STAMFORD, CONN. – Higher costs associated with the merger with Sterling Bancorp left Webster Financial Corp. $16.8 million in the red for the first quarter, the company reported on Thursday.
The profit loss marks a more-than-100% drop over the Webster Bank parent company’s earnings from the first quarter of 2021, driven primarily by expenses and higher taxes associated with its $10.3 billion merger with the New York bank, which closed in January.
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Earnings per diluted share fell $1.31 to a negative 14 cents per share.
The first-quarter earnings also include a $279.5 million pre-tax provision, primarily reflecting merger-related expenses.
The company set aside $188.8 million in credit loss provisions, a majority of which was to account for loans and leases taken on from its merger with Sterling. In contrast, Webster dumped $25.7 million from its reserves stockpile in the first quarter of 2021, following a move made by many financial institutions as pandemic fears over credit quality subsided.
While profits took a hit, interest income soared thanks to the merger and the company’s own deposit and loan growth, increasing nearly two-fold to $409.8 million. This was partially offset by a 31.9% increase in interest expenses, which reached $15.6 million.
The net interest margin, the difference between interest income generated and the amount paid out to lenders, was up 29 basis points year-over-year to 3.21%.
Again reflecting the merger results, non-interest income also increased, rising 35.5% to $104 million with the biggest gains in loan and lease related fees.
Non-interest expenses skyrocketed, nearly doubling to $359.8 million, including $104.4 million in costs related to the merger and “strategic initiative charges,” the company stated.
Total assets doubled over a year ago, reaching $65.1 billion, including $45.5 million in loans and leases. The more-than-100% increase in loans and leases was driven primarily by gains in the commercial and commercial real estate sector.
Quarterly deposits of $54.4 billion marked a 90.8% increase over a year ago, with money market accounts nearly tripling to $11.9 billion and demand deposits up more than two fold to $13.6 billion.
“This was a landmark quarter for Webster, as we closed our merger of equals with Sterling Bancorp,” John R. Ciulla, president and CEO, said in a statement. “We are excited about our future as a combined entity, as we are adding scale, talent, and capabilities that will enhance our client experience. I am equally proud we were able to produce strong underlying business trends while at the same time combining these complementary organizations.”
While many of the changes to income and the balance sheet are “largely attributable” to the merger, the first quarter results do not reflect a full quarter of comparable earnings, since the deal closed on Jan. 31, the company stated.
Webster held the 10th largest-share of in-market deposits in Rhode Island as of June 30, according to the Federal Deposit Insurance Corp.
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.
