8-K

UNITED STATES
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): January 25, 2005

WEBSTER FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	001-31486	06-1187536
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

Webster Plaza, Waterbury, Connecticut 06702

(Address of principal executive offices)

Registrant’s telephone number, including area code: (203) 578-2476

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EX-99.1: PRESS RELEASE

Item 2.02. Results of Operations and Financial Condition

On January 25, 2005, Webster Financial Corporation issued a press release describing its results of operations for the fourth quarter and fiscal year ended December 31, 2004. That press release is attached hereto as Exhibit 99.1.

Item 9.01. Financial Statements and Exhibits

(a)   Not applicable.

(b)   Not applicable.

(c)   Exhibits.

Exhibit
No.	Description
99.1	Press release dated, January 25, 2005.

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

(Registrant)

/s/ William J. Healy

William J. Healy

Executive Vice President and

Chief Financial Officer

Date: January 25, 2005

EXHIBIT INDEX

Exhibit
No.	Description
99.1	Press release dated, January 25, 2005

EX-99.1

Exhibit 99.1

News

Media Contact:	Investor Contact:
Meghan Thompson 203-578-2287	Terry Mangan 203-578-2318
mthompson@websterbank.com	tmangan@websterbank.com

WEBSTER REPORTS FOURTH QUARTER EARNINGS AND COMPLETION OF
BALANCE SHEET RESTRUCTURING; NET INTEREST MARGIN IMPROVES 19 BASIS
POINTS

WATERBURY, Conn., January 25, 2005 — Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A., today announced net income of $16.3 million in the fourth quarter compared to $41.4 million a year ago. For the full year, net income was $153.8 million compared to $163.2 million the prior year. The decline for the quarter and the year is entirely attributable to Webster’s previously announced fourth quarter balance sheet de-leveraging program, which resulted in $32.4 million of after-tax costs.

Net income per diluted share was $.30 in the fourth quarter compared to $.89 the prior year. For the full year, net income per share was $3.00 compared to $3.52 in 2003. Excluding the balance sheet de-leveraging costs, net income per diluted share was $.90 in the fourth quarter and $3.63 for the full year 2004.

As described in Webster’s 2004 third quarter earnings release, a balance sheet de-leveraging of $750 million was implemented and completed during the fourth quarter. With this transaction, $750 million of securities were sold and the proceeds used to repay an equal amount of borrowings. The de-leveraging resulted in $49.9 million of pre-tax costs consisting of $4.1 million in losses on the sale of securities and $45.8 million in debt prepayment penalties.

The de-leveraging resulted in a decline in the securities portfolio to 22 percent of assets at December 31, 2004 compared to 25 percent at September 30 while borrowings were reduced to 28 percent of assets from 32 percent at September 30. The balance sheet restructuring also strengthened Webster’s capital position and improved its ability to respond to rising interest rates by moving to a modestly asset sensitive position.

“2004 was a transformational year for Webster,” said Webster Chairman and Chief Executive Officer James C. Smith. “We expanded our franchise in four states, converted to a commercial bank charter and grew to be the largest independent bank headquartered in southern New England. Webster is well positioned as a leading financial services provider in the markets we serve.”

Revenues and Expenses

Total revenues (net interest income plus total noninterest income) were $176.4 million in the fourth quarter, compared to $163.8 million a year ago, an increase of 8 percent. For the full year 2004, total revenues were $687.9 million for an increase of 6 percent from a year ago. Impacting the quarter and the full year 2004 was the implementation on December 31, 2003 of Financial Accounting Standards Board Interpretation No. (“FIN”) 46 (revised), which required the reclassification of capital trust securities expense as of January 1, 2004 from noninterest expenses to interest expense. Adjusting the year 2003 for FIN 46R and excluding Duff & Phelps, which was sold in the first quarter of 2004, total revenues would have grown by 15 percent in the fourth quarter and 12 percent for the full year.

Net interest income was $127.6 million in the fourth quarter of 2004, compared to $107.3 million in the year-ago period and $121.3 million in the third quarter. Adjusting for FIN 46R, net interest income grew by $23.8 million, or 23 percent, from a year ago and by $6.3 million, or 5 percent, from the third quarter. Net interest income for the full year 2004 was $468.2 million compared to an adjusted $401.6 million in 2003, an increase of 17 percent. The increases over the prior year reflect double-digit growth in earning assets and a higher net interest margin, while the increase over the third quarter is due entirely to a higher net interest margin.

Webster’s net interest margin (annualized tax-equivalent net interest income as a percentage of average earning assets) improved 19 basis points to 3.25 percent from 3.06 percent in the third quarter and compares to 3.08 percent in the year-ago period adjusted for FIN 46R. The increases reflect the benefit of the fourth quarter de-leveraging and the impact of higher interest rates on earning asset yields. Webster’s net interest margin for the full year 2004 was 3.11 percent compared to 3.05 percent adjusted for FIN 46R in 2003.

In the fourth quarter of 2004, total noninterest income was $48.8 million, compared to $56.5 million in the year-ago period. Excluding securities transactions, noninterest income declined in the fourth quarter to $51.5 million from $53.8 million in the year-ago period. This decline is explained by the absence of revenue from Duff & Phelps in the fourth quarter compared to $7.3 million a year ago. For the full year 2004, noninterest income excluding securities gains and Duff & Phelps increased by 5 percent from the year-ago period.

Webster’s growth in core fees remains strong as revenues from deposit services, insurance, loan and loan servicing and wealth management grew by 12 percent in the fourth quarter and 11 percent for the full year 2004. Gains on sales of loans and loan servicing declined during the quarter and for the full year primarily as a result of lower mortgage origination volumes. Other income of $2.7 million in the fourth quarter included $1.7 million of non-recurring insurance proceeds.

Total noninterest expenses for the 2004 fourth quarter were $154.0 million compared to $98.3 million in the year-ago period, and $447.1 million for the full year 2004 compared to $378.0 million in 2003. Adjusting for de-leveraging costs, acquisitions, Duff & Phelps, FIN 46R and $3.4 million of non-recurring items in the fourth quarter of 2004, total noninterest expenses increased approximately 5 percent for both the quarter and the full year. This reflects continuing investment in personnel, technology and de novo branches under our strategic plan for growth.

Income tax expense was $2.1 million in the fourth quarter and $68.9 million for the full year 2004. This reflects tax benefits of $17.5 million from the balance sheet de-leveraging and $2.0 million related to favorable resolution of audits in the fourth quarter.

Balance Sheet Trends

At December 31, 2004, total assets were $17.0 billion, up 17 percent from $14.6 billion a year ago. Total loans of $11.7 billion at December 31, 2004 increased 27 percent from $9.2 billion the prior year, while deposits were $10.6 billion, up 26 percent from $8.4 billion a year ago. Excluding FIRSTFED, total loans increased by $1.0 billion, or 11 percent, over the past year, while total deposits increased $0.7 billion, or 8 percent.

“With solid growth of our core franchise from innovative additions to our products and services, Webster is in an enhanced competitive position in our markets,” stated Webster President and Chief Operating Officer William T. Bromage. “Even as we continue to grow loans and deposits faster than the market, we will be especially focused on increasing the net interest margin.”

At the end of the fourth quarter, commercial loans including commercial real estate were $4.3 billion, up 29 percent from $3.3 billion a year ago. Commercial real estate loans were $1.7 billion, up 34 percent. Consumer loans, primarily home equity loans and lines, increased 23 percent to $2.6 billion compared to $2.1 billion a year ago. Excluding FIRSTFED, commercial loans including commercial real estate were up 14 percent, commercial real estate loans were up 17 percent, and consumer loans increased 11 percent.

Core deposits (consisting of checking, money market and savings accounts) of $7.0 billion at December 31, 2004 increased by 26 percent from a year ago and represented 66 percent of total deposits. Excluding FIRSTFED, core deposits grew 8 percent. Webster’s overall growth in deposits has been driven in part by its High Performance Checking products and the continuing success of its de novo branches in Fairfield County, Connecticut and Westchester County, New York.

Book value per common share of $28.79 at December 31, 2004 increased from $24.91 one year ago. Tangible book value per share of $16.30 at December 31, 2004 decreased from $18.18 one year ago, principally reflecting an increase in intangible assets related to the FIRSTFED acquisition.

Asset Quality

Nonperforming assets totaled $39.2 million or 0.23 percent of total assets at December 31, 2004, compared to $42.9 million or 0.29 percent a year ago and $40.0 million or 0.22 percent at September 30, 2004.

“Our nonperforming assets declined during the quarter and were below the levels of both a year ago and the prior quarter,” stated Webster Chief Financial Officer William J. Healy. “Webster maintains a disciplined approach to credit risk management.”

The allowance for loan losses was $150.1 million, or 1.28 percent of total loans at December 31, 2004, compared to $121.7 million, or 1.32 percent, a year ago and $148.2 million, or 1.28 percent, at September 30, 2004. The ratio of the allowance to nonperforming loans at December 31, 2004 was 416 percent, compared to 323 percent a year ago and 401 percent at September 30, 2004.

The provision for loan losses totaled $4.0 million in the fourth quarter, $1.3 million more than net loan charge-offs of $2.7 million, compared to a provision of $5.0 million and net loan charge-offs of $3.0 million a year ago. The provision totaled $18.0 million for the full year 2004, $7.7 million more than net loan charge-offs of $10.3 million, compared to a provision of $25.0 million and net loan charge-offs of $22.2 million a year ago. The annualized net charge-off ratio was 0.09 percent of

average loans in the fourth quarter compared to 0.13 percent a year ago, and 0.10 percent for the full year 2004 compared to 0.25 percent in 2003.

***

Webster Financial Corporation is the holding company for Webster Bank, National Association and Webster Insurance. With $17.0 billion in assets, Webster provides business and consumer banking, mortgage, insurance, financial planning, trust and investment services through 152 banking offices, 289 ATMs, telephone banking and the Internet. Webster Bank owns the asset-based lending firm Webster Business Credit Corporation, the insurance premium finance company Budget Installment Corp., and Center Capital Corporation, an equipment finance company headquartered in Farmington, Connecticut.

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

***

Conference Call

A conference call covering Webster’s 2004 fourth quarter earnings announcement will be held today, Tuesday, January 25, at 1:00 p.m. Eastern Time and may be heard through Webster’s investor relations website at www.wbst.com, or in listen-only mode by calling 1-877-407-8291 or 201-689-8345 internationally. The call will be archived on the website and available for future retrieval.

Statements in this press release regarding Webster Financial Corporation’s business that are not historical facts are “forward-looking statements” that involve risks and uncertainties. For a discussion of such risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statement, see “Forward Looking Statements” in Webster’s Annual Report for 2003.

—30—

WEBSTER FINANCIAL CORPORATION

Selected Financial Highlights (unaudited)

	At or for the Three						At or for the Twelve
	Months Ended December 31,						Months Ended December 31,
(In thousands, except per share data)	2004			2003			2004			2003
Net income and performance ratios (annualized):
Net income	$	16,306		$	41,386		$	153,833		$	163,248
Net income per diluted common share		0.30			0.89			3.00			3.52
Return on average shareholders’ equity		4.28	%		14.92	%		11.14	%		15.16	%
Return on average tangible equity		7.50			20.59			18.03			20.98
Return on average assets		0.38			1.15			0.94			1.15
Noninterest income as a percentage of total revenue		27.67			34.51			31.94			35.99
Efficiency Ratio (a)		87.33			59.99			65.00			58.51
Net income and performance ratios before deleveraging charges (annualized):
Net income	$	16,306		$	41,386		$	153,833		$	163,248
Debt prepayment penalties, net of tax		29,745			—			29,745			—
Loss on sale of securities, net of tax		2,702			—			2,702			—
Net income before deleveraging charges		48,753			41,386			186,280			163,248
Net income per diluted common share		0.90			0.89			3.63			3.52
Return on average shareholders’ equity		12.81	%		14.92	%		13.49	%		15.16	%
Return on average tangible equity		22.43			20.59			21.84			20.98
Return on average assets		1.13			1.15			1.13			1.15
Noninterest income as a percentage of total revenue		29.33			34.51			32.35			35.99
Efficiency Ratio(a)		59.97			59.99			58.00			58.51
Cash income and performance ratios (annualized) (b):
Net income	$	16,306		$	41,386		$	153,833		$	163,248
Stock-based compensation, net of tax		1,248			965			4,490			3,749
Intangible amortization, net of tax		3,149			2,644			11,924			10,399
Cash income		20,703			44,995			170,247			177,396
Cash income per diluted common share		0.38			0.96			3.32			3.83
Cash return on average shareholders’ equity		5.44	%		16.22	%		12.33	%		16.48	%
Cash return on average tangible equity		9.52			22.39			19.96			22.80
Cash return on average assets		0.48			1.25			1.04			1.25
Cash income and performance ratios before deleveraging charges (annualized) (b):
Net income before deleveraging charges	$	48,753		$	41,386		$	186,280		$	163,248
Stock-based compensation, net of tax		1,248			965			4,490			3,749
Intangible amortization, net of tax		3,149			2,644			11,924			10,399
Cash income		53,150			44,995			202,694			177,396
Cash income per diluted common share		0.98			0.96			3.95			3.83
Cash return on average shareholders’ equity		13.97	%		16.22	%		14.68	%		16.48	%
Cash return on average tangible equity		24.45			22.39			23.76			22.80
Cash return on average assets		1.23			1.25			1.23			1.25
Asset quality:
Allowance for loan losses	$	150,112		$	121,674		$	150,112		$	121,674
Nonperforming assets		39,166			42,882			39,166			42,882
Allowance for loan losses / total loans		1.28	%		1.32	%		1.28	%		1.32	%
Net charge-offs/ average loans (annualized)		0.09			0.13			0.10			0.25
Nonperforming loans / total loans		0.31			0.41			0.31			0.41
Nonperforming assets / total assets		0.23			0.29			0.23			0.29
Allowance for loan losses / nonperforming loans		415.50			323.22			415.50			323.22
Other ratios (annualized):
Tangible capital ratio		5.21	%		5.77	%		5.21	%		5.77	%
Shareholders’ equity / total assets		9.07			7.91			9.07			7.91
Interest-rate spread (c)		3.22			3.13			3.09			3.10
Net interest margin (c)		3.25			3.18			3.11			3.14
Share related:
Book value per common share	$	28.79		$	24.91		$	28.79		$	24.91
Tangible book value per common share		16.30			18.18			16.30			18.18
Common stock closing price		50.64			45.86			50.64			45.86
Dividends declared per common share		0.23			0.21			0.90			0.82
Common shares issued and outstanding		53,628			46,276			53,628			46,276
Basic shares (average)		53,187			45,814			50,506			45,542
Diluted shares (average)		54,045			46,699			51,352			46,362

Footnotes:

(a)	Noninterest expense as a percentage of net interest income plus noninterest income.
(b)	Cash income represents net income excluding the after tax effects of non-cash charges related to the amortization of intangible assets and stock-based compensation, which includes stock options and restricted stock.
(c)	Webster adopted FIN 46R on December 31, 2003, and in accordance with its provisions, deconsolidated the capital trusts and reported the associated liabilities as other long-term debt. Commencing in 2004, the costs have been reclassified from noninterest expenses to interest expense.
(d)	For purposes of this computation, unrealized gains (losses) are excluded from the average balance for rate calculations.

WEBSTER FINANCIAL CORPORATION

Consolidated Statements of Condition (unaudited)

	December 31,			September 30,			December 31,
(In thousands)	2004			2004			2003
Assets:
Cash and due from depository institutions	$	248,825		$	234,449		$	209,234
Short-term investments		17,629			25,783			42,420
Securities:
Trading, at fair value		—			2,635			555
Available for sale, at fair value		2,494,406			4,164,056			4,128,255
Held-to-maturity securities		1,229,613			323,378			173,371
Total securities		3,724,019			4,490,069			4,302,181
Loans held for sale		147,211			111,175			89,830
Loans:
Residential mortgages		4,775,344			4,773,284			3,744,013
Commercial		2,584,738			2,586,351			2,040,921
Commercial real estate		1,715,047			1,619,968			1,281,516
Consumer		2,637,646			2,595,629			2,146,359
Total loans		11,712,775			11,575,232			9,212,809
Allowance for loan losses		(150,112	)		(148,179	)		(121,674	)
Loans, net		11,562,663			11,427,053			9,091,135
Accrued interest receivable		63,406			65,812			52,756
Premises and equipment, net		149,069			136,385			95,631
Goodwill and intangible assets		694,165			676,176			330,929
Cash surrender value of life insurance		228,120			226,503			180,556
Prepaid expenses and other assets		185,490			408,837			174,018
Total Assets	$	17,020,597		$	17,802,242		$	14,568,690
Liabilities and Shareholders’ Equity:
Deposits:
Demand deposits	$	1,409,682		$	1,356,924		$	1,090,060
NOW accounts		1,368,213			1,271,553			1,052,690
Money market deposit accounts		1,996,918			2,153,852			1,581,276
Savings accounts		2,253,073			2,243,949			1,869,398
Certificates of deposit		3,376,718			3,204,624			2,681,986
Total retail deposits		10,404,604			10,230,902			8,275,410
Treasury deposits		166,684			208,521			96,725
Total deposits		10,571,288			10,439,423			8,372,135
Federal Home Loan Bank advances		2,590,335			3,021,503			2,511,495
Federal funds purchased and securities sold under agreements to repurchase		1,438,483			1,973,478			1,892,138
Other long-term debt (c)		670,015			695,316			532,760
Accrued expenses and other liabilities		196,925			144,963			97,690
Total liabilities		15,467,046			16,274,683			13,406,218
Preferred stock of subsidiary corporation		9,577			9,577			9,577
Shareholders’ equity		1,543,974			1,517,982			1,152,895
Total Liabilities and Shareholders’ Equity	$	17,020,597		$	17,802,242		$	14,568,690

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Consolidated Statements of Income (unaudited)

	Three Months Ended					Twelve Months Ended
	December 31,					December 31,
(In thousands, except per share data)	2004			2003		2004		2003
Interest income:
Loans	$	154,177		$	117,983	$	547,308	$	460,677
Securities and short-term investments		42,807			43,065		178,118		182,632
Loans held for sale		1,718			1,790		6,682		15,409
Total interest income		198,702			162,838		732,108		658,718
Interest expense:
Deposits		32,993			26,319		120,606		111,311
Borrowings		38,109			29,224		143,341		133,888
Total interest expense		71,102			55,543		263,947		245,199
Net interest income		127,600			107,295		468,161		413,519
Provision for loan losses		4,000			5,000		18,000		25,000
Net interest income after provision for loan losses		123,600			102,295		450,161		388,519
Noninterest income:
Deposit service fees		20,712			17,731		77,743		70,018
Insurance revenue		10,348			9,077		43,506		39,975
Loan and loan servicing fees		7,727			8,001		28,574		26,384
Wealth and investment services		5,198			4,416		22,207		18,341
Financial advisory services		—			7,265		3,808		22,758
Gain on sale of loans and loan servicing, net		2,492			2,854		13,305		19,520
Increase in cash surrender value of life insurance		2,283			2,082		8,835		8,490
Other		2,692			2,402		7,416		8,423
		51,452			53,828		205,394		213,909
Gain on sale of securities, net		(2,646	)		2,715		14,313		18,574
Total noninterest income		48,806			56,543		219,707		232,483
Noninterest expenses:
Compensation and benefits		57,428			53,722		219,820		206,381
Occupancy		9,909			7,470		35,820		30,698
Furniture and equipment		10,889			7,792		37,626		31,143
Intangible amortization		4,844			4,067		18,345		15,998
Marketing		2,533			2,058		13,380		11,508
Professional services		5,523			3,654		15,654		11,708
Acquisition costs		426			1,349		706		1,497
Debt prepayment penalties		45,761			—		45,761		—
Capital trust securities (c)		—			3,485		—		11,924
Other		16,735			14,683		60,025		57,125
Total noninterest expenses		154,048			98,280		447,137		377,982
Income before income taxes		18,358			60,558		222,731		243,020
Income taxes		2,052			19,172		68,898		79,772
Net income	$	16,306		$	41,386	$	153,833	$	163,248
Diluted shares (average)		54,045			46,699		51,352		46,362
Net income per common share:
Basic	$	0.31		$	0.90	$	3.05	$	3.58
Diluted		0.30			0.89		3.00		3.52

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Consolidated Statements of Income (unaudited)

	Three Months Ended
	Dec. 31,			Sept. 30,		June 30,		March 31,		Dec. 31,
(In thousands, except per share data)	2004			2004		2004		2004		2003
Interest income:
Loans	$	154,177		$	145,456	$	129,084	$	118,591	$	117,983
Securities and short-term investments		42,807			45,541		45,162		44,608		43,065
Loans held for sale		1,718			1,755		2,139		1,070		1,790
Total interest income		198,702			192,752		176,385		164,269		162,838
Interest expense:
Deposits		32,993			32,611		29,172		25,830		26,319
Borrowings		38,109			38,853		33,746		32,633		29,224
Total interest expense		71,102			71,464		62,918		58,463		55,543
Net interest income		127,600			121,288		113,467		105,806		107,295
Provision for loan losses		4,000			4,000		5,000		5,000		5,000
Net interest income after provision for loan losses		123,600			117,288		108,467		100,806		102,295
Noninterest income:
Deposit service fees		20,712			20,596		19,250		17,185		17,731
Insurance revenue		10,348			10,924		10,596		11,638		9,077
Loan and loan servicing fees		7,727			6,893		7,305		6,649		8,001
Wealth and investment services		5,198			6,044		5,849		5,116		4,416
Financial advisory services		—			—		—		3,808		7,265
Gain on sale of loans and loan servicing, net		2,492			4,467		5,321		1,025		2,854
Increase in cash surrender value of life insurance		2,283			2,421		2,177		1,954		2,082
Other		2,692			1,912		964		1,848		2,402
		51,452			53,257		51,462		49,223		53,828
Gain on sale of securities, net		(2,646	)		5,843		5,616		5,500		2,715
Total noninterest income		48,806			59,100		57,078		54,723		56,543
Noninterest expenses:
Compensation and benefits		57,428			55,606		53,659		53,127		53,722
Occupancy		9,909			9,144		8,402		8,365		7,470
Furniture and equipment		10,889			10,103		8,993		7,641		7,792
Intangible amortization		4,844			4,827		4,582		4,092		4,067
Marketing		2,533			4,233		3,630		2,984		2,058
Professional services		5,523			4,294		2,938		2,899		3,654
Acquisition costs		426			—		265		—		1,349
Debt prepayment penalties		45,761			—		—		—		—
Capital trust securities (c)		—			—		—		—		3,485
Other		16,735			15,562		14,710		13,033		14,683
Total noninterest expenses		154,048			103,769		97,179		92,141		98,280
Income before income taxes		18,358			72,619		68,366		63,388		60,558
Income taxes		2,052			23,258		22,523		21,065		19,172
Net income	$	16,306		$	49,361	$	45,843	$	42,323	$	41,386
Diluted shares (average)		54,045			53,767		50,475		47,059		46,699
Net income per common share:
Basic	$	0.31		$	0.93	$	0.92	$	0.92	$	0.90
Diluted		0.30			0.92		0.91		0.90		0.89

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Retail and Wholesale Interest-Rate Spreads (unaudited)

Three Months Ended,	December			September			June			March			December
	2004			2004			2004			2004			2003
Interest-rate spread
Total interest-earning assets		5.02	%		4.82	%		4.68	%		4.78	%		4.81	%
Total interest-bearing liabilities		1.80			1.78			1.69			1.74			1.68
Interest-rate spread		3.22	%		3.04	%		2.99	%		3.04	%		3.13	%
Net interest margin		3.25			3.06			3.02			3.09			3.18
Retail interest-rate spread
Yield on loans and loans held for sale		5.25	%		5.07	%		4.93	%		5.05	%		5.09	%
Cost of deposits		1.25			1.25			1.23			1.24			1.26
Spread		4.00	%		3.82	%		3.70	%		3.81	%		3.83	%
Wholesale interest-rate spread
Yield on securities and short-term investments		4.37	%		4.18	%		4.09	%		4.19	%		4.17	%
Cost of borrowings		2.91			2.80			2.50			2.56			2.41
Spread		1.46	%		1.38	%		1.59	%		1.63	%		1.76	%

Consolidated Average Statements of Condition (unaudited)

Three Months Ended December 31,	2004								2003
						Fully tax-								Fully tax-
	Average					equivalent			Average					equivalent
(Dollars in thousands)	balance		Interest			yield/rate			balance		Interest			yield/rate
Assets:
Interest-earning assets:
Loans	$	11,649,909	$	154,177			5.25	%	$	9,206,436	$	117,983			5.08	%
Securities		4,053,134		44,495			4.39	(d)		4,153,607		43,486			4.20	(d)
Loans held for sale		136,197		1,718			5.05			135,632		1,790			5.28
Short-term investments		25,772		134			2.03			32,791		76			0.91
Total interest-earning assets		15,865,012		200,524			5.02			13,528,466		163,335			4.81
Noninterest-earning assets		1,411,162								903,477
Total assets	$	17,276,174							$	14,431,943
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Demand deposits	$	1,399,592	$	—			—	%	$	1,058,875	$	—			—	%
Savings, NOW and money market deposit accounts		5,643,515		12,340			0.87			4,471,260		9,115			0.81
Time deposits		3,434,389		20,653			2.39			2,755,184		17,204			2.48
Total deposits		10,477,496		32,993			1.25			8,285,319		26,319			1.26
Federal Home Loan Bank advances		2,690,001		19,810			2.88			2,299,456		19,641			3.34
Fed funds and repurchase agreements		1,778,435		8,455			1.86			2,139,619		5,587			1.02
Other long-term debt (c)		686,226		9,844			5.74			317,509		3,996			5.03
Total borrowings		5,154,662		38,109			2.91			4,756,584		29,224			2.41
Total interest-bearing liabilities		15,632,158		71,102			1.80			13,041,903		55,543			1.68
Noninterest-bearing liabilities		112,063								85,714
Total liabilities		15,744,221								13,127,617
Capital securities and preferred stock of subsidiary corporation (c)		9,577								194,832
Shareholders’ equity		1,522,376								1,109,494
Total liabilities and shareholders’ equity	$	17,276,174							$	14,431,943
				129,422								107,792
Less: tax-equivalent adjustment				(1,822	)							(497	)
Net interest income			$	127,600							$	107,295
Interest-rate spread							3.22	%							3.13	%
Net interest margin							3.25	%							3.18	%

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Consolidated Average Statements of Condition (unaudited)

Twelve Months Ended December 31,	2004								2003
						Fully tax-								Fully tax-
	Average					equivalent			Average					equivalent
(Dollars in thousands)	balance		Interest			yield/rate			balance		Interest			yield/rate
Assets:
Interest-earning assets:
Loans	$	10,719,446	$	547,308			5.11	%	$	8,756,883	$	460,677			5.26	%
Loans held for sale		129,945		6,682			5.14			292,514		15,409			5.27
Securities		4,331,385		183,028			4.23	(d)		4,177,490		184,007			4.45	(d)
Short-term investments		30,651		390			1.27			25,588		250			0.98
Total interest-earning assets		15,211,427		737,408			4.85			13,252,475		660,343			5.00
Noninterest-earning assets		1,234,124								951,575
Total assets	$	16,445,551							$	14,204,050
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Demand deposits	$	1,255,897	$	—			—	%	$	1,010,952	$	—			—	%
Savings, NOW and money market deposit accounts		5,286,637		47,683			0.90			4,282,536		41,519			0.97
Time deposits		3,162,939		72,923			2.31			2,677,863		69,792			2.61
Total deposits		9,705,473		120,606			1.24			7,971,351		111,311			1.40
Federal Home Loan Bank advances		2,774,287		82,092			2.96			2,395,814		88,845			3.71
Fed funds and repurchase agreements		1,834,605		24,693			1.35			2,218,799		26,108			1.18
Other long-term debt (c)		646,636		36,556			5.65			316,736		18,935			5.98
Total borrowings		5,255,528		143,341			2.73			4,931,349		133,888			2.72
Total interest-bearing liabilities		14,961,001		263,947			1.76			12,902,700		245,199			1.90
Noninterest-bearing liabilities		94,145								79,491
Total liabilities		15,055,146								12,982,191
Capital securities and preferred stock of subsidiary corporation (c)		9,577								145,227
Shareholders’ equity		1,380,828								1,076,632
Total liabilities and shareholders’ equity	$	16,445,551							$	14,204,050
				473,461								415,144
Less: tax-equivalent adjustment				(5,300	)							(1,625	)
Net interest income			$	468,161							$	413,519
Interest-rate spread							3.09	%							3.10	%
Net interest margin							3.11	%							3.14	%

See Selected Financial Highlights for footnotes.

WEBSTER FINANCIAL CORPORATION

Asset Quality (unaudited)

	At or for the Three Months Ended
	Dec. 31,			Sept. 30,			June 30,			March 31,			Dec. 31,
( Dollars in thousands)	2004			2004			2004			2004			2003
Nonperforming Assets
Nonperforming loans:
Commercial:
Commercial	$	14,624		$	12,407		$	15,895		$	11,832		$	14,266
Specialized industry		—			—			—			5,019			6,427
Equipment financing		3,383			4,501			5,021			5,561			5,583
Total commercial		18,007			16,908			20,916			22,412			26,276
Commercial real estate		8,431			11,157			13,757			5,583			4,281
Residential		7,796			7,695			8,599			7,941			6,128
Consumer		1,894			1,204			826			604			959
Total nonperforming loans		36,128			36,964			44,098			36,540			37,644
Other real estate owned and repossessed assets:
Commercial		2,824			2,482			3,192			4,273			4,296
Residential		100			527			238			325			942
Consumer		114			20			130			124			—
Total other real estate owned and repossessed assets		3,038			3,029			3,560			4,722			5,238
Total nonperforming assets	$	39,166		$	39,993		$	47,658		$	41,262		$	42,882
Summary of Classified Loans
Substandard:
Accruing	$	79,292		$	89,463		$	90,421		$	87,477		$	72,638
Nonaccruing		33,896			32,234			39,600			31,595			29,403
Total substandard		113,188			121,697			130,021			119,072			102,041
Doubtful:
Nonaccruing		1,110			3,615			3,286			4,377			6,791
Loss		—			—			—			—			—
Total classified loans	$	114,298		$	125,312		$	133,307		$	123,449		$	108,832
Classified as a percent of total loans		1.0	%		1.1	%		1.2	%		1.3	%		1.2	%

WEBSTER FINANCIAL CORPORATION

Allowance for Loan Losses (unaudited)

	At or for the Three Months Ended
	Dec. 31,			Sept. 30,			June 30,			March. 31,			Dec. 31,
( Dollars in thousands)	2004			2004			2004			2004			2003
Allowance for Loan Losses
Beginning balance	$	148,179		$	146,511		$	123,613		$	121,674		$	117,707
Allowance for purchased loans		617			—			20,081			—			1,970
Provision		4,000			4,000			5,000			5,000			5,000
Charge-offs:
Commercial:
Specialized industry		—			—			—			826			558
All other commercial		3,432			3,556			2,646			2,249			2,949
Total commercial		3,432			3,556			2,646			3,075			3,507
Residential		367			92			187			983			330
Consumer		147			195			174			97			174
Total charge-offs		3,946			3,843			3,007			4,155			4,011
Recoveries		(1,262	)		(1,511	)		(824	)		(1,094	)		(1,008	)
Net loan charge-offs		2,684			2,332			2,183			3,061			3,003
Ending balance	$	150,112		$	148,179		$	146,511		$	123,613		$	121,674
Asset Quality Ratios:
Allowance for loan losses / total loans		1.28	%		1.28	%		1.30	%		1.30	%		1.32	%
Net charge-offs/ average loans (annualized)		0.09			0.08			0.08			0.13			0.13
Nonperforming loans / total loans		0.31			0.32			0.39			0.38			0.41
Nonperforming assets / total assets		0.23			0.22			0.28			0.27			0.29
Allowance for loan losses / nonperforming loans		415.50			400.87			332.24			338.30			323.22