Webster Financial : First Quarter 2024 Earnings Presentation

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

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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

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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

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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

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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

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3 See non-GAAPreconciliation on pages 35 through 36.

WEBSTER FINANCIAL CORPORATION

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

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

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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

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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

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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

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