WEBSTER FINANCIAL CORP [WBS] Filings

10-Q 1 wbs-20240630.htm 10-Q wbs-20240630

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________________________________

FORM 10-Q

_________________________________________________________________________________________________________________________________________-___________________________________________________________________________________________________

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2024

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____ to ____

Commission File Number: 001-31486

_______________________________________________________________________________________

WEBSTER FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

______________________________________________________________________________________


Delaware						06-1187536
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

200 Elm Street, Stamford, Connecticut 06902

(Address and zip code of principal executive offices)

(203) 578-2202

(Registrant’s telephone number, including area code)

______________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock, par value $0.01 per share	WBS	New York Stock Exchange
Depositary Shares, each representing 1/1000th interest in a share	WBS-PrF	New York Stock Exchange
of 5.25% Series F Non-Cumulative Perpetual Preferred Stock
Depositary Shares, each representing 1/40th interest in a share	WBS-PrG	New York Stock Exchange
of 6.50% Series G Non-Cumulative Perpetual Preferred Stock

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares of common stock, par value $0.01 per share, outstanding as of August 2, 2024 was 171,426,372.

INDEX


		Page No.

Key to Acronyms and Terms		ii
Forward-Looking Statements		iii

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	33

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	80

Item 4.	Controls and Procedures	80

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	81

Item 1A.	Risk Factors	81

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	81

Item 3.	Defaults Upon Senior Securities	81

Item 4.	Mine Safety Disclosures	81

Item 5.	Other Information	81

Item 6.	Exhibits	82

EXHIBIT INDEX		82

SIGNATURES		83

KEY TO ACRONYMS AND TERMS


ACL			Allowance for credit losses
Agency CMBS			Agency commercial mortgage-backed securities
Agency CMO			Agency collateralized mortgage obligations
Agency MBS			Agency mortgage-backed securities
ALCO			Asset/Liability Committee
Ametros			Ametros Financial Corporation
AOCI (AOCL)			Accumulated other comprehensive income (loss), net of tax
ASC			Accounting Standards Codification
ASU or the Update			Accounting Standards Update
Basel III Capital Rules			Capital rules under a global regulatory framework developed by the Basel Committee on Banking Supervision

BHC Act			Bank Holding Company Act of 1956, as amended
CECL			Current expected credit losses
CET1			Common Equity Tier 1 Capital, defined by Basel III capital rules
CET1 Risk-Based Capital			Ratio of CET1 capital to total risk-weighted assets, defined by the Basel III Capital Rules
CFPB			Consumer Financial Protection Bureau

CMBS			Non-agency commercial mortgage-backed securities
COVID-19			Coronavirus
CRA			Community Reinvestment Act of 1977
DTA			Deferred tax asset
EAD			Exposure at default
FASB			Financial Accounting Standards Board
FDIC			Federal Deposit Insurance Corporation
FHLB			Federal Home Loan Bank
FICO			Fair Isaac Corporation
FRB			Federal Reserve Bank
FTE			Fully tax-equivalent
FTP			Funds Transfer Pricing, a matched maturity funding concept
GAAP			U.S. Generally Accepted Accounting Principles
Holding Company			Webster Financial Corporation
HSA			Health savings account
HSA Bank			HSA Bank, a division of Webster Bank, National Association

interLINK			Interlink Insured Sweep LLC


LGD			Loss given default

LIHTC			Low-income housing tax credit
MBS			Non-agency mortgage-backed securities
NAV			Net asset value
OCC			Office of the Comptroller of the Currency

OREO			Other real estate owned

PD			Probability of default
PPNR			Pre-tax, pre-provision net revenue
PTNR			Pre-tax, net revenue

ROU			Right-of-use
S&P			Standard and Poor’s Rating Services

SEC			United States Securities and Exchange Commission

SOFR			Secured overnight financing rate
Sterling			Sterling Bancorp, collectively with its consolidated subsidiaries
Tier 1 Leverage Capital			Ratio of Tier 1 capital to average tangible assets, defined by the Basel III Capital Rules
Tier 1 Risk-Based Capital			Ratio of Tier 1 capital to total risk-weighted assets, defined by the Basel III Capital Rules
Total Risk-Based Capital			Ratio of total capital to total risk-weighted assets, defined by the Basel III Capital Rules

UPB			Unpaid principal balance
Webster Bank or the Bank			Webster Bank, National Association, a wholly-owned subsidiary of Webster Financial Corporation
Webster or the Company			Webster Financial Corporation, collectively with its consolidated subsidiaries

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “continue,” “remain,” “will,” “should,” “may,” “plans,” “estimates,” and similar references to future periods. However, these words are not the exclusive means of identifying such statements.

Examples of forward-looking statements include, but are not limited to:

▪projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items;

▪statements of plans, objectives, and expectations of the Company or its management or Board of Directors;

▪statements of future economic performance; and

▪statements of assumptions underlying such statements.

Forward-looking statements are based on the Company’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. The Company’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 our actual results to differ from those discussed in any forward-looking statements include, but are not limited to:

▪our ability to successfully execute our business plan and strategic initiatives, and manage any risks or uncertainties;

▪continued regulatory changes or other mitigation efforts taken by government agencies in response to volatility in the banking industry, including due to the bank failures in 2023;

▪volatility in Webster’s stock price due to investor sentiment and turmoil in the banking industry;

▪local, regional, national, and international economic conditions, and the impact they may have on us or our customers;

▪volatility and disruption in national and international financial markets, including as a result of geopolitical conflict;

▪the impact of unrealized losses in our available-for-sale securities portfolio;

▪changes in laws and regulations, or existing laws and regulations that we become subject to, including those concerning banking, taxes, dividends, securities, insurance, cybersecurity, and healthcare administration, with which we must comply;

▪adverse conditions in the securities markets that could lead to impairment in the value of our securities portfolio;

▪inflation, monetary fluctuation, and changes in interest rates, including the impact of such changes on economic conditions, customer behavior, funding costs, and our loans and leases and securities portfolios;

▪possible changes in governmental monetary and fiscal policies, including, but not limited to, Federal Reserve policies in connection with continued inflationary pressures and the impact of the 2024 U.S presidential election;

▪the timely development and acceptance of new products and services, and the perceived value of those products and services by customers;

▪changes in deposit flows, consumer spending, borrowings, and savings habits;

▪our ability to implement new technologies and maintain secure and reliable information and technology systems;

▪the effects of any cybersecurity threats or fraudulent activity, including those that involve our third-party vendors and service providers;

▪performance by our counterparties and third-party vendors;

▪our ability to increase market share and control expenses;

▪changes in the competitive environment among banks, financial holding companies, and other traditional and non-traditional financial service providers;

▪our ability to maintain adequate sources of funding and liquidity;

▪our ability to attract, develop, motivate, and retain skilled employees;

▪changes in loan demand or real estate values;

▪changes in the mix of loan geographies, sectors, or types, and the level of non-performing assets, charge-offs, and delinquencies;

▪changes in our estimates of current expected credit losses based upon periodic review under relevant regulatory and accounting requirements;

▪the effect of changes in accounting policies and practices applicable to us, including impacts of recently adopted accounting guidance;

▪legal and regulatory developments, including the resolution of legal proceedings or regulatory or other governmental inquiries, and the results of regulatory examinations or reviews;

▪our ability to navigate any environmental, social, governmental, and sustainability concerns of different stakeholders and activists that may arise from our business activities;

▪our ability to assess and monitor the effect of artificial intelligence on our business and operations; and

▪unforeseen events, such as pandemics or natural disasters, and any governmental or societal responses thereto;

Any forward-looking statement in this Quarterly Report on Form 10-Q 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.

iii

PART I – FINANCIAL INFORMATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Webster Financial Corporation is a bank holding company and financial holding company under the BHC Act, incorporated under the laws of Delaware in 1986, and headquartered in Stamford, CT. Webster Bank is a leading commercial bank in the Northeast that provides a wide range of digital and traditional financial solutions across three differentiated lines of business: Commercial Banking, Healthcare Financial Services, and Consumer Banking. While its core footprint spans the northeastern U.S. from New York to Massachusetts, certain businesses operate in extended geographies.

The following discussion and analysis provides information that management believes is necessary to understand the Company’s financial condition, results of operations, and cash flows for the three and six months ended June 30, 2024, as compared to 2023. This information should be read in conjunction with the Condensed Consolidated Financial Statements, and accompanying Notes thereto, contained in Part I - Item 1. Financial Statements of this report, and the Consolidated Financial Statements, and accompanying Notes thereto, contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The Company’s financial condition, results of operations, and cash flows for the three and six months ended June 30, 2024, are not necessarily indicative of future results that may be attained for the entire year or other interim periods.

Results of Operations

The following table summarizes selected financial highlights and key performance indicators:


	At or for the three months ended June 30,						At or for the six months ended June 30,
(In thousands, except per share and ratio data)	2024			2023			2024			2023
Income and performance ratios:
Net income	$	181,633		$	234,968		$	397,956		$	455,972
Net income available to common stockholders	177,471			230,806			389,631			447,647
Earnings per diluted common share	1.03			1.32			2.26			2.57
Return on average assets (annualized)	0.96		%	1.23		%	1.05		%	1.23		%
Return on average tangible common stockholders’ equity (annualized) (non-GAAP)	14.17			18.12			15.25			17.89
Return on average common stockholders’ equity (annualized)	8.40			11.38			9.21			11.16
Non-interest income as a percentage of total revenue	6.88			13.28			11.05			11.96
Asset quality:
ACL on loans and leases	$	669,355		$	628,911		$	669,355		$	628,911
Non-performing assets (1)	374,884			222,215			374,884			222,215
ACL on loans and leases / total loans and leases	1.30		%	1.22		%	1.30		%	1.22		%
Net charge-offs / average loans and leases (annualized)	0.26			0.16			0.28			0.18
Non-performing loans and leases / total loans and leases (1)	0.72			0.42			0.72			0.42
Non-performing assets / total loans and leases plus OREO and repossessed assets (1)	0.73			0.43			0.73			0.43
ACL on loans and leases / non-performing loans and leases (1)	181.48			287.35			181.48			287.35
Other ratios:

Tangible common equity (non-GAAP)	7.18		%	7.23		%	7.18		%	7.23		%
Tier 1 Risk-Based Capital	11.09			11.16			11.09			11.16
Total Risk-Based Capital	13.28			13.25			13.28			13.25
CET1 Risk-Based Capital	10.59			10.65			10.59			10.65
Stockholders’ equity / total assets	11.46			11.18			11.46			11.18
Net interest margin	3.32			3.35			3.33			3.50
Efficiency ratio (non-GAAP)	46.22			42.20			45.74			41.92
Equity and share related:
Common stockholders’ equity	$	8,525,289		$	7,995,747		$	8,525,289		$	7,995,747
Book value per common share	49.74			46.15			49.74			46.15
Tangible book value per common share (non-GAAP)	30.82			29.69			30.82			29.69
Common stock closing price	43.59			37.75			43.59			37.75
Dividends and equivalents declared per common share	0.40			0.40			0.80			0.80
Common shares issued and outstanding	171,402			173,261			171,402			173,261
Weighted-average common shares outstanding - basic	169,675			172,739			170,061			172,752
Weighted-average common shares outstanding - diluted	169,937			172,803			170,351			172,839

(1)Non-performing asset balances and related asset quality ratios exclude the impact of net unamortized (discounts)/premiums and net unamortized deferred (fees)/costs on loans and leases.

Non-GAAP Financial Measures

The non-GAAP financial measures identified in the preceding table provide both management and investors with information useful in understanding the Company’s financial position, results of operations, the strength of its capital position, and overall business performance. These non-GAAP financial measures are used by management for performance measurement purposes, as well as for internal planning and forecasting and by securities analysts, investors, and other interested parties to assess peer company operating performance. Management believes that this presentation, together with the accompanying reconciliations, provides investors with a more complete understanding of the factors and trends affecting the Company’s business and allows investors to view its performance in a similar manner.

Tangible book value per common share represents stockholders’ equity less preferred stock and goodwill and other intangible assets (tangible common equity) divided by common shares outstanding at the end of the reporting period. The tangible common equity ratio represents tangible common equity divided by total assets less goodwill and other intangible assets (tangible assets). Both of these measures are used by management to evaluate the Company’s capital position. The annualized return on average tangible common stockholders’ equity is calculated using net income available to common stockholders, adjusted for the annualized tax-effected amortization of intangible assets, as a percentage of average tangible common equity. This measure is used by management to assess the Company’s performance against its peer financial institutions. The efficiency ratio, which represents the costs expended to generate a dollar of revenue, is calculated excluding certain non-operational items in order to measure how well the Company is managing its recurring operating expenses.

These non-GAAP financial measures should not be considered a substitute for GAAP basis financial measures. Because
non-GAAP financial measures are not standardized, it may not be possible to compare these with other companies that present financial measures having the same or similar names.

The following tables reconcile non-GAAP financial measures to the most comparable financial measures defined by GAAP:


	At June 30,
(Dollars and shares in thousands, except per share data)	2024			2023
Tangible book value per common share:
Stockholders’ equity	$	8,809,268		$	8,279,726
Less: Preferred stock	283,979			283,979
Common stockholders’ equity	$	8,525,289		$	7,995,747
Less: Goodwill and other intangible assets	3,242,193			2,852,117
Tangible common stockholders’ equity	$	5,283,096		$	5,143,630
Common shares outstanding	171,402			173,261
Tangible book value per common share	$	30.82		$	29.69
Book value per common share (GAAP)	$	49.74		$	46.15

Tangible common equity ratio:
Tangible common stockholders’ equity	$	5,283,096		$	5,143,630
Total assets	$	76,838,106		$	74,038,243
Less: Goodwill and other intangible assets	3,242,193			2,852,117
Tangible assets	$	73,595,913		$	71,186,126
Tangible common equity ratio	7.18		%	7.23		%
Common stockholders’ equity to total assets (GAAP)	11.10		%	10.80		%


	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2024			2023			2024			2023
Return on average tangible common stockholders’ equity:
Net income	$	181,633		$	234,968		$	397,956		$	455,972
Less: Preferred stock dividends	4,162			4,162			8,325			8,325
Add: Intangible assets amortization, tax-effected	6,886			7,262			14,149			14,765
Adjusted net income	$	184,357		$	238,068		$	403,780		$	462,412
Adjusted net income (annualized)	$	737,428		$	952,272		$	807,560		$	924,824
Average stockholders’ equity	$	8,733,737		$	8,395,298		$	8,746,865		$	8,305,983
Less: Average preferred stock	283,979			283,979			283,979			283,979
Average goodwill and other intangible assets	3,246,940			2,856,581			3,168,846			2,853,146
Average tangible common stockholders’ equity	$	5,202,818		$	5,254,738		$	5,294,040		$	5,168,858
Return on average tangible common stockholders’ equity (annualized)	14.17		%	18.12		%	15.25		%	17.89		%
Return on average common stockholders’ equity (annualized) (GAAP)	8.40		%	11.38		%	9.21		%	11.16		%

Efficiency ratio:
Non-interest expense	$	326,021		$	344,089		$	661,944		$	676,556
Less: Foreclosed property activity	(364)			(432)			(694)			(694)
Intangible assets amortization	8,716			9,193			17,910			18,690
Operating lease depreciation	560			1,639			1,223			3,523
FDIC special assessment estimate	—			—			11,862			—
Merger-related expenses (1)	—			40,840			3,139			70,213


Adjusted non-interest expense	$	317,109		$	292,849		$	628,504		$	584,824
Net interest income	$	572,297		$	583,829		$	1,140,036		$	1,179,112
Add: FTE adjustment	14,315			17,292			30,194			33,203
Non-interest income	42,298			89,374			141,651			160,140
Other income (2)	7,802			5,035			15,428			9,346
Less: Operating lease depreciation	560			1,639			1,223			3,523
(Loss) on sale of investment securities, net	(49,915)			(48)			(59,741)			(16,795)
Net gain on sale of mortgage servicing rights	—			—			11,655			—
Adjusted income	$	686,067		$	693,939		$	1,374,172		$	1,395,073
Efficiency ratio	46.22		%	42.20		%	45.74		%	41.92		%
Non-interest expense as a percentage of total revenue (GAAP)	53.05		%	51.11		%	51.65		%	50.52		%

(1)Merger-related expenses include Ametros acquisition expenses for the six months ended June 30, 2024, and primarily Sterling merger expenses for the three and six months ended June 30, 2023. Additional information regarding the Company’s business developments, including the acquisition of Ametros in January 2024, can be found within Note 2: Business Developments in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.

(2)Other income (non-GAAP) includes the taxable equivalent of net income generated from LIHTC investments.

Net Interest Income

Net interest income is the Company’s primary source of revenue, representing 93.1% and 88.9% of total revenues for the three and six months ended June 30, 2024, respectively, and 86.7% and 88.0% of total revenues for the three and six months ended June 30, 2023, respectively. Net interest income is the difference between interest income on interest-earning assets (i.e., loans and leases and investment securities) and interest expense on interest-bearing liabilities (i.e., deposits and borrowings), which are used to fund interest-earning assets and other activities. Net interest margin is calculated as the ratio of FTE net interest income to average interest-earning assets.

Net interest income, net interest margin, and average yields and rates on an FTE basis are considered non-GAAP financial measures, and are used by management to evaluate the comparability of the Company’s revenue arising from both taxable and non-taxable sources. FTE adjustments are determined assuming a statutory federal income tax rate of 21%.

Net interest income and net interest margin are influenced by the volume and mix of interest-earning assets and interest-bearing liabilities, changes in interest rate levels, re-pricing frequencies, contractual maturities, prepayment behavior, and the use of interest rate derivative financial instruments. These factors are affected by changes in economic conditions, which impacts monetary policies, competition for loans and deposits, as well as the extent of interest lost on non-performing assets.

Comparison to Prior Year Quarter

Net interest income decreased $11.5 million, or 2.0%, from $583.8 million for the three months ended June 30, 2023, to $572.3 million for the three months ended June 30, 2024. On an FTE basis, net interest income decreased $14.5 million. Net interest margin decreased 3 basis points from 3.35% for the three months ended June 30, 2023, to 3.32% for the three months ended June 30, 2024.

Average total interest-earning assets decreased $1.2 billion, or 1.8%, from $70.1 billion for the three months ended June 30, 2023, to $68.9 billion for the three months ended June 30, 2024, primarily due to decreases of $3.0 billion in average interest-bearing deposits held at the FRB and $0.2 billion in average FHLB and FRB stock, partially offset by increases of $1.6 billion in average total investment securities, $0.3 billion in average loans and leases, and $0.1 billion in average loans held for sale. The average yield on interest-earning assets increased 33 basis points from 5.32% for the three months ended June 30, 2023, to 5.65% for the three months ended June 30, 2024, primarily due to the higher interest rate environment, partially offset by lower purchase accounting accretion on interest-earning assets that were acquired in the Sterling merger.

Average interest-bearing deposits held at the FRB decreased $3.0 billion, or 86.3%, from $3.5 billion for the three months ended June 30, 2023, to $0.5 billion for the three months ended June 30, 2024, primarily due to the Company’s risk management approach to hold higher levels of on-balance sheet liquidity in 2023. At June 30, 2024, and 2023, average interest-bearing deposits held at the FRB comprised 0.7% and 5.0% of total average interest-earning assets, respectively. The average yield on interest-bearing deposits held at the FRB increased 35 basis points from 5.05% for the three months ended June 30, 2023, to 5.40% for the three months ended June 30, 2024, primarily due to the higher interest rate environment.

Average FHLB and FRB stock decreased $0.2 billion, or 34.5%, from $0.5 billion for the three months ended June 30, 2023, to $0.3 billion for the three months ended June 30, 2024, primarily due to a lower FHLB stock investment required as a result of the decrease in average FHLB advances. At June 30, 2024, and 2023, average FHLB and FRB stock comprised 0.5% and 0.7% of total average interest-earning assets, respectively. The average yield on FHLB and FRB stock increased 97 basis points from 5.21% for the three months ended June 30, 2023, to 6.18% for the three months ended June 30, 2024, primarily due to the higher interest rate environment.

Average total investment securities increased $1.6 billion, or 10.8%, from $14.8 billion for the three months ended June 30, 2023, to $16.4 billion for the three months ended June 30, 2024, primarily due a higher volume of purchases net of paydown activities and sales of available-for-sale securities. At June 30, 2024, and 2023, the average total investment securities portfolio comprised 23.8% and 21.1% of total average interest-earning assets, respectively. The average yield on investment securities increased 87 basis points from 2.99% for the three months ended June 30, 2023, to 3.86% for the three months ended June 30, 2024, primarily due to the reinvestment of funds received from the sale of lower yielding securities for securities at higher yields.

Average loans and leases increased $0.2 billion, or 0.5%, from $51.2 billion for the three months ended June 30, 2023, to $51.4 billion for the three months ended June 30, 2024, primarily due to commercial real estate and residential mortgage growth in 2024, partially offset by a decrease in mortgage warehouse loans and the transfer of the payroll finance and factored receivables portfolios to held for sale in March 2024. At June 30, 2024, and 2023, average loans and leases comprised 74.7% and 73.0% of total average interest-earning assets, respectively. The average yield on loans and leases increased 17 basis points from 6.06% for the three months ended June 30, 2023, to 6.23% for the three months ended June 30, 2024, primarily due to the higher interest rate environment, partially offset by lower purchase accounting accretion on loans and leases that were acquired in the Sterling merger.

Average loans held-for sale increased $0.1 billion, or 130.0%, from $0.1 billion for the three months ended June 30, 2023, to $0.2 billion for the three months ended June 30, 2024, primarily due to the payroll finance and factored receivables loan portfolios that were classified as held for sale in March 2024. At June 30, 2024, and 2023, average loans held for sale comprised 0.3% and 0.1% of total average interest-earning assets, respectively. The average yield on loans held for sale increased 833 basis points from 1.74% for the three months ended June 30, 2023, to 10.07% for the three months ended June 30, 2024, primarily due to higher yields on the payroll finance and factored receivables portfolios that were classified as held for sale in March 2024.

Average total interest-bearing liabilities decreased $1.3 billion, or 2.0%, from $66.6 billion for the three months ended June 30, 2023, to $65.3 billion for the three months ended June 30, 2024, primarily due to an increase of $3.1 billion in average total deposits, partially offset by decreases of $4.3 billion in average FHLB advances and $0.1 billion in average long term debt. The average rate on interest-bearing liabilities increased 39 basis points from 2.10% for the three months ended June 30, 2023, to 2.49% for the three months ended June 30, 2024, primarily due to the higher interest rate environment.

Average total deposits increased $3.1 billion, or 5.4%, from $58.6 billion for the three months ended June 30, 2023, to $61.7 billion for the three months ended June 30, 2024, reflecting a $4.3 billion increase in interest-bearing deposits, partially offset by a $1.2 billion decrease in non-interest-bearing deposits. The overall increase in average total deposits was primarily due the Ametros acquisition, and growth in interLINK, HSA, and retail certificates of deposit, partially offset by decreases in non-interest-bearing deposits. At June 30, 2024, and 2023, average total deposits comprised 94.6% and 88.0% of total average interest-bearing liabilities, respectively. The average rate on deposits increased 63 basis points from 1.72% for the three months ended June 30, 2023, to 2.35% for the three months ended June 30, 2024, primarily due to the higher interest rate environment and growth in higher cost deposit products, such as money market accounts and certificates of deposit. Average higher cost time deposits as a percentage of average total interest-bearing deposits increased from 15.2% for the three months ended June 30, 2023, to 15.5% for the three months ended June 30, 2024, primarily due to a shift in customer preferences from non-interest-bearing demand and savings to higher rate retail certificates of deposit.

Average FHLB advances decreased $4.3 billion, or 63.9%, from $6.7 billion for the three months ended June 30, 2023, to $2.4 billion for the three months ended June 30, 2024, primarily due to the Company’s risk management approach to hold higher levels of on-balance sheet liquidity in 2023. At June 30, 2024, and 2023, average FHLB advances comprised 3.7% and 10.1% of total average interest-bearing liabilities, respectively. The average rate on FHLB advances increased 28 basis points from 5.21% for the three months ended June 30, 2023, to 5.49% for the three months ended June 30, 2024, primarily due to the higher interest rate environment.

Average long-term debt decreased $147.9 million, or 13.9%, from $1.1 billion for the three months ended June 30, 2023, to $0.9 billion for the three months ended June 30, 2024, primarily due to the maturity of the 4.375% senior fixed-rate notes in February 2024. At June 30, 2024, and 2023, average long-term debt comprised 1.4% and 1.6% of total average interest-bearing liabilities, respectively. The average rate on long-term debt decreased 13 basis points from 3.68% for the three months ended June 30, 2023, to 3.55% for the three months ended June 30, 2024, also primarily due to the maturity of the 4.375% senior fixed-rate notes in February 2024.

Comparison to Prior Year to Date

Net interest income decreased $39.1 million, or 3.3%, from $1.2 billion for the six months ended June 30, 2023, to $1.1 billion for the six months ended June 30, 2024. On an FTE basis, net interest income decreased $42.1 million. Net interest margin decreased 17 basis points from 3.50% for the six months ended June 30, 2023, to 3.33% for the six months ended June 30, 2024.

Average total interest-earning assets increased $0.4 billion, or 0.6%, from $68.1 billion for the six months ended June 30, 2023, to $68.5 billion for the six months ended June 30, 2024, primarily due to increases of $1.6 billion in average total investment securities and $0.5 billion in average loans and leases, partially offset by decreases of $1.7 billion in average interest-bearing deposits held at the FRB and $146.5 million in average FHLB and FRB stock. The average yield on interest-earning assets increased 41 basis points from 5.21% for the six months ended June 30, 2023, to 5.62% for the six months ended June 30, 2024, primarily due to the higher interest rate environment, partially offset by lower purchase accounting accretion on interest-earning assets that were acquired in the Sterling merger.

Average total investment securities increased $1.6 billion, or 10.9%, from $14.7 billion for the six months ended June 30, 2023, to $16.3 billion for the six months ended June 30, 2024, primarily due a higher volume of purchases net of paydown activities and sales of available-for-sale securities. At June 30, 2024, and 2023, the total average investment securities portfolio comprised 23.8% and 21.6% of total average interest-earning assets, respectively. The average yield on investment securities increased 86 basis points from 2.89% for the six months ended June 30, 2023, to 3.75% for the six months ended June 30, 2024, primarily due to the reinvestment of funds received from the maturities and sales of lower yielding securities for securities at higher yields.

Average loans and leases increased $0.5 billion, or 1.1%, from $50.6 billion for the six months ended June 30, 2023, to $51.2 billion for the six months ended June 30, 2024, primarily due to commercial real estate and residential mortgage growth in 2024, partially offset by a decrease in mortgage warehouse loans and the transfer of the payroll finance and factored receivables portfolios to held for sale in March 2024. At June 30, 2024, and 2023, average loans and leases comprised 74.7% and 74.4% of average total interest-earning assets, respectively. The average yield on loans and leases increased 30 basis points from 5.93% for the six months ended June 30, 2023, to 6.23% for the six months ended June 30, 2024, primarily due to the higher interest rate environment, partially offset by lower purchase accounting accretion on interest-earning assets that were acquired in the Sterling merger.

Average interest-bearing deposits held at the FRB decreased $1.7 billion, or 76.2%, from $2.2 billion for the six months ended June 30, 2023, to $0.5 billion for the six months ended June 30, 2024, primarily due to the Company’s risk management approach to hold higher levels of on-balance sheet liquidity in 2023. At June 30, 2024, and 2023, average interest-bearing deposits held at the FRB comprised 0.8% and 3.3% of total average interest-earnings assets, respectively. The average yield on interest-bearing deposits held at the FRB increased 43 basis points from 4.96% for the six months ended June 30, 2023, to 5.39% for the six months ended June 30, 2024, primarily due to the higher interest rate environment.

Average FHLB and FRB stock decreased $146.4 million, or 30.1%, from $486.6 million for the six months ended June 30, 2023, to $340.2 million for the six months ended June 30, 2024, primarily due to a lower FHLB stock investment required as a result of the decrease in average FHLB advances. At June 30, 2024, and 2023, average FHLB and FRB stock comprised 0.5% and 0.7% of total average interest-earning assets, respectively. The average yield on FHLB and FRB stock increased 83 basis points from 4.80% for the six months ended June 30, 2023, to 5.63% for the six months ended June 30, 2024, primarily due to the higher interest rate environment.

Average total interest-bearing liabilities increased $0.4 billion, or 0.6%, from $64.5 billion for the six months ended June 30, 2023, to $64.9 billion for the six months ended June 30, 2024, primarily due to an increase of $4.4 billion in average total deposits, partially offset by decreases of $3.6 billion in average FHLB advances, $0.2 billion in average federal funds purchased, $0.1 billion in average long-term debt, and $0.1 billion in average securities sold under agreements to repurchase. The average rate on interest-bearing liabilities increased 62 basis points from 1.82% for the six months ended June 30, 2023, to 2.44% for the six months ended June 30, 2024, primarily due to the higher interest rate environment.

Average total deposits increased $4.4 billion, or 7.8%, from $56.7 billion for the six months ended June 30, 2023, to $61.1 billion for the six months ended June 30, 2024, primarily reflecting a $6.0 billion increase in interest-bearing deposits, partially offset by a $1.6 billion decrease in non-interest-bearing deposits. The overall increase in deposits was primarily due to the Ametros acquisition, and growth in interLINK, HSA, and retail certificates of deposit, partially offset by decreases in non-interest-bearing demand deposits. At June 30, 2024, and 2023, average total deposits comprised 94.2% and 87.9% of total average interest-bearing liabilities, respectively. The average rate on deposits increased 86 basis points from 1.43% for the six months ended June 30, 2023, to 2.29% for the six months ended June 30, 2024, primarily due to the higher interest rate environment and growth in higher cost deposit products, such as money market and certificates of deposit. Average higher cost time deposits as a percentage of average total interest-bearing deposits increased from 12.5% for the six months ended June 30, 2023, to 15.1% for the six months ended June 30, 2024, primarily due to a shift in customer preferences from non-interest-bearing demand and savings to higher rate retail certificates of deposit.

Average FHLB advances decreased $3.6 billion, or 58.7%, from $6.2 billion for the six months ended June 30, 2023, to $2.6 billion for the six months ended June 30, 2024, primarily due to the Company’s risk management approach to hold higher levels of on-balance sheet liquidity in 2023. At June 30, 2024, and 2023, average FHLB advances comprised 3.9% and 9.6% of total average interest-bearing liabilities, respectively. The average rate on FHLB advances increased 47 basis points from 5.02% for the six months ended June 30, 2023, to 5.49% for the six months ended June 30, 2024, primarily due to the higher interest rate environment.

Average federal funds purchased decreased $224.5 million, or 67.3%, from $333.7 million for the six months ended June 30, 2023, to $109.2 million for the six months ended June 30, 2024, primarily due to the additional liquidity generated from the interLINK deposit sweep program, which allowed for the Company to decrease is federal funds borrowing volume. At June 30, 2024, and 2023, average federal funds purchased comprised 0.2% and 0.5% of total average interest-bearing liabilities, respectively. The average rate on federal funds purchased increased 84 basis points from 4.62% for the six months ended June 30, 2023, to 5.46% for the six months ended June 30, 2024, primarily due to the higher interest rate environment.

Average long-term debt decreased $119.6 million, or 11.2%, from $1.1 billion for the six months ended June 30, 2023, to $0.9 billion for the six months ended June 30, 2024, primarily due to the maturity of the 4.375% senior fixed-rate notes in February 2024. At June 30, 2024, and 2023, average long-term debt comprised 1.5% and 1.7% of total average interest-bearing liabilities, respectively. The average rate on long-term debt decreased 7 basis points from 3.67% for the three months ended June 30, 2023, to 3.60% for the three months ended June 30, 2024, also primarily due to the maturity of the 4.375% senior fixed-rate notes in February 2024.

Average securities sold under agreements to repurchase decreased $104.4 million, or 45.4%, from $229.8 million for the six months ended June 30, 2023, to $125.4 million for the six months ended June 30, 2024, primarily due to the maturity of a $216.3 million non-callable, fixed repurchase agreement in January 2024. At June 30, 2024, and 2023, average securities sold under agreements to repurchase comprised 0.2% and 0.4% of total average interest-bearing liabilities, respectively. The average rate on securities sold under agreements to repurchase increased 22 basis points from 0.11% for the six months ended June 30, 2023, to 0.33% for the six months ended June 30, 2024, primarily due to the higher interest rate environment.

The following tables summarize daily average balances, interest, and average yield/rate by major category, and net interest margin on an FTE basis:


	Three months ended June 30,
	2024						2023
(Dollars in thousands)	Average Balance		Interest Income/Expense		Average Yield/Rate		Average Balance		Interest Income/Expense		Average Yield/Rate

Assets
Interest-earning assets:
Loans and leases (1)	$	51,434,799	$	808,309	6.23	%	$	51,184,715	$	782,557	6.06	%
Investment securities: (2)
Taxable	14,788,061		154,691		4.00		12,252,503		102,492		3.15
Non-taxable	1,594,154		10,239		2.56		2,527,754		13,535		2.14
Total investment securities	16,382,215		164,930		3.86		14,780,257		116,027		2.99
FHLB and FRB stock	336,342		5,166		6.18		513,559		6,675		5.21
Interest-bearing deposits (3)	483,947		6,603		5.40		3,528,824		45,008		5.05

Loans held for sale	222,080		5,593		10.07		96,537		421		1.74
Total interest-earning assets	68,859,383		$	990,601	5.65	%	70,103,892		$	950,688	5.32	%
Non-interest-earning assets	7,076,950						6,128,636
Total assets	$	75,936,333					$	76,232,528

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Demand deposits	$	10,156,691	$	—	—	%	$	11,375,059	$	—	—	%
Health savings accounts	8,528,476		3,206		0.15		8,250,766		3,090		0.15
Interest-bearing checking, money market and savings	35,012,709		264,009		3.03		31,768,511		178,707		2.26
Time deposits	8,017,223		94,048		4.72		7,173,552		69,669		3.90
Total deposits	61,715,099		361,263		2.35		58,567,888		251,466		1.72

Securities sold under agreements to repurchase	120,082		36		0.12		215,874		63		0.11
Federal funds purchased	78,242		1,078		5.45		—		—		—

FHLB advances	2,429,653		33,727		5.49		6,724,139		88,556		5.21
Long-term debt (2)	913,608		7,885		3.55		1,061,526		9,482		3.68

Total interest-bearing liabilities	65,256,684		$	403,989	2.49	%	66,569,427		$	349,567	2.10	%
Non-interest-bearing liabilities	1,945,912						1,267,803
Total liabilities	67,202,596						67,837,230

Preferred stock	283,979						283,979
Common stockholders’ equity	8,449,758						8,111,319
Total stockholders’ equity	8,733,737						8,395,298
Total liabilities and stockholders’ equity	$	75,936,333					$	76,232,528
Net interest income (FTE)			$	586,612					$	601,121
Less: FTE adjustment			(14,315)						(17,292)
Net interest income			$	572,297					$	583,829
Net interest margin (FTE)					3.32	%					3.35	%

(1)Non-accrual loans have been included in the computation of average balances.

(2)For the purposes of our average yield/rate and margin computations, unsettled trades on investment securities, unrealized gains (losses) on available-for-sale investment securities, and basis adjustments on long-term debt from de-designated fair value hedges are excluded.

(3)Interest-bearing deposits are included as a component of Cash and cash equivalents on the Condensed Consolidated Statements of Cash Flows included in Part I - Item 1. Financial Statements.


	Six months ended June 30,
	2024						2023
(Dollars in thousands)	Average Balance		Interest Income/Expense		Average Yield/Rate		Average Balance		Interest Income/Expense		Average Yield/Rate

Assets
Interest-earning assets:
Loans and leases (1)	$	51,186,608	$	1,610,173	6.23	%	$	50,642,963	$	1,508,100	5.93	%
Investment securities: (2)
Taxable	14,371,728		295,822		3.94		12,173,428		194,782		3.03
Non-taxable	1,941,054		22,753		2.34		2,533,729		27,219		2.15
Total investment securities	16,312,782		318,575		3.75		14,707,157		222,001		2.89
FHLB and FRB stock	340,167		9,518		5.63		486,617		11,585		4.80
Interest-bearing deposits (3)	528,174		14,389		5.39		2,221,119		55,404		4.96

Loans held for sale	117,749		5,675		9.64		50,838		437		1.72
Total interest-earning assets	68,485,480		$	1,958,330	5.62	%	68,108,694		$	1,797,527	5.21	%
Non-interest-earning assets	7,149,069						6,176,650
Total assets	$	75,634,549					$	74,285,344

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Demand deposits	$	10,369,552	$	—	—	%	$	11,999,028	$	—	—	%
Health savings accounts	8,567,058		6,397		0.15		8,271,493		6,117		0.15
Interest-bearing checking, money market and savings	34,534,198		513,659		2.99		30,816,229		301,755		1.97

WEBSTER FINANCIAL CORP [WBS] Filings
WEBSTER FINANCIAL CORP [WBS-PF] Filings
WEBSTER FINANCIAL CORP [WBS-PG] Filings
10-Q	[2024-08-08]
10-Q	[2024-05-10]
10-K	[2024-02-27]
10-Q	[2023-11-07]
10-Q	[2023-08-08]
10-Q	[2023-05-08]
10-K	[2023-03-10]
10-Q	[2022-11-04]
10-Q	[2022-08-05]
10-Q	[2022-05-13]
10-K	[2022-02-25]
10-Q	[2021-11-03]
10-Q	[2021-08-04]
10-Q	[2021-05-06]
10-K	[2021-02-26]
10-Q	[2020-11-04]
10-Q	[2020-08-05]
10-Q	[2020-05-08]
10-K	[2020-02-28]
10-Q	[2019-11-01]
10-Q	[2019-08-05]
10-Q	[2019-05-07]
10-K	[2019-03-01]
10-Q	[2018-11-05]
10-Q	[2018-08-03]
10-Q	[2018-05-07]
10-K	[2018-03-01]
10-Q	[2017-11-06]
10-Q	[2017-08-04]
10-Q	[2017-05-05]
10-K	[2017-03-01]
10-Q	[2016-11-07]
10-Q	[2016-08-09]
10-Q	[2016-05-09]
10-K	[2016-02-29]
10-Q	[2015-11-05]
10-Q	[2015-08-07]
10-Q	[2015-05-08]
10-K	[2015-02-27]
10-Q	[2014-11-05]
10-Q	[2014-08-06]
10-Q	[2014-05-07]
10-K	[2014-02-28]
10-Q	[2013-11-05]
10-Q	[2013-08-01]
10-Q	[2013-05-06]
10-K	[2013-02-28]
10-Q	[2012-11-02]
10-Q	[2012-08-01]
10-Q	[2012-05-02]
10-K	[2012-02-29]

WEBSTER FINANCIAL CORP [WBS] Filings

WEBSTER FINANCIAL CORP [WBS-PF] Filings

WEBSTER FINANCIAL CORP [WBS-PG] Filings