WATERBURY, Conn. – Webster Financial Corp. nearly doubled its profits in 2021 as the bank slashed the amount of money it set aside for anticipated bad loans, posting $408.9 million in net income for the year, the company reported Thursday.
The annual net income represented an 85.3% jump over 2020, driven by the release of $54.5 million from its stockpile of loan loss provisions. Like institutions nationwide, the parent company for Webster Bank socked away money in 2020 expecting many to default on loans during the COVID-19 pandemic, but that largely never materialized.
In 2021, Webster began driving down the $137.8 million added the year prior, prompted by “stable economic outlook and favorable credit quality trends,” the company stated.
Annual earnings per diluted share rose from $2.35 to $4.42.
Webster is the 10th largest bank that does business in Rhode Island in terms of deposits in the market, according to data from the Federal Deposit Insurance Corp. It has eight locations. The bank is set to finalize a merger with New York-based Sterling Bancorp next month.
Increased earnings also reflect gains in several sources of non-interest income, including deposit service fees, loan and lease-related fees and charges for wealth and investment services. Together, these fueled a 13.4% rise in annual non-interest income to $373.4 million, despite more than halving its mortgage banking activity income compared with the prior year.
Interest income was down 6.3% to $942.8 million amid low interest rates.
Also a reflection of low interest rates, the net interest margin, – the difference between interest income generated and the amount paid out to lenders – fell 16 basis points year-over-year to 2.84%.
Declining interest income was more than offset by a sharper drop in interest expenses, which fell 62.3% to $41.8 million.
Non-interest expenses also ticked down 1.8% to $745.1 million, including decreases in compensation and benefits, occupancy costs and marketing that were partially offset by higher spending on professional and outside services.
Year-end assets stood at $34.9 billion, a 7.1% increase that included $22.3 billion in loans and leases despite lost revenue from the now-ended Paycheck Protection Program. Increases in commercial real estate and residential mortgage loans and leases helped to drive the 2.9% rise in total loans and leases, though consumer loans were down.
As of Dec. 31, the company had $200 million in remaining Paycheck Protection Plan loans.
Total deposits of $29.9 billion were 9.2% higher than a year ago, reflecting gains in demand deposits, interest-bearing checking accounts, money market and savings accounts.
In the fourth quarter of 2021, the company brought in $108.4 million in earnings, an 87.9% increase over the fourth quarter of 2020. This again reflected a release of credit loss reserves – letting go of $15 million versus the $1 million released a year ago.
Quarterly non-interest income also rose 17.4% to $90.1 million, driven primarily by an increase in other income from realized gains and fair value adjustments on direct investments, as well as the gain on the sale of a commercial loan. Mortgage banking activities were cut to less than a quarter of what was reported a year ago, reflecting the “strategic choice” to originate loans for portfolio and lower spreads on loans originated for sale, the company stated.
Quarterly interest income remained flat at $236 million amid low interest rates. Quarterly non-interest expenses were down 13.5% year over year to $189.9 million, with occupancy costs cut by more than half and an 11.0% decline in employee compensation and benefits.
Quarterly earnings also reflected $13.7 million in charges related to the $10.3 billion merger with Sterling Bancorp as well as “strategic optimization initiatives” and debt prepayment, the company stated.
“Our financial performance is the result of a broad effort across our company,” Glenn MacInnes, executive vice president and chief financial officer, said in a statement. “We continued to generate robust loan growth, we were successful in deploying the meaningful liquidity our deposit growth generated, and measures of asset quality remained exceptionally strong. We approach our merger with Sterling with substantial momentum.”
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.
