STAMFORD, Conn., October 20, 2022 - Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A. and its HSA Bank division, today announced net income available to common shareholders of $229.8 million, or $1.31 per diluted share, for the quarter ended September 30, 2022, compared to $93.7 million, or $1.03 per diluted share, for the quarter ended September 30, 2021.

Third quarter 2022 results include $36.8 million pre-tax, ($27.2 million after tax), or $0.15 per diluted share, of expenses related to the merger, strategic initiatives, and other charges. Excluding these expenses, earnings per diluted share would have been $1.46 for the quarter ended September 30, 2022. Reported results prior to the first quarter of 2022 reflect legacy Webster Financial results only.

“Third quarter results reflect the strong progress our colleagues have made in creating a high performing and differentiated company,” said John R. Ciulla, president and chief executive officer. “While executing on integration activities, we have maintained a laser-focus on our clients, resulting in financial performance that exceeds the targets we set forth at the announcement of the MOE more than a year ago.”

Highlights for the third quarter of 2022:

•Revenue of $664.6 million.

•Period end loan and lease balance of $47.8 billion; 80 percent commercial loans and leases, 20 percent consumer loans, and a loan to deposit ratio of 89 percent.

•Period end deposit balance of $54.0 billion.

•Provision for credit losses totaled $36.5 million.

•Charges related to the merger, strategic initiatives, and other totaled $36.8 million.

•Return on average assets of 1.38 percent; adjusted 1.54 percent (non-GAAP).

•Return on average tangible common equity of 18.62 percent; adjusted 20.76 percent (non-GAAP).

•Net interest margin of 3.54 percent, up 26 basis points from prior quarter.

•Common equity tier 1 ratio of 10.82 percent.

•Efficiency ratio (non-GAAP) of 41.17 percent.

•Tangible common equity ratio of 7.27 percent.

•Repurchased approximately $100 million in shares under Webster's share repurchase program.

“Not only were our financial results strong this quarter, the underlying drivers of increases in profitability should provide tailwinds into the future,” said Glenn MacInnes, executive vice president and chief financial officer. “Our net interest income should continue to benefit from higher interest rates, and we continue to execute on the efficiencies created in our recent merger.”

Increases in the balance sheet and income statement, when compared to a year ago, are largely attributable to the merger with Sterling Bancorp on January 31, 2022.

Webster’s Commercial Banking segment serves businesses that have more than $2 million of revenue through our business banking, middle market, asset-based lending, equipment finance, commercial real estate, sponsor finance, and treasury services business units. Additionally, our Wealth group provides wealth management solutions to business owners, operators, and consumers within our targeted markets and retail footprint. As of September 30, 2022, Commercial Banking had $38.5 billion in loans and leases and $20.8 billion in deposit balances.

Pre-tax, pre-provision net revenue increased $147.1 million to $271.6 million in the quarter as compared to prior year. The increase in balances and income was largely attributable to the merger. Net interest income increased $181.5 million to $333.6 million, primarily driven by the merger, organic growth in loans and deposits since the merger, and the impact of the rising rate environment. Non-interest income increased $17.7 million to $40.5 million, with $18.8 million driven by the merger, partially offset by lower direct investment income. Non-interest expense increased $52.2 million to $102.4 million, with $47.2 million due to the merger, and $5.0 million primarily to support loan and deposit growth.

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 September 30, 2022, HSA Bank had $11.1 billion in total footings comprising $7.9 billion in deposit balances and $3.2 billion in assets under administration through linked investment accounts.

Pre-tax net revenue increased $13.2 million to $47.7 million in the quarter as compared to prior year. Net interest income increased $16.5 million to $58.6 million, primarily due to an increase in net deposit spread and growth in deposits. Non-interest income increased $1.1 million to $25.8 million, due primarily to increased interchange revenue. Non-interest expense increased $4.4 million to $36.7 million, primarily due to incremental expenses from Bend's acquired business and higher compensation, temporary help, and travel expenses.

Consumer Banking serves consumer and business banking customers primarily throughout southern New England and the New York Metro and Suburban markets. Consumer Banking is comprised of the Consumer Lending and Small Business Banking (businesses that have less than $2 million of revenue) business units, as well as a distribution network consisting of 201 banking centers and 354 ATMs, a customer care center, and a full range of web and mobile-based banking services. Additionally, our Webster Investment Services group provides investment services to consumers and small business owners within our targeted markets and retail footprint. As of September 30, 2022, Consumer Banking had $9.3 billion in loans and $23.9 billion in deposit balances, as well as $7.4 billion in assets under administration.

Pre-tax, pre-provision net revenue increased $70.3 million to $120.0 million in the quarter as compared to prior year. The increase in balances and income was largely attributable to the merger. Net interest income increased $97.2 million to $195.7 million, with $71.7 million driven by the merger, and $25.5 million driven by deposit and loan growth, coupled with the impact of the rising rate environment. Non-interest income increased $9.5 million to $33.8 million, with $6.1 million driven by the merger, and $4.7 million from higher deposit, loan, and investment services income, partially offset by $1.5 million in lower mortgage banking fee income. Non-interest expense increased $36.4 million to $109.6 million, primarily driven by $38.4 million of incremental expenses due to the merger, partially offset by lower shared services charges.

•Net interest income was $551.0 million compared to $229.7 million.

•Net interest margin was 3.54 percent compared to 2.80 percent. The yield on interest-earning assets increased by 104 basis points, and the cost of interest-bearing liabilities increased by 32 basis points.

•Average interest-earning assets totaled $62.2 billion and increased by $29.3 billion, or 89.2 percent.

•Average loans and leases totaled $46.2 billion and increased by $24.7 billion, or 114.6 percent.

•Average deposits totaled $54.0 billion and increased by $24.1 billion, or 80.8 percent.

•The provision for credit losses reflects a $36.5 million expense in the quarter, contributing to a $2.8 million increase in the allowance for credit losses on loans and leases and a $5.2 million increase in reserves on unfunded commitments. The provision for credit losses reflected an expense of $12.2 million in the prior quarter, compared to $7.8 million a year ago.

•Net charge-offs were $28.5 million, compared to $9.6 million in the prior quarter and $0.9 million a year ago. The ratio of net charge-offs to average loans and leases on an annualized basis was 0.25 percent, compared to 0.09 percent in the prior quarter and 0.02 percent a year ago.

•The allowance for credit losses on loans and leases represented 1.20 percent of total loans and leases at September 30, 2022, compared to 1.25 percent at June 30, 2022 and 1.46 percent at September 30, 2021. The allowance represented 274 percent of nonperforming loans and leases at September 30, 2022 compared to 231 percent at June 30, 2022 and 309 percent at September 30, 2021.

•Total non-interest income was $113.6 million compared to $83.8 million, an increase of $29.8 million. The increase primarily reflects the impact of the merger with Sterling, offset by lower direct investment income and mortgage banking revenue. Total non-interest income includes a net $0.3 million related to a gain on the early termination of repurchase agreements partially offset by a loss on the sale of investment securities.

•Total non-interest expense was $330.1 million compared to $180.2 million, an increase of $149.9 million. Total non-interest expense includes a net $26.7 million of merger and strategic initiatives and a $10.5 million donation to the Webster Bank Charitable Foundation, compared to $5.8 million of merger and strategic initiative related charges a year ago. Excluding those charges, total non-interest expense increased $118.5 million which primarily reflects the impact of the merger with Sterling.

•Income tax expense was $64.1 million compared to $29.8 million, and the effective tax rate was 21.5 percent compared to 23.7 percent. The lower effective tax rate in the current period primarily reflects higher levels of tax-exempt income and tax credits than a year ago, partially offset by the effects of increased income overall in 2022 compared to 2021.

•Total investment securities, net were $14.6 billion, compared to $15.2 billion at June 30, 2022 and $9.4 billion at September 30, 2021. The carrying value of the available-for-sale portfolio included $941.8 million of net unrealized losses, compared to net unrealized losses of $609.8 million at June 30, 2022 and net unrealized gains of $44.7 million at September 30, 2021. The carrying value of the held-to-maturity portfolio does not reflect $855.9 million of net unrealized losses, compared to net unrealized losses of $539.4 million at June 30, 2022 and net unrealized gains of $152.9 million at September 30, 2021.

•Total loans and leases were $47.8 billion, compared to $45.6 billion at June 30, 2022 and $21.6 billion at September 30, 2021. Compared to June 30, 2022, commercial loans and leases increased by $1.1 billion, commercial real estate loans increased by $0.7 billion, residential mortgages increased by $0.4 billion, while consumer loans decreased by $28.4 million.

•Compared to a year ago, commercial loans and leases increased by $11.5 billion, commercial real estate loans increased by $12.3 billion, residential mortgages increased by $2.5 billion, and consumer loans increased by $1.3 million.

•Loan originations for the portfolio were $5.1 billion, compared to $5.0 billion in the prior quarter and $2.0 billion a year ago. In addition, $1.5 million of residential loans were originated for sale in the quarter, compared to $5.0 million in the prior quarter and $56.7 million a year ago.

•Total nonperforming loans and leases were $209.5 million, or 0.44 percent of total loans and leases, compared to $247.5 million, or 0.54 percent of total loans and leases, at June 30, 2022 and $101.8 million, or 0.47 percent of total loans and leases, at September 30, 2021. As of September 30, 2022, $82.0 million of nonperforming loans and leases were contractually current.

•Past due loans and leases were $46.4 million, compared to $51.7 million at June 30, 2022 and $17.1 million at September 30, 2021.

•Total deposits were $54.0 billion, compared to $53.1 billion at June 30, 2022 and $30.0 billion at September 30, 2021. Core deposits to total deposits were 95.2 percent, compared to 95.2 percent at June 30, 2022 and 93.7 percent at September 30, 2021. The loan to deposit ratio was 88.5 percent, compared to 86.0 percent at June 30, 2022 and 71.9 percent at September 30, 2021.

•Total borrowings were $5.9 billion, compared to $5.3 billion at June 30, 2022 and $1.3 billion at September 30, 2021.

•The return on average common shareholders’ equity and the return on average tangible common shareholders’ equity were 11.78 percent and 18.62 percent, respectively, compared to 11.61 percent and 14.16 percent, respectively, in the third quarter of 2021.

•The tangible equity and tangible common equity ratios were 7.70 percent and 7.27 percent, respectively, compared to 8.12 percent and 7.71 percent, respectively, at September 30, 2021. The common equity tier 1 risk-based capital ratio was 10.82 percent, compared to 11.77 percent at September 30, 2021.

•Book value and tangible book value per common share were $43.32 and $27.69, respectively, compared to $35.78 and $29.63, respectively, at September 30, 2021.

•Repurchased approximately $100 million in shares under Webster's share repurchase program.

Webster Financial Corporation (NYSE:WBS) is the holding company for Webster Bank, N.A. and its HSA Bank Division. Webster 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, Consumer Banking and its HSA Bank division, one of the country's largest providers of employee benefits solutions. Headquartered in Stamford, CT, Webster is a values-driven organization with $69 billion in assets. Its core footprint spans the northeastern U.S. from New York to Massachusetts, with certain businesses operating in extended geographies. Webster Bank is a member of the FDIC and an equal housing lender. For more information about Webster, including past press releases and the latest annual report, visit the Webster website at www.websterbank.com.

A conference call covering Webster’s third quarter 2022 earnings announcement will be held today, Thursday, October 20, 2022 at 9:00 a.m. Eastern Time. To listen to the live call, please dial 888-330-2446, or 240-789-2732 for international callers. The passcode is 8607257. The webcast, along with related slides, will be available via Webster's Investor Relations website at investors.websterbank.com. A replay of the conference call will be available for one week via the website listed above, beginning at approximately 12:00 noon (Eastern) on October 20, 2022. To access the replay, dial 800-770-2030, or 647-362-9199 for international callers. The replay conference ID number is 8607257.

Alice Ferreira, 203-578-2610

acferreira@websterbank.com

Emlen Harmon, 212-309-7646

eharmon@websterbank.com

This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking statements can be identified by words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “continue,” “remain,” “will,” “should,” “may,” “plans,” “estimates,” and similar references to future periods; however, such words are not the exclusive means of identifying such statements. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items; (ii) statements of plans, objectives, and expectations of Webster or its management or Board of Directors; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Forward-looking statements are based on Webster’s current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Webster’s actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: (1) our ability to successfully integrate the operations of Webster and Sterling Bancorp and realize the anticipated benefits of the merger; (2) our ability to successfully execute our business plan and strategic initiatives, and manage any risks or uncertainties; (3) our ability to successfully achieve the anticipated cost reductions and operating efficiencies from planned strategic initiatives, including process automation, organization simplification, and spending reductions, and avoid any higher than anticipated costs or delays in the ongoing implementation; (4) local, regional, national, and international economic conditions and the impact they may have on us and our customers; (5) volatility and disruption in national and international financial markets, including as a result of geopolitical conflict such as the war between Russia and Ukraine; (6) the potential adverse effects of the ongoing novel coronavirus (COVID-19) pandemic, or other unusual and infrequently occurring events, and any governmental or societal responses thereto; (7) changes in laws and regulations, including those concerning banking, taxes, dividends, securities, insurance, and healthcare, with which we and our subsidiaries must comply; (8) adverse conditions in the securities markets that lead to impairment in the value of our investment securities and goodwill; (9) inflation, changes in interest rates, and monetary fluctuations; (10) the replacement of and transition from the London Interbank Offered Rate (LIBOR) to the Secured Overnight Financing Rate (SOFR) as the primary interest rate benchmark; (11) the timely development and acceptance of new products and services and the perceived value of those products and services by customers; (12) changes in deposit flows, consumer spending, borrowings, and savings habits; (13) our ability to implement new technologies and maintain secure and reliable technology systems; (14) the effects of any cyber threats, attacks or events or fraudulent activity; (15) performance by our counterparties and vendors; (16) our ability to increase market share and control expenses; (17) changes in the competitive environment among banks, financial holding companies, and other financial services providers; (18) changes in the level of non-performing assets and charge-offs; (19) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (20) the effect of changes in accounting policies and practices applicable to us, including the impact of recently adopted accounting guidance; (21) legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; (22) our ability to appropriately address social, environmental, and sustainability concerns that may arise from our business activities; and (23) 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 Operations.” 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.

In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. A reconciliation of net income, ROATCE, and other performance ratios, in each case 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.

Five Quarter Changes in the Allowance for Credit Losses on Loans and Leases (unaudited)
			For the Three Months Ended
(Dollars in thousands)			September 30, 2022						June 30, 2022						March 31, 2022						December 31, 2021						September 30, 2021
ACL on loans and leases, beginning balance			$	571,499					$	569,371					$	301,187					$	314,922					$	307,945
Initial allowance on PCD loans and leases (1)			—						—						88,045						—						—
Provision			31,352						11,728						189,068						(14,980)						7,898
Charge-offs:
Commercial portfolio			31,356						18,757						11,248						799						1,723
Consumer portfolio			1,453						896						1,120						1,382						2,053
Total charge-offs			32,809						19,653						12,368						2,181						3,776
Recoveries:
Commercial portfolio			1,413						7,765						1,364						1,107						142
Consumer portfolio			2,870						2,288						2,075						2,319						2,713
Total recoveries			4,283						10,053						3,439						3,426						2,855
Total net charge-offs (recoveries)			28,526						9,600						8,929						(1,245)						921
ACL on loans and leases, ending balance			$	574,325					$	571,499					$	569,371					$	301,187					$	314,922
ACL on unfunded loan commitments, beginning balance			$	20,149					$	19,640					$	13,104					$	12,170					$	11,974
Acquisition of Sterling			—						—						6,749						—						—
Provision			5,180						509						(213)						934						196
ACL on unfunded loan commitments, ending balance			$	25,329					$	20,149					$	19,640					$	13,104					$	12,170
Total ending balance			$	599,654					$	591,648					$	589,011					$	314,291					$	327,092

(1)Represents the establishment of the initial reserve for PCD loans and leases net of $48 million in charge-offs recognized upon completion of the merger in accordance with GAAP.

The Company evaluates its business based on certain ratios that utilize non-GAAP financial measures. The Company believes the use of these non-GAAP financial measures provides additional clarity in assessing the results and financial position of the Company. Other companies may define or calculate supplemental financial data differently.

The efficiency ratio, which measures the costs expended to generate a dollar of revenue, is calculated excluding certain non-operational items. Return on average tangible common shareholders' equity (ROATCE) measures the Company’s net income available to common shareholders, adjusted for the tax-effected amortization of intangible assets, as a percentage of average shareholders’ equity less average preferred stock and average goodwill and intangible assets. The tangible equity ratio represents shareholders’ equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets. The tangible common equity ratio represents shareholders’ equity less preferred stock and goodwill and intangible assets divided by total assets less goodwill and intangible assets. Tangible book value per common share represents shareholders’ equity less preferred stock and goodwill and intangible assets divided by common shares outstanding at the end of the period. Core deposits express total deposits less certificates of deposit and brokered time deposits. Adjusted net income (loss) available to common shareholders, adjusted diluted earnings per share (EPS), adjusted ROATCE, and adjusted return on average assets (ROAA) are calculated by excluding after tax non-operational items including merger-related expenses and the initial non-PCD provision related to the merger. See the tables below for reconciliations of these non-GAAP financial measures with financial measures defined by GAAP.

(1)Strategic initiatives and other is comprised of a contribution to the Webster foundation of $10.5 million (included within other non-interest expense), professional & outside services of $1.4 million, and occupancy of $(0.2) million.

(2)Other income includes the taxable equivalent of net income generated from low income housing tax-credit investments.

(3)Other is comprised of a $2.5 million gain related to the early termination of repurchase agreements.