Webster Financial (WBS) - 2025 Q3 - Quarterly Results

Executive Summary & Highlights Webster Financial Corporation achieved record quarterly EPS and strong financial growth in Q3 2025, reflecting favorable strategic positioning and robust performance across key financial metrics Third Quarter 2025 Performance Overview Webster Financial Corporation reported strong financial results for Q3 2025, achieving record quarterly EPS of $1.54 per diluted share, up from $1.10 in Q3 2024, reflecting favorable strategic positioning and consistent excellence | Metric | Q3 2025 | Q3 2024 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | | Net Income Applicable to Common Stockholders | $254.1 million | $186.8 million | +35.06% | | Diluted EPS | $1.54 | $1.10 | +40.00% | - Chairman and CEO John R. Ciulla noted Webster continues to exhibit strong financial results, reflecting consistency and excellence since its founding[4] - CFO Neal Holland highlighted the company's growth, efficiency, and returns are reflective of its favorable strategic positioning, delivering record quarterly EPS[4] Key Financial Highlights Key financial highlights for Q3 2025 include robust revenue, significant growth in loans and deposits, strong capital and efficiency metrics, and share repurchases | Metric | Q3 2025 Value | | :-------------------------------- | :------------ | | Revenue | $732.6 million | | Period End Loans and Leases Balance | $55.1 billion | | Period End Deposits Balance | $68.2 billion | | Provision for Credit Losses | $44.0 million | | Return on Average Assets | 1.27% | | Return on Average Tangible Common Equity | 17.64% | | Net Interest Margin | 3.40% | | Common Equity Tier 1 Ratio | 11.40% | | Efficiency Ratio | 45.79% | | Tangible Common Equity Ratio | 7.50% | - Period end loans and leases balance increased by $1.4 billion, or 2.6%, from the prior quarter[5] - Period end deposits balance increased by $1.9 billion, or 2.8%, from the prior quarter[5] - Webster repurchased 2.2 million shares under its share repurchase program[5] Consolidated Financial Performance Analysis This section analyzes Webster's consolidated financial performance, including net interest income, credit losses, non-interest items, taxes, and key balance sheet components Net Interest Income and Margin Net interest income increased year-over-year due to higher average interest-earning assets, loans, and deposits, though net interest margin slightly decreased | Metric | Q3 2025 | Q3 2024 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | | Net Interest Income | $631.7 million | $589.9 million | +7.09% | | Net Interest Margin | 3.40% | 3.41% | -1 bps | | Average Interest-Earning Assets | $75.4 billion | $70.4 billion | +7.1% | | Average Loans and Leases | $54.4 billion | $51.8 billion | +5.1% | | Average Deposits | $67.3 billion | $62.6 billion | +7.6% | - The yield on interest-earning assets decreased by 24 basis points, while the cost of deposits and interest-bearing liabilities decreased by 28 basis points[9] Provision for Credit Losses Provision for credit losses decreased quarter-over-quarter and year-over-year, while net charge-offs slightly increased, and allowance for credit losses remained stable relative to total loans | Metric | Q3 2025 | Q2 2025 | Q3 2024 | Change (QoQ) | Change (YoY) | | :-------------------------------- | :------ | :------ | :------ | :----------- | :----------- | | Provision for Credit Losses | $44.0 million | $46.5 million | $54.0 million | -5.38% | -18.52% | | Net Charge-Offs | $38.4 million | $36.4 million | $35.4 million | +5.49% | +8.47% | | Net Charge-Offs to Average Loans and Leases | 0.28% | 0.27% | 0.27% | +1 bps | +1 bps | | Allowance for Credit Losses to Total Loans and Leases | 1.32% | 1.35% | 1.32% | -3 bps | 0 bps | | Allowance for Credit Losses to Non-Performing Loans and Leases | 134% | 135% | 162% | -1% | -17.28% | Non-Interest Income Total non-interest income significantly increased year-over-year, driven by higher client hedging, increased credit valuation adjustment, and a beneficial legal settlement, contrasting with prior year losses | Metric | Q3 2025 | Q3 2024 | Change (YoY) | | :-------------------- | :------ | :------ | :----------- | | Total Non-Interest Income | $100.9 million | $57.7 million | +$43.2 million | | Adjusted Non-Interest Income (excluding Q3 2024 specific items) | N/A | N/A | +$7.6 million | - Q3 2024 included a $19.6 million net loss on sale of investment securities and a $16.0 million loss on the exit of non-core operations[8] - The increase in non-interest income was primarily driven by increased client hedging activity, an increase in credit valuation adjustment, and a $4.0 million beneficial legal settlement[8] Non-Interest Expense Total non-interest expense increased year-over-year, mainly due to investments in human capital, increased performance-based incentives, business development, and risk management infrastructure, excluding prior year adjustments | Metric | Q3 2025 | Q3 2024 | Change (YoY) | | :-------------------- | :------ | :------ | :----------- | | Total Non-Interest Expense | $356.7 million | $349.0 million | +$7.7 million | | Adjusted Non-Interest Expense (excluding Q3 2024 specific items) | N/A | N/A | +$28.3 million | - Q3 2024 included a net $20.6 million related to strategic restructuring costs and other adjustments, and a benefit on the FDIC special assessment[10] - The increase was primarily driven by investments in human capital, increased performance-based incentives, business development, and risk management infrastructure[10] Income Taxes Income tax expense increased year-over-year, reflecting higher income in 2025, partially offset by discrete tax benefits compared to prior year expense | Metric | Q3 2025 | Q3 2024 | Change (YoY) | | :---------------- | :------ | :------ | :----------- | | Income Tax Expense | $70.7 million | $51.7 million | +36.75% | | Effective Tax Rate | 21.3% | 21.1% | +0.2% | - The higher effective tax rate in the current quarter reflects the effects of a higher level of income in 2025, partially offset by the recognition of discrete tax benefits[11] Investment Securities Total investment securities, net, increased quarter-over-quarter and year-over-year, with AFS net unrealized losses decreasing and HTM net unrealized losses increasing | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | Change (QoQ) | Change (YoY) | | :-------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Total Investment Securities, Net | $18.0 billion | $17.8 billion | $17.2 billion | +1.12% | +4.65% | | AFS Net Unrealized Losses | $496.8 million | $568.3 million | $486.1 million | -12.58% | +2.20% | | HTM Net Unrealized Losses (not reflected) | $836.7 million | $901.6 million | $677.0 million | -7.19% | +23.59% | Loans and Leases Total loans and leases continued to grow quarter-over-quarter and year-over-year across all major categories, with significant increases in loan originations | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | Change (QoQ) | Change (YoY) | | :-------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Total Loans and Leases | $55.1 billion | $53.7 billion | $51.9 billion | +2.61% | +6.17% | | Commercial Loans and Leases | +$619.7 million | N/A | +$1.8 billion | N/A | N/A | | Commercial Real Estate Loans | +$552.5 million | N/A | +$219.9 million | N/A | N/A | | Residential Mortgages | +$176.7 million | N/A | +$932.5 million | N/A | N/A | | Consumer Loans | +$31.2 million | N/A | +$160.8 million | N/A | N/A | | Loan Originations for Portfolio | $4.1 billion | $3.8 billion | $2.8 billion | +7.89% | +46.43% | Asset Quality Total non-performing loans and leases increased year-over-year but decreased as a percentage of total loans quarter-over-quarter, while past due loans increased, driven by commercial real estate and residential mortgages | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | Change (QoQ) | Change (YoY) | | :-------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Total Non-Performing Loans and Leases | $543.9 million | $534.5 million | $425.6 million | +1.76% | +27.79% | | Ratio of Non-Performing Loans and Leases to Total Loans and Leases | 0.99% | 1.00% | 0.82% | -1 bps | +17 bps | | Past Due Loans and Leases | $65.6 million | $54.8 million | $108.9 million | +19.71% | -39.76% | - The increase in past due loans from the prior quarter is primarily driven by commercial real estate and residential mortgages, partially offset by a decrease in commercial non-mortgage[17] Deposits and Borrowings Total deposits continued to grow quarter-over-quarter and year-over-year, with core deposits forming a strong majority, while total borrowings decreased from prior periods | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | Change (QoQ) | Change (YoY) | | :-------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Total Deposits | $68.2 billion | $66.3 billion | $64.5 billion | +2.87% | +5.73% | | Core Deposits to Total Deposits | 88.9% | 88.1% | 88.5% | +0.8% | +0.4% | | Loan to Deposit Ratio | 80.8% | 80.9% | 80.5% | -0.1% | +0.3% | | Total Borrowings | $3.9 billion | $4.6 billion | $4.1 billion | -15.22% | -4.88% | Capital Ratios and Equity Webster maintained strong capital ratios, with Common Equity Tier 1 ratio increasing quarter-over-quarter and year-over-year, alongside consistent growth in book value and tangible book value per common share | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | Change (QoQ) | Change (YoY) | | :-------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Return on Average Common Stockholders' Equity | 11.23% | 11.31% | 8.67% | -0.08% | +2.56% | | Return on Average Tangible Common Stockholders' Equity | 17.64% | 17.96% | 14.29% | -0.32% | +3.35% | | Tangible Equity Ratio | 7.86% | 7.82% | 7.85% | +0.04% | +0.01% | | Tangible Common Equity Ratio | 7.50% | 7.46% | 7.48% | +0.04% | +0.02% | | Common Equity Tier 1 Ratio | 11.40% | 11.35% | 11.25% | +0.05% | +0.15% | | Book Value Per Common Share | $55.69 | $54.19 | $52.00 | +2.77% | +7.10% | | Tangible Book Value Per Common Share | $36.42 | $35.13 | $33.26 | +3.67% | +9.49% | Reportable Segment Performance This section details the financial performance of Webster's Commercial Banking, Healthcare Financial Services, and Consumer Banking segments, highlighting key trends Commercial Banking Webster's Commercial Banking segment, offering diverse financial solutions, experienced a year-over-year decrease in pre-tax, pre-provision net revenue due to lower net interest spread, despite loan and deposit growth - Commercial Banking delivers financial solutions to companies, investors, government entities, and institutions, with expertise in Commercial & Institutional Lending, Commercial Real Estate, Capital Markets, Capital Finance, and Treasury Management[18] | Metric | Q3 2025 | Q3 2024 | Change (YoY) | | :---------------------- | :------ | :------ | :----------- | | Net Interest Income (In thousands) | $328,306 | $338,424 | (3.0)% | | Non-Interest Income (In thousands) | $33,902 | $33,288 | 1.8% | | Operating Revenue (In thousands) | $362,208 | $371,712 | (2.6)% | | Non-Interest Expense (In thousands) | $108,590 | $100,892 | (7.6)% | | Pre-Tax, Pre-Provision Net Revenue (In thousands) | $253,618 | $270,820 | (6.4)% | | Loans and Leases (In millions) | $42,361 | $40,372 | 4.9% | | Deposits (In millions) | $18,261 | $17,124 | 6.6% | | AUA / AUM (off balance sheet, In millions) | $2,813 | $2,968 | (5.2)% | - Net interest income decreased primarily due to a lower net spread on loans and leases, partially offset by higher average loan and deposit balances[19] Healthcare Financial Services The Healthcare Financial Services segment, including HSA Bank and Ametros, reported a strong increase in pre-tax net revenue, driven by higher deposit balances and increased non-interest income - Healthcare Financial Services includes HSA Bank, a leading administrator of health savings accounts, emergency savings accounts, and flexible spending accounts, and Ametros, a professional administrator of medical insurance claim settlements[20] | Metric | Q3 2025 | Q3 2024 | Change (YoY) | | :---------------------- | :------ | :------ | :----------- | | Net Interest Income (In thousands) | $100,041 | $93,940 | 6.5% | | Non-Interest Income (In thousands) | $27,304 | $26,541 | 2.9% | | Operating Revenue (In thousands) | $127,345 | $120,481 | 5.7% | | Non-Interest Expense (In thousands) | $54,492 | $54,023 | (0.9)% | | Pre-Tax Net Revenue (In thousands) | $72,853 | $66,458 | 9.6% | | Number of Accounts (thousands) | 3,475 | 3,341 | 4.0% | | Deposits (In millions) | $10,305 | $9,940 | 3.7% | | Linked Investment Accounts (off balance sheet, In millions) | $6,270 | $5,205 | 20.5% | | Total Footings (In millions) | $16,575 | $15,146 | 9.4% | - Net interest income increased primarily due to higher deposit balances, partially offset by lower deposit spreads, while non-interest income increased due to higher interchange and medical fees[21] Consumer Banking Webster's Consumer Banking segment, offering diverse financial solutions, maintained stable pre-tax, pre-provision net revenue year-over-year, with increased net interest income offset by decreased non-interest income and higher expenses - Consumer Banking provides deposit, lending, treasury management, and wealth management solutions through 196 banking centers and digital platforms like BrioDirect[22] | Metric | Q3 2025 | Q3 2024 | Change (YoY) | | :---------------------- | :------ | :------ | :----------- | | Net Interest Income (In thousands) | $214,465 | $202,122 | 6.1% | | Non-Interest Income (In thousands) | $24,909 | $28,299 | (12.0)% | | Operating Revenue (In thousands) | $239,374 | $230,421 | 3.9% | | Non-Interest Expense (In thousands) | $125,397 | $116,253 | (7.9)% | | Pre-Tax, Pre-Provision Net Revenue (In thousands) | $113,977 | $114,168 | (0.2)% | | Loans (In millions) | $12,683 | $11,571 | 9.6% | | Deposits (In millions) | $27,548 | $27,020 | 2.0% | | AUA (off balance sheet, In millions) | $7,656 | $7,948 | (3.7)% | - Net interest income increased due to higher average loan and deposit balances coupled with a higher interest rate spread on loans, partially offset by a lower interest rate spread on deposits[23] - Non-interest income decreased primarily due to a non-recurring gain on an investment portfolio sale in Q3 2024 and lower investment services income[23] Company Information This section provides an overview of Webster Financial Corporation, including its structure, assets, and business lines, along with Q3 2025 earnings conference call and contact details Company Overview Webster Financial Corporation, headquartered in Stamford, CT, is the holding company for Webster Bank, N.A., a commercial bank with over $83 billion in total consolidated assets, operating across three key business lines - Webster Financial Corporation (NYSE:WBS) is the holding company for Webster Bank, N.A., headquartered in Stamford, CT[24] - Webster is a values-driven organization with more than $83 billion in total consolidated assets[24] - Webster Bank provides financial products and services to businesses, individuals, and families across three differentiated lines of business: Commercial Banking, Healthcare Financial Services, and Consumer Banking[24] Conference Call & Contacts Details for the Q3 2025 earnings conference call, including dial-in and webcast access, are provided, along with contact information for media and investor relations - A conference call for Q3 2025 earnings was scheduled for October 17, 2025, at 9:00 a.m. Eastern Time, with dial-in and webcast details provided[25] - A replay of the conference call would be available for one week via Webster's Investor Relations website[25] - Media contact: Alice Ferreira (203-578-2610, acferreira@websterbank.com); Investor contact: Emlen Harmon (212-309-7646, eharmon@websterbank.com)[26] Legal & Accounting Disclosures This section outlines important legal and accounting disclosures, including disclaimers regarding forward-looking statements and explanations of non-GAAP financial measures Forward-Looking Statements This section contains a standard disclaimer regarding forward-looking statements, emphasizing that actual results may differ materially from projections due to inherent uncertainties, risks, and changes in circumstances beyond Webster's control - Forward-looking statements are based on current expectations and assumptions, subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict[27] - Factors that could cause actual results to differ include Webster's ability to execute its business plan, regulatory changes, economic conditions, market volatility, and the impact of unrealized losses in financial instruments[27] - Webster undertakes no obligation to publicly update any forward-looking statement, except as required by law[27] Non-GAAP Financial Measures This section explains the use of non-GAAP financial measures, such as the efficiency ratio and tangible equity ratios, which Webster believes provide useful information for understanding its financial position and performance - The press release includes non-GAAP financial measures like the efficiency ratio, return on average tangible common stockholders' equity, tangible equity ratio, tangible common equity ratio, tangible book value per common share, and core deposits[28] - Webster uses these non-GAAP measures for performance measurement, internal planning, and forecasting, believing they provide investors with a more complete understanding of factors and trends affecting its business[29] - Non-GAAP financial measures should not be considered a substitute for GAAP-basis financial measures and may not be comparable to those presented by other companies[31] Financial Statements & Supplementary Data This section provides comprehensive financial statements and supplementary data, including selected highlights, balance sheets, income statements, average balances, and detailed breakdowns of key financial metrics Selected Financial Highlights This table summarizes key income, performance ratios, asset quality metrics, and equity/share-related data for the past five quarters, offering a quick overview of Webster's financial trends - The table presents key financial metrics including net income, EPS, return on assets, asset quality ratios, capital ratios, and per-share data across five quarters[33] Consolidated Balance Sheets This table presents Webster's consolidated balance sheets for September 30, 2025, June 30, 2025, and September 30, 2024, detailing assets, liabilities, and stockholders' equity - Total assets increased to $83.19 billion at September 30, 2025, from $81.91 billion at June 30, 2025, and $79.45 billion at September 30, 2024[35] - Total deposits reached $68.18 billion at September 30, 2025, up from $66.31 billion at June 30, 2025, and $64.51 billion at September 30, 2024[35] - Common stockholders' equity stood at $9.18 billion at September 30, 2025, compared to $9.05 billion at June 30, 2025, and $8.91 billion at September 30, 2024[35] Consolidated Statements of Income These tables provide consolidated statements of income for the three and nine months ended September 30, 2025 and 2024, and for the past five quarters, detailing income and expense components - Net interest income for the three months ended September 30, 2025, was $631.67 million, up from $589.88 million in the same period of 2024[36] - Total non-interest income for Q3 2025 was $100.91 million, a significant increase from $57.74 million in Q3 2024[36] - Net income applicable to common stockholders for Q3 2025 was $254.05 million, compared to $186.80 million in Q3 2024[36] Consolidated Average Balances, Interest, Average Yields/Rates, and Net Interest Margin These tables present average balances, interest income/expense, and average yields/rates for interest-earning assets and liabilities on a fully tax-equivalent basis for Q3 2025 and 2024, including net interest margin - Average interest-earning assets for Q3 2025 were $75.40 billion with an average yield of 5.45%, compared to $70.42 billion and 5.69% in Q3 2024[38] - Average deposits and interest-bearing liabilities for Q3 2025 were $71.02 billion with an average rate of 2.21%, compared to $66.13 billion and 2.49% in Q3 2024[38] - Net interest margin was 3.40% for Q3 2025, a slight decrease from 3.41% in Q3 2024[38] Loans and Leases (Five Quarter) This table details actual and average balances of loans and leases by category for the past five quarters, including commercial, real estate, residential, and consumer segments - Total actual loans and leases increased to $55.05 billion at September 30, 2025, from $51.95 billion at September 30, 2024[42] - Commercial non-mortgage loans grew from $18.66 billion in Q3 2024 to $20.65 billion in Q3 2025[42] - Residential mortgages increased from $8.58 billion in Q3 2024 to $9.51 billion in Q3 2025[42] Changes in Allowance for Credit Losses on Loans and Leases (Five Quarter) This table tracks changes in the allowance for credit losses on loans and leases over the past five quarters, including provisions, charge-offs, and recoveries - The allowance for credit losses on loans and leases increased to $727.90 million at September 30, 2025, from $687.80 million at September 30, 2024[44] - Provision for credit losses was $44.21 million in Q3 2025, down from $53.87 million in Q3 2024[44] - Total net charge-offs for Q3 2025 were $38.35 million, compared to $35.43 million in Q3 2024[44] Non-performing Assets and Past Due Loans and Leases (Five Quarter) This table provides a five-quarter breakdown of non-performing assets, including non-performing loans and leases by category, other real estate owned, and past due loans and leases - Total non-performing assets increased to $545.33 million at September 30, 2025, from $427.27 million at September 30, 2024[45] - Non-performing commercial non-mortgage loans increased from $215.83 million in Q3 2024 to $223.40 million in Q3 2025[45] - Total past due loans and leases (30-89 days and 90+ days) were $65.63 million at September 30, 2025, a decrease from $108.93 million at September 30, 2024[45] Non-GAAP to GAAP Reconciliations These tables provide detailed reconciliations of various non-GAAP financial measures, including efficiency ratio and tangible equity ratios, to their most comparable GAAP measures for the past five quarters - The efficiency ratio was 45.79% for Q3 2025, compared to 45.49% for Q3 2024[46] - Return on average tangible common stockholders' equity was 17.64% for Q3 2025, up from 14.29% for Q3 2024[46] - Tangible book value per common share increased to $36.42 at September 30, 2025, from $33.26 at September 30, 2024[47]