SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 16, 2002
WEBSTER FINANCIAL CORPORATION.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-15213 06-1187536
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
WEBSTER PLAZA, WATERBURY, CONNECTICUT 06702
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(Address of principal executive offices)
Registrant's telephone number, including area code: (203) 578-2476
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NOT APPLICABLE
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(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS
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Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank,
announced that the Company has taken actions to reduce its exposure to
telecommunications credit risk in its loan portfolio. Five substandard shared
national telecommunications credits totaling $25.8 million at September 30,
2002, have since been sold or written down to current market bids, resulting in
a fourth quarter charge against the allowance for loan losses of approximately
$13.5 million. At December 31, 2002, Webster expects written down
telecommunications loans held for sale to amount to approximately $7.3 million,
of which $4.2 million are nonperforming loans. Webster expects to sell these
commercial loans held for sale within twelve months.
Earlier in the quarter Webster sold its two classified shared national cable
credits totaling $9.8 million, resulting in a $1.6 million charge-off.
Webster has increased its planned fourth quarter provision for loan losses by
$11.0 million to $16.0 million and notes that its year-end allowance for loan
losses should be virtually unchanged from September 30, 2002. The higher
provision has been offset by gains on the sale of securities. These actions
should have no net impact on fourth quarter or full year 2002 earnings. After
taking gains on the sale of securities, Webster's net unrealized gain in its
available for sale securities portfolio is approximately $61 million.
Ongoing analysis of the telecommunications industry and a review of credits
comprising telecommunications exposure led Webster to conclude that these
credits evidenced continuing economic uncertainties. Accordingly, Webster has
chosen to reduce exposure in the telecommunications sector, even as the sector's
performance has shown signs of improvement. All of Webster's telecommunications
loans classified substandard have now been sold or written down to current
market value. The remaining telecommunications loans, all performing, total $65
million and represent less than one percent of the total loan portfolio. There
are no classified telecommunications loans remaining in the portfolio. These
actions are consistent with Webster's history of decisive action in the interest
of maintaining high credit quality throughout economic cycles.
Webster currently estimates that nonperforming loans, including those held for
sale, should fall to approximately $49 million at year end from $68 million at
September 30, 2002 and the ratio of these loans to total loans will be
approximately 0.60 percent compared to 0.82 percent at September 30, 2002. The
allowance for loan losses as a percent of nonperforming loans is expected to
rise to approximately 260 percent at year-end from 170 percent at the end of the
third quarter, while overall loan loss coverage at year-end should approximate
1.40 percent of loans outstanding, approximately the same as at September 30,
2002.
The tables below detail the credit related actions taken in the fourth quarter
on an estimated basis and include comparisons to year-end 2001 and to the 2002
third quarter.
SUMMARY OF NONPERFORMING ASSETS
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ESTIMATED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
(In thousands) 2002 2002 2001
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NONPERFORMING LOANS:
Commercial:
Business banking $ 18,500 $ 19,000 $ 20,574
Specialized lending 3,399 27,231 8,947
Equipment financing 6,100 5,559 7,333
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Total commercial 27,999 51,790 36,854
Commercial real estate 10,000 10,124 11,062
Residential 5,500 5,521 7,677
Consumer 1,150 1,062 1,823
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Total nonperforming loans $ 44,649 $ 68,497 $ 57,416
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As % of total loans 0.54% 0.82% 0.82
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Nonperforming loans held for sale $ 4,192 $ -- $ --
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Total nonperforming loans including loans
held for sale 48,841 68,497 57,416
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As % of total loans and loans held for sale 0.59% 0.82% 0.82%
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OTHER REAL ESTATE OWNED AND REPOSSESSED ASSETS:
Commercial $ 3,200 $ 3,007 $ 2,534
Residential 675 686 1,956
Consumer 12 12 548
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Total other real estate owned and repossessed assets 3,887 3,705 5,038
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Total nonperforming assets $ 52,728 $ 72,202 $ 62,454
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SELECTED ASSET QUALITY RATIOS
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Allowance for loan losses to total loans 1.40% 1.40% 1.40%
Allowance for loan losses to nonperforming loans 260.1 169.5 169.5
Net charge-offs (quarterly) to average loans (annualized) 0.72 0.25 0.19
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SUMMARY OF CLASSIFIED LOANS
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ESTIMATED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
(In thousands) 2002 2002 2001
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Substandard:
Accruing $ 78,570 $102,436 $ 88,397
Nonaccruing 42,547 62,170 47,846
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Total substandard 121,117 164,606 136,243
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Doubtful:
Accruing 3 3 66
Nonaccruing 3,724 3,724 4,464
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Total doubtful 3,727 3,727 4,530
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Loss -- -- --
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Total $124,844 $168,333 $140,773
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Classified as a percent of loans 1.5% 2.0% 2.0%
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Statements in this Form 8-K regarding Webster Financial
Corporation's business that are not historical facts are "forward looking
statements" that involve risks and uncertainties. For a discussion of such risks
and uncertainties, which could cause actual results to differ from those
contained in the forward-looking statements, see "Forward Looking Statements" in
the Company's Annual Report for the most recent fiscal year.
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 hereunto duly authorized.
WEBSTER FINANCIAL CORPORATION
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(Registrant)
/s/ William J. Healy
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William J. Healy
Executive Vice President and
Chief Financial Officer
Date: December 16, 2002