Webster sees Q3 profits double after Sterling merger

WEBSTER FINANCIAL CORP. reported $229.8 million in third-quarter earnings on Thursday./ PBN FILE PHOTO

STAMFORD, Conn. – Webster Financial Corp. more than doubled its third-quarter profits over a year ago, reporting $229.8 million in earnings on Thursday.

The Webster Bank parent company’s balance sheet was boosted by a $10.3 billion merger with Sterling Bancorp that closed in January, along with interest rate hikes. 

Indeed, interest income nearly tripled year-over-year, to $617.6 million.

Noninterest income also rose 35.6%, to $113.6 million, with gains in deposit service and loan and lease fees driven by the merger, partially offset by lower mortgage banking income and a $2.2 million loss in direct investment income.

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Earnings per diluted share also rose 28 cents, to $1.31 per share.

Higher profits come despite the company socking away reserves in anticipation of bad loans from a forecasted economic downturn. Quarterly credit loss provisions of $36.5 million were more than 4.5 times the $7.6 million loan-loss reserve of the third quarter of 2021.

Costs also rose, both on the interest and noninterest side, thanks to rising interest rates and continued expenses from the merger.

Noninterest expenses spiked 83.1%, to $330.1 million, including $27.6 million in net merger-related costs plus a $10.5 million donation to the company’s charitable foundation. Employee compensation and benefits also rose 65.1% to $174 million.

The $66.6 million in interest expenses was more than six-fold what the company reported a year ago.

Net interest margin, the difference between interest income generated and the amount paid out to lenders, climbed 74 basis points to 3.54%.

Quarterly assets of $69.1 billion marked a 95.2% jump over a year ago, driven by a more-than-two-fold increase in loans and leases. The $47.8 billion in loans and leases included growth across all types, but primarily commercial and commercial real estate loans, each of which more than doubled compared with a year ago. Net securities also rose 55.3%, reflecting higher interest rates and continued growth from the merger.

Total quarterly deposits stood at $54 billion, up 44.5% year-over-year, with the biggest gains in demand deposits, savings and money market accounts. 

“Third quarter results reflect the strong progress our colleagues have made in creating a high performing and differentiated company,” John R. Ciulla, CEO and president, said in a statement. “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 [merger] more than a year ago.” 

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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