A Webster Bank branch in downtown Boston. Photo by James Sanna | Banker & Tradesman Staff

Waterbury, Connecticut-based Webster Bank announced a substantial drop in its earnings for the second quarter thanks to a $40 million provision for credit losses.

The $31.66 billion-asset bank, which has a strong presence in Massachusetts, saw earnings drop 47 percent on a year-over-year basis, to $50.7 million for the second quarter of 2020.

Much of the $45.5 million drop was due to a $40 million provision for credit losses, including a $23.8 million provision for losses in loans and leases, which the bank made under the new Current Expected Credit Loss (CECL) accounting standard. The bank had made provisions of just $11.9 million for the second quarter of last year. Its allowance for credit losses on loans and leases represented 1.64 percent of total loans as of June 30, compared to 1.6 percent as of March 31.

Net charge-offs were $16.4 million, compared to $7.8 million in the prior quarter and $11.6 million a year ago. The ratio of net charge-offs to average loans on an annualized basis was 0.30 percent, compared to 0.15 percent in the prior quarter and 0.24 percent a year ago.

“We continue to focus on prudently managing capital, credit and liquidity during these uncertain times, while also supporting our customers, employees, and communities,” chairman and CEO John R. Ciulla said in a statement. “We are pleased with our performance in the quarter given the challenging environment.”

The bank reported revenues of $284.5 million and per-diluted-share earnings of $0.57, down from $1.05 for the second quarter of 2019.

Webster grew its loans by $1.2 billion during the quarter, excluding Paycheck Protection Program loans, or 6.1 percent. Deposits grew by $3.8 billion, or 16.6 percent year-over-year, including $2 billion in demand deposits and $574 million in health savings account deposits. The bank’s net interest margin was 2.99 percent. Its tier 1 capital ratio now exceeds 11 percent and its loan-to-deposit ratio grew to 83 percent, Executive Vice President and CFO Glenn
MacInnes said.