Webster Reports Quarterly Earnings Per Share of $.86 With Continued Strong Increases in Deposits and Commercial Loans

WATERBURY, Conn., Oct. 19 /PRNewswire-FirstCall/ -- Webster Financial Corporation , the holding company for Webster Bank, N.A., today announced net income of $46.6 million in the third quarter compared to $49.4 million in the year-ago quarter. Net income per diluted share was $.86 compared to $.92 a year ago. For the first nine months of 2005, net income was $140.4 million compared to $137.5 million a year ago. Net income per share was $2.59 and $2.73 in the respective periods. Average diluted shares outstanding are higher in 2005 as a result of shares issued in connection with the acquisition of FIRSTFED AMERICA BANCORP, INC. on May 14, 2004.

Cash net income, which adds stock-based compensation and intangible amortization expenses back to net income, was $51.3 million compared to $53.8 million in the year-ago quarter. Cash net income per share was $.95 in the third quarter compared to $1.00 a year ago. For the first nine months of 2005, cash net income was $154.5 million compared to $149.5 million a year ago. Cash net income per share was $2.85 and $2.96 in the respective periods.

Included in net income are gains on the sale of securities. In the third quarter, these gains represented $.01 per share compared to $.07 a year ago. For the first nine months of 2005, securities gains were $.03 per share compared to $.22 a year ago. The reduced level of securities and securities gains in 2005 is consistent with Webster's emphasis on delivering high quality earnings. In addition, one-time expenses equivalent to $.03 per share in the third quarter and $.08 in the first nine months of 2005 were incurred in support of Webster's core infrastructure conversion project.

"Our third quarter results demonstrate continued strong core growth in deposits and commercial loans and the further strengthening of our balance sheet," stated Webster Chairman and Chief Executive Officer James C. Smith. "Webster's plan for growth is producing high quality earnings for our shareholders in the near term while affirming our commitment to investing in our future."

Revenues

Total revenues (net interest income plus total noninterest income) were $185.6 million in the third quarter, compared to $180.4 million a year ago, an increase of 3 percent. Adjusting both periods to exclude securities gains, total revenues grew by 6 percent. Driving the growth in revenues was net interest income, which totaled $129.6 million in the third quarter of 2005 compared to $121.3 million in the year-ago period. The increase over the prior year reflects growth in the loan portfolio fully funded by deposit growth and a higher net interest margin.

Webster's net interest margin (annualized tax-equivalent net interest income as a percentage of average earning assets) was 3.26 percent in the third quarter, an improvement of 20 basis points from 3.06 percent in the year-ago period. The increase from a year ago reflects the benefit of Webster's de-leveraging in the fourth quarter of 2004 and the impact of higher interest rates on earning asset yields over the past year. The recent interest rate environment, with longer-term interest rates not rising at the same level as short-term rates, resulted in a 6 basis point decline from the net interest margin of 3.32 percent in the second quarter of 2005.

In the third quarter of 2005, total noninterest income was $56.0 million compared to $59.1 million in the year-ago period. Excluding securities gains of $1.1 million and $5.8 million in the respective periods, noninterest income increased in the third quarter to $54.8 million from $53.3 million in the year-ago period. Deposit service fees grew by $1.6 million, or 8 percent, from a year ago aided by recently acquired HSA Bank while loan and loan servicing fees grew by 12 percent. Gains on sales of loans and loan servicing totaled $3.7 million in the quarter and decreased 17 percent from a year ago primarily as a result of the impact of competitive pricing in the market.

The provision for loan losses totaled $2.0 million in the third quarter and exceeded net loan charge-offs by $0.2 million. This compares to a provision of $4.0 million a year ago, which exceeded net loan charge-offs by $1.7 million. The annualized net loan charge-off ratio was 0.06 percent of average loans in the third quarter compared to 0.08 percent a year ago.

Expenses

Total noninterest expenses for the 2005 third quarter were $114.9 million, which includes $2.2 million of non-recurring charges under Webster's core infrastructure conversion project, compared to $103.8 million in the year-ago period. Adjusting each period for acquisitions, investments in de novo branch expansion and the non-recurring core infrastructure conversion charges, total noninterest expenses were $106.8 million in the third quarter and $101.8 million a year ago for an increase of just under 5 percent. The increase reflects higher employee-related costs and investments in technology to support Webster's new core systems.

Balance Sheet Trends

Total assets were $17.8 billion at September 30, 2005, same as a year ago. Total loans of $12.2 billion increased 5 percent from $11.6 billion the prior year, while deposits were $11.7 billion, up 12 percent from $10.4 billion a year ago.

"Webster's double-digit organic growth in deposits and commercial loans over the past year reflects increasing success in our markets," stated Webster President and Chief Operating Officer William T. Bromage. "Our expanding regional footprint and our role as a trusted local provider offer substantial opportunity for future growth."

At the end of the third quarter, commercial loans were $4.6 billion, including commercial and industrial loans at $3.0 billion, up 15 percent from a year ago, and commercial real estate loans at $1.6 billion, up 3 percent. Consumer loans, primarily home equity loans and lines, increased 6 percent to $2.7 billion compared to $2.6 billion a year ago. Commercial, commercial real estate and consumer loans comprised 61 percent of total loans at September 30, 2005 compared to 59 percent a year ago.

Demand and NOW deposits have grown by 6 percent and 26 percent (14 percent adjusted for the HSA Bank acquisition), respectively, compared to a year ago while certificates of deposit balances have grown by 29 percent as consumer preferences have shifted to this product offering. Wholesale borrowings as a percent of total assets declined to 25 percent at September 30, 2005 compared to 32 percent a year ago as total deposit growth exceeded loan growth by $601 million over the past year.

"We actively manage our balance sheet, consistent with our stated operating principles," stated Webster Chief Financial Officer William J. Healy. "In the past year, we've made significant progress improving our loan to deposit ratio, reducing reliance on wholesale borrowings and building our tangible equity ratio."

Book value per common share of $30.41 at September 30, 2005 increased from $28.54 a year ago. Tangible book value per share of $17.71 at September 30, 2005 increased from $16.30 last year. The ratio of tangible equity to tangible assets increased to 5.45 percent at September 30, 2005 compared to 4.92 percent a year ago. Return on average tangible equity was 19.6 percent in the third quarter compared to 23.6 percent a year ago while the cash return on average tangible equity was 21.6 percent and 25.7 percent in the respective periods.

Asset Quality

Nonperforming assets increased during the quarter and totaled $60.4 million, or 0.34 percent of total assets, at September 30, 2005 compared to $44.2 million, or 0.25 percent, at June 30 and $40.0 million, or 0.22 percent, a year ago.

The allowance for loan losses was $155.1 million, or 1.27 percent of total loans, at September 30, 2005 compared to $148.2 million, or 1.28 percent, a year ago and $154.8 million, or 1.31 percent, at June 30. The ratio of the allowance to nonperforming loans at September 30, 2005 was 265 percent compared to 401 percent a year ago and 369 percent at June 30.

Webster Financial Corporation is the holding company for Webster Bank, National Association and Webster Insurance. With $17.8 billion in assets, Webster provides business and consumer banking, mortgage, insurance, financial planning, trust and investment services through 154 banking offices, 293 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., Center Capital Corporation, an equipment finance company headquartered in Farmington, Connecticut and provides health savings account trustee and administrative services through HSA Bank, a division of Webster Bank.

For more information about Webster, including past press releases and the latest Annual Report, visit the Webster website at http://www.websteronline.com/.

Conference Call

A conference call covering Webster's 2005 third quarter earnings announcement will be held today, Wednesday, October 19, at 11:00 a.m. Eastern Time and may be heard through Webster's investor relations website at http://www.wbst.com/, or in listen-only mode by calling 1-877-407-3980 or 201-689-8475 internationally. The call will be archived on the website and available for future retrieval.

Forward-looking Statements

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 2004. Except as required by law, Webster does not undertake to update any such forward-looking information.

Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. We believe that providing certain non-GAAP financial measures, such as cash basis net income, provides investors with information useful in understanding our financial performance, our performance trends and financial position. A reconciliation of cash basis net income to net income is included in the accompanying financial tables, elsewhere in this report.

Media Contact Clark Finley 203-578-2287 cfinley@websterbank.com

Investor Contact Terry Mangan 203-578-2318 tmangan@websterbank.com

Selected Financial Highlights (unaudited) At or for the Three At or for the Nine Months Ended Months Ended September 30, September 30, (In thousands, except per share data) 2005 2004 2005 2004 Net income and performance ratios (annualized): Net income $46,602 $49,361 $140,355 $137,527 Net income per diluted common share 0.86 0.92 2.59 2.73 Return on average shareholders' equity 11.39% 13.25% 11.69% 13.75% Return on average tangible equity 19.59 23.56 20.34 21.64 Return on average assets 1.06 1.13 1.08 1.13 Noninterest income as a percentage of total revenue 30.16 32.76 29.56 33.41 Efficiency ratio (a,d) 61.93 57.53 61.09 57.30 Cash income and performance ratios (annualized) (b): Net income $46,602 $49,361 $140,355 $137,527 Stock-based compensation, net of tax 1,470 1,260 4,493 3,242 Intangible amortization, net of tax 3,251 3,138 9,693 8,776 Cash income 51,323 53,759 154,541 149,545 Cash income per diluted common share 0.95 1.00 2.85 2.96 Cash return on average shareholders' equity 12.55% 14.43% 12.87% 14.95% Cash return on average tangible equity 21.57 25.65 22.39 23.53 Cash return on average assets 1.16 1.23 1.19 1.23 Asset quality: Allowance for loan losses $155,052 $148,179 $155,052 $148,179 Nonperforming assets 60,355 39,993 60,355 39,993 Allowance for loan losses/ total loans 1.27% 1.28% 1.27% 1.28% Net charge-offs/average loans (annualized) 0.06 0.08 0.03 0.10 Nonperforming loans/ total loans 0.48 0.32 0.48 0.32 Nonperforming assets/ total assets 0.34 0.22 0.34 0.22 Allowance for loan losses/ nonperforming loans 264.87 400.87 264.87 400.87 Other ratios (annualized): Tangible capital ratio 5.45% 4.92% 5.45% 4.92% Shareholders' equity/ total assets 9.19 8.53 9.19 8.53 Interest-rate spread 3.22 3.04 3.26 3.02 Net interest margin 3.26 3.06 3.30 3.05 Share related: Book value per common share $30.41 $28.54 $30.41 $28.54 Tangible book value per common share 17.71 16.30 17.71 16.30 Common stock closing price 44.96 49.39 44.96 49.39 Dividends declared per common share 0.25 0.23 0.73 0.67 Common shares issued and outstanding 53,795 53,185 53,795 53,185 Basic shares (average) 53,648 52,938 53,612 49,606 Diluted shares (average) 54,310 53,767 54,269 50,448 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) For purposes of this computation, unrealized gains (losses) are excluded from the average balance for rate calculations. (d) Excluding conversion and infrastructure cost in 2005, the efficiency ratio would be 60.73% and 59.85% for the three and nine months ended September 30, 2005, respectively. Consolidated Statements of Condition (unaudited) September 30, June 30, September 30, (In thousands) 2005 2005 2004 Assets: Cash and due from depository institutions $269,859 $322,376 $234,449 Short-term investments 9,224 13,088 25,783 Securities: Trading, at fair value 1,901 1,409 2,635 Available for sale, at fair value 2,668,226 2,649,930 4,164,056 Held-to-maturity securities 1,161,507 1,196,368 323,378 Total securities 3,831,634 3,847,707 4,490,069 Loans held for sale 247,365 245,174 111,175 Loans: Residential mortgages 4,812,298 4,690,318 4,773,284 Commercial 2,978,537 2,781,938 2,586,351 Commercial real estate 1,666,384 1,666,235 1,619,968 Consumer 2,740,019 2,671,197 2,595,629 Total loans 12,197,238 11,809,688 11,575,232 Allowance for loan losses (155,052) (154,822) (148,179) Loans, net 12,042,186 11,654,866 11,427,053 Accrued interest receivable 73,253 67,380 65,812 Premises and equipment, net 179,463 171,579 136,385 Goodwill and intangible assets 703,740 708,387 676,176 Cash surrender value of life insurance 235,467 233,129 226,503 Prepaid expenses and other assets 214,865 208,511 408,837 Total Assets $17,807,056 $17,472,197 $17,802,242 Liabilities and Shareholders' Equity: Deposits: Demand deposits $1,431,642 $1,509,957 $1,356,924 NOW accounts 1,600,481 1,640,692 1,271,553 Money market deposit accounts 1,971,075 1,892,664 2,153,852 Savings accounts 2,032,927 2,284,076 2,243,949 Certificates of deposit 4,118,765 3,830,999 3,204,624 Total retail deposits 11,154,890 11,158,388 10,230,902 Treasury deposits 507,302 420,846 208,521 Total deposits 11,662,192 11,579,234 10,439,423 Federal Home Loan Bank advances 2,064,963 2,126,437 3,021,503 Securities sold under agreements to repurchase and other short-term debt 1,633,906 1,345,910 1,973,478 Other long-term debt 673,999 674,117 695,316 Accrued expenses and other liabilities 126,537 126,011 144,963 Total liabilities 16,161,597 15,851,709 16,274,683 Preferred stock of subsidiary corporation 9,577 9,577 9,577 Shareholders' equity 1,635,882 1,610,911 1,517,982 Total Liabilities and Shareholders' Equity $17,807,056 $17,472,197 $17,802,242 See Selected Financial Highlights for footnotes. Consolidated Statements of Income (unaudited) Three Months Ended Nine Months Ended September 30, September 30, (In thousands, except per 2005 2004 2005 2004 share data) Interest income: Loans $175,680 $145,456 $501,434 $393,131 Securities and short-term investments 43,775 45,541 127,358 135,311 Loans held for sale 3,686 1,755 9,382 4,964 Total interest income 223,141 192,752 638,174 533,406 Interest expense: Deposits 51,338 32,611 131,305 87,613 Borrowings 42,191 38,853 119,190 105,232 Total interest expense 93,529 71,464 250,495 192,845 Net interest income 129,612 121,288 387,679 340,561 Provision for loan losses 2,000 4,000 7,500 14,000 Net interest income after provision for loan losses 127,612 117,288 380,179 326,561 Noninterest income: Deposit service fees 22,182 20,596 63,058 57,031 Insurance revenue 10,973 10,924 33,337 33,158 Loan and loan servicing fees 7,739 6,893 23,942 20,847 Wealth and investment services 5,554 6,044 16,977 17,009 Gain on sale of loans and loan servicing, net 3,703 4,467 9,251 10,813 Increase in cash surrender value of life insurance 2,341 2,421 6,881 6,552 Financial advisory services - - - 3,808 Other 2,347 1,912 6,603 4,724 54,839 53,257 160,049 153,942 Gain on sale of securities, net 1,141 5,843 2,607 16,959 Total noninterest income 55,980 59,100 162,656 170,901 Noninterest expenses: Compensation and benefits 60,808 55,406 176,564 162,192 Occupancy 10,482 9,144 32,151 25,911 Furniture and equipment 13,009 10,103 35,418 26,737 Intangible amortization 5,001 4,827 14,912 13,501 Marketing 3,339 4,233 10,286 10,847 Professional services 3,626 4,294 11,368 10,131 Conversion and infrastructure costs 2,217 200 6,857 200 Other 16,450 15,562 48,655 43,570 Total noninterest expenses 114,932 103,769 336,211 293,089 Income before income taxes 68,660 72,619 206,624 204,373 Income taxes 22,058 23,258 66,269 66,846 Net income $46,602 $49,361 $140,355 $137,527 Diluted shares (average) 54,310 53,767 54,269 50,448 Net income per common share: Basic $0.87 $0.93 $2.62 $2.77 Diluted 0.86 0.92 2.59 2.73 See Selected Financial Highlights for footnotes. Consolidated Statements of Income (unaudited) Three Months Ended Sept. 30, June 30, March 31, Dec. 31 Sept. 30, (In thousands, except 2005 2005 2005 2004 2004 per share data) Interest income: Loans $175,680 $166,967 $158,787 $154,177 $145,456 Securities and short- term investments 43,775 42,684 40,899 42,807 45,541 Loans held for sale 3,686 2,964 2,732 1,718 1,755 Total interest income 223,141 212,615 202,418 198,702 192,752 Interest expense: Deposits 51,338 44,099 35,868 32,993 32,611 Borrowings 42,191 38,681 38,318 38,109 38,853 Total interest expense 93,529 82,780 74,186 71,102 71,464 Net interest income 129,612 129,835 128,232 127,600 121,288 Provision for loan losses 2,000 2,000 3,500 4,000 4,000 Net interest income after provision for loan losses 127,612 127,835 124,732 123,600 117,288 Noninterest income: Deposit service fees 22,182 21,747 19,129 20,712 20,596 Insurance revenue 10,973 10,562 11,802 10,348 10,924 Loan and loan servicing fees 7,739 7,274 8,929 7,727 6,893 Wealth and investment services 5,554 6,028 5,395 5,198 6,044 Gain on sale of loans and loan servicing, net 3,703 3,012 2,536 2,492 4,467 Increase in cash surrender value of life insurance 2,341 2,302 2,238 2,283 2,421 Other 2,347 2,013 2,243 2,692 1,912 54,839 52,938 52,272 51,452 53,257 Gain (loss) on sale of securities, net 1,141 710 756 (2,646) 5,843 Total noninterest income 55,980 53,648 53,028 48,806 59,100 Noninterest expenses: Compensation and benefits 60,808 57,854 57,902 57,128 55,406 Occupancy 10,482 10,810 10,859 9,909 9,144 Furniture and equipment 13,009 11,611 10,798 10,889 10,103 Intangible amortization 5,001 5,009 4,902 4,844 4,827 Marketing 3,339 3,664 3,283 2,533 4,233 Professional services 3,626 3,972 3,770 5,523 4,294 Conversion and infrastructure costs 2,217 3,506 1,134 300 200 Debt prepayment penalties - - - 45,761 - Other 16,450 17,079 15,126 17,161 15,562 Total noninterest expenses 114,932 113,505 107,774 154,048 103,769 Income before income taxes 68,660 67,978 69,986 18,358 72,619 Income taxes 22,058 21,720 22,491 2,052 23,258 Net income $46,602 $46,258 $47,495 $16,306 $49,361 Diluted shares (average) 54,310 54,278 54,217 54,045 53,767 Net income per common share: Basic $0.87 $0.86 $0.89 $0.31 $0.93 Diluted 0.86 0.85 0.88 0.30 0.92 See Selected Financial Highlights for footnotes. Retail and Wholesale Interest-Rate Spreads (unaudited) Three Months Ended, September June March December September 2005 2005 2005 2004 2004 Interest-rate spread Yield on interest-earning assets 5.55% 5.40% 5.22% 5.02% 4.82% Cost of interest-bearing liabilities 2.33 2.11 1.94 1.80 1.78 Interest-rate spread 3.22% 3.29% 3.28% 3.22% 3.04% Net interest margin 3.26 3.32 3.32 3.25 3.06 Retail interest-rate spread Yield on loans and loans held for sale 5.83% 5.66% 5.44% 5.25% 5.07% Cost of deposits 1.76 1.57 1.37 1.25 1.25 Spread 4.07% 4.09% 4.07% 4.00% 3.82% Wholesale interest-rate spread Yield on securities and short- term investments 4.67% 4.62% 4.52% 4.37% 4.18% Cost of borrowings 3.84 3.54 3.23 2.91 2.80 Spread 0.83% 1.08% 1.29% 1.46% 1.38% Consolidated Average Statements of Condition (unaudited) Three Months Ended September 30, 2005 Fully tax- Average equivalent (Dollars in thousands) balance Interest yield/rate Assets: Interest-earning assets: Loans $11,974,880 $175,685 5.81% Securities 3,906,118 45,997 4.68(c) Loans held for sale 223,002 3,686 6.61 Short-term investments 20,044 117 2.28 Total interest-earning assets 16,124,044 225,485 5.55 Noninterest-earning assets 1,505,579 Total assets $17,629,623 Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand deposits $1,477,230 - - Savings, NOW and money market deposit accounts 5,679,259 18,021 1.26 Time deposits 4,413,329 33,317 3.00 Total deposits 11,569,818 51,338 1.76 Federal Home Loan Bank advances 2,128,760 19,134 3.52 Repurchase agreements and other short-term debt 1,518,921 11,859 3.06 Other long-term debt 674,056 11,198 6.65 Total borrowings 4,321,737 42,191 3.84 Total interest-bearing liabilities 15,891,555 93,529 2.33 Noninterest-bearing liabilities 92,381 Total liabilities 15,983,936 Preferred stock of subsidiary corporation 9,577 Shareholders' equity 1,636,110 Total liabilities and shareholders' equity $17,629,623 131,956 Less: tax-equivalent adjustment (2,344) Net interest income $129,612 Interest-rate spread 3.22% Net interest margin 3.26% See Selected Financial Highlights for footnotes. Consolidated Average Statements of Condition (unaudited) Three Months Ended September 30, 2004 Fully tax- Average equivalent (Dollars in thousands) balance Interest yield/rate Assets: Interest-earning assets: Loans $11,401,076 $145,456 5.06% Securities 4,456,849 47,095 4.20 (c) Loans held for sale 129,157 1,755 5.44 Short-term investments 31,231 106 1.33 Total interest-earning assets 16,018,313 194,412 4.82 Noninterest-earning assets 1,413,030 Total assets $17,431,343 Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand deposits $1,357,230 - - Savings, NOW and money market deposit accounts 5,673,797 12,703 0.89 Time deposits 3,366,232 19,908 2.35 Total deposits 10,397,259 32,611 1.25 Federal Home Loan Bank advances 3,147,887 23,373 2.91 Repurchase agreements and other short-term debt 1,608,818 5,919 1.44 Other long-term debt 695,365 9,561 5.50 Total borrowings 5,452,070 38,853 2.80 Total interest-bearing liabilities 15,849,329 71,464 1.78 Noninterest-bearing liabilities 82,696 Total liabilities 15,932,025 Preferred stock of subsidiary corporation 9,577 Shareholders' equity 1,489,741 Total liabilities and shareholders' equity $17,431,343 122,948 Less: tax-equivalent adjustment (1,660) Net interest income $121,288 Interest-rate spread 3.04% Net interest margin 3.06% See Selected Financial Highlights for footnotes. Consolidated Average Statements of Condition (unaudited) Nine Months Ended September 30, 2005 Fully tax- Average equivalent (Dollars in thousands) balance Interest yield/rate Assets: Interest-earning assets: Loans $11,796,868 $501,440 5.65% Securities 3,836,811 133,373 4.61 (c) Loans held for sale 226,468 9,382 5.52 Short-term investments 20,028 390 2.57 Total interest-earning assets 15,880,175 644,585 5.39 Noninterest-earning assets 1,467,085 Total assets $17,347,260 Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand deposits $1,425,093 - - Savings, NOW and money market deposit accounts 5,678,099 47,161 1.11 Time deposits 4,064,228 84,144 2.77 Total deposits 11,167,420 131,305 1.57 Federal Home Loan Bank advances 2,247,887 55,881 3.28 Repurchase agreements and other short-term debt 1,542,111 31,274 2.67 Other long-term debt 676,426 32,035 6.31 Total borrowings 4,466,424 119,190 3.53 Total interest-bearing liabilities 15,633,844 250,495 2.13 Noninterest-bearing liabilities 102,981 Total liabilities 15,736,825 Preferred stock of subsidiary corporation 9,577 Shareholders' equity 1,600,858 Total liabilities and shareholders' equity $17,347,260 394,090 Less: tax-equivalent adjustment (6,411) Net interest income $387,679 Interest-rate spread 3.26% Net interest margin 3.30% See Selected Financial Highlights for footnotes. Consolidated Average Statements of Condition (unaudited) Nine Months Ended September 30, 2004 Fully tax- Average equivalent (Dollars in thousands) balance Interest yield/rate Assets: Interest-earning assets: Loans $10,407,028 $393,131 5.01% Securities 4,424,813 138,533 4.18 (c) Loans held for sale 127,846 4,964 5.18 Short-term investments 32,290 256 1.04 Total interest-earning assets 14,991,977 536,884 4.76 Noninterest-earning assets 1,174,680 Total assets $16,166,657 Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand deposits $1,207,649 - - Savings, NOW and money market deposit accounts 5,166,808 33,143 0.86 Time deposits 3,071,795 54,470 2.37 Total deposits 9,446,252 87,613 1.24 Federal Home Loan Bank advances 2,802,588 62,282 2.92 Repurchase agreements and other short-term debt 1,853,465 16,238 1.15 Other long-term debt 633,343 26,712 5.62 Total borrowings 5,289,396 105,232 2.62 Total interest-bearing liabilities 14,735,648 192,845 1.74 Noninterest-bearing liabilities 88,132 Total liabilities 14,823,780 Preferred stock of subsidiary corporation 9,577 Shareholders' equity 1,333,300 Total liabilities and shareholders' equity $16,166,657 344,039 Less: tax-equivalent adjustment (3,478) Net interest income $340,561 Interest-rate spread 3.02% Net interest margin 3.05% See Selected Financial Highlights for footnotes. At or for the Three Months Ended (Unaudited) Sept. 30, June 30, March 31, (Dollars in thousands) 2005 2005 2005 Asset Quality Nonperforming loans: Commercial: Commercial $27,544 $19,073 $17,112 Equipment financing 3,209 3,466 3,800 Total commercial 30,753 22,539 20,912 Commercial real estate 19,650 11,654 15,609 Residential 6,436 6,690 7,528 Consumer 1,699 1,019 1,586 Total nonperforming loans 58,538 41,902 45,635 Loans held for sale 181 - 492 Other real estate owned and repossessed assets: Commercial 1,408 2,217 2,472 Residential 218 112 446 Consumer 10 10 85 Total other real estate owned and repossessed assets 1,636 2,339 3,003 Total nonperforming assets $60,355 $44,241 $49,130 Allowance for Loan Losses Beginning balance $154,822 $152,519 $150,112 Allowance for purchased loans - - - Provision 2,000 2,000 3,500 Charge-offs: Commercial 2,204 1,432 2,155 Residential 378 178 167 Consumer 137 201 142 Total charge-offs 2,719 1,811 2,464 Recoveries (949) (2,114) (1,371) Net loan (recoveries) charge-offs 1,770 (303) 1,093 Ending balance $155,052 $154,822 $152,519 Asset Quality Ratios: Allowance for loan losses/total loans 1.27% 1.31% 1.30% Net charge-offs (recoveries)/average loans (annualized) 0.06 (0.01) 0.04 Nonperforming loans/total loans 0.48 0.35 0.39 Nonperforming assets/total assets 0.34 0.25 0.28 Allowance for loan losses/ nonperforming loans 264.87 369.49 334.21 At or for the Three Months Ended (Unaudited) Dec. 31, Sept. 30, (Dollars in thousands) 2004 2004 Asset Quality Nonperforming loans: Commercial: Commercial $14,624 $12,407 Equipment financing 3,383 4,501 Total commercial 18,007 16,908 Commercial real estate 8,431 11,157 Residential 7,796 7,695 Consumer 1,894 1,204 Total nonperforming loans 36,128 36,964 Loans held for sale - - Other real estate owned and repossessed assets: Commercial 2,824 2,482 Residential 100 527 Consumer 114 20 Total other real estate owned and repossessed assets 3,038 3,029 Total nonperforming assets $39,166 $39,993 Allowance for Loan Losses Beginning balance $148,179 $146,511 Allowance for purchased loans 617 - Provision 4,000 4,000 Charge-offs: Commercial 3,432 3,556 Residential 367 92 Consumer 147 195 Total charge-offs 3,946 3,843 Recoveries (1,262) (1,511) Net loan (recoveries) charge-offs 2,684 2,332 Ending balance $150,112 $148,179 Asset Quality Ratios: Allowance for loan losses/total loans 1.28% 1.28% Net charge-offs (recoveries)/ average loans (annualized) 0.09 0.08 Nonperforming loans/total loans 0.31 0.32 Nonperforming assets/total assets 0.23 0.22 Allowance for loan losses/ nonperforming loans 415.50 400.87