Webster Financial (WBS) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Earnings Highlights Q2 2025 Performance Summary Webster Financial Corporation reported strong Q2 2025 financial results, with net income and diluted EPS significantly increasing year-over-year, alongside solid growth in loans, deposits, and revenue Q2 2025 vs Q2 2024 Performance | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income (Common Stockholders) | $251.7 million | $175.5 million | | Diluted EPS | $1.52 | $1.03 | Key Financial Metrics for Q2 2025 | Metric | Value | | :--- | :--- | | Revenue | $715.8 million | | Period End Loans and Leases | $53.7 billion (+1.2% QoQ) | | Period End Deposits | $66.3 billion (+1.1% QoQ) | | Provision for Credit Losses | $46.5 million | | Return on Average Assets (ROA) | 1.29% | | Return on Average Tangible Common Equity (ROTCE) | 17.96% | | Net Interest Margin (NIM) | 3.44% (-4 bps QoQ) | | Common Equity Tier 1 (CET1) Ratio | 11.33% | | Efficiency Ratio | 45.40% | - Management expressed confidence in the company's future success, citing impressive financial and strategic results and new opportunities for business growth. The CFO highlighted improved asset quality, capital returns to shareholders, and continued investments for future growth[4] Consolidated Financial Performance Net Interest Income Net interest income increased to $621.2 million in Q2 2025, with net interest margin expanding to 3.44% driven by lower deposit costs Net Interest Income and Margin (YoY Comparison) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Interest Income | $621.2 million | $572.3 million | | Net Interest Margin | 3.44% | 3.39% | | Avg. Interest-Earning Assets | $74.0 billion | $69.6 billion | | Avg. Loans and Leases | $53.3 billion | $51.4 billion | | Avg. Deposits | $66.0 billion | $61.7 billion | Provision for Credit Losses Provision for credit losses decreased to $46.5 million in Q2 2025, with net charge-offs at 0.27% and allowance for credit losses at 1.35% Credit Loss Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Provision for Credit Losses | $46.5 million | $77.5 million | $59.0 million | | Net Charge-offs | $36.4 million | $55.0 million | $33.1 million | | NCOs / Avg. Loans Ratio | 0.27% | 0.42% | 0.26% | | Allowance / Total Loans | 1.35% | 1.34% | 1.30% | Non-Interest Income Total non-interest income significantly increased to $94.7 million in Q2 2025, mainly due to the absence of a prior-year investment securities loss - Total non-interest income rose by $52.4 million year-over-year to $94.7 million. A key factor was the absence of a $49.9 million loss on investment securities sales that occurred in Q2 2024[8] - Excluding the prior-year securities loss, non-interest income increased by $2.5 million, mainly from higher bank-owned life insurance income, direct investment gains, and Healthcare Financial Services income, partially offset by lower loan and lease-related fees[8] Non-Interest Expense Non-interest expense increased to $345.7 million in Q2 2025, driven by strategic investments in human capital and risk management - Total non-interest expense increased by $19.7 million year-over-year to $345.7 million[10] - The primary drivers for the expense increase were investments in human capital and risk management infrastructure[10] Income Taxes Income tax expense was $64.8 million in Q2 2025, with the effective tax rate decreasing to 20.0% due to a discrete tax benefit Income Tax Comparison (YoY) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Income Tax Expense | $64.8 million | $47.9 million | | Effective Tax Rate | 20.0% | 20.9% | | Discrete Tax Benefit | $3.9 million | $0.3 million | Balance Sheet and Capital Analysis Investment Securities Total net investment securities reached $17.8 billion as of June 30, 2025, with net unrealized losses decreasing in the available-for-sale portfolio Investment Securities Portfolio (June 30, 2025) | Portfolio | Carrying Value | Net Unrealized Losses | | :--- | :--- | :--- | | Total Investment Securities | $17.8 billion | N/A | | Available-for-Sale | $9.6 billion | $568.3 million | | Held-to-Maturity | $8.2 billion | $901.6 million (not reflected in carrying value) | Loans and Leases Total loans and leases grew to $53.7 billion in Q2 2025, driven by commercial and residential mortgage growth, with strong quarterly originations Loan Portfolio Growth | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total Loans and Leases | $53.7 billion | $53.1 billion | $51.6 billion | | Loan Originations | $3.8 billion | $2.7 billion | $3.0 billion | - Compared to the prior year, commercial loans and leases increased by $1.8 billion and residential mortgages by $1.0 billion, while commercial real estate loans decreased by $919.0 million[15] Asset Quality Asset quality improved in Q2 2025, with non-performing loans decreasing to $534.5 million (1.00% of total loans) and past due loans declining Asset Quality Ratios | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Non-Performing Loans | $534.5 million | $564.4 million | $368.8 million | | NPLs / Total Loans | 1.00% | 1.06% | 0.72% | | Past Due Loans | $54.8 million | $87.2 million | $166.3 million | Deposits and Borrowings Total deposits increased to $66.3 billion at quarter-end, maintaining a stable loan-to-deposit ratio of 80.9% with core deposits at 88.1% Deposits and Borrowings Summary | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total Deposits | $66.3 billion | $65.6 billion | $62.3 billion | | Core Deposits / Total Deposits | 88.1% | 88.5% | 87.5% | | Loan to Deposit Ratio | 80.9% | 80.9% | 82.8% | | Total Borrowings | $4.6 billion | $3.9 billion | $4.0 billion | Capital Capital ratios remained strong and improved, with the CET1 ratio increasing to 11.33% and tangible common equity ratio improving to 7.46% Key Capital Ratios and Returns | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | CET1 Ratio | 11.33% | 11.25% | 10.59% | | Tangible Common Equity Ratio | 7.46% | 7.43% | 7.18% | | Return on Avg. Tangible Common Equity | 17.96% | 15.93% | 14.17% | | Tangible Book Value per Share | $35.13 | $33.97 | $30.82 | Reportable Segments Commercial Banking Commercial Banking reported a 10.0% decrease in pre-tax, pre-provision net revenue to $240.8 million, driven by lower net interest and non-interest income Commercial Banking Operating Results (Q2 2025 vs Q2 2024) | Metric (in thousands) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net interest income | $318,518 | $337,588 | (5.6)% | | Non-interest income | $30,628 | $34,510 | (11.2)% | | Pre-tax, pre-provision net revenue | $240,774 | $267,510 | (10.0)% | - The segment had $41.2 billion in loans and leases and $16.2 billion in deposits as of June 30, 2025[20] - The decrease in net interest income was primarily due to lower spreads on loans and leases, while the decrease in non-interest income was driven by lower factoring, prepayment, and syndication fees[21] Healthcare Financial Services Healthcare Financial Services delivered a 4.4% increase in pre-tax net revenue to $70.9 million, driven by higher net interest and non-interest income Healthcare Financial Services Operating Results (Q2 2025 vs Q2 2024) | Metric (in thousands) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net interest income | $97,625 | $91,664 | 6.5% | | Non-interest income | $28,687 | $27,465 | 4.4% | | Pre-tax net revenue | $70,859 | $67,862 | 4.4% | Healthcare Financial Services Key Metrics (YoY) | Metric | June 30, 2025 | June 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | Deposits | $10,180 million | $9,392 million | 8.4% | | Total Footings | $15,931 million | $14,914 million | 6.8% | - The segment includes HSA Bank, a leading administrator of health savings accounts, and Ametros, a professional administrator of medical insurance claim settlements[22] Consumer Banking Consumer Banking reported a 2.7% increase in pre-tax, pre-provision net revenue to $114.2 million, driven by higher net interest income and strong loan growth Consumer Banking Operating Results (Q2 2025 vs Q2 2024) | Metric (in thousands) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net interest income | $212,672 | $202,679 | 4.9% | | Non-interest income | $24,591 | $24,392 | 0.8% | | Pre-tax, pre-provision net revenue | $114,219 | $111,166 | 2.7% | Consumer Banking Balance Sheet (YoY) | Metric | June 30, 2025 | June 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | Loans | $12,472 million | $11,239 million | 11.0% | | Deposits | $27,790 million | $27,108 million | 2.5% | - Non-interest expense increased by $7.1 million, primarily due to investments in technology, employee-related expenses, and professional services[25] Financial Tables and Reconciliations Forward-Looking Statements and Non-GAAP Measures This section outlines forward-looking statement disclaimers and defines non-GAAP financial measures used to assess performance and provide investors with business insights - The report includes forward-looking statements subject to risks and uncertainties, including economic conditions, regulatory changes, and market volatility, which could materially affect actual results[29] - The company uses non-GAAP measures like the efficiency ratio, ROTCE, and tangible book value per share to provide investors with information useful for understanding its financial position and performance[30][31] - Investors are encouraged to review the consolidated financial statements in their entirety and not rely on any single financial measure, as non-GAAP measures are not standardized and may not be comparable to those of other companies[33] Selected Financial Highlights Selected financial highlights show positive trends in profitability and capital strength, with diluted EPS and key performance ratios peaking in Q2 2025 Five-Quarter Performance Trend | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Diluted EPS | $1.52 | $1.30 | $1.01 | $1.10 | $1.03 | | ROA (annualized) | 1.29% | 1.15% | 0.91% | 1.01% | 0.96% | | ROTCE (annualized) | 17.96% | 15.93% | 12.73% | 14.29% | 14.17% | | CET1 Ratio | 11.33% | 11.25% | 11.54% | 11.25% | 10.59% | Consolidated Balance Sheets The consolidated balance sheet as of June 30, 2025, shows total assets of $81.9 billion, driven by increases in loans, leases, and deposits Balance Sheet Summary (YoY Comparison) | Balance Sheet Item (in billions) | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Assets | $81.9 | $76.8 | | Total Loans and Leases, net | $52.9 | $50.9 | | Total Investment Securities, net | $17.8 | $16.4 | | Total Deposits | $66.3 | $62.3 | | Total Liabilities | $72.6 | $68.0 | | Total Stockholders' Equity | $9.3 | $8.8 | Consolidated Statements of Income Consolidated statements of income show Q2 2025 net income of $258.8 million, a substantial increase driven by higher net interest income and non-interest income Income Statement Summary (YoY Comparison) | Income Statement Item (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Interest Income | $621,182 | $572,297 | | Provision for Credit Losses | $46,500 | $59,000 | | Total Non-interest Income | $94,657 | $42,298 | | Total Non-interest Expense | $345,714 | $326,021 | | Net Income | $258,848 | $181,633 | | Diluted EPS | $1.52 | $1.03 | Analysis of Net Interest Margin Analysis of net interest margin shows a NIM of 3.44% for Q2 2025, improving due to a larger decrease in deposit costs offsetting asset yield declines Net Interest Margin Components (YoY Comparison) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Interest Margin (Tax-equivalent) | 3.44% | 3.39% | | Average Yield on Interest-Earning Assets | 5.44% | 5.65% | | Average Rate on Total Deposits | 2.07% | 2.35% | | Average Rate on Total Deposits and Interest-Bearing Liabilities | 2.18% | 2.49% | Loan Portfolio and Credit Quality This section details the loan portfolio and credit quality metrics, showing total loans at $53.7 billion and non-performing loans decreasing to $534.5 million Loan Portfolio Composition (June 30, 2025) | Loan Category | Balance (in thousands) | | :--- | :--- | | Commercial non-mortgage | $19,943,097 | | Commercial real estate | $21,358,775 | | Residential mortgages | $9,332,413 | | Consumer | $1,687,668 | | Total loans and leases | $53,671,959 | Non-Performing Assets (June 30, 2025) | Metric | Value (in thousands) | | :--- | :--- | | Total non-performing loans and leases | $534,522 | | Total other real estate owned | $2,528 | | Total non-performing assets | $537,050 | - The allowance for credit losses on loans and leases increased from $713.3 million in Q1 2025 to $722.0 million in Q2 2025, after accounting for a $45.1 million provision and $36.4 million in net charge-offs[46] Non-GAAP to GAAP Reconciliations This section provides detailed reconciliations of non-GAAP financial measures to GAAP, including efficiency ratio, ROTCE, and tangible equity ratios Tangible Common Equity Reconciliation (June 30, 2025) | Item (in thousands) | Value | | :--- | :--- | | Stockholders' equity (GAAP) | $9,337,617 | | Less: Goodwill and other intangible assets | $3,184,039 | | Less: Preferred stock | $283,979 | | Tangible common stockholders' equity (Non-GAAP) | $5,869,599 | Return on Average Tangible Common Equity (Q2 2025) | Item (in thousands) | Value | | :--- | :--- | | Net income (GAAP) | $258,848 | | Adjustments (Preferred dividends, tax-effected amortization) | $2,465 | | Adjusted net income (Non-GAAP) | $261,313 | | Average tangible common stockholders' equity | $5,821,098 | | Return on Average Tangible Common Equity | 17.96% |