Webster Financial Corporation · NYSE:WBS
Webster Financial — Q1 2023 Earnings Presentation
36 slides from Webster Financial's earnings presentation, Apr 20, 2023
Slide 1: Earnings Conference Call First Quarter 2023
Earnings Conference Call First Quarter 2023 April 20, 2023 WEBSTER FINANCIAL CORPORATION
Slide 2: First Quarter 2023 Highlights
First Quarter 2023 Highlights REPORTED ADJUSTED • R eported results include merger/initiative related charges of $56.6 million pre-tax $333.6M $379.7M PPNR PPNR • Highlighted results: $216.8M $259.1M ◦ Loans grew 2.3% LQ ◦ Deposits grew 2.3% LQ ◦ Strong liquidity profile NET INCOME AVAILABLE TO COMM
Slide 3: Diversified and Stable Deposit Profile
Diversified and Stable Deposit Profile Consumer Bank / Commercial Bank Corporate • 200+ financial centers • Sophisticated treasury • Longstanding top 3 • Tech-enabled cash • Specialized treasury serving consumers and services offering for players nationally, with sweep program activities small busin
Slide 4: Available Liquidity Covers All Uninsured Deposits
Available Liquidity Covers All Uninsured Deposits Estimated Uninsured Deposit Analysis Immediately Available Liquidity ($ in billions) ($ in millions) 4/19/2023 $16.0 1 Uninsured deposits $ 18,912 $3.5 Less: collateralized deposits 1 (5,334) Uninsured deposits (after exclusions) $ 13,578 Total depos
Slide 5: Office CRE 2.8% of Total Loans
Office CR E 2.8% of Total Loans Office Portfolio by Geography Portfolio Profile and Metrics • Origination WA LTV: ~52% • Current WA Debt Service Coverage R atio (DSCR ): 1.93x 5% NYC 7% • Criticized / Classified rate: 4.7% / 2.1% Other New York 7% • Accruing Delinquency / Non-Accruals: 0.0% / 1.3% 2
Slide 6: WBS 1Q23 Net Income Available to Common
WBS 1Q23 Net Income Available to Common GAAP to Adjusted Reconciliation ($ in millions) Pre-Tax After Tax EPS Reported (GAAP) $ 286.8 $ 216.8 $ 1.24 Merger related 1 36.1 27.0 0.16 Strategic initiatives and other 2 20.5 15.3 0.09 Adjusted (non-GAAP) $ 343.4 $ 259.1 $ 1.49 Impact of merger related an
Slide 7: Balance Sheet — End of Period
Balance Sheet — End of Period ($ in millions) 1Q23 4Q22 Increase / (Decrease) 1Q22 Key Observations Interest-bearing deposits $ 2,232 $ 1,657 $ 1,680 Securities 14,862 405 (245) • Interest-bearing deposits up $1.7 billion providing increased Commercial loans 41,289 1,185 6,318 liquidity Consumer loa
Slide 8: Loans
Loans ($ in millions, balances end of period) Loan Growth of 2.3% LQ LQ growth of $1.2 billion or 2.3% YOY • Total loans up $1.2 billion from the prior quarter, with diverse 1Q23 4Q22 1Q22 LQ Change Change growth across C&I, CR E, and R esidential C&I $ 13,678 $ 13,136 $ 11,310 4.1% 20.9% • Floating
Slide 9: Deposits
Deposits ($ in millions, balances end of period) Deposit Growth of 2.3% LQ LQ growth of $1.2 billion or 2.3% YOY • interLINK added $2.9 billion of deposits By Product 1Q23 4Q22 1Q22 LQ Change Change • Deposit costs increased 51 bps to 1.11% , driven by growth in Demand $ 12,007 $ 12,975 $ 13,571 (7.
Slide 10: Deposits — Beta Outlook
Deposits — Beta Outlook Historical Cost of Total Deposits Forecasted Cumulative Deposit Beta Betas Lagged Early in the Cycle Historical Forecast Expected 24% 38% Terminal 36% Beta 35% 32% 15% 24% 1.11% 10% 0.60% 4% 0.28% 0.09% Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 C
Slide 11: Income Statement
Income Statement Reported to Adjusted Favorable / Reported Adjusted ($ in millions, except EPS) 1Q23 Adjustments 1 1Q23 (Unfavorable) 4Q22 2 Key Observations Net interest income $ 595.3 $ — $ 595.3 $ (7.1) Reported GAAP: Non-interest income 70.8 16.7 87.5 (19.2) • Net income of $221.0 million, down
Slide 12: Net Interest Income — Pro Forma
Net Interest Income — Pro Forma ($ in millions) Historical Combined 1 $602.4 $595.3 Linked Quarter NII • Net interest income totaled $595.3 million, down from prior quarter $463.9 5.08% by $7.1 million or 1.2% 4.60% $69.6 • Net interest income excluding accretion totaled $588.5 million, 3.33% down $
Slide 13: Non-Interest Income — Pro Forma
Non-Interest Income — Pro Forma ($ in millions) Historical Combined 1 Adjusted non-interest income decreased $19.2 million LQ $114.9 $106.7 • 1Q23 adjusted for a $16.7 million loss on sale of investment $10.8 (adj) securities; 4Q22 adjusted for a $4.5 million loss on sale of investment $104.0 $87.5
Slide 14: Non-Interest Expense — Pro Forma
Non-Interest Expense — Pro Forma Historical Combined 1 ($ in millions) $405.9 Adjusted expense increased $0.6 million LQ • Efficiency ratio of 41.6% $348.4 $104.4 $332.5 • R eduction in compensation expense was offset by higher FDIC $45.9 $29.4 deposit insurance, technology costs and intangible amor
Slide 15: Allowance for Credit Losses
Allowance for Credit Losses ($ in millions) Provision: $41 Provision: $38 $21 $595 $26 $6 $614 $574 $20 $12 $(20) $(25) Coverage % 1.20% 1.20% 1.21% 9/30/2022 4Q Net Loan Growth 4Q Macro/ 12/31/2022 1Q Net Loan Growth 1Q Macro/ TDR 3/31/2023 Charge-Offs Credit Charge-Offs Credit Accounting Change 4Q
Slide 16: Key Asset Quality Metrics
Key Asset Quality Metrics ($ in millions) Nonperforming Loans, OREO, NPL Ratio Net Charge-Offs (Recoveries) $251 $24.8 $20.6 $248 $206 $187 $204 $9.9 $185 0.57% 0.41% 0.36% $(1.0) $(0.4) $(0.3) 0.10% 0.17% 0.20% 1Q22 4Q22 1Q23 1Q22 4Q22 1Q23 Nonperforming Loans OREO/Repossessed NPL Ratio Commercial
Slide 17: Strong Capital Levels
Strong Capital Levels Hold Co Capital Levels Hold Co Capital Ratios 12.94% At Mar 31, At Dec 31, At Mar 31, 2023* 2022 2022 10.91% 10.40% Common Equity Tier 1 risk-based capital 10.40% 10.71% 11.46% 8.65% Tangible common equity 7.15% 7.38% 8.26% 10.00% Tangible equity 7.55% 7.79% 8.72% 8.00% 6.50% T
Slide 18: Full Year 2023 Outlook
Full Year 2023 Outlook Outlook assumes no material changes to the regulatory environment or macro environment / rate assumptions • Expect full year period end loan growth to be 4% to 6% Loan Growth • Focus on strategic segments • Core deposit growth of 8% to 10% 1 Deposit Growth • interLINK acquisit
Slide 19: Merger Integration Update
Merger Integration Update • On track with key integration milestones, with a sharp focus on executing "business as usual" • Core businesses are investing in additional front-line colleagues and new onboarding experiences while bringing on new clients • Entering testing and mock conversion phases ahe
Slide 20: Supplemental Information
Supplemental Information pg. 21 Impact of Purchase Accounting pg. 22 to 24 Lines of Business Summary pg. 25 Net Interest Margin - Linked Quarter pg. 26 Interest R ate NII Sensitivity pg. 27 Earning Asset & Funding Mix pg. 28 to 29 Investment Portfolio pg. 30 Loan Originations & Mix pg. 31 Deposit Mi
Slide 21: Impact of Purchase Accounting
Impact of Purchase Accounting Purchase Accounting Accretion (PAA) Summary Actuals Scheduled1 ($ in thousands) 1Q23 2Q23 3Q23 4Q23 FY23 FY24 FY25 Thereafter Loans & leases $ 9,317 $ 12,398 $ 7,275 $ 7,018 $ 36,008 $ 19,817 $ 10,595 $ 14,623 Securities (3,241) (3,206) (3,182) (3,168) (12,797) (12,267)
Slide 22: Commercial Banking
Commercial Banking ($ in millions) Total Loans Key Business Metrics Increase / (Decrease) $41,287 1Q23 4Q22 1Q22 $40,115 $361 Loan originations $ 2,999 $ (1,106) $ 1,025 $375 $34,928 Loan fundings $ 2,047 $ (733) $ 500 $357 Coupon on fundings 6.29 % 0.14 % 3.08 % $19,381 $20,275 Deposits $ 18,298 $
Slide 23: HSA Bank
HSA Bank ($ in millions) Key Business Metrics Increase / (Decrease) Total Footings 1Q23 4Q22 1Q22 1 HSA accounts ('000) 3,172 157 227 1 $12,049 Percent of unfunded accounts 5.65 % (0.23)% (0.15)% $11,566 $11,339 Footings per account $ 3,798 $ 71 $ 27 1 $3,776 Deposits per account $ 2,608 $ (14) $ 8
Slide 24: Consumer Banking
Consumer Banking ($ in millions) Total Loans $8,595 $9,624 $9,617 Key Business Metrics Increase / (Decrease) $375 $351 $351 1Q23 4Q22 1Q22 Loan originations - Consumer Lending $ 248 $ (358) $ (302) $9,273 $9,266 Loan originations - Small Business $ 23 $ (5) $ 2 $8,220 Coupon on fundings 6.76 % 1.12
Slide 25: Net Interest Margin — Linked Quarter
Net Interest Margin — Linked Quarter 1Q23 4Q22 Increase / (Decrease) Average Yield/ Adjusted Average Adjusted ($ in millions) Balance Interest Rate Yield/Rate * Balance Interest BPs BPs Securities $ 14,633 $ 106.0 2.79 % 2.87 % $ 162 $ 7.2 22 21 Money market & other 1,358 15.3 4.51 4.51 442 6.4 67 6
Slide 26: Interest Rate NII Sensitivity
Interest R ate NII Sensitivity Rising vs. Flat Rate Scenarios Falling vs. Flat Rate Scenarios 6.5% 5.3% 3.2% 2.5% 4Q22 1Q23 (3.3)% (2.8)% Ramp Up 100 bps Ramp Up 200 bps (6.6)% (5.6)% * 4Q22 1Q23 Assumes given rate ramps occur over first 12 months of forecast period Shock Down 100 bps Ramp Down 100
Slide 27: Earning Asset & Funding Mix
Earning Asset & Funding Mix ($ in millions, end of period balances) Earning Asset Mix Type Balance Total % Floating % Periodic % Fixed % • Floating and periodic rate loans represent 60% of total loans: Securities $ 17,680 26 % 20 % 3% 77 % Loans HFS 211 — 100 — — ◦ Floating rate loans represent 48%
Slide 28: Investment Portfolio
Investment Portfolio ($ in millions, end of period balances) Investment Securities Duration / Yield $15,107 $14,458 $14,862 4.4 4.3 4.5 3.9 3.7 3.7 $8,745 $7,893 $7,799 $6,362 $6,565 $7,064 1Q22 4Q22 1Q23 1Q22 4Q22 1Q23 HTM Securities AFS Securities Portfolio Duration (years) Purchase Duration (year
Slide 29: Investment Securities
Investment Securities ($ in millions, end of period balances; duration in years) Available-for-Sale March 31, 2023 December 31, 2022 Increase / (Decrease) Balances Portfolio Duration Balances Portfolio Duration Balances Portfolio Duration U.S. Treasury Notes $ 387 $ 717 $ (330) Government Agency Deb
Slide 30: Loan Originations & Mix
Loan Originations & Mix ($ in millions) Originations by Loan Portfolio 1Q23 4Q22 1Q22 End of period balances Full quarter originations Balance Originations Balance Originations Balance Originations Commercial non-mortgage $ 19,015 $ 1,774 $ 18,663 $ 2,267 $ 15,578 $ 1,095 Asset-based lending 1,761 6
Slide 31: Deposit Mix & Rate
Deposit Mix & R ate ($ in millions) By Product End of period balances 1Q23 4Q22 1Q22 Full quarter cost Balance Rate Balance Rate Balance Rate Demand $ 12,007 —% $ 12,975 — % $ 13,571 — % Health savings accounts 8,273 0.15 7,945 0.15 7,805 0.06 Interest-bearing checking 8,561 1.44 9,237 0.77 9,580 0.
Slide 32: Income Statement — GAAP
Income Statement — GAAP Favorable / (Unfavorable) ($ in millions, except EPS) 1Q23 4Q22 1Q22 Net interest income $ 595.3 $ (7.1) $ 201.0 Non-interest income 70.8 (31.4) (33.3) Total revenue $ 666.0 $ (38.5) $ 167.8 Non-interest expense 332.5 15.9 27.3 Pre-provision net revenue $ 333.6 $ (22.6) $ 195
Slide 33: Non-GAAP Reconciliations
Non-GAAP R econciliations ($ in thousands, except per share amounts) Efficiency R atio 1Q23 4Q22 1Q22 Non-interest expense $ 332,467 $ 348,390 $ 359,785 Less: Net foreclosed (income) (262) (80) (75) Amortization of intangibles 9,497 8,240 6,387 Operating lease depreciation 1,884 2,021 1,632 Strategi
Slide 34: Non-GAAP Reconciliations
Non-GAAP R econciliations ($ in thousands, except per share amounts) Tangible Common Equity R atio 1Q23 4Q22 1Q22 Stockholders' equity $ 8,294,294 $ 8,056,186 $ 8,177,135 Less: Goodwill and other intangible assets 2,861,310 2,713,446 2,738,353 Tangible stockholders' equity 5,432,984 5,342,740 5,438,
Slide 35: Forward-Looking Statements
WBS 1Q23 Financial R eview Forward-Looking Statements This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation R eform Act of 1995. Forward-looking statements can be identified by words such as “believes,” “anticipates,” “expects,” “intends,” “t
Slide 36: Webster Financial Corporation
S) Webster Financial Corporation