UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the period ending June 30, 1997
-------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________________ to __________________
Commission File Number: 0-15213
WEBSTER FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 06-1187536
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Webster Plaza, Waterbury, Connecticut 06720
(Address of principal executive offices) (ZipCode)
(203) 753-2921
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate the number of shares outstanding for the issuer's classes of
common stock, as of the latest practicable date.
Common Stock (par value $ .01) 13,647,211 Shares
------------------------------ -----------------------------------------
(Class) Issued and Outstanding at August 14, 1997
<PAGE>
Webster Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Condensed Consolidated Statements of Condition at June 30, 1997
and December 31, 1996 3
Condensed Consolidated Statements of Income for the Three and Six
Months Ended June 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Condensed Consolidated
Financial Statements 10
PART II - OTHER INFORMATION 18
SIGNATURES 19
2
<PAGE>
Webster Financial Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
(Dollars in Thousands, Except Share Data)
- -----------------------------------------------------------------------------------------------------------------------
June 30, December 31,
1997 1996
------------ ------------
ASSETS (unaudited)
<S> <C> <C>
Cash and Due from Depository Institutions $ 91,038 $ 100,113
Interest-bearing Deposits 38,019 27
Securities: (Note 2)
Trading at Fair Value 70,197 59,331
Available for Sale, at Fair Value, (Book Value: $1,541,715 in 1997;
$807,028 in 1996) 1,566,780 810,989
Held to Maturity, (Market Value: $435,869 in 1997;
$500,458 in 1996) 443,158 506,159
Loans Receivable, Net 3,495,485 3,384,465
Segregated Assets, Net 48,127 75,670
Accrued Interest Receivable 32,828 31,400
Premises and Equipment, Net 56,144 56,575
Foreclosed Properties, Net 13,133 12,991
Core Deposit Intangible 43,502 46,442
Prepaid Expenses and Other Assets 45,355 42,116
----------- ------------
Total Assets $5,943,766 $5,126,278
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $4,006,688 $4,099,501
Federal Home Loan Bank Advances 962,045 510,130
Other Borrowings 484,365 144,627
Advance Payments by Borrowers for Taxes and Insurance 23,225 28,447
Accrued Expenses and Other Liabilities 68,905 51,480
----------- ------------
Total Liabilities 5,545,228 4,834,185
----------- ------------
Corporation-Obligated Mandatorily Redeemable Capital
Securities of Subsidiary Trust (Note 9) 100,000 --
----------- ------------
Shareholders' Equity
Cumulative Convertible Preferred Stock, Series B,
No shares issued and outstanding at June 30, 1997 and
98,084 shares issued and outstanding at December 31, 1996 -- 1
Common Stock, $.01 par value:
Authorized - 30,000,000 shares;
Issued - 12,003,116 shares at June 30, 1997 and
12,142,555 shares at December 31, 1996 120 120
Paid-in Capital 153,536 171,766
Retained Earnings 142,953 139,936
Less Treasury Stock at cost, 17,810 shares at June 30, 1997
and 575,274 shares at December 31, 1996 (614) (18,801)
Less Employee Stock Ownership Plan Shares Purchased with Debt (1,971) (2,574)
Unrealized Gains on Securities, Net 4,514 1,645
----------- ------------
Total Shareholders' Equity 298,538 292,093
----------- ------------
Total Liabilities and Shareholders' Equity $5,943,766 $5,126,278
=========== ============
Webster Financial Corporation and Subsidiaries
See accompanying notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
Webster Financial Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(Dollars in Thousands, Except Share Data)
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30,
-------- --------
1997 1996 1997 1996
-------- -------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Interest Income:
Loans and Segregated Assets $69,860 $68,087 $137,198 $130,695
Securities and Interest-bearing Deposits 31,445 21,205 56,133 42,776
-------- ------- -------- --------
Total Interest Income 101,305 89,292 193,331 173,471
-------- ------- -------- --------
Interest Expense:
Interest on Deposits 38,354 40,492 77,669 79,972
Interest on Borrowings 18,118 9,128 29,458 18,950
-------- ------- -------- --------
Total Interest Expense 56,472 49,620 107,127 98,922
-------- ------- -------- --------
Net Interest Income 44,833 39,672 86,204 74,549
Provision for Loan Losses (Note 6) 2,375 2,050 9,400 3,700
-------- ------- -------- --------
Net Interest Income After Provision for Loan Losses 42,458 37,622 76,804 70,849
-------- ------- -------- --------
Noninterest Income:
Fees and Service Charges 5,977 5,484 11,580 9,471
Gain on Sale of Loans and Loan Servicing, Net 184 154 323 269
Gain on Sale of Securities, Net 237 802 635 1,384
Other Noninterest Income 849 1,055 2,014 2,105
-------- ------- -------- --------
Total Noninterest Income 7,247 7,495 14,552 13,229
-------- ------- -------- --------
Noninterest Expenses:
Salaries and Employee Benefits 12,748 13,995 27,344 27,375
Occupancy Expense of Premises 2,852 2,831 5,801 5,529
Furniture and Equipment Expenses 2,667 2,620 5,368 4,525
Federal Deposit Insurance Premiums 243 525 489 1,051
Foreclosed Property Expenses and Provisions, Net (Note 4) 354 687 791 2,080
Marketing Expenses 1,379 1,355 2,873 2,777
Core Deposit Intangible Amortization 1,468 1,471 2,939 2,384
Non-recurring Expenses (Note 6) -- -- 19,858 500
Capital Securities Expense 2,398 -- 4,046 --
Other Operating Expenses 6,168 6,009 11,627 9,951
-------- ------- -------- --------
Total Noninterest Expenses 30,277 29,493 81,136 56,172
-------- ------- -------- --------
Income Before Income Taxes 19,428 15,624 10,220 27,906
Income Tax Expense 7,390 5,758 3,140 10,352
-------- ------- -------- --------
Net Income 12,038 9,866 7,080 17,554
Preferred Stock Dividends -- 321 -- 645
-------- ------- -------- --------
Net Income Available to Common Shareholders $12,038 $ 9,545 $ 7,080 $ 16,909
======== ======= ======== ========
Net Income Per Common Share:
Primary $0.99 $0.80 $0.58 $1.43
Fully Diluted $0.98 $0.77 $0.58 $1.36
Dividends Declared Per Common Share $0.20 $0.16 $0.38 $0.32
See accompanying notes to condensed consolidated financial statements.
4
</TABLE>
<PAGE>
Webster Financial Corporation and Subsidiaries
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
- -----------------------------------------------------------------------------------------------------
Six Months Ended June 30,
-------------------------
OPERATING ACTIVITIES: 1997 1996
------------ -----------
(unaudited)
<S> <C> <C>
Net Income $ 7,080 $ 17,554
Adjustments to Reconcile Net Income to Net
Cash Provided (Used) by Operating Activities:
Provision for Loan Losses 9,400 3,700
Provision for Foreclosed Property Losses 125 1,025
Provision for Depreciation and Amortization 4,391 3,576
Amortization of Securities (Discounts) Premiums, Net (1,181) 1,559
Amortization of Hedging Costs, Net 1,477 267
Amortization of Core Deposit Intangible 2,940 2,384
Amortization of Mortgage Servicing Rights 216 345
Gains on Sale of Foreclosed Properties, Net (466) (556)
Loans and Securities Gains, Net (891) (1,540)
Gains on Trading Securities, Net (67) (113)
(Increase) Decrease in Trading Securities (9,905) 15,434
Loans Originated for Sale (24,614) (38,655)
Sale of Loans, Originated for Sale 23,023 42,373
(Increase) Decrease in Interest Receivable (1,428) 1,036
Increase (Decrease) in Interest Payable 3,307 (3,128)
Increase (Decrease) in Accrued Expenses and Other Liabilities, Net 13,224 (20,954)
(Increase) Decrease in Prepaid Expenses and Other Assets, Net (2,932) 2,892
----------- -----------
Net Cash Provided by Operating Activities 23,699 27,199
----------- -----------
INVESTING ACTIVITIES:
Purchases of Securities, Available for Sale (913,535) (206,369)
Purchases of Securities, Held to Maturity (8,403) (98,596)
Maturities of Securities 29,546 69,216
Proceeds from Sale of Securities, Available for Sale 84,412 132,544
Net (Increase) Decrease in Interest-bearing Deposits (37,992) 21,427
Purchase of Loans (116,815) (54,317)
Net (Increase) Decrease in Loans (11,153) 34,969
Proceeds from Sale of Foreclosed Properties 9,661 8,214
Net Decrease in Segregated Assets 13,843 15,143
Sale of Segregated Assets 13,700 --
Principal Collected on Mortgage-backed Securities 120,412 108,901
Purchases of Premises and Equipment, Net (3,960) (6,989)
Net Cash and Cash Equivalents Received from Bank Acquisition -- 113,551
----------- -----------
Net Cash (Used) Provided by Investing Activities (820,284) 137,694
----------- -----------
FINANCING ACTIVITIES:
Net Decrease in Deposits (92,813) (73,040)
Repayment of FHLB Advances (1,951,216) (677,596)
Proceeds from FHLB Advances 2,403,131 666,077
Repayment of Other Borrowings (1,963,498) (369,855)
Proceeds from Other Borrowings 2,304,004 333,412
Net (Increase) Decrease in Advance Payments for Taxes and Insurance (5,222) 6,003
Net Proceeds from Issuance of Capital Securities 97,700 --
Cash Dividends to Common and Preferred Shareholders (4,062) (3,629)
Common Stock Repurchased (1,660) (1,418)
Exercise of Stock Options 1,146 1,079
----------- -----------
Net Cash Provided (Used) by Financing Activities 787,510 (118,967)
----------- -----------
(Decrease) Increase in Cash and Cash Equivalents (9,075) 45,926
Cash and Cash Equivalents at Beginning of Period 100,113 62,653
----------- -----------
Cash and Cash Equivalents at End of Period $ 91,038 $ 108,579
=========== ===========
Supplemental Disclosures:
Income Taxes Paid $ 10,666 $ 11,307
Interest Paid 103,311 99,047
Supplemental Schedule of Noncash Investing and Financing Activities:
Transfer of Loans to Foreclosed Properties 14,744 10,903
See accompanying notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE>
Webster Financial Corporation and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
-----------------------------------------------------
The accompanying condensed consolidated financial statements include all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. All adjustments
were of a normal recurring nature. The results of operations for the three and
six month periods ended June 30, 1997 are not necessarily indicative of the
results which may be expected for the year as a whole. These financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Webster Financial Corporation 1996 Annual Report to
shareholders. The consolidated financial statements include the accounts of
Webster Financial Corporation ("Webster") and its wholly owned subsidiary,
Webster Bank (the "Bank"). On January 31, 1997, Webster acquired DS Bancor, Inc.
("DS Bancor") through a merger transaction. The transaction was accounted for as
a pooling of interests, accordingly, the financial statements as of and for the
periods prior to the DS Bancor transaction have been restated to reflect the
combination.
NOTE 2 - SECURITIES
----------
Securities with fixed maturities that are classified as Held to Maturity
are carried at cost, adjusted for amortization of premiums and accretion of
discounts over the estimated terms of the securities utilizing a method which
approximates the level yield method. Securities that management intends to hold
for indefinite periods of time (including securities that management intends to
use as part of its asset/liability strategy, or that may be sold in response to
changes in interest rates, changes in prepayment risk, the need to increase
regulatory capital or other similar factors) are classified as Available for
Sale. All Equity Securities are classified as Available for Sale. Securities
Available for Sale are carried at fair value with unrealized gains and losses
recorded as adjustments to shareholders' equity on a tax effected basis.
Securities classified as Trading Securities are carried at fair value with
unrealized gains and losses included in earnings. Gains and losses on the sales
of securities are recorded using the specific identification method.
A summary of securities follows (in thousands):
<TABLE>
<CAPTION>
June 30, 1997
-------------------------------------------------------
Amortized Gross Unrealized Market
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Trading Securities:
Mortgage-Backed Securities $ 70,197 $ -- $ -- $ 70,197
----------- ----------- ----------- -----------
Available for Sale Portfolio:
U.S. Treasury Notes 2,507 25 (3) 2,529
U.S. Government Agency 18,633 75 (88) 18,620
Corporate Bonds and Notes 2,662 2 (5) 2,659
Equity Securities 122,800 9,954 (4,904) 127,850
Mortgage-Backed Securities 1,395,042 12,316 (5,788) 1,401,570
Unamortized Hedge Instruments 16,659 -- (3,107) 13,552
----------- ----------- ----------- -----------
1,558,303 22,372 (13,895) 1,566,780
----------- ----------- ----------- -----------
Held to Maturity Portfolio:
U.S. Treasury Notes 2,454 6 -- 2,460
U.S. Government Agency 28,883 612 (165) 29,330
Corporate Bonds and Notes 3,977 4 (8) 3,973
Mortgage-Backed Securities 407,844 1,753 (9,491) 400,106
----------- ----------- ----------- -----------
443,158 2,375 (9,664) 435,869
----------- ----------- ----------- -----------
Total $ 2,071,658 $ 24,747 $ (23,559) $ 2,072,846
=========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31, 1996
--------------------------------------------------------
Amortized Gross Unrealized Market
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Trading Securities:
Mortgage-Backed Securities $ 59,331 $ -- $ -- $ 59,331
----------- ----------- ----------- -----------
Available for Sale Portfolio:
U.S. Treasury Notes 2,508 40 (4) 2,544
U.S. Government Agency 22,583 100 (71) 22,612
Corporate Bonds and Notes 4,659 -- (5) 4,654
Equity Securities 79,534 4,301 (123) 83,712
Mortgage-Backed Securities 692,284 7,774 (6,627) 693,431
Unamortized Hedge Instruments 5,460 -- (1,424) 4,036
----------- ----------- ----------- -----------
807,028 12,215 (8,254) 810,989
----------- ----------- ----------- -----------
Held to Maturity Portfolio:
U.S. Treasury Notes 944 12 -- 956
U.S. Government Agency 35,455 935 (324) 36,066
Corporate Bonds and Notes 9,577 6 (8) 9,575
Mortgage-Backed Securities 460,183 2,097 (8,419) 453,861
----------- ----------- ----------- -----------
506,159 3,050 (8,751) 500,458
----------- ----------- ----------- -----------
Total $ 1,372,518 $ 15,265 $ (17,005) $ 1,370,778
=========== =========== =========== ===========
6
</TABLE>
<PAGE>
Webster Financial Corporation and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------
NOTE 3 - NET INCOME PER SHARE
--------------------
Primary net income per share is calculated by dividing net income less
preferred stock dividends by the weighted-average number of shares of common
stock and common stock equivalents outstanding, when dilutive. The common stock
equivalents consist of common stock options and warrants. Fully diluted net
income per share is calculated by dividing adjusted net income by the
weighted-average fully diluted common shares, including the effect of common
stock equivalents and, for the year to date period, the hypothetical conversion
into common stock of the Series B 7 1/2% Cumulative Convertible Preferred Stock
("Series B Stock"). There was no Series B Stock outstanding during the second
quarter of 1997. The weighted-average number of shares used in the computation
of primary net income per share for the three and six months ended June 30, 1997
was 12,207,844 and 12,155,708, respectively, and for the three and six months
ended June 30, 1996 was 11,861,351 and 11,846,433, respectively. The
weighted-average number of shares used in the computation of fully diluted
earnings per share for the three and six months ended June 30, 1997 was
12,291,399 and 12,248,461, respectively, and for the three and six months ended
June 30, 1996 was 12,886,066 and 12,888,086 respectively.
NOTE 4 - FORECLOSED PROPERTY EXPENSES AND PROVISIONS, NET
------------------------------------------------
Foreclosed property expenses and provisions, net are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gain on Sale of Foreclosed Property, Net $ (315) $ (276) $ (466) $ (624)
Provision for Losses on Foreclosed Property 62 375 125 1,025
Rental Income (19) (71) (46) (190)
Foreclosed Property Expenses 626 659 1,178 1,869
------- ------- ------- -------
Foreclosed Property Expenses and Provisions, Net $ 354 $ 687 $ 791 $ 2,080
======= ======= ======= =======
</TABLE>
NOTE 5 - REVERSE REPURCHASE AGREEMENTS
-----------------------------
At June 30, 1997, Webster had short term borrowings through reverse
repurchase agreements outstanding. Information concerning borrowings under
reverse repurchase agreements is summarized below (dollars in thousands):
<TABLE>
<CAPTION>
Balance at Weighted Maturity Book Value Market Value
June 30, 1997 Term Average Rate Date of Collateral of Collateral
- ------------------ --------- ------------ -------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
$432,387 1 to 3 months 5.41% Less than 3 months $ 440,109 $ 441,560
</TABLE>
The securities underlying the reverse repurchase agreements are all
U.S. Agency collateral and have been delivered to the broker-dealers who arrange
the transactions. Webster uses reverse repurchase agreements when the cost of
such borrowings is less than other funding sources. The average balance and the
maximum amount of outstanding reverse repurchase agreements at any month-end
during the 1997 second quarter was $395.5 million and $432.7 million,
respectively. The total balance for reverse repurchase agreements outstanding at
December 31, 1996 was $77.6 million.
7
<PAGE>
Webster Financial Corporation and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 6 - DS BANCOR ACQUISITION
---------------------
In connection with the acquisition of DS Bancor, Inc., which was
completed on January 31, 1997, Webster recorded approximately $19.9 million in
merger-related charges and a $5.6 million addition to the provision for loan
losses to conform to Webster's credit policies.
The following table presents a summary of the merger-related accrued
liability (in thousands):
Balance of DS Bancor merger-related accrual
at December 31, 1996 $ 0
Additions 19,900
Compensation (severance and related costs) (6,700)
Data Processing Contract Termination (1,200)
Write down of fixed assets (600)
Transaction costs (including investment bankers,
attorneys and accountants) (2,100)
Merger related and miscellaneous expenses (2,800)
---------
Balance of DS Bancor merger-related accrual
at June 30, 1997 $ 6,500
========
The remaining liability of $6.5 million represents, for the most part,
an accrual for data processing contract termination and the estimated loss on
sale of excess fixed assets due to consolidation of overlapping branch
locations.
NOTE 7 - ACCOUNTING STANDARDS
--------------------
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings
per Share." This statement simplifies the standards for computing and presenting
earnings per share previously found in APB Opinion No. 15 and makes them
comparable to international standards. It replaces the presentation of primary
earnings per share with a presentation of basic earnings per share and requires
dual presentation of basic and diluted earnings per share on the face of the
income statement for all entities with complex capital structures. It is
expected that the implementation of this statement will not have a material
impact on the financial results of Webster. This statement is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure." This statement establishes standards for
disclosing information about an entity's capital structure. This statement is
effective for financial statements issued for periods ending after December 15,
1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The objective of this statement is to report a measure of
all changes in equity of an enterprise that result from transactions and other
economic events of the period other than transactions with owners. Comprehensive
income is the total of net income and all other non-owner changes in equity.
This statement is effective for fiscal years beginning after December 15, 1997
and reclassification of financial statements of earlier periods for comparative
purposes is required.
8
<PAGE>
Webster Financial Corporation and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7 - ACCOUNTING STANDARDS (continued)
--------------------
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." This statement establishes standards
for the method in which public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
reports issued to shareholders. This statement requires that public business
enterprises report quantitative and qualitative information about its reportable
segments, including profit or loss, certain specific revenue and expense items
and segment assets. This statement also requires reconciliations of total
segment revenues, total segment profit or loss, total segment assets and other
amounts disclosed for segments to corresponding amounts in the consolidated
financial statements. This statement is effective for financial statements for
periods beginning after December 15, 1997 and in the initial year of
application, comparative information for earlier years is required.
NOTE 8 - CONVERSION OF CONVERTIBLE PREFERRED STOCK
-----------------------------------------
During the month of January 1997, preferred stockholders converted the
remaining 98,084 shares of convertible preferred shares into 563,002 shares of
common stock.
NOTE 9 - CORPORATION-OBLIGATED MANDATORILY REDEEMABLE CAPITAL SECURITIES OF
SUBSIDIARY TRUST
------------------------------------------------------------------
On January 30, 1997, Webster completed the sale of $100 million of
Webster Capital Trust I Capital Securities. Webster Capital Trust I is a
business trust formed for the purpose of issuing capital securities and
investing the proceeds in junior subordinated debentures, due 2027, issued by
Webster. The primary assets of the Trust are the junior subordinated debentures.
Interest payments on the debentures are tax deductible by Webster. The
securities have an annual interest rate of 9.36%, payable semiannually,
beginning July 29, 1997. Webster will use the capital for general corporate
purposes.
NOTE 10 - SUBSEQUENT EVENTS
-----------------
On July 31, 1997, Webster completed its previously announced merger
transaction with People's Savings Financial Corporation. On August 1, 1997,
Webster completed its previously announced merger transaction with Sachem Trust
National Association.
9
<PAGE>
Webster Financial Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
GENERAL
- -------
WebsterFinancial Corporation ("Webster" ), through its subsidiary,
Webster Bank, (the "Bank") delivers financial services to individuals, families
and businesses located throughout Connecticut. Webster Bank emphasizes four
business lines - consumer, business, mortgage banking, and trust and investment
management services each supported by centralized administration and operations.
The Corporation has grown significantly in recent years, primarily through a
series of acquisitions which have expanded and strengthened its franchise.
Webster currently serves customers from 78 full service banking offices located
in Hartford, New Haven, Fairfield, Litchfield, and Middlesex counties in
Connecticut.
CHANGES IN FINANCIAL CONDITION
- ------------------------------
Total assets were $5.9 billion at June 30, 1997, an increase of $817.5
million from $5.1 billion at December 31, 1996. The increase in total assets is
due primarily to the purchase of securities and an increase in net loans of
$703.7 million and $111.0 million, respectively. The increases were funded, in
part, by borrowings and by the capital securities issued in January 1997 as
discussed below.
Net Segregated Assets decreased to $48.1 million at June 30, 1997 from
$75.7 million at December 31, 1996 due primarily to the bulk sale of
approximately $13.7 million in multi-family loans. Principal repayments and net
chargeoffs totaled approximately $9.7 million and $4.2 million, respectively.
Total net foreclosed properties were $13.1 million at June 30, 1997 compared to
$13.0 million at December 31, 1996. The net increase in foreclosed properties of
$140,000 for the current six month period was primarily attributable to
additions of $11.0 million, that were offset by sales of $7.0 million and
valuation write downs of $4.0 million.
Total liabilities were $5.5 billion at June 30, 1997, an increase of
$711.0 million from $4.8 billion at December 31, 1996. The increase in total
liabilities is due primarily to a net increase in borrowings of $791.7 million
that was partially offset by a decrease of $92.8 million in deposits.
On January 30, 1997, Webster completed the sale of $100 million of
Webster Capital Trust I Capital Securities. Webster Capital Trust I is a
business trust formed for the purpose of issuing capital securities and
investing the proceeds in subordinated debentures, due 2027, issued by Webster.
Interest payments on the debentures are tax deductible by Webster. The
securities have an annual interest rate of 9.36%, payable semiannually,
beginning July 29, 1997. Webster will use the net proceeds for general corporate
purposes.
Shareholders' equity was $298.5 million at June 30, 1997 and $292.1
million at December 31, 1996. At June 30, 1997, the Bank had Tier 1 leveraged,
Tier 1 risk-based, and total risk-based capital ratios of 5.98%, 12.46% and
13.71% , respectively. The Bank continues to meet the regulatory capital
requirements to be categorized as a "well capitalized" institution at June 30,
1997.
ASSET QUALITY
- -------------
Webster devotes significant attention to maintaining high asset quality
through conservative underwriting standards, active servicing of loans,
aggressively managing nonperforming assets and maintaining adequate reserve
coverage on nonaccrual assets. At June 30, 1997, residential and consumer loans
comprised approximately 87% of the loan portfolio. All fixed income securities
must have an investment rating in the top two rating categories by a major
rating service at time of purchase. Unless otherwise noted, the information set
forth concerning loans, nonaccrual loans, foreclosed properties and allowances
for loan losses excludes Segregated Assets which are discussed separately.
10
<PAGE>
Webster Financial Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
A breakdown of loans receivable, net by type as of June 30, 1997 and
December 31, 1996 follows (in thousands):
June 30, 1997 December 31, 1996
-------------- -----------------
Residential Mortgage Loans $2,689,523 $2,574,304
Commercial Real Estate Loans 259,634 267,265
Commercial Loans 189,298 194,220
Consumer Loans (Including Home Equity) 405,762 390,284
---------- ----------
Total Loans 3,544,217 3,426,073
Allowance for Loan Losses (48,732) (41,608)
---------- ----------
Loans Receivable, Net $3,495,485 $3,384,465
========== ==========
Included above at June 30, 1997 and December 31, 1996 were loans held for
sale of $4.4 million and $3.9 million, respectively. Loans held for sale at June
30, 1997 and December 31, 1996 represented one-to-four family residential
mortgage loans.
The following table details the nonaccrual assets at June 30, 1997 and
December 31, 1996 (in thousands):
June 30, 1997 December 31, 1996
------------- -----------------
Loans Accounted For on a Nonaccrual Basis:
Residential Real Estate $21,500 $24,067
Commercial 13,597 12,874
Consumer 2,182 3,116
-------- --------
Total Nonaccrual Loans 37,279 40,057
Foreclosed Properties:
Residential and Consumer 8,290 5,082
Commercial 4,843 7,909
--------- --------
Total Nonaccrual Assets $50,412 $53,048
========= ========
The net decrease in nonaccrual assets of $2.6 million at June 30, 1997 as
compared to the December 31, 1996 balance is due primarily to payoffs,
foreclosed property sales and charge-offs.
At June 30, 1997, Webster's allowance for losses on loans of $48.7
million represented 130.7% of nonaccrual loans and its total allowances for
losses on nonaccrual assets of $49.3 million amounted to 96.7% of nonaccrual
assets. A detail of the changes in the allowances for losses on loans and
foreclosed property for the six months ended June 30, 1997 follows (in
thousands):
<TABLE>
<CAPTION>
Allowances For Losses On
-------------------------------------
Impaired Foreclosed Total
Loans Loans Properties Allowances for Losses
----- ----- ---------- ---------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $39,152 $ 2,456 $ 740 $42,348
Provisions for Losses 3,750 - 90 3,840
Provision for DS Bancor Loan Losses 5,650 - - 5,650
Allocation to General Allowance 1,600 (1,600) - -
Losses Charged to Allowances (5,398) - (362) (5,760)
Recoveries Credited to Allowances 3,122 - 110 3,232
----------- ------------ ---------- ---------
Balance at June 30, 1997 $ 47,876 $ 856 $ 578 $ 49,310
=========== ============ ========== =========
</TABLE>
11
<PAGE>
Webster Financial Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
Segregated Assets, Net
- ----------------------
Segregated Assets, Net at June 30, 1997 included the following assets
purchased from the FDIC in the First Constitution Acquisition which are subject
to a loss-sharing arrangement with the FDIC (in thousands):
June 30, 1997 December 31, 1996
------------- ------------------
Commercial Real Estate Loans $ 44,275 $ 58,745
Commercial Loans 6,160 6,606
Multi-Family Real Estate Loans -- 12,772
Foreclosed Properties 342 406
--------- ---------
50,777 78,529
Allowance for Segregated Assets Losses (2,650) (2,859)
--------- ----------
Segregated Assets, Net $ 48,127 $ 75,670
========= ========
Under the Purchase and Assumption Agreement with the FDIC relating to
the First Constitution Acquisition, during the first five years after October 2,
1992 (the "Acquisition Date"), the FDIC is required to reimburse Webster
quarterly for 80% of all net charge-offs (i.e., the excess of charge-offs over
recoveries) and certain permitted expenses related to the Segregated Assets
acquired by Webster.
During the sixth and seventh years after the Acquisition Date, Webster
is required to pay quarterly to the FDIC an amount equal to 80% of the
recoveries during such years on Segregated Assets which were previously charged
off after deducting certain permitted expenses related to those assets. Webster
is entitled to retain 20% of such recoveries during the sixth and seventh years
following the Acquisition Date and 100% thereafter.
Upon termination of the seven-year period after the Acquisition Date,
if the sum of net charge-offs on Segregated Assets for the first five years
after the Acquisition Date plus permitted expenses during the entire seven-year
period, less any recoveries during the sixth and seventh year on Segregated
Assets charged off during the first five years, exceeds $49.2 million, the FDIC
is required to pay Webster an additional 15% of any such excess over $49.2
million at the end of the seventh year. At June 30, 1997, cumulative net
charge-offs aggregated $58.2 million.
The reduction of $27.5 million for gross Segregated Assets for the 1997
second quarter period is the result of of the sale of approximately $13.7
million in multi-family loans. Any losses incurred on the sale of these
multi-family loans was covered under the loss-sharing arrangement and the
transaction had no impact on the Statements of Income. Additionally,
approximately $4.2 million in gross charge-offs and $9.7 million in payments
received contributed to the reduction of Segregated Assets. In the first six
months of 1997, Webster received reimbursements for net charge-offs and eligible
expenses on Segregated Assets aggregating $1.0 million. A reimbursement request
totaling $3.3 million has been submitted to the FDIC for the second quarter 1997
period.
A detail of changes in the allowance for Segregated Assets losses
follows (in thousands):
Balance at December 31, 1996 $ 2,859
Charge-offs (224)
Recoveries 15
-------
Balance at June 30, 1997 $ 2,650
=======
12
<PAGE>
Webster Financial Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
The following table details nonaccrual Segregated Assets at June 30,
1997 and December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
---------------- ------------------
<S> <C> <C>
Segregated Assets Accounted For on a Nonaccrual Basis:
Commercial Real Estate Loans $ 4,233 $ 3,337
Commercial Loans 192 192
Multi-Family Real Estate Loans -- 495
-------- --------
Total Nonaccrual Loans 4,425 4,024
Foreclosed Properties:
Commercial Real Estate 259 269
Multi-Family Real Estate 83 138
-------- --------
Total Nonaccrual Segregated Assets $ 4,767 $ 4,431
======== ========
</TABLE>
ASSET/LIABILITY MANAGEMENT
- --------------------------
The goal of Webster's asset/liability policy is to manage interest-rate
risk so as to maximize net interest income over time in changing interest-rate
environments while maintaining acceptable levels of risk. Webster must provide
for sufficient liquidity for daily operations while maintaining mandated
regulatory liquidity levels. To this end Webster's strategies for managing
interest-rate risk are responsive to changes in the interest-rate environment
and market demands for particular types of deposit and loan products. Management
measures interest-rate risk using GAP, duration and simulation analysis with
particular emphasis on measuring changes in the market value of portfolios and
changes in net interest income in different interest-rate environments. The
simulation analyses incorporate assumptions about balance sheet changes such as
asset and liability growth, loan and deposit pricing and changes due to the mix
and maturity of such assets and liabilities. From such simulations, interest
rate risk is quantified and appropriate strategies are formulated.
As part of its asset/liability management strategy, Webster utilizes
various interest rate instruments including short futures positions, interest
rate swaps, interest rate caps and interest rate floors. Webster holds short
futures positions to minimize the price volatilty of certain adjustable rate
assets held as Trading Securities. Changes in the market value of the short
futures positions and trading securities are recognized as a gain or loss in the
consolidated statement of income in the period for which the change occurred.
Interest rate caps, interest rate floors and interest rate swaps are
entered into as hedges against future interest rate fluctuations. Webster does
not trade in speculative interest rate contracts. Those agreements meeting the
criteria for hedge accounting treatment are designated as hedges and are
accounted for as such. If a contract is terminated, any unrecognized gain or
loss is deferred and amortized as an adjustment to the yield of the related
asset or liability over the remainder of the period that was being hedged. If
the linked asset or liability is disposed of prior to the end of the period
being managed, the related interest rate contract is marked to fair value, with
any resulting gain or loss recognized in current period income as an adjustment
to the gain or loss on the disposal of the related asset or liability. Interest
income or expense associated with interest rate caps and swaps is recorded as a
component of net interest income. Interest rate instruments that hedge available
for sale assets are marked to fair value monthly with adjustments to
shareholders' equity on a tax effected basis.
13
<PAGE>
Webster Financial Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
The following table details the estimated market value of Webster's
financial assets at June 30, 1997 if interest rates instantaneously increase or
decrease 100 basis points.
<TABLE>
<CAPTION>
Book Market Estimated Market Value
Assets Value Value -100 BP +100BP
- ------ ----- ----- ------- ------
<S> <C> <C> <C> <C>
Cash & Interest Bearing Deposits $ 129,057 $ 129,057 $ 129,057 $ 129,057
Trading Securities 70,197 70,197 71,779 67,950
Hedges -- -- (1,748) 1,982
---------- ---------- ---------- ----------
Total Trading Securities 70,197 70,197 70,031 69,932
Available for Sale Securities 1,541,644 1,553,228 1,578,888 1,516,474
Hedges 16,659 13,552 7,947 23,793
---------- ---------- ---------- ----------
Total Available for Sale Securities 1,558,303 1,566,780 1,586,835 1,540,267
Held to Maturity Securities 443,158 435,869 439,985 425,456
Loans 3,544,217 3,593,749 3,650,091 3,518,417
Mortgage Loan Servicing Assets 5,683 8,729 6,728 9,713
Liabilities
Deposits $4,006,688 $3,808,031 $3,874,306 $3,745,314
Advances & Other Borrowings 1,406,410 1,404,619 1,407,312 1,401,956
Senior Notes & Capital Securities 140,000 140,480 150,365 131,487
</TABLE>
Based on Webster's asset/liability mix at June 30, 1997, managements
sensitivity analysis of the effects of changing interest rates estimates that an
instantaneous +/-100 basis point change in interest rates would change net
interest income over the next twelve months by less than 3%. The above estimated
market values are subject to factors that could cause actual results to differ
from such projections and estimates.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Under regulations of the Office of Thrift Supervision, Webster Bank is
required to maintain assets which are readily marketable in an amount equal to
5% or more of its net withdrawable deposits plus short-term borrowings. At June
30, 1997, Webster Bank had a liquidity ratio of 5.1% and was in compliance with
the applicable regulations. Webster Bank had mortgage commitments outstanding of
$77.5 million, non-mortgage commitments of $35.1 million, unused home equity
credit lines of $262.3 million, available credit card lines of $72.6 million and
commercial lines and letters of credit of $99.4 million.
14
<PAGE>
Webster Financial Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Comparison of the three and six month periods ended June 30, 1997 and
June 30, 1996
GENERAL
- -------
Net income for the three month period ended June 30, 1997 was $12.0
million, or $.98 per fully diluted share compared to $9.9 million or $.77 per
fully diluted share for the same period in 1996. Net income for the six month
period ended June 30, 1997, excluding non-recurring items, was $22.1 million, or
$1.80 per fully diluted share compared to $17.8 million, or $1.38 per fully
diluted share for the same period in 1996. Including the non-recurring after tax
charges of $15.0 million related to Webster's acquisition of DS Bancor, Inc.,
Webster reported net income of $7.1 million or $0.58 per fully diluted share for
the first six months of 1997. Results for the first six months of 1996 included
$290,000 of after tax non-recurring conversion costs related to the 20 branches
acquired from Shawmut Bank Connecticut National Association (the "Shawmut
Transaction").
NET INTEREST INCOME
- --------------------
Net interest income for the three and six month periods ended June 30,
1997 amounted to $44.8 million and $86.2 million, respectively, compared to
$39.7 million and $74.5 million for the respective periods in 1996. The
increases are primarily attributable to an increased volume of average
interest-earning assets and interest-bearing liabilities and a decrease in the
cost of interest-bearing liabilities between the six month periods. The net
interest rate spread for the three and six month periods ended June 30, 1997 was
3.10% and 3.15% compared to 3.20% and 3.07% for the same periods in 1996.
INTEREST INCOME
- ---------------
Interest Income for the three and six months ended June 30, 1997
amounted to $101.3 million and $193.3 million, respectively, compared to $89.3
million and $173.5 million, respectively, for the comparable periods in 1996.
The increases for both periods are due primarily to a higher volume of average
interest-earning assets, which were $5.5 million and $5.3 million, respectively,
for the 1997 periods and $4.8 million and $4.7 million, respectively, for the
1996 periods. The increases resulting from higher levels of interest-earning
assets in the current periods were partially offset by lower yields on
interest-earning assets. The yield on interest-earning assets for the three and
six months ended June 30, 1997 was 7.34% and 7.35%, respectively, compared to
7.42% and 7.43%, respectively, for the same periods the previous year.
INTEREST EXPENSE
- ----------------
Interest Expense for the three and six months ended June 30, 1997
amounted to $56.5 million and $107.1 million, respectively, compared to $49.6
million and $98.9 million for the same periods in 1996. This increase is due
primarily to an increase in average borrowings, which were $1.3 million and $1.0
million, respectively, for the 1997 periods as compared to $598,000 and
$610,000, respectively, for the 1996 periods. The cost of interest-bearing
liabilities increased to 4.24% for the three months ended June 30, 1997 compared
to 4.22% for the same period in 1996. The cost of interest-bearing liabilities
decreased to 4.20% for the six months ended June 30, 1997 compared to 4.36% for
the comparable 1996 period. Interest expense on borrowings for the three and six
months ended June 30, 1997 amounted to $18.1 million and $29.5 million,
respectively, as compared to $9.1 million and $19.0 million, respectively, for
the same periods in 1996.
15
<PAGE>
Webster Financial Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
The following tables show the major categories of average assets and
average liabilities together with their respective interest income or expense
and the rates earned and paid by Webster.
<TABLE>
<CAPTION>
Three Months Ended June 30, 1997 1996
- --------------------------- ---------------------------------- ---------------------------
Average Average Average Average
(Dollars in Thousands) Balance Interest Yield Balance Interest Yield
------- -------- ----- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest Earning Assets:
Loans and Segregated Assets $3,579,562 $ 69,860 7.79% $3,507,542 $ 68,087 7.77%
Securities 1,937,027 31,445 6.49 1,314,975 21,205 6.49
---------- -------- ------- ---------- -------- -------
Total Interest Earning Assets 5,516,589 101,305 7.34 4,822,517 89,292 7.42
------- ------- -------- -------
Noninterest Earning Assets 241,684 260,701
---------- ----------
Total Assets $5,758,273 $5,083,218
========== ==========
Liabilities and Shareholders' Equity:
Interest Bearing Liabilities:
Deposits $4,046,597 $ 38,354 3.78 $4,146,858 $ 40,492 3.92
Borrowings 1,255,739 18,118 5.71 598,330 9,128 5.13
---------- ------- ------- ---------- -------- -------
Total Interest Bearing Liabilities 5,302,336 56,472 4.24 4,745,188 49,620 4.22
------- ------- -------- -------
Noninterest Bearing Liabilities 67,439 39,366
---------- ----------
Total Liabilities 5,369,775 4,784,554
Corporation-Obligated Mandatorily Redeemable
Capital Securities of Subsidiary Trust 100,000 ---
Shareholders' Equity 288,498 298,664
---------- ----------
Total Liabilities and Shareholders' Equity $5,758,273 $5,083,218
========== ==========
Net Interest Income $44,833 $39,672
======= =======
Interest Rate Spread 3.10% 3.20%
===== =====
Net Yield on Average Interest Earning Assets 3.26% 3.30%
===== =====
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1997 1996
- ------------------------- ----------------------------------- ----------------------------------
Average Average Average Average
(Dollars in Thousands) Balance Interest Yield Balance Interest Yield
------- -------- ----- ------- -------- -----
Assets:
Interest Earning Assets:
Loans and Segregated Assets $3,537,742 $137,198 7.76% $3,346,404 $130,695 7.81%
Securities 1,725,421 56,133 6.51 1,328,092 42,776 6.49
---------- --------- ----- ---------- -------- -------
Total Interest Earning Assets 5,263,163 193,331 7.35 4,674,496 173,471 7.43
--------- ----- -------- -------
Noninterest Earning Assets 251,656 250,381
---------- ----------
Total Assets $5,514,819 $4,924,877
========== ==========
Liabilities and Shareholders' Equity:
Interest Bearing Liabilities:
Deposits $4,055,638 $ 77,669 3.82 $3,973,847 $ 79,972 4.04
Borrowings 1,027,430 29,458 5.70 609,522 18,950 6.15
---------- --------- ----- ---------- -------- ------
Total Interest Bearing Liabilities 5,083,068 107,127 4.20 4,583,369 98,922 4.36
-------- ------ -------- ------
Noninterest Bearing Liabilities 60,614 46,302
---------- -------------
Total Liabilities 5,143,682 4,629,671
Corporation-Obligated Mandatorily Redeemable
Capital Securities of Subsidiary Trust 84,530 ---
Shareholders' Equity 286,607 295,206
---------- ------------
Total Liabilities and Shareholders' Equity $5,514,819 $4,924,877
========== ==========
Net Interest Income $86,204 $74,549
======= =======
Interest Rate Spread 3.15% 3.07%
===== =====
Net Yield on Average Interest-Earning Assets 3.29% 3.19%
===== =====
16
</TABLE>
<PAGE>
Webster Financial Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
PROVISION FOR LOAN LOSSES
- -------------------------
The provision for loan losses amounted to $2.4 million and $9.4 million
for the three and six month periods ended June 30, 1997, respectively, compared
to $2.1 million and $3.7 million for the respective periods in 1996. Included in
the provision for the six month period ended June 30, 1997 was a $5.6 million
provision related to loans acquired in the DS Bancor Acquisition. At June 30,
1997, the allowance for loan losses was $48.7 million and represented 130.7% of
nonaccrual loans, compared to $50.8 million and 92.7%, respectively a year
earlier.
NONINTEREST INCOME
- ------------------
Noninterest income for the three and six month periods ended June 30,
1997 amounted to $7.2 million and $14.6 million, respectively, compared to $7.5
million and $13.2 million, respectively, for the same periods in 1996. The
decrease in noninterest income for the three month period ended June 30, 1997 as
compared to the same period in 1996 is primarily due to decreased gains on the
sale of securities in the 1997 period. There were $421,000 and $958,000 of net
gains on sales of loans and securities for the three and six months ended June
30, 1997, respectively, compared to $956,000 and $1.7 million, respectively, for
the same periods in 1996.
NONINTEREST EXPENSES
- --------------------
Noninterest expenses for the three and six months ended June 30, 1997
amounted to $30.3 million and $81.1 million, respectively, compared to $29.5
million and $56.2 million for the same respective periods in 1996. The increase
in noninterest expenses for the current six month period is due primarily to
$19.9 million in non-recurring expenses related to the acquisition of DS Bancor,
Inc., completed on January 31, 1997. Additionally, increases in employee
benefits, furniture and equipment, core deposit intangible amortization, capital
securities expense and other operating expenses were offset by decreases in
foreclosed property expenses and FDIC premiums for the six month periods.
INCOME TAXES
- ------------
Total income tax expense for the three and six month periods ended June
30, 1997 amounted to $7.4 million and $3.1 million, respectively, compared to
$5.8 million and $10.4 million, respectively, for the same periods in 1996.
Income taxes for the three months ended June 30, 1997 increased due to a higher
level of income before taxes compared to the same period in 1996. Income taxes
for the six months ended June 30, 1997 decreased compared to the year earlier
period due primarily to lower income before taxes as a result of the $25.5
million of non-recurring expenses recorded in connection with the DS Bancor,
Inc. Acquisition.
17
<PAGE>
Webster Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS - Not Applicable
-----------------
Item 2. CHANGES IN SECURITIES - Not Applicable
---------------------
Item 3. DEFAULTS UPON SENIOR SECURITIES - Not Applicable
-------------------------------
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
(a) Not Applicable
(b) Not Applicable
(c) The following matters were voted upon and approved by the
Registrant's shareholders at the 1997 annual meeting:
(i) re-election of four directors to serve a three year term
(Proposal 1); (ii) ratification of the appointment of KPMG Peat
Marwick LLP as independent auditors of Webster for the year
ending December 31, 1997 (Proposal 2). As to Proposal 1, O.
Joseph Bizzozero, Jr. received 9,946,218 votes for election and
64,794 votes were withheld, John J Crawford received 9,945,902
votes for election and 65,110 votes were withheld, Robert A.
Finkenzeller received 9,946,218 votes for election and 64,794
votes were withheld and Sister Marguerite Waite received
9,945,733 votes for election and 65,079 votes were withheld.
There were no abstentions or broker non- votes for any of the
nominees. Continuing directors include: Achille A. Apicella, Joel
S. Becker, Harry P. DiAdamo, Jr., Walter R. Griffen, J. Gregory
Hickey, C. Michael Jacobi, Harold W. Smith, and James C. Smith.
As to Proposal 2, shareholders cast 9,897,741 votes for, 94,639
against, 18,632 abstentions, and no broker non-votes.
(d) Not Applicable
Item 5. OTHER INFORMATION
-----------------
On July 31, 1997, Webster completed its previously announced merger
transaction with People's Savings Financial Corporation. On August 1,
1997, Webster completed its previously announced merger transaction
with Sachem Trust National Association.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
Exhibit No. 27. Financial Data Table
(b) Reports on Form 8-K
Form 8K filed April 11, 1997 (announcing the Agreement and Plan of
Merger by which Webster will acquire People's Savings Financial
Corp.)
Form 8K filed May 20, 1997 (restated financial statements
reflecting the acquisition of DS Bancor, Inc.)
18
<PAGE>
Webster Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WEBSTER FINANCIAL CORPORATION
-----------------------------
Registrant
Date: August 13, 1997 By: /s/ John V. Brennan
------------------- -----------------------------
John V. Brennan
Executive Vice President
Chief Financial Officer and Treasurer
19
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> MAR-30-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 91,038
<SECURITIES> 2,118,154
<RECEIVABLES> 3,492,230
<ALLOWANCES> 51,382
<INVENTORY> 0
<CURRENT-ASSETS> 237,582
<PP&E> 56,144
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,943,766
<CURRENT-LIABILITIES> 4,006,688
<BONDS> 1,446,410
0
0
<COMMON> 298,538
<OTHER-SE> 192,130
<TOTAL-LIABILITY-AND-EQUITY> 5,943,766
<SALES> 108,552
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 30,277
<LOSS-PROVISION> 2,375
<INTEREST-EXPENSE> 56,472
<INCOME-PRETAX> 19,428
<INCOME-TAX> 7,390
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,038
<EPS-PRIMARY> 0.99
<EPS-DILUTED> 0.98
</TABLE>
