Webster Financial (US:WBS)2025-08-11 20:42PART I – FINANCIAL INFORMATION Management's Discussion and Analysis of Financial Condition and Results of Operations Webster Financial Corporation reported total consolidated assets of approximately $82 billion as of June 30, 2025, with net income increasing to $258.8 million in Q2 2025, driven by higher net interest income and a positive swing in non-interest income. - Webster Financial Corporation is a bank holding company with approximately $82 billion in total consolidated assets as of June 30, 2025, operating through Commercial Banking, Healthcare Financial Services, and Consumer Banking17 - Management believes the company's diverse business, strong capital, and risk management framework position it to operate effectively despite economic uncertainty from potential changes in U.S. trade policies and tariffs19 Results of Operations In Q2 2025, net income rose to $258.8 million, a 42.5% increase YoY, with diluted EPS at $1.52, driven by an 8.5% quarterly increase in net interest income and a 123.8% surge in non-interest income. Selected Financial Highlights (Q2 & YTD 2025 vs 2024) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income (in thousands) | $258,848 | $181,633 | $485,765 | $397,956 | | Diluted EPS | $1.52 | $1.03 | $2.81 | $2.26 | | Return on Average Assets (annualized) | 1.29% | 0.96% | 1.22% | 1.05% | | Return on Avg. Tangible Common Equity (non-GAAP, annualized) | 17.96% | 14.17% | 16.95% | 15.25% | | Net Interest Margin | 3.44% | 3.39% | 3.46% | 3.40% | | Efficiency Ratio (non-GAAP) | 45.40% | 46.22% | 45.59% | 45.74% | Segment Reporting For Q2 2025, Commercial Banking's pre-tax, pre-provision net revenue (PPNR) decreased 10.0% YoY to $240.8 million, while Healthcare Financial Services' PPNR grew 4.4% to $70.9 million, and Consumer Banking's PPNR increased 2.7% to $114.2 million. Segment Pre-Tax, Pre-Provision Net Revenue (PPNR) (in thousands) | Segment | Q2 2025 | Q2 2024 | Change | YTD 2025 | YTD 2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Commercial Banking | $240,774 | $267,510 | (10.0%) | $482,273 | $537,507 | (10.3%) | | Healthcare Financial Services | $70,859 | $67,862 | 4.4% | $140,890 | $132,934 | 6.0% | | Consumer Banking | $114,219 | $111,166 | 2.7% | $219,831 | $230,800 | (4.8%) | - Commercial Banking loans and leases grew by $581.5 million (1.4%) since year-end 2024, driven by commercial non-mortgage lending71 - Healthcare Financial Services deposits increased by $214.4 million (2.2%) since year-end 2024, due to growth in HSA Bank and Ametros account holders76 - Consumer Banking loans increased by $585.6 million (4.9%) since year-end 2024, primarily from growth in residential mortgages and other consumer loans82 Financial Condition As of June 30, 2025, total assets increased by $2.9 billion (3.7%) to $81.9 billion from year-end 2024, driven by a $1.2 billion rise in loans and leases and a $0.9 billion increase in cash equivalents. Balance Sheet Changes (June 30, 2025 vs. Dec 31, 2024) | Item | Change (in billions) | Key Drivers | | :--- | :--- | :--- | | Total Assets | +$2.9 | +$1.2B in Loans & Leases, +$0.9B in Cash & Equivalents | | Total Liabilities | +$2.7 | +$1.5B in Deposits, +$1.2B in FHLB Advances | | Total Stockholders' Equity | +$0.2 | +$485.8M Net Income, offset by -$261.9M Stock Repurchases & Dividends | Liquidity and Capital Resources The company maintains a strong liquidity and capital position, with the Holding Company's primary liquidity source being dividends from the Bank, and all regulatory capital ratios significantly exceeding 'well-capitalized' thresholds. - The Board of Directors increased the common stock repurchase program authority by $700.0 million on April 30, 2025, with the company repurchasing 5.1 million shares for $259.6 million in the first six months of 2025130 Regulatory Capital Ratios as of June 30, 2025 | Ratio | Webster Financial Corp. | Webster Bank | Well Capitalized Minimum | | :--- | :--- | :--- | :--- | | CET1 Risk-Based Capital | 11.35% | 12.55% | 6.5% | | Tier 1 Risk-Based Capital | 11.86% | 12.55% | 8.0% | | Total Risk-Based Capital | 14.05% | 13.80% | 10.0% | | Tier 1 Leverage Capital | 8.57% | 9.08% | 5.0% | - Total uninsured deposits, after excluding affiliate and collateralized deposits, were $14.0 billion, representing 21.1% of total deposits142 - The company reports immediately available liquidity of $26.2 billion, covering these adjusted uninsured deposits by 187.0%143 Financial Statements The unaudited condensed consolidated financial statements for the period ended June 30, 2025, show total assets of $81.9 billion, up from $79.0 billion at year-end 2024, with net income for the six months at $485.8 million. Condensed Consolidated Financial Statements The condensed consolidated financial statements present the company's financial position as of June 30, 2025, with total assets of $81.9 billion, total liabilities of $72.6 billion, and total stockholders' equity of $9.3 billion. Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Assets | $81,914,270 | $79,025,073 | | Loans and leases, net | $52,949,913 | $51,815,602 | | Total Deposits | $66,314,425 | $64,753,080 | | Total Liabilities | $72,576,653 | $69,891,859 | | Total Stockholders' Equity | $9,337,617 | $9,133,214 | Condensed Consolidated Income Statement Highlights (Six Months Ended June 30) | Account (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net Interest Income | $1,233,374 | $1,140,036 | | Provision for credit losses | $124,000 | $104,500 | | Total Non-interest Income | $187,263 | $141,651 | | Total Non-interest Expense | $689,358 | $661,944 | | Net Income | $485,765 | $397,956 | Notes to Condensed Consolidated Financial Statements The notes provide detailed disclosures, including the January 2024 acquisition of Ametros for $378.4 million, the February 2024 sale of mortgage servicing rights for an $11.7 million net gain, and the July 2024 formation of a private credit joint venture. - On January 24, 2024, the Bank acquired Ametros for a total purchase price of $378.4 million, resulting in $228.2 million of goodwill and $188.9 million in other intangible assets204205207 - In February 2024, the company sold the majority of its mortgage servicing portfolio for net cash proceeds of $18.4 million, recognizing an $11.7 million net gain on the sale211 - In July 2024, the company formed a private credit joint venture with Marathon Asset Management, seeding it with $242.2 million of commercial non-mortgage loans reclassified to 'Loans held for sale' in June 2025212213 - The Allowance for Credit Losses (ACL) on loans and leases increased to $722.0 million at June 30, 2025, from $689.6 million at year-end 2024, primarily due to macroeconomic uncertainty and organic loan growth233 Quantitative and Qualitative Disclosures about Market Risk This section refers to the detailed market risk disclosures provided in Note 13 of the Financial Statements and the 'Asset/Liability Management and Market Risk' section of the MD&A. - The company's disclosures about market risk are incorporated by reference from Note 13 (Derivative Financial Instruments) and the 'Asset/Liability Management and Market Risk' section within the MD&A381 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025. - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025382 - A new cloud-based general ledger system was implemented during the quarter, leading to modifications and additions to internal controls over financial reporting383 PART II – OTHER INFORMATION Legal Proceedings The company is subject to various legal proceedings in the ordinary course of business, with management believing that the outcomes will not have a material impact on the company's financial position. - Information regarding legal proceedings is incorporated by reference from Note 17: Commitments and Contingencies387 Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024. - No material changes to risk factors were reported since the last Annual Report on Form 10-K388 Unregistered Sales of Equity Securities and Use of Proceeds During the second quarter of 2025, the company repurchased a total of 1,528,615 shares of its common stock at an average price of $51.70 per share, with the Board increasing repurchase authority by $700.0 million. Issuer Purchases of Equity Securities (Q2 2025) | Period (2025) | Total Shares Purchased | Avg. Price Paid Per Share | Shares Purchased Under Program | Remaining Authority (in millions) | | :--- | :--- | :--- | :--- | :--- | | April | 368,600 | $51.08 | 366,318 | $728.2 | | May | 598,919 | $52.05 | 598,257 | $697.1 | | June | 561,096 | $51.72 | 555,939 | $668.4 | | Total | 1,528,615 | $51.70 | 1,520,514 | $668.4 | - On April 30, 2025, the Board of Directors increased the authority for the common stock repurchase program by $700.0 million391 Other Information John Ciulla, the Chairman and Chief Executive Officer, entered into a Rule 10b5-1 trading agreement on April 30, 2025, covering the potential sale of up to 32,000 shares of Webster common stock. - Chairman and CEO John Ciulla entered into a Rule 10b5-1 trading plan on April 30, 2025, for the sale of up to 32,000 shares of common stock394 Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, indentures, new employment-related agreements, and certifications required by the Sarbanes-Oxley Act.