Webster posts $182M Q2 profit, boosted by Sterling merger

WEBSTER FINANCIAL CORP. on Thursday reported a $182.3 million profit for the second quarter, boosted by its January merger with Sterling Bancorp. /PBN FILE PHOTO

STAMFORD, Conn. – After ending the first quarter in the red due to merger-related costs, Webster Financial Corp. rebounded with a $182.3 million second-quarter profit, the company announced on Thursday.

The parent company for Webster Bank’s latest quarterly earnings also represent a 93.4% increase over profits a year ago. Earnings per diluted share fell 1 cent to $1.

The jump in profits was driven in part by the first-quarter merger with Sterling Bancorp, which closed in January. The $10.3 billion merger gave the company’s balance sheet a major boost, showing near-doubling of both assets and deposits.

Indeed, total assets increased more than twofold, to $67.6 billion, with total loans and leases also doubling to $45.6 billion. Commercial loans and commercial real estate loans were the biggest sources of growth, though partially offset by a decline in consumer loans.

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Quarterly deposits stood at $53.1 billion, an 84% year-over-year increase, stemming from demand, money market, and interest-bearing deposit growth.

Also reflecting the benefits of the merger, as well as rising interest rates, interest income spiked 121.9% to $513.7 million. As expected with higher interest rates, interest expenses also increased, up 153% to $27.1 million.

The net interest margin, the difference between interest income generated and the amount paid out to lenders, was up 46 basis points year-over-year to 3.28%.

The company also increased its loan loss provisions, setting aside $12.2 million for its stockpile, mostly related to new accounting and risk standards tied to its merger. By comparison, Webster dumped $21.5 million from its reserves in the second quarter of 2021, mirroring the trend among financial institutions nationwide as they decided that extra protection against pandemic-induced loan defaults was no longer needed. 

Non-interest income rose 66.3% to $120.9 million, with increases in deposit and loan fees as a result of more transaction activity, the company stated.

Non-interest expenses of $358.2 million was up 91.5% over a year ago, driven primarily by the merger, including $66.5 million in merger and strategic initiative charges, the company stated. 

“Our second quarter performance is a great reflection of the strength of Webster,”John R. Ciulla, president and CEO, said in a statement. “We achieved strong and diverse loan growth, the quality of our core deposit franchise was evident in this rising rate environment, and we maintained our strong capital position, providing flexibility as we operate through a changing macro environment.”

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.

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