Webster Contacts: Media: Michael G. Bazinet, Jim Kalach,

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1 Webster Contacts: Media: Michael G. Bazinet, Jim Kalach, Investors: James M. Sitro, WEBSTER FINANCIAL REPORTS RECORD ANNUAL EARNINGS FOR 2000 WATERBURY, Conn., January 23, Webster Financial Corporation (Nasdaq: WBST), holding company for Webster Bank, today reported record 2000 net income of $118.3 million or $2.55 per diluted share, compared to $95.4 million or $2.10 per diluted share in Net operating earnings in 2000 increased to $114.8 million or $2.47 per diluted share, excluding nonrecurring items with a net benefit of $4.7 million. Net operating earnings in 1999 were $102.2 million or $2.25 per diluted share, excluding a nonrecurring acquisition related expense of $9.5 million resulting from the New England Community Bancorp, Inc. merger. Net income for the fourth quarter ended Dec. 31, 2000 was $31.8 million, or $0.64 per diluted share, compared to $19.6 million, or $0.43 per diluted share, for the previous year. Webster reported net operating earnings of $29.4 million, or $0.60 per diluted share, for the quarter compared to $26.4 million, or $0.58 per diluted share, for the 1999 period. The year 2000 was exciting and eventful for Webster as we moved decisively to strengthen our franchise and enhance our capabilities as a leading Connecticut-based financial services provider, said James C. Smith, chairman and chief executive officer. Webster completed its acquisition of Mechanics Savings Bank and the purchase of 10 branch banking offices from FleetBoston and Chase Manhattan. In addition, we acquired two more insurance agencies, formed Webster Financial Advisors, launched an improved Web site, and bought a controlling interest in Duff & Phelps. All of these initiatives were pursued in the interest of building strong customer relationships that increase shareholder value. Webster also announced today that it has declared a regular quarterly cash dividend of $.16 per common share. The dividend is payable on Feb. 19, 2001, to shareholders of record on Feb. 5, This is the 54th consecutive quarterly dividend since Webster first paid a dividend in more

2 2 Financial Highlights Net interest margin (net interest income as a percentage of average earning assets) was 3.32 percent in the fourth quarter, compared to 3.34 percent in the year-ago period and 3.30 percent in the third quarter of The net interest margin has remained stable as rising retail spreads have offset the impact of higher wholesale borrowing costs. Revenue from fee based services and other noninterest income in 2000, excluding gains, increased 31 percent to $110.0 million from $83.9 million in 1999 due to revenue related to trust and investment services, investment banking services, insurance commissions and expanded product offerings to Webster s growing customer base. For the fourth quarter of 2000 income from fee based services exceeded 26 percent of total revenue. Cash return on average shareholders' equity before non-recurring items was 18.9 percent for 2000, up from 18.2 percent in the previous year. The annual results exclude one-time gains of $5.3 million from the sale of branch offices and a $1.1 million life insurance benefit, as well as $1.7 million of nonrecurring expenses related to occupancy, furniture and equipment. The branch and equipment items were recorded in the fourth quarter. Asset quality remained strong in the quarter with nonaccrual assets amounting to 0.39 percent of total assets at Dec. 31, 2000 down from 0.44 percent a year earlier and 0.43 percent in the third quarter. The allowance for loan losses as a percent of nonaccrual loans was 221 percent, compared to 189 percent a year earlier and 200 percent in the third quarter. Allowances for nonaccrual assets as a percent of nonaccrual assets were 204 percent, up from 167 percent in the year ago period and 185 percent in the third quarter. Allowances as a percent of total loans increased to 1.31 percent at Dec. 31, 2000, from 1.19 percent in the year-ago period and 1.28 percent in the third quarter, reflecting the increase in the commercial loan portfolio. Book value per common share increased 29 percent to $18.19 from $14.09 at Dec. 31, 1999 due primarily to the impact of net income, increases in the fair value of available for sale securities, and common shares issued in conjunction with the Mechanics Savings Bank acquisition. Shareholders equity reached $890 million at the close of 2000, up from $636 million at the end of 1999, representing 7.9% percent of total assets. Webster had 48.9 million shares outstanding at Dec. 31, Strategic Actions In June 2000, Webster completed the acquisition of Mechanics Savings Bank, a statechartered savings bank. The acquisition enhanced Webster s market share in Hartford County, where Webster already ranked second in deposit market share. Also during the year, Webster completed the purchase of four branch offices from FleetBoston Financial that were divested as the result of the Fleet-BankBoston merger and six Connecticut branches of Chase Manhattan Bank in transactions that strengthened and extended the retail banking franchise. The FleetBoston branches

3 3 were located in Brookfield, Guilford, Meriden, and Thomaston. The Chase branches were located in Cheshire, Middlebury, North Haven, Waterbury (2) and Watertown. -- more In June, Webster combined its existing Trust operations with new private banking services in an organization called Webster Financial Advisors offering a full range of investment, credit and fiduciary services for high-net worth clients. Services include investment management, trust and estate planning, retirement wealth management, tax planning, credit services and insurance. Webster also was actively engaged during 2000 in building a dynamic statewide insurance operation, purchasing the Levine agency, based in Waterford, and Folis Wylie & Lane of Hamden. Webster entered the insurance agency business in The acquisition of Musante Reihl, a Cheshire agency specializing in group benefits, long-term care and life insurance was announced earlier this month. Webster Insurance offers a full line of commercial and personal insurance; risk management services; employee benefit plans; life insurance and annuities. Webster Insurance has a staff of 130 employees and writes in excess of $180 million in annual premiums. In November, Webster Bank announced several enhancements to its Web banking offering and a completely redesigned Web site at The site provides customers with the highest level of security available, and uses the latest Web technology to make navigation easy and intuitive. Also in the fourth quarter, Webster purchased a 65 percent interest in Duff & Phelps, LLC, an independent privately owned financial advisor and investment bank headquartered in Chicago, with offices in New York, Los Angeles and Raleigh- Durham. Terms were not disclosed. Duff & Phelps provides expertise in middlemarket mergers and acquisitions, private placements, fairness opinions, valuations, ESOP and ERISA advisory services, and special financial advisory services. The Duff & Phelps transaction is expected to be marginally accretive to Webster s 2001 earnings per share, adding in excess of $20 million of fee-based revenue, and further accelerates progress toward the strategic objective of broadening commercial bank product offerings and increasing revenue from fee-based services. Other 2000 Highlights In the fourth quarter of 2000, Webster completed the sale of its Olde Port Bank division consisting of two bank branches to Granite Bank, a New Hampshire state-chartered commercial bank, whose parent company is Granite State Bankshares, Inc. (Nasdaq: GSBI) of Keene, NH. Terms of the transaction were not disclosed. The two branch offices in Portsmouth and Hampton have a total of $43 million in loans and $44 million in deposits. Webster acquired the former Olde Port Bank & Trust with the purchase of New England Community Bancorp, which was completed in late 1999.

4 4 Also in the fourth quarter, Webster announced it had completed the private placement of $126 million of senior unsecured notes, due in 2007 with a fixed coupon rate of 8.72 percent. The notes were placed with a variety of institutions. Net proceeds from the note placement are designated for general corporate purposes. # # # -- more -- Connecticut-based Webster Bank provides business and consumer banking, mortgage, insurance, trust and investment services through more than 110 banking offices, 200 ATMs and the Internet ( Webster's online mortgage subsidiary at on the Worldwide Web originates low-cost mortgages across the United States. For more information on Webster, including past press releases and the latest Annual Report, visit the Webster Bank website at Conference Call A conference call covering today s announcement will be held today, Tuesday, Jan. 23, at 1 p.m., Eastern Time and may be heard through Webster s investor relations website at or in listen-only mode by calling (Access Code: ). The call will be archived on the website and available for future retrieval. * * * 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, which could cause actual results to differ from those contained in the forward-looking statement, see "Forward Looking Statements in the Company s Annual Report for the most recently ended fiscal year

5 Consolidated Statements of Condition (unaudited) December 31, December 31, (Dollars in thousands) Assets: Cash and due from depository institutions $ 265,035 $ 245,783 Interest-bearing deposits 1,751 37,838 Securities: Trading, at fair value 6 50,854 Available for sale, at fair value 3,143,327 2,700,585 Held to maturity, (fair value: $248,215 in 2000; $300,282 in 1999) 261, ,462 Loans receivable: Residential loans 4,146,780 3,898,943 Commercial and industrial loans 1,207, ,035 Commercial real estate loans 857, ,168 Home equity loans 609, ,684 Other consumer loans 89,514 47,064 Allowance for loan losses (90,809) (72,658) Loans receivable, net 6,819,209 6,022,236 Accrued interest receivable 69,733 58,918 Premises and equipment, net 94, ,403 Foreclosed properties, net 3,295 4,909 Intangible assets 326, ,829 Cash surrender value of life insurance 174, ,252 Prepaid expenses and other assets 90, ,675 Total assets $ 11,249,508 $ 9,931,744 Liabilities and Shareholders' Equity: Deposits: Checking and NOW $ 1,603,671 $ 1,375,692 Savings and MMDAs 1,916,543 1,719,562 Certificates of deposit 3,421,308 3,095,837 Total deposits 6,941,522 6,191,091 Borrowed funds 3,030,225 2,788,445 Accrued expenses and other liabilities 187, ,964 Total liabilities 10,159,557 9,096,500 Corporation-obligated mandatorily redeemable capital securities of subsidiary trusts 150, ,000 Preferred stock of subsidiary corporation 49,577 49,577 Shareholders' equity 890, ,667 Total liabilities and shareholders' equity $ 11,249,508 $ 9,931,744

6 Consolidated Statements of Income (unaudited) Three Months Ended Twelve Months Ended December 31, December 31, (Dollars in thousands, except per share data) Interest income: Loans $ 141,315 $ 113,642 $ 518,315 $ 435,326 Securities and interest-bearing deposits 55,407 50, , ,466 Total interest income 196, , , ,792 Interest expense: Deposits 61,849 50, , ,805 Borrowings 49,470 36, , ,474 Total interest expense 111,319 87, , ,279 Net interest income 85,403 76, , ,513 Provision for loan losses 3,200 2,322 11,800 9,000 Net interest income after provision for loan losses 82,203 74, , ,513 Noninterest income: Fees and service charges 17,311 13,878 60,059 49,523 Trust and investment services 4,618 3,572 18,184 10,246 Investment banking revenue 1,290-1,290 - Insurance commissions 3,451 1,807 14,360 7,167 Gain on sale of loans and loan servicing, net ,956 4,434 Gain on sale of securities, net 616 1,835 8,445 4,248 Gain on sale of deposits 4,859-4,859 - Increase in cash surrender value of life insurance 2,322 1,983 8,555 7,892 Other noninterest income 2,484 3,176 9,113 9,120 Total noninterest income 37,404 26, ,821 92,630 Noninterest expenses: Compensation and benefits 31,506 28, , ,493 Occupancy expense 7,123 5,637 24,774 20,892 Furniture and equipment expense 7,472 6,251 26,302 22,302 Intangible amortization expense 7,335 3,976 22,400 13,780 Marketing expense 2,541 2,618 9,118 9,584 Professional services expense 2,228 2,117 7,399 9,144 Acquisition-related expenses - 9,500-9,500 Capital securities expense 3,615 3,661 14,323 14,645 Dividends on preferred stock of subsidiary corporation 1,038 1,038 4,151 4,151 Other operating expenses 9,518 8,146 36,406 33,970 Total noninterest expenses 72,376 71, , ,461 Income before income taxes 47,231 29, , ,682 Income taxes 15,441 9,760 58,116 47,332 Net income $ 31,790 $ 19,630 $ 118,291 $ 95,350 Net Income per common share before acquisition-related expense and other non-recurring items: Basic $0.60 $0.59 $2.50 $2.29 Diluted $0.60 $0.58 $2.47 $2.25 Net income per common share after acquisition-related expense and other non-recurring items: Basic $0.65 $0.44 $2.58 $2.14 Diluted $0.64 $0.43 $2.55 $2.10

7 Selected Financial Highlights (unaudited) (Dollars in thousands, except per share data) Operating and Performance Ratios (annualized): At or for the Three Months Ended December 31, At or for the Twelve Months Ended December 31, GAAP earnings (a) $ 31,790 $ 19,630 $ 118,291 $ 95,350 Return on average shareholders' equity % % % % Return on average shareholders' equity before non-recurring items (b) Return on average assets Return on average assets before non-recurring items (b) Cash earnings $ 38,146 $ 22,855 $ 137,317 $ 106,125 Cash return on average shareholders' equity (c) % % % % Cash return on average shareholders' equity before non-recurring items (d) Fee income as a percentage of total revenue Noninterest expenses / average assets Noninterest expenses / average assets (e) Efficiency ratio (e) Efficiency ratio (f) Shareholders' equity / total assets Interest-rate spread Net interest margin Loan originations: Residential $ 157,626 $ 188,383 $ 658,367 $ 1,168,228 Commercial 199, , , ,396 Consumer 97,657 60, , ,910 Asset Quality: Nonaccrual loans $ 41,034 $ 38,394 $ 41,034 $ 38,394 Nonaccrual assets, net 44,329 43,302 44,329 43,302 Allowance for loan losses 90,809 72,658 90,809 72,658 Allowances for nonaccrual assets 91,001 72,908 91,001 72,908 Net loan charge-offs 1,308 2,653 4,629 5,190 Nonaccrual assets / total assets 0.39 % 0.44 % 0.39 % 0.44 % Allowance for loan losses / gross loans Allowance for loan losses / nonaccrual loans Allowances for nonaccrual assets / nonaccrual assets Share Related: Book value per common share $ $ $ $ Tangible book value per common share Common stock closing price Dividend declared per common share $ 0.16 $ 0.12 $ 0.62 $ 0.47 Common shares issued and outstanding 48,939,426 45,103,770 48,939,426 45,103,770 Basic shares 48,780,586 45,108,608 45,910,447 44,553,859 Diluted shares 49,307,867 45,882,093 46,427,507 45,393,488 (a) Net income applying General Accepted Accounting Principles. (b) Excludes income from a one-time life insurance benefit of $1.1 million recorded in June 2000, gain on sale of deposits and related facilities of $5.3 million (net of taxes, $3.5 million), recorded in December 2000, non-recurring facilities expenses of $1.7 million (net of taxes, $1.1 million) recorded in December 2000 and non-recurring acquisition expense of $9.5 million (net of taxes, $6.8 million) recorded in December (c) Net income, excluding tax-effected intangible amortization, divided by average shareholders' equity. (d) Net income, excluding tax-effected intangible amortization, income from a one-time life insurance benefit of $1.1 million, gain on sale of deposits and related facilities of $5.3 million (net of taxes, $3.5 million), non-recurring facilities expenses of $1.7 million (net of taxes, $1.1 million) and non-recurring acquisition expense of $9.5 million (net of taxes, $6.8 million). (e) Excludes non-recurring items, intangible amortization, capital securities, preferred dividend and foreclosed property expenses. (f) Excludes non-recurring items, intangible amortization, and foreclosed property expenses.

8 Retail and Wholesale Interest-Rate Spreads (unaudited) Three months ended, December September June March December Interest-rate spread Total interest-earning assets (a) 7.62 % 7.56 % 7.32 % 7.21 % 7.14 % Total interest-bearing liabilities Interest-rate spread 3.19 % 3.18 % 3.18 % 3.10 % 3.23 % Net interest margin Retail interest-rate spread Yield on loans 8.12 % 8.06 % 7.79 % 7.68 % 7.57 % Rate on deposits Spread 4.60 % 4.62 % 4.54 % 4.41 % 4.34 % Wholesale interest-rate spread Yield on securities (a) 6.58 % 6.58 % 6.46 % 6.35 % 6.32 % Rate on borrowings Spread 0.05 % 0.15 % 0.33 % 0.50 % 0.75 % Consolidated Average Statements of Condition (unaudited) Three months ended December 31, Fully tax Fully tax Average equivalent Average equivalent (Dollars in thousands) balance Interest yield/rate balance Interest yield/rate Assets: Interest-earning assets: Loans $ 6,945,093 $ 141, % $ 5,987,112 $ 113, % Securities and interest-bearing deposits 3,313,372 55, (a) 3,173,573 50, (a) Total interest-earning assets 10,258, , ,160, , Noninterest-earning assets 874, ,956 Total assets $ 11,133,445 $ 9,763,641 Liabilities and Shareholders' Equity: Interest-bearing liabilities: Interest-bearing deposits $ 6,146,087 $ 61, % $ 5,621,272 $ 50, % Noninterest-bearing deposits 845, , Federal Home Loan Bank advances 2,230,705 36, ,583,239 21, Repurchase agreements and other borrowings 739,628 11, ,016 14, Senior notes 45, , Total interest-bearing liabilities 10,006, , ,822,289 87, Noninterest-bearing liabilities 84,524 98,807 Total liabilities 10,091,336 8,921,096 Capital securities and preferred stock of subsidiary corporation 199, ,577 Shareholders' Equity 842, ,968 Total liabilities and shareholders' equity $ 11,133,445 $ 9,763,641 Net interest income $ 85,403 $ 76,538 Interest-rate spread 3.19 % 3.23 % Net interest margin 3.32 % 3.34 % (a) For purposes of this computation, unrealized gains(losses) are excluded from the average rate calculations.

9 Consolidated Average Statements of Condition (unaudited) Twelve months ended December 31, Fully tax Fully tax Average equivalent Average equivalent (Dollars in thousands) balance Interest yield/rate balance Interest yield/rate Assets: Interest-earning assets: Loans $ 6,541,659 $ 518, % $ 5,802,453 $ 435, % Securities and interest-bearing deposits 3,298, , (a) 3,342, , (a) Total interest-earning assets 9,840, , ,144, , Noninterest-earning assets 799, ,483 Total assets $ 10,640,215 $ 9,745,124 Liabilities and Shareholders' Equity: Interest-bearing liabilities: Interest-bearing deposits $ 5,879,940 $ 224, % $ 5,618,130 $ 203, % Noninterest-bearing deposits 759, , Federal Home Loan Bank advances 2,047, , ,585,458 84, Repurchase agreements and other borrowings 935,629 56, ,581 50, Senior notes 31,142 2, ,000 3, Total interest-bearing liabilities 9,654, , ,830, , Noninterest-bearing liabilities 78,870 93,252 Total liabilities 9,732,974 8,923,556 Capital securities and preferred stock of subsidiary corporation 199, ,577 Shareholders' Equity 707, ,991 Total liabilities and shareholders' equity $ 10,640,215 $ 9,745,124 Net interest income $ 326,516 $ 303,513 Interest-rate spread 3.16 % 3.18 % Net interest margin 3.29 % 3.32 % (a) For purposes of this computation, unrealized gains (losses) are excluded from the average rate calculations.