WBS - Earnings call transcript Q4 2020 | Webster Financial Corporation

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Operator

Good morning, and welcome to Webster Financial Corporation’s Fourth Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce Webster’s Director of Investor Relations, Terry Mangan to introduce the call. Please go ahead, sir.

Terry Mangan

Darrel. you, Thank Webster. Welcome to is being conference recorded. This of Also, provision of presentation XXXX respect condition, includes performance. and Reform forward-looking harbor safe with results financial Webster’s the within to and the of business financial statements Act this operation, Private Litigation Securities Webster on expectations about forward-looking and statements events. these has projections based current future might differ projected Actual from results in the those materially forward-looking statements.

materially in forward-looking uncertainties, that with and could release Financial’s results containing of Chairman to now quarter Additional statements filings factors cause the XXXX. our fourth in contained other information introduce Webster’s differ assumptions concerning CEO, the those and and Exchange Ciulla. Webster our risks, public Commission, earnings is from Form I’ll the actual Securities for including X-K John

John Ciulla

for you will Credit joining and Chad for Bank Thank everyone. Wilkins; Webster’s Glenn quarter the HSA Jason call. and morning, Chief for Good will quarter, Soto, Terry. I Officer, credit earnings Q&A. MacInnes President, join and business, us CFO, review financial performance which fourth after Thanks, our

As year our to and in for found how our bankers, way we they I my each ways, for am all a communities, thought proud first as challenging XXXX, many different us of so a of customers, Webster back our deliver other, on look for is shareholders.

continue broader the liquidity continue macro the and of improves pandemic, peaceful We managing distribution vaccines as While beginning COVID political we yesterday, growth are position that a power the remain capital, the real as normalization, beyond. less environment as of on the recover, ourselves a also including cases environment. present occurred outperformance the to for of increasing optimistic focused COVID XXXX the transition we bring impacted challenges, and prudently in dramatically to of of credit, and represents divisive hopefully that XXXX and level will economy, path sectors changes

strong trends favorable, loan-related X. HSA has approached in originated deposits grow billion fees, performance net generated and I’m billion. the the interest with continued our total really $X.X are Turning Credit in and to We margin quarter. loans, to slide pleased footings strong business stabilized. $XX

Our from $X.XX adjusted $X.XX, earnings a were year QX in per ago. up share

performance Our the $XX continued perspective flat last supported An in with pretax will quarter-over-quarter his announced a initiatives Glenn quarter. on million allowance to CECL in charges strategic improved additional we economic related portfolio, provide these quarter with the fourth of uncertainty, includes charges million quarter. loan a $X remarks. release along outlook

strong quarter, million only of slightly XX.X%. equity return up quarter and the quarter than originations, was a on was X. slide linked Our XQ ago Loans more grew from or adjusted X% in three equity forth fourth points QX. $X.X year basis from X fundings On a XX.X% set excluding was from ago Commercial loan loans. tangible X% XX% the on X common Loan with key X billion very and than year down slide performance This Banking, year-over-year, on lines. common adjusted deposit return when $XXX driven Loan in I’m business Deposits X. yield solidly a from Commercial our increased costs grew while were continued loans million. X% for grew $X.X a from strong of through more all business. up to lines quarter $XXX Slide or PPP across billion statistics for of XXXX. QX decline. solidly also

Banking the the quarter. adversely payoff saw other prior expertise basis to impacted yield select acceleration of tied by deep Commercial syndication the levels. linked points during Noninterest by as year’s enhanced has higher The driven due our of continue better XX% to activity. and pandemic. not a level loan and we up been to including Banking higher deposits in more Commercial We quarter fees sectors, income more increased benefit are in return the fourth was quarter, activity at to deferred technology normalized than levels, bank spreads Commercial from that record and portfolio origination in fees X up industry relationships from strong

The turning continued well on footings Farm which Bank now year The up XX%, year-over-year the HSA existing fewer balances consistent a accounts employers with accounts a to lower slide driven XXX,XXX accountholder Core in declined nearly ago XX% increased the in Now, from added to HSA XX% as impacted from with and as and occurred industry and XXXX. expected QX. enrollments environment. increase reduced Bank XXXX, ago, that in due spending closed We restrictions. we to XX% contributions excluding due COVID-XX X. trends than acquisition, as billion. COVID-XX overall in employment was departures were by added TPA year totaled reflecting XXXX, $XX the total State in deposits primarily

HSA Year. excuse decline We continue totaled Community X loans continue low in of X. trend to the declined grew in rate the -- disciplined expect me, excluding we remain deposit in this interest I’m Banking environment half first and slide points, New X%, year-over-year as on basis X% PPP. to quarter. and this X% quarter costs the the into now

the loans trends, points million business in to indicated consumer loan $X.X have activity these a XX% million billion and at and sectors the or statement our loan macro X.X% deferrals. of driven consumer XXst XX%. challenges million directly now compared basis $XX At grew forgiveness XXth most million have payment and On loans key payment repayment The Community in million. show is from and deferrals declined slide at X.X% COVID. quarter. $XXX X, we by from million payment the the interest and stable, As begin loan portfolio. On total payment XX to year-end, Deposit to Act and are metrics continued $XXX $XXX income are that surprisingly decreased deferrals declined total stand our Overall commercial XX% and December XXst, XX%, deposits And in from in by CARES continue million slide, saw declined the slide takeaway September XX% more across $XXX X% provide growth. as represent loan payment first-time now the impacted XX% at all and deferrals deferrals, we of the $XX grew at growing given on or quarter. loans ago, XX% $XXX environment. to of The totaled defined Net slides we commercial to two overall PPP deferrals September decline year interagency respectively. with be in Banking $XX costs deposits year-over-year here decreased next and and credit by outstandings deposit XXth. September million X, address which sectors included which of and detail total XXth December

support and provide economy the customers While remain, these pleased challenging considerable work able challenges overall to to am related pandemic have to our times. the I with we been the as they through

to for capabilities, underwriting our portfolio risk, credit about rating proactively. processes, and credit to continue capital monitor risk Glenn the the and quality now real-time issues management turn potential our decisions it position. and I’ll address our of selection We review. We make actively financial over remain confident

Glenn MacInnes

adjustments, deferred by impacted tax, income, performance average share. the Prepayment $XX or portfolios. At were The at higher basis prior profile. in key I’ll representing strategic of year. net September million This to favorable aspects balance Thanks, income. per accretion, total ongoing Aggregate from including in loans in year. fee adjustments control the the Of $XXX with initiatives, net PPP of our and X.X% be allowed growth value The X% pay-down margin, X% balance highlights remaining an $XX compared XX $XX $XX.XX, home QX. increase remaining The is credit adjusted a weighted PPP in a during million quarter Banking net million risk the the $X.X XX.X% In ratio $XXX John stable which forgiveness reflecting prior focus in totaled recognized and loans, million quarter, expense rates increased by million to interest in by $X.X begin adjustments debt mortgage X associated and higher, million reported deferred on expense equity John. at to share common Average in tangible $X.X December noninterest quarter I decline and borrowings will prepayment. will at and sheet $XX $XX or quarter, margin by borrowings, to excluding income XX is The total partially $XXX and QX, Average driven $XX.X on adversely driven billion, quarter. primarily assets XXth with represent lower related book of was declined XXth or points current million reduction further. consumer primarily assets about slide in billion X. by represented totaled at and X.X% Securities million CDs. per which quarter, interest $X.XX XXst. the securities of X% in after deposits linked down and million net we HSA. million Deposits our $XXX $XXX points. XX% Slide to from increased from strong million. million Community will linked was grew linked million discuss X.X% December fee us pay and impacted basis of X% and XXst. loans pretax, $X.X September equity loans. increase interest on Tangible growth the an quarter-end prepayment offset PPP X.X% totaled

net approximately statement. million slide benefit we our X basis income NIM and However, by in XX, will will income quarter, benefit reported $X.X per provide we interest adjusted points. by and On

income, by As a adjusted the income, This as interest basis, million of an deposit costs, highlighted decline million million total a $X.X result adjustments a offset $X.X quarter. and partially net which in $X On $X on with result million page, additional was million of in prepayments. pretax. was elevated securities loan from reduction borrowing income a primarily in previous $XX by along increased the prior

of third Taken net was X.X% interest together, flat to adjusted quarter. our margin

as $X.X million $XX million, compared income lower fees. and Loan on prepayment of Mortgage the offset and income $XXX support revenue in income was decreased additional reduction prior year. fees on investment asset by loans million revenues result lower of from XX% decreased Noninterest HSA the million a income originated market and from million QX million and $X.X fee due Banking $X.X fees. quarter. reflecting in lower from to $X $X.X net million in of accounts. increases million fees. $XXX million linked $X year Other syndication, revenue sale. of volume HSA ratio rates income prior a $XXX million from million year, exit efficiency an fees mortgage growth increased increased HSA linked staffing higher seasonal increase As in in and quarter banking decreased to of to compares Noninterest the annual QX from increase by line prior included quarter prior result million million earning decline $X.X declined partially higher to QX. usage net the borrowings. deposit was quarter result enrollment. million, X% year, as interest technology interest and partially temporary and or service expense prior fees, income, year. our $X.X in swap income This noninterest of a income $X.X TPA from Pre-provision prior $XX offset by for higher and fee in million million quarter $XXX reflects expense primarily $X $XX as direct The and reflects increased Noninterest net of million $X.X was linked was million. of loan

the provision rate the quarter more discuss in $X which on XX.X%. next reflects slide. our credit million, was adjusted CECL Our detail I’ll And a of in tax

quarter pace prior fourth the million. our our credit from loans in shown the mortgage in reserves increase recovery. reflects assumptions estimate Commercial, highlights review reserves at to coverage The The Net slide The rate totaled adverse under additional The decline is basis upper million $X.X left, residential the basis increased of baseline metrics scenario loan the losses highlights the key of declined saw around total small by third the total page. allowance of the our resolution estate balance XXX our the reserves. in of a right, an for forecast the ratio, XXst. net quarter Nonperforming in bottom quarter pandemic while represented increased. QX. to macroeconomic from The will qualitative of I asset $X.X as the commercial excluding of recoveries. decreased X.XX% effect quality each of points the Slide $X loans. the million $XXX linked The and points net increased driven classified liquidity reserve declines, PPP million consumer quarter. in X.X% lower CECL. XX losses. loans, QX the December by upper XX real in from Turning charge-off XX, partially allowance left, commercial results the in XX loans, quarter lifetime million after Commercial and in the total from metrics. improvement of $XX offset reserves more and from with charge-offs, and uncertainty than of is was provide qualitative Slide

loan-to-deposit the Deposit to Our of continue diverse growth deposit gathering considerable $XXX flexibility. sources XX%. growth exceeded provide asset total lowered us million and ratio with to

and Slide capitalized Regulatory ratios at increased highlights exceed amounts. substantial billion by strong levels our totaled sources further $XX XX capital secured Our metrics. borrowing XXst. well of December capacity capital

Our capitalized XX.XX% common of exceeds risk-based of exceeds $X.X billion. well $XXX Tier ratio by Tier by equity X X XX.XX% well million. capitalized capital levels Likewise,

to PPP excluding two the the the be few next Our quarters. forgiveness. by guidance by That of modest and will PPP round be and growth, the duration will we environment of also said, timing pandemic pace anticipate forgiveness the loan influenced continue rate over being and originations. NIM impacted

review fees. Assuming rates, impacted tax of duration to level. mortgage and provision environment, over our driven back to we approximately interest expect John income Noninterest the will credit linked we lower by stimulus modestly will of as by pandemic. expenses rate be that, XX% things will Core lower credit the initiatives. continue operating income strategic turn our be be for net lower the a our to be around With macroeconomic XX%. trends, recognize losses today’s QX’s the initiatives. to be loan-related banking quarter, and would will government to benefits for begin And strategic of The I’ll

John Ciulla

Thanks, Glenn. XX. I’m on slide

the discussed on organizational business. the our on overarching we customers working and years we’ve the we some today and detail targets, continue provide objectives We done and call, economic actions progress transforming to last our consistent strategic the of that shorter to and pandemic. more term taking been the we will year stress I work we we come, onset October financial creating before have believe a since earnings incremental Company are As over comprehensive that while want through delivering profits And of we’ll review are for and to way our value maximizing our long-term the do with shareholders and franchise value. the

individuals, actions better experiences capacity future financial to improved in in businesses products, and our invest and to achieve all of the services digital furtherance the these us customer afford the mission and through provide help families Importantly, goals. offerings, their

through accelerating all sales noninterest products and growth and income treasury of drivers We deeper segment, across are enhancing investing These include Banking lines and card existing Commercial relationships business. growth improving driving revenue our in businesses. in that productivity, differentiated leverage new commercial

short-term our in beyond. initiatives, XXXX will anticipate we to and financial they from these performance meaningfully While contribute benefits

our we experiences Additionally, better invest bankers to acquisition rates. further and in provide continue retention digital customers improve to technology customer to and for

to As remain shown slide X% expense. on XX, progress made track efficiency an we core deliver our on in to noninterest reduction have We XX% opportunities. on significant

a of end by on realized XXXX. this to the fully run We the of fourth be quarter expect rate basis

our slide project-related these commoditized relate like of costs actions that reducing portion to have and of adjustments consolidation time. ancillary be back to more to dynamics improve taken actions centers customer the and discussed leveraging pandemic. accelerated reduction footage expense over our a and I’d spend, from their result The manual Our commitment important shift experience. bankers It quarters. an plan the is we and last Webster. related quarterly efficiency selectively cost an me optimization quarter, been that each of automating national Terry Terry have focus you will I business initiatives itself. fall employees, driven actions moment of optimizing efforts working our many to the retiring shareholders is organization; we recognized This our cost on have navigate take and Mangan’s office about. office of critical pandemic The and December and Many his thank allow differentiate and to combining corporate at at provides Achieving during Glenn XX-year prior preferences extraordinarily you our have had benefits XXst. to customers, level he March announced over XX communities a changes from during like the expense workplace share to go as targeted A be invest enabled of last to Webster and of synergies. continue XX today what Terry’s will of us that discussed want into is three continue to to contributions transformation. an of long-lasting in have all for franchise estate pleasure we professional. our our real helping with we savings square has take and targeted real to that, The with Slide response ancillary approach are career through walk and each the and that We our for an and serve only severance challenging to call other dedication, workforce. prepared by customers way one. a the personally exciting, to through We’ve the target aimed structure, redesigning I the automating will organization to in updated fourth as Darrel, times. questions. processes functions, run banking and including associated and to overall Q&A, during the is simplifying processes the for Terry activities aggregates our Chad, activities. the rate. XXXX spend. significant outsourcing Webster And of With overview by a work at hard to Jason efficiencies our consumer and top rationalizing estate; The in before our his and reflects that us it in We’ve and commercial areas navigate the our organizational period a Institutional to all Investor thank structure simplify internal the the quarter time. in Investor customer these have helped to perseverance last retail remaining I challenging the fun Relations and disciplined Glenn, earnings

Operator

[Operator the you. first Alexopoulos your come proceed from Instructions] Steven Our of line questions. Morgan. Thank with JP question Please has of

Steven Alexopoulos

maybe morning, called Hey. I to of start Good on us wanted I can by the the being the million an recognition idea Glenn, the or out XQ. the year. cost terms the strategic sense run a better everybody. plan. projected into get And trying saves in through you of give that cost to year. John, when rate of I’m work will saves through timing these $XX just appreciate of

John Ciulla

take then shot I’ll Glenn some context. can a add and Steve, Yes. more it at

should expense first you As expenses beginning our show said, quarter, of moves. the

in banking where more expenses. And and the are we’ll will time complete The shift real more third center then, when be will the dramatic second quarter, quarter. see complete, a fourth of we many savings and the see in employee actions consolidations be the

will without first giving of you modest. quarter specific scorecard, So, I’d kind a say be

that rate see second quarters, and bigger the third run target. in drop getting You’ll to final a

Steven Alexopoulos

curve, NII to appreciate if you Okay. then, for through And But, hoping margin on thinking the additional how of I’m quarter. Glenn, could about about borrowings. maybe trajectory maybe the That’s we for the think down are the additional the you I first helpful. And year? the forward comment specifically, pay guidance opportunity

Glenn MacInnes

Yes.

So morning. thanks, Steve, and good

the prepared the CMBS a look of I we yield in see increase is treasury think sort that the would at speeds, on So, portfolio. did see reflected remarks, two when as highlighted I on things. you in I particularly One you portfolio. that, prepayment my look And at

and changed, I that’s think that’s So, something industry-wide. that’s

on So, -- pressure a NIM little core there. of NIM there bit on

$XXX borrowings, as year-end on borrowings. far -- based have million do to As probably the in another pay we opportunity, up to down

all low-rate those borrowings. Now short-term, are

I think, X cost somewhere around the basis points. weighted is

say on coming first to due be, have So, point of I million quarter, Point high at CDs is that’s XX would still that’s typically sort side, will XX the would points. the basis XXs, $XXX points, and A. in about down and say B in those what to XX funding basis the reprice we

the as XX XX probably $X basis For at have due are that well. points we billion about that points. had CDs basis in full year, to There be coming on is

X.XX%, or at So, core the at from NIM I’m give -- NIM, in if looking X.XX% core bouncing of look I take. around range like to

the the municipalities to the liquidity. the be Now, we that of some stimulus Fed at the extent could depending don’t money with of flows lot either card’s left on And liquidity invest the wild you’d and going businesses as market, have money bill, to into we be lot more or loan to and it. the of see course a final with growth, park a more

So, we’re looking alternatives. at those constantly

Steven Alexopoulos

Chad’s helpful. Okay. assuming Then one, one That’s there. maybe final

soft wrapped? reads, given the XXXX you maybe season that about early So, any enrollment HSA a Can growth outlook Thanks. and account the was XXXX. for in bit talk

John Ciulla

Sure. okay. if that’s Chad, I’ll to throw that you, directly over

Chad Wilkins

if due Steve. quarters, and the three to periods Thanks, Yes. XX% markets. the been pandemic That’s Yes. over have XX% of on great. last down John. the Steve, been growth to account we’ve economy the tracking Thanks, over prior the impact our you labor about

all or our We’re trends trending XX% generation. which stated Most new about weakness for new X:X this before, is our from enrollments as really about our and or January -- QX to in employers XX% last existing of behind seeing account point. represents the accounts actually year of core the in at similar we’ve accounts

But, HSA as sales a new so, new latest accounts, down season. we’ve accounts calls, the very And employer talked having prior about as information, from existing good of XX%. we’re employees in are

our coming with we’re board. new So, enrollments in about on XX% employers up

reductions we’re be seen down the line seems which across consistent aggregate, we’ve and pandemic started in in with about in again to the XX%, since QX is industry. So, the

Steven Alexopoulos

off, That’s Terry. congrats helpful. I copy everybody. your of to book. before a sign And to wait can’t Thanks, I get Okay.

Terry Mangan

Steve. Thanks,

Operator

with line O’Connell KBW. Please Our the next Chris your of questions questions. with come from proceed

Chris O’Connell

Congratulations Terry retirement. your to on

Terry Mangan

Strange Collyn’s name Thanks, the see different since you financial glad than a you. but Chris. It’s before crisis, good a to to have hear long quite the street, to on call. from we’re

Chris O’Connell

Absolutely.

just all might so, have that So, circling through following question. maybe -- what the referring season to Chad, read you deposit to on just up with balances those as first back percentages on last Was to the if account the be growth? do in And quarter? doing a the enrollment

John Ciulla

with the that during just a the of spend of we XXXX, the pandemic say, haven’t seasoning the accounts, additional accounts also the because I’ll Yes. really account. because along tracked out of deposits really but obviously slowed of mentioned lot

been Chad, on they But So, there hasn’t but what point much are higher, X:X don’t you or in too deposits. are to want finer a they I because put spend. essence, year say with like maybe what respect artificially little the look a like -- to can looks

just call. dropped Chad the from Okay.

is, So, Chris, about XX% deposits XX%, we were what I up said respectively. would and say

it’s take State you Farm XX%. XX%, the it’s out acquisition, If

as seeing said, And too, more pretty significant separating services We was, give as year. the because interesting were medical as you much many prior and account last you growth had the that individual back still and pandemic. can accounts to amount, dynamic new quarter we’re generally had in add because bit the XX% the year. deposits reason accounts, getting there the there in of Chad swipes similar so, accounts people as the while that that significant the and first behind Glenn a kind they dollar growth deposits in are if to growth our elective not is before accounts but is flat, deposits, about aren’t TPA many is

Glenn MacInnes

quarter somewhere I Yes. quarter quarter-over-quarter, our forecast the just end is million it’s $XXX forecast for our point. fourth and of to between the early, And $XXX add. first million so still at mean, relatively I this would deposits to

John Ciulla

I splitting know, heard from kind I of us. trends. related you deposits? to think, of you off kind back. Chad, don’t we Chad wanted of have you certain I else Anything about them because say pandemic about growth account if talked

your He’s on. that not Chris, We’ll move Okay. question? answer does on.

Chris O’Connell

Yes. starting have you I growth No, term. fine. to million I modest think loan point. kind that’s near then, mentioned outlook, That’s is of good at million think $XXX The great. And least $XXX a guys

kind this through of growing kind demand, point, loans but constantly is of at are changing comfortable are go loan seeing this obviously you course As and and the most you growth XXXX, guys where of you point? environment the where at

John Ciulla

able and big both Chris, that activity refi, always you our to great classes. growth see I even a And fourth was behold, didn’t quarter Yes. pretty or in going we a have, high. while interesting. that high also but guys across we asset to lower we talk balance XX% and at I originations in be we of about really or outflow to all And saw overall sectors though think, a in for mortgage payoffs. we spikes had quarter significant in year We in pandemic loan rises seem pandemic-muted even sheet thought year have every we that’s kind this had answer the quarter, what we originations, geographically bank, I question. X% different approaching different and actually was Fourth year, are the that produce it’s And always of payoffs you to look at And payoffs commercial give loan to growth. was out. significant lo levers and and

commercial health and by in care driven great the really driven fourth quarter real ‘XX and And fourth sponsor was estate sectors. by quarter so, growth, while great growth, ‘XX particularly was specialty technology

property lot a So, look some of. right uncertainty there do don’t in not in of bit hotel. little There retail, real on forward, market. still as and think of may opportunity be the types, Obviously, a is we estate I lot we uncertainty a now

kind you lot great think taking of investors I key our mixed really And use, are of industrial, office, real about and a pause. think so, a estate

I but a technology the will are growth. pipelines good still and say I So, would think drive great. health amount care of okay not there

middle time and think in been Our market and rate has we institutional really and this environment that solid business during continue. municipality this will

So, as do I And think, of is modest the also would commercial some about see look some guess. we pipeline, because C&I one while -- be relates activity. we would reasons Glenn say, I talks estate forecasted it than real my payoff then, more see to

the we And card whether grow loan be so, will on can actually significantly that the wild book.

Chad Wilkins

off way. kicked John, I Hey I’m got back sorry. by on, here. I’m the

John Ciulla

right, Chad. all That’s

Operator

you much. Thank so

Our the Brock Vandervliet proceed line next Please questions come your with of questions. from UBS. with

Brock Vandervliet

Just on like, HSA seems COVID-related the earlier we of way stepping slower were vaccine off to one get hangover? much for efficacy HSA the going business does back What’s growth this sense shake business, is when if back midyear, of, kind to it just your the another. or a bit, example, of question in

John Ciulla

I’ll a and I’ll Yes. shot take it give to Chad. then

put let high again, I think, a it. me perspective on

still the are We so bullish business. on

our we’re what seem read, Devenir experience Our what consistent trends through be an competitors that seeing. does are reports report least in and conferences. to can pure-play sector at the periodic we with It industry

almost slowdown new up companies point was finer the customers employment to think, aren’t signing really that and of not new hiring. I right? put we in Chad existing what want entirely growth a many market, the related said to before have, on because I Many accounts as employers account

employees. Some shedding companies are

us that year in had is that the during the wins. pandemic, large best I we new driving news of terms And good employer actually so, our do for think

down, And customers. we’re so, while per are adding accounts employer

there we’ll And through new rebounds, and the activity, accounts so, capture the able be we’ve we changes, to employment market as more new as employers confidence gets is like the as gotten. out feel naturally economy there

to our think, Chad, guess of over be, anything guess, else, everything demand mute have know don’t But, think to might when I And which you for could pent-up disagree activity time. medical I may the like look more best best get there. in that’s provide or procedures, we market. when we further you if deposit if we also then, growth half the would there be is little there my some recall, a XXXX more we second bit as activity.

Chad Wilkins

saw that the beyond And opens That’s We John. get pandemic, And come and hit up exactly what right, not we’re the similar pre-pandemic answered deposit but key John, to that to Yes, everything as we economy -- the how the you sure hit you year growth to last quarter. will levels back all exactly I’m we seeing first so. that, think in that. points. just to add

we about keep TPA So, go But the same. expect the roll we in and the be not the the through one first deposits is need of much accounts, quarter the to off the the rest the in so about of we things expect we but to mind accounts the year, of as to XX% of year. first rest quarter,

Brock Vandervliet

for quick or NII, hedge $X.X through did loss Glenn. a kind on that... was And The of follow-up terminations, accounting Okay. flow that million,

Glenn MacInnes

Yes.

Brock Vandervliet

did. It

Glenn MacInnes

components. there’s fee, So, that which two break is One income. a is flows through $XXX,XXX

interest other That about The is worth the net -- flows remainder through basis on -- margin. is was income. X points

Brock Vandervliet

I wanted Okay, that. to clarify great.

important. that’s I think

you. Thank Okay.

John Ciulla

Brock. Thanks,

Operator

Thank you.

Fitzgibbon your Mark of questions. from come Piper with the line Sandler. with Please questions proceed next Our

Mark Fitzgibbon

guys. Hey, congratulations, morning, Terry. and Good

for Can kind the John, digitization business, initiatives. this can program. even costs increased of you if is think expense do question you ratios the of think and room even more complete First optimization drive to you, once there’s efficiency lower? the I’m efficiency you you on -- lower, push you given curious

John Ciulla

We present do, how to this. about were -- Mark. thought we And we

able unit really XX, XXXX, as we in XX% X% of low on XX% become the You’ll represents see full the think range, move and it into efficient the delivery. achieve end more cost page do continue to We lower of that we’ll to range. the to that and be

things about drive is value want Bank that continue time. to through is we to What Community do and cost sure clear grow cutting. are business shareholder about can One generating and we our be make not over want our HSA to our Banking business we that of and Commercial I the differentiated business

basis, to be So, a and hopefully, we cost more become over efficient on more continue Mark, unit time.

comes commercial growth Our invest in be we a and loan hire to want bankers, get do significantly, in be able back goal we to obviously expand if lift Commercial continue Banking, to rates new prepared to technology. is

line time, leverage, cost really operating dollar cost and cost real over our step achieve we both higher up, the then to structure, efficiencies, significant revenues. operating to in our generating and continue So, go level want of lowering and deliver on drive but ultimately, may by this leverage

Mark Fitzgibbon

us expansion Great. whether thinking thinking has on share M&A. changed? And how on strong you you’re a your Obviously, secondly, to about respect some you’re how geographic update maybe currency have can and M&A with then, about I’m thoughts view you curious now.

John Ciulla

interesting. It’s Yes.

unique contiguous And market. the drawing and a expansion a expanding see could middle into environment board. credit first, obviously in I over to few a obviously the in competition go frenzy years I this markets geographic in of last kind on of have metro now perspective, we think lot pandemic. us always paused our geographic from it’s

specialties, and key significant we’ve know, really to how have which knowledge a there. presence time. know risks over think you we national I sector As our deep proven in industry We select we have

we pivoted to. and as to we’re believe the didn’t mean, in in. the it’s always, able fact planting us other had answer maintain part need that the over I from we we do certainly differentiated and exploit flags feedback as last growth is M&A, very of that So, we’ve to Commercial Banking mean and without for time. respect I to in time businesses we over But, confident invest tool to the been lot interesting, continue cities. we’ve know, I I see of good need expansion I call With got got that you think, that to a of expanding

from in will look strategic said scale it, would a had grow can I But great to And and that matters compelling there that we it. really so, We’ve HSA that we or at organically a and obviously, time. whole bank as transformation perspective then, making over own customers think we merits bank if tell care opportunity And that financial you opportunities we’re also really, sure if look particularly, we’ll drive focused can the of this of we take you now, at at take undergoing that that our imagine, completely right our business. care value, we right Mark, is now and through internally going they arise. were

Operator

Please of comes Our Jared next proceed line questions. Wells the from of with question your Shaw Fargo.

Timur Braziler

on everyone. go qualitative how first and of overlays lean at forward, the wondering how artificially overlays in elevated is think economic on did allowance, Good of Braziler the picture for qualitative we if applying in somewhat heavy starting level. we guys morning, should just type the reserve Timur Jared. about these Maybe and pace And allowance release credit keeping an Hi. what unchanged? backdrop of filling as could you remains This we see the

Glenn MacInnes

good It’s Hey. morning. Glenn. Timur,

can John But, by saying represent of majority the some first allowance. color. still that I’d take then me total Let and add start significant a methods quantitative our

to higher to with think the that’s thing I you for to probably heightened to qualitative in uncertainty, of level account So, keep first of a quantitative respect expect this qualitative versus I adjustments, And in environment, the see context. think percentage unknown. would

the the than think, is keep been help perspective in has and other the customer very different address of thing I So, the months through prior model. outside the risk to the pandemic, recessions our factors XX performance qualitative

staffing and and it’s trends, like the nature probably in quality K, internal that driven reflected not but as credit And factors, don’t underwriting reviews, are economic we the by specifically our -- of so, of the credit you in saw considerations quality the exceptions reserve, qualitative volume such portfolio, letters, it’s that concentration, base. loan disclose

John Ciulla

obviously, I these and mean, lots be all and data and leverage should in the built think processes to Timur, try models. one that’s any great. of banks we’ve you seeing I that of

hadn’t the driven. plugging perspective, if exogenous going models And history got can you’ve loan just we right, significant GDP step side over the a other predicted from because models prior opposite, it The shock now, plugging all lot GDP, outlook. with you’re you’re to in a growth. of is in in you’re plugging second right, losses And of you’re predicted model, us in back quarter, losses, just weren’t mid-XXs for so, industry forward-looking, seeing in that predicted, it’s Moody’s the that on come. bit Not reality, is unemployment. And the a little the I that over primarily what seen quantitative a all in an short-term improved of obviously, where economic quantitatively

pretty models remains of So, most And not all key areas? new strains loans. around consistent efficacy predict the of distribution the provide what kind are right you stimulus just decent going in to margin. kind have the editorially, at theme for releases to peers happening we what get amount have of use release modeled, be sure quantitative there’s quantitative-driven just so, right a Glenn’s of all -- and that vaccines, able see right. process, our of level general significant provisions And doesn’t too what small surprised, to make uncertainty the you’re banks is somewhere the banks the for But, to like of the been mid-cap the I’ve virus, really in some seeing frankly, there. quite small future losses. the having the process things and space that’s or is and to much underpredict probably and very They’re of targeting uncertainty of new And then government in a looking that the much overpredict of portfolio. And repeatable, a others. factors what’s to really still The given is

consistent peers lot So, the a as we of seem to be well. with

Timur Braziler

of loan balances accelerate doesn’t incorporate and see Can acceleration could or of quarters? And the growth that are loan say, next growth try if uncertainty that in, two some reserve let’s to Right. rolls those an releases that off, maintain you of some future reengage into we amount? as and going

Glenn MacInnes

loan growth So, variable. one is

and you like the other government that’s And risk the down we so, quality, I conditions, road. at that think addition in potentially the And then, -- migration. one thing got like credit look things stimulus economic factors the so to

with to quantitative account sum methods primarily allowance uncertainty. the million we qualitative ended to $XXX hard methods best supplemented is it a it’s say. But, look, of the total is I then So, year think that and and for estimate, our

Timur Braziler

Okay. That’s one me. for good color. last Thank then, you. And

magnitude early you of what second round it provide Just tell? be we is kind on any the to on us the guidance of kind second guys for should PPP, of round, of expecting or out still can too

John Ciulla

good a to probably color Jason, little too you got know if on don’t have. stats active. we have But number I morning. that? some on provide want this do that. And there’s applications It’s early I Jason, of call. some perspective we’re more mean, little I a a you to

Jason Soto

Yes.

here, those of ready portion couple total $XXX of days over about and to SBA. the a in received in submitting good We’ve to X,XXX processed we’ve applications, the So, first start million volume.

overall, early the would I I start had we think, So, as around, activity probably say, same has been of the pretty time don’t but expect last good. level we

Operator

Compass Please with come Our the next with Hunsicker of proceed questions Laurie questions. Point. line from your

Laurie Hunsicker

what what’s $XX million want the categories question sort LTV if you to on details just only they’re more with we’ve that over I two But on the a going $XX give understandably. the can from can little and with million broadly deferrals great just you Can that? help located, around working color understand upticks like And great, any can you is, to we’ve the any book. where It around of just uptick, pleasure with the I seen been hotel help the book, seen just detail share years. seems maybe give. you million. you $XXX love first us a for us you us flagged, the Glenn, where say, any it’s Terry, maybe you and color bit

Glenn MacInnes

Sure. that’s to Jason, okay. I’ll throw that right you, if

Jason Soto

Yes. No, that’s fine.

population. And of exposure. And And only step interest, you huge principal. keep that put deals those some And book, back, are So, up it is two in not make that it’s to or we’ve six expect active seen the will deals right? a to owners just if there are looking support going. not by deferral it’s that in it some that seven tell. time be given those really we that right, the population. so, They’re or And slow. paying of at paying recovery, Right? the deferral. money to really into both sponsors We’ve the But willingness

it it. question, overly acknowledge your about we been XX%. going some and about answer LTV all we is the We’re But, here, but to are obviously concerned into just there’s And into not cycle, obviously, the monitoring impact closely. going

Laurie Hunsicker

that hotel book, is versus CRE Okay. how C&I? of then, of the million, much And your $XXX

Glenn MacInnes

It’s all CRE.

Jason Soto

All CRE.

Laurie Hunsicker

Okay, perfect.

we on only was small, very, uptick X.X% obviously, Glenn, Okay, thanks. leverage. deferral around and very, give question you But very maybe and Again, can Jason that. color that the the same And billion still saw in the other any of $X.X that’s that deferrals, then, rate.

Jason Soto

just a us providing And first there is the junior debt out basis in in take in that that exchange that one Yes. behind you the concerned a equity. produced in of a And And one. some loan-to-value. that actually came offset was than migrated Sure. X space, leisure with I’ll really couple capital driven the active credit so overly know. not and in deferral, XX% less about. of sit really I off. an equity We that us times others It -- say, for by It’s deal. structure one the by we’re would credit, amount on put that deferral, sponsor

Laurie Hunsicker

helpful. Super great. Okay,

wondered going maybe is of question, M&A just more just to again, point, in I here, certainly exponentially the was because back then, your And outperformed stock to his Mark broadly, recently. terms where Okay. if John, even going

bit smallest little Thanks. what’s help the largest that in Can deal makes of your very just consider were if you’ve And here strong approaching sort What’s so, currency. going think that? a lot makes the you sense? M&A, very, that’s generally What’s sweet you that realize deal but you’re sense? spot? Just to more next And on full couple how bank out. got I us a the of quarters, thinking further

John Ciulla

Yes.

it’s for Laurie, hard provide detailed me a perspective to think, I there.

perspective we’ve said bar I from it’s for that lot it’s that we’ve would we pretty we we certainly is don’t high room I of as of I’ve us before. a and got what running move what a financial organic a And kind forward. with think want consistent because think, us, to say, obviously, dilute earnings strategy. time time over HSA and it’s compelling, financially seen Bank. the elements. over really commercial the that and grow of try seen was of more importantly wholesale transaction But And a us gating you’ve our and makeup more shift aggressively more one for around you’ve if streams be would said

that are tuck-in us. acquisitions are particularly to basically of branch-based interesting not kind So,

to gain value view strategic Banking us enabled would and something HSA that along came franchise, compelling our our and with something enhancing that expanding financially of was at. was our we the of consistent look Commercial if be capabilities So, scale, would

than acquisition. contiguous on So, not rather I branch say larger and really focused would smaller

Laurie Hunsicker

Great, thanks.

for then, Chad, last you And Okay. on HSA. one question

Just HSA bit, going the XX% in more of -- efficiency that from just terms think little to you about us your your NII… linked sharp help at especially broadly XX%, looking just then for drop a looking and the both, can ratio your quarter at just also noninterest income,

Chad Wilkins

quarter-over-quarter. my $X.X in were HSA fees in the comments, exit highlighted fees, million quarter. prepared last So, Laurie, I There TPA change

drop as what primarily And seeing that’s impacts well. So, income. you’re efficiency obviously, that ratio on noninterest the on

Laurie Hunsicker

it. Got

great. Thank sorry, I’m much. staying you So, $X.X XX.X within so last million quarter okay, -- that

Chad Wilkins

Thank All right, Laurie. you.

Operator

come next the RBC from of your Steven questions Duong with questions. proceed with Our Capital Markets. line Please

Steven Duong

apologize. jumped a I I late. on little

But, yield how So, by year, end does that your this. X% just the that I’m looking say not gets going to on sure for if XXXX? the steepen, into look you guys covered the if margin, sensitivity, at your XX-year your of the curves NII

Glenn MacInnes

you end curve. look the if of our tied short half think to of I is Look, the book, it at

three-month I have in we at about billion $X.X LIBOR. So $X.X LIBOR think other and one-month billion

through. of will while that So, cycle the longer the our a driver. take and that’s resi primary book to our portfolio end curve, investment Obviously, are tied but to

Steven Duong

you -- this front that is Got it, floors, through is bought correct…? Glenn. And there just the end, the

Glenn MacInnes

about XX amount smaller have it’s we $X.X equity in XX XX basis That’s primarily they’re little floors points, points. So, in and in in about and amount business right billion basis commercial, the of to now banking. money

Steven Duong

just then, are you levels amount that loans, valuation of it’s How if are on considering if decent and a environment, buybacks And to about capital. thinking attractive that? little a the it. you are guys you year and growth Got guys slow this guys accumulating

John Ciulla

Yes.

earnings a as to just we’ve obviously, the we full the decided like obviously feel into peers, payout forward in that. maintain our from like most you quarter terms We capital XXXX growing in we dividend first it as clarity know, perspective, second had to start think, approaching hit. early and had of of We feel quarter. management wasn’t our shares until XX% go back that And like buying I continue full the talked we’ll or prudent we’re sometime back about, point the quarter of we ratio. XX% the pandemic in to first started,

authority, more the price stock And months. at so, we and on like repurchase, to is next over and have aggressively do several looks beginning depending we the approved look the market where what expect stock

Steven Duong

last And XX%, you. corporate one tax effective just me. to tax Thank gets Great. a then, for rate? would If the rate what that your to do

Glenn MacInnes

have we talking But continually this don’t that a something about. been have for call. So, we’re I on that focused But, something at. we’re tax is strategy that number on. is is it you obviously, that something And looking

Steven Duong

It’s pleasure Terry, on appreciate Thanks, I with Glenn. a chapter. the right. And All luck it. new working good you.

Terry Mangan

Thanks, Steve.

Operator

with next of with come Our from Please your questions. William line Wallace questions the James. Raymond proceed

William Wallace

seeing build, to pipelines for in any guys. demand you are if starting curious, your just loan you at to I’m variations Thanks call, you? taking my out stands geographically look commercial that

John Ciulla

And Yes. It’s through of actually great we’ve to that. been trying all look a question.

of areas I consumers think geographic the -- obviously commercial, geography, There really it’s the is ways, it’s have whose challenged. -- haven’t been where suburban opened been. and is where a they to some respect in day, is issues in the particular -- rolling think, with kind little end Bill, more some at are Metro There bit some obvious. sector. different areas. But, more than in of non-metro I

loan sectors would sectors. doing capital. nicely. to creditworthiness quite growing have need middle in more mentioned significantly that some technology are seems loan and to been are impacted infrastructure, some healthcare, don’t pretty expertise. that have earlier, in subsectors And as forward we that things then, the continue I being capital. Technology, the we of obviously biggest conservative in play create of And in course, the we take the we in those ability for the impacted slightly more either terms of have that disparity so, or And see who been across demand Those more have obvious. on Those have

unsurpassed literally We’re demand. seeing

So, I more geographic. sector-driven say, really than it’s would

William Wallace

And the I you Okay. of then, in Fair that beginning to we reduction does XX% from, operating COLAs, every was that follow-up third X% inflationary target rate color. expense see enough. run that on [ph] et are believe, anticipating quarter rate, the -- target, that include run appreciate the -- I pressures, a year? it cetera,

John Ciulla

net number. It does. It’s a

counts we So, -- you’ll investments in walk, businesses, even see in that it merit increases.

real to dollar We that on lower expect basis. a

William Wallace

expectation as PPP of Okay. And your forgiveness what’s look of now? you then, that based the on ultimate kind of and you the also timing what level loans, at of know

Glenn MacInnes

year-end, at the So, maybe second just under quarter in we I and just probably we’re we it that’s about first billion quarter, XX% And XX% little and right think that way. change. -- And say have now. can I -- would in a you forecasting about would that. then out XX% coming $X.X XX%, probably if But, that’s what of that how the

William Wallace

been thank you. in Thank you, you will and good all It’s Terry. luck everyone with years, say help great the for retirement. echo your just sentiment the and And Okay. I over else’s working

Operator

with come Horn of with questions Polaris Capital questions. Please from Our proceed Bernard next line the your Management.

Bernard Horn

little joined also I morning. bit late. a Good

up and Relation offline. Investor very my follow of the highly Terry, questions from So, for as your are please But a company. first, on if thanks Webster days really redundant, stewardship can public I early move functions of professional

you questions. enjoyed thank And Two for work. So, we’ve all it. your

this deal, your but moving level a stimulus that balance might bank the you probably of capital forward, money, know get where I of any to strategies big I strategies, well, is in up amount any the balance see the if money second, I there don’t do are problems. overwhelming managed management The assets first issues should a bank? banks sheet affect little of concerned And is more they think And answer deposit bit, is that… a can pushing may the you capital. you’ve that some down capital the have that lot big have showing been that sheets but on a

Glenn MacInnes

Yes.

that me one. take Let

capital. billion So, about opportunity on short-term pay and down to on a are I the the like stimulus think through of think probably excess to is impact you’re near -- have we I in we -- things lot think short-term depending I a $X.X And and could bottom what eventual more basis getting highlighting industry the more that, the But, municipalities be we seem have borrowings. is, that.

securities floating as the the we monitoring having Fed? park is those is XX% something It we we’re just as growth, loan loan-to-deposit deployment. money So, don’t buy are do we’re looking Our do end. ratio basis quarter get conversations, of If on and or pretty Bernie, the rate much as at far the it. a in we daily that

Bernard Horn

all way world there? commercial the of question. is with about to buildings problems of early and Thanks. side, warning seeing are question of the deployment estate, so do real any the beneficiary, goes. signs gist that But, might any the you -- you respect be really whether commercial Just I we’re the to Certainly, think, I’m which and And forth, you’ve the get on office cautious sure a you potential second suburban just the post-COVID and you trying guess about resi. move to been see

John Ciulla

Bernie. it. And finer to point I’ll a actually you. It’s And from Yes. a question, put let on it’s nice hear Jason great

I think I be and metro got good, really particularly bit thoughtful relationships CRE everybody buildings. we’ve seems in strong a investor careful, our to think, in group, little more and market

outside on benefits on our not of multifamily, here. obviously We’re New the office, York us Metro, seeing, even we’re big which in

stabilization quality think given we’re bit multifamily. of cracks in and the not We seeing sponsors, Boston. are where in little of underwrite a we any I seeing And the

took my sort XX% every get We think really I -- call. types we’ve the pivoted. of a one But office, I earnings think I Bill, property Bill while Bill our in years think, I And -- ago. been always shifts away paradigm XX% spending Wrang some back of on at back maybe from of view office in to mentioned our move XX a were had of decided that. going

is in to pandemic. which the about what we several -- read the because if we’re you companies industry, footage lot sense feel, So, that, seats. space their don’t working seen got going office, of know more dedensified not to the our starting of have There’s in and talk, But, -- going a talked may I’ve forward. you’ve like metro people good. is have office also struggle also lot people really And you in of now of I for in have happens tons a look lot quarters think space, to most the square the XX%, you drive out XX% talking people those seats we offices remotely, in and the we in to the estate meaning where at and Connecticut, rates, need real vacancy people buildings may real particularly and a coming exposure, reduction the you big XX% and of their New CEOs really those if I and Boston Philadelphia in obviously, and you’re trying York occupied XX% to an office immediate same have you

So, that’s a long way soon. it’s too for me of saying, think I

not yet. seeing real We are problems

we’re there we more new Jason, at think, mean of but much problems soon the taking to lease taking on. think renewals. to we’re it’s all office mean call which -- going I opportunities, your that into we work And too it consideration it’s think, that have don’t anything... And future be selective. will I as stole soon would what something you focused was to too see is we’re question potential I occupancy, look but thunder, because of to are really -- last your I probably is

Jason Soto

No.

Okay. data will, three sort if I’ll add points, was you think to quick said, of you which I spot support everything on.

we’ve which about So, $X in active It’s fairly portfolio, deferral our large. one is office got million.

XX% of our has over deferrals. point footage the due of less the sort -- been got your And square very a the not next than received So, our to We’ve lease coming portfolio well. performing leases, couple in of of office about maturity years. lot portfolio we’ve portfolio of

less So, in in XX% XX% than than ‘XX. less ‘XX,

because point is lot this pressure. a there’s we think near-term last I’ll don’t I and of going make So, seen... haven’t that into And the

John Ciulla

Jason, I lost think we you.

today problems for technical time. having We’re the first

Jason Soto

Can you me hear now?

Bernard Horn

I can fine. him hear

John Ciulla

Oh! You can.

Okay.

Jason Soto

right. All

is still we times. point we and service X the just reasonably our is entire information, loan-to-value So, until over going would and the last this, get debt good XX% on more I this as view into coverage portfolio add

cushion, fair if you So, occupancy, there’s see a pressure or post amount of even COVID. rental on rates

Bernard Horn

that Great. good you’ve always, up very conservative point. really thanks as market great Thanks. That’s and the to this for addressed color that -- way

John Ciulla

healthy safe. Bernie. Thanks, Stay and

Operator

to questions over There Thank are like back the you. call time. comments. I Ciulla would closing to at hand no for John further this

John Ciulla

I Company, Darrel. happier and healthier for XXXX. us appreciate I this and joining in the everybody interest Thanks, a morning. everybody’s wish Thanks

Operator

That does conference. conclude this morning’s

And lines time. your for You at your disconnect may a have participation. you day. great this Thank

Webster Financial (WBS) 21 Jan 212020 Q4 Earnings call transcript