Webster Reports Fourth Quarter Earnings and Completion of Balance Shee

    Business Editors/Financial Editors

    WATERBURY, Conn.--(BUSINESS WIRE)--Jan. 25, 2005--Webster Financial Corporation (NYSE:WBS), the holding company for Webster Bank, N.A., today announced net income of $16.3 million in the fourth quarter compared to $41.4 million a year ago. For the full year, net income was $153.8 million compared to $163.2 million the prior year. The decline for the quarter and the year is entirely attributable to Webster's previously announced fourth quarter balance sheet de-leveraging program, which resulted in $32.4 million of after-tax costs.
    Net income per diluted share was $.30 in the fourth quarter compared to $.89 the prior year. For the full year, net income per share was $3.00 compared to $3.52 in 2003. Excluding the balance sheet de-leveraging costs, net income per diluted share was $.90 in the fourth quarter and $3.63 for the full year 2004.
    As described in Webster's 2004 third quarter earnings release, a balance sheet de-leveraging of $750 million was implemented and completed during the fourth quarter. With this transaction, $750 million of securities were sold and the proceeds used to repay an equal amount of borrowings. The de-leveraging resulted in $49.9 million of pre-tax costs consisting of $4.1 million in losses on the sale of securities and $45.8 million in debt prepayment penalties.
    The de-leveraging resulted in a decline in the securities portfolio to 22 percent of assets at December 31, 2004 compared to 25 percent at September 30 while borrowings were reduced to 28 percent of assets from 32 percent at September 30. The balance sheet restructuring also strengthened Webster's capital position and improved its ability to respond to rising interest rates by moving to a modestly asset sensitive position.
    "2004 was a transformational year for Webster," said Webster Chairman and Chief Executive Officer James C. Smith. "We expanded our franchise in four states, converted to a commercial bank charter and grew to be the largest independent bank headquartered in southern New England. Webster is well positioned as a leading financial services provider in the markets we serve."

    Revenues and Expenses

    Total revenues (net interest income plus total noninterest income) were $176.4 million in the fourth quarter, compared to $163.8 million a year ago, an increase of 8 percent. For the full year 2004, total revenues were $687.9 million for an increase of 6 percent from a year ago. Impacting the quarter and the full year 2004 was the implementation on December 31, 2003 of Financial Accounting Standards Board Interpretation No. ("FIN") 46 (revised), which required the reclassification of capital trust securities expense as of January 1, 2004 from noninterest expenses to interest expense. Adjusting the year 2003 for FIN 46R and excluding Duff & Phelps, which was sold in the first quarter of 2004, total revenues would have grown by 15 percent in the fourth quarter and 12 percent for the full year.
    Net interest income was $127.6 million in the fourth quarter of 2004, compared to $107.3 million in the year-ago period and $121.3 million in the third quarter. Adjusting for FIN 46R, net interest income grew by $23.8 million, or 23 percent, from a year ago and by $6.3 million, or 5 percent, from the third quarter. Net interest income for the full year 2004 was $468.2 million compared to an adjusted $401.6 million in 2003, an increase of 17 percent. The increases over the prior year reflect double-digit growth in earning assets and a higher net interest margin, while the increase over the third quarter is due entirely to a higher net interest margin.
    Webster's net interest margin (annualized tax-equivalent net interest income as a percentage of average earning assets) improved 19 basis points to 3.25 percent from 3.06 percent in the third quarter and compares to 3.08 percent in the year-ago period adjusted for FIN 46R. The increases reflect the benefit of the fourth quarter de-leveraging and the impact of higher interest rates on earning asset yields. Webster's net interest margin for the full year 2004 was 3.11 percent compared to 3.05 percent adjusted for FIN 46R in 2003.
    In the fourth quarter of 2004, total noninterest income was $48.8 million, compared to $56.5 million in the year-ago period. Excluding securities transactions, noninterest income declined in the fourth quarter to $51.5 million from $53.8 million in the year-ago period. This decline is explained by the absence of revenue from Duff & Phelps in the fourth quarter compared to $7.3 million a year ago. For the full year 2004, noninterest income excluding securities gains and Duff & Phelps increased by 5 percent from the year-ago period.
    Webster's growth in core fees remains strong as revenues from deposit services, insurance, loan and loan servicing and wealth management grew by 12 percent in the fourth quarter and 11 percent for the full year 2004. Gains on sales of loans and loan servicing declined during the quarter and for the full year primarily as a result of lower mortgage origination volumes. Other income of $2.7 million in the fourth quarter included $1.7 million of non-recurring insurance proceeds.
    Total noninterest expenses for the 2004 fourth quarter were $154.0 million compared to $98.3 million in the year-ago period, and $447.1 million for the full year 2004 compared to $378.0 million in 2003. Adjusting for de-leveraging costs, acquisitions, Duff & Phelps, FIN 46R and $3.4 million of non-recurring items in the fourth quarter of 2004, total noninterest expenses increased approximately 5 percent for both the quarter and the full year. This reflects continuing investment in personnel, technology and de novo branches under our strategic plan for growth.
    Income tax expense was $2.1 million in the fourth quarter and $68.9 million for the full year 2004. This reflects tax benefits of $17.5 million from the balance sheet de-leveraging and $2.0 million related to favorable resolution of audits in the fourth quarter.

    Balance Sheet Trends

    At December 31, 2004, total assets were $17.0 billion, up 17 percent from $14.6 billion a year ago. Total loans of $11.7 billion at December 31, 2004 increased 27 percent from $9.2 billion the prior year, while deposits were $10.6 billion, up 26 percent from $8.4 billion a year ago. Excluding FIRSTFED, total loans increased by $1.0 billion, or 11 percent, over the past year, while total deposits increased $0.7 billion, or 8 percent.
    "With solid growth of our core franchise from innovative additions to our products and services, Webster is in an enhanced competitive position in our markets," stated Webster President and Chief Operating Officer William T. Bromage. "Even as we continue to grow loans and deposits faster than the market, we will be especially focused on increasing the net interest margin."
    At the end of the fourth quarter, commercial loans including commercial real estate were $4.3 billion, up 29 percent from $3.3 billion a year ago. Commercial real estate loans were $1.7 billion, up 34 percent. Consumer loans, primarily home equity loans and lines, increased 23 percent to $2.6 billion compared to $2.1 billion a year ago. Excluding FIRSTFED, commercial loans including commercial real estate were up 14 percent, commercial real estate loans were up 17 percent, and consumer loans increased 11 percent.
    Core deposits (consisting of checking, money market and savings accounts) of $7.0 billion at December 31, 2004 increased by 26 percent from a year ago and represented 66 percent of total deposits. Excluding FIRSTFED, core deposits grew 8 percent. Webster's overall growth in deposits has been driven in part by its High Performance Checking products and the continuing success of its de novo branches in Fairfield County, Connecticut and Westchester County, New York.
    Book value per common share of $28.79 at December 31, 2004 increased from $24.91 one year ago. Tangible book value per share of $16.30 at December 31, 2004 decreased from $18.18 one year ago, principally reflecting an increase in intangible assets related to the FIRSTFED acquisition.

    Asset Quality

    Nonperforming assets totaled $39.2 million or 0.23 percent of total assets at December 31, 2004, compared to $42.9 million or 0.29 percent a year ago and $40.0 million or 0.22 percent at September 30, 2004.
    "Our nonperforming assets declined during the quarter and were below the levels of both a year ago and the prior quarter," stated Webster Chief Financial Officer William J. Healy. "Webster maintains a disciplined approach to credit risk management."
    The allowance for loan losses was $150.1 million, or 1.28 percent of total loans at December 31, 2004, compared to $121.7 million, or 1.32 percent, a year ago and $148.2 million, or 1.28 percent, at September 30, 2004. The ratio of the allowance to nonperforming loans at December 31, 2004 was 416 percent, compared to 323 percent a year ago and 401 percent at September 30, 2004.
    The provision for loan losses totaled $4.0 million in the fourth quarter, $1.3 million more than net loan charge-offs of $2.7 million, compared to a provision of $5.0 million and net loan charge-offs of $3.0 million a year ago. The provision totaled $18.0 million for the full year 2004, $7.7 million more than net loan charge-offs of $10.3 million, compared to a provision of $25.0 million and net loan charge-offs of $22.2 million a year ago. The annualized net charge-off ratio was 0.09 percent of average loans in the fourth quarter compared to 0.13 percent a year ago, and 0.10 percent for the full year 2004 compared to 0.25 percent in 2003.

    Webster Financial Corporation is the holding company for Webster Bank, National Association and Webster Insurance. With $17.0 billion in assets, Webster provides business and consumer banking, mortgage, insurance, financial planning, trust and investment services through 152 banking offices, 289 ATMs, telephone banking and the Internet. Webster Bank owns the asset-based lending firm Webster Business Credit Corporation, the insurance premium finance company Budget Installment Corp., and Center Capital Corporation, an equipment finance company headquartered in Farmington, Connecticut.
    For more information about Webster, including past press releases and the latest Annual Report, visit the Webster website at www.websteronline.com.

    Conference Call

    A conference call covering Webster's 2004 fourth quarter earnings announcement will be held today, Tuesday, January 25, at 1:00 p.m. Eastern Time and may be heard through Webster's investor relations website at www.wbst.com, or in listen-only mode by calling 1-877-407-8291 or 201-689-8345 internationally. The call will be archived on the website and available for future retrieval.

    Statements in this press release regarding Webster Financial Corporation's business that are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statement, see "Forward Looking Statements" in Webster's Annual Report for 2003.

WEBSTER FINANCIAL CORPORATION ---------------------------------------------------------------------- Selected Financial Highlights (unaudited) ---------------------------------------------------------------------- At or for the At or for the Three Months Ended Twelve Months Ended (In thousands, except December 31, December 31, per share data) 2004 2003 2004 2003 ----------------------------------------------------------------------

Net income and performance ratios (annualized): ----------------------------

Net income $ 16,306 $ 41,386 $153,833 $163,248 Net income per diluted common share 0.30 0.89 3.00 3.52 Return on average shareholders' equity 4.28 % 14.92 % 11.14 % 15.16 % Return on average tangible equity 7.50 20.59 18.03 20.98 Return on average assets 0.38 1.15 0.94 1.15 Noninterest income as a percentage of total revenue 27.67 34.51 31.94 35.99 Efficiency Ratio (a) 87.33 59.99 65.00 58.51

Net income and performance ratios before deleveraging charges (annualized): ----------------------------

Net income $ 16,306 $ 41,386 $153,833 $163,248 Debt prepayment penalties, net of tax 29,745 - 29,745 - Loss on sale of securities, net of tax 2,702 - 2,702 - -------- -------- -------- -------- Net income before deleveraging charges 48,753 41,386 186,280 163,248

Net income per diluted common share 0.90 0.89 3.63 3.52 Return on average shareholders' equity 12.81 % 14.92 % 13.49 % 15.16 % Return on average tangible equity 22.43 20.59 21.84 20.98 Return on average assets 1.13 1.15 1.13 1.15 Noninterest income as a percentage of total revenue 29.33 34.51 32.35 35.99 Efficiency Ratio (a) 59.97 59.99 58.00 58.51

Cash income and performance ratios (annualized) (b): ----------------------------

Net income $ 16,306 $ 41,386 $153,833 $163,248 Stock-based compensation, net of tax 1,248 965 4,490 3,749 Intangible amortization, net of tax 3,149 2,644 11,924 10,399 -------- -------- -------- -------- Cash income 20,703 44,995 170,247 177,396

Cash income per diluted common share 0.38 0.96 3.32 3.83 Cash return on average shareholders' equity 5.44 % 16.22 % 12.33 % 16.48 % Cash return on average tangible equity 9.52 22.39 19.96 22.80 Cash return on average assets 0.48 1.25 1.04 1.25

Cash income and performance ratios before deleveraging charges (annualized) (b) ---------------------------- Net income before deleveraging charges $ 48,753 $ 41,386 $186,280 $163,248 Stock-based compensation, net of tax 1,248 965 4,490 3,749 Intangible amortization, net of tax 3,149 2,644 11,924 10,399 -------- -------- -------- -------- Cash income 53,150 44,995 202,694 177,396

Cash income per diluted common share 0.98 0.96 3.95 3.83 Cash return on average shareholders' equity 13.97 % 16.22 % 14.68 % 16.48 % Cash return on average tangible equity 24.45 22.39 23.76 22.80 Cash return on average assets 1.23 1.25 1.23 1.25

Asset quality: ----------------------------

Allowance for loan losses $150,112 $121,674 $150,112 $121,674 Nonperforming assets 39,166 42,882 39,166 42,882 Allowance for loan losses / total loans 1.28 % 1.32 % 1.28 % 1.32 % Net charge-offs/ average loans (annualized) 0.09 0.13 0.10 0.25 Nonperforming loans / total loans 0.31 0.41 0.31 0.41 Nonperforming assets / total assets 0.23 0.29 0.23 0.29 Allowance for loan losses / nonperforming loans 415.50 323.22 415.50 323.22

Other ratios (annualized): ----------------------------

Tangible capital ratio 5.21 % 5.77 % 5.21 % 5.77 % Shareholders' equity / total assets 9.07 7.91 9.07 7.91 Interest-rate spread (c) 3.22 3.13 3.09 3.10 Net interest margin (c) 3.25 3.18 3.11 3.14

Share related: ----------------------------

Book value per common share $ 28.79 $ 24.91 $ 28.79 $ 24.91 Tangible book value per common share 16.30 18.18 16.30 18.18 Common stock closing price 50.64 45.86 50.64 45.86 Dividends declared per common share 0.23 0.21 0.90 0.82

Common shares issued and outstanding 53,628 46,276 53,628 46,276 Basic shares (average) 53,187 45,814 50,506 45,542 Diluted shares (average) 54,045 46,699 51,352 46,362

Footnotes:

(a) Noninterest expense as a percentage of net interest income plus noninterest income. (b) Cash income represents net income excluding the after tax effects of non-cash charges related to the amortization of intangible assets and stock-based compensation, which includes stock options and restricted stock. (c) Webster adopted FIN 46R on December 31, 2003, and in accordance with its provisions, deconsolidated the capital trusts and reported the associated liabilities as other long-term debt. Commencing in 2004, the costs have been reclassified from noninterest expenses to interest expense. (d) For purposes of this computation, unrealized gains (losses) are excluded from the average balance for rate calculations.

WEBSTER FINANCIAL CORPORATION ---------------------------------------------------------------------- Consolidated Statements of Condition (unaudited) ---------------------------------------------------------------------- December 31, September 30, December 31, (In thousands) 2004 2004 2003 ----------------------------------------------------------------------

Assets:

Cash and due from depository institutions $ 248,825 $ 234,449 $ 209,234 Short-term investments 17,629 25,783 42,420

Securities: Trading, at fair value - 2,635 555 Available for sale, at fair value 2,494,406 4,164,056 4,128,255 Held-to-maturity securities 1,229,613 323,378 173,371 ------------ ------------ ------------ Total securities 3,724,019 4,490,069 4,302,181

Loans held for sale 147,211 111,175 89,830

Loans: Residential mortgages 4,775,344 4,773,284 3,744,013 Commercial 2,584,738 2,586,351 2,040,921 Commercial real estate 1,715,047 1,619,968 1,281,516 Consumer 2,637,646 2,595,629 2,146,359 ------------ ------------ ------------ Total loans 11,712,775 11,575,232 9,212,809 Allowance for loan losses (150,112) (148,179) (121,674) ------------ ------------ ------------ Loans, net 11,562,663 11,427,053 9,091,135

Accrued interest receivable 63,406 65,812 52,756 Premises and equipment, net 149,069 136,385 95,631 Goodwill and intangible assets 694,165 676,176 330,929 Cash surrender value of life insurance 228,120 226,503 180,556 Prepaid expenses and other assets 185,490 408,837 174,018 ------------ ------------ ------------

Total Assets $17,020,597 $17,802,242 $14,568,690 ============ ============ ============

Liabilities and Shareholders' Equity:

Deposits: Demand deposits $ 1,409,682 $ 1,356,924 $ 1,090,060 NOW accounts 1,368,213 1,271,553 1,052,690 Money market deposit accounts 1,996,918 2,153,852 1,581,276 Savings accounts 2,253,073 2,243,949 1,869,398 Certificates of deposit 3,376,718 3,204,624 2,681,986 ------------ ------------ ------------ Total retail deposits 10,404,604 10,230,902 8,275,410 Treasury deposits 166,684 208,521 96,725 ------------ ------------ ------------ Total deposits 10,571,288 10,439,423 8,372,135

Federal Home Loan Bank advances 2,590,335 3,021,503 2,511,495 Federal funds purchased and securities sold under agreements to repurchase 1,438,483 1,973,478 1,892,138 Other long-term debt (c) 670,015 695,316 532,760 Accrued expenses and other liabilities 196,925 144,963 97,690 ------------ ------------ ------------ Total liabilities 15,467,046 16,274,683 13,406,218

Preferred stock of subsidiary corporation 9,577 9,577 9,577

Shareholders' equity 1,543,974 1,517,982 1,152,895 ------------ ------------ ------------

Total Liabilities and Shareholders' Equity $17,020,597 $17,802,242 $14,568,690 ============ ============ ============

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION ---------------------------------------------------------------------- Consolidated Statements of Income (unaudited) ---------------------------------------------------------------------- Three Months Ended Twelve Months Ended December 31, December 31, (In thousands, except per share data) 2004 2003 2004 2003 ----------------------------------------------------------------------

Interest income: Loans $154,177 $117,983 $547,308 $460,677 Securities and short-term investments 42,807 43,065 178,118 182,632 Loans held for sale 1,718 1,790 6,682 15,409 --------- --------- --------- --------- Total interest income 198,702 162,838 732,108 658,718 --------- --------- --------- ---------

Interest expense: Deposits 32,993 26,319 120,606 111,311 Borrowings 38,109 29,224 143,341 133,888 --------- --------- --------- --------- Total interest expense 71,102 55,543 263,947 245,199 --------- --------- --------- ---------

Net interest income 127,600 107,295 468,161 413,519 Provision for loan losses 4,000 5,000 18,000 25,000 --------- --------- --------- --------- Net interest income after provision for loan losses 123,600 102,295 450,161 388,519 --------- --------- --------- ---------

Noninterest income: Deposit service fees 20,712 17,731 77,743 70,018 Insurance revenue 10,348 9,077 43,506 39,975 Loan and loan servicing fees 7,727 8,001 28,574 26,384 Wealth and investment services 5,198 4,416 22,207 18,341 Financial advisory services - 7,265 3,808 22,758 Gain on sale of loans and loan servicing, net 2,492 2,854 13,305 19,520 Increase in cash surrender value of life insurance 2,283 2,082 8,835 8,490 Other 2,692 2,402 7,416 8,423 --------- --------- --------- --------- 51,452 53,828 205,394 213,909 Gain on sale of securities, net (2,646) 2,715 14,313 18,574 --------- --------- --------- --------- Total noninterest income 48,806 56,543 219,707 232,483 --------- --------- --------- ---------

Noninterest expenses: Compensation and benefits 57,428 53,722 219,820 206,381 Occupancy 9,909 7,470 35,820 30,698 Furniture and equipment 10,889 7,792 37,626 31,143 Intangible amortization 4,844 4,067 18,345 15,998 Marketing 2,533 2,058 13,380 11,508 Professional services 5,523 3,654 15,654 11,708 Acquisition costs 426 1,349 706 1,497 Debt prepayment penalties 45,761 - 45,761 - Capital trust securities (c) - 3,485 - 11,924 Other 16,735 14,683 60,025 57,125 --------- --------- --------- --------- Total noninterest expenses 154,048 98,280 447,137 377,982 --------- --------- --------- ---------

Income before income taxes 18,358 60,558 222,731 243,020 Income taxes 2,052 19,172 68,898 79,772 --------- --------- --------- --------- Net income $ 16,306 $ 41,386 $153,833 $163,248 ========= ========= ========= =========

Diluted shares (average) 54,045 46,699 51,352 46,362

Net income per common share: Basic $ 0.31 $ 0.90 $ 3.05 $ 3.58 Diluted 0.30 0.89 3.00 3.52

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION ---------------------------------------------------------------------- Consolidated Statements of Income (unaudited) ---------------------------------------------------------------------- Three Months Ended

Dec. 31, Sept. 30, June 30, March 31, Dec. 31, (In thousands, except per share data) 2004 2004 2004 2004 2003 ----------------------------------------------------------------------

Interest income: Loans $154,177 $145,456 $129,084 $118,591 $117,983 Securities and short-term investments 42,807 45,541 45,162 44,608 43,065 Loans held for sale 1,718 1,755 2,139 1,070 1,790 --------- --------- --------- --------- --------- Total interest income 198,702 192,752 176,385 164,269 162,838 --------- --------- --------- --------- ---------

Interest expense: Deposits 32,993 32,611 29,172 25,830 26,319 Borrowings 38,109 38,853 33,746 32,633 29,224 --------- --------- --------- --------- --------- Total interest expense 71,102 71,464 62,918 58,463 55,543 --------- --------- --------- --------- ---------

Net interest income 127,600 121,288 113,467 105,806 107,295 Provision for loan losses 4,000 4,000 5,000 5,000 5,000 --------- --------- --------- --------- --------- Net interest income after provision for loan losses 123,600 117,288 108,467 100,806 102,295 --------- --------- --------- --------- ---------

Noninterest income: Deposit service fees 20,712 20,596 19,250 17,185 17,731 Insurance revenue 10,348 10,924 10,596 11,638 9,077 Loan and loan servicing fees 7,727 6,893 7,305 6,649 8,001 Wealth and investment services 5,198 6,044 5,849 5,116 4,416 Financial advisory services - - - 3,808 7,265 Gain on sale of loans and loan servicing, net 2,492 4,467 5,321 1,025 2,854 Increase in cash surrender value of life insurance 2,283 2,421 2,177 1,954 2,082 Other 2,692 1,912 964 1,848 2,402 --------- --------- --------- --------- --------- 51,452 53,257 51,462 49,223 53,828 Gain on sale of securities, net (2,646) 5,843 5,616 5,500 2,715 --------- --------- --------- --------- --------- Total noninterest income 48,806 59,100 57,078 54,723 56,543 --------- --------- --------- --------- ---------

Noninterest expenses: Compensation and benefits 57,428 55,606 53,659 53,127 53,722 Occupancy 9,909 9,144 8,402 8,365 7,470 Furniture and equipment 10,889 10,103 8,993 7,641 7,792 Intangible amortization 4,844 4,827 4,582 4,092 4,067 Marketing 2,533 4,233 3,630 2,984 2,058 Professional services 5,523 4,294 2,938 2,899 3,654 Acquisition costs 426 - 265 - 1,349 Debt prepayment penalties 45,761 - - - - Capital trust securities (c) - - - - 3,485 Other 16,735 15,562 14,710 13,033 14,683 --------- --------- --------- --------- --------- Total noninterest expenses 154,048 103,769 97,179 92,141 98,280 --------- --------- --------- --------- ---------

Income before income taxes 18,358 72,619 68,366 63,388 60,558 Income taxes 2,052 23,258 22,523 21,065 19,172 --------- --------- --------- --------- --------- Net income $ 16,306 $ 49,361 $ 45,843 $ 42,323 $ 41,386 ========= ========= ========= ========= =========

Diluted shares (average) 54,045 53,767 50,475 47,059 46,699

Net income per common share: Basic $ 0.31 $ 0.93 $ 0.92 $ 0.92 $ 0.90 Diluted 0.30 0.92 0.91 0.90 0.89

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION ---------------------------------------------------------------------- Retail and Wholesale Interest-Rate Spreads (unaudited) ----------------------------------------------------------------------

Three Months Ended, December September June March December 2004 2004 2004 2004 2003 ----------------------------------------------------------------------

Interest-rate spread ------------------ Total interest- earning assets 5.02 % 4.82 % 4.68 % 4.78 % 4.81 % Total interest- bearing liabilities 1.80 1.78 1.69 1.74 1.68 -------- -------- -------- -------- -------- Interest-rate spread 3.22 % 3.04 % 2.99 % 3.04 % 3.13 % Net interest margin 3.25 3.06 3.02 3.09 3.18

Retail interest- rate spread ------------------ Yield on loans and loans held for sale 5.25 % 5.07 % 4.93 % 5.05 % 5.09 % Cost of deposits 1.25 1.25 1.23 1.24 1.26 -------- -------- -------- -------- -------- Spread 4.00 % 3.82 % 3.70 % 3.81 % 3.83 % ======== ======== ======== ======== ========

Wholesale interest- rate spread ------------------- Yield on securities and short-term investments 4.37 % 4.18 % 4.09 % 4.19 % 4.17 % Cost of borrowings 2.91 2.80 2.50 2.56 2.41 -------- -------- -------- -------- -------- Spread 1.46 % 1.38 % 1.59 % 1.63 % 1.76 % ======== ======== ======== ======== ========

---------------------------------------------------------------------- Consolidated Average Statements of Condition (unaudited) ----------------------------------------------------------------------

Three Months Ended December 31, 2004 ---------------------------------------------------------------------- Fully tax- Average equivalent (Dollars in thousands) balance Interest yield/rate ----------------------------------------------------------------------

Assets: Interest-earning assets: Loans $11,649,909 $ 154,177 5.25 % Securities 4,053,134 44,495 4.39 (d) Loans held for sale 136,197 1,718 5.05 Short-term investments 25,772 134 2.03 ------------ ------------ ------------ Total interest-earning assets 15,865,012 200,524 5.02 ------------ Noninterest-earning assets 1,411,162 ------------ Total assets $17,276,174 ============

Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand deposits $ 1,399,592 $ - - % Savings, NOW and money market deposit accounts 5,643,515 12,340 0.87 Time deposits 3,434,389 20,653 2.39 ------------ ------------ ------------ Total deposits 10,477,496 32,993 1.25 ----------- ----------- ------------ Federal Home Loan Bank advances 2,690,001 19,810 2.88 Fed funds and repurchase agreements 1,778,435 8,455 1.86 Other long-term debt (c) 686,226 9,844 5.74 ------------ ------------ ------------ Total borrowings 5,154,662 38,109 2.91 ------------ ------------ ------------ Total interest-bearing liabilities 15,632,158 71,102 1.80 ------------ Noninterest-bearing liabilities 112,063 ------------ Total liabilities 15,744,221

Capital securities and preferred stock of subsidiary corporation (c) 9,577

Shareholders' equity 1,522,376 ------------ Total liabilities and shareholders' equity $17,276,174 ============ 129,422 Less: tax-equivalent adjustment (1,822) ------------

Net interest income $ 127,600 ============

Interest-rate spread 3.22 % ============ Net interest margin 3.25 % ============

See Selected Financial Highlights for footnotes.

Three Months Ended December 31, 2003 ---------------------------------------------------------------------- Fully tax- Average equivalent (Dollars in thousands) balance Interest yield/rate ----------------------------------------------------------------------

Assets: Interest-earning assets: Loans $ 9,206,436 $ 117,983 5.08 % Securities 4,153,607 43,486 4.20 (d) Loans held for sale 135,632 1,790 5.28 Short-term investments 32,791 76 0.91 ------------ ------------ ------------ Total interest-earning assets 13,528,466 163,335 4.81 ------------ Noninterest-earning assets 903,477 ------------ Total assets $14,431,943 ============

Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand deposits $ 1,058,875 $ - - % Savings, NOW and money market deposit accounts 4,471,260 9,115 0.81 Time deposits 2,755,184 17,204 2.48 ------------ ------------ ------------ Total deposits 8,285,319 26,319 1.26 ------------ ------------ ------------ Federal Home Loan Bank advances 2,299,456 19,641 3.34 Fed funds and repurchase agreements 2,139,619 5,587 1.02 Other long-term debt (c) 317,509 3,996 5.03 ------------ ------------ ------------ Total borrowings 4,756,584 29,224 2.41 ------------ ------------ ------------ Total interest-bearing liabilities 13,041,903 55,543 1.68 ------------ Noninterest-bearing liabilities 85,714 ------------ Total liabilities 13,127,617

Capital securities and preferred stock of subsidiary corporation (c) 194,832

Shareholders' equity 1,109,494 ------------ Total liabilities and shareholders' equity $14,431,943 ============ 107,792 Less: tax-equivalent adjustment (497) ------------

Net interest income $ 107,295 ============

Interest-rate spread 3.13 % ============ Net interest margin 3.18 % ============

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION ---------------------------------------------------------------------- Consolidated Average Statements of Condition (unaudited) ----------------------------------------------------------------------

Twelve Months Ended December 31, 2004 ---------------------------------------------------------------------- Fully tax- Average equivalent (Dollars in thousands) balance Interest yield/rate ----------------------------------------------------------------------

Assets: Interest-earning assets: Loans $10,719,446 $547,308 5.11 % Loans held for sale 129,945 6,682 5.14 Securities 4,331,385 183,028 4.23 (d) Short-term investments 30,651 390 1.27 ----------- -------- ----------- Total interest-earning assets 15,211,427 737,408 4.85 -------- Noninterest-earning assets 1,234,124 ----------- Total assets $16,445,551 ===========

Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand deposits $1,255,897 $ - - % Savings, NOW and money market deposit accounts 5,286,637 47,683 0.90 Time deposits 3,162,939 72,923 2.31 ----------- -------- ----------- Total deposits 9,705,473 120,606 1.24 ----------- -------- ----------- Federal Home Loan Bank advances 2,774,287 82,092 2.96 Fed funds and repurchase agreements 1,834,605 24,693 1.35 Other long-term debt (c) 646,636 36,556 5.65 ----------- -------- ----------- Total borrowings 5,255,528 143,341 2.73 ----------- -------- ----------- Total interest-bearing liabilities 14,961,001 263,947 1.76 -------- Noninterest-bearing liabilities 94,145 ----------- Total liabilities 15,055,146

Capital securities and preferred stock of subsidiary corporation (c) 9,577

Shareholders' equity 1,380,828 ----------- Total liabilities and shareholders' equity $16,445,551 =========== 473,461 Less: tax-equivalent adjustment (5,300) --------

Net interest income $468,161 ========

Interest-rate spread 3.09 % =========== Net interest margin 3.11 % ===========

Twelve Months Ended December 31, 2003 ---------------------------------------------------------------------- Fully tax- Average equivalent (Dollars in thousands) balance Interest yield/rate ----------------------------------------------------------------------

Assets: Interest-earning assets: Loans $8,756,883 $460,677 5.26 % Loans held for sale 292,514 15,409 5.27 Securities 4,177,490 184,007 4.45 (d) Short-term investments 25,588 250 0.98 ----------- -------- ----------- Total interest-earning assets 13,252,475 660,343 5.00 -------- Noninterest-earning assets 951,575 ----------- Total assets $14,204,050 ===========

Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand deposits $1,010,952 $ - - % Savings, NOW and money market deposit accounts 4,282,536 41,519 0.97 Time deposits 2,677,863 69,792 2.61 ----------- -------- ----------- Total deposits 7,971,351 111,311 1.40 ----------- -------- ----------- Federal Home Loan Bank advances 2,395,814 88,845 3.71 Fed funds and repurchase agreements 2,218,799 26,108 1.18 Other long-term debt (c) 316,736 18,935 5.98 ----------- -------- ----------- Total borrowings 4,931,349 133,888 2.72 ----------- -------- ----------- Total interest-bearing liabilities 12,902,700 245,199 1.90 -------- Noninterest-bearing liabilities 79,491 ----------- Total liabilities 12,982,191 Capital securities and preferred stock of subsidiary corporation (c) 145,227 Shareholders' equity 1,076,632 ----------- Total liabilities and shareholders' equity $14,204,050 =========== 415,144 Less: tax-equivalent adjustment (1,625) -------- Net interest income $413,519 ======== Interest-rate spread 3.10 % =========== Net interest margin 3.14 % ===========

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION ---------------------------------------------------------------------- Asset Quality (unaudited) ----------------------------------------------------------------------

At or for the Three Months Ended ------------------------------------------------- (Dollars in Dec. 31, Sept. 30, June 30, March 31, Dec. 31, thousands) 2004 2004 2004 2004 2003 ----------------------------------------------------------------------

Nonperforming Assets --------------------

Nonperforming loans: Commercial: Commercial $14,624 $12,407 $15,895 $11,832 $14,266 Specialized industry - - - 5,019 6,427 Equipment financing 3,383 4,501 5,021 5,561 5,583 ------------------------------------------------- Total commercial 18,007 16,908 20,916 22,412 26,276

Commercial real estate 8,431 11,157 13,757 5,583 4,281 Residential 7,796 7,695 8,599 7,941 6,128 Consumer 1,894 1,204 826 604 959 -------------------------------------------------

Total nonperforming loans 36,128 36,964 44,098 36,540 37,644 -------------------------------------------------

Other real estate owned and repossessed assets: Commercial 2,824 2,482 3,192 4,273 4,296 Residential 100 527 238 325 942 Consumer 114 20 130 124 - -------------------------------------------------

Total other real estate owned and repossessed assets 3,038 3,029 3,560 4,722 5,238 -------------------------------------------------

Total nonperforming assets $39,166 $39,993 $47,658 $41,262 $42,882 =================================================

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Summary of Classified Loans ---------------------

Substandard: Accruing $79,292 $89,463 $90,421 $87,477 $72,638 Nonaccruing 33,896 32,234 39,600 31,595 29,403 ------------------------------------------------- Total substandard 113,188 121,697 130,021 119,072 102,041

Doubtful: Nonaccruing 1,110 3,615 3,286 4,377 6,791

Loss - - - - - -------------------------------------------------

Total classified loans $114,298 $125,312 $133,307 $123,449 $108,832 =================================================

Classified as a percent of total loans 1.0% 1.1% 1.2% 1.3% 1.2% -------------------------------------------------

WEBSTER FINANCIAL CORPORATION ---------------------------------------------------------------------- Allowance for Loan Losses (unaudited) ----------------------------------------------------------------------

At or for the Three Months Ended ------------------------------------------------- (Dollars in Dec. 31, Sept. 30, June 30, March 31, Dec. 31, thousands) 2004 2004 2004 2004 2003 ----------------------------------------------------------------------

Allowance for Loan Losses ------------------

Beginning balance $148,179 $146,511 $123,613 $121,674 $117,707

Allowance for purchased loans 617 - 20,081 - 1,970 Provision 4,000 4,000 5,000 5,000 5,000

Charge-offs: Commercial: Specialized industry - - - 826 558 All other commercial 3,432 3,556 2,646 2,249 2,949 ------------------------------------------------- Total commercial 3,432 3,556 2,646 3,075 3,507 Residential 367 92 187 983 330 Consumer 147 195 174 97 174 ------------------------------------------------- Total charge- offs 3,946 3,843 3,007 4,155 4,011 Recoveries (1,262) (1,511) (824) (1,094) (1,008) ------------------------------------------------- Net loan charge- offs 2,684 2,332 2,183 3,061 3,003 -------------------------------------------------

Ending balance $150,112 $148,179 $146,511 $123,613 $121,674 =================================================

Asset Quality Ratios: ---------------------

Allowance for loan losses/total loans 1.28 % 1.28 % 1.30 % 1.30 % 1.32 % Net charge-offs/ average loans (annualized) 0.09 0.08 0.08 0.13 0.13 Nonperforming loans/ total loans 0.31 0.32 0.39 0.38 0.41 Nonperforming assets/ total assets 0.23 0.22 0.28 0.27 0.29 Allowance for loan losses/nonperforming loans 415.50 400.87 332.24 338.30 323.22

--30--NR/ny*

CONTACT: Webster Financial Corporation Media Contact: Meghan Thompson, 203-578-2287 mthompson@websterbank.com or Investor Contact: Terry Mangan, 203-578-2318 tmangan@websterbank.com

KEYWORD: CONNECTICUT INDUSTRY KEYWORD: INSURANCE BANKING EARNINGS CONFERENCE CALLS SOURCE: Webster Financial Corporation

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