• Adjusted Return on Tangible Common Equity (4Q 2024): 17.7%
• Adjusted Return on Assets (4Q 2024): 1.27%
• Efficiency Ratio (4Q 2024): Just below 45%
• Net Income to Common Shareholders (4Q 2024): $240 million
• Diluted EPS (4Q 2024): $1.43
• Total Assets (End of 4Q 2024): $79 billion
• Loan to Deposit Ratio (End of 4Q 2024): 81.1%
• Loan Growth (4Q 2024): $558 million or 1.1% linked quarter
• Net Charge-Offs (4Q 2024): Just over $60 million
• Net Interest Margin (4Q 2024): 3.39%
• Total Revenues Increase (4Q 2024): $35 million over the prior quarter
• Non-Interest Income Increase (4Q 2024): $16 million over the prior quarter
• Adjusted Expenses (4Q 2024): $340 million
• Allowance for Credit Losses (4Q 2024): Up $2 million relative to the prior quarter
• Tangible Book Value Per Share (End of 4Q 2024): $32.95

• Warning! GuruFocus has detected 7 Warning Sign with WBS.

Release Date: January 17, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Webster Financial Corp (NYSE:WBS) achieved strategic milestones in 2024, including optimizing asset risk weightings and reducing commercial real estate concentration.
• The acquisition of Ametros added a new source of low-cost, long-duration deposits, enhancing growth opportunities.
• The company reported strong financial metrics, with an adjusted return on tangible common equity of 17.7% and an efficiency ratio below 45%.
• Webster Financial Corp (NYSE:WBS) experienced growth in both loans and deposits, driven by C&I and residential mortgage sectors.
• The company has a differentiated funding profile, with a loan-to-deposit ratio of just over 80%, providing flexibility for future growth.

Negative Points

• Webster Financial Corp (NYSE:WBS) faced higher charge-offs in the quarter, particularly in office-related and healthcare services credits.
• The yield on the loan portfolio decreased by 26 basis points due to the effects of Fed rate cuts on floating rate loans.
• The company anticipates $15 million to $20 million in incremental operating expenses to prepare for transition to a Category 4 bank.
• Despite growth, the company experienced a decline in cash levels at the period end, offsetting loan and securities growth.
• Webster Financial Corp (NYSE:WBS) continues to face challenges in the commercial real estate sector, particularly in office and healthcare services.

Q & A Highlights

Q: With the Treasury Secretary nominee potentially easing regulations, would Webster consider acquiring smaller banks if the Category 4 threshold is raised? A: John Ciulla, CEO, stated that while Webster is currently focused on organic growth, a change in the regulatory paradigm could make inorganic growth more feasible. However, this is not part of their 2025 plan, and they are taking a conservative view on how quickly regulatory changes might occur.

Q: Can you provide details on the $53 million increase in C&I non-performing loans (NPLs) this quarter? A: John Ciulla, CEO, explained that the increase was due to three or four credits, including some office-related loans. The overall credit perspective shows moderated risk rating migration, with most issues stemming from office and healthcare services portfolios.

Q: How should we think about the margin trajectory, especially with the securities repositioning? A: Neal Holland, CFO, indicated that the net interest margin (NIM) for 2025 is expected to be in the range of 3.35% to 3.40%, slightly higher than previously anticipated due to positive movements in Q4 and a steeper yield curve. The securities repositioning had a minimal impact in Q4 but is expected to add $18 million to net interest income in 2025.

Q: What are the expectations for deposit costs and betas in 2025? A: Neal Holland, CFO, noted that deposit costs were at 2.2% in Q4 and decreased to 2.13% in December. The expectation is for continued decline in Q1, with a terminal beta of approximately 30% for the cycle, assuming two Fed rate cuts.

Q: Regarding the office portfolio, what contributed to the sharp drop in office exposure this quarter? A: John Ciulla, CEO, clarified that the reduction in office exposure was due to natural payoffs and paydowns, not loan sales or charge-offs. Office-related charge-offs were around $15 million, with healthcare services contributing approximately $20 million.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.