Webster Financial Corp. in Waterbury, Conn., said Thursday that its loss in the third quarter deepened by 20% from the year earlier, to $26.1 million, as credit quality continued to sour.

The loss of 39 cents a share missed analyst estimates by a wide margin. On average they have expected the company to lose 24 cents a share, according to Thomson Reuters.

The $17.8 billion-asset Webster increased its provision for loan losses 87% from a year earlier, to $85 million, as nonperforming loans jumped 60%, to $361.1 million, or 3.19% of total loans. The nonperforming loans had been $350.4 million, or 3.07% of total loans, at June 30.

The results included a $4.7 million loss on the sale of investment securities and a $1.3 million writedown on the value of securities it still holds.

The $21.7 million loss in the third quarter of 2008 included a $33.5 million writedown on securities.

Deposit expenses dropped 27% from a year earlier, to $41.9 million.

The net interest margin was 3.18%, down 14 basis points from a year earlier, but up 14 basis points from the second quarter.

Webster said the private-equity firm Warburg Pincus completed its $115 million investment in the company during the quarter. The private-equity firm bought $40 million of common stock in late July and completed the investment Oct. 15, with $30 million of that being in common equity and $45 million in convertible junior nonvoting preferred shares.

The company also has a $400 million investment from the Treasury Department's Troubled Asset Relief Program. The quarterly loss includes the $6.85 million Webster paid in preferred dividends.

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