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Webster Financial Corp.
NASDAQ: WBST
www.websterbank.com
Chairman & CEO:
James Smith, 50
President:
William Bromage, 54
Market Capitalization:
$1.2 billion
Employees: 2,250
Branches: 110
Assets: $11,256,550,000
1999 Net Income:
$95.4 million ($2.10 per share)
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Business New Haven
11/13/2000
By: Mitchell Young
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Webster Financial Corp.
The Halloween announcement by Webster Financial that it had agreed to purchase a controlling 65-percent interest in Duff & Phelps, LLC, demonstrated that Webster CEO Jim Smith continues to add to his bag of treats in an effort to build the bank into a full-service financial-services enterprise.
The once-sleepy thrift was founded (as First Federal Savings) 65 years ago, during the teeth of the Depression, by Smith's father, Harold Webster Smith, when he was only 26 years old.
Smith has knocked on quite a few doors and has offered a variety of treats himself, using both cash and the bank's stock, when necessary, to acquire his candy. Terms of the Duff & Phelps deal were not announced.
Duff & Phelps with 90 employees is headquartered in Chicago, with offices in New York, Los Angeles and Raleigh-Durham. It provides expertise in middle-market mergers and acquisitions, private placements, fairness opinions, valuations, ESOP and ERISA advisory services, and special financial advisory services.
Along with a broader product mix that Webster hopes will make it more attractive to middle-market companies, the acquisition should help Webster's effort to diversify its income stream with more fee-based income.
Webster's desire to expand into the middle market (companies with sales in the $20 million to $200 million range) is driven in part by the banking climate in Connecticut. Fleet and BankBoston have controlled the lion's share of this market, and critics questioned regulators about whether in-state competitors could field the banking services for this market.
Webster's recent acquisition follows its $210 million purchase of Mechanics Savings Bank (by which it acquired more than $1 billion in assets and 16 branches in the greater Hartford market), and the $220 million acquisition of New England Community Bancorp Inc., which yielded $800 million in assets and 16 branches throughout north-central Connecticut. Webster acquired both banks in exchanges of stock. The acquisitions closed in June and December 1999, respectively.
In the last 12 months Webster also closed acquisitions of the Essex-based Maritime Savings Bank ($100 million in assets) and the Fairfield County Village Bank & Trust ($220 million in assets).
Beyond banking, Webster continued its expansion into the insurance market with the purchase of two agencies and approximately $50 million in premium business.
The strategy appears to be working as the bank reported a 20-percent increase in net income for the third quarter ended September 30.
Net income for the quarter rose to a record $31.6 million, or 64 cents per diluted share, compared to $26.4 million (57 cents per diluted share) for the quarter ended September 30, 1999. Prior-period financial data have been restated to reflect the December 1999 merger with New England Community Bancorp Inc.
Total non-interest income for the quarter increased 51 percent to $33.2 million, compared to $21.9 million for the same period in 1999. Excluding income from gains on the sale of securities and loans, total non-interest income increased 28 percent to $28.7 million from $22.4 million in the prior year period due to revenue related to trust and investment services, revenue from expanded insurance operations and income from other fee-based services.
At the end of the most recent fiscal quarter, the bank's book value per common share was $16.95 . Shareholders equity of $828 million as of September 30 represented 7.4 percent of total assets.
Return on average assets for the third quarter was 1.12 percent, up from 1.08 percent in the third quarter of 1999.
For the nine-month period ending September 30., net income was $86.501 million versus $75.720 in the prior year, and $1.90 per share diluted vs. $1.67 a year ago.
Net income for the 1999 fiscal year (ending December 31), including non-recurring charges, was $95.4 million, or $2.10 per diluted share, compared to $78 million or $1.69 a share, for all of 1998.
While Webster has been an active acquirer and, with $11 billion of assets, is now the second largest bank in Connecticut, Webster remains a potential acquisition candidate itself. Stock prices and large-scale acquisitions have settled down significantly for regional banks' stock in the past 12 months, but similar sized banks have sold from two to almost four times book value in the last flurry of major banking mergers.
Analysts are divided on the near-term stock strength of the both the sector (Banks Northeast) and the bank. Investment bankers Robertson Stephens upgraded their opinion on the stock on November 1 from long-term attractive to a buy. But a week earlier CSFB downgraded the stock from strong buy to buy.
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