Webster Financial (WBS) Q2 2025 Earnings Call July 17, 2025 09:00 AM ET Company ParticipantsEmlen Harmon - Senior MDJohn Ciulla - Chairman & CEOLuis Massiani - COO & PresidentNeal Holland - Senior EVP & CFOAndrew Leischner - AVP - Equity ResearchMark Fitzgibbon - Head of FSG ResearchJared Shaw - Managing DirectorMatt Breese - Managing DirectorAnthony Elian - Equity Research – BanksDavid Smith - Head - Consumer LendingDaniel Tamayo - Vice PresidentTimur Braziler - Director - Mid-Cap Bank Equity ResearchBen G ...

Financial Data and Key Metrics Changes - The company reported a return on tangible common equity of 18% and a return on assets (ROA) of nearly 1.3% with overall revenue growth of 1.6% compared to the prior quarter [5][6] - The common equity Tier one ratio increased, and the loan to deposit ratio remained flat at 81% [6][15] - The tangible book value per common share grew to $35.13, up over 3% from the previous quarter [15][23] Business Line Data and Key Metrics Changes - Total loans increased by $616 million or 1.2% linked quarter, with a notable one-time transfer of $242 million of loans to held for sale [16][17] - Total deposits grew by $739 million, with deposit costs up three basis points due to seasonal mix shifts [17][20] - Non-interest income was $95 million, reflecting a modest increase driven by growth in deposit service fees [20] Market Data and Key Metrics Changes - The company has not observed new pockets of credit deterioration across any industry or sector, maintaining a strong operating position [7][22] - The healthcare financial services segment is expected to benefit from favorable provisions in the reconciliation bill, potentially increasing HSA deposits significantly over the next five years [11][12] Company Strategy and Development Direction - The company is focused on organic growth, tuck-in acquisitions, and enhancing its healthcare services vertical [25][46] - The asset management partnership with Marathon is anticipated to enhance loan growth and drive fee revenue starting in 2026 [9][13] - The company aims to leverage its differentiated deposit profile and strong capital position to capitalize on growth opportunities [7][28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about loan growth accelerating as clients adapt to the current economic environment [25][26] - The company is well-positioned to thrive in various operating environments, including an accelerating investment cycle [27][28] - Management remains vigilant regarding potential impacts from proposed tariffs but does not foresee significant exposure to affected industries [7][26] Other Important Information - The company authorized an additional $700 million in share repurchases and bought back 1.5 million shares during the quarter [6][15] - The company welcomed a new Chief Risk Officer and a new Board member, enhancing its executive management team [28][29] Q&A Session Summary Question: What is the company's willingness to reduce CET1 and thoughts on near-term buyback pace? - Management indicated a medium-term goal of 11% for CET1 and a potential reduction over time, with disciplined capital management strategies in place [34][35] Question: What is the outlook for NIM and cash balances? - Management confirmed that cash balances are at desired levels, with a slight impact on NIM expected from cash build and new debt issuance [40] Question: How does the company view deposit costs in light of expected rate cuts? - Management expects to lower deposit costs if rate cuts occur but noted significant competition in the deposit market [42][43] Question: What is the company's stance on M&A if the category four threshold is lifted? - Management stated that while they are not actively pursuing whole bank M&A, they remain open to opportunities if the regulatory environment changes [46][47] Question: How will the expansion of the HSA market impact expenses? - Management indicated no major changes in expense trajectory for HSA, with some marketing investments anticipated for consumer education [53][55] Question: What is the outlook for credit quality metrics? - Management expressed cautious optimism about continued improvement in credit quality metrics, with no new pockets of problems identified [76][78] Question: How will the joint venture with Marathon impact loan growth? - Management expects the joint venture to enhance competitive positioning and facilitate participation in larger transactions, positively impacting loan growth [95][101]

Financial Performance - Reported PPNR was $370.1 million[4] - Net income applicable to common shareholders was $251.7 million[4] - Diluted EPS reached $1.52[4] - ROAA stood at 1.29%[4, 5] - ROATCE was 17.96%[4, 5] Balance Sheet Highlights - Loans increased by $0.6 billion, a 1.2% LQ increase[5] - Excluding loans moved to held for sale, loan growth would have been $0.9 billion, or 1.6%[5, 14] - Total deposits grew by $0.7 billion, representing a 1.1% LQ increase[5] - TBVPS grew 3.4% to $35.13 LQ[5] - Total loans as a % of earning assets is 73%[83] Key Ratios - The loan-to-deposit ratio was 80.9%[5, 7] - The efficiency ratio improved to 45.4%, down 0.4% LQ[5] - CET1 was 11.33%[5, 7] - TCE was 7.46%[5, 7] Loan Portfolio - Total loans reached $53.672 billion[7] - Commercial loans totaled $42.652 billion[7] - Consumer loans amounted to $11.020 billion[7] - C&I loans increased by $420 million LQ, or 3.0%, reaching $14.232 billion[11] - CRE decreased by $44 million LQ, or -0.2%, reaching $21.111 billion[11] Deposit Portfolio - Total deposits reached $66.314 billion[7] - Transactional deposits totaled $19.164 billion[7] - Healthcare Financial Services deposits were $10.180 billion[7] - interSYNC deposits were $8.719 billion[16] - Ametros accounts were $1.115 billion[16] Net Interest Income and Margin - Net interest income totaled $621.2 million, up $9.0 million or 1.5% LQ[21, 26] - Net interest margin was 3.44%, down 4 bps LQ[5, 21] Commercial Real Estate Portfolio - The commercial real estate portfolio totaled $18.8 billion[57, 61] - Classified loans were 3.9%[57]