WATERBURY, Conn., Jan. 15 /PRNewswire-FirstCall/ -- Webster Financial Corporation (NYSE: WBS), the holding company for Webster Bank, N.A., today announced its expected fourth quarter 2008 loan loss provision and write-downs in its investment portfolio. These charges reflect the impact of the deteriorating economic environment.

Webster expects to record a non-cash charge of $118 million against its trust preferred investments. Economic and market conditions have created significant current valuation declines for these securities. The company also expects to record a $12 million, non-cash charge against its equity securities.

Webster will also record provision for credit losses of approximately $100 million, compared to $45.5 million for the third quarter of 2008. After expected net charge-offs of $53 million, Webster's total allowance for loan losses will rise to 105 percent of non-accruing loans and will exceed 2 percent of total loans outstanding.

"Our exceptionally strong capital levels serve us well during these challenging times as we address the potential losses associated with the deteriorating economic conditions," said Webster Chairman and CEO James C. Smith. "We remain well positioned to meet our customers' borrowing needs and to contribute to the region's economic recovery."

Webster today issued the attached 8-K report regarding these matters.

As previously announced, the company will issue its fourth quarter earnings release on January 23, 2009.

Webster Financial Corporation is the holding company for Webster Bank, National Association. With $17.5 billion in assets, Webster provides business and consumer banking, mortgage, financial planning, trust and investment services through 181 banking offices, 489 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., Center Capital Corporation, an equipment finance company headquartered in Farmington, Conn., and provides health savings account trustee and administrative services through HSA Bank, a division of Webster Bank. Member FDIC and equal housing lender. For more information about Webster, including past press releases and the latest annual report, visit the Webster website at www.websteronline.com.

Forward-looking Statements

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 2007. Except as required by law, Webster does not undertake to update any such forward looking information.

Item 8.01. Other Events

In preparation of its year-end announcement of results of operations for the fourth quarter of 2008, Webster Financial Corporation has reached certain preliminary determinations related to other-than-temporary impairment ("OTTI") charges on investment securities and provisions for credit losses.

Investment Securities:

The Company expects to record total pre-tax charges of $129.6 million for the fourth quarter of 2008 in connection with its corporate bonds and notes and equity securities as detailed below.

Corporate Bonds and Notes

The Company expects to record a pre-tax OTTI charge estimated to total $118.0 million against pooled and single issuer trust preferred securities issued by financial institutions held in its investment portfolio. Approximately $44.4 million of the estimated charge relates to securities downgraded in the fourth quarter to below investment grade by ratings agencies. The fair value of the portfolio is expected to approximate $93.5 million at December 31, 2008. At September 30, 2008, the Company's portfolio of pooled and single issuer trust preferred investment securities had an amortized cost basis of $282.7 million and an estimated fair value of $185.2 million. All of these securities were, and remain, classified as Available for Sale. Please refer to the table below for the breakout of the pooled (CDO Trust Preferred) and single issuer (Individual Name) trust preferred securities portfolio as of December 31, 2008, including the estimated fourth quarter charges for OTTI and the unrealized loss amounts as of December 31, 2008 with comparative data as of September 30, 2008.

                                  Estimated December 31, 2008

                        Par      Amortized   Estimated             Unrealized
    (In thousands)      Value    Cost*       Fair Value    OTTI      Losses

    Corporate Bonds
     and Notes:
     CDO Trust
      Preferred
       AAA           $50,975     $49,004     $22,627               $(26,377)
       AA             23,186      21,258       6,281                (14,977)
       A              25,000      24,265       4,435    (19,830)
       BBB           118,690      68,370      16,746    (51,624)       -
       Below
        Investment
         Grade        43,207      42,680       8,329    (34,351)       -
       Non-rated
        Income Notes  27,082       6,446       4,279     (2,167)       -
    Individual Name
       AA                           -                      -           -
       A              56,855      50,597      25,859                (24,738)
       BBB                          -           -          -           -
       Below Investment
        Grade         15,000      14,971       4,962    (10,009)       -
    Total Corporate
     Bonds and
      Notes         $359,995    $277,591     $93,518  $(117,981)   $(66,092)



                                      September 30, 2008

                                Par         Amortized       Estimated
                               Value          Cost*         Fair Value

    Corporate Bonds
     and Notes:
     CDO Trust
      Preferred
        AAA                   $52,878       $50,834         $30,540
        AA                     23,249        21,305           8,988
        A                      55,500        54,524          31,678
        BBB                   130,335        79,652          59,270
        Below
         Investment Grade                      -               -
        Non-rated
         Income Notes          53,531        10,853          10,853
    Individual Name
       AA                                      -               -
       A                       56,855        50,564         35,369
       BBB                     15,000        14,972          8,492
       Below Investment
        Grade                                  -               -
    Total Corporate
     Bonds and Notes         $387,348      $282,704       $185,190

    * Estimated Amortized Cost amounts as of December 31, 2008 are shown
    before reduction for OTTI charges. September 30, 2008 amounts reflect
    $41.5 million and $24.5 million of OTTI that was recorded in the second
    and third quarters of 2008, respectively.

The Company performs ongoing analysis of the pooled and single issuer trust preferred investment securities portfolio in light of current market conditions. As a result, the above estimates are subject to change.

Equity Securities

The Company expects to incur pre-tax OTTI charges against equity securities held in its investment portfolio totaling $11.6 million, including $1.1 million against common stocks, $0.8 million against FNMA and FHLMC preferred stock and $9.7 million against other preferred stock.

Provision for Credit Losses:

The Company expects to record a provision for credit losses for the fourth quarter of 2008 of approximately $100.0 million, compared to $45.5 million for the third quarter of 2008. The provision for credit losses by portfolios is estimated as follows: approximately $75.0 million for the continuing portfolios, and approximately $25.0 million for the liquidating home equity portfolio. The provision for the continuing portfolios includes approximately $30.0 million for the Company's portfolio of nonaccruing residential development loans on the basis of analysis of recent appraisals the Company announced it was obtaining in the quarter as previously disclosed in the Form 8-K filed on November 18, 2008.

Net charge-offs are expected to total $52.8 million, of which $43.1 million relates to the continuing portfolios and $9.7 million relates to the liquidating portfolio. The net charge-offs in the continuing portfolios include $30.1 million in the residential development portfolio. The net charge-offs in the liquidating portfolio include $8.8 million in the liquidating home equity portfolio and $0.9 million in the liquidating national construction portfolio.

Nonaccruing loans are expected to total approximately $232.6 million at December 31, 2008, compared to $226.9 million at September 30, 2008. The total allowance for credit losses to total nonaccruing loans would be 105.70%, and would be 2.02% of total outstanding loans compared to 87.55% and 1.54%, respectively at September 30, 2008.

Goodwill:

As indicated in the Company's report on Form 10-Q for the quarterly period ended September 30, 2008, accounting principles generally accepted in the U.S. require the Company to undertake additional testing for goodwill impairment if events or circumstances indicate that impairment may exist. Based on the continued public capital markets disruption and the Company's further market capitalization compared to book value deterioration, the Company is once again testing its goodwill for potential impairment. The Company has engaged an independent valuation consultant to assist in the evaluation of the potential for a reduction to the carrying value of goodwill, which totaled $718.5 million at September 30, 2008. The Company may upon completion of its analysis incur impairment charges to reduce the carrying amount of goodwill, which could also result in an increase in the valuation allowance against its deferred tax asset. A goodwill impairment charge would be non-cash in nature and would not affect the Company's liquidity, tangible equity or well capitalized position under regulatory capital ratios. The Company expects to provide the results of this analysis as part of its fourth quarter earnings release on January 23, 2009.

SOURCE Webster Financial Corporation