Good morning. Welcome to the 2Q25 Webster Financial Corporation Earnings Call. Please note this event is being recorded. I would now like to introduce Webster's Director of Investor Relations, Emlyn Harmon, to introduce the call. Mr. Harmon, please go ahead.

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 and safe harbor language in today's press release and presentation for more information about risks and uncertainties. The presentation accompanying management's remarks can be found on the company's investor relations site at investors.websterbank.com. For the Q&A portion of the call, we ask that each participant ask just one question and one follow-up before returning to the queue. I'll now turn it over to Webster Financial's CEO and Chairman John Ciula.

Thanks, Emlyn. Good morning and welcome to Webster Financial Corporation's second quarter 2025 earnings call. We appreciate you joining us this morning. I'm going to start with a recap of our results and the competitive positioning that drives them. Our president and chief operating officer, Luis Macciani, is going to provide an update on exciting developments in our operating segments. And our CFO, Neil Holland, will provide additional detail on financials before my closing remarks and Q&A. Highlights for the second quarter are provided on slide two of our earnings presentation. Our results were solid, with a return on tangible common equity of 18%, ROA of nearly 1.3%, and growth in both loans and deposits of over 1% in quarter. Overall revenue grew 1.6% over the prior quarter. Our financial results put our company on a trajectory to meet the outlook we established in January, despite a less certain macroeconomic picture at points in the first half of the year. We achieved this outcome while maintaining our strong operating position and balance sheet flexibility. Our common equity tier one ratio increased, and our loan-to-deposit ratio remained roughly flat. With our strong capital position and new capital generation, the board authorized an additional $700 million in share repurchases, and we bought back 1.5 million shares in the quarter. Additionally, the inflection point in asset quality that we projected to occur in mid-2025 is materializing. Both criticized commercial loans and non-accruals were down in the quarter. Our net charge-off ratio was 27 basis points within our long-term normalized charge-off range of 25 to 35 bits. We do not see new pockets of credit deterioration developing anywhere across any industry or sector. Similar to our view a quarter ago, we have not yet seen any impact to credit related to various tariff proposals. While remaining vigilant, any potential effects from proposed tariffs, we don't have disproportionate exposure to industries we believe could be most impacted, and our borrowers have had additional time to develop strategies to manage costs, their supply chains, and pricing. Our strong operating position in distinctive businesses provide us a lot of flexibility and growth opportunities, an advantage that will serve us well as tailwinds accumulate for the banking industry. We feel we have the most differentiated deposit profile within our peer group, in particular our healthcare financial services segment comprised of HSA Bank and Amitros, our growing source of low cost, long duration, and very sticky deposits. The B2B2C model of these businesses enables efficient operation and distribution. Provisions included within the recently passed reconciliation bill should also accelerate growth in HSA deposits. In addition to the healthcare financial services segment, we also have strong deposit franchises in our consumer and commercial bank. We also operate InterSync, previously known as InterLink, and rebranded this quarter. InterSync provides us access to granular deposits and is another differentiating feature for Webster as a source of liquidity. As a predominantly commercial bank, we have a diversity of loan origination channels with distinct risk-reward characteristics. These provide us the opportunity to add assets in the loan categories that provide the most appealing risk-reward characteristics at a given point in time. We anticipate that the asset management partnership with Marathon we announced last year will be effective as of later today, and we believe that it will enhance sponsor loan growth and drive fee revenue in 2026 and beyond. A combination of our funding advantage and diversified loan origination engine allow us to grow at an accelerated rate relative to peers over the long term. Ultimately, with our distinctive business composition, we have a lot of liquidity, we run a highly efficient and profitable bank, and we generate a lot of capital. This provides us with both a solid defensive position and a great deal of optionality on offense, whether that be organic growth, strategically compelling tuck-in acquisitions, or returning capital to shareholders. I will now turn it over to Luis to discuss emerging strategic opportunities for Webster, including at HSA Bank and within the commercial segment, each of which have recently experienced strategically important developments.

Thanks, John. Starting with HSA Bank, we were pleased to see three favorable provisions for HSA Accounts Incorporated in the reconciliation bill which was signed into law earlier this month. In our view, these provisions will significantly increase the addressable market for the HSA industry and HSA Bank, mainly driven by bronze ACA plan participants newly gained eligibility to fund an HSA account this part. We estimate the potential deposit opportunity for HSA Bank over the next five years ranges from $1 billion to $2.5 billion of additional deposits, starting with incremental growth next year of $50 to $100 million. There is likely to be a somewhat lengthy ramp-up period for adoption as newly eligible consumers begin to understand the benefits of an HSA account and how best to use it for their health. We were further encouraged that for the first time eligibility for HSA accounts has been decoupled from high deductible health plans and that several provisions that were initially included but didn't make the final spending bill as strong citizenship legislation in 2025 is likely included. If all of the provisions that were in the original spending bill passed by this house were to become law, we believe this could double our range. Turning to asset management, we have reached operational realization of the prior we moved 242 million of loans as these loans will be contributed to the joint venture which we expect will be up and running in the third quarter. The economics of our asset management strategy will be determined by the long-term performance. The asset management platform will also drive economic value by generating the income which we anticipate will be limited for the remainder of 20.

The loan-to-deposit ratio held flat at 81 percent as we maintained a favorable liquidity position. Those remain well positioned book value for common share to $35.13, up over 3% from last quarter. At the same time, we repurchased 1.5 million shares. Loan trends are highlighted on slide 5. In total, loans were up $616 million or 1.2% linked quarter. Excluding the one-time transfer of $242 million of loans moved to held for sale, loan growth would have been $858 million or 1.6%. We provide additional detail on deposits on slide 6. We grew total deposits by $739 million. Deposit costs were up three basis points over the prior quarter as we experienced the seasonal mix shift effects of the second quarter in HSA and public deposit accounts. On slide 7, our interest income was up $9 million from Q1 and non-interest income was up $2.1 million. Expenses were up $2 million. At an efficiency ratio of 45.4%, we maintained solid efficiency while investing in our franchise. Overall, net income to common shareholders was up $31 million. ETFs was $1.52 versus $1.30 in the first quarter. In addition to a solid PPNR trend, we also saw a significant reduction in the provision this quarter. Our Our tax rate was 20%. On slide 8, we highlight net interest income, which increased $9 million, driven by balance sheet growth, and the higher day count, quarter over quarter. The NIM was down four basis points from the prior quarter to 3.4% discrete benefit from a non-accrual reversal that added two basis points to the NIM this quarter. Excluding this, the NIM would have been three seasonal deposit mixed shifts. Slide 9 illustrates our interest income sensitivity to rates. We remain effectively neutral to interest rates on the short end of the curve, with modest shifts expected in our net income for up and down rate scenarios. On slide 10 is non-interest income. Non-interest income was $95 million, up $3 million over the prior quarter. The modest increase reflects growth in deposit service fees and a lower impact from the credit valuation adjustment. Slide 11 has non-interest expenses of $346 million, up $2.1 million linked quarters. The modest increase in expenses was primarily the result of investments in human capital partially offset by seasonal benefits expense. We continue to incur expenses that enhance our operating foundation as we prepare to cross $100 billion in assets. One significant investment came to fruition in the second quarter. I'm happy to say that this is the first quarter we were reporting earnings on our new cloud-native general ledger. On slide 12, detailed components of our allowance for credit losses, which was up $9 million relative to the prior quarter. The increase in the allowance was predominantly tied to balance sheet growth. Our CECL macroeconomic scenario was relatively stable, and we saw good asset quality. After booking $36 million in net charge-offs, we recorded a $47 million provision. This increased our allowance for loan losses to $722 million, or 1.35% of loans. Our provision was down $31 million from the prior quarter. Slide 13 highlights our key asset quality metrics. As you can see on the left side of the page, non-performing assets were down 5%, and commercial classified loans were down 4%. On slide 14, our capital ratios remain above well capitalized levels and we maintain excess capital to our publicly stated targets. Our tangible book value per share increased to $35.13 from $33.97 when that income partially offset by shareholder capital return. Our full year 2025 outlook, which appears on slide 15, points to improvements in NII and the tax rate for the year. We now expect NII of $2.47 billion to $2.5 billion on a non-FTE basis. This assumes two Fed funds rate cuts beginning in September. We expect the full year tax rate will be in the range of 20 to 21 percent. Year-to-date, we are at a 20 percent effective tax rate due to discrete benefits, but we expect the rate to return to 21 percent in the second half of the year. With that, I will turn back to John for closing remarks.

Thanks, Neil. In summary, it was a good quarter for Webster. We're generating solid growth and high returns. We're executing on new opportunities to grow our business, and our proactive approach on credit risk management has allowed us to remain in front of potential problems. Tailwinds are building for regional banks. Some additional time to digest and plan for tariffs, our clients are moving forward with business development plans, and it appears that loan growth is set to accelerate. We are starting to observe changes in banking regulations such that they are appropriately tailored to the complexities and size of individual institutions, and they should help enable U.S. banks to strengthen their competitive position. As I stated last quarter, Webster is positioned to prosper in a variety of operating environments, including an accelerating investment cycle, and we are excited to demonstrate we have excess capital to deploy, diverse loan origination channels, a differentiated and competitively advantageous funding profile, and are focused on new business opportunities. I want to take a moment to welcome Jason Shugel to our Executive Management Committee. Jason joined us as Chief Risk Officer this week, as we had previously announced Dan Bly's intent to retire. Jason has 15 years of experience at a Category 4 bank, most recently as Chief Risk Officer. particularly valuable experience as we grow our bank toward $100 billion in assets. Dan served as our chief risk officer for 15 years and built an exemplary risk team over a period of substantial change for Webster and the banking industry. We wish him the best in his retirement. We were also happy to announce recently that we added Fred Crawford as a new board member. Fred joins the board with impressive C-suite large financial institution expertise. Finally, I'd like to thank our colleagues for their efforts so far this year. We saw positive financial and strategic outcomes virtually across the board this quarter. This type of result doesn't materialize without a significant amount of effort and engagement throughout our organization. Thanks again for joining us on the call today. Operator, we'll now open the line to questions.

At this time, I would like to remind everyone, in order to ask a question, please press star, followed by the number one on your telephone keypad. Your first question comes from the line of Chris McGrady with KBW. Please go ahead.

Hey, how's it going? This is Andrew Leichner on for Chris McGrady. Andrew, how are you? Hey, how's it going? Just starting on capital, just given the current environment and outlook for potential deregulation, what is your willingness to reduce CET1 and then just overall thoughts on near-term pace of the buyback?

I know we stated that our medium-term and short-term goal is 11%, and that over the long term as markets stabilize that we could see that target move back towards a 10.5% range. I would still say that for the balance of 25, that 11% target is probably the right amount. And we'll talk further about that going forward. But we do think over time that we can reduce the level comfortably and safely of our CET1 ratio. And the second question I think was on capital management and share buybacks. I think we say every quarter we take a really disciplined approach to it. First prize is continuing to grow our balance sheet with good full relationship loans. If that's not available to us, we do have, and we continue to look seriously at opportunities to continue to enhance our healthcare services vertical and other areas of the bank where we think we can grow deposits and fees inorganically through tuck in acquisitions if neither of those are available we look to our return capital to shareholders through dividends or share buybacks and so i think if the first two don't materialize given our capital level you'll likely see us continue some level of share buyback in the second half your next question comes from the line of casey hair with autonomous research please go ahead great thanks good morning everyone um question on the uh the nim outlook um

the cash build are you guys good with with where the cash balances are today and then also the uh i think you guys talked about a long-term debt issue coming in the second half of the year i'm just wondering what how that's going to impact yeah uh on the cash we're getting right to the levels that we're hoping to get to.

In this quarter, building cash had a one basis point impact to NIM. We expect an additional one basis point throughout the rest of this year over the next two quarters. So a little bit of impact there, but not overly material. And we are still expecting a new debt issuance in the back half of the year that will have one basis point.

Your next question comes from the line of Mark Fitzgibbon with Piper Sandlin. Please go ahead.

Hey, guys. Neil, just to follow up, I was curious on deposit costs for the second half of the year, given your expectation for two rate cuts and also interesting sort of strong deposit growth. How are you thinking about deposit costs?

Yeah. So maybe I'll take a step back and talk about our interest rate sensitivity for a second. So we've positioned pretty neutral. So two cuts in the back half of the year, we don't expect any material impact to our overall net interest margin. But going specifically to your deposit question, obviously, if we get additional cuts, we expect to continue to move our deposit costs down. If we don't get two additional cuts, you know, we are seeing some pretty significant competition on the deposit side. So don't see material opportunity to continue to move down deposit costs. But the team is actively focused in that area, and it's something that we're closely monitoring.

And then just to follow up, John, unrelated, if the Category 4 threshold gets lifted, how important does Bank M&A become for Webster? And if so, what would you be sort of looking for in potential targets, whether business line or geography or any comments on that would be much appreciated?

Sure, Mark. I mean, I think our stance right now, and, you know, clearly there is some noise around the fact that there may be an indexing of that $100 billion mark or maybe even an elimination of it. We're kind of standing pat to say that happens when and if it happens. And it impacts kind of the way we stage and how aggressively we continue to build out certain regulatory requirements. So I think, you know, that we're attuned to it. there's no question about the fact that we've said that we're not really in the market for whole bank M&A. Part of the reason was that we'd do something transformational if we did, and we were not going to do that until we were ready to cross $100 billion. I think the clear thing we want to get across is that's not our primary goal, regardless of whether the $100 billion mark moves or not. So I think it's fair to say for you that that gives us more optionality if that number either moves up or is eliminated. And if the right circumstances exist, we would be more able to engage in whole bank acquisition. But I think if you think about what we're talking to our board about and what we're doing as a management team right now, it's really a focus on, you know, organic growth, tuck-in acquisitions that continue to build out our deposit profile and strengthen our healthcare services vertical. So I would still say it's unlikely to see us engage in the short to medium term in active bank M&A.

Thank you. Next question comes from the line of Jared Shaw with Barclays Capital. Please go ahead.

Hey, good morning. Good morning. I guess maybe on the HSA news, it's great that the total addressable market is expanding. Does that require you to make any investments in new delivery channels or new outreach channels to capture that additional pool? Or how should we think about the expense associated with going after that market?

Yeah, no, great question, Jared. No material change in the expense trajectory of HSA. You know, we actually today already run a pretty significant direct-to-consumer channel, and this is going to be the opportunity that's presented itself for these changes. It is slightly different than what we typically do through the employers, and it is more of a direct-to-consumer channel. But we actually do have a direct-to-consumer channel today that generates a not insignificant amount of new account openings and pretty sizable business that we run direct-to-consumer today already. So no major change. There will be, obviously, some elements of different types of marketing and some marketing spend that we'll have to figure out as we go.

And, you know, the reason for, you know, we do envision that, as you can follow up, on the allowance and provision, you know, with the improving broader credit backdrop, how should we think about the allowance billed from here and the provision? Is that being targeted as a percentage of loan originations, or should we be thinking of that as a percentage of average loans?

Jared, as we say every quarter, the CECL program and process is pretty much tied to risk rating migration, loan growth, weighted average risk ratings in the portfolio, and we generally don't give guidance on it. I think we are comfortable in our total coverage ratio of when you triangulate and look at peers and our Category 4 peers and our current peer group. I think we're in a pretty good place right now. You know, I think growth in our coverage would come from balance sheet growth or credit deterioration. I think, you know, we took a great move, I thought, strategically in the first quarter of changing our waiting for a recession scenario. So we really felt like that was a good move to get us in the right spot. We did not back off our sense of what the future holds. So I think one of the things we're proud of is that our provision came down significantly, driven by credit performance underlying, not driven by a change in what we think the outlook is. We still have a pretty good balance and a pretty good assessment or a pretty good portion of assuming that there could be recession risk in the future. So I feel like where we are is conservative, appropriate, and it'll be driven by loan growth and credit performance in the second and a half of the year.

The next question comes from the line of Matthew Brees with Stevens Incorporated. Please go ahead.

Hey, good morning. Two things on originations. First, C&I originations picked up quite a bit this quarter, over $2 billion. How much of that feels sustainable and how are spreads holding up there? And then two, commercial real estate originations were strong as well at $1.2 billion. Balances were actually down. So maybe you could talk about that dynamic and how payoffs are playing a role in commercial real estate today.

Yeah, I'll take a shot and then ask Luis and Neil if they want to add anything. I mean, I think another thing we were proud of this quarter is that our originations came really across the entire bank in all categories, commercial and consumer. We had a really nice quarter with respect to, you know, commercial middle market, traditional C&I. And as you mentioned at the end of the day, we actually reduced our Cree concentration, quite frankly, not intentionally. That pipeline is building. We've said we're really comfortable where we are in that 250-ish range. And so we do have a building pipeline in Cree with high quality full relationship loans. And hopefully you'll see that category contribute to what we believe will be strong back half of the year loan growth across the board. And with respect to your specific question about is it replicable uh given the fact that it wasn't in any one category and we're seeing pipelines build we do think that we can see similar loan growth uh quarterly over the course of the rest of 25. yeah matt the only thing that you know i'd add there is that the you know can you with all the noise uh ramping up over the and my second question is just in in light of montani's

ascendancy here towards the mayorship in new york city and of course this is if he wins you know how much of a valuation impact do you think there could be to, you know, the heavier rent regulated buildings? Could this asset class become more of a problem for you? And do you have at your fingertips what kind of allowance against this asset class you already have?

So we don't have the allowance on the rent regulated itself. You know, let me see if we can track it down while we're here. But, you know, you kind of hit the nail on the head in the question. You know, we had moved away from the rent-regulated business and the portfolio, you know, wealth and how seasoned it is. And, you know, we'll have to manage and, you know, deal with whatever, you know, eventualities come up if it does that Mondami wants.

And Matt, just again to reiterate, $1.368 million in current debt services. So I think, you know, we think of that as we are not overly exposed to that asset class. And I think more than 60% or somewhere around 60% of what we underwrote in rent-regulated multifamily was underwritten after back in 2019, meaning we weren't anticipating significant rent increases in order to service the debt. So really granular, very small part. Again, we don't see a material credit impact, even if there's further regulation.

Appreciate all that. Thank you.

Your next question comes from the line of Anthony Ellion with JP Morgan. Please go ahead.

Hi, everyone. Credit quality metrics inflected as you would expect by this part of the year, but should we expect the metrics you highlight on slide 13 to improve further in the coming quarters? I understand there will be one-offs, but is this declaring victory on credit quality now, or should we expect these metrics to improve even further?

Yeah, I think you kind of asked and answered the question. You know, we're always loathe to predict credit performance, and I probably get myself in trouble for not being more aggressively positive. But underlying here is the fact that our risk-rating migration has really stabilized, and we're not seeing any new pockets of problems either in any sector, any geography, or any business line, which is really encouraging. And the other thing that I would remind everybody is even the NPLs and classifieds that are outstanding, they're really concentrated in those two portfolios that we continue to talk about for a long time. So 45% of our NPLs on the balance sheet right now are either Cree office or healthcare services, and 25% of our classified loans are in those two categories. Two categories now, which are both well below a billion dollars. We've worked through them significantly. We don't have significant originations in either of those two categories. So that gives us another sense that, yes, directionally over time, we think we should continue to see trending down in those two asset categories, and obviously with the caveat that because we're a commercial bank with larger exposures, that in any one quarter you could see things bump around.

That's fair. Your next question comes from the line of David Smith with Truist Securities. Please go ahead.

Good morning. Just on the topic of credit continuing to improve, is there any further benefit to recovery of interest income in the NII forecast as other nonaccruals work down over time?

Yeah. Again, that's one where obviously if we had line of sight to it and we would be dealing with it, accelerating it. So I would say if you look at every single one of our quarters, ins and outs and non-accruals tend to have an impact. You either accelerate if you have a resolution, you know, previously deferred income, or you start to get a drag if you've got a new non-performer. I guess the best thing to say would be we anticipate non-performers to trend down, so we hope that the positive impact outweighs the negative impact, but nothing in our forecast would lead us to believe that we have sort of any material impact on NII either way in the second half of the year.

All right. Thank you. Your next question comes from the line of Bernard von Gizik with Deutsche Bank. Please go ahead.

Hey, guys. Good morning. Neil, first question, just on non-interest-bearing deposits, there's a nice uptick of about $200 million in the quarter, and I know that previous guidance was expecting the DBAs remain flat on a full-year basis. Just any thoughts on how you're thinking about any potential growth in the second and a half and how we should think about full-year?

Yeah, non-interest-faring was interesting this quarter. As you pointed out, we were up $200 million point-to-point. But if you get into the average balance movement, we were actually down $200 million in the quarter. So we did see a little bit of a positive movement towards the end. We continue to believe that, you know, if you trend back historically over the last five or six quarters, obviously as an industry and banking, we've seen decline in DDA accounts. Our belief is we're at the bottom of that decline, and we'll start to see some, you know, mild growth coming in the back half of the year. We're not counting on outsized growth to hit our guidance, but we do believe we've kind of reached that bottom and should bank in for the banking industry.

Okay, great. And just one follow-up for Reese. Just on HSA, like you mentioned on the three provisions included in the final bill, most of the benefit that you mentioned is coming from the bronze HSA plan participants. But the other two regarding the direct primary care and telehealth, anything – how big were those, would you say, of the $1 to $2.5 billion you kind of cited? Was Is that just, you know, kind of like a rounding error or just anything you can give just on, like, sizing since the bronze is, like, the bare component?

Yeah, it's slightly more than a rounding error, but I think you could still characterize it as a rounding error on the last two. The big driver of this is the fact that you now have, you know, so, you know, under today's enrollment rates in the bronze package, you'll be eligible to, you know, that's largely the driver of this. And that's, again, why this, you know, for us identifying the $7 million, it is largely, that is the driver.

The other two are valuable. You know, the telehealth, for example, was a risk to the industry, and it's great to see that passing and that risk removed.

Okay, great. Thanks for taking my questions.

Thank you.

The next question comes from the line of Daniel Tamayo with Raymond James. Please go ahead.

Hey, good morning, guys. Thanks for taking my questions. Most of my questions ask and answer at this point, but I guess first just you've talked about the C&I and CRE broadly, but I'm curious on the sponsor side that's been a little bit light lately, if you're seeing any changes in demand there, if you're kind of baking in any pickup in that book in the back half of the year as the other categories start to pick up.

Sure, the answer is yes. It was very late in the first and early part of the second quarter of this year, even going back to, you know, we had already started to see a downward trend in origination activity that picked up nicely in the second part of the second quarter. And we do envision that we're going to get back to what we do think that the addition of the, you know, just becoming a improving and strengthening our competitive position through the joint venture with Marathon is also going. We're going to be able to look at more deals than what we looked at in the past. We're going to be able to target slightly larger deals than what we have been able to do in the past. And so when you factor in return to greater sector activity for PE in general, combined with what we are doing on just improving our competitive position as an originator, all of that should result in a better growth trajectory in the back.

Thanks, Luis, for that. And then I guess just quickly on the deposit side, so you had the seasonal factors that impacted your growth or inflows of the broker CDs in the quarter. I'm curious if you can kind of how you're thinking about the movement of that portfolio, maybe in the third quarter, but overall just thoughts on where you think that that category shakes out for you as you look at the contribution of brokerage percentage of deposits longer term. Thanks.

Yes. So brokered, we run brokered fairly low as a percent of our total deposit mix. In season one and season three, we see nice increases in our public deposit accounts. In quarter two and quarter four, as we see those trend down, we bring in more brokered deposits to help offset those. So as you think about Q3, you'll likely see potentially brokered come down as those public deposits move up, and you'll see that trend reverse again in Q4. But we really run our broker deposits kind of in that 3% to 5% of deposit range, so range we're real comfortable with, and that's how we think about the season.

Your next question comes from the line of Kamur Braziller with Wells Fargo. Please go ahead. Hey, good morning.

Following up on the marathon commentary, I'm just wondering to what extent does that loan growth come just from looking at larger deals?

And is that a two-way street where things that marathon might originate will end up on your balance sheet, or is that just what you're originating will end up on the JV? um it uh it largely we think that the more swings at the plate will come from the fact that we can participate and compete for larger transactions without increasing the on balance sheet hold sizes i would say that yes there is a two-way street there that could benefit us from an origination perspective although our origination channel and capabilities will be the majority of the originations related to what we would put in the joint venture. So excited about it. Again, this will be, as Luis mentioned in his comments, there'll be a ramp period before we start to get non-interest income. But we do think that we'll benefit relatively shortly from a more competitive offering and a larger implied balance sheet.

Okay, great. And then as a follow-up, just looking at margin trajectory, realizing that it benefited a little bit from some interest recoveries here in 2Q, but can you just maybe talk to some of the competitive landscapes around the deposit side, some of the spread tightening on new loan production, and is the expectation that we're still kind of tracking towards a 340 margin as we go through the back end of the year, or does maybe some of the loan growth commentary mitigate some of those pressures?

Yeah. So we're still expecting a net interest margin of approximately 3.4% this year. And so if you think about that in the first half of the year, we were obviously a little bit above that 3.4% level. So we kind of expect to exit the year somewhere between 335 and 340. And I mentioned a couple items. We'll have a little bit more cash on the balance sheet. We've got a debt restructure in the back half of the year. We've got a little bit of pressure on our securities portfolio called a basis pointer. And then there'll be some modest spread impacts. And that really depends. Deposit competition is challenging the market right now. I think our teams are doing a great job of maintaining clients and winning new relationships.

And the one thing I would say to tie that to the earlier question, if we do see continued increase M&A activity and what Luis talked about with respect to sponsor pipeline improves, that gives us a chance to outperform as great.

Thank you. Your next question comes from the line of Ben Gerlinger with Citi. Please go ahead.

Hi, good morning.

Good morning, Ben.

Just kind of following up a little bit or tangential on the similar question about the marathon. With the larger loan size, we would theoretically think it's maybe a little bit bigger company. And then with the fee income opportunities you had in front of you you guys teased it a little bit that it's going to take a little while to ramp up and it's more of a 26 question than 25 but once we get that flywheel really going the contribution to fee income are we talking like a couple million incremental per quarter or are we talking like tens of millions per quarter once you get the full thing going so probably more like a run rate late 26. yeah i think that there's uh there's two opportunities as we think about the potential for what the impact of the joint venture is going to be.

When we're referring to the fee income, we're talking about asset management income, and that is, for the first vehicle that we're going to be running, it's going to be more of the, as you said, tens of millions, it's not that big. It's going to be smaller than that, but it's going to be a good recurrent we'll be generating, and we'll continue to provide more details, and you'll see it ramping up through the P&L over time. The just as good of an opportunity, if not better, and I think you hit the nail on the head when you said larger transactions means larger companies, which will mean larger opportunity to be able to do capital markets business, swap syndications, as well as just treasury management and deposit opportunity plays there as well. You're going to start seeing that fee income being generated and running in the third quarter.

And one important point I want to make on this is, because this isn't new activity for us. This isn't us having to go out and find new sponsors or we're chasing things. This simply gives us the capacity to continue to deliver full relationship, loan fees, originations with existing sponsors who, as the markets change with private credit, do tons of business with them. But on the larger deals, they move away from us because of our balance sheet. So I think it's an important point to know that this isn't changing risk profile. This isn't changing activity. We don't need to hire new people. We have very sophisticated people in that sponsor group. It's just giving them more tools to take advantage and deliver for their existing clients.

Gotcha. That's helpful. I just want to dig a little deeper than that. You have the kind of, let's call it back office or banking opportunity for, for kind of legacy marathon relationships now, or is it really trying to keep separate church and state between Webster, JV and Merit on like opportunity. Yeah.

I wouldn't comment on that now. I think over the long term they're a great firm and I think there are more things we can do together. One of them would be what you talked about with respect to having a good banking services product for other borrowers but that's not on the drawing board now and I wouldn't comment on that.

Thank you.

I appreciate Next question comes from the line of Lori Hunsaker with Seaport. Please go ahead.

Good morning. Two questions. Number one, what was your share buyback price on the million and a half shares in the quarter? And then number two, just going back to the rent-regulated multifamily, that $1.4 billion, do you have an approximate debt service coverage and then anything to think about or know about on that 185 million of maturities coming up over the next 12 months yeah our q2 share repurchases were at 51.69 john and our thank you and our current debt service coverage ratio on the portfolio is 1.56 times perfect thank you so much oh and anything on that um 185 million

of maturities that we should be thinking about no normal course right thanks guys thank you lori i will now turn the call back over to john ceula for closing remarks please go ahead Thank you very much.

We appreciate everyone participating this morning. Have a great day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining and you may now disconnect.