Earnings call transcript Q4 2022

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Operator

Ladies and gentlemen, good morning, and welcome to the Webster Financial Corporation Fourth Quarter 2022 Earnings Call. Please note that this event is being recorded. I would now like to introduce Webster's Director of Investor Relations, Emlen Harmon to introduce the call. Mr. Harmon, please go ahead.

Emlen Harmon

morning. Good

Securities our on by to statements Harbor can disclaimer to management The meaning the begin the you within the I of company's uncertainties press of made which the Act Please comments may Private affect in Safe remarks, Harbor us. we are release remind want that be about the and at XXXX review rules. Before and Reform the subject Litigation include language information and forward-looking presentation accompanying risks remarks management's presentation found and Safe site relations today's for more investor may forward-looking investors.websterbank.com.

Webster now it I'll John Ciulla. Financial's over to turn CEO,

John Ciulla

to results, it over Thanks, strategic welcome Fourth financials Webster Emlen. turning XXXX Corporation's merger actions morning, detail. our before to Glenn Financial to in and strategic execution, remarks more integration provide on am and high-level Earnings our review Good going to Quarter Call. I

we remains Our merger strategy and of straightforward in is the unchanged announced April our day from

XXXX.

Opportunistic profile. differentiation funding while and enhancing we have advantageous see and targeted competitive in a diverse prudent continually where areas growth

We returns continue economic capital to into and profit. that maximize expense business dollars activities deploy shareholder and

on executing with while unified as strategy the same our at time delivering a Sterling. are on We of this integarion the Webster merger

We in continue we our and loss to positioned exhibit solid are capital loan conservatively credit performance, allowance. levels and

for and EPS numbers basis, our generated strategic Both quarter-over a evident and GAAP adjusted our in X% or we quarter. $X.XX last this an record are are executing $XX plan quarter net on adjusted of EPS million. grew quarterly The results performance this versus our Webster. PPNR On by quarter of $X.XX

XXXX such public in focused in NIM expanded net interest and XX credit growth XQ profiles, again over with loans fund points asset banking. in forecast. solid sector loan further expansion our as moderate With our respect our origination our with we classes loan grew quarter to stronger basis Underpinning growth, our the and finance and margin performance, X% activities

were For uncertain than intentional the of risk existing average originations the macro significantly stronger the more our commercial in is environment. quarter, fourth that a which consecutive weighted when operating rating of portfolio,

our solid to We position. profile acquisition we a have enhanced liquidity of with continue capital and interLINK, also the

an X.XX%, a return and produced an ROA of common ratio XX%. adjusted nearly results equity These tangible of efficiency on of XX%

we figures these the of time exceed All or our pro detailed merger of targets the metric forma meet announcement. at

aided on of drive We goal from opportunities by PPNR the environments variety interest can targets in to business delivering business solid throughout that efficiencies, and beneficial operating backdrops operating our new excess leverage growth is and rate our operating interest and earnings our revenue realizing While growing believe merger. growth consistent environment, our a a we rate of loans cycles. generate through also are original operational and and macroeconomic

confident that with ability also invest ratio without operate to businesses. XXs We we differentiated can in sacrificing our an to enhancing and feel efficiency franchise low in the continue

commercial in over QX, coming in years. several we dollars result banking our fact, should activities, in growth expanding In future million the which invested

ahead accomplished evident a also and expectations. post-merger our the increased in XX% these from tangible which see XX% growth X. annual basis, to our Slide and XX.X%. full of is on full year loan ratio in you our equity to The On $X.XX of year prior on We $X.XX XX%, strength our our grew with franchise of to EPS return efficiency we X% results, adjusted year results a can of

culture metrics first what achieved in financial merger perspective. and accomplished certainly but may are the proud year of we closing, we've since of a be even We the prouder from talent

and values-based ahead of together a talented expectations. our aligned incredibly culture that and management an initial coming have team is defined clearly We

been building and the last the and keys colleagues, over no the our execution talent our of among of since whom two company of culture years virtually have has performance, consistency, loss we retention continuity experienced a calendar One to deal client client-facing as announcement.

overview optionality funding acquisition our and earlier to tremendous differentiated interLINK, month closed we Before provide this turning of it I with to to over provides want adding is already us which a core of Glenn, believe an brief funding what profile. deposit

importantly, we well via attractive quickly of according which an up perspective, core to be rate or in are Deposits thereby low down it funding profile, all access considered an regulatory interLINK from scaled And works cost cost and scenarios. extremely all-in have a most our needs. relatively can acquisition

broker-dealers’ portion We programs currently a Webster in deposit that the customers interLINK banks, portion $X broker-dealers There to administer over on receive between suite FDIC on and is FDIC of ensure not we small in access insurance program, which deposits the Operationally, cash a balances time. customers insurance substantial program billion balances. the maximum coverage of around in insured would access could FDIC receive their that such idle balances administers deposit account. their in

small hold deposits of a we changing do balance on fee collect risk the already asset sheet a funding as great deposits closing weeks our on for had with been success We’ve our our generation. and on program. wholesale not only replacement It’s sheet. tolerances in utilizing we’ve We without terms balance since that two begun

contract brand last And new we’ve just week. a signed up broker-dealer

other are broker-dealer revenue also about synergies potential with partners. We excited our

positioning in confident financial care top-tier performance take excited how communities. clients, the as performance company the ability our with our consistently future our about our in are deliver of our we pleased we the and are for colleagues to We and quarter,

that, I'll Glenn turn for With over review. to it financial the

Glenn MacInnes

of we $XXX shareholders with core shareholders million net everyone. morning, EPS after-tax with expenses exclude of $XX reported On an Thanks, onetime We adjusted income Slide common GAAP million. reported of of $X.XX. of John, of reconciliation which $X.XX, to basis, a to EPS income and $XXX start million on common earnings and each X. good net will I of

primarily repositioning expenses of our is consolidation, expense real fees. estate Merger were to . initiative and The securities professional related portfolio. severance strategic

income at billion of period X, increased Loan by and quarter-over-quarter. of were Slide billion. balance to assets statement. essentially growth end, primarily moving review $X.X which Commercial Deposits were driven On was billion Next, flat billion. total of loans total billion, I'll $X.X $XX with sheet trends on Banking, $XX.X total the before $XX.X deposits

provide X slides. the of on our of additional lines. X.X% total, highlights the both detail will basis. loans In by two linked-quarter grew I breadth of next loan Slide a diversity the illustration for billion growth our $X.X a on or category, great business we

lending was quarter yield was following million. $XXX partially the points. the in $XXX $XXX on Quarter-over-quarter, million. accretion commercial real This million; estate, mortgage, basis fund and warehouse increased Growth lower by basis portfolio points by sponsor verticals: for $XXX the and offset residential million; banking, $XXX the XX increased million excluding of mortgage XX

wholesale were $X.X by deposits deposit XX sources total we quarter. This the to billion prior to as on net points points XX Switching offset X, were essentially of was total flat down result basis of points and a seasonally deposits sweeps – alternate which basis greater quarter. of XX funds, number used Slide deposits from public by reduction from and balances a increased in other The basis of cost funds. prior

for was beta Our XX% year. quarter and the XX% effective the in

our item X.X% interest linked origination income of quarter. million a our to statement Slide the to adjusted on compare driven or by details line provided volume the rate our Beginning grew $XX.X income and I'll Net statement. quarter, earnings our income by review XX, environment. by We and adjusted reported third higher

the was income in $XX X.X%. $XX line interest XX%, was on points or down million growth or The On net basis, ratio detail cover quarter. reported million meaningful PPNR interest prior $X.XX XX up items more XX%. drove in up X.XX%, margin improvement will and income a our an basis Net net subsequent income XX basis basis PPNR, X% and points was was slides. adjusted The individual EPS or net and in I efficiency EPS. up from was on up

our grew $XX.X third prior sheet. by On Slide net Adjusted of of sensitivity in balance accretion results was quarter and strong quarter. the growth income relative for was up net This million. interest XX, asset our both both to periods, $XX.X interest driven million loan income

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

We deposits effects through from quarter-over-quarter. cycle rate As roughly – coming and the XX% cost basis mix into the XX illustrated deposit quarters on increases shift excluding of wholesale of in the beta earlier interlinked the points slide, cumulative increased further anticipate – deposits. mix the funding interlink effect shift from

The our quarter our services linked mortgage we was well an On were quarter. year-over-year was number as a Slide platform, highlight a $X The fees. our outsourcing On and the banking outsourcing as by driven fees investment quarter. investment items of of in services. as smaller result basis, and down direct fee well the other income primarily linked of million decline of XX, fees, consumer decrease for lower income as the investment adjusted

$XXX expense XX Slide prior summarizes of quarter of million adjusted $XXX million. expense. relative non-interest We reported to

We continue the make related on to efficiencies merger. progress cost to

cost of the $X amortization, quarter a of performance-based this million year-over-year of increased is Banking. investment Bend However, benefits to-date, the compensation, and performance-based efforts compensation. included a by acquisition The increase intangible expense and offset save levels in Commercial combination increase strategic our in

credit net in for expense our over macro loan million adding Slide After $XX representing we million in recording $XX which prior the and $XX $XX recorded quarter. provision highlights losses, XX million. $XX up was factors with allowance growth million charge-offs, of increase million

metrics. quality asset key our highlights XX Slide

left, XXX declined commercial the $X loans loans. upper of and of assets XX classified represented million Likewise, nonperforming declined and quarter basis $X points On points prior from commercial total million loans. basis represents

of increased points. prior on remained from times, commercial an at last upper the Coverage XXX ratio quarter. as points and period-over-period right allowance from a to non-performing of charge-offs to percent The coverage Net $XX XX% classified increased on loans XX% to allowance million XX basis annualized X.X loans average loan flat up or basis quarter. basis totaled times ratio X.X the

Our capital targets. on ratios remain of internal well Slide illustrated as capital excess in levels XX. All strong and regulatory remain

common Our equity share X by was our and a the book driven Tangible operating to common ratio per medium-term ratio XX.X% of value XX.XX% earnings tangible equity growth. $X.XX share, $XX.XX X.XX%. Tier above strong target increased was

my our comments we Slide year projections. full outlook up where with wrap I'll provide our on XX,

QX that at XX X% Our basis expectation and end for Fed the year the lower. rate funds curve is the in points peak

lines. We in expect with range the loans all X% across business of diverse to to growth X% grow

interLINK. grow to of X% X% excluding impact deposits the to expect We

The acquisition growth. provides our of forecasted flexibility in interLINK loan funding

full net interest Given is around our balance in for of the billion. outlook accretion $X.X excluding sheet, that structure our income, year

the of On you slide, results. expected the see range

We expect $XX be to million in accretion outlook. the income added net interest that would

modeling would on add outlook. $XX an income to the roughly net interest those basis, million For FTE I

lower as $XXX a from lower consumer of income. of in impact be should services year full platform, the as $XXX million income well our net incorporates range of outsourcing which derivative to Fee fees million, the investment

illustrates, $X.X As the outlook billion to $X.XXX the expected result XX% in billion, to efficiency in On which is range in our be our to around expenses core capital, range. overall unchanged. ratio philosophy an continue are will

we target, and will of rate As our approach medium-term an XX% forecasting organic greater XX%. likely occupy share tax opportunities a we of to are capital effective deployment operating growth

to With turn it remarks. that, I’ll over John for closing back

John Ciulla

Glenn. Thanks, a lot

are timeline on core remains integrations the final unchanged year. with executing this middle conversion our We systematically our for merger and targeted of conversion

operating consolidate to colleagues’ as as of systems core our our technology, top continue simplifies which processes. the sitting and conversion capabilities We our process, enhances on well

We've also detailed estate previously corporate consolidation. real wrapped up our

turned functioning tremendous the from you are all imagine, is a a operating management as service conversion, While smooth going of have systems of perspective. unified client into can Webster an relationship ensuring and a business the page as and amount lines effort,

for vision at our the bank, across structure level operating strategic a high focused clients. is we performing delivering and our are are on and integrated, and Our values established

year the a was for terrific overall XXXX Bank.

for of loans HSA deposit commercial environment for transactional cost benefit deposits rate XX% from and should a deposits year. low maintained We a in our the relatively balances, us continue full well positioned of lower to funding cost we XXXX. as relatively Our grew higher a including

across of subsequent We transaction, investing HSA which the and funding the and enablement Bank, the in differentiated added our Bank acquisition interLINK to our technology-enabled profile. close with of also all the at of announcement while Bend businesses enhances digital

year, position in and capital stock generation repurchased During we strong the $XXX enabled by capability. million our capital

understand As we that the we look forward this environment the remains uncertain. for rest macroeconomic year, of

of out respect in to year results the the However, we to regardless are operating generate confident our plays ability economy. with solid how

efficient approach importantly, company highly agile of differentiated competitively efficiency, credit ability a and channels, to with business operate our very and business our risk profitable Our at lines our our XX% prudent diversity across to organization. enterprise structure starts management and funding operating our importantly, an

and term to years for industry-leading us the in allow both These should attributes results, generate to near come.

in holding As York saw highlight that you be we to sure March X City, our want am wrap Day but up, most on XXXX we'll Investor just announcement, I of our I approach where strategies business, for our significant will we talented front extensive to of and us. an managing our provide view opportunities the have disciplined management of our team growth in go-forward New our

to enterprise a look portfolios, a of We'll do view seeing dive and as how I forward and management responsible to frameworks credit our deep risk corporate citizen. an many opportunity have also importantly loan role community-focused on you there. our we

I want Finally, today the the and our colleagues their our thank hard of focus all are at clients. results on result work outstanding announced commitment The a of to direct culture Webster. to we and

Operator, it Glenn and I will to questions. open up

Operator

take will our question [Operator with from first And Instructions] Chris McGratty KBW. we

Your is line open.

Chris McGratty

Great. Good morning.

John Ciulla

Hey, Chris.

Chris McGratty

stock versus traded InterLINK question the guess, do you think and borrowings using but of because I over and how you on maybe the on that I what on to was maybe some heavy InterLINK put very are concerns I a growth your these sheet? in has balance think quarter are the rates it on weeks plan quarter Could us few deal, expect from John. strong. feels you John. about Thanks. the with deposits and much help Hey, a classification just the how liquidity just just the Hey, past like the the arbitrage on

John Ciulla

liquidity give a needed they cost deposits? issue. some it feedback, on Yes. a to the their of saying, is you of They detail Glenn can beef liquidity. boy! more right? the We've had some up interesting, gotten lot Look,

to other side, were growth going loan the billion we and macro On accelerate uncertain an $X that environment. and take concerns generate into

as from sources. a are optionality Neither funding further long-term of this at strength We those the of opportunity to enhance case, position a Chris. on looked our

and like our loan-to-deposit haven't seasonally So, this seen had at ratio, yet low us, even we first $X deposits, after the of where we a comfortably of if deposits XXs. quarter in inflow low quarter the look loan still growth you even billion quarter government HSA in

$XXX million advantage. And in in. million or be of the government first quarter, work to to have seasonality We'll our flow we're going HSA deposits $XXX

So, perspective. to looked year with from at fund can in a how opportunity deposits we and our constrained as we're perspective a all can we replace our funding to us five plan, growth But this growth and core terms give not around three at funding. of an optionality it wholesale

we have us well. help help get of all can economic we It acceleration growth from the the when if it clear do loan environment, can as us there,

really and this continue deposits, retail and a us government now deposits and our is out at a sticky we for funding you looked this when and bank think add to good you So BRIO, addition. opportunistic as add it to to commercial you we core are our we and add we HSA where really it deposits in it position our and to direct build a really and diversified acquisition think source this our broad we

Glenn MacInnes

standpoint, we for just you but it like a on all we're – if has as about -- priced are and the probably think would to that cost FHLB a use XX I proxy, from plus Chris, it's I product it a quarter, funds FHLB at about this Fed XX. in like think Yes, paying add, is XXX

our just geography of increasing core it's moving our funding really, ability. So funding and the actually

Christopher McGratty

us, do that X.X, with of sponsor book have you credit, don't roughly the portfolios? moved certain feeling marks? on Can maybe ACL how but of a know make Thank on also or helpful. off you And lot last attention. John, credits. That's And Obviously, attention is billion, you Thanks. remind $X.X riskier about is two stat your comment which you. a just, are I Okay. the quarter, enough you got

John Ciulla

no, that’s to Yes, all points. an to industry is going from really think I following economic here Obviously, everyone the the is and perspective credit. the good what on right what going focus are of impact be see we

we on comment where the quality down make down NPAs pleased I classified and real we're pretty basis, portfolio come the of obviously, So a a around far, percentage has dollar both our on originations. We, did of again, interestingly, write with and are. come basis

and to in areas being cyclical lot thoughtful businesses of very a our think around to there's stick We're trying avoid we resiliency. knitting where

From the good terms think and was really a strategically material billion fourth quarter. terms quarter. in did didn't $X.X continued in I way we of Chris, the that sales the – move we of portfolio that to call moves in about a shed like just any markets third the in have

charge-offs, than are proactive. on of the four in quarter but office the Our which being process, commercial are or A foreclosure that not lower up loans, that took loans of through do include charges again, million. deals $XX sale gone make taken losses a have we that five couple prior some

proactive we balance are really management perspective. from a still So sheet being

mentioned And XXXX, right that concerned now all of we're as quarter, subscale into our there or – some we've when businesses that to last we kind as businesses are currently got see we of we look whether are niche commercial evaluating we about. portfolios are

companies we're the paradigm as We in now, environment economic don't and you right talk people only impact frankly, does of But broadly but broadly, to just we don't think and More actions more ramble urgency cover, office any didn't the you we focused are it, material in shift want to credit on concerned see because on deteriorating the not probably forever. take quarter all still I performance. there. the about fourth any quite terms

ratings position rent in still we in risk are rolls, good so, classified. pretty a And terms there, of

We're at on a really risk all not on also but selection we're focused panicked. our all it forward. lot, So, focused moving of

now. are we where with pleased So,

the seen deterioration. really haven't We

industry anticipated. that people think I have would across the

being select balance how we onboarding more portfolio way, deep and feeling we're in sure industry dives proactive more doing we I right manage whole credits, sheet, in think but have we what now. that our making how the book we're on certainly is frequent our

Christopher McGratty

could. I Just, if

You on updated any watch, provide classified non-accrual, mentioned office. exposure, anything Thanks. there? the Can you trends

John Ciulla

Sure.

a classifieds down bit. Our little are

Let me up. pull it

I when medical kind is of traditional across think $X.X board total I exposure we white know, the it's it's office And which, total really in well performing you not are say now. office exposure, anyway. as office, billion the collar, about including

think see. I so, our And --let's

slight Yes, we've had in classified. decline a

representa the any been probably which haven't we looking doing that at kind loans of that credits But with Some billion. the kind that not been deterioration those about think selecting of whether there and fact Class-C of We’ve material about then we've in of kind not on or can and those to exit Class-B the to before half seeing or whether seen office $X.X what again, and up of trying have we’ve been vulnerability portfolio. is and is do we particular them lightening portfolio maturity.

actions. And so, I billion $X.X come as would think down characterize through I it we from

$X.X characteristics still asset at of Class It’s sort XX:XX everyone about C the that class. seen general and stabilization are nature Class we’ve else, the of are, billion. concerned like portfolio, We A that long-term but of we in about and B, credit

Christopher McGratty

Thanks, Great. John.

John Ciulla

Thanks, Chris.

Operator

our take question next Mark will from we And Piper Fitzgibbon with Sandler.

Your open. line is

Mark Fitzgibbon

Hey morning. guys. Good

Glenn MacInnes

Hey, Mark.

John Ciulla

are How Mark. Hey, doing? you

Mark Fitzgibbon

Good, thanks.

New follow-up stuff. Of portfolio office a that on Boston, Metro Metro billion, of $X.X is Just York? most in the quick the

John Ciulla

yes, office say, boroughs. exposure Actually, of our half, It I that's is is not probably true. would about is Latest five Mark. about data, Hang XX% have on. I not – there

Mark Fitzgibbon

Boston? Boston downtown the small is Okay. portfolio And relatively

John Ciulla

Yes. probably XX% of portfolio. I would say the XX% to

Mark Fitzgibbon

on average book at and look origination, what that the LTVs at looked And like? do if those you

John Ciulla

about last weighted we through the go it average XX% reading this Yes. time I end And the at am The LTV, updated right. LTV. we this average were third of we quarter, actually the as weighted

improvement of from because classifieds about we’ve and also X.X%, the X.X%, amount down criticized and probably that the Our overall portfolio. have is lowered gone

stability, we decent rest the now. So, the watch industry said, right But pretty continue as Mark, like to I does. that of

Mark Fitzgibbon

shaping share new of right? Great. the Okay. business in. in you wondered I heard Did or thought And with you I I say the hear renewal then, how million up. is coming I $XXX could that if HSA $XXX million season HSA deposits us

John Ciulla

sure. Yes,

than have by provide more to quarter like we you information know saying it question You we'll tell historically this able season's this, done. when you earnings of detailed call did can growth. I I last be in points we're percentage answered always first a But the and looks higher enrollment couple confident and the this is

$XXX to I of I works deposits of way in there XX% come deposits It's and $XXX how XXX,XXX funding expectation we're where we the slightly in for whether is is accounts, new were as maybe is mentioned, initial the the not and million think million. expect to quarter the kind into or always first because the there, numbers. about year. last new which predict the of harder any we attrition those ahead or accounts of And

give comfort you Day, But give a I and we'll good first feel where obviously, we think we to and we'll you that's as level going exactly in and Investor then we're enough to you are. to quarter dive, achieve what the tell deep at a

Mark Fitzgibbon

Okay. for Great. two? the And then could thoughts or share I outlook if on the next over quarter lastly, provision Glenn, any the you wondered

Glenn MacInnes

Yes.

So in flat. the group. as we top XXX, basically at we're been reported of our the We're it's quartile quarter, peer at

So that. really we good feel about

be challenge and of is. that's more will we the environment impacted macro the where it over next think couple importantly, the quarters, loan growth go but by as I

we $XX the related so environment. macro that of and did build million And was about in build was the there to quarter

light it's for see a But a drift to tell I think all can now. but going could economy. slowdown coverage our right in handicap, or So us hard do into we ratio the me I you if that's up

Mark Fitzgibbon

you. Thank

John Ciulla

Mark. Thanks,

Operator

take And Stephens. from next with Matthew we will our Breese question

open. is Your line

Matthew Breese

Good morning.

John Ciulla

Matt. Hi,

Matthew Breese

of but and quarter, towards NII go to some, I half be there back on you then touch about is some to outlook. the wanted is potentially higher million averages it the like going get cuts for Fed the outlook, $XXX to, core the as fund alluded It year. to NII the looks the going

and where So of I was we cadence might hoping NII. of kind idea to the an year-end get see

Glenn MacInnes

take I'll Good. that. Yes.

at you if probably these So numbers of range ex would our accretion. quarter, XXX And it, right? mid-XXXs. So I look about year-end, accretion, the fourth say we think by Matt, end if ex the we that I look, in think, are like

quarter, So, over next it of bit quarters. the couple little the two start getting we days, going first but by less of sort expansion then into tapered a

– sum a do And of of based basis factors. is it's then quarter, funds forecast end that's think the lot we XX is a where on Obviously, it down this and of a year, points. peaks – by like the comes X% said, I in Fed second the

that there data, So is is an ended there on is – the loan up. origination volume. where assumption that's we There but

Matthew Breese

mid-XXXs, And to Okay. you're core the to just NIM. clarify, alluding

Glenn MacInnes

core Yes, accretion. NIM, excluding

Matthew Breese

Understood.

Okay.

a HAS, a million of to we book back November. sold sold deposit Going looked in It like HSA so the XX% for near ago, a couple deposits premium. on days it's received pricing $XXX

size and overall feel certainly kind current of doesn't valuation like the valuation company, of your getting Given you're the book of that the it recognition.

it better mind, within With the either get showcase or and value potentially Webster it elsewhere? how HSA thoughts of would your to that in thoughts underlying achieving I on love your on

John Ciulla

question, credit bank assets. the and and interest what stocks, see you we it you now for kind valuations are just in great do rates. own value you a this concerns hard answered to about getting valuation and when matter and that banking differentiated of days full industry are some right you question of who now, just parts of it’s of with given No and with agree brings right frequently. the the that I right, more That’s terms Matt would in Look, overhang back the

to business over a wholly deposits the the to owning our and term. deploy We over come our again, creates continuously over the long and our and conclusion holistic to advantage and perspective that have of from we continue long-duration we relationships and business the profit HSA growth pure owning value business economic ability into of low-cost, evaluate said, the that most

And of throughout in cost start basis trajectory, long the have like fees quarter, of because importantly, its from deposit seen to average interest deposits. X recognition deposits it this low-cost that are. our still and for unique growth having of The here you points seen below cycles, went rate the get that costs those something business rate business to what generates is, sticky, you've us duration, that's XX-year XX what

do economy other nature profile the believe that should overall clarity the the business, terms and general we we both of just a realize growth funding differentiation faster people and more deposit and So by to funding it and power channels just that contributor to start people of grow than again get in from as its perspective. once recognize of become again, will more the that a perspective a our

I is correct. So observation your think

I businesses are constantly think in and valuable. capital stewards of we where we the the assets as have a things duty at obviously, – our our to and are all own look value where most we

best creation it could value continue shareholders, to now absolutely it wholly will is of to continue to owning We provide of HSA. we that determined the be value that that Bank have the shareholders Webster with right and Bank

Matthew Breese

Two me. appreciate from Thank that. you. ones I other

just loans. maybe pay there? pickup towards or of dues, estate bit sort Curious one NPA is what and offs? of The a if on there first any was past ABL progress commercial in was real going a there was And

John Ciulla

Yes, $XX transparent. actually, I was that and can – great delinquencies. am case. the I They I question million up went always am it's that a in basically frustrated about reported

We of increase than have year, resolved since delinquencies. the more the the end in

meaning couldn't the restructurings or documents whatever get they So all looked off the we or administrative extensions or books. the together you were at get the payoffs those were if delinquencies, the and it,

now at million $XX to day, and of we're $XX the end current and million, paying all were the in delinquencies. down They

spike entire to really delinquencies that that administrative was So, been due since year-end resolved. have

Matthew Breese

one. last that. then Great. And I appreciate the

time you your and Specialty laid quarter of first charge-offs, XXXX, go was Sponsor metrics of cumulative a I loan-to-value On portfolio, in some loan point to leveraged out the you on the update & at really really if the them out ratios and hoping frequently laid entire there ratios, across then some fantastic for book. them back have I non-performers including leverage an couple handy? presentation where this

John Ciulla

to to am going I that Day. our Matt, Investor defer

to provide year-end have of What seen a we rating I are not tell that together the significant current can you We of all risk not really have you – as putting deep dive. our is migration. numbers

We in loss not a portfolio. have seen certainly that material

– have, to you portfolio. flows. answer with uncertainty, seem we're be same to periods We seen we're give can seeing resilient predictable of more is recession in the of we've is, I I the general the again, which and give that characteristic that you in contractual industries thing cash think that our a That's more right best now

love revenues with capital and sponsors hand that structure continue to and have to to we a the we're that structure continue even valuations valuations of and even with such we position support with, the been if position where deal have is sponsors and if a we know that is just been challenged and wanting that that We close we capital keys time and and sure sort our the revisited, spent make each and one enterprise or in have work other of us both in through. going us evaluate to no lot opportunities

significant have not seen migration. So, we

activities, where been and we pretty technology areas focus people We places environment deciding operating the the & we've so from areas we've challenging good that is pleased portfolio that resiliency like in too far. not seen Sponsor have and and healthcare our Specialty the seen like

higher that mean, don't particularly on doesn't squeezed. revenues right, if That matter service, getting interest are rates debt

update can year-end looks that give good Xnd, sponsors on on what top and all like deep dive the working of information will on we're closely we portfolio that you XXXX. the assured really with you portfolio, rest So, March of a our as and

Matthew Breese

Great. all appreciate Well, very Thank you much. I questions. my taking

Operator

Casey next [Operator Haire with question, Instructions] from pardon our we And will take Jefferies. me,

Your line is open.

Casey Haire

deposit thoughts everyone. any deposit this is on underlying what morning, I NII? cumulative missed Good beta, beta Glenn, expectation Thanks. this. if Yes. Apologies

Glenn MacInnes

Yes, sure.

missed Day Legal that will say, X% since – year dropped that our did We our cumulative quarter cumulative Casey, points our over basis by it, Fed funds beta if peak think the XX given is I you outlook, of rate deposit are end XX%. So XX%, deposit around be our beta means by the meaning legal and quarter-over-quarter at was and beta one, XX%. through-the-cycle –

about to HSA by should X%. benefit point that I that out

of nature duration us. deposits long So existing benefits the certainly low cost

Casey Haire

over to since how you. the Excellent. then book And vehicle one build very to another applications spoken funding Thank that then first of And like, be you and way on the much of kind you you for increased would off, two, cuts using deal this Fed bond ahead this a used can forecast follow-up – pivot. month? disclose Fed of the have InterLINK, is guys this your nice closed to a sensitivity have calls liability

as you're wondering just an thinking So that application. how about

Glenn MacInnes

Yes.

a let then to So me flip John. and it I'll hit few over

to pricing this basically leverage you closed, tranche are first exclude – million dynamics betas and of as of from mean, of because a but weeks we some be FHLB that that a with to as provide or I that first the it I off talked paying two So, To-date, in and of $XXX so our is optionality – gave have and takes off, interLINK interLINK us the standpoint, decide at just on the off whether there'll that does core to paying deposits deposits. I the puts they is about beginning we're this about wash not. things and the our we and some provides

And to to the optionality FHLB we some investments then, your have point, going borrowings in future pay to do securities. or forward, off

you So, at that that's know an But looking don't forward. want if option to... going we're I

John Ciulla

right, we've the Casey, on in to have comments, of my does for thank provide you I it. our different point think last I in so time mean committed more desire Yes. consistency sensitivity, optionality. you a heard made, asset been mean, This I earnings you agree. And lot spending we were that. given I me making our right? traditionally,

funds face, into but those – Fed does these it lower a them funds the can of deploy environment, cost cost or deploy in we interest rate loans. give deposits is take and its opportunity securities the and obviously, advantages on down, as . of into some come Yes, us them to

our As already, strength fact and in position we opportunities be and have are I deposits various potential growth other business deploy said with of to to in other broker-dealers. and inflows tool of rate outflows another terms various scenarios, great in and toolkit where at wouldn't in of of opportunity, scenarios, the the that the asset in looked funding our love given this very the interest really profile this said, we and the beginning, we given seasonality

would and a the very, I be answer good your one very point So, yes. think is

Casey Haire

Great. more side Got of just the it. things. one And on then, expense

quarter, here you the I midyear. if and got guide, fourth coming the So, conversion run your rate your look in the that in middle at kind of you are point guide of

back the of So half you cost be there saves. some in as could the recognize leverage some

fourth in expense saves? can those guess, I the year we the are realization rate cost what at of where of terms And quarter? exit the in run Just

John Ciulla

there to a expenses. go we’ve going can conversion. million significant after obviously comment been as merger, have some am to $XX the you I do depth, synergies make to which Glenn said, realized, more we give others want again, to specifics. come, able Right, ultimate end have already obviously, do I including, I to to what and state into to of mean, we Casey, million are let related still related you we $XX technology that strategic on this

have businesses also in along of us the said efficiency We're to a We and all operating this invest. allows managing said that ratio. XX% terms at I've

robust ROA point look guidance, high to on it have and demonstrating handle a and that you businesses efficiency a we're in three the operate drive value our to ROATC continue differentiated I that. is at the think has the at and and resilient to go some could really goal invest franchise and bank and ratio If ability

our related but synergies top-of-the-house ability increase not in the a also to and from core just have million rate to perspective, continuing investments only to more talk get we're HSA we offset in to So, Glenn initiatives and not to Bend, to about our commercial while Day. at invest. look banking Investor run $XX about expenses, at in other that talked some expenses teams again we'll and lowest

look we've that that our very like the been deliberate efficiency comment the because square able would at also continue do of centers. we things banking synergies significantly out footage I We're in without ratio merger. the increasing that come reducing to to of in terms

the only were think bunch one have I out economics predicated not branches. MOEs a to taking on the of we of

footage. the have accelerate of we've – knows, in reductions opportunities We at had one-off to talked we longer take square there'll well for off, but to like time, over or make the be want since the two expiration, reduce square term. levers reduction branches branch customers. to and maybe sure that we've a as except our to no the any about our industry a we expense closed footage care through pull lease haven't as footprint. get Obviously, over conversion, But We

to that underlying seeing my a about that many growth you key synergies think managing are we to we've opportunity So, I thoughts businesses expenses that wanted fact got will not in give in of and to pressures to where allow us invest continue have in not the just quarter-by-quarter the kind our inflationary we're that expenses. of peers significant unique and growth

potential the And to have time, footprint of to our levers more then branch look cost at at We saves over do other we levers have we pull. and revenue pull should kind and tailwinds slow. look

Glenn MacInnes

we our our core I are increase would Yes. suggest expenses and about X% Casey, to have on would just X%. basis, XXXX $X.XX pro I an guidance billion of add. a for that forma think, Look,

million. to $XX So that's million $XX anywhere from

offsetting As investment vendor FDIC of all bulk investment of tied up redundancy, or those whether commercial whether John it's FTE the indicated, the end, equals. we're cost through $XX it's to the in business, merger in million the going pretty much

this really feel about expense we good at point. our projections So,

Casey Haire

Great. Thank you.

John Ciulla

Thank you.

Operator

next our Steven question take will Alexopoulos JPMorgan. from with We

line is open. Your

Alex Lau

This Lau on morning. Steve. is good Alex for Hi,

John Ciulla

Alex. to Say for Thanks, hi Steve us.

Alex Lau

DDA your think first more DDA you My outflows? normal customers? What do. you do deposits. what is talk a from deposit question about operating is are hearing for on Can expectations maybe your as forward? level And Do Will you you is This about deposits. back excluding mix total is of to XX% realistic you pre-pandemic, or point, going reference Sterling. what go level? a were that more a to expect considered And

John Ciulla

we think On And there on X%. I spot maybe of of was So deposits running – wasn't I average deterioration, think an a basis, total basis, a hundred probably couple a right? DDA, couple are about about down, on that I think, million. much quarter-over-quarter XX% it

I that the that deposits municipal is of talked about. Some

seasonality So you'll some that come into as well. see back

full So growth. I think think on total which out year indicate outlook be deposits, of as some XX% given going to that forecast, would say, to our we XX% in we range, a deposit it's looked

Alex Lau

the your to spot the And for quarter? then, you. just as a average are NIM, what XX/XX loan yields follow-up Thank question, for of On XXX relative that

Glenn MacInnes

a see, just spot our on quarter, hold let me were the minute, yields XXX. For loan –

Alex Lau

Great. guys. for you. Thank taking my Thanks question

Glenn MacInnes

Yes.

John Ciulla

Hi, Alex. Thanks.

Operator

next our And question Securities. take Wells Jared with we Shaw from Fargo will

open. is Your line

Jared Shaw

Thanks. everybody. Hey,

John Ciulla

Hey, Jared.

Jared Shaw

Hey. as year-end on what’s Maybe just the that, following cost at well? up spot deposit

Glenn MacInnes

XX points. basis

Jared Shaw

of if at just you you maybe the on then, detail a year? extending much securities the And duration, there duration sort repositioning, are Thanks. end you in of how the Okay. AOC sold, and picked what you little have up terms of

Glenn MacInnes

was think securities million earn back is a it – primarily Mae repurchased small, that We it we've year and Ginnie on the -- the $XXX So, and project. it was probably sold than about less relatively and of s munis Jared. I of sort

a we've that. around gone somewhere rate a So, from so like that, X.X% X.X%, on there on the yield like to

years and it. X.X the in So, duration was about

a was million. amount it $XXX So, small of

done looking we've about more we're like – at asset loan As stuff looking We're We're also sensitivity, collars. swaps looking at and we that. that. think some

so the And – asset rates there protect given our that in sensitivity a is on downside little we time probably take right view the to the we more. it's bit and begin think on

some these taking. actions are So, the we're of that

Jared Shaw

Okay. at That's good. AOCI end of the the what's And the then year?

Glenn MacInnes

after us On an had think tax. $XX So to I a improvement we bit. back capital the a AOCI came basis, little million of about actually

of after we went from XXX actually after-tax an million tax an it is XXX. to So

to capital. into of kind So the to that it and back way. that's about our tied accrete think starting years It's five

Jared Shaw

Okay.

more on think economic good. backdrop it growth at broadly I if your yourself back And a that tampering is X% in weren't uncertainty? then, to based better little in bit, go on you you uncertain it you Where would backdrop? that’s think do guess, holding loan could where - do be And X% economic looking that with just pretty Okay. still the comments a

John Ciulla

for have done we've always loans, because said, that like different or seven can And X% feel right? cycles a throughout time environments. that economic pretty and different a Jared, Yes, commercial answering proud demand, tough right, of I question, loan circumstances, I've we I we've throughout XX%. been grow great years, it, eight And general that's to this again, and

time, feel had that said try there at right characteristics we have comfortable about if original to generate all risk able over then our is and loans that a we with obviously, higher safe also did, not we've higher risk we about being we're outsized take return never And or And risk we I the that from concern loans And forecast. think bigger a whether and growth to or perspective. think, about grow to going higher organization, levels, hold talked no could market that. as better we There levels. I was, credits hold loan quality

loan growth's were we we're we mortgage growth, think loan really growth of disciplined. drive played out and in are our I were everything less we talked that to can growth, where and have kind We loan getting commercial getting XX% relationship-driven, loan loan true you growth didn't sake, the warehouse where about see in going came for for deposits. like areas year,

geographic We're we're commercial moving in. We're estate, and not real of in careful We're being industrial, care classes sponsor in forward. our right? multifamily middle We're and office. being market and mixed-use doing We're about the it careful asset clients. doing we're taking

is of to if think understanding the make to is X% this sort assumption choppier right. I our could that but plain as that possible it So, I XX% as X% probably X%, year, general it's a

characteristics and there demand to given want And that may understanding really growth careful. less economic be be loan we

a what out. again, can year safely predictably grow it XX% I think X% asked in bank would weren't if to said, So, as we and when this and environment, we and year loans you in be

to seeing little uncertainty given quality you're because of the discount there credit. be that out concerns return that about guidance economic characteristics and a put general think and just it prudent I to would risk

Jared Shaw

Thank Great. you.

John Ciulla

Thank you.

Operator

We will question Stanley. Gosalia with take from our Manan Morgan next

Your line open. is

Manan Gosalia

this competitive in book. and morning. loan spreads for quarter? just portfolios repricing expectations have general Hey, repricing ask how you are what later about to on holding Can talk pauses loan wanted the up I the the dynamics if on you good commercial Fed runway

John Ciulla

you competitive loan the and what about fall? sensitivity rate happens spreads? and the when asset asking on Great. impact Are of Or our floating rates portfolio landscape more

Manan Gosalia

former. The

John Ciulla

former. The Yes.

– actually perspective, competitive couple read I it's peers bank a other and interesting, a big of our transcripts. from So

other non-bank seeing I with have given is which and thing, of the elements. slightly been competing active less macro the and funding that is same cost think aggressive environment, everybody competition lenders banks there the given less is just the are

stabilized. I have So over that would continuing say spreads time of kind high growth had of periods narrow been to during

So has more do a perspective, in that paid competitive from I leverage for feel little bit getting a sure risk. are industry banking making the they regulated

seen So I of kind slightly environment. rates we've think to stabilize given expand the credit

to credit allows But floating higher this to I our And underlying the have in yields stable would slightly say, environment the I interest improving. then fact a on loans. rate we book spreads, large are that rate obviously, us think, have

Manan Gosalia

it. follow-up a on just And then, helpful. Got That's interLINK.

what think you mentioned synergies synergies what your are broker other would timing Can you are have talk those that partners. there I the be? those you about synergies with of revenue and

John Ciulla

forecast, opportunities with forward broker-dealers. cross-sell to respect have into our factored nothing with services and is but banking Again, we Yes. the

We have opportunities platforms potentially with with activities. securities HSA the Bank investment BDs, and lending

exploring. that a number of things in our we're So, is Nothing there are guidance.

and And guidance that fee So you can there revenue going hope a from like the have it synergies coming kind would focuses merger to March look and a one the I acquisitions think we're Bend all I interLINK. of of some on will upside these be again, the at be and kind of to provided. of number and revenue be from of we X

provide meat more the on a bit we'll little there. bone So,

there opportunities, we But opportunities potential significant already are in partners the engaged some there of discussing we've with and our have.

Manan Gosalia

it. to forward Perfect. I Thank look you.

Operator

And from Hunsicker we Laurie Compass Point. will our next question with take

line Your is open.

Laurie Hunsicker

morning. Hi. Good Thanks.

John Ciulla

Laurie. Hey,

Laurie Hunsicker

deposits are one, guide, XX, am much actually you this back going If Number in looking here. forward pulled your questions to XXXX? unrelated interLINK. assuming interLINK that Slide you in at year down how Three I just

Glenn MacInnes

billion the quarter. now, to $X a to will Again, we first said, I right billion depend $X first quarter the optionality. on that grow the then So and and in think quarter like in couple you million expect I each of have about could billion $XXX

So, would to billion I is But . think $X in outlook we year-end. have that and we will billion right there again, by that our the optionality highest $X monitor assume

Laurie Hunsicker

you. Got

Thanks. quarter, should And talk drop a wealth can this your in Okay. that? we how think bit little you management about about revenues

Glenn MacInnes

Yes.

that is third in, our LPL. Webster think, call quarter had announced platform Services, retail outsourced I we So to which Investment the we our on

reduction Laurie, lower fees expenses around there, see you a is to it's $X.X a so what and of the $X the fees as netting so, million with generally million result in expenses. And of

Laurie Hunsicker

Got it.

John Ciulla

those two. an it that, for satisfaction own gross and did to of we The Sterling we examination we outsourced we expenses. where where when client used lot a all us fee in We made and to net of there Laurie, is and are of used Sterling revenue was recognize from a So the terms economic model perspective sense an right, model. legacy adopt to recognize

of now The in but lower actual happily there that trajectory well. perspective fee does an kind revenue, change where report of But any expenses the we than are. economic overall the And from slightly net significantly so underlying not is indicate better overall business. we as lower

Laurie Hunsicker

net office, office commercial charge-offs, of if any quarter? any that Got of then office? $XX your much for this it. sales And And did or Perefect. then, so you question, Thanks the last million there. Thanks. refresh have was how

John Ciulla

Yes.

our again, question, pre-pandemic with on year of an – an on in a and running annualized that, to as are net rate charge-off point, of what contributed. number proactive we're some couple average note was – earlier were So there consistent four that is is our mentioned kind basis wonderful your there sales I

we business, neutral had net to we consumer So net in had our recovery.

commercial driven those three two in were were basically were of of Aggregating Laurie two four or five range proactive by somewhere and related. sales. three charge-offs credits, the million note credits $XX which the or All office office

ultimate as And we've the good that some us to results of forward. going sales within the of way And think benefit there. so, and from that's about there feel the going asset managing are get about book gotten we I'll I as sort granular we're pretty proactively again,

Laurie Hunsicker

Thanks Great. for questions. my taking

John Ciulla

You got great a it. Have day.

Operator

we our And from Jon Capital RBC will Markets. take next question with Arfstrom

is open. Your line

Jon Arfstrom

Thanks morning, till the on for good everyone. Hey, end. hanging

John Ciulla

Of course.

Jon Arfstrom

it fee just fourth Anything there? guidance. out Yes, expectations the else losses continue few a the had Glenn, just pull the the a you and anything cleanups. that simple on new out as call in to quarter? path Is

Glenn MacInnes

fee the On line? income

Jon Arfstrom

and line income the guidance. income fee fee Yes,

Glenn MacInnes

looking $XXX talk so the of about $XXX Yes, guidance always million million at. we to

Jon Arfstrom

Exactly.

Glenn MacInnes

the is I the think – netting don't decline of of we talked investment No. the I whatever mean, of of that just platform. about consumer about part think $XX We is part year-over-year. million half a that is last higher or that on fees rates. got that consumer industry we factored income because – like swap behavior, to things we we And deposit get year, and in pricing then, obviously, HSA. due have did of will lower

Jon Arfstrom

enough. Okay. Good. Fair

Glenn MacInnes

you securities on as am I $X.X GAAP quarter, have well. a sorry, million of fourth basis, that for loss obviously,

if that spike obviously. out, But portfolio, So, that be, that the basis. could as GAAP we'll actions, more securities will take we number we on that influence review a

Jon Arfstrom

report X? a you're Good. sheet? And it you in to interLINK, on And there limit balance Slide separately then, plan terms are is on Okay. your doing about on size do you deposits thinking like of

John Ciulla

it's that. optimal accordion provide absolutely in whether great an distribution us. terms we'll valve about is we liquidity Yes. there the Again, for where automatic thing it and of feature the need is

we think our about the HSA like was years whether care number? right to always I XX% HSA, regulators the deposits. the over becoming had questions what's got just of around questions XX% that We

many the have make direct and not BRIO Bank sure to when retail, I HSA deposit we so use that I about our be you concentration. which much is commercial, same will think think business, we'll channel, a too just there channels small prudent now that is risk Direct, and prudent interLINK management think of different

the at earlier, the But represent even said funding a if or to it given core could billion $XX deposit going opportunity, available mentioned Glenn concentration what if about $X overall us, doesn't look you profile. what really be billion just we

do be artificial to going sending an more to deploy us think those about limit I deposits. it’s opportunity have an and we about used less So,

Glenn MacInnes

we have at funding are so XXX Yes. we at And similar FHLB and John, pricing in $X.X is to quarter basically end very billion InterLINK. the and much pretty about

right? the same pay And on that And the core perspective that so, optionality, things of about think down like that. have deposits or you bulk you further gain if securities then, time, you the can it's whether and a portfolio at

option have significant around – of I there right? for us. have a say for questions provides could billion year-end. it to that's we don't So to answered We I by up amount of or optionality an X somewhere us, the $X But take think

Jon Arfstrom

That's I that. Slide Okay. X. good like a slide,

John Ciulla

We'll keep it Jon. in,

Jon Arfstrom

Okay. Great. talk mentioned you answer commercial may that? that more And And Investor you now then, is what there you expenses but you Is of some terms on about expenses, talked have it not expanding about you Day? on this, answered already, sharing may something on activities. can in that

John Ciulla

viewing is Yes. are couple people. business and hidden, we're that new right? It's hiring There right nothing mean, I verticals, initiatives new a teams of it's there potential now.

that continue both invest is frankly, organizations and relationships actually get geographies, where you'd markets to you've the opportunities and Webster expect capital new do take which it's and classes time, entirely what deposits, and seen bank So can full and legacy we those. cash quite over form with asset to verticals management what in of advantage this areas fees, of in look at

success I'd in top and out with to the not done I we've activities. of building but about secret. think like expanding think what and more I we a respect that time it past we've to replicating with it's Investor share over It's And will at kind say Day, done

Jon Arfstrom

Yes.

Thank right. for All Okay. you everything.

Glenn MacInnes

Jon. Thanks.

John Ciulla

Thank you.

Operator

you turn remarks. appreciate Mr. and very day. your Thank us Really back this great a for with And for continued you Have great call much. the I for to interest no thank will joining in this now further Ciulla Webster. John morning questions, discussion closing everybody

Operator

thank gentlemen, today's And for you this your participation. call. concludes ladies and We

may You disconnect. now

Webster Financial (WBS) 26 Jan 232022 Q4 Earnings call transcript