Webster Financial : 3Q23 Earnings Call

Earnings

Conference Call

Third Quarter 2023

October 19, 2023

WEBSTER FINANCIAL CORPORATION

Third Quarter 2023 Highlights

• Merger related core systems conversion successfully completed in July
• Highlighted results:
• • Deposits grew 2.7% LQ with growth in interLINK, money market, demand, and CDs
  • Enhanced off-balance sheet liquidity profile
  • Loans declined 3.0% LQ, led by declines in non- strategic segments
  • Efficiency ratio of 42%
  • Adjusted results:
  • • ROAA 1.48%
    • ROATCE 20.96%
    • LQ increase in NII of 0.6%
    • LQ growth in PPNR of 1.8%
• Reported results include merger/initiative related charges of $61.6 million pre-tax
• NIM of 3.49%; up 14 bps
• Capital:
• • CET1 of 11.15%
  • TCE of 7.22%

Note: Adjusted results are non-GAAP. See non-GAAP reconciliation on pages 6 and 32 through 33.

REPORTED

$314.9M

PPNR

$222.3M

NET INCOME AVAILABLE TO COMMON

$1.28

DILUTED EPS

1.23%

ROAA

11.00%

ROACE

17.51%

ROATCE

ADJUSTED

$376.5M

PPNR

$267.4M

NET INCOME AVAILABLE TO COMMON

$1.55

DILUTED EPS

1.48%

ROAA

13.23%

ROACE

20.96%

ROATCE

WEBSTER FINANCIAL CORPORATION

2

Diversified and Stable Deposit Profile

Consumer Bank /

•	200+ financial centers
	serving consumers and
	small businesses in the
	highly populated
Business	Northeast I-95 corridor
Description	and Long-Island
•	Complemented by online
	platform (BrioDirect)

Commercial Bank

• Sophisticated treasury services offering for commercial clients
• Full credit and deposit relationships with targeted deposit gathering in select verticals including law firms, NFP, property mgmt, and municipal

• Longstanding top player nationally, with strong growth characteristics
• Offers a comprehensive consumer-directed healthcare solution

		Corporate
• Tech-enabled cash		• Specialized treasury
sweep program		activities
administrator for broker-
dealers

Volume of	$23.6bn	$19.4bn	$8.2bn	$5.2bn	$3.9bn
Deposits	39% of Total	32% of Total	14% of Total	9% of Total	6% of Total

	• Branch deposits are
	sticky and low cost,
	complemented by low
Key Benefits	all-in cost digital channel

•	Lower cost, operating	• High growth, sticky, low	•	Access to core	•	Low operating cost
	deposits	cost		deposits	•	Provides liquidity
•	Volume includes $2.4		•	Significant flexibility;		optionality
	billion in business			deposit onboarding
	banking and $5.5 billion			based on liquidity
	of collateralized public			needs
	funds deposits		•	Highly scalable with
				low operating costs

WEBSTER FINANCIAL CORPORATION

3

Available Liquidity Covers All Uninsured Deposits

Estimated Uninsured Deposit Analysis

Immediately Available Liquidity

($ in millions)

9/30/2023	($ in billions)
$19.8

Uninsured deposits 1	$	19,122
	$3.6
Less: collateralized deposits 1		(5,737)
Uninsured deposits (after exclusions)	$	13,385
Total deposits	$	60,332
			$13.4

Uninsured deposits as a % of total deposits

Uninsured deposit coverage by immediately available liquidity

22.2%

148%

$2.8

Sept 30

Unencumbered Cash & Secs.

FHLB

FRB

• Uninsured deposits exclude $2.9 billion of Webster internal accounts. Collateralized deposits reflect all notional deposits subject to collateralization.

WEBSTER FINANCIAL CORPORATION

4

Traditional Office CRE 2.3% of Total Loans

Office Portfolio by Geography	Portfolio Profile and Metrics

NYC

Other New York

New Jersey

Connecticut

Boston

Other Northeast

Other East Coast

West

Pennsylvania

Other

	•	Actively reducing exposure (~$495 million/-30% vs. 2Q22) to
		$1.17 billion
6%	•	Origination WA LTV: ~54%
8%	•	Current WA Debt Service Coverage Ratio (DSCR): 1.90x

8%	23%	•	Criticized / Classified rate: 5.6% / 5.0%
4%		•	Accruing Delinquency / Non-Accruals: 0.0% / 1.5%

• 12-monthNCO: 2.8% (2.3% attributed to note sales)

6%		38%	Average Commitment: $5.2 million
	•
2%		•	2023	Remaining Maturities: $110 million
	15%	•	2024	Maturities: $222 million
	10%

• Class A vs. Class B: ~55/45 split

18%	•	Urban vs. Suburban: ~55/45 split
	•	'23 / '24 Lease Roll: ~5% / ~8%
	•	Loan support in > 60% of exposure (reserve or guaranty)

Note: Office CRE excludes Medical Office and Owner Occupied CRE

WEBSTER FINANCIAL CORPORATION

5

WBS 3Q23 Net Income Available to Common

GAAP to Adjusted Reconciliation

($ in millions)		Pre-Tax			After Tax			EPS
Reported (GAAP)	$	278.4	$	222.3	$	1.28
Merger related 1		61.6			45.1			0.27
Adjusted (non-GAAP)	$	340.0	$	267.4	$	1.55

Impact of merger related adjustments:

• $61.6 million of pre-tax income
• $45.1 million of after tax income
• Impact of the above on EPS is $0.27 per share

• Merger related charges are primarily comprised of compensation & benefits of $9.6 million, occupancy of $(0.1) million, technology & equipment of $9.6 million, professional & outside services of $18.2 million, and other expenses of $24.3 million.

WEBSTER FINANCIAL CORPORATION

6

Balance Sheet - End of Period

Increase / (Decrease)

($ in millions)		3Q23			2Q23			3Q22
Interest-bearing deposits	$	1,766	$	689	$	1,440
Securities		14,529			(174)			(62)
Commercial loans		40,275			(1,604)			1,801
Consumer loans		9,813			66			463
Total loans	$	50,088		$	(1,538)		$	2,264
Total assets	$	73,131	$	(907)	$	4,078
Transactional deposits	$	20,236	$	303	$	(2,817)
HSA deposits		8,230			23			341
All other deposits		31,866			1,258			8,799
Total deposits	$	60,332		$	1,584		$	6,323
Borrowings		3,018			(2,588)			(2,833)
Common equity	$	7,915	$	(81)	$	373
Total liabilities and equity	$	73,131	$	(907)	$	4,078
Key Ratios:					Favorable / (Unfavorable)
Loans / total deposits		83.0 %			488 bps			555 bps
Transactional & HSAs / total deposits		47.2 %			(72) bps			(1,011) bps
Common Equity Tier 1 1		11.15 %			50 bps			35 bps
Tangible common equity 2		7.22 %			(1) bps			(5) bps
Tangible book value / common share 2	$	29.48	$	(0.21)	$	1.79

• Represents the estimated common equity tier 1 ("CET1") ratio for the current period inclusive of CECL regulatory capital transition provisions.

• See non-GAAP reconciliation on pages 32 through 33.

Key Observations

• Securities portfolio:
• • AFS $7.7 billion, 3.14% yield, duration of 3.8 years
  • HTM $6.9 billion, 3.01% yield, duration of 5.3 years
• Loan balances LQ:
• • Commercial loan decline of $1.6 billion or 3.8%; mortgage warehouse contributed $590 million of the decline
  • Consumer loan growth of $0.1 billion or 0.7%
• Total deposits grew $1.6 billion, with diverse growth across business lines and product type
• Loan-to-depositratio declined to 83%
• HSA represents 14% of total deposits
• Borrowings composed of:
• • $1.8 billion FHLB advances
  • $1.1 billion long-term debt
  • $0.2 billion in Fed Funds and repurchase agreements
• Capital ratios are strong
• AOCI losses on available-for-sale securities of $819.2 million, an increase of $174.6 million after-tax from prior quarter
• Tangible book value per common share of $29.48

WEBSTER FINANCIAL CORPORATION

7

Loans

($ in millions, balances end of period)

Loan Decline of 3.0% LQ

		3Q23			2Q23			3Q22		LQ Change		YOY Change
C&I	$	13,064	$	14,002	$	12,624	(6.7)%	3.5 %
Sponsor & Specialty		6,765			6,747			6,279	0.3	7.7
Warehouse		119			709			894	(83.2)	(86.7)
CRE		20,327			20,421			18,677	(0.5)	8.8
Residential		8,228			8,140			7,618	1.1	8.0
Consumer		1,585			1,607			1,732	(1.4)	(8.5)
Total	$	50,088		$	51,626		$	47,824		(3.0)%		4.7 %
Yield		6.20%			6.06%			4.52%		14 bps		168 bps

LQ decline of $1.5 billion or 3.0%

• Total loans declined $1.5 billion from the prior quarter, as certain asset classes were de-emphasized
• Floating and periodic to total loans ratio1 of 59%
• Loan balance comprised of 80% commercial loans and 20% consumer loans
• Loan yield increased 14 bps

YOY growth of $2.3 billion or 4.7%

• Growth in commercial loans of 4.7% and consumer loans of 5.0%
• Loan yield increased 168 bps

• Floating rate loans totaled $22.8 billion and reset in 1 month or less; periodic loans totaled $6.6 billion and reset in greater than 1 month but before final maturity.

WEBSTER FINANCIAL CORPORATION

8

Deposits

($ in millions, balances end of period)

Deposit Growth of 2.7% LQ

By Product		3Q23			2Q23			3Q22		LQ Change		YOY Change
Demand	$	11,410	$	11,157	$	13,850	2.3 %	(17.6)%
Health savings accounts		8,230			8,207			7,889	0.3	4.3
Interest-bearing checking		8,826			8,776			9,203	0.6	(4.1)
interLINK		5,170			4,303			-	20.2	100.0
Money market		12,585			11,887			11,157	5.9	12.8
Savings		6,623			7,132			9,340	(7.1)	(29.1)
Time deposits		7,488			7,286			2,570	2.8	191.4
Total	$	60,332		$	58,748		$	54,009		2.7 %		11.7 %
Deposit cost		1.96 %			1.72 %			0.28 %		24 bps		168 bps
By Line of Business
Consumer Banking	$	23,624	$	23,875	$	23,859	(1.1)%	(1.0)%
Commercial Banking		14,272			14,040			14,853	1.7	(3.9)
Public Funds		5,139			4,309			5,975	19.3	(14.0)
HSA Bank		8,230			8,208			7,889	0.3	4.3
Corporate 1		9,067			8,316			1,433		9.0		532.9
Total	$	60,332	$	58,748	$	54,009	2.7 %	11.7 %

• Includes interLINK

LQ growth of $1.6 billion or 2.7%

• Deposit growth was diverse by product category and type
• Deposit costs increased 24 bps to 1.96%, which reflects growth in higher rate categories replacing wholesale borrowings
• Growth in interLINK of $0.9 billion and public funds of $0.8 billion
• Period end deposit composition: 33% transactional, 14% HSAs, and 53% non-transactional deposits

YOY growth of $6.3 billion or 11.7%

• Public funds decreased $0.8 billion
• Commercial Banking decreased $0.6 billion
• HSA up $0.3 billion; up $0.5 billion excluding TPA deposits
• Deposit costs increased 168 bps to 1.96%, driven by growth in higher rate categories and a rising rate environment
• Cumulative cycle to date total beta of 37%

WEBSTER FINANCIAL CORPORATION

9

Deposits - Beta Outlook

Historical Cost of Total Deposits

Betas Lagged Early in the Cycle

					37%
				34%
					1.96%
			24%	1.72%
		15%	1.11%
	10%
4%		0.60%
0.09%	0.28%
Q2 2022	Q3 2022	Q4 2022	Q1 2023	Q2 2023	Q3 2023

Cumulative Deposit Beta		Cost of Total Deposits

Note: The cycle starts in Q1 2022

Forecasted Cumulative Deposit Beta

			40%
		37%
	34%
24%
Q1 2023	Q2 2023	Q3 2023	Q4 2023
	Actuals	Current Expectations

WEBSTER FINANCIAL CORPORATION

10