Webster Financial Corporation (NYSE:WBS) Q1 2023 Earnings Call Transcript

And that 19 basis points annualized charge-off rate is actually at or slightly below our pre-pandemic annualized charge-off rate. So, we felt like it was another good quarter, and I just wanted to give you that differentiation of the $7 million of those charge-offs that were done for us through proactive loan sales by us.Zach Westerlind Understood. Thank you. And then just one other quick one for me. On the securities growth, could you just provide if you are able to new purchase yields versus what’s rolling off the book?Glenn MacInnes So, I think what we purchased that was a little over 6, 13, somewhere around there. And what came off was at about $311 million. So, there is about $200 million that came off and about $900 million that went on.

And then in addition to that, we had, as I have said in my prepared remarks, about $400 million in restructuring that we did, so security sales effectively. And those were at – those are at about 60 basis points to 70 basis points.Zach Westerlind Prefect. That’s it for me. Thank you.Glenn MacInnes Thank you.John Ciulla Thank you.Operator Our next question comes from Jared Shaw from Wells Fargo Securities. Please go ahead. Your line is open.Jared Shaw Hey guys. Good morning.John Ciulla Hey Jared.Jared Shaw Hey. Just looking at the quarter-to-date deposit growth, can you give the composition of where you were seeing that, I guess especially the contributions from Brio and interLINK? And then to get to that higher 38% terminal beta, are you expecting higher contributions from Brio and interLINK than I guess you are assuming before?Glenn MacInnes Yes.

So, for the – is your question about from the fourth quarter to the first quarter, Jared?Jared Shaw Well, I guess both, yes. And then what you have seen – what you called out is seeing so far in April?Glenn MacInnes Yes. So interLINK itself was – for the first quarter was $2.8 billion of the growth. And so we basically – that’s from zero to $2.8 billion. So, that was a big driver. The offset to that was we let some of the brokered deposits run off. So, they went from like $1.4 billion to $672 million, right. And then the other areas where we saw growth, as I have said in my prepared remarks, we are in like certificates of deposits that were up about $1 billion. And those were long dated, a little over 4% retail type of CDs, that’s how we ended the first quarter.

As I said in the prepared remarks, we are actually up in the second quarter by another $2.8 billion. And a big piece of that, and I would say about $500 million to $600 million of that is interLINK. Again, and then the remainder is primarily brokered CDs. And our idea with that, and there is some commercial growth, as John indicated, there is continued retail growth, but in being chunks, that’s what it is. And so that we are using to pay down basically some FHLB borrowings and things like that. So, it’s sort of cost neutral from a NIM standpoint and things like that. But it also provides us more off-balance sheet liquidity, if you think of it that way. And so we wanted to make sure we preserve the optionality of that. And then the other dynamic, as I have said a few times, is that we are managing down cash.

And so you would expect to see our FHLB borrowings to come down. The growth in interLINK as we go through the year, brokered deposits will probably flatten out because I think we have other sources of funding that we will get, whether it’s Brio or things like that. So, I think that’s kind of how we are thinking about it.Jared Shaw Okay. Thanks. And then when we just look at where these are on the balance sheet, is interLINK money market or I guess, were Brio and interLINK in terms of brokered CDs and money market?Glenn MacInnes So interLINK is in money market, but I would point you to our slide – the slide presentation because we broke it out there. So, if you look on Page 9 of our presentation, you can see the interLINK piece, so we sort of broke it out by product type and then by line of business.