Webster Financial Corporation

good morning and welcome to the webster financial corporation second quarter 2023 earnings call please note this event is being recorded i would now like to introduce webster's director of investor relations emlyn harman to introduce the call mr harman please go ahead 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

They're 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 and accompanying management's remarks can be found on the company's investor relations website at investors.websterbank.com. I'll now turn it over to Webster Financial CEO, John Sciulla.

Thanks, Emlyn. Good morning and welcome to Webster Financial Corporation's second quarter 2023 earnings call. We appreciate you joining us this morning. I'll provide remarks on our high-level results and operations before turning it over to Glenn to cover our financial results in greater detail. Webster's results in the quarter illustrate the competitive advantages of our funding profile. While we experienced some temporary NIM headwinds as we pulled liquidity onto our balance sheet early in the quarter, overall our diverse and distinctive deposit gathering channels provided steady funding as we grew deposits significantly and increased our off-balance sheet liquidity. Len will provide more specific detail on balance sheet trends in his remarks. In the face of industry challenges, we are proud of our financial performance in the quarter. On an adjusted basis, we generated EPS of $1.50. While we saw a modest 1.9 percent quarter-over-quarter decline in net interest income, we anticipate a positive trajectory through the remainder of the year. Our other income statement lines exhibited positive trends as we grew non-interest income and maintained flat expenses. Despite maintaining a higher than normal liquidity position, we generated an adjusted ROA at just under 1.4% and an adjusted return on tangible common equity of 20.4%. We grew our deposits by over 6% in the quarter. Our robust funding profile positioned us to continue to serve our clients, and we grew our loan book by 1.4%. Our strong deposit growth allowed us to reduce our loan-to-deposit ratio to 88%, which provides us balance sheet flexibility as we move forward. If you turn to slide three, I want to reemphasize the unique funding model that enabled this performance. We have a diverse set of deposit generating businesses, each with distinct client dynamics. This model provides us with a funding advantage as characteristics of the various businesses partially mitigate the effects of general industry deposit outflows. While we are not immune to the higher funding costs the banking industry is experiencing, We like our competitive positioning on that front, and we have the ability to grow core deposits through environments in which others are challenged. Our consumer deposits are largely originated in footprint to long tenured clients. Our $8 billion plus of HSA deposits are all in individual customer accounts, and nearly all are within FDIC insurance limits. As most of you are aware, this is a particularly unique source of low cost and long duration deposits. Within commercial banking, we have $2 billion of business banking deposits that share similar characteristics to the consumer book. The remainder of commercial deposits are diverse by industry, customer type, and geography, and are aligned with our relationship banking model. And finally, Interlink, a platform we acquired earlier this year, provides readily available core deposit funding at a low cost of acquisition, with nearly all deposits covered by FDIC insurance. On slide four, you can see that not only did we grow deposits smartly, but immediately available liquidity also increased to $18 billion, which covers just under 125% of our uninsured and uncollateralized deposits. Our balance sheet remains in exceptionally sound condition. As Glenn will discuss further on subsequent slides, things remain stable from an overall credit perspective. While we do not see any significant signs of broad credit weakness, We continue to act prudently and proactively with respect to managing our existing loan portfolio and onboarding new credit given the existing macro uncertainties. I want to once again touch briefly on our office portfolio. You can see that on slide five. As that has continued, I know, to be an area of market focus. We have proactively reduced the size of our non-medical office portfolio which is now down by almost $400 million over the last year, or roughly 25%. We've done so without incurring significant losses, as our charge-off rate on this relatively small portion of the office portfolio is under 2% on an annual basis. The overall credit characteristics of this portfolio have not changed materially, as you can see in the figures we provide on LTVs, debt service coverage, and other metrics. While our criticized and classified loans are up modestly from last quarter, they are down relative to fourth quarter and the year-ago period, given the proactive actions we've taken. Consistent with my comments above, while we are pleased with performance to date, we fully appreciate the changing dynamics in commercial real estate, and we continue to manage our portfolios and credit selection accordingly and prudently. I'll now turn it over to Glenn to provide more details on the quarter.