Webster Financial Corporation · NYSE:WBS
Webster Financial — Q2 2024 Earnings Presentation
40 slides from Webster Financial's earnings presentation, Jul 23, 2024
Slide 1: Earnings Conference Call Second Quarter 2024
Earnings Conference Call Second Quarter 2024 July 23, 2024 WEBSTER FINANCIAL CORPORATION
Slide 2: Second Quarter 2024 Highlights
Second Quarter 2024 Highlights REPORTED ADJUSTED • Highlighted results: $288.6M $338.5M ◦ Loans up $0.5 billion or 0.9% PPNR PPNR $177.5M $216.2M ◦ Core deposit growth of $0.7 billion ◦ Efficiency ratio of 46.2% ◦ Adjusted ROAA 1.16% NET INCOME AVAILABLE TO COMMON NET INCOME AVAILABLE TO COMMON ◦ Ad
Slide 3: Diversified and Stable Deposit Profile
Diversified and Stable Deposit Profile Consumer Bank / Commercial Bank Corporate • 200+ financial • Sophisticated • Longstanding top • Leading • Tech-enabled cash • Specialized centers serving treasury services player nationally, professional sweep program treasury activities consumers and offering
Slide 4: Commercial Real Estate Portfolio
Commercial Real Estate Portfolio Investor CRE portfolio remains diversified with limited exposure to risky assets Investor CRE Portfolio Rent Regulated Multifamily Detail • $1.5 billion in exposure represents properties where > 50% of NOI is RR 2.3% • $99 million in additional exposure where RR NOI
Slide 5: 2Q24 Net Income Available to Common
2Q24 Net Income Available to Common GAAP to Adjusted Reconciliation ($ in millions) Pre-Tax After Tax Diluted EPS Reported (GAAP) $ 229.6 $ 177.5 $ 1.03 Securities repositioning loss 49.9 38.7 0.23 Adjusted (non-GAAP) $ 279.5 $ 216.2 $ 1.26 Impact of securities repositioning loss • $49.9 million of
Slide 6: Balance Sheet — End of Period
Balance Sheet — End of Period ($ in millions) 2Q24 1Q24 Increase / (Decrease) 2Q23 Key Observations Interest-bearing deposits $ 1,189 $ (34) $ 112 • Securities portfolio: Securities 16,447 165 1,743 ◦ AFS $7.8 billion, 3.99% yield, duration of 4.2 years Commercial loans 41,770 432 (108) ◦ HTM $8.6 b
Slide 7: Loans
Loans ($ in millions, balances end of period) Loan Growth of 0.9% LQ LQ growth of $0.5 billion or 0.9% Portfolio 2Q24 1Q24 2Q23 LQ Change YOY Change • Total loans up $0.5 billion from the prior quarter, with growth driven by commercial categories C&I $ 13,108 $ 12,987 $ 14,002 0.9 % (6.4)% • Floatin
Slide 8: Deposits
Deposits ($ in millions, balances end of period) Deposit Growth of 2.5% LQ LQ growth of $1.5 billion or 2.5% 2Q24 1Q24 2Q23 LQ Change YOY Change • Deposit growth of $1.5 billion, driven by interLINK, savings, and time deposits, partially offset by seasonality in public Demand $ 9,994 $ 10,213 $ 11,1
Slide 9: Deposits and Funding — Beta Outlook
Deposits and Funding — Beta Outlook Historical & Forecasted Cumulative Deposit Historical & Forecasted Cumulative Funding Beta & Cost of Total Deposits Beta & Cost of Total Fundings Betas Lagged Early in the Cycle Historical Forecast Historical Forecast ~ 45% 45% ~ 46% 44% 43% 41% 41% 40% 40% 39% 37
Slide 10: Income Statement
Income Statement Reported to Adjusted Favorable / Reported Adjusted ($ in millions, except EPS) 2Q24 Adjustments 1 2Q24 (Unfavorable) 1Q24 2 Key Observations Net interest income $ 572.3 $ — $ 572.3 $ 4.6 Reported GAAP: Non-interest income 42.3 49.9 92.2 (5.3) • Net income of $181.6 million, down fro
Slide 11: Net Interest Income
Net Interest Income ($ in millions) Linked Quarter NII $583.8 $567.7 $572.3 • Net interest income totaled $572.3 million, up from prior quarter by $4.6 million or 0.8%, driven by balance sheet growth and an increase in 5.59% 5.65% 5.32% earning asset yields, partially offset by funding costs • Net i
Slide 12: Non-Interest Income
Non-Interest Income ($ in millions) $99.3 $99.4 $92.2 Adjusted non-interest income decreased $5.3 million LQ (adj) $89.4 $97.5 • 2Q24 has been adjusted for a $49.9 million loss on sale of investment (adj) (adj) securities; 1Q24 has been adjusted for a $9.8 million loss on sale of investment securiti
Slide 13: Non-Interest Expense
Non-Interest Expense ($ in millions) $344.1 $335.9 $326.0 Adjusted expense increased $5.1 million LQ $40.8 $11.9 $3.1 • 1Q24 has been adjusted for an $11.9 million FDIC special assessment estimate and $3.1 million in Ametros acquisition expenses • The increase was due to increased deposit insurance
Slide 14: Allowance for Credit Losses on Loans & Leases
Allowance for Credit Losses on Loans & Leases ($ in millions) Provision: $43 Provision: $61 $55 $669 $636 $38 $641 $5 $6 $(37) $(33) Coverage % 1.25% 1.26% 1.30% 12/31/2023 1Q Net Charge- Loan Balances 1Q Macro/ 3/31/2024 2Q Net Charge- Loan Balances 2Q Macro/ 6/30/2024 Offs Credit Offs Credit 1Q24
Slide 15: Key Asset Quality Metrics
Key Asset Quality Metrics ($ in millions) Nonperforming Loans, OREO, NPL Ratio Net Charge-Offs (Recoveries) $375 $37.9 $33.0 $289 $369 $20.9 $222 $284 0.72% $219 0.56% $0.1 0.42% $(0.7) $(0.4) 0.16% 0.29% 0.26% 2Q23 1Q24 2Q24 2Q23 1Q24 2Q24 Nonperforming Loans OREO/Repossessed NPL Ratio Commercial C
Slide 16: Strong Capital Levels
Strong Capital Levels Hold Co Capital Levels Hold Co Capital Ratios 13.28% At Jun 30, At Mar 31, At Jun 30, 2024* 2024 2023 11.13% 10.62% Common Equity Tier 1 risk-based capital 10.62% 10.57% 10.65% 8.55% Tangible common equity 7.18% 7.15% 7.23% 10.00% Tangible equity 7.56% 7.54% 7.62% 8.00% 6.50% T
Slide 17: 2024 Full Year Outlook
2024 Full Year Outlook Outlook includes Ametros; assumes no material changes to the regulatory environment or macro environment / rate assumptions Loan Growth • Full year loan growth of 4% to 5% Deposit Growth • Deposit growth of ~5% • Full year NII of $2.32 billion to $2.34 billion (GAAP), excludin
Slide 18: Supplemental Information
Supplemental Information pg. 19 to 20 Commercial Real Estate Portfolio pg. 21 to 24 Lines of Business Summary pg. 25 Net Interest Margin - Linked Quarter pg. 26 Interest Rate NII Sensitivity pg. 27 Earning Asset & Funding Mix pg. 28 to 29 Investment Portfolio pg. 30 Loan Originations & Mix pg. 31 De
Slide 19: Commercial Real Estate Portfolio
Commercial Real Estate Portfolio ($ in millions) Core portfolio metrics remain sound Commercial Real Estate Portfolio Portfolio Characteristics Loan-to- Amortizing Classified Non- 12-Month • Portfolio balance of $20 billion (excluding owner occupied) Property Type Balances Value 1 DSCR 2 % Accrual %
Slide 20: Commercial Real Estate Portfolio
Commercial Real Estate Portfolio ($ in millions) Balances by Geography & Property Type Portfolio Profile and Metrics Other NY Property Type NYC County CT Southeast NJ MA Other • Balances are varied by location with limited exposure ADC / Construction 31 % 19 % 7% 16 % 7% 8% 11 % to single assets Mul
Slide 21: Commercial Banking
Commercial Banking ($ in millions) Total Loans Key Business Metrics Increase / (Decrease) $40,477 $39,883 $40,331 2Q24 1Q24 2Q23 $363 $363 $355 Loan originations $ 2,510 $ 287 $ 428 Loan fundings $ 1,735 $ 61 $ 263 Coupon on fundings 7.51% 0.22 % 0.57 % $19,330 $20,490 $20,942 Deposits $ 15,464 $ (6
Slide 22: Healthcare Financial Services
Healthcare Financial Services ($ in millions) Total Footings $14,914 Key Business Metrics Increase / (Decrease) $14,668 2Q24 1Q24 2Q23 $12,331 HSA accounts ('000) 3,310 (9) 133 $5,194 $5,522 HSA new accounts ('000) 100 (181) (6) Ametros accounts ('000) 27 2 N/A $4,123 Ametros new accounts ('000) 1 —
Slide 23: Healthcare Financial Services — PTNR Detail
Healthcare Financial Services — PTNR Detail ($ in millions) Favorable / HSA Bank PTNR Favorable / (Unfavorable) Ametros PTNR (Unfavorable) 2Q24 1Q24 2Q23 2Q24 1Q24* Net interest income $ 80.4 $ — $ 5.0 Net interest income $ 11.3 $ 5.6 Interchange revenue 13.4 (0.6) 0.6 Medical services fees 4.7 1.9
Slide 24: Consumer Banking
Consumer Banking ($ in millions) Total Loans $11,124 $11,209 $11,239 $1,858 $1,822 $1,800 Key Business Metrics Increase / (Decrease) 2Q24 1Q24 2Q23 Loan originations - Consumer Lending $ 342 $ 142 $ (54) $9,266 $9,387 $9,439 Loan originations - Small Business $ 102 $ 22 $ 38 Coupon on fundings 7.51
Slide 25: Net Interest Margin — Linked Quarter
Net Interest Margin — Linked Quarter 2Q24 1Q24 Increase / (Decrease) Average Yield/ Adjusted Average Adjusted ($ in millions) Balance Interest Rate Yield/Rate 1 Balance Interest BPs BPs Securities $ 16,382 $ 164.9 3.86 % 3.88 % $ 139 $ 11.3 22 17 Money market & other 820 11.8 5.72 5.72 (96) (0.4) 45
Slide 26: Interest Rate NII Sensitivity
Interest Rate NII Sensitivity Rising vs. Flat Rate Scenarios Falling vs. Flat Rate Scenarios 3.4% 1.7% 1.7% 0.9% 1Q24 2Q24 (0.7)% (2.0)% (1.5)% Ramp Up 100 bps Ramp Up 200 bps (3.9)% * 1Q24 2Q24 Assumes given rate ramps occur over first 12 months of forecast period Shock Down 100 bps Ramp Down 100 b
Slide 27: Earning Asset & Funding Mix
Earning Asset & Funding Mix ($ in millions, end of period balances) Earning Asset Mix • Floating and periodic rate loans represent 58% of Type Balance Total % Floating % Periodic % Fixed % total loans: Securities $ 17,984 26 % 12 % 2% 86 % ◦ Floating rate loans represent 46% of total Loans HFS 248 —
Slide 28: Investment Portfolio
Investment Portfolio ($ in millions, end of period balances) Investment Securities Duration / Yield $16,281 $16,447 $14,703 $7,809 4.4 4.5 4.6 $8,601 $7,759 3.6 3.6 3.7 $7,680 $8,638 $6,944 2Q23 1Q24 2Q24 2Q23 1Q24 2Q24 HTM Securities AFS Securities Portfolio Duration (years) Purchase Duration (year
Slide 29: Investment Securities
Investment Securities ($ in millions, end of period balances; portfolio duration in years) Available-for-Sale June 30, 2024 March 31, 2024 Increase / (Decrease) Balances Portfolio Duration Balances Portfolio Duration Balances Portfolio Duration Government Agency Debentures $ 264 $ 262 $ 1 Municipal
Slide 30: Loan Originations & Mix
Loan Originations & Mix ($ in millions) Originations by Loan Portfolio 2Q24 1Q24 2Q23 End of period balances Full quarter originations Balance Originations Balance Originations Balance Originations Commercial non-mortgage $ 18,022 $ 1,412 $ 17,976 $ 1,003 $ 19,499 $ 1,251 Asset-based lending 1,471 6
Slide 31: Deposit Mix & Rate
Deposit Mix & Rate ($ in millions) End of period balances 2Q24 1Q24 2Q23 Full quarter cost Balance Rate Balance Rate Balance Rate Demand $ 9,994 —% $ 10,213 —% $ 11,157 —% Interest-bearing checking 8,599 1.90 8,627 1.80 8,776 1.36 Health savings accounts 8,475 0.15 8,603 0.15 8,207 0.15 interLINK 6,
Slide 32: Income Statement — GAAP
Income Statement — GAAP Favorable / (Unfavorable) ($ in millions, except EPS) 2Q24 1Q24 2Q23 Net interest income $ 572.3 $ 4.6 $ (11.5) Non-interest income 42.3 (57.1) (47.1) Total revenue $ 614.6 $ (52.5) $ (58.6) Non-interest expense 326.0 9.9 18.1 Pre-provision net revenue $ 288.6 $ (42.6) $ (40.
Slide 33: Impact of Sterling Purchase Accounting
Impact of Sterling Purchase Accounting Purchase Accounting Accretion (PAA) Summary Actuals Scheduled1 ($ in thousands) 1Q24 2Q24 3Q24 4Q24 FY24 FY25 FY26 Thereafter Loans & leases $ 7,129 $ 5,338 $ 4,217 $ 3,442 $ 20,126 $ 10,151 $ 6,124 $ 7,214 Securities (2,670) (589) (539) (522) (4,320) (1,667) (
Slide 34: Non-GAAP Reconciliations
Non-GAAP Reconciliations ($ in thousands, except per share amounts) Efficiency Ratio 2Q24 1Q24 2Q23 Non-interest expense $ 326,021 $ 335,923 $ 344,089 Less: Foreclosed property activity (364) (330) (432) Intangible assets amortization 8,716 9,194 9,193 Operating lease depreciation 560 663 1,639 FDIC
Slide 35: Non-GAAP Reconciliations
Non-GAAP Reconciliations ($ in thousands) Tangible Common Equity Ratio 2Q24 1Q24 2Q23 Stockholders' equity $ 8,809,268 $ 8,747,498 $ 8,279,726 Less: Goodwill and other intangible assets 3,242,193 3,250,909 2,852,117 Tangible stockholders' equity 5,567,075 5,496,589 5,427,609 Less: Preferred stock 28
Slide 36: Non-GAAP Reconciliations — Adjusted
Non-GAAP Reconciliations — Adjusted ($ in thousands) Adjusted Return on Average Assets 2Q24 Net income $ 181,633 Add: Loss on sale of investment securities, tax-effected 38,694 Adjusted income 220,327 Adjusted income, annualized basis $ 881,308 Average assets $ 75,936,333 Adjusted Return on Average
Slide 37: Non-GAAP Reconciliations — Adjusted
Non-GAAP Reconciliations — Adjusted ($ in thousands) Adjusted Return on Average Common Stockholders' Equity 2Q24 Average stockholders' equity $ 8,733,737 Less: Average preferred stock 283,979 Average common stockholders' equity $ 8,449,758 Net income $ 181,633 Less: Preferred stock dividends 4,162 L
Slide 38: Non-GAAP Reconciliations — Adjusted
Non-GAAP Reconciliations — Adjusted ($ in thousands) Adjusted Return on Average Tangible Common Stockholders' Equity 2Q24 Average stockholders' equity $ 8,733,737 Less: Average goodwill and other intangible assets 3,246,940 Average preferred stock 283,979 Average tangible common stockholders' equity
Slide 39: Forward-Looking Statements
WBS 2Q24 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 40: Webster Financial Corporation
S) Webster Financial Corporation