496			61,579			59,471			57,660
Preferred stock dividends and other		(2,183)			(2,070)			(2,094)			(2,129)			(2,159)
Earnings applicable to common shareholders	$	67,710		$	62,426		$	59,485		$	57,342		$	55,501
Weighted-average common shares outstanding - Diluted		92,400			92,503			92,495			92,342			92,099
Earnings per common share:
Basic	$	0.74		$	0.68		$	0.65		$	0.62		$	0.61
Diluted		0.73			0.67			0.64			0.62			0.60

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,
		2017												2016
(Dollars in thousands)		Average balance			Interest			Yield/rate						Average balance			Interest		Yield/rate
Assets:
Interest-earning assets:
Loans and leases	$	17,502,176		$	186,375			4.20	%				$	16,755,408		$	162,901		3.84	%
Securities (a)		7,095,241			52,494			2.95						7,058,135			50,187		2.85
Federal Home Loan and Federal Reserve Bank stock		141,226			1,256			3.53						189,338			1,724		3.62
Interest-bearing deposits		62,544			226			1.41						57,912			79		0.53
Loans held for sale		24,657			208			3.39						55,938			443		3.16
Total interest-earning assets		24,825,844		$	240,559			3.83	%					24,116,731		$	215,334		3.54	%
Non-interest-earning assets		1,679,135												1,708,317
Total Assets	$	26,504,979											$	25,825,048
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand deposits	$	4,197,461		$	-			-	%				$	4,005,076		$	-		-	%
Savings, interest checking, and money market deposits		14,446,859			10,167			0.28						13,257,671			6,850		0.21
Certificates of deposit		2,311,321			7,212			1.24						2,026,121			5,741		1.13
Total deposits		20,955,641			17,379			0.33						19,288,868			12,591		0.26
Securities sold under agreements to repurchase and other borrowings		851,987			3,395			1.56						960,960			3,529		1.44
Federal Home Loan Bank advances		1,571,976			7,777			1.94						2,631,478			7,516		1.12
Long-term debt		225,736			2,632			4.67						225,478			2,537		4.50
Total borrowings		2,649,699			13,804			2.05						3,817,916			13,582		1.40
Total interest-bearing liabilities		23,605,340		$	31,183			0.52	%					23,106,784		$	26,173		0.45	%
Non-interest-bearing liabilities		223,906												192,165
Total liabilities		23,829,246												23,298,949
Preferred stock		131,707												122,710
Common shareholders' equity		2,544,026												2,403,389
Total shareholders' equity		2,675,733												2,526,099
Total Liabilities and Shareholders' Equity	$	26,504,979											$	25,825,048
Tax-equivalent net interest income					209,376												189,161
Less: tax-equivalent adjustments					(4,444)												(3,902)
Net interest income				$	204,932											$	185,259
Net interest margin								3.33	%										3.11	%
(a) For purposes of the yield computation, unrealized gains (losses) on securities available for sale are excluded from the average balance.

WEBSTER FINANCIAL CORPORATION Consolidated Average Balances, Interest, Yields and Rates, and Net Interest Margin on a Fully Tax-equivalent Basis (unaudited)
		Twelve Months Ended December 31,
		2017												2016
(Dollars in thousands)		Average balance			Interest			Yield/rate						Average balance			Interest		Yield/rate
Assets:
Interest-earning assets:
Loans and leases	$	17,295,027		$	712,794			4.12	%				$	16,266,101		$	624,300		3.84	%
Securities (a)		7,047,744			210,044			2.97						6,910,649			203,467		2.95
Federal Home Loan and Federal Reserve Bank stock		155,949			5,988			3.84						188,854			6,039		3.20
Interest-bearing deposits		63,397			698			1.10						57,747			295		0.51
Loans held for sale		29,680			1,034			3.49						44,560			1,449		3.25
Total interest-earning assets		24,591,797		$	930,558			3.78	%					23,467,911		$	835,550		3.56	%
Non-interest-earning assets		1,669,370												1,753,316
Total Assets	$	26,261,167											$	25,221,227
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand deposits	$	4,079,493		$	-			-	%				$	3,853,700		$	-		-	%
Savings, interest checking, and money market deposits		14,348,404			36,899			0.26						13,072,577			27,331		0.21
Certificates of deposit		2,137,574			25,354			1.19						2,027,029			22,527		1.11
Total deposits		20,565,471			62,253			0.30						18,953,306			49,858		0.26
Securities sold under agreements to repurchase and other borrowings		876,660			14,365			1.64						947,858			14,528		1.53
Federal Home Loan Bank advances		1,764,347			30,320			1.72						2,413,309			29,033		1.20
Long-term debt		225,639			10,380			4.60						225,607			9,981		4.42
Total borrowings		2,866,646			55,065			1.92						3,586,774			53,542		1.49
Total interest-bearing liabilities		23,432,117		$	117,318			0.50	%					22,540,080		$	103,400		0.46	%
Non-interest-bearing liabilities		211,775												199,730
Total liabilities		23,643,892												22,739,810
Preferred stock		124,978												122,710
Common shareholders' equity		2,492,297												2,358,707
Total shareholders' equity		2,617,275												2,481,417
Total Liabilities and Shareholders' Equity	$	26,261,167											$	25,221,227
Tax-equivalent net interest income					813,240												732,150
Less: tax-equivalent adjustments					(16,953)												(13,637)
Net interest income				$	796,287											$	718,513
Net interest margin								3.30	%										3.12	%
(a) For purposes of the yield computation, unrealized gains (losses) on securities available for sale are excluded from the average balance.

WEBSTER FINANCIAL CORPORATION Five Quarter Loan and Lease Balances (unaudited)
(Dollars in thousands)		December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016
Loan and Lease Balances (actual):
Commercial non-mortgage	$	4,533,915		$	4,464,704		$	4,282,968		$	4,171,246		$	4,135,625
Equipment financing		550,233			566,777			585,673			619,861			635,629
Asset-based lending		834,779			883,599			861,203			848,137			805,306
Commercial real estate		4,523,828			4,464,917			4,556,208			4,530,507			4,510,846
Residential mortgages		4,490,878			4,499,441			4,388,308			4,290,685			4,254,682
Consumer		2,590,225			2,566,983			2,599,318			2,634,063			2,684,500
Total Loan and Lease Balances		17,523,858			17,446,421			17,273,678			17,094,499			17,026,588
Allowance for loan and lease losses		(199,994)			(201,803)			(199,578)			(199,107)			(194,320)
Loans and Leases, net	$	17,323,864		$	17,244,618		$	17,074,100		$	16,895,392		$	16,832,268
Loan and Lease Balances (average):
Commercial non-mortgage	$	4,525,843		$	4,416,834		$	4,288,612		$	4,148,625		$	4,053,728
Equipment financing		554,424			573,312			602,834			625,306			630,546
Asset-based lending		876,070			859,289			864,247			845,269			780,587
Commercial real estate		4,446,162			4,475,207			4,550,595			4,479,379			4,343,949
Residential mortgages		4,498,707			4,455,932			4,340,656			4,279,662			4,252,106
Consumer		2,600,970			2,583,945			2,619,480			2,662,915			2,694,492
Total Loan and Lease Balances		17,502,176			17,364,519			17,266,424			17,041,156			16,755,408
Allowance for loan and lease losses		(202,632)			(202,628)			(201,852)			(198,308)			(192,565)
Loans and Leases, net	$	17,299,544		$	17,161,891		$	17,064,572		$	16,842,848		$	16,562,843

WEBSTER FINANCIAL CORPORATION Five Quarter Nonperforming Assets (unaudited)
(Dollars in thousands)		December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016
Nonperforming loans and leases:
Commercial non-mortgage	$	39,402		$	58,942		$	68,430		$	74,483		$	38,550
Equipment financing		393			570			547			703			225
Asset-based lending		589			8,558			-			-			-
Commercial real estate		4,484			11,066			11,168			9,793			10,521
Residential mortgages		44,407			45,597			46,018			46,792			47,201
Consumer		37,307			38,915			40,206			42,054			37,538
Total nonperforming loans and leases	$	126,582		$	163,648		$	166,369		$	173,825		$	134,035
Other real estate owned and repossessed assets:
Commercial	$	-		$	-		$	-		$	-		$	-
Repossessed equipment		305			328			33			82			-
Residential		3,110			2,843			2,513			2,296			2,625
Consumer		2,649			2,143			1,475			1,732			1,286
Total other real estate owned and repossessed assets	$	6,064		$	5,314		$	4,021		$	4,110		$	3,911
Total nonperforming assets	$	132,646		$	168,962		$	170,390		$	177,935		$	137,946

WEBSTER FINANCIAL CORPORATION Five Quarter Past Due Loans and Leases (unaudited)
(Dollars in thousands)		December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016
Past due 30-89 days:
Commercial non-mortgage	$	5,809		$	2,302		$	1,910		$	1,685		$	1,949
Equipment financing		2,358			867			883			1,298			1,596
Asset-based lending		-			-			-			-			-
Commercial real estate		551			1,783			1,013			2,072			8,173
Residential mortgages		13,771			11,700			9,831			11,530			11,202
Consumer		22,394			15,942			14,360			14,762			18,293
Total past due 30-89 days		44,883			32,594			27,997			31,347			41,213
Past due 90 days or more and accruing		887			934			1,185			747			749
Total past due loans and leases	$	45,770		$	33,528		$	29,182		$	32,094		$	41,962

WEBSTER FINANCIAL CORPORATION Five Quarter Changes in the Allowance for Loan and Lease Losses (unaudited)
		For the Three Months Ended
(Dollars in thousands)		December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016
Beginning balance	$	201,803		$	199,578		$	199,107		$	194,320		$	187,925
Provision		13,000			10,150			7,250			10,500			12,500
Charge-offs:
Commercial non-mortgage		254			3,002			2,196			123			1,067
Equipment financing		133			121			119			185			44
Asset-based lending		2,572			-			-			-			-
Commercial real estate		8,324			749			100			102			161
Residential mortgages		560			585			623			732			1,099
Consumer		6,174			6,197			5,602			6,474			6,433
Total charge-offs		18,017			10,654			8,640			7,616			8,804
Recoveries:
Commercial non-mortgage		1,220			466			317			322			439
Equipment financing		11			79			13			14			95
Asset-based lending		33			-			-			-			44
Commercial real estate		144			10			4			7			151
Residential mortgages		100			280			407			237			348
Consumer		1,700			1,894			1,120			1,323			1,622
Total recoveries		3,208			2,729			1,861			1,903			2,699
Total net charge-offs		14,809			7,925			6,779			5,713			6,105
Ending balance	$	199,994		$	201,803		$	199,578		$	199,107		$	194,320

WEBSTER FINANCIAL CORPORATION Reconciliations to GAAP Financial Measures
The Company evaluates its business based on certain ratios that utilize tangible equity, a non-GAAP financial measure. Return on average tangible common shareholders' equity measures the Company's net income available to common shareholders, adjusted for the tax-affected amortization of intangible assets, as a percentage of average shareholders' equity less average preferred stock and average goodwill and intangible assets. The tangible equity ratio represents shareholders' equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets. The tangible common equity ratio represents shareholders' equity less preferred stock and goodwill and intangible assets divided by total assets less goodwill and intangible assets. Tangible book value per common share represents shareholders' equity less preferred stock and goodwill and intangible assets divided by common shares outstanding at the end of the period.
The efficiency ratio, which measures the costs expended to generate a dollar of revenue, is calculated excluding foreclosed property expense, amortization of intangibles, gain or loss on securities, and other non-recurring items. Core deposits express total deposits less time deposits. Accordingly, these are also non-GAAP financial measures.
The Company believes the use of these non-GAAP financial measures provides additional clarity in assessing the results of the Company. Other companies may define or calculate supplemental financial data differently. See the tables below for reconciliations of these non-GAAP financial measures with financial measures defined by GAAP.
		At or for the Three Months Ended
(In thousands, except per share data)		December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016
Return on average tangible common shareholders' equity:
Net income (GAAP)	$	69,893		$	64,496		$	61,579		$	59,471		$	57,660
Less: Preferred stock dividends (GAAP)		2,112			2,024			2,024			2,024			2,024
Add: Intangible assets amortization, tax-affected at 35% (GAAP)		635			651			668			686			703
Income adjusted for preferred stock dividends and intangible assets amortization (non-GAAP)	$	68,416		$	63,123		$	60,223		$	58,133		$	56,339
Income adjusted for preferred stock dividends and intangible assets amortization, annualized basis (non-GAAP)	$	273,664		$	252,492		$	240,892		$	232,532		$	225,356
Average shareholders' equity (non-GAAP)	$	2,675,733		$	2,635,312		$	2,597,222		$	2,559,354		$	2,526,099
Less: Average preferred stock (non-GAAP)		131,707			122,710			122,710			122,710			122,710
Average goodwill and other intangible assets (non-GAAP)		568,546			569,538			570,560			571,611			572,682
Average tangible common shareholders' equity (non-GAAP)	$	1,975,480		$	1,943,064		$	1,903,952		$	1,865,033		$	1,830,707
Return on average tangible common shareholders' equity (non-GAAP)		13.85	%		12.99	%		12.65	%		12.47	%		12.31	%
Efficiency ratio:
Non-interest expense (GAAP)	$	171,049		$	161,823		$	164,419		$	163,784		$	161,871
Less: Foreclosed property activity (GAAP)		(97)			(72)			(143)			74			(90)
Intangible assets amortization (GAAP)		977			1,002			1,028			1,055			1,082
Other expenses (non-GAAP)		6,106			213			1,587			1,123			1,243
Non-interest expense (non-GAAP)	$	164,063		$	160,680		$	161,947		$	161,532		$	159,636
Net interest income (GAAP)	$	204,932		$	200,904		$	197,787		$	192,664		$	185,259
Add: Tax-equivalent adjustment (non-GAAP)		4,444			4,340			4,136			4,033			3,902
Non-interest income (GAAP)		66,039			65,846			64,551			63,042			70,617
Other (non-GAAP)		421			431			555			391			408
Less: Gain on investment securities, net (GAAP)		-			-			-			-			-
One-time gain on the sale of an asset (GAAP)		-			-			-			-			7,331
Income (non-GAAP)	$	275,836		$	271,521		$	267,029		$	260,130		$	252,855
Efficiency ratio (non-GAAP)		59.48	%		59.18	%		60.65	%		62.10	%		63.13	%
Tangible equity:
Shareholders' equity (GAAP)	$	2,701,958		$	2,638,787		$	2,605,126		$	2,560,358		$	2,527,012
Less: Goodwill and other intangible assets (GAAP)		567,984			568,962			569,964			570,992			572,047
Tangible shareholders' equity (non-GAAP)	$	2,133,974		$	2,069,825		$	2,035,162		$	1,989,366		$	1,954,965
Total assets (GAAP)	$	26,487,645		$	26,350,182		$	26,174,930		$	26,002,916		$	26,072,529
Less: Goodwill and other intangible assets (GAAP)		567,984			568,962			569,964			570,992			572,047
Tangible assets (non-GAAP)	$	25,919,661		$	25,781,220		$	25,604,966		$	25,431,924		$	25,500,482
Tangible equity (non-GAAP)		8.23	%		8.03	%		7.95	%		7.82	%		7.67	%
Tangible common equity:
Tangible shareholders' equity (non-GAAP)	$	2,133,974		$	2,069,825		$	2,035,162		$	1,989,366		$	1,954,965
Less: Preferred stock (GAAP)		145,056			122,710			122,710			122,710			122,710
Tangible common shareholders' equity (non-GAAP)	$	1,988,918		$	1,947,115		$	1,912,452		$	1,866,656		$	1,832,255
Tangible assets (non-GAAP)	$	25,919,661		$	25,781,220		$	25,604,966		$	25,431,924		$	25,500,482
Tangible common equity (non-GAAP)		7.67	%		7.55	%		7.47	%		7.34	%		7.19	%
Tangible book value per common share:
Tangible common shareholders' equity (non-GAAP)	$	1,988,918		$	1,947,115		$	1,912,452		$	1,866,656		$	1,832,255
Common shares outstanding		92,101			92,034			92,195			92,154			91,868
Tangible book value per common share (non-GAAP)	$	21.59		$	21.16		$	20.74		$	20.26		$	19.94
Core deposits:
Total deposits	$	20,993,729		$	20,855,235		$	20,458,097		$	20,241,657		$	19,303,857
Less: Certificates of deposit		2,187,756			1,918,817			1,795,871			1,718,193			1,724,906
Brokered certificates of deposit		280,652			299,674			299,670			299,906			299,902
Core deposits (non-GAAP)	$	18,525,321		$	18,636,744		$	18,362,556		$	18,223,558		$	17,279,049

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SOURCE Webster Financial Corporation