Webster Financial Corporation · NYSE:WBS
Webster Financial — Q4 2023 Earnings Presentation
40 slides from Webster Financial's earnings presentation, Jan 23, 2024
Slide 1: Earnings Conference Call Fourth Quarter 2023
Earnings Conference Call Fourth Quarter 2023 January 23, 2024 WEBSTER FINANCIAL CORPORATION
Slide 2: Full Year 2023 Highlights
Full Year 2023 Highlights REPORTED ADJUSTED • Substantial strategic accomplishments: ◦ Completion of core conversion and merger $1.2B $1.5B related initiatives PPNR PPNR ◦ Expanded deposit diversification ▪ interLINK closed in January 2023 ▪ Ametros announced in December 2023 $0.9B $1.0B ◦ Growth in
Slide 3: Fourth Quarter 2023 Highlights
Fourth Quarter 2023 Highlights REPORTED ADJUSTED • Highlighted results: ◦ Period end balance sheet growth: $257.6M $352.3M ▪ Loans up $0.6 billion or 1.3% PPNR PPNR • Deposits up $0.5 billion or 0.7% ◦ Efficiency ratio of 43.0% ◦ ROAA 1.39% $181.2M $250.5M NET INCOME AVAILABLE TO COMMON NET INCOME A
Slide 4: Diversified and Stable Deposit Profile
Diversified and Stable Deposit Profile Consumer Bank / Commercial Bank Corporate (Pending close) • 200+ financial • Sophisticated • Longstanding top • Tech-enabled cash • Specialized • Leading centers serving treasury services player nationally, sweep program treasury activities professional consume
Slide 5: Ametros Leads an Emerging Market
Ametros Leads an Emerging Market Ametros, through its proprietary platform CareGuard, is the leading professional administrator of medical insurance claim settlements, servicing the vast majority of the professionally administered cases in the country Typical member is the recipient of a workers com
Slide 6: Office CRE 2.1% of Total Loans
Office CRE 2.1% of Total Loans Office Portfolio by Geography Portfolio Profile and Metrics • Portfolio balance of $1.04 billion ◦ Actively reducing exposure (~$615 million / -35% vs. 7% 4Q22) NYC 8% • Origination WA LTV: ~54% Other New York 22% • Current WA Debt Service Coverage Ratio (DSCR): 1.90x
Slide 7: 4Q23 Net Income Available to Common
4Q23 Net Income Available to Common GAAP to Adjusted Reconciliation ($ in millions) Pre-Tax After Tax EPS Reported (GAAP) $ 221.6 $ 181.2 $ 1.05 FDIC special assessment 47.2 34.5 0.21 Merger related expense 1 30.7 22.5 0.13 Securities repositioning loss 16.8 12.3 0.07 Adjusted (non-GAAP) $ 316.3 $ 2
Slide 8: Balance Sheet — End of Period
Balance Sheet — End of Period ($ in millions) 4Q23 3Q23 Increase / (Decrease) 4Q22 Key Observations Interest-bearing deposits $ 1,286 $ (480) $ 711 • Securities portfolio: Securities 16,035 1,505 1,577 ◦ AFS $9.0 billion, 3.51% yield, duration of 3.9 years Commercial loans 40,930 655 826 ◦ HTM $7.1
Slide 9: Loans
Loans ($ in millions, balances end of period) Loan Growth of 1.3% LQ LQ growth of $0.6 billion or 1.3% 4Q23 3Q23 4Q22 LQ Change YOY Change • Total loans up $0.6 billion from the prior quarter, with growth driven by commercial categories C&I $ 13,246 $ 13,064 $ 13,322 1.4 % (0.6)% • Floating and peri
Slide 10: Deposits
Deposits ($ in millions, balances end of period) Deposit Growth of 0.7% LQ LQ growth of $0.5 billion or 0.7% By Product 4Q23 3Q23 4Q22 LQ Change YOY Change • Deposits grew across multiple product categories and types, offset by seasonal decline in public funds Demand $ 10,733 $ 11,410 $ 12,975 (5.9)
Slide 11: Deposits — Beta Outlook
Deposits — Beta Outlook Historical Cost of Total Deposits Forecasted Cumulative Deposit Beta Betas Lagged Early in the Cycle Historical Forecast 40% 37% 34% 2.15% 40% 41% 1.96% 37% 34% 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 Q4 2023 Q1 2023 Q2
Slide 12: Income Statement
Income Statement Reported to Adjusted Favorable / Reported Adjusted ($ in millions, except EPS) 4Q23 Adjustments 1 4Q23 (Unfavorable) 3Q23 2 Key Observations Net interest income $ 571.0 $ — $ 571.0 $ (16.1) Reported GAAP: Non-interest income 63.8 16.8 80.6 (9.8) • Net income of $185.4 million, down
Slide 13: Net Interest Income
Net Interest Income ($ in millions) $602.4 $587.1 $571.0 Linked Quarter NII 5.49% 5.54% • Net interest income totaled $571.0 million, down from prior quarter by $16.1 million or 2.7%, driven by timing of asset growth and reduction in 4.60% non-strategic portfolios • Net interest income excluding acc
Slide 14: Non-Interest Income
Non-Interest Income ($ in millions) $106.7 (adj) $102.2 Adjusted non-interest income decreased $9.8 million LQ $102.2 • 4Q23 has been adjusted for a $16.8 million loss on sale of investment $90.4 $80.6 securities (adj) • Income declined $8.0 million due to a non-cash swing in our modeled credit valu
Slide 15: Non-Interest Expense
Non-Interest Expense ($ in millions) $377.2 $362.6 $348.4 $47.2 $61.6 Adjusted expense decreased $1.6 million LQ $45.9 $30.7 • 4Q23 has been adjusted for $47.2 million for a FDIC special assessment and $30.7 million for merger related expense • Increased marketing and employee benefit costs were off
Slide 16: Allowance for Credit Losses on Loans & Leases
Allowance for Credit Losses on Loans & Leases ($ in millions) Provision: $36 Provision: $34 $629 $43 $635 $26 $636 $8 $(29) $(8) $(34) Coverage % 1.22% 1.27% 1.25% 6/30/2023 3Q Net Charge- Loan Balances 3Q Macro/ 9/30/2023 4Q Net Charge- Loan Balances 4Q Macro/ 12/31/2023 Offs Credit Offs Credit 3Q2
Slide 17: Key Asset Quality Metrics
Key Asset Quality Metrics ($ in millions) Nonperforming Loans, OREO, NPL Ratio Net Charge-Offs (Recoveries) $27.1 $28.4 $218 $219 $206 $20.6 $215 $210 $204 $5.6 $2.2 0.43% 0.41% 0.41% $(0.4) 0.17% 0.23% 0.27% 4Q22 3Q23 4Q23 4Q22 3Q23 4Q23 Nonperforming Loans OREO/Repossessed NPL Ratio Commercial Con
Slide 18: Strong Capital Levels
Strong Capital Levels Hold Co Capital Levels Hold Co Capital Ratios 13.72% At Dec 31, At Sep 30, At Dec 31, 11.63% 2023* 2023 2022 11.12% Common Equity Tier 1 risk-based capital 11.12% 11.12% 10.71% 9.06% 10.00% Tangible common equity 7.73% 7.22% 7.38% Tangible equity 8.12% 7.62% 7.79% 8.00% 6.50% T
Slide 19: 2024 Full Year Outlook
2024 Full Year Outlook Outlook includes pro forma Ametros financials assuming January close; assumes no material changes to the regulatory environment or macro environment / rate assumptions Loan Growth • Full year loan growth of 5% to 7% Deposit Growth • Deposit growth of 5% to 7% • Full year NII o
Slide 20: Supplemental Information
Supplemental Information pg. 21 Impact of Purchase Accounting pg. 22 to 24 Lines of Business Summary pg. 25 Net Interest Margin - Linked Quarter pg. 26 Interest Rate NII Sensitivity pg. 27 Earning Asset & Funding Mix pg. 28 to 29 Investment Portfolio pg. 30 Loan Originations & Mix pg. 31 Deposit Mix
Slide 21: Impact of Purchase Accounting
Impact of Purchase Accounting Purchase Accounting Accretion (PAA) Summary Actuals Scheduled1 ($ in thousands) 1Q23 2Q23 3Q23 4Q23 FY23 FY24 FY25 Thereafter Loans & leases $ 9,317 $ 8,507 $ 7,561 $ 7,919 $ 33,304 $ 19,141 $ 10,339 $ 13,872 Securities (3,241) (3,205) (3,181) (3,167) (12,794) (12,264)
Slide 22: Commercial Banking
Commercial Banking ($ in millions) Total Loans Key Business Metrics Increase / (Decrease) $40,934 4Q23 3Q23 4Q22 $40,115 $40,261 $359 Loan originations $ 2,938 $ 1,779 $ (1,167) $375 $357 Loan fundings $ 1,991 $ 1,308 $ (789) Coupon on fundings 7.52 % 0.29 % 1.37 % $19,381 $20,340 $20,920 Deposits $
Slide 23: HSA Bank
HSA Bank ($ in millions) Key Business Metrics Increase / (Decrease) Total Footings 4Q23 3Q23 4Q22 1 HSA accounts ('000) 3,184 (2) 169 $12,930 Percent of unfunded accounts 1 5.91 % 0.06 % 0.03 % $12,325 $11,339 Footings per account $ 4,061 $ 193 $ 334 1 $4,642 Deposits per account $ 2,603 $ 20 $ (19)
Slide 24: Consumer Banking
Consumer Banking ($ in millions) Total Loans $9,624 $9,807 $9,781 $361 $355 Key Business Metrics Increase / (Decrease) $351 4Q23 3Q23 4Q22 Loan originations - Consumer Lending $ 218 $ (111) $ (388) $9,273 $9,446 $9,426 Loan originations - Small Business $ 13 $ (5) $ (15) Coupon on fundings 7.72 % 0.
Slide 25: Net Interest Margin — Linked Quarter
Net Interest Margin — Linked Quarter 4Q23 3Q23 Increase / (Decrease) Average Yield/ Adjusted Average Adjusted ($ in millions) Balance Interest Rate Yield/Rate 1 Balance Interest BPs BPs Securities $ 15,254 $ 135.5 3.35 % 3.43 % $ 567 $ 15.5 26 26 Money market & other 958 14.5 5.96 5.96 (584) (9.2) (
Slide 26: Interest Rate NII Sensitivity
Interest Rate NII Sensitivity Rising vs. Flat Rate Scenarios Falling vs. Flat Rate Scenarios 3.3% 2.4% 1.7% 1.1% 3Q23 4Q23 (1.6)% (2.0)% Ramp Up 100 bps Ramp Up 200 bps (3.4)% (4.1)% * 3Q23 4Q23 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 Type Balance Total % Floating % Periodic % Fixed % • Floating and periodic rate loans represent 59% of total loans: Securities $ 17,648 26 % 13 % 2% 85 % Loans HFS 7 — 100 — — ◦ Floating rate loans represent 46% of
Slide 28: Investment Portfolio
Investment Portfolio ($ in millions, end of period balances) Investment Securities Duration / Yield $16,035 $14,458 $14,529 4.3 4.4 4.4 $8,960 3.7 3.7 $7,893 $7,653 3.2 $6,565 $6,876 $7,075 4Q22 3Q23 4Q23 4Q22 3Q23 4Q23 HTM Securities AFS Securities Portfolio Duration (years) Purchase Duration (year
Slide 29: Investment Securities
Investment Securities ($ in millions, end of period balances; duration in years) Available-for-Sale December 31, 2023 September 30, 2023 Increase / (Decrease) Balances Portfolio Duration Balances Portfolio Duration Balances Portfolio Duration U.S. Treasury Notes $ — $ 387 $ (387) Government Agency D
Slide 30: Loan Originations & Mix
Loan Originations & Mix ($ in millions) Originations by Loan Portfolio 4Q23 3Q23 4Q22 End of period balances Full quarter originations Balance Originations Balance Originations Balance Originations Commercial non-mortgage $ 18,214 $ 1,563 $ 18,059 $ 720 $ 18,663 $ 2,267 Asset-based lending 1,558 25
Slide 31: Deposit Mix & Rate
Deposit Mix & Rate ($ in millions) By Product End of period balances 4Q23 3Q23 4Q22 Full quarter cost Balance Rate Balance Rate Balance Rate Demand $ 10,733 —% $ 11,410 —% $ 12,975 —% Health savings accounts 8,288 0.15 8,230 0.15 7,945 0.15 Interest-bearing checking 8,994 — 8,826 1.57 9,238 0.77 int
Slide 32: Income Statement — GAAP
Income Statement — GAAP Favorable / (Unfavorable) ($ in millions, except EPS) 4Q23 3Q23 4Q22 Net interest income $ 571.0 $ (16.1) $ (31.4) Non-interest income 63.8 (26.6) (38.4) Total revenue $ 634.8 $ (42.7) $ (69.7) Non-interest expense 377.2 (14.6) (28.8) Pre-provision net revenue $ 257.6 $ (57.3
Slide 33: Non-GAAP Reconciliations
Non-GAAP Reconciliations ($ in thousands, except per share amounts) Efficiency Ratio 4Q23 3Q23 4Q22 Non-interest expense $ 377,221 $ 362,578 $ 348,390 Less: Foreclosed property activity (96) (492) (80) Intangible assets amortization 8,618 8,899 8,240 Operating lease depreciation 900 1,146 2,021 FDIC
Slide 34: Non-GAAP Reconciliations
Non-GAAP Reconciliations ($ in thousands) Tangible Common Equity Ratio 4Q23 3Q23 4Q22 Stockholders' equity $ 8,689,996 $ 8,199,201 $ 8,056,186 Less: Goodwill and other intangible assets 2,834,600 2,843,217 2,713,446 Tangible stockholders' equity 5,855,396 5,355,984 5,342,740 Less: Preferred stock 28
Slide 35: Non-GAAP Reconciliations — Adjusted
Non-GAAP Reconciliations — Adjusted ($ in thousands) Adjusted Return on Average Assets 4Q23 2023 Net income $ 185,393 $ 867,840 Add: FDIC special assessment, tax-effected 34,509 34,509 Merger related expense, tax-effected 22,447 124,466 Loss on sale of investment securities, tax-effected 12,310 27,5
Slide 36: Non-GAAP Reconciliations — Adjusted
Non-GAAP Reconciliations — Adjusted ($ in thousands) Adjusted Return on Average Tangible Common Stockholders' Equity 4Q23 2023 Average stockholders' equity $ 8,312,798 $ 8,323,955 Less: Average goodwill and other intangible assets 2,838,770 2,848,114 Average preferred stock 283,979 283,979 Average t
Slide 37: Non-GAAP Reconciliations — YTD
Non-GAAP Reconciliations — YTD ($ in thousands) Full Year Efficiency Ratio 2023 2022 Non-interest expense $ 1,416,355 $ 1,396,473 Less: Foreclosed property activity (1,282) (906) Intangible assets amortization 36,207 31,940 Operating lease depreciation 5,569 8,193 FDIC special assessment 47,164 — Me
Slide 38: Non-GAAP Reconciliation
Non-GAAP Reconciliation Full Year 2023 GAAP to Adjusted ($ in millions) Pre-Tax After Tax EPS Reported (GAAP) $ 1,084.5 $ 851.2 $ 4.91 FDIC special assessment 47.2 34.5 0.21 Merger related expense 1 169.2 124.5 0.72 Securities repositioning loss 37.3 27.6 0.15 Adjusted (non-GAAP) $ 1,338.2 $ 1,037.8
Slide 39: Forward-Looking Statements
WBS 4Q23 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