Webster Financial Corp. Reports Operating Results (10-K)

Webster Financial Corp. (WBS) filed Annual Report for the period ended 2010-12-31.

Webster Financial Corp. Waterbury has a market cap of $2.03 billion; its shares were traded at around $23.23 with a P/E ratio of 49.43 and P/S ratio of 2.22. The dividend yield of Webster Financial Corp. Waterbury stocks is 0.17%.

Hedge Fund Gurus that owns WBS: Richard Pzena of Pzena Investment Management LLC, Paul Tudor Jones of The Tudor Group, Bruce Kovner of Caxton Associates, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors. Mutual Fund and Other Gurus that owns WBS: Kenneth Fisher of Fisher Asset Management, LLC, HOTCHKIS & WILEY of Hotchkis & Wliey Capital Management LLC, Mario Gabelli of GAMCO Investors.

Highlight of Business Operations:

Webster has focused its efforts in recent years on enhancing its risk management capabilities. Those efforts were evidenced in 2010 as the Company experienced significant improvement in virtually all credit related metrics and non-performing loans fell by nearly $100 million in the past year from $373.0 million at December 31, 2009 (3.38% of total loans) to $273.6 million at December 31, 2010 (2.48% of total loans). During the same timeframe, past due loans fell from $101.2 million (0.92% of total loans) to $73.6 million (0.67% of total loans). Foreclosed and repossessed assets remained relatively stable at $28.2 million at December 31, 2010 compared to $29.0 million at December 31, 2009. The improving trend in credit metrics favorably impacted the provision for loan losses. The Company recorded $115.0 million in provision for loan losses in 2010 compared to $303.0 million in 2009.

The Company saw success from its efforts to grow the core banking business in 2010. In support of that goal, six experienced commercial lenders and eleven small business development officers were hired. While impacted by the economic environment, the loan portfolio benefitted from this investment as originations in 2010 were $480.2 million and $128.2 million in middle market and business and professional banking portfolios, respectively. The continued move from transaction-based to relationship-based lending was clearly evident in commercial bank results as middle market originations were accompanied by $234 million of net deposit growth.

The Company also significantly improved the quality of its capital position in 2010. On March 3, 2010 and again on October 13, 2010, Webster repurchased $100 million of its Capital Purchase Program preferred shares held by the United States Treasury. On December 27, 2010, Webster completed a public offering of 6.6 million shares of common stock at a price to the public of $18.00 per share and a concurrent sale of 2.1 million shares to Warburg Pincus and one if its affiliates, each an existing stockholder, at the price to the public less applicable underwriting discounts and commissions. On December 29, 2010, Webster used the proceeds together with available funds to redeem the remaining $200 million of Capital Purchase Program preferred shares held by the United States Treasury. These measures, amongst others, served to improve the capital of the Company, as evidenced by the Company’s ratio of Tier 1 Common Equity over risk weighted assets, which rose from 7.83% at December 31, 2009 to 9.87% at December 31, 2010.

The Collins Amendment, included in the Dodd-Frank Act, requires bank holding companies with assets greater than $500 million to be subject to the same capital requirements as insured depository institutions, meaning, for instance, that such bank holding companies will no longer be able to count trust preferred securities as Tier 1 capital. The Collins Amendment also directs the appropriate federal banking supervisors, subject to Council recommendations, to develop capital requirements for all insured depository institutions, depository institution holding companies and systemically important non-bank financial companies to address systemically risky activities. For bank holding companies with assets of $15 billion or greater, such as Webster, the phase out of existing trust preferred and other non-qualifying securities from Tier 1 capital will occur over a 3-year period beginning on January 1, 2013. Trust preferred securities will be entitled to be treated as Tier 2 capital.

FRB regulations require depository institutions to maintain non-interest-earning reserves against their transaction accounts (primarily NOW and regular checking accounts). Required reserves can be in the form of vault cash and, if vault cash does not fully satisfy the required reserves, in the form of a balance maintained. The FRB regulations currently require that reserves be maintained against aggregate transaction accounts except for transaction accounts up to $10.7 million which are exempt. Transaction accounts greater than $10.7 million up to $44.5 million have a reserve requirement of 3% and those greater than $44.5 have a reserve requirement of 10%. The FRB generally makes annual adjustments to the tiered reserves. The Bank is in compliance with these requirements.

The Federal Home Loan Bank System consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility for member institutions. The Bank is a member of the Federal Home Loan Bank of Boston (“FHLB”). The Bank is required to purchase and hold shares of capital stock in the FHLB in an amount equal to 0.35% of the aggregate principal amount of its unpaid residential mortgage loans and similar obligations at the beginning of each year up to a maximum of $25 million. The Bank is also required to hold shares of capital stock in the FHLB in amounts that vary between 3.0% to 4.5% of its advances (borrowings), depending on the maturity of the advance. The Bank was in compliance with this requirement with an investment in FHLB stock at December 31, 2010 of $93.2 million. At December 31, 2010, the Bank had approximately $768.0 million in FHLB advances.