WBS - Earnings call transcript Q2 2022 | Webster Financial Corporation

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Operator

Good morning. Welcome to the Webster Financial Corporation Second Quarter 2022 Earnings Call. Please note this event is being recorded [Operator Instructions]. Comments made by Webster Financial's management team may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to the safe harbor rules. Please review the forward-looking disclaimer and safe harbor language in today's press release and presentation for more information about the risks and uncertainties which may affect us. remarks at found investors.websterbank.com. management's Investor the accompanying site Relations presentation can on be company's The I to Executive Webster now Financial's will turn Chief Officer, the John call over Ciulla. Mr. go please ahead. Ciulla,

John Ciulla

joining to results call. a I other Glenn think excited progress start of morning, am turn thank including Good initiatives, morning Chantelle. some you speaking on overview am on going our environment. results of on the you, outlook. the earnings you Slide in our a to and integration I’ll Thank the X. at up quarterly for quarter macroeconomic second us with with and this be the I’ll for to I strategic as our we of performance quality illustration perspectives focus comments and are our potential the execution, the over as with it financial great our dedication I review and level progress for a colleagues’ company, of additional quarter, the I'm end of a quarter’s and put the uncertain the we the then high few it team they our of wrap our integration. together and through review

strong adjusted and costs, of with EPS second mentioned advantageous capital close on return rate of of of sets our $X.XX is our just I basis, of franchise XX.X%. diverse full common an following core equity the led ago, an return is growth, first and team environment, and quarter a deposit of HSA we consumer with exhibited the banking On merger-related of maintained loan X.XX% of a our tangible potential. we onetime materializing eliminating moment merger great company As Sterling. rising a and reflection Bank generated by The position. new a a quarter the Webster's our power earnings in quality We the with

merger our continue the competencies to provides as of diverse synergies execute efficiency our on the was we XX% company. and ratio Our leverage

verticals, the asset quarter. industry lines, favorable. quality loans grew Our our total was broad assets and and grow can of geographies colleagues loans. was and industry The growing prudently growth number business to this merger classes, equals Loan X.X% safely talented rationale continue respectively expanded our stated and I and straightforward, and asset relatively metrics remain geography generated times. several in an behind a of as With across is X.X% and sectors,

company including a created have with Bank funding HSA franchise. We diverse our incredibly profile, an

the we XQ, laser and rates. drive of to broad materially continue achieve two above proven fees. In We asset in combining bank have bigger day-to-day businesses, proof and revenue classes remain points swap and on key our markets also a at cash of maintaining the validating while net we to balance existing revenue income, On growing clients the operations deepen interest of sponsors companies. and management across power and the to relationships a early momentum. and our the geographies market our or improve saw colleagues integration, Slide our capital focused with milestones X, we track loans set record growth of With a sheet ability

our completion XX% or year evident in this at remain to ago, to $XXX financial quarter. to ability of and deal growth, we our key in forth Our was saves expense the conversion annual ability first announcement We including set two achieve the million XXXX. merger a in loan X% both do mid technology confident by years the over metrics exceed over

time. investments not profitable in that and franchise away While we will return from shy growth high profit and manage we continue differentiated, add over economic opportunities, remain synergistic on to our for businesses value look expenses will and focused

across initiatives to mortgage consolidations servicing, continue lines. and to making payroll. our including several We see systems, talent on the corporate structure team, great our office quarter, executive outlined treasury of finalized launch opportunities progress high and consolidate began key we're In back we we last performing office business the to all management quarter. and second management of We attract the

over our been affordable ability to review quarter. it the have Collectively, program of going quarter, to and announced other increased I'm investment and turn and performance provide development, given in community communities. a In Glenn office for investment, to the to corporate establish billion formally business Finally, and With an that scale, includes responsibility sustainability $X.X have work. financial we oversee philanthropic community to three our lending efforts that, community small housing company's our community more the we to able efforts. we year philanthropy the investment engagement for

Glenn MacInnes

good John, of everyone. common with GAAP shareholders start Thanks, and of We earnings will Slide morning, $XXX the I with on reconciliation net core reported to income of EPS $X. X. million

net of after-tax consolidation, $XXX to EPS shareholders onetime income and As The of related which estate were of adjusted million. real an reported we and to and other excluded merger $X.XX, John common charges. million $XX noted, charges on severance onetime expenses basis, integration

$XX.X before billion. Next, were to statement. billion total the trends our balance Slide On the moving and of billion, total total I'll assets with income $XX.X on loans $XX.X X, deposits review sheet of

grew balances a total, public which Switching $X.X the Slide later growth, balances in linked strong or prior decline diversity the C&I basis and merger linked with largest the due million. X, categories. to mix. our X.X% down primarily $XXX contributors The with of was driver Slide delivered or we quarter of I'll the in of effects On in on see, on $X.X public deposits on were seasonal loan the quarter-over-quarter deposits Total basis. $XXX a billion growth we increase with to loan commercial deposit cover slide. relative funds commercial a By estate $X.X to post primary an which to highlighted residential illustration potential category, quarter. by funds, Webster's on a X.X% is billion $XXX and real decline with million, seasonal quarter declined X. consumer you In mortgages loans As detail billion. of we million more business The was in

We quarter. higher effectively growth the as were liquidity drive expect Short borrowings deposits. and to quarter in to up funds fund continue Portion HSA entities. X.X% the as on term rebuild, in see year-over-year. a of the at public third paid quarter to leveraged will a public and tax reversal we new flat gather were down collections deposits borrowings be

deposits becoming that mirrors book third-party TPA of X.X% impact overall runoff an end year-over-year. state. less significant administrative Excluding much is as accounts, The growth increased on an

is item Slide review the in on Beginning our pro provided on XX details income income of to earnings for our We Slide I'll appendix. reported compared X, adjusted statement detail Bank our and items statement quarter line to earnings. Additional forma HSA first quarter. by adjusted the major compared exhibited the detail the quarter-over-quarter a subsequent improvement our Webster items in results Notably, on I'll individual on aggregated to income line cover slides. of each on basis of an line of the last the more adjusted basis, when and Sterling statement.

quarter. ratio XX%. a million, adjusted now the Net Our interest when income margin pre X.XX% was results. income efficiency reported basis on periods, Adjusting on XX and basis first Net compared combined On to points net for accretion forma interest million combined in up by was million relative excluding interest $XX million Slide net X.XX%. is accretion interest income, X, to basis $XX.X grew our net quarter provision margin, to quarter-over-quarter. was both up $XX.X the $XXX revenue first increased an pro

expansion expect our we the to year. current the throughout margin further forward curve, Given net interest core

increased X As illustrated on deposits an basis of cost points earlier quarter-over-quarter. slide, the

in We deposit $X year-over-year. On driven $X to to of duplicate the by XX income expense finalization $XX $XXX materially quarter. on performance were macroeconomic basis. to our XX, individual in John provision The as the costs million commercial and million subsequent of is and were lower an on increased losses a driven pro increased was related and corporate interest flat. rate driven Fees initiatives pricing a move deposit pandemic adjusted and by Slide including a expense expect structure, allowance we certain by future also activity systems modestly update, by highlights will noninterest was on show variables. outlook increase basis, was relative impacted summarizes last quarter categories driven with primarily reported deposit forma $XX estate allowance customer in We offset income year-over-year start recorded million Slide the linked quarters million the relative growth. the hedging partially expense elimination in integration org The vendors. fee for by in where Slide decline consolidation transaction periods. credit year-over-year of which On improvement $XXX in actions. Year-over-year million fee improvement outlined up loan improvement a the Fed for expense. activity fees reflects expense our million also more adjusted mix, provision loan quarter credit we bank. of XX The real our in the his and and

As fell X.XX%. a ratio a of result, as the allowance coverage percent to loans

stated with we and credit at Net points repurchased metrics basis to quarter also of charge-offs point last strong. excess be decline of previously $XX and delinquencies strong basis million resulted earnings. continue million in our see and We regulatory the to last going which AOCI The a $XX $X declined well tangible forward. XX remain levels. repurchases on quarter the X from remain loans, this classified would strong declines highlighted Slide million by our offset levels. internal low ratios remain in $XX.XX, linked targets, value capital in reported Slide million, you to effects in assets by targets. with note All quarter. both quarter share, opportunistic our from share over the primarily capital capital down decreased highlights net driven and respectively. repurchases As XX, we'll Consistent our capital per X and and can quarter slight $XX partially losses, book of declined all shares I in X underlying million nonperforming our

I'll a our diligence full for from to XX.XX% Our internal We year common remained wrap strong portfolio. metrics underwriting at above generation and of return and strong XX.X%. ratio the on the anticipate marked capital up on comments still sound our will well is well operating loan given outlook shareholders, equity term target my refresh our profitability, X and prudently minimum ample XXXX. with capital opportunistically improving we reserve Tier credit

environment We scheduled of interest purchase which are realized loan increasing accounting the can $XX excludes rate our our by of to and growth. million outlook income on in for strong be the details year appendix. XX Slide and found This the driven full projections guidance net accretion, $X.X billion, on

at our year near reminder, is points implying million. the top Our ends loan growth increases. our And income now another interest XXX rate X.XX%, be basis. as basis We in X% the Fed non-FTE end be of projections of a to to a XX% assume a million Fees to range. should range $XXX funds rate of expect $XXX outlook the on

confident to to John to turn full feel of expense tax to are $X.X we With $X.XX We remarks. XX% over will our I'll being we in businesses, forecasting rate an monitor course billion. continue closing that, inflationary back our to of That XX%. headwinds effective continue things to continue achieving adjusted invest for billion in said, and year target of and

John Ciulla

merger, months Thanks, closing Five progress. made we've material Glenn. after our

year-to-date are products ton the two merits bringing a we organization in have growth of and the of this annualized we Our commercial bringing classes systems, basis. companies in We've unique year. reflected capabilities and processes as and together, has an created strategic loan While with front us XX% bank of on together accomplishments portfolio grown operating work asset far is so one our a

We unique with have engine. funding a bank the

the short basis this while the pace. a us significant capital increasing since capability. have the costs rates to million fast a provide common term bank equity we time, The deposit of At Our at flexibility deliver increased quarter. returns. with over have this closed, move $XXX we repurchased capital generation tangible superior with points We've all adjusted same we quarter return over that created X levels is maintaining Fed in the Webster illustrates as And forward. transaction potential shares outsized on [XX%]

address I and want do environment Finally, to operating preparedness. our the

increased on today an peers the feel tangible As headwinds things despite good have recession. and our many of macro ground risk of remarked,

in well maintained consistent management a have and any us that risk prudent framework We serve environment. economic will

and we harmonize the it portfolio relates organization. we have credit, platform tech in able eliminate consolidate been consolidate diverse as is in the risk in plan quickly to credit management asset businesses new our I'm very pleased quarter. portfolio to to merger with and the Specifically serving our concentrations how classes, across actually geographies. loan third management with to practices fact, And

We of with losses have proxy quartile a peer peer loan top robust our allowance in coverage for the group.

benefited from work party marks our associated the on last internal diligence We book. incurred We loan have year. on portfolio loan third with and accounting purchase merger

capital forward. provides position flexibility We generate have shareholders this the during well We work all our should to regulatory both and short, generate environment. strong in the In moving and believe ratios term. now our continue process quarter significant our colleagues solid give operating execution long to of the their buffers and and for I to significant tremendous to operate macro and a cycles Webster our I minimums, in to want questions. of result our changing hard an of capital integrating direct challenging constantly of us big will a and to to substantial excess that company was through all adapt this colleagues, believe a Operator, strengths company above take thanks the great returns MOE. the Glenn efforts. it's near We and very we believe

Operator

from [Operator McGratty with Bruyette, Chris first question Woods. Instructions] & Keefe, comes Our

Chris McGratty

just we Glenn, portfolio deposits. we've of trend thinking quarter And you to risk, just kind should the outlook you in retention commentary funds. public about sheet. how that improved maybe all challenge growing of be is this on on might that be the what see start could the funding at of I'm noticed appreciate guess I I the a interested an comments with and growth? this in the about deposits, balance

Glenn MacInnes

it. how we're here's So thinking about

funds, funding as digital in side, $X.X we us. about commercial. back will billion. mean, [$XX.X] seasonality, have I So that to to the pull is talked we're levers public the that's We at whether billion But think about going it's -- come the in We which deposits. so mentioned multiple we that's past, to on or

be we elevated of all we're coming so some it balances, the somewhere around funds put new liquidity loan-to-deposit begin deposits, at end some down. XX%. and DDA like total think represented at and if that of channels we ratio factoring all attract [offset]. are if our that And partially And day, of still together, you it we're But a will those the because that to think the targeting we'll two look in you things of

Chris McGratty

it And of more kind ways fair you to of profitable the that in terms lower assume gradually [it] is portfolio, investment as works find kind of to…

Glenn MacInnes

Yes.

our it's So $XX assets. XX% of billion, about earning

probably the so And drift time, that to think time probably But will time of a that's get to and XX% over primarily to like some through prepayments there. we over down going take level. flow, course cash

Chris McGratty

just back, last Maybe hop the on combined just me remind a and cycle the you're betas. you company? what the Can one for assuming through I'll betas

Glenn MacInnes

be that we're closer takes into the four would new various base have. the a on that would deposit over that the effective XX%. capturing think from to fact deposits we we channels I effect look, So next beta think full our quarters, And

that's So it. thinking of how we're

recall, about were quarter underneath another quarter, us. now We You'll last XX%. we have

we're thinking [four] that to And be over would process, so XX%. it a probably quarter close

Operator

Our next question Fitzgibbon Piper from Mark Sandler. with comes

Mark Fitzgibbon

I those wondered like line commercial first what now? us look right share if could utilization with your you rates,

John Ciulla

Yes, they're improving marginally.

were they up they in June, So about up up In X%. March, were about -- X%.

from X%. seeing June From they're they’re last the from about about -- June, we're quarter, So X%. prior up up

board. that we're So seeing across the

the we see ABL think consistent capital sign where of working And I kind it of of kind the we're seeing industry. that's with changes. best in

Mark Fitzgibbon

more deals recently. think book continue to you kinds priority And John, likely competitor if a Webster? secondly, curious the be we'll kinds a you these to you for small saw ahead, whether a these some sold transactions? quarters know of And I'm -- HSA gets then how of we in it's of see

John Ciulla

you pretty five transactions market. great I of player five transactions, on transparent value all top the the we've Mark, these and a obviously Obviously, own that's the are XX% steep. the Yes, top We pretty and many as think and it. see of question, pricing the the been about know

it's to So I'd say, yes, us. a priority

You to cost we're do tangible a also acquisition, of we acquiring portfolio can book Bend saw technology a and trying value it balancing be with disciplined deposits. dilution and of us which But was other against to respect combination that the lever. the

So the priority. answer a is yes. significant It is

You've seen deals price go won reason generally we transactions. those some up in has the of market been and the haven't

Mark Fitzgibbon

footprint where areas could your prune? if which you you potential then I about geographies And maybe look franchise and bit maybe little see to best you having wondered lastly, a as the might and growth talk

John Ciulla

but sounds the of really, like felt all levers at the answer, working is quarter this time. always a evident was kind truth of really pun It I same

legacy think specialty commercial New in real you so concentrations, and some areas. estate sponsor City, the Sterling Webster, And about at in York

And of activity we're was all in and quarter areas. seeing broad so this a loan growth strength and

what cyclicality, more way going is the real businesses in or specialty, we and businesses, real there more Cyclical we're potentially at So even say little the it's shift to market businesses more that office, both real as our back. on where higher we're opportunity, classes our to a obviously whether people we're or geographic a bit I core not any there's public I keenly of retail are would supply footprint, asset or to commercial risk like careful. middle looking chain looking being energy in work. sector where and prices, estate or disruption, footprint, businesses national like don't with areas say in paradigm see would we sponsor regional finance pull core concerned see geographically

now, reducing more the some borrower office, eye origination those are specific robust keeping more areas healthy. than an in in we're and a it's So of all probably new I would geographies cyclical And sector, any businesses, right of of our where on and still say couple industry besides more geography.

Operator

question comes Our Alexopoulos JPMorgan. from Steven next with

Steven Alexopoulos

Chris' side. on deposit follow first wanted I to the up question on

you a you pointed more to support XX% growth? diverse your forward to to give going right? loan-to-deposit generate have ability which deposit Glenn, So you fund You're cost category deposits, we is there. low and you're Can expect ratio more base, But should color basically target, on which fine. saying loan

Glenn MacInnes

think it's mix, I a So Steven.

loan was deposits get of have to loan-to-deposit we so XX% of of strong we And expect pretty back about the in this year. from and some by like X% driven of the the funds. ratio a part the texture and back decline that municipal And public gone to in do XX% you quarter, from come for X% growth, the that

I think of be be to the type treasury on management whether us and key are accounts. to in business, going whether digital channels the it's commercial for are transactional going it's or

We the HSA the enrollment in the -- of too, we'll get coming course natural will have into four quarters, we the over have as season.

coming I because pluses from channels, now. elevated DDA I so the it's also in multiple I in a of offset have have right And think an lot of but sort

think, So can we you or going what forecasted the our us bring to That to quarter, deposit did going raise our is is -- be combination beta loan-to-deposit the we to of that quarters. as said, see first over those, four XX% from ratio. what's being increase I all mean, I think

moved XX%. mean an funding on closer that we quarter that to that doesn't was heat source But over things XX where a the up last a to expensive see be XX this little is to now more, deposit we've We're but So side. of bit cycle. for starting thought going quarter

feel are really thinking you which the end So about as top we operating now. all quarter, to this feel the about it's stated we right at we're and of in range. our that's where And loan saw we confident fund growth, how it

John Ciulla

a context perspective put Steven, just well. from as I'll business

really banking lot in vast are full Glenn a and new As our of in logos, those deposits outflows deposits new of and lot commercial of make deposits. was teams sure and see, loan a reduction cash sector relationships the also require of we companies, as relationships public seasonal from a out mentioned, you and X.X% to business there with lot management. adding, new can government the majority We're growth,

environment see natural because that deposits, number growth Chris a Motl But of that the we relationships, a you'll in continue a make roll and we're to right liquidity making from deposits is to in So and focused the perspective. in have on sure because out of deposits. macro more able maybe not pricing of what's can commercial folks are on these raise bit there our refine now, to going sure

Glenn MacInnes

our right thing And the closer for elevated portfolio level is you I We probably as last XX%. natural that know, think our would investment to at investment is the add, Steve, now more is XX%. portfolio,

cash And $XXX loan the about which so as that's into growth go million running fund we the well. quarter, flow out portfolio, to get going the of investment as a is to

come And that XXX so off some the we're as flows picking that book. but basically will basis on more it up take to XXX, trade loan points time into

Steven Alexopoulos

about for a I want to Bank shift minute. talk direction HSA and

So party not stuff. after again if environment growth engine went growing basically growing as you if much the versus what's even I transform do slowest look or we to this need and at the the company? structural adjust for the from year-over-year for growth cyclical of to third segments How administration the a into see fastest your one the metrics, of of segment I the one this fastest downshift

John Ciulla

we're that's a a it's that know And on think Steve. you think great I because focused terrific question, we asset. it

through, relationships. we if of at winning in with pleased think showed you cut a to the data execution we going really really that said good performance And terms RFPs on-the-ground in kind the I and of direct-to-employer do that So we're market. out

bigger our bit market. providers of relationships health care than a slower have with grown Some little

growth points XX% business. of of couple we've So And single of more given result obviously, by of teens. market, all the digits, the percentage kind slowed, has is industry low mix our of trailing been that from high the rate that towards the net whole that HSA a

So slowed. it has

is industry low deposits. still those of duration the wide. think more a cost at with we nature the much X% and characteristics of wonderful particularly drivers obviously are I long And year-over-year the growing thing, deposits

things the Bend So doing, one Steve, acquisition. the of we're

our portal we're in speak are six and technology next with customer our now We will customers really to why savers we providing they out average digital integrating And our the clients right and be education like participation not We that and that testing, think material It's great that. increase account own existing be a million increase employers uplift that and as should X experience funding beta over rolling plus we our deposits. and spenders. about amounts. there holders months. will that a in to And think

kind working working everything. we're So we're better of We're working sales. technology transparency tools, on we're experience, products, focused

And pandemic growth able is and industry we coming goal at to so rate we're as rates. be relates to of that strengthening we'll come growing the the as market do market out market of kind a say, our the to well. And see it that of think to market,

that So participant. sure happens a we that want we to can when make strong be

Steven Alexopoulos

cultures been And know What's if is I Big the about us needs I yet, going. two could how What And the is ask well? one more integration final picture far? one, experience done the customer how but the conversion you thus gone John Talk John. of haven't attention? system to question.

John Ciulla

question. I'll really from start your haven't because disrupted really last operational perspective. been has an with really, customer anything The we experience good,

here. this was all so deal frontline are of because So folks our complementary,

think with reasons with kind All to that's customers people on were loans. our of and dealing they able we one the were the I are of of beat market dealing same growth

good. far so experience customer So

I having slower And conversion XXXX that's disrupt deliberate approach. mid customers. because think not are we more and why our to determined we're why are reasons our in the taking we technology a of One is

we five off that with happy. us with better culture, A, to being closing A relates it the down. to respect months the messaging As I believe said, sat the I'm hard. kind here way I an of is top, cascading minus, after right team, I MOE and in if we're be management give really at now All can't would alignment transaction, the

hard a making idea one feels last sure lot the takes work, it but that X,XXX if so of a every lot team singular they're of one of time. purposeful part of also as colleagues our takes of And training,

if And for told everyone so you in I'd to was this be I organization worked the place the XX if would our around last that entire lying like you feel you they years. walked

So we're at working that. really hard

our And alignment, well. it's really great is are great. so great, people far, risk relationships, our executing, regulators framework We’ve got are [worked] the

not seen key in attrition have We areas.

couldn't a perfect head the sand I'm it's I So I long -- have in also get pleased, know spot. and road the that to but don't be I to more my

Operator

Our next with comes from question Matthew Breese Stephens.

Matthew Breese

Just versus thinking you've of X% rate accomplished year-to-date. incorporate the here Is about already the is from growth growth or the annualized range, loan safe already tremendous guide growth XX% we should what amount a that to you've seen?

John Ciulla

I we're put mean, can up looking I'm we not organic incorporating rate. sure at growth. the X.X% it another growth

to reason XX%, and we it make side think never us to on people of and could loans, guided talk that that we look, above Glenn to and about There's we've chance The So high telling much on telling end side XX% it's go back and if a we'll we're sustainably us good getting X% the then as range. consumer go to out strong. we forth outperform the able too it or X% the to on then traction always stays grow that commercial now in our the we're not that going I range. and whether particularly environment figuring is, been well

push 'XX Matt, is you out think as into that So do, I can well. what

think try rate. to we're I XX% looking to quarter annualized growth and post every X% an So

obviously, to and origination saying we're opportunity XX% next But XX% going to grow we in the we're high to the to characteristics. loan on outperform. saying be depending sticking six Some X% year. loans our quarters range not at But end range prepayments the lower, that the higher we're will another and to for have or certain be an of months. We're

Matthew Breese

be growth way diverse can And quarter? looks, the does seem like this -- it was is your as pipeline it the as

John Ciulla

pipelines it really classes risk that right of know different healthy. as are well. kind I with the teams appears the being franchise their Matt, on it have asset energy say a You Yes, now and this of lot does smile. we're and and I think disciplined, across selection a thrilled that And because I'm

be not understanding think too in classes sure and downturn, we're we're think pockets one reaching of I I could that a area. far any making we're asset the being vulnerable in bomb throwing disciplined to or

We growth commercial and and broad middle area. consumer we X% that broad in So still growth. kind all market, specialty, estate, and plus ABL, in sponsor of our really public all sector lending, see finance, real of mortgage had

So the growth. nice it really granular was to see

Matthew Breese

outlook little what the bit hoping was you about Banking the Webster legacy effort I then was that effort at fully guess how important funding as I'm this of Sterling. important I overall curious and talk brought if didn't of days towards And to Curious going a growth. of the it's deposits, over we rate what entails. and could Sterling, hiking be And growth the amount primary appreciate cycle? to was the deposit for of drivers Service into end one a from I that's the head that as deeper

John Ciulla

billion low deposits, in existing with clear couple pipeline that major can with. of in factoring as from see And quarters, working although, sort as next to path that response do on driver $X probably not in of are area cost earlier you deposits of Glenn's relatively a relationships a tell, we're we that the we

we kind of operational time. that's strategic So on a plate. of hopefully is be for say what period what lever is another have that will our kind to I'd of gravy It believe

saying be we're think or major quarter could it significant. it's of over I a deposit the that next is what not but two, driver so growth And

Matthew Breese

on lending that XX And Obviously, increased industry. that near quarter-over-quarter. am I stress ABL number, then not day. some It some huge area my last to but see focused transitioned like noticed of from NPAs an could it looks term the a across as equipment XX a one. I bit

was book give just I for So you some on equipment overall a shaping book, the curious, equipment background types the And this perspective how could then is us combined exposures, underwrite in from that stress historical of up an environment? losses. you just sense the

John Ciulla

there, right these concerned collateral bringing -- because too not we've almost there's we're think together, pretty It's equipment good now interesting two everything coverage. I finance businesses Matt. an got

also there's transactions banks, equipment based, ticket low granular larger larger participations volume there's in in So finance. stuff that's

how imagine. systemic So respect of a you scares And as now. as more with can been of performance of new us nothing in over and cyclical from areas. I We're kind the you build haven't framework think there market granular right kind There's that and can putting profitable some to really credit grown perspective the on to see, we've kind going a businesses, to of we're originations up in business. attack we back a trying kind slowly

collateralized nature and the say business. particularly can business big forward combined and of that been So the how driver more in given strategically it of not all on growth. to I now loss of the move hasn't a portfolio kind with outsized kind we We're concerned right come of

Operator

comes [Operator next Our question Hunsicker Instructions] from Laurie Compass Point. with

Laurie Hunsicker

stay bigger sponsor to the of different your sat with if credit refresh balance, the and you're it's to that we -- on question, respect much Can here. versus signal us with importantly, sort specialty it’s leverage how you if how remind book, on warning areas a credit you during and just is we flash Question thinking that? just about GFC? and more in charge starting where And the then loan could offs us loan of a and give and how

John Ciulla

How do much question. No, [kidding]. I'm only have, Good we Laurie? time

the the I'll So fund give you facts. kind of

representing reduced it total leverage X% because is that bigger commercial portfolio stuff numbers doing at or know, when have is the portfolio we've level we've a as tech time long of years. of of flows, for with continues a the and infrastructure, care about one about around been which are $X because to known as can little leverage, protectable, book lower. leveraged billion, more Recession there the XX% both volatility we the case is repeatable, loans the the sustainable risk of perform obviously, those roughly the perspective the is specialty in with bank, a the XX There Great in overall the is line more risk and you in ratings. in that in pandemic. leverage which ratings with And rest the has what will it's cash I be and commercial loans been of our sheet things risk or and which to bit news XX and a So little for sponsors The June XXth, of world, with from variability overall ratings services, been. percentage around sponsor tell a And XX% a loans performance merger, the bit through bigger about sectors the little those in X.X% start is of health end-of-period historically talked in wonderful loans balance loans. and that you the industries it's concentration good balance

the have higher not of or continued behind losses. to of strength financial sponsors the have that result in the However, deals non-accruals levels

it's The book other about granular. thing is say the more I'll

up top about commercial So think and leveraged you make only the the making up in X.X% they our XXX of loans aggregate about names. book, of exposure loan X% if exposures

leveraged highest think single commitments obviously the if that's to you tend about the loans and in exposures So not that, point organization intentional. our be and

But been worked posted. well, [or] portfolio. we and capital organization of where as Tier do so who and much to activity percentage people disciplined that activity far, how a allow do the we've that X you plus of has the also in reserves the about keep we'll really we overall is So activity, our that premise about

Laurie Hunsicker

And is do follow-up. you book quick one billion to what what and then that your are? nonperformers of have And relative $X charge-offs just more have I balance

John Ciulla

in reach with know that can numbers five off Laurie book,I out but years, loss to we little last I a that. but back you don't those the things over have

Laurie Hunsicker

York one you much And in have New just how last balance is then the office. that of office? And Can in is that question, City? us remind you what

John Ciulla

We have all exposure, in about $X.X billion around. office

-- medical take underwritten Obviously, different you're XX% B are at has office to C, you half or A of LTVs. $XXX,XXX, billion down Split underwriting. related a so. -- Class those office, at about If $X.X completely which X.X and characteristic, $XXX,XXX between Class and

value About five on times the up with a and debt average service a So are X.X York bit in boroughs. coverage. exposure moved there is view depending is those LTVs of what your New probably $XXX million City that of

from overall rating again, is worse office it's the exposure Similar and out slightly you office our commercial medical a average the the footprint, in worse If rest weighted classified is five which boroughs, to across $XXX performing watch about traditional and to million it and the nonperformer. and in take levels risk say than I office would of of criticized. classified

lot a we We imagine. a where relatively small it, It's that's as portion. are. you can on of time So spend

next to which gives than there of us years, properties. probably a some that have some less rolling good those the is with shift there time means borrowers other work two real it off in there's rolls permanent The on of news paradigm rent and before each if the is XX% issues, we time really arise

Operator

with Our Polaris Management. next question comes from Horn Capital Bernie

Bernie Horn

quick some debt. some very PE question the general some their cautious of future we're sell tone borrowers. behavior trying to space even pay to the of borrowers down are or that I the some portfolio had the a off sectors, assets that they're of companies the speaking where getting about actually economy point to on the from in of We've this and borrowers heard to

is borrowers be Are point conservative. into of in huge. guess it going that some I not the the heavy you mode, you big the potentially So that you're any more behavior it's growth I out economic I'm are guess [crisis], kind a to borrowers? question in of going seems kind getting seeing of very saying But before like seeing there -- are your is,

John Ciulla

that we well. at same lot our the some liquidity there might be we're we in in think of long there's areas think the private still thing. to have actions as I because lower a vulnerable we're absolutely. portfolio sectors, out book opportunities taking managers, in And loan If we are, term, doing Bernie,

sense the not the potential of I in mode, is here outcomes wide. we're preparedness So number full that don't want you to get

if could Our is base mild we there that there it's downturn. on broad obviously credit, but relatively recession, of is worse still impact in a case -- terms know a be

in said I that taking pedal as and origination, So not all geographies care all borrowers loan at in now. we’re we're the we're sectors meaning down, earlier, of doing avoid we're in growth cautious and of its anything to and hotel, our right our like existing costs, trying really our not we estate, should, relationships in but opportunities we're office and cautious real

been so market. contractors. who about the disruption, labor property are industrial distribution, We're I'd careful by really where transportation labor actually And folks supply healthy. which still costs, been impacted that focused shortages costs cyclical are significantly there we're by energy exposed about growth have in on to who've chain -- careful impacted And is we're say so types is pretty tight and C&I, our multifamily,

on demand. we be But credit Jason this life, our everything and level demand not the we of loan are will decent we we. vulnerability well year. be We because more is, be will and less blanket will do what I the growth Credit loan the light terrific. there cycle our little the the for think whatever are Soto, a closer cautious borrowers is yellow up just red that aware our team, projecting balance think and who bit, where why So a of to we Chief in there we're more still through, it's of same put move they're which coming but is as put so Officer and don't our or there his selection, folks risk is think,

Bernie Horn

as my That's terrific up for thanks where I follow detail, you're commentary, cautious. additional to that because being anticipated obviously

Operator

We Ciulla to the have reached the over I end the remarks. call turn question-and-answer session. of will back closing for John

John Ciulla

Thanks, it. Have interest I day. thank for a joining Chantelle. great want and I Webster. you really your everyone appreciate to morning, thank us for this in

Operator

conference today's concludes call. This

disconnect. may You now

Webster Financial (WBS) 21 Jul 222022 Q2 Earnings call transcript