Webster Financial Corporation · NYSE:WBS
Webster Financial — Q2 2023 Earnings Presentation
36 slides from Webster Financial's earnings presentation, Jul 20, 2023
Slide 1: Earnings Conference Call Second Quarter 2023
Earnings Conference Call Second Quarter 2023 July 20, 2023 WEBSTER FINANCIAL CORPORATION
Slide 2: Second Quarter 2023 Highlights
Second Quarter 2023 Highlights REPORTED ADJUSTED • Reported results include merger/initiative related charges of $40.8 million pre-tax $329.1M $369.9M • Highlighted results: PPNR PPNR ◦ Deposits grew 6.2% LQ with growth in interLINK, CDs and checking $230.8M $260.7M ◦ Enhanced off-balance sheet liqu
Slide 3: Diversified and Stable Deposit Profile
Diversified and Stable Deposit Profile Consumer Bank / Commercial Bank Corporate • 200+ financial centers • Sophisticated treasury • Longstanding top player • Tech-enabled cash • Specialized treasury serving consumers and services offering for nationally, with strong sweep program activities small b
Slide 4: Available Liquidity Covers All Uninsured Deposits
Available Liquidity Covers All Uninsured Deposits Estimated Uninsured Deposit Analysis Immediately Available Liquidity ($ in billions) ($ in millions) 6/30/2023 $18.0 1 Uninsured deposits $ 18,922 $3.6 Less: collateralized deposits 1 (4,460) Uninsured deposits (after exclusions) $ 14,462 Total depos
Slide 5: Office CRE 2.5% of Total Loans
Office CRE 2.5% of Total Loans Office Portfolio by Geography Portfolio Profile and Metrics • Origination WA LTV: ~53% • Current WA Debt Service Coverage Ratio (DSCR): 1.93x 6% NYC 8% • Criticized / Classified rate: 6.0% / 5.6% Other New York • Accruing Delinquency / Non-Accruals: 0.0% / 1.4% 8% 24%
Slide 6: WBS 2Q23 Net Income Available to Common
WBS 2Q23 Net Income Available to Common GAAP to Adjusted Reconciliation ($ in millions) Pre-Tax After Tax EPS Reported (GAAP) $ 297.6 $ 230.8 $ 1.32 Merger related 1 40.8 29.9 0.18 Adjusted (non-GAAP) $ 338.4 $ 260.7 $ 1.50 Impact of merger related and strategic initiative adjustments: • $40.8 milli
Slide 7: Balance Sheet — End of Period
Balance Sheet — End of Period ($ in millions) 2Q23 1Q23 Increase / (Decrease) 2Q22 Key Observations Interest-bearing deposits $ 1,077 $ (1,155) $ 470 • Interest-bearing deposits (cash) returned to a normalized level after Securities 14,703 (159) (483) peaking early in 2Q ($3.5 billion average balanc
Slide 8: Loans
Loans ($ in millions, balances end of period) Loan Growth of 1.4% LQ LQ growth of $0.7 billion or 1.4% 2Q23 1Q23 2Q22 LQ Change YOY Change • Total loans up $0.7 billion from the prior quarter, with modest growth across most loan categories C&I $ 13,762 $ 13,677 $ 11,928 0.6 % 15.4 % • Floating and p
Slide 9: Deposits
Deposits ($ in millions, balances end of period) Deposit Growth of 6.2% LQ LQ growth of $3.5 billion or 6.2% By Product 2Q23 1Q23 2Q22 LQ Change YOY Change • Deposit costs increased 61 bps to 1.72%, driven by growth in higher cost deposit categories and a rising rate environment Demand $ 11,157 $ 12
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 34% Expected 40% Terminal 38% Beta 36% 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 Q1 2023 Q2 2023 Q3 2023
Slide 11: Income Statement
Income Statement Reported to Adjusted Favorable / Reported Adjusted ($ in millions, except EPS) 2Q23 Adjustments 1 2Q23 (Unfavorable) 1Q23 2 Key Observations Net interest income $ 583.8 $ — $ 583.8 $ (11.5) Reported GAAP: Non-interest income 89.4 — 89.4 1.9 • Net income of $235.0 million, up from $2
Slide 12: Net Interest Income
Net Interest Income ($ in millions) Impact of Short-Term Liquidity Increase: $595.3 $583.8 • Average on-balance sheet liquidity increased $2.6 billion linked quarter • No impact to net interest income $486.7 5.32% • Impact to NIM of (12) bps 5.08% Linked Quarter NII 3.46% • Net interest income total
Slide 13: Non-Interest Income
Non-Interest Income ($ in millions) $120.9 Adjusted non-interest income increased $1.9 million LQ • Increase primarily driven by the valuation of client hedging activity, loan prepayment fees, and investment service fees $87.5 $89.4 • 1Q23 adjusted for a $16.7 million loss on sale of investment (adj
Slide 14: Non-Interest Expense
Non-Interest Expense ($ in millions) $358.2 $344.1 $332.5 Adjusted expense increased $0.2 million LQ $66.5 $40.8 $29.4 • Efficiency ratio of 42.2% • Reduction in professional services, technology, and marketing, partially offset by higher employee benefit expense and deposit insurance $291.7 $303.1
Slide 15: Allowance for Credit Losses on Loans & Leases
Allowance for Credit Losses on Loans & Leases ($ in millions) Provision: $38 Provision: $35 $26 $6 $614 $27 $629 $595 $12 $8 $(25) $(20) Coverage % 1.20% 1.21% 1.22% 12/31/2022 1Q Net Loan Growth 1Q Macro/ TDR 3/31/2023 2Q Net Loan Growth 2Q Macro/ 6/30/2023 Charge-Offs Credit Accounting Charge-Offs
Slide 16: Key Asset Quality Metrics
Key Asset Quality Metrics ($ in millions) Nonperforming Loans, OREO, NPL Ratio Net Charge-Offs (Recoveries) $250 $24.8 $222 $20.9 $248 $187 $219 $11.0 $185 0.54% 0.42% 0.36% $(0.3) $(1.4) $(0.7) 0.09% 0.20% 0.16% 2Q22 1Q23 2Q23 2Q22 1Q23 2Q23 Nonperforming Loans OREO/Repossessed NPL Ratio Commercial
Slide 17: Strong Capital Levels
Strong Capital Levels Hold Co Capital Levels Hold Co Capital Ratios 13.26% At Jun 30, At Mar 31, At Jun 30, 2023* 2023 2022 11.17% 10.66% Common Equity Tier 1 risk-based capital 10.66% 10.42% 11.09% 8.36% 10.00% Tangible common equity 7.23% 7.15% 7.68% Tangible equity 7.62% 7.55% 8.12% 8.00% 6.50% T
Slide 18: Full Year 2023 Outlook
Full Year 2023 Outlook Outlook assumes no material changes to the regulatory environment or macro environment / rate assumptions Loan Growth • Expect full year period end loan growth to be 4% to 6%; Focus on strategic segments • Core deposit growth of 8% to 10%1 Deposit Growth • interLINK further di
Slide 19: Merger Integration Update
Merger Integration Update • Entering final phases of integration with core conversion on track to complete this weekend • Continued focus on service execution • Webster will continue to invest in products and capabilities as we aim to deliver a superior experience to our clients, colleagues, and oth
Slide 20: Supplemental Information
Supplemental Information pg. 21 Impact of Purchase Accounting pg. 22 to 24 Lines of Business Summary pg. 25 Net Interest Margin - Linked Quarter pg. 26 Interest Rate NII Sensitivity pg. 27 Earning Asset & Funding Mix pg. 28 to 29 Investment Portfolio pg. 30 Loan Originations & Mix pg. 31 Deposit Mix
Slide 21: Impact of Purchase Accounting
Impact of Purchase Accounting Purchase Accounting Accretion (PAA) Summary Actuals Scheduled1 ($ in thousands) 1Q23 2Q23 3Q23 4Q23 FY23 FY24 FY25 Thereafter Loans & leases $ 9,317 $ 8,507 $ 11,043 $ 6,890 $ 35,757 $ 19,640 $ 10,552 $ 14,709 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) $41,287 $41,862 2Q23 1Q23 2Q22 $361 $363 Loan originations $ 2,130 $ (869) $ (2,082) $36,634 Loan fundings $ 1,509 $ (538) $ (1,309) $371 Coupon on fundings 6.95 % 0.66 % 3.33 % $20,275 $20,410 Deposits $ 18,34
Slide 23: HSA Bank
HSA Bank ($ in millions) Key Business Metrics Increase / (Decrease) Total Footings 2Q23 1Q23 2Q22 1 HSA accounts ('000) 3,177 5 217 $12,049 $12,331 Percent of unfunded accounts 1 6.14 % 0.49 % (0.03)% $11,055 Footings per account $ 3,881 $ 83 $ 288 1 $3,776 $4,123 Deposits per account $ 2,584 $ (24)
Slide 24: Consumer Banking
Consumer Banking ($ in millions) Total Loans $8,965 $9,617 $9,739 Key Business Metrics Increase / (Decrease) $351 $364 $364 2Q23 1Q23 2Q22 Loan originations - Consumer Lending $ 396 $ 148 $ (379) $8,601 $9,266 $9,375 Loan originations - Small Business $ 16 $ (7) $ (7) Coupon on fundings 6.60 % (0.16
Slide 25: Net Interest Margin — Linked Quarter
Net Interest Margin — Linked Quarter 2Q23 1Q23 Increase / (Decrease) Average Yield/ Adjusted Average Adjusted ($ in millions) Balance Interest Rate Yield/Rate * Balance Interest BPs BPs Securities $ 14,780 $ 116.0 2.99 % 3.07 % $ 147 $ 10.1 20 20 Money market & other 4,042 51.7 5.06 5.06 2,684 36.4
Slide 26: Interest Rate NII Sensitivity
Interest Rate NII Sensitivity Rising vs. Flat Rate Scenarios Falling vs. Flat Rate Scenarios 5.3% 3.2% 2.5% 1.5% 1Q23 2Q23 (2.8)% (2.1)% Ramp Up 100 bps Ramp Up 200 bps (4.3)% (5.6)% * 1Q23 2Q23 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 60% of total loans: Securities $ 16,188 24 % 9% 3% 88 % Loans HFS 11 — 100 — — ◦ Floating rate loans represent 49% of
Slide 28: Investment Portfolio
Investment Portfolio ($ in millions, end of period balances) Investment Securities Duration / Yield $15,187 $14,862 $14,703 4.7 4.5 4.4 4.1 $8,638 $7,799 $7,759 3.7 3.6 $6,548 $7,064 $6,944 2Q22 1Q23 2Q23 2Q22 1Q23 2Q23 HTM Securities AFS Securities Portfolio Duration (years) Purchase Duration (year
Slide 29: Investment Securities
Investment Securities ($ in millions, end of period balances; duration in years) Available-for-Sale June 30, 2023 March 31, 2023 Increase / (Decrease) Balances Portfolio Duration Balances Portfolio Duration Balances Portfolio Duration U.S. Treasury Notes $ 384 $ 387 $ (3) Government Agency Debenture
Slide 30: Loan Originations & Mix
Loan Originations & Mix ($ in millions) Originations by Loan Portfolio 2Q23 1Q23 2Q22 End of period balances Full quarter originations Balance Originations Balance Originations Balance Originations Commercial non-mortgage $ 19,499 $ 1,251 $ 19,014 $ 1,774 $ 16,628 $ 2,317 Asset-based lending 1,718 4
Slide 31: Deposit Mix & Rate
Deposit Mix & Rate ($ in millions) By Product End of period balances 2Q23 1Q23 2Q22 Full quarter cost Balance Rate Balance Rate Balance Rate Demand $ 11,157 —% $ 12,007 —% $ 13,576 —% Health savings accounts 8,207 0.15 8,273 0.15 7,778 0.06 Interest-bearing checking 8,776 1.36 8,561 1.24 9,548 0.12
Slide 32: Income Statement — GAAP
Income Statement — GAAP Favorable / (Unfavorable) ($ in millions, except EPS) 2Q23 1Q23 2Q22 Net interest income $ 583.8 $ (11.5) $ 97.2 Non-interest income 89.4 18.6 (31.6) Total revenue $ 673.2 $ 7.2 $ 65.6 Non-interest expense 344.1 (11.6) 14.1 Pre-provision net revenue $ 329.1 $ (4.5) $ 79.7 Pro
Slide 33: Non-GAAP Reconciliations
Non-GAAP Reconciliations ($ in thousands, except per share amounts) Efficiency Ratio 2Q23 1Q23 2Q22 Non-interest expense $ 344,089 $ 332,467 $ 358,227 Less: Net foreclosed (income) (432) (262) (358) Amortization of intangibles 9,193 9,497 8,802 Operating lease depreciation 1,639 1,884 2,425 Strategi
Slide 34: Non-GAAP Reconciliations
Non-GAAP Reconciliations ($ in thousands, except per share amounts) Tangible Common Equity Ratio 2Q23 1Q23 2Q22 Stockholders' equity $ 8,279,726 $ 8,294,294 $ 7,997,788 Less: Goodwill and other intangible assets 2,852,117 2,861,310 2,729,551 Tangible stockholders' equity 5,427,609 5,432,984 5,268,23
Slide 35: WBS 2Q23 Financial Review
WBS 2Q23 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 36: Webster Financial Corporation
S) Webster Financial Corporation