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Webster Financial 10-Q 2008
Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2008.

or

 

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-31486

 

 

LOGO

WEBSTER FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   06-1187536
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
Webster Plaza, Waterbury, Connecticut   06702
(Address of principal executive offices)   (Zip Code)

(203) 465-4364

(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.    þ  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  þ    Accelerated filer  ¨    Non-accelerated filer  ¨    Smaller reporting company  ¨
  

            (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ

The number of shares of common stock outstanding as of July 31, 2008 was 52,547,675.

 

 

 


Table of Contents

INDEX

 

     Page No.

PART I – FINANCIAL INFORMATION

  

Item 1.

  

Interim Financial Statements (unaudited)

  
  

Consolidated Balance Sheets at June 30, 2008 and December 31, 2007

   3
  

Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007

   4
  

Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the three and six months ended June 30, 2008 and 2007

   5
  

Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007

   6
  

Notes to Consolidated Interim Financial Statements

   8

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   30

Item 3.

  

Quantitative and Qualitative Disclosures about Market Risk

   50

Item 4.

  

Controls and Procedures

   50

PART II - OTHER INFORMATION

  

Item 1.

  

Legal Proceedings

   51

Item 1A.

  

Risk Factors

   51

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

   51

Item 3.

  

Defaults upon Senior Securities

   51

Item 4.

  

Submission of Matters to a Vote of Security Holders

   51

Item 5.

  

Other Information

   52

Item 6.

  

Exhibits

   52

SIGNATURES

   53

EXHIBIT INDEX

   54

 

2


Table of Contents

ITEM 1. INTERIM FINANCIAL STATEMENTS

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (unaudited)

 

 

 

(In thousands, except share and per share data)

   June 30,
2008
    December 31,
2007
 

Assets:

    

Cash and due from depository institutions

   $ 323,480     $ 306,654  

Short-term investments

     2,996       5,112  

Investment securities:

    

Trading, at fair value

     2,280       2,340  

Available for sale, at fair value

     849,591       639,364  

Held-to-maturity (fair value of $2,026,214 and $2,094,566)

     2,065,771       2,107,227  

Other securities

     132,210       110,962  
                

Total investment securities

     3,049,852       2,859,893  

Loans held for sale

     3,972       221,568  

Loans, net

     12,581,586       12,287,857  

Goodwill

     719,538       728,038  

Cash surrender value of life insurance

     274,570       269,366  

Premises and equipment

     190,273       193,063  

Accrued interest receivable

     73,060       80,432  

Assets held for disposition

     900       51,603  

Other intangible assets, net

     36,965       39,977  

Deferred tax assets, net

     94,823       58,126  

Prepaid expenses and other assets

     126,621       100,271  
                

Total assets

   $ 17,478,636     $ 17,201,960  
                

Liabilities and Shareholders’ Equity:

    

Deposits

   $ 12,076,567     $ 12,354,158  

Federal Home Loan Bank advances

     1,419,570       1,052,228  

Securities sold under agreements to repurchase and other short-term debt

     1,275,024       1,238,012  

Long-term debt

     653,995       650,643  

Liabilities held for disposition

     —         9,261  

Accrued expenses and other liabilities

     152,198       151,449  
                

Total liabilities

     15,577,354       15,455,751  
                

Preferred stock of subsidiary corporation

     9,577       9,577  

Shareholders’ equity:

    

Preferred stock, $0.01 par value; Authorized—3,000,000 shares;

     225,000       —    

Issued and outstanding—225,000 shares at June 30, 2008

    

Common stock, $.01 par value; Authorized—200,000,000 shares;

     566       566  

Issued—56,603,497 shares and 56,594,469 shares

    

Paid in capital

     729,090       734,604  

Retained earnings

     1,146,628       1,183,621  

Less: Treasury stock, at cost; 4,052,343 and 4,119,374 shares

     (163,439 )     (166,263 )

Accumulated other comprehensive loss, net

     (46,140 )     (15,896 )
                

Total shareholders’ equity

     1,891,705       1,736,632  
                

Total liabilities and shareholders’ equity

   $ 17,478,636     $ 17,201,960  
                

See accompanying Notes to Consolidated Interim Financial Statements.

 

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Table of Contents

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

 

 

 

     Three months ended
June 30,
    Six months ended
June 30,
 

(In thousands, except per share data)

   2008     2007     2008     2007  

Interest Income:

        

Loans

   $ 175,786     $ 210,337     $ 367,058     $ 419,501  

Investments

     38,115       32,563       77,447       65,843  

Loans held for sale

     92       7,419       1,492       13,668  
                                

Total interest income

     213,993       250,319       445,997       499,012  
                                

Interest Expense:

        

Deposits

     60,055       89,683       135,297       177,313  

Borrowings

     28,252       30,283       60,158       63,265  
                                

Total interest expense

     88,307       119,966       195,455       240,578  
                                

Net interest income

     125,686       130,353       250,542       258,434  

Provision for credit losses

     25,000       4,250       40,800       7,250  
                                

Net interest income after provision for credit losses

     100,686       126,103       209,742       251,184  
                                

Noninterest Income:

        

Deposit service fees

     29,943       28,758       58,376       54,112  

Loan related fees

     7,891       7,901       14,749       15,841  

Wealth and investment services

     7,634       7,637       14,590       14,515  

Mortgage banking activities

     104       3,962       844       6,191  

Increase in cash surrender value of life insurance

     2,623       2,586       5,204       5,120  

Securities’ gains, net

     126       503       249       1,044  

Loss on write-down of investments to fair value

     (54,924 )     —         (56,177 )     —    

Gain on Webster Capital Trust I and II securities

     —         2,130       —         2,130  

Visa share redemption

     —         —         1,625       —    

Other income

     854       2,025       2,638       3,903  
                                

Total noninterest income

     (5,749 )     55,502       42,098       102,856  
                                

Noninterest Expenses:

        

Compensation and benefits

     62,866       60,899       126,309       122,434  

Occupancy

     13,128       12,064       26,810       24,625  

Furniture and equipment

     15,634       15,014       30,794       29,572  

Intangible assets amortization

     1,464       3,144       3,012       6,466  

Marketing

     4,940       4,175       8,583       8,363  

Professional services

     3,706       3,181       7,859       7,692  

Debt redemption premium

     —         8,940       —         8,940  

Goodwill impairment

     8,500       —         8,500       —    

Severance and other costs

     9,368       5,291       8,718       9,813  

Other expenses

     18,117       16,224       33,249       32,188  
                                

Total noninterest expenses

     137,723       128,932       253,834       250,093  
                                

(Loss) income from continuing operations before income tax (benefit) expense

     (42,786 )     52,673       (1,994 )     103,947  

Income tax (benefit) expense

     (14,285 )     16,801       18       32,995  
                                

(Loss) income from continuing operations

     (28,501 )     35,872       (2,012 )     70,952  

Loss from discontinued operations, net of tax

     (439 )     (405 )     (2,563 )     (449 )
                                

Net (loss) income applicable to common shareholders

   $ (28,940 )   $ 35,467     $ (4,575 )   $ 70,503  
                                

Net (loss) income per common share:

        

Basic

        

(Loss) income from continuing operations

   $ (0.55 )   $ 0.65     $ (0.04 )   $ 1.27  

Net (loss) income applicable to common shareholders

     (0.56 )     0.64       (0.09 )     1.26  

Diluted

        

(Loss) income from continuing operations

     (0.55 )     0.64       (0.04 )     1.26  

Net (loss) income applicable to common shareholders

     (0.56 )     0.63       (0.09 )     1.25  

See accompanying Notes to Consolidated Interim Financial Statements.

 

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Table of Contents

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (unaudited)

 

 

 

     Six months ended June 30, 2007  
     Preferred    Common Stock    Paid-in     Retained     Treasury     Accumulated
Other
Comprehensive
       

(In thousands, except share and per share data)

   Stock    Shares    Amount    Capital     Earnings     Stock     Income (Loss)     Total  

Balance, December 31, 2006

   $ —      56,388,707    $ 564    $ 726,886     $ 1,150,008     $ —       $ (3,324 )   $ 1,874,134  

Comprehensive income:

     —      —        —        —         70,503       —         —         70,503  

Net income

                   

Other comprehensive income (loss), net of taxes:

                   

Defered gain on derivatives sold

     —      —        —        —         —         —         2,636       2,636  

Net unrealized loss on securities available for sale, net of taxes

     —      —        —        —         —         —         (4,574 )     (4,574 )

Amortization of unrealized loss on securities transferred to held to maturity, net of taxes

     —      —        —        —         —         —         200       200  

Amortization of net actuarial loss and prior service costs

     —      —        —        —         —         —         234       234  

Amortization of deferred hedging gain

     —      —        —        —         —         —         (85 )     (85 )
                                                           

Other comprehensive loss

                      (1,589 )
                                                           

Comprehensive income

                      68,914  

Dividends paid of $.57 per common share

     —      —        —        —         (32,198 )     —         —         (32,198 )

Exercise of stock options, including excess tax benefits

     —      189,206      2      6,262       —         —         —         6,264  

Repurchase of 1,973,753 common shares

     —      —        —        —         —         (87,032 )     —         (87,032 )

Stock-based compensation expense

     —      —        —        1,674       —         —         —         1,674  

Restricted stock grants and expense

     —      4,176      —        2,373       —         537       —         2,910  

Cumulative impact of change in accounting for uncertainties in income taxes

     —      —        —        —         1,400       —         —         1,400  

Contingent consideration in a business combination

     —      —        —        105       —         1,480       —         1,585  
                                                           

Balance, June 30, 2007

   $ —      56,582,089    $ 566    $ 737,300     $ 1,189,713     $ (85,015 )   $ (4,913 )   $ 1,837,651  
                                                           
    

 

Six months ended June 30, 2008

 
     Preferred    Common Stock    Paid-in     Retained     Treasury     Accumulated
Other
Comprehensive
       

(In thousands, except share and per share data)

   Stock    Shares    Amount    Capital     Earnings     Stock     Income (Loss)     Total  

Balance, December 31, 2007

   $ —      56,594,469    $ 566    $ 734,604     $ 1,183,621     $ (166,263 )   $ (15,896 )   $ 1,736,632  

Comprehensive income (loss):

                   

Net loss

     —      —        —        —         (4,575 )     —         —         (4,575 )

Other comprehensive income (loss), net of taxes:

                   

Net unrealized loss on securities available for sale, net of taxes

     —      —        —        —         —         —         (32,324 )     (32,324 )

Amortization of unrealized loss on securities transferred to held to maturity

     —      —        —        —         —         —         150       150  

Net actuarial loss and prior service cost for pension and other postretirement benefits

     —      —        —        —         —         —         23       23  

Unrealized gain on cash flow hedge

     —      —        —        —         —         —         2,123       2,123  

Amortization of deferred hedging gain

     —      —        —        —         —         —         (216 )     (216 )
                                                           

Other comprehensive loss

                      (30,244 )
                                                           

Comprehensive loss

                      (34,819 )

Dividends paid of $.60 per common share

     —      —        —        —         (31,495 )     —         —         (31,495 )

Exercise of stock options, including excess tax benefits

     —      4,695      —        (73 )     —         513       —         440  

Repurchase of 11,447 common shares

     —      —        —        —         —         (349 )       (349 )

Stock-based compensation expense

     —      —        —        1,327       —         —         —         1,327  

Restricted stock grants and expense

     —      4,333      —        532       —         2,660       —         3,192  

Issuance of convertible preferred stock

     225,000    —        —        (7,300 )     —         —         —         217,700  

EITF 06-4 Adoption

     —      —        —        —         (923 )     —         —         (923 )
                                                           

Balance, June 30, 2008

   $ 225,000    56,603,497    $ 566    $ 729,090     $ 1,146,628     $ (163,439 )   $ (46,140 )   $ 1,891,705  
                                                           

See accompanying Notes to Consolidated Interim Financial Statements.

 

5


Table of Contents

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 

 

 

     Six months ended June 30,  

(In thousands)

   2008     2007  

Operating Activities:

    

Net (loss )income

   $ (4,575 )   $ 70,503  

Loss from discontinued operations, net of tax

     (2,563 )     (449 )
                

(Loss) income from continuing operations

     (2,012 )     70,952  

Adjustments to reconcile net (loss) income from continuing operations to net cash provided by operating activities:

    

Provision for credit losses

     40,800       7,250  

Depreciation and amortization

     26,027       25,754  

Amortization of intangible assets

     3,012       6,466  

Gain on Webster Capital Trust I and II securities

     —         (2,130 )

Debt redemption premium

     —         8,940  

Stock-based compensation

     4,519       4,584  

Excess tax benefits from stock-based compensation

     (1 )     (598 )

Net loss (gain) on sale of foreclosed properties

     925       (35 )

Loss on write-down of investments to fair value

     56,177       —    

Impairment of goodwill

     8,500       —    

Net gain on sale of securities

     (316 )     (1,128 )

Net gain on sale of loans and loan servicing

     (844 )     (6,191 )

Net loss on trading securities

     67       84  

Increase in trading securities

     (7 )     (1,177 )

Increase in cash surrender value of life insurance

     (5,204 )     (5,120 )

Loans originated for sale

     (157,810 )     (1,632,814 )

Proceeds from sale of loans originated for sale

     376,250       1,524,588  

Decrease in interest receivable

     7,372       5,487  

Net (increase) decrease in prepaid expenses and other assets

     (17,063 )     109  

Net (decrease) increase in accrued expenses and other liabilities

     (18,508 )     39,485  

Proceeds from surrender of life insurance contracts

     —         338  
                

Net cash provided by operating activities

     321,884       44,844  
                

Investing Activities:

    

Purchases of securities, available for sale

     (339,438 )     (240,581 )

Proceeds from maturities and principal payments of securities available for sale

     21,083       296,975  

Proceeds from sales of securities, available for sale

     6,277       29,807  

Purchases of held-to-maturity securities

     (75,163 )     (57,702 )

Proceeds from maturities and principal payments of held-to-maturity securities

     116,252       97,380  

Purchases of other securities

     (21,248 )     —    

Net decrease in short-term investments

     2,116       167,426  

Net increase in loans

     (341,820 )     (80,775 )

Proceeds from sale of foreclosed properties

     5,855       1,714  

Net purchases of premises and equipment

     (15,730 )     (15,092 )
                

Net cash (used for) provided by investing activities

     (641,816 )     199,152  
                

Financing Activities:

    

Net (decrease) increase in deposits

     (277,591 )     360,665  

Proceeds from FHLB advances

     28,275,925       11,714,916  

Repayment of FHLB advances

     (27,906,974 )     (12,256,687 )

Increase in securities sold under agreements to repurchase and other short-term borrowings

     37,322       7,066  

Net proceeds from issuance of preferred stock

     217,700       —    

Issuance of long term debt

     —         199,344  

Payments on long term debt

     —         (172,170 )

Cash dividends to common shareholders

     (31,495 )     (32,198 )

Exercise of stock options

     440       5,278  

Excess tax benefits from stock-based compensation

     1       598  

Common stock repurchased

     (349 )     (87,032 )
                

Net cash provided by (used for) financing activities

     314,979       (260,220 )
                

 

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Table of Contents

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited), continued

 

 

 

     Six months ended
June 30,
 

(In thousands)

   2008    2007  

Cash Flows from Discontinued Operations:

     

Operating activities

   $ (2,141)    $ (2,441)  

Proceed from sale of discontinued operations

     23,920      —    
               

Net cash provided by (used for) discontinued operations

     21,779      (2,441 )
               

Increase (decrease) in cash and cash equivalents

     16,826      (18,665 )

Cash and cash equivalents at beginning of period

     306,654      311,888  
               

Cash and cash equivalents at end of period

   $ 323,480    $ 293,223  
               

Supplemental disclosures of cash flow information:

     

Interest paid

   $ 199,203    $ 241,021  

Income taxes paid

     24,190      31,239  

Noncash investing and financing activities:

     

Transfer of loans and leases, net to foreclosed properties

   $ 15,478    $ 4,894  

Issuance of loan to finance sale of subsidiary

     18,000      —    

Transfer of property from premises and equipment to assets held for disposition

     900      —    

Mortgage loans securitized and transferred to mortgage-backed securities held-to-maturity

     —        632,897  

Residential construction loans held-for-sale transferred to residential construction loan portfolio

     —        96,324  

Contingent consideration in a business combination

     —        1,585  

Sale transactions:

     

Fair value of noncash assets sold

   $ 40,833    $ —    

Fair value of liabilities extinguished

     7,117      —    

See accompanying Notes to Consolidated Interim Financial Statements.

 

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WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

(Unaudited)

NOTE 1: Summary of Significant Accounting Policies and Other Matters

The Consolidated Interim Financial Statements include the accounts of Webster Financial Corporation (“Webster” or the “Company”) and its subsidiaries. The Consolidated Interim Financial Statements and Notes thereto have been prepared in conformity with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. All significant inter-company transactions have been eliminated in consolidation. Amounts in prior period financial statements are reclassified whenever necessary to conform to current period presentations. The results of operations for the three or six months ended June 30, 2008 are not necessarily indicative of the results which may be expected for the year as a whole.

The preparation of the Consolidated Interim Financial Statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, as of the date of the Consolidated Interim Financial Statements, and the reported amounts of revenues and expenses for the periods presented. Actual results could differ from those estimates. Material estimates that are susceptible to near-term changes include goodwill impairment, other-than-temporary impairment on securities, the determination of the allowance for credit losses and the valuation allowance for the deferred tax asset. These Consolidated Interim Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in Webster’s Annual Report on Form 10-K for the year ended December 31, 2007.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (FASB) issued revised Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, (SFAS No. 141(R)). SFAS No. 141(R) retains the fundamental requirements of SFAS No. 141 that the acquisition method of accounting (formerly the purchase method) be used for all business combinations; that an acquirer be identified for each business combination; and that intangible assets be identified and recognized separately from goodwill. SFAS No. 141(R) requires the acquiring entity in a business combination to recognize the assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. Additionally, SFAS No. 141(R) changes the requirements for recognizing assets acquired and liabilities assumed arising from contingencies and recognizing and measuring contingent consideration. SFAS No. 141(R) also enhances the disclosure requirements for business combinations. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 and may not be applied before that date.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statement—an amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 amends Accounting Research Bulletin No. 51, Consolidated Financial Statements to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Among other things, SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements and requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. SFAS No. 160 also amends SFAS No. 128, Earnings per Share, so that earnings per share calculations in consolidated financial statements will continue to be based on amounts attributable to the parent. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 and is applied prospectively as of the beginning of the fiscal year in which it is initially applied, except for the presentation and disclosure requirements which are to be applied retrospectively for all periods presented. SFAS No. 160 is not expected to have a material impact on Webster’s financial condition or results of operations.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 requires enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related items are accounted for under SFAS No. 133 and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. The new standard is effective for Webster on January 1, 2009. Webster is currently evaluating the impact of adopting SFAS No. 161 on the Consolidated Financial Statements.

 

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In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS No. 162). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). The hierarchical guidance provided by SFAS No. 162 did not have an effect on the Company’s Consolidated Interim Financial Statements.

NOTE 2: Sale Transactions

On February 1, 2008, Webster completed the sale of Webster Insurance to USI Holdings Corporation. In connection with the sale, Webster Bank entered into a joint marketing arrangement with USI to provide expanded products and services to their respective clients. The sale resulted in the recording of a loss of $2.2 million, net of tax in the first quarter of 2008. A total of $40.4 million of assets held for disposition were transferred to the buyer as well as $6.3 million of liabilities.

On April 22, 2008, Webster announced that a definitive agreement had been reached to sell Webster Risk Services, a third-party workers’ compensation administrator. A $0.2 million loss, net of tax, was recorded upon completion of the sale on June 30, 2008.

The activities related to Webster Insurance and Webster Risk Services have been reported separately, with current and prior period amounts reclassified as assets and liabilities held for disposition in the Consolidated Balance Sheets and operating results reclassified as discontinued operations in the Consolidated Statements of Operations. Related prior period disclosures in the Notes to the Consolidated Interim Financial Statements have also been revised to incorporate the effect of the discontinued operations. Excluding the $2.4 million loss, net of taxes on the sale of Webster Insurance and Webster Risk Services, the operating results from discontinued operations for both the three and six months ended June 30, 2008 was a loss of $0.2 million, net of taxes.

 

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NOTE 3: Investment Securities

The following table presents a summary of the cost and fair value of Webster’s securities:

 

     June 30, 2008    December 31, 2007
     Amortized
Cost
   Unrealized     Estimated
Fair Value
   Amortized
Cost
   Unrealized     Estimated
Fair Value

(In thousands)

      Gains    Losses           Gains    Losses    

Trading:

                     

Municipal bonds and notes

           $ 2,280            $ 2,340
                                                         

Available for Sale:

                     

Government Treasury Bills

   $ 1,497    $ 1    $ —       $ 1,498    $ —      $ —      $ —       $ —  

Corporate bonds and notes

     306,747      190      (55,580 )     251,357      350,209      2,672      (20,583 )     332,298

Equity securities

     63,840      621      (3,302 )     61,159      78,354      1,763      (4,944 )     75,173

Mortgage-backed securities

     544,567      1,187      (10,177 )     535,577      230,116      1,831      (54 )     231,893
                                                         

Total available for sale

   $ 916,651    $ 1,999    $ (69,059 )   $ 849,591    $ 658,679    $ 6,266    $ (25,581 )   $ 639,364
                                                         

Held-to-maturity:

                     

Municipal bonds and notes

   $ 687,246    $ 5,453    $ (11,261 )   $ 681,438    $ 635,103    $ 10,580    $ (2,470 )   $ 643,213

Mortgage-backed securities

     1,378,525      1,850      (35,599 )     1,344,776      1,472,124      2,748      (23,519 )     1,451,353
                                                         

Total held-to-maturity

   $ 2,065,771    $ 7,303    $ (46,860 )   $ 2,026,214    $ 2,107,227    $ 13,328    $ (25,989 )   $ 2,094,566
                                                         

Other securities:

                     

Federal Home Loan Bank stock

   $ 90,495    $ —      $ —       $ 90,495    $ 69,249    $ —      $ —       $ 69,249

Federal Reserve Bank stock

     41,715      —        —         41,715      41,713      —        —         41,713
                                                         

Total other securities

   $ 132,210    $ —      $ —       $ 132,210    $ 110,962    $ —      $ —       $ 110,962
                                                         

Management evaluates all investments with an unrealized loss in value, whether caused by adverse interest rates, credit movements or some other factor to determine if the loss is other-than-temporary.

The following table provides information on the gross unrealized losses and fair value of Webster’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2008.

 

     Less Than Twelve Months     Twelve Months or Longer     Total  

(In thousands)

   Fair Value    Unrealized
Losses
    Fair Value    Unrealized
Losses
    Fair Value    Unrealized
Losses
 

Available for Sale:

               

Corporate bonds and notes

   $ 170,055    $ (50,346 )   $ 9,738    $ (5,234 )   $ 179,793    $ (55,580 )

Equity securities

     14,830      (3,302 )     —        —         14,830      (3,302 )

Mortgage-backed securities

     317,241      (10,177 )     —        —         317,241      (10,177 )
                                             

Total available for sale

   $ 502,126    $ (63,825 )   $ 9,738    $ (5,234 )   $ 511,864    $ (69,059 )
                                             

Held-to-maturity:

               

Municipal bonds and notes

   $ 362,205    $ (10,249 )   $ 18,955    $ (1,012 )   $ 381,160    $ (11,261 )

Mortgage-backed securities

     700,826      (11,863 )     541,337      (23,736 )     1,242,163      (35,599 )
                                             

Total held-to-maturity

   $ 1,063,031    $ (22,112 )   $ 560,292    $ (24,748 )   $ 1,623,323    $ (46,860 )
                                             

Total securities

   $ 1,565,157    $ (85,937 )   $ 570,030    $ (29,982 )   $ 2,135,187    $ (115,919 )
                                             

 

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The following table provides information on the gross unrealized losses and fair value of Webster’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2007.

 

     Less Than Twelve Months     Twelve Months or Longer     Total  

(In thousands)

   Fair Value    Unrealized
Losses
    Fair Value    Unrealized 
Losses
    Fair Value    Unrealized 
Losses
 

Available for Sale:

               

Corporate bonds and notes

   $ 284,385    $ (19,686 )   $ 4,504    $ (897 )   $ 288,889    $ (20,583 )

Equity securities

     47,001      (4,764 )     639      (180 )     47,640      (4,944 )

Mortgage-backed securities

     70,819      (54 )     —        —         70,819      (54 )
                                             

Total available for sale

   $ 402,205    $ (24,504 )   $ 5,143    $ (1,077 )   $ 407,348    $ (25,581 )
                                             

Held-to-maturity:

               

Municipal bonds and notes

   $ 143,177    $ (2,210 )   $ 19,118    $ (260 )   $ 162,295    $ (2,470 )

Mortgage-backed securities

     —        —         1,034,467      (23,519 )     1,034,467      (23,519 )
                                             

Total held-to-maturity

   $ 143,177    $ (2,210 )   $ 1,053,585    $ (23,779 )   $ 1,196,762    $ (25,989 )
                                             

Total securities

   $ 545,382    $ (26,714 )   $ 1,058,728    $ (24,856 )   $ 1,604,110    $ (51,570 )
                                             

The following summarizes, by security type, the basis for the conclusion that the applicable investments within the Company’s available for sale portfolio were not other-than-temporarily impaired at June 30, 2008:

The unrealized losses on the Company’s investment in corporate bonds and notes increased to $55.6 million at June 30, 2008 after an other-than-temporary impairment charge of $41.6 million for the three and six months ended June 30, 2008. This portfolio consists of various trust preferred securities, both pooled and single issuer, that are at investment grade, below investment grade and unrated. The decline in market value is attributable primarily to changes in interest rates therefore, the Company continues to believe it will collect all scheduled payments. The Company also has the ability and intent to hold these investments until a recovery of fair value, which may be at maturity. As a result, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2008.

The unrealized losses on the Company’s investment in equity securities decreased to $3.3 million at June 30, 2008 after an other-than-temporary impairment charges of $12.1 million and $12.6 million for the three and six months ended June 30, 2008, respectively. This portfolio consists primarily of investments in the common and preferred stock of other financial institutions ($47.1 million of the total fair value and $3.3 million of the total unrealized losses) and preferred stock of federal agencies ($14.1 million of the total fair value which approximated cost at June 30, 2008). Estimating the recovery period for equity securities in an unrealized loss position includes analyst forecasts, earnings assumptions and other company specific financial performance metrics. In addition, this assessment incorporates general market data, industry and sector cycles and related trends to determine a reasonable recovery period. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the impairment. Based on that evaluation and the Company’s ability and intent to hold the investments for a reasonable period of time sufficient for a forecasted recovery of fair value, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2008.

The unrealized losses on the Company’s investment in mortgage-backed securities increased to $10.2 million at June 30, 2008. There were no other-than-temporary impairment charges for mortgage-backed securities for the three and six months ended June 30, 2008. The reason for the decline is due to both interest rate and widening credit spreads. The contractual cash flows for these investments are performing as expected. As the decline in market value is attributable to changes in interest rates and credit spreads and not due to underlying credit deterioration, and because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be at maturity, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2008.

Management also determined that the $560.3 million in held-to-maturity securities that had been in an unrealized loss position for twelve consecutive months or longer were not other-than-temporarily impaired at June 30, 2008. These securities have had varying levels of unrealized loss due to changes in interest rates and spreads since being purchased. At June 30, 2008, the unrealized loss for mortgage-backed securities of $23.7 million was concentrated in seven securities with a total fair value of $541.3 million. These securities carry AAA ratings or Agency-implied AAA credit ratings and are currently performing as expected. The remaining $1.0 million unrealized loss was concentrated in 35 held-to-maturity municipal bonds and notes with a fair value of $19.0 million at June 30, 2008. Most of these bonds and notes are insured AAA rated general obligation bonds with stable ratings. There were no significant credit downgrades since the last review period, and these securities are currently performing as anticipated. Management does not consider these investments to be other-than-temporarily impaired and Webster has the ability and intent to hold these investments to full recovery of the cost basis. Management expects that recovery of these temporarily impaired securities will occur over the weighted-average estimated remaining life of these securities.

 

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The following table shows the impact of the recognition of other-than-temporary impairments and net realized gains and losses on the sale of securities from the available for sale portfolio for the three and six months ended June 30, 2008 and 2007.

 

     Three months ended
June 30,
    Six months ended
June 30,
 

(In thousands)

   2008     2007     2008     2007  

Corporate bonds and notes

        

Gross gains

   $ 23     $ 24     $ 309     $ 49  

Gross losses (a)

     (41,620 )     —         (41,678 )     —    
                                

Net gains (losses) on corporate bonds and notes

     (41,597 )     24       (41,369 )     49  
                                

Equity securities

        

Gross gains

     80       620       80       1,258  

Gross losses (b)

     (12,160 )     (178 )     (12,705 )     (178 )
                                

Net gains (losses) on equity securities

     (12,080 )     442       (12,625 )     1,080  
                                

Net gains (losses) on investment securities

   $ (53,677 )   $ 466     $ (53,994 )   $ 1,129  
                                

 

(a) Other-than-temporary impairment losses were $41.6 million for the three and six months ended June 30, 2008. There were no impairment losses for the three and six months ended June 30, 2007.
(b) Other-than-temporary impairment losses were $12.1 million and $12.6 million for the three and six months ended June 30, 2008, respectively. There were no impairment losses for the three and six months ended June 30, 2007.

The following summarizes, by security type, the basis for the conclusion that the applicable investments within the Company’s available for sale portfolio were other-than-temporarily impaired at June 30, 2008:

Corporate bonds and notes:

Trust preferred securities - the other-than-temporary impairment charge for these securities for the three and six months ended June 30, 2008 was $37.4 million. Approximately $8.5 million was due to an unexpected disruption in expected cash flows due to the increase in the amount of participants in the pool electing to defer interest payments. Based on information received from the securities’ underwriters and the trustees, it is expected that these securities will resume payments in 2009 and/or 2010. Approximately $28.9 million was due to management’s determination that based on the best estimate of cash flows that a market participant would use in determining the current fair value of the beneficial interest, there was an implied adverse change in expected cash flows and accordingly impaired these securities and wrote them down to fair value as of June 30, 2008.

Income notes – the other-than-temporary impairment charge for these securities was $4.2 million for the three and six months ended June 30, 2008 due to management’s determination that based on the best estimate of cash flows that a market participant would use in determining the current fair value of the beneficial interest, there was an implied adverse change in expected cash flows and accordingly impaired these securities and wrote them down to fair value as of June 30, 2008.

Equity securities – the other-than-temporary impairment charge for these securities was $12.1 million and $12.6 million for the three and six months ended June 30, 2008, respectively. The conclusion that these investments were other-than-temporarily impaired was based on management’s review of these securities and their prospects for a near term recovery.

To the extent that continued changes in interest rates, credit movements and other factors that influence the fair value of investments occur, the Company may be required to record additional impairment charges for other than temporary impairment in future periods.

 

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NOTE 4: Loans, Net

A summary of loans, net follows:

 

     June 30, 2008    December 31, 2007

(Dollars in thousands)

   Amount     %    Amount     %

Residential mortgage loans:

         

1-4 family

   $ 3,443,083     27.0    $ 3,440,056     27.5

Construction

     77,368     0.6      106,553     0.9

Liquidating portfolio

         

Construction

     46,103     0.4      83,253     0.7

1-4 family

     16,699     0.1      —       —  
                         

Total residential mortgage loans

     3,583,253     28.1      3,629,862     29.1
                         

Commercial loans:

         

Commercial non-mortgage

     1,790,974     14.0      1,736,644     13.9

Asset-based loans

     843,006     6.6      793,023     6.4

Equipment financing

     988,334     7.7      970,857     7.8
                         

Total commercial loans

     3,622,314     28.3      3,500,524     28.1
                         

Commercial real estate:

         

Commercial real estate

     1,935,049     15.2      1,739,707     13.9

Commercial construction

     383,474     3.0      323,700     2.6
                         

Total commercial real estate

     2,318,523     18.2      2,063,407     16.5
                         

Consumer loans:

         

Home equity loans

     2,840,826     22.3      2,844,094     22.8

Liquidating portfolio-home equity loans

     310,407     2.4      340,662     2.7

Other consumer

     31,187     0.2      32,498     0.3
                         

Total consumer loans

     3,182,420     24.9      3,217,254     25.8
                         

Net unamortized premiums

     15,932     0.1      18,055     0.1

Net deferred costs

     44,012     0.4      46,841     0.4
                         

Total net unamortized premiums and deferred costs

     59,944     0.5      64,896     0.5
                         

Total loans

     12,766,454     100.0      12,475,943     100.0
                     

Less: allowance for loan losses

     (184,868 )        (188,086 )  
                     

Loans, net

   $ 12,581,586        $ 12,287,857    
                     

In 2007, Webster discontinued indirect residential construction lending and indirect home equity lending outside of its primary market area. At December 31, 2007, these two indirect out of market loan portfolios totaling $424.0 million ($340.7 million of indirect home equity products and $83.3 million of residential construction products), were placed into liquidating portfolios, and are currently being managed by a designated credit team. At June 30, 2008, the liquidating portfolios had declined to $373.2 million ($310.4 million of indirect home equity, $46.1 million of residential construction and $16.7 million of 1-4 family residential mortgages).

 

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Financial instruments with off-balance sheet risk

Webster is a party to financial instruments with off-balance sheet risk to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the Consolidated Balance Sheets.

The following table summarizes financial instruments with off-balance sheet risk:

 

(In thousands)

   June 30,
2008
   December 31,
2007

Unused commercial letters and lines of credit

   $ 2,304,142    $ 2,800,458

Unused portion of home equity credit lines

     

Continuing portfolio

     2,045,780      2,041,065

Liquidating portfolio

     34,029      65,000

Unadvanced portion of closed loans

     372,900      452,321

Outstanding loan commitments

     23,255      8,071
             

Total financial instruments with off-balance sheet risk

   $ 4,780,106    $ 5,366,915
             

The interest rates for outstanding loan commitments are generally established shortly before closing. The interest rates on home equity lines of credit adjust with changes in the prime rate. At June 30, 2008, the fair value of financial instruments with off-balance sheet risk are considered insignificant to the financial statements taken as a whole.

NOTE 5: Allowance for Credit Losses

There was significant disruption and volatility in the financial and capital markets during the second half of 2007 and the first half of 2008. Turmoil in the mortgage market adversely impacted both domestic and global markets, and led to a significant credit and liquidity crisis. These market conditions were attributable to a variety of factors; in particular the fallout associated with subprime mortgage loans (a type of lending never actively pursued by Webster). The disruption has been exacerbated by the continued value declines in the real estate and housing market. Webster is not immune to some negative consequences arising from overall economic weakness and, in particular, a sharp downturn in the housing market, both locally and nationally. Decreases in real estate values could adversely affect the value of property used as collateral for loans. Adverse changes in the economy may have a negative effect on the ability of Webster’s borrowers to make timely loan payments, which would have an adverse impact on the Company’s earnings. A further increase in loan delinquencies would decrease net interest income and adversely impact loan loss experience, causing potential increases in the provision and allowance for credit losses.

The allowance for credit losses is maintained at a level adequate to absorb probable losses inherent in the loan portfolio and in unfunded credit commitments. This allowance is increased by provisions charged to operating expense and by recoveries on loans previously charged-off and reduced by charge-offs on loans.

 

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A summary of the changes in the allowance for credit losses follows:

 

     Three months ended
June 30,
    Six months ended
June 30,
 

(In thousands)

   2008     2007     2008     2007  

Beginning balance - continuing portfolio

   $ 147,691     $ 152,660     $ 147,680     $ 154,994  

Provision

     25,000       4,250       40,800       7,250  

Charge-offs continuing portfolio:

        

Commercial (a)

     (8,664 )     (2,034 )     (20,103 )     (4,327 )

Residential

     (1,036 )     (286 )     (2,516 )     (2,867 )

Consumer

     (2,784 )     (3,176 )     (6,481 )     (5,169 )
                                

Charge-offs continuing portfolio

     (12,484 )     (5,496 )     (29,100 )     (12,363 )

Recoveries

     1,290       1,336       2,117       2,869  
                                

Net loan charge-offs—continuing portfolio

     (11,194 )     (4,160 )     (26,983 )     (9,494 )
                                

Ending balance—continuing portfolio

   $ 161,497     $ 152,750     $ 161,497     $ 152,750  
                                

Beginning balance—liquidating portfolio (b)

   $ 42,117     $ N/A     $ 49,906     $ N/A  

Provision

     —         N/A       —         N/A  

Charge-offs liquidating portfolio:

        

NCLC

     (4,203 )     N/A       (8,544 )     N/A  

Consumer (home equity)

     (5,450 )     N/A       (8,898 )     N/A  
                                

Charge-offs liquidating portfolio

     (9,653 )     N/A       (17,442 )     N/A  

Recoveries

     407       N/A       407       N/A  
                                

Net loan charge-offs—liquidating portfolio

     (9,246 )     N/A       (17,035 )     N/A  
                                

Ending balance—liquidating portfolio

   $ 32,871       N/A     $ 32,871       N/A  
                                

Ending balance—total allowance for credit losses

   $ 194,368     $ 152,750     $ 194,368     $ 152,750  
                                

Components:

        

Allowance for loan losses

   $ 184,868     $ 144,974     $ 184,868     $ 144,974  

Reserve for unfunded credit commitments (d)

     9,500       7,776       9,500       7,776  
                                

Allowance for credit losses

   $ 194,368     $ 152,750     $ 194,368     $ 152,750  
                                

Net loan charge-offs as a percentage of average total loans (c)

     0.64 %     0.14 %     0.69 %     0.15 %

Allowance for loan losses as a percentage of total loans

     1.45       1.17       1.45       1.17  

Allowance for credit losses as a percentage of total loans

     1.52       1.23       1.52       1.23  

 

(a) All Business & Professional Banking loans, both commercial and commercial real estate, are considered commercial for purposes of reporting charge-offs and recoveries.
(b) In 2007 Webster discontinued indirect residential construction lending and indirect home equity lending outside of its primary market area. Webster placed these two portfolios into a liquidating portfolio and disclosed this as a separate segment from its continuing portfolio. Comparable information for the liquidating portfolio for the three and six month periods ended June 30, 2007 is therefore not available as the portfolio was established in the fourth quarter of 2007.
(c) Net loan charge-offs as a percentage of average loans is calculated by annualizing the charge off amounts for the three and six month period and dividing the result by average total loans for the respective periods.
(d) Reserve for unfunded credit commitments is reported as a component of accrued expenses and other liabilities in the accompanying Consolidated Balance Sheets

 

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NOTE 6: Goodwill and Other Intangible Assets

The following tables set forth the carrying values of goodwill and other intangible assets, net of accumulated amortization:

 

(In thousands)

   June 30,
2008
   December 31,
2007

Balances not subject to amortization:

     

Goodwill

   $ 719,538    $ 728,038
             

Balances subject to amortization:

     

Core deposit intangibles

     35,633      38,612

Other identified intangibles

     1,332      1,365
             

Total other intangible assets

     36,965      39,977
             

Total goodwill and other intangible assets

   $ 756,503    $ 768,015
             

Goodwill is allocated to Webster’s business segments as follows:

 

(In thousands)

   June 30,
2008
   December 31,
2007

Commercial Banking

   $ 6,681    $ 6,681

Retail Banking

     516,332      516,332

Consumer Finance

     149,391      149,391

Other

     47,134      55,634
             

Total goodwill

   $ 719,538    $ 728,038
             

Webster tests its goodwill for impairment annually in its third quarter. Accounting principles generally accepted in the U.S. require additional testing if events or circumstances indicate that impairment may exist. As a result of the continued disruption in the financial markets and the spread between its market capitalization and book value, Webster performed impairment testing of the goodwill for all reporting units as of June 30, 2008. Based upon the impairment testing performed, there was no impairment indicated for Webster’s goodwill as of June 30, 2008 with the exclusion of its insurance premium financing business. The fair value of this reporting unit was determined utilizing a capitalized earnings approach for valuation purposes. Webster then determined the implied fair value of the reporting unit’s goodwill as compared to its carried balance. Based upon this comparison Webster reduced the carrying value of goodwill by $8.5 million through a charge to second quarter earnings. This charge had no effect on Webster’s cash balances or liquidity. In addition, as goodwill and other intangible assets are not included in the calculation of regulatory capital, the well-capitalized regulatory ratios of Webster and Webster Bank, N.A., were not affected by this non-cash charge.

A continuing period of market disruption, or further market capitalization deterioration, will result in the requirement to continue to perform testing for impairment between annual assessments. To the extent that additional testing results in the identification of impairment, the Company may be required to record additional charges for the impairment of goodwill.

Amortization of intangible assets for the three and six months ended June 30, 2008, totaled $1.5 million and $3.0 million, respectively. Estimated annual amortization expense of current intangible assets with finite useful lives, absent any impairment or change in estimated useful lives, is summarized below.

 

(In thousands)

    

For years ending December 31,

  

2008 (full year)

   $ 5,939

2009

     5,754

2010

     5,684

2011

     5,684

2012

     5,516

Thereafter

     11,400

 

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NOTE 7: Income Taxes

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at June 30, 2008 and December 31, 2007 are summarized below. Temporary differences result from the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Due to uncertainties of realization, a valuation allowance has been established for the full amount of the net state deferred tax asset applicable to Connecticut, and for substantially all Massachusetts and Rhode Island net state deferred tax assets.

 

(In thousands)

   June 30,
2008
    December 31,
2007
 

Deferred tax assets:

    

Allowance for credit losses

   $ 75,628     $ 76,955  

Net operating loss and tax credit carry forwards

     38,754       34,190  

Compensation and employee benefit plans

     21,376       17,423  

Net unrealized loss on securities available for sale

     23,471       6,760  

Impairment losses on securities available for sale

     23,796       —    

Other

     12,124       15,422  
                

Total deferred tax assets

     195,149       150,750  

Valuation allowance

     (50,888 )     (41,374 )
                

Deferred tax assets, net of valuation allowance

     144,261       109,376  
                

Deferred tax liabilities:

    

Deferred loan costs

     17,057       19,918  

Premises and equipment

     4,798       3,454  

Equipment financing leases

     17,874       16,202  

Purchase accounting and fair-value adjustments

     6,034       7,341  

Other

     3,675       4,335  
                

Total deferred tax liabilities

     49,438       51,250  
                

Deferred tax assets, net

   $ 94,823     $ 58,126  
                

Management believes it is more likely than not that Webster will realize its net deferred tax assets, based upon its recent historical and anticipated future levels of pre-tax income. There can be no absolute assurance, however, that any specific level of future income will be generated.

At June 30, 2008, Webster’s total amount of unrecognized tax benefits (“UTBs”), determined under the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109 (“FIN 48”), was $7.1 million. If recognized, $4.3 million of that amount would impact the effective tax rate. During the six months ended June 30, 2008, Webster’s UTBs decreased by $3.2 million as a result of settlements with taxing authorities.

Additionally, Webster recognizes interest and, where applicable, penalties related to UTBs as a component of income tax expense. During the six months ended June 30, 2008, Webster recognized $0.5 million of interest and penalties and, at June 30, 2008, had accrued interest and penalties related to UTBs of $1.4 million.

Webster has determined it is reasonably possible that its UTBs could decrease within the next 12 months by an amount in the range of $0.5 million to $2.8 million, as a result of potential settlements with state taxing authorities.

 

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NOTE 8: Deposits

The following table summarizes the period end balance and the composition of deposits:

 

     June 30, 2008     December 31, 2007  

(In thousands)

   Amount    Percentage
of Total
    Amount    Percentage
of Total
 

Demand

   $ 1,583,686      13.1 %   $ 1,538,083      12.5 %

NOW

     1,357,484      11.2       1,314,899      10.6  

Money market

     1,591,857      13.2       1,828,656      14.8  

Savings

     2,452,831      20.3       2,259,747      18.3  

Health savings accounts (“HSA”)

     504,513      4.2       403,858      3.3  

Retail certificates of deposit

     4,416,165      36.6       4,772,624      38.6  

Brokered deposit

     170,031      1.4       236,291      1.9  
                              

Total

   $ 12,076,567      100.0 %   $ 12,354,158      100.0 %
                              
Interest expense on deposits is summarized as follows:  
     Three months ended June 30,     Six months ended June 30,  

(In thousands)

   2008    2007     2008    2007  

NOW

   $ 784    $ 1,764     $ 1,872    $ 3,419  

Money market

     8,341      17,057       19,998      34,523  

Savings

     7,559      8,827       16,188      16,098  

HSA

     2,621      2,740       5,427      5,110  

Retail certificates of deposit

     38,915      54,702       87,583      108,762  

Brokered deposit

     1,835      4,593       4,229      9,401  
                              

Total

   $ 60,055    $ 89,683     $ 135,297    $ 177,313  
                              

NOTE 9: Federal Home Loan Bank Advances

Advances payable to the Federal Home Loan Bank (“FHLB”) are summarized as follows:

 

     June 30, 2008    December 31, 2007

(In thousands)

   Total
Outstanding
   Callable    Total
Outstanding
    Callable

Fixed Rate:

          

2.25 % to 2.98 % due in 2008

   $ 683,106    $ —      $ 613,956     $ 67,000

4.98 % to 5.96 % due in 2009

     142,616      123,000      142,616       123,000

4.16 % to 8.44 % due in 2010

     235,138      135,000      235,175       135,000

1.99 % to 6.60 % due in 2011

     200,818      100,000      947       —  

2.94 % to 5.49 % due in 2013

     149,000      49,000      49,000       49,000

0.00 % to 6.00 % due after 2013

     2,431      —        2,464       —  
                            
     1,413,109      407,000      1,044,158       374,000

Unamortized premiums

     6,461      —        8,310       —  

Hedge accounting adjustments

     —        —        (240 )     —  
                            

Total advances

   $ 1,419,570    $ 407,000    $ 1,052,228     $ 374,000
                            

Webster Bank had additional borrowing capacity from the FHLB of approximately $0.8 billion at June 30, 2008 and $1.2 billion at December 31, 2007. Advances are secured by a blanket security agreement against certain qualifying assets, principally residential mortgage loans. At June 30, 2008 and December 31, 2007, Webster Bank had unencumbered investment securities available to secure additional borrowings. If these securities had been used to secure FHLB advances, borrowing capacity at June 30, 2008 and December 31, 2007 would have been increased by an additional $758.2 million and $449.6 million, respectively. At June 30, 2008 Webster Bank was in compliance with the FHLB collateral requirements.

 

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NOTE 10: Securities Sold Under Agreements to Repurchase and Other Short-term Debt

The following table summarizes securities sold under agreements to repurchase and other short-term borrowings:

 

(In thousands)

   June 30,
2008
    December 31,
2007
 

Securities sold under agreements to repurchase

   $ 745,048     $ 754,792  

Federal funds purchased

     380,895       348,820  

Treasury tax and loan

     145,000       130,000  

Other

     —         9  
                
     1,270,943       1,233,621  

Unamortized premiums

     4,081       5,110  

Hedge accounting adjustments

     —         (719 )
                

Total

   $ 1,275,024     $ 1,238,012  
                

 

The following table sets forth certain information on short-term repurchase agreements:

 

 

(Dollars in thousands)

   June 30,
2008
    December 31,
2007
 

Quarter end balance

   $ 272,049     $ 268,766  

Quarter average balance

     243,105       285,499  

Highest month end balance during quarter

     272,049       298,537  

Weighted-average maturity (in months)

     0.17       8.50  

Weighted-average interest rate at end of period

     1.32 %     2.53 %

NOTE 11: Fair Value Measurements

Effective January 1, 2008, Webster adopted the provisions of SFAS No. 157, “Fair Value Measurements”, for financial assets and financial liabilities. In accordance with FASB Staff Position (FSP) No. 157-2, “Effective Date of FASB Statement No. 157,” Webster will delay application of SFAS No. 157 for non-financial assets and non-financial liabilities, until January 1, 2009. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.

SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

SFAS No. 157 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, SFAS No. 157 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

 

   

Level 1 Inputs—Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

 

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Level 2 Inputs—Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

 

   

Level 3 Inputs—Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of Webster’s financial assets and financial liabilities carried at fair value effective January 1, 2008.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect credit quality as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. Webster’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes Webster’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Securities Available for Sale. Equity securities and government treasury bills are reported at fair value utilizing Level 1 inputs based upon quoted market prices. Other securities and certain preferred equity securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, Webster obtains fair value measurements from various sources and utilizes matrix pricing to calculate fair value. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. Webster recorded other-than-temporary impairment charges of $53.7 million and $54.2 million, respectively, for the three and six months ended June 30, 2008 reducing the amortized cost of the related available for sale securities. The other-than-temporary charges did not result in a change to the fair value reported in the accompanying Consolidated Balance Sheets.

Trading Securities. Securities classified as trading are reported at fair value utilizing Level 2 inputs in the same manner as described above for securities available for sale.

Derivatives. Derivatives are reported at fair value utilizing Level 2 inputs obtained from third parties to value interest rate swaps and caps. Fair values are compared to independent broker values for reasonableness.

Loans Held for Sale. Loans held for sale are required to be measured at the lower of cost or fair value. Under SFAS No. 157, market value is to represent fair value. As of June 30, 2008, Webster had $4.0 million of loans held for sale. Management obtains quotes or bids on all or part of these loans directly from the purchasing financial institutions. At June 30, 2008, $2.5 million of loans held for sale were recorded at cost and $1.5 million of loans held for sale were recorded at fair value. Webster recorded a mark to market recovery of $4,393 and a charge of $10,278, respectively, to mortgage banking activities in the accompanying Consolidated Statements of Operations for the three and six months ended June 30, 2008.

Impaired Loans. Certain impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. When the fair value of the collateral is based on an observable market price or certain appraised values, Webster records the impaired loan using Level 2 inputs. For all other impairments, Webster records the impairment using Level 3 inputs. Loans totaling $44.6 million were deemed impaired at June 30, 2008 and an allowance for loan loss allocation of $14.8 million was made upon identification of impaired loans during the six months ended June 30, 2008.

Servicing Assets. Servicing assets are carried at cost and are subject to impairment testing. Fair value is estimated utilizing market based assumptions for loan prepayment speeds, servicing costs, discount rates and other economic factors. Where the carrying value exceeds fair value a valuation allowance is established through a charge to non-interest income and subsequently adjusted for changes in fair value. For those servicing assets that experienced a change in fair value, Webster reduced its valuation allowance and recorded a valuation allowance recovery of $0.3 million and $0.4 million, respectively, as a component of mortgage banking activities in the accompanying Consolidated Statements of Operations for the three and six months ended June 30, 2008.

 

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The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of June 30, 2008, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

 

(In thousands)

   Balance as of
June 30, 2008
   Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
   Significant Other
Observable Inputs
(Level 2)
   Significant
Unobservable Inputs
(Level 3)

Financial assets held at fair value:

           

Trading securities

   $ 2,280    $ —      $ 2,280    $ —  

Available for sale securities:

           

Government treasury notes

     1,498      1,498      —        —  

Corporate bonds and notes

     251,357      —        251,357      —  

Equity securities

     61,159      47,926      13,233      —  

Mortgage backed securities

     535,577      —        535,577      —  
                           

Total available for sale securities

     849,591      49,424      800,167      —  

Derivatives instruments

     17,176      —        17,176      —  
                           

Total financial assets held at fair value

   $ 869,047    $ 49,424    $ 819,623    $ —  
                           

Financial liabilities held at fair value:

           

Derivative instruments

   $ 8,311    $ —      $ 8,311    $ —  

Certain assets and liabilities are measured at fair value on a non-recurring basis in accordance with generally accepted accounting principles. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period as well as assets that are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

The following table summarizes financial assets and financial liabilities measured at fair value on a non-recurring basis as of June 30, 2008, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

 

(In thousands)

   Balance as of
June 30, 2008
   Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
   Significant Other
Observable Inputs
(Level 2)
   Significant
Unobservable Inputs
(Level 3)

Assets:

           

Impaired loans

   $ 44,600    $ —      $ —      $ 44,600

Loans held for sale

     1,461      —        1,461      —  

Servicing assets

     872      —        —        872

Non-financial assets and non-financial liabilities measured at fair value on a non-recurring basis include reporting units measured at fair value in the first step of goodwill impairment tests. Non-financial assets and non-financial liabilities measured at fair value in the second step of a goodwill impairment test, and other intangible assets and other non-financial long-lived assets measured at fair value for impairment assessment. As stated above, SFAS No. 157 will be applicable to these fair value measurements beginning January 1, 2009.

Effective January 1, 2008, Webster adopted the provisions of SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115.” SFAS No. 159 permits Webster to choose to measure eligible items at fair value at specified election dates. Unrealized gains and losses on items for which the fair value measurement option has been elected are reported in earnings at each subsequent reporting date. The fair value option (i) may be applied instrument by instrument, with certain exceptions, thus Webster may record identical financial assets and liabilities at fair value or by another measurement basis permitted under generally accepted accounting principles, (ii) is irrevocable (unless a new election date occurs) and (iii) is applied only to entire instruments and not to portions of instruments. Adoption of SFAS No. 159 on January 1, 2008 did not have a significant impact on Webster’s Consolidated Interim Financial Statements as Webster did not elect to report any additional financial assets or financial liabilities at fair value.

 

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NOTE 12: Shareholders’ Equity

In June 2008, Webster issued 225,000 shares of 8.50% Series A Non-Cumulative Perpetual Convertible Preferred Stock, at $0.01 per share (Series A Preferred Stock). Dividends on the Series A Preferred Stock will be payable quarterly in arrears, when, as and if authorized and declared by Webster’s board of directors, at an annual rate of 8.50% on the liquidation preference of $1,000 per share of Series A Preferred Stock. The dividend payment dates will be the fifteenth day of each March, June, September and December, commencing on September 15, 2008. Dividends on the Preferred Stock will be non-cumulative; however, with certain limited exceptions, if Webster has not paid or set aside for payment full quarterly dividends on the Series A Preferred Stock for a particular dividend period, Webster may not declare or pay dividends on, or redeem, purchase or acquire, its common stock or other junior securities during the next succeeding dividend period.

Each share of Series A Preferred Stock may be converted at any time, at the option of the holder, into 36.8046 shares of Webster’s common stock plus cash in lieu of fractional shares, subject to adjustment under certain circumstances. On or after June 15, 2013, if the closing price of Webster’s common stock exceeds 130% of the then-applicable conversion price for 20 trading days during any 30 consecutive trading day period, including the last trading day of such period, ending on the trading day preceding the date Webster gives notice of conversion, Webster may at its option cause some or all of the Series A Preferred Stock to be automatically converted into Webster common stock at the then prevailing conversion rate. If Webster exercises its right to cause the automatic conversion of Series A Preferred Stock on June 30, 2013, it will still pay any accrued dividends payable on June 15, 2013 to the applicable holders of record.

The shares of Series A Preferred Stock are not subject to the operation of a sinking fund and have no participation rights. The holders of this series have no general voting rights. If any quarterly dividend payable on this series is in arrears for six or more dividend periods (whether consecutive or not), the holders of this series, voting together as a single class with holders of any and all other series of voting preferred stock then outstanding, will be entitled to vote for the election of two additional members of Webster’s board of directors subject to certain limitations. These voting rights and the terms of any preferred stock directors terminate when Webster has paid in full dividends on this series for at least four consecutive dividend periods following the dividend arrearage.

Accumulated other comprehensive income (loss) is comprised of the following components:

 

(In thousands)

   June 30,
2008
    December 31,
2007
 

Unrealized loss on available for sale securities (net of tax)

   $ (44,668 )   $ (12,344 )

Unrealized loss upon transfer of available for sale securities to held-to-maturity (net of tax and amortization)

     (1,238 )     (1,388 )

Underfunded pension and other postretirement benefit plans (net of tax):

    

Net actuarial loss

     (5,133 )     (5,135 )

Prior service cost

     (365 )     (388 )

Unrealized gain on derivatives held and amortization of deferred hedging gain

     5,264       3,359  
                

Accumulated other comprehensive loss

   $ (46,140 )   $ (15,896 )
                

 

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NOTE 13: Regulatory Matters

Capital guidelines issued by the Federal Reserve Board and the Office of the Comptroller of Currency of the United States (“OCC”) require Webster and its banking subsidiary to maintain certain minimum ratios, as set forth below. At June 30, 2008, Webster and Webster Bank, were deemed to be “well capitalized” under the regulations of the Federal Reserve Board and the OCC, respectively, and in compliance with the applicable capital requirements.

The following table provides information on the capital ratios:

 

     Actual     Capital Requirements     Well Capitalized  

(In thousands)

   Amount    Ratio     Amount    Ratio     Amount    Ratio  

At June 30, 2008

               

Webster Financial Corporation

               

Total risk-based capital

   $ 1,807,733    13.5 %   $ 1,070,577    8.0 %   $ 1,338,221    10.0 %

Tier 1 capital

     1,480,121    11.1       535,288    4.0       802,933    6.0  

Tier 1 leverage capital ratio

     1,480,121    8.9       662,748    4.0       828,435    5.0  

Webster Bank, N.A.

               

Total risk-based capital

   $ 1,560,829    11.8 %   $ 1,059,182    8.0 %   $ 1,323,977    10.0 %

Tier 1 capital

     1,234,976    9.3       529,590    4.0       794,386    6.0  

Tier 1 leverage capital ratio

     1,234,976    7.5       656,176    4.0       820,220    5.0  

At December 31, 2007

               

Webster Financial Corporation

               

Total risk-based capital

   $ 1,665,578    11.4 %   $ 1,169,375    8.0 %   $ 1,461,719    10.0 %

Tier 1 capital

     1,282,680    8.8       584,687    4.0       877,031    6.0  

Tier 1 leverage capital ratio

     1,282,680    8.0       645,295    4.0       806,619    5.0  

Webster Bank, N.A.

               

Total risk-based capital

   $ 1,596,068    11.1 %   $ 1,154,343    8.0 %   $ 1,442,929    10.0 %

Tier 1 capital

     1,215,246    8.4       577,172    4.0       865,757    6.0  

Tier 1 leverage capital ratio

     1,215,246    7.6       637,486    4.0       796,858    5.0  

 

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NOTE 14: Earnings Per Common Share

The following table presents the computation of basic and diluted earnings per share (“EPS”):

 

     Three months ended June 30,     Six months ended June 30,  

(In thousands)

   2008     2007     2008     2007  

(Loss) income from continuing operations

   $ (28,501 )   $ 35,872     $ (2,012 )   $ 70,952  

Loss from discontinued operations

     (439 )     (405 )     (2,563 )     (449 )
                                

Net (loss) income

   $ (28,940 )   $ 35,467     $ (4,575 )   $ 70,503  
                                

Weighted average common shares outstanding - basic

     52,017       55,677       52,009       55,894  

Dilutive effect of stock-based compensation

     —         566       —         603  

Dilutive effect of preferred stock

     —         —         —         —    
                                

Weighted average common and common equivalent shares - diluted

     52,017       56,243       52,009       56,497  
                                

Basic EPS:

        

(Loss) income from continuing operations

   $ (0.55 )   $ 0.65     $ (0.04 )   $ 1.27  

Loss from discontinued operations

     (0.01 )     (0.01 )     (0.05 )     (0.01 )
                                

Net (loss) income

   $ (0.56 )   $ 0.64     $ (0.09 )   $ 1.26  
                                

Diluted EPS:

        

(Loss) income from continuing operations

   $ (0.55 )   $ 0.64     $ (0.04 )   $ 1.26  

Loss from discontinued operations

     (0.01 )     (0.01 )     (0.05 )     (0.01 )
                                

Net (loss) income

   $ (0.56 )   $ 0.63     $ (0.09 )   $ 1.25  
                                

At June 30, 2008 and 2007, options to purchase 2,746,397 and 1,276,514 shares of common stock at exercise prices ranging from $21.88 to $51.31 and $43.67 to $51.31, respectively, were not considered in the computation of potential common shares for purposes of diluted EPS, since the exercise prices of the options were greater than the average market price of Webster’s common stock for the respective periods.

When computing diluted earnings per share, all potential common stock, including stock options, restricted stock and convertible preferred stock, are anti-dilutive to the earnings per common share calculation. Therefore, for the three and six months ended June 30, 2008 the dilutive effect of these items has not been considered for diluted EPS purposes.

 

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NOTE 15: Business Segments

Webster has four business segments for purposes of reporting segment results. These segments are Commercial Banking, Retail Banking, Consumer Finance and Other. Commercial Banking includes middle market, asset-based lending and commercial real estate. Retail Banking includes retail banking, business and professional banking and investment services. Consumer Finance includes residential mortgage, consumer lending and mortgage banking activities. Other includes equipment financing, investment planning, insurance premium financing, and HSA Bank. The Corporate and reconciling amounts include the Company’s Treasury unit, Government Finance, the results of discontinued operations and the amounts required to reconcile profitability metrics to GAAP reported amounts. For further discussion of Webster’s business segments, see Note 21, “Business Segments”, on pages 103-105 of Webster’s 2007 Annual Report on Form 10-K.

The following tables present the operating results and total assets for Webster’s reportable segments for the three and six months ended June 30, 2008 and 2007. The results for the three and six months ended June 30, 2008 incorporate the allocation of the increased in the provision for loan losses, other-than-temporary impairment charges, goodwill impairment charges and income tax benefit to each of Webster’s business segments resulting in an increase in the net income of certain business segments as compared to the comparable periods in 2007. For the three and six months ended June 30, 2008, Webster realized an income tax benefit for the effects of the increase in the provision for loan losses and the other-than-temporary impairment of certain available for sale securities. The results for Other for the three and six month periods ended June 30, 2008 include the $8.5 million goodwill impairment charge for the insurance premium financing subsidiary taken in the second quarter of 2008. The impact of this charge was not allocated across all reporting segments.

 

Three months ended June 30, 2008  

(In thousands)

   Commercial
Banking
    Retail
Banking
    Consumer
Finance
    Other     Total Reportable
Segments
    Corporate &
Reconciling
Amounts
    Consolidated
Total
 

Net interest income

   $ 27,245     $ 53,950     $ 29,800     $ 10,008     $ 121,003     $ 4,683     $ 125,686  

Provision for credit losses

     4,136       1,164       3,443       1,175       9,918       15,082       25,000  
                                                        

Net interest income after provision

     23,109       52,786       26,357       8,833       111,085       (10,399 )     100,686  

Non-interest income

     5,520       31,615       3,440       6,378       46,953       (52,702 )     (5,749 )

Non-interest expense

     15,143       72,051       17,806       21,479       126,479       11,244       137,723  
                                                        

Income (loss) from continuing operations before income taxes

     13,486       12,350       11,991       (6,268 )     31,559       (74,345 )     (42,786 )

Income tax expense (benefit)

     (5,198 )     (5,020 )     (5,296 )     (717 )     (16,231 )     1,946       (14,285 )
                                                        

Income (loss) from continuing operations

     18,684       17,370       17,287       (5,551 )     47,790       (76,291 )     (28,501 )

Loss from discontinued operations

     —         —         —         —         —         (439 )     (439 )
                                                        

Net income (loss)

   $ 18,684     $ 17,370     $ 17,287     $ (5,551 )   $ 47,790     $ (76,730 )   $ (28,940 )
                                                        

Total assets at period end

   $ 3,827,368     $ 1,593,736     $ 7,031,084     $ 1,356,068     $ 13,808,256     $ 3,670,380     $ 17,478,636  
                                                        
Three months ended June 30, 2007  

(In thousands)

   Commercial
Banking
    Retail
Banking
    Consumer
Finance
    Other     Total Reportable
Segments
    Corporate &
Reconciling
Amounts
    Consolidated
Total
 

Net interest income

   $ 27,669     $ 65,411     $ 31,054     $ 9,842     $ 133,976     $ (3,623 )   $ 130,353  

Provision for credit losses

     3,727       1,168       3,275       1,125       9,295       (5,045 )     4,250  
                                                        

Net interest income after provision

     23,942       64,243       27,779       8,717       124,681       1,422       126,103  

Non-interest income

     4,920       31,586       7,063       5,904       49,473       6,029       55,502  

Non-interest expense

     13,376       72,871       17,212