Webster Financial Corp at RBC Capital Markets Global Financial Institutions Conference Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Perfect. Also, I'll just note that we are open for questions. So if anyone has questions throughout the session, put up your hand and we'll get you a microphone for questions. So John, topical maybe is just the economy. Maybe there's uncertainty, maybe there isn't, I'm not sure, but how do you feel about the economy in your region in general? What are your thoughts on maybe some of the tariffs and if there's any impact that you think about there? John Ciulla - Webster Financial Corp - Chairman of the Board, Chief Executive Officer of the Company and Bank, President of the Bank Yeah, it's great. It's interesting. I mean I think the general view is that there is a positive outlook on economic growth. I probably subscribe to the idea that the probability of recession is relatively low. In our market, when we talk to our commercial and consumer borrowers and clients, there is decidedly more optimism than there was pre-election. However, we haven't seen that translate into an acceleration in the investment cycle. And I think that goes to your exact point that we're seeing a bit of whiplash now with respect to some government policies and tariffs and even geopolitical issues that I think have people feeling good about the fundamentals of their business or the fundamentals of their personal balance sheet, but also a little cautious in waiting for the dust to settle to see what happens. And I think as we mentioned earlier, I think as managers and stewards of everyone's capital, we are similarly feeling good about the long-term future of the economy. We're feeling good about a more constructive regulatory environment, but we're not making any bold moves right now and counting on anything happening in the short term. So we're managing our bank and positioning ourselves for what should be a good environment for banks over the next couple of years.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Let's talk about that a little bit more because it seems like the goalpost is may be shifting and so philosophically, I know that there are some expenses and debt that might come into play. But how do you think about that philosophically? And how do you just manage through them? John Ciulla - Webster Financial Corp - Chairman of the Board, Chief Executive Officer of the Company and Bank, President of the Bank Yeah, I think it's a great question, and we get that a lot. So I think we found a way to have a deliberate build of expenses, and these are things like liquidity and capital management, regulatory reporting, first-line risk infrastructure, all of the things are required from a governance perspective as you approach Category IV. And when we're asked, hey, that $100 billion barrier might go away, that's not our base case. It might get less onerous. I think what we're trying to do is be thoughtful in how we build. I think I said on the last earnings call, probably three-quarters of those expenses that we've talked about, as shareholders, you would want us to do anyway, to build a more resilient and more industrialized bank, right, that will allow us to do acquisitions, that will allow us to navigate whatever the future holds for us. And then there might be 25% of those expenses that are a little bit regulatory check the box, right? Not tailored. And what we're trying to do is stagger those expenses so that if the $100 billion barrier goes away or if the requirements of becoming a large financial institutions change, we can pivot away and defer some of those out-year expenses. So we've been thoughtful in, first of all, planning the journey, but also trying to prioritize and layer those expenses in so that if the regulatory paradigm changes, we cannot make those expenses that we feel are more regulatory check the box rather than building resiliency and building a great infrastructure for the bank.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Okay. Great. You called out the health care financial services as an objective business for you to grow. Talk a little bit about that, the appeal of that business, and I think there's also maybe some fee synergies and potential other areas that you can grow there. John Ciulla - Webster Financial Corp - Chairman of the Board, Chief Executive Officer of the Company and Bank, President of the Bank Yeah, absolutely. The core businesses there, HSA and Ametros have some real -- there are different businesses with different end users, obviously, but they have some similarities. They're both B2B2C. We know how to manage that. In other words, we acquire clients basically through large employers or through insurance companies in the case of Ametros. But then our relationship really goes to the end user, the individual that has the account. And as I mentioned earlier, I think our focus is, number one, continuing to drive deposit growth and fees in those two businesses because they come with both, and that helps us because we want more fee income. But we also have an opportunity to, for example, we're exploring emergency savings accounts and other lending products to HSA clients, we're looking at providing more traditional banking products to some of our Ametros clients. So we do think that there are opportunities to manage that space and explore the large client base that we have and penetrate and provide more solutions and services to those clients. And there are some broad synergies in terms of managing those companies as well. I also think -- and Neal, our really talented new CFO, always mentions that because we're active in that market, we're a preferred acquirer. I mean, we -- I think we get -- Ametros was not done through an auction. We paid for it, obviously, but we think we're a preferred buyer because of our experience in the space. And we think investors should be confident that when we do do a tuck-in acquisition in that space that we have the ability to actually deliver the financial results that we expect because of our experience in doing it through HSA and through Ametros.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Great. Thank you for that. Loan growth outlook? What do you think will be the key drivers of your mid-single-digit loan growth outlook? John Ciulla - Webster Financial Corp - Chairman of the Board, Chief Executive Officer of the Company and Bank, President of the Bank Yeah. I mean I think we did 4% loan growth last year, and we basically shut down commercial real estate for a while when all the focus was on CRE concentration. So I think our 4% to 5% year-long loan growth, we think is pretty balanced and doesn't have us betting on a huge M&A spike or incredible hockey stick at the end of next year. So I think it's the fact that we've got a whole bunch of verticals. We're doing some mortgage origination. So I think given the portfolio of origination channels, it's kind of BAU based in with good solid optimism in our commercial client base. I will say that the first quarter, and you've heard and we've heard at your conference, has been a bit slower from an industry perspective. My take on that is first quarter, number one, is always the seasonally slowest quarter and then it goes back to the aforementioned volatility, if you will, in the new administration, I think that's keeping people a little bit on the sidelines from an investor perspective. So first-quarter loan growth may be a little slower, but we feel pretty confident in our 4% to 5% annualized loan growth.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Okay. Ideal rate environment would be a steeper curve. How about on the short end, any preference? John Ciulla - Webster Financial Corp - Chairman of the Board, Chief Executive Officer of the Company and Bank, President of the Bank That's it. I think we're relatively agnostic now to the short end of the curve, but we would love to see a steeper curve as we move forward.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : So it sounds like you're pretty comfortable with the net interest income outlook that you've layed out. John Ciulla - Webster Financial Corp - Chairman of the Board, Chief Executive Officer of the Company and Bank, President of the Bank Yes.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Okay. That was the next topic I wanted to go to was credit. So you took a lot of it, but that's fine. Just key areas of concern. I mean, a year ago, we sat here and we were all thinking about one of your peers and how that might impact you and it unfortunately impacted your stock price. But it -- what are the key areas of concerns from here? John Ciulla - Webster Financial Corp - Chairman of the Board, Chief Executive Officer of the Company and Bank, President of the Bank Yeah. I think it's interesting, and I'm always reticent to make great promises on credit. And sometimes I get accused of being too conservative, I was the former Chief Credit Risk Officer coming out of the Great Recession. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 3:00PM, WBS.N - Webster Financial Corp at RBC Capital Markets Global Financial Institutions Conference For us, the story has been around credit costs, have really been around two discrete portfolios that people have heard me mention over the last year. It's our office portfolio. So we're in the same boat as others and our health care services portfolio, and that's really a question of inflation, higher input costs, lower reimbursement costs. And so both of those portfolios are pretty discrete. I think our health care services portfolio is in the $700 million range, and our office is now down around $800 million. And what's left in those portfolios has better credit metrics than the things we've been working through. So I'm encouraged by the fact that we haven't seen any other discrete portfolios pop up as a place of problem. Obviously, I think that if we do get lower rates over time, it will help on all of the real estate refinancings that the industry has to take. I think that's more industry-related than us. So I think if we do see lower rates, I think it takes some risk off the table on real estate as we move forward. But otherwise, the portfolio is performing pretty well. And I just hope talking to some people that haven't -- don't remember the great financial recession, they're wondering whether this is a credit correction or not a credit correction. We really haven't seen a real credit correction really since 2008 and 2009 and as long as we get this balanced economic growth over time, I feel pretty good about the portfolio performance.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Okay. Very helpful. Touch on private credit a little bit and the Marathon joint venture. Just quick description of it and what kind of objectives and outlook you have for that business? John Ciulla - Webster Financial Corp - Chairman of the Board, Chief Executive Officer of the Company and Bank, President of the Bank Yeah, sure. I mean private credit is here to stay, unlimited pools of capital, unregulated and continuing to, I think, compete formidably with banks across more asset classes than people probably think. For us, and we talked about it on our calls, the competition has been stiffest in our Sponsor & Specialty business. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 3:00PM, WBS.N - Webster Financial Corp at RBC Capital Markets Global Financial Institutions Conference One of the moves we've decided to make as a management team, which I think is thoughtful, and we've taken our time to make sure we have the right partnership is a joint venture with Marathon Asset Management, an established private credit provider. And we should go live sometime in the second quarter. Very simply, what we believe that joint venture will allow us to do is sort of have an inherent larger balance sheet to be able to compete on middle market sponsor credits at a higher level than we do now, without having us put any additional credit exposure on the balance sheet, because we want to make sure that we're managing our credit appropriately. And then ultimately, once the joint venture gets up and running as a GP, we will get nice investment income coming back, which should enhance our noninterest income as well. So we think there are a number of benefits to that, give us a little bit more flexibility on structure, allow us to participate, because our clients want us to, in larger transactions, without going larger with respect to our on-balance sheet credit exposure and ultimately getting a nice source and flow of fee income in. We have not layered any of that into our '25 guidance. And what we've decided to do, and we've told all of you on our calls is that as soon as we have it up and running, and we seed the fund, we will get a little bit more granular on what it means for us economically.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Okay. What is your thinking on M&A? There's a lot of discussion around it. I guess maybe the theme is there a lot of potential buyers and potential sellers, but how do you feel about M&A? And is it of interest to Webster? John Ciulla - Webster Financial Corp - Chairman of the Board, Chief Executive Officer of the Company and Bank, President of the Bank Yeah. I mean, I think it is. I think we're building a really great franchise. And I think scale continues to matter in another -- a number of dynamics. What I've said very transparently and honestly is that right now, given the regulatory paradigm and the work we're doing on building the infrastructure of the organization, it's highly unlikely over the next, let's say, four to eight quarters that we would be engaged in whole bank acquisition. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 3:00PM, WBS.N - Webster Financial Corp at RBC Capital Markets Global Financial Institutions Conference We believe we have a reason to exist and that we've got a good path organically to be an independent bank and continue to deliver outsized returns to our shareholders. So I think what we're doing and our view internally right now is, if there are tuck-in acquisitions to strengthen the deposit and fee franchise, we look at it, and then all the other work we do puts us in a position of optionality that if the regulatory landscape gets a bit more constructive on M&A, and we're ready because we feel like we've got the right technology and risk and data infrastructure, that we'll be in a really good position to be a buyer for 8, 12 quarters out.