Good morning. Welcome to the Webster Financial Corporation Third Quarter 2022 Earnings Call. Please note, this event is being recorded. I would now like to introduce Webster's Director of Investor Relations, Emlen Harmon to introduce the call. Mr. Harmon, please go ahead.

Good morning. Before we begin our remarks, let me 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 and 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 website at investors.websterbank.com. I'll now turn the call over to Webster Financial’s CEO, John Ciulla.

Thanks, Emlen. Good morning, everyone, and thank you for joining us for our third quarter earnings call. I'm going to provide remarks on financial performance, strategic execution, and merger integration before turning over to Glenn to review our financials in more detail. The third quarter results announced today reflect the strong progress we've made in creating a high-performing and differentiated company through solid execution on integration activities and a laser focus on delivering for our clients. We are one unified Webster growing across a diverse set of business lines, realizing revenue and cost synergies, supporting the communities in an expanded footprint, and delivering financial results that meet or exceed the target metrics we set forth when we announced the merger 18 months ago. Our financial performance this quarter was stronger than last. On an adjusted basis, we generated diluted EPS of $1.46 versus $1.29 last quarter. Net income available to common shareholders was $257 million versus $229 million in the prior quarter, and PPNR was up, reaching $371 million from $316 million. The potential of the company we have created is evident in our results. On an adjusted basis, we produced a return on assets in excess of 1.5% and a return on tangible common equity of nearly 21%. Our efficiency ratio was 41% in the quarter, reflecting over a 400 basis point improvement. These results exceeded the full-year 2022 performance we provided when we first announced our merger in April 2021. We are surpassing loan growth expectations without expanding our risk tolerances. We're proactive in optimizing the balance sheet, continuing to generate solid fee income, and maintaining high client service levels, thereby adding and retaining clients and talent while executing on the integration plan. Given the positioning of our balance sheet, the NIM expanded 23 basis points to 3.5%. Loans grew significantly this quarter, driven by various industries, asset classes, and geographies. Several of our major loan categories grew significantly, including C&I, CRE, and residential mortgages. Deposits also increased by just under 2%. While executing on cost synergies and approaching an efficiency ratio of 40%, we continue to make strategic investments for the company. We've stated from the outset that Webster post-MLE is focused on growing our business. We have been adding to commercial verticals and had the opportunity to add middle-market bankers in our core footprint as well as strengthening our national ABL team. We will continue to look for and make investments in colleagues and businesses that can grow our differentiated commercial business lines and generate deposits, fees, and loans as we pursue maximum economic profit over time. We will also keep investing in technology that enhances colleague and client experience. As we operate in an uncertain macro environment, we remain committed to executing on asset growth while staying disciplined and prudent in risk selection, underwriting, and portfolio management activities. Our credit metrics remain remarkably strong with lower non-performing loans (NPLs) and non-performing assets (NPAs), a reduction in commercial classified loans, and decreased delinquencies compared to the prior quarter on both a percentage of the portfolio and an absolute basis. While net charge-offs were elevated from the prior quarter at a reported 25 basis points annualized, approximately $13 million of the net charge-offs resulted from proactive balance sheet management and optimization through the sale of more than $500 million worth of loans that were either no longer strategic or had suboptimal risk-return metrics. Absent those portfolio actions, the net charge-off rate would be an annualized 13 basis points, more in line with Q2 and still below our five-year annualized range of 16 to 19 basis points. A quick recap on integration. As I've touched on, we've accomplished a number of tasks already. We continue to integrate subledgers and systems into our core infrastructure. This quarter, we combined our commercial credit risk management system and rolled out consolidated commercial pricing tools. We also continued our corporate real estate consolidation, where we are now 50% complete. Major milestones we anticipate in the fourth quarter include the consolidation of cloud data centers, the transition of our consumer wealth and investment services operation with a third-party provider, and by year-end, all colleagues will have completed cultural activation sessions, establishing a common foundation for our organization and aligning everyone on strategy, behaviors, and most importantly, the strong values that are at the foundation of Webster Bank. With that, I'm going to turn it over to Glenn to review our financial performance for the quarter.

Thanks, John, and good morning, everyone. I will start with the reconciliation of core earnings on slide four. We reported GAAP net income to common shareholders of $230 million with EPS of $1.31. On an adjusted basis, we reported net income to common shareholders of $257 million and EPS of $1.46, each of which excludes one-time after-tax expenses of $27 million. Merger expenses were related to real estate consolidation, severance, and professional fees. The strategic initiative expense is primarily the contribution to the Webster foundation. Next, I'll review balance sheet trends before moving on to the income statement. At period-end, total assets were $69.1 billion with total loans of $47.8 billion and total deposits of $54 billion. Loan growth was predominantly driven by the commercial and residential portfolios. Deposits were up over $900 million on a quarter-over-quarter basis, with both public funds and HSA contributing. I will provide some additional color on the breakout later in the presentation. Loan growth was also funded in part by cash flow from the securities portfolio and shorter duration FHLB advances. Highlighting the diversity of our loan growth by category illustrates the breadth of our promising portfolio. In total, we grew loans by $2.2 billion or 4.8% on a linked-quarter basis. Growth was driven between categories with C&I, sponsor, and commercial real estate all growing by $600 million and residential mortgage growing by $400 million. As for deposits, total deposit balances increased by $932 million or 1.8%. Increases in public funds and HSA drove this growth, with public funds up over $800 million and HSA up $111 million. Corporate deposits grew by roughly $500 million as we utilized a greater number of sweep and other alternative sources of funds. The total deposit costs increased by 28 basis points from 9 basis points in the prior quarter. Our effective beta was 13% during the quarter and 11% since the closing of the merger. Excluding third-party administered accounts, deposits grew by $700 million or 9.8% year-over-year. Additional detail on HSA Bank is available in the appendix. I will now review the details of our income statement. We provide our reported to adjusted income statement by line item and compare our adjusted earnings to the second quarter. Significant growth in net interest income this quarter drove a meaningful improvement in PPNR, net income, and EPS. On an adjusted basis, PPNR was up $56 million or 17.6%. Net income increased by $28 million or 12.4%, and EPS grew by $0.17 or 13%. Our net interest margin was 3.54%, up 26 basis points on a reported basis, and our efficiency ratio was 41%, down 408 basis points. Net interest income grew by $64.3 million relative to the prior quarter. Adjusting for accretion in both periods, interest income was up $76.8 million, driven by growth and the asset sensitivity of our balance sheet. Excluding accretion, the net interest margin increased by 35 basis points to 3.44%, and the earning asset yield was up 57 basis points in the quarter. We expect deposit pricing to increase in the upcoming quarters; however, our NIM should continue to grow given the attractive profile of our earning assets which reprice and originate at higher absolute rates. On slide 10, we highlight our fee income for the quarter. On an adjusted basis, fees were down $7 million linked quarter and $3 million year-over-year. The linked-quarter decrease in fee income was driven primarily by lower levels of customer interest rate hedging activity and other transactional loan fees in commercial banking. The year-over-year decline was the result of lower direct investment and mortgage banking income. On slide 11, we summarize non-interest expense. We reported adjusted expenses of $293 million relative to the prior quarter of $292 million. We continue to progress on cost efficiencies related to the merger; however, this quarter included increased levels of performance-based compensation. The year-over-year decline of $2 million reflects our cost-saving efforts to date, offset by the increase in intangible amortization from the Bend acquisition and performance-based compensation. On slide 12, we highlight our allowance for credit losses, which was up $3 million over the prior quarter. After recording $28 million in net charge-offs, we recorded $31 million in provision expense with loan growth representing $20 million of the increase and macro factors adding $11 million. On slide 13, we highlight our key asset quality metrics. Non-performing assets declined by $38 million or 15% quarter-over-quarter. Likewise, commercial classified loans declined by $98 million or 14%. Net charge-offs totaled $28 million or 25 basis points of average loans on an annualized basis. As John mentioned, $13 million of the charge-offs were related to portfolio optimization activities. The allowance coverage declined modestly from 1.25% to 1.2% at period end. The allowance to non-performing loan ratio increased 2.7 times, up from 2.3 times last quarter. Coverage as a percent of commercial classified loans increased to 95% from 81% last quarter. Slide 14 highlights our strong capital levels. All capital ratios remain well in excess of regulatory and internal targets. Our common equity Tier 1 ratio remains strong at 10.82%, still above the medium-term operating target of 10.5%. The tangible common equity ratio was 7.27%. The net of all capital effects this quarter resulted in a slight decline in our tangible book value per share, which decreased to $27.69, primarily driven by AOCI valuation and share repurchases, partially offset by strong earnings. I'll wrap-up my comments with our outlook on slide 15, where we have narrowed our view down to the remaining quarter. We expect GAAP net interest income on a non-FTE basis of $570 million to $590 million, excluding accretion, driven by our projection of a year-end Fed funds rate of 4.25%, as well as continued loan growth. This excludes $15 million of scheduled purchase accounting accretion, detailed in the appendix. For those modeling net interest income on an FTE basis, I would add roughly $14 million to that metric. Relative to last quarter, our outlook implies full-year net interest income excluding accretion of $2 billion, an increase of roughly $100 million or 5% from the outlook we provided last quarter. We expect loan growth for the quarter will be in the range of 2% to 3%. Given the progress so far this year, that would imply growth of around 14% since the merger closed, relative to our original target of 8% to 10%. Fee income should be in the range of $105 million to $110 million, which incorporates the impact of lower fees on the outsourced consumer investment business. Core expenses are expected to be in the range of $290 million to $295 million, including increased performance-based compensation relative to our prior estimates. On capital, our overall philosophy remains unchanged. As we approach our medium-term operating target, organic growth opportunities will likely occupy a greater share of capital deployment, and we will remain disciplined in evaluating opportunities to effectively deploy capital. Lastly, we are forecasting an effective tax rate of 22% to 23%. With that, I will turn things back over to John for closing remarks.

Thanks, Glenn. We recognize we're operating at a time of uncertainty in the macroeconomic and geopolitical landscape, and that there are wider ranges of potential outcomes that could impact the operating environment. We believe that our diversified and high-quality businesses, loan, and securities portfolios, healthy capital, and loan reserve positions, along with our credit and operating risk infrastructures and the quality of our colleagues, have us prepared to effectively navigate the macro environment ahead. As I mentioned earlier, we are being thoughtful in our loan risk selection and emphasizing strong underwriting and portfolio management processes. I want to wrap up by emphasizing the outstanding progress we've made year-to-date and the momentum we expect to carry forward. Our commercial loans are on pace for 14% growth this year as we pursue growth in businesses where we have a strategic advantage and the ability to be selective with respect to risk profile and return metrics. Our deposit franchise positions us particularly well relative to peers, with our total cost of deposits increasing only 19 basis points compared to a 57 basis-point increase in our earning asset yields, excluding the impact of accretable yield. We remain confident in our ability to fund future loan growth given our multiple deposit channels and our liquidity profile. We expect to continue to benefit meaningfully from interest rate increases, and we have levers to pull in terms of capital allocation, efficiencies, and investments to maintain our current momentum. We'll be sending out a save-the-date, but we wanted to provide a heads-up that our intention is to hold an Investor Day in New York City on March 2nd, where you'll have the opportunity to hear from our talented management team about our company and the forward-looking strategies and financial performance expectations for 2023 and beyond. Finally, I want to thank my colleagues for their continued diligence and hard work as they execute on our core business initiatives while addressing the added challenge of integrating the new Webster. And I want to apologize, I understand we had some technical difficulties at the beginning of the call, and I thank you for bearing with us. Operator, Glenn and I will open it up to questions.

Your first question comes from Chris McGratty with Keefe, Bruyette & Woods.

Good morning. Thank you for the question. Glenn, regarding the upgraded NII guidance of $100 million, it’s a very positive update. One trend we’ve noticed this quarter is the discussion around peak NII. I wouldn't conclude that's the case based on this information, but could you elaborate on growth compared to the fourth quarter as we move into 2023? I would appreciate your insights on that. Thank you.

Sure. Great question. Let me just start; I'll talk a little about NIM. Just for texture, I think our ex-accretion or exit NIM in September was 3.55%, and then I would think if you look at our Q4 range, I'd probably put that in a range, again ex-accretion, of 3.6%. So we continue to see NIM expansion. As we look out into 2023, there are a couple of factors; first, is that our modeling expects peak fed funds in the second quarter of around 450. Given that dynamic and our beta, we're forecasting it to remain in the low 30s over the next four quarters, we continue to see NIM expansion. We see NIM expansion going into the first quarter, and then more modest expansion in the second half of the year. So, I think we still feel positively about the prospects in 2023. The dynamic here is that, even though we have higher deposit pricing which we are expecting, our asset book is repricing more significantly.

Okay, that's great. Is the 30% in the low 30s referring to interest-bearing deposits?

I'm sorry, is that for all deposits?

Just interest-bearing.

Yes. I'm looking at the total deposit costs. And I'd say lower 30s over the course of four quarters.

Great. If possible, could you provide more details on the actions taken during the quarter to address credit issues? I believe you mentioned there were some loan sales. What led to this decision? Should we expect more actions, and how should we assess our confidence in credit as we move into the year?

Yeah, Chris, happy to discuss it. I think it was less about cleaning up credit and more about optimizing our balance sheet going forward. We've talked publicly from the beginning that after diligence in closing the deal, we liked all the businesses, but over the next four to six quarters from close, as good stewards of capital, we would continue to evaluate all of our businesses to see whether they remain strategic, whether the risk-return dynamics were strong, and whether there were any potential credit weaknesses looking ahead. So, we took the opportunity. I mean, consider that we grew loans around 5%, including the disposition of over $500 million in assets. With the tailwinds from our asset sensitivity and the strong organic loan growth in key segments, we thought it was a great time to take those actions. And if you think about it again, look at the total charges related to those actions; over $500 million, the average sale price was roughly $0.98 on the dollar. These were certainly not sales of distressed assets. There were note sales and portfolio sales, some even to regulated banks. So, this was not a cleanup of credit close at hand, but rather a proactive move in a higher expectation of spread environment. There is an interest-rate impact on the discount, on the prices, and there were some note sales of non-strategic office portfolios that we thought would be better to dispose of at this time. So, we see this as a wise decision, and we believe it will benefit us going forward from both a return-on-equity perspective and avoiding potential credit issues.

That's great color. I agree, good move. Should we expect more into the end of the year, or is this kind of it?

I don't see anything right now. So we don't have that in our guidance. I don't think it's going to be a reflection of what we do every quarter going forward. We really like the businesses we're in. But as we've said, we'll continue to look at the dynamics of the combined portfolios. And so, if there are opportunities that make sense from an economic perspective or give us more flexibility going forward or protect us from potential paradigm shifts in credit, we will pursue those, but nothing is currently on our horizon.

Great, thanks, John.

Thank you.

Hey, guys, good morning.

Hey, Mark. Good morning.

Glenn, I wonder if you could share with us what your spot rate on deposits is today?

Sure. I know that we ended the quarter at around 60 to 65 basis points.

Okay, great. And then secondly, just to kind of follow up on one of the earlier questions about credit. I guess I'm curious how you're modeling the provision line?

Yeah. I mean, Mark, as you know, we think a lot about the provision line, and we have a relatively conservative bias. But that doesn't always factor in particularly with CECL and the way it works now. So, at a high level, and then Glenn can certainly fill in, the dynamics this quarter were significant loan growth, which requires a higher reserve. The Moody's scenario which us and many of our peers use was somewhat worse, which generally requires more reserves. Then you saw our credit stats, which as I said, I used the word remarkably, not to brag, but it was surprising in this environment that our NPLs and our classifieds were down materially. This is encouraging. Looking at the portfolio, we saw that in each of the last three consecutive quarters, the average weighted risk rating of our originations has been materially better than that of the existing commercial portfolio. In combination, this translates into bringing on lower risk assets over time, pulling down the overall weighted average risk rating, which is favorable. Essentially, we have a larger loan portfolio that requires larger reserves, worsened forward-looking economic scenarios for Moody's requiring more reserves, but better asset quality metrics resulting in lower reserves, and higher quality originations lowering reserves as well. We now feel good, since we are still top quartile regarding our reserve coverage ratios relative to our peers, and we have ample capital.

The only thing I would add to that, Mark, is that John talked about the loan growth of $2.2 billion, alongside that was a provision increase of $20 million. If you look at the macro factors, we have $11 million in the slide here, but it's really two essential elements. If you took out the Moody's impact of slashing GDP estimates, it would likely account for about $20 million, and clawing that back is $9 million, resulting in the net $11 million from those two factors. And the $9 million relates to the improvement that we see in NPLs and our decline in classified loans, et cetera, in conjunction with an improved weighted risk metric.

Great. And lastly, I wonder if you could give us a sense for what your loan pipelines look like today? And maybe also share with us what the commercial line utilization rates are?

I'd say, we're still tracking all the different categories. I would characterize the line utilization as flat to slightly up, not materially so, across all of our commercial businesses, Mark. I am not sure what that evidence might suggest. I think there is still solid demand, but they're not expanding at a crazy margin in ABL, which is typically indicative of a faster working capital cycle. So, I would lean towards flat to marginally up. The pipeline remains robust in certain sectors. I feel like we might see a flattening of loan growth over the next couple of quarters in core middle-market areas. We've seen some slowdown in the trading of real estate assets, as well as in sponsorship, with respect to people selling and buying companies, which has impacted that. If I look at my pipeline report, which I reviewed last night, it looks strong and is slightly above the third quarter going into the fourth quarter, where typically there is heightened activity.

Thank you.

Mark, before you go, let me just clarify something. I may have misunderstood the last question. On our deposit cost for the second quarter, I think we exited around 41 basis points, but for the fourth quarter, we're expecting that to be in the range of 55 to 60 basis points. Just for clarification.

Thank you.

Thanks a lot, Mark.

Yeah. Hi, thanks. Good morning, guys.

Hi, Casey.

How are you doing? Glenn, just to clarify, did you mean that the spot rate for deposit costs ended at 55 to 60 basis points for the fourth quarter?

In the third quarter, we're currently at 41 basis points. Going into the fourth quarter with our beta assumptions, we expect to be in the range of 55 to 60 basis points.

Got you. Okay. Thanks for clarifying. So, I was wondering about the funding strategy in the fourth quarter underlying your NII guide here. So in the third quarter, you guys balanced between a rebound in the muni deposits, a run down of securities, and a little bit of borrowings. What’s the outlook for the fourth quarter and beyond here?

Yes. So, great question. If you look at our loan guidance and say it sits right in the middle between 2% and 3%, you're looking at around $1.2 billion, give or take. The bright side about our franchise is the multiple levers we have for funding and liquidity sources, which is encouraging. So as I look at funding for the fourth quarter and beyond, some key drivers will be the continued run-off of our securities portfolio as we invest that into loans. I believe we have deposit growth in some of our commercial segments, naturally boosted as HSA comes towards the front of the year. Lastly, we have digital deposit gathering sources, whether it’s Brio or the banking-as-a-service platforms. Meanwhile, from a liquidity standpoint, we have plenty of funding sources available though we'd ideally want to exhaust those last. We continue to feel confident in our funding abilities.

Got you. Okay. And the guide is predicated on another 100 bps of Fed hikes here. What kind of upside is there? I mean, the forward curve is at 475 by year-end. What kind of upside would there be if it plays out as the curve expects?

Yeah. We're using our estimate right now of 450, obviously, there's more upside. You can assume that mathematically, but the thing I do want to note is the significance of our assets repricing and the more sluggish behavior of betas.

Okay, very good. And just last one on the credit front. So the $500 million disposition, was there anything that touched the sponsor and specialty finance book, and just any color on what was driving about $60 million of commercial losses outside of the disposition, just any color on what was driving that?

Yeah. Nothing in sponsor and specialty was disposed of. Regarding the core 13 basis points that I reflected, that was driven by two commercial credits, one of which had been classified since pre-pandemic and finally capitulated. Neither of those were in the same geography or asset class, and I wouldn’t say they held any systemic issues. I'm pleased with a 13 basis point charge-offs currently in this cycle, which stems from unique credits ending up with losses.

Understood. Thank you, guys.

Thank you.

Hey, good morning everyone.

Hey, Steve.

I wanted to start on the deposit side. So if we look at non-interest bearing deposit balances, you actually had pretty decent growth in the quarter while banks everywhere were seeing outflows. How did you buck this trend in the quarter, and do you expect to see outflows of those moving forward?

Yes, Steve, that’s encouraging news, but we're quite realistic about it. There were some seasonal inflows from government deposits, right? Our focus going forward is to ensure that as we go through the next few quarters, we grow loans in tandem with our deposits. We're actively focused on generating full relationships to promote commercial deposits. The sustained growth of HSA as we approach the year-end and first quarter will be beneficial. We've essentially seen strong retention from our retail franchise, which underscores that our deposits are sticky. Overall, we’re engaging in potential opportunities in HSA, utilizing our direct bank, Brio, which is a higher-cost deposit option, but the outcome is better than we originally anticipated. Additionally, our diversified business in commercial banking, small business, and retail will contribute to our funding strategy. While we will relish the victory of growing deposits this quarter, it was also aided by seasonal government inflows.

Okay. John, can you size that for us? What was that benefit from the seasonal inflow from government deposits?

Well, I think it was roughly $800 million, Steve.

Yeah, quarter-over-quarter. We also observed a drop in commercial deposits but that was offset by some wholesale funding.

Okay. I wanted to also ask, so the loan-to-deposit ratio has moved up quite a bit over the last few quarters. Where do you see that stabilizing?

So we feel good about operating in the high 80s% to 90% range given the environment today. That's where I would expect it to be. In fact, as I look out over the next couple of quarters, that's exactly where it's trending.

Got you, okay. Thanks. And then finally, regarding the acquisition of Peoples, this deal has attracted quite a bit of attention in Connecticut, particularly around the system conversion that didn't seem to go as planned. How much of an opportunity do you see there? You're the bank I think of most that could benefit from what’s going on there. Have you seen any increase in client acquisition related to all the negative news on that?

Steve, you know I’m respectful in my responses to that bank. We’ve previously discussed that in many key businesses we actually don’t overlap with Peoples, nor do we overlap with the combined M&T Peoples. There has evidently been some disruption. Peoples Bank clients are generally loyal, as it’s a strong institution. There are opportunities due to colleague disruptions, but I’d reinforce that customer loyalty will likely persist. There may be chances for growth, be they personnel or client-related over time. However, our respect for Peoples remains, thus I won’t comment on specific opportunities.

Okay, fair enough. Thanks for taking my questions.

Thanks, Steve.

Good morning.

Hi, Matt. Good morning.

Hey, John, you alluded to this earlier, just talking about maybe a softening of loan growth next year. I was hoping you could better frame that for us. Historically, you've positioned the bank as a high single-digit grower. The company has performed better than that over the last few quarters. What are your expectations for next year? And can you provide a sense for the current rate in the pipeline?

Yeah, no, great question. And we’re not changing guidance on that. I think we still see 8% to 10% annually. This year, we've been fortunate with a couple of categories driving growth, particularly those with lower loss given default, which I appreciate during this cycle. The pipeline remains robust, and I think we’re in a favorable position to grow our commercial loans 8% to 10% year after year, even if overall loan demand slows. Given our increased hold levels and our balance sheet's larger scale, we’re optimistic about achieving this growth while remaining disciplined on risk selection.

The only thing I'd add, Matthew, is that our originations for the third quarter were approximately 5.2%. As we look out, it’s likely to trend closer to 550 to 600 in origination rates.

Understood. Okay. And then could you just talk about digital deposits, the balances between Brio Direct and the Banking as a Service segments? How much of your funding projections should we be thinking rely on these buckets compared to traditional retail and commercial?

Yes, Matt, sure. As I've mentioned, we've leaned in on those areas. Brio is fully operational and proving itself as a deposit generator. Deposits increased in the second and third quarters, while Banking as a Service is still developing. We projected $500 million to $750 million of deposits through a pipeline of a few relationships. Even so, we’re not planning for substantial profitability or investment in the Banking as a Service space. We believe we’ll rely on Brio for growth, while its effectiveness will support our funding model.

Currently, digital direct is around $1.1 billion, with the bulk being Brio. It tends to be a higher beta product, but it’s a beneficial funding source. As we align it with our loan origination rates in the range of 550 to 600, it remains an important component of our arsenal. We also expect deposit growth in commercial segments and HSA deposit growth as we enter the first quarter from enrollment periods. I keep stressing the advantage in funding flexibility since we have multiple funding sources.

Okay, thank you. Lastly, regarding the loan sale, some lingering questions surround whether there were areas in the Sterling portfolio to eventually be exited. Did the loan sale incorporate some legacy Sterling assets? If so, what were those?

I'm not going to give specifics here. The overall theme is relevant for both banks regarding suboptimal risk-return businesses. We can make proactive decisions as a $70 billion entity on whether we should correct certain businesses or consider exiting. So, while the move to eliminate some non-strategic assets was made in the last quarter, it’s important to note that we’re focused on maintaining our asset quality and making decisions wisely.

Understood, okay. That's all I had. Thanks for taking my questions.

Thank you.

Hi, good morning. This is Timur Braziler filling in for Jared.

Hey, Timur.

Hey, guys. Maybe starting on the bond book and using that as a source of funds, does that slow with the expectation that loan growth slows? And does that pretty much end in the first quarter as HSA seasonality kicks in? What's an ideal base we should think about for the bond book?

No, I think you would continue to see that it has extended with rising rates. Our cash flow has come down slightly, but for the quarter, if you're using something in the range of around $250 million, I think that’s pretty solid. This is generally how I would model it. We are continuing to reinvest; in the third quarter, we had $238 million come off at 2.83%. If we can reinvest that into loans, you can ascertain the spread difference. So we’ll continue that strategy moving forward.

Okay, and then looking at the Sterling integration. The results post-deal closing have already been quite promising. What's the change like once that integration is complete? Will it primarily reduce expenses or yield operational gains in lending or deposits?

Yes, that’s a thoughtful inquiry. It shouldn't materially impact revenue generation. This transaction centers around complementary business structures. During our transaction announcement, we emphasized that two focused banks can pursue their client bases without overlap in retail business banking. Once we complete the technology integration next July, it will primarily drive operational efficiencies rather than directly accelerating revenue. We'll retire one of the two core systems, expediting processes and enhancing efficiency over time, which should benefit our cost structure. Despite the inflationary pressures on the industry, we can offset these through measures like retaining three call centers and enhancing our technology. So we maintain flexibility and efficiency in expenses while holding our growth steady.

Great, and lastly, for modeling, the scheduled accretion guide of $14.6 million in Q4 '22, do you have estimates for what accelerated accretion in the quarter could be? Could we assume a similar acceleration amount in Q4, or is each quarter’s result reliant on prepayment activities?

We laid out the anticipated figures for you. On the loan side, it is around $17 million. That remains the best estimate as far as I see it. It could change based on prepayment activity and other external factors, obviously.

Got it. Great, thank you.

Thank you.

Yeah, hi, thanks. Good morning. On AOCI, what was that intangible common equity this quarter on a dollar basis?

Without AOCI? For the third quarter, AOCI impact was $(688 million), right, after tax, which reflects an increase of about $242 million quarter-over-quarter.

Perfect, perfect. Okay, great. And John and Glenn, regarding the $500 million sale and understanding that you don't want to break down what's legacy Webster versus legacy Sterling, how much of that was offset? What larger components are involved? And could you refresh us on office exposure? Last quarter, you indicated it was $2.2 billion, of which $520 million was in New York. What's the current status?

Sure. The impact on our office exposure between the asset sales and general amortization and payoffs is about $75 million. So we're approximately $75 million lighter regarding total office exposure than what we had discussed. Regarding office specifics, we've noted little to no change besides the $75 million adjustment. Total office exposure stands at around $2.2 billion, with slightly over $500 million in stabilized medical offices that are less subject to paradigm shifts. Total remaining office exposure currently consists of around $1.7 billion, divided evenly between Class A and B, C offices, which we continue to assess. On NYC office exposure, it hovers around $400 million, with similar 50-50 splits of Class A and B and C. We haven't observed significant changes to risk ratings or classifications, though we remain vigilant. It’s important to note that we sold loans with a combined average of $0.98 on the dollar, indicating they weren't distressed assets; rather, we made decisions to divest non-strategic assets.

Got it, okay. And just so that I'm clear, I had in my notes last quarter that $520 million was NYC, which now stands at $400 million?

Let me check; perhaps medical is included in that, Laurie. So non-medical office in New York is around $400 million.

And at this time, there are no further questions.

Great. Thank you very much for joining us today, and have a wonderful day.

This concludes today's conference. You may now disconnect.