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April 28, 2022

Merger expenses lead to 1Q loss for Webster Financial; major corporate office space consolidation planned

John Ciulla

Stamford-based Webster Financial on Thursday reported a first quarter loss, driven by expenses related to its recent merger with New York’s Sterling Bancorp.

The parent company of Webster Bank said it lost $16.7 million, or  14 cents per share during the quarter, which ended March 31.

Webster said the loss was driven by a $279.5 million pre-tax expense it recorded during the quarter, primarily related to its merger with Sterling. Excluding that expense, the bank said it would have reported profits of $1.24 per share.

Webster Bank CEO and President John R. Ciulla took an optimistic tone in announcing the first quarter results.

"This was a landmark quarter for Webster, as we closed our merger of equals with Sterling Bancorp," he wrote in a statement. "We are excited about our future as a combined entity, as we are adding scale, talent, and capabilities that will enhance our client experience. I am equally proud we were able to produce strong underlying business trends while at the same time combining these complementary organizations."

The merged bank now had $65 billion in assets, $44 billion in loans, 202 branches and a new Stamford headquarters in the immediate wake of the merger. Ciulla reported Thursday it also has $54 billion in deposits.

Webster officials predicted positive results as the merged bank takes advantage of increased clout and trims redundant expenses and office space.

“We believe our combination is as strategically compelling today as it was when we announced it a year ago,” Ciulla said. He anticipates cutting expenses by $60 million this year and another $60 million in 2023.  

The combined banks’ workforce has been trimmed by 7% since the merger was announced a year ago, Ciulla said. It also plans to cede more than 40% of its “corporate square footage” by the end of this year, he said.

A Webster Bank branch.

The bank is seeing business loan growth. Ciulla reported Sterling and Webster had 109 “relationships” with exposure of more than $40 million at the end of 2021. Since the merger, Webster has approved 27 deals with exposure of more than $40 million, he said.

This trend gives confidence to the bank’s projection of loan growth of 8% to 10% this year, Ciulla said.

Glenn MacInnes, Webster’s executive vice president and chief financial officer, said the corporate square footage reduction is “not related” to exiting markets or shifting headquarters from Waterbury to Stamford.

“We actually have more people in our Waterbury headquarters than we did before we moved our official headquarters,” MacInnes said.  

MacInnes said the company is shifting employee locations to eliminate redundancy and to reflect new working practices.

“We have multiple locations that will consolidate in terms of overlap between the two banks,” MacInnes said. “And it’s really just reduction in square footage in a lot of our markets in terms of taking less space in an existing building or moving to a more efficient building because of the future of work, because we have a hybrid model going forward and because we are using a campus model where people are going into different offices.”

Call center square footage will also be reduced as more employees work remotely, he said.

Webster’s release also touted its recent acquisition of Bend Financial Inc., meant to advance a differentiated, modern, approach to Health Savings Account management.

Webster Bank owns HSA Bank, a health savings account administrator based in Milwaukee.

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