WATERBURY, Conn. – Webster Financial Corp., the parent company for Webster Bank, saw a 46.2% year-over-year cut to profits, ending the second quarter at $50.7 million in earnings, the company reported on Thursday.
The slash to profits reflects a nearly fourfold increase of the company’s provision for credit losses – from $11.9 million a year ago to $40 million – due to the continued economic impact of COVID-19. An even higher allocation for credit losses – $76 million – was the primary driver behind year-over-year earnings losses in the first quarter of the year.
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Quarterly earnings per diluted share dropped from $1.05 to 57 cents.
Total revenue reached $312.4 million, a 15% decrease over revenue reported a year ago, reflecting cuts to both interest and noninterest income. The $60.1 million in noninterest income, down 20.8%, resulted primarily from an $11 million cut to other income due to fair value adjustments in customer derivatives as well as a $7.3 million drop in deposit service fees, the company stated.
Net interest income, the difference between interest earned on assets like loans, mortgages and securities and interest paid out to customer deposits, was $224.4 million, a 7.2% year-over-year decrease reflecting lower interest generated on loans and leases.
Noninterest expense ticked down 2.2% to $176.6 million, a result of lower pension, legal and other variable operating expenses which were partially offset by a $1.2 million bump in employee compensation and benefits.
Total quarterly assets grew 13% to reach $32.7 billion, including $21.8 billion in loans and leases. The $2.5 billion jump in loans and leases over a year ago stemmed primarily from an increase in commercial loans, thanks to the $1.4 billion issued in small-business loans through the U.S. Small Business Administration’s Paycheck Protection Program.
Total deposits were $26.4 billion, a 16.6% increase over a year ago driven by a $2 billion jump in demand deposits and $574 million in health savings accounts deposits through its HSA bank.
Net interest margin, the difference between interest income generated versus the amount of interest paid out to lenders, declined 66 basis points to 2.99%.
“We continue to focus on prudently managing capital, credit and liquidity during these uncertain times, while also supporting our customers, employees, and communities,” said John R. Ciulla, chairman and chief executive officer. “We are pleased with our performance in the quarter given the challenging environment.”
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.
