Webster Financial Corporation · NYSE:WBS
Webster Financial — Q3 2023 Earnings Presentation
35 slides from Webster Financial's earnings presentation, Oct 19, 2023
Slide 1: Earnings Conference Call Third Quarter 2023
Earnings Conference Call Third Quarter 2023 October 19, 2023 WEBSTER FINANCIAL CORPORATION
Slide 2: Third Quarter 2023 Highlights
Third Quarter 2023 Highlights REPORTED ADJUSTED • Merger related core systems conversion successfully completed in July $314.9M $376.5M • Highlighted results: PPNR PPNR ◦ Deposits grew 2.7% LQ with growth in interLINK, money market, demand, and CDs ◦ Enhanced off-balance sheet liquidity profile $222
Slide 3: Diversified and Stable Deposit Profile
Diversified and Stable Deposit Profile Consumer Bank / Commercial Bank Corporate • 200+ financial centers • Sophisticated treasury • Longstanding top player • Tech-enabled cash • Specialized treasury serving consumers and services offering for nationally, with strong sweep program activities small b
Slide 4: Available Liquidity Covers All Uninsured Deposits
Available Liquidity Covers All Uninsured Deposits Estimated Uninsured Deposit Analysis Immediately Available Liquidity ($ in billions) ($ in millions) 9/30/2023 $19.8 1 Uninsured deposits $ 19,122 $3.6 Less: collateralized deposits 1 (5,737) Uninsured deposits (after exclusions) $ 13,385 Total depos
Slide 5: Traditional Office CRE 2.3% of Total Loans
Traditional Office CRE 2.3% of Total Loans Office Portfolio by Geography Portfolio Profile and Metrics • Actively reducing exposure (~$495 million/-30% vs. 2Q22) to $1.17 billion 6% • Origination WA LTV: ~54% NYC 8% Other New York • Current WA Debt Service Coverage Ratio (DSCR): 1.90x 8% 23% New Jer
Slide 6: WBS 3Q23 Net Income Available to Common
WBS 3Q23 Net Income Available to Common GAAP to Adjusted Reconciliation ($ in millions) Pre-Tax After Tax EPS Reported (GAAP) $ 278.4 $ 222.3 $ 1.28 Merger related 1 61.6 45.1 0.27 Adjusted (non-GAAP) $ 340.0 $ 267.4 $ 1.55 Impact of merger related adjustments: • $61.6 million of pre-tax income • $4
Slide 7: Balance Sheet — End of Period
Balance Sheet — End of Period ($ in millions) 3Q23 2Q23 Increase / (Decrease) 3Q22 Key Observations Interest-bearing deposits $ 1,766 $ 689 $ 1,440 • Securities portfolio: Securities 14,529 (174) (62) ◦ AFS $7.7 billion, 3.14% yield, duration of 3.8 years Commercial loans 40,275 (1,604) 1,801 ◦ HTM
Slide 8: Loans
Loans ($ in millions, balances end of period) Loan Decline of 3.0% LQ LQ decline of $1.5 billion or 3.0% 3Q23 2Q23 3Q22 LQ Change YOY Change • Total loans declined $1.5 billion from the prior quarter, as certain asset classes were de-emphasized C&I $ 13,064 $ 14,002 $ 12,624 (6.7)% 3.5 % • Floating
Slide 9: Deposits
Deposits ($ in millions, balances end of period) Deposit Growth of 2.7% LQ LQ growth of $1.6 billion or 2.7% By Product 3Q23 2Q23 3Q22 LQ Change YOY Change • Deposit growth was diverse by product category and type • Deposit costs increased 24 bps to 1.96%, which reflects Demand $ 11,410 $ 11,157 $ 1
Slide 10: Deposits — Beta Outlook
Deposits — Beta Outlook Historical Cost of Total Deposits Forecasted Cumulative Deposit Beta Betas Lagged Early in the Cycle 40% 37% 37% 34% 34% 1.96% 24% 1.72% 24% 15% 1.11% 10% 0.60% 4% 0.28% 0.09% Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Cumulative Deposit B
Slide 11: Income Statement
Income Statement Reported to Adjusted Favorable / Reported Adjusted ($ in millions, except EPS) 3Q23 Adjustments 1 3Q23 (Unfavorable) 2Q23 2 Key Observations Net interest income $ 587.1 $ — $ 587.1 $ 3.3 Reported GAAP: Non-interest income 90.4 — 90.4 1.0 • Net income of $226.5 million, down from $23
Slide 12: Net Interest Income
Net Interest Income ($ in millions) $583.8 $587.1 $551.0 Linked Quarter NII 5.32% 5.49% • Net interest income totaled $587.1 million, up from prior quarter by $3.3 million or 0.6% • Net interest income excluding accretion totaled $582.2 million, up $4.2 3.96% million or 0.7% from 2Q23 Linked Quarter
Slide 13: Non-Interest Income
Non-Interest Income ($ in millions) $113.6 $0.3 Non-interest income increased $1.0 million LQ • Stronger direct investment income and valuation of client hedging $89.4 $90.4 activity offset by lower deposit service income $113.3 Adjusted non-interest income decreased $22.9 million YOY • Year-over-ye
Slide 14: Non-Interest Expense
Non-Interest Expense ($ in millions) $362.6 $344.1 $330.1 $61.6 Adjusted expense decreased $2.3 million LQ $40.8 $37.2 • Efficiency ratio of 41.8% • Reductions in professional services, occupancy, and marketing, partially offset by higher employee benefit and technology expense $292.9 $303.3 $301.0
Slide 15: Allowance for Credit Losses on Loans & Leases
Allowance for Credit Losses on Loans & Leases ($ in millions) Provision: $35 Provision: $36 $27 $629 $43 $635 $614 $8 $(20) $(29) $(8) Coverage % 1.21% 1.22% 1.27% 3/31/2023 2Q Net Charge- Loan Balances 2Q Macro/ 6/30/2023 3Q Net Charge- Loan Balances 3Q Macro/ 9/30/2023 Offs Credit Offs Credit 2Q23
Slide 16: Key Asset Quality Metrics
Key Asset Quality Metrics ($ in millions) Nonperforming Loans, OREO, NPL Ratio Net Charge-Offs (Recoveries) $29.9 $27.1 $212 $222 $218 $20.9 $210 $219 $215 $2.2 0.44% 0.42% 0.43% $(1.4) $(0.7) 0.25% 0.16% 0.23% 3Q22 2Q23 3Q23 3Q22 2Q23 3Q23 Nonperforming Loans OREO/Repossessed NPL Ratio Commercial C
Slide 17: Strong Capital Levels
Strong Capital Levels Hold Co Capital Levels Hold Co Capital Ratios 13.82% At Sep 30, At Jun 30, At Sep 30, 11.67% 2023* 2023 2022 11.15% Common Equity Tier 1 risk-based capital 11.15% 10.65% 10.80% 8.83% Tangible common equity 7.22% 7.23% 7.27% 10.00% Tangible equity 7.62% 7.62% 7.70% 8.00% 6.50% T
Slide 18: Fourth Quarter 2023 Outlook
Fourth Quarter 2023 Outlook Outlook assumes no material changes to the regulatory environment or macro environment / rate assumptions Loan Growth • Period end loan growth of 1% to 2% linked quarter; Focus on strategic segments • Core deposits flat to 3Q1 Deposit Growth • interLINK further diversifie
Slide 19: Supplemental Information
Supplemental Information pg. 20 Impact of Purchase Accounting pg. 21 to 23 Lines of Business Summary pg. 24 Net Interest Margin - Linked Quarter pg. 25 Interest Rate NII Sensitivity pg. 26 Earning Asset & Funding Mix pg. 27 to 28 Investment Portfolio pg. 29 Loan Originations & Mix pg. 30 Deposit Mix
Slide 20: Impact of Purchase Accounting
Impact of Purchase Accounting Purchase Accounting Accretion (PAA) Summary Actuals Scheduled1 ($ in thousands) 1Q23 2Q23 3Q23 4Q23 FY23 FY24 FY25 Thereafter Loans & leases $ 9,317 $ 8,507 $ 7,561 $ 6,802 $ 32,187 $ 19,463 $ 10,492 $ 14,665 Securities (3,241) (3,205) (3,181) (3,167) (12,794) (12,264)
Slide 21: Commercial Banking
Commercial Banking ($ in millions) Total Loans Key Business Metrics Increase / (Decrease) $41,862 3Q23 2Q23 3Q22 $40,261 $38,493 $363 Loan originations $ 1,159 $ (971) $ (3,207) $357 $390 Loan fundings $ 683 $ (826) $ (2,579) Coupon on fundings 7.23 % 0.28 % 2.50 % $20,410 $20,340 Deposits $ 19,411
Slide 22: HSA Bank
HSA Bank ($ in millions) Key Business Metrics Increase / (Decrease) Total Footings 3Q23 2Q23 3Q22 1 HSA accounts ('000) 3,186 9 165 $12,331 $12,325 Percent of unfunded accounts 1 5.85 % (0.29)% (0.13)% $11,122 Footings per account $ 3,868 $ (13) $ 318 1 $4,123 $4,095 Deposits per account $ 2,583 $ (
Slide 23: Consumer Banking
Consumer Banking ($ in millions) Total Loans $9,739 $9,807 $9,302 $357 $364 $361 Key Business Metrics Increase / (Decrease) 3Q23 2Q23 3Q22 Loan originations - Consumer Lending $ 329 $ (67) $ (392) $8,945 $9,375 $9,446 Loan originations - Small Business $ 18 $ 2 $ (10) Coupon on fundings 7.00 % 0.40
Slide 24: Net Interest Margin — Linked Quarter
Net Interest Margin — Linked Quarter 3Q23 2Q23 Increase / (Decrease) Average Yield/ Adjusted Average Adjusted ($ in millions) Balance Interest Rate Yield/Rate * Balance Interest BPs BPs Securities $ 14,687 $ 120.0 3.09 % 3.17 % $ (93) $ 4.0 10 10 Money market & other 1,542 23.7 6.05 6.05 (2,500) (28
Slide 25: Interest Rate NII Sensitivity
Interest Rate NII Sensitivity Rising vs. Flat Rate Scenarios Falling vs. Flat Rate Scenarios 3.2% 2.4% 1.5% 1.1% 2Q23 3Q23 (2.1)% (1.6)% Ramp Up 100 bps Ramp Up 200 bps (4.3)% (3.4)% * 2Q23 3Q23 Assumes given rate ramps occur over first 12 months of forecast period Shock Down 100 bps Ramp Down 100 b
Slide 26: 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 59% of total loans: Securities $ 16,602 25 % 17 % 2% 81 % Loans HFS 46 — 100 — — ◦ Floating rate loans represent 46% o
Slide 27: Investment Portfolio
Investment Portfolio ($ in millions, end of period balances) Investment Securities Duration / Yield 6.3 $14,591 $14,703 $14,529 4.4 4.4 4.0 $8,085 $7,759 $7,653 3.6 3.2 $6,506 $6,944 $6,876 3Q22 2Q23 3Q23 3Q22 2Q23 3Q23 HTM Securities AFS Securities Portfolio Duration (years) Purchase Duration (year
Slide 28: Investment Securities
Investment Securities ($ in millions, end of period balances; duration in years) Available-for-Sale September 30, 2023 June 30, 2023 Increase / (Decrease) Balances Portfolio Duration Balances Portfolio Duration Balances Portfolio Duration U.S. Treasury Notes $ 387 $ 384 $ 3 Government Agency Debentu
Slide 29: Loan Originations & Mix
Loan Originations & Mix ($ in millions) Originations by Loan Portfolio 3Q23 2Q23 3Q22 End of period balances Full quarter originations Balance Originations Balance Originations Balance Originations Commercial non-mortgage $ 18,059 $ 720 $ 19,499 $ 1,251 $ 17,807 $ 2,464 Asset-based lending 1,633 25
Slide 30: Deposit Mix & Rate
Deposit Mix & Rate ($ in millions) By Product End of period balances 3Q23 2Q23 3Q22 Full quarter cost Balance Rate Balance Rate Balance Rate Demand $ 11,410 —% $ 11,157 —% $ 13,850 —% Health savings accounts 8,230 0.15 8,207 0.15 7,889 0.06 Interest-bearing checking 8,826 1.57 8,776 1.36 9,203 0.37
Slide 31: Income Statement — GAAP
Income Statement — GAAP Favorable / (Unfavorable) ($ in millions, except EPS) 3Q23 2Q23 3Q22 Net interest income $ 587.1 $ 3.3 $ 36.1 Non-interest income 90.4 1.0 (23.3) Total revenue $ 677.5 $ 4.3 $ 12.9 Non-interest expense 362.6 (18.5) (32.5) Pre-provision net revenue $ 314.9 $ (14.2) $ (19.6) Pr
Slide 32: Non-GAAP Reconciliations
Non-GAAP Reconciliations ($ in thousands, except per share amounts) Efficiency Ratio 3Q23 2Q23 3Q22 Non-interest expense $ 362,578 $ 344,089 $ 330,071 Less: Net foreclosed (income) (492) (432) (393) Amortization of intangibles 8,899 9,193 8,511 Operating lease depreciation 1,146 1,639 2,115 Strategi
Slide 33: Non-GAAP Reconciliations
Non-GAAP Reconciliations ($ in thousands, except per share amounts) Tangible Common Equity Ratio 3Q23 2Q23 3Q22 Stockholders' equity $ 8,199,201 $ 8,279,726 $ 7,826,410 Less: Goodwill and other intangible assets 2,843,217 2,852,117 2,721,040 Tangible stockholders' equity 5,355,984 5,427,609 5,105,37
Slide 34: Forward-Looking Statements
WBS 3Q23 Financial Review Forward-Looking Statements This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “believes,” “anticipates,” “expects,” “intends,” “tar
Slide 35: Webster Financial Corporation
S) Webster Financial Corporation