From Morgan Stanley:

Webster Financial Corp Quick Comment: Messy
Quarter, but Core Results Better Than Expected
What's new: Webster reported operating EPS of
$(0.39), below our estimate of $(0.34) and consensus of $(0.25). However, included in its results was $0.06 of security losses and another $0.04 of severance costs,
which we consider operating, but should not be
considered core. Excluding those items, core EPS was $(0.29). This was a messy quarter for WBS, but our Overweight thesis remains intact, with core results trending broadly in line with expectations.

Unusual, but operating, items reduce EPS by $0.10: Included in reported EPS was $4.7 mil of losses on sale of securities and a $1.2 mil loss from further write-downs of its pooled TRUPs portfolio. Results also include $4.2
mil of severance costs. We do not view these as
recurring items, but we do view them as operating.

Higher credit losses due entirely to its discontinued portfolio: While the headline provision expense was disappointing at $85 mil (MS = $75 mil), the breakout was more encouraging. The entire miss was due to higher discontinued provisions at $28.5 mil (MS = $11
mil), while its much larger continuing portfolio provisions were just $56.5 mil (MS = $64 mil).

Other operating items: Included in non-interest
expenses was a $3.1 mil increase in reserves against a potential loan fraud (reducing EPS by $0.03). Net interest margin was in line with expectations at 3.18%.

Investment thesis: We see considerable upside to the WBS shares, with the stock still trading at a discount to tangible book value. Webster has been aggressively building reserves against both its small discontinued loan portfolio and considerably stronger, but still deteriorating, continuing portfolio. While credit losses
are likely to continue, we believe management has been proactive at addressing its credit and investment issues.