- Earnings call transcript Q3 2022

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Operator

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

Emlen Harmon

morning. Good

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

John Ciulla

us to quarter call. review more merger Glenn Thanks, Emlen. Good our remarks morning, provide integration to in everyone, strategic joining our I'm before earnings for and execution going to financial financials for thank performance, of over and turning third detail. you

announced strong laser focus through for The integration a solid and today company third clients. activities our reflect execution differentiated made quarter progress in on a and the results on high-performing creating we've delivering

an cost across supporting are revenue XX ago. we metrics unified we realizing the of the when financial announced and that and footprint, We [indiscernible] business months exceed one communities lines, set diverse the target delivering growing Webster in results expanded or synergies, meet set forth

common a our evident of adjusted we nearly and we adjusted $XXX of PPNR basis, quarter. On quarter we financial diluted $XXX stronger and Net Our an in shareholders million to on million. from XX%. The million last. assets of basis, on available an company tangible common of $XXX $XXX up million [Technical return the generated was $X.XX performance this a $X.XX results. return income quarter EPS X.X% excess equity was On have versus is versus created in Difficulty] last potential produced than

basis of merger XXX when results the and XX% our the exceeded we was XXXX. Our efficiency point in full-year in improvement. XXXX April quarter over announced ratio provided first performance These we

loan are job tolerances. and solid levels, we growth risk maintaining the our we've an retaining adding integration excellent continue client on proactive surpassing optimizing expanding balance and We service talent, while in expectations sheet, to done generate of fee the without income, We're executing plan. clients

to the major classes our and CRE this Deposits asset also residential X%. Given driven the of Difficulty] positioning grew grew sheet, [Technical expanded X.X%. grew of Several meaningfully points basis loan NIM mortgage. C&I, geographies. including XX by Loan of balance just our set under significantly, categories quarter, industries, and

While executing outset on said cost an synergies [Technical investments Difficulty]. for Webster the We've post the efficiency we ratio XX%, make to that MLE company. and approaching of continue from

in added We add opportunity bankers national have [Technical we have our commercial had the middle-market Difficulty] core been and team. to ABL to footprint adding close, to verticals our

look We deposits, will business that and as businesses profit loans can in we grow and generate continue will fees economic commercial to look for differentiated and colleagues that and lines to time. make over our maximize investments

and client colleague continue in experience. the technology also that invest will We enhances to

growth, operate macro management disciplined we on execute uncertain prudent As and we an risk portfolio activities. underwriting asset while in to and continue selection, environment, in staying

basis. and remarkably lower classified percentage NPAs, with commercial NPLs remain of on to lower strong the prior metrics lower portfolio both credit Our all and loans quarter delinquencies, absolute compared and

annualized either management through no and sale will at a annualized, still actions, on you rate range below optimization charge-offs points basis of XX that points, with XX the prior [Technical basis balance Absent net line more risk-return suboptimal would be had those and more of to recap or difficulty] than quick XX sheet from longer in charge-offs from annualized A basis basis metrics. points. of $XX million were quarter portfolio XX an $XXX elevated the resulted integration. proactive net reported QX While charge-off loans of net see million our approximately the worth points strategic were five-year

of a the on integration items touched the already. slide number on I've As

integrate core infrastructure. our ledgers to sub systems and [Technical continue We Difficulty]

organization risk anticipate This real quarter, we wealth system consolidation [Technical services centers, data common rolled that, transition continued of management operation end, quarter it strong are of of a cloud we the and tools, third-party we fourth turn our aligning at and will behaviors for complete. consumer all where commercial year that investment Webster to strategy, combined for values colleagues Major the I'm going performance with XX% quarter. most Glenn activation pricing our and and on of over With to establishing consolidated our the our milestones are and commercial credit and provider review corporate consolidation include sessions, out estate now the the foundation Difficulty] we our by in our Bank. to the colleagues cultural foundation have financial completed importantly,

Glenn MacInnes

million the were will of million of everyone. which consolidation, good severance The foundation. expenses related reconciliation EPS professional. strategic core to to income an is earnings GAAP primarily net Thanks, million. We we On slide common to of $XXX each of reported John, expense $XX shareholders I onetime of basis, with to morning, Merger $X.XX. shareholders start contribution and and $XXX with common of on Webster income EPS and real the exclude the reported $X.XX, after-tax initiative four. of expenses net adjusted estate

loans billion basis deposits on presentation. slide predominantly up on will also by was before moving Loan public end, I $XXX later On and with assets both HSA and total period commercial to and Next, with on sheet statement. color funded in balance was $XX out over contributing. review I'll were total growth million of driven were Growth (ph) the growth funds by of illustration we securities flow a Deposits Loan the Difficulty]. shorter billion $XX.X income total five, great Slide highlights a growth some portfolios. the cash break grew quarter-over from of billion. provide by the additional advances. loan portfolio FHLB residential X.X% of our real the the quarter at trends linked loans duration $XX.X in or the mortgage Difficulty] [Technical basis was promising our and Difficulty] all quarter In C&I, million. category, XX basis. categories with a billion breadth and of growing portfolio between residential increased estate, and on part $XXX [diversity] points. $X.X total, million six growing [Technical commercial $XXX sponsor [Technical

million deposit points, and growth HSA basis Excluding million reflection yield the alternative the up over Corporate costs we utilized quarter. $XXX deposit Switching up portfolio with of points public The XX total XX of $XXX floating the deposits number points former or and Total other of X.X%. as $XXX prior deposits million the and increased sweep basis from by drove or funds to basis accretion funds. increased being sources $XXX seven. greater in HSA increased of XX% million. balances Increases slide on grew X periodic. roughly a a

effective quarter the environment. HSA. the merger. unchanged beta the final deposits Our XX% of in on HSA note rate of in were A of and XX% was a illustrating cost closing the value rising since business the

grew third-party $XXX or accounts, Excluding deposits administered X.X% year-over-year. million

for in net meaningful balance growth or prior nine, in or an of basis, quarter Significant relative This or of quarter. second points and basis items on item EPS. slides. and was HSA exceptionally grew on by earnings net on net provide our the reported basis PPNR, was We on XX.X%. adjusted On slide in detail up a reported our will improvement to is $X.XX and asset our was our to PPNR up periods interest in details efficiency interest slide the income million. I Additional compare interest XX%. adjusted our growth basis interest income review income Adjusting Beginning the ratio million sheet. line the individual was The adjusted net income up Bank eight, by and down appendix. up slide cover $XX.X $XX an EPS margin up accretion both drove sensitivity strong Net XX income X.XX%, line XX.X% XX%, to million statement. and in this was the result income was in XXX more I was points. will $XX.X driven detail income subsequent XX quarter. On million the $XX statement

accretion, basis X.XX% net XX quarter, to in points basis excluding and XX margin up was interest points Excluding the accretion. increased yield the the earning also asset

impacted to by trajectory loan [indiscernible]. addition In rates, longer yields increase reprices of portion in loan the of the a our accelerated no is book that benchmark our as

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

prior fee higher $X income fee the by adjusted of absolute adjusted investment in result million hedging highlight anticipate quarter $XXX to of was The slide non-interest the our and income NIM basis, expense. On the attractive reprice in quarter. summarizes year-over-year. banking and decrease was we primarily quarter our XX, linked rate lower were commercial million we of customer relative year-over-year quarters, and rates. given million. down originate the assets activity direct other mortgage Slide which earning reported million of deposit Banking. On coming increases in fees should at profile $XXX the loan transactional continue linked-quarter The While grow fees to and income. interest our XX an We for lower expense driven decline pricing levels $X of

compensation. $X million losses, of and loan key however, $XX The charge-offs, compensation. million. slide date, up representing credit this and On to for quarter progress provision decline million performance-based million factors year-over-year growth increase of cost we make with our is to to combination $X expense we amortization, allowance highlight Bend After intangible which highlights related our performance-based offset asset the metrics. included the in $XX recorded continue XX, over increased the We quarter. increase $XX quality the on by XX of was merger; of macro efforts net million save prior cost our Slide in million $XX levels acquisition in adding efficiencies the recording

assets or loans of nonperforming quarter. left, an average annualized upper commercial right or Likewise, XX%. million million $XX $XX in or basis declined the declined upper loans the charge-offs XX on basis. On Net XX% classified million totaled $XX quarter-over points

loan Coverage As ratios ratio mentioned, allowance times quarter. highlights from up that, in The quarter. closer All excess nonperforming increased capital million last basis XX coverage the portfolio allowance XX% XX charge-offs $XX optimization of to internal points. increased times, of declined classified end. activities. from rate commercial regulatory from Without levels. strong a to related percent and John to to our well The X.XX% loans capital targets. Slide X.X charge-off period remain modestly have to XX% last as X.X of a would were X.X% been net

capital all still share, to equity offset per value equity narrowed outlook and our resulted driven decreased to it's by of XX.XX% of ratio by share quarter. our the X slight medium-term tangible effects comments we tangible my Our in X.XX%. in earnings. quarter which was remaining The our wrap-up and above primarily operating this strong partially common AOCI common decline with Tier $XX.XX. have the a strong down target slide I'll The ratio book was at where remains XX, XX.X%. view on repurchases valuation, net This

We million driven interest accretion, of excluding on of projection of a be income appendix. This accretion, basis can which year-end purchase growth. million, a million details expect non-FTE the XX on loan as slide in accounting excludes GAAP $XXX X.XX%, continued funds the $XX as found of by rate net well of our scheduled Fed to $XXX

we add on an quarter. million last roughly of Relative or income of roughly income $XXX net basis, outlook net FTE increase an For would implies X% $XX interest million full-year provided our interest from metric. to $X to accretion I excluding billion, those quarter, last outlook that the modeling

loan expect for be the range X% growth of X%. quarter We the in will to

to year, progress target which that income range XX% close, compensation so original should prior relative Fee are incorporates merger a Core $XXX of the far of the which is be impact estimates. $XXX X% relative $XXX imply to range growth to to XX%. Given to philosophy this million performance-based since our around in be million, the would our includes of capital, million lower unchanged. expenses consumer to in overall of business. million, our investment the expected fees $XXX outsourced on On increased of

to forecasting will growth As capital opportunities a tax-rate back of we With remarks. disciplined deploy evaluating to share And greater for opportunities John remain closing things and effectively will I in operating are we of over we effective lastly, approach organic capital. target, occupy likely XX%. that, XX% an our will deployment, to medium-term turn

John Ciulla

and the of Glenn. Thanks, potential there landscape outcomes it of and portfolios, and ahead. effectively we're capital of recognize that reserve operating ranges at businesses risk quality macroeconomic We high-quality time impact securities We our diversified colleagues us our the uncertainty and could and that loan have positions, the operating macro-environment environment. and a and navigate prepared healthy all to infrastructures operating credit wider in our loan are that the and believe geopolitical our

above, mentioned are and we forward. strong selection processes. underwriting being emphasizing expect risk we year-to-date to up thoughtful to progress the want emphasizing I wrap carry I outstanding and and in momentum As made our portfolio loan by we've management the

Our are and XX% commercial growth risk return with the growth to and where selective we have a profile strategic loans be with pace in as this respect on businesses year ability advantage pursue to we metrics.

accretable earning our yields, of XX growth We channels where cost basis in positions relative given multiple and relative liquidity to profile. to Our our future yield. basis-point increased in asset just XX our us our points fund particularly well our ability a the confident peers excluding deposits franchise deposit deposit impact to total remain of increase loan

We rate to I but out you'll intention a have a thank to and from you and and and difficulties continue for open bearing from will And and as thank pull strategies in Day execute the expect Webster. call questions. we the hard hold save-the-date, be current go-forward where talented up added wanted of and they it continued our Investor the levers beyond. We'll maintain business to new is an I initiatives company have expectations finally, efficiencies our colleagues we meaningfully momentum. that the on team capital New technical increases, and benefit York my want will the management to us. understand investment March on allocation, hear terms some interest financial sending apologize, core to Operator, work challenge and to of the for diligence heads-up for on we provide to while to had City addressing we our the our opportunity to I Xnd, their at performance I with beginning Glenn of XXXX And integrating in you

Operator

[Operator comes the McGratty Instructions] first Woods. Bruyette, line with question of Your & Keefe, from Chris

Chris McGratty

question. Very good the Glenn, good Good very million. NII the I Thanks morning. the for upgraded $XXX -- guide, update. Maybe, guess,

you interested you case to One we've trends in this, there. of Wouldn't quarter this that but given into around see be narrative level I'd from fourth the that's growth peak a Thanks. your XXXX? is seen NII. quarter like can the thoughts -- speak that go as

Glenn Macinnes

Sure. Great.

So little talk let me just start, I'll a about NIM.

ex-accretion then if So ex-accretion in and range, that just probably exit for in or of X.XX% X.X%. texture, put NIM was I think, a would you think our I'd I at our look range, again September QX

to So expansion. we see continue NIM

the peak I into of factors; in out of that couple one is XXX, fed funds look we modeling, XXXX, As there's think we're expecting our second a quarter right. around

like continue NIM the expansion. and dynamic quarters, that see again, given over four in next the forecasting, we so which And low our to beta we're XXs

the half into going quarter year. modest see expansion more the in NIM of first we the NIM expansion back see we Now, and then

about pricing we positive think The we repricing that, dynamic feel XXXX. asset I still we our are prospects have the So, which is more is expecting, higher book in though even here significantly. deposit really

Chris McGratty

great. Is -- the that low that's that's the [indiscernible] Okay, a total? XXs, XX% is

Glenn Macinnes

I'm all for sorry. that deposits. Is

Chris McGratty

Just interest-bearing [Multiple Speakers]

Glenn Macinnes

I over at XXs costs. I'm the course And of quarters. total the looking Yes. would four say lower deposit

Chris McGratty

the could quarter in actions color little you could, I the if then more And a clean on bit up to that. credit, Great. you provide took just

think what about the confidence Could I think -- guess, more guess be and year? I in is I we prompted should sale, this? you said you a going loan credit the there into you thinking I how consider maybe,

John Ciulla

I about to talk it. and about it important Chris, Yeah. to think talk it's happy

more up was kind to forward. think to of our sheet optimize and less I it clean credit balance literally going

total opportunity. continue tailwinds you dollar. of if were of deal, publicly over paradigm out million was the X%, beginning price of was look risk and to take of actions we that to $XXX you businesses, I see quarters next looked the around whether talked were the it four weaknesses again, diligence at loans in good growth it with kind about whether would a we they segments, took grew think sensitivity or including like the those from average key strategic, look any in at to but time we've there capital, the disposition those the related our great so our return liked close mean, the the the think over the all over stewards strong, dynamics after remain and So $XXX in actions. -- closing the in six potential to the credit from all And $X.XX as and the shifts we sale on businesses over it, assets we as not thought asset loan to organic over strong we charges million, about whether

this of banks. And sales, So sale there assets. there to certainly were some note sales there, portfolio were weren't regulated in distressed

a example us, So be environment. not but right discount, were would of some sales time an this expectation a credit we obviously, there impact of is for the of non-strategic now clean-up kind note that There be thought higher would good interest-rate front on spread dispose. on to of prices and office the a was in in of

issue smart going a forward move we thought benefit and perspective. an as So a from will just perspective as it credit think from obviously, much it return-on-equity was really we us avoid

Chris McGratty

I this it? the more great into we the is of Good year agree. expect end That's Should kind of color. move. or

John Ciulla

anything see now. don't right I

going quarter the said, we'll like obviously, have think to of businesses the We continue forward. our reflection look to But don't in. at dynamics portfolios. a as be combined it's every going do I what we're don't that we the we we guidance. So of in really

that are if sense from nothing in an perspective us makes paradigm protect that's or our in potential we'll opportunities it, credit, do there economic forward us more give from but flexibility going And so, or shifts sights.

Chris McGratty

Great. Thanks, John.

John Ciulla

you. Thank

Operator

of Your next the Fitzgibbon question from Mark with line Piper comes Sandler.

Mark Fitzgibbon

Hey, good morning. guys

John Ciulla

morning. Hey, Mark. Good

Mark Fitzgibbon

your Glenn, us are on could deposits what I is with you share spot today? the rate wonder if --

Glenn Macinnes

Sure. I it points. to somewhere. points, basis -- -- say know that would points the that in in it -- XX ended have me range a quarter might basis see, let's we the let yes, here -- XX -- we're of I be basis put think I of range XX I

Mark Fitzgibbon

Okay, great. I modeling, earlier to curious about guess you credit. your when the one follow-up of thinking about you And are then do I'm secondly, how line? just on questions the of kind guys how -- provision you're

John Ciulla

I a mean, the have Yeah. about and always Mark, factor that line now. works you provision we way as relatively think but the particularly know, lot conservative with bias, it we and CECL a doesn't in

requires saw I brag, right, to word peers can NPAs in level and used I environment, us which you more certainly remarkably Then say credit were a a directionally in. quarter then significant to not to which So, feel growth, and general, the worse, which at just classifieds our free and reserves. in this of dynamics scenario Glenn many our use right, this of reserve. Moody's stats, materially. down right, that kind as The would was higher fill I said, like The requires our which were loan surprising be high our

that I'm is actually up risk weighted quarter, material rating average that at will one portfolio the if would ends the have quarters, on we commercial originations of -- overall translated down tell encouraging the Then we the weighted you then the be basis sequential kind last of risk for again guy. which lower which of is on risk assets. the existing three into So a as risk our will. than are the than bringing in each that's bringing average me a rating, actual each average fact better good And that rating portfolio, average looking point good weighted of kind I rating a you risk the consecutive data of guy,

and worse more we that's loan end reserves, Moody's, So metrics, from originations, economic quality then kind of feel reserves lower good. higher and up. really you better those saw portfolio, reserves, where dynamics, reserves lower asset more bigger forward-looking quality We scenarios

at and look pretty terms still where coverage are we pleased you ratios, of If are. peers, reserve quartile, our Mark, we I'm our least top in at with

We also lot capital. have of a

the way about So, that's I'm of kind thinking it.

Glenn Macinnes

talked is add provision they million impact John that. slashed is that those The Moody's clawing that GDP slide estimates. $X of would against growth that's thing And NPLs the so Yeah. commercial I net two the factors, the probably out look million to, things. is $XX classifieds, cetera we $XX if folks in really and $XX about only $X.X you loan you improvement to million, billion, took et just the mean I John weighted really and so that's, sort and highlighted, $XX improving. But $X then, Mark see million two fact we and related metric macro of back the that risk our that, that things million if One, here. million of that the have a the as it's [indiscernible] on at at

Mark Fitzgibbon

lastly, rates And if line wonder you And also a share loan sense us maybe give today? could what like are? pipelines with commercial for what look utilization the us Great. I your

John Ciulla

we'll the not faster usually I cycles. I characterize it's ABL, is. in of a -- expanding of to of which as marginally businesses, loan I am flat evidence would across -- tracking of I is is still but we're couple areas. they're of what strong Pipeline see capital sectors. relatively is demand, flat in middle-market not the next core growth crazy say, not that line Yeah. over materially, quarters margin And in Mark. up. of all a feel different solid I example, to say all at slightly mean, I utilization I'd like sure flattening certain the would [indiscernible]. working our the still commercial pipeline not for up, kind kind a think harbinger

in terms estate the buying in sponsor and assets have people some We selling or of the in slowdown trading of companies. seen companies book real

my report, slightly robust that as into if similar, I at look an usually amount going where did it's I impact, quarter it's last has there So obviously, third a is of just quarter, but night, above and which, fourth pipeline you heightened activity. see

Mark Fitzgibbon

you. Thank

Glenn Macinnes

may second-quarter. before go, just the clarify something. Hey, me On have cost the let for misunderstood you question. deposit Mark, our I

we but I basis XX that exited we're at of fourth basis clarification. points, the to on the just like think to points, points quarter, expecting XX XX in range for be basis

Mark Fitzgibbon

Thank you.

Glenn Macinnes

Sure.

John Ciulla

Thanks a Mark. lot,

Operator

next Casey from Your Haire Jefferies. with comes the line of question

Casey Haire

thanks. morning, guys. Yeah. Hi, Good

John Ciulla

Hi, Casey.

Casey Haire

How're you guys doing? Glenn, just to clarify.

I think rate you you meant -- it end ended quarter, the spot you said basis deposit to points costs exited for basis third quarter the XX expect quarter, XX points, -- [XXX] or (ph) fourth

Glenn Macinnes

the And to probably assumptions, now, points. as XX we're points. third XX range XX quarter into go quarter points the said our in we're at -- beta the fourth basis third you basis of I with right then basis quarter

Casey Haire

okay. clarifying. you, All for Got Thanks right.

So, guide the I fourth was the wondering funding underlying your here. NII about quarter in strategy

between fourth down guys balance run and kind rebound a a here? is you had beyond of outlook What a securities nice the quarter, borrowings. and the third muni for in of of quarter in So bit the the deposits, little

Glenn Macinnes

Yes.

So, great question.

our So in the sort take [$X.X had and or middle if probably a between something that. you like and X% you X%, loan you billion] (ph) guidance right of say look at

proxy. use that as let's a just So

levers funding of that's about we've encouraging. encouraging liquidity thing times sources, think the and few many that multiple -- that is out pointed a that's this really we have franchise I really so the

like some and the look beyond, that into key securities of at will fourth we quarter So loans. be continued funding run-off the the going even in as invest drivers of our as things portfolio I

And HSA think would banking-as-a-service, as things thing that like a can from funds that. we do. our deposit have we plenty of down whether the gathering it’s part (ph), And liquidity we sources that funds whether towards sources, [Brio] have digital far year. then of be I sort first commercial deposit have of obviously, in we draw we segments, get it's as last on, growth some we next then of as of lastly, standpoint, but

to we So continue funding our good about feel ability.

Casey Haire

you. Got

end. is kind there guide another bps here. Okay. expects? if as is predicated the Fed by would of of And there? is mean, curve year the What of out kind forward on XXX upside upside hikes plays be it curve the I at XXX What

Glenn Macinnes

there's look, I XXX, right Yeah. now we're estimate mean, upside. obviously, more our of using

repricing You don't can out -- of assets of and the around. guess, point the I figure it out mathematically, betas the thing but I coming is, would slowness significance our I

model at don't have XXX, that. would peaking I that? Where it there's be generally. upside So our to has if additive That

Casey Haire

Okay, And credit last one on just the very good. front.

color anything and just on So disposition, specialty $XX there is my the million and commercial disposition, -- outside the touched any -- of book driving $XXX the was was any of was any there was -- about the sponsor finance color million what if there on math just was right, losses that?

John Ciulla

charge-offs would so basis driven Casey, or at up been there, XX except I finally cycle, and pre-pandemic geography about this having the I loss class two to which capitulated, of that in at that nothing classified in unique Yeah. same them since Nothing of respect credits, commercial one the their say of had had of anything And sponsor basis unfortunately. systemic asset reflected two that feel points and a XX points say specialty in the by were of. pretty credits point day, with given I was good disposed neither [indiscernible] ended core of kind to the is in end

Casey Haire

you, guys. Thank Understood.

John Ciulla

Thank you.

Operator

of Morgan. next comes the Your question from JP with Alexopoulos Steven line

Steven Alexopoulos

everyone. Hey, good morning

John Ciulla

Hey, Steve.

Steven Alexopoulos

deposit wanted side. start the I on to

now in banks do seeing you decent forward? bearing to had outflows non-interest did you pretty quarter actually balances, the at in look outflows. moving we expect if while quarter, deposit everywhere see How the those and of you were So growth buck trend the

John Ciulla

is our first where year-end focus as of we're it. on continuing inflows full sure get quarters get from going on but the go we're next news, good we're government loans to benefit kind grow the we grow right? few so to focus relatively of our as it's making we going obviously, Steve, There Yes, was seasonal pretty about forward is some quarter. HSA deposits, growing And also that relationships, to to deposits. and that Obviously, commercial through realistic

think I because franchise. it retail largely got did our in really deposits sticky So, we've we

I reason have outflows seasonal really were a deposits. deposits I but of commercial government flow-in lot think when we relationships, solid were would we've was got the there growth able to good say a with deposit a from claim X% that our to

we up Fed obviously, and said, key sensitivity bank deposit is does we've our what's higher taking a got in I but banking, that Obviously, deposits, HSA, segments, than prudent this pricing time originally to from balance commercial cost we're obviously think would right small core be when we've we made on stickier us do now but a deposits on significantly. which down, were continuing as we're be. sure we've Brio found some now thought got flexibility So direct give deposit, measures we sheet way our focused flows, asset but to areas And business make generate comes it benefit business great then fund we the that and about got Glenn relationship it is rate comes to whenever retail. all diversified nonetheless, the the protecting cash in is the

sticky we to take clip right, benefit loans and going we to deposits if because on did to growing in going but government of continuing it's sure are, growing you're quarter, need to make good at that work we'll forward, it, seasonality. also we're from the we we're generate be focus the victory continuing So but the deposits

Steven Alexopoulos

us? for that was size the from benefit you government seasonal can deposits? What John, from that inflow Okay.

John Ciulla

Steve. think about was million, it $XXX I Well,

Glenn Macinnes

in the there so was quarter-over-quarter, of Yeah, sort commercial. right, a then decline

think offset I [indiscernible] wholesale have funding. by some we and

Steven Alexopoulos

that a ratio see few Where I wanted over also quite has last loan-to-deposit to ask, so do up you the Okay. bit stabilizing? the quarters. moved

John Ciulla

in the operating given the about high good range environment XXs% feel today. XX% we to So

I be. it to So that's would where expect

the In couple -- where that's over that's next exactly out I fact, as quarters, is. it look of where

Steven Alexopoulos

Got planned. negative you, okay. news in go on on quite Thanks. seem conversion acquisition didn't regarding bit And the you? And a could How deal then you I that all Thanks. to the finally, for as most there of is particularly increase acquisition in People, opportunity of client the so, of an has seen system going from benefit that? the that of attention what's this around related to bank You're attracted Connecticut, any there? think have much

John Ciulla

MOE, ask question. key in such a respect that talked don't that we've it's past of get to really we Look, opportunities, some disruption acquisition. Peoples, Peoples, disruption. and as been not businesses, Steve, bank. it's Peoples and colleague is with There good we on don't a can't bank. There about had you with we that lot that's overlap with an the are in M&T that Bank have because Peoples you there overlap obviously this an me Peoples. our loyal obviously, are can't -- clients interesting overlap because I well, really with the didn't combined

want perspective time. and wouldn't specific And from bank I and are as to client But, opportunities good I so a a from personnel over it's perspective there said, on comment a opportunities.

Steven Alexopoulos

Okay. Fair for questions. Thanks taking enough. my

Glenn Macinnes

Steve. Thanks,

Operator

Your question the Inc. Stephens Breese Matthew next comes from with line of

Matthew Breese

Good morning.

John Ciulla

Good morning. Matt. Hi,

Matthew Breese

you year, could Hey, I this but alluded talking for earlier, was to loan of hoping that softening frame of John, growth better us. kind you a just maybe next about

always the been better quarters year than bank sense historically, there. few on then Yeah, secondarily, of I'll Obviously, in us last single-digit positioned what for a just of for kind it are? grower. to kind think next be And have that. rate expectations current How a I the you would the you've high company pipeline. the frame leave

John Ciulla

of And changing guidance. question. we're sort great No, not Yeah.

I a fortunate they and to think we're that this been about we're year default, be in X% have in out. loss think which I'm and This lower categories we've cycle. year, that with year of categories think given I tend couple happy growth really selective. We've to I XX% got driven

mentioned I pipeline questions, robust. one our the to As of remains earlier

little I of competitors have and some be as rate lenders well dynamics and many of will their more the just and other structure fact luxury going changing the to the on marketplace. I think our and funds the ability a that of we're bit the the nonbank are think given and of cost selective nature

grow hold XXXX, in higher announcement April we've of the deal XX% in by basis and levels a of loans that I sheet made the bigger So like we obviously feel X% year one and benefited to still on which our out. talked premises the a combined we We're when about. balance year commercial could was of

to of niches loan grow if the the and us even bit, a have little continue to So relationships and loans. loan demand and enable some market slows verticals we that

at call, overall portends want to in earnings kind Risk on he model, never Jason our businesses, your kind the stay X% grow we're in call, things is. regardless we I environment generally narrow more our think can away don't looking at and Chief think because loan And that of we're able XX% growth continue bad obviously, XX%. Credit of But Officer year, demand to the So do things. loans you what to we resilient cyclical -- were to are the still on X% next we of from believe here, I safely. want if to safely focus it If

Glenn Macinnes

originations probably quarter, The about quarter, X.XX% this origination the of so -- when range about XXX I it's the XXX were think out, right? And you -- rates. only at look to as the thing to would look like to and going that is, I add third probably at to we be our closer is X.X%,

Matthew Breese

Understood.

then on just your how street and And the Service commercial? you Brio a segment? thinking buckets should we balances as projections then of traditional deposits, between much digital Direct be retail Okay. about And these the versus rely Banking funding and could talk

John Ciulla

is you Glenn I in second in can running some the did give Obviously, Brio And tried generate sure. able third number. Matt, there. in, we deposits saying consistent to Yes, to proven in up the been the those we're in think pretty and we've and We areas. I've quarter, quarter. did lean

to live pipeline a quarter, investment or factor nor As a narrative. space. but significant know really that to with in in I of we contribution the are that Service three pivot deposits, didn't factor second significant about $XXX as or the as that Banking this relationships in about in I don't Service, whether talked a is we four it But the fact relates have a million million of did Banking profitability in $XXX we

there are in significant core channel thought. where I not deposits drive the kind things I is, those of think think kind drive narrow to the of Luis XXXX. funding over than and slower areas focus a factoring from can course we and we We're little the our of in we BAS update liquidity. continue

relying not can upside our arsenal would and Glenn, that That to expect our part Speakers] be gravy. we in we're With you [Multiple do to So respect Brio, model. on have as of maybe, that

Glenn Macinnes

Yeah, sure.

just right I billion So, about is start think digital $X.X now. like, direct probably -- to

know, XXX, turning of driver as as more a Brio Brio. like we And pretty long lever being that loans that source. into a can funding. as in we're of it is a beta higher type that so the range have biggest funding XXX But get with it that's of good you to but the product, is we And good

Brio will in That's besides that. So we think the know, one we service we segments. pull quickly. in portfolio that that can more like then growth commercial deposit have securities can quarter. stuff mentioned, a expect But importantly, and I think as off, the the lever, you period. is John first banking the I channel in enrollment as adjust come to as running HSA, And that have we pretty

see as a the on should So HSA well. pop we

unique in we I that will funding us. it's again, certainly, financial -- I is have to to So back playing continue so forecast. keep multiple of think it's And our really coming there's that us sources distinguish for because many out

Matthew Breese

last sale. going you. back one from Thank just And then the me, loan Okay. to

been of legacy questions those? kind were areas what exited be that Sterling with whether continue do sale portfolio the would loan part or eventually on And the I there some ancillary or think not segments? Sterling lingering of if to to be the were story. Did anything of have there's so,

John Ciulla

going to not I'm Yes. talk specifically.

banks $XX now, through or businesses of and as or whether businesses. correct both we suboptimal I billion not work the kind return think And as a decide opportunity them and risk to bank either had the we can decide we have overall theme to accelerate is, improve exit.

I'm to I guess trying be [indiscernible]. So not

for we lighten answer didn't but quarter in to that office, are may related to where moved said were I exposure. of not kind through. shifts select the appropriate the we to the key to where of were entire of be the is able everything to organization. and suboptimal identified like areas of related things think kind portfolios We as or our couple There we were to risk get sales paradigm on act at specifically as in think going of we've I kind able looked note be we on able a Sterling, there return legacy kind

at to don't that. it going I'm I leave think a So worry. it's And

the that subscale love the when We together. loan accelerate happen lot sale bring a time. and like to figure out exit characterize not we we we portfolios of the worry, over time a to are bank a a is entire will as that all we like You of business portfolio exit just businesses want of over you right whether there or that suboptimal or winddown it want but But kind the assets. now, whether and in will whether the or quality credit

Matthew Breese

Understood, okay. had. That's all taking questions. for my I Thanks

John Ciulla

you. Thank

Operator

from question Fargo with Securities. Shaw of the line Jared comes Your next Wells

Timur Braziler

Braziler filling for This morning. Jared. Hi, is in Timur good

Glenn Macinnes

Hey, Timur.

Timur Braziler

the that pretty much starting book that Hey, slow guys. as that a kicks slows? for seasonality does does with the be growth of loan quarter a bond kind book? as that bond funds, just and should base on in of guess I first And the good using expectation end Maybe about in? the we HSA thinking what's source

Glenn Macinnes

to think you all, no, see it rising I So would with extended -- of has the first rates. continue

how can if I would second that's pretty in continue a a So quarter, that the right? of it. But can in reinvest using of do in source for something the the to So we but third quarter generally reinvest range cash came to So, as the off at the flow model forward. to what Did you million. was we'll our million, $XXX right? see difference, like you're you we has think -- X.XX%, have funding So right? come spread It quarter off little like going loans a still that question? came in loans, part I that's continue that bit, and good, down for if $XXX

Timur Braziler

will a first [indiscernible] the well? that used be slow quarter on of being kind coming Or and used is the HSA as strategy that Well, 'XX? that in just with 'XX in in fund that as

Glenn Macinnes

at total deployment think the I you of if $XX this, of that it billion, couple think of excess we've mean, a of we at -- but we of the is think had I sort ago. as talked I back about book liquidity look it part quarters

basis so or of done sort the points book and so. well move but for And pick our an in from to now up that points standpoint, earnings XXX doing it's been that's attention into us always basis loan XXX

So still the think that of source HSA given quarter, for for I a good us. in loan with first be funding growth will in year, the coming even our

Timur Braziler

generation integration. deal maybe once And have still mean, picture bigger of the next that Okay. complete? year. take you of out conducted? expect What is you'll then integration for is on how kind able to operational I see lending just kind closing is the in some expenses? to be that changes slated Is or Sterling Or being just strong. results gains deposit been middle Integration already some do more post quite of

John Ciulla

really that's question. interesting Yes, a

no don't deliver right? and impact a we won't again, MOEs they either on when because One on deliver cost with take ability ever, the saves. able This it's XX% wasn't is center the right? this, the lot about nature. material don't was not the to we it opportunity harp to again, have of of or cost talked proven revenue, consolidation about do put commercial our in always I'll times business it is time that things the I that's perspective. cost the banking of where was their And complementary there banks of were to a transaction think out. save really no I of this generate that from out on only the save, or fact combined focusing And because customer deal, I could think banking retail It overlap continue the together a virtually two gate, everyone

maybe next point So of operational us retire will for except one scalable integration to don't time. finally two done when addition of and to your accelerate will finally I a core our signals we retire more more conversion to and what get technology is, having efficient revenue of do that But resilient platform. get kind commercial and the get it July, us, to over subledgers several We'll make we systems. think

do feel be our operational will like we So, better. effectiveness

of certainly and our And go will cost things about. operational one we're structure down. excited that's the Our efficiency

give still to the You've of of by seen on we of fact pressures haven't the the pressures things XX We ability other that some obviously still the industry and throughout. three have of consolidated conversion it still call months gotten centers. We I on system, that so kind us don't expense growth. revenue all an haven't should perspective. core of of change offset expenses think our fully to the more our another trajectory will months inflationary wages flexibility XX to inflationary on from

Timur Braziler

any in what The visibility a 'XX, guide delta kind the accretion have great. to as me, accretion do just quarter of loan at the accretion third could million then quarter accretion the of the there? of quarter the quarter looking And driven just more the I you drive the of kind and accelerated component third any was modeling for between accretion, sales, by any question. accelerated of be, And last $XX.X guess Okay, scheduled guide? of in XQ $XXX of component fourth that million loan -- for that

Glenn Macinnes

will accelerate, $XXX,XXX customers that think accretion based and announced -- mean generally, volatility. accretion put I No. purchase XX down but see back It's note. meaningful. smaller I probably seven on is quarter-over-quarter, page maybe I was Look, right? the the -- due on accounting prepayments. that that probably it's be mean And is $XXX,XXX on the that, loan we stuff the there'll to obviously slide, its just about not to this there's prepay scheduling. but and of impact amount, obviously, you sale in like as when in

Timur Braziler

the -- the be a at is -- hard kind or of at looking the accretion But fourth but Okay. we paydown similar look that level schedule, in accelerated it's should assuming quarter I to guess,

Glenn Macinnes

And it right? that. activity Timur, for its laid estimate like and like right there. Well, on loan million, we out the could prepayment it now, to $XX change you you. side, gave It's on based stuff it We best that's our

Timur Braziler

Got thank it. you. Great,

John Ciulla

you. Thank

Glenn Macinnes

Thanks.

Operator

comes of with Hunsicker question Compass line Your the next Laurie from Point.

Laurie Hunsicker

what thanks. a basis? AOCI, that was this equity dollar hi, morning. Good on intangible quarter common Yeah, On

Glenn Macinnes

Without AOCI?

Laurie Hunsicker

No, no.

Just intangible what was equity? AOCI drag in the common

Glenn Macinnes

was million, $XXX So that's quarter the in AOCI impact its -- tax. third after right,

million of increase an that's about So quarter-over-quarter. $XXX

Laurie Hunsicker

perfect. Perfect,

Thanks. Glenn, Okay, of offset? of don't million great. what's then refresh legacy of proper, us, in -- that York. And right, just larger John was had were I Webster components a other as much $X.X And you we million was on the in a $XXX How XQ? office, the I of want it out refresh just what New to And Do going versus what gave you which there? guess, back then to or sale last kind have quarter, Sterling. was do you have is on and and NYC, break $XXX you that appreciate then legacy billion

John Ciulla

Sure. Sure. I'm happy to do that.

$XX exposure our So the is the office amortization sales impact between asset and million. on other payoffs just general and about

not so I recall, a really of terms say $XXX So stuff C&I there's million would activity $XX you a office the what kind million related if we're in million, so businesses. for we office, total for general the through, $XX to I'll reduction. to except those that of refresh numbers of if than C&I you had change general the or on walked second. refresh material in and rest the exposure lighter And

million much office. total profile office to about shifts in which $XXX subject and that better $X.X office, impact billion kind think stabilized over traditional we would which exposure, is has was about not little So a operating medical I paradigm of talked of a

roughly, A. you it Class is So that if take $X.X of half about remaining billion

on The what other half focused is is Class B, we're which C, most. the

asset in million about A office C. to The B, around largely five $XXX New maybe boroughs That the and you're of City total that's down C B office sales, and split York in exposure XX-XX $XXX and again, is exposure. the the unchanged, remained terms of take So XX-XX million. about then

a contents of change not ratings really or the focus seen it. we're haven't off classified although We in our risk underlying there, taking

assets $X.XX over on eliminate a in the of content, of non-strategic weren't with lower again, selling could loans dollar. also of category, a that kind node reminding were loans those rate combined the identified by We discrete -- of all time have just fact our you But decisions So sales we're to we that at that Laurie. evidenced and loss sold some obviously, value. that making

Laurie Hunsicker

okay. it, down York New in I $XXX $XXX That's that clear, last City. just Got quarter, had was million? And million so I'm to now notes my

John Ciulla

in Let is it's me oh, also maybe check, I Laurie. medical for think that, --

in office New around nonmedical So York, $XXX million.

Operator

this at questions. time, And there are further no

John Ciulla

day. Great. much Thank us and you very joining a for have today wonderful

Operator

This conference. concludes today's

You may disconnect. now

Webster Financial (WBS) 20 Oct 222022 Q3 Earnings call transcript