Q4 2025 Webster Financial Corp Earnings Call

January 23, 2026

Speaker #2: Good morning. Welcome to Webster's Financial Corporation's fourth quarter 2025 earnings conference call. Please note that this event is being recorded. I would now like to introduce Webster's Director of Investor Relations, Emlen Harmon, to introduce the call.

Emlen Harmon: Good morning. Welcome to Webster Financial Corporation's Q4 2025 Earnings Conference Call. Please note that this event is being recorded. I would now like to introduce Webster's Director of Investor Relations, Emlen Harmon, to introduce the call. Mr. Harmon, please go ahead.

Operator: Good morning. Welcome to Webster Financial Corporation's Q4 2025 Earnings Conference Call. Please note that this event is being recorded. I would now like to introduce Webster's Director of Investor Relations, Emlen Harmon, to introduce the call. Mr. Harmon, please go ahead.

Speaker #2: Mr. Harmon, please go ahead.

Speaker #3: Good morning. Before we begin our remarks, I want to remind you that comments made by management may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to the safe harbor rules.

[Company Representative] (Webster Financial Corporation): Good morning. Before we begin our remarks, I want to remind you that comments made by management may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to the Safe Harbor Rules. Please review the forward-looking disclaimer in Safe Harbor language in today's press release and presentation for more information about risks and uncertainties which may affect us. The presentation accompanying management's remarks can be found on the company's Investor Relations website at investors.websterbank.com. I'll now turn the call over to Webster Financial CEO, John Ciulla.

Emlen Harmon: Good morning. Before we begin our remarks, I want to remind you that comments made by management may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to the Safe Harbor Rules. Please review the forward-looking disclaimer in Safe Harbor language in today's press release and presentation for more information about risks and uncertainties which may affect us. The presentation accompanying management's remarks can be found on the company's Investor Relations website at investors.websterbank.com. I'll now turn the call over to Webster Financial CEO, John Ciulla.

Speaker #3: Please review the forward-looking disclaimer and safe harbor language in today's press release and presentation for more information about risks and uncertainties which may affect us.

Q4 2025 Webster Financial Corp Earnings Call

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Q4 2025 Webster Financial Corp Earnings Call

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Friday, January 23rd, 2026 at 2:00 PM

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John Ciulla: Thanks, Emlen. Good morning and welcome to Webster Financial Corporation's Fourth Quarter and Full Year 2025 Earnings Call. We appreciate you joining us this morning. I'm going to start with a quick synopsis of the year. Our President and Chief Operating Officer, Luis Massiani, is going to provide an update on operating developments, and our CFO, Neil Holland, will provide additional detail on financials before my closing remarks and Q&A. Webster continued to excel from a fundamental perspective in the fourth quarter, and we entered 2026 on our front foot. Our strategic efforts in 2025 largely focused on execution, and our performance was consistently strong over the course of this year. Despite an uncertain macro backdrop at times, we held our focus on delivering for our clients and enhancing the operating capabilities of the bank. On a full-year basis, Webster generated a 17% ROTCE and a 1.2% ROA.

John Ciulla: Our EPS was up 10% over the year prior, while we grew loans 8% and deposits 6%. Our tangible book value per share increased 13% over the prior year, while accelerating capital distributions to shareholders by repurchasing 10.9 million shares. We produced strong financial results while continuing to invest in our non-traditional banking verticals, including HSA Bank, Ametros, and InterSync, as we look to fortify and advance the strategic advantages these businesses provide. We also aggressively remediated the two isolated pockets of our loan portfolio with less favorable credit characteristics, which optimizes our balance sheet and enhances forward profitability. One illustration of this initiative is the 5% decline in commercial classified loans relative to prior year-end. The macroeconomic backdrop remains supportive of asset quality performance more generally, as we continue to see solid asset quality trends from our portfolio at large.

Our EPS was up 10% over the year prior, while we grew loans 8% and deposits 6%. Our tangible book value per share increased 13% over the prior year, while accelerating capital distributions to shareholders by repurchasing 10.9 million shares. We produced strong financial results while continuing to invest in our non-traditional banking verticals, including HSA Bank, Ametros, and InterSync, as we look to fortify and advance the strategic advantages these businesses provide. We also aggressively remediated the two isolated pockets of our loan portfolio with less favorable credit characteristics, which optimizes our balance sheet and enhances forward profitability. One illustration of this initiative is the 5% decline in commercial classified loans relative to prior year-end. The macroeconomic backdrop remains supportive of asset quality performance more generally, as we continue to see solid asset quality trends from our portfolio at large.

Luis Massiani: Thanks, John. Our performance in Q4 echoed the solid results that we delivered through the year. Our clients continued to navigate well through the macro environment, and client activity remained robust in terms of both loan growth and lending-related fee income. Limited payoff activity also contributed to better-than-expected loan growth in Q4. Growth was generated across a broad range of asset classes, highlighting the diversity of origination capabilities that is a key strength of our franchise. We saw significant progress on credit remediation as classified commercial loans were down 7% and non-performers were down 8%. Net charge-offs were 35 basis points. The trajectory of problem assets should continue to decline, with some quarters decreasing more than others, as was the case in 2025.

Luis Massiani: Following a strong year of deposit growth in which our commercial, consumer, healthcare financial services, and InterSync businesses all contributed to our performance, we see continued opportunity to grow across our diverse funding platforms. While still early stages, Bronze Plan participants in Affordable Care Act healthcare plans have started opening HSA accounts. We enhanced our existing mobile and web enrollment systems to better serve ACA participants, and we are seeing increased account openings in our direct-to-consumer channel, which should accelerate through the rest of the year. Our expectation for deposit growth from HSA eligibility for Bronze and Catastrophic Plan participants is unchanged. We believe newly HSA-eligible plan participants will drive $1 billion to $2.5 billion in incremental deposit growth at HSA Bank over the next five years, including $50 to $100 million of growth in 2026.

Following a strong year of deposit growth in which our commercial, consumer, healthcare financial services, and InterSync businesses all contributed to our performance, we see continued opportunity to grow across our diverse funding platforms. While still early stages, Bronze Plan participants in Affordable Care Act healthcare plans have started opening HSA accounts. We enhanced our existing mobile and web enrollment systems to better serve ACA participants, and we are seeing increased account openings in our direct-to-consumer channel, which should accelerate through the rest of the year. Our expectation for deposit growth from HSA eligibility for Bronze and Catastrophic Plan participants is unchanged. We believe newly HSA-eligible plan participants will drive $1 billion to $2.5 billion in incremental deposit growth at HSA Bank over the next five years, including $50 to $100 million of growth in 2026.

Luis Massiani: The acceleration in growth will be gradual as newly eligible enrollees in the ACA plans first recognize and then adopt HSA accounts. We're also closely watching healthcare policy developments as there is growing appetite in Washington for a number of potential legislative actions that would enable HSA Bank to help a significantly greater portion of Americans manage their healthcare savings and spending needs. This includes the potential for unpassed provisions in last year's reconciliation bill to now be passed, and proposed legislation that could direct some ACA subsidies directly into consumer HSA accounts. The outlook for deposit growth at Ametros also remains very strong. A greater portion of settlement recipients are recognizing the benefits of professional administration. We are adding sales capacity and leveraging Webster scale and technology to further enhance the member experience. Turn it over to Neil.

The acceleration in growth will be gradual as newly eligible enrollees in the ACA plans first recognize and then adopt HSA accounts. We're also closely watching healthcare policy developments as there is growing appetite in Washington for a number of potential legislative actions that would enable HSA Bank to help a significantly greater portion of Americans manage their healthcare savings and spending needs. This includes the potential for unpassed provisions in last year's reconciliation bill to now be passed, and proposed legislation that could direct some ACA subsidies directly into consumer HSA accounts. The outlook for deposit growth at Ametros also remains very strong. A greater portion of settlement recipients are recognizing the benefits of professional administration. We are adding sales capacity and leveraging Webster scale and technology to further enhance the member experience. Turn it over to Neil.

Glenn MacInnes: Thanks, Luis, and good morning, everyone. I'll start on slide five with a review of our balance sheet. Balance sheet growth continued at a solid clip in Q4, with growth in both loans and deposits. Assets were up $880 million, or 1%, in Q4. On a full year basis, they were up just over $5 billion, or 6.4%. We continue to operate from a strong capital position relative to internal and external thresholds. During Q4, we repurchased 3.6 million shares. Loan trends are highlighted on slide six. In total, loans were up $1.5 billion, or 2.8%, and on a full year basis, were up 7.8%. Growth was diverse and predominantly driven by commercial loan categories, including commercial real estate. We provide additional details on deposits on slide seven, where total deposits were up 0.9% over the prior quarter.

Neal Holland: Thanks, Luis, and good morning, everyone. I'll start on slide five with a review of our balance sheet. Balance sheet growth continued at a solid clip in Q4, with growth in both loans and deposits. Assets were up $880 million, or 1%, in Q4. On a full year basis, they were up just over $5 billion, or 6.4%. We continue to operate from a strong capital position relative to internal and external thresholds. During Q4, we repurchased 3.6 million shares. Loan trends are highlighted on slide six. In total, loans were up $1.5 billion, or 2.8%, and on a full year basis, were up 7.8%. Growth was diverse and predominantly driven by commercial loan categories, including commercial real estate. We provide additional details on deposits on slide seven, where total deposits were up 0.9% over the prior quarter.

Glenn MacInnes: While we did see a seasonal $1.2 billion decline in public funds, we also saw growth across each of our business lines and backfilled the seasonal public fund outflows with corporate deposits. Deposit costs were down 11 basis points relative to the prior quarter. While deposit pricing remains competitive, we should see some repricing accelerate in the first quarter, driven by seasonal factors and recent repricing efforts. Income statement trends are on slide eight. There were a number of adjustments this quarter. The net effect was a loss of $8 million to pre-tax income and $6 million to after-tax income. Excluding these, adjusted PP&R was down $4.9 million relative to the prior quarter, with slightly better revenue offset by expenses related to current and future growth. Adjusted net income was slightly higher than the prior quarter on a lower provision and tax rate.

While we did see a seasonal $1.2 billion decline in public funds, we also saw growth across each of our business lines and backfilled the seasonal public fund outflows with corporate deposits. Deposit costs were down 11 basis points relative to the prior quarter. While deposit pricing remains competitive, we should see some repricing accelerate in the first quarter, driven by seasonal factors and recent repricing efforts. Income statement trends are on slide eight. There were a number of adjustments this quarter. The net effect was a loss of $8 million to pre-tax income and $6 million to after-tax income. Excluding these, adjusted PP&R was down $4.9 million relative to the prior quarter, with slightly better revenue offset by expenses related to current and future growth. Adjusted net income was slightly higher than the prior quarter on a lower provision and tax rate.

Glenn MacInnes: Adjusted earnings per share additionally benefited from a lower share count. The adjustments to GAAP earnings are highlighted on the following slide. On slide 10 is detail of net interest income. We saw a modest increase in NII as loan growth remained solid through the quarter, and we saw more limited payoffs activity than anticipated into quarter end. Better-than-expected loan yields also helped support the net interest margin, which was a couple basis points better than our most recent guidance. Our December and spot NIM were both 3.35% for the quarter and December. As illustrated on slide 11, we remained effectively neutral to gradual changes in short-term interest rates. On slide 12, linked quarter adjusted fees were up $2.7 million, with contributions from increased client activity, direct investment gains, and the credit valuation adjustment. Slide 13 reviews non-interest expense trends.

Adjusted earnings per share additionally benefited from a lower share count. The adjustments to GAAP earnings are highlighted on the following slide. On slide 10 is detail of net interest income. We saw a modest increase in NII as loan growth remained solid through the quarter, and we saw more limited payoffs activity than anticipated into quarter end. Better-than-expected loan yields also helped support the net interest margin, which was a couple basis points better than our most recent guidance. Our December and spot NIM were both 3.35% for the quarter and December. As illustrated on slide 11, we remained effectively neutral to gradual changes in short-term interest rates. On slide 12, linked quarter adjusted fees were up $2.7 million, with contributions from increased client activity, direct investment gains, and the credit valuation adjustment. Slide 13 reviews non-interest expense trends.

Glenn MacInnes: Increases in expenses quarter-over-quarter were largely related to growth and growth potential, with higher incentive accruals, investments in the expanded opportunity at HSA Bank, and investments in technology. Slide 14 details components of our allowance for credit losses, which decreased $9 million relative to the prior quarter. The decline was driven by charge-offs of loans previously reserved and improvements in underlying credit trends. Those improving trends are highlighted on the following slide, which shows that non-performing assets were down 8% and commercial classified loans were down 7%. Criticized loans were also down 6%. Charge-offs for the quarter were 35 basis points. Turning to Slide 16, our capital ratios remain above well-capitalized levels and in excess of our publicly stated targets. Our tangible book value per share increased to $37.20 from $36.42 in the prior quarter, with net income partially offset by shareholder capital return.

Increases in expenses quarter-over-quarter were largely related to growth and growth potential, with higher incentive accruals, investments in the expanded opportunity at HSA Bank, and investments in technology. Slide 14 details components of our allowance for credit losses, which decreased $9 million relative to the prior quarter. The decline was driven by charge-offs of loans previously reserved and improvements in underlying credit trends. Those improving trends are highlighted on the following slide, which shows that non-performing assets were down 8% and commercial classified loans were down 7%. Criticized loans were also down 6%. Charge-offs for the quarter were 35 basis points. Turning to Slide 16, our capital ratios remain above well-capitalized levels and in excess of our publicly stated targets. Our tangible book value per share increased to $37.20 from $36.42 in the prior quarter, with net income partially offset by shareholder capital return.

Glenn MacInnes: I'll wrap up my comments on slide 17 with our outlook for full year 2026. We're anticipating loan growth of 5% to 7% and deposit growth of 4% to 6%. The midpoint of the guide has expected revenue of $3 billion for 2026. On a GAAP basis, we expect net interest income of $2.57 to $2.63 billion, which assumes two 25 basis point Fed funds cuts in June and September. We expect fees to be $390 to $410 million and expenses to be $1.46 to $1.48 billion, while noting that first quarter of 2026 expenses will likely be a few percentage points higher than adjusted expenses in the fourth quarter, primarily due to seasonal impacts of payroll taxes, annual merit, and benefit costs. With that, I'll turn back to John for closing remarks.

John Ciulla: Thanks, Neil. Our outlook for this year anticipates that we continue to drive growth that enhances our financial performance, as we also invest in and grow businesses that advance our strategic advantage in terms of attractive funding characteristics and asset origination capabilities, further building on Webster's substantial franchise value. We're in a unique period for the banking industry, with positive momentum coming from macroeconomic and regulatory tailwinds. While we anticipate we will be a beneficiary of these dynamics, we will also ensure we grow while maintaining the resiliency and adaptability of the company. In terms of Webster's performance, 2025, our 90th year, it was a record year for the bank in terms of milestones and financial achievements, and we're positioned to prosper into the future.

Glenn MacInnes: Yeah. For those of you who listened to our last public comments, we've guided down NIM for Q4 by a few basis points. And when we had the mid-December cut, we made more aggressive moves than some of our last cuts. And so we had nice pricing down, and we ended December with an average cost of deposits at 1.91 versus 1.99 for the quarter. So a nice trajectory down there. As John said, competition remains strong, but we did have some positive movement, especially on that last cut, and are continuing to look for ways to optimize our overall cost of deposits. Carrying that into kind of beta assumptions, we're assuming for kind of this cycle through the end of next year, a 30% overall beta, which is a little bit higher than we are today, but that's how we're looking at deposit pricing within our guide.

Neal Holland: Yeah. For those of you who listened to our last public comments, we've guided down NIM for Q4 by a few basis points. And when we had the mid-December cut, we made more aggressive moves than some of our last cuts. And so we had nice pricing down, and we ended December with an average cost of deposits at 1.91 versus 1.99 for the quarter. So a nice trajectory down there. As John said, competition remains strong, but we did have some positive movement, especially on that last cut, and are continuing to look for ways to optimize our overall cost of deposits. Carrying that into kind of beta assumptions, we're assuming for kind of this cycle through the end of next year, a 30% overall beta, which is a little bit higher than we are today, but that's how we're looking at deposit pricing within our guide.

John Ciulla: Yeah. That's another interesting question. Credit spreads have tightened significantly. I was talking with our chief credit risk officer yesterday, and we've seen 30 to 50 basis points over the last 18 months or so compression in spreads, particularly in kind of commercial real estate assets that have gone to kind of stabilize down to 180 basis points to 200 basis points over reference rates. So I do think you're seeing in our portfolio and what you saw in our provisioning this quarter. Neil mentioned the fact that we resolved some problem assets, and that sort of continues to release. But you're right in that what we've been adding in terms of stabilized commercial real estate, in terms of fund banking, in terms of some of the other asset categories, public sector finance tend to make the weighted average risk rating of the overall portfolio better.

John Ciulla: Sure. I do think that there was, and Neil mentioned the fact that there were lower payoffs than we had anticipated in the Q4. And so I think if you normalize that, we feel kind of our growth was a little bit kind of less than the headline number was. I think the other dynamic here is we've talked a lot about making sure we maintain our profitability and our returns as we move forward. And so I think one of the things that Luis and Neil and I and the rest of the team have been doing is spending a lot of time thinking about sort of really deliberate capital allocations and looking at what businesses are going to continue to grow franchise value in the long term. We may be de-emphasizing some businesses and really looking at kind of core franchise building full relationships.

John Ciulla: So I think when you put everything together, as I said earlier, I think we do anticipate continued competition from private credit in the sponsor group, although the moves we're making, hopefully, will get a little bit more growth out of that business than is in our numbers. So that could help us surprise to the upside. But I think we think we can grow loans 5 to 7% in a very profitable manner, continue to show at or better than market growth over time, and do it profitably. So we think that's the right number for growth. Could we outperform that if the economy continues to kind of hum along and we get a few breaks with respect to M&A activity and in the sponsor book? Yes, but we think this is our best guess of optimal growth and profitability mix.

Glenn MacInnes: Nothing unusual. I guess I would say the one unusual factor relates to what you mentioned, the subdebt. So throughout the quarter, we were a little bit elevated on the subdebt side with long-term debt just over, I think we were at $1.1 billion, slightly over $1.1 billion, and we now sit at $650 million back where we wanted to be after we redeemed two outstanding notes. So we also have some seasonality in the quarter where I mentioned in my prepared remarks, we had $1.2 billion of public funds leave. Those are already starting to flow back in for Q1, just those seasonal trends. So we offset some of that with broker deposits and FHLB advances. But during Q1, we'll see, as I mentioned, those public funds flow back in and the broker deposits reduce back down.

Neal Holland: Nothing unusual. I guess I would say the one unusual factor relates to what you mentioned, the subdebt. So throughout the quarter, we were a little bit elevated on the subdebt side with long-term debt just over, I think we were at $1.1 billion, slightly over $1.1 billion, and we now sit at $650 million back where we wanted to be after we redeemed two outstanding notes. So we also have some seasonality in the quarter where I mentioned in my prepared remarks, we had $1.2 billion of public funds leave. Those are already starting to flow back in for Q1, just those seasonal trends. So we offset some of that with broker deposits and FHLB advances. But during Q1, we'll see, as I mentioned, those public funds flow back in and the broker deposits reduce back down.

[Analyst] (Piper Sandler): Yeah. David, so far, so good, as we're characterizing it. So we're slightly ahead of where we were last year. We've opened up approximately about 15,000 more accounts than what we had at this point in 2025. And total account openings so far are just high at 250,000. So we had, as we mentioned on prior calls during the course of the year, we've had a fair amount; we made a fair amount of investments on just broad-based client experience, new technology, new investment experience. That led to some nice client wins. Obviously, it's a competitive market, so we had some client losses as well, but net net, the client wins have outweighed the client losses on the employer side. And so therefore, we've seen some nice momentum on account openings.

Luis Massiani: Yeah. David, so far, so good, as we're characterizing it. So we're slightly ahead of where we were last year. We've opened up approximately about 15,000 more accounts than what we had at this point in 2025. And total account openings so far are just high at 250,000. So we had, as we mentioned on prior calls during the course of the year, we've had a fair amount; we made a fair amount of investments on just broad-based client experience, new technology, new investment experience. That led to some nice client wins. Obviously, it's a competitive market, so we had some client losses as well, but net net, the client wins have outweighed the client losses on the employer side. And so therefore, we've seen some nice momentum on account openings.

[Analyst] (Piper Sandler): And so we think that it should be. It sets up pretty well for having good performance, and we should be slightly ahead of where we were in 2025 when you'll see for first quarter results. What we haven't seen yet and we're still waiting on is on the Direct-to-Consumer side. So we had guided to the new HSA opportunity to be a kind of slow-moving target, I guess, that's going to take some time for us to play out. We've seen account openings that are faster in our Direct-to-Consumer channel as of through this date last year. So we have seen growth, but we have not yet seen the type of growth that we think we're going to see over the balance of the year. So we should see the Direct-to-Consumer channel kind of increasing and accelerating.

John Ciulla: Sure. I think our kind of capital strategies from the top of the house remain the same. We look to invest in organic growth, and we're still looking for tuck-in acquisitions to enhance and supplement our healthcare verticals. And if those aren't available to us, we obviously look to return capital to shareholders in the form of dividends or buybacks. I think we think that you could see another year like you saw in 2025 with respect to share repurchases as we move forward. As it relates to changing from our short-term to our long-term 10.5 target, I think you see that the industry en masse is kind of getting closer to pivoting, and you've seen some people announce we go through at the end of Q1 and into Q2 our annual stress testing and capital management activities.

John Ciulla: Sure. I feel really pretty good overall. I mean, I think we nailed it, and I give credit to our chief credit officer in terms of calling the inflection point. We've had three good quarters of underlying risk rating, migration trending. As you saw, we've materially reduced criticized, classified, and non-accrual loans. And so the overall credit profile, I think, continues to improve and be certainly well within our comfort levels. With respect to those two portfolios we've talked about over and over again, our office and our healthcare services, they still represent a large portion of NPLs and classifieds, which is sticky and frustrating, but also really portends to the fact that the vast majority of the $55 billion loan book is performing really, really well.

John Ciulla: The way I would characterize office, and this would also go to healthcare services, is that I think we have it pretty much ring-fenced. We're about $720 million left in the office portfolio. There's a good amount that's performing as agreed. We've risk-rated it appropriately. We've got appropriate reserves. And so we don't think it's going to be a big contributor as we move forward to kind of outsize non-accruals or losses. We could see, obviously, more as we try and resolve some of the sticky non-accruals we have now. We'll make the right calls in terms of loan sales or charges, but we feel pretty good about the fact that we can operate within that 25 to 35 basis points annualized charge-off rate. Obviously, when you're a commercial bank with big credits, that can sort of bump around a little bit as you've seen in the last several quarters.

The way I would characterize office, and this would also go to healthcare services, is that I think we have it pretty much ring-fenced. We're about $720 million left in the office portfolio. There's a good amount that's performing as agreed. We've risk-rated it appropriately. We've got appropriate reserves. And so we don't think it's going to be a big contributor as we move forward to kind of outsize non-accruals or losses. We could see, obviously, more as we try and resolve some of the sticky non-accruals we have now. We'll make the right calls in terms of loan sales or charges, but we feel pretty good about the fact that we can operate within that 25 to 35 basis points annualized charge-off rate. Obviously, when you're a commercial bank with big credits, that can sort of bump around a little bit as you've seen in the last several quarters.

Glenn MacInnes: Yeah. I would answer that with two different directions. The first is saying that we are seeing a slowing pace in reductions in non-interest-bearing. For the full year, we were down just over $200 million. So we believe that we're very close to an inflection point there. Looking at it a little differently as an organization, we really focus on non-interest-bearing, including our healthcare services priced at 15 basis points, where we had $450 million in growth this year. And so when we have a marginal dollar of marketing where we could put towards an Ametros or towards an HSA versus going out and competing head-to-head for a new consumer client, we tend to go in the direction of our healthcare services book, which is differentiated, and we have strong opportunities there.

Neal Holland: Yeah. I would answer that with two different directions. The first is saying that we are seeing a slowing pace in reductions in non-interest-bearing. For the full year, we were down just over $200 million. So we believe that we're very close to an inflection point there. Looking at it a little differently as an organization, we really focus on non-interest-bearing, including our healthcare services priced at 15 basis points, where we had $450 million in growth this year. And so when we have a marginal dollar of marketing where we could put towards an Ametros or towards an HSA versus going out and competing head-to-head for a new consumer client, we tend to go in the direction of our healthcare services book, which is differentiated, and we have strong opportunities there.

Yeah, you know, I I would answer that uh with 2 different directions. The first is saying that we are seeing a slowing pace and reductions in non-interest bearing for the full year, we were down just over 200 million. So, uh, we believe that we're very close to an inflection point there, um, looking at it a little differently as an organization. Uh, we really focus on non-interest-bearing, including our health care services, you know, Bryce did 15 basis points, uh, you know, where we had 450 million in growth this year. And so, when we have a marginal dollar of marketing where we can put towards a Metro or towards the HSA versus going out, uh, and competing head-to-head for a new uh, consumer client. We tend to go in the direction of our Healthcare Services book which is differentiated and we have a, a strong opportunity there. So overall we kind of look at those combined. And we do think um for the pure non-interest-bearing excluding uh Health uh Health Care uh vertical we are

Glenn MacInnes: Yeah. I would put it across multiple categories. When we look at consumer CDs, we've seen some of the large banks in our market maintain very aggressive pricing there, which we're priced a little bit below some of those competitors at this point in time. On the direct bank, we don't have a large portion of our portfolio there, between $2 and 3 billion, but there's some offers still sitting out in the market, well over 4%, where we moved lower. The commercial side continues to be competitive, as always, especially in our market. So I would say it's generally across the board, we're seeing a competitive landscape. As we talked about, we did move pricing down in the mid-December rate cut, and we'll continue to be aggressive, but we do very much focus on that balance between liquidity and net interest margin.

Neal Holland: Yeah. I would put it across multiple categories. When we look at consumer CDs, we've seen some of the large banks in our market maintain very aggressive pricing there, which we're priced a little bit below some of those competitors at this point in time. On the direct bank, we don't have a large portion of our portfolio there, between $2 and 3 billion, but there's some offers still sitting out in the market, well over 4%, where we moved lower. The commercial side continues to be competitive, as always, especially in our market. So I would say it's generally across the board, we're seeing a competitive landscape. As we talked about, we did move pricing down in the mid-December rate cut, and we'll continue to be aggressive, but we do very much focus on that balance between liquidity and net interest margin.

Yeah, I I I would put it across multiple categories. Um, when we look at, um, consumer CDs, we've seen some of the large banks in our Market, uh, maintained very aggressive pricing there, um, which were priced a little bit below some of those, uh, competitors at this point in time on the direct Bank, we don't have a large portion of our portfolio there. You know, between 2 and 3 billion, but there's some offers still sitting out in the market. Well, over 4%, where we moved, uh, lower, uh, the commercial side continues to be competitive as always uh especially in our markets. So I would say it's generally across the board. Uh, we're seeing a competitive landscape, uh, as we talked about, we we did, uh, move pricing down. Um, it in the mid December rate, cut, and we'll continue to, uh, be aggressive. But we do very, uh, much focused on that balance between liquidity, and net, interest margin. And we we feel like we're in a good spot but uh,

Luis Massiani: And so we've seen, similar to what we've been talking about a little bit on the deposit side, we've seen a bottoming out in an inflection point where spreads, for the most part, have contracted to where they're going to contract. And part of the spread contraction that we've seen in new originations for us is driven by the fact that we've been focusing on higher quality, just better, call it more middle-of-the-fairway type of assets that are just by design going to have a tighter credit spread than things that are not middle-of-the-fairway and not as bank-eligible or as bank-friendly from an asset class perspective. So we feel good about where the origination and pipeline activity is for 2026. We think that spreads are going to hold in relative to what we've seen for the back half of this year.

And so we've seen, similar to what we've been talking about a little bit on the deposit side, we've seen a bottoming out in an inflection point where spreads, for the most part, have contracted to where they're going to contract. And part of the spread contraction that we've seen in new originations for us is driven by the fact that we've been focusing on higher quality, just better, call it more middle-of-the-fairway type of assets that are just by design going to have a tighter credit spread than things that are not middle-of-the-fairway and not as bank-eligible or as bank-friendly from an asset class perspective. So we feel good about where the origination and pipeline activity is for 2026. We think that spreads are going to hold in relative to what we've seen for the back half of this year.

Uh, and part of the spread contraction that we've seen in new originations for us is, is driven by the fact that we've been focusing on higher quality, uh, you know, just better call more middle of the Fairway. Type of assets that are just by Design, going to have a tighter credit spread than, uh, you know, than than things that are not in the middle of the Fairway or not, not as uh, as Bank eligible, or as as Bank friendly from an asset class for perspective. So um, you know, we feel good about where the, you know, the origination and pipeline activity is for 26. We think that spreads are going to help you know, hold in relative to what we've seen for the back half of this year. Uh, and if anything, to the extent that there's a, uh, you know, a better Supply demand imbalance with credit providers into the market relative to uh, to loan demand. We think that there could be some potential for credit spreads to, you know, move slightly up over the course of the year. But that's not factored into our numbers today and if anything that would be uh you know, that would be a positive.

John Ciulla: Yeah. It's a great question. I think the answer is it does not really change our financial outlook. I think it does give us a little more flexibility in terms of those kind of prescriptive guidance things. It's interesting. The unintended consequences is you end up maybe doing transactions that are not as optimal and actually not as credit-strong, but within a box of a prescriptive leverage covenant. This gives us a little more flexibility to do deals we know are good. In the sponsor book, we've been in the business for 25 years, and we're really good at it. So I would say during the course of the year, will it allow us to do 3 to 5 more transactions that we otherwise might have not done because of regulatory scrutiny that we know are really, really good transactions? Yes.

Yeah, it's a great question. I I think the answer is it does not really change our financial Outlook. I think it does give us a little more flexibility. Uh, in terms of, you know, those kind of prescriptive guidance things. It's it's interesting. The unintended consequences is you end up, uh, maybe doing transactions that are not as optimal and actually not as credit strong, but within a box of a prescriptive, leverage Covenant. Um, this gives us a little more flexibility to do deals. We know are good. You know, in the sponsor book, we've been in the business for 25 years and we're really good at it. Um, so I would say, you know, during the course of the year, will it allow us to do, you know, 3 to 5 more transactions that we otherwise might have not done because of regulatory scrutiny? That we know are really, really good transactions. Yes. Does that really move the needle and change our kind of forward? Look on on loan growth or

Luis Massiani: Yeah. On the size of the deal, Bernard, we didn't put anything out when we announced it. And so you could assume that it's relatively small, and it's already factored into all of the quarter-end balance sheet numbers and capital metrics and so forth. So I'd say SecureSave is a relatively small company. We could characterize it as almost still pseudo-startup phase, but it does have, it's a market leader in that growing business of ESAs, of emergency savings accounts. It's clearly, or the mission of the business is focused on helping large employers that have large workforces, help those employees through an incremental benefit to being able to save for eventuality-specific rainy-day funds and so forth. And so it's largely viewed as a retention tool by employers.

That have large employee workforces to, you know, just bug, you know, kind of put more, you know, more arms around them and bear hug their employees to, uh, you know, to stay, uh, you know, stay on and kind of limit turnover. Uh, but again, it's a small business. We think that it has a lot of good potential. It's a product that we had started to sell through our HSA Bank channel to our employer clients for some time and saw some good receptivity. So we've been very familiar with the product for about the last year, year and a half. And we think that this could be, again, it's going to be well received into our existing channels. But we're also expanding the universe of potential large employers that we can now target, because this is something that we think is going to be well received by, uh, by the, uh, the large world of, you know, human resources in large, in large corporate.

John Ciulla: Yeah, it is. I mean, I think it's always a good question, and we answer it every year. We're obviously very active in looking to enhance two things: our deposit-gathering, low-cost, long-duration deposit-gathering capabilities. We've got a first-mover advantage in healthcare through HSA and Ametros or potentially adding more fee income streams to our business. And so we continue to look at those tuck-ins where we can. We have been very transparent in the past that most banks are also looking at those two categories to grow. And when companies go to auction, the metrics in terms of tangible book value dilution and others get very challenging. So I'd say we're active. If you think about it, since the Sterling MOE, we've done Bend and HSA. We've done InterSync. We've done SecureSave. We've done Ametros.

Potentially adding more fee, income streams to our business. And so we continue to look at those tuck-ins where we can. We have been very transparent in the past that most banks are also looking at those 2 categories to grow. And when, when companies go to auction, um, the metrics, in terms of tangible Book, value dilution and others get very challenging. So I'd say we're active. You know, if you think about it, since the Sterling, uh, Moe. We've done Bend IN HSA. We've done, interesting. We've done secure save. We've done a mitro. So, we, we have a really good track record, I think of, uh, acquiring businesses that enhance our existing business, and let us leverage our core competencies without, uh, making it shareholder unfriendly. And so, I think that's the key. We'll continue to look at it. We'd love to do that, sort of, on a Serial basis. But again, we're going to be really disciplined in terms of how much we pay and what we are looking to.

Uh, perfect background, I guess, maybe, yeah, yeah, yeah. Yes. As I mentioned in prepared remarks, uh, we'll move up seasonally a little bit in q1, uh, due to those 3 factors that I mentioned, um, outside of that I I I I, I think fairly stable, uh, expenses on the quarters after, uh, we're going to continue to invest in our client facing, um, businesses. Uh, look for opportunities to grow at the same time. We'll be continuing as we always do to look for ways to drive efficiencies into the organization. So, uh, I would say that we'll have a, a, a few percentage Point increase in the q1 as I had mentioned before and then, uh, probably neutral to slight increase each quarter going forward. So not a material UPS slope after the first quarter. Okay good. That that helps. Um, and then back on growth, I I heard your comments on

Luis Massiani: But then you'll see potentially some seasonality in the back half of 2026 as well that could get you to the higher end of the range that we put out there today. So there's a little bit of all the above. Why did the expected payoffs perform better? It happens at times. So again, we think that we go through the portfolio. We have pretty good visibility onto how things will perform. Rate moves being a little bit later in the quarter than what we had originally anticipated also drove some of that performance. But if rates continue to go down, you should see some accelerated payoffs, particularly on the CRE book. But we'll see what happens over the course of the year. And if rate cuts do come, that will have some sort of impact. So it's a little bit of a conservative guide from that perspective.

But then you'll see potentially some seasonality in the back half of 2026 as well that could get you to the higher end of the range that we put out there today. So there's a little bit of all the above. Why did the expected payoffs perform better? It happens at times. So again, we think that we go through the portfolio. We have pretty good visibility onto how things will perform. Rate moves being a little bit later in the quarter than what we had originally anticipated also drove some of that performance. But if rates continue to go down, you should see some accelerated payoffs, particularly on the CRE book. But we'll see what happens over the course of the year. And if rate cuts do come, that will have some sort of impact. So it's a little bit of a conservative guide from that perspective.

The year, but then you'll see potentially some seasonality in the back half of 26, as well that could, that could get you to the higher end of the range that we put out there today. So there's um, you know, there's a little bit of all the above, why did the expected payoffs, you know, perform better? Uh, it happens at times, you know? So we again, we think that there's, uh, you know, we go through the portfolio, we have, you know, pretty good. Uh, you know, visibility on to, uh, you know, how things will perform, uh, you know, rate moves being a little bit later in the quarter, than what we had originally anticipated. Also, you know, drove some of that performance. But, uh, you know, rates continue to go down, you see you should see some, um, you know, accelerated payoffs particularly in the CRA book. But, you know, we'll, uh, we'll see what happens over the course of the year and the rate comes rate Cuts, do come well, that will have some sort of impact. So it's a little bit of a conservative guy from that perspective, but the overall theme is pipelines are good. We feel good about the origination activity for the year, and uh, we think that there's, you know, there could be good potential opportunities for us to hit the high end of the range.

Okay. And then on HSA and the 1 to 2 and a half billion incremental deposit growth, you could see from the bill over the next 5 years is all the necessary infrastructure technology in place to support that growth. Or is there any further buildout required? Thank you know, Bill that required from technology perspective, it's in place. Uh, and we feel very good that we've made the Investments. That if there is a uh, mad rush of uh, of potentially to say clients trying to open up accounts that are direct to Consumer channel that we have all the capabilities and capable and and scalability to be able to, you know, to take that on it. No incremental cost to where we are today. So we feel very good about that Tech Investments that we've made there.

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Q4 2025 Webster Financial Corp Earnings Call

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Q4 2025 Webster Financial Corp Earnings Call

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