WBS - Earnings call transcript Q1 2022 | Webster Financial Corporation

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Operator

Good morning. Welcome to the Webster Financial Corporation's First Quarter 2022 Earnings Call. Please note this event is being recorded. I would now like to introduce Webster's Director of Investor Relations, Alan Herman, to introduce the call, Mr. Herman, please go ahead.

Alan Herman

morning. Good

Securities the our by to statements to management meaning the begin the you within the I of and of made The to Act harbor safe company's turn be uncertainties Please comments which and may Private forward-looking information safe about remarks, harbor we language in are review remind risks want at can that site today's Relations the it CEO, XXXX, remarks press affect rules. Before Investor and Reform the release subject Ciulla. disclaimer presentation us. Litigation wbst.com. and include forward-looking found now management's on presentation, Webster for more will John accompanying may I Financial over

John Ciulla

completed thank first quarter equals for you for to Thanks lot, our Financial, and merger closed Bend on a joining the macro quarter announced an eventful call. of And integration environment. I'll businesses. our remarks underlying It solid as our generate was we high on begin Sterling with executed the of our and plan level acquisition everyone. some continuing Good performance while all with everyone. earnings us in morning

for outlook impact in uncertainty some Despite lingering XXXX. provide and in on environment year 'XX turn that for in quarter performance to chain, supply Ukraine, first of quick I effects our the financials, I'll war of review it to full merger. labor driven COVID macroeconomic of the a and provide by update our over Our to after the market will and merger, of the the Glenn financing the financial underlying surprising feel in X for clients economic very performance solid rates, with pleased our over Demand next our economic X.X% positive strength in prevalent, among that the loan GDP rising for contraction interest activity case continues confidence to continued QX. seen X strong. the and to quarters. we have and trending call remained in is and our growth, this demand base We're that may morning, you debt challenges

was including ratio in metrics All strong, on basis points common adjusted a XX loans our for closed for efficiency loss $XX Slide We basis one-time was income standalone merger provision impacted $XXX We XX a included today $XX million. compelling remained income as company. in expenses, the NPLs Credit the be quarter. total combination Loans period-end, share a and was $X.XX. net We January strategically to credit the growth. was announced deposits, points be $XX a by performance non-PCD of metrics $X.XX. in ago. deposits XXst, these reported on equate These and year-over-year, million EPS to when I'm favorable, it of a return including we're excluding smartly and tangible at $XX merger now and and approximately year X. and believe million, net combined year Sterling. charges, expenses our ago. merger-related quarter on accounting, provision of double-count XX%. on have and return Our ratio is it non-PCD assets merger-related billion in as to as a our continues was the adjusted operating earnings manage adjusted for organization as results, a however, various for billion $XX a billion grew equity was were material X.X.X excluding our Those combined driving loans loss the assets, XX% was and excited we our revenue from effectively Webster per down now provision

believe commercially industry focused significant have can broad verticals, generation we that we back outset, the as expertise, asset intended and leverage capabilities. our was outperform a we As created our

profile is liquidity and funding Our differentiated Webster. a for strength

deposits, HSA low-beta and normalized provide of Bank liquidity sources to competitive franchise, rise as our more from a levels. interest returns As should our rates advantage including diversified

XX%, for a portfolio, interest deposit forward. income flexibility to expect with loan improvement of Our us we provides environment. ratio rising a ample significant rate floating predominantly in going In rate loan combination

value per share capital book were in close, announcement. at our at roughly expectations with tangible Our and levels merger line

of realized to footprint consolidation in expect began savings $XX real cost estate our our the We achieve 'XX, another full the and of to million for reduce $XX of in and saves corporate million combined We year XX% headcount over its expect announcement were and We've year year. by redundant, footage at merger the square a XX% was of at ago. operating eliminated identified, operating end combined relative of organization by to costs corporate quarter-end of the the 'XX.

And common complete great second-quarter, re-branding generating has anticipated. commercial to on we material the the the growth market. believe have categories XXXX. the metrics of covers people, same outstanding of heading deal or attrition the PPP year-over-year strong the facing the us X driven warehouse combined our merits in respect contraction X.X% annualized. banking with financial combination effects return conversion was the effectively customer to business execution, in quarter equity. of the expect entities rate and balances the targeted of been or tangible year basis was Slide environment, we sustainably at help by two systems our the in we All and We've core loan well deal was excluding X.X%, growth legacy a momentum on have commercial X% colleagues high-teams for to set mortgage fact, on ago financial quarter as growth announcement, to growth loans. linked labor to among into the teams competitive primarily no pipeline added We In we and additional will client-facing business With the bankers portfolios are momentum. and a path we've sustain including that due completed. third merger due forth the seen

with expand base. existing As immediately we have are allows with increased customer you relationships discussed our many capacity us of sheet to balance

of of XX% without XX portfolio. overall of XXXX. note, a full-year with a exposures These bigger on greater higher our in targets. feel ability without loan top exposure X% approved -screened growth million is average existing As -- sacrificing our banks $XX our loan confidence good of over with the deals we pre sheet relationships more January XXXX risk our deals to a a leverage contribute to one and at year-end point, XX, than balance legal trend, We old shifts million. reaching with our sheet, proof bigger guidelines. The XX $XX balance XXX turn and the that than XXX about total a exposures than had combined underwriting credit our quality XX to better weighted half rating our merger day Of expanding

growth exhibited also quarter improves Asset quality as Deposits levels on only on this year-over-year. a X.X% combined and up quarter, increase. basis, up almost hold basis solid X%

higher this of deposits Our deposit tightening broadly. the accounts driven added XXX,XXX and despite almost billion. and $X.X was basis market cost HSA rates our Growth start Fed increased by business. core new declined principally HSA and quarter one points government banking

turn accelerate view we this respect our it merger, earlier, the mentioned HSA deposits. that, Glenn. As I'll another opportunities we closed With additional long-duration them providing to on in over to as low-cost, growth to acquisition quarter, with proof-point of which

Glenn Macinnes

good Thanks, John. everyone. morning, And

common growth by equity close. with with one value million charges, a Tangible strong of ratio last common of $XXX merger merger-related the to increased per billion. were this was share across tangible C&I. with of decline, in Slide $XXX growth of basis, book offset XX.X% was quarter from sheet quarter. deposits announcement, be mortgage X% at start Borrowings tier $X.X were valuation $XX.X PPP. including were At all equity of loans and ratio we contributed specialty accounting, $XX.XX a led securities $XX.X period-end marks This one billion and and loan in our and equity linked X.X%. total On our $XX.XX number sponsor at except on had period-end, AFS common At or total on and ratios billion, X. quarter AOCI. down $XX.X to $X.X tier total CDs. linked warehouse billion. balance was a Capital million in proforma categories, factors A higher-cost common Let period partially a continue impact estimated merger XX.X% assets me billion, ratio exceptionally post-merger the and declines deposits ended Proforma by proforma

detail the provisions. for income reported a our occurred $X.XX to merger. merger restructuring various is the Slide nine, the results the reported a $X.XX adjustments reversal and results includes these on statement, On Sterling. items prior common Slide adjusted $XXX the the expenses, available for the reported adjusted Moving including an closing provide or to of X, and earnings non-PCD three of strategic accrued the merger-related proforma expenses, EPS, share we from net initiative subtracted In which aggregate, from quarter, basis, The excluded we for to adjusted income of to it quarter. quarter. and per million as our we January Sterling On performance in diluted in January double-count

was net -provision pre $XXX.X revenue million. Our

performance tax was assets the our point benefited Our deferred on reflected and tax the quarter, was valuation on will tangible return an adjusted XX.X%. in ratio the is in of from we efficiency rate that X.XX%, effective of million return out XX%, XX%. $XX adjustment equity common had of which I

we about returns, feel the where the John our good As highlighted are earlier, very we process. in trajectory integration of given

X.XX%, for combined million X.XX%. Webster of the Slide was a pro combining is again $XXX we slides, quarter. net in on non-interest forma have excluding the purchase on XX. January for Non-interest Sterling's $XXX net on is the give proforma includes includes was our categories we Webster you effects million for and purchase point income. accounting, January. sense into Slide - ten quarter presented margin margin basis, income income including 's This while head net three million. When provided with interest total reflects income to interest presented Non-interest accretion. gains of interest X for in shows $XXX lower million in income million January, as at of at for million the million trends QX $XX On The of a quarter. the interest starting the investment The proforma the million decline next linked-quarter realized income Sterling. reported Webster accounting in statement better net $XXX total $XX QX $XX million the second Sterling, for $XX from Sterling and income non-interest reported is

the In addition, expenses in adjusted $XXX January income. million The linked-quarter lower adjusted XX. is basis. mortgage $XX expenses, and and tangible Total and were amortization. a $XXX.X we trend a general prior a basis reported banking offset million, periods seasonal by in in wealth - total intangible QX, On Non-interest driven was presented management to expenses $X.X on was expense of expenses was to Webster amortization which in partially forma XXXX. performance-based Slide million. non-interest million compared expense by in recognized $X.X QX fee million on each Sterling's decrease and benefit which pro

allowance PCD gross Slide The the balance the the $XX PCD written our for allowance added as million effect our a of expense. are onto of totaled balance that's the allowance off $XXX as quality largely million both The in -- statements the this $XXX less increase as million net marked recognized purchase income balances million and we driven recognized reflecting XX, marked on The was accounting. referred reserves, the is key statement. income $XXX prior allowance periods. was sheet. The commonly with Moving $X by provide adjustment through as acquisition, on million asset net truly by our $XX in PCD Sterling to assets accordance of non-PCD added million XX, merger-related net is $XX the for provision double-count that provision charge-offs million charge-offs in Sterling metrics. and By in sheet the double-count and accounting, provision balance quarter,

a NPL earlier, respectively at asset compares XX, portfolio. basis On commercial capital points XXX XX points on ratio are strong, indicated well-positioned remains This our exceptionally Slide basis combined basis XX of John and XXX loans classified quality perspective. the basis points a commercial to totaling we a from an basis including As year-end. and of points

exceed levels amounts. Our well-capitalized regulatory by capital ratios substantial

XX.X% by capitalized and well Our of tier-one of risk-based tier-one ratio billion, XX% common exceeds our capitalized exceeds capital well by billion. one equity $X.X $X.X

share related to $XXX at totaled close marks interest per $X.XX up announcement, value marks year. prior Loan XX relative million credit, accounting announcement. Our is provides to $XXX our and anticipated compared purchase book from $XX.XX marks Slide estimated at including expectations million a tangible merger liquidity. of to

at at revenue of banks is $XX also of million $XXX higher announcements, intangibles estimated the million of in customer equipment environment. and security Our again, intangibles originally with $XXX related have accounting rates. driven the was than anticipated relationships our intangible other portfolios intangible we and deposit quarter, announcement. $XX lower property and acquisition for is mark the expected to by amortization net purchase $XX and The $X.X provided The accounting, are driven reoccurring yield core billion higher We've impacts first versus Slide scheduled $XXX In mark the we million eliminated. segment. million rate added statement million accretion million mark previously accordance by income. On in of merger. Sterling's million. income totaled Goodwill XX, $XX.X the interest line of In realized with accretion, commercial the

merger. amortization will amortization, Slide million interest intangible related merger reported first these QX by accounting to regulatory $X.X legacy million. in Our XX scheduled full of effect including and $XX.X the intangible a accretion full-year $X no in we margin outlook. provide QX, assumes respect Total benefited intangible Webster quarter, Each With On asset amortization. macroeconomic is environment. be calendar In the or of the material year for million points. includes amortization the for change $X.X the items the our million XX, basis in purchase net which accretion to

net interest $X.XX of income billion a accretion. GAAP excluding on expect We basis,

increases. the assumes at projection of of addition XXX the points rate X.X%, Our an Fed rate ends funds basis year implying

Our interest one from at also grow to net balances our legal projection anticipates of billion. loans XX% $XX.X X% beginning annually, income day

excluding million fee $X.X one-time million We to billion. expect and billion of $X.XX to income of $XXX costs expenses $XXX

that, anticipate over John tax in effective closing rate We headwinds. With remarks. to turn XX% XX% of inflationary an monitor to to range forward. the continue I'll we things going So back for

John Ciulla

to best our organization. agreed few committed were including made to we compelling, elevating into each merger scale the Thanks, that already is coming to months merger benefits uniquely values Kopnisky building felt valuable leadership in funding culture of an The combined We're core in the and both expected legacy executing the Already the organizations, allow organization. particularly talents Glenn. upon aspects company, are rolled I we both merger out addition The have the and on complementary and there talent businesses. best the of companies, several Management the a a in and When Committee transaction, from to set Jack been organizations. in Executive strategic contemporary elevate investment to and on base decided from this merits values-based first These the will bank. from nature to two the financial embark alignment, differentiated would the group us and provide. it this accelerate to of ability verticals, a a lending the as We're that new coalesced to behaviors. team has run program formalized culture across shaping balanced the

encourage on you are colleagues report our website. And and our ESG I published recently citizenship. available company outstanding Our to committed our to corporate read

originations execute net segments, larger and key realizing immediately commercial sponsor on loan to on we're our estate and real particularly the had we commercial loan differentiated and on specialty and highlighted, solid ability previously institutional in transactions, As business. growth

funding an our digital of delivery led further exceptional We by by cost HSA couple of explore and were organization. quarter. to the digital deposit and able verticals banking in customer sticky this continue Bank saw to enhance combined a point low-cost the position. that should base deposits channels network consumer We capabilities. in reduce We basis a investing first and quarter, the of new We're our examples have

will in the our brings it's a about Financial, and platform space. Bend excited business purchased to HSA solutions benefits provide. we mentioned, technology client-facing provider the the cloud-based previously experience Bend We're As

innovations a our Consortium work through as into the founding blockchain The capabilities addition, banks Webster to support group, member. like-minded joined operations. forward-thinking will integrate to USDF as consortium work In their they

engaged and we activities, effects and active other from pooled the members. an As will expertise the consortium's in network participant of benefit

platforms and our to We migrate data will environment our in to digital cloud. the continue invest

flexibility generate We us returns announcement combined year as forward. a set we going organization forth ago. significant merger significant capital provide excess This capital expect as to with the will and a

our generate equity. continue and disciplined return will capital those capital highest the allocating framework, on be to businesses We that activities management to in

our authorization into in We yesterday. as shares return acquisitions dividends capital to our replenished opportunities shareholders organic business portfolios continue and We'll of $XXX or repurchase we activities will the deploy first we through QX, Bend. capital and In into like differentiated to absence commercial inorganic repurchased did with growing product and repurchases. organic also have select over and in share announced and million loan

colleague for lot execution. year, the were a of as a for want I outstanding asked our over of the all efforts preparing and macro-environment. and engagement, merger their every close thank delivering in challenging Webster colleagues last we We've Finally, to performance

colleagues With I our shareholders. and to Our stepped are up our our clients, and for that, communities, Glenn for prepared and delivered questions. take

Operator

Our Instructions] first with McGratty Chris KBW. [Operator you. Thank Please question from proceed. is

Chris Mcgratty

Glenn start in effectively cost once just looking from lift The line Where the XX, realize for thanks synergies pretty go over you Great, to what year expense. XXth And are in question. on X, do issued next with year. the guide expenses I'm was less? is we in the X there interested this much quarters? then the next for. we're in the cadence, as the maybe

Glenn MacInnes

and good Yeah. morning. Thanks Chris,

million because his square the it how you've And elimination efficiencies contracts, then the probably heard reduction systems, the of remarks John consolidation of in footage, in automation. facilities and from operating vendor operational as consolidation note achieve redundancies, of on XX% Let little me I we're corporate and at we categories; have texture clear the more give into that. you to a going can on falls $XX pretty sight three say

want spike of I range going to like to get trajectory traditionally that things guidance So HSA comp we that to a fourth us expenses, type In basically a related us the that of fourth is the I do by to in the -- the preference quarter. somewhat health $X.X to we would $X.XX say the you And in that. and range lower billion gets have by XXX billion. care with we gave quarter, employee that. have costs -- on offset probably

So jump be quarter. say in I fourth off that's would range would range, our it's a that the --

Chris Mcgratty

I Okay. pressures. from XXXX, a there's bit there's to always And also still for but then inflationary there's -- more, go little there, guess,

Glenn MacInnes

XXX core achieving million we'll, generate driver the rate we of So look, we'll And you I, a lot will banking which conversion, will a of we're our the significant big savings. run additional completion year. sticking XXXX, full-year the in of be expect, with would initiatives executed as that that the this then of get

Chris Mcgratty

QX? if more margin. you little The than months I just thought. of the was in And provide just you, could then given challenges on was two one liftoff what core we for March quarter, Can a margin expansion the the for can better the

Glenn MacInnes

XXX. Yeah.

Chris Mcgratty

That's month of my March estimate

Glenn MacInnes

Ex-accretion. Right?

Chris Mcgratty

Thank right. All you.

John Ciulla

Thanks Chris.

Operator

question Our is Haire next from proceed. please with Jefferies, Casey

Casey Haire

morning, Yes, thanks. Good everyone.

John Ciulla

Casey. Morning

Casey Haire

on to I a that what in know really mix you then also, is the wise? that to wanted give quarter, of the to see and I guess, this sponsor What I moving Obviously slower I Lots love that to but X% slide in growth. that here remaining loan just quarters is sponsor can XX%. color specialty? I also is similar touch What concentration us guess parts and limit specialty this good. the vertical. mix. get John -- a on expect X, little some the bit And very we very good,

John Ciulla

great It's question, Casey. a

that this C&I is You in of are on characteristics proof had hear obviously point much don't balance warehouse to estate rest kind bigger of warehouse for million were business me, for thought purchasing specialty real during that accelerate $XXX is a million loan and X right momentum, PPP able average GAAP-reported going contracting contraction we page the see in and transaction I'm why underlying institutional obviously, with we and Mortgage $XXX year. the of But that's that strong that the growth. and growth, sponsor of this can and now. a to good kind more mortgage and the be loan pretty a muted in probably the what about sheet, confident. We be lot for our of balances because was the that season would general on that our still runoff balance is

growth neither of and CRE. C&I a a an had And CRE sponsor nor But prepayments driver in specialty. we noted, just quarter were our fourth of So amount you over from inordinate actually, drag. investor really across as the originations that big spilled in strong

So billion as announced I and a talked concentration " sponsor our deal, a business were lot commercial "hey, they maybe we loan and from momentum And portfolio ourselves, legacy when in about We is saying on to there, Webster threshold this had of standalone of specialty $XX legacy a on real other think we the our Sterling now, side we a reaching concentration? are a company. estate. perspective, relative

and categories. nature expand You really room these all of in all look portfolio have significant running this we granular at $XX billion the loan to these categories,

was So Again, in. of we because good bigger wouldn't to I prepayments, that pencil the that and sponsor from market that businesses, loan pipeline, sheet. and XX% sponsor lower a the is across middle grow specialty general demand, some expect C&I smartly CRE, continue a stronger But in and all growth balance investor to of in quarter single terrific.

the the of because growth muted what are perspective why numbers the think of underlying I So a that's not here loan growth. from geography discouraging

Casey Haire

Great. then Okay. the on And buyback.

ahead $XXX you announced of us some last announcement. at or $XXX that appetite You updated night. renewal expectation Can a going just million $XXX that thoughts in your quarter forward? guys so of million the your on million buyback Ahead deal give

John Ciulla

Sure.

payout environment recessionary authorization, loan a look us us say growth, of our certainly XX% of product use I a enhancements increased organic HSA dividend have We to companies in and company back for four our like continue the we're course makes we for be I think forward. the and choppy. portfolio our line-of-sight think if lift is I bit And size we we as there's outs, we team purchases, like prepay buy in some articulated, disciplined a to is investment to confident, for of prize robust had moving to front activities XX% opportunistic first divisions and outsized we Obviously, opportunistic. given which sense pretty The Bank. and going feel a to the don't quarters. authorization and next we'll of three don't that shares ratio. to over like right obviously, the feel to pretty But environment

Casey Haire

Okay. Slide sensitivity Very good. just last me, And XX, the for asset slide. one Glenn.

at beta -- You over the forecast. a blips guys point that out XX% the XXX first XX Is hold hikes months XXX? that of for and of does

Glenn MacInnes

that, last we the recall from were the So have increased if you we range. call, XX% in

up now, I have to think and look XX is basis, the spike like XX-month at using up on I up, The we is full-year ramp ramp think using wildcard Fed in a right Casey the towards of here, it do have basis, XX%. model in year. goes the I right now may but we're a XX, think part that's if that we're our what we end XXXX something

Casey Haire

That that have XXX bps? and just Okay. or well, XXX a holds for bps -- as would

Glenn MacInnes

does. well. for as holds XXX Yes. It That

Casey Haire

Okay. Very good. Thank you.

John Ciulla

Thanks Casey.

Operator

question is Please Alexopoulos with Steven Our JPMorgan. proceed. next from

Alex Larong

for questions. morning. for good This taking Larong Steve, thanks is my Hi, Alex

John Ciulla

Alex. Hi

Alex Larong

are beyond integrate targeting? will of guys synergies are more together, of you're the And that some time you larger what opportunities for Thanks. revenue more take your the As immediate companies what synergies? that, two revenue some that

John Ciulla

question. great Yeah. That's a

capital of opportunities. I've larger existing conditions revenue more commercial balance to synergy. our is obviously in is and the which larger depending that market be already that key balance sheet categories relationships with ones cross-sell immediate profitable fees sheet the commercial have to clients, more scale our so is market on There penetration and able existing immediate referenced, potentially think I more

private management our we portfolio a at opportunity in services the to Legacy example, bigger and into broader more clients products our commercial penetration across deliver Bank, sell selling Sterling, have to and as into get bank to footprint. is an to Webster wealth For -- Private immediate Legacy

because HSA of we're our to through digitize a Bank ways side group long On serve working clients things retail lot about products. innovations X and the digitally it's we end at other can think million exciting

feel to larger HSA use basic a bigger 's. on Can to relationships into So balance lot we opportunities a Webster. leverage digitize and strategies and -- we more cards sales time our and or short-term loan other HSA of HSA products around sheet client of spending our base that corporate of are we longer-term products our at larger into standard corporate sell

immediately I innovation and see deeper over the through more bank broader, profitable our across and HSA relationships, our more products. and create think So products is what you'll relationships, cross-selling in to and ability core the commercial long-term, digital

Alex Larong

on Thanks John, and one question business. the HSA

and out can coming some So growth income. HSA for of Thanks. the about pandemic, business, fee you're seeing business if the as and balance that such you talk for return-to-normal

John Ciulla

muted Yeah, Alex, activity. back another great was there question and we Not have. to pre-pandemic but levels,

the the account of from the that You came several of dynamics clients. existing deposit growth was talk calls and one most probably growth heard last us about actually over

into of further pandemic. waned during the activity So sort little penetration existing slowed a clients. bit as That's general

muted new was health deposits, plans signing that were underlying X.X was core was up did trend deductible high and had growth, account was a increase more And what still and by heard year's healthy. that Almost XXX But clients reported the accounts. a see obviously me mentioned thousand As you in billion script, bit an last in off. we line. existing little And employees accounts new net was our running of which account TPA growth HSA new my also to so over that we accounts. positive

just towards and discretionary I likes. activity trending right So saw from healthcare I'd the well levels. direction the our think activities in card And say we that's swipes pre-pandemic same and the in thing as

where to we'd not encouraging, back definitely yet So it. like

Glenn MacInnes

a Yes, color. and little let me just add

I the On did the quarter example, million debit think $X.X we that's as versus transactions million. $X.X an in

is So X.X, volume little X%. transaction that's the year-over-year over up

that on light year. prior some seeing quarter of a we So are basis

Alex Larong

questions. my taking for Thanks

John Ciulla

Alex. Thanks,

Operator

question from is with proceed. Brock Our UBS. Please next Vandervliet

Brock Vandervliet

-- good morning good Hey, morning guys.

John Ciulla

Morning Brock.

Brock Vandervliet

Morning.

expect Just going see we economics the the the significantly sheet to forward you Is funds off-balance on-balance on the two? compare then and growing follow up your can faster. are deposits, of the should should -- HSA sheet I that questions, we mix noticed

John Ciulla

happy this to. be amount. I'd talk good We about a Sure.

benefit the low. is And you So the It's number, into and while detriment investment the but line, the fact expansion only that basis more the that investments really also investments respect course the rising which look the around, both the increasing, the its our were and there's and transition as loan that, there market the Obviously, in with and valuable obviously, get on more rate that asset and value on profitable investments. category or people is environment, obviously, deposits we're proprietary obviously, runs, answer offering in relatively those that the other very XXb-X into through somewhere that we our in those transparent larger moves of still and performance so, avenue going significant to trend I'd a vendor, to full relatively for it investments. and say are value into overall [Indiscernible] ones XX when between year, well depending at that accounts over because us, less we're get us the directly the so low. of talking XX from points those secret fees as no is last so penetration about deploy face. of to of the It's balance interest we are growth, particularly and a benefit deposits and of

we obviously in our HSA our and tend as our well, provide to among be always stickiest have client flexibility want deposit We said base balances much high the as However, is can tend to what clients to there. investors with average as we've depositors.

keep the of running; there's cycle as has end not us dollar, deposit the at growth day, dollar to it's think allowed albeit a virtuous for that nice I profitable.

Brock Vandervliet

it. Got

give as not a resection company range terms forward? set assuming you ahead can in relative charge-off combined net And range follow-up, a us going level of the -- stability Okay. a net for charge-offs

Glenn MacInnes

even before basis pandemic That's former performed, I've were know, up give the as XX credit Yeah. we the couple. experiencing it's way about surprised, pandemic. take credit a or guy leading as net that period. I the points -- a annualized say you charge-offs has been would into

categories, stimulus XX there annualized maybe commercial about commercial a rate kind points if ever XX to charge-off charge-off normalize rate. our more been there basis. about a it, where think seen as I a that in of haven't think think And we lot minds other reasons why would normalized return is that it that's if of obviously a has you commercial we of and basis probably to think on still normal, but

Brock Vandervliet

it. Got

Okay. Thanks the for questions.

Glenn MacInnes

Thank you, Brock.

Operator

Jared is next proceed. Our with Please Wells Shaw Fargo from question Securities.

Jared Shaw

Hey. morning, everybody. Good

Glenn MacInnes

Good morning.

Jared Shaw

growth accelerate? and starting Does we stable from that lot right some the sort of securities? in of we that's Maybe a assume that or securities is mix are that where of funded that's and guide. Should NII out of Or now? of with loan loans cash assume cash funded

Glenn MacInnes

Yes.

So XX% it between to loan X% growth. assumes somewhere

that in securities middle. of fund that. our does right are. think X% assume where It say will portfolio our the can But you I So part that's we some -- of all-in

So there's some borrowings see. as expect well to you that

we drawn levels -- our know, as quarters. down not couple are the cash last We have of you for

billion. about XX portfolios So our securities

where phase longer. we'll the as now we start reached to realize So that

see down probably securities If the to portfolio start little a bit. temper you'll

Jared Shaw

Okay, combined at that's the quarter-end? color. basis what And a what was AOCI was -- on good then

Glenn MacInnes

So total AOCI?

Jared Shaw

Yes.

Glenn MacInnes

- Securities? So From

Jared Shaw

please. Yes,

Glenn MacInnes

impact of of the securities, that's after-tax, The $XXX if for. So what the looking the you're million. valuation securities impact

tangible from out, includes impacted unrealized equity I of really strong. portfolio. that mentioned And we on AFS XX -- the X.XX%, that basis point ratio started so the That common reduction loss

Jared Shaw

balance when that And down actual at you'd Thank mentioned look quarter, Okay. accretion, more this What -- That's was we of on great. were expecting? the Gary. you were the accelerated paydowns? the guess Was the what pay I than then you.

Glenn MacInnes

in So that comments. circle on back office I'm the with we I prepaid my General had on. balances it associated not was that about loan I as actual balances sure these mentioned in you impact think accretion $XX with million

Jared Shaw

with just the finally, Okay. of that Thanks. or charge-offs. credit current? then good good. qualitative ratio That's that me, reserve the -- there is the forward? for we into Brock's still move allowance on for loss the And as the for expectation What's the following about larger up are a we question tied

Glenn MacInnes

we'll coverage well. I loan continue we're stable I ratio guess that and think we quality, ACL macro loan credit are to expecting mix, growth monitor XXX at and like as

conservative portion things I is quarters. it somewhat some there of couple think that next on over until see of a play we his we're on and John comments, being hit out how the in qualitative

John Ciulla

Yes.

on. spot that's think I

think I reserve to review conservative. we relatively it's about the think other we way said, really in good say, as Glenn

think going lower choppiness think the to do if that see But may level it's uncertainties of down is reserve an I right enough some that be a now. forward there there do the opportunity war, bit. settled of some the going of reserve we forward, the choppiness we other kind

Jared Shaw

lot. a Thanks Great.

Operator

Tamberrino proceed. is Securities. question next Please from Our with Wedbush David

David Tamberrino

Hi. Thanks the question. taking for

leverage about Could historical details narrative some contracting enters question whenever exposure. equity You investors any Can you comfort a by equity to can is, seem to talk economy rates, leverage you mentioned private there outset give provide your stats to at the cushion Webster multiples, for and I the off loan is the about to recession provide to rattle you what exposure sponsors always loss the guys. contribution there? related get you related and

John Ciulla

it. a is was Hey, concentration of from balance we ask going other room and that to to bigger to for seem were reasons running portfolio but the another it, didn't specialty one script, it the wasn't but the been having talk one my from we in about were blind my more we've approach -- -- David, your GDP perspective under a of in I to contraction transaction way what And you talked this prudent the next and I and on. promise want colleagues me hour sheet gives because we minute to manage stay like that, sponsor about under love could that we again, a blond,-- last question. benefit of I here to it management I won't. doing

roughly may as before, tell that defined of will rest portfolio like pandemic much things crisis, rest there great not market both level the leverage like-credit held that feel was while really involved in it through the the be of better we're as -- talking entire loans volatility portfolio goes quarter-end, our you that's X% syndicated at I the So of to regulatory in in or in performance involved it the deals. of -- the we've definition risk through that of of financial of the than the large said We about. and you're performed historically to not times, rating portfolio organization with it loan the some at

We healthcare play tend group our have center, a technology lot group. of healthcare really like group, sponsors. that and good cash like repeatable, like to long-term infrastructure data have equity areas predictable in relationship protectable, services and with our our flows. We private

So transactions. flow, are did during they cash of companies of to normal in well. say, deals a be these actually do benefits tend real covenant so that have during firm the takes light keys. the your any don't cycles is you to And debt, lot that it there say we to have lot and obviously, one company's of those to predictable We underneath performance pandemic, senior the or here private is equity are right the added in we're a paradigm you cash want hey, equity a give shift

firms great the in for with tend work equity some literally gets and really we so, where work these a debt than relationship XX to equity a outcome. years private good and senior And the have cases, more

again, that's long it, underwriting also but $XX market enterprise area. in sometimes portfolio, a I we a we to billion have durable where So why it and I strategies think so collateral I underneath asks loan think and to that it's question, are. right-sized, hard reliant. had the our time doesn't is believe, It the of and And X% always validate

David Tamberrino

Thank you. to Consortium. on to curious helpful. opportunity was front? over deposit guys then, spoke And USDF you there, I particularly shifting about talk the the can you Very the

John Ciulla

Sure.

[Indiscernible] a we're number the We've Let great this we're me And take looking the a former of group, a Innovations there. step back CFO of Group. So things about at Sterling. in excited leader there

and to terms two-fold, to to to In and look existing and to And the it don't significant built-in pools. continue short-term. digital on Consortium lot it's retail around is, we and businesses goal apply strategies and is, including analyst bank a distributed to Consortium way What activities, revenue expenses reality The a which and any the ledger try effective the then efficient is to an an I Obviously, get our example, really for banking new use is a profit help consumer distributed of have like. of on augment blockchain. the -- perspective, in digitize through our have ultimately and guess, banking, ledger and discover in cases. this service as direct not drag we from a

effective, in strategies. specifically chain, end-to-end mortgage, technology think could off quite be a other on work and cheap, Consortium, a of or to little So think relates storing correspondent can of you work And we payments going could the providers, with trading the think and you of to banks, XX-hour loans you slow efficient as process we there's with as as walk with regulators, we the frankly, bit work the it

Glenn MacInnes

kind moving forward. on of

of landscape. the and the I direct are regulatory the technology, that just working of nature benefit use development won't the also mentioned we of those aspects, of the through just see the all it's expectations risks the out cases because immediate but all So figuring

and it's from factored exciting XXXX financial statements. of we a that us a lot benefit not So things will but perspective, into beyond our think XXXX

David Tamberrino

very much. it. Got Thanks

Operator

proceed. Matthew Please from is Breese question Stephens next with Incorporated. Our

Matthew Breese

morning. Good

Glenn MacInnes

Hi Matt.

Matthew Breese

could to feels go the it given for rates to year quarter? guide, billion help $X.XX that $XXX for rate but want be with north and of the help I in the the home can maybe the higher you exit It NII me doubt. and core fourth asset-sensitive you sheet, curious should the your me NII of million, expectations thoughts like balance

Glenn MacInnes

in net the income quarter? the You're exit fourth rate looking for interest of

Matthew Breese

Exactly.

Glenn MacInnes

Yes.

million. the range is above of in prescriptive, I'm not range going So be the $XXX to slightly it real but

Matthew Breese

Okay.

Glenn MacInnes

I'd I'm in the use to $XXX to $XXX So million that. range say million, of going

Matthew Breese

Great.

have estate, started front the Okay. real you all? on at today, putting feel pressure, And deposit are pricing, then the And even on loan traditional books commercial what new oppositely, any the yields to blended you're exception-based then C&I?

John Ciulla

really, no. So on on the a I'll second government side, easy. And maybe question but first. That's and on otherwise, not select then, deposits, first the circumstances take question few is rates spreads. that the the

there through but pretty asset some organizations, as disciplined, try been think remain go legacy it's the As both and variability is you different we I always for, classes.

estate specialties, about higher talked being on plus getting L I commercial sponsor high-quality leverage institutional say, you're X to real in of range. So Obviously, yields done. those loan. I'm would looking L much and we at plus the estate, XXX some real on commercial

one mix we in So is given of it's the quarter, any based about originations kind usually quarter. that talk what upon when in

category, is while have saw it meet We competitive pandemic, just better kind hurdles the of some in which our And on there, have but lower. not that obviously, ones lower return And capital business are the is evened competitive, that ratings dramatic booking. out very out, compression. on is before of -- we've question ones and a risk seen loan able and very We allocation still capital really obviously, the we're rate which the in yields these to it loans. it's not we're have it so

Matthew Breese

Got it.

And out just more of Okay. one then the last me for is curiosity.

or way predominantly legacy that square that? savings of And course could how XX% headquarter You footage footage much in us just said is? to what corporate by headquarters were from you corporate double cost for going or is XX%. reduce square to the Is the frame Sterling's the you

John Ciulla

in Yeah, million more on than our where we people around either our official and everybody basis is is. we're headquarters. exiting to annualized it not headquarters really $X related we or changing I -- before moved did headquarters. have --rejiggering actually an markets think And it's Waterbury We we

are all We've using in a of one through working then we call have in banks. center. people terms markets move got also of overlap Bank we're locations York reduction process of HSA taking call our because and do Webster center, remote, lot an the a -- the New forward. significantly merger And of because centers less into trying really multiple campus building from we have And And of lot which that have we efficient an a call future a to consolidate. space and a more -- moving hybrid between efficiency Sterling we're is going existing work, where what those footage an activities. perspective, trend. two in before to model basically offices. Matt, we're an the in And to will center, it's legacy We of the terms of of in center different just because model things call square legacy in going is a started our call even the or building industry the have

cost we're centers also to big So footprint, housing able space, reduce sort time. over office of

Matthew Breese

That’s Well, appreciate Thank you. it. Great. I all had. I

Operator

Instructions). (Operator

next proceed. with Compass Our please Laurie question is from Point, Hunsicker

Laurie Hunsicker

question 's equity? I billion to you're morning. X.XXX loss if back AOCI. of Jared AOCI what wanted on good the actual you Hey, to go Can is see dollar

Glenn MacInnes

at you after-tax we're is We're maybe spot common of it’s sure Though of a is equity that look And of would reiterate, I way to the I it, loss million, concerned just loss. coming is, mean, will $XXX unrealized about from I'm some X.XX%. not of tangible this Laurie as loss, and I are. unrealized lot this talk

XXX For XXX impact the the can basis immediate common ratio probably basis tangible expect you points, every points. equity would curve, points by basis XX shock and to

in So that we put perspective.

points got a XXX You shock. XXX shock, basis basis rate points

your X% above be tangible equity still would ratio. You common on

as about be to not you. with So we're understand I talk about it I honest concerned the concerns the understand it, but and

John Ciulla

And perspective, increase economic would obviously on side rate that -- from an would the significantly. help us revenue

Glenn MacInnes

Exactly.

Laurie Hunsicker

tangible at wanted It's want because tiny just bucks. this we make only follow On get valuable. I I've all interest that look income, you've I No. obviously slides right. just given, net the and one clarity sure more interest the you, hear margin, became clarity your in just got marking deposits to appreciate but obviously net piece that. on to we I

on guide in million first is year million for Did So to of income I $XX.X right? $XX.X the the the quarter, hear full million dropping which your in that was accretion quarter. second $XX

Glenn MacInnes

did. You

Laurie Hunsicker

Okay.

Glenn MacInnes

is this -- this contractual. spread based on -- on And is scheduled -- these are -- out based

and that, prepayments lumpiness [Indiscernible] there's stuff the Our so will be this. there like -- in loan if

that, that's for can You expect sure.

Laurie Hunsicker

the absolutely. Yeah, appreciate I guide.

margin, margin. it headline points headline was XX together, to next Just your XX quarter, that your it on again, basis drops basis points this on putting quarter

Glenn MacInnes

Exactly.

Laurie Hunsicker

Is that right? Okay.

Glenn MacInnes

No. That's reconciled.

Laurie Hunsicker

so to And or then quarter, per going fourth falling million X and extrapolating to you're million quarter a or -- that's so basis the be then by so. third you're points million $X $X to $XX -- $XX to million

Glenn MacInnes

Yeah.

Laurie Hunsicker

Five, okay.

Glenn MacInnes

quarter, think accretion; I is the fourth between my in calculation XX XX. basis and XX by probably about somewhere points

Laurie Hunsicker

PPP okay, terms this helpful. of -- between Somewhere interest that fees, And what super net was amount dollar then quarter income? of in that's

Glenn MacInnes

was It $X.X million.

Laurie Hunsicker

of? you've And do you know got how much remaining

Glenn MacInnes

$XX quarter. even million probably in which the left will just in second off balances, run

then. be it should through we So by all

Laurie Hunsicker

Okay.

just about probably million two that? you fees PPP on left or of have a spend So

Glenn MacInnes

Very Yes. small. It's small. very

Laurie Hunsicker

Great.

well, you Okay. questions. us little talk income, -- bit about a can And just two to then on fee

[Indiscernible], some got you. drop higher looking I just forma of something [Indiscernible] has sort know of I First, some at than specifically or that. pro was a Was on there's Sterling like that? there or mark sort

Glenn MacInnes

there. mark should don't adjustment be There a no you're there. looking, I no No. not is there if change. There's

Laurie Hunsicker

Okay.

How Great. could Okay. fees? just we customer-friendly see change that can line? comment a maybe income, could we about that when OD how income And was to impact approaching timing on little fee you in much then bit more when that NSS the see the quarter, you're and a non-interest

Alan Herman

like banks on rest set. we're product the mean, the we two harmonizing I Laurie, combine in industry, as of working integration obviously, Sure the

not needs it have So in XXXX. is we're a in and product everyone consumer else with consistent meets an I on that's consumer-friendly industry. will actually obviously say the impact working creating would

of than thing are recognize aggregate other our revenue. is fees X% total important less to that The OD

organizations. than less two So the $XX across million

it we financial our material won't have new impact so any that over see won't go have time And products, a performance and on impact you'll financial really think in performance, our roll-out it I down but on XXXX. as

Glenn MacInnes

Laurie. And

double could may release from at as have because Were that because that volumes. I just statement in -- press only income back misunderstood on it. have our Sterling me And you looking Let on some your months question two the would

Laurie Hunsicker

Right.

Glenn MacInnes

So that's -- probably would

Laurie Hunsicker

Yeah.

Glenn MacInnes

did -- looking miss -- I thought at I sheet. Okay. you were I the balance

Laurie Hunsicker

I know number the at was I in wrong. income back look the I what, and go maybe change Sterling grabbed you no -- there's at that. looking No. that will if

Glenn MacInnes

Okay.

Laurie Hunsicker

wanted then And fees, right. ODNFS the sure make on I to I heard just that

annually, combined that is for $XX a million about at on running of both that's right? So you basis

John Ciulla

aggregate. In

Laurie Hunsicker

In aggregate.

then And one Great. great. for is last obviously is your me. credit just looking This so Perfect. more question Okay.

last anything some commercial one was that charge-offs been was around of -- jump running, of was that $XX.X was or million Webster, not it's vintage color what growth of Your growth, such net, XXX,XXX, most last and from from that? a Sterling specific, any quarter quarter

Alan Herman

Yeah Legacy of I will vast -- Laurie. was one it about the Webster I majority that say was don't not It up and credit. made We're credit that one talk it that, was -- with specifically commercial charge

Laurie Hunsicker

Okay. Great.

Alan Herman

-- it. correlation no other interesting aspects or in

Laurie Hunsicker

you Okay. give billion. just Great. gets around what's remind rank you And Sterling's helpful. anything on are, you. book, us it here. got that around around just, little then A to respect Does refresh, bit $X that? last your of multi-family sorry, control, color could Thank little one be us color would question just what With a plans if you've LTVs any can

Glenn MacInnes

very about of has Thank LTV average you, economic X.XX%, XX% and origination and Laurie. It's well $X.X coverage weighted-average performing profit. on generating a about of It ratio billion. a service debt at

So I we'll don't Thank think changes. any originate business and opportunistic. you. are a Obviously, actually strategic to nice there, there continue have we where

Laurie Hunsicker

Do control is there? you know how rent much

Glenn MacInnes

-- I all [Indiscernible] don't I got

Laurie Hunsicker

Perfect. so Thank much. you

Glenn MacInnes

Yeah. you. Thank

Operator

RBC question Please is from proceed. Jon Markets. Capital final Arfstrom And our with

Jon Arfstrom

me of I squeezing have Great. in. Thanks for only a couple --

Operator

Anytime.

Jon Arfstrom

versus rate is, questions. see of next can that couple environmental think the a is term the couple couple a the of about, I XX%, over have you're how company? much question the company from of for only growth potential we this my to long of X of kind guess I John, rate years? The years do talking the growth you of

Glenn MacInnes

grow some the because interesting roughly those saw been it's And that we've business and first opportunities, historically the our those true. but impact great remain loans, mortgage that particularly a that quarter short-term six mentioned or can seven on and Obviously, benefit, maybe CAGR exposures. question. years. you I'm this growth one we've base, the we've simplistic balance to I predominant could bigger fundamentally enough to pull we the quarter we in able all growth leverage, All a at which and believe of been an rate niches leverage year, felt I having about verticals on given risk in earlier, the in but have change, bigger us. up portion my balance this single-point script commercial any in of things quarter, like of have accelerate at annualized now sheet you least for make XX% as the the bunch the That's sheet without from a -- not it got to on who geographic push warehouse followed enough in of --

gets various least we're with Chris the close as an what are Motl we sheet get bigger, probably and company But balance dictate, the with it of My we this I as obviously my growth. high forward, say targeting loan mind, at the ourselves, we double-digits, may teams we loan to commercial still year, think try is annualized on leader to get to XX% more Commercial market have, with now Banking and challenging. in can have, my basis? is, conditions Going the if going we single-digits attract, businesses will growth the guess that Head right think, we smile, how of to

won't bogey in mortgage some overall XX% environment But be I growth. normalized our which think that's other expectation on forward. consumer categories drag as economic less, just we which should and a of still realistic are loan the move market to allow the because it, a sometimes down Now X% could not

Jon Arfstrom

that's what work on learned on? real And talked good you've to from a off-site. activities? about need do work that. what culture well of a just then soft gone maybe need curious far to and question, from Okay. way Good. serious, but a those one. And call. It's the And shaping then What question, do what's so I'm But the you you last Thanks. to end kind you guys

Glenn MacInnes

it's a Yes, question. great

technical had guarded pleased I thing, couple be wasn't. I in originally mentioned that wait it's know it I you're would roadshows, of for four term, a to I think couldn't I it say level out have if months where our situation of other the if folks I that level be executives hardest I each and the sucked, a and months and non-deal asked more you the more or lining and anticipated was to close from you'd on it sucked, what date. planning I in work across silver four and the X or X meeting together terms building that of we any was, the more organization think fact figuring But trust.

I've what to the it that operating really understand as about and really, mission We I Half before do, were question need come pleased. make them, on ground what those have to what time was grandeur, together different went when that perspective. wanted solidly. and all to But the bank a each we running. I trust definitions of about banks, spent think and We we're the to versus trying what it the the that referring are helped. accomplish. when we around been operating direct that we and think and and the Sterling. of believe I want all sure understand we be these we're as Webster to we the hit same were, page. a legacy There's as from we things will a of get really we values and means be making careful we from we practice still we're We either you are different saying, expectations, actually bank's purpose I coalesced collaborative in, while don't leadership lot expect people tell really had of you too well about my so a no all went behaviors we've reports really get banker team, like And behaviors that so, take Webster fact we've into to legacy culture the to that or us rid time legacy to of sure realized

we'll days working it, more but So into XX keep this are reinforcing with couldn't we be it, where I pleased project.

Jon Arfstrom

lot, guys. a Thanks

Glenn MacInnes

you. Thank

Operator

our This for comments. question-and-answer I does over closing to would conference session. management turn like the conclude to back

Glenn MacInnes

everybody thank day. has the company. interest want their support for and continued I Yeah. great everybody to of just in a participation Hope

Operator

does today's This conclude conference. you. Thank

your this you your participation. at thank time disconnect for and lines may You

Webster Financial (WBS) 28 Apr 222022 Q1 Earnings call transcript