Webster Financial Corporation · NYSE:WBS
Webster Financial — Q1 2024 Earnings Presentation
41 slides from Webster Financial's earnings presentation, Apr 23, 2024
Slide 1: Earnings Conference Call First Quarter 2024
Earnings Conference Call First Quarter 2024 April 23, 2024 WEBSTER FINANCIAL CORPORATION
Slide 2: First Quarter 2024 Highlights
First Quarter 2024 Highlights REPORTED ADJUSTED • Highlighted results: ◦ Completed the Ametros acquisition on January 24th $331.2M $344.4M ◦ Loans up $0.4 billion or 0.7% PPNR PPNR ◦ Core deposit growth of $1.5 billion, and $0.4 billion in retail CDs ◦ Efficiency ratio of 45.3% $212.2M $233.0M ◦ Adj
Slide 3: Completed Ametros Acquisition
Completed Ametros Acquisition The acquisition of Ametros closed on January 24th and added $871 million in low cost, long duration deposits; Webster is actively exploring potential for new partnerships Ametros is the leading professional administrator of medical insurance claim settlements; the typic
Slide 4: 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 5: Commercial Real Estate Portfolio
Commercial Real Estate Portfolio Investor CRE Portfolio Rent Regulated Multifamily Detail • $1.5 billion in exposure represents properties where > 50% of NOI is RR; $117 million in additional exposure where RR NOI between 30-50% ADC / Construction 11.6% 7.3% 2.4% • Classified / Non-Accrual rates of
Slide 6: 1Q24 Net Income Available to Common
1Q24 Net Income Available to Common GAAP to Adjusted Reconciliation ($ in millions) Pre-Tax After Tax Diluted EPS Reported (GAAP) $ 285.7 $ 212.2 $ 1.23 FDIC special assessment estimate 11.9 8.9 0.05 Ametros acquisition expenses 3.1 2.4 0.01 Securities repositioning loss 9.8 7.4 0.04 Net (gain) on s
Slide 7: Balance Sheet — End of Period
Balance Sheet — End of Period ($ in millions) 1Q24 4Q23 Increase / (Decrease) 1Q23 Key Observations Interest-bearing deposits $ 1,223 $ (63) $ (1,009) • Securities portfolio: Securities 16,281 247 1,419 ◦ AFS $8.6 billion, 3.85% yield, duration of 4.0 years Commercial loans 41,339 409 49 ◦ HTM $7.7
Slide 8: Loans
Loans ($ in millions, balances end of period) Loan Growth of 0.7% LQ LQ growth of $0.4 billion or 0.7% 1Q24 4Q23 1Q23 LQ Change YOY Change • Total loans up $0.4 billion from the prior quarter, with growth driven by commercial real estate C&I $ 12,987 $ 13,246 $ 13,889 (2.0)% (6.5)% • Floating and pe
Slide 9: Deposits
Deposits ($ in millions, balances end of period) Deposit Decline of 0.1% LQ LQ decrease of $36.5 million or 0.1% 1Q24 4Q23 1Q23 LQ Change YOY Change • Core deposit growth of $1.5 billion and retail CD growth of $0.4 billion offset by a decrease in brokered deposits Demand $ 10,213 $ 10,733 $ 12,007
Slide 10: Deposits — Beta Outlook
Deposits — Beta Outlook Historical Cost of Total Deposits Forecasted Cumulative Deposit Beta Betas Lagged Early in the Cycle 41% Historical Forecast 40% 37% 34% 2.23% 42% 2.15% 41% 40% 1.96% 1.72% 37% 24% 34% 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
Slide 11: Income Statement
Income Statement Reported to Adjusted Favorable / Reported Adjusted ($ in millions, except EPS) 1Q24 Adjustments 1 1Q24 (Unfavorable) 4Q23 2 Key Observations Net interest income $ 567.7 $ — $ 567.7 $ (3.3) Reported GAAP: Non-interest income 99.4 (1.8) 97.5 16.9 • Net income of $216.3 million, up fro
Slide 12: Net Interest Income
Net Interest Income ($ in millions) $595.3 Linked Quarter NII $571.0 $567.7 • Net interest income totaled $567.7 million, down from prior quarter by $3.3 million or 0.6%, driven by day count, loan and deposit mix, and the 5.54% 5.59% impact of interest rate hedges 5.08% • Net interest income excludi
Slide 13: Non-Interest Income
Non-Interest Income ($ in millions) $99.4 Adjusted non-interest income increased $16.9 million LQ $87.5 (adj) $80.6 $97.5 • 1Q24 has been adjusted for a $9.8 million loss on sale of investment (adj) (adj) securities and an $11.7 million net gain on sale of MSRs; 4Q23 has been adjusted for a $16.8 mi
Slide 14: Non-Interest Expense
Non-Interest Expense ($ in millions) $377.2 $332.5 $47.2 $335.9 Adjusted expense increased $21.5 million LQ $11.9 $29.4 $30.7 $3.1 • 1Q24 has been adjusted for $3.1 million in Ametros acquisition expenses and $11.9 million for a FDIC special assessment estimate; 4Q23 has been adjusted for $47.2 mill
Slide 15: Allowance for Credit Losses on Loans & Leases
Allowance for Credit Losses on Loans & Leases ($ in millions) Provision: $34 Provision: $43 $635 $26 $636 $38 $641 $8 $5 $(34) $(37) Coverage % 1.27% 1.25% 1.26% 9/30/2023 4Q Net Charge- Loan Balances 4Q Macro/ 12/31/2023 1Q Net Charge- Loan Balances 1Q Macro/ 3/31/2024 Offs Credit Offs Credit 4Q23
Slide 16: Key Asset Quality Metrics
Key Asset Quality Metrics ($ in millions) Nonperforming Loans, OREO, NPL Ratio Net Charge-Offs (Recoveries) $37.9 $289 $28.4 $24.8 $219 $284 $187 $210 0.56% $185 $5.6 0.41% 0.36% $(0.3) $(0.4) 0.20% 0.27% 0.29% 1Q23 4Q23 1Q24 1Q23 4Q23 1Q24 Nonperforming Loans OREO/Repossessed NPL Ratio Commercial C
Slide 17: Strong Capital Levels
Strong Capital Levels Hold Co Capital Levels Hold Co Capital Ratios 13.13% At Mar 31, At Dec 31, At Mar 31, 2024* 2023 2023 11.01% 10.51% Common Equity Tier 1 risk-based capital 10.51% 11.11% 10.42% 8.51% Tangible common equity 7.15% 7.73% 7.15% 10.00% Tangible equity 7.54% 8.12% 7.55% 8.00% 6.50% T
Slide 18: 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 ~5% Deposit Growth • Deposit growth of 5% to 7% • Full year NII of ~$2.4 billion (GAAP), excluding ~$65 million of
Slide 19: Supplemental Information
Supplemental Information pg. 20 to 21 Commercial Real Estate Portfolio pg. 22 to 25 Lines of Business Summary pg. 26 Net Interest Margin - Linked Quarter pg. 27 Interest Rate NII Sensitivity pg. 28 Earning Asset & Funding Mix pg. 29 to 30 Investment Portfolio pg. 31 Loan Originations & Mix pg. 32 De
Slide 20: Commercial Real Estate Portfolio
Commercial Real Estate Portfolio ($ in millions) Commercial Real Estate Portfolio Portfolio Characteristics Loan-to- Amortizing Classified Non- 12-Month • Strong portfolio across property types with largest concentrations in 1 2 Property Type Balances Value DSCR % Accrual % Maturities Multifamily an
Slide 21: Commercial Real Estate Portfolio
Commercial Real Estate Portfolio ($ in millions) Balances by Geography & Property Type Portfolio Profile and Metrics Property Type NYC Other NY CT Southeast NJ MA Other • Portfolio is concentrated in NYC/NY, particularly ADC / Construction 30 % 18 % 7% 15 % 6% 7% 18 % Multifamily (largest book, lowe
Slide 22: Commercial Banking
Commercial Banking ($ in millions) Total Loans Key Business Metrics Increase / (Decrease) $40,127 $39,481 $39,883 1Q24 4Q23 1Q23 $361 Loan originations $ 2,223 $ (636) $ (737) $359 $363 Loan fundings $ 1,674 $ (249) $ (349) Coupon on fundings 7.29 % (0.24)% 0.91 % $19,371 $20,490 Deposits $ 16,075 $
Slide 23: Healthcare Financial Services
Healthcare Financial Services ($ in millions) Total Footings Key Business Metrics Increase / (Decrease) $14,668 1Q24 4Q23 1Q23 $12,930 HSA accounts ('000) 3,319 135 147 $12,049 $5,194 HSA new accounts ('000) 281 177 2 $4,642 Ametros accounts ('000) 25 N/A N/A $3,776 Ametros new accounts ('000) 1 N/A
Slide 24: Healthcare Financial Services — PTNR Detail
Healthcare Financial Services — PTNR Detail ($ in millions) HSA Bank PTNR Favorable / (Unfavorable) Ametros PTNR 1Q24 4Q23 1Q23 1Q24 Net interest income $ 80.4 $ 2.3 $ 8.7 Net interest income $ 5.7 Interchange revenue 14.0 2.9 0.9 Medical services fees 2.8 Account and other fees 12.5 3.4 1.5 Account
Slide 25: Consumer Banking
Consumer Banking ($ in millions) Total Loans $10,777 $11,235 $11,209 $1,808 $1,822 Key Business Metrics Increase / (Decrease) $1,511 1Q24 4Q23 1Q23 Loan originations - Consumer Lending $ 200 $ (18) $ (48) $9,266 $9,427 $9,387 Loan originations - Small Business $ 80 $ (13) $ 18 Coupon on fundings 7.5
Slide 26: Net Interest Margin — Linked Quarter
Net Interest Margin — Linked Quarter 1Q24 4Q23 Increase / (Decrease) Average Yield/ Adjusted Average Adjusted ($ in millions) Balance Interest Rate Yield/Rate 1 Balance Interest BPs BPs Securities $ 16,243 $ 153.6 3.64 % 3.71 % $ 990 $ 18.1 29 28 Money market & other 916 12.1 5.27 5.27 (41) (2.4) (6
Slide 27: Interest Rate NII Sensitivity
Interest Rate NII Sensitivity Rising vs. Flat Rate Scenarios Falling vs. Flat Rate Scenarios 3.3% 3.4% 1.7% 1.7% 4Q23 1Q24 (2.0)% (2.0)% Ramp Up 100 bps Ramp Up 200 bps (4.1)% (3.9)% * 4Q23 1Q24 Assumes given rate ramps occur over first 12 months of forecast period Shock Down 100 bps Ramp Down 100 b
Slide 28: Earning Asset & Funding Mix
Earning Asset & Funding Mix ($ in millions, end of period balances) Earning Asset Mix • Floating and periodic rate loans represent 59% of Type Balance Total % Floating % Periodic % Fixed % total loans: Securities $ 17,886 26 % 13 % 2% 85 % ◦ Floating rate loans represent 46% of total Loans HFS 240 —
Slide 29: Investment Portfolio
Investment Portfolio ($ in millions, end of period balances) Investment Securities Duration / Yield $16,035 $16,281 $14,862 4.5 4.4 4.5 $8,960 $8,601 $7,799 3.7 3.7 3.6 $7,064 $7,075 $7,680 1Q23 4Q23 1Q24 1Q23 4Q23 1Q24 HTM Securities AFS Securities Portfolio Duration (years) Purchase Duration (year
Slide 30: Investment Securities
Investment Securities ($ in millions, end of period balances; portfolio duration in years) Available-for-Sale March 31, 2024 December 31, 2023 Increase / (Decrease) Balances Portfolio Duration Balances Portfolio Duration Balances Portfolio Duration Government Agency Debentures $ 262 $ 265 $ (3) Muni
Slide 31: Loan Originations & Mix
Loan Originations & Mix ($ in millions) Originations by Loan Portfolio 1Q24 4Q23 1Q23 End of period balances Full quarter originations Balance Originations Balance Originations Balance Originations Commercial non-mortgage $ 17,976 $ 1,003 $ 18,214 $ 1,563 $ 19,014 $ 1,774 Asset-based lending 1,493 3
Slide 32: Deposit Mix & Rate
Deposit Mix & Rate ($ in millions) End of period balances 1Q24 4Q23 1Q23 Full quarter cost Balance Rate Balance Rate Balance Rate Demand $ 10,213 —% $ 10,733 —% $ 12,007 —% Interest-bearing checking 8,627 1.80 8,994 1.81 8,561 1.44 Health savings accounts 8,603 0.15 8,288 0.15 8,273 0.15 interLINK 5
Slide 33: Income Statement — GAAP
Income Statement — GAAP Favorable / (Unfavorable) ($ in millions, except EPS) 1Q24 4Q23 1Q23 Net interest income $ 567.7 $ (3.3) $ (27.5) Non-interest income 99.4 35.5 28.6 Total revenue $ 667.1 $ 32.3 $ 1.0 Non-interest expense 335.9 41.3 (3.5) Pre-provision net revenue $ 331.2 $ 73.6 $ (2.4) Provi
Slide 34: 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 $ 5,250 $ 4,187 $ 3,454 $ 20,020 $ 10,201 $ 6,133 $ 7,372 Securities (2,670) (2,629) (2,518) (2,477) (10,294) (8
Slide 35: Non-GAAP Reconciliations
Non-GAAP Reconciliations ($ in thousands, except per share amounts) Efficiency Ratio 1Q24 4Q23 1Q23 Non-interest expense $ 335,923 $ 377,221 $ 332,467 Less: Foreclosed property activity (330) (96) (262) Intangible assets amortization 9,194 8,618 9,497 Operating lease depreciation 663 900 1,884 FDIC
Slide 36: Non-GAAP Reconciliations
Non-GAAP Reconciliations ($ in thousands) Tangible Common Equity Ratio 1Q24 4Q23 1Q23 Stockholders' equity $ 8,747,498 $ 8,689,996 $ 8,294,294 Less: Goodwill and other intangible assets 3,250,909 2,834,600 2,861,310 Tangible stockholders' equity 5,496,589 5,855,396 5,432,984 Less: Preferred stock 28
Slide 37: Non-GAAP Reconciliations — Adjusted
Non-GAAP Reconciliations — Adjusted ($ in thousands) Adjusted Return on Average Assets 1Q24 Net income $ 216,323 Add: FDIC special assessment, tax-effected 8,917 Ametros acquisition expenses, tax-effected 2,360 Loss on sale of investment securities, tax-effected 7,386 Net (gain) on sale of MSRs, tax
Slide 38: Non-GAAP Reconciliations — Adjusted
Non-GAAP Reconciliations — Adjusted ($ in thousands) Adjusted Return on Average Common Stockholders' Equity 1Q24 Average stockholders' equity $ 8,759,992 Less: Average preferred stock 283,979 Average common stockholders' equity $ 8,476,013 Net income $ 216,323 Less: Preferred stock dividends 4,163 A
Slide 39: Non-GAAP Reconciliations — Adjusted
Non-GAAP Reconciliations — Adjusted ($ in thousands) Adjusted Return on Average Tangible Common Stockholders' Equity 1Q24 Average stockholders' equity $ 8,759,992 Less: Average goodwill and other intangible assets 3,090,751 Average preferred stock 283,979 Average tangible common stockholders' equity
Slide 40: Forward-Looking Statements
WBS 1Q24 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 41: Webster Financial Corporation
S) Webster Financial Corporation