Earnings
Conference Call
First Quarter 2024
April 23, 2024
WEBSTER FINANCIAL CORPORATION
First Quarter 2024 Highlights
- Highlighted results:
- Completed the Ametros acquisition on January 24th
- Loans up $0.4 billion or 0.7%
- Core deposit growth of $1.5 billion, and $0.4 billion in retail CDs
- Efficiency ratio of 45.3%
- Adjusted ROAA 1.26%
- Adjusted ROATCE 17.85%
- Reported results include (pre-tax):
- FDIC special assessment estimate of $11.9 million
- Ametros acquisition expenses of $3.1 million
- Securities repositioning loss of $9.8 million
- Net gain on sale of MSRs of $11.7 million
- Discrete tax adjustment of $10.9 million (after-tax)
- NIM of 3.35%, down 7 bps, reflective of loan and deposit mix
- Capital:
- CET1 of 10.51%1
- TCE of 7.15%
Adjusted results are non-GAAP. See non-GAAP reconciliations on pages 6 and 35 through 39.
- Preliminary. Represents the estimated ratios for the current period inclusive of CECL regulatory capital transition provisions.
REPORTED
$331.2M
PPNR
$212.2M
NET INCOME AVAILABLE TO COMMON
$1.23
DILUTED EPS
1.15%
ROAA
10.01%
ROACE
16.30%
ROATCE
ADJUSTED
$344.4M
PPNR
$233.0M
NET INCOME AVAILABLE TO COMMON
$1.35
DILUTED EPS
1.26%
ROAA
11.00%
ROACE
17.85%
ROATCE
WEBSTER FINANCIAL CORPORATION | 2 |
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 typical member is the recipient of a workers compensation settlement for a chronic injury
Value-added services to claim recipients:
- Custodian of claim settlements
- Facilitates settlement process and navigation of benefits
- Discounted medical services
- Bill payment
- Medicare disbursement reporting
Member deposits exhibit a 20+ year duration, have an average cost of deposits less than 10 bps, and are anticipated to grow at a 25% CAGR
Income is generated on custodied funds, negotiated medical expense arrangements, and administrative fees
3
Diversified and Stable Deposit Profile
Consumer Bank / | Commercial Bank | |||||||||
• | 200+ financial | • | Sophisticated | • | Longstanding top | • Leading | ||||
centers serving | treasury services | player nationally, | professional | |||||||
consumers and | offering for | with strong growth | administrator of | |||||||
small businesses | commercial clients | characteristics | medical insurance | |||||||
Business | in the highly | • | Full credit and | • | Offers a | claim settlements | ||||
Description | populated | deposit | comprehensive | |||||||
Northeast corridor | relationships with | consumer-directed | ||||||||
and Long-Island | targeted deposit | healthcare solution |
gathering in select verticals
- Tech-enabledcash sweep program administrator for broker-dealers
Corporate
- Specialized treasury activities
Volume of | $26.9bn | $16.1bn | $8.6bn | $0.9bn | $5.8bn | $2.4bn |
Deposits | 44% of Total | 27% of Total | 14% of Total | 1% of Total | 10% of Total | 4% of Total |
Key
Benefits
• | Branch deposits | • | Relationship-based | • | Long duration | • | Long duration | • | Access to core | • | Low operating cost |
are sticky and low | operating deposits | • | Low cost | • | Low cost | deposits | • | Provides liquidity | |||
cost | • | Includes $4.5 | • | High growth | • | Strong growth | • | Significant | optionality | ||
• | Complemented by | billion of | prospects | flexibility based on | |||||||
low all-in cost | collateralized | liquidity needs | |||||||||
digital channel | public funds | • | Highly scalable | ||||||||
deposits | with low operating | ||||||||||
costs |
Note: Business Banking deposits of $2.2 billion were realigned to Consumer Banking from Commercial Banking as of 1Q24.
WEBSTER FINANCIAL CORPORATION | 4 |
Commercial Real Estate Portfolio
Investor CRE Portfolio
ADC / Construction | 11.6% | 7.3% |
Multifamily / Co-op | 2.4% | |
Rent-Regulated MF | 7.1% | |
Traditional Office | ||
Medical Office | 31.0% | |
15.8% | ||
Retail | ||
Industrial | ||
Healthcare | ||
Hotel | 8.5% | |
Other | 3.7% 5.1% | 7.5% |
Portfolio Characteristics
- Portfolio balance of $20 billion (excluding owner-occupied)
- Weighed Average LTV / Amortizing DSCR of 56% / 1.5x
- Classified / Non-Accrual rates of 1.5% / 0.1%
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%
- Classified / Non-Accrual rates of 0.1% / 0.1%
- Diverse book with only 7 exposures >$15 million (average $3.5 million)
- ~65% of balances originated in 2019 or later
- Remaining maturities of $99 million in 2024; largest loan of $57 million resolved in 1Q with paydown of loan to produce 1.25x DSCR at market rate
- Maturities of $56 million in 2025
Traditional Office Detail
- $1 billion in exposure, have proactively reduced exposure by > 40% (~$700 million) since 1H22
- Classified / Non-Accrual rates of 12% / 0.0%
- NYC exposure: $217 million; only $37 million Criticized, no Classified loans
- Class A vs. Class B: ~52/48 split
- 2024 / 2025 Lease roll: ~10% / ~14%
- Portion of portfolio with recourse is ~75% (increased through extensions)
- Remaining maturities of $260 million in 2024
- Maturities of $158 million in 2025
WEBSTER FINANCIAL CORPORATION | 5 |
1Q24 Net Income Available to Common
GAAP to Adjusted Reconciliation
($ 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 sale of mortgage servicing rights | (11.7) | (8.8) | (0.05) | |||||
Discrete tax adjustment | N/A | 10.9 | 0.07 | |||||
Adjusted (non-GAAP) | $ | 298.9 | $ | 233.0 | $ | 1.35 | ||
Impact of FDIC special assessment estimate, Ametros acquisition expenses, securities repositioning loss, net gain on sale of mortgage servicing rights, and discrete tax adjustment:
- $13.2 million of pre-tax income
- $20.8 million of after tax income
- Impact of the above on Diluted EPS is $0.12 per share
Note: Totals may not sum due to rounding.
WEBSTER FINANCIAL CORPORATION | 6 |
Balance Sheet - End of Period
Increase / (Decrease) | Key Observations | ||||||||||
($ in millions) | 1Q24 | 4Q23 | 1Q23 | ||||||||
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 billion, 3.37% yield, duration of 5.1 years | |||||||||||
Consumer loans | 9,760 | (36) | 123 | ||||||||
◦ Executed $0.4 billion securities repositioning in 1Q | |||||||||||
Total loans | $ | 51,099 | $ | 373 | $ | 172 | |||||
• | Loan balances LQ: | ||||||||||
Total assets | $ | 76,162 | $ | 1,216 | $ | 1,317 | |||||
Transactional deposits | $ | 18,840 | $ | (887) | $ | (1,729) | ◦ Commercial loan growth of $0.4 billion or 1.0% | ||||
◦ Consumer loans flat | |||||||||||
Healthcare Financial Services deposits 1 | 9,474 | 1,186 | 1,202 | ||||||||
• Deposit growth related to Ametros, HSA, and public funds were offset | |||||||||||
All other deposits | 32,434 | (335) | 5,977 | ||||||||
by declines in wholesale deposits | |||||||||||
Total deposits | $ | 60,748 | $ | (36) | $ | 5,450 | |||||
• | Loan-to-deposit ratio of 84% | ||||||||||
Borrowings | 4,936 | 1,069 | (5,002) | ||||||||
Common equity | $ | 8,464 | $ | 58 | $ | 453 | • | Borrowings composed of: | |||
Total liabilities and equity | $ | 76,162 | $ | 1,216 | $ | 1,317 | ◦ $3.7 billion FHLB advances | ||||
Key Ratios: | Favorable / (Unfavorable) | ◦ $0.9 billion long-term debt | |||||||||
◦ $0.4 billion in Fed funds and repurchase agreements | |||||||||||
Loans / total deposits | 84.1 % | (65) bps | 800 bps | • Capital ratios remain strong | |||||||
Transactional & Healthcare / total deposits | 46.6 % | 52 bps | (555) bps | ||||||||
• AOCI losses on available-for-sale securities of $553.7 million, an | |||||||||||
Common Equity Tier 1 | 2 | 10.51 % | (60) bps | 9 bps | |||||||
increase of $36.3 million after-tax from prior quarter | |||||||||||
Tangible common equity 3 | 7.15 % | (58) bps | 0 bps | ||||||||
Tangible book value / common share 3 | $ | 30.22 | $ | (2.16) | $ | 0.75 | • | Tangible book value per common share of $30.22, down 6.7% LQ and | |||
1 Comprised of HSA Bank and Ametros. | up 2.6% YOY, reflecting the addition of Ametros intangibles and higher | ||||||||||
AFS securities mark in AOCI | |||||||||||
7
Loans
($ in millions, balances end of period)
Loan Growth of 0.7% LQ
1Q24 | 4Q23 | 1Q23 | LQ Change | YOY Change | ||||||||
C&I | $ | 12,987 | $ | 13,246 | $ | 13,889 | (2.0)% | (6.5)% | ||||
Sponsor & Specialty | 6,745 | 6,779 | 6,624 | (0.5) | 1.8 | |||||||
Warehouse | - | - | 474 | N/A | (100.0) | |||||||
CRE | 21,607 | 20,905 | 20,302 | 3.4 | 6.4 | |||||||
Residential | 8,226 | 8,228 | 8,002 | - | 2.8 | |||||||
Consumer | 1,534 | 1,568 | 1,636 | (2.2) | (6.2) | |||||||
Total | $ | 51,099 | $ | 50,726 | $ | 50,927 | 0.7 % | 0.3 % | ||||
Yield | 6.24% | 6.24% | 5.80% | 0 bps | 44 bps |
LQ growth of $0.4 billion or 0.7%
- Total loans up $0.4 billion from the prior quarter, with growth driven by commercial real estate
- Floating and periodic to total loans ratio1 of 59%
- Loan balance comprised of 81% commercial loans and 19% consumer loans
- Loan yield was flat to prior quarter
- Total loans excludes $0.2 billion of payroll finance and factoring loans that were moved to held for sale during the quarter
YOY growth of $0.2 billion or 0.3%
- Growth in commercial loans of 0.1% and consumer loans of 1.3%
- Loan yield increased 44 bps
- Floating rate loans totaled $23.5 billion and reset in 1 month or less; periodic loans totaled $6.4 billion and reset in greater than 1 month but before final maturity.
WEBSTER FINANCIAL CORPORATION | 8 |
Deposits
($ in millions, balances end of period)
Deposit Decline of 0.1% LQ
1Q24 | 4Q23 | 1Q23 | LQ Change | YOY Change | ||||||||
Demand | $ | 10,213 | $ | 10,733 | $ | 12,007 | (4.8)% | (14.9)% | ||||
Interest-bearing checking | 8,627 | 8,994 | 8,561 | (4.1) | 0.8 | |||||||
Health savings accounts | 8,603 | 8,288 | 8,273 | 3.8 | 4.0 | |||||||
interLINK | 5,799 | 5,689 | 2,875 | 1.9 | 101.7 | |||||||
Ametros accounts | 871 | - | - | N/A | N/A | |||||||
Money market | 12,816 | 11,973 | 11,329 | 7.0 | 13.1 | |||||||
Savings | 6,882 | 6,643 | 7,723 | 3.6 | (10.9) | |||||||
Time deposits | 6,937 | 8,464 | 4,530 | (18.0) | 53.1 | |||||||
Total | $ | 60,748 | $ | 60,784 | $ | 55,297 | (0.1)% | 9.9 % | ||||
Deposit cost | 2.23 % | 2.15 % | 1.11 % | 8 bps | 112 bps |
By Line of Business | ||||||||||||
Consumer Banking | $ | 26,914 | $ | 26,252 | $ | 25,708 | 2.5 % | 4.7 % | ||||
Commercial Banking | 11,810 | 12,282 | 11,286 | (3.8) | 4.6 | |||||||
Public funds | 4,265 | 3,772 | 5,001 | 13.1 | (14.7) | |||||||
Healthcare Financial Services 1 | 9,474 | 8,288 | 8,273 | 14.3 | 14.5 | |||||||
Corporate 2 | 8,285 | 10,190 | 5,029 | (18.7) | 64.7 | |||||||
Total | $ | 60,748 | $ | 60,784 | $ | 55,297 | (0.1)% | 9.9 % |
- Comprised of HSA Bank and Ametros
2 Includes interLINK
LQ decrease of $36.5 million or 0.1%
- Core deposit growth of $1.5 billion and retail CD growth of $0.4 billion offset by a decrease in brokered deposits
- Deposit costs increased 8 bps to 2.23%, which reflects continued deposit repricing and category mix shift
- Period end deposit composition: 31% transactional, 16% HSA, and 53% non-transactional deposits
YOY growth of $5.5 billion or 9.9%
- Public funds decreased $0.7 billion
- Commercial Banking up $0.5 billion
- Healthcare Financial Services up $1.2 billion
- Deposit costs increased 112 bps to 2.23%, driven by a rising rate environment and growth in higher rate categories
- Cumulative cycle to date total beta of 41%
WEBSTER FINANCIAL CORPORATION | 9 |
Deposits - Beta Outlook
Historical Cost of Total Deposits
Betas Lagged Early in the Cycle
Forecasted Cumulative Deposit Beta
15%
10%
0.60%
4%
0.09% 0.28%
24%
1.11%
40% | 41% | |
37% | ||
34% | 2.23% | |
2.15% | ||
1.96% | ||
1.72% |
40%
37%
34%
41%
42%
Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024
Cumulative Deposit Beta | Cost of Total Deposits | |
Note: The cycle starts in Q1 2022
Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | ||
Actuals | Current Expectations | |||||
WEBSTER FINANCIAL CORPORATION | 10 |
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Webster Financial Corporation published this content on 23 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 April 2024 11:34:04 UTC.