Webster Financial Corporation

Ladies and gentlemen, good morning and welcome to the Webster Financial Corporation fourth quarter 2022 earnings call. Please note that this event is being recorded. I would now like to introduce Webster's Director of Investor Relations, Emlyn Harmon, to introduce the call. Mr. Harmon, please go ahead.

Good morning. Good morning. Before we begin our remarks, I want to remind you that the comments made by management may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to the Safe Harbor rules. Please review the forward-looking disclaimer in Safe Harbor language in today's press release and presentation for more information about risks and uncertainties which may affect us. The presentation accompanying management's remarks can be found on the company's investor relations site at investors.websterbank.com. I'll now turn it over to Webster Financial CEO, John Ciula.

Thanks, Emlyn. Good morning and welcome to Webster Financial Corporation's fourth quarter 2022 earnings call. I'm going to provide remarks on our strategic execution, high-level results, merger integration, and strategic actions before turning it over to Glenn to review our financials in more detail. Our strategy is straightforward and remains unchanged from the day we announced our merger in April of 2021. Opportunistic and prudent growth in targeted areas, where we have competitive differentiation while continually enhancing a diverse and advantageous funding profile. We continue to deploy capital and expense dollars into business activities that maximize shareholder returns and economic profit. We are delivering on this strategy as a unified Webster while at the same time executing on the integration of our merger with Sterling. We continue to exhibit solid credit performance and we are conservatively positioned in our capital levels and loan loss allowance. The net results of executing on this strategic plan are evident in our performance this quarter. On an adjusted basis, we generated EPS of $1.60 versus $1.46 last quarter, and our PPNR grew 9% quarter over quarter, or by $35 million. Both our GAAP and adjusted EPS numbers are a quarterly record for Webster. Underpinning our performance, our net interest margin expanded 20 basis points, and loans grew over 4% in the quarter, with further moderate NIM expansion and solid loan growth in our 2023 forecast. With respect to our 4Q loan growth, we again focused our origination activities in asset classes with stronger credit profiles, such as public sector finance and fund banking. For the fourth consecutive quarter, The weighted average risk rating of our commercial originations were significantly stronger than that of the existing portfolio, which is intentional when operating in a more uncertain macro environment. We also enhanced our liquidity profile with the acquisition of Interlink, and we continue to have a solid capital position. These results produced an adjusted ROA of 1.61%, a return on tangible common equity of nearly 23%, and an efficiency ratio of 40%. All of these figures meet or exceed the pro forma metric targets we detailed at the time of our merger announcement. While aided by a beneficial interest rate environment, we are also delivering on our operational efficiencies, growing loans in excess of our original targets, and realizing new business opportunities from the merger. We believe that our business can drive solid operating leverage and PPNR growth through a variety of macroeconomic operating environments and interest rate backdrops. And our goal is to generate consistent earnings and revenue growth throughout operating cycles. We also feel confident that we can operate with an efficiency ratio in the low 40s without sacrificing our ability to continue to invest in franchise enhancing and differentiated businesses. In fact, in Q4, we invested several million dollars in expanding our commercial banking activities, which should result in future growth over the coming years. The strength of our franchise is also evident in our annual results, which you can see on slide three. On a full-year basis, we grew our adjusted EPS to $5.62 from $4.85 in the year prior, and our return on tangible equity increased to 19.8%. We accomplished these results with a full-year efficiency ratio of 43% and post-merger loan growth of 15% ahead of our 8% to 10% expectations. We're certainly proud of the financial metrics achieved in the first year since merger closing, but we may be even prouder of what we've accomplished from a culture and talent perspective. We have an incredibly aligned and talented management team and a clearly defined values-based culture that is coming together ahead of our initial expectations. One of the keys to our performance, culture building, and client retention as a company has been the consistency, continuity, and execution of our client-facing colleagues. among whom we have experienced virtually no loss of talent over the last two calendar years since deal announcement. Before turning it over to Glenn, I want to provide a brief overview of our acquisition of Interlink, which closed earlier this month and provides us with tremendous core funding optionality, adding to what we believe is an already differentiated deposit funding profile. Deposits we access via Interlink are considered core from a regulatory perspective, have an extremely low cost of acquisition, and thereby an attractive all-in cost profile, which works well in all rate scenarios. And most importantly, it can be scaled up or down relatively quickly according to our funding needs. Operationally, Interlink administers FDIC-insured deposit suite programs between broker-dealers and banks, such that broker-dealers' customers receive FDIC insurance on idle cash balances in their account. We currently administer around $9 billion in deposit balances in the program, a substantial portion of which Webster could access over time. There's a small portion of the deposits we would not access to ensure that customers in the program receive maximum FDIC insurance coverage on their balances. We collect a small fee on deposits that we do not hold on our balance sheet. It's only been two weeks since closing, and we've already had great success with the program. We've begun utilizing deposits on our balance sheet as a replacement for wholesale funding without changing our risk tolerances in terms of asset generation. and we've signed up a brand new broker-dealer contract just last week. We're also excited about potential other revenue synergies with our broker-dealer partners. We're pleased with our performance in the quarter, excited about how we're positioning the company for the future, and confident in our ability to consistently deliver top-tier financial performance as we take care of our clients, our colleagues, and our communities. With that, I'll turn it over to Glenn for the financial review.