Webster Reports 2007 Fourth Quarter Results and 2008 Outlook and Focus

WATERBURY, Conn., Jan. 24 /PRNewswire-FirstCall/ -- Webster Financial Corporation , the holding company for Webster Bank, N.A., today announced a net loss for the fourth quarter of 2007 of $8.7 million or $.16 per diluted share, compared to $35.0 million in net income or $.64 in earnings per share for the third quarter of 2007 and $37.8 million in net income or $.67 in earnings per share for the fourth quarter of 2006. Results in the fourth quarter of 2007 reflect previously announced charges of $.86 per share, including a special provision of $40.0 million ($26.0 million net of tax or $.49 per share) for credit losses for the discontinued residential construction and home equity portfolios, and other charges taken in the quarter aggregating $.37 per share. For the twelve months ended December 31, 2007, net income from continuing operations totaled $110.7 million or $2.01 per diluted share compared to $133.7 million or $2.47 per share for the twelve months ended December 31, 2006.

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"Webster closes 2007 having addressed head-on the challenges facing the financial services industry and taken aggressive, constructive action," said Webster Chairman and CEO James C. Smith. "Our future is in-market and contiguous franchise growth and lending relationships that are direct to consumer and commercial customers. We look forward with confidence in our strategy and in our ability to be New England's bank."

Webster will provide details on its 2008 outlook and ongoing business focus during its fourth quarter earnings conference call later today (refer to details for the conference call at the end of this release). Additional details are also available on our website at http://www.wbst.com/.

Webster had previously announced that it discontinued indirect residential construction lending and indirect out of market home equity lending. In the aggregate, these two indirect loan portfolios totaled $424.0 million and have been placed into a liquidating portfolio which will be managed by a designated credit team. With the addition of the $40.0 million special provision as of December 31, 2007, the allowance for loan losses for these portfolios totals $49.9 million at year end 2007.

Smith further stated: "Our objective in setting up the liquidating portfolio was to identify, segregate and reserve against estimated losses inherent in these portfolios using default rates and loss rates that reflect our view that such rates will significantly worsen from current levels."

Regarding the other previously announced charges taken in the fourth quarter, $14.0 million or $.27 per share related to the company's anticipated sale of its insurance operations. The company expects that the sale will be structured such that the consideration will comprise an upfront payment and additional potential consideration over a multi-year earn-out period. Given this structure, Webster has accordingly written down the carrying value of its investment and as of year end 2007 is reporting Webster Insurance separately from its continuing operations.

The company also recorded other previously announced charges totaling $8.5 million or $.10 per share. Included in the other charges was a $3.6 million pre-tax write down in value in a direct investment based on management's assessment that the decline in market value of the underlying securities will not be recovered in the near term and on uncertainty of intent to continue to hold this investment in the future. Other charges in the fourth quarter of 2007 include $1.4 million in pre-tax, nonrecurring charges related to a retail office lease termination and a technology service contract settlement. Webster also discontinued all national wholesale mortgage banking activities and, as a result, is closing its wholesale lending offices in Seattle, Washington; Phoenix, Arizona; Cheshire, Connecticut; and Chicago, Illinois. As a result, the company recorded severance and other costs, primarily for lease terminations and outplacement, of $3.5 million (pre tax) in the fourth quarter of 2007. Webster's remaining mortgage and home equity operations in Cheshire, CT will now focus solely on direct to consumer retail originations.

In addition, fourth quarter 2007 results include an additional pre-tax charge of $2.0 million or $.03 per share consisting of $0.5 million of other severance costs and $1.5 million for the recording of a liability relating to Visa Inc. legal dispute settlements reflecting Webster's share as a Visa U.S.A. member. If Visa Inc. is successful in completing its planned public offering, Webster expects that shares received from an anticipated Class B common stock redemption related to its ownership interest in Visa Inc. will more than offset the Visa U.S.A.-related liability.

Also as previously announced, Webster has launched an earnings optimization program, assigning senior officers from each line of business and shared services area to teams dedicated to enhance revenues and reduce expenses. Harvest Earnings Group, LLC, a highly regarded firm with expertise in this area, will assist with this employee-led program. The effort to ensure that positive operating leverage and improved operating efficiency are achieved will be undertaken over the next four months and implemented through the end of the year and into 2009. The company anticipates that some job eliminations will be necessary as an outcome of this initiative.

During the fourth quarter, Webster announced an ATM branding agreement with plans for 158 in-store Webster branded ATMs in select Walgreens stores in Massachusetts (131 locations, primarily in the eastern part of the state), Rhode Island (20 locations) and Connecticut (7 locations). The project is scheduled to begin and reach completion in the first quarter of 2008. This branding agreement complements Webster's branch expansion program and establishes another distribution platform for future growth in Rhode Island and the Boston market. Also during the fourth quarter, Webster opened two new branches, one in East Longmeadow, Massachusetts and one in Woodbridge, Connecticut. In 2007, Webster added four de novo branches for a total of 29 branches opened since 2002.

Revenues

Total revenue, which consists of net interest income plus total noninterest income, totaled $170.7 million in the fourth quarter. This compares to total revenue of $178.5 million in the third quarter and $172.2 million a year ago.

Net interest income totaled $122.7 million in the fourth quarter compared to $127.1 million in the third quarter and $129.2 million a year ago with the reductions compared to the fourth quarter of 2007 reflecting lower levels of average interest-earning assets in 2007 from Webster's balance sheet repositioning actions. The net interest margin was 3.26 percent in the fourth quarter of 2007 compared to 3.38 percent in the third quarter of 2007 and 3.23 percent a year ago. The 12 basis point reduction from the third quarter relates to stock buyback activity in the fourth quarter coupled with the negative near term impact of recent Fed Funds rate reductions and higher levels of nonaccrual loans. The spread between the yield on interest-earning assets and the cost of interest-bearing liabilities was 3.18 percent in the fourth quarter compared to 3.29 percent in the third quarter and 3.14 percent a year ago.

Total noninterest income was $48.0 million in the fourth quarter, inclusive of the aforementioned $3.6 million loss on the write-down of a direct investment to fair value. This compares to $51.4 million in the third quarter and $43.1 million a year ago, which was reduced by a $5.7 million loss on the sale of mortgage loans. Deposit service fees totaled $30.6 million compared to $30.0 million in the third quarter and $25.5 million a year ago, with growth partly reflecting the implementation of a new consumer fee structure during 2007. Loan-related fees were $7.3 million compared to $7.7 million in the third quarter and $9.6 million a year ago, which included higher commercial real estate prepayment fees. Wealth and investment services revenues totaled $7.5 million compared to $7.1 million in the third quarter and $7.2 million a year ago. Income from mortgage banking activities was $1.3 million in the fourth quarter compared to income of $1.8 million in the third quarter and $2.9 million a year ago. Other non-interest income was $2.1 million compared to $1.7 million in the third quarter and $3.8 million a year ago, which included a $1.4 million gain on the sale of properties.

Provision For Credit Losses

The provision for credit losses was $45.25 million compared to $15.25 million in the third quarter and $3.0 million a year ago. As previously disclosed, $40.0 million of the provision for credit losses recorded in the fourth quarter was to increase the allowance for credit losses for $424.0 million of loans in the discontinued indirect residential construction lending and indirect out of footprint home equity portfolios.

Net loan charge-offs totaled $11.7 million during the fourth quarter of 2007, of which $7.1 million and $1.8 million were in the discontinued indirect national construction and indirect, out of footprint home equity portfolios, respectively.

The allowance for credit losses, which consists of the allowance for loan losses and the reserve for unfunded credit commitments, was $197.6 million or 1.58 percent of total loans at December 31, 2007, compared to 1.32 percent of total loans at September 30, 2007 and 1.20 percent at December 31, 2006. Of the total allowance for credit losses as of December 31, 2007, $49.9 million was allocated toward the discontinued indirect residential construction lending and indirect out of footprint home equity portfolios.

Noninterest Expenses

Total noninterest expenses were $120.3 million in the fourth quarter, or $113.4 million excluding $6.9 million of severance and other costs. This amount compares to $113.6 million in the third quarter, which included $0.5 million of severance and other costs in connection with Webster's recently completed strategic review, and $112.7 million a year ago, which included $2.0 million of acquisition costs. Adjusting for the aforementioned costs particular to each quarter, noninterest expenses increased slightly from the third quarter and increased by 2 percent from a year ago.

Balance Sheet Trends

Total assets were $17.2 billion at December 31, 2007 compared to $17.1 billion a year ago. Total loans were $12.5 billion, a decrease of $0.4 billion or 3 percent from a year ago that reflects a $0.8 billion reduction in residential loans primarily from loans that were securitized and transferred into the securities portfolio during the first quarter of 2007. Securities totaled $2.7 billion and increased by $0.9 billion primarily due to the aforementioned securitization of residential loans. Commercial loans (consisting of commercial and industrial and commercial real estate) and consumer loans increased at a combined rate of 4 percent compared to a year ago and totaled $8.8 billion at December 31, 2007. Commercial and consumer loans represent 71 percent of total loans at December 31, 2007 compared to 66 percent a year ago. Securities represented 16 percent of total assets at December 31, 2007 compared to 11 percent a year ago.

Total deposits were $12.4 billion, a decrease of $0.1 billion or 1 percent from a year ago, as a result of a $0.2 billion decline in brokered deposits. Borrowings totaled $2.9 billion, an increase of $350 million primarily in repurchase agreements, from a year ago. Total borrowings were 17 percent of total assets at December 31, 2007 compared to 15 percent a year ago.

The loan to deposit ratio was 101 percent at December 31, 2007 compared to 104 percent a year ago. Improvement from a year ago reflects completion of balance sheet repositioning actions.

Book value per common share of $33.09 at December 31, 2007 compared to $33.25 a year ago. Tangible book value per share was $18.73 at December 31, 2007 compared to $19.76 a year ago. The ratio of tangible equity to tangible assets was 5.89 percent at December 31, 2007 compared to 6.72 percent a year ago. Webster's projected leverage ratio was 7.99 at December 31, 2007 compared to 7.43% a year ago, and projected total risk based ratio was 11.5% at December 31, 2007 compared with 11.45% a year ago. Webster repurchased 1.3 million shares of its common stock during the fourth quarter and 4.39 million shares throughout 2007. As of December 31, 2007, Webster had 2.1 million shares remaining under a 2.7 million share authorization that was announced on September 26, 2007. Given the target levels the company has established for tangible, leverage and total risk based capital, it does not intend to continue to repurchase its stock in the near term.

Asset Quality

Non-performing assets totaled $121.1 million or 0.97 percent of total loans and other real estate owned at December 31, 2007 compared to $104.2 million or 0.84 percent at September 30, 2007 and $61.8 million or 0.48 percent a year ago. Non-performing loans in the liquidating indirect national construction and indirect out of footprint home equity portfolio totaled $22.8 million and $7.1 million at December 31, 2007, respectively compared to $18.5 million and $4.2 million at September 30, 2007 respectively and $1.1 million and $2.5 million a year ago. Non-performing assets from the ongoing portfolios totaled $91.2 million or 0.73 percent of total loans at December 31, 2007. The increase in non-performing assets from September 30, 2007 was primarily composed of $4.7 million in residential, $1.8 million in home equity, and $4.3 million and $2.9 million from the discontinued liquidating indirect national construction and indirect, out of footprint home equity portfolios.

The ratio of the allowance for credit losses to non-performing loans was 175 percent at December 31, 2007 compared to 172 percent at September 30, 2007 and 263 percent a year ago. At December 31, 2007, the $49.9 million allowance for the discontinued indirect portfolios was 153 percent of non-performing loans from the discontinued portfolios, while the $147.7 million allowance for the continuing portfolios was 184 percent of non-performing loans from the continuing portfolios.

Webster Financial Corporation is the holding company for Webster Bank, National Association and Webster Insurance. With $17.2 billion in assets, Webster provides business and consumer banking, mortgage, insurance, financial planning, trust and investment services through 181 banking offices, 343 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, and provides health savings account trustee and administrative services through HSA Bank, a division of Webster Bank.

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

Conference Call

A conference call covering Webster's fourth quarter earnings announcement will be held today, Thursday, January 24, at 9:00 a.m. EST and may be heard through Webster's investor relations website at http://www.wbst.com/, or in listen- only mode by calling 1-877-407-8289 or 201-689-8341 internationally. The call will be archived on the website and available for future retrieval.

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 2006. Except as required by law, Webster does not undertake to update any such forward-looking information.

Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. A reconciliation of net income and other performance ratios, as adjusted is included in the accompanying selected financial highlights table.

We believe that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends and financial position. Specifically, we provide measures based on what we believe are our operating earnings on a consistent basis and exclude non-core operating items which affect the GAAP reporting of results of operations. We utilize these measures for internal planning and forecasting purposes. We, as well as securities analysts, investors and other interested parties, also use these measures to compare peer company operating performance. We believe that our presentation and discussion, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting our business and allows investors to view performance in a manner similar to management. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

Media Contact Arthur House 203-578-2391 ahouse@websterbank.com

Investor Contact Terry Mangan 203-578-2318 tmangan@websterbank.com

WEBSTER FINANCIAL CORPORATION Selected Financial Highlights (unaudited) At or for the Three At or for the Twelve Months Ended December Months Ended December 31, 31, (In thousands, except per share data) 2007 2006 (c) 2007 2006 (c) Adjusted net income and performance ratios, net of tax (annualized): Income from continuing operations $5,169 $38,808 $110,696 $133,680 Net debt prepayment expense - - 4,427 - Recognition of loss on direct investments 2,317 - 2,317 - Closing costs-National Wholesale Operations 2,250 - 2,250 - Software development cost write-off - - 2,212 - Severance and other costs 2,233 - 5,184 - Closing costs - Peoples Mortgage Company - - 1,509 - Write-down of construction loans held for sale - - 1,071 - Recognition of loss on AFS securities - 1,560 - 33,328 Loss on sale of mortgage loans - 3,713 - 3,713 NewMil acquisition costs - 1,312 - 1,918 Net gain from pension plan curtailment - (195) - (195) Gain on sale of properties - (910) - (910) Adjusted net income from continuing operations 11,969 44,288 129,666 171,534 Net income from continuing operations per diluted common share 0.23 0.78 2.36 3.17 Return on average shareholders' equity 2.68 % 9.46 % 7.00 % 9.99 % Return on average tangible equity 4.63 15.80 11.84 16.26 Return on average assets 0.29 0.99 0.77 0.96 Noninterest income as a percentage of total revenue 29.61 28.39 28.79 27.05 Efficiency ratio (a) 65.07 62.31 64.20 62.41 Net income and performance ratios (annualized): Income from continuing operations $5,169 $38,808 $110,696 $133,680 Net income from continuing operations per diluted common share 0.10 0.69 2.01 2.47 Return on average shareholders' equity 1.16 % 8.29 % 5.97 % 7.78 % Return on average tangible equity 2.00 13.84 10.10 12.67 Return on average assets 0.13 0.87 0.66 0.75 Noninterest income as a percentage of total revenue 28.14 25.01 28.48 20.56 Efficiency ratio (a) 70.47 65.42 68.12 68.16 Asset quality: Allowance for credit losses $197,586 $154,994 $197,586 $154,994 Nonperforming assets 121,071 61,825 121,071 61,825 Allowance for credit losses / total loans 1.58 % 1.20 % 1.58 % 1.20 % Net charge-offs / average loans (annualized) 0.38 0.27 0.20 0.13 Nonperforming loans / total loans 0.90 0.46 0.90 0.46 Nonperforming assets / total loans plus OREO 0.97 0.48 0.97 0.48 Allowance for credit losses / nonperforming loans 175.01 263.09 175.01 263.09 Other ratios (annualized): Tangible capital ratio 5.89 % 6.72 % 5.89 % 6.72 % Shareholders' equity / total assets 10.10 10.96 10.10 10.96 Interest-rate spread 3.18 3.14 3.32 3.09 Net interest margin 3.26 3.23 3.40 3.16 Share related: Book value per common share $33.09 $33.24 $33.09 $33.24 Tangible book value per common share 18.73 19.76 18.73 19.76 Common stock closing price 31.97 48.72 31.97 48.72 Dividends declared per common share 0.30 0.27 1.17 1.06 Common shares issued and outstanding 52,475 56,389 52,475 56,389 Basic shares (average) 52,400 55,753 54,469 53,435 Diluted shares (average) 52,795 56,452 54,996 54,065 Footnotes: (a) Noninterest expense as a percentage of net interest income plus noninterest income. (b) For purposes of the yield computation, unrealized gains (losses) are excluded from the average balance. (c) Certain previously reported information has been reclassified for the effect of reporting Webster Insurance as discontinued operations. Consolidated Statements of Condition (unaudited) December September December (In thousands) 31, 2007 30, 2007(c) 31, 2006(c) Assets: Cash and due from depository institutions $306,654 $264,929 $311,888 Short-term investments 5,112 80,270 175,648 Federal Home Loan and Federal Reserve Bank stock 110,962 110,962 137,755 Trading, at fair value 2,340 635 4,842 Available for sale, at fair value 640,117 344,546 366,163 Held-to-maturity 2,107,227 2,051,277 1,453,973 Loans held for sale 221,568 211,659 354,798 Loans: Residential mortgages 3,641,602 3,677,682 4,424,634 Commercial 3,516,213 3,562,394 3,386,274 Commercial real estate 2,059,881 1,896,566 1,904,597 Consumer 3,258,247 3,283,914 3,207,986 Total loans 12,475,943 12,420,556 12,923,491 Allowance for loan losses (188,086) (154,532) (147,719) Loans, net 12,287,857 12,266,024 12,775,772 Accrued interest receivable 80,432 86,654 90,565 Premises and equipment, net 193,063 192,880 191,492 Goodwill and other intangible assets 768,015 769,893 777,659 Cash surrender value of life insurance 269,366 266,729 259,318 Assets held for disposition 51,603 64,971 69,580 Prepaid expenses and other assets 157,644 140,418 127,937 Total Assets $17,201,960 $16,851,847 $17,097,390 Liabilities and Shareholders' Equity: Deposits: Demand deposits $1,538,083 $1,479,503 $1,588,783 NOW accounts 1,718,757 1,664,025 1,671,778 Money market deposit accounts 1,828,656 2,065,474 1,908,496 Savings accounts 2,259,747 2,211,125 1,985,202 Certificates of deposit 4,772,624 4,847,060 4,911,860 Brokered deposits 236,291 286,806 392,277 Total deposits 12,354,158 12,553,993 12,458,396 Federal Home Loan Bank advances 1,052,228 628,445 1,074,933 Securities sold under agreements to repurchase and other short-term debt 1,238,012 994,624 893,206 Long-term debt 650,643 666,236 621,936 Reserve for unfunded credit commitments 9,500 9,479 7,275 Liabilities held for disposition 9,261 9,310 10,807 Accrued expenses and other liabilities 141,949 175,140 147,126 Total liabilities 15,455,751 15,037,227 15,213,679 Preferred stock of subsidiary corporation 9,577 9,577 9,577 Shareholders' equity 1,736,632 1,805,043 1,874,134 Total Liabilities and Shareholders' Equity $17,201,960 $16,851,847 $17,097,390 See Selected Financial Highlights for footnotes. Consolidated Statements of Income (unaudited) Three Months Ended Twelve Months Ended December 31, December 31, (In thousands, except per share data) 2007 2006 (c) 2007 2006 (c) Interest income: Loans $205,363 $225,634 $837,711 $843,398 Securities and short-term investments 36,318 32,514 136,324 154,127 Loans held for sale 3,276 6,191 21,560 17,213 Total interest income 244,957 264,339 995,595 1,014,738 Interest expense: Deposits 89,510 90,195 361,307 310,199 Borrowings 32,748 44,994 126,096 195,989 Total interest expense 122,258 135,189 487,403 506,188 Net interest income 122,699 129,150 508,192 508,550 Provision for credit losses 45,250 3,000 67,750 11,000 Net interest income after provision for credit losses 77,449 126,150 440,442 497,550 Noninterest income: Deposit service fees 30,577 25,494 114,645 96,765 Loan related fees 7,328 9,643 30,830 34,389 Wealth and investment services 7,507 7,161 29,164 27,183 Mortgage banking activities 1,276 2,917 9,316 8,542 Increase in cash surrender value of life insurance 2,637 2,550 10,386 9,603 Gain (loss) on sale of securities, net 195 (2,732) 1,721 1,289 Other 2,094 3,761 7,685 8,426 51,614 48,794 203,747 186,197 Loss on write-down of investments to fair value (3,565) - (3,565) - Loss on write-down of AFS securities to fair value - - - (48,879) Loss on sale of mortgage loans - (5,713) - (5,713) Gain on Webster Capital Trust I and II securities - - 2,130 - Total noninterest income 48,049 43,081 202,312 131,605 Noninterest expenses: Compensation and benefits 59,910 57,552 243,515 229,556 Occupancy 12,321 12,396 48,878 46,083 Furniture and equipment 15,353 14,352 59,771 54,828 Intangible amortization 1,881 3,322 10,374 13,865 Marketing 1,727 3,338 14,213 15,417 Professional services 3,721 5,253 15,038 15,927 Other 18,513 14,451 66,078 57,708 113,426 110,664 457,867 433,384 Debt redemption premium - - 8,940 - Severance and other costs 6,898 - 17,163 - Acquisition costs - 2,018 - 2,951 Total noninterest expenses 120,324 112,682 483,970 436,335 Income from continuing operations before income taxes 5,174 56,549 158,784 192,820 Income taxes 5 17,741 48,088 59,140 Income from continuing operations 5,169 38,808 110,696 133,680 (Loss) income from discontinued operations, net of tax (13,867) (1,010) (13,923) 110 Net (loss) income $(8,698) $37,798 $96,773 $133,790 Diluted shares (average) 52,795 56,452 54,996 54,065 Net income per common share: Basic Income from continuing operations $0.10 $0.70 $2.03 $2.50 Net (loss) income (0.17) 0.68 1.78 2.50 Diluted Income from continuing operations 0.10 0.69 2.01 2.47 Net (loss) income (0.16) 0.67 1.76 2.47 See Selected Financial Highlights for footnotes. Consolidated Statements of Income (unaudited) Three Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, (In thousands, except 2007 2007 (c) 2007 (c) 2007 (c) 2006 (c) per share data) Interest income: Loans $205,363 $212,847 $210,337 $209,164 $225,634 Securities and short- term investments 36,318 34,163 32,563 33,280 32,514 Loans held for sale 3,276 4,616 7,419 6,249 6,191 Total interest income 244,957 251,626 250,319 248,693 264,339 Interest expense: Deposits 89,510 94,484 89,683 87,630 90,195 Borrowings 32,748 30,083 30,283 32,982 44,994 Total interest expense 122,258 124,567 119,966 120,612 135,189 Net interest income 122,699 127,059 130,353 128,081 129,150 Provision for credit losses 45,250 15,250 4,250 3,000 3,000 Net interest income after provision for credit losses 77,449 111,809 126,103 125,081 126,150 Noninterest income: Deposit service fees 30,577 29,956 28,758 25,354 25,494 Loan related fees 7,328 7,661 7,901 7,940 9,643 Wealth and investment services 7,507 7,142 7,637 6,878 7,161 Mortgage banking activities 1,276 1,849 3,962 2,229 2,917 Increase in cash surrender value of life insurance 2,637 2,629 2,586 2,534 2,550 Gain (loss) on sale of securities, net 195 482 503 541 (2,732) Other 2,094 1,688 2,025 1,878 3,761 51,614 51,407 53,372 47,354 48,794 Loss on write-down of investments to fair value (3,565) - - - - Gain on Webster Capital Trust I and II securities - - 2,130 - - Loss on sale of mortgage loans - - - - (5,713) Total noninterest income 48,049 51,407 55,502 47,354 43,081 Noninterest expenses: Compensation and benefits 59,910 61,171 60,899 61,535 57,552 Occupancy 12,321 11,932 12,064 12,561 12,396 Furniture and equipment 15,353 14,846 15,014 14,558 14,352 Intangible amortization 1,881 2,027 3,144 3,322 3,322 Marketing 1,727 4,123 4,175 4,188 3,338 Professional services 3,721 3,625 3,181 4,511 5,253 Other 18,513 15,377 16,224 15,964 14,451 113,426 113,101 114,701 116,639 110,664 Debt redemption premium - - 8,940 - - Severance and other costs 6,898 452 5,291 4,522 - Acquisition costs - - - - 2,018 Total noninterest expenses 120,324 113,553 128,932 121,161 112,682 Income from continuing operations before income taxes 5,174 49,663 52,673 51,274 56,549 Income taxes 5 15,088 16,801 16,194 17,741 Income from continuing operations 5,169 34,575 35,872 35,080 38,808 (Loss) income from discontinued operations, net of tax (13,867) 393 (405) (44) (1,010) Net (loss) income $(8,698) $34,968 $35,467 $35,036 $37,798 Diluted shares (average) 52,795 54,259 56,243 56,762 56,452 Net income per common share: Basic Income from continuing operations $0.10 $0.64 $0.64 $0.63 $0.70 Net (loss) income (0.17) 0.65 0.64 0.62 0.68 Diluted Income from continuing operations 0.10 0.64 0.64 0.62 0.69 Net (loss) income (0.16) 0.64 0.63 0.62 0.67 See Selected Financial Highlights for footnotes. Interest-Rate Spread (unaudited) Three Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, 2007 2007 2007 2007 2006 Interest-rate spread Yield on interest- earning assets 6.42 % 6.61 % 6.62 % 6.61 % 6.52 % Cost of interest-bearing liabilities 3.24 3.32 3.25 3.29 3.38 Interest-rate spread 3.18 % 3.29 % 3.37 % 3.32 % 3.14 % Net interest margin 3.26 % 3.38 % 3.47 % 3.41 % 3.23 % Consolidated Average Statements of Condition (unaudited) Three Months Ended December 31, 2007 Fully tax- Average equivalent (Dollars in thousands) balance Interest yield/rate Assets: Interest-earning assets: Loans $12,422,076 $205,363 6.54 % Securities (b) 2,561,459 37,569 5.85 Loans held for sale 208,199 3,276 6.29 Federal Home Loan and Federal Reserve Bank stock 110,962 1,760 6.29 Short-term investments 18,464 132 2.79 Total interest-earning assets 15,321,160 248,100 6.42 Noninterest-earning assets 1,564,878 Total assets $16,886,038 Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand deposits $1,492,936 $ - - % Savings, NOW and money market deposit accounts 5,795,625 31,608 2.16 Time deposits 5,104,534 57,902 4.50 Total deposits 12,393,095 89,510 2.86 Federal Home Loan Bank advances 797,713 8,812 4.32 Repurchase agreements and other short-term debt 1,072,976 11,560 4.22 Long-term debt 662,904 12,376 7.47 Total borrowings 2,533,593 32,748 5.10 Total interest-bearing liabilities 14,926,688 122,258 3.24 Noninterest-bearing liabilities 161,761 Total liabilities 15,088,449 Preferred stock of subsidiary corporation 9,577 Shareholders' equity 1,788,012 Total liabilities and shareholders' equity $16,886,038 125,842 Less: tax-equivalent adjustment (3,143) Net interest income $122,699 Interest-rate spread 3.18 % Net interest margin 3.26 % Three Months Ended December 31, 2006 Fully tax- Average equivalent (Dollars in thousands) balance Interest yield/rate Assets: Interest-earning assets: Loans $13,362,185 $225,634 6.69 % Securities (b) 2,289,026 32,085 5.63 Loans held for sale 417,479 6,191 5.93 Federal Home Loan and Federal Reserve Bank stock 146,960 2,610 7.05 Short-term investments 29,896 368 4.82 Total interest-earning assets 16,245,546 266,888 6.52 Noninterest-earning assets 1,617,888 Total assets $17,863,434 Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand deposits $1,522,571 $ - - % Savings, NOW and money market deposit accounts 5,582,187 29,609 2.10 Time deposits 5,405,010 60,586 4.44 Total deposits 12,509,768 90,195 2.86 Federal Home Loan Bank advances 1,444,155 18,169 4.92 Repurchase agreements and other short-term debt 1,239,065 14,100 4.45 Long-term debt 637,853 12,725 7.98 Total borrowings 3,321,073 44,994 5.33 Total interest-bearing liabilities 15,830,841 135,189 3.38 Noninterest-bearing liabilities 149,623 Total liabilities 15,980,464 Preferred stock of subsidiary corporation 9,577 Shareholders' equity 1,873,393 Total liabilities and shareholders' equity $17,863,434 131,699 Less: tax-equivalent adjustment (2,549) Net interest income $129,150 Interest-rate spread 3.14 % Net interest margin 3.23 % See Selected Financial Highlights for footnotes. Consolidated Average Statements of Condition (unaudited) Twelve Months Ended December 31, 2007 Fully tax- Average equivalent (Dollars in thousands) balance Interest yield/rate Assets: Interest-earning assets: Loans $12,390,955 $837,711 6.76 % Securities (b) 2,356,669 136,398 5.79 Loans held for sale 344,663 21,560 6.26 Federal Home Loan and Federal Reserve Bank stock 113,731 7,954 6.99 Short-term investments 59,345 3,045 5.13 Total interest-earning assets 15,265,363 1,006,668 6.60 Noninterest-earning assets 1,590,282 Total assets $16,855,645 Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand deposits $1,506,696 $ - - % Savings, NOW and money market deposit accounts 5,749,378 125,590 2.18 Time deposits 5,218,449 235,717 4.52 Total deposits 12,474,523 361,307 2.90 Federal Home Loan Bank advances 757,367 35,302 4.66 Repurchase agreements and other short-term debt 996,341 44,769 4.49 Long-term debt 609,371 46,025 7.55 Total borrowings 2,363,079 126,096 5.34 Total interest-bearing liabilities 14,837,602 487,403 3.28 Noninterest-bearing liabilities 156,083 Total liabilities 14,993,685 Preferred stock of subsidiary corporation 9,577 Shareholders' equity 1,852,383 Total liabilities and shareholders' equity $16,855,645 519,265 Less: tax-equivalent adjustment (11,073) Net interest income $508,192 Interest-rate spread 3.32 % Net interest margin 3.40 % Twelve Months Ended December 31, 2006 Fully tax- Average equivalent (Dollars in thousands) balance Interest yield/rate Assets: Interest-earning assets: Loans $12,800,864 $843,398 6.59 % Securities (b) 3,061,432 152,832 4.93 Loans held for sale 288,892 17,213 5.96 Federal Home Loan and Federal Reserve Bank stock 163,344 9,672 5.92 Short-term investments 25,514 1,079 4.23 Total interest-earning assets 16,340,046 1,024,194 6.25 Noninterest-earning assets 1,531,421 Total assets $17,871,467 Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand deposits $1,470,861 $ - - % Savings, NOW and money market deposit accounts 5,427,812 100,165 1.85 Time deposits 5,193,608 210,034 4.04 Total deposits 12,092,281 310,199 2.57 Federal Home Loan Bank advances 2,035,786 94,322 4.63 Repurchase agreements and other short-term debt 1,243,269 52,301 4.21 Long-term debt 633,667 49,366 7.79 Total borrowings 3,912,722 195,989 5.01 Total interest-bearing liabilities 16,005,003 506,188 3.16 Noninterest-bearing liabilities 139,057 Total liabilities 16,144,060 Preferred stock of subsidiary corporation 9,577 Shareholders' equity 1,717,830 Total liabilities and shareholders' equity $17,871,467 518,006 Less: tax-equivalent adjustment (9,456) Net interest income $508,550 Interest-rate spread 3.09 % Net interest margin 3.16 % See Selected Financial Highlights for footnotes. Nonperforming Assets (unaudited) Dec. 31, Sept. 30, June 30, March 31, Dec. 31, (Dollars in thousands) 2007 2007 2007 2007 2006 Nonperforming loans: Continuing Portfolio: Commercial: Commercial $26,804 $25,845 $20,142 $13,679 $21,105 Equipment financing 6,473 5,054 2,584 2,405 2,616 Total commercial 33,277 30,899 22,726 16,084 23,721 Commercial real estate 12,896 14,238 12,242 18,524 17,618 Residential: Residential construction to permanent 2,820 - - - - All other 19,532 14,811 13,288 10,838 10,231 Total residential 22,352 14,811 13,288 10,838 10,231 Consumer 14,455 12,688 8,164 8,114 3,779 Nonperforming loans - continuing portfolio 82,980 72,636 56,420 53,560 55,349 Liquidating Portfolio: NCLC 22,797 18,486 13,395 2,635 1,076 Consumer 7,126 4,199 2,711 2,694 2,487 Nonperforming loans - liquidating portfolio 29,923 22,685 16,106 5,329 3,563 Total nonperforming loans 112,903 95,321 72,526 58,889 58,912 Other real estate owned and repossessed assets: Commercial 2,211 5,233 3,950 4,833 1,922 Residential 1,061 985 711 350 383 Consumer 4,896 2,635 1,467 758 608 Total other real estate owned and repossessed assets 8,168 8,853 6,128 5,941 2,913 Total nonperforming assets $121,071 $104,174 $78,654 $64,830 $61,825 Accruing loans 90 or more days past due $1,891 $1,286 $2,088 $4,636 $1,490 See Selected Financial Highlights for footnotes. Past Due Loans (unaudited) Dec. 31, Sept. 30, June 30, March 31, Dec. 31, (Dollars in thousands) 2007 2007 2007 2007 2006 Past Due 30-89 days: Continuing Portfolio: Commercial: Commercial $13,291 $4,237 $9,999 $20,537 $5,672 Equipment financing 5,644 3,057 3,355 3,582 1,443 Total commercial 18,935 7,294 13,354 24,119 7,115 Commercial real estate 12,054 21,017 13,452 6,429 26,476 Residential: Residential construction to permanent 3,743 1,656 536 - - All other 19,967 22,501 14,556 10,354 14,269 Total residential 23,710 24,157 15,092 10,354 14,269 Consumer 22,347 17,836 17,005 6,801 11,730 Past Due 30-89 days - continuing portfolio 77,046 70,304 58,903 47,703 59,590 Liquidating Portfolio: NCLC 13,143 10,209 9,037 1,835 685 Consumer 8,793 7,815 5,379 2,815 2,288 Past Due 30-89 days - liquidating portfolio 21,936 18,024 14,416 4,650 2,973 Past Due 90 days or more: Commercial 1,141 1,031 1,188 1,361 1,490 Commercial real estate 750 255 900 3,275 - Total $100,873 $89,614 $75,407 $56,989 $64,053 See Selected Financial Highlights for footnotes. Allowance for Credit Losses (unaudited) For the Three Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, 2007 2007 2007 2007 2006 (Dollars in thousands) Beginning balance $164,011 $152,750 $152,660 $154,994 $156,331 Provision 45,250 15,250 4,250 3,000 3,000 Allowance for acquired loans - - - - 4,724 Charge-offs continuing portfolio: Commercial 2,485 1,992 2,034 2,293 9,352 Residential 71 364 286 442 199 Consumer 1,833 1,613 1,892 1,136 382 Charge-offs continuing portfolio: 4,389 3,969 4,212 3,871 9,933 Charge-offs liquidating portfolio: NCLC 7,051 69 - 2,139 - Consumer 1,846 969 1,284 857 72 Charge-offs liquidating portfolio: 8,897 1,038 1,284 2,996 72 Total charge-offs 13,286 5,007 5,496 6,867 10,005 Recoveries (1,611) (1,018) (1,336) (1,533) (944) Net loan charge-offs 11,675 3,989 4,160 5,334 9,061 Ending balance $197,586 $164,011 $152,750 $152,660 $154,994 Components: Allowance for loan losses $188,086 $154,532 $144,974 $145,367 $147,719 Reserve for unfunded credit commitments 9,500 9,479 7,776 7,293 7,275 Allowance for credit losses $197,586 $164,011 $152,750 $152,660 $154,994 Asset Quality Ratios: Allowance for loan losses / total loans 1.51% 1.24% 1.17% 1.18% 1.14% Allowance for credit losses / total loans 1.58 1.32 1.23 1.24 1.20 Net charge- offs / average loans (annualized) 0.38 0.13 0.14 0.17 0.27 Nonperforming loans / total loans 0.90 0.77 0.58 0.48 0.46 Nonperforming assets / total loans plus OREO 0.97 0.84 0.63 0.53 0.48 Allowance for credit losses / nonperforming loans 175.01 172.06 210.61 259.23 263.09 Continuing Portfolio Allowance for loan losses / total loans 1.15% n/a n/a n/a n/a Allowance for credit losses / total loans 1.23 n/a n/a n/a n/a Net charge-offs / average loans (annualized) 0.09 n/a n/a n/a n/a Nonperforming loans / total loans 0.69 n/a n/a n/a n/a Nonperforming assets / total loans plus OREO 0.76 n/a n/a n/a n/a Allowance for credit losses / nonperforming loans 177.98 n/a n/a n/a n/a Liquidating Portfolio NCLC Allowance for loan losses / total loans 20.65% n/a n/a n/a n/a Net charge- offs / average loans (annualized) 25.43 n/a n/a n/a n/a Nonperforming loans / total loans 27.37 n/a n/a n/a n/a Allowance for loan losses / nonperforming loans 75.45 n/a n/a n/a n/a Consumer Allowance for loan losses / total loans 9.60% n/a n/a n/a n/a Net charge -offs / average loans (annualized) 2.17 n/a n/a n/a n/a Nonperforming loans / total loans 2.09 n/a n/a n/a n/a Allowance for loan losses / nonperforming loans 458.88 n/a n/a n/a n/a See Selected Financial Highlights for footnotes.