Earnings call transcript Q1 2023

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Operator

Good morning. Welcome to Webster Financial Corporation’s First Quarter 2023 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

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

to will turn I CEO, John Webster it Ciulla. over now Financial

John Ciulla

We Emlen. Thanks positioning today. Webster detail. and us Glenn Corporation’s on appreciate I results Good will to our provide call. it greater high turning welcome to strategic you morning and a cover level results financial remarks joining first lot, to Financial over our before earnings quarter XXXX in

was strong and for good less news of failures Webster’s remains across The than system. quarter by the the that that reflective caused memorable the bank is highlighted in near-term unfortunately well XXXX the ago. a fundamentally is are industry high-profile business month of for capitalized the quarter resilient model banking. view results our a First and industry, dislocation volatile banking environment a one and shifting

loans prudently from our We And core deliver asset we unchanged remained the grew We and profile quarter. the effectively to generated continue for clients. returns quality our deposits. quarter, prior solid and in

actions augment higher position our out dislocation including liquidity caution, light we our of On of balance cost $X.XX. cash market to of sheet took abundance an basis, In sources. utilizing an adjusted we of funding and and generated EPS increasing the

result direct effects. among a reduced also gains fees client overall activities in of investment other and financing as a We saw decline

actions factors, from these Due our and quarter. down prior was to the X.X% seasonal some PPNR

ago X% Loans was focus categories a and a X.XX% basis up year. common a linked-quarter up with our return a from XX%, of tangible year risk grew equity was on X.XX% strategic on attractive last profiles. strong ROA adjusted on with Our XX% from

Our deposits X%, up a with X%. up were total linked also core basis quarter deposits on

ages X, like Day days market attended disruption. before seems you our it Investor many on ago, of just While March the

During look our focus that strategies a during funding and differentiated with on which profile especially beneficial we event, stress and our of provided unique a risk and at transparent times go-forward credit practices, of businesses all are uncertainty. management and

of revisit continue early some points operating encourage the our March, Day While posted we you on we to company attributes as of drive in webcast our benefit outlined presentation outperformance that will would I regardless on and touch we made are will website, I the the to again environment. the believe Investor and

core strength deposit minute qualities I Let unique our office me our that remain trends deposit on of interest. and on update of you significant deposit and I on a a portfolio, franchise presentation. topics our are spend of then an know X of The provide just Page am Webster. with two

deposits and nearly Our billion these of to are the our are largely consumer consist and cost. clients. limits, customer deposits long-tenured deposits coverage in duration you deposits low individual billion as deposits, entirety know, HSA of FDIC long of accounts originated $XX Bank are of retail $X and within insurance footprint all HSA

characteristics. highly $X within deposits these public the billion commercial consumer collateralized dollar business our bank. are the commercial of which book. those fund $X predictable are behaved billion banking of bank, smaller to of similarly and deposits within with the in behavioral Generally, majority

balance we balance customer Chris Day at down are of in diverse less are where sector no concentrations an $XXX,XXX are deposits presentation deposits $XX type remaining of and small and account. to average Investor again I these There will you broke billion refer the commercial than we proven our by deposit access be relatively Motl’s Our readily industry, nature very per multiple geography. And in deposit-generating businesses quarter to and in which at completed insured funds we funding acquisition of commercial acquisition. provides already to all has first highly the valuable, the cost bank these available deposits FDIC finally, low franchise. interLINK, core to almost have of with a

small HSA summary, balance business duration categories Bank, nature. month interLINK, deposit XX% highlights both of the grew are Consumer the total the long QX. are accounts was of deposit HSA throughout entire Consumer usual within tremendous value quarter and of franchise. in the in Customer accounts as The In between Bank past our and deposit these that activity our activity and of consumer-oriented,

within are of saw that approximately for Bank, operating XXX the concentrations, primarily process activity middle of commercial normal quickly few opened accounts, as I we the funded a being their clients we resumed days accounts to mid-March, elevated in In look but activity that since its March. would with also Commercial two-way note have deposit the new that diversify depositors course.

our addition of displayed X. Slide is maintained deposit strength on of we This to overall franchise, liquidity. In the sources significant alternate

XXX% yesterday, of we uncollateralized deposits. undrawn of our facilities. and available As liquidity borrowing $XX cash This had between immediately uninsured of billion balances represents and

continue to ratio We the grow will over short-term. expect this

Officer, portfolio. to Investor loan relates our Chief our Day, quality Soto, Credit the of at credit, detailed As Jason it

We risk of credit proud are selection. framework risk our our and

For many rated customers been on efforts origination and loans. existing quarters, our focused higher have

risk. past future rating sold trends. it testing, and is standards include reviews year, are is We be last our sensitivity average actions in improved linked would result interest perform the to The stress basis. loan and reduce on over of credit Our robust of that strict our economics underwriting proactively of weighted unchanged risk has we help to year, net and that rate all continue portfolio quarter believed segments loans and we economic portfolio each our quarter where sensitive environmental a the

disclosures, in well. of our stable our see will the in as has assets you classified remained level As portfolio

refreshed portfolio. our our office augmented On on disclosures have Slide and we X,

As current has service strong perform to and origination you across non-medical is a X.X% limited our years ratio diversified debt each lease continues geographies represents profile loans, can just low has of in maturities LTV, far thus of well. and updated office X a portfolio see, total next the ad coverage

a of close exposure In as of have since our ‘XX. ago. were you proactive fact, X.X% office fallen this in nominal to billion portfolio together office down XX% banks two we have criticized ‘XX. we assets the or from is amount X.X% the only million of the the exposure a from will in And of remind $XXX loans during managing in $X.X MOE quarter fourth loans originated also year of I that came

detail. I Glenn over turn will that, in statements to With financial the review it to more

Glenn MacInnes

million I morning, shareholders will shareholders earnings of portfolio. acquired related strategic onetime and fees, $XXX were to severance million $X.XX. after-tax of of X Merger our of repositioning $X.XX for share start On on of securities to and earnings. commitments. reported Good expenses initiative with John. net our net compensation-related provision $XXX and with adjusted lending expenses Slide million. adjusted GAAP We reported we Thanks, $XX basis, everyone. related per adjustment common an to and expense The charges income a common unfunded excluding is GAAP after EPS other income of to professional

period as the beginning growth. $XX.X $X.X billion bolstered trends, review Slide will liquidity loan sheet up sheet and assets in had our quarter X. fourth end, were on billion Total at billion I Next, $X.X from balance we balance

Our securities balance quarter. increased in the modestly

in loss lower a securities on sale. As million were $XXX in earn-back January, an proceeds than our Investor recording securities, purchase less in at resulting discussed X yield Day, used of to we yielding sold The year. higher

to environment, billion commercial Loan quarter. annually. billion, a of HSA and growth primarily we unrealized losses from from interLINK, by driven this anticipate attributed were interest was Deposits growth. rate quarter accrete our into our AFS reflective in to portfolio million AOCI loan roughly $X.X and $XX portfolio $XXX million banking. against will steady of match back our $XXX last capital In $X.X improved million end, growth quarterly CD up

Borrowings by April grown billion in of From quarter we events. have $X.X position our $X.X as enhanced billion. light increased market recent deposits through liquidity end another XX,

billion Our of FHLB advances. borrowings $X.X included

environment rate replacing rate borrowings holding our of while wholesale we as levels While anticipate cash continue more funding profile funding. normalized deposit the to liquidity with enhance we stabilizes, –

levels tangible common capital a XX.X% by evidenced ratio as equity strong remain common Our our X.XX%. and ratio of equity X of Tier

Lastly, tangible per we grow $XX.XX quarter book continue to value ended at which share. the

quarter grew Loan trends increases are costs. on we as residential million $XXX highlighted million, was on $XXX modestly. portfolio loan deposit commercial increased up by yield outpaced the real The were balances diverse growth mortgage in estate by grew XX loans points Loan $X.X basis Slide on yields basis. or by In total, by Commercial billion linked category. a X. X.X% grew and

and remained Excluding quarter accretion, points. approximately XX% XX loan by loans basis yields Floating rate at increased end. periodic

with from up deposits additional detail provide $X.X X.X%. or on We on Slide X total prior billion quarter deposits

In addition HSA, in interLINK million CDs. to $XXX in we growth added and

average Bank, Banking, our balance FDIC is under XX fully deposit under interLINK, up $XXX,XXX. duration account are and points Our deposits cycle-to-date consumer, XX% loan insured. our costs business, HSA and average and total account in our basis between to categories, a XX%. In large average of our account points repeating It’s worth basis beta for is to a Commercial under the were cumulative in HAS, XXX In that $XX,XXX extent, Consumer $X,XXX. balance is balance of consumer-oriented

Slide followed ramp increase deposit year. the you more XXXX progression significant will fairly our our see XX, second beta deposit with by XX% cycle-to-date first steady On by the assumptions. to quarter, of of progression anticipate beta quarter throughout forward of total the remainder a the in We the

adjusted line to down XXXX. from while inclusive quarter was to remained fees were The income mix flat. count see to down actions or the fourth provide net interest and ratio can our margin prior X augment a points XX%. $X.X for will and reflecting you liquidity. compared the XX, shorter Moving basis expenses day the million funding additional quarter down I Adjusted X.X% on shift X.XX%, income a interest was million statement item linked detail adjusted slides. the subsequent efficiency effectively quarter $XX of earnings to was reported Net our of our Slide

or XX, a On net Slide million roughly headwind X.X%. Day linked count interest quarter-over-quarter. X%, was $X.X quarter interest growth income was net X% income to down

or million accretion, have excluding accretion $X.X from just would X down X.X%. Excluding been net interest decreased margin, interest quarter. the Net prior basis income, points income

driven basis over of the yield quarter, as decline points our increased on earning accretion, cost liquidity assets, points was costs enhanced Total basis was While funds the our in up XX excluding XX position. quarter-over-quarter. funding NIM by higher prior we

valuation adjusted primary drivers The I quarter. quarter. decline client marks move well million investment will highlight and direct XX, basis, our the expect lower investment outlook fees. linked contract fees were fee for mark and income, of the Slide hedging which as direct income my portion the lower we On income lower down recapture later for the client through the remarks, activity hedging $XX an but we and of in to year as detail our a were XXXX. valuation as

Slide expense the line acquisitions. reported We and results Non-interest associated interLINK, reflect an on strategic compensation the in interLINK quarter. expenses were prior on intangible and with operating Bend including by XX. highlighted marketing adjusted rate, investments, The which million, cost with expenses, $XXX increase in FDIC and assessment amortization are of offset an lower

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

recorded completed this TDR charge $X million a to rules resulted accounting we retained year. This reserve, a effective increase of was X as adoption in which in the Additionally, of the earnings. January

increased a X.XX%. our coverage As you will result, see ratio modestly to

asset Slide quality XX our highlights key metrics.

of absolute upper million increase X.X% loans On average classified on quarter $X assets and a commercial or loans Net XX right basis. $XX despite of a basis annualized of on modest as points million upper points an XX loans. basis charge-offs million totaled of an declined basis. loans to percent the X.XX% from $XX the declined non-performing prior represent from Commercial left, on

All in remain of levels On strong Slide and regulatory to XX, capital we capital levels. continue exhibit internal excess targets.

equity Our our XX.X% X ratio equity Tier common tangible was and X.XX%. was common ratio

per approximately our approximately be portfolio, marks and as value a $XX.XX ratio from would $XX.XX book ratio on XX. equity AFS both the TCE to last our quarter. common of Our Tier and both tangible share in be Including X would securities X.X% HTM increased our March share X.X%,

outlook will wrap full comments up XX on with I my Slide our for year XXXX.

segments. loans to of expect in in We with X% strategic focused grow range growth X% the to

with XX% XX% year of a We deposit the XX%. loan-to-deposit year expect X% of in full range growth core to end ratio to

$X.XXX non-FTE on to $X.XXX excluding expect billion of a billion We accretion. basis, income net interest

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

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

income interest rate growth remainder Fed along XX rate fund hike of outlook at expectations are May. flat ratio We $X.XXX net income with Our in above a the remains XXXX expected million the basis billion be includes the for the assume of XX%. billion expenses to with roughly of Fee Core should an $X.X range $XXX to million. X.XX%. in efficiency to be point $XXX

the our XX%. tax range effective expect to in of We XX% to rate be

market to on continue capital. Capital actions will be prudent environment. the dependent We managers of be

a target We over continue X XX.X% time. of Tier to common equity ratio

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

John Ciulla

of last through or of Most core our in conversion our mock short additional others complete weekend integration to a will aspects next few several the use have Thanks, as technology, time. is of people conversion and in We of go-live we improve to months’ continue invest is XX, our our we scale Glenn. first client approaching company our and conversion, soon have approach our our as On The the merger to Page on to core integration, largest though hit we ran experience. outstanding the our bringing planned platform the together. successfully notably, continuing date. activities list briefly I’ll steps

maintain share generation in future. capital, per We’re position risk internal marked ability stated basis and capital our a of base, of fortunate position and levels us invest strength, to operations to rate platform deposit diversity a exhibit our going ability well and of and the We on operate funding consistently grow high interest the to robust for efficient book both and management, forward. growing value tangible from

weigh continue interest we a on While will to benefits our NIM loan a higher continue to to degree, the higher of environment. operating reprice environment the to in shift in yields and will our lock rate

operating of year in The case of effects our our based business a provided clients to the to events, or to it’s base later the all recent segments through is the With of recession we our we factors including it’s of the costs to depth our aim potential support bank future on and macro position full regulatory impact thinking the continue and year. strategic that ensure today guidance around early said, key any best too environment. anticipate our for

likely continue to new add will and full of with prudently within This the loans funding growing economic grow focus deposits. credit franchise businesses enhancing and We all funding loans and scrutiny continued closer relationships will confines core of on existing and the mean environment.

environmental and an in continue challenges. efficient stewards We prudent capital of and opportunities and/or manage will depending be good we to balance sheet the on manner our

based the XX% but Day that’s believe metrics forth, have our ROATCE peer on will We point, of ratio we in last will only to peer this highlighted exceed be continue I or year range, announcement of ROA to return group. believe expect X.X% kind still metrics best-in-class in an month, at not and performance we to of group, top we today. will around those efficiency summary, the have provided, set and Investor that important merger end to want approximately the meet we our our strength make we XX%. at to In continue generate our the I thanks guidance targets

operating I our their period. made our this high level just quarter. at before colleagues thoughts. National I and month Ryan after in our event in to through kept number earlier Gold our support colleagues of of we our that that in an them character, has for we and and in place run team express unusual know our to have their front took individuals of And you conclude, Louisville, to there. entire this stay the Webster for Jim want clients a Thank They a efforts exceptional engage strong industry the very special an They work know a Bank and to rest want the and organization organization

Operator, it to and open up I questions. will

Operator

comes Instructions] from Bruyette from Thank Our ahead. Woods. Chris & Please McGratty Keefe, go you. question first [Operator

Your line open. is

Chris McGratty

Good morning.

John Ciulla

morning, Good Chris.

Chris McGratty

the make was What XX sure want want ROATCE, sure to it? just make the period I Just and again, XXX to the time XX. got the

John Ciulla

merger. It’s X-year a

fourth ‘XX. I So quarter think

Chris McGratty

Okay. Great.

to could you help loan here? deposit wanted of borrowings to the continue from interLINK that terms for with expectations ultimately, settle? In and implications How your balance you’re you us the sheet, maybe where going to pull just on and just for the much to

Glenn MacInnes

Yes. Thanks.

me Glenn. let that. Chris, So take Good It’s morning.

closer So now. right we close billion that think $X will probably the year the interLINK to

$X.X now, And billion of so yesterday. as we’re almost as as I – at mean November, of of

the on well we’re So there. path

John Ciulla

And beauty lever that of from can down pull is the perspective. have an accordion about it’s we talked we and Chris, a just

So out if to to business it’s environment. that lines in – of deposit growth, respect have, particularly with the we tool But throttle momentum see continue we can to this wonderful down. a

Chris McGratty

then the lastly, timing? And thinking in I macro going out uncertainty. of back guess buyback, just the obviously, shake where you terms a is terms this of because period your lot about on do of of in

John Ciulla

return will capital the in. I million the we it’s to this hundred attractive us at in again, fact to always an Yes, the that’s model settle likely quarter, to valuation, in in won’t in there’ll be for we Obviously, that fourth But be active. with quarter, happen caveat the first that macro I in in – of several that environment the will believe our our things now that we and third base certainly, given be the do that market, we great. think environment be. want case uncertainty in investment But we and we with second buybacks weren’t dollars quarter. And the what’s the going way. But as prudent

Chris McGratty

lot. Alright. Thanks a

Operator

Jefferies. Haire ahead. comes go question from Please next from Our Casey

open. Your line is

Casey Haire

Yes. Thanks. Good morning, guys.

John Ciulla

Casey. Hey,

Casey Haire

questions of front, the caused XX-K of strategic expenses so Couple the delay? any in issues up – control around Was that relating quarter. on the that expense the to the

John Ciulla

Yes. The answer we’re with charges. doing with conversion other is what no. It to respect has and to merger-related our do

we MW related too. not material expense that, increases have the the of we and are had path resolution So, all of of on to remediation well

So pop not anywhere. to going it’s

Casey Haire

is what going to on about it’s to guys have lead talked to meaningful impact a with not this expenses. Investor at consistent not – Day, So you going

John Ciulla

No.

Casey Haire

level, still remaining guys XX% revenues. shooting following first up, expense but efficiency Okay. And guide your XX% ratio quarter, the just sub-XX% the ratio, in the the taken efficiency keeping your that implies quarters despite you’re in down are you’ve for a so you same, which

So I’m be just tougher you’re and still trying ratio? efficiency to appears a to square what holding outlook that

Glenn MacInnes

Yes.

basically So million expenses first for the our you at $XXX flat saw quarter quarter-over-quarter.

think feel forward, there. operating good range. as the still it have in we some So I opportunity think XX% we we But push you about

So quarter, and little this it will fine. think were out a we I elevated play

John Ciulla

I Yes, the about range out at of that you think so look our Casey, targets. and I flat guidance, of comes if kind again, around with said our to middle XX%, XX%

think to do pull through get conversion we levers I and on once expenses. we opportunities have

I range. XX% XX%, that where in low right XXs, And we so will be that’s think

Casey Haire

growth to with good. year-over-year, bit you. And lighter Thank Day, commentary little guys HSA a about on year-over-year. you but like a what Very X% just at last seems Investor that’s rate that in HSA now, up John, long a I Any talked color ago mid-single-digit time agree on you, think just I than one.

John Ciulla

we bit. what growth is we’re where think the are little of slowed I a kind No, – industry

are where with respect in happy first quarter the growth. with we year-over-year to pretty We’re

in I anything deposit deposits, unusual. year-over-year Devenir high and would good Devenir digits difficult the pretty actually, we growth. we’re say to low-cost it’s what that think a in single so to bullish on had relative I think Casey, of quarter relative what industry don’t it’s still very growth to So terms And showed find nothing I unusual.

Casey Haire

Thanks, Great. guys.

John Ciulla

you. Thank

Operator

Our go next question Please ahead. from Matthew Stephens. comes Breese from

Your open. line is

Matthew Breese

morning. I touch on wanted Good to credit.

sense on these First, yield XXXX vintages of does loans is for could impact is change XXXX, kind kind you And commercial have behaving those loan then coverage change what of the just us coming that out to type real And debt on assume what’s And average for same estate, service to that you of, ratios? today, using when how in some I’d XXXX right, XXXX you’re are in resets or have underwrite give the just of today? what of or properties? loan borrowers profile, question second changes? I reacting average to cap vintages the kind rates

John Ciulla

bit Yes, debt if pull on to either we’re to are hard what response or of increasing ratios, little more up seeing I’m with sort data maturities what it’s have They trying give proceeds putting to is I are service interesting. borrowers. we’re coverage around. LTV the blanket that is It’s we’re a obviously, a risk more because and doing rates in we’re taking some renegotiating

couple like increases the XXX about – from probably second. XXX down I cap increases that our I basis commercial ‘XX March all-in Matt, a as That’s in that’s kind up to kind my decline about in shows of portfolio I’m basis dynamics. think XX% in and DCR, range. estate. basis here, probably if by impacts all those XX% of we NOI point perspective. rates to XX% yield. think cap we’ve And X.X% say that reviewing points. basis a up we XX rate up X are was had of going number in give That’s I’d of real now. and been some sorry, have, increase of hundred the A our LTV research LTVs ‘XX me in trying what points we’re originating since I’m of a points

the taking would service not coverage higher either ratio lower a enhancements for to a settling say for the get borrower respect seeing coming on coverage any we’re commercial work debt our and issues to service been is with we’re with steps if additional proactive And renewal, real estate. rightsize up current proceeds as aggressive or So LTV. we’ve really to it’s I what debt

left by good in in slides all I on of pretty think at classes, in there. we in million one resolved of gave you in still enhancements, office, obviously, And about comfortable we our showed the either we’re the $XXX so that you down additional got reasonable those the coverage, in as office, new equity in that shape a We’ve XXXX, we’re far, from if office did getting borrowers. working maturities still lot debt additional and look within asset and at settling this the we’ve and And So, kind we’re year. credit service proceeds already our of we’re and paying yields, we getting maturities LTVs.

Matthew Breese

Understood.

of was I the talk Does hoping it change is New then man the of your market regards you with And to could share or York wake on the of view about in other kind how you in disruption? just some of Okay. attack dislocated. this take New being the field market there City, signature the of York in in players of what wake City market to going kind everything that and opportunity

John Ciulla

critical of Yes. York our it we a estate loans. is I real you perspective, look think strong guess at strong underwritten City conservatively we So two about having look exposure. all from sponsors, borrowers, property strong New credit and And the managing at think thing right? ways, I again

be the New obviously, with York be loans Bank that we will selling And Bank particularly so didn’t while, that believe they’ll buy. we Signature Community the in stressed,

in got sponsors We’ve no right? commercial our in we’ve long good there, really work limited estate worried to got portfolio maturities, the the York, real We’re their overall good there impact about cliff able LTVs. not as behind as we we’re properties said flows, and too strong lease is through New market borrowers and standing as on

of And with we’re individual our so borrowers working move as forward. we each

there market, teams the We as to do dust think believe think about be do in that Matt, transactions high-quality available potentially settles, be us. we I available. we and that the believe there’ll opportunities will

about opportunistically think to team focused I we to to to the sure and focused got strong the future the at want we liquidity advantage want in be management right have sure deposits, on thinking about last asset much going which right what we is fact and able our continue think, what we make you’d are for in our with we’re quarter, how making we’re on, if be obviously strong we right that we’ve think funding can will it we’re you think given time. given us that that relationships grow credit think flexibility looking share, react the own and but now, how to we classes I doing at that has we’re the our been take

think in an the I year. for now, for grow there, market continue cognizant we’re also is York the there dynamics do of at us So recession potential opportunity a our to the to very right but New smartly book of the end

So what I’d prudent yes, take about about go share. how to future, and say is, where opportunity the in deciding but we that really when

Matthew Breese

Understood. me. it. Got one Last for

rate see sensitivity, interest on Just rate the scenario. in I down XXX basis point

I year-end. think NII is down now about X.X%. at This think, X% is off from, I

the do ball the expect you time balance cuts, move XXXX on to do get and you the where sensitivity forward on by potentially As be? to front, to this we this continue metric rate sheet close to

Glenn MacInnes

Yes.

take me Matt. let So that,

on reduce Page chart, the continue to we on same that see asset XX back probably I or you’ll so So sensitivity. our think you’re

that things like done talked Day, Investor about we’ve loan swaps, collars of that. we so and things at some And

will continue we down. So think I that don’t down. I we point, be to a at manage just but think we to that neutral continue work

Matthew Breese

Understood. questions. had. Okay. I for Thanks taking all That’s my

John Ciulla

Matthew. Thanks,

Operator

ahead. Please from go next question comes James. Tamayo Daniel Raymond Our from

line open. Your is

Daniel Tamayo

good morning, everyone. Thanks,

question for one Just me.

to similar you’re might on – the have that forward. or and – stay expect the kind frame if that to going I had that’s that normalized you Curious excess mentioned cash of balance holding think if now the kind grow you you if that higher think, to Glenn, of that expect where amount Thanks. sheet? the time percentage to of a hold you

Glenn MacInnes

good Yes. and morning. Thanks

that we So manage helping the next course the billion. were I level and the of we think to levels. we that think right quarter, $X normalized cash of about say as now, And is I couple down to will more $X.X level over in are billion a quarters, elevated opposed

out cash closed down because of the that see from standpoint, continue the continue you’ll to think a NIM remainder some quarter, year. little only that build bit in manage will right. obviously, a we And the second we but I for quarter implications to that’s that has balances, elevated so we – the

And so drags it’s – from doesn’t because it’s – doesn’t deters basically it it not – – NIM. –

will see cash compression quarter. back NIM that should that in and come third So, a – But down, the probably deploy NIM draw bit then should more we you as up. it it little

Daniel Tamayo

Okay. the in contemplated laid? your guidance And just you this is all way

Glenn MacInnes

is. it Yes,

Daniel Tamayo

it. appreciate Okay. Thanks. had. all That’s I I

John Ciulla

Thanks.

Operator

ahead. Our next Please Mark question comes from Piper go Fitzgibbon Sandler. from

line is open. Your

Mark Fitzgibbon

morning. Good guys. Hey

John Ciulla

Mark. Hey

Mark Fitzgibbon

had, of you had particular came concentrations any commercial growth the $XXX in? real about first that question estate First was I million quarter, in

John Ciulla

can tell industrial of about it across pretty mixed-use, you of spread is, you, geographies. if multifamily is office think where I wasn’t. across kind obviously that’s kind footprint, Mark again, and disfavored. It But our

The the other the commercial and, prepays estate all frankly, Mark in were down growth real significantly. thing about loan quite interesting quarter is

our sponsor conditions volume down C&I so originations in book, in not aren’t market high. are transaction from and were regular that having the as So, the the actually obviously, year a trading ago. is But materially it properties

lot nearly level of of in as there for growth it the was that a year as So, in in as was get more CRE have I originations just to there context prepayments did where a not throw to the be that quarter, ago $XXX high well. million

Mark Fitzgibbon

at rates? I there forward. then costs And any seeing assuming XX secondly, going Okay. if your pressure is around that to boost you And are stay basis HSA am modeling points deposit deposit curious

Glenn MacInnes

Yes.

XX So, modeling are points. basis at we

increase two rate. You ago, the did probably we quarters saw

very XX basis far went to is from X basis the as the of like end the XX that So, points but points basis points, it beta low as on or range. at

funding one of are to at one us those like it’s a know that time of now. sources really – important you those obviously, So,

Mark Fitzgibbon

then local a And that result – share I in the to with coming charge lastly, you expect I some breach. in had of in Okay. here large you that’s whether if you the saw quarters? customer could in papers us Connecticut likely data wondered a

John Ciulla

have of use our None incident impact don’t there we financial we that will a Mark, We with had fraud said, to data to with of the release think communicated as material the behind us all and experienced actually, and there be respect impact will were we regulators vendor aspects our third-party it’s to us. any security believe and And of that that – for monitoring that Webster financial putting be information. we impacted, no clients. systems

Mark Fitzgibbon

you. Thank

John Ciulla

Thank you, Mark.

Operator

from comes ahead. go from Our Please JPMorgan. next Steve question Alexopoulos

Your open. line is

Steve Alexopoulos

John Good Hey. Glenn. and good morning morning

John Ciulla

Steve. Hey

Glenn MacInnes

Hey Steve.

Steve Alexopoulos

wanted there to Sterling to your So, happened I And I Silicon and I Valley the you Can am said aftermath base? start curious outflows. of were deposit thought inflows particularly us you on John, in what the walk through side. Bank.

John Ciulla

banks, to hate legacy no between Interestingly, Yes. deal. our this at I which juncture two say the was there into differentiation really

$XXX three consumer across And was commercial in think HSA. the million Steve, I hearing And New pressure you usual JPM million Steve, our the from customers, or deposits Webster as not-for-profit, accounts. two terrific a business commercial, our mentioned, branch or across what of And We most relationships to like. by have the $XXX They insurance – fiduciary. across our Steve, took larger obviously, of either $XXX so Board were a borrowers on that had kind are portion $XX across their that deposits borrowers from acted grew behaviorally, and from of that limits. saw consumer a who that you million duty. the And million more sure our footprint, large and the no am pushed one of balances or we sophisticated million, the was to likely deposit we a and all the those I down deposit. job everyone across those all to the which the fiduciary one they where ones the In points corporate as days deposit our Board their work, closed footprint, team were No to $XXX was, which handful drove organically same the literally from there. deposit days a million in of had moved or lines, interesting business else FDIC there, $XXX to a this

our really, We commercial you it our quickly, have and numbers, seen that some quarter-to-quarter. down in deposits can were down settle really see

some seeing flow back. are that We of

are amount failures, We activities our I the there openings. it attribute out seeing obviously, us. footprint, that in reaching are also bank but people of to don’t new two like deposit to are to a And significant

we as opportunity to got those our again. have we so fund grow And accounts deposits commercial

respect activity. lived where stabilized and the see on and to or unusual trajectory deposits will quickly did we difference than thought outflow, a level So, with are we continue geography across We legacy commercial it some which was of we bank. no shorter think now we grow to core

Steve Alexopoulos

so helpful, much less tied You credit just that in the down the to be just the demand will the I the economic outlook? modest, is If to assuming you tightening the loan shift by there versus loan Very side, growth, right? each, of shift X% took helpful. guys how is could but down given in ranges actually. box which That’s market, Okay.

John Ciulla

great this question. talked about a yesterday, I Steve. It’s

think because importantly, probably we Number of loan your three HX the one, lower implications. Fed on are I to point probably organic and demand. most a fine there lowered guidance put question,

the maybe and driver. is So, that’s whether lend that cyclicality to less loan it’s obviously, get cyclical us recession, little less more I industries the others under and that inclined choppiness, a but are going into don’t time, a shrinking into pressure. as demand have we Two, are there a significant market, credit more to potential we those box, know be

liquidity, that everyone’s relationships little impact of or to deposit the liquidity relates of have industry, box, it maybe have but that national more shrinking obviously, not new a bit standards, So, that with flow an continues has And businesses the as impact them. on tightening get will selective don’t I prioritize customers box. credit customers then sort maybe to of and loan and over growth the as as think existing shrinking the out they credit

of high-single in that’s digits that the the have three will think us I from things going digits. So, order prioritization, mid-single to

Steve Alexopoulos

Got it.

Okay. maybe That’s one Glenn last the around great. margin. And for one

Fed or early of second next half for but percentage this of need say start year of interest-bearing deposits? of either year. either How we do you at think about rest you the start the rate I change of cutting outlook delay, the the point, let’s could terms reducing is cost rates lag the your assume some or if flat months before the in they year, rates starts So, know cutting

Glenn MacInnes

think deposits within or down, have we if think I look, look I you months, the so think the in – deposit to But quarters pretty increases. side, would I at it beta, quickly. way begin it’s so two the cut, see three our as probably lagged to rate on you On like Fed begins

would reaction way way down the think on I lag on than So, more the significant the up. be the

Steve Alexopoulos

Perfect. Okay.

we be play see half, cuts calling impact you materially we second not for beta if rate that out Glenn, – that would XX% So, material? are did the it would that two saw or this out,

Glenn MacInnes

first well, thinking – No. I the you half. I it what it on the in are so reduction. we But mean rate a see see wouldn’t in second we depends it quarter, quarter, probably as much, like like see – if it’s anything. in probably you would because right, wouldn’t be or the before saw days days something that, XX XX it you fourth

what in that. up interLINK, deposit is like you because up CDs base part seeing our a along catching standpoint stuff that in liquidity shoring things from deposit the base broker I are think the like sheet of growth balance is here, this with Steve, and with

all I So, you the some I driving And it. this QX pressure a which quarters, if more standpoint, get about have the from that next we before, then what’s manage in is are the down. will we thinking said we like be margin clarity excess it as in think on – that’s because really thing there the But are cash, prudent holding couple will to of future do.

will you back so come the see up. margin And

Steve Alexopoulos

it. Got for my Thanks Perfect. taking questions.

John Ciulla

Steve. Thanks

Operator

go Zach Our ahead. Instructions] from next question [Operator from comes UBS. Westerlind Please

Your open. is line

Zach Westerlind

any categories My Zach number? on that you Brody. is the XX around Could of points loan provide color question drove This just Hi. charge-offs. is for basis on what

John Ciulla

commercial. Mostly Sure.

the $XX have in $XXX to $XX the that loan about So, million our think you of quarters, give credit this in about related $X the in just quarter, were been – sales, charge-offs because talking strategic about if about Zach, million several last some million you we million, to quarter.

of no on very in business all lines in four of or sector correlated anything discount So, credits in with charge-off are at industry rest rate. with we is optimization our of terms about actually XX kind so small credit obviously, balance proactive pre-pandemic with the different very, I or monitoring. The were – that points slightly charge-off annualized annualized or million risk respect $XX basis and below to actually, or four or And think sheet commercial rate that geography. seeing

wanted I by that proactive charge-offs done and of you sales those it give million like $X loan felt through differentiation just that of we So, to was good another quarter, us for us. the were

Zach Westerlind

for just me. you. one And Thank then Understood. quick other one

securities just book? rolling the versus if what’s purchase new off On yields provide to you could growth, you the are able

Glenn MacInnes

was was little think about $XXX around I we million. came X, there. somewhere what XX, purchased And So, that a over off what at

were remarks, basis said XX and points is my there So, $XXX so effectively. we prepared restructuring And on. that about in those off $XXX I And did, went we then XX that, at points. $XXX had, about sales million to about came to million have that that security – million in as are about at addition basis in those

Zach Westerlind

you. for it Prefect. me. Thank That’s

Glenn MacInnes

you. Thank

John Ciulla

you. Thank

Operator

Our next Fargo go Please Securities. ahead. Jared from comes Wells question from Shaw

open. Your line is

Jared Shaw

Good morning. guys. Hey

John Ciulla

Jared. Hey

Jared Shaw

Hey.

Brio guess from Just I give XX% composition contributions were that, higher of seeing are looking and at I contributions where Brio higher to then get from you the before? terminal quarter-to-date than and to especially And the that deposit you the are you growth, you can beta, assuming interLINK guess interLINK? expecting

Glenn MacInnes

Yes.

the question for Jared? So, about your first is the the quarter to – from fourth quarter,

Jared Shaw

both, Well, have out then so I guess called you And is April? you seen yes. in seeing what what – far

Glenn MacInnes

Yes.

was the quarter – for of growth. itself the $X.X was first billion interLINK So

– $X.X basically we so that’s from zero And to billion.

we offset brokered big The was to let a the some was deposits that So, that run off. of driver.

like from $XXX of prepared how billion certificates those And my remarks, retail over ended were that of in quarter. right. said And CDs, So, in other were the type I as we long up little $X.X have they growth, to a then billion. are first the that’s like saw dated, deposits we $X went where million, X% we areas about

interLINK. million $XXX by about that commercial what I a is. $XXX in and being that, up remarks, primarily are retail and to million there another is chunks, in of then is some CDs. our second And is And as remainder and the growth, in John there indicated, with say I continued would that’s billion. big As it but the actually idea Again, said brokered prepared piece $X.X we growth, that, the is of quarter

pay are we borrowings using that things to so like FHLB that. down and basically And some

of you if neutral cost So, think us provides it’s sort also sheet it NIM from like of it But things that off-balance standpoint liquidity, and more way. that. a

cash. of a And optionality we down few wanted as And make so managing the I the we then is times, said we preserve that dynamic, that. sure have to other are

to that. see probably in we And so that or borrowings to as brokered get, our will the it’s think year, things funding out expect we FHLB through flatten like interLINK The go deposits we other I whether down. come will you growth have sources of Brio would because

that’s I how thinking So, think kind are we it. about of

Jared Shaw

brokered interLINK market or of in Okay. money and I And the on are when is Thanks. were then look balance guess, we where interLINK money Brio just market? these and CDs at terms sheet,

Glenn MacInnes

it So you broke because the interLINK there. is in presentation we – to our would money but slide slide out point market, I

X see Page can so type interLINK of presentation, by it broke by line of you the product our piece, and sort of out if we So, business. then you on look

headed and whatever And so well, the is in you funding. basically difference in which between And actually John see interLINK the slide net else the is corporate piece, as wholesale piece. his treasury

Jared Shaw

for on guess then similar quarter, we that… cost and interLINK, that where cost just finally, – – to the I the And where that of is Okay. on the is FHLB,

Glenn MacInnes

Fed plus like XX%, it’s like say. X%, – It’s Fed funds Yes. funds

Jared Shaw

very much. you Thank Great. Okay.

Glenn MacInnes

Sure.

John Ciulla

Thank you, Jared.

Operator

go Our Please from Woods. comes Bruyette, next ahead. Keefe, from McGratty & question Chris

line Your is open.

Chris McGratty

make expenses those, start mean I point? in I are for the excluding the Just now you charges? sure anything and guide, follow-up. the right the just Glenn, the Thanks got on fees, the

Glenn MacInnes

am sorry... I Excluding,

Chris McGratty

In the expenses, the X.X…

Glenn MacInnes

those Yes, operating core our are expenses.

have we strategic other doesn’t we include which So, expense the spend. much any have extent shouldn’t that it we to initiatives merger-related or

Chris McGratty

And the that same fees, bond? with the excludes

Glenn MacInnes

thing. Yes. Same

Chris McGratty

it. Got Thank you. Alright.

Glenn MacInnes

Sure.

John Ciulla

Thanks Chris.

Operator

remarks. no have We Ciulla for like further John to to I in back over the closing call queue. turn would questions

John Ciulla

very joining morning. day. Have I much. this a Thank great you everyone appreciate

Operator

call. conference your participation. concludes you This today’s Thank for

may disconnect. now You

Webster Financial (WBS) 20 Apr 232023 Q1 Earnings call transcript