Webster Bank’s recently announced branch closures are expected to produce savings starting this year, but in the meantime they lopped 35% off of its parent company’s fourth-quarter profits, the Waterbury lender said Thursday.
In its final quarter of 2020, Webster Financial said it booked profits of $57.7 million, or 64 cents per diluted share, down from $88.1 millon, or 96 cents, in the fourth quarter of 2019.
That was shy of analyst estimates compiled by Zacks Investment Research, which had anticipated quarterly earnings of 72 cents per share.
Absent severance and other expenses related to facilities consolidation and organizational changes, Webster said its per-share earnings for the recent quarter would have been 99 cents instead of 64 cents.
In December, Webster notified its federal regulator that it would close 27 banking centers, including 16 in Connecticut.
While the consolidation has up-front costs, Webster said it expects the moves to start paying off by the third quarter of this year, with annual savings projected at $15 million.
A majority of Connecticut banks had reduced earnings during 2020, thanks in part to near-zero interest rates and economic damage tied to the COVID-19 pandemic.
After the novel coronavirus hit Connecticut last March, Webster and other banks began preparing for a potential downturn in their lending portfolios, increasing set-asides for future loan losses.
However, Webster said Thursday that it reduced the size of its balance-sheet reserve during the fourth quarter, due to a more positive forecast of economic conditions and continued favorable credit trends.
For the full year, Webster reported profits of $211.5 million, or $2.35 per share, down from $373 million, or $4.06 per share, in 2019.
