Fitch Rts Webster Bank's $200MM Sub Nts 'BBB-'

Business Wire, Jan 9, 2003

Business Editors

NEW YORK--(BUSINESS WIRE)--Jan. 9, 2003

Fitch Ratings expects to assign a 'BBB-' long-term rating to the $200mln in subordinated notes being issued by Webster Bank, the principal bank subsidiary of Webster Financial Corporation (WBS). The proceeds will be used for general corporate purposes. All other ratings are affirmed at this time and the Rating Outlook remains Stable. A complete listing of the ratings is provided below.

WBS' initiative in transitioning its portfolio towards higher yielding commercial loans continues to pay dividends, as evidenced by the company's expanded measures of earnings generation. Earnings for the nine month period ending 9/30/02, increased 17.4% over the comparable period during 2001, driven by heightened levels of net interest and non-interest income (excluding gains on securities sales), augmented by the adoption of SFAS 141/142, which significantly reduced intangibles amortization. During the nine month period, WBS' ROA improved to 1.31%, up from 1.15% for the full year of 2001. On a linked quarter basis, there was a slight compression in spread, driven by decreasing interest rates. Nonetheless, WBS' net interest margin remained solid at 3.48% (3.59% for 2Q02).

The company's asset profile reflects growing components of higher yielding C&I, CRE and consumer loans and a slight de-emphasis within its sizeable residential mortgage (29% of total assets) and liquid securities portfolios (31% of total assets). The recent acquisition of the asset based lending division of IBJ Whitehall Business Credit Corporation, a former subsidiary of the Industrial Bank of Japan, added approximately $450mln of commercial loans to WBS' commercial book. The deal was completed on 8/2/02. At 9/30/02, the company's asset quality was sound (NPA ratio was 0.91%) and problem loans were moderate, although up $21mln, quarter-over-quarter. Loan loss reserves (Reserves/Loans of 1.45%), which have grown in parallel with the growth of riskier commercial and consumer loans, remain adequate, further buttressed by the company's high level of liquid securities and lower risk residential mortgages.

Although stock buyback programs and the recent acquisition for the IBJ Whitehall asset based lending business compressed capital somewhat, WBS' capital metrics remain solid, as reflected by its tangible equity ratio of 5.7% and Tier I and Total capital ratios of 9.7% and 10.9%, respectively. The company has an adequate level of liquidity and the balance sheet is predominantly deposit funded, augmented by a sizeable level of collateralized FHLB borrowings and repurchase agreements. WBS maintains a moderate level of trust preferred securities.

Webster Financial Corporation

--Long-term, 'BBB';

--Short-term, 'F2';

--Individual, 'B/C';

--Support, '5';

--Rating Outlook Stable.

Webster Bank

--Long-term deposits, 'BBB+';

--Long-term debt, 'BBB';

--Subordinated Debt, 'BBB-';

--Short-term deposits, 'F2';

--Short-term debt, 'F2';

--Individual, 'B/C';

--Support, '5';

--Rating Outlook Stable.

Webster Capital Trust I - II

--Preferred Stock, 'BBB-';

--Rating Outlook Stable.

Webster Preferred Capital Corp

--Preferred Stock, 'BBB-';

--Rating Outlook Stable.