Webster Financial Corporation

Good morning. Welcome to the Webster Financial Third Quarter 2024 Earnings Call. Please note 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. 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 Security Litigation Reform Act of 1995 that 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. For the Q&A portion of the call, we ask that each participant ask just one question and one follow-up before returning to the queue. I'll now turn it over to Webster Financial CEO, Chairman John Ciula.

Thanks, Hamlin. Good morning and welcome to Webster Financial Corporation's third quarter 2024 earnings call. We appreciate you joining us this morning. I'm very pleased to welcome Neil Holland as he is joining his first earnings call as Webster's CFO. As we anticipated, Neil has hit the ground running since he officially stepped into the role in mid-August, and you can already see the impact of some of the steps his team has taken to optimize the positioning of our balance sheet and grow interest income this quarter. Luis Massiani, Webster's President and Chief Operating Officer, is also joining us for the Q&A portion of the call today. I'll provide remarks on our high-level results and operations before turning it over to Neil to cover our financial results in greater detail. We're really pleased with our strategic and tactical accomplishments in the quarter. I'll hit the highlights, and Neil will provide more details. We grew deposits 3.6% in the quarter, including growth in DDA, overall commercial deposits, and HSA. We grew loans 0.7% in the quarter, consistent with our full-year growth expectations. Excluding a $300 million securitization we performed to reduce our CREE concentration, our growth was 1.3% in the quarter. with accelerating growth in CNI categories. We further reduced our CREE concentration through payoffs and reclassification of certain healthcare-related loans. As a result, our CREE outstandings as a percentage of Tier 1 capital and reserves declined from 285% to approximately 265% at the end of Q3. Our net interest income grew quarter over quarter and increased over last year's comparable period in line with our full year expectations. We benefited from asset growth and a balance sheet repositioning. We continue to mitigate our asset sensitivity, positioning us well as rates continue to come down. Our capital levels remain strong, with our CET1 now in excess of our current operating target of 11%, resulting from earnings and capital optimization activities, providing us capital flexibility in 4Q and beyond. Our expenses remained well managed, resulting in a third quarter efficiency ratio of 45%, still in an industry-leading position. I'll now turn to our financial performance for the quarter, beginning on slide two. On an adjusted basis for the quarter, we generated a return on average assets of 1.22% and a return on tangible common equity of 17.3%. Our adjusted EPS was $1.34. Our profitability and return metrics remain favorable to peers again this quarter. At this point, most of you are familiar with slide three, which illustrates our diverse and versatile deposit base. As I mentioned up front, our robust growth this period came from a breadth of the segments on this slide, including lower cost channels in our commercial bank, HSA bank, and Amitros. We executed on the $400 million deposit opportunity for HSA bank we discussed last quarter. which provided a nice boost to deposits there. Strong execution within the commercial bank added to lower-cost funding growth as well. Our ability to generate low-cost funding across a number of business segments continues to be a tremendous advantage in growing our balance sheet efficiently and profitably. Moving to slide four, I will review our commercial real estate portfolio, as that has been a continued focus of investors. The segment of the CREE portfolio on which we have been most focused continues to be traditional office. The portfolio balance continues to shrink with $917 million in outstandings at quarter end, down roughly 45% from the first half of 2022. We did see some continued negative migration this quarter with non-accrual loans increasing to 14% from 9% last quarter, largely as a result of two larger credits. We continue to be proactive in identifying and managing problem credits and prudently managing reserves in the sector. While it has been an investor focus, there have been no significant changes in the quality of our rent-regulated multifamily portfolio, where credit performance has held up consistently well. On credit more generally, we continue to see negative risk rating migration in the quarter as we keep a close eye on credit at a later stage in the cycle. We did see our non-accrual loans increase by $50 million this quarter, primarily driven by the aforementioned office portfolio migration. Outside of Cree office, negative migration was generally credit-specific across the portfolio and not driven by one industry, sector, or asset class, although healthcare-related portfolios continue to show some weakness. While we have seen continued migration and will continue to be proactive in our risk reviews, our realization of loan losses remains in the range we have observed in recent quarters and, importantly, is consistent with through-the-cycle and pre-pandemic commercial annualized charge-off rates. With that, I'll turn it over to Neil to cover our financials in more detail.