Webster Reports First Quarter 2025 EPS of $1.30

Webster Financial Corporation ("Webster") (NYSE:WBS), the holding company for Webster Bank, N.A., today announced net income applicable to common stockholders of $220.4 million, or $1.30 per diluted share, for the quarter ended March 31, 2025, compared to $210.1 million, or $1.23 per diluted share, for the quarter ended March 31, 2024.

"Webster has again proven its capacity to consistently execute through a variety of operating environments," said John R. Ciulla, chairman and chief executive officer. "Growth in loans and deposits was generated by a breadth of businesses, as we continue to generate strong returns for our stockholders."

Highlights for the first quarter of 2025:

• Revenue of $704.8 million.
• Period end loans and leases balance of $53.1 billion, up $0.6 billion, or 1.0 percent from prior quarter.
• Period end deposits balance of $65.6 billion, up $0.8 billion, or 1.3 percent, from prior quarter.
• Provision for credit losses of $77.5 million.
• Return on average assets of 1.15 percent.
• Return on average tangible common equity of 15.93 percent¹.
• Net interest margin³ of 3.48 percent, up 4 basis points from prior quarter.
• Common equity tier 1 ratio of 11.26 percent².
• Efficiency ratio of 45.79 percent¹.
• Tangible common equity ratio of 7.43 percent¹.

"While we continue to see solid fundamental strength in our business and clients, market volatility conveys a less certain economic outlook," said Neal Holland, senior executive vice president and chief financial officer. "To ensure we are prepared for a wider range of economic scenarios, we accordingly increased our allowance for credit losses on loans and leases."

Consolidated financial performance:

Quarterly net interest income compared to the first quarter of 2024:

• Net interest income was $612.2 million, compared to $567.7 million.
• Net interest margin was 3.48 percent, compared to 3.41 percent. The yield on interest-earning assets decreased by 17 basis points, and the cost of interest-bearing liabilities decreased by 24 basis points.
• Average interest-earning assets totaled $72.9 billion, an increase of $4.1 billion, or 6.0 percent.
• Average loans and leases totaled $52.6 billion, an increase of $1.6 billion, or 3.2 percent.
• Average deposits totaled $65.0 billion, an increase of $4.4 billion, or 7.3 percent.

Quarterly provision for credit losses:

• The provision for credit losses was $77.5 million, contributing to a $23.8 million increase in the allowance for credit losses on loans and leases from the prior quarter. The provision for credit losses was $63.5 million in the prior quarter, and $45.5 million a year ago.
• Net charge-offs were $55.0 million, compared to $60.9 million in the prior quarter, and $37.5 million a year ago. The ratio of net charge-offs to average loans and leases was 0.42 percent, compared to 0.47 percent in the prior quarter, and 0.29 percent a year ago.
• The allowance for credit losses on loans and leases represented 1.34 percent of total loans and leases, compared to 1.31 percent at December 31, 2024, and 1.26 percent at March 31, 2024.
• The allowance for credit losses on loans and leases represented 126 percent of non-performing loans and leases, compared to 149 percent at December 31, 2024, and 226 percent at March 31, 2024.

Quarterly non-interest income compared to the first quarter of 2024:

• Total non-interest income was $92.6 million, compared to $99.4 million, a decrease of $6.8 million. In the first quarter of 2024, total non-interest income included losses on sale of investment securities of $9.8 million and an $11.7 million net gain on the sale of mortgage servicing rights. Excluding these items, total non-interest income decreased $4.9 million. The decrease is primarily attributable to the credit valuation adjustment and bank-owned life insurance events in the first quarter of 2024.

Quarterly non-interest expense compared to the first quarter of 2024:

• Total non-interest expense was $343.6 million, compared to $335.9 million, an increase of $7.7 million. In the first quarter of 2024, total non-interest expense included $11.9 million related to an increase to the FDIC special assessment estimate and $3.1 million of Ametros Financial Corporation ("Ametros") acquisition expenses. Excluding these items, total non-interest expense increased $22.7 million. The increase is primarily attributable to investments in human capital and our risk management infrastructure, and a full quarter of Ametros expenses as the transaction closed in late-January 2024.

Quarterly income taxes compared to the first quarter of 2024:

• Income tax expense was $56.7 million, compared to $69.3 million, and the effective tax rate was 20.0 percent, compared to 24.3 percent. The higher income tax expense and effective tax rate in the first quarter of 2024 primarily reflects the recognition of a $10.9 million discrete expense in that period, which impacted the effective rate by 3.8 percentage points.

Investment securities:

• Total investment securities, net were $17.7 billion, compared to $17.5 billion at December 31, 2024, and $16.3 billion at March 31, 2024. The carrying value of the available-for-sale portfolio included $580.4 million of net unrealized losses, compared to $712.9 million at December 31, 2024, and $758.5 million at March 31, 2024. The carrying value of the held-to-maturity portfolio does not reflect $893.3 million of net unrealized losses, compared to $991.2 million at December 31, 2024, and $897.2 million at March 31, 2024.

Loans and leases:

• Total loans and leases were $53.1 billion, compared to $52.5 billion at December 31, 2024, and $51.1 billion at March 31, 2024. Compared to December 31, 2024, commercial loans and leases increased by $203.9 million, commercial real estate loans decreased by $7.9 million, residential mortgages increased by $269.3 million, and consumer loans increased by $85.8 million. Compared to March 31, 2024, commercial loans and leases increased by $1.4 billion, commercial real estate loans decreased by $486.4 million, residential mortgages increased by $896.8 million, and consumer loans increased by $135.3 million.
• Loan originations for the portfolio were $2.7 billion, compared to $3.4 billion in the prior quarter, and $2.5 billion a year ago.

Asset quality:

• Total non-performing loans and leases were $564.4 million, compared to $461.3 million at December 31, 2024, and $283.6 million at March 31, 2024. The ratio of total non-performing loans and leases to total loans and leases was 1.06 percent, compared to 0.88 percent at December 31, 2024, and 0.56 percent at March 31, 2024.
• Past due loans and leases were $87.2 million, compared to $113.4 million at December 31, 2024, and $125.2 million at March 31, 2024. The decrease from prior quarter is primarily driven by asset-based lending and commercial real estate, partially offset by commercial non-mortgage and residential mortgages.

Deposits and borrowings:

• Total deposits were $65.6 billion, compared to $64.8 billion at December 31, 2024, and $60.7 billion at March 31, 2024. The ratio of core deposits to total deposits¹ was 88.5 percent, compared to 87.3 percent at December 31, 2024, and 88.6 percent at March 31, 2024. The loan to deposit ratio was 80.9 percent, compared to 81.1 percent at December 31, 2024, and 84.1 percent at March 31, 2024.
• Total borrowings were $3.9 billion, compared to $3.4 billion at December 31, 2024, and $4.9 billion at March 31, 2024.

Capital:

• The return on average common stockholders' equity and the return on average tangible common stockholders' equity¹ were 9.94 percent and 15.93 percent, respectively, compared to 7.80 percent and 12.73 percent, respectively, in the prior quarter, and 10.01 percent and 16.30 percent, respectively, a year ago.
• The tangible equity¹ and tangible common equity¹ ratios were 7.80 percent and 7.43 percent, respectively, compared to 7.82 percent and 7.45 percent, respectively, at December 31, 2024, and 7.54 percent and 7.15 percent, respectively, at March 31, 2024.
• The common equity tier 1² ratio was 11.26 percent, compared to 11.54 percent at December 31, 2024, and 10.57 percent at March 31, 2024.
• Book value per common share and tangible book value per common share¹ were $52.91 and $33.97, respectively, compared to $51.63 and $32.95, respectively, at December 31, 2024, and $49.07 and $30.22, respectively, at March 31, 2024.

Reportable segments:

Commercial Banking

Webster's Commercial Banking segment delivers financial solutions both nationally and regionally to a wide range of companies, investors, government entities, and other public and private institutions. Commercial Banking helps its clients achieve their business and financial goals with expertise in Commercial & Institutional Lending, Commercial Real Estate, Capital Markets, Capital Finance, and Treasury Management. Its Private Banking team also pairs holistic wealth solutions, including tailored lending, with commercial banking services. At March 31, 2025, Commercial Banking had $40.8 billion in loans and leases and $16.6 billion in deposits, as well as a combined $3.0 billion in assets under administration ("AUA") and management ("AUM").

Commercial Banking Operating Results:

Pre-tax, pre-provision net revenue decreased $28.5 million, to $241.5 million, in the quarter as compared to the prior year. Net interest income decreased $22.8 million, to $319.1 million, primarily driven by lower loan yields, partially offset by loan growth and lower deposit costs. Non-interest income decreased $5.3 million, to $29.0 million, primarily driven by lower direct investment gains, interest rate hedging activities, cash management fees, and factoring income. Non-interest expense increased $0.4 million, to $106.6 million, primarily driven by increased investments in human capital, operational process improvements, and technology to support growth of the Commercial Banking segment.

Healthcare Financial Services

Webster's Healthcare Financial Services segment includes HSA Bank and Ametros. HSA Bank is one the country's largest providers of employee benefits solutions, including being one of the leading bank administrators of health savings accounts, emergency savings accounts, and flexible spending accounts administration services in 50 states. Ametros, the nation's largest professional administrator of medical insurance claim settlements, helps individuals manage their ongoing medical care through their CareGuard service and proprietary technology platform. At March 31, 2025, Healthcare Financial Services had $15.4 billion in total footings comprising $10.2 billion in deposits and $5.1 billion in AUA through linked investment accounts.

Healthcare Financial Services Operating Results:

Pre-tax net revenue increased $4.9 million, to $70.0 million, in the quarter as compared to the prior year. Net interest income increased $10.2 million, to $96.4 million, primarily driven by higher deposit balances partially offset by lower deposit spreads. Non-interest income decreased $1.7 million, to $29.4 million, primarily driven by a decrease of $2.8 million from HSA Bank due to lower deposit service fees and higher revenue share costs, partially offset by an increase of $1.2 million from Ametros. Non-interest expense increased $3.6 million, to $55.7 million, primarily driven by an increase of $4.1 million from Ametros, partially offset by a decrease of $0.5 million from HSA Bank due to lower compensation and benefits.

Consumer Banking

Webster's Consumer Banking segment delivers customized financial solutions for individuals and families, private clients, and small business owners across 196 banking centers. Consumer Banking offers a full suite of deposit, lending, treasury management, and wealth management solutions delivered by experienced relationship managers and financial advisors. Consumer Banking also provides a fully digital banking experience through its mobile banking apps and BrioDirect. At March 31, 2025, Consumer Banking had $12.3 billion in loans and $27.8 billion in deposits, as well as $7.4 billion in AUA.

Consumer Banking Operating Results:

Pre-tax, pre-provision net revenue decreased $14.0 million, to $105.6 million, in the quarter as compared to the prior year. Net interest income decreased $3.7 million, to $202.1 million, primarily driven by growth in higher cost deposit products, partially offset by loan growth. Non-interest income decreased $7.8 million, to $26.2 million, primarily driven by the net gain on sale of a mortgage servicing rights in the first quarter of 2024, coupled with lower investment services income and loan servicing fees, partially offset by increased deposit service fees. Non-interest expense increased $2.5 million, to $122.7 million, primarily driven by increased investments in technology and outside professional services, partially offset by lower operational support expenses, costs related to debit card processing, and employee benefits expenses.

***

Webster Financial Corporation ("Webster") (NYSE:WBS) is the holding company for Webster Bank, N.A. ("Webster Bank"). Headquartered in Stamford, CT, Webster is a values-driven organization with more than $80 billion in total assets. Webster Bank is a commercial bank that provides a wide range of financial products and services to businesses, individuals, and families across three differentiated lines of business: Commercial Banking, Healthcare Financial Services, and Consumer Banking. While its core footprint spans the Northeast from the New York metropolitan area to Rhode Island and Massachusetts, certain businesses operate in extended geographies. Webster Bank is a member of the FDIC and an equal housing lender. For more information about Webster, including past press releases and the latest annual report, visit the Webster website at www.websterbank.com.

Conference Call

A conference call covering Webster's first quarter 2025 earnings announcement will be held today, Thursday, April 24, 2025, at 9:00 a.m. Eastern Time. To listen to the live call, please dial 888-330-2446, or 1-240-789-2732 for international callers. The passcode is 8607257. The webcast, along with related slides, will be available via Webster's Investor Relations website at investors.websterbank.com. A replay of the conference call will be available for one week via the website listed above, beginning at approximately 12:00 noon (Eastern Time) on April 24, 2025. To access the replay, dial 800-770-2030, or 1-609-800-9909 for international callers. The replay conference ID number is 8607257.

Forward-Looking Statements

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "believes," "outlook," "expects," "target," "continue," "remain," "will," "should," "may," "plans," "estimates," "conveys," and similar references to future periods. However, these words are not the exclusive means of identifying such statements. Examples of forward-looking statements include but are not limited to: projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items; statements of plans, objectives, and expectations of Webster or its management or Board of Directors; statements of future economic performance; and statements of assumptions underlying such statements. Forward-looking statements are based on Webster's current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Webster's actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Factors that could cause Webster's actual results to differ from those discussed in any forward-looking statements include, but are not limited to: Webster's ability to successfully execute its business plan and strategic initiatives, and manage any risks or uncertainties; continued regulatory changes or other risk mitigation efforts taken by government agencies in response to the risk to safety and soundness in the banking industry; volatility in Webster's stock price due to investor sentiment and perception of the banking industry; local, regional, national, and international economic conditions or macroeconomic instability (including any economic slowdown or recession, inflation, interest rate changes, credit loss trends, unemployment, changes in housing or securities markets, or other factors) and the impact of the same on Webster or its customers; volatility, disruption, or uncertainty in national and international financial markets, including as a result of geopolitical developments; the impact of unrealized losses in Webster's financial instruments, particularly in Webster's available-for-sale securities portfolio; changes in laws and regulations, or existing laws and regulations that Webster becomes subject to, including those concerning banking, taxes, dividends, securities, insurance, cybersecurity, and healthcare administration, with which Webster and its subsidiaries must comply; adverse conditions in the securities markets that could lead to impairment in the value of Webster's securities portfolio; inflation, monetary fluctuations, and changes in interest rates, including the impact of such changes on economic conditions, customer behavior, funding costs, and Webster's loans and leases and securities portfolios; possible changes in governmental monetary and fiscal policies, including, but not limited to, Federal Reserve policies in connection with continued inflationary pressures; the effects of any U.S. federal government shutdown, closures or significant staff reductions in agencies regulating or otherwise impacting Webster's business; the impact of any new regulatory, policy, or enforcement developments resulting from the change in U.S. presidential administration, including the implementation of tariffs and other protectionist trade policies, including any reciprocal tariffs by foreign countries; the timely development and acceptance of new products and services, and the perceived value of those products and services by customers; changes in deposit flows, consumer spending, borrowings, and savings habits; Webster's ability to implement new technologies and maintain secure and reliable information and technology systems; the effects of any cybersecurity threats, attacks or disruptions, fraudulent activity, or other data breaches or security events, including those involving Webster's third-party vendors and service providers; performance by Webster's counterparties and third-party vendors; Webster's ability to increase market share and control expenses; changes in the competitive environment among banks, financial holding companies, and other traditional and non-traditional financial service providers; Webster's ability to maintain adequate sources of funding and liquidity; Webster's ability to attract, develop, motivate, and retain skilled employees; changes in loan demand or real estate values; changes in the mix of loan geographies, sectors, or types and the level of non-performing assets, charge-offs, and delinquencies; changes in Webster's estimates of current expected credit losses based upon periodic review under relevant regulatory and accounting requirements; the effect of changes in accounting policies and practices applicable to Webster, including the impacts of recently adopted accounting guidance; legal and regulatory developments, including any due to judicial decisions, the resolution of legal proceedings or regulatory or other governmental inquiries, the results of regulatory examinations or reviews, disruptions at regulatory agencies, or protracted congressional negotiations regarding government funding and other issues; Webster's ability to navigate differing environmental, social, governmental, and sustainability concerns among governmental administrations, Webster's stakeholders, and other activists that may arise from Webster's business activities; Webster's ability to assess and monitor the effect of evolving uses of artificial intelligence on its business and operations; the occurrence of natural disasters, severe weather events, and public health crises, and any governmental or societal responses thereto; and the other factors that are described in Webster's Annual Report on Form 10-K for the year ended December 31, 2024, and subsequent filings with the U.S. Securities and Exchange Commission. Any forward-looking statement made by Webster in this release speaks only as of the date on which it is made. Factors or events that could cause Webster's actual results to differ may emerge from time to time, and it is not possible for Webster to predict all of them. Webster undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures, including 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. A reconciliation of each non-GAAP financial measure to the most closely comparable GAAP measure is included in the accompanying selected financial highlights table.

Webster believes that providing certain non-GAAP financial measures provides investors with information useful in understanding its financial performance, performance trends, and financial position. Webster utilizes these measures for internal planning and forecasting purposes. Webster, as well as securities analysts, investors, and other interested parties, also use these measures to compare peer company operating performance. Webster believes that its presentation and discussion, together with the accompanying reconciliations, provides additional clarity of factors and trends affecting its business and allows investors to view performance in a manner similar to management.

The efficiency ratio, which represents the costs expended to generate a dollar of revenue, is calculated excluding certain non-operational items. The return on average tangible common stockholders' equity represents net income available to common stockholders, adjusted for the tax-effected amortization of intangible assets, as a percentage of average stockholders' equity less average preferred stock and average goodwill and net intangible assets. The tangible equity ratio represents stockholders' equity less goodwill and net intangible assets divided by total assets less goodwill and net intangible assets. The tangible common equity ratio represents stockholders' equity less preferred stock and goodwill and net intangible assets divided by total assets less goodwill and net intangible assets. Tangible book value per common share represents stockholders' equity less preferred stock and goodwill and net intangible assets divided by common shares outstanding at the end of the period. Core deposits reflect total deposits less certificates of deposit and brokered certificates of deposit.

These non-GAAP measures should not be considered a substitute for GAAP basis measures and results, and Webster strongly encourages investors to review its consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

Refer the tables beginning on page 18 for Non-GAAP to GAAP reconciliations.