WBS - Earnings call 3 2023 | Webster Financial Corporation

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Operator

Good morning. Welcome to Webster Financial's Third 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

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

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

John Ciulla

of We our Good illustrate provide as profile. welcome Thanks, today to of morning, Webster appreciate financial results Corporation's we Glenn our cover high-level terms announced to potential in greater joining and Third us. results operations over remarks and to the Financial it risk power I'll before sound Earnings The turning operating on earnings Emlen. Webster detail. you and as further Call. results in Quarter our XXXX well

grew position. by continue trends, enhance industry contrast $X.X we We to to billion. broader in And liquidity our deposits

interest net and interest We also grew our the materially margin expanded quarter. income net in

In milestone and the did with conversion, in quarter, so are systems we with significant also outcome the completed client our a we marking our core pleased integration, and limited disruption.

conversion. our our gratitude to this team, further took colleagues us of want colleagues client clients efficiently allow the streamlined their and shareholders on to efforts. the for executive enhance for express of to those in dedicated client-facing effort our the directors an technology outcome will architecture and the and Achieving Our our I deliver particularly experience exceptional part future. more

direct our to service, capabilities forward, consumer build our With medium more relationships, that and and potential continuing to near Webster and HSA including our I'll will expect operating allow us product and will running financial With become keep and get evident noninterest more the highlights going income term client upon we significantly businesses. opportunity develop market commercial, our introduction, the financial colleagues company's as will to our to over Furthermore, to deepen enhance even operations quarter. their conversion we profile that as organization complete, the attention core have existing new capabilities client services raise enhance for the they full our grow an into smoothly. in

of with Slide an return lines, adjusted I'll adjusted equity grew of all $X.XX, start an of This quarter. nearly On return nearly XX%. X.X% common on assets our on across solid the basis, income results X. of X% an EPS generated statement tangible generated we adjusted PPNR prior on from and and

best our among were a grow able at despite remained ratio industry. by in quarter, loans. X% over prior We deposits the to decline XX% net income grew efficiency Our almost the in and we interest

lending a deemphasize environment to where capital allocated remains credit an March, businesses evaluate years our As with we've that is prior environment allocation in and across could merger our X return premium are uncertain. be risk and continued where we nearly the of and particularly and discussed the our resources today, capital time businesses come some we've you ago. since would and in in Investor that starting Day we have the some our to better to liquidity dynamics many at our of closed calls discussed at see

where our our building, real mortgage focused quarter, on materially origination C&I relationships, the efforts warehouse declined. purposely In full we balances activities We estate. and commercial non loan deemphasized franchise office

as our more providing flexibility a we ratio loan-to-deposit our to improved loan of result targeted ton growth and activities, of a As XX%, deposit move origination forward.

feel and sluggish good pipeline earning a continue have demand. backdrop assets, loan the ability about of safely loan to even our We grow with to solid

at respectively. are Tier and ratio TCE and XX.X% Our X.X%, ratio common X equity strong

Our terms growth, robust in and repurchases, common we've returns great capital capital and it instances, as position in transactions of acquisitions ] the selective and over provide the our organic share on be whether payment deployment, on flexibility on us years. Ben dividend X such complementary deal executed a of or [ executing interLINK optionality that last

deposits slide growth unique these exit X, channels we but deposit like more times with one we of now, Glenn the diverse profile contributing generated funding. our deposits and from on what our as was have our provide seen particularly Slide $XX X. versus system. most be On quarter of uninsured details believe slide, to from following Slide team banking quarter. This we will and In competitive review billion deposit this our The effort highlight we'd coverage billion XX% to shortly. a a our enables our to this also increased last of profile which you a growth quarter, of Many liquidity immediately deposits to key again uninsured XXX% few our position, fell advantages, most deposit provide total liquidity to available business the on the quarter. grew of quarter, XXX% last those last $XX.X robust recent liquidity we and again XX% of We

be actively with the Slide $XXX portfolio in now or that turn of X. proactively or form a is to of and non-accruing portfolio remaining this some level billion support to our touch our the as taken reduced of portfolio continues ratio original risk which class. second a loan since and we've asset Note with portfolio has continue of XXXX exposure, an loans. on assets. XX% of balance. tertiary the well by guarantee The weighted coverage and X/X LTV we've X.Xx. generally focus quarter Including million portfolio, actions in service debt a the of office secured Office X.X% under $X.X No manage of investors credit exposure to Cree exposure or that in in of is we of our we of a I'll our the Office delinquencies general XX% conversations Notably, low quarter, almost of the origination current average our level reserve. and reduced

clear it's remain industry and pleased we portfolio. loan credit indicates level environment we credit trend bumpiness law that move some forward, our that remains the as resilience the existing Overall with of generally in the uncertain metrics and

While well our commercial remain the class quarter, they pre-pandemic increased in below levels.

and and favorable nonperforming remain stable levels. historically Our loans charge-offs at

continue and We our loans X.XX% peers. and overall compared coverage allowance to losses favorably for to credit leases our of to add

of ensure We proactively to exposure identification continue problem early in our portfolio to credits. manage credit

details turn quarter. on over I'll Glenn to it provide now to more the

Glenn MacInnes

start $X.XX. core income adjusted were earnings. to with expense. our our shareholders X associated net everyone. merger-related net reported quarter. with shareholders significantly and pretax an reported completed third basis, Merger-related the we income earnings GAAP of which million morning, common GAAP good and $XXX on common decline per in million million John, I'll adjusted $XX of On of Slide in share with and $XXX charges will We quarter Thanks, the in was of EPS $X.XX, conversion, fourth excluding and to

$X.X period anticipate primarily X. quarter trends, for averaged what at going period from Next, $XX second I Interest-bearing million in line was we cash beginning balance forward. deposits, at held down billion end, end. Fed Total on were the billion assets $X.X We billion the the with review $XXX will in at quarter. Slide our sheet cash

the lower we loan flat sales. quarter proceeds were over billion, $X.X balances both decline reflective borrowings the Our $X.X in security categories. relatively as nonstrategic from were and in billion demand and types by reinvested million $XXX down deposit product Loans a in $X.X several majorities of loan across reduced lines, noninterest-bearing quarter, Deposits including growth. billion. business we in growth was grew Deposit and in

and anticipate forward. XX% XX% operating in last in down quarter ratio loan-to-deposit we going the quarter, Our was from the mid-XXs

security X.X%. levels consistently by strong. Tangible retained In into capital from environment, interest would common offset XX.X%, higher per share in Our losses, was decreased last roughly Unrealized equity included our steady rates. $XXX million equity tax a the value of capital to repurchase. we annually. $XX.XX a quarter, ratio to ratio tangible this The share, by of million common book $XXX AOCI, accrete driven book million after reflecting $XXX earnings. Tier partially anticipate impact increased value rate and tangible back This small are the X dividend, was was

highlighted linked quarter at was on the a was basis In X% total, The exposure were and C&I and Bank million. Loan lower reflective total quarter basis. demand nonstrategic down yield points our were down Slide trends Mortgage X. reduce by were million. The periodic increased real floating are we loans office warehouse loan to estate on categories. or loans billion Commercial $XXX drive XX% down lower of of to loans continues portfolio and $X.X where in Commercial end. declines by declines both continue trends, as $XXX $XXX was XX and on million loan

deposits Slide diversity well and public search have all by earlier aided in deposit detail on X. as growth growth additional In year of funds, as Growth X.X%. was inflow that total in the categories seasonal business, of recapture We exception savings. in continue provide With this quarter our we in along clients. $X.X prior with saw left with HSA. million from major new the We of were commercial on interLINK, deposits commercial to balances

basis points beta cycle-to-date XX of to cumulative Our were XXX costs XX%. deposit total up deposit basis points for total a

progression of beta beta XX, quarter our this Slide cycle-to-date have our reach year. On forward assumptions. of deposit in will updated the anticipate XX% the fourth we We

interest still of beta data middle low pushed has the While macro out the would in we anticipate by cycle, a to the mid-XXs XXXX. rate the

with cuts at we the are which aligned with this outlook no Our Fed half expectations at XXXX. back of point further our for increases beginning assume

statement was income adjusted our prior up period. expenses balance continue income our we sheet. noninterest from net quarter. reported $X Net Overall, to Adjusted benefit our compared million. was adjusted $X.X the prior up million adjusted XX, interest asset-sensitive were we down to flat while $X.X Slide as to income Moving income to earnings million was for highlight over

trends, rate, in quarter, as up XX%. The liquidity net basis more on-balance offsetting as $X margin down from our from X.XX%, position. from points benefited We sheet And second million. efficiency tax provision a well The was the up benefited normalized XX.X% was also prior the this interest from was Partially quarter. our XX NIM XX.X% lower ratio quarter. asset-sensitive these the

quarter. net basis which interest highlight million prior income, quarter. XX margin XX, On points from linked grew interest the we $X.X Net Slide increased

moderated was assets deposit and yield used brokered pace prior growth the basis total to CDs. core points in pricing cost from funds up note points. of deposit the our of quarter It's were increased as Our and funding basis points categories on wholesale that earning to to XX basis XX replace just X important

direct investment we prior noninterest was in next declines quarter. client On the $X clients Slide is was increase platform activity flat year. Transaction activity. decrease lower to derivative though third by and offset our quarter, and by the XX, million gains fees. to consumer service highlight loan-related outlook tied the in which from lower driven was outsourcing valuation the primarily $XX deposit An service client slow in in deposit commercial into remained lower of fees, year-over-year fees, $X improving million investment The million hedging income,

$XXX Noninterest of down Reductions professional expenses were expense partially occupancy and is on prior in quarter. the and million higher technology Slide by fees, XX. offset employee $X from benefits We marketing adjusted reported expense. million,

a for of our incurred reporting $XX balances. lower credit $XX by for were over macro $X After impact provision XX credit loan partially of million expense up which components million factors, details allowance quarter. million in charge-offs, the offset net prior Slide we owned losses,

As from loans quarter. increased points to to basis XXX basis points a last our allowance result, coverage XXX

our key asset metrics. highlights quality XX Slide

with Worth loans. office to These million, year the quarter. representing basis basis of increased totaled prior in $XX increased quarter flat office a divestitures charge-offs. larger of and we left, XX exposure points actions of balance declined another to charge-offs credits right of basis. or absolute points Commercial by On $XXX Net an saw our on XX the prior $XXX loans classified we the as was loans upper just to this points repeating, a XXX an net loans of million We nonperforming commercial total XXX a over up as the other migration points from $XX basis. assets of on generated loans, classified The loans million annualized basis as XX% few expect inclusive of million nonperforming basis $XX are percent in in million average loans time. that quarter. in cure million $XX upper divested loans

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

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

XX. ratio Our the common equity value X Including our of portfolio, September would $XX.XX was X.X% tangible on a be as Tier approximately mark securities share. book AFS our

I'll XX outlook. Slide wrap up quarter fourth my with comments on our

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

We loan-to-deposit expect core of range ratio third quarter mid-XXs. the be with in to a the deposits in year-end

We million $XXX to And accretion million excluding $XXX million I would on income a basis be to million $XX interest those expect income of roughly in on basis, had and modeling outlook. to outlook. net add the would interest interest income approximately added accretion an non-FTE FTE $X the for

of $XXX expect expenses no XX%. expected interest approximately million. an $XX None the net NIM with assumes further in currently Our around to be to [indiscernible] be third million increases. flat be range ratio outlook quarter. Core efficiency income Fed We to the should are

excludes outlook special Our FDIC expense assessment. the

XX%. of of tax and target to We'll common equity XX.X%. be We capital ratio rate expect of a prudent Tier managers an continue effective X

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

John Ciulla

Thanks a Glenn. lot,

As to application years regulations about. may remarks, I would be significantly the environment reported at the of frequently among billion before impact changes banks Webster I on in during the as the of and the asked of operating will up it's hit my it anticipate the topics time, wrap in $XXX asset several reach threshold most We that want we're the regulatory regulations change. proposed the assets for implications we which excess both

as may the approach would $XXX standard As tackle threshold. the requirements to to risk us necessary just the capabilities, that heightened begun requirements already and enhanced expect, talent crossing billion investment tackle that as we apply billion, we to you framework we've with came OCC's the build $XX

and to agility including of we In a scale a term, key the could lines, utilize to be power. our mix strong brings costs, relative earnings size markets management resources paths our While increased unique position believe issuance there near scale framework. peers. within burdens increased opportunities, many compliance all will We'll financial challenges, business of likely return our our as and these operating risk our net be several to and regional there bank in grow highest allocating absorbing and such to required the and our overcoming disciplined

by to that, with With I conversion today. to in saying I to efforts, that, to wrap up we want strong our questions. completing are our the comments open and you up getting line both forward, thank their for moving my will us where colleagues and all the Operator, strategy Glenn

Operator

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

Christopher McGratty

the loss the where derisking on bit Could implied you of are ongoing John, quarters. for in rates looks what doing do been I maybe guess big how that on the derisking loss do the office, a to in been this you more the a you've where terms think the high-level you've kind picture, need I rates of office much question. you quarter mean, higher you This several terms last like of book? just doing, than from are you

John Ciulla

line. interesting. Chris, of there's I think, time it's a dedicated kind don't Yes,

heard to -- $X.X a me I right about relative off now, work have you on portfolio. having credit say, and respect to as of enhancements, good with the as the continuing billion feel sort on -- we think we we're getting basis

continue the doing So going well that whether it's business at kind at nature with transactional, metrics very investors that the for of know they're them, to and dynamics us, looking clients stand-alone whether we looking and we're they're strategic with, are. what loans, of

a down. is the economic an we quarter, say, not problem this then us something now, we opportunity even for team Hey, strategic And may that's sit down each Jason a cost and at have reasonable this or -- move though not and be

problems they're looking economic the decisions see to loans you'll if opportunistic us book rid some we're at to serial business in $XX really off way not exit looking $XX We're a going just pay million, strategic we the think get urgently of of which and right a a the being may I reduction future million in fashion think we the or many material these a we're this exposure. And at exposure. shift. the will. good in of we're those fine, have making, So some given I to to think, are level at paradigm economic not because But the of going fine, in kind But trying there's portfolio quarter. continue credits, of refinance

Christopher McGratty

securities about Okay. That's sheet. the loan and just of helpful. borrowings expectations on here growth Maybe, Glenn, gave from deposit we be you level to thinking or balance and decline? should How the the

Glenn MacInnes

So I take think I'll securities first.

like million, million. $XX we're So $XX.X

the The of, stay expect is probably you where would depending $X-plus we say, course to think growth. level mark. on it a to within couple I range, on I quarters -- think that the the of right pretty say, borrowings at flat next we're over expect billion to question be now loan

Christopher McGratty

Okay. And last one. maybe

back your your updated at the of this whether in of cycle buyback point One peers this interested makes thoughts turned the sense? buybacks on quarter. I'm

John Ciulla

the in think have Chris, $XX the good recognizing we significantly, tell also to want I if QX. of generate capital we great continue would a from acquisition, market loans we see to to the if that quarter looking position have we this Yes, make we a capital do clearly capacity capital a do bought credit grow it's question. million at and We having perspective. program. that tuck-in sure flexibility, that if from in cracks but you a I We in back we're levels

it I little bit quarter we're out, as guess cautious our look the would the in rule wouldn't a it in I more we to fourth characterize So that think is being I way I area. activities but

Operator

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

Casey Haire

guess, I on following NIM. the Just up, Glenn,

helped there. the quarter be going and borrowings, flat in the which third is to the decline in quarter, obviously fourth NIM So

be they're going like to Sounds flat.

NIM beta the to in to flat? it a Is quarter? offset the for on growth? the Just little loan is fourth that what you creep holds keep So color looking expect what NIM stable

Glenn MacInnes

Sure.

of it loan is growth. some So

there'll Some X of do day, much some at by what it the pretty we you it's full -- benefit loans up And an least is going be pick there's moderate we we of quarter. in deposit that's said or I cost comments, last get certainly earnings quarter, have think And will end albeit deposit into more the be rate be of the pressure than of on been then it's think repricing. Like fourth very still -- on will the fourth deposit in my from standpoint. loans the then periodic growth and we going an basis into quarters. the that do neutralized couple

Casey Haire

Okay. franchise. question on for the is deposit there -- growth term, deposit is mean, What level? X. a of or of your It's ceiling the have Slide Just to trying X% your big on that Great. just heavy still interLINK long was -- is that I And funding right that is slide, become? doing interLINK is out pretty what figure broad-based. can you lifting is there is that X% the lot it, then strategy. a that how

Glenn MacInnes

in over the and of next the years. outlook doing our process we're So couple actually of quarters

So that but go planning high something go right of sources XX%, of It we're as other that's we're funds of I our process could now, Casey. funds, if or plus on think the sources as minus. depending now in that X% still at and could

Casey Haire

it. Got

X last just And me. Okay. for

guys that coverage my you for up? billion. know efficient drip about it's be that John, 'XX, are but -- are Or the you the that can XX% ratio at universe. $XXX -- along? early of let mentioned there is obviously pass something burdens ready On you What to you financial are might getting going some bank to be in than efficiency most I you the efficiency, more

John Ciulla

plan which a and you, as we're we Yes. back opportunity our to we're -- Glenn out office we And guidance now, conversion subledgers for completed. centers, look That's consolidate 'XX. have as still ready will haven't we and look, of tell our consolidate question. working sense coming some again, said, is not processes to call going not still provide and the I sort But of good through we're

cost merger-related So as we we save And opportunities. are. kind I like of still opportunities, do cost have some where

in loan is we that particularly grow, people feeling with FX and card opportunities in feel growth investing have think and about we bring to landing, comfortable teams noninterest enhance Our banking green to and lights the a can also income. invest soft treasury and We're definitely additional our products I commercial respect if other identify balance products capital to and commercial on. will of and markets market

operate cost and in So the efficiency our opportunity of is the gain can we to people. in savings we services key we an that will extent view will can XXs provide ratio. it kind low invest more products and -- And think steadily to us

the continue ROA ratio numbers when the we the can to starving us think the momentum if low efficiency XXs efficiency investment. So the will scale the that bank to and I an allow X.X ratio with we we to that without in XX% in post ROA respect XXs, low the size, TC, promised merger, did future and keep

model right, forward, how if approach I as in then operating are our our is. place you situated we'll sheet optionality, years, you be balance who at of the think size of look kind we'll and similarly than better some billion, efficient a have fast others we given And $XXX X

Operator

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

Matthew Breese

curious I I environment? attention days, of rate the know and sponsor thoughts and the in a these portfolios lot loan higher been color How updated grabs book. specialty on leveraged office performing was CRE a but those have

John Ciulla

streams, so have good. there Matt, cash flow it cash before cash underwrite protectable, streams. that talked flow about Yes, predictable companies streams, contractual to flow so far, we We've those tend recurring

but and business like equity the to been of spooked negative type us and so moderate years are doing XX the And we future, And firms for the cash, probably haven't deterioration but flush really it's that hard all. of give always of I'd of some to are -- in deterioration that at up it's companies rest raising credit new hasn't these level things rating risk we the book, portfolio kind a good migration with with seen the again, the reticent behaving of say predict about that significant funds private besides profile. that really XX one it wonderful [indiscernible] not to and we've lend companies. the

the -- generally about question that these fact floating No rate floating are loans.

their debt in amortization. contractual lower are So service generally They increased. has

and the capacity it's we has them the that in comfort expense to far, firms private that got and interest feel strong fact to to continue seemed so obviously, really, So those case service deals we behind debt the start continue And with things perform. in the things work companies we've strong. equity Generally, go to sideways. through

So it's to pretty according a so they're to far, cost that we rate increased the able oil, to I'd out say in seem have stable coming and which book. is interest performance service

Matthew Breese

then the -- the loans definition be a considered what meets then the anything a of what beyond leveraged that, just reminder, is that loan size would portfolio? of and And syndicated

John Ciulla

couple actually statutory you we've Yes. of our that, It's those quarters. flat relatively most on about sponsor there's book regulatory, of as And total This leverage the tricky And have our last is overlap and specialty or book. loan $X billion. loans, in everywhere, -- right? because intimated reported remained of our over it's X%

together numbers subset from actually of and between Sterling. That given credits just of and total XX% that Webster XX% about there's down came total a which number Webster of premerger shared leveraged, but that, percentage kind is is loans, of the are Our some about as mix national loans.

of kind there. differentiated no Again, performance

last years story a a to loans. big about shared a the over national don't the for syndicating I've have nonbanks or told credits. XX desk, the are times Street buy-side banks who million the out So were not fee We stuff the

in years use been we that. last in have they meaning have within Our $XXX access the opportunities, corporate And or cross-sell market where a direct has certainly, middle it's credit management, or credits shared provide a company strategy facility. that sheet or over have national market we million to balance product but to don't the XX of in footprint middle our geography

strategically sponsor same all access a in companies we Credit XX our portfolio X.X credit rating a specialty the and exactly have we can shared and that where in of bilateral in bigger management. Again, way our other credits where we our participate point Shared and to average be we'll It's cross-sell. expertise credit group portfolio revenue with industry more our risk manage than underwrite basis we'll has technology So verticals and book have weighted and more because do national and of overall turn, resilient weighted average about streams. the a of National commercial risk full step those rating participate

So and participating national figured points, we those how are view underwriting in about the and I our I'd share you credits. on go shared with data

Matthew Breese

commercial from find serious the understanding of loan that there. or So specialty, underwriting in... We blend fair sponsor it's from and like real likely similar leverage a the it to to in a perspective, some real Is debt perspective the LTVs a are estate estate leverage ratios. coverage portfolio, and characteristics probably assume similar to book and

John Ciulla

But little our those specialty, have. little. real we on in think asset-based market exposure national in exposure and geography don't and a large in estate then I lending, also and those relationships are about in with dominion mid-corporate is credit have statement. fair groups we of very ones sponsor that's have transactions. the we shared middle And you, problems commercial shared we cash national very are corporate I'll the some strong our credit I mean any have Yes, larger tell I agents, lease. retailers, worry generally Those Most

just national tools. one been estate. much commercial It's in our real credit have of we So shared very exposure not don't

Matthew Breese

Understood.

Okay. is or if curious capital meant other around that sorts discussions HSA historically, had was of it's Last one you John, banks know whole comment perhaps tuck-in me. been in I vehicles? income handy acquisitions, keeping mentioned but for for acquisitions. perhaps fee tuck-in anything I broader

John Ciulla

highly and like But the right feel that say would bank whole income We learned just did, income and unlikely have integration a or targeted to up we that whole And balance of generating think are I've to rather are, businesses our lesson we the to complementary given where gathering mean noninterest on growth better marketplace, enhance No, existing clearly would where fee-generating dynamics my be that and bank gathering interest speed organic get would complementary some a and quite that Yes. activities. fee never now, in there. at acquisition. path we path say I something low-cost the question. side great than activity on and would look or the inorganic don't but the given it great you deposit we never, deposit a conversion acquisitions to around I of further be sort businesses

Matthew Breese

I'll it leave there. Great.

Operator

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

Mark Fitzgibbon

Glenn, could on you fourth may thoughts or up wondered given restructuring stuck I wonder selling in a that quarter, rates the available-for-sale securities while. share for here I your if be

Glenn MacInnes

Yes.

So look restructured Mark, that we as did and something things in and first that time. forecast of that looked that say And we that. is at, far our know we levels this because capital the I What at. capital we that our year, would quarter see about million is we and balance you it continually it's something $XXX at obviously we as

well. is leave competing there's it look some at. And It's there there. obviously other something against at to capital for opportunity that initiatives as I'll So we continue

that's we So where are on.

Mark Fitzgibbon

loans us you can relative office to then you this you those where performing and sold on update quarter in in And how roughly much Okay. par? sold

Glenn MacInnes

if that equates So I on dollar. was do the million it we $XX of the the million, sold. provision about $XX just to on in math $X.XX you comments, that And my think

Mark Fitzgibbon

be And more banks, hopefully, aren't are, there a some transactions? there any if failed likely but lastly, then in Okay. FDIC interested buyer would Webster Great.

John Ciulla

that if do that whole that the the priority of clear it's financial we'll well. then I But us. behoove that for guess hoping there and strategic -- it settles, and us bank we if acquisitions something right comment keep further failed Mark, a think would sure happens position think banks I that have to I'm are, right? hopefully, good I economically, make of ton just bank a to interesting, it's are we I strength Yes, there made dust to a if us, right? sense where wouldn't the in is just not be a are a way. characteristics Matt, think, high makes opportunity executing be good no exclude buyer as But a I strategic I

rule but our plan. it not it's wouldn't on I certainly out, game So

Operator

Your UBS. Preston Instructions] line next Brod question [Operator the of of comes from

Broderick Preston

little a late. joined I Sorry bit

feel free guys I XX%. me on. the you I transcript. I on, and you Do lead saw did which credit John, you the But agent shared the repeat to underwriter at anything, are have, to if the review percentage think, national to tell just So I happen think gave

John Ciulla

than Yes, X% of less that.

Broderick Preston

Okay.

X of than less XX. So the

John Ciulla

Correct.

Broderick Preston

the at is on you what Okay. Cool. point? portfolio office reserve this the And do have and

John Ciulla

higher haven't number. it's the up Brod. level that that, we at disclose But We moved disclosed than it's and portfolio. a Obviously, overall don't

Broderick Preston

that? to yields and it speak will the what me help NIM Glenn, Okay. the fourth quarter XXXX you and takes the be Maybe through going forward? loan could and the will of repricing to better as asset impact understand and puts be of maybe then fixed what the around relates throughout NII cadence the the

Glenn MacInnes

Sure. Yes.

if pick XXX, think right, it X I'll as Let year, me right? that $X.X that you the on of that that quarters, just bid dynamic about quarter, about quarters. that bit. there, repricing. And you about on it's might the that's fixed a XXX over the on give forecast, loans the couple basis rate end think about is rate that in of think our up rolls of And then couple loans. about But a depending back billion where the given if little And -- a it, sense in points next you'd and forward rate the -- come probably you you next the are look just Brod, have it's we at $X.X fixed repricing. billion over dynamics of So

mid-Xs. it I typically it have picking X as probably investment points rates about picking terms points probably up X we're But XXX our of basis that, NIM low about think like NIM, And for there, Xs, change That portfolio, supports in again, million the up we're you about that forward. points reinvested. going about NIM by forward. the now. about probably And basis $XXX support on likewise, then is basis going will to drop

reprice book, side. I those as the to X as loan factors well the we'll if on which at continue So look periodic

the that moderate should did support positive any the pricing, as at in favorable the cutting you get actually that proceed the positive think so a repricing then wildcard pressures so it is Fed moderate then for going we of of right? should have And under least here then half And tailwind. the positioned. side, -- is but see the the think on we we and And back think will And do first We we Fed over cut. the of -- we quarter. of have side, like to continue fourth There'll to But with the couple second quarters. begin we will year, half going half XX-day be that it's does the moderate to the the reinvestment we next that well in natural then a the be -- on sort year. lag side do

Broderick Preston

the like understand do were XX%, not aid the sponsor John, par. to FILO know and like I of like structure details to but earlier at And I'm the you ABL to the protection. of credit the XX% the on the of of book. you Got there to loans speak kind it. loan credit, you talked the write kind really And in guess all trading of market you specialty I bankruptcy, give about files specific to those notes for the sponsor expecting on of are some kind and better then, wanted points underwriting the leverage things I final But

of loss. first. very collateralized. And really and like It you the banks And feels it little market so well back get are paid to positioned like looks obviously other kind expects guys

kind goes yourself of the structure kind just something us you understand those you could in protect to what help event wrong? deals the do of of better and help that So

John Ciulla

of there's And right? that's I Yes. at completely so I a threw questions the couple end, a -- that's think deal ABL guess there different because you the animal. in

asset-based is an on market be value do company out. everyone will what everybody believes think over liquidation the seen liquidation over story a and large orderly this believes play and retail provide I of lending. against get that's standard underwriting that kind And again. will and financing, You're paid someone we've and will there in come

Sponsor it's with the for it people, -- strength been of about credits guess expertise sponsors and and we and the support deal who the In business, doing in the We continuity, Specialty I industries XX in. know have we've years. sectors they're

We and The we're You'd diligence evaluating software. the third-party the do users -- last valuations the chase, be you as play the well. amazed know we the deal very different turns we're doing Service know, of level market. if We're of technology, level where the we leverage so management some know detail a deal in there's the We very well. where chasing, nonbanks the structured of of of at sponsors that We a end deals contracts. amortization. doing Software don't as we of in are couple team a

just crisis it's the environment, financial through a a and So And been resilience the through in it's in and lanes not and the of that the that understand really interest to see the and right of why, disciplined that we've moving combination and this swim great rate having pandemic we staying off approach portfolio. process. people, able sectors higher through disciplined know

Broderick Preston

wanted the because are other last that the ask that's then has assets a sporadically come they feel potentially I And like this on just it. last me. to up have. the I for years. to several book. topic ask one I HSA banks Got But just to unique over been looking monetize wanted

feels you HSA pay be when it happened same really as so your to otherwise do, much. able I some that of if that what's had of HSA, they in have other I to been nonbank think really able to multiples high look acquire competitors wouldn't kind base portfolios And of at investor like kind the pay they

slowing how the up that and that the that like of something grow to just and about of the And treated in the really value there kind your business? more maybe so others strategic you're given bank like monetizing that be do extent and investors of full versus like to think not some that kind business help it'd multiple doing in nonbanks, -- are realize to a it growth line business, you of treated showing value tough that inorganically with

John Ciulla

doing you're still single your That's digits. deploy a to think are high for slowed, observations in long-duration, that us that a profitability great And low way there really that market look it, growing very talked that. is at for question. to help you The we deposits while and the mid- the many we've it bank all efficient time. low-cost basic deposits costs have general has premise aren't about us. very if at And over I a are And correct, channels of as in

are we the with along continuing organic and basis. market on So an to grow

So top of I the take your players. the terms point of inorganic in other growth of X some

the is part it very albeit MOE. generate to the we smaller valuable So after of of profitability have, the It us. whole and helps us returns a kind it's

the continue recognize evaluate to time frustrated know, building forward. best the move in that that the it value and And we an we're the the in because still outside business obligation for that as as value we're the you in it to bank shareholders part market We the bank all we are that bank. decisions of we doesn't talk of and about have HSA our bank has the as sure make the we making

pretty and And a for continued, shareholders of we're bank trading us Xx which higher until at long to us better as most flows. operating think people now, quality levels I continue in and a this in the so company and we think want our a were a are. unique multiple future it's the better up the will, it's business, cash experience we year, don't execute interest earnings is compete terms that of it's able the and helped market value where say to the the of informing to marketplace. last easy us and in about the and if HSA user on transaction educating mousetrap, for gave creates particularly where to in rate We people keep reflecting BEN value of the We environment, our term you division on

the because another deal portfolio the market consolidating. every a of still time keeps are market in there's We looking

now I try We'll of the and in think a market. XX% participant the in XX that. top be represent

create a that evaluation or the owning it given belongs a of decision or bank. where be company that think we'll I for a continued it or outside can the make receive different But it's somewhere the joint right the venture company was us, to a we and going would value on part value HSA as else

Operator

comes line Tamayo of next Raymond James. Daniel Your from question the of

Daniel Tamayo

in there. decline I industrial, commercial just loan about asset in the classes Maybe areas. some talked the you commercial deemphasizing starting know

little I detail that. jumped apologize if pulling a on already were Just give back, more little covered I on a late where you you and

John Ciulla

and It's that's all in haven't question, it right. a detail. good covered No, we quite

-- the C&I decline we that on crisis on when generally had obviously perspective I in to we're very across from see the continuing down. side the transaction-only reduce careful driven by equipment warehouse in finance you'll was board a ABL the and So the likely mortgage And think quarter since March. strategic

have may declines. small so did rapidly And had and those grow

equity to utilization. driven lower loans, equity payoff down fund then Our high-quality about $X.X is banking firms private and banking which and activity, just big fund lines was by one that billion, subscription

quarters after holding for the into several XX% mid-XXs. kind of Our down was steady C&I at utilization market middle overall lines on

And in well. utilization we what see lower usage. was of I seasonally anything, don't that terms portends know client as confidence So or did but lower

the drove quarter was results, pulling levers. of of kind us on back some that it So

loan third seasonally we slow Some more up. and of that's where ended a quarter, growth, was it sluggish

as making real C&I and those specialty, office loan-to-deposit ancillary our the you we've about sponsor middle non grow capital forward, really ratio market go commercial I across liquidity our sure relationships the think have talked the that we other to full and businesses, estate. businesses, capacity,

are the of up billion. into our quarter, is move some level $X.X demand pipeline we We about increased fourth as seeing

generating to think in building of loan be growth we'll So a can our think continue that where may run kind be we see warehouse but generated small mortgage generation. subscale There core make other I we think loan that of won't the -- down. with past, we franchise we've you we'll offset the couple businesses

Daniel Tamayo

Maybe the on you on loans absolute could increase? basis about classified that up portfolio. bit talk then a flip as what And an that of commercial side, both Terrific. and drove the were percentage a little

John Ciulla

Sure, happy to.

did comments, of that, in is in percentage XXX actually fourth but First X.XX% quarter that basis of the lower classified quarter up in my of I a I all, of XXXX the portfolio the classified smaller Webster's didn't front say level than before at reference pandemic. points

and again, So step, just going the -- been really has a small rate been favorable metrics, normalized is reminder, we've forward. just more credit a benefiting this think, entire that really, a industry from I towards

We there generally in weren't any across terms in small and a class We kind the some But contributions about of correlations geography, health the migration office saw C&I that prior, had some there, had we portion We care. categories. actual ABL. business of across asset line. other then just of talked C&I

our credit-specific in We part portfolio. So it didn't really risk. modest wasn't rating see risk migration migration as negative correlated overall saw the just of -- we

Daniel Tamayo

would on for rate they the if you strategy. Okay. Glenn materialize one just cuts And do lastly, that hedging next year? And react income to expect interest net Terrific. how

Glenn MacInnes

Yes.

NIM at Daniel, point. our fourth supported loans as of periodic repricing the through talk little look made will XXXX that that for we're is as I -- outlook we repricing, about into earlier be quarters benefit repricing. into So not we an the and I did providing next The this think quarter loans both point to investment as the securities of continue well a the rate couple fixed

couple up. obviously feeling where next end will be and cumulative beta of thinking going the generally, will that the our Some offset that's quarters. of I by will But into on think deposit deposit be how cost we're

Operator

line JPMorgan. Steve Alexopoulos question the of comes from of next Your

Alex Lau

for touch deposits. on Lau Steve. to Alex wanted on I

noninterest-bearing that balances and in seasonal Was a basis deposits the chasing on fair period done? the And were uptick? are end demand these products What higher up to say that is So inflows? drove yield quarter. customers largely it these

Glenn MacInnes

Yes.

bigger combination BDA But portion combined at which the be and all the about BDA the looked a because Webster and the I deposits. look point the I've when analysis, did billion we back that if is forecast, seasonality. I me point, impact sort interLINK that out we've and and deposits back range. represented the And -- at in I back to that increase But in quarter $XX gone the we're that's had at to stripped -- add think look of related noninterest-bearing government our Sterling, inflow, and of third relatively same let we'd the at in way the I XX% XXXX about of take that, I is XX%. If to was is and think So gone John. there of as we new,

about I if XX%. So where to are, typically it's pandemic. And it's run look we pre

in we've a at I continued some as this think there will balances customers on and average be the looked customer-by-customer normalization move, basis.

the relationship, higher-yielding I of is to But think of some some that by quarters, we'll next growth of of that through treasury be say, some So there new higher into acquisitions I but opportunities offset products. will I over services. couple think or get migration it's normalization think -- type whether type management

XXX, you and time, have, the on So I puts in guidance think if for there'll 'XX, somewhere that that we're think not and giving we that the of takes be over about should range. be course

John Ciulla

the to and statement that that the in more I Alex, agree a of behavior, important more was Glenn. cost the chase were with continue core, last increase have is customer rate we're to people done down them was there tune to the rate creep see think so. in because I your deposit going up of right slowing it but Yes, that, to

Alex Lau

done, with Sterling? do that demand And you're you that any of material see the deposits growth of cross-selling integrated growing speaking terms Sterling now of in opportunities, these conversion opportunities now is

John Ciulla

product hinted the able commercial, we mean that loyal deeper to with believe card, of the other products core for customers having penetration on kind corporate broader plan treasury of one and that's a core capital where deposits. benefit growing and defined the in and Yes. out. have markets, broadly development commercial that set our side and our a cash products, management think having now will really being I operating added robust I I on Alex, build getting single We've our that, to to got of also that's kind resources pivot platform of things

we'll So we we can we that, execute believe we move forward post successful be that's conversion. something I on do believe and as that think

Alex Lau

And then a I just the had follow-up business. HSA on

think would quarters the for in a have So the take balances billion stronger past these of it balances $X.X weaker range? to to macro in for said digit. the you these talk mid- range? higher this increasing the single the environment start How for what benefit get I Would actually high you we Can do a John, been market adoption HSA range. about three end job to

John Ciulla

higher Yes, of bit I quite it's that as penetration transparency, you, to part move significant to believe been replacement reason of tight, that companies higher tell the costs. are Part the adoption more willing slowed will we I definitely, there's full high-deductible is right? and now. market a time. in is these full market interesting. environment, care health We replacement, plans not adoption think generally, health the companies a all to it used recessionary push to higher of labor if answer But if was costs questions

there have increase in we greenfields growth. worse in economic this a recession we So terms job a a as environment, or in new slight so for aren't big environment I'm many slower job seen and of get rooting market market But this our obviously and in growth opportunities. that not HSA

are those But higher coming I costs There think the some in. care health dynamics. of are

see dynamics and also growth economic. it's people to So obviously down days, a maturing lot a lot the of I It's XX% But got the growth do there's and we're opportunity, the there, to continuing that does it just and RFPs out from a industry. there. XX% the days, are look [indiscernible] know of of at market not just

Operator

next of Thank The Von from you. line [Operator Bank. Bernie Instructions] of Gizycki Deutsche comes question the

Bernard Von Gizycki

question fees My is on specifically.

these you if and I you the drive next some cap management helps from less next have pick clients? on capital talked What opportunities? but improving any And So signs seen provide markets timing fee treasury What see you side, So an that up could cash into the activity, combine hearing outlook Sterling Sterling that outlook? of sizing? maybe areas this opportunities from just integration, integration size fees year. you improving about you markets signs of pressure do on year highlighted basically but the you on are in

John Ciulla

great it's Yes, a question.

'XX, think that working right plan opportunities the for I'll I of through sized with we're some and our those we haven't timing of now rollout. and stick Glenn's comments the

investment and level in we where and little do BAU are, be direct to shows underneath organic at that relates more the activity we side quarter and good relatively getting which the in sponsor active a see bit were healthy noninterest that some did it income, of income they of year-end. tag equity normally As as a may more some signs, people on more

-- And a so as we're we sign that's good forward. us for move

Obviously, the the spot kind market, that of are, where been activity just have rates but more interest see pivot. fact the given may down, we may some Fed given

map some post-conversion we'll we plan, we as give of out benefit to to, decent road investment. maybe and be there's the run incremental So in size guidance some of QX, signs able be then able our on

Operator

Your next Fargo. question of Timur the Wells comes Braziler of from line

Timur Braziler

look [indiscernible]? wondering your mark much here And trajectory sterling is And allowing increase I'm in is quarter the just the wondering just kind the with in remaining book? the linked loans. commensurate on then quarter I'm if of credit what increase classified for that allowance, given you linked the of how at expectation

John Ciulla

the good Obviously, a on higher classified these that loan was obviously kind a there's and work it. has Yes, because answering like a huge question. of reserve amount goes of modeling. just into CECL questions I like

would industry most you of So overall of concerns the forward. and the office because dynamics in of still us others. and be for a why higher loan we're levels a of economic and moving as balances quarter lower now level It's nonaccruals charge-off stable outlook classified build right in CECL see for the

portfolio. And portfolio, an then in believe qualitative particular going is what on like on overlays office you any

have the economic driven balances few outlook certainly are which of because, the add And in still would loan level obviously, but giving other like you some to and high more a areas. classified and of the lower is component to I'm mall uncertain, increase stability a been obviously, then all So reserves, the offsets kind point drives it's at basis end day. qualitative the there

Glenn MacInnes

million. would XX. I loan you macro And on build of was third -- sort $X of see we is the lower slides, out environment and balances So credit only right? this macro of out a was laid can Page point the thing the XX impact then quarter of The

the unemployment stuff look that. like been at you below, hasn't chart If there really much growth that movement GDP and and an

that's see I'd in sort migration, it. how of which So is classifieds, the that of and characterize a you portion risk

Operator

question Partners. of the last your And line of Laurie comes from Hunsicker Seaport Research

Laura Havener Hunsicker

to wanted just to here. back office So circle

your of Slide New So Boston But there? $XX big X roughly, office same much help of due of Slide risk. on the Number risk, the York think of the couple then seeing $X.XX million, Class in billion. is can X B? you was help last versus is that City is $XX one, million and How that Boston, great. New some versus jump wondered book, is us owner-occupied about, things. A Obviously, York archive question, think And to of in How us a that you A just B? City the then about of loans specifically still is but the Class office investor. how only related? part Can that much is? concerns past lower $XX And Any you're million how from that much also jump

John Ciulla

I the mix is around in overall. markets, B XX-XX of similar on to the the [indiscernible] right. so last the and up you All also which ladders A may but the ask question, come back pretty to all

that's terms remaining XX-XX Class and about New Boston B. right in under of it's about is We and B. York in of XX% smaller the Class XX-XX about XX% have that City, also and in that, geography Class A Class and of A offices

non-investor owner-occupied about Cree, Cree. asked You

portfolio the be Laurie? C&I would as and last relatively office, office on cash where deterioration of what secondary of we Regulatorily company have source was the loans that which with based collateral, at portion the internally, those those a in C&I around question, to lend repayment overall And we've small pretty the small. is in enhanced portfolio, that's million, no So of we the seen flows underwrite just companies that having our $XXX all. it's we

Laura Havener Hunsicker

Yes.

[indiscernible]? jump past the how much the Just $XX in that, loans, million, any, the due $XX million if of to

John Ciulla

payment will that a I you I $XX million question. was on one great the know if a Don't know That's there of but answer to I second [indiscernible], is the that thing tell made October.

So was one administrative an them of delinquency.

And so XX, XX that right. in if loans down would there. my finance equipment that would whatever tell you Mostly do to from that I be math can we're

real commercial wasn't really it So estate.

Glenn MacInnes

It's not.

John Ciulla

You got it.

Operator

for no further John will closing time. at turn now to are There call the questions over I remarks. Ciulla, this CEO,

John Ciulla

us this Enjoy Thank you day. joining on call very morning. much long for this the

Operator

call. conference today's This concludes

disconnect. now may You

Webster Financial (WBS) 19 Oct 232023 Q3 Earnings call transcript