0000801337 us-gaap:AllowanceForCreditLossMember 2015-12-31
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 

FORM 10-K

☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Fiscal
Year Ended December 31, 2017
For the fiscal year ended December 31, 2019
or
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ____ to ____
Commission File Number: 001-31486

WEBSTER FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
 _______________________________________________________________________________
DelawareDelaware06-1187536
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
145 Bank Street, Waterbury, Connecticut 06702
(Address and zip code of principal executive offices)
Registrant's
Registrant’s telephone number, including area code: (203) 578-2202

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolsName of exchange on which registered
Common Stock, $.01$0.01 par valueWBSNew York Stock Exchange
Depository Shares, each representing 1/1000th interest in a shareWBS PrFNew York Stock Exchange
of 5.25% Series F Non-Cumulative Perpetual Preferred StockNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933.☑Act. ☒  Yes    ☐  No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.Act.   ☐  Yes  ☑☒  No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☑☒  Yes    ☐  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  ☑☒  Yes  ☐  No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☑
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☑☒Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transaction period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).   ☐ Yes    ☑☒ No
The aggregateAggregate market value of Webster Financial Corporation’s common stock held by non-affiliates of Webster Financial Corporation was approximately $4.7$4.3 billion, based on the June 30, 2019 closing sale price of the common stock on the New York Stock Exchange, on June 30, 2017,as of the last trading day of the registrant'sregistrant’s most recently completed second quarter.
The numberNumber of shares of common stock, par value $.01 per share, outstanding as of February 16, 201827, 2020 was 92,111,033.91,629,752.
Documents Incorporated by Reference
Part III: Portions of the Definitive Proxy Statement (the "Proxy Statement"“Proxy Statement”) for the Annual Meeting of Shareholders to be held on April 26, 2018.23, 2020.




Table of Contents

INDEX

Page No.
Forward-Looking Statements
ii
Key to Acronyms and Terms
iii
Item 1.Page No.
Forward-Looking StatementsBusiness
ii1
Key to Acronyms and Terms
Item 1A.Risk Factors
iii12
Item 1B.Unresolved Staff Comments
18
Item 2.Properties
19
Item 3.Legal Proceedings
19
Item 4.Mine Safety Disclosures
19
Item 1.Business
1
Item 1A.Risk Factors
12
Item 1B.Unresolved Staff Comments
17
Item 2.Properties
18
Item 3.Legal Proceedings
18
Item 4.Mine Safety Disclosures
18
PART II
Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
1920
Item 6.Selected Financial Data
2221
Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations
22
Item 7A.Quantitative and Qualitative Disclosures About Market Risk
5949
Item 8.Financial Statements and Supplementary Data
6050
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
121109
Item 9A.Controls and Procedures
121109
Item 9B.Other Information
123109
Item 10.Directors, Executive Officers and Corporate Governance
123111
Item 11.Executive Compensation
125112
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
125113
Item 13.Certain Relationships and Related Transactions, and Director Independence
125113
Item 14.Principal Accountant Fees and Services
125113
Item 15.Exhibits and Financial Statement Schedules
125113
SIGNATURESEXHIBIT INDEX
126114
Item 16.Form 10-K Summary
115
127116


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WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains "forward-looking statements"“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "believes," "anticipates," "expects," "intends," "targeted," "continue," "remain," "will," "should," "may," "plans," "estimates,"“believes,” “anticipates,” “expects,” “intends,” “targeted,” “continue,” “remain,” “will,” “should,” “may,” “plans,” “estimates,” and similar references to future periods; however, such words are not the exclusive means of identifying such statements. References to the “Company,” “Webster,” “we,” “our,” or “us” mean Webster Financial Corporation and its consolidated subsidiaries.
Examples of forward-looking statements include, but are not limited to:
•projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items;
•statements of plans, objectives and expectations of Webster or its management or Board of Directors;
•statements of future economic performance; and
•statements of assumptions underlying such statements.
Forward-looking statements are based on Webster’s current expectations and assumptions regarding its business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Webster’s actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance.
Factors that could cause our actual results to differ from those discussed in the forward-looking statements include, but are not limited to:
•our ability to successfully execute our business plan and manage our risks;
•local, regional, national and international economic conditions and the impact they may have on us and our customers;
•volatility and disruption in national and international financial markets;
government intervention in the U.S. financial system;
•changes in the level of non-performing assets and charge-offs;
•changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements;
•adverse conditions in the securities markets that lead to impairment in the value of securities in our investment portfolio;
•inflation, changes in interest rate,rates, and securities market and monetary fluctuations;
•the timely development and acceptance of new products and services and the perceived overall value of these products and services by customers;
•changes in deposit flows, consumer spending, borrowings and savings habits;
technological changes•our ability to implement new technologies and cyber-security matters;maintain secure and reliable technology systems;
the•performance by our counterparties and vendors;
•our ability to increase market share and control expenses;
•changes in the competitive environment among banks, financial holding companies and other financial services providers;
the effect of •changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, insurance and healthcare) with which we and our subsidiaries must comply, including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), the final rules establishing a new comprehensive capital framework for U.S. banking organizations (Capital Rules), and the Tax Cuts and Jobs Act of 2017 (Tax Act);comply;
•the effect of changes in accounting policies and practices as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board (FASB)applicable to us, including changes in our allowance for loan and lease losses and other impacts of our adoption of new accounting standard setters;guidance regarding the recognition of credit losses; and
the costs and effects of •legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; andreviews.
our success at assessing and managing the risks involved in the foregoing items.
AnyAll forward-looking statements made by Webster Financial Corporation (the Company) in this Annual Report on Form 10-K speaksspeak only as of the date they are made. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

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WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
KEY TO ACRONYMS AND TERMS
Agency CMBSAgency commercial mortgage-backed securities
Agency CMOAgency collateralized mortgage obligations
Agency MBSAgency mortgage-backed securities
ALCOAsset/Liability Committee
ALLLAllowance for loan and lease losses
AOCLAccumulated other comprehensive loss, net of tax
ARRCAlternative Reference Rates Committee
ASC / ASUAccounting Standards Codification
ASU / Accounting Standards Update
Basel IIICapital rules under a global regulatory framework developed by the Basel Committee on Banking Supervision
BHC ActBank Holding Company Act of 1956, as amended
Capital RulesFinal rules establishing a new comprehensive capital framework for U.S. banking organizations
CECLCurrent expected credit losses
CET1 capitalCommon Equity Tier 1 Capital, defined by Basel III capital rules
CFPBConsumer Financial Protection Bureau
CFTCCommodity Futures Trading Commission
CLOCollateralized loan obligation securities
CMBSNon-agency commercial mortgage-backed securities
CMEChicago Mercantile Exchange
CRACommunity Reinvestment Act of 1977
DIFFederal Deposit Insurance Fund
Dodd-Frank ActDodd-Frank Wall Street Reform and Consumer Protection Act of 2010
DTADeferred tax asset
EGRRCPAEconomic Growth, Regulatory Relief, and Consumer Protection Act of 2018
ERMCEnterprise Risk Management Committee
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
FHLBFederal Home Loan Bank
FICOFair Isaac Corporation
FINRAFinancial Industry Regulatory Authority
FRAFederal Reserve Act
FRBFederal Reserve Bank
FTPFunds Transfer Pricing, a matched maturity funding concept
GAAPU.S. Generally Accepted Accounting Principles
Holding CompanyWebster Financial Corporation
HSA BankAHSA Bank, a division of Webster Bank, National Association
ISDAInternational Swaps Derivative Association
LEPLoss emergence period
LGDLoss given default
LIBORLondon Interbank Offered Rate
LPLLPL Financial Holdings Inc.
NIINAVNet asset value
NIINet interest income
OCCOffice of the Comptroller of the Currency
OCI/OCI / OCLOther comprehensive income (loss)
OREOOther real estate owned
OTTIOther-than-temporary impairment
PDProbability of default
PPNRPre-tax, pre-provision net revenue
QMQualified mortgage
SALTROURight-of-use
SALTState and local tax
SECUnited States Securities and Exchange Commission
SERPSupplemental defined benefit retirement plan
SIPCSecurities Investor Protection Corporation
SOFRSecured overnight financing rate
Tax ActTax Cuts and Jobs Act of 2017
TDR
Troubled debt restructuring, defined in ASC 310-40 "“Receivables-Troubled Debt Restructurings by Creditors"”
UTBUnrecognized tax benefit
UTPVIE / VOEUncertain tax position
VIE
Variable interest entity / voting interest entity, defined in ASC 810-10 "Consolidation-Overall"
“Consolidation-Overall”
Webster Bank or the BankWebster Bank, National Association, a wholly-owned subsidiary of Webster Financial Corporation
Webster or the CompanyWebster Financial Corporation, collectively with its consolidated subsidiaries

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PART 1
ITEM 1. BUSINESS
Company Overview
Webster Financial Corporation is a bank holding company and financial holding company under the Bank Holding Company Act of 1956, as amended (BHC Act), incorporated under the laws of Delaware in 1986, and headquartered in Waterbury, Connecticut. Its principal asset is all of the outstanding capital stock of Webster Bank, National Association (Webster Bank).
At December 31, 2017,2019, Webster had assets of $26.5$30.4 billion, net loans and leases of $17.3$19.8 billion, deposits of $21.0$23.3 billion, and shareholders'shareholders’ equity of $2.7$3.2 billion.
AtWebster had 3,298 full-time equivalent employees at December 31, 2017, Webster had 3,302 full-time equivalent employees.2019. Webster provides its employees with comprehensive benefits, some of which are provided on a contributory basis, including medical and dental plans, a 401(k) savings plan with a company matching contribution, life insurance, and short-term and long-term disability coverage.
Webster Financial Corporation'sCorporation’s common stock is traded on the New York Stock Exchange under the symbol WBS. Webster'sWebster’s internet address is www.websterbank.com and investor relations internet address is www.wbst.com. Webster makes available free of charge on these websites its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, definitive proxy statements, and amendments, if any, to those documents filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as soon as practicable after it electronically files such material with, or furnishes it to, the United States Securities and Exchange Commission (SEC). These documents are also available to the public on the Internet at the SEC'sSEC’s website at www.sec.gov. Information on Webster’s website and theits investor relations website is not incorporated by reference into this report.
References in this report to Webster, the Company, we, our, or us, mean Webster Financial Corporation and its consolidated subsidiaries.
Business Segments
The Company delivers a wide range of banking, investment, and financial services to businesses and individuals through three reportable segments - Commercial Banking, HSA Bank, a division of Webster Bank, National Association (HSA Bank), and Community Banking.
Commercial Banking provides lending, deposit, and treasury and payment solutions with a focus on building relationships with companies that have annual revenues greater than $25 million, primarily within our Northeast footprint. Commercial Banking is comprised of the following:
Middle Market delivers a full array of financial services to a diversified group of companies, leveraging industry specialization and delivering competitive products and services.
Commercial Real Estate provides financing for the acquisition, development, construction, or refinancing of commercial real estate for which the property is the primary security for the loan and income generated from the property is the primary repayment source.
Webster Business Credit Corporation is the asset-based lending subsidiary of Webster Bank and is one of the top 25 asset-based lenders in the U.S. Webster Business Credit Corporation builds relationships with growing middle market companies by financing core working capital and import financing needs primarily with revolving credit facilities with advance rates against accounts receivable and inventory.
Webster Capital Finance is the equipment finance subsidiary of Webster Bank. Webster Capital Finance offers small to mid-ticket financing for critical equipment with specialties in construction, transportation, environmental and manufacturing equipment. Webster Capital Finance lends primarily in the eastern half of the U.S. and in other select markets
Treasury and Payment Solutions delivers a broad range of deposit, lending, treasury, and trade services via a dedicated team of treasury professionals and local commercial bankers. Treasury and Payment Solutions is comprised of Government and Institutional Banking, Cash Management Sales and Product Management to deliver holistic solutions to Webster’s increasingly sophisticated business and institutional clients.
HSA Bank is a leading bank administrator of health savings accounts based on assets under administration. With a focus on health savings accounts, HSA Bank also delivers health reimbursement arrangements, and flexible spending and commuter benefit account administration services to employers and individuals in all 50 states. Health savings accounts are distributed nationwide directly to employers and individual consumers as well as through national and regional insurance carriers, benefit consultants and financial advisors. At December 31, 2017, HSA Bank held almost 2.5 million accounts encompassing more than $6.3 billion in health savings account deposits and linked investments.

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Community Banking serves consumers and business banking customers primarily throughout southern New England and into Westchester County, NY. Community Banking is comprised of personal and business banking, as well as a distribution network consisting of 167 banking centers, 334 ATMs, a customer care center, and a full range of web and mobile based banking services.
Personal Banking offers consumer deposit and fee-based services, residential mortgages, home equity lines/loans, unsecured consumer loans, and credit card products. In addition, investment and securities-related services, including brokerage and investment advice is offered through a strategic partnership with LPL Financial Holdings Inc. (LPL), a broker dealer registered with the SEC, a registered investment advisor under federal and applicable state laws, a member of the Financial Industry Regulatory Authority (FINRA), and a member of the Securities Investor Protection Corporation (SIPC). Webster Bank has employees located throughout its banking center network, who, through LPL, are registered representatives.
Business Banking offers credit, deposit, and cash flow management products to businesses and professional service firms with annual revenues of up to $25 million. This group builds broad customer relationships through business bankers and business certified banking center managers, supported by a team of customer care center bankers and industry and product specialists.
Additional information relating to our business segments is included under the caption "Segment Reporting" in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, while financial and other information is included within Note 19: Segment Reporting in the Notes to Consolidated Financial Statements contained elsewhere in this report, both of which are incorporated herein by reference.
Subsidiaries of Webster Financial Corporation
Webster Financial Corporation's directCorporation’s principal consolidated subsidiary is Webster Bank (the Bank). Its other directly consolidated subsidiaries include Webster Bank,are Webster Wealth Advisors, Inc., and Webster Licensing, LLC. Additionally, Webster Financial Corporation (Holding Company)The Holding Company also owns all of the outstanding common stock of Webster Statutory Trust which is an unconsolidated financial vehicle that has issued, and may in the future issue, trust preferred securities.
Webster Bank offers its wide range of financial services to individuals, families and businesses. Through its HSA Bank division, Webster Bank offers health savings accounts, health reimbursement accounts, flexible spending accounts, and other financial solutions. Through a strategic partnership with LPL, a broker dealer registered with the SEC, a registered investment advisor under federal and applicable state laws, a member of the FINRA, and a member of the SIPC, Webster Bank offers investment and securities-related services.
Webster Bank'sBank’s significant direct subsidiaries include;include the following: Webster Servicing, which provides a variety of services to health savings accounts; Webster Mortgage Investment Corporation, a passive investment subsidiary whose primary function is to provide servicing on qualified passive investments, such as residential real estate and commercial mortgage real estate loans acquired from Webster Bank; Webster Business Credit Corporation, which offers asset-based lending services; and Webster Capital Finance, Inc., which offers equipment financing for end users of equipment. Webster Bank also has various other subsidiaries that are not significant to the consolidated group.
Business Segments
Webster Bank delivers a wide range of banking, investment, and financial services to individuals, families, and businesses through three reportable segments - Commercial Banking, HSA Bank, and Community Banking.
Commercial Banking provides lending, deposit, and treasury and payment solutions with a focus on building relationships with companies that have annual revenues greater than $25 million. Commercial Banking is comprised of the following:
•Middle Market delivers a full array of financial services to a diversified group of companies, leveraging industry specialization and delivering competitive products and services, primarily in the Northeast.
•Commercial Real Estate provides financing, primarily in the Northeast, for the acquisition, development, construction, or refinancing of commercial real estate for which the property is the primary security for the loan and income generated from the property is the primary repayment source.
•Webster Business Credit Corporation is one of the top 25 asset-based lenders in the U.S. that builds relationships with growing middle market companies by financing core working capital and other financing needs primarily with revolving credit facilities with advance rates against accounts receivable and inventory. Webster Business Credit Corporation lends primarily in the eastern half of the U.S.
•Webster Capital Finance offers small to mid-ticket financing for critical equipment, specializing in construction, transportation, environmental, and manufacturing equipment. Webster Capital Finance lends primarily in the eastern half of the U.S. and also in other select markets.
•Treasury and payment solutions delivers a broad range of deposit, lending, treasury, and trade services, primarily in the Northeast, via a dedicated team of treasury professionals and local commercial bankers. Treasury and payment solutions is comprised of Government and Institutional Banking, Cash Management Sales, and Product Management to deliver holistic solutions to Webster’s increasingly sophisticated business and institutional clients.
•Private Banking provides local, full relationship banking that serves high net worth clients, not-for-profit organizations, and business clients with asset management, financial planning services, trust services, loan products, and deposit products. These client relationships generate fee revenue on assets under management or administration, while a majority of the relationships also include lending and/or deposit accounts which provide net interest income and other ancillary fees.
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HSA Bank is a division of Webster Bank with a focus on providing health savings accounts, while also delivering health reimbursement arrangements and flexible spending and commuter benefit account administration services to employers and individuals in all 50 states. It is a leading bank administrator of health savings accounts based on assets under administration. Health savings accounts are distributed nationwide directly to employers and individual consumers as well as through national and regional insurance carriers, benefit consultants, and financial advisors. At December 31, 2019, HSA Bank had approximately 3 million accounts with more than $8.5 billion in health savings account deposits and linked investment balances.
Community Banking serves consumers and business banking customers primarily throughout southern New England and Westchester County, New York. Community Banking is comprised of personal and business banking, as well as a distribution network consisting of 157 banking centers, 309 ATMs, a customer care center, and a full range of web and mobile based banking services.
•Personal Banking offers consumer deposit and fee-based services, residential mortgages, home equity lines/loans, unsecured consumer loans, and credit card products. In addition, investment and securities-related services, including brokerage and investment advice, are offered through a strategic partnership with LPL Financial Holdings Inc. (LPL), a broker dealer registered with the SEC, a registered investment advisor under federal and applicable state laws, a member of the Financial Industry Regulatory Authority (FINRA), and a member of the Securities Investor Protection Corporation (SIPC). Webster Bank has employees located throughout its banking center network who, through LPL, are registered representatives.
•Business Banking offers credit, deposit, and cash flow management products to businesses and professional service firms with annual revenues of up to $25 million. This group builds broad customer relationships through business bankers and business certified banking center managers, supported by a team of customer care center bankers and industry and product specialists.
Competition
Webster is subject to strong competition from banks, thrifts, credit unions, non-bank health savings account trustees, consumer finance companies, investment companies, insurance companies, e-commerce and other internet-based companies.online lending and savings institutions. Certain of these competitors are larger financial institutions with substantially greater resources, lending limits, larger branch systems, and a wider array of commercial and consumer banking services than Webster. Competition could intensify in the future as a result of industry consolidation, the increasing availability of products and services from non-bank entities, greater technological developments in the industry, and continued bank regulatory reforms.
Webster faces substantial competition for deposits and loans throughout its market areas. The primary factors in competing for deposits are interest rates, personalized services, the quality and range of financial services, convenience of office locations and hours, mobile banking and other automated services, and office hours.services. Competition for deposits comes from other commercial banks, savings institutions,thrifts, credit unions, non-bank health savings account trustees, mutual funds, and other investment alternatives. The primary factors in competing for consumer and commercial loans are interest rates, loan origination fees, ease and convenience of loan origination channels, the quality and range of lending services, personalized service, and ability to close within customers'customers’ desired time frame. Competition for origination of mortgage loans comes primarily from commercial banks, non-bank lenders, savings institutions, mortgage banking firms, mortgage brokers, other commercial banks,online lenders, and insurance companies. Other factors which affect competition include the general and local economic conditions, current interest rate levels, and volatility in the mortgagelending markets.
Supervision and Regulation
Webster and its bank and non-bank subsidiaries are subject to comprehensive regulation under federal and state laws. The regulatory framework applicable to bank holding companies and their subsidiary banks is intended to protect depositors, the Federal Deposit Insurance Fund (DIF), and the U.S. banking system as a whole. This system is not designed to protect equity investors in bank holding companies. Set forth below is a summary of the significant laws and regulations applicable to Webster and its bank and non-bank subsidiaries. The description that follows is qualified in its entirety by reference to the full text of the statutes, regulations, and policies that are described. Such statutes, regulations, and policies are subject to ongoing review by Congress, and state legislatures, and federal and state regulatory agencies. A change in any of the statutes, regulations, or regulatory policies applicable to Webster and its bank and non-bank subsidiaries could have a material effect on the results of the Company.

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Webster Financial Corporation is a separate and distinct legal entity from Webster Bank and its other subsidiaries. As a registered bank holding company and a financial holding company, it is subject to inspection, examination, and supervision by the Board of Governors of the Federal Reserve System and is regulated under the Bank Holding Company Act of 1956, as amended (BHC Act).BHC Act. Webster is under the jurisdiction of the SEC and is subject to the disclosure and other regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, as administered by the SEC. Webster is subject to the rules for companies listed on the New York Stock Exchange. In addition, the Consumer Financial Protection Bureau (CFPB) supervises Webster for compliance with federal consumer financial protection laws. Webster is also is subject to oversight by state attorneys general for compliance with state consumer protection laws. Webster'sWebster’s non-bank subsidiaries are subject to federal and state laws and regulations, including regulations of the Federal Reserve System.
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Webster Bank is organized as a national banking association under the National Bank Act. Webster Bank is subject to the supervision of, and to regular examination by, the Office of the Comptroller of the Currency (OCC) as its primary federal regulator, as well as by the Federal Deposit Insurance Corporation (FDIC) as its deposit insurer. Webster Bank'sBank’s deposits are insured by the FDIC up to the applicable deposit insurance limits in accordance with FDIC laws and regulations.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) significantly changed the financial regulatory regime in the United States. Since the enactment of the Dodd-Frank, Act, U.S. banks and financial services firms have been subject to enhanced regulation and oversight. Several provisions of the Dodd-Frank Act are subject to further rulemaking, guidance, and interpretation by the federal banking agencies. While theThe current administration and its appointees to the federal banking agencies have expressed interest in reviewing, revising, and perhaps repealing portions of the Dodd-Frank Act and certain of its implementing regulations,regulations.
As such, among other things, the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (EGRRCPA) amended certain provisions of Dodd-Frank as well as statutes administered by the Federal Reserve System, the FDIC, and the OCC. The amendments resulting from EGRRCPA provide limited regulatory relief for certain financial institutions and additional tailoring of banking and consumer protection laws, while preserving the existing framework under which U.S. financial institutions are regulated, including the discretionary authority of the Federal Reserve System, the FDIC, and the OCC to supervise bank holding companies and insured depository institutions.
In addition, EGRRCPA includes certain other banking-related consumer protection and securities law-related provisions. Many of these provisions must be implemented through rules adopted by the federal banking agencies and certain changes remain subject to substantial regulatory discretion of the federal banking agencies. Although the federal banking agencies have made progress on several rules required under EGRRCPA, its full impact remains unclear for the immediate future. The Company expects to continue to evaluate the potential impact of EGRRCPA as it is not clear whether any such legislation or regulatory changes will be enacted or, if enacted, whatfurther implemented by the effect would be on Webster or Webster Bank.regulators.
Bank Holding Company Regulation
Webster Financial Corporation is a bank holding company as defined under the BHC Act. The BHC Act generally limits the business of bank holding companies to banking, managing or controlling banks, and other activities that the Board of Governors of the Federal Reserve System has determined to be so closely related to banking as to be a proper incident thereto. Bank holding companies that have elected to become financial holding companies, such as Webster Financial Corporation, may engage in any activity, or acquire and retain the shares of a company engaged in any activity, that is either (i) financial in nature or incidental to such financial activity (as determined by the Board of Governors of the Federal Reserve System in consultation with the Secretary of the Treasury) or (ii) complementary to a financial activity, and that does not pose a substantial risk to the safety and soundness of depository institutions or the financial system (as solely determined by the Board of Governors of the Federal Reserve System). Activities that are financial in nature include securities underwriting and dealing, insurance underwriting, and making merchant banking investments.
Mergers and Acquisitions
The BHC Act, the Bank Merger Act, and other federal and state statutes regulate the direct and indirect acquisition of depository institutions. The BHC Act requires the prior Federal Reserve System prior approval for a bank holding company to acquire, directly or indirectly, 5% or more of any class of voting securities of a commercial bank or its parent holding company, and for a company other than a bank holding company to acquire 25% or more of any class of voting securities of a bank or bank holding company.  Under the Change in Bank Control Act, any person including aor company may not acquire, directly or indirectly, control of a bank without providing 60 days prior notice and receiving a non-objection from the appropriate federal banking agency. 
Under the Bank Merger Act, the prior approval of the appropriate federal banking agency is required for insured depository institutions to merge or enter into purchase and assumption transactions.  In reviewing applications seeking approval of merger or purchase and assumption transactions, the federal banking agencies will consider, among other things, the competitive effect and public benefits of the transactions, the capital position of the combined banks, the applicant'sapplicant’s performance record under the Community Reinvestment Act of 1977 (CRA), and the effectiveness of the merging banks in combating money laundering.
Enhanced Prudential Standards
Section 165 of the Dodd-Frank Act imposes enhanced prudential standards on larger banking organizations. Certain of these standards are applicable to banking organizations over $10However, EGRRCPA makes bank holding companies with less than $100 billion includingin assets, such as Webster Financial Corporation, exempt from the enhanced prudential standards imposed under Section 165 including, but not limited to, the resolution planning and enhanced liquidity and risk management requirements therein. Further, on October 15, 2019, EGRRCPA was amended by raising the applicability threshold for company-run stress test requirements for bank holding companies from $10 billion or more in assets to $250 billion or more in assets. As a result, Webster Financial Corporation is relieved from the requirement to conduct company-run stress testing for itself and Webster Bank. Additionally,However, while the FDIC,federal banking agencies will not require company-run stress testing, the OCC,capital planning and risk management practices of the Company will continue to be reviewed through regular supervisory processes of the Federal Reserve System issued separate but similar rules requiring covered banks and bank holding companies with $10 billionthe OCC. The Company will continue to $50 billion in total consolidated assets, which includes Webster Financial Corporation and Webster Bank, to conduct an annual company-run stress test. Annual company-runperform certain stress tests are conducted forinternally and incorporate the Holding Companyeconomic models and Webster Bank, as required byinformation developed through its stress testing program into its risk management and business planning activities.
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Furthermore, under a previously issued rule of the Dodd-Frank Act. Webster publicly disclosed its most recent company-run capital stress test results on October 17, 2017.
The Federal Reserve System also issued a rule further implementing the enhanced prudential standards required by the Dodd-Frank, Act. Although most of the standards only apply to bank holding companies with more than $50 billion in assets, as directed by the Dodd-Frank Act, the rule contains certain standards that apply to bank holding companies with more than $10 billion in assets were subject to certain rules, including a requirement to establish a separate risk committee of the Company's board ofindependent directors to manage enterprise-wide risk. Webster meets these requirements.

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TableEGRRCPA subsequently increased the asset threshold for requiring a bank holding company to establish a separate risk committee of Contentsindependent directors from $10 billion to $50 billion. Notwithstanding the changes implemented by EGRRCPA, the Company has retained its Risk Committee of the Board of Directors.

Debit Card Interchange Fees
The Dodd-Frank Act requires that any interchange transaction fee charged for a debit transaction be reasonable and proportional to the cost incurred by the issuer for the transaction withand includes regulations that establish such fee standards, eliminate exclusivity arrangements between issuers and networks for debit card transactions, and limit restrictions on merchant discounting for use of certain payment forms, and minimum or maximumminimum-maximum amount thresholds as a condition for acceptance of credit cards. Under theThe Federal Reserve System'sSystem, pursuant to Dodd-Frank, approved a final debit card interchange rule pursuant to the Dodd-Frank Act,which caps an issuer'sissuer’s base fee is capped at 21 cents per transaction and allows for an additional amount equal to 5 basis points of the transaction's value. The Federal Reserve System separately issued a final rule that also allows a fraud-prevention adjustment of 1 centone-cent per transaction conditioned upon an issuer developing, implementing, and updating reasonably designed fraud-prevention policies and procedures.
Identity Theft
The SEC and the Commodity Futures Trading Commission (CFTC) jointly issued final rules and guidelines implementing the provisions of the Dodd-Frank Act which require certain regulated entities to establish programs to address risks of identity theft. The rules require financial institutions and creditors to develop and implement a written identity theft prevention program that is designed to detect, prevent, and mitigate identity theft in connection with certain existing accounts or the opening of new accounts. The rules include guidelines to assist entities in the formulation and maintenance of programs that would satisfy these requirements. In addition, the rules establish special requirements for any credit and debit card issuers that are subject to the jurisdiction of the SEC or the CFTC to assess the validity of notifications of changes of address under certain circumstances. Webster implemented an ID Theft Prevention Program, approved by its Board of Directors, in compliance with these requirements.
Volcker Rule
Section 619 of the Dodd-Frank, Act, commonly known as the Volcker Rule, restricts the ability of banking entities, such as Webster and Webster Bank, from: (i) engaging in proprietary trading and (ii) investing in or sponsoring certain covered funds, subject to certain limited exceptions. Under the Volcker Rule, the term covered funds is defined as any issuer that would be an investment company under the Investment Company Act but for the exemption in section 3(c)(1) or 3(c)(7) of that Act, which includes collateralized loan obligation securities (CLO) and collateralized debt obligation securities. There are also several exemptions from the definition of covered fund, including, among other things, loan securitizations,securitization, joint ventures, certain types of foreign funds, entities issuing asset-backed commercial paper, and registered investment companies. The EGRRCPA and subsequent promulgation of inter-agency final rules have aimed to simplify and tailor requirements related to the Volcker Rule, including eliminating collection of certain metrics and reducing the compliance burdens associated with other metrics for banks with less than $20 billion in average trading assets and liabilities. The Federal Reserve approved Webster's illiquid funds extension request, thereby providinghas granted Webster with up to five additional years, tountil July 21, 2022 to bring suchits holdings into compliance with the Volcker Rule.
Derivatives Regulation
Title VII of the Dodd-Frank Act imposes requirements related to over-the-counter derivatives. Key provisions of the Title VII regulation are implemented by the CFTC. Among other things, the CFTC's rules apply to swap dealers, major swap participants and commercial entities that enter into OTC derivatives transactions to hedge or mitigate risk. Under rules and guidance of the CFTC, end users are subject to a wide range of requirements including capital, margining, clearing, documentation, reporting, eligibility and business conduct requirements. The Company complies with all aspects of the Title VII regulation that impact derivative activities, including interest rate risk hedges and its customer loan hedge program.
Dividends
The principalprimary source of liquidity at the Holding Company's liquidityCompany is dividends from Webster Bank. The priorPrior approval offrom the OCC is required if the total of all dividends declared byfor a national bank to declare a dividend in aany year that would exceed the sum of its net income for that year and its undistributed net income for the preceding two years, less any required transfers to surplus. Federal law also prohibits a national bank from paying dividends that would be greater than its undivided profits after deducting statutory bad debt in excess of allowance for loan and lease losses (ALLL). Webster Bank paid the Holding Company $120.0$360.0 million in dividends during the year ended December 31, 2017,2019 and $368.8had $302.8 million of undistributed net income available for the payment of dividends remained at December 31, 2017.2019.
In addition, Webster Financial Corporation and Webster Bank are subject to other regulatory policies and requirements relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums. The appropriate federalFederal regulatory authority isagencies are authorized to determine, under certain circumstances relating to the financial condition of a bank holding company or a bank, that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof. The appropriate federal banking agency authoritiesagencies have indicated that paying dividends that deplete a bank'sbank’s capital base to an inadequate level would be an unsafe and unsound banking practice, and that banking organizations should generally pay dividends only out of current operating earnings.

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Federal Reserve System
Federal Reserve System regulations require depository institutions to maintain cash reserves against their transaction accounts, primarily interest-bearing and regular checking accounts. The required cash reserves can be in the form of vault cash and, if vault cash does not fully satisfy the required cash reserves, in the form of a balance maintained with Federal Reserve Banks.Banks (FRBs). The Board of Governors of the Federal Reserve System generally makes annual adjustments to the tiered cash reserve requirements. The regulations require that Webster maintain cash reserves against aggregate transaction accounts in excess of the exempt amount of $15.5$16.3 million at December 31, 2017. Amounts2019. Effective January 16, 2020, amounts greater than $15.5$16.9 million up to and including $115.1$127.5 million have a reserve requirement of 3%. Amounts and amounts in excess of $115.1$127.5 million have a reserve requirement of 10%. Webster Bank is in compliance with these cash reserve requirements.
As a national bank and member of the Federal Reserve System, Webster Bank is required to hold capital stock of the Federal Reserve Bank (FRB)FRB of Boston. The required shares may be adjusted up or down based on changes to Webster Bank'sBank’s common stock and paid-in surplus. Webster Bank was in compliance with these requirements, with a total investment in FRB of Boston stock of $50.7$59.8 million at December 31, 2017.2019. The FRBs pay, a semi-annual dividend, to member banks with total assets greater than $10 billion, a semi-annual dividend equal to the lesser of 6% or the high yield ofon the 10-year Treasury note auctioned at the last auction prior to the dividend payment date. For the semi-annual period ended December 31, 2017,2019, the FRB of Boston declared a cash dividend equal to an annual yield of 2.384%1.84%.
Federal Home Loan Bank System
The Federal Home Loan Bank (FHLB) System provides a central credit facility for member institutions. Webster Bank is a member of the FHLB of Boston. Webster Bank (the Bank)Boston and is required to purchase and hold shares of capital stock in the FHLB for both membership and activity-based purposes. The capitalCapital stock requirement includesrequirements include an amount equal to 0.35% of the aggregate principal amount of the Bank'sBank’s unpaid residential mortgage loans and similar obligations at the beginning of each year, up to a maximum of $25 million, and alsoplus an amount based on its FHLB advances, which totaled approximately $1.7 billion at December 31, 2017, that varyvaries from 3.0% to 4.5% depending on the maturities of those advances. Theits FHLB recently initiated a process, based on current conditions, to redeem the holdings of its member banks in excess of their membership and activity-based requirements.advances, which totaled approximately $1.9 billion at December 31, 2019. Webster Bank was in compliance with these requirements, with a total investment in FHLB stock investment of $100.9$89.3 million at December 31, 2017.2019. On November 2, 2017,4, 2019, the FHLB paid a quarterly cash dividend equal to an annual yield of 4.33%5.73%.
Source of Strength Doctrine
Federal Reserve System policy requires bank holding companies to act as a source of financial and managerial strength to their subsidiary banks. Section 616 of the Dodd-Frank Act codified the requirement that bank holding companies act as a source of financial strength. As a result, Webster Financial Corporation is expected to commit resources to support Webster Bank, including at times when Webster Financial Corporation may not be in a financial position to provide such resources. Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary banks. The U.S. bankruptcy code provides that, in the event of a bank holding company'scompany’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment. In addition, under the National Bank Act, if the capital stock of Webster Bank is impaired by losses or otherwise, the OCC is authorized to require payment of the deficiency by assessment upon the Holding Company. If the assessment is not paid within three months, the OCC could order a sale of the Webster Bank stock held by Webster Financial Corporation to cover any deficiency.
Capital Adequacy
The capital rules under a global regulatory framework developed by the Basel Committee on Banking Supervision (BASEL III) adopted by the Federal Reserve System, the OCC, and the FDIC adopted Capital Rules in accordance with BASEL III, which generally implement the capital framework for strengthening international capital standards. The Capital Rules define the components of regulatory capital, as well as address other issues affecting the numerator in banking institutions’the regulatory capital ratios.ratios of a banking institution. The Capital Rules also address asset risk weights and other matters affecting the denominator in banking institutions’the regulatory capital ratios.ratios of a banking institution.
The Capital Rules:Rules (i) include the capital measure Common Equity Tier 1 Capital, defined by Basel III capital rules (CET1 capital) and related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specify that Tier 1 capital consists of CET1 capital and additional Tier 1 capital instruments meeting certain revised requirements; (iii) mandate that most deductions/deductions or adjustments to regulatory capital measures be made to CET1 capital and not to the other components of capital; and (iv) expand the scope of deductions from and adjustments to capital as compared to existing regulations.
Under the Capital Rules, for most banking organizations, including Webster, the most common form of additional Tier 1 capital is non-cumulative perpetual preferred stock, and the most common forms of Tier 2 capital are subordinated notes and the qualifying portion of the allowance for loan and lease losses in each case,(ALLL), all subject to specific requirements of the Capital Rules.
Pursuant to the Capital Rules, the minimum capital ratios are: (i) CET1 to risk-weighted assets of at least 4.5%; (ii) Tier 1 capital to risk-weighted assets of at least 6.0%; (iii) Total capital (Tier 1 capital plus Tier 2 capital) to risk-weighted assets of at least 8.0%; and Tier 1 capital to adjusted, as defined, quarterly average consolidated assets (calledis known as the Tier 1 leverage ratio) of at least 4.0%.ratio.

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Pursuant to the Capital Rules, ratio thresholds are as follows:
 Adequately CapitalizedWell Capitalized
CET1 risk-based capital4.5 %6.5 %
Total risk-based capital8.0  10.0  
Tier 1 risk-based capital6.0  8.0  
Tier 1 leverage capital4.0  5.0  
The Capital Rules, which became fully phased-in on January 1, 2019, in addition to the minimum risk-weighted asset ratios, also include a capital conservation buffer composed entirely of CET1 capital, in addition to these minimum risk-weighted asset ratios.capital. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions withmust hold a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer will face constraintsabove its minimum risk-based capital requirements in order to avoid limitations on distributions, such as dividends, equity, and other capital instrument repurchases, and compensationcertain discretionary bonus payments to executive officers, based on the amount of theany shortfall. When fully phased-in on January 1, 2019, theThe capital standards applicable to Webster and Webster Bank will include an additional capital conservation buffer of 2.5% of CET1for which the lowest capital effectively resulting in minimum ratios inclusive of the capital conservation buffer of: (i) CET1 to risk-weighted assets ofratio excess over adequately capitalized must be at least 7%; (ii) Tier 1 capital to risk-weighted assets of at least 8.5%; and (iii) Total capital to risk-weighted assets of at least 10.5%2.5%.
The Capital Rules provide for a number of deductions from and adjustments to CET1 capital. These include, for example, the requirement that mortgage servicing assets, certain deferred tax assets (DTAs), and significant investments in non-consolidated financial institutions be deducted from CET1 capital to the extent that any one such category exceeds 10% of CET1 capital or all such items in the aggregate exceed 15% of CET1 capital.
The Capital Rules also precludeUnder the Basel III Rule, certain hybrid securities, such as trust preferred securities, from inclusion in Tier 1 capital of bank holding companies, subject to phase-out for bank holding companies, such as Webster Financial Corporation,off-balance sheet commitments and obligations are converted into risk-weighted assets that, had $15 billion or more in total consolidatedtogether with on-balance sheet assets, as of December 31, 2009. The Company has excluded trust preferred securities from Tier 1 capital since 2016.
Implementation ofare the deductions and other adjustments to CET1 capital began on January 1, 2015 and was being phased in over a 4-year period. The transition provisions applicable during 2017 under the banking agencies'base against which regulatory capital rules have been extended indefinitely for certain regulatory capital deductions and risk weight requirements. In addition, implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and increases by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019.
is measured. The risk-weighting categories are standardized for bank holding companies and includebanks based on a risk-sensitive number of categories,analysis, depending on the nature of the assets, generally rangingexposure. Risk weights range from 0% for U.S. government and agency securities to 600%1,250% for exposures such as certain tranches of securitization or certain equity exposures,exposures.
In September 2017, the federal banking agencies proposed simplifying the Capital Rules. On July 9, 2019, the federal banking agencies adopted a final rule, replacing a substantially similar interim rule, to simplify several requirements of the regulatory capital rules for non-advanced approaches institutions, such as the Company. The final rule simplifies the capital treatment for mortgage servicing assets, certain deferred tax assets, investments in the capital instruments of unconsolidated financial institutions, and resulting in higher risk weights for a variety of asset classes. Management believes Webster is in compliance, and will continue to be in compliance, with the targeted capital ratios as such requirements are phased in.minority interests.
Prompt Corrective Action and Safety and Soundness
Pursuant to Section 38 of the Federal Deposit Insurance Act, federal banking agencies are required to take prompt corrective action should an insured depository institution fail to meet certain capital adequacy standards. At each successive lower capital category, an insured depository institution is subject to more restrictions and prohibitions, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends, and restrictions on the acceptance of brokered deposits. Furthermore, if an insured depository institution is classified in one of the under capitalizedunder-capitalized categories, it is required to submit a capital restoration plan to the appropriate federal banking agency, and the holding company must guarantee the performance of that plan.
Prompt corrective action ratios are as follows:
 WellAdequatelyUnderSignificantly
CapitalizedCapitalizedCapitalizedUnder-Capitalized
CET1 risk-based capital6.5 %4.5 %< 4.5%  < 3.0%  
Total risk-based capital10.0  8.0  < 8.0  < 6.0  
Tier 1 risk-based capital8.0  6.0  < 6.0  < 4.0  
Tier 1 leverage capital5.0  4.0  < 4.0  < 3.0  
Based upon its capital levels, a bank that is classified as well capitalized, adequately capitalized, or under capitalizedunder-capitalized may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition or an unsafe or unsound practice warrants such treatment.
For purposes of prompt corrective action, to be: (i) well-capitalized, an An insured depository institution must have a total risk based capital ratio of at least 10%, a Tier 1 risk based capital ratio of at least 8%, a CET1 risk based capital ratio of at least 6.5%, and a Tier 1 leverage ratio of at least 5%; (ii) adequately capitalized, an insured depository institution must have a total risk based capital ratio of at least 8%, a Tier 1 risk based capital ratio of at least 6%, a CET1 risk based capital ratio of at least 4.5%, and a Tier 1 leverage ratio of at least 4%; (iii) under-capitalized, an insured depository institution would have a total risk based capital ratio of less than 8%, a Tier 1 risk based capital ratio of less than 6%, a CET1 risk based capital ratio of less than 4.5%, and a Tier 1 leverage ratio of less than 4%; (iv) significantly under-capitalized, an insured depository institution would have a total risk based capital ratio of less than 6%, a Tier 1 risk based capital ratio of less than 4%, a CET1 risk based capital ratio of less than 3%, and a Tier 1 leverage ratio of less than 3%; (v) critically under-capitalized, an insured depository institution would havewith a ratio of tangible equity to total assets that is less than or equal to 2%. is considered critically under-capitalized.
Bank holding companies and insured depository institutions may also be subject to potential enforcement actions of varying levels of severity by the federal banking agencies for unsafe or unsound practices in conducting their business, or for violation of any law, rule, regulation, condition imposed in writing by the agency, or term of a written agreement with the agency. In more serious cases, enforcement actions may include the issuance of directives to increase capital; the issuance of formal and informal agreements; the imposition of civil monetary penalties; the issuance of a cease and desist order that can be judicially enforced; the issuance of removal and prohibition orders against officers, directors, and other institution affiliated parties; the termination of the insured depository institution’s deposit insurance; the appointment of a conservator or receiver for the insured depository institution; and the enforcement of such actions through injunctions or restraining orders based upon a judicial determination that the FDIC, as receiver, would be harmed if such equitable relief was not granted.

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Transactions with Affiliates and Insiders
Under federal law, transactions between insured depository institutions and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act (FRA) and implementingFederal Reserve Regulation W. In a bank holding company context, at a minimum, the parent holding company of a bank, and any companies which are controlled by such parent holding company, are affiliates of the bank. Generally, sections 23A and 23B of the FRA are intended to protect insured depository institutions from losses arising from transactions with non-insured affiliates by limiting the extent to which a bank or its subsidiaries may engage in covered transactions with any one affiliate and with all affiliates of the bank in the aggregate, and requiring that such transactions be on terms consistent with safe and sound banking practices.
Further, Section 22(h) of the FRA and its implementing Regulation O restricts loans to directors, executive officers, and principal stockholders or insiders. Under Section 22(h), loans to insiders and their related interests may not exceed, together with all other outstanding loans to such persons and affiliated entities, the institution'sinstitution’s total capital and surplus. Loans to insiders above specified amounts must receive the prior approval of the boardBoard of directors.Directors. Further, under Section 22(h) of the FRA, loans to directors, executive officers, and principal stockholders must be made on terms substantially the same as offered in comparable transactions to other persons, except that such insiders may receive preferential loans made under a benefit or compensation program that is widely available to the bank'sbank’s employees and does not give preference to the insider over the employees. Section 22(g) of the FRA places additional limitations on loans to executive officers.
Consumer Protection and Consumer Financial Protection Bureau Supervision
The Dodd-Frank Act centralized responsibility for consumer financial protection by creating the CFPB, an independent agency charged with responsibility for implementing, enforcing, and examining compliance with federal consumer financial protection laws. The Company is subject to a number of federal and state laws designed to protect borrowers and promote lending to various sectors of the economy and population. These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection Procedures Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Practices Act, various state law counterparts, and the Consumer Financial Protection Act of 2010, which is part of theDodd-Frank. Dodd-Frank Act. The Dodd-Frank Act does not prevent states from adopting stricter consumer protection standards. State regulation of financial products and potential enforcement actions could also adversely affect the Company’s business, financial condition or operations.
The ability-to-repay provision of the Truth in Lending Act requires creditors to make reasonable, good faith determinations that borrowers are able to repay their mortgages before extending the credit based on a number of factors and consideration of financial information about the borrower from reasonably reliable third-party documents. Under the Dodd-Frank Act and the qualified mortgage provisions of the Truth in Lending Act, commonly known as the qualified mortgageQualified Mortgage (QM) Rule, loans meeting the definition of qualified mortgage are entitled to a presumption that the lender satisfied the ability-to-repay requirements. The presumption is a conclusive presumption/safe harbor for prime loans meeting QM requirements and a refutable presumption for higher-priced/subprime loans meeting QM requirements. The QM definition incorporates the statutory requirements, such as not allowing negative amortization or terms longer than 30 years. The QM Rule also adds an explicit maximum 43% debt-to-income ratio for borrowers if the loan is to meet the QM definition, though some mortgages that meet GSE, FHA, and VA underwriting guidelines may, for a period not to exceed seven years, meet the QM definition without being subject to the 43% debt-to-income limits. The CFPB is expected to continue to issue and amend rules implementing the consumer financial protection laws, which may impact Webster Bank'sBank’s operations.
Financial Privacy and Data Security
Webster is subject to federal laws, including the Gramm-Leach-Bliley Act and certain state laws containing consumer privacy protection provisions. These provisions limit the ability of banks and other financial institutions to disclose nonpublic information about consumers to affiliated and non-affiliated third parties and limit the reuse of certain consumer information received from non-affiliated financial institutions. These provisions require notice of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain nonpublic personal information to affiliates or non-affiliated third parties by means of opt-out or opt-in authorizations.
The Gramm-Leach-Bliley Act requires that financial institutions implement comprehensive written information security programs that include administrative, technical, and physical safeguards to protect consumer information. Federal banking agencies have also adopted guidelines for establishing information security standards and programs to protect such information. These guidelines, along with related regulatory materials, increasingly focus on risk management and processes related to information technology and the use of third-parties in the provision of financial products and services. The federal bank regulatory agencies expect financial institutions to establish lines of defense and to ensure that their risk management processes address the risk posed by compromised customer credentials, and also expect financial institutions to maintain sufficient business continuity planning processes to ensure rapid recovery, resumption, and maintenance of the institution’s operations after a cyber attack.
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Further, pursuant to interpretive guidance issued under the Gramm-Leach-Bliley Act and certain state laws, financial institutions are required to notify customers of security breaches that result in unauthorized access to their non-public personal information.

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Table In October 2016, the federal bank regulatory agencies issued proposed rules on enhanced cybersecurity risk-management and resilience standards that would apply to very large financial institutions and to services provided by third parties to these institutions. The comment period for these proposed rules has closed and a final rule has not been published. Although the proposed rules would apply only to bank holding companies and banks with $50 billion or more in total consolidated assets, these rules could influence the federal bank regulatory agencies’ expectations and supervisory requirements for information security standards and cybersecurity programs of Contents

financial institutions with less than $50 billion in total consolidated assets, such as the Company.
Depositor Preference
The Federal Deposit Insurance Act provides that, in the event of the liquidation or other resolution of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution. If an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors, including the parent bank holding company, with respect to any extensions of credit they have made to such insured depository institution.
Federal Deposit Insurance
The FDIC uses a risk-based assessment system that imposes insurance premiums based upon a risk matrix that takes into account a bank's capital level and supervisory rating. The risk matrix utilizes different risk categories distinguished by capital levels. As a result of the Dodd-Frank Act, the base for insurance assessments is now consolidated average assets less average tangible equity. Assessment rates are calculated using formulas that take into account the risk of the institution being assessed. FDIC deposit insurance expense includes deposit insurance assessments and Fair Isaac Corporation (FICO) assessments related to outstanding FICO bonds.
The FDIC’s deposit insurance limit is $250,000 per depositor, per insured bank, for each account ownership category. Substantially all of the deposits of Webster Bank are insured up to applicable limits by the DIF of the FDIC and are subject to deposit insurance assessments to maintain the DIF.
The Dodd-Frank Act requires thatBank’s quarterly assessment is calculated using the FDIC’s standardized risk-based assessment methodology, determined by the FDIC, raisewhich multiplies the minimum reserve ratioBank’s assessment base by its assessment rate. The assessment base is defined as the average consolidated total assets less the average tangible equity of the DIF from 1.15% to 1.35%, and that the FDIC offset the effect of this increase on insured depository institutions with total consolidated assets of less than $10 billion. In March 2016, the FDIC issued a final rule affecting insured depository institutions with total consolidated assets of more than $10 billion, such as Webster Bank. The final rule imposes a surcharge of 4.5 cents per $100assessment rate is based on measures of the institution’s assessment base on deposit insurance assessment rates paid by these larger institutions. Ifcapital adequacy, asset quality, management, earnings, liquidity and sensitivity to market risk, commonly known as CAMELS ratings, which are certain financial measures to assess an institution’s ability to withstand asset-related stress and funding-related stress, and a measure of loss severity that estimates the reserve ratio does not reach 1.35% by December 31, 2018, through implementationrelative magnitude of potential losses to the FDIC in the event of the surcharge, the FDIC will impose an additional, one-time shortfall assessment on insured depository institutions with more than $10 billion in assets on March 31, 2019, to be paid by June 30, 2019.Bank’s failure. The FDIC also has authoritythe ability to further increase deposit insurance assessments.make discretionary adjustments to the base assessment rate to reflect idiosyncratic quantitative and qualitative risk factors not captured in the FDIC’s standardized risk-based assessment methodology.
Under the Federal Deposit Insurance Act, the FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC. Webster'sWebster’s management is not aware of any practice, condition, or violation that might lead to the termination of its deposit insurance.
Incentive Compensation
The Dodd-Frank Act requiresrequired the federal banking agencies and the SEC to establish joint regulations or guidelines prohibiting incentive-based payment arrangements atfor specified regulated entities including Webster and Webster Bank, with at least $1 billion in total consolidated assets, which includes the Holding Company and Webster Bank, prohibiting incentive-based payment arrangements that encourage inappropriate risks by providing an executive officer, employee, director, or principal shareholder with excessive compensation, fees, or benefits that could lead to material financial loss to the entity. The federal banking agencies and the SEC most recently proposed such regulations in 2016, but the regulationswhich have not yet been finalized. If the regulations are adopted in the form initially proposed in 2016, they will restrict the manner in which executive compensation is presently structured.
The Dodd-Frank Act also requires publicly traded companies to give stockholders a non-binding vote on executive compensation at their first annual meeting taking place six months after the date of enactment and at least every three years thereafter and on so-called "golden parachute" payments in connection with approvals of mergers and acquisitions. At Webster's 2011 Annual Meeting of Shareholders, its shareholders voted on a non-binding, advisory basis to hold a non-binding, advisory vote on the compensation of named executive officers of Webster annually. As a result of the vote, the Board of Directors determined to hold the vote annually.
Community Reinvestment Act and Fair Lending Laws
Webster Bank has a responsibility under the CRA, as implemented by OCC regulations to help meet the credit needs of its communities, including low and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution'sinstitution’s discretion to develop the types of products and services that it believes are best suited to its particular community. The OCC examines Webster Bank'sBank’s record of compliance with the CRA. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit discrimination in lending practices on the basis of characteristics specified in those statutes. Webster Bank'sBank’s failure to comply with the provisions of the CRA could, at a minimum, result in regulatory restrictions on its activities and the activities of Webster Financial Corporation. Webster Bank'sBank’s failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions against it by the OCC, as well as other federal regulatory agencies, including the CFPB and the Department of Justice. Webster Bank'sBank’s latest OCC CRA rating was Satisfactory.Outstanding.

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On December 17, 2019, the OCC and the FDIC issued a joint notice of proposed rulemaking to modernize the regulations implementing the CRA. The proposed rule, if finalized, will apply to all insured banks, such as Webster Bank. Under the rulemaking, the federal banking agencies intend to (i) clarify which activities qualify for CRA credit, (ii) update where activities count for CRA credit, (iii) create a more transparent and objective method for measuring CRA performance, and (iv) provide for more transparent, consistent, and timely CRA-related data collection, record keeping, and reporting. Webster Financial Corporation and Webster Bank expect to monitor developments with respect to this rulemaking and assess the impact, if any, of changes to the CRA regulations proposed by the federal banking agencies.
USA PATRIOT Act
Under Title III of the USA PATRIOT Act, all financial institutions are required to take certain measures to identify their customers, prevent money laundering, monitor customer transactions, and report suspicious activity to U.S. law enforcement agencies. Financial institutions also are required to respond to requests for information from federal banking agencies and law enforcement agencies. Information sharing among financial institutions for the above purposes is encouraged by an exemption granted to complying financial institutions from the privacy provisions of the Gramm-Leach-Bliley Act and other privacy laws. Financial institutions that hold correspondent accounts for foreign banks or provide private banking services to foreign individuals are required to take measures to avoid dealing with certain foreign individuals or entities, including foreign banks with profiles that raise money laundering concerns, and are prohibited from dealing with foreign "shell banks"“shell banks” and persons from jurisdictions of particular concern. The primary federal banking agencies and the Secretary of the Treasury have adopted regulations to implement several of these provisions. All financial institutions also are required to establish internal anti-money laundering programs. The effectiveness of a financial institution in combating money laundering activities is a factor to be considered in any application submitted by the financial institution under the Bank Merger Act. Webster has in place a Bank Secrecy Act and USA PATRIOT Act compliance program and engages in very few transactions of any kind with foreign financial institutions or foreign persons.
Office of Foreign Assets Control Regulation
The United States government has imposed economic sanctions that affect transactions with designated foreign countries, nationals, and others. These are typically known as the "OFAC"“OFAC” rules based on their administration by the U.S. Treasury Department Office of Foreign Assets Control. The Office of Foreign Assets Control-administered sanctions targeting countries take many different forms. Generally, they contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on U.S. persons engaging in financial transactions relating to making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons). Blocked assets (property and bank deposits) cannot be paid out, withdrawn, set off, or transferred in any manner without a license from the Office of Foreign Assets Control. Failure to comply with these sanctions could have serious legal and reputational consequences.
Future Legislative Initiatives
Federal and state legislatures may introduce legislation that will impact the financial services industry. In addition, federal banking agencies may introduce regulatory initiatives that are likely to impact the financial services industry, generally. Such initiatives may include proposals to expand or contract the powers of bank holding companies and/or depository institutions or proposals to substantially change the financial institution regulatory system. Such legislation could change banking statutes and the operating environment of the Company in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities, or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. The Company cannot predict whether any such legislation will be enacted, and,or, if enacted, the effect that it or any implementing regulations would have on the financial condition or results of operations of the Company. A change in statutes, regulations, or regulatory policies applicable to Webster or any of its subsidiaries could have a material effect on the business of the Company.
Risk Management Framework
Webster takesmaintains a comprehensive approach to risk management program with a defined enterprise risk management framework which provides a structured approach for identifying, assessing, and managing risks across the Company in a coordinated manner, including strategic and reputational, credit, market, liquidity, capital,information security and technology, operational and compliance, market, liquidity, and capital risks as discussed in detail in the sections below.
Strategic and Reputational Risks
The enterprise risk management framework enables the aggregation of risk across the enterprise and ensures the Company has the tools, programs, and processes in place to support informed decision making in order to anticipate risks before they materialize and to maintain Webster'sWebster’s risk profile consistent with its risk strategy and appetite.
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The enterprise risk management framework includes an articulateda risk appetite statement approved annually by the Board of Directors. The risk appetite statement is supported by board and business level scorecards with defined risk tolerance limits to ensuretolerances that Webster maintains an acceptable risk profile by providing a common framework and a comparable set of measures to indicate the level of risk that the Company is willing to accept. The risk appetite is refreshed annually in conjunction with the strategic plan to alignensure alignment of risk appetite with Webster'sWebster’s strategy and financial plan.

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Webster promotes proactive risk management by all Webster employees and clear ownership and accountability across three lines of defense to enable an effective and credible challenge in line with Webster'sWebster’s strong risk culture. Employees in each line of business serve as the first line of defense and have responsibility for identifying, managing and owning the risks in their businesses. Risk and enterprise support functions for example third party risk management and legal departments, serve as the second line of defense and are responsible for providing guidance, oversight, and challenge to the first line of defense. Internal Audit and Credit Risk Review, both of which are independentreport independently of management, serve as the third line of defense and ensure through review and testing that appropriate risk management controls, processes, and systems are in place and functioning effectively.
The Risk Committee of the Board of Directors, comprised of independent directors, oversees all of Webster'sWebster’s risk-related matters and provides input and guidance to the Board of Directors and the executive team, as appropriate. Webster'sWebster’s Enterprise Risk Management Committee (ERMC), which reports directly to the Risk Committee of the Board of Directors, is chaired by the Chief Risk Officer and is comprised of Webster'sWebster’s executive management and senior risk officers.
The Chief Risk Officer is responsible for establishing and maintaining Webster'sWebster’s enterprise risk management framework and overseeing credit risk, operational and compliance risk, Bank Secrecy Act compliance and loan workout/recovery programs. The Corporate Treasurer, who reports to the Chief Financial Officer, is responsible for overseeing market, liquidity, and capital risk management activities. The Chief Information Officer, who reports to the Chief Executive Officer, is responsible for overseeing information security and technology risk management activities.
Credit Risk
Webster manages and controls credit risk in its loan and investment portfolios through established underwriting practices, adherence to standards, and utilization of various portfolio and transaction monitoring tools and processes. Credit policies and underwriting guidelines provide limits on exposure and establish various other standards as deemed necessary and prudent. Additional approval requirements and reporting are implemented to ensure proper risk identification, decision rationale, risk ratings, and disclosure of policy exceptions.
Credit risk management policies and transaction approvals are managed under the supervision of the Chief Credit Officer who reports to the Chief Risk Officer. The Chief Credit Officer and team of credit executives are independent of the loan production and treasury areas.functions. The credit risk function oversees the underwriting, approval, and portfolio management process, establishes and ensures adherence to credit policies, and manages the collections and problem asset resolution activities.
As part of credit risk management governance, Webster has an established a Credit Risk Management Committee that meets regularly to review key credit risk topics, issues, and policies. The Credit Risk Management Committee reviews Webster'sWebster’s credit risk scorecard, which covers key risk indicators and limits established as part of the Company'sCompany’s risk appetite framework. The Credit Risk Management Committee is chaired by the Chief Credit Officer and includes senior managers responsible for lending as well as senior managers from the credit risk management function. Important findings regarding credit quality and trends within the loan and investment portfolios are regularly reported by the Chief Credit Officer to the Enterprise Risk Management Committee (ERMC)ERMC and Risk Committee of the Board of Directors.
In addition to the credit risk management team, there is an independent Credit Risk Review function that assesses risk ratings and credit underwriting process for all areas of the organization that incur credit risk. The head of Credit Risk Review reports directly to the Risk Committee of the Board of Directors and administratively to the Chief Risk Officer. Credit Risk Review findings are reported to the Credit Risk Management Committee, ERMC, and Risk Committee of the Board of Directors. Corrective measures are monitored and tested to ensure risk issues are mitigated or resolved.
Information Security and Technology Risks
The use of technology to store and process information and an increasing use of mobile devices and cloud technologies to conduct financial transactions exposes Webster to the risk of potential operational disruption or information security incidents. Sources of these risks include deliberate or accidental acts by employees, external parties, technology failure, third-party security practices, and environmental factors. Webster is committed to detecting, preventing, and responding to incidents that may impact the confidentiality, integrity, and availability of information assets, and has established a comprehensive information security and technology program under the direction of the Chief Information Security Officer. Webster's information technology risk function is responsible for the technology risk framework and associated policies, procedures, and processes. Oversight of both the information security and information technology risk programs is provided by the Information Risk Committee, which is chaired by the Director of Information Technology Risk.
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Operational and Compliance Risks
Operational risk represents the risk of loss resulting from inadequate or failed internal processes, people, and systems or from external events, such as fraud, cyber-attacks, or natural disasters.events. The Operational Risk function is responsible for establishing processes and tools to identify, manage, and aggregate operational risk across the organization; providing guidance and advice on operational risk matters; and educating the organization on operational risks. Compliance risk represents the risk of non-adherence to applicable laws and regulations, including fines penalties and reputation damage. Specific programs and functions have been implemented to manage the risks associated with legal and regulatory requirements, suppliers and other third-parties, information security, business disruption, fraud, analytical and forecasting models, and new products and services.
Webster'sWebster’s Operational Risk Management Committee, which consists of senior risk officers and senior managers responsible for operational and compliance risk management across the Company, periodically reviews the aforementioned programs, as well as key operational risk trends, issues, and mitigation activities. The Director of OperatingEnterprise and Operational Risk Management chairs the Operational Risk Management Committee and is responsible for overseeing the development and implementation of Webster'sWebster’s operational risk management framework.

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Market Risk
Market risk refers to the risk of loss arising from adverse changes in interest rates, foreign currency exchange rates, commodity prices, and other relevant market rates and prices, such as equity prices. The risk of loss is assessed from the perspective of adverse changes in fair values, cash flows, and future earnings. Due to the nature of its operations, Webster is primarily exposed to interest rate risk. Webster'sWebster’s interest rate sensitivity is monitored on an ongoing basis by its Asset/Liability Committee (ALCO). The primary goal of ALCO is to manage interest rate risk to maximize earnings and net economic value in changing interest rate and business environments, subject to Board approved risk limits. ALCO is chaired by Webster'sWebster’s Corporate Treasurer and members include the Chief Executive Officer, Chief Financial Officer, and Chief Risk Officer.Officer, and Heads of Commercial and Community Banking. ALCO activities and findings are regularly reported to the ERMC and Risk Committee of the Board of Directors.
Liquidity Risk
Liquidity risk refers to the ability to meet a demand for funds by converting assets into cash or cash equivalents and by increasing liabilities at an acceptable cost. Liquidity management for Webster Bank involves maintaining the ability to meet day-to-day and longer-term cash flow requirements of customers, whether they are depositors wishing to withdraw funds or borrowers requiring funds to meet their credit needs. Sources of funds include deposits, borrowings, or sales of assets such as unencumbered investment securities.
The Holding Company requires funds for dividends to shareholders, payment of debt obligations, repurchase of shares, potential acquisitions, and for general corporate purposes. Its sources of funds include dividends from Webster Bank, income from investment securities, and the issuance of equity and debt in the capital markets.
Both the Holding Company and Webster Bank maintain a level of liquidity necessary to achieve their business objectives under both normal and stressed conditions. Liquidity risk is monitored and managed by ALCO and reviewed regularly with the ERMC and Risk Committee of the Board of Directors.
Capital Risk
Webster aims to maintain adequate capital in both normal and stressed environments to support its business objectives and risk appetite. ALCO monitors regulatory and tangible capital levels according to regulatory requirements and management operating ranges and recommends capital conservation, generation, and/or deployment strategies. ALCO also has responsibility for the annual capital plan, capital ratio range setting, contingency planning and stress testing, which are all reviewed and approved by the ERMC and Risk Committee of the Board of Directors at least annually.
Internal Audit
Internal Audit provides an independent, objective assurance and advisory services by testingapplying a risk-based approach to selectively test and evaluatingevaluate the design and operating effectiveness of applicable internal controls throughout Webster.the Company. This evaluation function brings a systematic and disciplined approach to enhancing the effectiveness of Webster'sthe Company’s governance, risk management, and internal control processes.
Results of Internal Audit reviews are reported to management and the Audit Committee of the Board of Directors. Corrective measures are monitored to ensure risk issues are mitigated or resolved. The General Auditor reports functionally to the Audit Committee and administratively to the Chief Executive Officer. The appointment or replacement of the General Auditor is overseen by the Audit Committee.
Additional information on risks and uncertainties and additional factors that could affect the Company'sCompany’s results of operations can be found in Item 1A and elsewhere within this Form 10-K for the year ended December 31, 2017,2019, and in other reports Webster Financial Corporation files with the SEC.

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ITEM 1A. RISK FACTORS
An investmentInvestment in our securities involves risks and uncertainties, some of which are inherent in the financial services industry and others of which are more specific to our business. The discussion below addresses the material risks and uncertainties, of which we are currently aware, that could adversely affect our business and impact results of operations andor financial condition. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included or incorporated by reference in this report. If any of the events or circumstances described in the following risks factors actually occurs, our business, financial condition or results of operations, or financial condition could suffer.be harmed as a result.
Risks Relating to the Economy, Financial Markets, and Interest Rates.Rates
Difficult conditions in the economy and the financial markets may have a materially adverse effect on our business, financial condition and results of operations.
Our financial performance is highly dependent upon the business environment in the markets where we operate and in the United States as a whole. Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, decreases in business activity, weakening of investor or business confidence, limitations on the availability or increases in the cost of credit and capital, increases in inflation, changes in interest rates, changes in tax laws, high unemployment, national and international political turmoil, the imposition of tariffs on trade, natural disasters or a combination of these or other factors.
In particular, we may face the following risks in connection with developments in the current economic and market environment:
•consumer and business confidence levels may decline and lead to less credit usage and increases in delinquencies and default rates;
•our ability to assess the creditworthiness of our customers may be impaired if the models and approaches we use to select, manage, and underwrite our customers become less predictive of future behaviors;
•customer desire to do business with us may decline, whether as a result of a decreased demand for loans or other financial products and services or decreased deposits or other investments in accounts with us;
•competition in our industry could intensify as a result of the increasingcontinued consolidation of financial services companies;companies and changes in financial services technologies; and
•the effects of recent and proposed changes in laws such as the Tax Act.laws.
The business environment and financial markets in the U.S. hashave experienced volatility in recent years and may continue to do so for the foreseeable future. There can be no assurance that economic conditions will not worsen. Difficult economic conditions could adversely affect our business, results of operations and financial condition.
Changes in local economic conditions could adversely affect our business.
A significant percentage of our loans are secured by real estate, primarily across the Northeast. Our success depends in part upon economic conditions in Southern New England and our other geographic markets. Adverse changes in such local markets could reduce our growth in loans and deposits, impair our ability to collect our loans, increase problem loans and charges-offs, and otherwise negatively affect our performance and financial condition.
The soundness of other financial institutions could adversely affect us.our business.
Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services companies are interrelated as a result of trading, clearing, counterparty or other relationships. We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional clients. As a result, defaults by, or even rumors or questions about, one or more financial services companies, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. Many of these transactions expose us to credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated if the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due us. There is no assurance that any such losses would not materially and adversely affect our business, financial condition, or results of operations.
We may not pay dividends if we are not able to receive dividends from our subsidiary, Webster Bank.
We are a separate and distinct legal entity from our banking and non-banking subsidiaries and depend on the payment of cash dividends from Webster Bank and our existing liquid assets as the principal sources of funds for paying cash dividends on our common stock. Unless we receive dividends from Webster Bank or choose to use our liquid assets, we may not be able to pay dividends. Webster Bank’s ability to pay dividends is subject to its ability to earn net income and to meet certain regulatory requirements. See the sub-section captioned "Dividends"“Dividends” in Item 1 of this report for a discussion of regulatory and other restrictions on dividend declarations.

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Changes in interest rates and spreads could have an impact on earnings and results of operationsfinancial condition which could have a negative impact on the value of our stock.
Our consolidated earnings and financial condition are dependent to a large degree upon net interest income, which is the difference between interest earned from loans and investments and interest paid on deposits and borrowings. The narrowing of interest rate spreads could adversely affect our earnings and financial condition. We cannot predict with certainty or control changes in interest rates. Regional and local economic conditions and the policies of regulatory authorities, including monetary policies of the FRB, affect interest income and interest expense. While we have ongoing policies and procedures designed to manage the risks associated with changes in market interest rates, changes in interest rates still may have an adverse effect on our profitability. For example, high interest rates could affect the amount of loans that we can originate because higher rates could cause customers to apply for fewer mortgages, or cause depositors to shift funds from accounts that have a comparatively lower cost to accounts with a higher cost, or cause us to experience customer attrition due to competitor pricing. If the cost of interest-bearing deposits increases at a rate greater than the yields on interest-earning assets increase, net interest income will be negatively affected. Changes in the asset and liability mix may also affect net interest income. Similarly, lower interest rates cause higher yielding assets to prepay and floating or adjustable rate assets to reset to lower rates. If we were not able to reduce our funding costs sufficiently, due to either competitive factors or the maturity schedule of existing liabilities, then our net interest margin would decline.
The uncertainty about the future of London Interbank Offered Rate (LIBOR) may adversely impact our business.
The United Kingdom Financial Conduct Authority, the authority that regulates LIBOR, has announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021, which may result in the use of LIBOR in financial contracts being phased out by the end of 2021. The Alternative Reference Rates Committee (ARRC) has proposed that the secured overnight financing rate (SOFR) represents best practice as the alternative to LIBOR for use in derivatives and other financial contracts that are currently indexed to LIBOR. ARRC has proposed a paced market transition plan to SOFR from LIBOR, and organizations are currently working on industry wide and company specific transition plans as it relates to derivatives and cash markets exposed to LIBOR. It is not possible at this time to predict what rate or rates may become accepted alternatives to LIBOR, or what the effect of any such changes in views or alternatives may be on the markets for LIBOR-indexed financial instruments. The market transition away from LIBOR to an alternative reference rate, such as SOFR, is complex and could have a range of adverse effects on our loan and lease and investment portfolios, asset-liability management, business, financial condition, and results of operations. Webster has interest rate swap agreements and other instruments that are indexed to LIBOR and is currently monitoring and evaluating this activity and the related risks.
Our stock price can be volatile.
Stock price volatility may negatively impact the price at which our common stock may be sold, and may also negatively impact the timing of any sale. Our stock price can fluctuate widely in response to a variety of factors, including, among other things:
•actual or anticipated variations in operating results;
•changes in recommendations by securities analysts;
•operating and stock price performance of other companies that investors deem comparable to us;
•news reports relating to trends, concerns, and other issues in the financial services and healthcare industries;
•new technology used or services offered by competitors;
•perceptions in the marketplace regarding us and/or our competitors;
•significant acquisitions or business combinations, strategic partnerships, joint ventures, or capital commitments by or involving us or our competitors;
•failure to integrate acquisitions or realize anticipated benefits from acquisitions;
•additional investments from third parties;
•issuance of additional shares of stock;
•changes in government regulations or actions by government regulators; and
•geo-political conditions such as acts or threats of terrorism or military conflicts.
General market fluctuations, industry factors, and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes, credit loss trends, or currency fluctuations, could also cause our stock price to decrease regardless of our operating results.
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Regulatory, Compliance, Environmental and Legal Risks
We are subject to extensive government regulation and supervision, which may interfere with our ability to conduct our business and may negatively impact our financial results.
We, primarily through Webster Bank and certain non-bank subsidiaries, are subject to extensive federal and state regulation and supervision. Banking regulations are intended to protect depositors’ funds, the DIF, and the safety and soundness of the banking system as a whole, not shareholders. These regulations affect our lending practices, capital structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations, and policies for possible changes. Changes to statutes, regulations, or regulatory policies, including changes in interpretation or implementation of statutes, regulations, or policies, could affect us in substantial and unpredictable ways. Such changes could subject us to additional costs, limit the types of financial services and products we may offer, and/or limit what we may charge for certain banking services, among other things. Additionally, recent changes to the legal and regulatory framework governing our operation, including the continued implementation of Dodd-Frank Actand EGRRCPA, have and will continue to affect the lending, investment, trading, and operating activities of financial institutions and their holding companies. The Dodd-Frank Act imposed additional regulatory obligations and increased scrutiny from federal banking agencies. In general, federal banking agencies have increased their focus on risk management and compliance with consumer financial protection obligations, and we expect this focus to continue. Additionalcontinue and compliance requirements are likely and can be costly to implement. Compliance personnel and resources may increase our costs of operations and adversely impact our earnings.
Failure to comply with laws, regulations, or policies could result in sanctions by regulatory agencies, civil money penalties, and/or reputation damage, which could have a material adverse effect on our business, financial condition, and results of operations.
While we have policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur. See the section captioned "Supervision“Supervision and Regulation"Regulation” in Item 1 of this report for further information.

Changes in accounting standards and policies could materially impact how we report our results of operations and financial condition.
Our accounting policies and methods are fundamental to how we record and report our results of operations and financial condition. Accordingly, we exercise judgment in selecting and applying these accounting policies and methods so they comply with U.S. Generally Accepted Accounting Principles (GAAP). The Financial Accounting Standards Board (FASB), regulatory agencies, and other bodies that establish accounting standards periodically change the financial accounting and reporting standards governing the preparation of our financial statements. Additionally, those bodies may change prior interpretations or positions on how these standards should be applied. The impact of these changes can be difficult to predict and can materially impact how we report our results of operations and financial condition. We could be required to apply new or revised guidance retrospectively, which may result in the revision of prior period financial statements by material amounts. Such changes could also require the Company to incur additional personnel, technology, or other costs. For example, under CECL, the new accounting standard on credit losses which became effective for us on January 1, 2020, credit losses on loans and held-to-maturity securities and other financial assets carried at amortized cost will be required to be recognized earlier than in the past. The CECL methodology requires that “expected lifetime credit losses” be recorded at the time the financial asset is originated or acquired, with adjustments each period to the extent the estimate for “expected lifetime credit losses” have changed. The CECL methodology replaces the existing impairment models under GAAP that generally require that a loss be incurred before it is recognized. A discussion of accounting standards recently adopted and issued but not yet adopted, including CECL, can be found in Note 1 to the Consolidated Financial Statements.
Health care reforms could adversely affect our HSA Bank division, revenues, financial position and results of operations.
The enactment of health care reforms affecting health savings accounts at the federal or state level may affect our HSA Bank division, which is a bank custodian of health savings accounts. We cannot predict if any such reforms will ultimately become law, or, if enacted, what their terms or the regulations promulgated pursuant to such laws will be. Any health care reforms enacted may be phased in over a number of years but, if enacted, could, with respect to the operations of our HSA Bank, reduce revenues, increase costs, and require us to revise the ways in which we conduct business or put us at risk for loss of business. In addition, our results of operations, financial position, and cash flows could be materially adversely affected by such changes.
Changes in the federal, state or local tax laws may negatively impact our financial performance. 
We are subject to changes in tax law that could increase our effective tax rates. While the Tax Cuts and Jobs Act of 2017 ("Tax Act") reduced the federal corporate tax rate from 35% to 21% beginning in 2018, which has had a favorable impact on our earnings and capital generation abilities, the new legislation also enacted limitations on certain deductions, such as FDIC deposit insurance premiums, which partially offset the increase in net earnings from the lower tax rate. In addition, further changes in the tax law, changes in interpretations, guidance or regulations that may be promulgated, or actions that we may take as a result of the Tax Act could negatively impact our business. Similarly, our customers are likely to continue to experience varying effects from both the individual and business tax provisions of the Tax Act and such effects, whether positive or negative, may have a corresponding impact on our financial performance and the economy as a whole.
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We are subject to financial and reputational risks from potential liability arising from lawsuits.
The nature of our business ordinarily results in a certain amount of claims and legal action. Whether claims and related legal actions are founded or unfounded, if such claims and legal actions are not resolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect our market perception, the products and services we offer, as well as impact customer demand for those products and services. We assess our liabilities and contingencies in connection with outstanding legal proceedings as well as certain threatened claims utilizing the latest and most reliable information. For matters where a loss is not probable or the amount of the loss cannot be estimated, no accrual is established. For matters where it is probable we will incur a loss and the amount can be reasonably estimated, we establish an accrual for the loss. Once established, the accrual is adjusted periodically to reflect any relevant developments. The actual cost of any outstanding legal proceedings or threatened claims, however, may turn out to be substantially higher than the amount accrued. These costs may adversely affect our business, results of operations, and prospects.
We are exposed to risk of environmental liabilities with respect to properties to which we obtain title.
A large portion of our loan portfolio is secured by real estate. In the course of our business, we may foreclose and take title to real estate and could be subject to environmental liabilities with respect to these properties. We may be held liable to a government entity or to third parties for property damage, personal injury, investigation, and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to clean up hazardous or toxic substances or chemical releases at a property. The costs associated with investigation and remediation activities could be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. These costs and claims could adversely affect our business, results of operations, and prospects.
Proposed health care reforms could adversely affect our HSA Bank division and our revenues, financial position and our results of operations.
The enactment of health care reforms affecting health savings accounts at the federal or state level may affect our HSA Bank division, which is a bank custodian of health savings accounts.  We cannot predict if any such reforms will ultimately become law, or, if enacted, what their terms or the regulations promulgated pursuant to such laws will be. Any health care reforms enacted may be phased in over a number of years but, if enacted, could, with respect to the operations of HSA Bank, reduce our revenues, increase our costs, and require us to revise the ways in which we conduct business or put us at risk for loss of business. In addition, our results of operations, financial position, and cash flows could be materially adversely affected by such changes.
Changes in the federal, state or local tax laws may negatively impact our financial performance. 
We are subject to changes in tax law that could increase our effective tax rates. The Tax Act, the full impact of which is subject to further evaluation and analysis, is likely to have both positive and negative effects on our financial performance. For example, the new legislation reduced the federal corporate tax rate from 35% to 21% beginning in 2018, which will have a favorable impact on our earnings and capital generation abilities. However, the new legislation also enacted limitations on certain deductions, such as FDIC deposit insurance premiums, which will partially offset the anticipated increase in net earnings from the lower tax rate. In addition, changes in interpretations, guidance or regulations that may be promulgated, or actions that we may take as a result of the Tax Act could negatively impact our business. Similarly, our customers are likely to experience varying effects from both the individual and business tax provisions of the Tax Act and such effects, whether positive or negative, may have a corresponding impact on our financial performance and the economy as a whole.
Risks Relating to the CompetitiveBusiness Environment in Which We Operateand Operations
We operate in a highly competitive industry and market area. If we fail to compete effectively, our financial condition and results of operations may be materially adversely affected.
We face substantial competition in all areas of our operations from a variety of different competitors, many of which are larger and may have more financial resources than we do. Such competitors primarily include national, regional, and community banks within the various markets in which we operate. We also face competition from many other types of financial institutions, including, without limitation, savings and loans, credit unions, non-bank health savings account trustees, finance companies, brokerage firms, insurance companies, online lenders, factoring companies, and other financial intermediaries. Some of the financial services organizations with which the Company competes are not subject to the same degree of regulation as is imposed on bank holding companies and federally insured depository institutions, which may give them certain advantages over the Company in accessing funding and in providing various services. The financial services industry could become even more competitive as a result of legislative, regulatory, and technological changes and continued consolidation. Technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services than we do, as well as better pricing for those products and services.

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Our ability to compete successfully depends on a number of factors, including, among other things:
•the ability to develop, maintain and build upon long-term customer relationships based on top quality service, high ethical standards, and safe, sound assets;
•the ability to expand market position;
•the scope, relevance, and pricing of products and services offered to meet customer needs and demands;
•the rate at which we introduce new products and services relative to our competitors;
•customer satisfaction with our level of service;service and products; and
•industry and general economic trends.
Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations.
The loss of key partnerships could adversely affect our HSA Bank division.
Our HSA Bank division relies on partnerships with various health insurance carriers and other partners to maximize our distribution model. TheseIn particular, health plan partners who provide high deductible health plan options are a significant source of new and existing HSAhealth savings account holders. If these health plan partners or other partners choose to align with our competitors, our results of operations, business, and prospects could be adversely affected.
We may not be able to attract and retain skilled people.
Our success depends in large part on our ability to attract and retain key people. Competition for the best people in most activities in which we engage can be intense and we may not be able to hire people or to retain them. The unexpected loss of services of one or more of our key personnel could have a material adverse impact on the business becauseas we would lose their skills, knowledge of the market, and years of industry experience, and may have difficulty promptly finding qualified replacement personnel.
Risks Relating to Risk Management
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We continually encounter technological change. The failure to understand and adapt to these changes could negatively impact our business.
The financialFinancial services industry isindustries continually undergoingexperience rapid technological change with frequent introductions of new technology-driven products and services. TheAn effective use of technology can increase efficiency, and enable financial institutions to better serve customers, and to reduce costs. However, some new technologies needed to compete effectively result in incremental operating costs and capital investments. Our future success depends in part upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in operations. Many of our competitors, because of their larger size and available capital, have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers within the same time frame as our large competitors. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations.
A failure or breach of our systems, or those of our third party vendors and other service providers, including as a result of cyber attacks, could disrupt our businesses, result in the misuse of confidential or proprietary information, damage our reputation, increase our costs, and cause losses.
As a large financial institution, we depend on our ability to process, record, and monitor a large number of customer transactions, and customer, public, and regulatory expectations regarding operational and information security have increased over time. Accordingly, our operational systems and infrastructure must continue to be safeguarded and monitored for potential failures, disruptions, and breakdowns. Our business, financial, accounting, data processing systems, or other operating systems and facilities, including mobile banking and other recently developed technologies, may stop operating properly or become disabled or compromised as a result of a number of factors that may be wholly or partially beyond our control. For example, there could be sudden increases in customer transaction volume; electrical or telecommunications outages; natural disasters; pandemics; events arising from political or social matters, including terrorist acts; and cyber attacks. Although we have business continuity plans and believe we have robust information security procedures and controls in place, disruptions or failures in the physical infrastructure or operating systems that support our businesses and customers, or cyber attacks or security breaches of the networks, systems, or devices on which customers’ personal information is stored and that our customers use to access our products and services, could result in customer attrition, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs, which could have a materially adverse effect on our results of operations and financial condition.
Third parties with whom we do business or that facilitate our business activities, including exchanges, clearing houses, financial intermediaries, or vendors that provide services or security solutions for our operations, could also be sources of operational and information security risk to us, including breakdowns or failures of their own systems, capacity constraints, and cyber attacks.
In recent years, information security risks for financial institutions have increased due in part to the increased sophistication and activities of organized crime, hackers, terrorists, hostile foreign governments, activists, and other external parties. There have been several instances involving financial services and consumer-based companies reporting unauthorized access to, and disclosure of, client or customer information or the destruction or theft of corporate data. There have also been highly publicized cases where hackers have requested ransom-payments in exchange for not disclosing customer information.
Although to date we have not experienced any material losses relating to cyber attacks or other information security breaches, there can be no assurance that we will not suffer such losses in the future. Our risk and exposure to these matters remains heightened, and as a result, the continued development and enhancement of our controls, processes, and practices designed to protect and facilitate the recovery of our systems, computers, software, data, and networks from attack, damage, or unauthorized access remain a high priority for us. As an additional layer of protection, we have purchased network and privacy liability risk insurance coverage which includes digital asset loss, business interruption loss, network security liability, privacy liability, network extortion, and data breach coverage, though there can be no assurance that such insurance will fully cover any actual losses. As cyber threats continue to evolve, we may be required to expend significant additional resources to modify our protective measures or to investigate and remediate any information security vulnerabilities.
Disruptions in services provided by third-party vendors may result in a material adverse effect on our business.
We rely on third-party vendors to provide products and services necessary to maintain day-to-day operations. For example, we are dependent on our vendor-provided core banking processing systems to process a large number of increasingly complex transactions. Accordingly, we are exposed to the risk that these vendors might not perform in accordance with the contracted arrangements or service level agreements because of changes in the vendor’s organizational structure, financial condition, support for existing products, services, and technology strategic focus or for any other reason. Such failure to perform could be disruptive to our operations, which could have a materially adverse impact on our business, results of operations, and financial condition. While we require third-party outsourced service providers to have business continuity and disaster recovery plans that are aligned with our overall recovery plans, we cannot be assured that such plans will operate successfully or in a timely manner so as to prevent any such material adverse impact.
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New lines of business or new products and services may subject us to additional risks. A failure to successfully manage these risks may have a material adverse effect on our business.
From time to time, we may implement new lines of business, offer new products and services within existing lines of business, or shift our asset mix. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, and/or shifting asset mix, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove attainable. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, results of operations, and financial condition.
A failureWe face risks in connection with completed or breachpotential acquisitions.
From time to time, we may evaluate expansion through the acquisition of our systems,banks or those of our third party vendors and other service providers, including as a result of cyber attacks, could disrupt our businesses, result in the misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses.
As a large financial institution, we depend on our ability to process, record, and monitor a large number of customer transactions, and customer, public and regulatory expectations regarding operational and information security have increased over time. Accordingly, our operational systems and infrastructure must continue to be safeguarded and monitored for potential failures, disruptions and breakdowns. Our business, financial, accounting, data processing systemsbranches, or other operating systemsfinancial businesses or assets. Such acquisitions involve various risks commonly associated with acquisitions, including, among other things:
•the possible loss of key employees and facilitiescustomers;
•potential business disruptions;
•potential changes in banking or tax laws or regulations that may stop operating properlyaffect the business;
•potential exposure to unknown or become disabled as a resultcontingent liabilities; and
•potential difficulties in integrating the target business into our own.
Acquisitions typically involve the payment of a numberpremium over book and market values, and therefore, some dilution of factors thatthe Company’s tangible book value and net income per common share may be wholly or partially beyond our control. For example, there could be suddenoccur in connection with any future transaction. Furthermore, failure to realize the expected revenue increases, cost savings, increases in customer transaction volume; electricalgeographic or telecommunications outages;

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natural disasters; pandemics; events arising from political or social matters, including terrorist acts; and cyber attacks. Although we have business continuity plans and believe we have robust information security procedures and controls in place, disruptions or failures in the physical infrastructure or operating systems that support our businesses and customers, or cyber attacks or security breaches of the networks, systems or devices on which customers’ personal information is stored and that our customers use to access our products and services could result in customer attrition, regulatory fines, penalties or intervention, reputational damage, reimbursement product presence, and/or other compensation costs, and/or additional compliance costs, whichprojected benefits from an acquisition could have a materially adverse effect on our results of operations and financial condition.
Third parties with whom we do business or that facilitate our business activities, including exchanges, clearing houses, financial intermediaries or vendors that provide services or security solutions for our operations, could also be sources of operational and information security risk to us, including from breakdowns or failures of their own systems, capacity constraints and cyber attacks.
Although to date we have not experienced any material losses relating to cyber attacks or other information security breaches, there can be no assurance that we will not suffer such losses in the future. Our risk and exposure to these matters remains heightened and as a result the continued development and enhancement of our controls, processes and practices designed to protect and facilitate the recovery of our systems, computers, software, data and networks from attack, damage or unauthorized access remain a high priority for us. As an additional layer of protection, we have purchased network and privacy liability risk insurance coverage which includes digital asset loss, business interruption loss, network security liability, privacy liability, network extortion and data breach coverage. As cyber threats continue to evolve, we may be required to expend significant additional resources to modify our protective measures or to investigate and remediate any information security vulnerabilities.
Disruptions in services provided by third-party vendors that we rely on may result in a material adverse effect on our business.
We rely on third-party vendors to provide products and services necessary to maintain day-to-day operations. For example, we are dependent on our vendor-provided core banking processing systems to process a large number of increasingly complex transactions. Accordingly, we are exposed to the risk that these vendors might not perform in accordance with the contracted arrangements or service level agreements because of changes in the vendor’s organizational structure,Company’s business, financial condition support for existing products, services and technology strategic focus or for any other reason. Such failure to perform could be disruptive to our operations, which could have a materially adverse impact on our business, results of operations and financial condition. While we require third-party outsourced service providers to have business continuity and disaster recovery plans that are aligned with our overall recovery plans, we cannot be assured that such plans will operate successfully or in a timely manner so as to prevent any such material adverse impact.operations.
Our controls and procedures may fail or be circumvented, which may result in a material adverse effect on our business.
Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of our controls and procedures, failure to implement any necessary improvement of our controls and procedures, or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition.
We face risks in connection with completed or potential acquisitions.
From time to time we may evaluate expansion through the acquisition of banks or branches, or other financial businesses or assets. Acquiring other banks, businesses, or branches involves various risks commonly associated with acquisitions, including, among other things:
The possible loss of key employees and customers of the target;
Potential disruption of the target business;
Potential changes in banking or tax laws or regulations that may affect the target business;
Potential exposure to unknown or contingent liabilities of the target; and
Potential difficulties in integrating the target business into our own.
Acquisitions typically involve the payment of a premium over book and market values, and therefore, some dilution of the Company’s tangible book value and net income per common share may occur in connection with any future transaction. Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits from an acquisition could have a material adverse effect on the Company’s business, financial condition and results of operations.
Our business may be adversely affected by fraud.
As a financial institution, we are inherently exposed to operational risk in the form of theft and other fraudulent activity by employees, customers, and other third parties targeting the Company or the Company’s customers or data. Such activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts. Although we devote substantial resources to maintaining effective policies and internal controls to identify and prevent such incidents, given the increasing sophistication of possible perpetrators, we may experience financial losses or reputational harm as a result of fraud.

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Risks Relating to Accounting Estimates
Our allowance for loan and lease losses may be insufficient.
Our business is subject to periodic fluctuations based on national and local economic conditions. These fluctuations are not predictable, cannot be controlled and may have a material adverse impact on our operations and financial condition. For example, declines in housing activity including declines in building permits, housing starts and home prices, may make it more difficult for our borrowers to sell their homes or refinance their debt. Sales may also slow, which could strain the resources of real estate developers and builders. We may suffer higher loan and lease losses as a result of these factors and the resulting impact on our borrowers. Recent economic uncertainty continues toA declining economy could negatively affect employment levels and impact the ability of our borrowers to service their debt. Bank regulatory agencies also periodically review our allowance for loan and lease losses and may require an increase in the provision for loan and lease losses or the recognition of further loan charge-offs, based on judgments different than those of management. In addition, if charge-offs in future periods exceed the allowance for loan and lease losses, we may need, depending on an analysis of the adequacy of the allowance for loan and lease losses, additional provisions to increase the allowance for loan and lease losses. Any increases in the allowance for loan and lease losses will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on our financial condition and results of operations. See Note 1 to the Consolidated Financial Statements for information regarding the adoption of the CECL methodology and the resulting impact to the Company.
We may not be able to fully realize the balance of our net DTA.
The value of our DTA is partially reduced by a valuation allowance. A valuation allowance is provided when it is more-likely-than-not that some portion of our DTA will not be realized. We regularly assess available positive and negative evidence to determine whether it is more-likely-than-not that our net DTA will not be realized. Realization of a DTA requires us to apply significant judgment and is inherently speculative because it requires estimates that cannot be made with certainty. If we were to conclude that a significant portion of our remaining DTA is not more-likely-than-not to be realized, the required valuation allowance could adversely affect our financial position, results of operations and regulatory capital ratios.
If our goodwill were determined to be impaired it could have a negative impact on our profitability.
Applicable accounting standards require that the purchase method of accounting be usedWebster evaluates goodwill for all business combinations. Under purchase accounting,impairment on an annual basis, or more frequently if the purchase price of an acquired company exceeds the fair value of the acquired company’s net assets, the excess is carried on the balance sheet as goodwill, by the acquirer.necessary. A significant decline in our expected future cash flows, a continuing period of market disruption, market capitalization to book value deterioration, or slower growth rates may require us to record charges in the future related to the impairment of our goodwill. If we were to conclude that a future write-down is necessary, we would record the appropriate charge, which may have a material adverse effect on our financial condition and results of operations.
If all or a significant portion of the unrealized losses in our portfolio of investment securities were determined to be other-than-temporarily impaired, we would recognize a material charge to our earnings and our capital ratios would be adversely impacted.
When the fair value of a security declines, management must assess whether that decline is other-than-temporary. When management reviews whether a decline in fair value is other-than-temporary, it considers numerous factors, many of which involve significant judgment. No assurance can be provided that the amount of the unrealized losses will not increase.
To the extent that any portion of the unrealized losses in our investment securities portfolio is determined to be other-than-temporary impairment, (OTTI), we will recognize a charge to our earnings in the quarter during which such determination is made and our capital ratios will be adversely impacted. If any such charge is deemed significant, a rating agency might downgrade our credit rating or put us on a credit watch. A downgrade or a significant reduction in our capital ratios might adversely impact our ability to access the capital markets or might increase our cost of capital. Even if we do not determine that the unrealized losses associated with the investment portfolio require an impairment charge, increases in such unrealized losses adversely impact the tangible common equity ratio, which may adversely impact credit rating agency and investor sentiment. Any such negative perception also may adversely impact our ability to access the capital markets or might increase our cost of capital.
We may not be able to fully realize the balance of our net DTA including net operating loss carryforwards.
The value of our DTA is partially reduced by valuation allowance. A valuation allowance is provided when it is more-likely-than-not that some portion of our DTA will not be realized. We regularly assess available positive and negative evidence to determine whether it is more-likely-than-not that our net DTA will not be realized. Realization of a DTA requires us to apply significant judgment and is inherently speculative because it requires estimates that cannot be made with certainty. If we were to conclude that a significant portion of our remaining DTA is not more-likely-than-not to be realized, the required valuation allowance could adversely affect our financial position, results of operations and regulatory capital ratios.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable

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ITEM 2. PROPERTIES
The Company maintains its headquarters in Waterbury, Connecticut. This owned facility houses the Company'sCompany’s executive and primary administrative functions, as well as the principal banking headquarters of Webster Bank. Other key operation and administration functions are in an owned facility in New Britain, Connecticut and in leased facilities in Stamford, Hartford, and Southington, Connecticut. The Company considers its properties suitable and adequate for present needs.
In addition to the propertyproperties noted above, the Company'sCompany’s segments maintain the following leased or owned offices. Lease expiration dates vary, up to 7067 years, with renewal options for 1 to 2510 years. For additional information regarding leases and rental payments seerefer to Note 20: Commitments and Contingencies7: Leasing in the Notes to Consolidated Financial Statements contained elsewhere in this report.
Commercial Banking
The Commercial Banking segment maintains offices across a footprint that primarily ranges from Boston, Massachusetts to Washington, D.C. Significant properties are located in: Hartford, New Haven, Stamford, and Waterbury, Connecticut; Boston, Massachusetts; New York City and White Plains, New York; Conshohocken, Pennsylvania; and Providence, Rhode Island.
The Commercial Banking segment also includes: Webster Capital Finance with headquarters in Kensington,Southington, Connecticut; Webster Business Credit Corporation with headquarters in New York, New York and offices in Atlanta, Georgia, Baltimore, Maryland, Boston, Massachusetts, Chicago, Illinois, Conshohocken, Pennsylvania,Dallas, Texas, Charlotte, North Carolina, and New Milford, Connecticut; and Private Banking with headquarters in Stamford, Connecticut and offices in Hartford, New Haven, Waterbury, Greenwich, and Wilton,Greenwich, Connecticut, Boston, Massachusetts, White Plains, New York, and Providence, Rhode Island.
HSA Bank
The HSA Bank segment is headquartered in Milwaukee, Wisconsin with an office in Sheboygan, Wisconsin.
Community Banking
The Community Banking segment maintains the following banking centers:
LocationLeasedOwnedTotal
Connecticut73  39  112  
Massachusetts19  10  29  
Rhode Island6  3  9  
New York7  —  7  
Total banking centers105  52  157  
LocationLeasedOwnedTotal
Connecticut73
42
115
Massachusetts24
11
35
Rhode Island7
3
10
New York7
—
7
Total banking centers111
56
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ITEM 3. LEGAL PROCEEDINGS
From time to time, Webster Financial Corporation or its subsidiaries are subject to certain legal proceedings and claims in the ordinary course of business. Management presently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not be material to Webster or its consolidated financial position. Webster establishes an accrual for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Legal proceedings are subject to inherent uncertainties, and unfavorable rulings could occur that could cause Webster to adjust its litigation accrual or could have, individually or in the aggregate, a material adverse effect on its business, financial condition, or operating results. Webster believes it has defenses to all claims asserted against it in existing litigation matters and intends to defend itself in those matters.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable

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PART II
ITEM 5. MARKET FOR REGISTRANT'SREGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Webster Financial Corporation'sCorporation’s common shares trade on the New York Stock Exchange under the symbol WBS.
The following table sets forth the high and low intra-day sales prices per share of Webster Financial Corporation's common stock and the cash dividends declared per share:
 2017 2016
 HighLowCash Dividends Declared HighLowCash Dividends Declared
Fourth quarter$59.25
$51.68
$0.26
 $55.80
$36.96
$0.25
Third quarter55.04
44.04
0.26
 38.97
31.45
0.25
Second quarter54.96
46.85
0.26
 39.61
31.29
0.25
First quarter57.50
47.59
0.25
 37.18
30.09
0.23
On January 30, 2018, Webster Financial Corporation’s Board of Directors declared a quarterly dividend of $0.26 per share.
On February 16, 2018,27, 2020, there were 5,6935,105 shareholders of record as determined by Broadridge, the Company’s transfer agent.
Restrictions on Dividends
Holders of Webster Financial Corporation's common stock are entitled to receive such dividends as the Board of Directors may declare out of funds legally available for such payments. Webster Financial Corporation, as a bank holding company, is dependent on dividend payments from Webster Bank for its legally available funds. The Bank paid the Holding Company $120 million in dividends during the year ended December 31, 2017.
The Bank’s ability to make dividend payments to the Holding Company is subject to certain regulatory and other requirements. Under OCC regulations, subject to the Bank meeting applicable regulatory capital requirements before and after payment of dividends, the Bank may declare a dividend, without prior regulatory approval, limited to net income for the current year to date as of the declaration date, plus undistributed net income from the preceding two years. At December 31, 2017, Webster Bank was in compliance with all applicable minimum capital requirements, and there was $368.8 million of undistributed net income available for the payment of dividends by the Bank to the Holding Company.
Under the regulations, the OCC may grant specific approval permitting divergence from the requirements and also has the discretion to prohibit any otherwise permitted capital distribution on general safety and soundness grounds. In addition, the payment of dividends is subject to certain other restrictions, none of which is expected to limit any dividend policy that the Board of Directors may in the future decide to adopt.
If the capital of Webster is diminished by losses, or otherwise, to an amount less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets, no dividends may be paid out of net profits until such deficiency has been repaired. See the "Supervision and Regulation" section in Item 1 contained elsewhere in this report for additional information on dividends.
Webster Financial Corporation has 6,000,000 outstanding Depository Shares, each representing 1/1000th interest in a share of 5.25% Series F Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, with a liquidation preference of $25,000 per share, or $25 per depository share. The Series F Preferred Stock is redeemable at Webster Financial Corporation's option, in whole or in part, on December 15, 2022, or any dividend payment date thereafter, or in whole but not in part, upon a "regulatory capital treatment event" as defined in the Prospectus Supplement. The terms of the Series F Preferred Stock prohibit the Holding Company from declaring or paying any cash dividends on its common stock, unless the Holding Company has declared and paid full dividends on the Series F Preferred Stock for the most recently completed dividend period.
Exchanges of Registered Securities
Registered securities are exchanged as part of employee and director stock compensation plans.
Recent Sales of Unregistered Securities
No unregistered securities were sold by Webster Financial Corporation during the three year period ended December 31, 2017.

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2019.
Issuer Purchases of Equity Securities
The following table provides information with respect to any purchase of equity securities for Webster Financial Corporation'sCorporation’s common stock made by or on behalf of Webster or any "affiliated“affiliated purchaser,"” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, during the three months ended December 31, 2017:2019:
Period
Total
Number of
Shares
Purchased (1)
Average Price
Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum
Dollar Amount Available for Repurchase
Under the Plans or Programs (2)
October7,479  $43.79  —  $200,000,000  
November—  —  —  200,000,000  
December—  —  —  200,000,000  
Total7,479  43.79  —  200,000,000  
Period
Total
Number of
Shares
Purchased (1)
Average Price
Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum
Dollar Amount Available for Repurchase
Under the Plans or Programs (1)
 
Total
Number of
Warrants
Purchased (2)
Average Price
Paid Per Warrant
October 1-31, 201742,832
$54.21
—
$103,903,923
 —
$—
November 1-30, 20171,138
52.72
—
103,903,923
 —
—
December 1-31, 2017305
57.69
—
103,903,923
 —
—
Total44,275
54.20
—
103,903,923
 —
—
(1)On October 24, 2017, the Company announced that its Board of Directors had approved a common stock repurchase program which authorizes management to repurchase, in open market or privately negotiated transactions, subject to market conditions and other factors, up to a maximum of $100 million of common stock. This approval is in addition to the $3.9 million remaining authorization on a similar common stock repurchase program announced on December 6, 2012. Both programs will remain in effect until fully utilized or until modified, superseded, or terminated.
(1)All 44,275 shares purchased during the three months ended December 31, 20172019 were acquired outside of the repurchase program at market prices and related to stock compensation plan activity, atactivity.
(2)Webster maintains a common stock repurchase program which authorizes management to purchase shares of its common stock, in open market prices.or privately negotiated transactions, subject to market conditions and other factors. On October 29, 2019, the Company announced that its Board of Directors approved a modification to this program, originally approved on October 24, 2017, increasing the maximum dollar amount available for repurchase to $200 million. This program will remain in effect until fully utilized or until modified, superseded, or terminated.
(2)On June 3, 2011, the Company announced that, with approval from its Board of Directors, it had repurchased a significant number of the warrants issued as part of Webster's participation in the U.S. Treasury's Capital Purchase Program in a public auction conducted on behalf of the U.S. Treasury. The Board approved plan provides for additional repurchases from time-to-time, as permitted by securities laws and other legal requirements. There remain 8,752 outstanding warrants to purchase a share (1:1) of the Company's common stock, which carry an exercise price of $18.28 per share and expire on November 21, 2018.

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Performance Graph
The performance graph compares Webster Financial Corporation’s cumulative shareholder return on its common stock over the last five fiscal years to the cumulative total return of the Standard & Poor’s 500 Index ("S(S&P 500 Index")Index) and the Keefe, Bruyette & Woods Regional Banking Index ("KRX Index")(KRX Index).
Cumulative shareholder return is measured by dividing total dividends, (assumingassuming dividend reinvestment)reinvestment, for the measurement period plus share price change for a period by the share price at the beginning of the measurement period. The cumulative shareholder return over a five-year period assumes a simultaneous initial investment of $100, on December 31, 2012,2014, in Webster Financial Corporation common stock and in each of the indices above.

wbs-20191231_g1.jpg
Period Ending December 31,
201420152016201720182019
Webster Financial Corporation$100  $117  $176  $185  $166  $185  
S&P 500 Index$100  $101  $113  $138  $132  $174  
KRX Index$100  $106  $147  $150  $124  $153  
  
Period Ending December 31,
 201220132014201520162017
Webster Financial Corporation$100
$155
$166
$194
$292
$308
S&P 500 Index$100
$132
$150
$153
$171
$208
KRX Index$100
$147
$150
$159
$222
$226


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ITEM 6. SELECTED FINANCIAL DATA
The required information is set forth below, in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, under the section captioned "Results of Operations," which is incorporated herein by reference.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated Financial Statements and the accompanying Notes thereto of Webster Financial Corporation contained elsewhere in this report.
Critical Accounting Policies and Accounting Estimates
The Company's significant accounting policies, as described in For a comparison of the Notes2018 results to Consolidated Financial Statements, are fundamental to understanding itsthe 2017 results of operations and financial condition. As disclosed in Note 1: Summary of Significant Accounting Policies, the preparation of financial statements in accordance with U.S. generally accepted accounting principles (GAAP) requires management to make judgments and accounting estimates that affect the amounts reported in the Consolidated Financial Statements and the accompanying Notes thereto. While the Company bases estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ materially from those estimates.
Accounting estimates are necessary in the application of certain accounting policies and procedures and can be susceptible to significant change. Critical accounting policies are defined as those that are most important2017 information not included herein, refer to the portrayal of the Company's financial condition and results of operation, and that require management to make the most difficult, subjective, and complex judgments about matters that are inherently uncertain and which could potentially result in materially different amounts using different assumptions or under different conditions. Critical accounting policies identified by management, which are discussed with the appropriate committees of the Board of Directors, are summarized below.
The Company has identified four such policies, which govern:
allowance for loan and lease losses;
fair value measurements for valuation of investments;
evaluation for impairment of goodwill; and
assessing the realizability of DTAs and the measurement of uncertain tax position (UTP)s.
Allowance for Loan and Lease Losses
The allowance for loan and lease losses is a reserve established through a provision for loan and lease losses charged to expense, which represents management’s best estimation of probable losses that are inherent within the Company’s portfolio of loans and leases as of the balance sheet date. For a description of our related accounting policies, see Note 1: Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements contained elsewhere in this report.
Changes in the allowance for loan and lease losses and, therefore, in the related provision for loan and lease losses can materially affect net income. The level of the allowance for loan and lease losses reflects management’s judgment based on continuing evaluation of specific credit risks, loss experience, current portfolio quality, present economic, political, and regulatory conditions and inherent risks not captured in quantitative modeling and methodologies, as well as trends therein. The allowance balance may be allocated for specific portfolio segments; however, the entire allowance balance is available to absorb credit losses inherent in the total loan and lease portfolio. While management utilizes its best judgment and information available, the ultimate adequacy of the allowance for loan and lease losses is dependent upon a variety of factors beyond the Company’s control, including performance of the Company’s loan portfolio, the economy, interest rate sensitivity, and other external factors.
Composition of the allowance for loan and lease losses, including valuation methodology, is more fully illustrated in Note 4: Loans and Leases in the Notes to Consolidated Financial Statements and in Item 7, Management's"Management’s Discussion and Analysis of Financial Condition and Results of Operations, seeOperations” included under the section captioned "Allowance for Loan and Lease Losses Methodology," contained elsewhere "Comparison of 2018 to 2017" in this report.

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Fair Value Measurements for Valuation of Investments
The Company records certain assets and liabilities at fair value in the Consolidated Financial Statements and the accompanying Notes thereto. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, as defined by applicable accounting guidance.
To increase consistency and comparability in fair value measures, management adheres to the three-level hierarchy established to prioritize the inputs used in valuation techniques, which consists of: (i) unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date; (ii) significant inputs other than quoted prices that are directly or indirectly observableCompany’s Annual Report on Form 10-K for the asset or liability; and (iii) inputs that are not observable, rather are reliant upon pricing models and techniques that require significant management judgment or estimation. Assets and liabilities recorded at fair value are categorized, in accordance with guidance, either on a recurring or nonrecurring basis into the above three levels. At the end of each quarter, management assesses the valuation hierarchy for each asset or liability and, as a result, assets or liabilities may be transferred between hierarchy levels due to changes in availability of observable market inputs used to measure fair value at that measurement date.
When observable market prices are not available, fair value is estimated using modeling techniques such as discounted cash flow analysis. These modeling techniques utilize assumptions that market participants would use in pricing the asset or liability, including assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset, and the risk of nonperformance. Depending on the nature of the asset or liability, the Company uses various valuation techniques and assumptions when estimating the instrument’s fair value. In addition, changes in legislation or regulatory environment could further impact these assumptions.
Available-for-sale securities classified as level 2 in the hierarchy consists of Agency collateralized mortgage obligations (Agency CMO), Agency mortgage-backed securities (Agency MBS), Agency commercial mortgage-backed securities (Agency CMBS), Non-agency commercial mortgage-backed securities (CMBS), CLO, corporate debt, and single issuer-trust preferred, as quoted market prices are not available for these asset classes. Management employs an independent pricing service that utilizes matrix pricing to calculate fair value. This fair value measurement considers observable data such as dealer quotes, dealer price indications, market spreads, credit information, and the respective terms and conditions for debt instruments. Procedures are in place to monitor assumptions and establish processes to challenge valuations received from pricing services that appear unusual or unexpected.
Composition of investment securities, the related impairment analysis, and fair value methodology and amounts, are more fully illustrated in Note 3: Investment Securities and Note 16: Fair Value Measurements in the Notes to Consolidated Financial Statements.
Evaluation for Impairment of Goodwill
Goodwill represents the excess purchase price of a business acquired over the fair value, at acquisition, of the identifiable net assets acquired and is assigned to specific reporting units. Goodwill is evaluated for impairment, at least annually, in accordance with ASC Topic 350, "Intangibles - Goodwill and Other." Quarterly, an assessment of potential triggering events is performed and should events or circumstances be present that, more likely than not, would reduce the fair value of a reporting unit below its carrying value, the Company would then evaluate: periods of market disruption; market capitalization to book value erosion; financial services industry-wide factors; geo-economic factors; and internally developed forecasts to determine if its recorded goodwill may be impaired. Goodwill is evaluated for impairment by performing a two-step quantitative test. The quantitative analysis utilizes both the discounted cash flow methodology and a comparable company methodology on an equally weighted basis. Discounted cash flow estimates, which include significant management assumptions relating to asset and revenue growth rates, net interest and operating margins, capital requirements, weighted-average cost of capital, and future economic and market conditions, are used to determine fair value under the two-step quantitative test. A comparable company methodology is based on a comparison of financial and operating statistics of publicly traded companies to each of the reporting units, and the appropriate multiples, such as equity value-to-tangible book value, core deposit premium multiples and/or price-to-earnings per share multiples, are applied to arrive at indications of value for each reporting unit.
Under Step 1, the fair value of a reporting unit is compared to its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired, and it is not necessary to continue to Step 2 of the impairment process. Otherwise, Step 2 is performed where the implied fair value of goodwill is compared to the carrying value of goodwill in the reporting unit. If a reporting unit's carrying value of goodwill exceeds fair value, an impairment is recognized and this difference is charged to non-interest expense.
Webster performed its annual impairment test under Step 1 as of its elected measurement date of November 30. The valuation of goodwill involves estimates which require significant management judgment. The Company utilizes a combined, equally weighted, income approach based on discounted cash flows and comparable company market approach to arrive at an indicated fair value range for the reporting unit.

23


The income approach involves several management estimates, including developing a discounted cash flow valuation model which utilizes variables such as asset and revenue growth rates, expense trends, capital requirements, discount rates, and terminal values. Based upon an evaluation of key data and market factors, management selects the specific variables to be incorporated into the valuation model. Projected future cash flows are discounted using estimated rates based on the Capital Asset Pricing Model, which considers the risk-free interest rate, market risk premium, beta, and unsystematic risk and size premium adjustments specific to the reporting unit. In the income approach the discount rate used for Consumer Deposits, Business Banking and HSA Bank was 7.6%, 9.8%, and 9.6%, respectively. The long-term growth rate used in determining the terminal value of the reporting unit's cash flows was estimated at 4.0% and is based on management's assessment of the minimum expected growth rate of each reporting unit as well as broader economic and regulatory considerations.
The comparable company market approach includes small to mid-sized banks primarily based in the Northeast with significant geographic or product line overlap to Webster and its reporting units to determine a fair value of each reporting unit.
At November 30, 2017, Webster calculated the following multiples for the selected comparable companies, as appropriate for each reporting unit: core deposit premium, equity value-to-tangible book value and price-to-earnings per share. In determining the appropriate multiples to be applied for each reporting unit, the financial and operating statistics of the reporting units were compared to the comparable companies. Certain financial statistics were compared in identifying the reporting unit’s most appropriate comparable companies whose multiples were used as the basis for the selected multiple range. For price-to-earnings per share, 2017 to 2019 net income compound annual growth rate and 2019 net income margins were used, while the return on tangible book value and return on assets were used for equity value-to-tangible book value multiples. For core deposit premium multiples, each of those four financial statistics were used. Additionally, a control premium was applied as the comparable company multiples are on a minority basis.
The indicated values derived from the discounted cash flows and the market comparable company methodologies were equally weighted to derive the fair value of each reporting unit. This fair value was then compared against the carrying value of each reporting unit to determine if a Step 2 test is required. In estimating the carrying value of each reporting unit, Webster uses a methodology that is based upon Basel III asset risk weightings and fully allocates book capital to all assets and liabilities of each reporting unit. Capital is allocated to assets based on risk weightings and to funding liabilities based on an assessment of operational risk, collateral needs and residual leverage capital as appropriate.
There was no impairment indicated as a result of the Step 1 test performed as of November 30, 2017. The fair value of the Consumer Deposits, Business Banking, and HSA Bank reporting units where goodwill resides exceeded carrying value by 1.6x, 1.7x, and 10.3x, respectively. The Consumer Deposits, Business Banking and HSA Bank reporting units had $377.6 million, $139.0 million, and $21.8 million of goodwill atyear ended December 31, 2017, respectively.
Assessing the Realizability of Deferred Tax Assets and the Measurement of Uncertain Tax Positions
In accordance with ASC Topic 740, "Income Taxes,2018" certain aspects of accounting for income taxes require significant management judgment, including assessing the realizability of DTAs and the measurement of UTPs. Such judgments are subjective and involve estimates and assumptions about matters that are inherently uncertain. Should actual factors and conditions differ materially from those used by management, the actual realization of DTAs and resolution of UTPs could differ materially from the amounts recorded in the Consolidated Financial Statements and the accompanying Notes thereto..
DTAs generally represent items for which a benefit has been recognized for financial accounting purposes that cannot be realized for tax purposes until a future period. The realization of DTAs depends upon future sources of taxable income . Valuation allowances are established for those DTAs determined not likely to be realized based on management's judgment. Income taxes are more fully described in Note 8: Income Taxes in the Notes to Consolidated Financial Statements contained elsewhere in this report.
Recently Issued Accounting Standards Updates
Refer to Note 1: Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements contained elsewhere in this report for a summary of recently issued ASUs and their expected impact on the Company's financial statements.

24


Results of Operations
Selected financial data is presented
Selected Financial DataAt or for the years ended December 31,
(Dollars in thousands, except per share data)20192018201720162015
Balance Sheets
Total assets$30,389,344  $27,610,315  $26,487,645  $26,072,529  $24,641,118  
Loans and leases, net19,827,890  18,253,136  17,323,864  16,832,268  15,496,745  
Investment securities8,219,751  7,224,150  7,125,429  7,151,749  6,907,683  
Deposits23,324,746  21,858,845  20,993,729  19,303,857  17,952,778  
Borrowings3,529,271  2,634,703  2,546,141  4,017,948  4,040,799  
Preferred stock145,037  145,037  145,056  122,710  122,710  
Total shareholders' equity3,207,770  2,886,515  2,701,958  2,527,012  2,413,960  
Statements Of Income
Interest income$1,154,583  $1,055,167  $913,605  $821,913  $760,040  
Interest expense199,456  148,486  117,318  103,400  95,415  
Net interest income955,127  906,681  796,287  718,513  664,625  
Provision for loan and lease losses37,800  42,000  40,900  56,350  49,300  
Non-interest income285,315  282,568  259,478  264,478  237,777  
Non-interest expense715,950  705,616  661,075  623,191  555,341  
Income before income tax expense486,692  441,633  353,790  303,450  297,761  
Income tax expense (1)
103,969  81,215  98,351  96,323  93,032  
Net income$382,723  $360,418  $255,439  $207,127  $204,729  
Earnings applicable to common shareholders$372,985  $351,703  $246,831  $198,423  $195,361  
Per Share Data
Basic earnings per common share$4.07  $3.83  $2.68  $2.17  $2.15  
Diluted earnings per common share4.06  3.81  2.67  2.16  2.13  
Dividends and dividend equivalents declared per common share1.53  1.25  1.03  0.98  0.89  
Dividends declared per Series A preferred stock share—  —  —  —  21.25  
Dividends declared per Series E preferred stock share—  —  1,600.00  1,600.00  1,600.00  
Dividends declared per Series F preferred stock share1,312.50  1,323.44  —  —  —  
Book value per common share33.28  29.72  27.76  26.17  24.99  
Tangible book value per common share (non-GAAP)
27.19  23.60  21.59  19.94  18.69  
Key Performance Ratios
Tangible common equity ratio (non-GAAP)
8.39 %8.05 %7.67 %7.19 %7.12 %
Return on average assets1.32  1.33  0.97  0.82  0.87  
Return on average common shareholders’ equity12.83  13.37  9.92  8.44  8.70  
Return on average tangible common shareholders' equity (non-GAAP)
16.01  17.17  13.00  11.36  11.96  
Net interest margin3.55  3.60  3.30  3.12  3.08  
Efficiency ratio (non-GAAP)
56.77  57.75  60.33  62.01  59.93  
Asset Quality Ratios
Non-performing loans and leases as a percentage of loans and leases0.75 %0.84 %0.72 %0.79 %0.89 %
Non-performing assets as a percentage of loans and leases plus OREO0.79  0.87  0.76  0.81  0.92  
Non-performing assets as a percentage of total assets0.52  0.59  0.50  0.53  0.59  
ALLL as a percentage of non-performing loans and leases138.56  137.22  158.00  144.98  125.05  
ALLL as a percentage of loans and leases1.04  1.15  1.14  1.14  1.12  
Net charge-offs as a percentage of average loans and leases0.21  0.16  0.20  0.23  0.23  
Ratio of ALLL to net charge-offs5.09 x7.16 x5.68 x5.25 x5.21 x
(1)The enactment of the Tax Act in December 2017 impacted income tax expense. Refer to Note 9 to the following table:Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for additional information.
22
 At or for the years ended December 31,
(Dollars in thousands, except per share data)20172016201520142013
BALANCE SHEETS     
Total assets$26,487,645
$26,072,529
$24,641,118
$22,497,175
$20,843,577
Loans and leases, net17,323,864
16,832,268
15,496,745
13,740,761
12,547,203
Investment securities7,125,429
7,151,749
6,907,683
6,666,828
6,465,652
Deposits20,993,729
19,303,857
17,952,778
15,651,605
14,854,420
Borrowings2,546,141
4,017,948
4,040,799
4,335,193
3,612,416
Series A preferred stock—
—
—
28,939
28,939
Series E preferred stock—
122,710
122,710
122,710
122,710
Series F preferred stock145,056
—
—
—
—
Total shareholders' equity2,701,958
2,527,012
2,413,960
2,322,815
2,209,348
STATEMENTS OF INCOME     
Interest income$913,605
$821,913
$760,040
$718,941
$687,640
Interest expense117,318
103,400
95,415
90,500
90,912
Net interest income796,287
718,513
664,625
628,441
596,728
Provision for loan and lease losses40,900
56,350
49,300
37,250
33,500
Non-interest income (less securities and one-time gain amounts)259,604
256,882
237,278
197,754
197,615
Gain on sale of investment securities, net—
414
609
5,499
712
Impairment loss on securities recognized in earnings(126)(149)(110)(1,145)(7,277)
One-time gain on redemption of an asset—
7,331
—
—
—
Non-interest expense661,075
623,191
555,341
501,600
497,709
Income before income tax expense353,790
303,450
297,761
291,699
256,569
Income tax expense98,351
96,323
93,032
91,973
77,113
Net income$255,439
$207,127
$204,729
$199,726
$179,456
Earnings applicable to common shareholders$246,831
$198,423
$195,361
$188,496
$168,036
Per Share Data     
Basic earnings per common share$2.68
$2.17
$2.15
$2.10
$1.90
Diluted earnings per common share2.67
2.16
2.13
2.08
1.86
Dividends and dividend equivalents declared per common share1.03
0.98
0.89
0.75
0.55
Dividends declared per Series A preferred stock share—
—
21.25
85.00
85.00
Dividends declared per Series E preferred stock share1,600.00
1,600.00
1,600.00
1,600.00
1,648.89
Book value per common share27.76
26.17
24.99
23.99
22.77
Tangible book value per common share (non-GAAP)
21.59
19.94
18.69
18.10
16.85
Key Performance Ratios     
Tangible common equity ratio (non-GAAP)
7.67%7.19%7.12%7.46%7.50%
Return on average assets0.97
0.82
0.87
0.93
0.89
Return on average common shareholders’ equity9.92
8.44
8.70
8.85
8.44
Return on average tangible common shareholders' equity (non-GAAP)
13.00
11.36
11.96
11.90
11.77
Net interest margin3.30
3.12
3.08
3.21
3.26
Efficiency ratio (non-GAAP)
60.33
62.01
59.93
59.18
60.32
Asset Quality Ratios     
Non-performing loans and leases as a percentage of loans and leases0.72%0.79%0.89%0.93%1.28%
Non-performing assets as a percentage of loans and leases plus OREO0.76
0.81
0.92
0.98
1.34
Non-performing assets as a percentage of total assets0.50
0.53
0.59
0.61
0.82
ALLL as a percentage of non-performing loans and leases158.00
144.98
125.05
122.62
94.10
ALLL as a percentage of loans and leases1.14
1.14
1.12
1.15
1.20
Net charge-offs as a percentage of average loans and leases0.20
0.23
0.23
0.23
0.47
Ratio of ALLL to net charge-offs5.68 x5.25 x5.21 x5.21 x2.63 x


25

Table of Contents

The non-GAAP financial measures identified in the preceding table providesprovide investors with information useful in understanding the Company's financial performance, performance trends and financial position. These measures are used by management for internal planning and forecasting purposes, as well as by securities analysts, investors and other interested parties to compare peer company operating performance. Management believes that the presentation, together with the accompanying reconciliations provides a complete understanding of the factors and trends affecting the Company's business and allows investors to view its performance in a similar manner. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures and results. Because non-GAAP financial measures are not standardized, it may not be possible to compare these measures with other companies that present measures having the same or similar names.
The following tables reconcile non-GAAP financial measures with financial measures defined by GAAP:
At December 31,
(Dollars and shares in thousands, except per share data)20192018201720162015
Tangible book value per common share (non-GAAP):
Shareholders' equity (GAAP)$3,207,770  $2,886,515  $2,701,958  $2,527,012  $2,413,960  
Less: Preferred stock (GAAP)145,037  145,037  145,056  122,710  122,710  
 Goodwill and other intangible assets (GAAP)560,290  564,137  567,984  572,047  577,699  
Tangible common shareholders' equity (non-GAAP)$2,502,443  $2,177,341  $1,988,918  $1,832,255  $1,713,551  
Common shares outstanding92,027  92,247  92,101  91,868  91,677  
Tangible book value per common share (non-GAAP)$27.19  $23.60  $21.59  $19.94  $18.69  
Tangible common equity ratio (non-GAAP):
Tangible common shareholders' equity (non-GAAP)$2,502,443  $2,177,341  $1,988,918  $1,832,255  $1,713,551  
Total assets (GAAP)$30,389,344  $27,610,315  $26,487,645  $26,072,529  $24,641,118  
Less: Goodwill and other intangible assets (GAAP)560,290  564,137  567,984  572,047  577,699  
Tangible assets (non-GAAP)$29,829,054  $27,046,178  $25,919,661  $25,500,482  $24,063,419  
Tangible common equity ratio (non-GAAP)8.39 %8.05 %7.67 %7.19 %7.12 %
For the years ended December 31,
(Dollars in thousands)20192018201720162015
Return on average tangible common shareholders' equity (non-GAAP):
Net Income (GAAP)$382,723  $360,418  $255,439  $207,127  $204,729  
Less: Preferred stock dividends (GAAP)7,875  7,853  8,184  8,096  8,711  
Add: Intangible assets amortization, tax-affected (GAAP)3,039  3,039  2,640  3,674  4,121  
Income adjusted for preferred stock dividends and intangible assets amortization (non-GAAP)$377,887  $355,604  $249,895  $202,705  $200,139  
Average shareholders' equity (non-GAAP)$3,067,719  $2,782,132  $2,617,275  $2,481,417  $2,387,286  
Less: Average preferred stock (non-GAAP)145,037  145,068  124,978  122,710  134,682  
  Average goodwill and other intangible assets (non-GAAP)562,188  566,048  570,054  574,785  579,366  
 Average tangible common shareholders' equity (non-GAAP)$2,360,494  $2,071,016  $1,922,243  $1,783,922  $1,673,238  
Return on average tangible common shareholders' equity (non-GAAP)16.01 %17.17 %13.00 %11.36 %11.96 %
Efficiency ratio (non-GAAP):
Non-interest expense (GAAP)$715,950  $705,616  $661,075  $623,191  $555,341  
Less: Foreclosed property activity (GAAP)(173) (139) (238) (326) 517  
  Intangible assets amortization (GAAP)3,847  3,847  4,062  5,652  6,340  
  Other expense (non-GAAP) (1)
1,757  11,878  9,029  3,513  975  
Non-interest expense (non-GAAP)$710,519  $690,030  $648,222  $614,352  $547,509  
Net interest income (GAAP)$955,127  $906,681  $796,287  $718,513  $664,625  
Add: Tax-equivalent adjustment (non-GAAP)9,695  9,026  16,953  13,637  10,617  
 Non-interest income (GAAP)285,315  282,568  259,478  264,478  237,777  
 Other (non-GAAP) (2)
1,448  1,244  1,798  1,780  1,111  
Less: Gain on sale of investment securities, net (GAAP)29  —  —  414  609  
Gains on sale of banking centers and asset redemption (GAAP)—  4,596  —  7,331  —  
Income (non-GAAP)$1,251,556  $1,194,923  $1,074,516  $990,663  $913,521  
Efficiency ratio (non-GAAP)56.77 %57.75 %60.33 %62.01 %59.93 %
 At December 31,
(Dollars and shares in thousands, except per share data)20172016201520142013
Tangible book value per common share (non-GAAP):     
Shareholders' equity (GAAP)$2,701,958
$2,527,012
$2,413,960
$2,322,815
$2,209,348
Less: Preferred stock (GAAP)145,056
122,710
122,710
151,649
151,649
 Goodwill and other intangible assets (GAAP)567,984
572,047
577,699
532,553
535,238
Tangible common shareholders' equity (non-GAAP)$1,988,918
$1,832,255
$1,713,551
$1,638,613
$1,522,461
Common shares outstanding92,101
91,868
91,677
90,512
90,369
Tangible book value per common share (non-GAAP)$21.59
$19.94
$18.69
$18.10
$16.85
      
Tangible common equity ratio (non-GAAP):     
Tangible common shareholders' equity (non-GAAP)$1,988,918
$1,832,255
$1,713,551
$1,638,613
$1,522,461
Total assets (GAAP)$26,487,645
$26,072,529
$24,641,118
$22,497,175
$20,843,577
Less: Goodwill and other intangible assets (GAAP)567,984
572,047
577,699
532,553
535,238
Tangible assets (non-GAAP)$25,919,661
$25,500,482
$24,063,419
$21,964,622
$20,308,339
Tangible common equity ratio (non-GAAP)7.67%7.19%7.12%7.46%7.50%
      
 For the years ended December 31,
(Dollars in thousands)20172016201520142013
Return on average tangible common shareholders' equity (non-GAAP):     
Net Income (GAAP)$255,439
$207,127
$204,729
$199,726
$179,456
Less: Preferred stock dividends (GAAP)8,184
8,096
8,711
10,556
10,803
Add: Intangible assets amortization, tax-affected at 35% (GAAP)2,640
3,674
4,121
1,745
3,197
Income adjusted for preferred stock dividends and intangible assets amortization (non-GAAP)$249,895
$202,705
$200,139
$190,915
$171,850
Average shareholders' equity (non-GAAP)$2,617,275
$2,481,417
$2,387,286
$2,289,699
$2,149,873
Less: Average preferred stock (non-GAAP)124,978
122,710
134,682
151,649
151,649
  Average goodwill and other intangible assets (non-GAAP)570,054
574,785
579,366
533,549
537,650
 Average tangible common shareholders' equity (non-GAAP)$1,922,243
$1,783,922
$1,673,238
$1,604,501
$1,460,574
Return on average tangible common shareholders' equity (non-GAAP)13.00%11.36%11.96%11.90%11.77%
      
Efficiency ratio (non-GAAP):     
Non-interest expense (GAAP)$661,075
$623,191
$555,341
$501,600
$497,709
Less: Foreclosed property activity (GAAP)(238)(326)517
(74)43
  Intangible assets amortization (GAAP)4,062
5,652
6,340
2,685
4,919
  Other expense (non-GAAP)9,029
3,513
975
3,029
5,649
Non-interest expense (non-GAAP)$648,222
$614,352
$547,509
$495,960
$487,098
Net interest income (GAAP)$796,287
$718,513
$664,625
$628,441
$596,728
Add: Tax-equivalent adjustment (non-GAAP)16,953
13,637
10,617
11,124
13,221
 Non-interest income (GAAP)259,478
264,478
237,777
202,108
191,050
 Other (non-GAAP)1,798
1,780
1,111
1,889
7,277
Less: Gain on sale of investment securities, net (GAAP)—
414
609
5,499
712
 One-time gain on the sale of an asset (GAAP)—
7,331
—
—
—
Income (non-GAAP)$1,074,516
$990,663
$913,521
$838,063
$807,564
Efficiency ratio (non-GAAP)60.33%62.01%59.93%59.18%60.32%


(1)Other expense (non-GAAP) includes business and facility optimization charges. In addition, there was a $10.0 million charge relating to additional FDIC premiums in 2018 and a $3.8 million charge for debt prepayment penalties in 2017.
(2)Other (non-GAAP) includes low income housing credits.
26
23


The following table summarizespresents daily average balances, interest, and yield,yield/rate, and net interest margin on a fully tax-equivalent basis:
 Years ended December 31,
 201920182017
(Dollars in thousands)Average
Balance		InterestYield/RateAverage
Balance		InterestYield/RateAverage
Balance		InterestYield/Rate
Assets
Interest-earning assets:
Loans and leases$19,209,611  $927,395  4.83 %$18,033,587  $845,146  4.69 %$17,295,027  $712,794  4.12 %
Investment securities (1)
7,761,937  229,989  2.97  7,137,326  211,227  2.93  7,047,744  210,044  2.97  
FHLB and FRB stock113,518  4,956  4.37  132,607  6,067  4.58  155,949  5,988  3.84  
Interest-bearing deposits56,458  1,211  2.14  63,178  1,125  1.78  63,397  698  1.10  
Securities7,931,913  236,156  2.98  7,333,111  218,419  2.98  7,267,090  216,730  2.98  
Loans held for sale22,437  727  3.24  15,519  628  4.04  29,680  1,034  3.49  
Total interest-earning assets27,163,961  $1,164,278  4.29 %25,382,217  $1,064,193  4.18 %24,591,797  $930,558  3.78 %
Non-interest-earning assets1,897,078  1,640,385  1,669,370  
Total assets$29,061,039  $27,022,602  $26,261,167  
Liabilities and equity
Interest-bearing liabilities:
Demand deposits$4,300,407  $—  — %$4,185,183  $—  — %$4,079,493  $—  — %
Health savings accounts6,240,201  12,316  0.20  5,540,000  10,980  0.20  4,839,988  9,612  0.20  
Interest-bearing checking, money market and savings9,144,086  54,566  0.60  9,115,168  36,559  0.40  9,508,416  27,287  0.29  
Time deposits3,267,913  62,695  1.92  2,818,271  42,868  1.52  2,137,574  25,354  1.19  
Total deposits22,952,607  129,577  0.56  21,658,622  90,407  0.42  20,565,471  62,253  0.30  
Securities sold under agreements to repurchase and other borrowings1,008,704  17,953  1.78  784,998  13,491  1.72  876,660  14,365  1.64  
FHLB advances1,201,839  31,399  2.61  1,339,492  33,461  2.50  1,764,347  30,320  1.72  
Long-term debt (1)
468,111  20,527  4.51  225,895  11,127  4.93  225,639  10,380  4.60  
Total borrowings2,678,654  69,879  2.62  2,350,385  58,079  2.47  2,866,646  55,065  1.92  
Total interest-bearing liabilities25,631,261  $199,456  0.78 %24,009,007  $148,486  0.62 %23,432,117  $117,318  0.50 %
Non-interest-bearing liabilities362,059  231,463  211,775  
Total liabilities25,993,320  24,240,470  23,643,892  
Preferred stock145,037  145,068  124,978  
Common shareholders' equity2,922,682  2,637,064  2,492,297  
Total shareholders' equity3,067,719  2,782,132  2,617,275  
Total liabilities and equity$29,061,039  $27,022,602  $26,261,167  
Tax-equivalent net interest income964,822  915,707  813,240  
Less: Tax-equivalent adjustments(9,695) (9,026) (16,953) 
Net interest income$955,127  $906,681  $796,287  
Net interest margin3.55 %3.60 %3.30 %
(1)For purposes of yield/rate computation, unrealized gain (loss) balances on available-for-sale securities and senior fixed-rate notes hedges are excluded.
24

 Years ended December 31,
 2017 2016 2015
(Dollars in thousands)Average
Balance		InterestYield/Rate Average
Balance		InterestYield/Rate Average
Balance		InterestYield/Rate
Assets           
Interest-earning assets:           
Loans and leases$17,295,027
$712,794
4.12% $16,266,101
$624,300
3.84% $14,746,168
$554,632
3.76%
Securities (based upon historical amortized cost)
7,047,744
210,044
2.97
 6,910,649
203,467
2.95
 6,846,297
207,675
3.04
FHLB and FRB stock155,949
5,988
3.84
 188,854
6,039
3.20
 188,631
6,479
3.43
Interest-bearing deposits63,397
698
1.10
 57,747
295
0.51
 107,569
281
0.26
Loans held for sale29,680
1,034
3.49
 44,560
1,449
3.25
 41,101
1,590
3.87
Total interest-earning assets24,591,797
$930,558
3.78% 23,467,911
$835,550
3.56% 21,929,766
$770,657
3.52%
Non-interest-earning assets1,669,370
   1,753,316
   1,625,196
  
Total assets$26,261,167
   $25,221,227
   $23,554,962
  
            
Liabilities and equity           
Interest-bearing liabilities:           
Demand deposits$4,079,493
$—
—% $3,853,700
$—
—% $3,564,751
$—
—%
Savings, checking, & money market deposits14,348,404
36,899
0.26
 13,072,577
27,331
0.21
 11,846,049
21,472
0.18
Time deposits2,137,574
25,354
1.19
 2,027,029
22,527
1.11
 2,138,778
24,559
1.15
Total deposits20,565,471
62,253
0.30
 18,953,306
49,858
0.26
 17,549,578
46,031
0.26
            
Securities sold under agreements to repurchase and other borrowings876,660
14,365
1.64
 947,858
14,528
1.53
 1,144,963
16,861
1.47
FHLB advances1,764,347
30,320
1.72
 2,413,309
29,033
1.20
 2,084,496
22,858
1.10
Long-term debt225,639
10,380
4.60
 225,607
9,981
4.42
 226,292
9,665
4.27
Total borrowings2,866,646
55,065
1.92
 3,586,774
53,542
1.49
 3,455,751
49,384
1.43
Total interest-bearing liabilities23,432,117
$117,318
0.50% 22,540,080
$103,400
0.46% 21,005,329
$95,415
0.45%
Non-interest-bearing liabilities211,775
   199,730
   162,347
  
Total liabilities23,643,892
   22,739,810
   21,167,676
  
            
Preferred stock124,978
   122,710
   134,682
  
Common shareholders' equity2,492,297
   2,358,707
   2,252,604
  
Webster Financial Corporation shareholders' equity2,617,275
   2,481,417
   2,387,286
  
Total liabilities and equity$26,261,167
   $25,221,227
   $23,554,962
  
Tax-equivalent net interest income 813,240
   732,150
   675,242
 
Less: Tax-equivalent adjustments (16,953)   (13,637)   (10,617) 
Net interest income $796,287
   $718,513
   $664,625
 
Net interest margin  3.30%   3.12%   3.08%
Table of Contents
Net interest income and net interest margin are impacted by the level of interest rates, mix of assets earning and liabilities payingbearing those interest rates, and the volume of interest-earning assets and interest-bearing liabilities. These conditionsfactors are influenced by changes in economic conditions that impact interest rate policy, competitive conditions that impact loan and deposit pricing strategies, as well as the extent of interest lost to non-performing assets.

27


Net interest income is the difference between interest income on earning assets, such as loans and investments, and interest expense on liabilities, such as deposits and borrowings, which are used to fund those assets. Net interest income is the Company's largest source of revenue, representing 75.4%77.0% of total revenue for the year ended December 31, 2017. 2019.
Net interest margin is the ratio of tax-equivalent net interest income to average earning assets for the period.
Webster manages the risk of changes in interest rates on net interest income and net interest margin through ALCO and through related interest rate risk monitoring and management policies. ALCO meets at least monthly to make decisions on the investment securities and funding portfolios based on the economic outlook, its interest rate expectations, the portfolio risk position, and other factors.
Four main tools are used for managing interest rate risk:
•the size, duration and credit risk of the investment portfolio,
•the size and duration of the wholesale funding portfolio,
off-balance sheet •interest rate contracts, and
•the pricing and structure of loans and deposits.
The Federal Open Market Committee increased the federal funds rate target range three times in 2017, from 0.50-0.75%was 1.50-1.75% at December 31, 2016,2019, as compared to 0.75-1.00% effective March 16, 2017,2.25-2.50% at December 31, 2018 and 1.25-1.50% at December 31, 2017. Refer to 1.00-1.25% effective June 15, 2017, and to 1.25-1.50% effective December 13, 2017. See the "Asset/Liability Management and Market Risk" section for further discussion of Webster's interest rate risk position.
Comparison of 20172019 to 20162018
Financial Performance
NetFor the year ended December 31, 2019, net income of $255.4$382.7 million increased 6.2% from the year ended December 31, 2018, due to increased net interest income, driven by strong loan growth and stable credit quality across all businesses. Although net interest income increased, net interest margin decreased 5 basis points to 3.55% for the year ended December 31, 2019 from 3.60% for the year ended December 31, 2018. Non-interest income improved, led by growth in deposit service fees and mortgage banking activities, while a modest increase in non-interest expense partially offset the growth in revenues.
Income before income tax expense was $486.7 million for the year ended December 31, 2017 increased 23.3% over the year ended December 31, 2016. Strong loan growth, funded with growth in low-cost long-duration HSA deposits, resulted in2019, an 18 basis points increase in net interest margin, and a lower provision for loan and lease losses, driven by stable credit performance throughout the year also positively impacted net interest margin. Non-interest income improved, excluding a one-time gain on the sale of an asset in 2016, while non-interest expense increases for strategic growth initiatives partially offset the net interest growth.
Income before income tax expense was $353.8$45.1 million from $441.6 million for the year ended December 31, 2017,2018.
Income tax expense was $104.0 million, for an increaseeffective tax rate of $50.3 million from $303.5 million21.4%, for the year ended December 31, 2016.
The primary factors positively impacting income before income tax expense include:
net interest income increased $77.8 million; and
provision for loan and lease losses decreased $15.5 million.
The primary factors negatively impacting income before income tax expense include:
non-interest expense increased $37.9 million; and
one-time gain on the sale of an asset in 2016 of $7.3 million.
The impact of the items outlined above, coupled with the effect from income tax expense of $98.4 million and $96.32019 as compared to $81.2 million, for an effective rate of 18.4%, for the yearsyear ended December 31, 2017 and 2016, respectively, resulted in net2018.
Net income of $255.4$382.7 million and diluted earnings per share of $2.67$4.06 for the year ended December 31, 2017 compared to2019 increased from net income of $207.1$360.4 million and diluted earnings per share of $2.16$3.81 for the year ended December 31, 2016. See the "Income Taxes" section for additional information with regard to the effect from income taxes, including the impact of the Tax Cuts and Jobs Act.2018.
The efficiency ratio, a non-GAAP financial measure which quantifies the cost expended to generate a dollar of revenue, was 60.33%56.77% for 20172019 and 62.01%57.75% for 2016.2018. The improvement in the ratio highlights the Company's strong net interest income growth in revenues accelerating at a rate greater than the increase in non-interest expense.expenses.
Credit quality remained stable to slightly improved as demonstrated by the asset quality ratios. Net charge-offs as a percentage of average loans and leases was 0.20%0.21% for the year ended December 31, 20172019 as compared to 0.23%0.16% for the year ended December 31, 2016.2018. Non-performing assets as a percentage of loans, leases, and other real estate owned (OREO) decreased to 0.76%0.79% at December 31, 20172019 from 0.81%0.87% at December 31, 2016, primarily driven by lower2018 due to growth in loan and lease balances, and also in part from the decrease in non-performing asset balances and, to a lesser extent, further reduced by loan growth.

28


during the year.
Net Interest Income
Net interest income totaled $796.3$955.1 million for the year ended December 31, 20172019 as compared to $718.5$906.7 million for the year ended December 31, 2016,2018, an increase of $77.8$48.4 million. On a fully tax-equivalent basis, net interest income increased $49.1 million when compared to 2018.
Net interest margin decreased 5 basis points to 3.55% for the year ended December 31, 2019 from 3.60% for the year ended December 31, 2018. The decrease in net interest margin is primarily due to increases in rates for interest-bearing liabilities rising at a greater rate than increases in yields for interest-earning assets.
25

Table of Contents
Average interest-earning assets during 20172019 increased $1.1$1.8 billion compared to 2016, substantially due to a significant increase in loan balances, with yield improvement2018, primarily from loans and leases growth of 28 basis points, up 6.3%. Net interest income increased primarily due to these increases, although the securities portfolio average balances and yields were modestly improved as well.$1.2 billion. The overall average yield on interest-earning assets increased 2211 basis points to 3.78%4.29% during 20172019 from 3.56%4.18% during 2016. The average yield on interest-earning assets is2018, primarily impacted by changes in market interest rates as well as changes in the volume and relative mix of interest-earning assets. Average interest-bearing liabilities during 20172019 increased $0.9$1.6 billion compared to 2016,2018, primarily from health savings account growth as other deposit balance increasesof $0.7 billion and FHLB advance balance decreases basically offset, and thean increase in borrowings of $0.9 billion. The average cost of interest-bearing liabilities increased 416 basis points to 0.50%0.78% during 20172019 compared to 0.46%0.62% during 2016. The average cost of borrowings increase is a result2018, from both the effects of the federal funds rate being increased four times between December 2016throughout 2018 and December 2017.
Net interest margin increased 18 basis points to 3.30% forthen decreased only in the year ended December 31, 2017 from 3.12% for the year ended December 31, 2016. The increase in net interest margin is primarily due to an increase in commercial loan yieldslatter part of 2019, and balances, as well as improved investment portfolio yields, partially offset by an increased cost ofhigher borrowing due to the federal funds rate increases, somewhat mitigated by a shift from FHLB advances to deposit balances which are generally lower cost and also not as sensitive to the federal funds rate increases.levels.
Changes in Net Interest Income
The following table presents the components of the change in net interest income attributable to changes in rate and volume, and reflects net interest income on a fully tax-equivalent basis:
Years ended December 31,
2019 vs. 2018
Increase (decrease) due to
(In thousands)
Rate (1)
VolumeTotal
Change in interest on interest-earning assets:
Loans and leases$27,010  $55,239  $82,249  
Loans held for sale(124) 224  100  
Securities (2)
393  17,344  17,737  
Total interest income$27,279  $72,807  $100,086  
Change in interest on interest-bearing liabilities:
Deposits$32,318  $6,853  $39,171  
Borrowings(1,654) 13,454  11,800  
Total interest expense$30,664  $20,307  $50,971  
Net change in net interest income$(3,385) $52,500  $49,115  
 Years ended December 31,
 2017 vs. 2016
Increase (decrease) due to
(In thousands)
Rate (1)
VolumeTotal
Change in interest on interest-earning assets:   
Loans and leases$50,509
$37,985
$88,494
Loans held for sale120
(534)(414)
Investments (2)
2,744
4,185
6,929
Total interest income$53,373
$41,636
$95,009
Change in interest on interest-bearing liabilities:


Deposits$8,574
$3,821
$12,395
Borrowings10,327
(8,803)1,524
Total interest expense$18,901
$(4,982)$13,919
Change in tax-equivalent net interest income$34,472
$46,618
$81,090
(1)The change attributable to mix, a combined impact of rate and volume, is included with the change due to rate.
(1)The change attributable to mix, a combined impact of rate and volume, is included with the change due to rate.
(2)Investments include: Securities; FHLB and FRB stock; and Interest-bearing deposits.
(2)Securities include: Investment securities, FHLB and FRB stock, and Interest-bearing deposits.
Average loans and leases for the year ended December 31, 20172019 increased $1.0$1.2 billion compared to the average for the year ended December 31, 2016.2018. The loan and lease portfolio comprised 70.3%70.7% of the average interest-earning assets at December 31, 20172019 compared to 69.3% of the average interest-earning assets71.0% at December 31, 2016.2018. The loan and lease portfolio yield increased 2814 basis points to 4.12%4.83% for the year ended December 31, 2017,2019 compared to the loan and lease portfolio yield of 3.84%4.69% for the year ended December 31, 2016.2018. The increase in the yield on the average loansloan and leaseslease portfolio is primarily due to increased yield on floatingthe impact of variable rate loans as well as increased spreads on loan originations.resetting higher and growth in commercial loans with higher yields.
Average investmentssecurities for the year ended December 31, 20172019 increased $109.8$598.8 million compared to the average for the year ended December 31, 2016. The investment portfolio2018. Securities comprised 29.6%29.2% of the average interest-earning assets at December 31, 20172019 compared to 30.5% of the average interest-earnings assets28.9% at December 31, 2016. The investment portfolio2018. Securities yield increased 5 basis points towas 2.98% for both the year ended December 31, 2017 compared to the investment portfolio yield of 2.93% for2019 and the year ended December 31, 2016. The increase in the yield on the investment portfolio is primarily due to a reduction in premium amortization from slower prepayment speeds and increased yields on floating-rate securities, more than offsetting lower current market rates on investment securities purchases compared to the yield on investment securities paydowns and maturities.

29


2018.
Average deposits for the year ended December 31, 20172019 increased $1.6$1.3 billion compared to the average for the year ended December 31, 2016. The increase is2018, comprised of an increase of $225.8$115.2 million in non-interest-bearing deposits and an increase of $1.4$1.2 billion in average interest-bearing deposits. The increase in average interest-bearing deposits, and an improved product mix to low-cost deposits, wasis primarily due to growth in health savings account deposit growth.accounts and time deposits. The average cost of deposits increased 414 basis points to 0.30%0.56% for the year ended December 31, 20172019 from 0.26%0.42% for the year ended December 31, 2016.2018. The increase is due to selected deposit product rate increases and a change in average costmix into certificate of deposits is mainly the result of an increase in the rate paid on public money marketdeposit accounts. Higher cost time deposits decreasedincreased to 13.0%17.5% for the year ended December 31, 20172019 from 13.4%16.1% for the year ended December 31, 2016,2018, as a percentage of total interest-bearing deposits.
Average borrowings for the year ended December 31, 2017 decreased $720.12019 increased $328.3 million compared to the average for the year ended December 31, 2016. Average securities2018. Securities sold under agreements to repurchase and other borrowings decreased $71.2increased $223.7 million, and averagewhile FHLB advances decreased $649.0$137.7 million. The Company completed an underwritten public offering of $300 million as utilizationsenior fixed-rate notes on March 25, 2019, which resulted in an increase of advances maturing within one year declined significantly.$242.2 million in average long-term debt. See "Sources of Funds and Liquidity" for further discussion of the notes issued. The average cost of borrowings increased 4315 basis points to 1.92%2.62% for the year ended December 31, 20172019 from 1.49%2.47% for the year ended December 31, 2016.2018. The increase in average cost of borrowings is thelargely a result of the senior notes and changes in the federal funds rate being increased four times between December 2016 and December 2017.
Cash flow hedges impacted the average cost of borrowings as follows:
 Years ended December 31,
(In thousands)2017 2016
Interest rate swaps on repurchase agreements$—
 $361
Interest rate swaps on FHLB advances6,799
 8,315
Interest rate swaps on senior fixed-rate notes306
 306
Interest rate swaps on brokered CDs and deposits780
 780
Net increase to interest expense on borrowings$7,885
 $9,762
rate.
Provision for Loan and Lease Losses
The provision for loan and lease losses is the expense necessary to maintain the allowance for loan and lease losses at levels appropriate to absorb estimated credit losses in the loan and lease portfolio.
The provision for loan and lease losses was $40.9$37.8 million for the year ended December 31, 2017,2019, which decreased $15.5$4.2 million compared to the year ended December 31, 2016. The decrease in2018. This level of provision for loan and lease losses was due primarily to lower loan growth as compared to the rate for 2016. Total net charge-offs was $35.2 million and $37.0 million for the year ended December 31, 2017 and 2016, respectively. The decrease wasis primarily due to lower commercial real estateloan growth, mix and other commercial loan related net charge-offs.
Allowance for Loan and Lease Losses
The ALLL is a significant accounting estimate that is determined through periodic and systematic detailed reviews of the Company's loan and lease portfolio. The ALLL is determined based on an analysis which assesses the inherent risk for probable losses within the portfolio. Significant judgments and estimates are necessary in the determination of the ALLL. Significant judgments include, among others, loan risk ratings and classifications, the probability of loan defaults, the net loss exposure in the event of loan defaults, the loss emergence period, the determination and measurement of impaired loans, and other quantitative and qualitative considerations.
At December 31, 2017, the ALLL totaled $200.0 million, or 1.14% of total loans and leases, as comparedstable asset quality. Refer to $194.3 million, or 1.14% of total loans and leases, at December 31, 2016.
See the sections captioned "Loans and Leases" through "Allowance for Loan and Lease Losses Methodology," contained elsewhere in this report for further details.

30
26


Non-Interest Income
Years ended December 31, Increase (decrease) Years ended December 31,Increase (decrease)
(Dollars in thousands)20172016 AmountPercent(Dollars in thousands)20192018AmountPercent
Deposit service fees$151,137
$140,685
 $10,452
7.4 %Deposit service fees$168,022  $162,183  $5,839  3.6 %
Loan and lease related fees26,448
26,581
 (133)(0.5)Loan and lease related fees31,327  32,025  (698) (2.2) 
Wealth and investment services31,055
28,962
 2,093
7.2
Wealth and investment services32,932  32,843  89  0.3  
Mortgage banking activities9,937
14,635
 (4,698)(32.1)Mortgage banking activities6,115  4,424  1,691  38.2  
Increase in cash surrender value of life insurance policies14,627
14,759
 (132)(0.9)Increase in cash surrender value of life insurance policies14,612  14,614  (2) —  
Gain on sale of investment securities, net—
414
 (414)(100.0)Gain on sale of investment securities, net29  —  29  100.0  
Impairment loss on securities recognized in earnings(126)(149) 23
15.4
Other income26,400
38,591
 (12,191)(31.6)Other income32,278  36,479  (4,201) (11.5) 
Total non-interest income$259,478
$264,478
 $(5,000)(1.9)%Total non-interest income$285,315  $282,568  $2,747  1.0 %
Total non-interest income was $259.5$285.3 million for the year ended December 31, 2017, a decrease2019, an increase of $5.0$2.7 million compared to $264.5$282.6 million for the year ended December 31, 2016.2018. The decreaseincrease is primarily attributable to lower other income and mortgage banking activities, more than offsetting higher deposit service fees and wealth and investment services.mortgage banking activities, partially offset by lower other income.
Deposit service fees totaled $151.1$168.0 million for 20172019 compared to $140.7$162.2 million for 2016.2018. The increase was a result of higher checking account service charges and check card interchange fees attributable to health savings account growth and usage activity.
Wealth and investment services totaled $31.1 million for 2017 compared to $29.0 million for 2016. The increase was primarily due to increased sales coupled with growth in assets under management.growth.
Mortgage banking activities totaled $9.9$6.1 million for 20172019 compared to $14.6$4.4 million for 2016.2018. The decreaseincrease was primarily the result of higher originations for sale and higher rate lock activity due to lower volume of conforming residential mortgage originations, driven by a decrease in refinance activity.rates.
Other income totaled $26.4$32.3 million for 20172019 compared to $38.6$36.5 million for 2016.2018. The decrease was primarily due to the following items recorded in 2016: a $7.3gain of $4.6 million gain on the redemption of an ownership interest in a privately held investment; a $2.7 million favorable adjustment to the fair value of a contingent receivable; and a $2.0 million gain on the sale of commercial loans, which did not repeatbanking centers in 2017. Other income was also impacted by lower net client interest rate hedging activities/hedging revenues, nearly2018. Bank owned life insurance gains were substantially offset by a settlement gain and increased alternativewrite-down in one equity method investment gains.

31


in 2019 compared to 2018.
Non-Interest Expense
Years ended December 31, Increase (decrease) Years ended December 31,Increase (decrease)
(Dollars in thousands)20172016 AmountPercent(Dollars in thousands)20192018AmountPercent
Compensation and benefits$359,926
$332,127
 $27,799
8.4 %Compensation and benefits$395,402  $381,496  $13,906  3.6 %
Occupancy60,490
61,110
 (620)(1.0)Occupancy57,181  59,463  (2,282) (3.8) 
Technology and equipment89,464
79,882
 9,582
12.0
Technology and equipment105,283  97,877  7,406  7.6  
Intangible assets amortization4,062
5,652
 (1,590)(28.1)Intangible assets amortization3,847  3,847  —  —  
Marketing17,421
19,703
 (2,282)(11.6)Marketing16,286  16,838  (552) (3.3) 
Professional and outside services16,858
14,801
 2,057
13.9
Professional and outside services21,380  20,300  1,080  5.3  
Deposit insurance25,649
26,006
 (357)(1.4)Deposit insurance17,954  34,749  (16,795) (48.3) 
Other expense87,205
83,910
 3,295
3.9
Other expense98,617  91,046  7,571  8.3  
Total non-interest expense$661,075
$623,191
 $37,884
6.1 %Total non-interest expense$715,950  $705,616  $10,334  1.5 %
Total non-interest expense was $661.1$716.0 million for the year ended December 31, 2017,2019, an increase of $37.9$10.3 million fromcompared to $705.6 million for the year ended December 31, 2016.2018. The increase is primarily attributable to higher compensation and benefits, technology and equipment, professional and outside services, and other expenses, somewhatexpense, partially offset by lower marketing and intangible assets amortization.deposit insurance.
Compensation and benefits totaled $359.9$395.4 million for 20172019 compared to $332.1$381.5 million for 2016.2018. The increase was driven bydue to strategic hires, within HSA Bank as well as additional annual merit compensationincreases, and group insuranceother benefit costs. In addition, in response to the Tax Cuts and Jobs Act, the Company announced a further investment in its employees and communities. As a result, an expense of $2.6 million is included in compensation and benefits for 2017 to cover a one-time cash bonus to full-time employees who are below the vice president level.
Occupancy totaled $60.5 million for 2017 compared to $61.1 million for 2016. Charges related to banking center optimization were offset by lower utilities and depreciation of premises and equipment.
Technology and equipment totaled $89.5$105.3 million for 20172019 compared to $79.9$97.9 million for 2016.2018. The increase was primarily due to increasedhigher service contracts and additional depreciation on infrastructure to support bank growth.
Marketing totaled $17.4 millionstrategic and infrastructure projects for 2017 compared to $19.7 million for 2016. The decrease was due to lower media spend.
Professional and outside services totaled $16.9 million for 2017 compared to $14.8 million for 2016. The increase was primarily due to consulting services used for strategic projects.continued investment in the businesses.
Other expense totaled $87.2$98.6 million for 20172019 compared to $83.9$91.0 million for 2016.2018. The increase was primarilyis due to $3.8a $1.7 million business optimization expense in 2019, as well as legal settlements and sales costs.
Deposit insurance totaled $18.0 million for 2019 compared to $34.7 million for 2018. The decrease reflects the benefit of cost associated with the redemptiontemporary FDIC deposit insurance fund surcharge ending in 2018 and a $10.0 million charge in 2018 related to additional FDIC premiums.
27

Table of Series E Preferred Stock.Contents
Income Taxes
Webster recognized income tax expense of $98.4$104.0 million in 2017for the year ended December 31, 2019 and $96.3$81.2 million in 2016,for the year ended December 31, 2018, and the effective tax rates were 27.8%21.4% and 31.7%18.4%, respectively. The increase in tax expense principally reflects both the higher level of pre-tax income and a lower level of net discrete tax benefits in 2017, while2019, and the decreaseincrease in the effective tax rate principally reflects the $7.8lower level of net discrete tax benefits recognized in 2019 compared to 2018, which included tax planning benefits related to the Tax Act.
The Company's gross DTAs applicable to its net operating loss and credit carryforwards of $69.8 million, or $31.6 million net benefit recognized inof the fourth quarter of 2017, the $28.7 million net benefit$38.2 related valuation allowance, pertain to state and local tax (SALT). The valuation allowance reflects management's estimates of the Company's taxable income projected through the year 2032 and includes assumptions about the content and apportionment of its income among its legal entities for SALT purposes. Those estimates and assumptions reflect the Company's plans and strategies for growth from its ordinary and recurring operations over the near term by legal entity, as well as a longer-term 4% growth rate assumption. Management believes the $31.6 million net DTAs are more likely than not realizable and the $20.9 million expense attributable to the Tax Act, and $7.1 million of excess tax benefits recognized under Accounting Standards Update (ASU) No. 2016-09, Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share Based Payment Accounting, which the Company adopted effective January 1, 2017.their estimates form a reasonable basis for this determination.
For additional information on Webster's income taxes, including its DTAs, and UTPs, seerefer to Note 8:9: Income Taxes in the Notes to Consolidated Financial Statements contained elsewhere in this report.

32


Comparison of 2016 to 2015
Financial Performance
Net income of $207.1 million for the year ended December 31, 2016 increased 1.2% over the year ended December 31, 2015, primarily due to strong loan growth, an increase in the net interest margin, and increased non-interest income, offset primarily by increased non-interest expenses.
Income before income tax expense was $303.5 million for the year ended December 31, 2016, an increase of $5.7 million from $297.8 million for the year ended December 31, 2015.
The primary factors positively impacting income before income tax expense include:
interest income increased $61.9 million; and
non-interest income increased $26.7 million.
The primary factors negatively impacting income before income tax expense include:
non-interest expense increased $67.9 million; and
provision for loan and lease losses increased $7.1 million.
The impact of the items outlined above, coupled with the effect from income tax expense of $96.3 million and $93.0 million for the years ended December 31, 2016 and 2015, respectively, resulted in net income of $207.1 million and diluted earnings per share of $2.16 for the year ended December 31, 2016 compared to net income of $204.7 million and diluted earnings per share of $2.13 for the year ended December 31, 2015.
The efficiency ratio, a non-GAAP financial measure which quantifies the cost expended to generate a dollar of revenue was 62.01% for 2016 and 59.93% for 2015. The increase in the ratio highlights the Company's investing in strategic opportunities such as HSA Bank's strategic initiatives and Community Banking's Boston expansion.
Credit quality improved as demonstrated by the asset quality ratios. Net charge-offs as a percentage of average loans and leases was 0.23% for both the year ended December 31, 2016 and 2015. Non-performing assets as a percentage of loans, leases, and OREO decreased to 0.81% at December 31, 2016 from 0.92% at December 31, 2015, driven by loan growth, partially offset by an increase in non-performing assets.
Net Interest Income
Net interest income totaled $718.5 million for the year ended December 31, 2016 compared to $664.6 million for the year ended December 31, 2015, an increase of $53.9 million. Average interest-earning assets during 2016 increased $1.5 billion compared to 2015, substantially due to strong loan growth of 8.6% with overall improved yields. Net interest income decreased primarily due to the increase in average interest-earning assets, partially offset by a relatively flat securities portfolio with declining reinvestment spreads on those assets. The average yield on interest-earning assets increased 4 basis points to 3.56% during 2016 from 3.52% during 2015. The average yield on interest-earning assets is primarily impacted by changes in market interest rates as well as changes in the volume and relative mix of interest-earning assets. Average interest-bearing liabilities during 2016 increased $1.5 billion compared to 2015, primarily from health savings account growth, while the average cost of interest-bearing liabilities increased 1 basis point to 0.46% during 2016 compared to 0.45% during 2015, primarily from a slight increase in the average cost of borrowings.
Net interest margin increased 4 basis points to 3.12% for the year ended December 31, 2016 from 3.08% for the year ended December 31, 2015. The increase in net interest margin is due primarily to increase in commercial loan yields, flat deposit costs partially offset by lower investment portfolio yields.

33


Changes in Net Interest Income
The following table presents the components of the change in net interest income attributable to changes in rate and volume, and reflects net interest income on a fully tax-equivalent basis:
 Years ended December 31,
 2016 vs. 2015
Increase (decrease) due to
(In thousands)
Rate (1)
VolumeTotal
Change in interest on interest-earning assets:   
Loans and leases$5,627
$64,041
$69,668
Loans held for sale(77)(65)(142)
Investments (2)
(6,297)1,664
(4,633)
Total interest income$(747)$65,640
$64,893
Change in interest on interest-bearing liabilities:   
Deposits$2,554
$1,273
$3,827
Borrowings2,663
1,495
4,158
Total interest expense$5,217
$2,768
$7,985
Change in tax-equivalent net interest income$(5,964)$62,872
$56,908
(1)The change attributable to mix, a combined impact of rate and volume, is included with the change due to rate.
(2)Investments include: Securities; FHLB and FRB stock; and Interest-bearing deposits.
Average loans and leases for the year ended December 31, 2016 increased $1.5 billion compared to the average for the year ended December 31, 2015. The loan and lease portfolio comprised 69.3% of the average interest-earning assets at December 31, 2016 compared to 67.2% of the average interest-earning assets at December 31, 2015. The loan and lease portfolio yield increased 8 basis points to 3.84% for the year ended December 31, 2016, compared to the loan and lease portfolio yield of 3.76% for the year ended December 31, 2015. The increase in the yield on average loans and leases is due to floating rate loans as well as increased spreads on loan originations.
Average investments for the year ended December 31, 2016 increased $14.8 million compared to the average for the year ended December 31, 2015. The investment portfolio comprised 30.5% of the average interest-earning assets at December 31, 2016 compared to 32.6% of the average interest-earnings assets at December 31, 2015. The investment portfolio yield decreased 7 basis points to 2.93% for the year ended December 31, 2016 compared to the investment portfolio yield of 3.00% for the year ended December 31, 2015. The decrease in the investment portfolio yield is due to reinvestment yields that are lower than yields on securities paydowns and maturities during 2016.
Average deposits for the year ended December 31, 2016 increased $1.4 billion compared to the average for the year ended December 31, 2015. The increase is comprised of an increase of $288.9 million in non-interest-bearing deposits and an increase of $1.1 billion in average interest-bearing deposits, driven by continued growth in health savings account deposits. The average cost of deposits was 0.26% for the year ended December 31, 2016 or flat compared with the year ended December 31, 2015. This was as a result of product mix. Higher cost time deposits decreased to 13.4% for the year ended December 31, 2016 from 15.3% for the year ended December 31, 2015, as a percentage of total interest-bearing deposits.
Average borrowings for the year ended December 31, 2016 increased $131.0 million compared to the average for the year ended December 31, 2015. Average securities sold under agreements to repurchase and other borrowings decreased $197.1 million, and average FHLB advances increased $328.8 million. The average cost of borrowings increased 6 basis points to 1.49% for the year ended December 31, 2016 from 1.43% for the year ended December 31, 2015. The increase in average cost of borrowings is due primarily to an increase to the federal funds rate.
Cash flow hedges impacted the average cost of borrowings as follows:
 Years ended December 31,
(In thousands)2016 2015
Interest rate swaps on repurchase agreements$361
 $1,442
Interest rate swaps on FHLB advances8,315
 8,272
Interest rate swaps on senior fixed-rate notes306
 306
Interest rate swaps on brokered CDs and deposits780
 632
Net increase to interest expense on borrowings$9,762
 $10,652

34


Provision for Loan and Lease Losses
Management performs a quarterly review of the loan and lease portfolio to determine the adequacy of the ALLL. At December 31, 2016, the ALLL totaled $194.3 million, or 1.14% of total loans and leases, compared to $175.0 million, or 1.12% of total loans and leases, at December 31, 2015.
Several factors are considered when determining the level of the ALLL, including loan growth, portfolio composition, portfolio risk profile, credit performance, changes in the levels of non-performing loans and leases and changes in the economic environment. These factors, coupled with current and projected net charge-offs, impact the required level of the provision for loan and lease losses. For the year ended December 31, 2016, total net charge-offs were $37.0 million compared to $33.6 million for the year ended December 31, 2015. The increase is primarily the result of a large charge-off for one commercial loan.
The provision for loan and lease losses totaled $56.4 million for the year ended December 31, 2016, an increase of $7.1 million compared to the year ended December 31, 2015. The increase in provision for loan and lease losses was due primarily to the increase in loan balances, partially offset by improved credit quality.
Non-Interest Income
 Years ended December 31, Increase (decrease)
(Dollars in thousands)20162015 AmountPercent
Deposit service fees$140,685
$135,057
 $5,628
4.2 %
Loan and lease related fees26,581
25,594
 987
3.9
Wealth and investment services28,962
32,486
 (3,524)(10.8)
Mortgage banking activities14,635
7,795
 6,840
87.7
Increase in cash surrender value of life insurance policies14,759
13,020
 1,739
13.4
Gain on sale of investment securities, net414
609
 (195)(32.0)
Impairment loss on securities recognized in earnings(149)(110) (39)(35.5)
Other income38,591
23,326
 15,265
65.4
Total non-interest income$264,478
$237,777
 $26,701
11.2 %
Total non-interest income was $264.5 million for the year ended December 31, 2016, an increase of $26.7 million, compared to $237.8 million for the year ended December 31, 2015. The increase is attributable to higher other income, deposit service fees, loan and lease related fees, and mortgage banking activities, partially offset by lower wealth and investment services.
Deposit service fees totaled $140.7 million for 2016 compared to $135.1 million for 2015. The increase was a result of increased account service charges driven by HSA Bank's account growth, check card interchange income, and cash management fees, offset by lower NSF fees.
Loan and lease related fees totaled $26.6 million for 2016 compared to $25.6 million for 2015. The increase was primarily due to increased syndication activity, deferred loan origination fee activity, loan servicing fees net of mortgage servicing right amortization, and increased amendment fees offset by decreases in prepayment fees and line usage fees.
Wealth and investment services totaled $29.0 million for 2016 compared to $32.5 million for 2015. The decrease was primarily due to lower investment management activity.
Mortgage banking activities totaled $14.6 million for 2016 compared to $7.8 million for 2015. The increase was due to higher margins on loans sold, partially offset by slightly lower volume of loan sale settlements.
Other income totaled $38.6 million for 2016 compared to $23.3 million for 2015. The increase was primarily due to a $7.3 million gain on the redemption of an ownership interest in a privately held investment, $4.9 million increase in client interest rate hedging activities, and a $2.0 million increase related to the gain on sale of commercial loans.


35


Non-Interest Expense
 Years ended December 31, Increase (decrease)
(Dollars in thousands)20162015 AmountPercent
Compensation and benefits$332,127
$297,517
 $34,610
11.6 %
Occupancy61,110
48,836
 12,274
25.1
Technology and equipment79,882
80,813
 (931)(1.2)
Intangible assets amortization5,652
6,340
 (688)(10.9)
Marketing19,703
16,053
 3,650
22.7
Professional and outside services14,801
11,156
 3,645
32.7
Deposit insurance26,006
24,042
 1,964
8.2
Other expense83,910
70,584
 13,326
18.9
Total non-interest expense$623,191
$555,341
 $67,850
12.2 %
Total non-interest expense was $623.2 million for the year ended December 31, 2016, an increase of $67.9 million from the year ended December 31, 2015. The increase for the year ended December 31, 2016 is primarily attributable to higher compensation and benefits, occupancy, marketing, professional and outside services, deposit insurance and other expenses.
Compensation and benefits totaled $332.1 million for 2016 compared to $297.5 million for 2015. The increase was driven by strategic hires within HSA Bank and the Boston expansion, variable compensation tied to Webster's share price increase, higher medical, and increased pension related expenses.
Occupancy costs totaled $61.1 million for 2016 compared to $48.8 million for 2015. The increase was primarily due to the Boston expansion and charges related to facilities optimization.
Marketing expenses totaled $19.7 million for 2016 compared to $16.1 million for 2015. The increase was primarily due to increased media spend.
Professional and outside services totaled $14.8 million for 2016 compared to $11.2 million for 2015. The increase was primarily due to strategic consulting services.
Deposit Insurance totaled $26.0 million for 2016 compared to $24.0 million for 2015. The increase was primarily due to asset growth which increased the assessment base.
Other expense totaled $83.9 million for 2016 compared to $70.6 million for 2015. The increase was due to a favorable adjustment recorded in the prior year to the unfunded reserve related to a refined estimate of the draw down factor assumption within the reserve, a favorable adjustment recorded in the prior year related to a reduced deposit insurance assessment for years prior to 2015, and increased operational expenses as a result of HSA Bank strategic initiatives and the Boston expansion.
Income Taxes
Webster recognized income tax expense of $96.3 million in 2016 and $93.0 million in 2015, and the effective tax rates were 31.7% and 31.2%, respectively. The increase in the effective rate principally reflects a $4.4 million net deferred tax benefit recognized in 2015, representing the portion of the $5.8 million reduction in the Company’s valuation allowance on its state and local deferred tax assets recognized that year for a change in their estimated realizability in future years, and $1.8 million associated with higher levels of tax-exempt interest income recognized in 2016, compared to 2015.

36


Segment Reporting
Webster’s operations are organized into three reportable segments that represent its primary businesses - Commercial Banking, HSA Bank, and Community Banking. These three segments reflect how executive management responsibilities are assigned, the primary businesses, thetype of customer served, how products and services are provided, the type of customer served, and how discrete financial information is currently evaluated. TheCertain Corporate Treasury unit of the Company,activities, along with adjustmentsthe amounts required to reconcile profitability metrics to amounts reported in accordance with GAAP, are included in the Corporate and Reconciling category. Refer to Note 20: Segment Reporting in the Notes to Condensed Consolidated Financial Statements contained elsewhere in this report for a reconciliation of segment information to amounts reported in accordance with GAAP and for a description of segment reporting methodology.
Commercial Banking is comprised of Commercial Banking and Private Banking operating segments.
Commercial Banking provides commercial and industrial lending and leasing, commercial real estate lending, and treasury and payment solutions. Specifically, Webster Bank deploys lending through middle market, commercial real estate, equipment financing, asset-based lending and specialty lending units. These groups utilize a relationship approach model throughout itstheir footprint when providing lending, deposit, and cash management services to middle market companies. In addition, Commercial Banking serves as a referral source within Commercial Banking and to the other lines of business.
Private Banking provides local, full relationship banking that serves high net worth clients, not-for-profit organizations, and business clients for asset management, financial planning services, trust services, loan products, and deposit products.products for high net worth clients, not-for-profit organizations, and business clients. These client relationships generate fee revenue on assets under management or administration, while a majority of the relationships also include lending and/and, or, deposit accounts which providegenerates net interest income and other ancillary fees.
HSA Bank offers a comprehensive consumer - directed healthcare solutionsolutions that includes,include, health savings accounts, health reimbursement accounts, flexible spending accounts, and other financial solutions. Health savings accounts are used in conjunction with high deductible health plans in order to facilitate tax advantages for account holders with respect to health care spending and retirement savings, in accordance with applicable laws. Health savings accounts are offered through employers for the benefit of their employees or directly to individual consumers and are distributed nationwide directly as well as through national and regional insurance carriers, benefit consultants and financial advisors.
HSA Bank deposits provide long duration low-cost funding that is used to minimize the Company’s use of wholesale funding in support of the Company’s loan growth. As such, net interest income represents the difference between a funding credit allocation, reflecting the value of the duration funding, and the interest paid on deposits. In addition, non-interest revenue is generated predominantly through service fees and interchange income.
Community Banking is comprised of Personal Banking and Business Banking operating segments.
Through a distribution network, consisting of 167157 banking centers 334and 309 ATMs, a customer care center, and a full range of web and mobile-based banking services, it serves consumer and business customers primarily throughout southern New England and into Westchester County, New York.
Personal Banking offers consumer deposit and fee-based services, residential mortgages, home equity lines/lines, or loans, unsecured consumer loans, and credit card products. In addition, investment and securities-related services, including brokerage and investment advice isare offered through a strategic partnership with LPL, a broker dealer registered with the SEC, a registered investment advisor under federal and applicable state laws, a member of the FINRA, and a member of the SIPC. Webster Bank has employees located throughout its banking center network, who, through LPL, are registered representatives.
Business Banking offers credit, deposit, and cash flow management products to businesses and professional service firms with annual revenues of up to $25 million. This group builds broad customer relationships through business bankers and business certified banking center managers, supported by a team of customer care center bankers and industry and product specialists.
Description of Segment Reporting Methodology
Webster’s reportable segment results are intended to reflect each segment as if it were a stand-alone business. Webster uses an internal profitability reporting system to generate information by operating segment, which is based on a series of management estimates and allocations regarding funds transfer pricing, provision for loan and lease losses, non-interest expense, income taxes, and equity capital. These estimates and allocations, certain of which are subjective in nature, are periodically reviewed and refined. Changes in estimates and allocations that affect the reported results of any operating segment do not affect the consolidated financial position or results of operations of Webster as a whole. The full profitability measurement reports, which are prepared for each operating segment, reflect non-GAAP reporting methodologies. The differences between full profitability and GAAP results are reconciled in the Corporate and Reconciling category.
Webster allocates interest income and interest expense to each business, while also transferring the primary interest rate risk exposures to the Corporate and Reconciling category, using a matched maturity funding concept called Funds Transfer Pricing. The allocation process considers the specific interest rate risk and liquidity risk of financial instruments and other assets and liabilities in each line of business. The matched maturity funding concept considers the origination date and the earlier of the maturity date or the repricing date of a financial instrument to assign an Funds Transfer Pricing, a matched maturity funding concept (FTP) rate for loans and deposits originated each day. Loans are assigned an FTP rate for funds used and deposits are assigned an FTP rate for funds provided. This process is executed by the Company’s Financial Planning and Analysis division and is overseen by ALCO.

37
28

Table of Contents

Webster allocates the provision for loan and lease losses to each reportable segment based on management’s estimate of the inherent loss content in each of the specific loan and lease portfolios. Management believes the reserve level is adequate to cover inherent losses in each reportable segment. For additional discussion related to asset quality metrics, see the "Asset Quality" section elsewhere within this report.
Webster allocates a majority of non-interest expense to each reportable segment using a full-absorption costing process. Costs, including corporate overhead, are analyzed, pooled by process, and assigned to the appropriate reportable segment. Income tax expense is allocated to each reportable segment based on the consolidated effective income tax rate for the period shown.
Segment Results
The 2016 and 2015 segment results have been adjusted for comparability to the 2017 segment presentation for the following changes:
To further strengthen Webster's ability to deliver the totality of its products and services to the owners and executives of commercial clients and other high net worth individuals, an organizational change was made during the second quarter of 2017. Effective April 1, 2017, the head of Private Banking reports directly to the head of Commercial Banking. The current organizational structure reflects how executive management responsibilities are assigned and reviewed. As a result of this change, the Private Banking and Commercial Banking operating segments are aggregated into one reportable segment, Commercial Banking.
In late 2007 Webster discontinued its indirect residential construction lending and its indirect home equity lending outside of its primary New England market area, referred to as National Wholesale Lending. Webster placed these two portfolios into a liquidating loan portfolio included within the Corporate and Reconciling category. The balance of the home equity liquidating loan portfolio was $65.0 million at December 31, 2016. As the remainder of this portfolio has been performing in the same manner as the continuing home equity portfolio, management has decided to combine the liquidating loan portfolio with the continuing home equity loan portfolio. The combined portfolio is included in the Community Banking reportable segment.
The following tables present net income (loss), selected balance sheet information, and assets under administration/management for Webster’s reportable segments and the Corporate and Reconciling category for the periods presented:
 Years ended December 31,
(In thousands)2017 2016 2015
Net income (loss):     
Commercial Banking$133,594
 $115,366
 $105,203
Community Banking83,468
 60,959
 76,335
HSA Bank49,774
 38,230
 37,443
Corporate and Reconciling(11,397) (7,428) (14,252)
Consolidated Total$255,439
 $207,127
 $204,729
 At December 31, 2017
(In thousands)Commercial
Banking		Community BankingHSA BankCorporate and
Reconciling		Total
Total assets$9,350,028
$8,909,671
$76,308
$8,151,638
$26,487,645
Loans and leases9,323,376
8,200,154
328
—
17,523,858
Goodwill—
516,560
21,813
—
538,373
Deposits4,122,608
11,476,334
5,038,681
356,106
20,993,729
Not included in above amounts:     
Assets under administration/management2,039,375
3,376,185
1,268,402
—
6,683,962
 At December 31, 2016
(In thousands)Commercial
Banking		Community BankingHSA BankCorporate and
Reconciling		Total
Total assets$9,069,445
$8,721,046
$83,987
$8,198,051
$26,072,529
Loans and leases9,066,905
7,959,558
125
—
17,026,588
Goodwill—
516,560
21,813
—
538,373
Deposits3,592,531
10,970,977
4,362,503
377,846
19,303,857
Not included in above amounts:     
Assets under administration/management1,781,840
2,980,113
878,190
—
5,640,143

38


Commercial Banking
Operating Results:
Years ended December 31,Years ended December 31,
(In thousands)2017 2016 2015(In thousands)201920182017
Net interest income$322,393
 $287,596
 $266,085
Net interest income$372,845  $356,509  $322,393  
Provision for loan and lease losses38,518
 37,455
 30,546
Net interest income after provision283,875
 250,141
 235,539
Non-interest income55,194
 57,253
 46,967
Non-interest income59,063  64,765  55,194  
Non-interest expense154,037
 138,379
 129,499
Non-interest expense181,580  174,054  154,037  
Income before income taxes185,032
 169,015
 153,007
Pre-tax, pre-provision net revenuePre-tax, pre-provision net revenue250,328  247,220  223,550  
Provision for loan and lease lossesProvision for loan and lease losses25,407  32,388  34,066  
Income before income tax expenseIncome before income tax expense224,921  214,832  189,484  
Income tax expense51,438
 53,649
 47,804
Income tax expense55,331  52,849  52,676  
Net income$133,594
 $115,366
 $105,203
Net income$169,590  $161,983  $136,808  
Comparison of 20172019 to 20162018
Net incomePre-tax, pre-provision net revenue increased $18.2$3.1 million in 20172019 compared to 2016.2018. Net interest income increased $34.8 million, primarily due to loan and deposit growth. The provision for loan and lease losses increased $1.1$16.3 million, primarily due to loan growth. Non-interest income decreased $2.1$5.7 million, driven by less syndication and client interest rate hedging activity. Non-interest expense increased $7.5 million, related to investments in people and technology.
The provision for loan and lease losses allocation decreased by $7.0 million due to stable asset quality.
Comparison of 2018 to 2017
Pre-tax, pre-provision net revenue increased $23.7 million in 2018 compared to 2017. Net interest income increased $34.1 million, primarily due to lowerloan and deposit growth and higher loan and deposit margins. Non-interest income increased $9.6 million, primarily due to loan related fees and client interest rate hedging activities. Non-interest expense increased $15.7$20.0 million, related to strategic hiresFDIC insurance and investments in cash management product enhancementspeople and support functions.technology.
Comparison of 2016 to 2015
Net income increased $10.2 million in 2016 compared to 2015. Net interest income increased $21.5 million, primarily due to greater loan and deposit volumes. The provision for loan and lease losses increased $6.9decreased by $1.7 million due primarily to the growth in loans. Non-interest income increased $10.3 million, primarily due to fees related to loan activities, client interest rate hedging activitiesstable asset quality and gain on loan sales. Non-interest expense increased $8.9 million, primarily due to strategic new hires and investments in technology.overall credit environment.
Selected Balance Sheet Information and Assets Under Administration/Management:Off-Balance Sheet Information:
At December 31,
(In thousands)201920182017
Loans and leases$11,499,573  $10,437,319  $9,323,376  
Deposits4,382,051  4,030,554  4,122,608  
Assets under administration/management2,304,350  1,930,199  2,039,375  
 At December 31,
(In thousands)2017 2016 2015
Total assets$9,350,028
 $9,069,445
 $7,999,084
Loans and leases9,323,376
 9,066,905
 7,999,565
Deposits4,122,608
 3,592,531
 3,301,773
      
Assets under administration/management (not included in above amounts)2,039,375
 1,781,840
 1,726,385
Loans and leases increased $0.3 billion at December 31, 2017 compared to December 31, 2016, due to loan originations near prior year levels partially offset by an increase in prepayments. Loans and leases increased $1.1 billion at December 31, 20162019 compared to December 31, 2015, primarily due2018, and increased $1.1 billion at December 31, 2018 compared to new originations.December 31, 2017, in line with our strategic priority to expand commercial banking.

Loan originations were $3.2$4.1 billion, $3.3$4.4 billion and $3.2 billion in 2019, 2018 and 2017, 2016 and 2015, respectively.

Deposits increased $530.1$351.5 million at December 31, 20172019 compared to December 31, 2016, primarily due to growth in client2018, as a result of new business development and operating funds maintained for cash management services.customers holding more balances at the bank. Deposits increased $290.8decreased $92.1 million at December 31, 20162018 compared to December 31, 2015,2017, primarily due to growtha decrease in client and operating funds maintained for cash management services.municipal deposits.
ThroughThe Private Banking Commercial Bankingoperating segment held approximately $357.5$1.8 billion, $1.5 billion, and $1.7 billion in assets under management and $539.7 million, $271.7$422.5 million, and $276.1$357.5 million in assets under administration and $1.7 billion, $1.5 billion, and $1.5 billion in assets under management, at December 31, 2017,2019, December 31, 2016,2018, and December 31, 2015,2017, respectively.

39
29


HSA Bank
Operating Results:
Years ended December 31,Years ended December 31,
(In thousands)2017 2016 2015(In thousands)201920182017
Net interest income$104,704
 $81,451
 $73,433
Net interest income$167,239  $143,255  $104,704  
Non-interest income77,378
 71,710
 62,475
Non-interest income97,041  89,323  77,378  
Non-interest expense113,143
 97,152
 81,449
Non-interest expense135,586  124,594  113,143  
Income before income taxes68,939
 56,009
 54,459
Pre-tax net revenuePre-tax net revenue128,694  107,984  68,939  
Income tax expense19,165
 17,779
 17,016
Income tax expense33,460  28,076  19,165  
Net income$49,774
 $38,230
 $37,443
Net income$95,234  $79,908  $49,774  
Comparison of 20172019 to 20162018
Net incomePre-tax, net revenue increased $11.5$20.7 million in 20172019 compared to 2016.2018. Net interest income increased $23.3increased $24.0 million, reflecting the growth in deposits and improvedimprovement in deposit spreads. Non-interest income increased $5.7$7.7 million, primarily due to a higher volume of fee and interchange income due to growth in the number of accounts. Non-interest expense increased $16.0$11.0 million, primarily due to increased compensation and benefits, cost, increased processing costs in support of business growth as well as continued investment in key initiatives related to continuous improvement, customer service,incremental account growth and investments in expanded distribution.sales and relationship management teams.
Comparison of 20162018 to 20152017
Net incomePre-tax, net revenue increased $0.8$39.0 million in 20162018 compared to 2015.2017. Net interest income increased $8.0$38.6 million, reflecting growth in deposits and improvement in deposit spreads. Non-interest income increased $11.9 million, primarily due to both account growth and deposit balance growth, offset by an adjustment in the funding credit due to a change in the duration valuehigher volume of deposits. Non-interest income increased $9.2 million, primarily due to service feesfee and interchange income as a result of the growth related to health savings account growth.in the number of accounts. Non-interest expense increased $15.7$11.5 million, primarily due to increased compensation and benefits, processing costs neededrelated to support theincremental account growth, and investments made in human capital and technology.expanded sales force.
Selected Balance Sheet Information and Assets Under Administration, through linked brokerage accounts:Off-Balance Sheet Information:
At December 31,
(In thousands)201920182017
Deposits$6,416,135  $5,740,601  $5,038,681  
Assets under administration, through linked brokerage accounts2,070,910  1,460,204  1,268,402  
Total footings$8,487,045  $7,200,805  $6,307,083  
 At December 31, 2017
(In thousands)2017 2016 2015
Total assets$76,308
 $83,987
 $95,815
Deposits5,038,681
 4,362,503
 3,802,313
      
Assets under administration, through linked brokerage accounts (not included in above amounts)1,268,402
 878,190
 692,306

Deposits increased $0.7 billion at December 31, 2019 compared to December 31, 2018 and increased $0.7 billion at December 31, 2018 compared to December 31, 2017. These increases are related to organic deposit and account growth.
HSA Bank deposits accounted for 24.0%27.5% and 22.6%26.3% of the Company’s total deposits as of December 31, 20172019 and December 31, 2016,2018, respectively.
DepositsAssets under administration, through linked brokerage accounts, increased $0.7 billion$610.7 million at December 31, 20172019 compared to December 31, 2016. The increase is related to organic account growth. Deposits increased $0.6 billion at December 31, 2016 compared to December 31, 2015. The increase is related to organic deposit and account growth.
Assets under administration increased $390.2 million at December 31, 2017 compared to December 31, 2016,2018, primarily due to the increasing number of account holders with investment accounts andplus increases in market value increases.values of investments over the year. Assets under administration, through linked brokerage accounts, increased $185.9$191.8 million at December 31, 20162018 compared to December 31, 2015, driven2017, primarily due to the increasing number of account holders with investment accounts partially offset by organic account growth.the fourth quarter decline in market value of investments.
The combination of deposit balances and assets under administration is known as total footings. Total footings were $6.3 billion, comprised of deposit balances of $5.0 billion and assets under administration of $1.3 billion at December 31, 2017, compared to total footings of $5.2 billion, comprised of deposit balances of $4.4 billion and assets under administration of $878.2 million at December 31, 2016.

40
30


Community Banking
Operating Results:
Years ended December 31,Years ended December 31,
(In thousands)2017 2016 2015(In thousands)201920182017
Net interest income$383,700
 $367,137
 $356,881
Net interest income$400,744  $404,869  $383,700  
Provision for loan and lease losses2,382
 18,895
 18,754
Net interest income after provision381,318
 348,242
 338,127
Non-interest income107,368
 110,197
 108,647
Non-interest income109,270  109,669  107,368  
Non-interest expense373,081
 369,132
 335,834
Non-interest expense388,399  384,599  373,081  
Income before income taxes115,605
 89,307
 110,940
Pre-tax, pre-provision net revenuePre-tax, pre-provision net revenue121,615  129,939  117,987  
Provision for loan and lease lossesProvision for loan and lease losses12,393  9,612  6,834  
Income before income tax expenseIncome before income tax expense109,222  120,327  111,153  
Income tax expense32,137
 28,348
 34,605
Income tax expense21,735  23,945  30,899  
Net income$83,468
 $60,959
 $76,335
Net income$87,487  $96,382  $80,254  
Comparison of 20172019 to 20162018
Net income increased $22.5Pre-tax, pre-provision net revenue decreased $8.3 million in 20172019 compared to 2016.2018. Net interest income increased $16.6decreased $4.1 million, primarily due to portfolio balances growthdecline in bothinterest rate spreads in loans and deposits coupled with improvedportfolio stemming from lower interest rate environment. Decrease in rate spreads on deposits as a result of widening interest spreads. The overall increase was partially offset by the effects of tightening spreads on the loan portfolio. The provisiongrowth in balances for loan and lease losses decreased by $16.5 million primarily due to loan portfolio quality improvements in the residential, home-equity and business bankingdeposit portfolios. Non-interest income decreased $2.8$0.4 million, primarily due to lower feesas increased income from mortgage banking activities and business clientincreased fees from loan servicing and interest rate hedging activities; partiallyactivities were offset by increased fee incomea $4.6 million gain from investment management activity and deposit related service charges.the sale of six banking centers recorded in the prior year. Non-interest expense increased $3.9$3.8 million, primarily due to charges related to banking centers optimization, increasedhigher compensation and benefits and increased investment and consultingcontinued investments in technology, infrastructure, partially offset by lower marketingmarketing-related costs and the absence, in 2017, of core deposit intangible amortization which ended in 2016.occupancy expenses.
Comparison of 2016 to 2015
Net income decreased $15.4 million in 2016 compared to 2015. Net interest income increased $10.1 million, primarily due to growth in both loans and deposits, which was partially offset by the impact of a historically low interest environment reducing the value of deposits. The provision for loan and lease losses increased $0.1by $2.8 million in large part due primarily to loan portfolio growth. Non-interest
Comparison of 2018 to 2017
Pre-tax, pre-provision net revenue increased $12.0 million in 2018 compared to 2017. Net interest income increased $1.6$21.2 million, primarily due to an increasegrowth in feesdeposit balances, as well as improved interest spreads on deposits. Non-interest income increased $2.3 million, due to a gain on the sale of six banking centers, coupled with growth in deposit and loan fees. These were partially offset by decreased fee income from mortgage banking activities credit card and client interest rate hedging activities, partially offset byas a result of lower NSF fees collected and reduced investment income driven by lower average per sale revenue due to the implementation of regulatory changes.mortgage production. Non-interest expense increased $33.3$11.5 million, primarily due to $21.7 million in expense associated with the Boston expansion as well as increases inhigher compensation benefits, marketingrelated expenses and expenses tiedcontinued investments in technology.
The provision for loan and lease losses increased by $2.8 million primarily due to branch optimization, partially offset by lowerchanges in loan workout expenses.balances and asset quality.
Selected Balance Sheet Information and Assets Under Administration:Off-Balance Sheet Information:
At December 31,
(In thousands)201920182017
Loans$8,537,341  $8,028,115  $8,200,154  
Deposits12,527,903  11,856,652  11,476,334  
Assets under administration3,712,311  3,391,946  3,376,185  
 At December 31,
(In thousands)2017 2016 2015
Total assets$8,909,671
 $8,721,046
 $8,521,672
Loans8,200,154
 7,959,558
 7,672,116
Deposits11,476,334
 10,970,977
 10,449,231
      
Assets under administration (not included in above amounts)3,376,185
 2,980,113
 2,762,759
Loan portfolio balances increased $240.6$509.2 million at December 31, 20172019 compared to December 31, 2016.2018. The net increase is related towas primarily driven by growth in jumbo residential mortgagesmortgage balances and business banking loans;balances. Mortgage balances growth included a $242.2 million portfolio purchase in the first quarter.Growth in business banking balances also contributed.This overall growth was partially offset by continued net decreasesattrition in thehome equity and unsecured personalbalances as loan portfolios.principal paydowns exceeded new loan production. Loan portfolio balances increased $287.4decreased $172.0 million at December 31, 20162018 compared to December 31, 2015, due2017. The decrease is related to net attrition in the residential mortgage and home equity balances as loan principal paydowns exceeded new loan production.These balance declines were partially offset by growth in the business banking residential mortgages, home equity lines, and personal loans.portfolio.
Loan originations were $1.9$2.2 billion, $2.3$1.3 billion, and $2.4$1.9 billion for the years ended 2017, 20162019, 2018 and 2015,2017, respectively. The decreaseincrease of $359.1$854.6 million in originations for the year ended December 31, 20172019 is driven by lower conformingincreased production in residential mortgages, and home equity, and business banking products.
Deposits increased $505.4$671.3 million at December 31, 20172019 compared to December 31, 2016,2018, resulting from growth in savings, transaction, and time deposit products. Deposits increased $380.3 million at December 31, 2018 compared to December 31, 2017, due to the Boston expansion and continued growth in all major deposit product types. Deposits increased $521.7 million at December 31, 2016 compared to December 31, 2015, due to growth in business and personal transaction account balances which was partially offset by a decrease in time deposit balances.
Additionally, at December 31, 2019, 2018 and 2017, Webster Bank's investment services division held $3.7 billion, $3.4 billion, and securities-related services had$3.4 billion, respectively, of assets under administration inthrough its strategic partnership with LPL, of $3.4 billion at December 31, 2017, compared to $3.0 billion at December 31, 2016 and $2.8 billion at December 31, 2015.LPL.

41
31


Financial Condition
Webster had total assets of $26.5$30.4 billion at December 31, 20172019 compared to $26.1$27.6 billion at December 31, 2016,2018, an increase of $415.1 million,$2.8 billion, or 1.6%.10.1% as:
Loans•loans and leases of $17.3$19.8 billion, net of ALLL of $200.0$209.1 million, at December 31, 20172019 increased $0.5$1.6 billion compared to loans and leases of $16.8$18.3 billion, net of ALLL of $194.3$212.4 million, at December 31, 2016.2018. The increases werenet increase was driven by strong commercial and residential loan origination activity.activity, while;
Total•total deposits of $21.0$23.3 billion at December 31, 20172019 increased $1.7$1.5 billion compared to $19.3$21.9 billion at December 31, 2016.2018. Non-interest-bearing deposits increased 4.2%6.8%, and interest-bearing deposits increased 9.9%6.7% during the year ended December 31, 2017,2019, primarily due to growth in health savings accounts while time deposit and money market balances increased to a lesser extent.balances.
At December 31, 2017,2019, total shareholders' equity was $2.7$3.2 billion compared to $2.5$2.9 billion at December 31, 2016,2018, an increase of $174.9$321.3 million or, 6.9%11.1%. Changes in shareholders' equity for the year ended December 31, 2017 consisted of 2019 include:
•an increase of $255.4$382.7 million for net income and $1.1income;
•an increase of $94.6 million for other comprehensive income partially offset by $94.9(OCI), primarily from higher market values for the available-for-sale securities portfolio;
•reductions of $141.3 million for common share dividends to common shareholders, and $8.1$7.9 million for preferred share dividends, paid to preferred shareholders.and;
•a reduction of $19.6 million for purchases of treasury stock, at cost.
The quarterly cash dividend to common shareholders was increased for the seventheighth consecutive year on April 24, 2017,22, 2019 to $0.26$0.40 per common share from $0.25$0.33 per common share. SeeOn January 28, 2020, Webster Financial Corporation’s Board of Directors declared a quarterly dividend of $0.40 per share. Refer to the "Selected Financial Highlights" section contained elsewhere in this item and Note 13:14: Regulatory Matters in the Notes to Consolidated Financial Statements contained elsewhere in this report for information on Webster’s regulatory capital levels and ratios.
Investment Securities
Webster Bank's investment securities portfolio isare managed within regulatory guidelines and corporate policy, which include limitations on aspects such as concentrations in and typestype of investments as well as minimum risk ratings per type of security. The OCC may establish additional individual limits on a certain type of investment if the concentration in such investment presents a safety and soundness concern. In addition to theWebster Bank, the Holding Company also may directly hold investment securities from time-to-time. At December 31, 2019, the Company had no investments in obligations of individual states, counties, or municipalities which exceeded 10% of consolidated shareholders’ equity.
The CompanyWebster maintains, through its Corporate Treasury Unit, anfunction, investment securities portfolio that isare primarily structuredused to provide a source of liquidity for operating needs, to generate interest income, and as a means to manage interest-rate risk. The portfolio isInvestment securities are classified into two major categories, available-for-sale and held-to-maturity. The available-for-sale portfolioAvailable-for-sale currently consists primarily of Agency CMO, Agency MBS, Agency CMBS, CMBS,U.S. Treasury Bills, agency collateralized mortgage obligations (Agency CMO), agency mortgage-backed securities (Agency MBS), agency commercial mortgage-backed securities (Agency CMBS), non-agency commercial mortgage-backed securities (CMBS), CLO, and CLO. The held-to-maturity portfoliocorporate debt. Held-to-maturity currently consists primarily of Agency CMO, Agency MBS, Agency CMBS, municipal bonds and notes, and CMBS. At December 31, 2017, the Company had no investments in obligations of individual states, counties, or municipalities which exceeded 10% of consolidated shareholders’ equity.
The combined carrying value of investment securities totaled $7.1$8.2 billion at December 31, 2019 and $7.2 billion at December 31, 2017 and2018.
Available-for-sale investment securities increased by $27.1 million, primarily due to increases in market value more than offsetting portfolio activity. The tax-equivalent yield in the portfolio was 2.94% for the year ended December 31, 2016, respectively. Available-for-sale2019 compared to 2.89% for the year ended December 31, 2018.
Held-to-maturity investment securities decreasedincreased by $353.1$968.5 million, primarily due to principal paydowns exceeding purchase activity. Held-to-maturity securities increased by $326.7 million, primarily due to the purchase activity exceedingfor Agency MBS and Agency CMBS more than offsetting principal paydowns. On apaydowns throughout the portfolio. The tax-equivalent basis, the yield in the securities portfolio was 2.98% for the yearsyear ended December 31, 2017 and 2016 was 2.97% and 2.95%, respectively.
The Company held $5.1 billion in investment securities that are in an unrealized loss position at2019 compared to 2.96% for the year ended December 31, 2017. Approximately $2.2 billion of this total has been in an unrealized loss position for less than twelve months, while the remainder, $2.9 billion, has been in an unrealized loss position for twelve months or longer. The total unrealized loss was $103.7 million at December 31, 2017. 2018.
These investment securities were evaluated by management and were determined not to be other-than-temporarily impaired.impaired, at December 31, 2019 and 2018. The Company does not have the intent to sell these investment securities, and it is more likely than not that it will not have to sell these securities before the recovery of their cost basis. To the extent that credit movements and other related factors influence the fair value of investments, the Company may be required to record impairment charges for OTTI in future periods.
For the year ended December 31, 2017, the Company recorded OTTI of $126 thousand on its available-for-sale securities. The amortized cost of available-for-sale securities is net of $1.4total unrealized loss was $30.3 million and $3.2 million of OTTI at December 31, 2017 and2019.
The benchmark 10-year U.S. Treasury rate decreased to 1.92% on December 31, 2016, respectively, related to previously impaired collateralized loan obligation securities (CLO) identified as Covered Fund investments as defined under the Volcker Rule.

2019 from 2.69% on December 31, 2018.
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Table of Contents

The following table summarizes the amortized cost and fair value of investment securities:
At December 31,At December 31,
2017 2016 20192018
(In thousands)
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value 
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value(In thousands)Amortized
Cost		Unrealized
Gains		Unrealized
Losses		Fair ValueAmortized
Cost		Unrealized
Gains		Unrealized
Losses		Fair Value
Available-for-sale:   Available-for-sale:
U.S. Treasury Bills$1,247
$—
$—
$1,247
 $734
$—
$—
$734
U.S. Treasury Bills$—  $—  $—  $—  $7,549  $1  $—  $7,550  
Agency CMO308,989
1,158
(3,814)306,333
 419,865
3,344
(3,503)419,706
Agency CMO184,500  2,218  (917) 185,801  238,968  412  (4,457) 234,923  
Agency MBS1,124,960
2,151
(19,270)1,107,841
 969,460
4,398
(19,509)954,349
Agency MBS1,580,743  35,456  (4,035) 1,612,164  1,521,534  1,631  (42,076) 1,481,089  
Agency CMBS608,276
—
(20,250)588,026
 587,776
63
(14,567)573,272
Agency CMBS587,974  513  (6,935) 581,552  608,167  —  (41,930) 566,237  
CMBS358,984
2,157
(74)361,067
 473,974
4,093
(702)477,365
CMBS432,085  38  (252) 431,871  447,897  645  (2,961) 445,581  
CLO209,075
910
(134)209,851
 425,083
2,826
(519)427,390
CLO92,628  45  (468) 92,205  114,641  94  (1,964) 112,771  
Single issuer-trust preferred7,096
—
(46)7,050
 30,381
—
(1,748)28,633
Corporate debt56,504
797
(679)56,622
 108,490
1,502
(350)109,642
Corporate debt23,485  —  (1,245) 22,240  55,860  —  (5,281) 50,579  
Equities-financial institutions—
—
—
—
 —
—
—
—
Securities available-for-sale$2,675,131
$7,173
$(44,267)$2,638,037
 $3,015,763
$16,226
$(40,898)$2,991,091
Securities available-for-sale$2,901,415  $38,270  $(13,852) $2,925,833  $2,994,616  $2,783  $(98,669) $2,898,730  
   
Held-to-maturity:   Held-to-maturity:
Agency CMO$260,114
$664
$(4,824)$255,954
 $339,455
$1,977
$(3,824)$337,608
Agency CMO$167,443  $1,123  $(1,200) $167,366  $208,113  $287  $(5,255) $203,145  
Agency MBS2,569,735
16,989
(37,442)2,549,282
 2,317,449
26,388
(41,768)2,302,069
Agency MBS2,957,900  60,602  (8,733) 3,009,769  2,517,823  8,250  (79,701) 2,446,372  
Agency CMBS696,566
—
(10,011)686,555
 547,726
694
(1,348)547,072
Agency CMBS1,172,491  6,444  (5,615) 1,173,320  667,500  53  (22,572) 644,981  
Municipal bonds and notes711,381
8,584
(6,558)713,407
 655,813
4,389
(25,749)634,453
Municipal bonds and notes740,431  32,709  (21) 773,119  715,041  2,907  (18,285) 699,663  
CMBS249,273
2,175
(620)250,828
 298,538
4,107
(411)302,234
CMBS255,653  2,278  (852) 257,079  216,943  405  (2,388) 214,960  
Private Label MBS323
1
—
324
 1,677
12
—
1,689
Securities held-to-maturity$4,487,392
$28,413
$(59,455)$4,456,350
 $4,160,658
$37,567
$(73,100)$4,125,125
Securities held-to-maturity$5,293,918  $103,156  $(16,421) $5,380,653  $4,325,420  $11,902  $(128,201) $4,209,121  
The following table summarizes thedebt securities period-end amount and weighted-average yield by contractual maturity, including called securities, for debt securities:or a firm call date, and the respective weighted-average coupon yields:
At December 31, 2019
Within 1 Year1 - 5 Years5 - 10 YearsAfter 10 YearsTotal
(Dollars in thousands)AmountWeighted
Average Coupon Yield		AmountWeighted
Average Coupon Yield		AmountWeighted
Average Coupon Yield		AmountWeighted
Average Coupon Yield		AmountWeighted
Average Coupon Yield
Available-for-sale:
Agency CMO$—  — %$—  — %$8,715  2.24 %$177,085  2.51 %$185,800  2.49 %
Agency MBS—  —  —  —  12,220  2.07  1,599,944  2.77  1,612,164  2.76  
Agency CMBS—  —  —  —  —  —  581,553  2.39  581,553  2.39  
CMBS—  —  —  —  186,391  3.14  245,480  3.06  431,871  3.10  
CLO—  —  —  —  92,205  3.69  —  —  92,205  3.69  
Corporate debt—  —  —  —  —  —  22,240  2.45  22,240  2.45  
Securities available-for-sale$—  — %$—  — %$299,531  3.24 %$2,626,302  2.69 %$2,925,833  2.75 %
Held-to-maturity:
Agency CMO$—  — %$—  — %$—  — %$167,443  2.48 %$167,443  2.48 %
Agency MBS—  —  2,887  3.86  5,983  2.25  2,949,030  2.71  2,957,900  2.71  
Agency CMBS—  —  —  —  189,980  2.74  982,511  2.63  1,172,491  2.65  
Municipal bonds and notes7,635  3.26  2,986  4.29  60,952  2.79  668,858  2.94  740,431  2.94  
CMBS—  —  —  —  —  —  255,653  2.75  255,653  2.75  
Securities held-to-maturity$7,635  3.26 %$5,873  4.08 %$256,915  2.74 %$5,023,495  2.72 %$5,293,918  2.73 %
Total debt securities$7,635  3.26 %$5,873  4.08 %$556,446  3.01 %$7,649,797  2.71 %$8,219,751  2.73 %
 At December 31, 2017
 Within 1 Year1 - 5 Years5 - 10 YearsAfter 10 YearsTotal
(Dollars in thousands)AmountWeighted
Average
Yield		AmountWeighted
Average
Yield		AmountWeighted
Average
Yield		AmountWeighted
Average
Yield		AmountWeighted
Average
Yield
Available-for-sale:          
U.S. Treasury Bills$1,247
1.29%$—
—%$—
—%$—
—%$1,247
1.29%
Agency CMO—
—
—
—
13,163
2.47
293,169
2.48
306,332
2.48
Agency MBS—
—
—
—
19,774
2.09
1,088,067
2.47
1,107,841
2.46
Agency CMBS—
—
—
—
—
—
588,026
2.51
588,026
2.51
CMBS—
—
19,229
2.99
128,085
2.78
213,754
2.89
361,068
2.86
CLO—
—
—
—
165,859
3.25
43,992
3.49
209,851
3.30
Single issuer-trust preferred—
—
—
—
7,050
2.57
—
—
7,050
2.57
Corporate debt—
—
21,218
2.90
—
—
35,404
2.66
56,622
2.75
Securities available-for-sale$1,247
1.29%$40,447
2.94%$333,931
2.96%$2,262,412
2.54%$2,638,037
2.60%
Held-to-maturity:          
Agency CMO$—
—%$—
—%$2,623
2.93%$257,491
2.47%$260,114
2.47%
Agency MBS1,924
3.60
—
—
18,443
2.83
2,549,368
2.64
2,569,735
2.64
Agency CMBS—
—
—
—
—
—
696,566
2.79
696,566
2.79
Municipal bonds and notes31,407
7.50
3,839
7.00
16,804
5.80
659,331
4.83
711,381
4.98
CMBS—
—
—
—
—
—
249,273
3.04
249,273
3.04
Private Label MBS323
4.50
—
—
—
—
—
—
323
4.50
Securities held-to-maturity$33,654
7.25%$3,839
7.00%$37,870
4.16%$4,412,029
3.00%$4,487,392
3.05%
           
Total debt securities$34,901
7.03%$44,286
3.30%$371,801
3.08%$6,674,441
2.85%$7,125,429
2.88%
The benchmark 10-year U.S. Treasury rate decreased to 2.41% on December 31, 2017 from 2.45% on December 31, 2016. Webster Bank has the ability to use its investment portfolio as well as interest-rate derivative financial instruments, within internal policy guidelines to manage interest rate risk as part of its asset/liability strategy. SeeRefer to Note 15:16: Derivative Financial Instruments in the Notes to Consolidated Financial Statements contained elsewhere in this report for additional information concerning the use of derivative financial instruments.

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Alternative Investments
Investments in Private Equity Funds. The Company has investments in private equity funds. These investments, which totaled $11.8 million at December 31, 2017 and $10.8 million at December 31, 2016, are included in other assets in the accompanying Consolidated Balance Sheets. The majority of these funds are held at cost based on ownership percentage in the fund, while some are accounted for at fair value using a net asset value. See a further discussion of fair value in Note 16: Fair Value Measurements in the Notes to Consolidated Financial Statements contained elsewhere in this report. The Company recognized a net gain of $2.6 million, $865 thousand, and $2.7 million for the years ended December 31, 2017, 2016, and 2015, respectively. These amounts are included in other non-interest income in the accompanying Consolidated Statements of Income.
Other Non-Marketable Investments. The Company holds certain non-marketable investments, which include preferred share ownership in other equity ventures. These investments, which totaled $6.3 million and $5.7 million at December 31, 2017 and December 31, 2016, respectively, are included in other assets in the accompanying Consolidated Balance Sheets. These funds are held at cost and subject to impairment testing. The Company recorded a net gain of $45 thousand, a net gain of $35 thousand, and a net loss of $398 thousand for the years ended December 31, 2017, 2016, and 2015, respectively, related to these investments. These amounts are included in other non-interest income in the accompanying Consolidated Statements of Income.
The Volcker Rule prohibits investments in private equity funds and non-public funds that are considered Covered Funds, as defined in the regulation. Webster must comply with the rule provisions by July 21, 2022. See the "Supervision and Regulation" section contained elsewhere in this report for additional information on the Volcker Rule, including Covered Funds.
Loans and Leases
The following table provides the composition of loans and leases:
At December 31,At December 31,
2017 2016 2015 2014 2013 20192018201720162015
(Dollars in thousands)Amount% Amount% Amount% Amount% Amount%(Dollars in thousands)Amount%Amount%Amount%Amount%Amount%
Residential$4,464,651
25.5 $4,232,771
24.9 $4,042,960
25.8 $3,498,675
25.2 $3,353,967
26.5
Consumer:          
Home equity2,336,846
13.3 2,395,483
14.1 2,439,415
15.6 2,459,458
17.7 2,460,159
19.3
Other consumer237,695
1.4 274,336
1.6 248,830
1.6 75,307
0.5 60,681
0.5
Total consumer2,574,541
14.7 2,669,819
15.7 2,688,245
17.2 2,534,765
18.2 2,520,840
19.8
Commercial:          Commercial:
Commercial non-mortgage4,551,580
26.0 4,151,740
24.4 3,575,042
22.8 3,098,892
22.3 2,734,025
21.5Commercial non-mortgage$5,313,989  26.5$5,269,557  28.5$4,551,580  26.0$4,151,740  24.4$3,575,042  22.8
Asset-based837,490
4.8 808,836
4.8 755,709
4.8 662,615
4.8 560,666
4.4Asset-based1,049,978  5.2971,876  5.3837,490  4.8808,836  4.7755,709  4.8
Total commercial5,389,070
30.8 4,960,576
29.1 4,330,751
27.6 3,761,507
27.1 3,294,691
25.9Total commercial6,363,967  31.76,241,433  33.85,389,070  30.84,960,576  29.14,330,751  27.6
Commercial real estate:          Commercial real estate:
Commercial real estate4,249,549
24.3 4,141,025
24.3 3,696,596
23.6 3,326,906
23.9 2,856,110
22.5Commercial real estate5,736,262  28.64,715,949  25.54,249,549  24.24,141,025  24.33,696,596  23.6
Commercial construction279,531
1.6 375,041
2.2 300,246
1.9 235,449
1.7 205,397
1.6Commercial construction223,707  1.1218,816  1.2279,531  1.6375,041  2.2300,246  1.9
Total commercial real estate4,529,080
25.9 4,516,066
26.5 3,996,842
25.5 3,562,355
25.6 3,061,507
24.1Total commercial real estate5,959,969  29.74,934,765  26.74,529,080  25.84,516,066  26.53,996,842  25.5
Equipment financing545,877
3.1 630,040
3.7 594,984
3.8 532,117
3.8 455,434
3.6Equipment financing533,048  2.7504,351  2.7545,877  3.1630,040  3.7594,984  3.8
ResidentialResidential4,944,480  24.74,389,866  23.84,464,651  25.54,232,771  24.94,042,960  25.8
Consumer:Consumer:
Home equityHome equity1,998,631  10.02,153,911  11.72,336,846  13.32,395,483  14.12,439,415  15.6
Other consumerOther consumer219,266  1.1227,257  1.2237,695  1.4274,336  1.6248,830  1.6
Total consumerTotal consumer2,217,897  11.12,381,168  12.92,574,541  14.72,669,819  15.72,688,245  17.2
Net unamortized premiums15,316
0.1 9,402
0.1 7,477
— 2,580
— 5,466
—Net unamortized premiums16,693  0.114,809  0.115,316  0.19,402  0.17,477  —
Net deferred fees5,323
— 7,914
— 10,476
0.1 8,026
0.1 7,871
0.1Net deferred fees932  —(903) —5,323  —7,914  —10,476  0.1
Total loans and leases$17,523,858
100.0 $17,026,588
100.0 $15,671,735
100.0 $13,900,025
100.0 $12,699,776
100.0Total loans and leases$20,036,986  100.0$18,465,489  100.0$17,523,858  100.0$17,026,588  100.0$15,671,735  100.0
Total residentialcommercial loans were $4.5$6.4 billion at December 31, 2017,2019, a net increase of $231.9$122.5 million from December 31, 2016,2018. The growth in commercial loans is primarily the result ofrelated to new originations of $749.6$2.0 billion in commercial non-mortgage loans for the year ended December 31, 2019, partially offset by loan payments.
Asset-based loans increased $78.1 million from December 31, 2018, reflective of $469.1 million in originations and line usage during the year ended December 31, 2017,2019, partially offset by loan payments.
Total consumercommercial real estate loans were $2.6$6.0 billion at December 31, 2017,2019, a net increase of $1.0 billion from December 31, 2018 as a result of originations of $1.8 billion during the year ended December 31, 2019, partially offset by loan payments.
Equipment financing loans and leases were $533.0 million at December 31, 2019, a net increase of $28.7 million from December 31, 2018, primarily the result of increased originations during the year ended December 31, 2019.
Total residential loans were $4.9 billion at December 31, 2019, a net increase of $554.6 million from December 31, 2018, primarily due to originations of $1.0 billion, partially offset by loan repayments during the year ended December 31, 2019.
Total consumer loans were $2.2 billion at December 31, 2019, a net decrease of $95.3$163.3 million from December 31, 2016,2018, primarily the result of net paydowns in the equity line and loan products partially offset by originations of $633.3$575.4 million during the year ended December 31, 2017.
Total commercial loans were $5.4 billion at December 31, 2017, a net increase of $428.5 million from December 31, 2016. The growth in commercial loans is primarily related to new originations of $1.9 billion in commercial non-mortgage loans for the year ended December 31, 2017, partially offset by loan payments. Asset-based loans increased $28.7 million from December 31, 2016, reflective of $413.8 million in originations and line usage during the year ended December 31, 2017, partially offset by loan payments.

2019.
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Total commercial real estate loans were $4.5 billion at December 31, 2017, a net increase of $13.0 million from December 31, 2016 as a result of originations of $1.0 billion during the year ended December 31, 2017, partially offset by loan payments.
Equipment financing loans and leases were $545.9 million at December 31, 2017, a net decrease of $84.2 million from December 31, 2016, primarily the result of $130.4 million in originations during the year ended December 31, 2017, partially offset by loan payments.
The following table provides information for the contractual maturity and interest-rate sensitivity information forprofile of loans and leases:
At December 31, 2019
Contractual Maturity
(In thousands)One Year Or LessOne To Five YearsMore Than Five YearsTotal
Commercial:
Commercial non-mortgage$707,746  $3,598,518  $990,347  $5,296,611  
Asset-based232,588  794,691  19,607  1,046,886  
Total commercial940,334  4,393,209  1,009,954  6,343,497  
Commercial real estate:
Commercial real estate573,473  2,080,806  3,068,401  5,722,680  
Commercial construction28,898  168,292  29,470  226,660  
Total commercial real estate602,371  2,249,098  3,097,871  5,949,340  
Equipment financing25,410  401,712  110,219  537,341  
Residential1,402  28,535  4,942,748  4,972,685  
Consumer:
Home equity11,707  69,884  1,932,953  2,014,544  
Other consumer17,047  189,112  13,420  219,579  
Total consumer28,754  258,996  1,946,373  2,234,123  
Total loans and leases$1,598,271  $7,331,550  $11,107,165  $20,036,986  
Interest-Rate Profile
(In thousands)One Year Or LessOne To Five YearsMore Than Five YearsTotal
Fixed rate$212,721  $1,025,217  $4,541,640  $5,779,578  
Variable rate1,385,550  6,306,333  6,565,525  14,257,408  
Total loans and leases$1,598,271  $7,331,550  $11,107,165  $20,036,986  
Credit Policies and Procedures
Webster Bank has credit policies and procedures in place designed to support lending activity within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. To assist management with its review, reports related to loan production, loan quality, concentrations of credit, loan delinquencies, non-performing loans, and potential problem loans are generated by loan reporting systems.
Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate and service its debt. Assessment of management is a critical element of the underwriting process and credit decision. Once it is determined that the borrower’s management possesses sound ethics and solid business acumen, current and projected cash flows are examined to determine the ability of the borrower to repay obligations as agreed. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected, and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed and may incorporate personal guarantees of the principals.
Commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans, in addition to those specific to real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Repayment of these loans is largely dependent on the successful operation of the property securing the loan, the market in which the property is located, and the tenants of the property securing the loan. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type and geographic location, which reduces the Company's exposure to adverse economic events that may affect a particular market. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. Management periodically utilizes third-party experts to provide insight and guidance about economic conditions and trends affecting its commercial real estate loan portfolio.
Consumer loans are subject to policies and procedures developed to manage the risk characteristics of the portfolio. Policies and procedures, coupled with relatively small individual loan amounts and predominately collateralized structures, spread across many different borrowers, minimize risk. Trend and outlook reports are reviewed by management on a regular basis, with policies and procedures modified, or developed, as needed. Underwriting factors for mortgage and home equity loans include the borrower’s Fair Isaac Corporation (FICO) score, the loan amount relative to property value, and the borrower’s debt to income level and are also influenced by regulatory requirements. Additionally, Webster Bank originates both qualified mortgage and non-qualified mortgage loans as defined by applicable CFPB rules.
35

 At December 31, 2017
 Contractual Maturity
(In thousands)One Year Or LessMore Than One To Five YearsMore Than Five YearsTotal
Residential$2,041
$31,138
$4,457,699
$4,490,878
Consumer:    
Home equity2,294
107,199
2,242,775
2,352,268
Other consumer19,437
205,021
13,499
237,957
Total consumer21,731
312,220
2,256,274
2,590,225
Commercial:    
Commercial non-mortgage669,745
3,120,899
743,271
4,533,915
Asset-based84,470
743,553
6,756
834,779
Total commercial754,215
3,864,452
750,027
5,368,694
Commercial real estate:    
Commercial real estate396,497
1,495,734
2,352,043
4,244,274
Commercial construction161,621
92,075
25,858
279,554
Total commercial real estate558,118
1,587,809
2,377,901
4,523,828
Equipment financing24,957
427,127
98,149
550,233
Total loans and leases$1,361,062
$6,222,746
$9,940,050
$17,523,858
     
 Interest-Rate Sensitivity
(In thousands)One Year Or LessMore Than One To Five YearsMore Than Five YearsTotal
Fixed rate$303,905
$986,768
$4,118,811
$5,409,484
Variable rate1,057,157
5,235,978
5,821,239
12,114,374
Total loans and leases$1,361,062
$6,222,746
$9,940,050
$17,523,858
Table of Contents
Asset Quality
Management maintains asset quality within established risk tolerance levels through its underwriting standards, servicing, and management of loan and lease performance. Loans and leases, particularly where a heightened risk of loss has been identified, are regularly monitored to mitigate further deterioration which could potentially impact key measures of asset quality in future periods. Past due loans and leases, non-performing assets, and credit loss levels are considered to be key measures of asset quality.
The following table provides key asset quality ratios:
 At or for the years ended December 31,
 2017
2016 2015 2014 2013
Non-performing loans and leases as a percentage of loans and leases0.72% 0.79% 0.89% 0.93% 1.28%
Non-performing assets as a percentage of loans and leases plus OREO0.76
 0.81
 0.92
 0.98
 1.34
Non-performing assets as a percentage of total assets0.50
 0.53
 0.59
 0.61
 0.82
ALLL as a percentage of non-performing loans and leases158.00
 144.98
 125.05
 122.62
 94.10
ALLL as a percentage of loans and leases1.14
 1.14
 1.12
 1.15
 1.20
Net charge-offs as a percentage of average loans and leases0.20
 0.23
 0.23
 0.23
 0.47
Ratio of ALLL to net charge-offs5.68x
 5.25x
 5.21x
 5.21x
 2.63x

45


At or for the years ended December 31,
20192018201720162015
Non-performing loans and leases as a percentage of loans and leases0.75 %0.84 %0.72 %0.79 %0.89 %
Non-performing assets as a percentage of loans and leases plus OREO0.79  0.87  0.76  0.81  0.92  
Non-performing assets as a percentage of total assets0.52  0.59  0.50  0.53  0.59  
ALLL as a percentage of non-performing loans and leases138.56  137.22  158.00  144.98  125.05  
ALLL as a percentage of loans and leases1.04  1.15  1.14  1.14  1.12  
Net charge-offs as a percentage of average loans and leases0.21  0.16  0.20  0.23  0.23  
Ratio of ALLL to net charge-offs5.09x7.16x5.68x5.25x5.21x
Potential Problem Loans and Leases
Potential problem loans and leases are defined by management as certain loans and leases that, for;for:
•commercial, commercial real estate, and equipment financing are performing loans and leases classified as Substandard and have a well-defined weakness that could jeopardize the full repayment of the debt,debt; and
•residential and consumer are performing loans 60-89 days past due and accruing.
Potential problem loans and leases exclude loans and leases past due 90 days or more and accruing, non-accrual loans and leases, and troubled debt restructuring (TDR)s.restructurings (TDRs).
Management monitors potential problem loans and leases due to a higher degree of risk associated with them. The current expectation of probable losses is included in the ALLL,ALLL; however, management cannot predict whether these potential problem loans and leases ultimately will become non-performing or result in a loss. The Company had potential problem loans and leases of $271.5$216.7 million at December 31, 20172019 compared to $263.3$226.9 million at December 31, 2016.2018.
Past Due Loans and Leases
The following table provides information regarding loans and leases past due 30 days or more and accruing income:
At December 31,
20192018201720162015
(Dollars in thousands)
Amount (1)
% (2)
Amount (1)
% (2)
Amount (1)
% (2)
Amount (1)
% (2)
Amount (1)
% (2)
Commercial:
Commercial non-mortgage$2,697  0.05  $1,700  0.03  $5,809  0.13  $1,949  0.05  $4,052  0.11  
Commercial real estate:
Commercial real estate1,700  0.03  1,514  0.03  551  0.01  8,173  0.20  2,250  0.06  
Equipment financing5,785  1.09  915  0.18  2,358  0.43  1,596  0.25  602  0.10  
Residential13,598  0.28  12,789  0.29  13,771  0.31  11,202  0.26  15,032  0.37  
Consumer:
Home equity13,761  0.69  14,595  0.68  18,397  0.79  14,578  0.61  13,261  0.54  
Other consumer5,074  2.31  2,729  1.20  3,997  1.68  3,715  1.35  2,000  0.80  
Loans and leases past due 30-89 days42,615  0.21  34,242  0.19  44,883  0.26  41,213  0.24  37,197  0.24  
Commercial non-mortgage—  —  104  —  644  0.01  749  0.02  22  —  
Commercial real estate—  —  —  —  243  0.01  —  —  —  —  
Residential—  —  —  —  —  —  —  —  2,029  0.05  
Loans and leases past due 90 days and accruing—  —  104  —  887  0.01  749  —  2,051  0.01  
Total loans and leases over 30 days past due and accruing income42,615  0.21  34,346  0.19  45,770  0.26  41,962  0.25  39,248  0.25  
Deferred costs and unamortized premiums92  86  77  86  86  
Total$42,707  $34,432  $45,847  $42,048  $39,334  
 At December 31,
 2017 2016 2015 2014 2013
(Dollars in thousands)
Amount (1)
% (2)
 
Amount (1)
% (2)
 
Amount (1)
% (2)
 
Amount (1)
% (2)
 
Amount (1)
% (2)
Residential$13,771
0.31 $11,202
0.26 $15,032
0.37 $17,216
0.49 $18,285
0.55
Consumer:              
Home equity18,397
0.79 14,578
0.61 13,261
0.54 16,415
0.67 20,096
0.82
Other consumer3,997
1.68 3,715
1.35 2,000
0.80 1,110
1.47 636
1.05
Commercial:              
Commercial non-mortgage5,809
0.13 1,949
0.05 4,052
0.11 2,099
0.07 4,100
0.15
Commercial real estate:              
Commercial real estate551
0.01 8,173
0.20 2,250
0.06 2,714
0.08 4,897
0.17
Equipment financing2,358
0.43 1,596
0.25 602
0.10 701
0.13 362
0.08
Loans and leases past due 30-89 days44,883
0.26 41,213
0.24 37,197
0.24 40,255
0.29 48,376
0.38
Residential—
— —
— 2,029
0.05 2,039
0.06 781
0.02
Commercial non-mortgage644
0.01 749
0.02 22
— 48
— 4,269
0.16
Commercial real estate243
0.01 —
— —
— —
— 232
0.01
Loans and leases past due 90 days and accruing887
0.01 749
— 2,051
0.01 2,087
0.02 5,282
0.04
Total loans and leases over 30 days past due and accruing income45,770
0.26 41,962
0.25 39,248
0.25 42,342
0.30 53,658
0.42
Deferred costs and unamortized premiums77
  86
  86
  96
  189
 
Total$45,847
  $42,048
  $39,334
  $42,438
  $53,847
 
(1)Past due loan and lease balances exclude non-accrual loans and leases.
(1)Past due loan and lease balances exclude non-accrual loans and leases.
(2)Represents the principal balance of past due loans and leases as a percentage of the outstanding principal balance within the comparable loan and lease category. The percentage excludes the impact of deferred costs and unamortized premiums.

(2)Represents the principal balance of past due loans and leases as a percentage of the outstanding principal balance within the comparable loan and lease category. The percentage excludes the impact of deferred costs and unamortized premiums, net.
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Non-performing Assets
The following table provides information regarding lending-related non-performing assets:
At December 31,
 20192018201720162015
(Dollars in thousands)
Amount (1)
% (2)
Amount (1)
% (2)
Amount (1)
% (2)
Amount (1)
% (2)
Amount (1)
% (2)
Commercial:
Commercial non-mortgage$59,360  1.12  $55,951  1.06  $39,402  0.87  $38,550  0.93  $27,086  0.76  
Asset-based loans139  0.01  224  0.02  589  0.07  —  —  —  —  
Total commercial59,499  0.93  56,175  0.90  39,991  0.74  38,550  0.78  27,086  0.63  
Commercial real estate:
Commercial real estate9,940  0.17  8,243  0.17  4,484  0.11  9,859  0.24  16,750  0.45  
Commercial construction1,614  0.72  —  —  —  —  662  0.18  3,461  1.15  
Total commercial real estate11,554  0.19  8,243  0.17  4,484  0.10  10,521  0.23  20,211  0.51  
Equipment financing5,433  1.02  6,314  1.25  393  0.07  225  0.04  706  0.12  
Residential43,100  0.87  49,069  1.12  44,407  0.99  47,201  1.12  54,101  1.34  
Consumer:
Home equity30,130  1.51  33,456  1.55  35,601  1.52  35,875  1.50  37,279  1.53  
Other consumer1,190  0.54  1,493  0.66  1,706  0.72  1,663  0.61  558  0.22  
Total consumer31,320  1.41  34,949  1.47  37,307  1.45  37,538  1.41  37,837  1.41  
Total non-performing loans and leases (3)
150,906  0.75  154,750  0.84  126,582  0.72  134,035  0.79  139,941  0.89  
Deferred costs and unamortized premiums153  17  (69) (219) 128  
Total$151,059  $154,767  $126,513  $133,816  $140,069  
Total non-performing loans and leases$150,906  $154,750  $126,582  $134,035  $139,941  
Foreclosed and repossessed assets:
Residential and consumer6,203  6,460  5,759  3,911  5,029  
Commercial271  407  305  —  —  
Total foreclosed and repossessed assets6,474  6,867  6,064  3,911  5,029  
Total non-performing assets$157,380  $161,617  $132,646  $137,946  $144,970  
 At December 31,
 2017 2016 2015 2014 2013
(Dollars in thousands)
Amount (1)
% (2)
 
Amount (1)
% (2)
 
Amount (1)
% (2)
 
Amount (1)
% (2)
 
Amount (1)
% (2)
Residential$44,407
0.99 $47,201
1.12 $54,101
1.34 $64,022
1.83 $80,589
2.40
Consumer:              
Home equity35,601
1.52 35,875
1.50 37,279
1.53 39,950
1.62 51,679
2.10
Other consumer1,706
0.72 1,663
0.61 558
0.22 280
0.37 139
0.23
Total consumer37,307
1.45 37,538
1.41 37,837
1.41 40,230
1.59 51,818
2.06
Commercial:              
Commercial non-mortgage39,402
0.87 38,550
0.93 27,086
0.76 6,436
0.21 10,933
0.40
Asset-based loans589
0.07 —
— —
— —
— —
—
Total commercial39,991
0.74 38,550
0.78 27,086
0.63 6,436
0.17 10,933
0.33
Commercial real estate:              
Commercial real estate4,484
0.11 9,859
0.24 16,750
0.45 15,016
0.45 13,428
0.47
Commercial construction—
— 662
0.18 3,461
1.15 3,659
1.55 4,235
2.06
Total commercial real estate4,484
0.10 10,521
0.23 20,211
0.51 18,675
0.52 17,663
0.58
Equipment financing393
0.07 225
0.04 706
0.12 518
0.10 1,141
0.25
Total non-performing loans and leases (3)
126,582
0.72 134,035
0.79 139,941
0.89 129,881
0.94 162,144
1.28
Deferred costs and unamortized premiums(69)  (219)  128
  267
  303
 
Total$126,513
  $133,816
  $140,069
  $130,148
  $162,447
 
               
Total non-performing loans and leases$126,582
  $134,035
  $139,941
  $129,881
  $162,144
 
Foreclosed and repossessed assets:              
Residential and consumer5,759
  3,911
  5,029
  3,517
  4,930
 
Commercial305
  —
  —
  2,999
  3,752
 
Total foreclosed and repossessed assets6,064
  3,911
  5,029
  6,516
  8,682
 
Total non-performing assets$132,646
  $137,946
  $144,970
  $136,397
  $170,826
 
(1)Balances by class exclude the impact of net deferred costs and unamortized premiums.
(1)Balances by class exclude the impact of net deferred costs and unamortized premiums.
(2)Represents the principal balance of non-performing loans and leases as a percentage of the outstanding principal balance within the comparable loan and lease category. The percentage excludes the impact of deferred costs and unamortized premiums.
(3)Includes non-accrual restructured loans and leases of $74.3 million, $75.7 million, $100.9 million, $76.9 million and $103.0 million as of December 31, 2017, 2016, 2015, 2014 and 2013, respectively.
(2)Represents the principal balance of non-performing loans and leases as a percentage of the outstanding principal balance within the comparable loan and lease category. The percentage excludes the impact of deferred costs and unamortized premiums.
(3)Includes non-accrual restructured loans and leases of $101.0 million, $91.9 million, $74.3 million, $75.7 million and $100.9 million as of December 31, 2019, 2018, 2017, 2016 and 2015, respectively.
The following table provides detail of non-performing loan and lease activity:
 Years ended December 31,
(In thousands)20172016
Beginning balance$134,035
$139,941
Additions139,095
109,002
Paydowns/draws(100,417)(64,057)
Charge-offs(37,903)(39,738)
Other reductions(8,228)(11,113)
Ending balance$126,582
$134,035

47


Years ended December 31,
(In thousands)2019  2018  
Beginning balance$154,750  $126,582  
Additions123,400  124,991  
Paydowns, net of draws(52,161) (54,468) 
Charge-offs(48,156) (35,298) 
Other reductions(26,927) (7,057) 
Ending balance$150,906  $154,750  
Impaired Loans and Leases
Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impairment is evaluated on a pooled basis for smaller-balance loans of a similar nature. Consumer and residential loans for which the borrower has been discharged in Chapter 7 bankruptcy are considered collateral dependent impaired loans at the date of discharge. Commercial, commercial real estate, and equipment financing loans and leases over a specific dollar amount, risk rated substandard or worse and non-accruing allare evaluated individually for impairment. All TDRs and allor loans that have had a partial charge-off are evaluated individually for impairment.impairment, as well. Impairment may be evaluated at the present value of estimated future cash flows using the original interest rate of the loan or at the fair value of collateral, less estimated selling costs. To the extent that an impaired loan or lease balance is collateral dependent, the Company determines the fair value of the collateral.
For residential and consumer collateral dependent loans, a third-party appraisal is obtained upon loan default. Fair value of the collateral for residential and consumer collateral dependent loans is reevaluated every six months, by either a new appraisal or other internal valuation methods. Fair value is also reassessed, with any excess amount charged off, for consumer loans that reach 180 days past due per Federal Financial Institutions Examination Council guidelines.
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Table of Contents
For commercial, commercial real estate, and equipment financing collateral dependent loans and leases, Webster's impairment process requires the Company to determine the fair value of the collateral by obtaining a third-party appraisal or asset valuation, an interim valuation analysis, blue book reference, or other internal methods. Fair value of the collateral for commercial loans is reevaluated quarterly. Whenever the Company has a third-party real estate appraisal performed by independent licensed appraisers, a licensed in-house appraisal officer or qualified individual reviews these appraisals for compliance with the Financial Institutions Reform Recovery and Enforcement Act and the Uniform Standards of Professional Appraisal Practice.
A fair value shortfall is recorded as an impairment reserve against the ALLL. Subsequent to an appraisal or other fair value estimate, should reliable information come to management's attention that the value has declined further, additional impairment may be recorded to reflect the particular situation, thereby increasing the ALLL. Any impaired loan for which no specific valuation allowance was necessary at December 31, 20172019 and December 31, 20162018 is the result of either sufficient cash flow or sufficient collateral coverage of the book balance.
At December 31, 2017,2019, there were 1,6061,423 impaired loans and leases with a recorded investment balance of $246.8$256.4 million, which included loans and leases of $105.4$125.8 million with an impairment allowance of $16.6$14.2 million, compared to 1,6351,501 impaired loans and leases with a recorded investment balance of $249.4$259.3 million, which included loans and leases of $152.6$93.1 million, with an impairment allowance of $18.6$15.4 million at December 31, 2016.
The overall reduction in the number of impaired loans is due primarily to small dollar consumer loans being resolved. Overall commercial impaired balances did not change, due to four credits entering impaired status offset by the resolution of four credits.2018. The reduction of $2.0$1.1 million in impaired reserve balanceimpairment allowance reflects management's current assessment on the resolution of these credits based on collateral considerations, guarantees, or expected future cash flows of the impaired loans.
Troubled Debt Restructurings
A modified loan is considered a TDR when two conditions are met: (i) the borrower is experiencing financial difficulties; and (ii) the modification constitutes a concession. Modified terms are dependent upon the financial position and needs of the individual borrower. The Company considers all aspects of the restructuring in determining whether a concession has been granted, including the debtor's ability to access market rate funds. In general, a concession exists when the modified terms of the loan are more attractive to the borrower than standard market terms. The most common types of modifications include covenant modifications, forbearance, and/or other concessions. If the buyer does not perform in accordance with the modified terms, the loan is reevaluated to determine the most appropriate course of action, which may include foreclosure. Loans for which the borrower has been discharged under Chapter 7 bankruptcy are considered collateral dependent TDRTDRs and thus, impaired at the date of discharge and charged down to the fair value of collateral less cost to sell.
The Company’s policy is to place each consumer loan TDR, except those that were performing prior to TDR status, on non-accrual status for a minimum period of 6six months. Commercial TDRTDRs are evaluated on a case-by-case basis for determination of whether or not to place them on non-accrual status. Loans qualify for return to accrual status once they have demonstrated performance with the restructured terms of the loan agreement for a minimum of 6six months. Initially, all TDRTDRs are reported as impaired. Generally, TDRTDRs are classified as impaired loans and reported as TDR for the remaining life of the loan. Impaired and TDR classification may be removed if the borrower demonstrates compliance with the modified terms for a minimum of 6six months and through one fiscal year-end, and the restructuring agreement specifies a market rate of interest equal to that which would be provided to a borrower with similar credit at the time of restructuring. In the limited circumstance that a loan is removed from TDR classification, it is the Company’s policy to continue to base its measure of loan impairment on the contractual terms specified by the loan agreement.

48


The following tables provide information for TDR:TDRs:
Years ended December 31,
(In thousands)20192018
Beginning balance$230,414  $221,404  
Additions105,981  75,565  
Paydowns, net of draws(74,888) (48,643) 
Charge-offs(21,776) (14,283) 
Transfers to OREO(2,293) (3,629) 
Ending balance$237,438  $230,414  
At December 31,
(In thousands)
20192018
Accrual status$136,449  $138,479  
Non-accrual status100,989  91,935  
Total recorded investment of TDRs$237,438  $230,414  
Specific reserves for TDR included in the balance of ALLL$12,956  $11,930  
Additional funds committed to borrowers in TDR status4,856  3,893  

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Table of Contents
 Years ended December 31,
(In thousands)2017 2016
Beginning balance$223,528
 $272,690
Additions36,253
 41,662
Paydowns/draws(31,641) (66,596)
Charge-offs(3,178) (18,588)
Transfers to OREO(3,558) (5,640)
Ending balance$221,404
 $223,528
    
 At December 31,
(In thousands)
2017 2016
Accrual status$147,113
 $147,809
Non-accrual status74,291
 75,719
Total recorded investment of TDR (1)
$221,404
 $223,528
    
Specific reserves for TDR included in the balance of ALLL$12,384
 $14,583
Additional funds committed to borrowers in TDR status2,736
 459
At December 31,
20192018201720162015
(In thousands)Amount
% (2)
Amount
% (2)
Amount
% (2)
Amount
% (2)
Amount
% (2)
Commercial (1)
$112,152  0.87  $87,739  0.75  $61,673  0.59  $58,464  0.58  $89,817  1.01  
Residential90,096  1.81  103,531  2.34  114,295  2.55  119,391  2.81  134,448  3.31  
Consumer35,190  1.58  39,144  1.63  45,436  1.75  45,673  1.70  48,425  1.79  
Total recorded investment of TDRs$237,438  1.18  $230,414  1.25  $221,404  1.26  $223,528  1.31  $272,690  1.74  

 At December 31,
 2017 2016 2015 2014 2013
(In thousands)Amount
% (3)
 Amount
% (3)
 Amount
% (3)
 Amount
% (3)
 Amount
% (3)
Residential$114,295
2.55 $119,391
2.81 $134,448
3.31 $141,982
4.05 $142,413
4.24
Consumer45,436
1.75 45,673
1.70 48,425
1.79 50,249
1.97 52,092
2.05
Commercial (1)
61,673
0.59 58,464
0.58 89,817
1.01 126,563
1.61 146,428
2.15
Total recorded investment of TDR (2)
$221,404
1.26 $223,528
1.31 $272,690
1.74 $318,794
2.29 $340,933
2.68
(1)Consists of commercial, commercial real estate and equipment financing loans and leases.

(2)Represents the balance of TDR as a percentage of the outstanding balance within the comparable loan and lease category. The percentage includes the impact of deferred costs and unamortized premiums.
(1)Consists of commercial, commercial real estate and equipment financing loans and leases.
(2)Excludes accrued interest receivable of $0.1 million, $0.7 million, $1.1 million, $1.4 million and $1.0 million at December 31, 2017, 2016, 2015, 2014 and 2013, respectively.
(3)Represents the balance of TDR as a percentage of the outstanding balance within the comparable loan and lease category. The percentage includes the impact of deferred costs and unamortized premiums.
Allowance for Loan and Lease Losses Methodology
The Company's policy for ALLL policymethodology is considered a critical accounting policy. Executive management reviews and advises on the adequacy of the ALLL reserve which is maintained on a quarterly basis at a level deemedmanagement deems sufficient by management to cover probable losses inherent within the loan and lease portfolios.
The quarterly process for estimating probable losses is based on predictive models tothat measure the current risk profile of the loan portfolio and combines the measurement with other quantitative and qualitative factors, that together with thean impairment reserve to determinedetermines the overall reserve requirement. Management's judgmentManagement applies significant judgments and assumptions that influence the loss estimatesestimate and ALLL balances.balance. Quantitative and qualitative factors thatconsiderations by management considers include factors such as the nature and volume of portfolio growth, national and regional economic conditions and trends, other internal performance metrics, and assumptions as to how each of these factors is expected to impact near term loss trends. While actual future conditions and losses realized losses may vary significantly from present judgments and assumptions, management believes the ALLL is adequate as of December 31, 2017.2019.
The Company’s methodology for assessing an appropriate level offor the ALLL includes three key elements:
•Impaired loans and leases are analyzed either analyzed on an individual or pooled basis and assessed for a specific reservesreserve which is measured based on the present value of expected future cash flows discounted at the effective interest rate of the loan or lease, except that as a practical expedient impairment may be measured based on a loan or lease's observable market price, or the fair value of the collateral, if the loan or lease is collateral dependent. A loan or lease is collateral dependent if the repayment of the loan or lease is expected to be provided solely by the underlying collateral. The CompanyManagement considers the pertinent facts and circumstances for each impaired loan or lease when selecting thean appropriate method to measure impairment then reviews and evaluates on a quarterly basis, each selection to ensure its continued appropriateness.

49


Loans and leases that are not considered impaired and have similar risk characteristics are segmented into homogeneous pools and modeled using quantitative methods. Themethods to determine a loss estimate. Loss estimates incorporate a loss emergence period (LEP) model which represents the period of time between a loss event first occurring and the confirming event of its charge-off. A LEP is determined for each loan type based on the Company's loss estimate for its commercialhistorical performance experience and is reassessed at least annually. Commercial portfolios utilizesutilize an expected loss methodology that is based on probability of default (PD) and loss given default (LGD) models. PD and LGD models generally are derived using the Company's portfolio specific data over a defined look back period and are refreshed annually. The PD and LGD models are based on borrower and facility risk ratings assigned to each loan and are updated throughout the year asshould the borrower's financial condition changes. PD and LGD models are derived using the Company's portfolio specific historic data and are refreshed annually.of a borrower change. Residential and consumer portfolio loss estimates are based onportfolios use roll rate models that utilizeto estimate probable inherent losses. The models calculate the Company's historicroll rate at which loans migrate from one delinquency category to the next worse delinquency category and eventually to loss. The roll rate models use the recent delinquency and default data. For each segmentation the loss estimates incorporateexperience based upon a loss emergencespecified look back period (LEP) model which represents an amount of time between when a loss event first occurs to when it is charged-off. A LEP is determined for each loan typeand are segmented based on product type and common risk characteristics. The models also incorporate an estimated pay down factor by product type. The roll rate calculations are performed quarterly and are done consistently from period to period. The portfolio performance and assumptions utilized are regularly reviewed, while the Company's historical experience androll rate model is reassessed at least annually.evaluated on an annual basis.
The Company•Management also considers qualitative factors, consistent with interagencyinter-agency regulatory guidance, that are not explicitly factored in the quantitative models but that can have an incremental or regressive impact on losses incurred in the current loan and lease portfolio.
Webster Bank has credit policies and procedures in place designed to support lending activity within an acceptable level
39

Table of risk. Management reviews and approves these policies and procedures on a regular basis. To assist management with its review, reports related to loan production, loan quality, concentrations of credit, loan delinquencies, non-performing loans, and potential problem loans are generated by loan reporting systems.Contents
Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate and service its debt. Underwriting standards are designed in support for the promotion of relationships rather than transactional banking. Once it is determined that the borrower’s management possesses sound ethics and solid business acumen, the Company examines current and projected cash flows to determine the ability of the borrower to repay obligations as agreed. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected, and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed and may incorporate personal guarantees of the principals.
Commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans, in addition to those specific to real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Repayment of these loans is largely dependent on the successful operation of the property securing the loan, the market in which the property is located, and the tenants of the property securing the loan. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type and geographic location, which reduces the Company's exposure to adverse economic events that may affect a particular market. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. The Company periodically utilizes third-party experts to provide insight and guidance about economic conditions and trends affecting its commercial real estate loan portfolio.
Commercial construction loans have unique risk characteristics and are provided to experienced developers/sponsors with strong track records of successful completion and sound financial condition and are underwritten utilizing feasibility studies, independent appraisals, sensitivity analysis of absorption and lease rates, and financial analysis of the developers and property owners. Commercial construction loans are generally based upon estimates of costs and value associated with the complete project. These estimates may be subject to change as the construction project proceeds. In addition, these loans often include partial or full completion guarantees. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property, or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored with on-site inspections by third-party professionals and the Company's internal staff.
Policies and procedures are in place to manage consumer loan risk and are developed and modified, as needed. Policies and procedures, coupled with relatively small loan amounts, and predominately collateralized structures spread across many individual borrowers, minimize risk. Trend and outlook reports are reviewed by management on a regular basis. Underwriting factors for mortgage and home equity loans include the borrower’s FICO score, the loan amount relative to property value, and the borrower’s debt to income level and are also influenced by regulatory requirements. Additionally, Webster Bank originates both qualified mortgage and non-qualified mortgage loans as defined by the CFPB rules that went into effect on January 10, 2014.
At December 31, 20172019, the ALLL was $200.0$209.1 million compared to $194.3$212.4 million at December 31, 2016.2018. The increasedecrease of $5.7$3.3 million in the reserve at December 31, 20172019 compared to December 31, 20162018 is primarily due to growth in both commercial banking and community banking portfolios partially offset by lower reserves on impaired loans in the residential and home-equity loan portfolios. The ALLL reserve remains adequate to cover inherent losses in the loan and lease portfolios. ALLL as a percentage of loans and leases, also known as the reserve coverage, remained at 1.14%decreased to 1.04% at December 31, 20172019 as compared to 1.14%1.15% at December 31, 2016,2018, and reflects an updated assessment of inherent losses and impaired reserves conducted throughout the year. ALLL as a percentage of non-performing loans and leases increased to 158.00%138.56% at December 31, 20172019 from 144.98%137.22% at December 31, 2016 due to lower non-accrual loans.

50


2018.
The following table provides an allocation of the ALLL by portfolio:
At December 31,
20192018201720162015
(Dollars in thousands)Amount
% (1)
Amount
% (1)
Amount
% (1)
Amount
% (1)
Amount
% (1)
Commercial$91,756  1.45  $98,793  1.59  $89,533  1.67  $71,905  1.46  $59,977  1.39  
Commercial real estate65,245  1.10  60,151  1.22  49,407  1.09  47,477  1.05  41,598  1.04  
Equipment financing4,668  0.87  5,129  1.01  5,806  1.06  6,479  1.02  5,487  0.91  
Residential20,919  0.42  19,599  0.44  19,058  0.42  23,226  0.55  25,876  0.64  
Consumer26,508  1.19  28,681  1.20  36,190  1.40  45,233  1.68  42,052  1.56  
Total ALLL$209,096  1.04  $212,353  1.15  $199,994  1.14  $194,320  1.14  $174,990  1.12  
(1)Percentage represents allocated ALLL to total loans and leases within the comparable category. However, the allocation of a portion of the allowance to one category of loans and leases does not preclude its availability to absorb losses in other categories.
The ALLL reserve allocated to the commercial portfolio segment:at December 31, 2019 decreased $7.0 million compared to December 31, 2018. The year-over-year decrease is primarily attributable to improved net rating migration.
The ALLL reserve allocated to the commercial real estate portfolio at December 31, 2019 increased $5.1 million compared to December 31, 2018. The year-over-year increase is primarily attributable to loan growth of $1.0 billion, partially offset by improved net rating migration.
 At December 31,
 2017 2016 2015 2014 2013
(Dollars in thousands)Amount
% (1)
 Amount
% (1)
 Amount
% (1)
 Amount
% (1)
 Amount
% (1)
Residential$19,058
0.42 $23,226
0.55 $25,876
0.64 $25,452
0.73 $23,027
0.69
Consumer36,190
1.40 45,233
1.68 42,052
1.56 43,518
1.71 41,951
1.65
Commercial89,533
1.67 71,905
1.46 59,977
1.39 47,068
1.26 46,655
1.42
Commercial real estate49,407
1.09 47,477
1.05 41,598
1.04 37,148
1.05 36,754
1.20
Equipment financing5,806
1.06 6,479
1.02 5,487
0.91 6,078
1.13 4,186
0.91
Total ALLL$199,994
1.14 $194,320
1.14 $174,990
1.12 $159,264
1.15 $152,573
1.20
The ALLL reserve allocated to the equipment financing portfolio at December 31, 2019 decreased $0.5 million compared to December 31, 2018. The year-over-year decrease is primarily attributable to improved net rating migration.
(1)Percentage represents allocated ALLL to total loans and leases within the comparable category. However, the allocation of a portion of the allowance to one category of loans and leases does not preclude its availability to absorb losses in other categories.
The ALLL reserve allocated to the residential loan portfolio at December 31, 2017 decreased $4.22019 increased $1.3 million compared to December 31, 2016.2018. The year-over-year decreaseincrease is primarily attributable to reduction in the impaired loan reserveshigher loss rates, partially offset by loan growtha decrease in TDR loans of $236.2$13.4 million.
The ALLL reserve allocated to the consumer portfolio at December 31, 20172019 decreased $9.0$2.2 million compared to December 31, 2016.2018. The year-over-year decrease is primarily attributable to improved credit quality and a decrease in loans of $94.3 million.
The ALLL reserve allocated to the commercial portfolio at December 31, 2017 increased $17.6 million compared to December 31, 2016. The year-over-year increase is primarily attributable to a $427.8 million increase in loans during the year and asset quality migration.
The ALLL reserve allocated to the commercial real estate portfolio at December 31, 2017 increased $1.9 million compared to December 31, 2016. The year-over-year increase is primarily attributable to loan growth of $13.0 million, partially offset by an improvement in asset quality.
The ALLL reserve allocated to the equipment financing portfolio at December 31, 2017 decreased $0.7 million compared to December 31, 2016. The year-over-year decrease is primarily attributable to a reduction in the loan balance of $85.4 million.

portfolio balance.
51
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The following table provides detail of activity in the ALLL:
At or for the years ended December 31,At or for the years ended December 31,
(In thousands)2017 2016 2015 2014 2013(In thousands)20192018201720162015
Beginning balance$194,320
 $174,990
 $159,264
 $152,573
 $177,129
Beginning balance$212,353  $199,994  $194,320  $174,990  $159,264  
Provision40,900
 56,350
 49,300
 37,250
 33,500
Provision37,800  42,000  40,900  56,350  49,300  
Charge-offs:         Charge-offs:
Residential(2,500) (4,636) (6,508) (6,214) (11,592)
Consumer(24,447) (20,669) (17,679) (20,712) (29,037)
Commercial(8,147) (18,360) (11,522) (13,668) (19,126)Commercial(29,033) (18,220) (8,147) (18,360) (11,522) 
Commercial real estate(9,275) (2,682) (7,578) (3,237) (15,425)Commercial real estate(3,501) (2,061) (9,275) (2,682) (7,578) 
Equipment financing(558) (565) (273) (595) (279)Equipment financing(793) (423) (558) (565) (273) 
ResidentialResidential(4,153) (3,455) (2,500) (4,636) (6,508) 
ConsumerConsumer(15,000) (19,228) (24,447) (20,669) (17,679) 
Total charge-offs(44,927) (46,912) (43,560) (44,426) (75,459)Total charge-offs(52,480) (43,387) (44,927) (46,912) (43,560) 
Recoveries:         Recoveries:
Residential1,024
 1,756
 875
 1,324
 1,402
Consumer6,037
 5,343
 4,366
 5,055
 6,185
Commercial2,358
 1,626
 2,738
 4,369
 5,123
Commercial1,626  4,439  2,358  1,626  2,738  
Commercial real estate165
 631
 647
 885
 1,648
Commercial real estate45  161  165  631  647  
Equipment financing117
 536
 1,360
 2,234
 3,045
Equipment financing78  75  117  536  1,360  
ResidentialResidential1,363  1,980  1,024  1,756  875  
ConsumerConsumer8,311  7,091  6,037  5,343  4,366  
Total recoveries9,701
 9,892
 9,986
 13,867
 17,403
Total recoveries11,423  13,746  9,701  9,892  9,986  
Net charge-offs         Net charge-offs
Residential(1,476) (2,880) (5,633) (4,890) (10,190)
Consumer(18,410) (15,326) (13,313) (15,657) (22,852)
Commercial(5,789) (16,734) (8,784) (9,299) (14,003)Commercial(27,407) (13,781) (5,789) (16,734) (8,784) 
Commercial real estate(9,110) (2,051) (6,931) (2,352) (13,777)Commercial real estate(3,456) (1,900) (9,110) (2,051) (6,931) 
Equipment financing(441) (29) 1,087
 1,639
 2,766
Equipment financing(715) (348) (441) (29) 1,087  
ResidentialResidential(2,790) (1,475) (1,476) (2,880) (5,633) 
ConsumerConsumer(6,689) (12,137) (18,410) (15,326) (13,313) 
Net charge-offs(35,226) (37,020) (33,574) (30,559) (58,056)Net charge-offs(41,057) (29,641) (35,226) (37,020) (33,574) 
Ending balance$199,994
 $194,320
 $174,990
 $159,264
 $152,573
Ending balance$209,096  $212,353  $199,994  $194,320  $174,990  
Net charge-offs for the years ended December 31, 20172019 and 20162018 were $35.2$41.1 million and $37.0$29.6 million, respectively. Net charge-offs decreasedincreased by $1.8$11.4 million during the year ended December 31, 20172019 compared to the year ended December 31, 2016.2018. The decreaseincrease in net charge-off activity is primarily due to improved asset quality in commercial loans, partially offset by a large charge-off in commercial real estate.loan charge-off.
The following table provides a summary of total net charge-offs (recoveries) to average loans and leases by category:
Years ended December 31,
Years ended December 31,20192018201720162015
2017 2016 2015 2014 2013
Residential0.03% 0.07% 0.15 % 0.14 % 0.31 %
Consumer0.70
 0.56
 0.51
 0.61
 0.89
Commercial0.11
 0.36
 0.22
 0.26
 0.46
Commercial0.43 %0.23 %0.11 %0.36 %0.22 %
Commercial real estate0.20
 0.05
 0.18
 0.07
 0.48
Commercial real estate0.07  0.04  0.20  0.05  0.18  
Equipment financing0.07
 —
 (0.20) (0.34) (0.67)Equipment financing0.14  0.07  0.07  —  (0.20) 
ResidentialResidential0.06  0.03  0.03  0.07  0.15  
ConsumerConsumer0.29  0.49  0.70  0.56  0.51  
Total net charge-offs to total average loans and leases0.20% 0.23% 0.23 % 0.23 % 0.47 %Total net charge-offs to total average loans and leases0.21 %0.16 %0.20 %0.23 %0.23 %
Reserve for Unfunded Credit Commitments
A reserve for unfunded credit commitments provides for probable losses inherent with funding the unused portion of legal commitments to lend. Reserve calculation factors are consistent with the ALLL methodology for funded loans using the PD, LGD, PD, probability of default, and a draw down factorLEP applied to the underlying borrower risk and facility grades.grades, and a draw down factor applied to utilization rates.
The following tables provide detail of activity in the reserve for unfunded credit commitments:
At or for the years ended December 31,
(In thousands)20192018201720162015
Beginning balance$2,506  $2,362  $2,287  $2,119  $5,151  
(Benefit) provision(139) 144  75  168  (3,032) 
Ending balance$2,367  $2,506  $2,362  $2,287  $2,119  
 At or for the years ended December 31,
(In thousands)2017 2016 2015 2014 2013
Beginning balance$2,287
 $2,119
 $5,151
 $4,384
 $5,662
Provision (benefit) (1)
75
 168
 (3,032) 767
 (1,278)
Ending balance$2,362
 $2,287
 $2,119
 $5,151
 $4,384

(1)See Note 20: Commitments and Contingencies in the Notes to Consolidated Financial Statements contained elsewhere in this report for information regarding a change in the draw down factor estimation for 2015.

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41


Sources of Funds and Liquidity
Sources of Funds. The primary source of Webster Bank’s cash flows for use in lending and meeting its general operational needs is deposits. Operating activities, such as loan and mortgage-backed securities repayments, and other investment securities sale proceeds and maturities also provide cash flows. While scheduled loan and investment security repayments are a relatively stable source of funds, loan and investment security prepayments and deposit inflows are influenced by prevailing interest rates and local economic conditions and are inherently uncertain. Additional sources of funds are provided by FHLB advances or other borrowings.
Federal Home Loan Bank and Federal Reserve Bank Stock. Webster Bank is a member of the FHLB System, which consists of eleven district Federal Home Loan Banks, each subject to the supervision and regulation of the Federal Housing Finance Agency. An activity-based FHLB capital stock investment in the FHLB of Boston is required in order for Webster Bank to access advances and other extensions of credit for sources of funds and liquidity purposes. The FHLB capital stock investment is restricted in that there is no market for it, and it can only be redeemed by the FHLB. Webster Bank held FHLB Boston capital stock of $100.9$89.3 million at December 31, 2017 and $143.92019 compared to $98.6 million at December 31, 20162018 for its membership and for outstanding advances and other extensions of credit. Webster Bank received $4.8$4.0 million in dividends from the FHLB Boston during 2017.2019.
Additionally, Webster Bank is required to hold FRB of Boston stock equal to 6% of its capital and surplus of which 50% is paid. The remaining 50% is subject to call when deemed necessary by the Federal Reserve System. AThe FRB capital stock investment is restricted in that there is no market for it, and it can only be redeemed by the FRB. At both December 31, 2017 and December 31, 2016, Webster Bank held $59.8 million and $50.7 million of FRB of Boston capital stock. The semi-annual dividend payment from the FRB is calculated as the lesser of three percent or yield of the 10-year Treasury note auctionedstock at the last auction held prior to the payment of the dividend.December 31, 2019 and December 31, 2018, respectively. Webster Bank received $1.2$1.0 million in dividends from the FRB of Boston during 2017.2019.
Deposits. Webster Bank offers a wide variety of deposit products for checking and savings (including: ATM and debit card use;use, direct deposit;deposit, ACH payments;payments, combined statements;statements, mobile banking services;services, internet-based banking;banking, bank by mail;mail, as well as overdraft protection via line of credit or transfer from another deposit account) designed to meet the transactional, savings, and investment needs for both consumer and business customers throughout 167 banking centers within its primary market area. Webster Bank manages the flow of funds in its deposit accounts and provides a variety of accounts and rates consistent with FDIC regulations. Webster Bank’s Retail Pricing Committee and its Commercial and Institutional Liability Pricing Committee meet regularly to determine pricing and marketing initiatives.
Total deposits were $21.0$23.3 billion, $19.3$21.9 billion, and $18.0$21.0 billion at December 31, 2019, 2018, and 2017, 2016, and 2015, respectively, with timerespectively. The trending increase is primarily due to health savings accounts growth. Time deposits that meet or exceed the FDIC limit, presently $250 thousand, representingrepresent approximately 2.7%2.8%, 2.5%, and 2.0%2.7%, respectively, of total deposits.deposits at December 31, 2019, 2018, and 2017, respectively. For additional information related to period-end balances and rates, refer to Note 10: Deposits in the Notes to Consolidated Financial Statements contained elsewhere in this report.
Daily average balances of deposits by type and weighted-average rates paid thereon for the periods as indicated:
Years ended December 31,Years ended December 31,
2017 2016 2015201920182017
(Dollars in thousands)Average BalanceAverage Rate Average BalanceAverage Rate Average BalanceAverage Rate(Dollars in thousands)Average BalanceAverage RateAverage BalanceAverage RateAverage BalanceAverage Rate
Non-interest-bearing:        Non-interest-bearing:
Demand$4,079,493
  $3,853,700
  $3,564,751
 Demand$4,300,407  $4,185,183  $4,079,493  
Interest-bearing:        Interest-bearing:
Checking2,601,962
0.07% 2,422,862
0.07% 2,245,015
0.06%Checking2,604,931  0.14 %2,585,593  0.08 %2,601,962  0.07 %
Health savings accounts4,839,988
0.20
 4,150,733
0.23
 3,561,900
0.24
Health savings accounts6,240,201  0.20  5,540,000  0.20  4,839,988  0.20  
Money market2,488,422
0.61
 2,279,301
0.36
 2,076,770
0.23
Money market2,365,367  1.27  2,351,188  0.95  2,488,422  0.61  
Savings4,418,032
0.23
 4,219,681
0.19
 3,962,364
0.18
Savings4,173,788  0.50  4,178,387  0.29  4,418,032  0.23  
Time deposits2,137,574
1.19
 2,027,029
1.11
 2,138,778
1.15
Time deposits3,267,913  1.92  2,818,271  1.52  2,137,574  1.19  
Total interest-bearing16,485,978
0.38
 15,099,606
0.33
 13,984,827
0.33
Total interest-bearing18,652,200  0.69  17,473,439  0.52  16,485,978  0.38  
Total average deposits$20,565,471
0.30% $18,953,306
0.26% $17,549,578
0.26%Total average deposits$22,952,607  0.56 %$21,658,622  0.42 %$20,565,471  0.30 %
Total average deposits increased $1.6$1.3 billion, or 8.5%6.0%, in 20172019 compared to 20162018 and increased $1.4$1.1 billion, or 8.0%5.3%, in 20162018 compared to 2015.2017. The increase wasincreases were driven by continued growth in health savings account deposits and time deposits. Additionally, there has also been steady growth in all core deposit categories.
For additional information, see Note 9: Deposits in the Notes to Consolidated Financial Statements contained elsewhere in this report.

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The following table presents time deposits with a denomination of $100 thousand$100,000 or more at December 31, 20172019 by maturity periods:
(In thousands)
Due within 3 months$750,372 
Due after 3 months and within 6 months307,748 
Due after 6 months and within 12 months354,561 
Due after 12 months221,994 
Time deposits with a denomination of $100 thousand or more$1,634,675 
42

(In thousands) 
Due within 3 months$291,993
Due after 3 months and within 6 months217,318
Due after 6 months and within 12 months252,984
Due after 12 months646,843
Time deposits with a denomination of $100 thousand or more$1,409,138
Table of Contents
Borrowings. UtilizedBorrowings primarily consist of FHLB advances which are utilized as a source of funding for liquidity and interest rate risk management purposes, borrowings primarily consist ofpurposes. At December 31, 2019 and December 31, 2018, FHLB advances totaled $1.9 billion and securities$1.8 billion, respectively. Webster Bank had additional borrowing capacity from the FHLB of approximately $2.9 billion and $2.6 billion at December 31, 2019 and December 31, 2018, respectively. Webster Bank also had additional borrowing capacity from the FRB of $0.9 billion and $0.6 billion at December 31, 2019 and December 31, 2018, respectively.
Securities sold under agreements to repurchase, whereby securities are delivered to counterparties under an agreement to repurchase the securities at a fixed price in the future. At December 31, 2017 and December 31, 2016, FHLB advances totaled $1.7 billion and $2.8 billion, respectively. Webster Bank had additional borrowing capacity from the FHLBfuture, to a lesser extent, are also utilized as a source of approximately $2.6 billion and $1.2funding. Unpledged investment securities of $5.5 billion at December 31, 2017 and December 31, 2016, respectively. Webster Bank also had additional borrowing capacity from the FRB of $0.5 billion and $0.6 billion at December 31, 2017 and December 31, 2016, respectively. In addition, unpledged securities of $4.4 billion at December 31, 20172019 could have been used for collateral on borrowings such as repurchase agreements or, alternatively, to increase borrowing capacity by $4.1approximately $5.0 billion with the FHLB by $4.2or approximately $5.2 billion with the FRB, or alternatively used to collateralize other borrowings such as repurchase agreements.
FRB. In addition, Webster Bank may utilize term and overnight Fed funds to meet short-term liquidityborrowing needs. The Company's long-term
Long-term debt consists of senior fixed-rate notes maturing in 2024 and 2029, and junior subordinated notes maturing in 2033. 2033, and totaled $0.5 billion and $0.2 billion at December 31, 2019 and December 31, 2018, respectively. The Company completed an underwritten public offering of $300 million senior fixed-rate notes on March 25, 2019, of which it invested the net proceeds of $296 million in Webster Bank as permanent capital to be used for working capital needs and other general purposes. The notes carry a 4.10% coupon rate and mature on March 29, 2029. During 2019, the Company initiated a fair value hedging relationship for the notes to swap the fixed interest rate to a variable rate. As a result, the effective interest rate was 3.40% at December 31, 2019.
Total borrowed funds were $2.5$3.5 billion, $4.0$2.6 billion and $4.0$2.5 billion, and represented 9.6%11.6%, 15.4%9.5% and 16.4%9.6% of total assets at December 31, 2019, 2018 and 2017, 2016respectively. The increase in 2019 compared to 2018 is due to loan and 2015, respectively.securities growth exceeding deposit growth. For additional information seerelated to period-end balances and rates, refer to Note 10:11: Borrowings in the Notes to Consolidated Financial Statements contained elsewhere in this report.
Daily average balances of borrowings by type and weighted-average rates paid thereon for the periods as indicated:
Years ended December 31,Years ended December 31,
2017 2016 2015201920182017
(Dollars in thousands)Average BalanceAverage Rate Average BalanceAverage Rate Average BalanceAverage Rate(Dollars in thousands)Average BalanceAverage RateAverage BalanceAverage RateAverage BalanceAverage Rate
FHLB advances$1,764,347
1.72% $2,413,309
1.20% $2,084,496
1.10%FHLB advances$1,201,839  2.61 %$1,339,492  2.50 %$1,764,347  1.72 %
Securities sold under agreements to repurchase695,922
1.79
 744,957
1.82
 842,207
1.93
Securities sold under agreements to repurchase296,498  0.88  467,873  1.57  695,922  1.79  
Federal funds180,738
1.06
 202,901
0.46
 302,756
0.21
Fed funds purchasedFed funds purchased712,206  2.16  317,125  1.94  180,738  1.06  
Long-term debt225,639
4.60
 225,607
4.42
 226,292
4.27
Long-term debt468,111  4.51  225,895  4.93  225,639  4.60  
Total average borrowings$2,866,646
1.92% $3,586,774
1.49% $3,455,751
1.43%Total average borrowings$2,678,654  2.62 %$2,350,385  2.47 %$2,866,646  1.92 %
Total average borrowings decreased $720.1increased $328.3 million, or 20.1%14.0%, in 20172019 compared to 20162018. The increase in 2019 compared to 2018 was due to the issuance of $300 million of senior fixed-rate notes in March 2019 and increased $131.0a related $17 million basis adjustment reflecting changes in the benchmark rate. Total average borrowings decreased $516.3 million, or 3.8%18.0%, in 20162018 compared to 2015.2017. The decrease in 20172018 compared to 20162017 was primarily due tothe result of deposits growing faster than loans which allowed for a decrease inlower usage of FHLB borrowings. The increase in 2016 compared to 2015 was due an increase in FHLB borrowings.advances. Average borrowings represented 10.9%9.2%, 14.2%8.7%, and 14.7%10.9% of average total assets for December 31, 2017, 2016,2019, 2018, and 2015,2017, respectively.
The following table sets forth additional information for short-term borrowings:
 At or for the years ended December 31,
 2017 2016 2015
(Dollars in thousands)AmountRate AmountRate AmountRate
Securities sold under agreements to repurchase:        
At end of year$288,269
0.17% $340,526
0.16% $334,400
0.15%
Average during year310,853
0.18
 321,460
0.16
 325,015
0.15
Highest month-end balance during year335,902
—
 365,361
—
 409,756
—
Federal funds:        
At end of year55,000
1.37
 209,000
0.60
 317,000
0.39
Average during year180,738
1.06
 202,893
0.46
 302,756
0.21
Highest month-end balance during year182,000
—
 294,000
—
 479,000
—

At or for the years ended December 31,
201920182017
(Dollars in thousands)AmountRateAmountRateAmountRate
Securities sold under agreements to repurchase:
At end of year$240,431  0.19 %$236,874  0.35 %$288,269  0.17 %
Average during year203,895  0.51  245,407  0.25  310,853  0.18  
Highest month-end balance during year240,431  —  264,491  —  335,902  —  
Fed funds purchased:
At end of year600,000  1.59  345,000  2.52  55,000  1.37  
Average during year712,206  2.16  317,125  1.96  180,738  1.06  
Highest month-end balance during year1,230,000  —  424,400  —  182,000  —  
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The following table summarizes contractual obligations to make future payments as of December 31, 2017:2019:
  
Payments Due by Period (1)
(In thousands)Less than
one year		1-3 years3-5 yearsAfter 5
years		Total
Senior notes$—  $—  $150,000  $317,486  $467,486  
Junior subordinated debt—  —  —  77,320  77,320  
FHLB advances1,690,000  200,130  50,229  8,117  1,948,476  
Securities sold under agreements to repurchase240,431  —  200,000  —  440,431  
Fed funds purchased600,000  —  —  —  600,000  
Deposits with stated maturity dates2,621,413  431,917  51,435  —  3,104,765  
Operating lease liabilities24,474  48,612  37,659  63,651  174,396  
Purchase obligations52,288  25,985  1,455  —  79,728  
Total contractual obligations$5,228,606  $706,644  $490,778  $466,574  $6,892,602  
  
Payments Due by Period (1)
 
(In thousands)
Less than
one year
1-3 years3-5 years
After 5
years
Total
Senior notes$—
$—
$—
$150,000
$150,000
Junior subordinated debt—
—
—
77,320
77,320
FHLB advances1,150,000
318,026
200,170
8,909
1,677,105
Securities sold under agreements to repurchase588,269
—
—
—
588,269
Fed funds purchased55,000
—
—
—
55,000
Deposits with stated maturity dates1,381,899
930,509
155,873
127
2,468,408
Operating leases29,181
54,289
45,437
77,541
206,448
Purchase obligations47,614
72,309
8,142
—
128,065
Total contractual obligations$3,251,963
$1,375,133
$409,622
$313,897
$5,350,615
(1)
Amounts for borrowings do not include interest. Amounts for leases are reflected as specified in the underlying contracts(1)Amounts for borrowings do not include interest.
The Company also has the following obligations which have been excluded from the above table:
•unfunded commitments remaining for particular investments in private equity funds of $9.1$42.3 million, for which neither the payment timing, nor eventual obligation is certain;
•credit related financial instruments with contractual amounts totaling $5.8$6.4 billion, of which many of these commitments are expected to expire unused or only partially used, and therefore, the total amount of these commitments does not necessarily reflect future cash payments; and
•liabilities for UTPsuncertain tax positions totaling $5.5 million, for which uncertainty exists regarding the amount that may ultimately be paid, as well as the timing of any such payment.
Liquidity. Webster meets its cash flow requirements at an efficient cost under various operating environments through proactive liquidity management at both the Holding Company and Webster Bank. Liquidity comes from a variety of cash flow sources such as operating activities, including principal and interest payments on loans and investments, orinvestments; financing activities, including unpledged securities which can be sold or utilized to secure funding or sold,funding; and new deposits. Webster is committed to maintaining a strong, increasing base of core deposits, consisting of demand, checking, savings, health savings, and money market accounts, to support growth in its loan and lease portfolio. Liquidity is reviewed and managed in order to maintain stable, cost effective funding to promote overall balance sheet strength. Net cash provided by operating activities was $303.9 million for the year ended December 31, 2019 as compared to $469.4 million for the year ended December 31, 2018. The most significant impact was due to derivatives activity.
Holding Company Liquidity. Webster’sThe primary source of liquidity at the Holding Company level is dividends from Webster Bank. Webster Bank paid $360 million in dividends to the Holding Company during the year ended December 31, 2019. To a lesser extent, investment income, net proceeds from investment sales, borrowings, and public offerings may provide additional liquidity. The main uses of liquidity are the payment of principal and interest to holders of senior notes and capital securities,junior subordinated debt, the payment of dividends to preferred and common shareholders, repurchases of its common stock, and purchases of available-for-saleinvestment securities. There are certain restrictions on the payment of dividends by Webster Bank to the Holding Company, which are described in the section captioned "Supervision and Regulation" in Item 1 contained elsewhere in this report. At December 31, 2017,2019, there was $368.8$302.8 million of retained earnings available for the payment of dividends by Webster Bank to the Holding Company. Webster Bank paid $120.0 million in dividends to the Holding Company during the year ended December 31, 2017.
The Company has a common stock repurchase program authorized by the Board of Directors, with $103.9$200.0 million of remaining repurchase authority at December 31, 2017.2019. In addition, Webster periodically acquires common shares outside of the repurchase program related to stock compensation plan activity. The Company records the purchase of shares of common stock at cost based on the settlement date for these transactions. During the year ended December 31, 2017,2019, a total of 434,227346,361 shares of common stock were repurchased at a cost of approximately $23.3$19.6 million, of which 222,000227,199 shares were purchased under the common stock repurchase program at a cost of approximately$11.6approximately $13.0 million, and 212,227119,162 shares were purchased relatedat market prices for a cost of approximately $6.6 million relating to stock compensation plan activity at a costactivity.
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Table of approximately $11.7 million.Contents
Webster Bank Liquidity. Webster Bank's primary source of funding is core deposits, consisting of demand, checking, savings, health savings, and money market accounts.deposits. The primary use of this funding is for loan portfolio growth. Including time deposits, Webster Bank had a loan to total deposit ratio of 83.5%85.9% and 88.2%84.5% at December 31, 20172019 and December 31, 2016,2018, respectively.
Webster Bank is required by OCC regulations adopted by the OCC to maintain liquidity sufficient to ensure safe and sound operations. Whether liquidity is adequate, as assessed by the OCC, depends on such factors as the overall asset/liability structure, market conditions, competition, and the nature of the institution’s deposit and loan customers. Webster Bank exceeded all regulatory liquidity requirements as of December 31, 2017.2019. Webster Bank's latest OCC CRA rating was Outstanding. The Company has a detailed liquidity contingency plan designed to respond to liquidity concerns in a prompt and comprehensive manner. ItThe plan is designed to provide early detection of potential problems, and details specific actions required to address liquidity stress scenarios.

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Applicable OCC regulations require Webster Bank, as a commercial bank, to satisfy certain minimum leverage and risk-based capital requirements. As an OCC regulated commercial institution, it is also subject to minimum tangible capital requirements. As of December 31, 2017,2019, Webster Bank was in compliance with all applicable capital requirements and exceeded the FDIC requirements for a well capitalizedwell-capitalized institution. SeeRefer to Note 13:14: Regulatory Matters in the Notes to Consolidated Financial Statements contained elsewhere in this report for a further discussion of regulatory requirements applicable to the Holding CompanyWebster Financial Corporation and Webster Bank.
The liquidity position of the Company is continuously monitored, and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Management is not aware of any events that are reasonably likely to have a material adverse effect on the Company’s liquidity, capital resources, or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity, which, if implemented, would have a material adverse effect on the Company.
Off-Balance Sheet Arrangements
Webster engages in a variety of financial transactions that, in accordance with GAAP, are not recorded in the financial statements or are recorded in amounts that differ from the notional amounts. Such transactions are utilized in the normal course of business, for general corporate purposes or for customer financing needs. Corporate purpose transactions are structured to manage credit, interest rate, and liquidity risks, or to optimize capital. Customer transactions are structured to manage their funding requirements or facilitate certain trade arrangements. These transactions give rise to, in varying degrees, elements of credit, interest rate, and liquidity risk. For the year ended December 31, 2017,2019, Webster did not engage in any off-balance sheet transactions that would have a material effect on its financial condition.
Asset/Liability Management and Market Risk
An effective asset/liability management process must balance the risks and rewards from both short and long-term interest rate risks in determining management strategy and action. To facilitate and manage this process, interest rate sensitivity is monitored on an ongoing basis by ALCO. The primary goal of ALCO is to manage interest rate risk to maximize net income and net economic value over time in changing interest rate environments subject to Board approved risk limits. The Board sets policy limits for earnings at risk for parallel ramps in interest rates over twelve months of plus and minus 100, and 200, and 300 basis points, as well as interest rate curve twist shocks of plus and minus 50 and 100 basis points. Economic value, or equity at risk, limits are set for parallel shocks in interest rates of plus and minus 100, 200, and 300 basis points. Based on
Due to the near historic lows in short-term interest ratesfederal funds rate target range set at 1.50-1.75% as of December 31, 2016,2019, the declining interest rate scenarios of minus 100200 basis points, or more, for both earnings at risk and equity at risk were temporarily suspended bynot run per ALCO policy. DuringInstead, scenarios were run with short and long term rates declining to zero, but not below. In 2019, ALCO implemented a balance sheet repositioning strategy with the year ended December 31, 2017, these declininggoal of reducing asset sensitivity to falling rates which included the purchase of interest rate scenarios were re-instituted. The results of these re-instituted minus rate scenarios are outside of the established interest rate risk limits due to the impact of deposit floors. Due to the low probability of occurrence and the current level of rates, the Board has approved a temporary exception to policy. ALCO also regularly reviews earnings at risk scenarios for non-parallel changes in rates, as well as longer-term scenarios of up to four years in the future.
Management measures interest rate risk using simulation analysis to calculate earnings and equity at risk. These risk measures are quantified using simulation software from one of the leading firms in the field of asset/liability modeling.software. Key assumptions relate to the behavior of interest rates and spreads, prepayment speeds, and the run-off of deposits. From such simulations, interest rate risk is quantified, and appropriate strategies are formulated and implemented.
Earnings at risk is defined as the change in earnings, (excludingexcluding provision for loan and lease losses and income tax expense)expense, due to changes in interest rates. Interest rates are assumed to change up or down in a parallel fashion, and earnings results are compared to a flat rate scenario as a base. The flat rate scenario holds the end of the period yield curve constant over the twelve month forecast horizon. Earnings simulation analysis incorporates assumptions about balance sheet changes such as asset and liability growth and mix changes and loan and deposit pricing, and changes to the mix of assets and liabilities.pricing. It is a measure of short-term interest rate risk.
Equity at risk is defined as the change in the net economic value of assets and liabilities due to changes in interest rates compared to a base net economic value. Equity at risk analyzes sensitivity in the present value of cash flows over the expected life of existing assets, liabilities, and off-balance sheet contracts. It is a measure of the long-term interest rate risk to future earnings streams embedded in the current balance sheet.
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Asset sensitivity is defined as earnings or net economic value increasing compared to a base scenario when interest rates rise and decreasing when interest rates fall. In other words, assets are more sensitive to changing interest rates than liabilities and, therefore, re-price faster. Likewise, liability sensitivity is defined as earnings or net economic value decreasing compared to a base scenario when interest rates rise and increasing when interest rates fall.

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Key assumptions underlying the present value of cash flows include the behavior of interest rates and spreads, asset prepayment speeds, and attrition rates on deposits. Cash flow projections from the model are compared to market expectations for similar collateral types and adjusted based on experience with Webster Bank's own portfolio. The model's valuation results are compared to observable market prices for similar instruments whenever possible. The behavior of deposit and loan customers is studied using historical time series analysis to model future customer behavior under varying interest rate environments.
The equity at risk simulation process uses multiple interest rate paths generated by an arbitrage-free trinomial lattice term structure model. The Base Case rate scenario, against which all others are compared, uses the month-end London Interbank Offered Rate (LIBOR)/LIBOR/Swap yield curve as a starting point to derive forward rates for future months. Using interest rate swap option volatilities as inputs, the model creates multiple rate paths for this scenario with forward rates as the mean. In shock scenarios, the starting yield curve is shocked up or down in a parallel fashion. Future rate paths are then constructed in a similar manner to the Base Case.
Cash flows for all instruments are generated using product specific prepayment models and account specific system data for properties such as maturity date, amortization type, coupon rate, repricing frequency, and repricing date. The asset/liability simulation software is enhanced with a mortgage prepayment model and a collateralized mortgage obligation database. Instruments with explicit options such as caps, floors, puts and calls, and implicit options such as prepayment and early withdrawal ability require such a rate and cash flow modeling approach to more accurately quantify value and risk.
On the asset side, risk is impacted the most by mortgage loans and mortgage-backed securities, which can typically prepay at any time without penalty and may have embedded caps and floors. In the loan portfolio, floors are a benefit to interest income in low rate environments. Floating-rate loans at floors pay a higher interest rate than a loan at a fully indexed rate without a floor, as with a floor there is a limit on how low the interest rate can fall. As market rates rise, however, the interest rate paid on these loans does not rise until the fully indexed rate rises through the contractual floor.
On the liability side, there is a large concentration of customers with indeterminate maturity deposits who have options to add or withdraw funds from their accounts at any time. Implicit floors on deposits, based on historical data, are modeled. Webster Bank also has the option to change the interest rate paid on these deposits at any time.
Webster's earnings at risk model incorporates net interest income (NII) and non-interest income and expense items, some of which vary with interest rates. These items include mortgage banking income, servicing rights, cash management fees, and derivative mark-to-market adjustments.
Four main tools are used for managing interest rate risk:
•the size, duration, and durationcredit risk of the investment portfolio;
•the size and duration of the wholesale funding portfolio;
off-balance sheet •interest rate contracts; and
•the pricing and structure of loans and deposits.
ALCO meets at least monthly to make decisions on the investment and funding portfolios based on the economic outlook, the Committee's interest rate expectations, the risk position, and other factors. ALCO delegates pricing and product design responsibilities to individuals and sub-committees but monitors and influences their actions on a regular basis.
Various interest rate contracts, including futures and options, interest rate swaps, and interest rate caps and floors can be used to manage interest rate risk. These interest rate contracts involve, to varying degrees, credit risk and interest rate risk. Credit risk is the possibility that a loss may occur if a counterparty to a transaction fails to perform according to the terms of the contract. The notional amount of interest rate contracts is the amount upon which interest and other payments are based. The notional amount is not exchanged, and therefore, should not be taken as a measure of credit risk. SeeRefer to Note 15:16: Derivative Financial Instruments in the Notes to Consolidated Financial Statements contained elsewhere in this report for additional information.
Certain derivative instruments, primarily forward sales of mortgage-backed securities, are utilized by Webster Bank in its efforts to manage risk of loss associated with its mortgage banking activities. Prior to closing and funds disbursement, an interest-rate lock commitment is generally extended to the borrower. During such time, Webster Bank is subject to risk that market rates of interest may change impacting pricing on loan sales. In an effort to mitigate this risk, forward delivery sales commitments are established, thereby setting the sales price.

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The following table summarizes the estimated impact that gradual parallel changes in income of 100 and 200 basis points, over a twelve month period starting December 31, 2017 and December 31, 2016, might have on Webster’s NII for the subsequent twelve month period compared to NII assuming no change in interest rates:
 -200bp-100bp+100bp+200bp
December 31, 2017N/A(5.9)%3.4%6.4%
December 31, 2016N/AN/A2.4%4.7%
The following table summarizes the estimated impact that gradual parallel changes in interest rates of 100 and 200 basis points, over a twelve month period starting December 31, 20172019 and December 31, 2016,2018, might have on Webster’s NII for the subsequent twelve month period compared to NII assuming no change in interest rates:
-200bp-100bp+100bp+200bp
December 31, 2019
n/a (1)
(4.7)% 2.7%  4.8%  
December 31, 2018(10.9)% (4.7)% 3.2%  5.9%  
(1)Impact not calculated for scenarios with negative interest rates. Impact from -175bp scenario was (8.1)%.
The following table summarizes the estimated impact that gradual parallel changes in interest rates of 100 and 200 basis points, over a twelve month period starting December 31, 2019 and December 31, 2018, might have on Webster’s pre-tax, pre-provision net revenue (PPNR) for the subsequent twelve month period, compared to PPNR assuming no change in interest rates:
-200bp-100bp+100bp+200bp
December 31, 2019
n/a (1)
(7.7)% 4.1%  7.1%  
December 31, 2018(18.3)% (7.9)% 5.0%  9.2%  
 -200bp-100bp+100bp+200bp
December 31, 2017N/A(10.4)%5.3%9.9%
December 31, 2016N/AN/A2.9%6.3%
(1)Impact not calculated for scenarios with negative interest rates. Impact from -175bp scenario was (13.2)%.
Interest rates are assumed to change up or down in a parallel fashion, and NII and PPNR results in each scenario are compared to a flat rate scenario as a base. The flat rate scenario holds the end of period yield curve constant over a twelve month forecast horizon. The flat rate scenario as of December 31, 20162019 and December 31, 2018 assumed a Fed Fundsfederal funds rate of 0.75%1.75% and 2.50%, while the flat rate scenario as of December 31, 2017 assumed a Fed Funds rate of 1.50%.respectively. Asset sensitivity for both NII and PPNR on December 31, 20172019 was higherlower as compared to December 31, 2016,2018, with the exception of the minus 100 basis points NII scenario. This lower asset sensitivity is primarily due to repositioning the balance sheet by adding fixed-rate securities, buying interest rate floors, fixed rate loan growth, inand shortening the weighted average life of the time deposits mainly health savings accounts, a reduction in borrowings, and loans moving further away from floors.portfolio to 8 months as of December 31, 2019 versus 14 months as of December 31, 2018.
Webster can also hold futures, options, and forward foreign currency contracts to minimize the price volatility of certain assets and liabilities. Changes in the market value of these positions are recognized in earnings.
The following table summarizes the estimated impact that immediate non-parallel changes in incomeinterest rates might have on Webster’s NII for the subsequent twelve month period starting December 31, 20172019 and December 31, 2016:2018:
 Short End of the Yield Curve Long End of the Yield Curve
 -100bp-50bp+50bp+100bp -100bp-50bp+50bp+100bp
December 31, 2017(8.5)%(4.3)%2.0%3.9% (3.9)%(1.7)%1.3%2.3%
December 31, 2016N/AN/A1.2%2.3% (3.8)%(1.6)%1.3%2.3%
Short End of the Yield CurveLong End of the Yield Curve
-100bp-50bp+50bp+100bp-100bp-50bp+50bp+100bp
December 31, 2019(5.1)% (2.5)% 1.0 %  2.1 %  (4.7)% (2.2)% 1.7 %  2.9 %  
December 31, 2018(7.1)% (3.3)% 1.7%  3.4%  (3.3)% (1.6)% 1.3%  2.3%  
The following table summarizes the estimated impact that immediate non-parallel changes in interest rates might have on Webster’s PPNR for the subsequent twelve month period starting December 31, 20172019 and December 31, 2016:2018:
 Short End of the Yield Curve Long End of the Yield Curve
 -100bp-50bp+50bp+100bp -100bp-50bp+50bp+100bp
December 31, 2017(14.8)%(7.5)%2.9%5.7% (4.8)%(2.2)%2.2%4.0%
December 31, 2016N/AN/A1.4%2.7% (5.6)%(2.1)%1.7%3.7%
Short End of the Yield CurveLong End of the Yield Curve
 -100bp-50bp+50bp+100bp-100bp-50bp+50bp+100bp
December 31, 2019(7.9)% (3.8)% 1.1%  2.4%  (8.1)% (3.9)% 3.0%  5.1%  
December 31, 2018(11.6)% (5.4)% 2.4%  4.8%  (5.6)% (2.9)% 2.4%  4.2%  
The non-parallel scenarios are modeled with the short end of the yield curve moving up or down 50 and 100 basis points while the long end of the yield curve remains unchanged, and vice versa. The short end of the yield curve is defined as terms of less than eighteen months, and the long end as terms of greater than eighteen months. These results above reflect the annualized impact of immediate rate changes. The actual impact can be uneven during the year especially in the short end scenarios where asset yields tied to Prime or LIBOR change immediately, while certain deposit rate changes take more time.
Sensitivity to increases in the short end of the yield curve for NII and PPNR increaseddecreased from December 31, 20162018 due primarily to higher forecasted health savings accountsbalance sheet repositioning and demand deposit balances.
Sensitivityan increase in balances of fixed-rate loans. NII and PPNR were more sensitive to increaseschanges in the long end of the yield curve was more positive thanas of December 31, 2016 in PPNR2019 when compared to December 31, 2018 due to higher market interest rates and the resulting decreasedincreased forecast prepayment speeds in the residential loan and investment portfolios. Sensitivity toresulting from decreases in the long end of the yield curve, was less negative than at December 31, 2016 in PPNR due to decreased forecasted prepayment speeds in thewhich shortens asset duration by increasing prepayments for MBS and residential loan and investment portfolios.

mortgages.
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The following table summarizes the estimated economic value of assets, liabilities, and off-balance sheet contracts at December 31, 20172019 and December 31, 20162018 and the projected change to economic values if interest rates instantaneously increase or decrease by 100 basis points:
Book
Value
Estimated
Economic
Value
Estimated Economic Value Change
Book
Value		Estimated
Economic
Value		Estimated Economic Value Change
(Dollars in thousands)-100 bp+100 bp(Dollars in thousands)-100 bp+100 bp
At December 31, 2017 
At December 31, 2019At December 31, 2019
Assets$26,487,645
$25,971,043
$505,148
$(631,744)Assets$30,389,344  $29,984,052  $598,578  $(720,572) 
Liabilities23,785,687
22,509,322
729,967
(624,789)Liabilities27,181,574  26,226,758  839,154  (708,815) 
Net$2,701,958
$3,461,721
$(224,819)$(6,955)Net$3,207,770  $3,757,294  $(240,576) $(11,757) 
Net change as % base net economic value (0.2)%Net change as % base net economic value(6.4)%(0.3)%
 
At December 31, 2016 
At December 31, 2018At December 31, 2018
Assets$26,072,529
$25,527,648
N/A$(633,934)Assets$27,610,315  $26,972,752  $568,122  $(677,864) 
Liabilities23,545,517
22,650,967
N/A(555,854)Liabilities24,723,800  23,119,466  719,658  (615,650) 
Net$2,527,012
$2,876,681
N/A$(78,080)Net$2,886,515  $3,853,286  $(151,536) $(62,214) 
Net change as % base net economic value (2.7)%Net change as % base net economic value(3.9)%(1.6)%
Changes in economic value can be best described using duration. Duration is a measure of the price sensitivity of financial instruments for small changes in interest rates. For fixed-rate instruments, it can also be thought of as the weighted-average expected time to receive future cash flows. For floating-rate instruments, it can be thought of as the weighted-average expected time until the next rate reset. The longer the duration, the greater the price sensitivity for given changes in interest rates. Floating-rate instruments may have durations as short as one day and, therefore, have very little price sensitivity due to changes in interest rates. Increases in interest rates typically reduce the value of fixed-rate assets as future discounted cash flows are worth less at higher discount rates. A liability's value decreases for the same reason in a rising rate environment. A reduction in value of a liability is a benefit to Webster.
Duration gap is the difference between the duration of assets and the duration of liabilities. A duration gap near zero implies that the balance sheet is matched and would exhibit no or minimal changes (positive or negative)change in estimated economic value for a small change in interest rates, however, larger rate movements typically result in a measurable level of price sensitivity.rates. Webster's duration gap was negative 0.90.8 years at December 31, 20172019 and negative 0.7 years at December 31, 2018 when measured using 50 basis point changes in rates. At December 31, 2016, the duration gap was aA negative 0.4 years. During 2017 changes in long term market rates impacted forecast prepayment speeds in the residential loan and investment portfolios resulting in an extension of asset duration. Rising market rate shortened the duration of liabilities but the shortening was partially offset due to the growth of health savings accounts and demand deposits. Combining the two effects resulted in the narrowing of the duration gap in 2017. An increase of 100 basis points would result in a slightly positive duration gap. A positive duration gap implies that liabilities are shorterlonger than assets and, therefore, they have lessmore price sensitivity than assets and will reset their interest rates fasterslower than assets for a small change inassets. Consequently, Webster's net estimated economic value would generally be expected to increase when interest rates leadingrise as the benefit of the decreased value of liabilities would more than offset the decreased value of assets. The opposite would generally be expected to aoccur when interest rates fall. Earnings would also generally be expected to increase when interest rates rise and decrease when interest rates fall over the longer term absent the effects of new business booked in net economic valuethe future. As of December 31, 2019, long-term rates have fallen by 77 basis points when rates rise.compared to December 31, 2018. This lower starting point shortens asset duration by increasing residential loans and MBS prepayment speeds.
These estimates assume that management does not take any action to mitigate any positive or negative effects from changing interest rates. The earnings and economic values estimates are subject to factors that could cause actual results to differ. Management believes that Webster's interest rate risk position at December 31, 20172019 represents a reasonable level of risk given the current interest rate outlook. Management, as always, is prepared to act in the event that interest rates do change rapidly.
Impact of Inflation and Changing Prices
The Consolidated Financial Statementsconsolidated financial statements and related data presented herein have been prepared in accordance with GAAP, which generally requires the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation.
Unlike most industrial companies, substantially all of the assets and liabilities of a banking institution are monetary in nature. As a result, interest rates have a more significant impact on Webster's performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the price of goods and services.
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Critical Accounting Policies and Accounting Estimates
The Company's significant accounting policies, as described in the Notes to Consolidated Financial Statements, are fundamental to understanding its results of operations and financial condition. As stated in Note 1 to the Consolidated Financial Statements contained in Item 8 of this report, the preparation of financial statements in accordance with GAAP requires management to make judgments and accounting estimates that affect the amounts reported in the Consolidated Financial Statements and the accompanying Notes. While the Company bases estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ materially from those estimates.
Accounting estimates are necessary in the application of certain accounting policies and procedures and can be susceptible to significant change. Critical accounting policies are defined as those that are most important to the portrayal of the Company's financial condition and results of operation, and that require management to make the most difficult, subjective, and complex judgments about matters that are inherently uncertain and which could potentially result in materially different amounts using different assumptions or under different conditions. The two critical accounting policies identified by management, which are discussed with the appropriate committees of the Board of Directors, are summarized below.
Allowance for Loan and Lease Losses
The ALLL is a reserve established through a provision for loan and lease losses charged to expense, which represents management’s best estimate of probable losses that are inherent within the Company’s portfolio of loans and leases as of the balance sheet date. Changes in the ALLL and, therefore, in the related provision for loan and lease losses can materially affect net income. The level of the ALLL reflects management’s judgment based on continuing evaluation of specific credit risks, loss experience, current portfolio quality, present economic, political, adequacy of underlying collateral, present value of expected future cash flows and regulatory conditions and inherent risks not captured in quantitative modeling and methodologies, as well as trends therein. The allowance balance may be allocated for specific portfolio segments; however, the entire allowance balance is available to absorb credit losses inherent in the total loan and lease portfolio.
While management utilizes its best judgment and information available, the ultimate adequacy of the ALLL is dependent upon a variety of factors beyond the Company’s control, including performance of the Company’s loan portfolio, the economy, interest rate sensitivity, and other external factors. Management evaluates the composition of the ALLL on a quarterly basis. Composition of the ALLL, including valuation methodology, is more fully described in Note 4: Loans and Leases in the Notes to Consolidated Financial Statements contained elsewhere in this report and in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, section captioned "Allowance for Loan and Lease Losses Methodology."
Realizability of Deferred Tax Assets
In accordance with Accounting Standards Codification (ASC) Topic 740, "Income Taxes," certain aspects of accounting for income taxes require significant management judgment, including assessing the realizability of DTAs. A DTA represents an item for which a benefit may be recognized for financial accounting purposes if it has been determined to be more likely than not realizable for tax purposes in a future period. A DTA valuation allowance represents the portion of a DTA determined unlikely to be realized in the future based on management's judgment. Such judgment is often subjective and involves estimates and assumptions about matters that are inherently uncertain, including with respect to the existence, and amount, of taxable income necessary to realize a DTA in future periods.
While management believes it has utilized a reasonable method for its determination of DTAs and the related valuation allowance, should factors and conditions differ materially from those used by management, the actual realization of DTAs could differ materially from the reported amounts. Management evaluates the realizability and the sufficiency of the reported amounts on a quarterly basis. Income taxes are more fully described in Note 9: Income Taxes in the Notes to Consolidated Financial Statements contained elsewhere in this report and in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, section captioned "Income Taxes."
Recently Issued Accounting Standards Updates
Refer to Note 1 in the Notes to Consolidated Financial Statements contained in Item 8 of this report for a summary of recently issued Accounting Standards Updates (ASUs) and the expected impact on the Company's financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The required information is set forth above, in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, seerefer to the section captioned "Asset/Liability Management and Market Risk," which is incorporated herein by reference.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements
Page No.
Page No.
Report of Independent Registered Public Accounting Firm
6151
Consolidated Balance Sheets
6253
Consolidated Statements of Income
6354
Consolidated Statements of Comprehensive Income
6455
Consolidated Statements of Shareholders' Equity
6556
Consolidated Statements of Cash Flows
6657
Notes to Consolidated Financial Statements
6859


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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
Webster Financial Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Webster Financial Corporation and subsidiaries (the "Company") as of December 31, 20172019 and 2016,2018, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2017,2019, and the related notes (collectively, the "consolidatedconsolidated financial statements")statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172019 and 2016,2018, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2017,2019, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)("PCAOB")(PCAOB), the Company's internal control over financial reporting as of December 31, 2017,2019, based on criteria established in Internal Control - Integrated Framework (2013) (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 1, 2018February 28, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involve our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Assessment of the allowance for loan and lease losses related to loans and leases collectively evaluated for impairment
As discussed in Notes 1 and 4 to the consolidated financial statements, the Company’s allowance for loan and lease losses for loans and leases collectively evaluated for impairment (non-impaired ALLL) was $194.8 million of the total allowance for loan and lease losses of $209.1 million as of December 31, 2019. The Company estimated the quantitative valuation allowance for non-impaired commercial loans and leases using a historical loss methodology that estimates the probability of default (PD) and loss given default (LGD), which are based on credit risk ratings. The Company estimated the quantitative valuation allowance for non-impaired consumer loans using roll rate models which estimate probable inherent losses. The models calculate the roll rate at which loans migrate from one delinquency category to the next worse delinquency category and eventually to loss. In addition, the Company’s non-impaired ALLL includes a qualitative element consisting of qualitative factors determined based on general economic conditions and other factors that may be internal or external to the Company.
We identified the assessment of the non-impaired ALLL as a critical audit matter because it involves significant measurement uncertainty requiring complex auditor judgment, and knowledge and experience in the industry. This assessment encompassed the evaluation of the non-impaired ALLL methodology, inclusive of the methodologies used to estimate (1) the PD and LGD and their key factors and assumptions, including the look back periods, the loss emergence periods, and risk ratings for commercial loans and leases, (2) the roll rates and their key factors and assumptions, including the look back periods, the loss emergence periods, and the pay down factors by product type for consumer loans, and (3) the qualitative factors.
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The primary procedures we performed to address the critical audit matter included the following. We tested certain internal controls over the (1) development and approval of the non-impaired ALLL methodology, (2) determination of the key factors and assumptions used to estimate the PD and LGD and the roll rates, (3) determination of the qualitative factors, and (4) analysis of the ALLL results. We tested management’s process to develop the non-impaired ALLL estimate by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions. We evaluated the qualitative factor framework and related adjustments by (1) evaluating the determination of each qualitative factor adjustment, and (2) evaluating trends in the non-impaired ALLL, inclusive of the qualitative factor adjustments, for consistency with changes in the loan portfolio and credit performance. In addition, we involved credit risk professionals with specialized industry knowledge and experience who assisted in evaluating:
▪the non-impaired ALLL methodology for compliance with U.S. generally accepted accounting principles,
▪the look back period assumptions by (1) evaluating that loss data in the look back period is representative of the credit characteristics of the current portfolio and (2) evaluating the sufficiency of loss data within the look back period,
▪the appropriateness of the methodology used to develop the loss emergence period assumption by considering the Company’s credit risk policies,
▪the appropriateness of the methodology used to develop the pay down factors by considering consumer loan balance changes over time by product type,
▪the framework used to develop the resulting qualitative factors and the effect of those factors on the non-impaired ALLL compared with relevant credit risk factors and consistency with credit trends, including the maximum qualitative factor adjustment and the metrics, and
▪the appropriateness of credit risk ratings for a selection of commercial loans and leases.
Assessment of the realizability of the deferred tax asset associated with the Company's state and local tax net operating loss carryforwards
As discussed in Note 9 to the consolidated financial statements, as of December 31, 2019, the Company had $69.8 million of net operating losses (NOLs) and credit carry forwards related to state and local taxes (SALT), which are recorded as a deferred tax asset (DTA). A valuation allowance of $38.2 million was recorded at December 31, 2019 related to SALT NOLs. The determination of the valuation allowance is subjective and involves estimates and assumptions about matters that are inherently uncertain, including the amount of taxable income necessary to realize a DTA in future periods.
We identified the assessment of the realizability of the DTAs associated with the Company’s SALT NOLs as a critical audit matter due to the complexity and related auditor judgment required to evaluate the future taxable income that would be necessary to realize the DTA. This assessment encompassed the evaluation of estimates and assumptions related to the projections of taxable income, allocation of income among its relevant legal entities, and estimates of SALT apportionment rates.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s SALT DTA valuation allowance assessment process, including controls over the determination of the estimates and assumptions. We evaluated the Company’s projections of taxable income by (1) comparing the historical taxable income projections to actual results to assess the Company’s ability to accurately forecast, (2) evaluating the forecasted growth rates for interest rate-sensitive assets and liabilities, by comparing the growth assumptions to historical experience, strategy, and industry outlooks, (3) testing projections of net interest income by comparing interest rates used to historical rates and third-party forecasted rates, and (4) comparing the long-term growth rate assumption to third-party forecasted rates and industry research. We evaluated the allocation of income among its relevant legal entities by comparing to historical allocations taking in to consideration forecasted growth. We evaluated the SALT apportionment rates by comparing to historical apportionment rates and by re-performing the calculation of the rates based on forecasted SALT taxable income. We involved federal and SALT professionals with specialized skills and knowledge, who assisted in assessing the Company’s application of the relevant tax laws and regulations and in evaluating the SALT apportionment rates.

/s/ KPMG LLP
We have served as the Company's auditor since 2013.

Hartford, Connecticut
March 1, 2018February 28, 2020



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WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,December 31,
(In thousands, except share data)2017 2016(In thousands, except share data)20192018
Assets:   Assets:
Cash and due from banks$231,158
 $190,663
Cash and due from banks$185,341  $260,422  
Interest-bearing deposits25,628
 29,461
Interest-bearing deposits72,554  69,077  
Securities available-for-sale, at fair value2,638,037
 2,991,091
Investment securities held-to-maturity (fair value of $4,456,350 and $4,125,125)4,487,392
 4,160,658
Investment securities available-for-sale, at fair valueInvestment securities available-for-sale, at fair value2,925,833  2,898,730  
Investment securities held-to-maturity (fair value of 5,380,653 and 4,209,121)Investment securities held-to-maturity (fair value of 5,380,653 and 4,209,121)5,293,918  4,325,420  
Federal Home Loan Bank and Federal Reserve Bank stock151,566
 194,646
Federal Home Loan Bank and Federal Reserve Bank stock149,046  149,286  
Loans held for sale (valued under fair value option $20,888 and $60,260)20,888
 67,577
Loans held for sale (valued under fair value option 35,750 and 7,908)Loans held for sale (valued under fair value option 35,750 and 7,908)36,053  11,869  
Loans and leases17,523,858
 17,026,588
Loans and leases20,036,986  18,465,489  
Allowance for loan and lease losses(199,994) (194,320)Allowance for loan and lease losses(209,096) (212,353) 
Loans and leases, net17,323,864
 16,832,268
Loans and leases, net19,827,890  18,253,136  
Deferred tax assets, net92,630
 84,391
Deferred tax assets, net61,975  96,516  
Premises and equipment, net130,001
 137,413
Premises and equipment, net270,413  124,850  
Goodwill538,373
 538,373
Goodwill538,373  538,373  
Other intangible assets, net29,611
 33,674
Other intangible assets, net21,917  25,764  
Cash surrender value of life insurance policies531,820
 517,852
Cash surrender value of life insurance policies550,651  543,616  
Accrued interest receivable and other assets286,677
 294,462
Accrued interest receivable and other assets455,380  313,256  
Total assets$26,487,645
 $26,072,529
Total assets$30,389,344  $27,610,315  
Liabilities and shareholders' equity:   Liabilities and shareholders' equity:
Deposits:   Deposits:
Non-interest-bearing$4,191,496
 $4,021,061
Non-interest-bearing$4,446,463  $4,162,446  
Interest-bearing16,802,233
 15,282,796
Interest-bearing18,878,283  17,696,399  
Total deposits20,993,729
 19,303,857
Total deposits23,324,746  21,858,845  
Securities sold under agreements to repurchase and other borrowings643,269
 949,526
Securities sold under agreements to repurchase and other borrowings1,040,431  581,874  
Federal Home Loan Bank advances1,677,105
 2,842,908
Federal Home Loan Bank advances1,948,476  1,826,808  
Long-term debt225,767
 225,514
Long-term debt540,364  226,021  
Operating lease liabilitiesOperating lease liabilities174,396  —  
Accrued expenses and other liabilities245,817
 223,712
Accrued expenses and other liabilities153,161  230,252  
Total liabilities23,785,687
 23,545,517
Total liabilities27,181,574  24,723,800  
Shareholders’ equity:   Shareholders’ equity:
Preferred stock, $.01 par value: Authorized - 3,000,000 shares;   
Series F issued and outstanding (6,000 shares at December 31, 2017)145,056
 —
Series E issued and outstanding (5,060 shares at December 31, 2016)—
 122,710
Common stock, $.01 par value: Authorized - 200,000,000 shares;   
Issued (93,680,291 and 93,651,601 shares)937
 937
Preferred stock, 0.01 par value: Authorized - 3,000,000 shares;Preferred stock, 0.01 par value: Authorized - 3,000,000 shares;
Series F issued and outstanding (6,000 shares)Series F issued and outstanding (6,000 shares)145,037  145,037  
Common stock, $0.01 par value: Authorized - 200,000,000 shares;Common stock, $0.01 par value: Authorized - 200,000,000 shares;
Issued (93,686,311 shares)Issued (93,686,311 shares)937  937  
Paid-in capital1,122,164
 1,125,937
Paid-in capital1,113,250  1,114,394  
Retained earnings1,595,762
 1,425,320
Retained earnings2,061,352  1,828,303  
Treasury stock, at cost (1,658,526 and 1,899,502 shares)(70,430) (70,899)
Treasury stock, at cost (1,659,749 and 1,508,456 shares)Treasury stock, at cost (1,659,749 and 1,508,456 shares)(76,734) (71,504) 
Accumulated other comprehensive loss, net of tax(91,531) (76,993)Accumulated other comprehensive loss, net of tax(36,072) (130,652) 
Total shareholders' equity2,701,958
 2,527,012
Total shareholders' equity3,207,770  2,886,515  
Total liabilities and shareholders' equity$26,487,645
 $26,072,529
Total liabilities and shareholders' equity$30,389,344  $27,610,315  
See accompanying Notes to Consolidated Financial Statements.

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WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31,Years ended December 31,
(In thousands, except per share data)2017 2016 2015(In thousands, except per share data)201920182017
Interest Income:     Interest Income:
Interest and fees on loans and leases$708,566
 $621,028
 $552,441
Interest and fees on loans and leases$924,693  $842,449  $708,566  
Taxable interest and dividends on securities181,131
 180,346
 190,061
Taxable interest and dividends on securities207,294  191,493  181,131  
Non-taxable interest on securities22,874
 19,090
 15,948
Non-taxable interest on securities21,869  20,597  22,874  
Loans held for sale1,034
 1,449
 1,590
Loans held for sale727  628  1,034  
Total interest income913,605
 821,913
 760,040
Total interest income1,154,583  1,055,167  913,605  
Interest Expense:     Interest Expense:
Deposits62,253
 49,858
 46,031
Deposits129,577  90,407  62,253  
Securities sold under agreements to repurchase and other borrowings14,365
 14,528
 16,861
Securities sold under agreements to repurchase and other borrowings17,953  13,491  14,365  
Federal Home Loan Bank advances30,320
 29,033
 22,858
Federal Home Loan Bank advances31,399  33,461  30,320  
Long-term debt10,380
 9,981
 9,665
Long-term debt20,527  11,127  10,380  
Total interest expense117,318
 103,400
 95,415
Total interest expense199,456  148,486  117,318  
Net interest income796,287
 718,513
 664,625
Net interest income955,127  906,681  796,287  
Provision for loan and lease losses40,900
 56,350
 49,300
Provision for loan and lease losses37,800  42,000  40,900  
Net interest income after provision for loan and lease losses755,387
 662,163
 615,325
Net interest income after provision for loan and lease losses917,327  864,681  755,387  
Non-interest Income:     Non-interest Income:
Deposit service fees151,137
 140,685
 135,057
Deposit service fees168,022  162,183  151,137  
Loan and lease related fees26,448
 26,581
 25,594
Loan and lease related fees31,327  32,025  26,448  
Wealth and investment services31,055
 28,962
 32,486
Wealth and investment services32,932  32,843  31,055  
Mortgage banking activities9,937
 14,635
 7,795
Mortgage banking activities6,115  4,424  9,937  
Increase in cash surrender value of life insurance policies14,627
 14,759
 13,020
Increase in cash surrender value of life insurance policies14,612  14,614  14,627  
Gain on sale of investment securities, net—
 414
 609
Gain on sale of investment securities, net29  —  —  
Impairment loss on securities recognized in earnings(126) (149) (110)Impairment loss on securities recognized in earnings—  —  (126) 
Other income26,400
 38,591
 23,326
Other income32,278  36,479  26,400  
Total non-interest income259,478
 264,478
 237,777
Total non-interest income285,315  282,568  259,478  
Non-interest Expense:     Non-interest Expense:
Compensation and benefits359,926
 332,127
 297,517
Compensation and benefits395,402  381,496  356,505  
Occupancy60,490
 61,110
 48,836
Occupancy57,181  59,463  60,490  
Technology and equipment89,464
 79,882
 80,813
Technology and equipment105,283  97,877  89,464  
Intangible assets amortization4,062
 5,652
 6,340
Intangible assets amortization3,847  3,847  4,062  
Marketing17,421
 19,703
 16,053
Marketing16,286  16,838  17,421  
Professional and outside services16,858
 14,801
 11,156
Professional and outside services21,380  20,300  16,858  
Deposit insurance25,649
 26,006
 24,042
Deposit insurance17,954  34,749  25,649  
Other expense87,205
 83,910
 70,584
Other expense98,617  91,046  90,626  
Total non-interest expense661,075
 623,191
 555,341
Total non-interest expense715,950  705,616  661,075  
Income before income tax expense353,790
 303,450
 297,761
Income before income tax expense486,692  441,633  353,790  
Income tax expense98,351
 96,323
 93,032
Income tax expense103,969  81,215  98,351  
Net income255,439
 207,127
 204,729
Net income382,723  360,418  255,439  
Preferred stock dividends and other(8,608) (8,704) (9,368)Preferred stock dividends and other(9,738) (8,715) (8,608) 
Earnings applicable to common shareholders$246,831
 $198,423
 $195,361
Earnings applicable to common shareholders$372,985  $351,703  $246,831  
     
Earnings per common share:     Earnings per common share:
Basic$2.68
 $2.17
 $2.15
Basic$4.07  $3.83  $2.68  
Diluted2.67
 2.16
 2.13
Diluted4.06  3.81  2.67  
See accompanying Notes to Consolidated Financial Statements.

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WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, Years ended December 31,
(In thousands)2017 2016 2015(In thousands)201920182017
Net income$255,439
 $207,127
 $204,729
Net income$382,723  $360,418  $255,439  
Other comprehensive (loss) income, net of tax:     
Total available-for-sale and transferred securities(7,590) (9,069) (22,828)
Total derivative instruments4,565
 5,912
 2,550
Total defined benefit pension and postretirement benefit plans4,135
 4,270
 (1,567)
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:
Investment securities available-for-saleInvestment securities available-for-sale88,625  (43,427) (7,590) 
Derivative instrumentsDerivative instruments129  5,703  4,565  
Defined benefit pension and postretirement benefit plansDefined benefit pension and postretirement benefit plans5,826  (1,397) 4,135  
Other comprehensive income (loss), net of tax1,110
 1,113
 (21,845)Other comprehensive income (loss), net of tax94,580  (39,121) 1,110  
Comprehensive income$256,549
 $208,240
 $182,884
Comprehensive income$477,303  $321,297  $256,549  
See accompanying Notes to Consolidated Financial Statements.


64
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WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except per share data)Preferred
Stock		Common
Stock		Paid-In
Capital		Retained
Earnings		Treasury
Stock, at cost		Accumulated
Other
Comprehensive
Loss, Net of Tax		Total Shareholders'
Equity
Balance at December 31, 2014$151,649
$936
$1,127,534
$1,202,251
$(103,294)$(56,261)$2,322,815
Net income—
—
—
204,729
—
—
204,729
Other comprehensive loss, net of tax—
—
—
—
—
(21,845)(21,845)
Dividends and dividend equivalents declared on common stock $0.89 per share—
—
119
(81,316)—
—
(81,197)
Dividends on Series A preferred stock $21.25 per share—
—
—
(615)—
—
(615)
Dividends on Series E preferred stock $1,600.00 per share—
—
—
(8,096)—
—
(8,096)
Common stock issued—
1
(1)—
—
—
—
Preferred stock conversion(28,939)—
(3,429)—
32,368
—
—
Stock-based compensation, net of tax impact—
—
2,906
(1,005)11,046
—
12,947
Exercise of stock options—
—
(2,781)—
5,841
—
3,060
Common shares acquired related to stock compensation plan activity—
—
—
—
(5,251)—
(5,251)
Common stock repurchase program—
—
—
—
(12,564)—
(12,564)
Common stock warrants repurchased—
—
(23)—
—
—
(23)
Balance at December 31, 2015122,710
937
1,124,325
1,315,948
(71,854)(78,106)2,413,960
Net income—
—
—
207,127
—
—
207,127
Other comprehensive income, net of tax—
—
—
—
—
1,113
1,113
Dividends and dividend equivalents declared on common stock $0.98 per share—
—
149
(90,062)—
—
(89,913)
Dividends on Series E preferred stock $1,600.00 per share—
—
—
(8,096)—
—
(8,096)
Stock-based compensation, net of tax impact—
—
2,976
403
10,713
—
14,092
Exercise of stock options—
—
(1,350)—
13,112
—
11,762
Common shares acquired related to stock compensation plan activity—
—
—
—
(11,664)—
(11,664)
Common stock repurchase program—
—
—
—
(11,206)—
(11,206)
Common stock warrants repurchased—
—
(163)—
—
—
(163)
Balance at December 31, 2016122,710
937
1,125,937
1,425,320
(70,899)(76,993)2,527,012
Adoption of ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from AOCI
—
—
—
15,648
—
(15,648)—
Net income—
—
—
255,439
—
—
255,439
Other comprehensive income, net of tax—
—
—
—
—
1,110
1,110
Dividends and dividend equivalents declared on common stock $1.03 per share—
—
168
(95,097)—
—
(94,929)
Dividends on Series E preferred stock $1,600.00 per share—
—
—
(8,096)—
—
(8,096)
Dividends accrued on Series F preferred stock—
—
—
(88)—
—
(88)
Stock-based compensation, net of tax impact—
—
—
2,636
11,548
—
14,184
Exercise of stock options—
—
(3,941)—
12,200
—
8,259
Common shares acquired related to stock compensation plan activity—
—
—
—
(11,694)—
(11,694)
Common stock repurchase program—
—
—
—
(11,585)—
(11,585)
Redemption of Series E preferred stock(122,710)—
—
—
—
—
(122,710)
Issuance of Series F preferred stock145,056
—
—
—
—
—
145,056
Balance at December 31, 2017$145,056
$937
$1,122,164
$1,595,762
$(70,430)$(91,531)$2,701,958
(In thousands, except per share data)Preferred
Stock		Common
Stock		Paid-In
Capital		Retained
Earnings		Treasury
Stock, at cost		Accumulated
Other
Comprehensive
Loss, Net of Tax		Total Shareholders'
Equity
Balance at December 31, 2016$122,710  $937  $1,125,937  $1,425,320  $(70,899) $(76,993) $2,527,012  
Adoption of ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220)-Reclassification of Certain Tax Effects from AOCI—  —  —  15,648  —  (15,648) —  
Net income—  —  —  255,439  —  —  255,439  
Other comprehensive income, net of tax—  —  —  —  —  1,110  1,110  
Common stock dividends/equivalents $1.03 per share—  —  168  (95,097) —  —  (94,929) 
Series E preferred stock dividends $1,600.00 per share—  —  —  (8,096) —  —  (8,096) 
Dividends accrued on Series F preferred stock—  —  —  (88) —  —  (88) 
Stock-based compensation—  —  —  2,636  11,548  —  14,184  
Exercise of stock options—  —  (3,941) —  12,200  —  8,259  
Common shares acquired from stock compensation plan activity—  —  —  —  (11,694) —  (11,694) 
Common stock repurchase program—  —  —  —  (11,585) —  (11,585) 
Redemption of Series E preferred stock(122,710) —  —  —  —  —  (122,710) 
Issuance of Series F preferred stock145,056  —  —  —  —  —  145,056  
Balance at December 31, 2017145,056  937  1,122,164  1,595,762  (70,430) (91,531) 2,701,958  
Adoption of ASU No. 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20)-Premium Amortization on Purchased Callable Debt Securities and ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10)-Recognition and Measurement of Financial Assets and Financial Liabilities—  —  —  (1,373) —  —  (1,373) 
Net income—  —  —  360,418  —  —  360,418  
Other comprehensive loss, net of tax—  —  —  —  —  (39,121) (39,121) 
Common stock dividends/equivalents $1.25 per share—  —  99  (115,442) —  —  (115,343) 
Series F preferred stock dividends $1,323.4375 per share—  —  —  (7,875) —  —  (7,875) 
Dividends accrued on Series F preferred stock—  —  —  22  —  —  22  
Stock-based compensation—  —  (1,541) 3,275  9,878  —  11,612  
Exercise of stock options—  —  (5,762) —  7,935  —  2,173  
Stock units conversion to shares—  —  (566) (6,484) 7,050  —  —  
Common shares acquired from stock compensation plan activity—  —  —  —  (13,779) —  (13,779) 
Common stock repurchase program—  —  —  —  (12,158) —  (12,158) 
Series F preferred stock issuance adjustment(19) —  —  —  —  —  (19) 
Balance at December 31, 2018145,037  937  1,114,394  1,828,303  (71,504) (130,652) 2,886,515  
Adoption of ASU No. 2016-02, Leases (Topic 842) and subsequent ASUs issued to amend this topic—  —  —  (513) —  —  (513) 
Net income—  —  —  382,723  —  —  382,723  
Other comprehensive income, net of tax—  —  —  —  —  94,580  94,580  
Common stock dividends/equivalents $1.53 per share—  —  —  (141,286) —  —  (141,286) 
Series F preferred stock dividends $1,312.50 per share—  —  —  (7,875) —  —  (7,875) 
Stock-based compensation—  —  885  —  11,741  —  12,626  
Exercise of stock options—  —  (2,029) —  2,648  —  619  
Common shares acquired from stock compensation plan activity—  —  —  —  (6,616) —  (6,616) 
Common stock repurchase program—  —  —  —  (13,003) —  (13,003) 
Balance at December 31, 2019$145,037  $937  $1,113,250  $2,061,352  $(76,734) $(36,072) $3,207,770  
See accompanying Notes to Consolidated Financial Statements.

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WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years ended December 31,
(In thousands)2017 2016 2015
Operating Activities:     
Net income$255,439
 $207,127
 $204,729
Adjustments to reconcile net income to net cash provided by operating activities:     
Provision for loan and lease losses40,900
 56,350
 49,300
Deferred tax (benefit) expense(9,074) 17,700
 (15,513)
Depreciation and amortization37,172
 36,449
 34,678
Amortization of earning assets and funding premium/discount, net45,444
 57,331
 54,555
Stock-based compensation12,276
 11,438
 10,935
Gain on sale, net of write-down, on foreclosed and repossessed assets(784) (976) (311)
(Gain on sale) write-down, net on premises and equipment(15) 397
 (244)
Impairment loss on securities recognized in earnings126
 149
 110
Gain on the sale of investment securities, net—
 (414) (609)
Increase in cash surrender value of life insurance policies(14,627) (14,759) (13,020)
Mortgage banking activities(9,937) (14,635) (7,795)
Proceeds from sale of loans held for sale333,027
 438,925
 452,590
Originations of loans held for sale(287,634) (452,886) (449,048)
Net decrease (increase) in derivative contract assets net of liabilities32,763
 27,929
 (6,489)
Gain on redemption of other assets—
 (7,331) —
Net (increase) decrease in accrued interest receivable and other assets(19,790) 54,269
 (44,554)
Net increase (decrease) in accrued expenses and other liabilities29,680
 (18,918) 33,478
Net cash provided by operating activities444,966
 398,145
 302,792
Investing Activities:     
Net decrease (increase) in interest-bearing deposits3,833
 126,446
 (23,212)
Purchases of available-for-sale securities(660,106) (980,870) (903,240)
Proceeds from maturities and principal payments of available-for-sale securities984,732
 672,965
 558,301
Proceeds from sales of available-for-sale securities—
 259,283
 123,270
Purchases of held-to-maturity securities(1,043,278) (1,066,156) (761,033)
Proceeds from maturities and principal payments of held-to-maturity securities687,439
 795,953
 681,124
Net proceeds (purchase) of Federal Home Loan Bank stock43,080
 (6,299) 4,943
Alternative investments return of capital (capital call), net873
 (381) 458
Net increase in loans(549,213) (1,440,141) (1,813,811)
Proceeds from loans not originated for sale14,679
 34,170
 33,644
Purchase of life insurance policies—
 —
 (50,000)
Proceeds from life insurance policies746
 —
 3,912
Proceeds from the sale of foreclosed properties and repossessed assets7,603
 9,205
 10,511
Proceeds from the sale of premises and equipment3,357
 1,550
 650
Additions to premises and equipment(28,546) (40,731) (36,115)
Proceeds from redemption of other assets

7,581
 —
 —
Acquisition of business, net cash acquired—
 —
 1,396,414
Net cash used for investing activities(527,220) (1,635,006) (774,184)
 
See accompanying Notes to Consolidated Financial Statements.


 Years ended December 31,
(In thousands)201920182017
Operating Activities:
Net income$382,723  $360,418  $255,439  
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses37,800  42,000  40,900  
Deferred tax expense (benefit)927  9,472  (9,074) 
Depreciation and amortization37,507  38,750  37,172  
Amortization of premiums/discounts, net49,731  50,984  45,444  
Stock-based compensation12,626  11,612  12,276  
Gain on sale, net of write-down, on foreclosed and repossessed assets(729) (709) (784) 
Loss (gain) on sale, net of write-down, on premises and equipment1,340  346  (15) 
Impairment loss on securities recognized in earnings—  —  126  
Gain on the sale of investment securities, net(29) —  —  
Increase in cash surrender value of life insurance policies(14,612) (14,614) (14,627) 
Gain from life insurance policies(4,933) (2,553) —  
Mortgage banking activities(6,115) (4,424) (9,937) 
Proceeds from sale of loans held for sale216,239  188,025  333,027  
Originations of loans held for sale(240,305) (171,883) (287,634) 
Net change in right-of-use lease assets2,479  —  —  
Net (increase) decrease in derivative contract assets net of liabilities(123,752) (4,615) 32,763  
Gain on sale of banking center deposits—  (4,596) —  
Net increase in accrued interest receivable and other assets(23,790) (739) (19,790) 
Net (decrease) increase in accrued expenses and other liabilities(23,257) (28,066) 29,680  
Net cash provided by operating activities303,850  469,408  444,966  
Investing Activities:
Purchases of available-for-sale investment securities(549,541) (873,108) (660,106) 
Proceeds from available-for-sale investment securities maturities/principle payments556,283  538,747  984,732  
Proceeds from sales of available-for-sale investment securities70,087  —  —  
Purchases of held-to-maturity investment securities(1,571,604) (393,693) (1,043,278) 
Proceeds from held-to-maturity investment securities maturities/principle payments573,703  524,862  687,439  
Net proceeds from Federal Home Loan Bank stock240  2,280  43,080  
Alternative investments (capital call) return of capital, net(6,065) (1,215) 873  
Net increase in loans(1,642,501) (990,014) (549,213) 
Proceeds from loans not originated for sale20,931  1,687  14,679  
Proceeds from life insurance policies12,866  4,271  746  
Proceeds from the sale of foreclosed properties and repossessed assets11,562  8,011  7,603  
Proceeds from the sale of premises and equipment—  567  3,357  
Additions to premises and equipment(25,717) (32,958) (28,546) 
Divestiture of banking center deposits, net cash paid—  (107,361) —  
Proceeds from redemption of other assets
—  —  7,581  
Net cash used for investing activities (1)
(2,549,756) (1,317,924) (531,053) 
See accompanying Notes to Consolidated Financial Statements.

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WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
 Years ended December 31,
(In thousands)201920182017
Financing Activities:
Net increase in deposits1,465,377  979,519  1,690,197  
Proceeds from Federal Home Loan Bank advances9,200,000  8,960,000  12,255,000  
Repayments of Federal Home Loan Bank advances(9,078,332) (8,810,297) (13,420,791) 
Net increase (decrease) in securities sold under agreements to repurchase and other borrowings458,557  (61,395) (306,257) 
Issuance of long-term debt300,000  —  —  
Debt issuance costs(3,642) —  —  
Redemption of Series E preferred stock—  —  (122,710) 
Issuance of Series F preferred stock—  —  145,056  
Dividends paid to common shareholders(140,783) (114,959) (94,630) 
Dividends paid to preferred shareholders(7,875) (7,875) (8,096) 
Exercise of stock options619  2,173  8,259  
Common stock repurchase program(13,003) (12,158) (11,585) 
Common shares acquired related to stock compensation plan activity(6,616) (13,779) (11,694) 
Net cash provided by financing activities2,174,302  921,229  122,749  
Net (decrease) increase in cash and cash equivalents (1)
(71,604) 72,713  36,662  
Cash and cash equivalents at beginning of period (1)
329,499  256,786  220,124  
Cash and cash equivalents at end of period (1)
$257,895  $329,499  $256,786  
Supplemental disclosure of cash flow information:
Interest paid$197,200  $144,726  $114,046  
Income taxes paid110,057  60,925  109,059  
Noncash investing and financing activities:
Transfer of loans and leases to foreclosed properties and repossessed assets$10,440  $8,105  $8,972  
Transfer of loans from portfolio to loans held for sale16,609  5,443  7,234  
Right-of-use lease assets recorded157,234  —  —  
Lessee operating lease liabilities recorded178,802  —  —  
WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
 
 Years ended December 31,
(In thousands)2017 2016 2015
Financing Activities:     
Net increase in deposits1,690,197
 1,351,609
 853,921
Contingent consideration—
 5,000
 —
Proceeds from Federal Home Loan Bank advances12,255,000
 19,630,000
 13,505,000
Repayments of Federal Home Loan Bank advances(13,420,791) (19,451,219) (13,700,279)
Net decrease in securities sold under agreements to repurchase and other borrowings(306,257) (201,874) (99,356)
Redemption of Series E preferred stock(122,710) —
 —
Issuance of Series F preferred stock145,056
 —
 —
Dividends paid to common shareholders(94,630) (89,522) (80,964)
Dividends paid to preferred shareholders(8,096) (8,096) (8,711)
Exercise of stock options8,259
 11,762
 3,060
Excess tax benefits from stock-based compensation—
 3,204
 2,338
Common stock repurchase program(11,585) (11,206) (12,564)
Common shares acquired related to stock compensation plan activity(11,694) (11,664) (5,251)
Common stock warrants repurchased—
 (163) (23)
Net cash provided by financing activities122,749
 1,227,831
 457,171
Net increase (decrease) in cash and due from banks40,495
 (9,030) (14,221)
Cash and due from banks at beginning of period190,663
 199,693
 213,914
Cash and due from banks at end of period$231,158
 $190,663
 $199,693
      
Supplemental disclosure of cash flow information:     
Interest paid$114,046
 $102,438
 $95,428
Income taxes paid109,059
 80,143
 106,991
Noncash investing and financing activities:     
Transfer of loans and leases to foreclosed properties and repossessed assets$8,972
 $6,769
 $8,714
Transfer of loans from portfolio to loans held for sale7,234
 39,383
 585
Deposits assumed in business acquisition—
 —
 1,446,899
Preferred stock conversion—
 —
 28,939
(1)The Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2017 have been revised to present an aggregated total change in cash and due from banks and interest-bearing deposits. Previously, cash flows from interest-bearing deposits was presented as a component of Net cash used for investing activities.
See accompanying Notes to Consolidated Financial Statements.


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Note 1: Summary of Significant Accounting Policies
Nature of Operations
Webster Financial Corporation is a bank holding company and financial holding company under the Bank Holding CompanyBHC Act, incorporated under the laws of Delaware in 1986 and headquartered in Waterbury, Connecticut. At December 31, 2017,Webster Bank is the principal consolidated subsidiary of Webster Financial Corporation's principal asset is allCorporation. Webster Bank and its HSA Bank division deliver a wide range of the outstanding capital stock of Webster Bank.
Webster deliversbanking, investment, and financial services to individuals, families, and businesses primarily within its regional footprint from New York to Massachusetts. businesses.
Webster providesBank serves consumer and business and consumer banking,customers with mortgage lending, financial planning, trust, and investment services through a distribution network consisting of banking offices,centers, ATMs, mobilea customer care center, and a full range of web and mobile-based banking services throughout southern New England and its internet website (www.websterbank.com or www.wbst.com). WebsterWestchester County, New York. It also offers equipment financing, commercial real estate lending, and asset-based lending, and treasury and payment solutions primarily acrossin the Northeast. On a nationwide basis, through itseastern U.S. HSA Bank division, Webster Bank offers and administersis a leading provider of health savings accounts, while also delivering health reimbursement arrangements, and flexible spending accounts, health reimbursement accounts, and commuter benefits.benefit account administration services to employers and individuals in all 50 states.
Basis of Presentation
The accounting and reporting policies of the Company that materially affect its financial statements conform with GAAP, and align with general practices within the financial services industry. The Consolidated Financial Statements and the accompanying Notes thereto include the accounts of Webster Financial Corporation and all other entities in which it has a controlling financial interest. Intercompany accounts and transactions have been eliminated in consolidation. Webster's accounting and financial reporting policies conform, in all material respects, to GAAP and to general practices within the financial services industry.
Assets that the Company holds or manages in a fiduciary or agency capacity for customers, typically referred to as assets under administration or assets under management, are not included in the accompanying Consolidated Balance Sheets sinceconsolidated balance sheets as those assets are not Webster's, and the Company is not the primary beneficiary.
Certain prior period amounts have been reclassified to conform to the current year's presentation. These reclassifications had an immaterial effect on net income, comprehensive income, total assets, total liabilities, total shareholders' equity, net cash provided by operating activities,the Company's consolidated financial statements.
Principles of Consolidation
The purpose of consolidated financial statements is to present the results of operations and net cash usedthe financial position of the Company and its subsidiaries as if the consolidated group were a single economic entity. In accordance with the applicable accounting guidance for investing activities.
Variable Interest Entities
Aconsolidations, the consolidated financial statements include any voting interest entity (VOE) in which the Company has a controlling financial interest and any variable interest entity (VIE) for which the Company is andeemed to be the primary beneficiary. The Company generally consolidates its VOEs if the Company, directly or indirectly, owns more than 50% of the outstanding voting shares of the entity that has either a total equity investment that is insufficient to finance its activities without additional subordinated financial supportand the non-controlling shareholders do not hold any substantive participating or whose equity investors lack the ability to control the entity’s activities or lack the ability to receive expected benefits or absorb obligations in a manner that’s consistent with their investment in the entity. controlling rights.
The Company evaluates each VIEVIEs to understand the purpose and design of the entity, and its involvement in the ongoing activities of the VIE.
The CompanyVIE and will consolidate the VIE if it has:
has (i) the power to direct the activities of the VIE that most significantly affect the VIE's economic performance;performance and
(ii) an obligation to absorb losses of the VIE, or the right to receive benefits from the VIE, that could potentially be significant to the VIE.
SeeThe Company accounts for unconsolidated partnerships and certain other investments using the equity method of accounting if it has the ability to significantly influence the operating and financial policies of the investee. This is generally presumed to exist when the Company owns between 20% and 50% of a corporation, or when it has greater than 3%-5% interest in a limited partnership or similarly structured entity. Refer to Note 2: Variable Interest Entities for further information.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements as well as income and expense during the period. The allowance for loan and lease losses, the fair value measurements for valuation of investments and other financial instruments, evaluation of investments for OTTI, valuation of goodwill and other intangible assets, and assessing the realizability of deferred tax assets and the measurement of uncertain tax position, as well as the status of contingencies, are particularly subject to change. Actual results could differ from those estimates.

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Cash and Cash Equivalents
Cash and cash equivalents, as referenced in the consolidated statement of cash flows, is comprised of cash and due from banks and interest-bearing deposits. Cash equivalents have a maturity of three months or less.
Cash and due from banks.banks, Cash equivalents, includingas referenced in the consolidated balance sheets, includes cash on hand, certain cash due from banks, and deposits at the FRB of Boston, and cash due from banks. Restricted cash related to Federal Reserve System requirements and cash collateral received on derivative positions are referenced asincluded in cash and due from banks in the accompanying Consolidated Balance Sheets and Consolidated Statements of Cash Flows.banks.
Interest-bearing deposits. deposits,Cash equivalents, primarily representing as referenced in the consolidated balance sheets, includes deposits at the FRB of Boston in excess of reserve requirements and federal funds sold which essentially represent uncollateralized loans to other financial institutions, are referenced as interest-bearing deposits ininstitutions. Federal funds sold essentially represents an uncollateralized loan and therefore the accompanying Consolidated Balance Sheets and Consolidated Statements of Cash Flows. The Company regularly evaluates the credit risk associated with thosethe other financial institutions to assessassure that Webster isdoes not become exposed to any significant credit risk on those cash equivalents.
Investment in Debt Securities
Investment securities are classified as available-for-sale or held-to-maturity at the time of purchase. Any classification change subsequent to trade date is reviewed for compliance with corporate objectives and accounting policy.policies. Debt securities classified as held-to-maturity are those which Webster has the ability and intent to hold to maturity. Securities classified as held-to-maturity are recorded at amortized cost net of unamortized premiums and discounts. Discount accretion income and premium amortization expense are recognized as interest income according to a constant yield methodology,using the effective interest method, with consideration given to prepayment assumptions on mortgage backed securities. Premiums are amortized to the earliest call date for debt securities purchased at a premium, with explicit, non-contingent call features and are callable at a fixed price and preset date. Securities classified as available-for-sale are recorded at fair value with unrealized gains and losses recorded as a component of other comprehensive income (OCI)/ or other comprehensive loss (OCL). SecuritiesIf securities are transferred from available-for-sale to held-to-maturity they are recorded at fair value at the time of transfer and the respective gain or loss iswould be recorded as a separate component of OCI/OCI or OCL and amortized as an adjustment to interest income over the remaining life of thesuch security.
Securities classified as available-for-sale or held-to-maturity and in an unrealized loss position are evaluated for OTTIother-than-temporary impairment (OTTI) on a quarterly basis. The evaluation considers several qualitative factors, including the period of time the security has been in a loss position, and the amount of the unrealized loss. If the Company intends to sell thea debt security or it is more likely than not the Company will be required to sell the debt security prior to recovery of its amortized cost basis, the securityit is written down to fair value, and the loss is recognized in non-interest income in the accompanying Consolidated Statements of Income.income. If the Company does not intend to sell the debt security and it is more likely than not that the Company will not be required to sell the debt security prior to recovery of its amortized cost basis, only the credit component of the unrealized loss is recorded as an impairment charge to a debt security and recognized as a loss.in non-interest income. The remaining loss component would be recorded to accumulated other comprehensive loss, net of tax (AOCL) in.
Debt security transactions are recognized on the accompanying Consolidated Balance Sheets.trade date, which is the date the order to buy or sell the security is executed. The entire amountcarrying value plus any related accumulated OCI or OCL balance of an unrealizedsold securities is used to calculate the realized gain or loss position of an equity security that is considered OTTI is recorded as an impairment loss in non-interest income in the accompanying Consolidated Statements of Income.
on sale. The specific identification method is used to determine realized gains and losses on sales of securities. SeeRefer to Note 3: Investment Securities for further information.
Investment in Equity Securities
The Company’s accounting treatment for equity investments differs for those with and without readily determinable fair values. Equity investments with readily determinable fair values are recorded at fair value with changes in fair value recorded in non-interest income. For equity investments without readily determinable fair values, the Company elected the measurement alternative, and therefore carry these investments at cost, less impairment, if any, plus or minus changes in observable prices. Certain equity investments that do not have a readily available fair value may qualify for net asset value (NAV) measurement based on specific requirements. The Company's alternative investments accounted for at NAV consist of investments in non-public entities that generally cannot be redeemed since the Company’s investments are distributed as the underlying equity is liquidated. On a quarterly basis, the Company reviews its equity investments without readily determinable fair values for impairment. If the equity investment is considered impaired, an impairment loss equal to the amount by which the carrying value exceeds its fair value is recorded through a charge to earnings. The impairment loss may be reversed in a subsequent period if there are observable transactions for the identical or similar investment of the same issuer at a higher amount than the carrying amount that was established when the impairment was recognized. Impairment as well as upward or downward adjustments resulting from observable price changes in orderly transactions for identical or similar investments are included in non-interest income.
Equity investments in entities that finance affordable housing and other community development projects provide a return primarily through the realization of tax benefits. The Company applies the proportional amortization method to account for its investments in qualified affordable housing projects.
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Investment in Federal Home Loan Bank and Federal Reserve Bank Stock
Webster Bank is a member of the FHLB and the Federal Reserve System, and is required to maintain an investment in capital stock of the FHLB of Boston and FRB of Boston. Based on redemption provisions, the stock of both the FHLB and the FRB has no quoted market value and is carried at cost. Membership stock is reviewed for impairment as economic circumstances warrant special review.
Loans Held for Sale
Effective January 1, 2016, on a loan by loan election, residential mortgage loansLoans that are classified as held for sale at the time of origination are accounted for under either the fair value option method of accounting or the lower of cost or fair value method of accounting with the election being made at the time the asset is first recognized. The Company has elected the fair value option to mitigate accounting mismatches between held for sale derivative commitments and loan valuations. Prior to January 1, 2016,residential mortgage loans that were classified as held for sale were accounted for at the lower of cost or fair value method of accounting and were valued on an individual asset basis.
option. Loans not originated for sale but subsequently transferred to held for sale continue to beare valued at the lower of cost or fair value method of accounting and are valued on an individual asset basis. Any cost amount in excess of fair value is recorded as a valuation allowance and recognized as a reduction of other income in the Consolidated Statements of Income.non-interest income.
Gains or losses on the sale of loans held for sale are recorded as part of mortgage banking activities. Cash flows from the sale of loans made by the Company that were acquiredoriginated specifically for resale are presented as operating cash flows. All other cashCash flows from the sale of loans originated for investment then subsequently transferred to held for sale are presented as investing cash flows. SeeRefer to Note 5: Transfers of Financial Assets for further information.

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Transfers and Servicing of Financial Assets
Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is generally considered to have been surrendered when: (i) the transferred assets are legally isolated from the Company or its consolidated affiliates, even in bankruptcy or other receivership; (ii) the transferee has the right to pledge or exchange the assets with no conditions that constrain the transferee and provide more than a trivial benefit to the Company; and (iii) the Company does not maintain the obligation or unilateral ability to reclaim or repurchase the assets.
The Company sells financial assets in the normal course of business, the majority of which are residential mortgage loan sales, primarily to government-sponsored enterprises through established programs, commercial loan sales through participation agreements, and other individual or portfolio loan and securities sales. In accordance with accounting guidance for asset transfers, the Company considers any ongoing involvement with transferred assets in determining whether the assets can be derecognized from the balance sheet. With the exception of servicing and certain performance-based guarantees, the Company’s continuing involvement with financial assets sold is minimal and generally limited to market customary representation and warranty clauses covering certain characteristics of the mortgage loans sold and the Company's origination process. The gain or loss on sale depends on the previous carrying amount of the transferred financial assets, the consideration received, and any other assets obtained or liabilities incurred in exchange for the transferred assets.
When the Company sells financial assets, it may retain servicing rights and/or other interests in the financial assets. Servicing assets and any other interests held by the Company are recorded at fair value upon transfer, and thereafter are carried at the lower of cost or fair value. SeeRefer to Note 5: Transfers of Financial Assets for further information.
Loans and Leases
Loans and leases are stated at the principal amount outstanding, net of amounts charged off, unearned income, unamortized premiums and discounts, and deferred loan and lease fees/fees or costs which are recognized as yield adjustments using the effective interest method. These yield adjustments are amortized over the contractual life of the related loans and leases adjusted for prepayments when applicable. Interest on loans and leases is credited to interest income as earned based on the interest rate applied to principal amounts outstanding. Prepayment fees are recognized in non-interest income. Cash flows from loans and leases are presented as investing cash flows.
Non-accrual Loans
Loans and leases are placed on non-accrual status when collection of principal and interest in accordance with contractual terms is doubtful, generally when principal or interest payments become 90 days delinquent, unless the loan or lease is well secured and in process of collection, or sooner if management concludes circumstances indicate that the borrower may be unable to meet contractual principal or interest payments. Residential real estate loans, excluding loans fully insured against loss and in the process of collection, and consumer loans are placed on non-accrual status at 90 days past due, or at the date when the Company is notified that the borrower is discharged in bankruptcy. A charge-off for the balance in excess of the fair value of the collateral less cost to sell, is recorded at 180 days if the loan balance exceeds the fair value of the collateral less costs to sell. Residential loans that are more than 90 days past due, fully insured against loss, and in the process of collection, remain accruing and are reported as 90 days or more past due and accruing. Commercial, commercial real estate loans, and equipment finance loans or leases are subject to a detailed review when 90 days past due to determine accrual status, or when payment is uncertain and a specific consideration is made to put a loan or lease on non-accrual status.
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When loans and leases are placed on non-accrual status, the accrual of interest is discontinued, and any unpaid accrued interest is reversed and charged against interest income. If ultimate repayment of a non-accrual loan or lease is expected, any payments received are applied in accordance with contractual terms. If ultimate repayment is not expected on commercial, commercial real estate, and equipment finance loans and leases, any payment received on a non-accrual loan or lease is applied to principal until the unpaid balance has been fully recovered. Any excess is then credited to interest income when received. If the Company determines, through a current valuation analysis, that principal can be repaid on residential real estate and consumer loans, interest payments may be taken into income as received on a cash basis. Except for loans discharged under Chapter 7 of the U.S. bankruptcy code, loans
Loans are generally removed from non-accrual status when they become current as to principal and interest or demonstrate a period of performance under contractual terms and, in the opinion of management, are fully collectible as to principal and interest. Pursuant to regulatory guidance, a loan discharged under Chapter 7 dischargedof the U.S. bankruptcy loancode is removed from non-accrual status when the bank expects full repayment of the remaining pre-discharged contractual principal and interest, the loan is a closed-end amortizing loan, it is fully collateralized, and post-discharge the loan had at least six consecutive months of current payments. SeeRefer to Note 4: Loans and Leases for further information.
Allowance for Loan and Lease Losses
The ALLL is a reserve established through a provision for loan and lease losses charged to expense and represents management’s best estimate of probable losses that may be incurred within the existing loan and lease portfolio as of the balance sheet date. The level of the allowance reflects management’s view of trends in losses, current portfolio quality, and present economic, political, and regulatory conditions. The ALLL may be allocated for specific portfolio segments; however, the entire allowance balance is

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available to absorb credit losses inherent in the total loan and lease portfolio. A charge-off is recorded when all or a portion of the loan or lease is deemed to be uncollectible. Back-testing is performed to compare original estimated losses and actual observed losses, resulting in ongoing refinements. While management utilizes its best judgment based on the information available at the time, the ultimate adequacy of the allowance is dependent upon a variety of factors that are beyond the Company’s control, which include the performance of the Company’s portfolio, economic conditions, interest rate sensitivity, and other external factors.
The ALLL consists of the following three elements: (i) specific valuation allowances established for probable losses on impaired loans and leases; (ii) quantitative valuation allowances calculated using loss experience for like loans and leases with similar characteristics and trends, adjusted, as necessary, to reflect the impact of current conditions; and (iii) qualitative factors determined based on general economic conditions and other factors that may be internal or external to the Company. The reserve level reflects management’s view of trends in losses, current portfolio quality, and present economic, political, and regulatory conditions. The ALLL may be allocated for specific portfolio segments; however, the entire balance is available to absorb credit losses inherent in the total loan and lease portfolio. A charge-off is recorded when all or a portion of the loan or lease is deemed to be uncollectible. While management utilizes its best judgment based on the information available at the time, the ultimate adequacy of the allowance is dependent upon a variety of factors that are beyond the Company’s control, which include the performance of the Company’s portfolio, economic conditions, interest rate sensitivity, and other external factors.
The process for estimating probable losses is based on predictive models that measure the current risk profile of the loan and lease portfolio and combines the measurement with other quantitative and qualitative factors. To measure credit risk for the commercial, commercial real estate, and equipment financing portfolios, the Company employs a dual grade credit risk grading system for estimating the PD and the LGD. The credit risk grade system assigns a rating to each borrower and to the facility, which together form a Composite Credit Risk Profile. The credit risk grade system categorizes borrowers by common financial characteristics that measure the credit strength of borrowers and facilities by common structural characteristics. The Composite Credit Risk Profile has ten grades, with each grade corresponding to a progressively greater risk of loss. Grades (1) - (6) are considered pass ratings, and (7) - (10) are considered criticized as defined by the regulatory agencies. Risk ratings, assigned to differentiate risk within the portfolio, are reviewed on an ongoing basis and revised to reflect changes in a borrowers’ current financial position and outlook, risk profile, and the related collateral and structural position. Loan officers review updated financial information or other loan factors on at least an annual basis for all pass rated loans to assess the accuracy of the risk grade. Criticized loans undergo more frequent reviews and enhanced monitoring. A (7) "Special Mention" asset has the potential weakness that, if left uncorrected, may result in deterioration of the repayment prospects for the asset. An (8) "Substandard" asset has a well defined weakness that jeopardizes the full repayment of the debt. An asset rated (9) "Doubtful" has all of the same weaknesses as a substandard credit with the added characteristic that the weakness makes collection or liquidation in full, given current facts, conditions, and values, improbable. Assets classified as (10) "Loss" in accordance with regulatory guidelines are considered uncollectible and charged off.
For residential and consumer loans, the Company considers factors such as past due status, updated FICO scores, employment status, collateral, geography, loans discharged in bankruptcy, and the status of first lien position loans on second lien position loans as credit quality indicators. On an ongoing basis for portfolio monitoring purposes, the Company estimates the current value of property secured as collateral for home equity and residential first mortgage lending products. The estimate is based on home price indices compiled by the S&P/Case-Shiller Home Price Indices. The real estate price data is applied to the loan portfolios taking into account the age of the most recent valuation and geographic area. Back-testing is performed to compare original estimated losses and actual observed losses, resulting in ongoing refinements. The balance resulting from this process together with specific valuation allowances determines the overall reserve level.
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Charge-offs of Uncollectible Loans
Any loan may be charged-off if a loss confirming event has occurred. Loss confirming events usually involve the receipt of specific adverse information about the borrower and may include bankruptcy (unsecured), foreclosure, or receipt of an asset valuation indicating a shortfall between the value of the collateral and the book value of the loan when that collateral asset is the sole source of repayment. The Company generally charges-off commercial loans when it is determined that the specific loan or a portion thereof is uncollectible. This determination is based on facts and circumstances of the individual loans and normally includes considering the viability of the related business, the value of any collateral, the ability and willingness of any guarantors to perform and the overall financial condition of the borrower. The Company generally charges-off residential real estate loans to the estimated fair value of their collateral, net of selling costs, when they become 180 days past due.
Impaired Loans
Loans and leases are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impairment is evaluated on a pooled basis for smaller-balance homogeneous residential, consumer loans and small business loans. Commercial, commercial real estate, and equipment financing loans and leases over a specific dollar amount and all TDRTDRs are evaluated individually for impairment. A loan identified as a TDR is considered an impaired loan for theits entire term, of the loan, with few exceptions. If a loan is impaired, a specific valuation allowance may be established, and the loan is reported net, at the present value of estimated future cash flows using the loan’s original interest rate or at the fair value of collateral less cost to sell if repayment is expected from collateral liquidation. Interest payments on non-accruing impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Loans and leases, or portions thereof, are charged off when deemed uncollectible. Factors considered by management in determining impairment include payment status, collateral value, discharged bankruptcy, and the likelihood of collecting scheduled principal and interest payments. The current or weighted-average (for multiple notes within a commercial borrowing arrangement) interest rate of the loan is used as the discount rate, for determining net present value of the loan evaluated for impairment, when the interest rate floats with a specified index. A change in terms or payments would be included in the impairment calculation. SeeRefer to Note 4: Loans and Leases for further information.
Reserve for Unfunded Commitments
The reserve for unfunded commitments provides for probable losses inherent with funding the unused portion of legal commitments to lend. The unfunded reserve calculation includes factors that are consistent with the ALLL methodology for funded loans using the PD, LGD, and a draw down factor applied to the underlying borrower risk and facility grades. The reserve for unfunded credit commitments is included within other liabilities in the accompanying Consolidated Balance Sheets,consolidated balance sheets, and changes in the reserve are reported as a component of other non-interest expense in the accompanying Consolidated Statementsconsolidated statements of Income. Seeincome. Refer to Note 20:22: Commitments and Contingencies for further information.
Troubled Debt Restructurings
A modified loan is considered a TDR when the following two conditions are met: (i) the borrower is experiencing financial difficulties;difficulty; and (ii) the modification constitutes a concession. The Company considers all aspects of the restructuring in determining whether a concession has been granted, including the debtor'sborrower's ability to access funds at a market rate. In general, a concession exists when the modified terms of the loan are more attractive to the borrower than standard market terms. Modified terms are dependent upon the financial position and needs of the individual borrower. The most common types of modifications include covenant modifications and forbearance. Loans for which the borrower has been discharged under Chapter 7 bankruptcy are considered collateral dependent TDR, impaired at the date of discharge, and charged down to the fair value of collateral less cost to sell, if management considers that loss potential likely exists.
The Company’s policy is to place consumer loan TDR,TDRs, except those that were performing prior to TDR status, on non-accrual status for a minimum period of six months. Commercial TDR are evaluated on a case-by-case basis for determination of whether or not to place them on non-accrual status. Loans qualify for return to accrual status once they have demonstrated performance with the restructured terms of the loan agreement for a minimum of six months. Initially, all TDRs are reported as impaired. Generally, TDRs are classified as impaired loans and reported as TDR for the remaining life of the loan. Impaired and TDR classification may be removed if the borrower demonstrates compliance with the modified terms for a minimum of six months and through a fiscal year-end and the restructuring agreement specifies a market rate of interest equal to that which would be provided to a borrower with similar credit at the time of restructuring. In the limited circumstance that a loan is removed from TDR classification, it is the Company’s policy to continue to base its measure of loan impairment on the contractual terms specified by the loan agreement. The Company’s loan and lease portfolio includes loans that have been restructured into an A-Note/B-Note structure as a result of evaluating the cash flow of the borrowersRefer to support repayment. Following these restructurings, Webster immediately charged off the balances of the B-Notes. The restructuring agreements specify a market interest rate equal to that which would be provided to a borrower with similar credit at the time of restructuring. See Note 4: Loans and Leases for further information.

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Foreclosed and Repossessed Assets
Real estate acquired through foreclosure or completion of a deed in lieu of foreclosure and other assets acquired through repossession are recorded at fair value less estimated cost to sell at the date of transfer. Subsequent to the acquisition date, the foreclosed and repossessed assets are carried at the lower of cost or marketfair value less estimated selling costs and are included within other assets in the accompanying Consolidated Balance Sheets.consolidated balance sheet. Independent appraisals generally are obtained to substantiate fair value and may be subject to adjustment based upon historical experience or specific geographic trends impacting the property. Within 90 days of a loan being foreclosed upon,Upon transfer to OREO the excess of loan balance over fair value less cost to sell is charged off against the ALLL. Subsequent write-downs in value, maintenance costs as incurred, and gains or losses upon sale are charged to non-interest expense in the accompanying Consolidated Statementsconsolidated statement of Income.income.
PremisesProperty and Equipment
PremisesProperty and equipment areis carried at cost, less accumulated depreciation. Depreciation of premisesdepreciation and equipmentamortization, which is computed on a straight-line basis over the estimated useful lives of the assets, as follows:
 Minimum Maximum 
Building and Improvements5-40years
Leasehold improvements5-20years (or term or lease, if shorter)
Fixtures and equipment5-10years
Data processing and software3-7years

MinimumMaximum
Building and Improvements5-  40years
Leasehold improvements5-  20years (or lease term, if shorter)
Fixtures and equipment5-  10years
Data processing and software3-  7years
Repairs and maintenance costs are charged to non-interest expense as incurred. PremisesProperty and equipment beingthat is actively marketed for sale areis reclassified asto assets held for disposition. The cost and accumulated depreciation and amortization relating to premisesproperty and equipment retired or otherwise disposed of are eliminated, and any resulting losses are charged to non-interest expense. SeeRefer to Note 6: Premises and Equipment for further information.
Leasing
A right-of-use (ROU) asset and corresponding lease liability is recognized at the lease commencement date when the Company is a lessee. ROU lease assets are included in premises and equipment on the consolidated balance sheet. A ROU asset reflects the present value of the future minimum lease payments adjusted for any initial direct costs, incentives, or other payments prior to the lease commencement date. A lease liability represents a legal obligation to make lease payments and is determined by the present value of the future minimum lease payments discounted using the rate implicit in the lease, or the Company’s incremental borrowing rate. Variable lease payments that are dependent on an index, or rate, are initially measured using the index or rate at the commencement date and are included in the measurement of the lease liability. Renewal options are not included as part of the ROU asset or lease liability unless the option is deemed reasonably certain to exercise.
For real estate leases, lease components and non-lease components are accounted for as a single lease component. For equipment leases, lease and non-lease components are accounted for separately. Operating lease expense is comprised of operating lease costs and variable lease costs, net of sublease income, and is reflected as part of occupancy within non-interest expense in the consolidated statement of income. Operating lease expense is recorded on a straight-line basis. Refer to Note 7: Leasing for further information.
Goodwill
Goodwill represents the excess purchase price of businesses acquired over the fair value of the identifiable net assets acquired and is assigned to specific reporting units. Goodwill is not subject to amortization but rather is evaluated for impairment annually, or more frequently in interim periods if events occur or circumstances change indicating it would more likely than not result in a reduction of the fair value of a reporting unit below its carrying value.
Goodwill ismay be evaluated for impairment by either performing a qualitative evaluation or a two-step quantitative test. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair value of athe reporting unit is less than its carrying amount, including goodwill. TheIf the qualitative assessment indicates it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill, then a quantitative process will be performed that requires the Company utilizesto utilize an equally weighted combined income and market approach to arrive at an indicated fair value range for the reporting unit. In Step 1, the fair value of a reporting unit is compared to its carrying amount, including goodwill, to ascertain if a goodwill impairment exists. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired, and it is not necessary to continue to Step 2 of the impairment process. Otherwise, Step 2 is performed where the implied fair value of goodwill is compared to the carrying value of goodwill in the reporting unit. If a reporting unit's carrying value of goodwill exceeds fair value of goodwill, the difference is charged to non-interest expense. See
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The Company completed a qualitative assessment for its reporting units during its most recent annual impairment review to determine if the quantitative impairment test was necessary. Based on its qualitative assessment, the Company determined that there was no evidence of impairment to the balance of its goodwill. Refer to Note 7:8: Goodwill and Other Intangible Assets for further information.
Other Intangible Assets
Other intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights, or because the assetit is capable of being sold or exchanged either separately or in combination with a related contract, asset, or liability. Other intangible assets with finite useful lives, such as core deposits and customer relationships, are amortized to non-interest expense over their estimated useful lives and are evaluated for impairment whenever events occur or circumstances change indicating the carrying amount of the asset may not be recoverable. Core deposit and customer relationship intangible assets are amortized over their estimated useful lives. SeeRefer to Note 7:8: Goodwill and Other Intangible Assets for further information.
Cash Surrender Value of Life Insurance
The investmentInvestment in life insurance represents the cash surrender value of life insurance policies on certain current and former officersemployees of Webster. Increases in the cashCash surrender value increases are recorded asin non-interest income. Decreasesincome, decreases are the result of collection on the policies, due to thewith death of an insured. Death benefit proceeds in excess of cash surrender value are recorded in other non-interest income when realized.

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an insured.
Securities Sold Under Agreements to Repurchase
These agreements are accounted for as secured financing transactions since Webster maintains effective control over the transferred investment securities and the transfer meets the other criteria for such accounting. Obligations to repurchase the sold investment securities are reflected as a liability in the accompanying Consolidated Balance Sheets.consolidated balance sheets. The investment securities underlying the agreementssold, with agreement to repurchase, to wholesale dealers are deliveredtransferred to a custodial account for the benefit of the dealer or bank with whom each transaction is executed. The dealers or banks which may sell, loan, or otherwise hypothecate such securities to other parties in the normal course of their operations and agree to resell to Webster the same securities at the maturity date of the agreements. Webster also enters into repurchase agreements with Bank customers. The investment securities underlying the agreementssold with agreement to repurchase to Bank customers are pledged; however,not transferred but internally pledged to the customer doesrepurchase agreement transaction. Refer to Note 11: Borrowings for further information.
Revenue From Contracts With Customers
Revenue from contracts with customers generally comprises non-interest income earned by the Company in exchange for services provided to customers and is recognized when services are complete or as they are rendered. These revenue streams include deposit service fees, wealth and investment services, and an insignificant component of other non-interest income in the consolidated statement of income. The Company identifies the performance obligations included in the contracts with customers, determines the transaction price, allocates the transaction price to the performance obligations, as applicable, and recognizes revenue when performance obligations are satisfied. Services provided over a period of time are typically transferred to customers evenly over the term of the contracts and revenue is recognized evenly over the period services are provided. Contract receivables are included in accrued interest receivable and other assets. Payment terms vary by services offered, and the time between completion of performance obligations and payment is typically not have abilitysignificant. Refer to hypothecate the underlying securities. See Note 10: Borrowings21: Revenue from Contracts with Customers for further information.
Share-Based Compensation
Webster maintains stock compensation plans under which restricted stock, restricted stock units, non-qualified stock options, incentive stock options, restricted stock, restricted stock units, or stock appreciation rights may be granted to employees and directors. Share awards are issued from available treasury shares. Share-based compensation cost is recognized over the vesting period, is based on the grant-date fair value, net of a reduction for estimated forfeitures which is adjusted for actual forfeitures as they occur, and is reported as a component of compensation and benefits expense. Awards are generally subject to a 3-year vesting period, while certain conditions provide for a 1-year vesting period. Excess tax benefits resultbenefit or tax deficiency results when tax return deductions exceeddiffer from recognized compensation cost determined using the grant-date fair value approach for financial statement purposes.
For time-based restricted stock and restricted stock unit awards, fair value is measured using the Company's common stock closing price at the date of grant. For certain performance-based restricted stock awards, fair value is measured using the Monte Carlo valuation methodology, which provides for the 3-year performance period. Awards ultimately vest in a range from zero0 to 150% of the target number of shares under the grant. Compensation expense is subject to adjustment based on management's assessment of Webster's return on equity performance relative to the target number of shares condition. For stockStock option awards use the Black-Scholes Option-Pricing Model was used to measure fair value at the date of grant.
Dividends are paid on the time-based shares upon grant and are non-forfeitable, while dividends are accrued on the performance-based awards and paid on earnedvested shares when the performance target is met. SeeRefer to Note 18:19: Share-Based Plans for further information.
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Income Taxes
Income tax expense, or benefit, is comprised of two components, current and deferred. The current component reflects taxes payable or refundable for a current period based on applicable tax laws, and the deferred component represents the tax effects of temporary differences between amounts recognized for financial accounting and tax purposes. Deferred tax assets and liabilities reflect the tax effects of such differences that are anticipated to result in taxable or deductible amounts in the future, when the temporary differences reverse. DTAs are recognized if it is more likely than not they will be realized, and may be reduced by a valuation allowance if it is more likely than not that all or some portion will not be realized.
Tax positions that are uncertain but meet a more likely than not recognition threshold are initially and subsequently measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position meets the more likely than not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management's judgment. Webster recognizes interest expense and penalties on uncertain tax positions as a component of income tax expense and recognizes interest income on refundable income taxes as a component of other non-interest income. SeeRefer to Note 8:9: Income Taxes for further information.
Earnings Per Common Share
Earnings per common share is computedpresented under the two-class method. Basic earnings per common share is computed by dividing earnings allocated to common shareholders by the weighted-average number of common shares outstanding during the applicable period, excluding outstanding non-participatingparticipating securities. Certain non-vestedunvested restricted stock awards are participating securities as they have non-forfeitable rights to dividends or dividend equivalents.dividends. Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation and warrants for common stock using the treasury stock method. A reconciliation of the weighted-average shares used in calculating basic earnings per common share and the weighted-average common shares used in calculating diluted earnings per common share is provided in Note 14:15: Earnings Per Common Share.

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Comprehensive Income
Comprehensive income includes all changes in shareholders’ equity during a period, except those resulting from transactions with shareholders. Comprehensive income consists of net income, and the after-tax effect of the following items;items: changes in net unrealized gain/loss on securities available for sale, changes in net unrealized gain/loss on derivative instruments, and changes in net actuarial gain/loss and prior service cost for defined benefit pension and other postretirement benefit plans. Comprehensive income is reported in the accompanying Consolidated Statementsconsolidated statement of Shareholders' Equity, Consolidated Statementsshareholders' equity, consolidated statement of Comprehensive Income,comprehensive income, and Note 12:13: Accumulated Other Comprehensive Loss, Net of Tax.
Derivative Instruments and Hedging Activities
Derivatives are recognized as assets and liabilities in the accompanying Consolidated Balance Sheets and measured at fair value. Forvalue, with exchange-traded contracts fair value is based on quoted market prices. Forprices while non-exchange traded contracts fair value isare based on dealer quotes, pricing models, discounted cash flow methodologies, or similar techniques for which the determination of fair value may require management judgment or estimation, relating to future rates and credit activities. Derivatives are included in accrued interest receivable and other assets and in accrued expenses and other liabilities on the consolidated balance sheet. Cash flows from derivative financial instruments are included in net cash provided by operating activities on the consolidated cash flow statement.
Interest Rate Swap Agreements.Derivatives Designated in Hedge Relationships. For asset/liability management purposes, theThe Company may use interest rate swaps or interest rate capsuses derivatives to hedge various exposures, or to modify interest rate characteristics, of variousfor certain balance sheet accounts. Interest rate swaps are contracts in which a series ofaccounts under its interest rate risk management strategy. The Company designates derivatives in qualifying hedge relationships as fair value or cash flow hedges for accounting purposes. Derivative financial instruments receive hedge accounting treatment if they are qualified and properly designated as a hedge and remain highly effective in offsetting changes in the fair value or cash flows are exchanged over a prescribed period of time. The notional amountattributable to the risk being hedged both at hedge inception and on whichan ongoing basis throughout the interest payments are based is not exchanged. Swap agreements entered into for hedge purposes are derivative instruments and generally convert a portionlife of the Company’s variable-rate debthedge. Quarterly prospective and retrospective assessments are performed to ensure hedging relationships continue to be highly effective. If a fixed-rate (cash flow hedge), or convert a portion of its fixed-rate debt to a variable-rate (fair value hedge).
Webster uses forward-settle interest rate swaps to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows relating to interest payments on forecasted debt issuances. Forward-settle swaps typically have a futurehedge relationship were no longer highly effective, date that coincides with the expected debt issuance date. The forward-settle swaps are typically terminated and cash settled upon hedge debt issuance date. accounting would be discontinued.
The gain or losschange in fair value on a derivative designated and qualifying as a fair value hedging instrument,hedge, as well as the offsetting gain or losschange in fair value on the hedged item attributable to the risk being hedged, is recognized currently in earnings in the same accounting period. The effective portion of the gain or loss on a derivative designated and qualifying as a cash flow hedging instrumenthedge is initially reportedrecorded as a component of AOCL and subsequently reclassified into earningsto interest income as hedged interest payments are received or to interest expense as hedged interest payments are made in the same period or periods during which the hedged transaction affects earnings.
Derivatives Not Designated in Hedge Relationships. The ineffective portion of the gain or loss on theCompany also enters into derivative instrument, if any, is recognizedtransactions which are not designated in non-interest income.
Interest rate derivativea hedge relationship. Derivative financial instruments receivenot designated in a hedge accounting treatment only if they are qualified and properly designated as hedges and are expected to be, and are, effective in substantially reducing interest rate risk arising from specifically identified assets and liabilities. A hedging instrument is expected at inception to be highly effective at offsetting changes in the hedged transactions attributable to the changes in the hedged risk. The Company expects that the hedging relationship will be highly effective; however, it does not assume there is no ineffectiveness. The Company performs quarterly prospective and retrospective assessments of the hedge effectiveness to ensure the hedging relationship continues to be highly effective and that hedge accounting can continue to be applied. Those derivative financial instruments that do not meet specified hedging criteria are recorded at fair value with changes in fair value recordedrecognized in income.
Cash flows from derivative financial instruments designated for hedge accounting are classified in the cash flow statement in the same category as the cash flows of the asset or liability being hedged.
Derivative Loan Commitments. Mortgage loan commitments related to the origination of mortgages that will be held for sale upon funding are considered derivative instruments. Loan commitments that are derivatives are recognized at fair valueother non-interest income on the Consolidated Balance Sheets in other assets and other liabilities with changes in their fair values recorded in non-interestconsolidated statement of income.
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Counterparty Credit Risk. The Company's exposure from bilateral, non-cleared derivatives is collateralized and subject to daily margin call settlements. Credit exposure related to non-cleared derivatives may be offset by the amount of collateral pledged by the counterparty. The Company's credit exposure on interest rate swaps consists of the net favorable value plus interest payments of all swaps by each of the counterparties.
Cleared derivative transactions are with our selected clearing exchange, Chicago Mercantile Exchange, and exposure is settled to market on a daily basis. There is additional credit exposure related to initial margin collateral pledged to Chicago Mercantile Exchange at trade execution.
In accordance with Webster policies, institutional counterparties are underwritten and approved through the Company’s independent credit approval process. The Company evaluates the credit risk of its counterparties, taking into account such factors as the likelihood of default, its net exposures, and remaining contractual life, among other things, in determining if any adjustments related to credit risk are required. See Note 15: Derivative Financial Instruments for further information.

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Offsetting Assets and Liabilities
.The Company presents derivative receivablesassets and derivative payablesliabilities with the same counterparty and the related variation margin of cash collateral receivables and payablesare presented on a net basis onin the Consolidated Balance Sheets when a legally enforceable master netting agreement exists. The cashconsolidated balance sheet. Cash collateral relating to the initial margin is included withinin accrued interest receivable and other assets inon the Consolidated Balance Sheets.consolidated balance sheet. Securities collateral is not offset. The Company clears all dealer eligible contracts through the Chicago Mercantile Exchange (CME), and has elected to record non-cleared derivative positions subject to a legally enforceable master netting agreement on a net basis.
Refer to Note 16: Derivative Financial Instruments for further information.
Fair Value Measurements
The Company measures many of its assets and liabilities on a fair value basis, in accordance with ASC Topic 820, "Fair Value Measurement." Fair value is used on a recurring basis for certain assets and liabilities in which fair value is the primary basis of accounting. Examples of these include derivative instruments, available-for-sale securities and loans held for sale where the Company has elected the fair value option. Additionally, fair value is used on a non-recurring basis to evaluate assets or liabilities for impairment. Examples of these include impaired loans and leases, mortgage servicing assets, long-lived assets, goodwill, and loans not originated for sale but subsequently transferred to held for sale, which are accounted for at the lower of cost or fair value. Further information regarding the Company's policies and methodology used to measure fair value is presented in Note 16:17: Fair Value Measurements.
Employee Retirement Benefit Plan
Webster Bank maintains a noncontributory defined benefit pension plan covering all employees that were participants on or before December 31, 2007. Costs related to this qualified plan, based upon actuarial computations of current and future benefits for eligible employees, are charged to non-interest expense and are funded in accordance with the requirements of the Employee Retirement Income Security Act. AnThe plan is recorded as an asset is recognized for an overfunded plan andif over-funded or a liability if under-funded. There is recognized for an underfunded plan. Aa supplemental retirement plan is also maintained for select executive level employees that were participants on or before December 31, 2007. Webster BankThere is also providesa postretirement healthcare benefits toplan for certain retired employees.
In December 2016, the Company elected to change the approach to estimating service and interest components of net periodic pension cost for the retirement benefit plans. Effective January 2017, a full yield curve approach was utilized to measure the benefit obligation. The Company changed to the new estimate method to improve the correlation between projected benefit cash flows and the corresponding yield spot rates and to provide a more precise measurement of service and interest costs.
Historically the Company estimated service and interest costs utilizing a single-weighted average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. The new method measures service and interest costs separately using the full yield curve approach applied to each corresponding obligation. Service costs are determined based on duration-specific spot rates applied to the service cost cash flows. The interest cost calculation is determined by applying duration-specific spot rates to the year-by-year projected benefit obligation.
Fee Revenue
Generally, fee revenue from deposit service charges and loans is recorded when earned, except where ultimate collection is uncertain, in which case revenue is recognized as received. Trust revenue is recorded as earned on individual accounts based upon a percentage of asset value. Fee income on managed institutional accounts is recognized as earned and collected quarterly based on the quarter-end value of assets managed.
Marketing Costs
Marketing costs are expensed as incurred over the projected benefit period.

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Recently Adopted Accounting Standards Updates
Effective January 1, 2017,2019, the following new accounting guidance was adopted by the Company:
ASU No. 2016-09, Compensation2018-16, Derivatives and Hedging (Topic 815) - Stock Compensation (Topic 718) - Improvements to Employee Share Based Payment Accounting.Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes.
The Update impactedpermits the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting for employee share-based payment transactions, includingpurposes under Topic 815 in addition to the income tax consequences, and classificationinterest rates on direct U.S. Treasury obligations, the London Interbank Offered Rate swap rate, the OIS rate based on the statementFed Funds Effective Rate, and the Securities Industry and Financial Markets Association Municipal Swap Rate.
The Company adopted the Update during the first quarter of cash flows. The Update requires the Company to recognize the income tax effects of awards in the income statement2019 on a prospective basis when the awards vest or are settled, compared to within additional paid-in capital. As a result, applicable excess tax benefits and tax deficiencies are recorded as an income tax benefit or expense, respectively. The Company elected to present the classification on the statement of cash flows on a prospective basis to better align this presentation with the income tax effects.
The impact of the Update will vary from period to period based on the Company's stock price and the quantity of shares that vest or are settled within a given period.
The Update also requires the Company to elect the accounting for forfeitures of share-based payments by either (i) recognizing forfeitures of awards as they occur or (ii) estimating the number of awards expected to be forfeited and adjusting the estimate when it is likely to change, as is currently required. The Company elected to account for forfeitures of share-based payments by estimating the number of awards expected to be forfeited and adjusting the estimate when it is likely to change, which is in accordance with the Company's previous accounting practices.
basis. The adoption of this accounting standardguidance did not have a material impacteffect on the Company's consolidated financial statements.
ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.
The Update issued in February 2018, provides for the reclassification of the effect of remeasuring deferred tax balances related to items within accumulated other comprehensive loss, net of tax to retained earnings resulting from the Tax Act.
The Update is effective for the Company on January 1, 2019 and early adoption is permitted. The Company elected to early adopt the Update during the fourth quarter 2017. As a result, the Company reclassified $15.6 million from accumulated other comprehensive loss, net of tax to retained earnings.
Accounting Standards Issued but not yet Adopted
The following list identifies ASUs applicable to the Company that have been issued by the FASB but are not yet effective:
ASU No. 2017-12, Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities.
The purpose of the Update is to better align a company’s risk management and financial reporting for hedging activities with the economic objectives of those activities. The updateUpdate expands an entity's ability to hedge non-financial and financial risk components and reduce complexity in hedges of interest rate risk. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness, and generally requires the entire change in fair value of a hedging instrument to be presented in the same income statement line in which the earnings effect of the hedged item is reported.
The Company adopted the Update during the first quarter of 2019 on a modified retrospective basis. The adoption of this guidance did not have a material effect on the Company's consolidated financial statements. The Company has provided enhanced disclosures in Note 16: Derivative Financial Instruments as a result of adopting this Update.
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ASU No. 2016-02, Leases (Topic 842) and subsequent ASUs issued to amend this Topic.
The Updates introduce a lessee model that requires substantially all leases to be recorded as assets and liabilities on the balance sheet and requires expanded quantitative and qualitative disclosures regarding key information about leasing arrangements. The lessor model remains substantially the same with targeted improvements that do not materially impact the Company.
The Company adopted the Updates during the first quarter of 2019 using the new transition method in whichoption that allows the Company willuse of effective date, January 1, 2019, as the date of initial application of the new lease accounting standard and to recognize a cumulative effect of the change oncumulative-effect adjustment to the opening balance of retained earnings upon adoption. The Company elected the transition relief package of practical expedients which forgoes the requirement to reassess the existence of leases in existing contracts, their lease classification and the accounting treatment of their initial direct costs. As a practical expedient, the Company has also made a policy election to not separate non-lease components from lease components for its real estate leases and instead account for each affectedseparate lease components and non-lease components associated with that lease component as a single lease component. The Company will separately account for the lease and non-lease components in its equipment leases. The Company determines whether a contract contains a lease based on whether a contract, or a part of equitya contract, conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The discount rate used is either the rate implicit in the financial statementslease, or when a rate cannot be readily determined an incremental borrowing rate. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments, in a similar economic environment.
As a result of adopting this Update, the Company recognized $157.2 million of right-of-use asset (ROU) and $178.8 million of lease liability, as of January 1, 2019. The Company also recorded a $513 thousand cumulative-effect adjustment directly to retained earnings as of January 1, 2019 for abandoned leased properties and the remaining deferred gains on sale-leaseback transactions which occurred prior to the date of adoption. Refer to Note 7: Leasing for further information.
Accounting Standards Issued but not yet Adopted
The following list identifies ASUs applicable to the Company that have been issued by the FASB but are pending adoption:
ASU No. 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes.
The Update isprovides simplifications to the accounting for income taxes related to a variety of topics and makes minor codification improvements. Changes include a requirement that the effects of an enacted change in tax law be reflected in the computation of the annual effective tax rate in the first interim period that includes the enactment date of the new legislation.
The Update will be effective for the Company on January 1, 2019 and early adoption is permitted.2021. The Company is in the process of assessing all potential impacts of the standard including the potentialdoes not expect this Update to early adopt the Update.have a material impact on its consolidated financial statements.
ASU No. 2017-08, Receivables2019-04, Codification Improvements to Topic 326, Financial Instruments - Nonrefundable FeesCredit Losses, Topic 815, Derivatives and Other Costs (Subtopic 310-20) - Premium Amortization on Purchased Callable Debt Securities.Hedging, and Topic 825, Financial Instruments.
The Update is intendedamends guidance on credit losses, hedge accounting, and recognition and measurement of financial instruments. The changes provide clarifications and codification improvements in relation to enhance therecently issued accounting for the amortization of premiums for purchased callable debt securities. Specifically, the Update shortens the amortization period for certain investments in callable debt securities purchased at a premium by requiring that the premium be amortizedupdates. The amendments to the earliest call date. The Update is being issuedguidance on credit losses are considered in responsethe paragraphs below related to concerns from stakeholders that, current GAAP excludes certain callable debt securities from considerationour adoption of early repayment of principal even if the holder is certain that the callASU 2016-13, and will be exercised.adopted concurrently with those Updates.
The Update upon adoption, is expected to accelerate the Company’s recognition of premium amortization on debt securities held within the portfolio. The amendments in the Update will be applied on a modified retrospective basis through a cumulative-effect adjustment directly through retained earnings upon adoption.
Management is in the process of evaluating the full impact of adopting the Update including, but not limited to the following:
Modifying system amortization requirements;
Evaluation of premiums associated with debt securities to determine the appropriate cumulative-effect adjustment; and
Establishing new accounting policies pertaining to premium amortization on purchased callable debt securities.
The Update isbecame effective for the Company on January 1, 2019 and early adoption is permitted.2020. The Company is evaluating the potentialdoes not expect these changes to early adopt the Update.

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have a material impact on its consolidated financial statements.
ASU No. 2017-07, Compensation2018-15, Intangibles - Retirement Benefits (Topic 715)Goodwill and Other - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.
The Update aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The updated guidance also requires an entity to amortize the capitalized implementation costs as an expense over the term of the hosting arrangement and to present in the same income statement line item as the fees associated with the hosting arrangement.
The Update became effective for the Company on January 1, 2020. The Company will apply the amendments in this update prospectively to retrospectively report service cost as partall implementation costs incurred after the date of compensation expenseadoption. The Company does not expect these changes to have a material impact on its consolidated financial statements.
ASU No. 2018-14, Compensation-Retirement Benefits - Defined Benefit Plan - General (Subtopic 715-20) - Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans.  
The Update modifies disclosure requirements for employers that sponsor defined benefit pension and other postretirement plans.
The Update will be effective for the Company on January 1, 2021. The Company does not expect this Update to have a material impact on its consolidated financial statements.
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ASU No. 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.
The Update modifies the disclosure requirements on fair value measurements. The updated guidance will no longer require entities to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy. However, it will require public companies to disclose changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the other componentsrange and weighted average of net periodic benefit cost separately from service cost insignificant unobservable inputs used to develop Level 3 measurements.
The Update became effective for the Company's Consolidated Statements of Income.Company on January 1, 2020. The Company currently includes all components of net periodic benefit cost in "compensation and benefits" expense in the Consolidated Statements of Income. Upon adoption of this Update in the first quarter 2018, only service cost will remain in compensation and benefits expense, and the other components (interest costdoes not expect these changes to have a material impact on benefit obligations, expected return on plan assets, amortization of prior service cost, and recognized net loss) will be included in "other expense" in the Consolidated Statements of Income.
The other components of net periodic benefit cost were $3.4 million and $6.1 million for the years ended December 31, 2017 and 2016, respectively.its consolidated financial statements.
ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment.
The Update simplifies quantitative goodwill impairment testing by requiring entities to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for any amount by which the carrying amount exceeds the reporting unit’s fair value of a reporting unit, up to the extent that the loss recognized doesbut not exceedexceeding the amount of goodwill allocated to thatthe reporting unit.
ThisThe Update changes current guidance by eliminating the second step toof the goodwill impairment analysis which involves calculating the implied fair value of goodwill determined in the same manner as the amount of goodwill recognized in a business combination upon acquisition. Entities will still have the option to first perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.
The updateUpdate must be applied prospectively and isbecame effective for the Company on January 1, 2020. Early adoption is permitted. The Company does not expect thethis new guidance to have a material impact on its financial statements.
ASU No. 2016-15, Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments.
The Update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The Update addresses the following eight issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle.
The Update will be implemented using a retrospective transition approach during the first quarter 2018, and will not have a significant impact on the Company'sconsolidated financial statements.
ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.Instruments and subsequent ASUs issued to clarify this Topic.
Current GAAP requires an "incurred loss" methodologyThe Updates will replace the existing incurred loss approach for recognizing credit losses. This approach delayslosses with a new credit loss methodology known as the current expected credit loss (CECL) model. The CECL methodology requires earlier recognition until it is probable a loss has been incurred. Both financial institutions and users of their financial statements expressed concern that current GAAP restricts the ability to record credit losses that are expected, but do not yet meet the "probable" threshold.
using a lifetime credit loss measurement approach for financial assets carried at amortized cost. The main objective of this Update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this Update replace the incurred loss impairmentCECL methodology in current GAAP with a methodology that reflects expected credit losses andalso requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates.
The Change from an "incurred loss" method to an "expected loss" method represents a fundamental shift from existing GAAP, and is likely to result in a material increase to the Company's accounting for credit losses on financial instruments. To prepare for implementation ofimplement the new standard, the Company has established a project lead and has formalizedempowered a cross functional steering committee comprised of members from different disciplines including Credit, Accounting, Finance, Financial Analytics, Information Technology, and Treasury, as well as specific working groups to focusfocused on key components of the development process. In addition, through one ofThrough the working groups, the Company has begun to evaluateevaluated the effect that this Update willthe Updates have on its financial statements and related disclosures. An implementation project plan has been created and is made up of targeted work streams focused onThe CECL credit models data management,incorporate assumptions used to calculate credit losses over the estimated life of the applicable financial assets and include the impact of forecasted macroeconomic conditions. During the fourth quarter of 2019, the Company continued testing CECL credit models, processes, and controls in parallel with the existing incurred loss approach. The Company is continuing to work on finalizing CECL accounting policies and governance. These work streamsdrafting required disclosures under these Updates.
Adopting the new standard required the Company to make certain policy elections and decisions on how expected losses are collectively assessing resources that may be required, usemeasured. Under CECL, the Company will estimate lifetime credit losses based on three portfolio segments: commercial loans and leases, consumer loans and lines of existingcredit, and new models, data availability,HTM debt securities. Expected losses within the commercial and system solutions to facilitate implementation. The Updateconsumer portfolio segments will be collectively assessed using PD/LGD models. Expected losses on HTM debt securities will be collectively assessed with separate models for each type of security. Through the Company’s established CECL Committee, policy elections, key assumptions, processes, and models will be reviewed and updated as necessary.
These Updates became effective for the Company on January 1, 2020, at which time the CECL processes, controls, and models became the Company’s primary method for calculating and recording the allowance for credit losses. The Company will adopt the Updates using the modified retrospective approach. Upon adoption of the Updates the Company expects an increase of approximately 30% in its allowance for credit losses, reflected as a reduction, net of tax, to the Company's beginning total shareholders' equity at January 1, 2020. While we are currently unable to reasonably estimateUpon adoption the impactCompany’s allowance for credit losses became reflective of adoptingall credit losses expected over the Update, we expectlifetime of the impact of adoptionCompany’s applicable financial assets. The allowance for credit losses will be significantly influenced bybased on the composition, characteristics, and credit quality of ourthe loan and securities portfolios as well asof the reporting date and will include consideration of current economic conditions as of the adoptionand reasonable and supportable forecasts at that date.

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ASU No. 2016-02, Leases (Topic 842).
The Update introduces a lessee model that brings most leases onto the balance sheet. The Update also aligns certain of the underlying principles of the new lessor model with those in ASC 606 "Revenue from Contracts with Customers", the FASB’s new revenue recognition standard (e.g., evaluating how collectability should be considered and determining when profit can be recognized).
Furthermore, the Update addresses other concerns including the elimination of the required use of bright-line tests for determining lease classification. Lessors are required to provide additional transparency into the exposure to the changes in value of their residual assets and how they manage that exposure.
The Update is effective for the Company on January 1, 2019. A modified retrospective transition approach is required for leases existing at or entered into after, the beginning of the earliest comparative period presentedentire increase in the financial statements.
The Company isallowance for credit losses will be reflected in the early assessment stage and will continue to review the existing lease portfolio to evaluate the impact of the new accounting guidance on the financial statements.
ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities.
This Update included targeted amendments in connection with the recognition, measurement, presentation and disclosure of financial instruments. The main provisions require investments in equity securities to be measured at fair value through net income, unless they qualify for a practicability exception, and require fair value changes arising from changes in instrument-specific credit risk for financial liabilities that are measured under the fair value option to be recognized in other comprehensive income. With the exception of disclosure requirements that will be adopted prospectively, the Update must be adopted on a modified retrospective basis.
The Update also emphasizes the existing requirement to use exit prices to measure fair value for disclosure purposes and clarifies that entities should not make use of a practicability exception in determining the fair value of loans. The Company will adopt the Update during the first quarter of 2018Company's regulatory capital ratios and will not have a material impact on the Company's financial statements.significant impact.
ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). Also, subsequent ASUs issued to clarify this Topic.
In May 2014, the FASB issued new accounting guidance for recognizing revenue from contracts with customers, which is effective on January 1, 2018. ASU 2014-09 and subsequent related updates establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The Update is intended to increase comparability across industries. The core principle of the revenue model is that a company will recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. The Update is effective for the first quarter of 2018, and can be adopted through either a full retrospective transition, or a modified retrospective transition approach.
The Update excludes the Company's revenue associated with net interest income, and certain non-interest income line items (loan and lease related fees, mortgage banking activities, increase in cash surrender value of life insurance policies, gain on sale of investment securities, net, impairment loss on securities recognized in earnings, and a majority of other income). As a result a substantial amount of the Company's revenue will not be affected.
The Company's deposit service fees, wealth and investment services, and certain other non-interest income line items are within the scope of the Update. The Update will require the Company to change how we present certain recurring revenue streams within wealth and investment services and other insignificant components of non-interest income; however, these changes will not have a significant impact on the Company's financial statements. The Update is effective for the first quarter of 2018. The Company will adopt the Update using the modified retrospective transition approach effective January 1, 2018. The adoption will not have a material impact on the Company's financial statements related to timing of revenue recognition, however, certain immaterial changes are expected in presentation.

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69


Note 2: Variable Interest Entities
The Company has an investment interest in severalthe following entities that meet the definition of a VIE. The following discussion provides information about the Company's VIEs.
Consolidated
Rabbi Trust. The Company established a Rabbi Trust to meet the obligations due under its Deferred Compensation Plan for Directors and Officers and to mitigate the expense volatility of the aforementioned plan. The funding of the Rabbi Trust and the discontinuation of the Deferred Compensation Plan for Directors and Officers occurred during 2012.
Investments held in the Rabbi Trust primarily consist of mutual funds that invest in equity and fixed income securities. The Company is considered the primary beneficiary of the Rabbi Trust as it has the power to direct the activities of the Rabbi Trust that significantly affect the VIE's economic performance and it has the obligation to absorb losses of the VIE that could potentially be significant to the VIE.
The Company consolidates the invested assets of the trust along with the total deferred compensation obligations and includes them in accrued interest receivable and other assets and accrued expenses and other liabilities, respectively, in the accompanying Consolidated Balance Sheets.consolidated balance sheets. Earnings in the Rabbi Trust, including appreciation or depreciation, are reflected as other non-interest income, and changes in the corresponding liability are reflected as compensation and benefits, in the accompanying Consolidated Statementsconsolidated statement of Income.income. Refer to Note 16:17: Fair Value Measurements for additional information.
Non-Consolidated
Securitized Investments. The Company, through normal investment activities, makes passive investments in securities issued by VIEs for which Webster is not the manager. The investment securities consist of Agency CMO, Agency MBS, Agency CMBS, CLO, and single issuer-trust preferred. The Company has not provided financial or other support with respect to these investment securities other than its original investment. For these investment securities, the Company determined it is not the primary beneficiary due to the relative size of its investment in comparison to the principal amount of the structured securities issued by the VIEs, the level of credit subordination which reduces the Company’s obligation to absorb losses or right to receive benefits and its inability to direct the activities that most significantly impact the economic performance of the VIEs. The Company’s maximum exposure to loss is limited to the amount of its investment in the VIEs. Refer to Note 3: Investment Securities for additional information.
Tax Credit - Finance Investments. The Company makes non-marketable equity investments in entities that finance affordable housing and other community development projects and provide a return primarily through the realization of tax benefits. In most instances the investments require the funding of capital commitments in the future. While the Company's investment in an entity may exceed 50% of its outstanding equity interests, the entity is not consolidated as Websterthe Company is not involved in its management. For these investments, the Company determined it is not the primary beneficiary due to its inability to direct the activities that most significantly impact the economic performance of the VIEs. The Company applies the proportional amortization method to account for its investments in qualified affordable housing projects.
At December 31, 20172019 and December 31, 2016,2018, the aggregate carrying value of the Company's tax credit-finance investments were $33.5was $42.5 million and $22.8$29.1 million, respectively, which represents the Company's maximum exposure to loss. At December 31, 20172019 and December 31, 2016,2018, unfunded commitments have been recognized, totaling $17.3$15.1 million and $14.0$10.4 million, respectively, and are included in accrued expenses and other liabilities in the accompanying Consolidated Balance Sheets.consolidated balance sheets.
Webster Statutory Trust. The Company owns all the outstanding common stock of Webster Statutory Trust, a financial vehicle that has issued, and in the future may issue, trust preferred securities. The trust is a VIE in which the Company is not the primary beneficiary and therefore, is not consolidated.beneficiary. The trust's only assets are junior subordinated debentures issued by the Company, which were acquired by the trust using the proceeds from the issuance of the trust preferred securities and common stock. The junior subordinated debentures are included in long-term debt in the accompanying Consolidated Balance Sheets,consolidated balance sheets, and the related interest expense is reported as interest expense on long-term debt in the accompanying Consolidated Statementsconsolidated statement of Income.income.
Other Non-Marketable Investments. The Company invests in various alternative investments in which it holds a variable interest. AlternativeThese investments are non-public entities which cannot be redeemed since the Company’s investment is distributed as the underlying equity is liquidated. For these investments, the Company has determined it is not the primary beneficiary due to its inability to direct the activities that most significantly impact the economic performance of the VIEs.
At December 31, 20172019 and December 31, 2016,2018, the aggregate carrying value of the Company's other non-marketable investments in VIEs was $13.8$21.8 million and $12.3$17.6 million, respectively, and the maximum exposure to loss of the Company's other non-marketable investments in VIEs, including unfunded commitments, was $22.9$64.2 million and $19.9$31.0 million, respectively. Refer to Note 16:17: Fair Value Measurements for additional information.
The Company's equity interests in Other Non-Marketable Investments, as well as Tax Credit-Finance Investments and Webster Statutory Trust, and Other Investments are included in accrued interest receivable and other assets in the accompanying Consolidated Balance Sheets.consolidated balance sheet. For a description of the Company's accounting policy regarding the consolidation of VIEs, refer to Note 1: Summary of Significant Accounting Policies under the section “Principles of Consolidation”.

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Note 3: Investment Securities
A Summarysummary of the amortized cost and fair value of investment securities is presented below:
 At December 31,
 2017 2016
(In thousands)
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value 
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
Available-for-sale:         
U.S. Treasury Bills$1,247
$—
$—
$1,247
 $734
$—
$—
$734
Agency CMO308,989
1,158
(3,814)306,333
 419,865
3,344
(3,503)419,706
Agency MBS1,124,960
2,151
(19,270)1,107,841
 969,460
4,398
(19,509)954,349
Agency CMBS608,276
—
(20,250)588,026
 587,776
63
(14,567)573,272
CMBS358,984
2,157
(74)361,067
 473,974
4,093
(702)477,365
CLO209,075
910
(134)209,851
 425,083
2,826
(519)427,390
Single issuer-trust preferred7,096
—
(46)7,050
 30,381
—
(1,748)28,633
Corporate debt56,504
797
(679)56,622
 108,490
1,502
(350)109,642
Total available-for-sale$2,675,131
$7,173
$(44,267)$2,638,037
 $3,015,763
$16,226
$(40,898)$2,991,091
Held-to-maturity:         
Agency CMO$260,114
$664
$(4,824)$255,954
 $339,455
$1,977
$(3,824)$337,608
Agency MBS2,569,735
16,989
(37,442)2,549,282
 2,317,449
26,388
(41,768)2,302,069
Agency CMBS696,566
—
(10,011)686,555
 547,726
694
(1,348)547,072
Municipal bonds and notes711,381
8,584
(6,558)713,407
 655,813
4,389
(25,749)634,453
CMBS249,273
2,175
(620)250,828
 298,538
4,107
(411)302,234
Private Label MBS323
1
—
324
 1,677
12
—
1,689
Total held-to-maturity$4,487,392
$28,413
$(59,455)$4,456,350
 $4,160,658
$37,567
$(73,100)$4,125,125

At December 31,
 20192018
(In thousands)Amortized
Cost		Unrealized
Gains		Unrealized
Losses		Fair ValueAmortized
Cost		Unrealized
Gains		Unrealized
Losses		Fair Value
Available-for-sale:
U.S. Treasury Bills$—  $—  $—  $—  $7,549  $1  $—  $7,550  
Agency CMO184,500  2,218  (917) 185,801  238,968  412  (4,457) 234,923  
Agency MBS1,580,743  35,456  (4,035) 1,612,164  1,521,534  1,631  (42,076) 1,481,089  
Agency CMBS587,974  513  (6,935) 581,552  608,167  —  (41,930) 566,237  
CMBS432,085  38  (252) 431,871  447,897  645  (2,961) 445,581  
CLO92,628  45  (468) 92,205  114,641  94  (1,964) 112,771  
Corporate debt23,485  —  (1,245) 22,240  55,860  —  (5,281) 50,579  
Total available-for-sale$2,901,415  $38,270  $(13,852) $2,925,833  $2,994,616  $2,783  $(98,669) $2,898,730  
Held-to-maturity:
Agency CMO$167,443  $1,123  $(1,200) $167,366  $208,113  $287  $(5,255) $203,145  
Agency MBS2,957,900  60,602  (8,733) 3,009,769  2,517,823  8,250  (79,701) 2,446,372  
Agency CMBS1,172,491  6,444  (5,615) 1,173,320  667,500  53  (22,572) 644,981  
Municipal bonds and notes740,431  32,709  (21) 773,119  715,041  2,907  (18,285) 699,663  
CMBS255,653  2,278  (852) 257,079  216,943  405  (2,388) 214,960  
Total held-to-maturity$5,293,918  $103,156  $(16,421) $5,380,653  $4,325,420  $11,902  $(128,201) $4,209,121  
Other-Than-Temporary Impairment
The balance of OTTI, includedamount in the amortized cost columns in the table above isincludes OTTI related to certain CLO positions that were previously considered Covered Funds as defined by Section 619 of the Dodd-Frank Act commonly known as the Volcker Rule.Dodd-Frank. The Company has taken measures to bring its CLO positions into conformancecompliance with the Volcker Rule.
To the extent that changes occur in interest rates, credit movements, and other factors that impact fair value and expected recovery of amortized cost of its investment securities, the Company may be required to recognize OTTI in earnings, in future periods.these requirements.
The following table presents the changes in OTTI:
Years ended December 31,
(In thousands)201920182017
Beginning balance$822  $1,364  $3,243  
Reduction for investment securities called—  (542) (2,005) 
Additions for OTTI not previously recognized in earnings—  —  126  
Ending balance$822  $822  $1,364  
 Years ended December 31,
(In thousands)2017 2016 2015
Beginning balance$3,243
 $3,288
 $3,696
Reduction for securities sold or called(2,005) (194) (518)
Additions for OTTI not previously recognized126
 149
 110
Ending balance$1,364
 $3,243
 $3,288


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Table of Contents

Fair Value and Unrealized Losses
The following tables provide information on fair value and unrealized losses for the individual investment securities with an unrealized loss, aggregated by investment security typeclassification and length of time that the individual investment securities have been in a continuous unrealized loss position:
 At December 31, 2019
 Less Than Twelve MonthsTwelve Months or LongerTotal
(Dollars in thousands)Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		# of
Holdings		Fair
Value		Unrealized
Losses
Available-for-sale:
Agency CMO$36,447  $(352) $32,288  $(565) 9  $68,735  $(917) 
Agency MBS41,408  (193) 299,674  (3,842) 79  341,082  (4,035) 
Agency CMBS174,406  (1,137) 357,717  (5,798) 34  532,123  (6,935) 
CMBS355,260  (232) 7,480  (20) 29  362,740  (252) 
CLO—  —  43,232  (468) 2  43,232  (468) 
Corporate debt—  —  22,240  (1,245) 4  22,240  (1,245) 
Total available-for-sale in an unrealized loss position$607,521  $(1,914) $762,631  $(11,938) 157  $1,370,152  $(13,852) 
Held-to-maturity:
Agency CMO$26,480  $(174) $54,602  $(1,026) 11  $81,082  $(1,200) 
Agency MBS164,269  (1,165) 727,778  (7,568) 105  892,047  (8,733) 
Agency CMBS488,091  (5,591) 4,148  (24) 21  492,239  (5,615) 
Municipal bonds and notes2,508  (21) —  —  1  2,508  (21) 
CMBS85,422  (852) —  —  8  85,422  (852) 
Total held-to-maturity in an unrealized loss position$766,770  $(7,803) $786,528  $(8,618) 146  $1,553,298  $(16,421) 
 At December 31, 2017
 Less Than Twelve Months Twelve Months or Longer Total
(Dollars in thousands)
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
 
# of
Holdings
Fair
Value
Unrealized
Losses
Available-for-sale:         
Agency CMO$81,001
$(449) $119,104
$(3,365) 27$200,105
$(3,814)
Agency MBS416,995
(2,920) 606,021
(16,350) 1351,023,016
(19,270)
Agency CMBS54,182
(851) 533,844
(19,399) 36588,026
(20,250)
CMBS23,869
(74) —
—
 623,869
(74)
CLO56,335
(134) —
—
 356,335
(134)
Single issuer-trust preferred7,050
(46) —
—
 17,050
(46)
Corporate debt11,082
(395) 6,265
(284) 417,347
(679)
Total available-for-sale in an unrealized loss position$650,514
$(4,869) $1,265,234
$(39,398) 212$1,915,748
$(44,267)
Held-to-maturity:         
Agency CMO$98,090
$(1,082) $106,775
$(3,742) 22$204,865
$(4,824)
Agency MBS762,107
(4,555) 1,197,839
(32,887) 2051,959,946
(37,442)
Agency CMBS576,770
(7,599) 109,785
(2,412) 56686,555
(10,011)
Municipal bonds and notes6,432
(38) 226,861
(6,520) 92233,293
(6,558)
CMBS92,670
(413) 14,115
(207) 13106,785
(620)
Total held-to-maturity in an unrealized loss position$1,536,069
$(13,687) $1,655,375
$(45,768) 388$3,191,444
$(59,455)

 At December 31, 2016
 Less Than Twelve Months Twelve Months or Longer Total
(Dollars in thousands)
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
 
# of
Holdings
Fair
Value
Unrealized
Losses
Available-for-sale:         
Agency CMO$107,853
$(2,168) $67,351
$(1,335) 15$175,204
$(3,503)
Agency MBS512,075
(10,503) 252,779
(9,006) 97764,854
(19,509)
Agency CMBS554,246
(14,567) —
—
 32554,246
(14,567)
CMBS12,427
(24) 63,930
(678) 1276,357
(702)
CLO49,946
(54) 50,237
(465) 5100,183
(519)
Single issuer-trust preferred—
—
 28,633
(1,748) 528,633
(1,748)
Corporate debt—
—
 7,384
(350) 27,384
(350)
Total available-for-sale in an unrealized loss position$1,236,547
$(27,316) $470,314
$(13,582) 168$1,706,861
$(40,898)
Held-to-maturity:         
Agency CMO$163,439
$(3,339) $17,254
$(485) 16$180,693
$(3,824)
Agency MBS1,394,623
(32,942) 273,779
(8,826) 1501,668,402
(41,768)
Agency CMBS347,725
(1,348) —
—
 25347,725
(1,348)
Municipal bonds and notes384,795
(25,745) 1,192
(4) 196385,987
(25,749)
CMBS60,768
(411) —
—
 860,768
(411)
Total held-to-maturity in an unrealized loss position$2,351,350
$(63,785) $292,225
$(9,315) 395$2,643,575
$(73,100)


 At December 31, 2018
 Less Than Twelve MonthsTwelve Months or LongerTotal
(Dollars in thousands)Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		# of
Holdings		Fair
Value		Unrealized
Losses
Available-for-sale:
Agency CMO$15,524  $(72) $180,641  $(4,385) 36  $196,165  $(4,457) 
Agency MBS321,678  (2,078) 975,084  (39,998) 184  1,296,762  (42,076) 
Agency CMBS—  —  566,237  (41,930) 37  566,237  (41,930) 
CMBS343,457  (2,937) 5,193  (24) 39  348,650  (2,961) 
CLO83,305  (1,695) 14,873  (269) 5  98,178  (1,964) 
Corporate debt35,990  (1,820) 14,589  (3,461) 8  50,579  (5,281) 
Total available-for-sale in an unrealized loss position$799,954  $(8,602) $1,756,617  $(90,067) 309  $2,556,571  $(98,669) 
Held-to-maturity:
Agency CMO$691  $(1) $182,396  $(5,254) 25  $183,087  $(5,255) 
Agency MBS288,635  (1,916) 1,892,951  (77,785) 272  2,181,586  (79,701) 
Agency CMBS—  —  635,284  (22,572) 56  635,284  (22,572) 
Municipal bonds and notes68,351  (882) 414,776  (17,403) 223  483,127  (18,285) 
CMBS24,881  (270) 132,464  (2,118) 20  157,345  (2,388) 
Total held-to-maturity in an unrealized loss position$382,558  $(3,069) $3,257,871  $(125,132) 596  $3,640,429  $(128,201) 
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Impairment Analysis
The following impairment analysis by investment security type, summarizes the basis for evaluating if investment securities within the Company’s available-for-sale and held-to-maturity portfolios have been impacted by OTTI.are other-than-temporarily impaired as of December 31, 2019. Unless otherwise noted for an investment security type, management does not intend to sell these investmentsinvestment securities and has determined, based upon available evidence, that it is more likely than not that the Company will not be required to sell these investment securities before the recovery of their amortized cost. As such, based on the following impairment analysis, the Company does not consider any of these investment securities, in unrealized loss positions, to be other-than-temporarily impaired at December 31, 2017.2019.
Available-for-Sale Securities
Agency CMO. There were unrealized losses of $3.8$0.9 million on the Company’s investment in Agency CMO at December 31, 2017,2019, compared to $3.5$4.5 million at December 31, 2016.2018. Unrealized losses increased slightlydecreased due to higherlower market rates while principal balances decreased for this asset class since December 31, 2016.2018. These investments are issued by a government or government sponsored agency and therefore, are backed by certain government guarantees, either direct or implicit. There has been no change in the credit quality, and the contractual cash flows are performing as expected.
Agency MBS. There were unrealized losses of $19.3$4.0 million on the Company’s investment in residential mortgage-backed securities issued by government agencies at December 31, 2017,2019, compared to $19.5$42.1 million at December 31, 2016.2018. Unrealized losses decreased slightly due to paydowns and purchase activity,lower market rates, while principal balances increased for this asset class since December 31, 2016.2018. These investments are issued by a government or government sponsored agency and therefore, are backed by certain government guarantees, either direct or implicit. There has been no change in the credit quality, and the contractual cash flows are performing as expected.
Agency CMBS. There were unrealized losses of $20.3$6.9 million on the Company's investment in commercial mortgage-backed securities issued by government agencies at December 31, 2017,2019, compared to $14.6$41.9 million at December 31, 2016.2018. Unrealized losses increaseddecreased due to higherlower market rates while principal balances increaseddecreased for this asset class since December 31, 2016.2018. These investments are issued by a government or government sponsored agency and therefore, are backed by certain government guarantees, either direct or implicit. There has been no change in the credit quality, and the contractual cash flows are performing as expected.
CMBS. There were unrealized losses of $74$252 thousand on the Company’s investment in CMBS at December 31, 2017,2019, compared to $702 thousand$3.0 million at December 31, 2016.2018. The portfolio of mainly floating rate CMBS experienced reduced market spreads which resulted in higher market prices and smallerlower unrealized losses atwhile principal balances declined for this asset class since December 31, 2017 compared to December 31, 2016.2018. Internal stress tests are performed on individual bonds to monitor potential losses under stress scenarios. Contractual cash flows for the bonds continue to perform as expected.
CLO. There were unrealized losses of $134$468 thousand on the Company’s investments in CLO at December 31, 20172019 compared to $519 thousand$2.0 million of unrealized losses at December 31, 2016.2018. Unrealized losses decreased due to reduced market spreads while principal balances decreased due to call activity and amortization for this asset class since December 31, 2016.2018. Internal stress tests are performed on individual bonds to monitor potential losses under stress scenarios. Contractual cash flows for the bonds continue to perform as expected.
Single issuer-trust preferred. There were unrealized losses of $46 thousand on the Company's investment in single issuer-trust preferred at December 31, 2017, compared to $1.7 million at December 31, 2016. Unrealized losses decreased due to lower principal balances for this asset class as a conversion feature for two securities was exercised by the issuer resulting in the reclassification of those securities into corporate debt. Single issuer-trust preferred consists of one investment issued by a large capitalization money center financial institution, which continues to service its debt. The Company performs periodic credit reviews of the issuer to assess the likelihood for ultimate recovery of amortized cost.
Corporate debt. There were $679 thousand$1.2 million of unrealized losses on the Company's corporate debt portfolio at December 31, 2017,2019, compared to $350 thousand$5.3 million at December 31, 2016.2018. Unrealized losses increased as reclassified securitydecreased due to reduced market spreads while principal balances with unrealized losses exceeded maturing corporate debt balancesdecreased since December 31, 2016.2018. The Company performs periodic credit reviews of the issuer to assess the likelihood for ultimate recovery of amortized cost.
Held-to-Maturity Securities
Agency CMO. There were unrealized losses of $4.8$1.2 million on the Company’s investment in Agency CMO at December 31, 2017,2019, compared to $3.8$5.3 million at December 31, 2016.2018. Unrealized losses increaseddecreased due to higherlower market rates while principal balances decreased since December 31, 2016. These investments are issued by a government or government sponsored agency and therefore, are backed by certain government guarantees, either direct or implicit. There has been no change in the credit quality, and the contractual cash flows are performing as expected.

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Agency MBS. There were unrealized losses of $37.4 million on the Company’s investment in residential mortgage-backed securities issued by government agencies at December 31, 2017, compared to $41.8 million at December 31, 2016. Unrealized losses decreased due to paydowns and purchase activity while principal balances increased for this asset class since December 31, 2016.2018. These investments are issued by a government or government sponsored agency and therefore, are backed by certain government guarantees, either direct or implicit. There has been no change in the credit quality, and the contractual cash flows are performing as expected.
Agency MBS. There were unrealized losses of $8.7 million on the Company’s investment in residential mortgage-backed securities issued by government agencies at December 31, 2019, compared to $79.7 million at December 31, 2018. Unrealized losses decreased due to lower market rates while principal balances increased for this asset class since December 31, 2018. These investments are issued by a government or government sponsored agency and therefore, are backed by certain government guarantees, either direct or implicit. There has been no change in the credit quality, and the contractual cash flows are performing as expected.
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Agency CMBS. There were unrealized losses of $10.0$5.6 million on the Company’s investment in commercial mortgage-backed securities issued by government agencies at December 31, 2017,2019, compared to $1.3$22.6 million at December 31, 2016.2018. Unrealized losses increaseddecreased due to higherlower market rates while principal balances increased for this asset class since December 31, 2016.2018. These investments are issued by a government or government sponsored agency and therefore, are backed by certain government guarantees, either direct or implicit. There has been no change in the credit quality, and the contractual cash flows are performing as expected.
Municipal bonds and notes. There were unrealized losses of $6.6 million$21 thousand on the Company’s investment in municipal bonds and notes at December 31, 2017,2019, compared to $25.7$18.3 million at December 31, 2016.2018. Unrealized losses decreased due to lower market spreadsrates while principal balances increased for this asset class since December 31, 2016.2018. The Company performs periodic credit reviews of the issuers and the securities are currently performing as expected.
CMBS. There were unrealized losses of $620$852 thousand on the Company’s investment in CMBS at December 31, 2017,2019, compared to $411 thousand$2.4 million unrealized losses at December 31, 2016.2018. Unrealized losses increaseddecreased due to higherlower market rates on mainly seasoned fixed rate conduit transactions while principal balances decreasedincreased for this asset class since December 31, 2016.2018. Internal stress tests are performed on individual bonds to monitor potential losses under stress scenarios.
Sales of Available-for Sale Securities
The following table provides information onFor the year ended December 31, 2019, proceeds from sales of available-for-sale securities:securities were $70.1 million. These sales produced gross realized gains of $773 thousand and a gross realized loss of $744 thousand from the tender of a corporate debt security, which resulted in a net gain on sale of investment securities of $29 thousand. There were 0 sales during the years ended December 31, 2018 and 2017.
 Years ended December 31,
(In thousands)2017 2016 2015
Proceeds from sales (1)
$—
 $259,273
 $95,101
      
Gross realized gains on sales$—
 $2,891
 $1,029
Less: Gross realized losses on sales—
 2,477
 420
Gain on sale of investment securities, net$—
 $414
 $609

(1)There were no sales during the year ended December 31, 2017.
Contractual Maturities
The amortized cost and fair value of debt securities by contractual maturity including called securities, are set forth below:
 At December 31, 2017
    
 Available-for-Sale Held-to-Maturity
(In thousands)
Amortized
Cost
Fair
Value
 
Amortized
Cost
Fair
Value
Due in one year or less$1,247
$1,247
 $33,654
$34,145
Due after one year through five years40,066
40,447
 3,839
3,857
Due after five through ten years332,558
333,931
 37,870
38,450
Due after ten years2,301,260
2,262,412
 4,412,029
4,379,898
Total debt securities$2,675,131
$2,638,037
 $4,487,392
$4,456,350

At December 31, 2019
 Available-for-SaleHeld-to-Maturity
(In thousands)Amortized
Cost		Fair
Value		Amortized
Cost		Fair
Value
Due in one year or less$—  $—  $1,084  $1,088  
Due after one year through five years—  —  4,621  4,747  
Due after five through ten years299,979  299,531  245,473  249,501  
Due after ten years2,601,436  2,626,302  5,042,740  5,125,317  
Total debt securities$2,901,415  $2,925,833  $5,293,918  $5,380,653  
For the maturity schedule above, mortgage-backed securities and CLO, which are not due at a single maturity date, have been categorized based on the maturity date of the underlying collateral. Actual principal cash flows may differ from this maturity date presentation as borrowers have the right to prepay obligations with or without prepayment penalties.
At December 31, 2017,2019, the Company had a carrying value of $1.2$1.3 billion in callable debt securities in its CMBS, CLO, and municipal bond portfolios. The Company considers prepayment risk in the evaluation of its interest rate risk profile. These maturities domay not reflect actual durationdurations, which aremay be impacted by prepayments.
Investment securities with a carrying value totaling $2.4$2.7 billion at December 31, 20172019 and $2.5$2.2 billion at December 31, 20162018 were pledged to secure public funds, trust deposits, repurchase agreements, and for other purposes, as required or permitted by law.

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Note 4: Loans and Leases
The following table summarizes loans and leases:
At December 31,
(In thousands)20192018
Commercial$6,343,497  $6,216,606  
Commercial Real Estate5,949,339  4,927,145  
Equipment Financing537,341  508,397  
Residential4,972,685  4,416,637  
Consumer2,234,124  2,396,704  
Loans and leases (1) (2)
$20,036,986  $18,465,489  
 At December 31,
(In thousands)2017 2016
Residential$4,490,878
 $4,254,682
Consumer2,590,225
 2,684,500
Commercial5,368,694
 4,940,931
Commercial Real Estate4,523,828
 4,510,846
Equipment Financing550,233
 635,629
Loans and leases (1) (2)
$17,523,858
 $17,026,588

(1)Loans and leases include net deferred fees and net premiums and discounts of $17.6 million and $13.9 million at December 31, 2019 and December 31, 2018, respectively.
(1)Loans and leases include net deferred fees and net premiums and discounts of $20.6 million and $17.3 million at December 31, 2017 and December 31, 2016, respectively.
(2)At December 31, 2017, the Company had pledged $6.7 billion of eligible loans as collateral to support borrowing capacity at the FHLB of Boston and the FRB of Boston.
(2)At December 31, 2019, the Company had pledged $7.9 billion of eligible loans as collateral to support borrowing capacity at the FHLB of Boston and the FRB of Boston.
The equipment financing portfolio includes net investment in leases of $169.3 million at December 31, 2019. Total undiscounted cash flows to be received from the Company's net investment in leases are $184.1 million at December 31, 2019 and are primarily due within the next five years. The Company's lessor portfolio has recognized interest income of $5.5 million for year ended December 31, 2019.
Loans and Leases Portfolio Aging
The following tables summarize the aging of loans and leases:
 At December 31, 2019
(In thousands)30-59 Days
Past Due and
Accruing		60-89 Days
Past Due and
Accruing		90 or More Days Past Due
and Accruing		Non-accrualTotal Past Due and Non-accrualCurrentTotal Loans
and Leases
Commercial:
Commercial non-mortgage$2,094  $617  $—  $59,369  $62,080  $5,234,531  $5,296,611  
Asset-based—  —  —  139  139  1,046,747  1,046,886  
Commercial real estate:
Commercial real estate1,256  454  —  9,950  11,660  5,713,939  5,725,599  
Commercial construction—  —  —  1,613  1,613  222,127  223,740  
Equipment financing5,493  292  —  5,433  11,218  526,123  537,341  
Residential7,166  6,441  —  43,193  56,800  4,915,885  4,972,685  
Consumer:
Home equity8,267  5,551  —  30,170  43,988  1,970,556  2,014,544  
Other consumer4,269  807  —  1,192  6,268  213,312  219,580  
Total$28,545  $14,162  $—  $151,059  $193,766  $19,843,220  $20,036,986  
 At December 31, 2017
(In thousands)
30-59 Days
Past Due and
Accruing
60-89 Days
Past Due and
Accruing
90 or More Days Past Due
and Accruing
Non-accrualTotal Past Due and Non-accrualCurrent
Total Loans
and Leases
Residential$8,643
$5,146
$—
$44,481
$58,270
$4,432,608
$4,490,878
Consumer:       
Home equity12,668
5,770
—
35,645
54,083
2,298,185
2,352,268
Other consumer2,556
1,444
—
1,707
5,707
232,250
237,957
Commercial:       
Commercial non-mortgage5,212
603
644
39,214
45,673
4,488,242
4,533,915
Asset-based—
—
—
589
589
834,190
834,779
Commercial real estate:       
Commercial real estate478
77
248
4,484
5,287
4,238,987
4,244,274
Commercial construction—
—
—
—
—
279,554
279,554
Equipment financing1,732
626
—
393
2,751
547,482
550,233
Total$31,289
$13,666
$892
$126,513
$172,360
$17,351,498
$17,523,858

 At December 31, 2016
(In thousands)
30-59 Days
Past Due and
Accruing
60-89 Days
Past Due and
Accruing
90 or More Days Past Due
and Accruing
Non-accrual
Total Past Due and
Non-accrual
Current
Total Loans
and Leases
Residential$8,631
$2,609
$—
$47,279
$58,519
$4,196,163
$4,254,682
Consumer:       
Home equity8,831
5,782
—
35,926
50,539
2,359,354
2,409,893
Other consumer2,233
1,485
—
1,663
5,381
269,226
274,607
Commercial:       
Commercial non-mortgage1,382
577
749
38,190
40,898
4,094,727
4,135,625
Asset-based—
—
—
—
—
805,306
805,306
Commercial real estate:       
Commercial real estate6,357
1,816
—
9,871
18,044
4,117,742
4,135,786
Commercial construction—
—
—
662
662
374,398
375,060
Equipment financing903
693
—
225
1,821
633,808
635,629
Total$28,337
$12,962
$749
$133,816
$175,864
$16,850,724
$17,026,588

 At December 31, 2018
(In thousands)30-59 Days
Past Due and
Accruing		60-89 Days
Past Due and
Accruing		90 or More Days Past Due
and Accruing		Non-accrualTotal Past Due and
Non-accrual		CurrentTotal Loans
and Leases
Commercial:
Commercial non-mortgage$1,011  $702  $104  $55,810  $57,627  $5,189,808  $5,247,435  
Asset-based—  —  —  224  224  968,947  969,171  
Commercial real estate:
Commercial real estate1,275  245  —  8,242  9,762  4,698,552  4,708,314  
Commercial construction—  —  —  —  —  218,831  218,831  
Equipment financing510  405  —  6,314  7,229  501,168  508,397  
Residential8,513  4,301  —  49,188  62,002  4,354,635  4,416,637  
Consumer:
Home equity9,250  5,385  —  33,495  48,130  2,121,049  2,169,179  
Other consumer1,774  957  —  1,494  4,225  223,300  227,525  
Total$22,333  $11,995  $104  $154,767  $189,199  $18,276,290  $18,465,489  
Interest on non-accrual loans and leases that would have been recorded as additional interest income for the years ended December 31, 2017, 2016,2019, 2018, and 2015,2017, had the loans and leases been current in accordance with their original terms, totaled $8.4$11.3 million, $11.0$9.7 million, and $8.2$8.4 million, respectively.

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Allowance for Loan and Lease Losses
The following tables summarize the activity in, as well as the loan and lease balances that were evaluated for, the ALLL: 
 At or for the Year ended December 31, 2019
(In thousands)CommercialCommercial
Real Estate		Equipment
Financing		ResidentialConsumerTotal
Allowance for loan and lease losses:
Balance at January 1, 2019$98,793  $60,151  $5,129  $19,599  $28,681  $212,353  
Provision for loan and lease losses20,370  8,550  254  4,110  4,516  37,800  
Charge-offs(29,033) (3,501) (793) (4,153) (15,000) (52,480) 
Recoveries1,626  45  78  1,363  8,311  11,423  
Balance at December 31, 2019$91,756  $65,245  $4,668  $20,919  $26,508  $209,096  
Individually evaluated for impairment7,867  1,143  418  3,618  1,203  14,249  
Collectively evaluated for impairment$83,889  $64,102  $4,250  $17,301  $25,305  $194,847  
Loan and lease balances:
Individually evaluated for impairment$102,393  $23,297  $5,433  $90,096  $35,191  $256,410  
Collectively evaluated for impairment6,241,104  5,926,042  531,908  4,882,589  2,198,933  19,780,576  
Loans and leases$6,343,497  $5,949,339  $537,341  $4,972,685  $2,234,124  $20,036,986  
 At or for the Year ended December 31, 2017
(In thousands)ResidentialConsumerCommercial
Commercial
Real Estate
Equipment
Financing
Total
Allowance for loan and lease losses:      
Balance at January 1, 2017$23,226
$45,233
$71,905
$47,477
$6,479
$194,320
Provision (benefit) charged to expense(2,692)9,367
23,417
11,040
(232)40,900
Losses charged off(2,500)(24,447)(8,147)(9,275)(558)(44,927)
Recoveries1,024
6,037
2,358
165
117
9,701
Balance at December 31, 2017$19,058
$36,190
$89,533
$49,407
$5,806
$199,994
Individually evaluated for impairment$4,805
$1,668
$9,786
$272
$23
$16,554
Collectively evaluated for impairment$14,253
$34,522
$79,747
$49,135
$5,783
$183,440
       
Loan and lease balances:      
Individually evaluated for impairment$114,295
$45,436
$72,471
$11,226
$3,325
$246,753
Collectively evaluated for impairment4,376,583
2,544,789
5,296,223
4,512,602
546,908
17,277,105
Loans and leases$4,490,878
$2,590,225
$5,368,694
$4,523,828
$550,233
$17,523,858
 At or for the Year ended December 31, 2016
(In thousands)ResidentialConsumerCommercial
Commercial
Real Estate
Equipment
Financing
Total
Allowance for loan and lease losses:      
Balance at January 1, 2016$25,876
$42,052
$59,977
$41,598
$5,487
$174,990
Provision (benefit) charged to expense230
18,507
28,662
7,930
1,021
56,350
Losses charged off(4,636)(20,669)(18,360)(2,682)(565)(46,912)
Recoveries1,756
5,343
1,626
631
536
9,892
Balance at December 31, 2016$23,226
$45,233
$71,905
$47,477
$6,479
$194,320
Individually evaluated for impairment$8,090
$2,903
$7,422
$169
$9
$18,593
Collectively evaluated for impairment$15,136
$42,330
$64,483
$47,308
$6,470
$175,727
       
Loan and lease balances:      
Individually evaluated for impairment$119,424
$45,719
$53,037
$24,755
$6,420
$249,355
Collectively evaluated for impairment4,135,258
2,638,781
4,887,894
4,486,091
629,209
16,777,233
Loans and leases$4,254,682
$2,684,500
$4,940,931
$4,510,846
$635,629
$17,026,588

 At or for the Year ended December 31, 2018
(In thousands)CommercialCommercial
Real Estate		Equipment
Financing		ResidentialConsumerTotal
Allowance for loan and lease losses:
Balance at January 1, 2018$89,533  $49,407  $5,806  $19,058  $36,190  $199,994  
Provision for loan and lease losses23,041  12,644  (329) 2,016  4,628  42,000  
Charge-offs(18,220) (2,061) (423) (3,455) (19,228) (43,387) 
Recoveries4,439  161  75  1,980  7,091  13,746  
Balance at December 31, 2018$98,793  $60,151  $5,129  $19,599  $28,681  $212,353  
Individually evaluated for impairment7,824  1,661  196  4,286  1,383  15,350  
Collectively evaluated for impairment$90,969  $58,490  $4,933  $15,313  $27,298  $197,003  
Loan and lease balances:
Individually evaluated for impairment$99,512  $10,828  $6,315  $103,531  $39,144  $259,330  
Collectively evaluated for impairment6,117,094  4,916,317  502,082  4,313,106  2,357,560  18,206,159  
Loans and leases$6,216,606  $4,927,145  $508,397  $4,416,637  $2,396,704  $18,465,489  
 At or for the Year ended December 31, 2015
(In thousands)ResidentialConsumerCommercial
Commercial
Real Estate
Equipment
Financing
Total
Allowance for loan and lease losses:      
Balance at January 1, 2015$25,452
$43,518
$47,068
$37,148
$6,078
$159,264
Provision (benefit) charged to expense6,057
11,847
21,693
11,381
(1,678)49,300
Losses charged off(6,508)(17,679)(11,522)(7,578)(273)(43,560)
Recoveries875
4,366
2,738
647
1,360
9,986
Balance at December 31, 2015$25,876
$42,052
$59,977
$41,598
$5,487
$174,990
Individually evaluated for impairment$10,364
$3,477
$5,197
$3,163
$3
$22,204
Collectively evaluated for impairment$15,512
$38,575
$54,780
$38,435
$5,484
$152,786
       
Loan and lease balances:      
Individually evaluated for impairment$134,448
$48,425
$56,581
$39,295
$422
$279,171
Collectively evaluated for impairment3,926,553
2,654,135
4,259,418
3,952,354
600,104
15,392,564
Loans and leases$4,061,001
$2,702,560
$4,315,999
$3,991,649
$600,526
$15,671,735


 At or for the Year ended December 31, 2017
(In thousands)CommercialCommercial
Real Estate		Equipment
Financing		ResidentialConsumerTotal
Allowance for loan and lease losses:
Balance at January 1, 2017$71,905  $47,477  $6,479  $23,226  $45,233  $194,320  
Provision for loan and lease losses23,417  11,040  (232) (2,692) 9,367  40,900  
Charge-offs(8,147) (9,275) (558) (2,500) (24,447) (44,927) 
Recoveries2,358  165  117  1,024  6,037  9,701  
Balance at December 31, 2017$89,533  $49,407  $5,806  $19,058  $36,190  $199,994  
Individually evaluated for impairment9,786  272  23  4,805  1,668  16,554  
Collectively evaluated for impairment$79,747  $49,135  $5,783  $14,253  $34,522  $183,440  
Loan and lease balances:
Individually evaluated for impairment$72,471  $11,226  $3,325  $114,295  $45,436  $246,753  
Collectively evaluated for impairment5,296,223  4,512,602  546,908  4,376,583  2,544,789  17,277,105  
Loans and leases$5,368,694  $4,523,828  $550,233  $4,490,878  $2,590,225  $17,523,858  
85
76

Table of Contents

Impaired Loans and Leases
The following tables summarize impaired loans and leases:
 At December 31, 2019
(In thousands)Unpaid
Principal
Balance		Total
Recorded
Investment		Recorded
Investment
No Allowance		Recorded
Investment
With Allowance		Related
Valuation
Allowance
Commercial non-mortgage$140,096  $102,254  $29,739  $72,515  $7,862  
Asset-based465  139  —  139  5  
Commercial real estate27,678  21,684  13,205  8,479  1,143  
Commercial construction1,614  1,613  1,613  —  —  
Equipment financing5,591  5,433  2,159  3,274  418  
Residential98,790  90,096  56,231  33,865  3,618  
Consumer home equity38,503  35,191  27,672  7,519  1,203  
Total$312,737  $256,410  $130,619  $125,791  $14,249  
 At December 31, 2017
(In thousands)
Unpaid
Principal
Balance
Total
Recorded
Investment
Recorded
Investment
No Allowance
Recorded
Investment
With Allowance
Related
Valuation
Allowance
Residential:     
1-4 family$125,352
$114,295
$69,759
$44,536
$4,805
Consumer home equity50,809
45,436
34,418
11,018
1,668
Commercial:     
Commercial non-mortgage79,900
71,882
27,313
44,569
9,786
Asset-based3,272
589
589
—
—
Commercial real estate:     
Commercial real estate11,994
11,226
6,387
4,839
272
Commercial construction—
—
—
—
—
Equipment financing3,409
3,325
2,932
393
23
Total$274,736
$246,753
$141,398
$105,355
$16,554

 At December 31, 2016
(In thousands)
Unpaid
Principal
Balance
Total
Recorded
Investment
Recorded
Investment
No Allowance
Recorded
Investment
With Allowance
Related
Valuation
Allowance
Residential:     
1-4 family$131,468
$119,424
$21,068
$98,356
$8,090
Consumer home equity52,432
45,719
22,746
22,973
2,903
Commercial:     
Commercial non-mortgage57,732
53,037
26,006
27,031
7,422
Asset based—
—
—
—
—
Commercial real estate:     
Commercial real estate24,146
23,568
19,591
3,977
169
Commercial construction1,188
1,187
1,187
—
—
Equipment financing6,398
6,420
6,197
223
9
Total$273,364
$249,355
$96,795
$152,560
$18,593

 At December 31, 2018
(In thousands)Unpaid
Principal
Balance		Total
Recorded
Investment		Recorded
Investment
No Allowance		Recorded
Investment
With Allowance		Related
Valuation
Allowance
Commercial non-mortgage$120,165  $99,287  $65,724  $33,563  $7,818  
Asset based550  225  —  225  6  
Commercial real estate13,355  10,828  2,125  8,703  1,661  
Commercial construction—  —  —  —  —  
Equipment financing6,368  6,315  2,946  3,369  196  
Residential113,575  103,531  64,899  38,632  4,286  
Consumer home equity44,654  39,144  30,576  8,568  1,383  
Total$298,667  $259,330  $166,270  $93,060  $15,350  
The following table summarizes the average recorded investment and interest income recognized for impaired loans and leases:
 Years ended December 31,
 2017 2016 2015
(In thousands)
Average
Recorded
Investment
Accrued
Interest
Income
Cash Basis Interest Income 
Average
Recorded
Investment
Accrued
Interest
Income
Cash Basis Interest Income Average
Recorded
Investment		Accrued
Interest
Income		Cash Basis Interest Income
Residential$116,859
$4,138
$1,264
 $126,936
$4,377
$1,200
 $138,215
$4,473
$1,139
Consumer home equity45,578
1,323
1,046
 47,072
1,361
985
 49,337
1,451
1,099
Commercial           
Commercial non-mortgage62,459
1,095
—
 54,708
1,540
—
 46,379
1,319
—
Asset based295
—
—
 —
—
—
 —
—
—
Commercial real estate:           
Commercial real estate17,397
417
—
 28,451
511
—
 64,495
1,165
—
Commercial construction594
12
—
 3,574
92
—
 6,062
133
—
Equipment financing4,872
207
—
 3,421
184
—
 527
16
—
Total$248,054
$7,192
$2,310
 $264,162
$8,065
$2,185
 $305,015
$8,557
$2,238


86


Credit Quality Indicators. To measure credit risk for the commercial, commercial real estate, and equipment financing portfolios, the Company employs a dual grade credit risk grading system for estimating the PD and the LGD. The credit risk grade system assigns a rating to each borrower and to the facility, which together form a Composite Credit Risk Profile. The credit risk grade system categorizes borrowers by common financial characteristics that measure the credit strength of borrowers and facilities by common structural characteristics. The Composite Credit Risk Profile has ten grades, with each grade corresponding to a progressively greater risk of loss. Grades (1) - (6) are considered pass ratings, and (7) - (10) are considered criticized as defined by the regulatory agencies. Risk ratings, assigned to differentiate risk within the portfolio, are reviewed on an ongoing basis and revised to reflect changes in a borrowers’ current financial position and outlook, risk profile, and the related collateral and structural position. Loan officers review updated financial information on at least an annual basis for all pass rated loans to assess the accuracy of the risk grade. Criticized loans undergo more frequent reviews and enhanced monitoring.
A (7) "Special Mention" credit has the potential weakness that, if left uncorrected, may result in deterioration of the repayment prospects for the asset. An (8) "Substandard" asset has a well defined weakness that jeopardizes the full repayment of the debt. An asset rated (9) "Doubtful" has all of the same weaknesses as a substandard credit with the added characteristic that the weakness makes collection or liquidation in full, given current facts, conditions, and values, improbable. Assets classified as (10) "Loss" in accordance with regulatory guidelines are considered uncollectible and charged off.
Years ended December 31,
201920182017
(In thousands)Average
Recorded
Investment		Accrued
Interest
Income		Cash Basis Interest IncomeAverage
Recorded
Investment		Accrued
Interest
Income		Cash Basis Interest IncomeAverage
Recorded
Investment		Accrued
Interest
Income		Cash Basis Interest Income
Commercial non-mortgage$100,771  $3,241  $—  $85,585  $3,064  $—  $62,459  $1,095  $—  
Asset based182  —  —  407  —  —  295  —  —  
Commercial real estate16,256  385  —  11,027  198  —  17,397  417  —  
Commercial construction806  —  —  —  —  —  594  12  —  
Equipment financing5,874  —  —  4,820  112  —  4,872  207  —  
Residential96,814  3,502  1,078  108,913  3,781  1,106  116,859  4,138  1,264  
Consumer home equity37,167  1,045  981  42,290  1,158  980  45,578  1,323  1,046  
Total$257,870  $8,173  $2,059  $253,042  $8,313  $2,086  $248,054  $7,192  $2,310  
The following table summarizes commercial, commercial real estate and equipment financing loans and leases segregated by risk rating exposure:
CommercialCommercial Real EstateEquipment Financing
At December 31,At December 31,At December 31,
(In thousands)201920182019201820192018
(1) - (6) Pass$5,985,338  $5,781,138  $5,860,981  $4,773,298  $528,561  $494,585  
(7) Special Mention94,809  206,351  26,978  75,338  808  1,303  
(8) Substandard259,490  222,405  61,380  78,509  7,972  12,509  
(9) Doubtful3,860  6,712  —  —  —  —  
Total$6,343,497  $6,216,606  $5,949,339  $4,927,145  $537,341  $508,397  
 Commercial Commercial Real Estate Equipment Financing
 At December 31, At December 31, At December 31,
(In thousands)2017 2016 2017 2016 2017 2016
(1) - (6) Pass$5,048,162
 $4,655,007
 $4,355,916
 $4,357,458
 $525,105
 $618,084
(7) Special Mention104,594
 56,240
 62,065
 69,023
 8,022
 1,324
(8) Substandard206,883
 226,603
 105,847
 84,365
 17,106
 16,221
(9) Doubtful9,055
 3,081
 —
 —
 —
 —
Total$5,368,694
 $4,940,931
 $4,523,828
 $4,510,846
 $550,233
 $635,629
77

For residential and consumer loans, the Company considers factors such as past due status, updated FICO scores, employment status, collateral, geography, loans discharged in bankruptcy, and the status
Table of first lien position loans on second lien position loans as credit quality indicators. On an ongoing basis for portfolio monitoring purposes, the Company estimates the current value of property secured as collateral for home equity and residential first mortgage lending products. The estimate is based on home price indices compiled by the S&P/Case-Shiller Home Price Indices. The real estate price data is applied to the loan portfolios taking into account the age of the most recent valuation and geographic area.Contents
Troubled Debt Restructurings
The following table summarizes information for TDRs:
At December 31,
(Dollars in thousands)20192018
Accrual status$136,449  $138,479  
Non-accrual status100,989  91,935  
Total recorded investment of TDR$237,438  $230,414  
Specific reserves for TDR included in the balance of ALLL$12,956  $11,930  
Additional funds committed to borrowers in TDR status4,856  3,893  
 At December 31,
(Dollars in thousands)2017 2016
Accrual status$147,113
 $147,809
Non-accrual status74,291
 75,719
Total recorded investment of TDR (1)
$221,404
 $223,528
Specific reserves for TDR included in the balance of ALLL$12,384
 $14,583
Additional funds committed to borrowers in TDR status2,736
 459
(1)Total recorded investment of TDRs exclude $0.1 million and $0.7 million at December 31, 2017 and December 31, 2016, respectively, of accrued interest receivable.
For years ended December 31, 2017, 20162019, 2018 and 2015,2017, Webster charged off $3.2$21.8 million, $18.6$14.3 million, and $11.8$3.2 million, respectively, for the portion of TDRs deemed to be uncollectible.

87


The following table provides information on the type of concession for loans and leases modified as TDRs:
Years ended December 31,
201920182017
Number of
Loans and
Leases
Post-Modification
Recorded
Investment(1)
Number of
Loans and
Leases
Post-Modification
Recorded
Investment(1)
Number of
Loans and
Leases
Post-Modification
Recorded
Investment(1)
(Dollars in thousands)
Commercial non mortgage:
Extended Maturity15  $2,413  12  $823  12  $1,233  
Adjusted Interest rates2  112  —  —  —  —  
Combination Rate and Maturity11  673  15  8,842  18  9,592  
Other (2)
28  65,186  20  41,248  4  6,375  
Commercial real estate:
Extended Maturity3  8,356  2  97  —  —  
Combination Rate and Maturity—  —  3  1,485  —  —  
Other (2)
3  4,816  1  5,111  —  —  
Equipment Financing
Extended Maturity—  —  4  736  —  —  
Residential:
Extended Maturity7  1,327  1  20  16  2,569  
Adjusted Interest rates—  —  —  —  2  335  
Combination Rate and Maturity15  2,241  9  947  12  1,733  
Other (2)
8  1,001  21  3,573  39  6,200  
Consumer home equity:
Extended Maturity6  599  4  469  12  976  
Adjusted Interest rates—  —  —  —  1  247  
Combination Rate and Maturity4  140  6  618  14  3,469  
Other (2)
34  1,907  45  2,812  73  4,907  
Total136  $88,771  143  $66,781  203  $37,636  
 Years ended December 31,
 2017 2016 2015
 
Number of
Loans and
Leases
Post-
Modification
Recorded
Investment(1)
 
Number of
Loans and
Leases
Post-
Modification
Recorded
Investment(1)
 
Number of
Loans and
Leases
Post-
Modification
Recorded
Investment(1)
(Dollars in thousands)
Residential:        
Extended Maturity16
$2,569
 17
$2,801
 27
$4,909
Adjusted Interest rates2
335
 2
528
 3
573
Combination Rate and Maturity12
1,733
 13
1,537
 26
5,315
Other (2)
39
6,200
 24
4,090
 30
4,366
Consumer home equity:        
Extended Maturity12
976
 11
484
 12
1,012
Adjusted Interest rates1
247
 —
—
 —
—
Combination Rate and Maturity14
3,469
 15
1,156
 12
945
Other (2)
73
4,907
 52
3,131
 68
3,646
Commercial non mortgage:        
Extended Maturity12
1,233
 12
14,883
 3
254
Adjusted Interest rates—
—
 —
—
 1
24
Combination Rate and Maturity18
9,592
 2
648
 7
5,361
Other (2)
4
6,375
 13
1,767
 20
22,048
Commercial real estate:        
Extended Maturity—
—
 3
4,921
 1
315
Adjusted Interest rates—
—
 1
237
 —
—
Combination Rate and Maturity—
—
 2
335
 1
42
Other (2)
—
—
 
1

509
 1
405
Equipment Financing        
Extended Maturity—
—
 7
6,642
 —
—
Total203
$37,636
 175
$43,669
 212
$49,215

(1)Post-modification balances approximate pre-modification balances. The aggregate amount of charge-offs as a result of the restructurings was not significant.
(1)Post-modification balances approximate pre-modification balances. The aggregate amount of charge-offs as a result of the restructurings was not significant.
(2)Other includes covenant modifications, forbearance, loans discharged under Chapter 7 bankruptcy, and/or other concessions.
The(2)Other includes covenant modifications, forbearance, loans discharged under Chapter 7 bankruptcy, and/or other concessions.
For the year ended December 31, 2019 there were no significant amounts6 Commercial non-mortgage and 1 Commercial Real Estate TDRs with a recorded investment of loans$0.8 million and leases$1.7 million, respectively, that had been modified as TDRs within the previous 12 months and for which there was a payment defaultdefault. There were 0 significant amounts for the years ended December 31, 2017, 20162018 and 2015.2017.
The recorded investment of TDRs in commercial, commercial real estate, and equipment financing segregated by risk rating exposure is as follows:
At December 31,
(In thousands)20192018
(1) - (6) Pass$3,952  $13,165  
(7) Special Mention63  84  
(8) Substandard104,277  67,880  
(9) Doubtful3,860  6,610  
Total$112,152  $87,739  
 At December 31,
(In thousands)2017 2016
(1) - (6) Pass$8,268
 $10,210
(7) Special Mention355
 7
(8) Substandard53,050
 45,509
(9) Doubtful—
 2,738
Total$61,673
 $58,464


88
78


Note 5: Transfers of Financial Assets
Transfers of Financial Assets
The Company sells financial assets in the normal course of business, primarily residential mortgage loans sold to government-sponsored enterprises through established programs and securitizations. Thesecuritization. Residential mortgage origination fees, adjustments for changes in fair value, and gain or loss on residential mortgage loans sold and the fair value adjustment to loans held for sale are included as mortgage banking activities in the accompanying Consolidated Statementsconsolidated statement of Income.income.
The Company may be required to repurchase a loan in the event of certain breaches of the representations and warranties, or in the event of default of the borrower within 90 days of sale, as provided for in the sale agreements. A reserve for loan repurchases provides for estimated losses pertaining to the potential repurchase of loans associated with the Company's mortgage banking activities. The reserve reflects management’s evaluation ofloan repurchase requests received by the Company for which management evaluates the identity of counterparty, the vintage of the loans sold, the amount of open repurchase requests, specific loss estimates for each open request, the current level of loan losses in similar vintages held in the residential loan portfolio, and estimated recoveries on the underlying collateral. The reserve also reflects management’s expectation of losses from loan repurchase requests for which the Company has not yet been notified, as the performance of loans sold and the quality of the servicing provided by the acquirer may also impact the reserve.notified. The provision recorded at the time of the loan sale is netted from the gain or loss recorded in mortgage banking activities, while any incremental provision, post loan sale, is recorded in other non-interest expense in the accompanying Consolidated Statementsconsolidated statement of Income.income.
The following table provides a summary of activity in the reserve for loan repurchases:
 Years ended December 31,
(In thousands)201920182017
Beginning balance$674  $872  $790  
Provision (benefit) charged to expense1,865  (160) 100  
Repurchased loans and settlements charged off(2,031) (38) (18) 
Ending balance$508  $674  $872  
 Years ended December 31,
(In thousands)2017 2016 2015
Beginning balance$790
 $1,192
 $1,059
Provision (benefit) charged to expense100
 (303) 133
Repurchased loans and settlements charged off(18) (99) —
Ending balance$872
 $790
 $1,192

The increase to the provision and corresponding charge-off during 2019 was related to a discrete legal settlement in connection with previously sold loans.
The following table provides information for mortgage banking activities:
 Years ended December 31,
(In thousands)2017 2016 2015
Residential mortgage loans held for sale:     
Proceeds from sale$335,656
 $438,925
 $452,590
Loans sold with servicing rights retained304,788
 399,318
 416,277
      
Net gain on sale6,211
 11,629
 7,795
Ancillary fees2,629
 3,532
 —
Fair value option adjustment1,097
 (526) —

The Company has retained servicing rights on residential mortgage loans totaling $2.6 billion at both December 31, 2017 and 2016.
The following table presents the changes in carrying value for mortgage servicing assets:
 Years ended December 31,
(In thousands)2017 2016 2015
Beginning balance$24,466
 $20,698
 $19,379
Additions9,249
 11,312
 8,027
Amortization(8,576) (7,544) (6,708)
Ending balance$25,139
 $24,466
 $20,698
Loan servicing fees, net of mortgage servicing rights amortization, were $0.8 million, $1.1 million, and $1.5 million, for the years ended December 31, 2017, 2016, and 2015, respectively, and are included as a component of loan related fees in the accompanying Consolidated Statements of Income.
See Note 16: Fair Value Measurements for additional fair value information on loans held for sale and mortgage servicing assets.
 Years ended December 31,
(In thousands)201920182017
Residential mortgage loans held for sale:
Proceeds from sale$216,239  $188,025  $335,656  
Loans sold with servicing rights retained199,114  166,909  304,788  
Net gain on sale4,031  3,146  6,211  
Ancillary fees1,614  1,544  2,629  
Fair value option adjustment470  (266) 1,097  
Additionally, loans not originated for sale were sold approximately at carrying value, except as noted, for cash proceeds of $7.4 million for certain residential loans and for cash proceeds of $7.2of: $17.0 million for certain commercial loans, for the year ended December 31, 2017; for cash proceeds of $26.5 million, resulting in a gain of $2.1$0.7 million, for certain commercial loans and for cash proceeds of $7.6$4.0 million for certain residential loans for the year ended December 31, 2016; and for cash proceeds of $0.72019; $1.3 million for certain commercial loans and for cash proceeds of $32.9$0.4 million for certain consumerresidential loans for the year ended December 31, 2015.2018; and $7.2 million for certain commercial loans and $7.4 for certain residential loans for the year ended December 31, 2017.

The Company has retained servicing rights on residential mortgage loans totaling $2.4 billion and $2.5 billion at December 31, 2019 and 2018, respectively.
The following table presents the changes in carrying value for mortgage servicing assets:
 Years ended December 31,
(In thousands)201920182017
Beginning balance$21,215  $25,139  $24,466  
Additions3,587  4,459  9,249  
Amortization(7,318) (8,383) (8,576) 
Ending balance$17,484  $21,215  $25,139  
Loan servicing fees, net of mortgage servicing rights amortization, were $1.9 million, $1.2 million, and $0.8 million, for the years ended December 31, 2019, 2018, and 2017, respectively, and are included as a component of loan and lease related fees in the consolidated statement of income.
Refer to Note 17: Fair Value Measurements for additional information on loans held for sale and mortgage servicing assets.
89
79


Note 6: Premises and Equipment
A summary of premises and equipment follows:
  
At December 31,
(In thousands)20192018
Land$10,997  $10,997  
Buildings and improvements77,892  79,619  
Leasehold improvements77,346  77,669  
Fixtures and equipment73,946  75,219  
Data processing and software263,445  252,723  
Property and equipment503,626  496,227  
Less: Accumulated depreciation and amortization(388,562) (371,377) 
Property and equipment, net115,064  124,850  
Leased assets, net155,349  —  
Premises and equipment, net$270,413  $124,850  
  
At December 31,
(In thousands)2017 2016
Land$11,302
 $12,595
Buildings and improvements80,646
 83,903
Leasehold improvements82,067
 83,971
Fixtures and equipment76,665
 76,146
Data processing and software234,667
 220,002
Total premises and equipment485,347
 476,617
Less: Accumulated depreciation and amortization(355,346) (339,204)
Premises and equipment, net$130,001
 $137,413

Depreciation and amortization of premisesproperty and equipment was $33.1$33.7 million, $30.8$34.9 million, and $28.4$33.1 million for the years ended December 31, 2019, 2018, and 2017, 2016,respectively.
Additional information about leased assets is provided in Note 7: Leasing.
Assets held for disposition are included as a component of accrued interest receivable and 2015, respectively.other assets in the consolidated balance sheets.
The following table provides a summary of activity for assets held for disposition:
Years ended December 31,
(In thousands)20192018
Beginning balance$91  $144  
Additions—  498  
Write-downs(91) (137) 
Sales—  (414) 
Ending balance$—  $91  
 Years ended December 31,
(In thousands)2017 2016
Beginning balance$637
 $637
Additions2,006
 —
Write-downs(529) —
Sales(1,970) —
Ending balance$144
 $637

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Table of Contents
Note 7: Leasing
The Company enters into leases, as lessee, primarily for office space, banking centers, and certain other operational assets. These leases are generally classified as operating leases, however, an insignificant amount are classified as finance leases. The Company's operating leases generally have lease terms for periods of 5 to 20 years with various renewal options. The Company does not have any material sub-lease agreements.
The following table summarizes lessee information related to the Company’s operating ROU assets and lease liability:
At December 31, 2019
(In thousands)Operating Leases Consolidated Balance Sheet Line Item Location 
ROU lease assets$155,052 Premises and equipment, net
 
Lease liabilities174,396 Operating lease liabilities 
The components of operating lease cost and other related information are as follows:
(In thousands)At or for the Year ended December 31, 2019
Lease Cost:
Operating lease costs$29,908 
Variable lease costs4,889 
Sublease income(577)
Total operating lease cost$34,220 
Other Information:
Cash paid for amounts included in the measurement of lease liabilities$31,223 
Right-of-use assets obtained in exchange for new operating lease liabilities22,948 
Weighted-average remaining lease term, in years8.39
Weighted-average discount rate - operating leases3.31 %
The undiscounted scheduled maturities reconciled to total operating lease liabilities are as follows:
(In thousands)At December 31, 2019
2020$28,504  
202130,070  
202226,548  
202323,647  
202420,215  
Thereafter74,134  
Total operating lease liability payments203,118  
Less: Present value adjustment28,722  
Lease liabilities$174,396  
Refer to Note 4: Loans and Leases for information relating to leases included within the equipment financing portfolio in which the Company is lessor.

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Table of Contents
Note 8: Goodwill and Other Intangible Assets
GoodwillThe net carrying amount for goodwill at December 31, 2019 was $538.4 million, comprised of $516.6 million in Community Banking and other$21.8 million in HSA Bank. There was no change to these carrying amounts during 2019.
Other intangible assets by reportable segment consisted of the following:
 At December 31,
 2017 2016
(In thousands)
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
 
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Goodwill:       
Community Banking$516,560
 $516,560
 $516,560
 $516,560
HSA Bank21,813
 21,813
 21,813
 21,813
Total goodwill$538,373
 $538,373
 $538,373
 $538,373
        
Other intangible assets:       
HSA Bank - Core deposit intangible assets$22,000
$(8,610)$13,390
 $22,000
$(6,162)$15,838
HSA Bank - Customer relationships21,000
(4,779)16,221
 21,000
(3,164)17,836
Total other intangible assets$43,000
$(13,389)$29,611
 $43,000
$(9,326)$33,674

 At December 31,
20192018
(In thousands)Gross Carrying
Amount		Accumulated
Amortization		Net Carrying
Amount		Gross Carrying
Amount		Accumulated
Amortization		Net Carrying
Amount
Other intangible assets:
HSA Bank - Core deposits$22,000  $13,073  $8,927  $22,000  $10,842  $11,158  
HSA Bank - Customer relationships21,000  8,010  12,990  21,000  6,394  14,606  
Total other intangible assets$43,000  $21,083  $21,917  $43,000  $17,236  $25,764  
As ofAt December 31, 2017,2019, the remaining estimated aggregate future amortization expense for other intangible assets is as follows:
(In thousands)
2020$3,847  
20213,847  
20223,847  
20233,847  
20241,615  
Thereafter4,914  
(In thousands) 
2018$3,847
20193,847
20203,847
20213,847
20223,847
Thereafter10,376


90


Note 8:9: Income Taxes
Income tax expense reflects the following expense (benefit) components:
 Years ended December 31,
(In thousands)201920182017
Current:  
Federal$84,447  $58,334  $96,364  
State and local18,595  13,409  11,061  
Total current103,042  71,743  107,425  
Deferred:
Federal811  8,508  39,568  
State and local116  964  (48,642) 
Total deferred927  9,472  (9,074) 
Total federal85,258  66,842  135,932  
Total state and local18,711  14,373  (37,581) 
Income tax expense$103,969  $81,215  $98,351  
 Years ended December 31,
(In thousands)2017 2016 2015
Current:     
Federal$96,364
 $73,194
 $97,575
State and local11,061
 5,429
 10,970
Total current107,425
 78,623
 108,545
Deferred:     
Federal39,568
 12,542
 (7,279)
State and local(48,642) 5,158
 (8,234)
Total deferred(9,074) 17,700
 (15,513)
      
Total federal135,932
 85,736
 90,296
Total state and local(37,581) 10,587
 2,736
Income tax expense$98,351
 $96,323
 $93,032
Included in the Company's income tax expense for the years ended December 31, 2019, 2018, and 2017, are net tax credits of $4.8 million, $1.2 million, and $1.6 million, respectively. Income tax expense in 2017 also included benefits from operating loss carryforwards of $25.1 million. These net tax credits and benefits are exclusive of the Tax Act impacts.

The $4.8 million of net tax credits in 2019 includes $3.0 million, related to federal and state research tax credits, $2.4 million of which relates to the Company’s qualifying technology expenditures incurred between 2015 and 2018.
The Company's deferred state and local benefit in 2017 includes $47.5 million related to a reduction in its beginning-of-year valuation allowance for SALT DTA's, or $37.5 million net of deferred federal expense of $10.0 million. The deferred state and local benefit in 2017 also includes $1.8 million from other SALT DTA adjustments, net of federal effects.
The Company's deferred federal expense in 2017 also includes $31.5 million from a re-measurement of its DTA upon the enactment of the Tax Act. Due to a $10.6 million impact of the Tax Act on the $39.3 million of net SALT DTA adjustments noted above, the Company reported a $20.9 million expense attributable to the Tax Act, and a $28.7 million net benefit from SALT DTAs for a net benefitin 2017.
82

Table of $7.8 million in its results for the quarter ended December 31, 2017.Contents
Included in the Company's income tax expense for the years ended December 31, 2017, 2016, and 2015, are benefits of operating loss carryforwards of $25.1 million, none, and $3.0 million, and net tax credits of $1.6 million, $1.0 million, and $2.1 million, respectively, exclusive of Tax Act impacts.
The following table reflects a reconciliation of reported income tax expense to the amount that would result from applying the federal statutory rate of 21.0% in 2019, and 2018, and 35.0%: and 2017:
 Years ended December 31,
 2017 2016 2015
(Dollars in thousands)AmountPercent AmountPercent AmountPercent
Income tax expense at federal statutory rate$123,826
35.0 % $106,208
35.0 % $104,217
35.0 %
Reconciliation to reported income tax expense:        
SALT expense, net of federal8,189
2.3
 6,882
2.3
 7,563
2.5
Tax-exempt interest income, net(10,826)(3.1) (8,917)(2.9) (7,117)(2.4)
SALT DTA adjustments, net of federal(28,724)(8.1) —
—
 (5,785)(1.9)
Tax Act impacts, net20,891
5.9
 —
—
 —
—
Excess tax benefits, net(6,349)(1.8) —
—
 —
—
Increase in cash surrender value of life insurance(5,120)(1.4) (5,166)(1.7) (4,557)(1.5)
Other, net(3,536)(1.0) (2,684)(1.0) (1,289)(0.5)
Income tax expense and effective tax rate$98,351
27.8 % $96,323
31.7 % $93,032
31.2 %

 Years ended December 31,
 201920182017
(Dollars in thousands)AmountPercentAmountPercentAmountPercent
Income tax expense at federal statutory rate$102,205  21.0 %$92,743  21.0 %$123,826  35.0 %
Reconciliation to reported income tax expense:
SALT expense, net of federal14,782  3.0  11,354  2.6  8,189  2.3  
Tax-exempt interest income, net(6,752) (1.4) (6,475) (1.5) (10,826) (3.1) 
Increase in cash surrender value of life insurance(3,069) (0.6) (3,069) (0.7) (5,120) (1.4) 
Excess tax benefits, net(2,251) (0.4) (4,483) (1.0) (6,349) (1.8) 
Non-deductible FDIC Deposit insurance premiums1,904  0.4  2,215  0.5  —  —  
SALT DTA adjustments, net of federal—  —  —  —  (28,724) (8.1) 
Tax Act impacts, net—  —  (10,982) (2.5) 20,891  5.9  
Other, net(2,850) (0.6) (88) —  (3,536) (1.0) 
Income tax expense and effective tax rate$103,969  21.4 %$81,215  18.4 %$98,351  27.8 %

91


tax planning benefits related to the Tax Act.
The following table reflects the significant components of the DTAs, net:
  At December 31,
(In thousands)2017 2016
Deferred tax assets:   
Allowance for loan and lease losses$51,203
 $77,908
Net operating loss and credit carry forwards71,813
 64,644
Compensation and employee benefit plans25,023
 46,433
Net losses on derivative instruments3,767
 8,624
Net unrealized loss on securities available for sale9,548
 9,898
Other12,273
 17,682
Gross deferred tax assets173,627
 225,189
Valuation allowance(38,292) (71,474)
Total deferred tax assets, net of valuation allowance$135,335
 $153,715
Deferred tax liabilities:   
Equipment-financing leases$27,955
 $41,910
Deferred income on repurchase of debt1,275
 4,251
Intangible assets6,164
 9,952
Mortgage servicing assets4,445
 7,313
Other2,866
 5,898
Gross deferred tax liabilities42,705
 69,324
Deferred tax assets, net$92,630
 $84,391

  At December 31,
(In thousands)20192018
Deferred tax assets:
Allowance for loan and lease losses$53,851  $54,390  
Net operating loss and credit carry forwards69,827  70,808  
Compensation and employee benefit plans24,518  29,623  
Lease liabilities under operating leases45,923  —  
Net unrealized loss on securities available for sale—  25,060  
Other9,521  14,388  
Gross deferred tax assets203,640  194,269  
Valuation allowance38,181  38,181  
Total deferred tax assets, net of valuation allowance$165,459  $156,088  
Deferred tax liabilities:
Net unrealized gain on securities available for sale$6,430  $—  
ROU assets under operating leases40,908  —  
Equipment financing leases31,332  28,140  
Premises and equipment7,838  10,293  
Loan origination costs, net6,816  9,608  
Goodwill and other intangible assets6,172  6,293  
Other3,988  5,238  
Gross deferred tax liabilities103,484  59,572  
Deferred tax assets, net$61,975  $96,516  
The Company's DTA,DTAs, net increaseddecreased by $8.2$34.5 million during 2017,2019, reflecting primarily the $9.1$0.9 million deferred tax benefitexpense and a $0.7$33.6 million expensebenefit allocated directly to shareholdersshareholders' equity.
The $38.3$38.2 million valuation allowance at December 31, 2017 consisted of $38.2 million2019 is attributable to SALT net operating loss carryforwards, which approximated $1.2 billion.
SALT net operating loss carryforwards approximated $1.2 billion at December 31, 2019 and $0.1are scheduled to expire in varying amounts during tax years 2024 through 2032. The valuation allowance has been established for approximately $644.4 million of those net operating loss carryforwards estimated to a capital loss carryforward. The $33.2expire unused. Credit carryovers of $0.7 million, net decreaseat December 31, 2019 have a five-year carryover period and are scheduled to expire in the valuation allowance includes: (i) a $27.0 million reduction in the beginning-of-year valuation allowance applicable to a change in the estimated realizability of SALT DTAs in futurevarying amounts during tax years (ii) a $3.5 million decrease applicable to the estimated utilization and expiration of capital loss carryforwards of $2.1 million and $1.4 million, respectively, and (iii) a $2.7 million net decrease in SALT net DTAs, including Tax Act-related impacts.
The reduction in the Company's valuation allowance for SALT DTAs noted above resulted from the completion of a review of its current and projected multi-jurisdictional SALT structure reflecting Webster's continued business expansion and growth. In connection with the review, an evaluation of the Company's net SALT DTAs, including valuation allowances previously established for DTAs not expected to be realized, was performed and a change in their estimated realizability was recognized.2020 through 2024.
Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize its total DTA,DTAs, net of the valuation allowance. Although taxable income in prior years is no longer able to be included as a source of taxable income, due to the general repeal of the carryback of net operating losses under the Tax Act, significant positive evidence remains in support of management's conclusion regarding the realizability of Webster's DTAs, including projected future reversals of existing taxable temporary differences and book-taxable income levels in recent and projected in future years. There can, however, be no assurance that any specific level of future income will be generated or that the Company’s DTAs will ultimately be realized.
A capital loss carryforward
83

Table of $1.1 million exists at December 31, 2017 and is scheduled to expire in 2018. A valuation allowance of $0.1 million has been established for the $0.4 million portion of the carryforward scheduled to expire.Contents
SALT net operating loss carryforwards approximating $1.2 billion at December 31, 2017 are scheduled to expire in varying amounts during tax years 2023 through 2032, and credits, totaling $0.8 million at December 31, 2017, have a five-year carryover period, with excess credits subject to expiration annually. A valuation allowance of $38.2 million has been established for approximately $644 million of those net operating loss carryforwards estimated to expire.
A deferred tax liability of $14.9$15.3 million has not been recognized for certain thrift bad-debt reserves, established before 1988, that would become taxable upon the occurrence of certain events: distributions by Webster Bank in excess of certain earnings and profits; the redemption of Webster Bank’s stock; or liquidation. Webster does not expect any of those events to occur. At December 31, 20172019 the cumulative taxable temporary differences applicable to those reserves approximated $58.0 million.

92


The following table reflects a reconciliation of the beginning and ending balances of unrecognized tax benefits (UTBs):
 Years ended December 31,
(In thousands)2017 2016 2015
Beginning balance$3,847
 $5,094
 $4,593
Additions as a result of tax positions taken during the current year584
 613
 865
Additions as a result of tax positions taken during prior years7
 —
 1,254
Reductions as a result of tax positions taken during prior years(61) (625) (247)
Reductions relating to settlements with taxing authorities(392) (693) (992)
Reductions as a result of lapse of statute of limitation periods(390) (542) (379)
Ending balance$3,595
 $3,847
 $5,094

Years ended December 31,
(In thousands)201920182017
Beginning balance$2,856  $3,595  $3,847  
Additions as a result of tax positions taken during the current year1,106  249  584  
Additions as a result of tax positions taken during prior years1,744  71  7  
Reductions as a result of tax positions taken during prior years(238) (474) (61) 
Reductions relating to settlements with taxing authorities(18) (97) (392) 
Reductions as a result of lapse of statute of limitation periods(637) (488) (390) 
Ending balance$4,813  $2,856  $3,595  
At December 31, 2019, 2018, and 2017, 2016, and 2015, there are $2.8were $3.9 million, $2.5$2.3 million, and $3.3$2.8 million, respectively, of UTBs that if recognized would affect the effective tax rate.
Webster recognizes interest and penalties related to UTBs, where applicable, in income tax expense. During the years ended December 31, 2017, 2016,2019, 2018, and 2015,2017, Webster recognized a benefit of $0.1 million, NaN, and an expense of $0.2 million, a benefit of $0.2 million, and an expense of $1.1 million, respectively. At December 31, 20172019 and 2016,2018, the Company had accrued interest and penalties related to UTBs of $1.9 million and $1.7 million, respectively.$1.8 million.
Webster has determined it is reasonably possible that its total UTBs could decrease by an amount in the range of $0.6$1.9 million to $1.8$2.7 million by the end of 2018, primarily2020 as a result of potential lapses in statute-of-limitation periods and/or potential settlements with state and local taxing authorities concerning apportionment and tax-base determinations and/or potential lapses in statute-of-limitation periods.determinations.
Webster is currently under, or subject to, examination by various taxing authorities. FederalWebster's federal tax returns for all years subsequent to 20132014 remain open to examination. For Webster's tax returns to its principal state tax jurisdictions (Connecticut,of Connecticut, Massachusetts, New York, and Rhode Island) returnsIsland for years subsequent to 20132014 are either under or remain open to examination.
Note 9:10: Deposits
A summary of deposits by type follows:
 At December 31,
(In thousands)2017 2016
Non-interest-bearing:   
Demand$4,191,496
 $4,021,061
Interest-bearing:   
Checking2,736,952
 2,528,274
Health savings accounts5,038,681
 4,362,503
Money market2,209,492
 2,047,121
Savings4,348,700
 4,320,090
Time deposits2,468,408
 2,024,808
Total interest-bearing16,802,233
 15,282,796
Total deposits$20,993,729
 $19,303,857
    
Time deposits and interest-bearing checking, included in above balances, obtained through brokers$898,157
 $848,618
Time deposits, included in above balance, that meet or exceed the FDIC limit561,512
 490,721
Demand deposit overdrafts reclassified as loan balances2,210
 1,885

At December 31,
(In thousands)20192018
Non-interest-bearing:
Demand$4,446,463  $4,162,446  
Interest-bearing:
Health savings accounts6,416,135  5,740,601  
Checking2,689,734  2,518,472  
Money market2,312,840  2,100,084  
Savings4,354,809  4,140,696  
Time deposits3,104,765  3,196,546  
Total interest-bearing18,878,283  17,696,399  
Total deposits$23,324,746  $21,858,845  
Time deposits and interest-bearing checking, included in above balances, obtained through brokers$652,151  $869,003  
Time deposits, included in above balance, that exceed the FDIC limit661,334  555,949  
Demand deposit overdrafts reclassified as loan balances1,721  2,245  
The scheduled maturities of time deposits are as follows:
(In thousands)At December 31, 2019
2020$2,621,413  
2021358,454  
202273,463  
202329,283  
202422,152  
Total time deposits$3,104,765  
(In thousands)At December 31, 2017
2018$1,381,899
2019693,554
2020236,955
2021106,042
202249,831
Thereafter127
Total time deposits$2,468,408


93
84


Note 10:11: Borrowings
Total borrowings of $2.5$3.5 billion at December 31, 20172019 and $4.0$2.6 billion at December 31, 2016,2018, are described in detail below.
The following table summarizes securities sold under agreements to repurchase and other borrowings:
 At December 31,
(In thousands)2017 2016
 Total OutstandingRate Total OutstandingRate
Securities sold under agreements to repurchase:     
Original maturity of one year or less$288,269
0.17 $340,526
0.16
Original maturity of greater than one year, non-callable300,000
3.10 400,000
3.09
Total securities sold under agreements to repurchase588,269
1.66 740,526
1.82
Fed funds purchased55,000
1.37 209,000
0.46
Securities sold under agreements to repurchase and other borrowings$643,269
1.64 $949,526
1.53

At December 31,
(In thousands)20192018
Total OutstandingRateTotal OutstandingRate
Securities sold under agreements to repurchase (1):
Original maturity of one year or less$240,431  0.19 %$236,874  0.35 %
Original maturity of greater than one year, non-callable200,000  1.78  —  —  
Total securities sold under agreements to repurchase440,431  0.91  236,874  0.35  
Fed funds purchased600,000  1.59  345,000  2.52  
Securities sold under agreements to repurchase and other borrowings$1,040,431  1.30  $581,874  1.64  
Repurchase agreements are used as a source of borrowed funds and are collateralized by U.S. Government agency mortgage-backed securities which are delivered to broker/dealers. Repurchase agreements counterparties are limited to primary dealers in government securities and commercial/municipal customers through Webster’s Treasury Unit. Dealer counterparties have the right to pledge, transfer, or hypothecate purchased securities during the term of the transaction. (1)The Company has right of offset with respect to all repurchase agreement assets and liabilities. Total securities sold under agreements to repurchase represents theare presented as gross amount for these transactions, as only liabilities are outstanding for the periods presented.
Repurchase agreements are used as a source of borrowed funds and are collateralized by U.S. Government agency mortgage-backed securities. Repurchase agreement counterparties are limited to primary dealers in government securities and commercial/municipal customers through the Corporate Treasury function.
The following table provides information for FHLB advances:
 At December 31,
 2017 2016
(Dollars in thousands)
Total
Outstanding
Weighted-
Average Contractual Coupon Rate
 
Total
Outstanding
Weighted-
Average Contractual Coupon Rate
Maturing within 1 year$1,150,000
1.48% $2,130,500
0.71%
After 1 but within 2 years103,026
1.81
 200,000
1.36
After 2 but within 3 years215,000
1.73
 128,026
1.73
After 3 but within 4 years200,000
4.13
 175,000
1.77
After 4 but within 5 years170
—
 200,000
1.81
After 5 years8,909
1.96
 9,370
2.59
 1,677,105
1.85
 2,842,896
0.95
Premiums on advances—
  12
 
Federal Home Loan Bank advances$1,677,105
  $2,842,908
 
      
Aggregate carrying value of assets pledged as collateral$6,402,066
  $5,967,318
 
Remaining borrowing capacity$2,600,624
  $1,192,758
 

At December 31,
20192018
(Dollars in thousands)Total
Outstanding		Weighted-
Average Contractual Coupon Rate		Total
Outstanding		Weighted-
Average Contractual Coupon Rate
Maturing within 1 year$1,690,000  1.79 %$1,403,026  2.55 %
After 1 but within 2 years200,000  2.53  215,000  1.73  
After 2 but within 3 years130  —  200,000  3.16  
After 3 but within 4 years229  2.95  150  —  
After 4 but within 5 years50,000  1.59  242  2.95  
After 5 years8,117  2.66  8,390  2.65  
FHLB advances$1,948,476  1.87  $1,826,808  2.52  
Aggregate carrying value of assets pledged as collateral$7,318,748  $6,689,761  
Remaining borrowing capacity2,937,644  2,568,664  
Webster Bank wasis in compliance with FHLB collateral requirements for the periods presented. Eligible collateral, primarily certain residential and commercial real estate loans, has been pledged to secure FHLB advances.
The following table summarizes long-term debt:
At December 31,
(Dollars in thousands)20192018
4.375%  Senior fixed-rate notes due February 15, 2024$150,000  $150,000  
4.100 %
Senior fixed-rate notes due March 25, 2029 (1)
317,486  —  
Junior subordinated debt Webster Statutory Trust I floating-rate notes due September 17, 2033 (2)
77,320  77,320  
Total notes and subordinated debt544,806  227,320  
Discount on senior fixed-rate notes(1,412) (608) 
Debt issuance cost on senior fixed-rate notes(3,030) (691) 
Long-term debt$540,364  $226,021  
 At December 31,
(Dollars in thousands)2017 2016
4.375%Senior fixed-rate notes due February 15, 2024$150,000
 $150,000
Junior subordinated debt Webster Statutory Trust I floating-rate notes due September 17, 2033 (1)
77,320
 77,320
Total notes and subordinated debt227,320
 227,320
Discount on senior fixed-rate notes(727) (845)
Debt issuance cost on senior fixed-rate notes(826) (961)
Long-term debt$225,767
 $225,514
(1)The interest rate on Webster Statutory Trust I floating-rate notes, which varies quarterly based on 3-month LIBOR plus 2.95%, was 4.55% at December 31, 2017 and 3.94% at December 31, 2016.

(1)In March 2019, the Company completed a $300 million senior fixed-rate notes issuance. The fixed interest rate has been designated in a fair value hedging relationship and swapped to a weighted-average variable rate of 3.40% at December 31, 2019. The $17.5 million basis adjustment included in the carrying value reflects the changes in the benchmark rate.

(2)The interest rate on Webster Statutory Trust I floating-rate notes, which varies quarterly based on 3-month LIBOR plus 2.95%, was 4.85% at December 31, 2019 and 5.74% at December 31, 2018.
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Note 11:12: Shareholders' Equity
Share activity during the year ended December 31, 20172019 is as follows:
 Preferred Stock Series EPreferred Stock Series FCommon Stock IssuedTreasury Stock HeldCommon Stock Outstanding
Balance at January 1, 20175,060
—
93,651,601
1,899,502
91,752,099
Restricted share activity—
—
—
(124,800)124,800
Stock options exercised—
—
—
(338,176)338,176
Common stock repurchased—
—
—
222,000
(222,000)
Warrant exercise—
—
28,690
—
28,690
Series F Preferred Stock issuance—
6,000
—
—
—
Series E Preferred Stock redemption(5,060)—
—
—
—
Balance at December 31, 2017—
6,000

93,680,291
1,658,526
92,021,765

Preferred Stock Series FCommon Stock IssuedTreasury Stock HeldCommon Stock Outstanding
Balance at January 1, 20196,000  93,686,311  1,508,456  92,177,855  
Restricted share activity—  —  (16,045) 16,045  
Stock options exercised—  —  (59,861) 59,861  
Common stock repurchased—  —  227,199  (227,199) 
Balance at December 31, 20196,000  93,686,311  1,659,749  92,026,562  
Common Stock
On October 24, 2017, Webster announced that its Board of Directors had authorizedmaintains a $100 million common stock repurchase program under which authorizes management to purchase shares may be repurchased from time to timeof its common stock, in the open market or in privately negotiated transactions, subject to market conditions and other factors. ThisOn October 29, 2019, the Company's Board of Directors approved a modification to this program, is in additionoriginally approved on October 24, 2017, increasing the maximum dollar amount available for repurchase to an existing common stock repurchase program authorized on December 6, 2012, under which $100 million had been authorized.$200 million. Common stock repurchased during 20172019 was acquired at an average cost of $52.18$57.23 per common share, which results in ashare. The shares were acquired prior to the modification and, therefore, the remaining repurchase authority forunder the common stock repurchase programs of $103.9program was $200.0 million at December 31, 2017.2019.
On June 8, 2011, the U.S. Treasury closed an underwritten public offering of 3,282,276 warrants issued in connection with the Company’s participation in the Capital Purchase Program, each representing the right to purchase one share of Webster common stock, $0.01 par value per share. The warrants have an exercise price of $18.28, and expire on November 21, 2018. Concurrent with the U.S. Treasury's action, the Board of Directors approved the repurchase of a significant number of warrants in a public auction conducted on behalf of the U.S. Treasury. The board approved plan provides for additional repurchases from time-to-time, as permitted by securities laws and other legal requirements. During 2017, there were 44,275 warrants exercised in cashless exchange transactions leaving 8,752 warrants outstanding and exercisable at December 31, 2017.
Preferred Stock
On December 15, 2017, Webster exercised its right to redeem all of the outstanding shares of 6.40% Series E Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, for the per share cash redemption price of $25,400 which includes the quarterly per share dividend amount that otherwise would have been paid on that date.
On December 12, 2017, Webster closed on a public offering ofhas 6,000,000 depository shares outstanding, each representing 1/1000th ownership interest in a share of Webster's 5.25% Series F Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, with a liquidation preference of $25,000 per share (equivalent to $25 per depository share) (the "SeriesSeries F Preferred Stock")Stock). Webster will pay dividends as declared by the Board of Directors or a duly authorized committee of the Board. Dividends are payable at a rate of 5.25% per annum, quarterly in arrears, on the fifteenth day of each March, June, September, and December. Dividends on the Series F Preferred Stock are not cumulative and are not mandatory. If for any reason the Board of Directors or a duly authorized committee of the Board does not declare a dividend on the Series F Preferred Stock for any dividend period, such dividend will not accrue or be payable, and Webster will have no obligation to pay dividends for such dividend period, whether or not dividends are declared for any future dividend periods. The terms of the Series F Preferred Stock prohibit the Company from declaring or paying any cash dividends on its common stock, unless Webster has declared and paid full dividends on the Series F Preferred Stock for the most recently completed dividend period.
The Company may redeem the Series F Preferred Stock, at its option in whole or in part, on December 15, 2022, or any dividend payment date thereafter, or in whole but not in part upon a "regulatory capital treatment event" as defined in the certificate of designation, at a redemption price equal to the liquidation preference plus any declared and unpaid dividends, without accumulation of any undeclared dividends. The Series F Preferred Stock does not have any voting rights except with respect to authorizing or increasing the authorized amount of senior stock, certain changes to the terms of the Series F Preferred Stock, or in the case of certain dividend non-payments.

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Note 12:13: Accumulated Other Comprehensive Loss, Net of Tax
The following table summarizes the changes in AOCL by component:
(In thousands)Available For Sale and Transferred SecuritiesDerivative InstrumentsDefined Benefit Pension and Other Postretirement Benefit PlansTotal(In thousands)Available For Sale SecuritiesDerivative InstrumentsDefined Benefit Pension and Other Postretirement Benefit PlansTotal
Balance at December 31, 2014$16,421
$(25,530)$(47,152)$(56,261)
Balance at December 31, 2016Balance at December 31, 2016$(15,476) $(17,068) $(44,449) $(76,993) 
Other comprehensive (loss) income before reclassifications(22,512)(3,136)(5,500)(31,148)Other comprehensive (loss) income before reclassifications(7,590) 181  98  (7,311) 
Amounts reclassified from accumulated other comprehensive (loss) income(316)5,686
3,933
9,303
Amounts reclassified from accumulated other comprehensive lossAmounts reclassified from accumulated other comprehensive loss—  4,384  4,037  8,421  
Net current-period other comprehensive (loss) income, net of tax(22,828)2,550
(1,567)(21,845)Net current-period other comprehensive (loss) income, net of tax(7,590) 4,565  4,135  1,110  
Balance at December 31, 2015(6,407)(22,980)(48,719)(78,106)
Balance at Adoption of ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from AOCIBalance at Adoption of ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from AOCI(4,881) (2,513) (8,254) (15,648) 
Balance at December 31, 2017Balance at December 31, 2017(27,947) (15,016) (48,568) (91,531) 
Other comprehensive (loss) income before reclassifications(8,901)825
(232)(8,308)Other comprehensive (loss) income before reclassifications(43,427) 208  (7,122) (50,341) 
Amounts reclassified from accumulated other comprehensive (loss) income(168)5,087
4,502
9,421
Amounts reclassified from accumulated other comprehensive lossAmounts reclassified from accumulated other comprehensive loss—  5,495  5,725  11,220  
Net current-period other comprehensive (loss) income, net of tax(9,069)5,912
4,270
1,113
Net current-period other comprehensive (loss) income, net of tax(43,427) 5,703  (1,397) (39,121) 
Balance at December 31, 2016(15,476)(17,068)(44,449)(76,993)
Adoption of ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from AOCI
(4,881)(2,513)(8,254)(15,648)
Other comprehensive (loss) income before reclassifications(7,590)181
98
(7,311)
Amounts reclassified from accumulated other comprehensive (loss) income—
4,384
4,037
8,421
Net current-period other comprehensive (loss) income, net of tax(7,590)4,565
4,135
1,110
Balance at December 31, 2017$(27,947)$(15,016)$(48,568)$(91,531)
Balance at December 31, 2018Balance at December 31, 2018(71,374) (9,313) (49,965) (130,652) 
Other comprehensive income (loss) before reclassificationsOther comprehensive income (loss) before reclassifications88,647  (4,945) 1,622  85,324  
Amounts reclassified from accumulated other comprehensive lossAmounts reclassified from accumulated other comprehensive loss(22) 5,074  4,204  9,256  
Net current-period other comprehensive income, net of taxNet current-period other comprehensive income, net of tax88,625  129  5,826  94,580  
Balance at December 31, 2019Balance at December 31, 2019$17,251  $(9,184) $(44,139) $(36,072) 
The following table provides information for the items reclassified from AOCL:
Years ended December 31,
Accumulated Other Comprehensive Loss Components201920182017Associated Line Item in the Consolidated Statement Of Income
(In thousands)
Available-for-sale securities:
Unrealized gains on investments$29  $—  $—  Gain on sale of investment securities, net  
Tax expense(7) —  —  Income tax expense  
Net of tax$22  $—  $—  
Derivative instruments:
Hedge terminations$(5,509) $(7,425) $(7,160) Interest expense  
Premium amortization(1,323) —  —  Interest income  
Tax benefit1,758  1,930  2,776  Income tax expense  
Net of tax$(5,074) $(5,495) $(4,384) 
Defined benefit pension and other postretirement benefit plans:
Amortization of net loss$(5,706) $(7,708) $(6,612) Other non-interest expense  
Tax benefit1,502  1,983  2,575  Income tax expense  
Net of tax$(4,204) $(5,725) $(4,037) 
 Years ended December 31, 
Accumulated Other Comprehensive Loss Components2017 2016 2015Associated Line Item in the Consolidated Statements Of Income
(In thousands)      
Available-for-sale and transferred securities:      
Unrealized gains on investments$—
 $414
 $609
Gain on sale of investment securities, net
Unrealized losses on investments—
 (149) (110)Impairment loss recognized in earnings
Total before tax—
 265
 499
 
Tax expense—
 (97) (183)Income tax expense
Net of tax$—
 $168
 $316
 
Derivative instruments:      
Cash flow hedges$(7,160) $(8,020) $(8,965)Total interest expense
Tax benefit2,776
 2,933
 3,279
Income tax expense
Net of tax$(4,384) $(5,087) $(5,686) 
Defined benefit pension and other postretirement benefit plans:      
Amortization of net loss$(6,612) $(7,126) $(6,161)(1)
Prior service costs—
 (14) (73)(1)
Total before tax(6,612) (7,140) (6,234) 
Tax benefit2,575
 2,638
 2,301
Income tax expense
Net of tax$(4,037) $(4,502) $(3,933) 
(1) These accumulated other comprehensive income components are included in the computation of net periodic benefit cost (see Note 17 Retirement Benefit Plans for further details).


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Table of Contents

The following tables summarize the items and related tax effects for each component of OCI/OCL, net of tax:
Year ended December 31, 2017Year ended December 31, 2019
(In thousands)Pre-Tax AmountTax Benefit (Expense)Net of Tax Amount(In thousands)Pre-Tax AmountTax Benefit (Expense)Net of Tax Amount
Available-for-sale and transferred securities: 
Available-for-sale securities:Available-for-sale securities:
Net unrealized gain during the periodNet unrealized gain during the period$120,333  $(31,686) $88,647  
Reclassification for net gain included in net incomeReclassification for net gain included in net income(29) 7  (22) 
Total available-for-sale securitiesTotal available-for-sale securities120,304  (31,679) 88,625  
Derivative instruments:Derivative instruments:
Net unrealized loss during the periodNet unrealized loss during the period(6,672) 1,727  (4,945) 
Reclassification adjustment for net loss included in net incomeReclassification adjustment for net loss included in net income6,832  (1,758) 5,074  
Total derivative instrumentsTotal derivative instruments160  (31) 129  
Defined benefit pension and other postretirement benefit plans:Defined benefit pension and other postretirement benefit plans:
Current year actuarial gainCurrent year actuarial gain2,202  (580) 1,622  
Reclassification adjustment for amortization of net loss included in net incomeReclassification adjustment for amortization of net loss included in net income5,706  (1,502) 4,204  
Total defined benefit pension and postretirement benefit plansTotal defined benefit pension and postretirement benefit plans7,908  (2,082) 5,826  
Other comprehensive income, net of taxOther comprehensive income, net of tax$128,372  $(33,792) $94,580  
Year ended December 31, 2018  
(In thousands)(In thousands)Pre-Tax AmountTax Benefit (Expense)Net of Tax Amount
Available-for-sale securities:Available-for-sale securities:
Net unrealized loss during the period$(12,423)$4,833
$(7,590)Net unrealized loss during the period$(58,792) $15,365  $(43,427) 
Reclassification for net gain included in net income—
—
—
Reclassification for net gain included in net income—  —  —  
Net non-credit other-than-temporary impairment—
—
—
Amortization of unrealized loss on securities transferred to held-to-maturity—
—
—
Total available-for-sale and transferred securities(12,423)4,833
(7,590)
Total available-for-sale securitiesTotal available-for-sale securities(58,792) 15,365  (43,427) 
Derivative instruments: Derivative instruments:
Net unrealized gain during the period291
(110)181
Net unrealized gain during the period280  (72) 208  
Reclassification adjustment for net loss included in net income7,160
(2,776)4,384
Reclassification adjustment for net loss included in net income7,425  (1,930) 5,495  
Total derivative instruments7,451
(2,886)4,565
Total derivative instruments7,705  (2,002) 5,703  
Defined benefit pension and other postretirement benefit plans: Defined benefit pension and other postretirement benefit plans:
Current year actuarial loss155
(57)98
Current year actuarial loss(9,600) 2,478  (7,122) 
Reclassification adjustment for amortization of net loss included in net income6,612
(2,575)4,037
Reclassification adjustment for amortization of net loss included in net income7,708  (1,983) 5,725  
Reclassification adjustment for prior service cost included in net income—
—
—
Total defined benefit pension and postretirement benefit plans6,767
(2,632)4,135
Total defined benefit pension and postretirement benefit plans(1,892) 495  (1,397) 
Other comprehensive income, net of tax$1,795
$(685)$1,110
Other comprehensive loss, net of taxOther comprehensive loss, net of tax$(52,979) $13,858  $(39,121) 
Year ended December 31, 2016Year ended December 31, 2017  
(In thousands)Pre-Tax AmountTax Benefit (Expense)Net of Tax Amount(In thousands)Pre-Tax AmountTax Benefit (Expense)Net of Tax Amount
Available-for-sale and transferred securities: 
Available-for-sale securities:Available-for-sale securities:
Net unrealized loss during the period$(14,113)$5,212
$(8,901)Net unrealized loss during the period$(12,423) $4,833  $(7,590) 
Reclassification for net gain included in net income(414)152
(262)Reclassification for net gain included in net income—  —  —  
Net non-credit other-than-temporary impairment149
(55)94
Amortization of unrealized loss on securities transferred to held-to-maturity—
—
—
Total available-for-sale and transferred securities(14,378)5,309
(9,069)
Total available-for-sale securitiesTotal available-for-sale securities(12,423) 4,833  (7,590) 
Derivative instruments: Derivative instruments:
Net unrealized loss during the period1,331
(506)825
Net unrealized gain during the periodNet unrealized gain during the period291  (110) 181  
Reclassification adjustment for net loss included in net income8,020
(2,933)5,087
Reclassification adjustment for net loss included in net income7,160  (2,776) 4,384  
Total derivative instruments9,351
(3,439)5,912
Total derivative instruments7,451  (2,886) 4,565  
Defined benefit pension and other postretirement benefit plans: Defined benefit pension and other postretirement benefit plans:
Current year actuarial loss(368)136
(232)
Current year actuarial gainCurrent year actuarial gain155  (57) 98  
Reclassification adjustment for amortization of net loss included in net income7,126
(2,633)4,493
Reclassification adjustment for amortization of net loss included in net income6,612  (2,575) 4,037  
Reclassification adjustment for prior service cost included in net income14
(5)9
Total defined benefit pension and postretirement benefit plans6,772
(2,502)4,270
Total defined benefit pension and postretirement benefit plans6,767  (2,632) 4,135  
Other comprehensive loss, net of tax$1,745
$(632)$1,113
Year ended December 31, 2015
(In thousands)Pre-Tax AmountTax Benefit (Expense)Net of Tax Amount
Available-for-sale and transferred securities: 
Net unrealized gain during the period$(35,701)$13,166
$(22,535)
Reclassification for net gain included in net income(609)223
(386)
Net non-credit other-than-temporary impairment110
(40)70
Amortization of unrealized loss on securities transferred to held-to-maturity37
(14)23
Total available-for-sale and transferred securities(36,163)13,335
(22,828)
Derivative instruments: 
Net unrealized loss during the period(4,945)1,809
(3,136)
Reclassification adjustment for net loss included in net income8,965
(3,279)5,686
Total derivative instruments4,020
(1,470)2,550
Defined benefit pension and other postretirement benefit plans: 
Current year actuarial loss(8,719)3,219
(5,500)
Reclassification adjustment for amortization of net loss included in net income6,161
(2,274)3,887
Reclassification adjustment for prior service cost included in net income73
(27)46
Total defined benefit pension and postretirement benefit plans(2,485)918
(1,567)
Other comprehensive loss, net of tax$(34,628)$12,783
$(21,845)
Other comprehensive income, net of taxOther comprehensive income, net of tax$1,795  $(685) $1,110  


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Note 13:14: Regulatory Matters
Capital Requirements
Webster Financial Corporation is subject to regulatory capital requirements administered by the Federal Reserve System, while Webster Bank is subject to regulatory capital requirements administered by the OCC. Regulatory authorities can initiate certain mandatory actions if Webster Financial Corporation or Webster Bank fail to meet minimum capital requirements, which could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, both Webster Financial Corporation and Webster Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. These quantitative measures require minimum amounts and ratios to ensure capital adequacy.
Under Basel III, total risk-based capital is comprised of three categories: CET1 capital, additional Tier 1 capital, and Tier 2 capital. CET1 capital includes common shareholders' equity, less deductions for goodwill, and other intangibles, adjusted forand certain deferred tax liabilities. Webster's commonadjustments. Common shareholders' equity, for purposes of CET1 capital, excludes AOCL components as permitted by the opt-out election taken by Webster upon adoption of Basel III. Tier 1 capital is comprised of CET1 capital plus perpetual preferred stock, while Tier 2 capital includes qualifying subordinated debt and qualifying allowance for credit losses, that together equal total capital.
The following table provides information on the capital ratios for Webster Financial Corporation and Webster Bank:
 Actual Capital Requirements
  Minimum Well Capitalized
(Dollars in thousands)AmountRatio AmountRatio AmountRatio
At December 31, 2017        
Webster Financial Corporation        
CET1 risk-based capital$2,093,116
11.14% $845,389
4.5% $1,221,118
6.5%
Total risk-based capital2,517,848
13.40
 1,502,914
8.0
 1,878,643
10.0
Tier 1 risk-based capital2,238,172
11.91
 1,127,186
6.0
 1,502,914
8.0
Tier 1 leverage capital2,238,172
8.63
 1,036,817
4.0
 1,296,021
5.0
Webster Bank        
CET1 risk-based capital$2,114,224
11.26% $844,693
4.5% $1,220,113
6.5%
Total risk-based capital2,316,580
12.34
 1,501,677
8.0
 1,877,097
10.0
Tier 1 risk-based capital2,114,224
11.26
 1,126,258
6.0
 1,501,677
8.0
Tier 1 leverage capital2,114,224
8.14
 1,038,442
4.0
 1,298,052
5.0
At December 31, 2016        
Webster Financial Corporation        
CET1 risk-based capital$1,932,171
10.52% $826,504
4.5% $1,193,840
6.5%
Total risk-based capital2,328,808
12.68
 1,469,341
8.0
 1,836,677
10.0
Tier 1 risk-based capital2,054,881
11.19
 1,102,006
6.0
 1,469,341
8.0
Tier 1 leverage capital2,054,881
8.13
 1,010,857
4.0
 1,263,571
5.0
Webster Bank        
CET1 risk-based capital$1,945,332
10.61% $825,228
4.5% $1,191,995
6.5%
Total risk-based capital2,141,939
11.68
 1,467,071
8.0
 1,833,839
10.0
Tier 1 risk-based capital1,945,332
10.61
 1,100,304
6.0
 1,467,071
8.0
Tier 1 leverage capital1,945,332
7.70
 1,010,005
4.0
 1,262,507
5.0

ActualCapital Requirements
 Adequately CapitalizedWell Capitalized
(Dollars in thousands)AmountRatioAmountRatioAmountRatio
At December 31, 2019
Webster Financial Corporation
CET1 risk-based capital$2,516,361  11.56 %$979,739  4.5 %$1,415,179  6.5 %
Total risk-based capital2,950,181  13.55  1,741,758  8.0  2,177,198  10.0  
Tier 1 risk-based capital2,661,398  12.22  1,306,319  6.0  1,741,758  8.0  
Tier 1 leverage capital2,661,398  8.96  1,188,507  4.0  1,485,634  5.0  
Webster Bank
CET1 risk-based capital$2,527,645  11.61 %$979,497  4.5 %$1,414,829  6.5 %
Total risk-based capital2,739,108  12.58  1,741,328  8.0  2,176,660  10.0  
Tier 1 risk-based capital2,527,645  11.61  1,305,996  6.0  1,741,328  8.0  
Tier 1 leverage capital2,527,645  8.51  1,187,953  4.0  1,484,941  5.0  
At December 31, 2018
Webster Financial Corporation
CET1 risk-based capital$2,284,978  11.44 %$898,972  4.5 %$1,298,514  6.5 %
Total risk-based capital2,722,194  13.63  1,598,172  8.0  1,997,715  10.0  
Tier 1 risk-based capital2,430,015  12.16  1,198,629  6.0  1,598,172  8.0  
Tier 1 leverage capital2,430,015  9.02  1,077,303  4.0  1,346,628  5.0  
Webster Bank
CET1 risk-based capital$2,170,566  10.87 %$898,317  4.5 %$1,297,569  6.5 %
Total risk-based capital2,385,425  11.95  1,597,008  8.0  1,996,260  10.0  
Tier 1 risk-based capital2,170,566  10.87  1,197,756  6.0  1,597,008  8.0  
Tier 1 leverage capital2,170,566  8.06  1,076,712  4.0  1,345,889  5.0  
Dividend Restrictions
Webster Financial Corporation is dependent upon dividends from Webster Bank to provide funds for its cash requirements, including payments of dividends to shareholders. Banking regulations may limit the amount of dividends that may be paid. Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of Webster Bank to fall below specified minimum levels, or if dividends declared exceed the net income for that year combined with the undistributed net income for the preceding two years. In addition, the OCC has discretion to prohibit any otherwise permitted capital distribution on general safety and soundness grounds. Dividends paid by Webster Bank to Webster Financial Corporation totaled $120$360 million and $145$290 million during the years ended December 31, 20172019 and 2016,2018, respectively.
Cash Restrictions
Webster Bank is required by Federal Reserve System regulations to hold cash reserve balances, on hand or with Federal Reserve Banks. Pursuant to this requirement, the Bank held $82.3$93.8 million and $58.6$81.2 million at December 31, 20172019 and 2016,2018, respectively.

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Note 14:15: Earnings Per Common Share
Reconciliation of the calculation of basic and diluted earnings per common share follows:
 Years ended December 31,
(In thousands, except per share data)201920182017
Earnings for basic and diluted earnings per common share:
Net income$382,723  $360,418  $255,439  
Less: Preferred stock dividends7,875  7,853  8,184  
Net income available to common shareholders374,848  352,565  247,255  
Less: Earnings applicable to participating securities (1)
1,863  862  424  
Earnings applicable to common shareholders$372,985  $351,703  $246,831  
Shares:
Weighted-average common shares outstanding - basic91,559  91,930  91,965  
Effect of dilutive securities323  297  391  
Weighted-average common shares outstanding - diluted91,882  92,227  92,356  
Earnings per common share (1):
Basic$4.07  $3.83  $2.68  
Diluted4.06  3.81  2.67  
 Years ended December 31,
(In thousands, except per share data)2017
2016
2015
Earnings for basic and diluted earnings per common share:




Net income$255,439

$207,127
 $204,729
Less: Preferred stock dividends8,184

8,096
 8,711
Net income available to common shareholders247,255

199,031
 196,018
Less: Earnings applicable to participating securities424

608
 657
Earnings applicable to common shareholders$246,831

$198,423
 $195,361
Shares:     
Weighted-average common shares outstanding - basic91,965
 91,367
 90,968
Effect of dilutive securities:     
Stock options and restricted stock385
 461
 524
Warrants6
 28
 41
Weighted-average common shares outstanding - diluted92,356
 91,856
 91,533
Earnings per common share:     
Basic$2.68
 $2.17
 $2.15
Diluted2.67
 2.16
 2.13
(1)Earnings per common share amounts under the two-class method, for nonvested time-based restricted shares with nonforfeitable dividends and dividend rights, are determined the same as the presentation above.

Dilutive Securities
The Company maintains stock compensation plans under which restricted stock, restricted stock units, non-qualified stock options, incentive stock options, or stock appreciation rights may be granted to employees and directors. The effect of dilutive securities for the periods presented is primarily the result of outstanding stock options, as well as non-participating restricted stock.
Potential common shares from non-participating restricted stock of $73 thousand, $47 thousand, and $58 thousand for the years ended December 31, 2019, 2018, and 2017, respectively, are excluded from the effect of dilutive securities because they would have been anti-dilutive are as follows:under the treasury stock method.
 Years ended December 31,
(In thousands)2017 2016 2015
Stock options (shares with exercise price greater than market price)—
 41
 213
Restricted stock (due to performance conditions on non-participating shares)58
 125
 92

Basic weighted-average common shares outstanding includes the effect of conversion of the Series A Preferred Stock which occurred on June 1, 2015. Prior to that, the Series A Preferred Stock was considered to be anti-dilutive. Refer to Note 11:12: Shareholders' Equity and Note 18:19: Share-Based Plans for further information relating to potential common shares excluded from the effect of dilutive securities.

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Note 15:16: Derivative Financial Instruments
Risk Management Objective of Using DerivativesDerivative Positions and Offsetting
Webster manages economic risks, including interest rate, liquidity, and credit risk by managing the amount, sources, and duration of its debt fundingDerivatives Designated in conjunction with the use of interest rate derivative financial instruments. Webster enters into interest rate derivatives to mitigate the exposure related to business activities that result in the receipt or payment of, both future known and uncertain, cash amounts that are impacted by interest rates. The primary objective for using interest rate derivatives is to add stability to interest expense by managing exposure to interest rate movements. To accomplish this objective, Webster uses interest rate swaps and interest rate caps as part of its interest rate risk management strategy.
Hedge Relationships. Interest rate swaps andallow the Company to change the fixed or variable nature of an interest rate caps designated as cash flow hedges are designed to managewithout the risk associated with a forecasted event or an uncertain variable-rate cash flow. Forward-settle interest rate swaps protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows relating to interest payments on forecasted debt issuances. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. InterestCertain pay fixed/receive variable interest rate capsswaps are designated as cash flow hedges involveto convert floating-rate debt into fixed-rate debt, while certain receive fixed/pay variable interest rate swaps are designated as fair value hedges to convert fixed-rate long-term debt into a variable-rate obligation. Certain purchased options are designated as cash flow hedges. Purchased options allow the receiptCompany to limit the potential adverse impact of variable amountsinterest rates by establishing a cap or a floor strike rate in exchange for an upfront premium. The purchased options designated as cash flow hedges represent interest rate caps where payment is received from athe counterparty if interest rates rise above the contractual strike rate on the contract in exchange for payment of an up-front premium.
Cash flow hedges are used to regulate the variable cash flows associated with existing variable-rate debt and forecasted issuances of debt. Derivative instruments designated as cash flow hedges are recorded on the balance sheet at fair value. The effective portion of the change in the fair value of derivatives which are designated as cash flow hedges, and that qualify for hedge accounting, is recorded to AOCL and is reclassified into earnings in the subsequent periods that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of these derivatives, attributable to the difference in the effective date of the hedge and the effective date of the debt issuance, is recognized directly in earnings. During the periods presented, there was no ineffectiveness to be recognized in earnings.
Certain fixed-rate obligations can be exposed to a change in fair value attributable to changes in benchmark interest rates. On occasion, interest rate swaps will be usedfloors where payment is received from the counterparty when interest rates fall below the contractual strike rate.
Derivatives Not Designated in Hedge Relationships. The Company also enters into other derivative transactions to manage this exposure. An interest rate swap which involveseconomic risks but does not designate the receipt of fixed-rate amounts from a counterpartyinstruments in exchange for Webster making variable-rate payments over the life of the agreement, without the exchange of the underlying notional amount, is designated as a fair value hedge. For a qualifying derivative designated as a fair value hedge the gain or loss on the derivative, as well as the gain or loss on the hedged item, is recognized in interest expense. During the periods presented, Webster did not have interest rate derivative financial instruments designated as fair value hedges and as a result, there was no impact to interest expense.
Additionally, in order to address certain other risk management matters,relationships. Further, the Company also utilizesenters into derivative instruments that do not qualify for hedge accounting. These derivative instruments, which are recorded on the balance sheet at fair value,contracts to accommodate customer needs. Derivative contracts with changes in fair value recognized each period as other non-interest income in the accompanying Consolidated Statements of Income, are described in the following paragraphs.
Interest rate swap and cap contracts are sold to commercial and other customers who wish to modify loan interest rate sensitivity. These contracts are offset with dealer counterparty transactions structured with matching terms. As a result, there isterms to ensure minimal impact on earnings, except for fee income earned in such transactions.
RPAs are entered into as financial guarantees of performance on interest rate swap derivatives. The purchased (asset) or sold (liability) guarantee allows the Company to participate-in (fee received) or participate-out (fee paid) the risk associated with certain derivative positions executed with the borrower by a lead bank in a loan syndication.
Other derivatives include foreign currency forward contracts related to lending arrangements, a VISA equity swap transaction, and mortgage banking derivatives such as mortgage-backed securities related to residential loan commitments and loans held for sale. Mortgage banking derivatives are utilized by Webster in its efforts to manage risk of loss associated with its mortgage loan commitments and mortgage loans held for sale. Prior to closing and funding certain single-family residential mortgage loans interest rate lock commitments are generally extended to the borrowers. During the period from commitment date to closing date, Webster is subject to the risk that market rates of interest may change. If market rates rise, investors generally will pay less to purchase such loans causing a reduction in the anticipated gain on sale of the loans and possibly resulting in a loss. In an effort to mitigate such risk, forward delivery sales commitments are established under which Webster agrees to deliver whole mortgage loans to various investors or issue mortgage-backed securities. Mandatory forward commitments establish the price to be received upon the sale of the related mortgage loan, thereby mitigating certain interest rate risk. There is, however, still certain execution risk specifically related to Webster’s ability to close and deliver to its investors the mortgage loans it has committed to sell.


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Fair Value of Derivative Instruments
The following table presents the notional amounts and fair values of derivative positions:
At December 31, 2019At December 31, 2018
Asset DerivativesLiability DerivativesAsset DerivativesLiability Derivatives
(In thousands)Notional
Amounts		Fair
Value		Notional
Amounts		Fair
Value		Notional
Amounts		Fair
Value		Notional
Amounts		Fair
Value
Designated as hedging instruments:
Interest rate derivatives (1) (2)
$1,225,000  $11,855  $300,000  $3,153  $325,000  $3,050  $—  $—  
Not designated as hedging instruments:
Interest rate derivatives (1)
4,869,139  133,455  4,090,522  9,732  4,435,530  42,205  3,643,985  38,029  
Mortgage banking derivatives (3)
27,873  329  57,000  110  13,599  226  17,000  293  
Other (4)
76,544  398  275,279  818  85,432  797  140,601  688  
Total not designated as hedging instruments4,973,556  134,182  4,422,801  10,660  4,534,561  43,228  3,801,586  39,010  
Gross derivative instruments, before netting$6,198,556  146,037  $4,722,801  13,813  $4,859,561  46,278  $3,801,586  39,010  
Less: Master netting agreements
4,779  4,779  2,495  2,495  
Cash collateral8,100  1,871  4,936  —  
Total derivative instruments, after netting$133,158  $7,163  $38,847  $36,515  
 At December 31, 2017 At December 31, 2016
 Asset Derivatives Liability Derivatives Asset Derivatives Liability Derivatives
(In thousands)Notional
Amounts		Fair
Value		 Notional
Amounts		Fair
Value		 Notional
Amounts		Fair
Value		 Notional
Amounts		Fair
Value
Designated as hedging instruments:           
Positions subject to master netting agreements (1)
           
Interest rate derivatives$325,000
$2,770
 $—
$—
 $225,000
$3,270
 $100,000
$792
            
Not designated as hedging instruments:           
Positions subject to master netting agreements (1)
           
Interest rate derivatives2,791,760
5,977
 721,048
1,968
 1,943,485
32,226
 1,242,937
24,388
Mortgage banking derivatives (2)
28,497
421
 39,230
110
 103,440
3,084
 59,895
711
Other7,914
258
 30,328
419
 10,634
231
 14,265
120
Positions not subject to master netting agreements           
Interest rate derivatives1,366,299
23,009
 2,146,518
25,631
 1,734,679
38,668
 1,451,762
19,001
RPAs93,713
80
 116,882
111
 86,037
139
 87,273
166
Other—
—
 2,073
184
 1,438
19
 181
11
Total not designated as hedging instruments4,288,183
29,745
 3,056,079
28,423
 3,879,713
74,367
 2,856,313
44,397
Gross derivative instruments, before netting$4,613,183
32,515
 $3,056,079
28,423
 $4,104,713
77,637
 $2,956,313
45,189
Less: Legally enforceable master netting agreements 2,245
  2,245
  24,252
  24,254
Less: Cash collateral posted 6,704
  —
  11,475
  600
Total derivative instruments, after netting $23,566
  $26,178
  $41,910
  $20,335
(1)Balances related to Chicago Mercantile Exchange (CME) are presented as a single unit of account. In accordance with its rule book, CME legally characterizes variation margin payments as settlement of derivatives rather than collateral against derivative positions. Notional amounts of interest rate swaps cleared through CME include $1.1 billion and $1.9 billion for asset derivatives and $2.6 billion and $1.1 billion for liability derivatives at December 31, 2019 and December 31, 2018, respectively. The related fair values approximate zero.
(2)The increase in the notional amount is for $1.0 billion of interest rate floors purchased due to balance sheet management activities.
(3)Notional amounts related to residential loan commitments include mandatory forward commitments of $57.0 million, while notional amounts do not include approved floating rate commitments of $7.3 million, at December 31, 2019.
(4)Other derivatives include foreign currency forward contracts related to lending arrangements and customer hedging activity, a Visa equity swap transaction, and risk participation agreements. Notional amounts of risk participation agreements include $65.7 million and $65.0 million for asset derivatives and $223.4 million and $96.3 million for liability derivatives at December 31, 2019 and December 31, 2018, respectively, that have insignificant related fair values.
The following table presents fair value positions transitioned from gross to net upon application of counterparty netting agreements:
At December 31, 2019
(In thousands)Gross
Amount		Offset AmountNet Amount on Balance Sheet Amounts Not Offset  Net Amounts
Asset derivatives$13,012  12,879  $133  $299  $432  
Liability derivatives6,710  6,650  60  329  389  
At December 31, 2018
(In thousands)Gross
Amount		Offset AmountNet Amount on Balance Sheet Amounts Not Offset    Net Amounts  
Asset derivatives$9,928  $7,431  $2,497  $—  $2,497  
Liability derivatives2,566  2,495  71  756  827  
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(1)One of Webster's counterparty relationships was impacted by a Chicago Mercantile Exchange rulebook amendment, resulting
Table of Contents
Derivative Activity
The following table presents the change in the presentation of that relationship on a settlement basis, as a single unit of account.
(2)Notional amounts include mandatory forward commitments of $39.0 million, while notional amounts do not include approved floating rate commitments of $11.3 million, at December 31, 2017.
Changes in Fair Value
Changes in the fair value for derivatives designated as fair value hedges as well as the offsetting change in fair value on the hedged item and the income statement effect of derivatives not qualifying for hedge accounting treatment are reporteddesignated as a component of other non-interest income in the accompanying Consolidated Statements of Income as follows:cash flow hedges:
 Years ended December 31,
(In thousands)2017 2016 2015
Interest rate derivatives$2,702
 $8,668
 $4,361
RPA242
 (361) (33)
Mortgage banking derivatives(2,062) 1,553
 801
Other(768) (67) (63)
Total impact on other non-interest income$114
 $9,793
 $5,066

Recognized InYears ended December 31,
(In thousands)Net Interest Income201920182017
Fair value hedges:
Recognized on derivativesLong-term debt$17,486  $—  $—  
Recognized on hedged itemsLong-term debt(17,486) —  —  
Net recognized on fair value hedges$—  $—  $—  
Cash flow hedges:
Interest rate derivativesLong-term debt$4,241  $6,557  $7,885  
Interest rate derivativesInterest and fees on loans and leases1,314  —  —  
Net recognized on cash flow hedges$5,555  $6,557  $7,885  
Amounts for the effective portion of changes in theAdditional information related to fair value hedges:
Consolidated Balance Sheet Line Item in Which Hedged Item is LocatedCarrying Amount of Hedged ItemCumulative Amount of Fair Value Hedging Adjustment Included in Carrying Amount
At December 31,At December 31,
(In thousands)2019201820192018
Long-term debt$317,486  $—  $17,486  $—  
The following table presents the effect on the income statement for derivatives not designated as hedging instruments:
Recognized InYears ended December 31,
(In thousands)Non-interest Income201920182017
Interest rate derivativesOther income$8,477  $10,376  $2,702  
Mortgage banking derivativesMortgage banking activities(6) (378) (2,062) 
OtherOther income1,100  2,391  (526) 
Total not designated as hedging instruments$9,571  $12,389  $114  
Purchased options designated as cash flow hedges exclude time-value premiums from the assessment of derivativeshedge effectiveness. Time-value premiums are reclassifiedamortized on a straight-line basis. During 2019, $1.3 million was amortized to net interest expense as interest payments are made on Webster's variable-rate debt. income. At December 31, 2019, the remaining unamortized balance of time-value premiums was $12.1 million.
Over the next twelve months, the Company estimates that $0.8an estimated $4.8 million reduction to interest expense will be reclassified from AOCL asrelating to cash flow hedges, and an estimated $2.3 million increase to interest expense.
Webster records gains and losses relatedexpense will be reclassified from AOCL relating to swap terminations as OCI. These balances are subsequently amortized into interest expense over the respective terms of the hedged debt instruments.hedge terminations. At December 31, 2017,2019, the remaining unamortized loss on the termination ofterminated cash flow hedges is $14.9$4.9 million. Over the next twelve months, the Company estimates that $6.2 million will be reclassified from AOCL as an increase to interest expense.The maximum length of time over which forecasted transactions are hedged is 10 years.
Additional information about cash flow hedge activity impacting AOCL and the related amounts reclassified to interest expenseearnings is provided in Note 12:13: Accumulated Other Comprehensive Loss, Net of Tax. Information about the valuation methods used to measure the fair value of derivatives is provided in Note 16:17: Fair Value Measurements.

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Offsetting DerivativesDerivative Exposure
Webster has entered into transactionsreviews collateral positions on a daily basis and exchanges collateral with counterparties that are subject to a legally enforceable master netting agreement. Derivatives subject to a legally enforceable master netting agreement are reported on a net basis, net of cash collateral. Net positions are recorded in other assets for a net gain position and in other liabilities for a net loss position in the accompanying Consolidated Balance Sheets. In addition, there was $406 thousand cash collateral posted, that was not offset, at December 31, 2017.
The following table is presented on a gross basis, prior to the application of counterparty netting agreements:
 At December 31, 2017 At December 31, 2016
(In thousands)
Gross
Amount
Relationship OffsetCash Collateral Offset
Net
Amount
 
Gross
Amount
Relationship OffsetCash Collateral Offset
Net
Amount
Derivative instrument assets         
Hedged Accounting$2,770
$91
$2,679
$—
 $3,270
$2,335
$935
$—
Non-Hedged Accounting6,222
2,154
4,025
43
 32,457
21,917
10,540
—
Total$8,992
$2,245
$6,704
$43
 $35,727
$24,252
$11,475
$—
          
Derivative instrument liabilities         
Hedged Accounting$—
$—
$—
$—
 $792
$792
$—
$—
Non-Hedged Accounting2,387
2,245
—
142
 24,508
23,462
600
446
Total$2,387
$2,245
$—
$142
 $25,300
$24,254
$600
$446

Counterparty Credit Risk
Use of derivative contracts may expose the bank to counterparty credit risk. The Company has International Swaps Derivative Association (ISDA) master agreements, including a Credit Support Annex, with all derivative counterparties. The ISDA master agreements provide that on each payment date, all amounts otherwise owing the same currency under the same transaction are netted so that only a single amount is owed in that currency. The ISDA provides, if the parties so elect, for such netting of amounts in the same currency among all transactions identified as being subject to such election that have common payment dates and booking offices. Under the Credit Support Annex, daily net exposure in excess of a negotiated threshold is secured by posted cash collateral. The Company has negotiated a zero threshold with the majority of its approved financial institution counterparties. In accordance with Webster policies, institutional counterparties must be analyzed and approved through the Company’s credit approval process.
The Company’s credit exposure on interest rate derivatives with non-dealer counterparties is limited to the net favorable value, including accrued interest, of all such instruments, reduced by the amount of collateral pledged by the counterparties. The Company's credit exposure related to derivatives with dealer counterparties is significantly mitigated with cash collateral equal to, or in excess of, the market value of the instrument updated daily.
In accordance with counterparty credit agreements and derivativestandard ISDA documentation, Dodd-Frank requirements, central clearing rules, theand other related agreements. The Company had approximately $3.1$121.6 million in net margin collateral received from financial counterparties at December 31, 2017, comprised of $32.0 million in initial margin posted and $35.1 million in variation margin collateral received fromwith financial counterparties or the derivative clearing organization. Collateral levels for approved financial institution counterparties are monitored dailyorganization at December 31, 2019, which is primarily comprised of $56.6 million in initial margin collateral posted at CME and adjusted as necessary. In$71.3 million in CME variation margin posted. At December 31, 2019, $8.4 million of cash collateral received is included in cash and due from banks on the event of default, should the collateral not be returned, the exposure would be offset by terminating the transaction.consolidated balance sheet and is considered restricted in nature.
The CompanyWebster regularly evaluates the credit risk of its counterparties,derivative customers, taking into account the likelihood of default, net exposures, and remaining contractual life, among other related factors. The Company'sCredit risk exposure is mitigated as transactions with customers are generally secured by the same collateral of the underlying transactions being hedged. Current net current credit exposure relating to interest rate derivatives with Webster Bank customers was $23.0$132.3 million at December 31, 2017.2019. In addition, the Company monitors potential future exposure, representing its best estimate of exposure to remaining contractual maturity. The potential future exposure relating to interest rate derivatives with Webster Bank customers totaled $28.2$39.6 million at December 31, 2017. The credit exposures are mitigated as transactions with customers are generally secured by2019. For additional information regarding accounting policies for derivative financial instruments refer to Note 1: Summary of Significant Accounting Policies under the same collateral of the underlying transactions being hedged.section “Derivative Instruments and Hedging Activities”.

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Note 16:17: Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined using quoted market prices. However, in many instances, quoted market prices are not available. In such instances, fair values are determined using appropriate valuation techniques. Various assumptions and observable inputs must be relied upon in applying these techniques. Accordingly, categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. As such, the fair value estimates may not be realized in an immediate transfer of the respective asset or liability.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings or any part of a particular financial instrument. Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These factors are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair Value Hierarchy
The three levels within the fair value hierarchy are as follows:
•
•Level 1: Valuation is based upon unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
•Level 2: Fair value is calculated using significant inputs other than quoted market prices that are directly or indirectly observable for the asset or liability. The valuation may rely on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, rate volatility, prepayment speeds, credit ratings,) or inputs that are derived principally or corroborated by market data, by correlation, or other means.
• Valuation is based upon unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
•
Level 2: Fair value is calculated using significant inputs other than quoted market prices that are directly or indirectly observable for the asset or liability. The valuation may rely on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit ratings, etc.), or inputs that are derived principally or corroborated by market data, by correlation, or other means.
•
Level 3: Inputs for determining the fair value of the respective assets or liabilities are not observable. Level 3 valuations are reliant upon pricing models and techniques that require significant management judgment or estimation.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Available-for-Sale Investment Securities.Securities. When quoted prices are available in an active market, the Company classifies available-for-sale investment securities within Level 1 of the valuation hierarchy. U.S. Treasury Bills are classified within Level 1 of the fair value hierarchy.
When quoted market prices are not available, the Company employs an independent pricing service that utilizes matrix pricing to calculate fair value. Such fair value measurements consider observable data such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayments speeds, credit information, and respective terms and conditions for debt instruments. Management maintains procedures to monitor the pricing service's assumptionsresults and establishes processeshas an established process to challenge the pricing service'stheir valuations, or methodologies, that appear unusual or unexpected. Available-for-Sale investment securities which include Agency CMO, Agency MBS, Agency CMBS, CMBS, CLO, single issuer-trust preferred, and corporate debt, are classified within Level 2 of the fair value hierarchy.
Derivative Instruments.Instruments. Foreign exchange contracts are valued based on unadjusted quoted prices in active markets and classified within Level 1 of the fair value hierarchy.
All other derivative instruments are valued using third-party valuation software, which considers the present value of cash flows discounted using observable forward rate assumptions. The Chicago Mercantile Exchange have amended their rulebooks to legally characterize variation margin payments for over-the-counter derivatives that clear as settlements rather than collateral, effective January 3, 2017. One of Webster's counterparty relationships was impacted by this change, resulting in the fair value of the instrument including cash collateral as a single unit of account. The resulting fair values areis validated against valuations performed by independent third parties and are classified within Level 2 of the fair value hierarchy. In determiningWebster evaluates the credit risk of its counterparties to determine if any fair value adjustment related to credit risk ismay be required, Webster evaluates the credit risk of its counterparties by considering factors such as the likelihood of default by the counterparties,counterparty, its net exposures, theexposure, remaining contractual life, as well as the amount of collateral securing the position. Webster reviews its counterparty exposure on a regular basis, and, when necessary, appropriate business actions are taken to adjust the exposure. When determining fair value, Webster applies the portfolio exception with respect to measuring counterparty credit risk for all of its derivative transactions subject to a master netting arrangement.
The change in value of derivative assets and liabilities attributable to credit risk was not significant during the reported periods.

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Mortgage Banking Derivatives.Derivatives. Forward sales of mortgage loans and mortgage-backed securities are utilized by the Company in its efforts to manage risk of loss associated with its mortgage loan commitments and mortgage loans held for sale. Prior to closing and funding certain single-family residential mortgage loans, an interest rate lock commitment is generally extended to the borrower. During the period from commitment date to closing date, the Company is subject to the risk that market rates of interest may change. If market rates rise, investors generally will pay less to purchase such loans resulting in a reduction in the gain on sale of the loans or, possibly, a loss. In an effort to mitigate such risk, forward delivery sales commitments are established, under which the Company agrees to deliver whole mortgage loans to various investors or issue mortgage-backed securities. The fair value of mortgage banking derivatives is determined based on current market prices for similar assets in the secondary market and, therefore, classified within Level 2 of the fair value hierarchy.
Originated Loans Held For Sale. Residential mortgage loans typically are classified as held for sale upon origination based on management's intent to sell such loans. The Company generally records residential mortgage loans held for sale under the fair value option of ASC Topic 825 "Financial Instruments." Electing to measure originated loans held for sale at fair value reduces certain timing differences and better matches changes in the value of these assets with changes in the value of the derivatives used as an economic hedge on these assets. The fair value of residential mortgage loans held for sale is based on quoted market prices of similar loans sold in conjunction with securitization transactions. Accordingly, such loans are classified within Level 2 of the fair value hierarchy.
The following table compares the fair value to unpaid principal balance of assets accounted for under the fair value option:
At December 31, 2019At December 31, 2018
(In thousands)Fair ValueUnpaid Principal BalanceDifferenceFair ValueUnpaid Principal BalanceDifference
Originated loans held for sale$35,750  $35,186  $564  $7,908  $8,227  $(319) 
Investments Held in Rabbi Trust. Investments held in the Rabbi Trust primarily include mutual funds that invest in equity and fixed income securities. Shares of mutual funds are valued based on net asset value, which represents quoted market prices for the underlying shares held in the mutual funds. Therefore, investments held in the Rabbi Trust are classified within Level 1 of the fair value hierarchy. WebsterThe Company has elected to measure the investments held in the Rabbi Trust at fair value. The cost basis of the investments held in the Rabbi Trust is $2.2$1.6 million as of December 31, 2017.2019.
Alternative Investments. AlternativeEquity investments have a readily determinable fair value when quoted prices are available in an active market. Accordingly, such alternative investments are classified within Level 1 of the fair value hierarchy.
Equity investments that do not have a readily available fair value may qualify for NAV practical expedient measurement, based on specific requirements. The Company's alternative investments accounted for at NAV consist of investments in non-public entities that generally cannot be redeemed since the Company’s investment isinvestments are distributed as the underlying equity is liquidated. Alternative investments in which the ownership percentage is greater than 3% are fair valued on a recurring basis based upon the net asset value of the respective fund. Alternative investments in which the ownership percentage is less than 3% are fair valued on a non-recurring basis. These alternative investments are recorded at cost, subject to impairment testing. Both recurring and non-recurring alternative investmentsNAV are not classified within Level 3 of the fair value hierarchy, as they are non-public entities that cannot be redeemed since the Company's investment is distributed as the underlying investments are liquidated.hierarchy. At December 31, 2017, the2019, these alternative investments book value was $18.0 million and there was $9.1 million inhad a remaining unfunded commitments.commitment of $23.8 million.
94
Originated Loans Held For Sale. Residential mortgage loans typically are classified as held for sale upon origination based on management's intent to sell such loans. The Company generally records residential mortgage loans held for sale under the fair value option of ASC Topic 825 "Financial Instruments." The fair value of residential mortgage loans held for sale is based on quoted market prices of similar loans sold in conjunction with securitization transactions. Accordingly, such loans are classified within Level 2 of the fair value hierarchy.

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Summaries of the fair values of assets and liabilities measured at fair value on a recurring basis are as follows:
 At December 31, 2019
(In thousands)Level 1Level 2Level 3NAVTotal
Financial assets held at fair value:
U.S. Treasury Bills$—  $—  $—  $—  $—  
Agency CMO—  185,801  —  —  185,801  
Agency MBS—  1,612,164  —  —  1,612,164  
Agency CMBS—  581,552  —  —  581,552  
CMBS—  431,871  —  —  431,871  
CLO—  92,205  —  —  92,205  
Corporate debt—  22,240  —  —  22,240  
Total available-for-sale investment securities—  2,925,833  —  —  2,925,833  
Gross derivative instruments, before netting (1)
328  145,709  —  —  146,037  
Originated loans held for sale—  35,750  —  —  35,750  
Investments held in Rabbi Trust4,780  —  —  —  4,780  
Alternative investments—  —  —  4,331  4,331  
Total financial assets held at fair value$5,108  $3,107,292  $—  $4,331  $3,116,731  
Financial liabilities held at fair value:
Gross derivative instruments, before netting (1)
$611  $13,202  $—  $—  $13,813  
 At December 31, 2017
(In thousands)Level 1Level 2Level 3Total
Financial assets held at fair value:    
U.S. Treasury Bills$1,247
$—
$—
$1,247
Agency CMO—
306,333
—
306,333
Agency MBS—
1,107,841
—
1,107,841
Agency CMBS—
588,026
—
588,026
CMBS—
361,067
—
361,067
CLO—
209,851
—
209,851
Single issuer-trust preferred—
7,050
—
7,050
Corporate debt—
56,622
—
56,622
Total available-for-sale investment securities1,247
2,636,790
—
2,638,037
Gross derivative instruments, before netting (1)
258
32,257
—
32,515
Investments held in Rabbi Trust4,801
—
—
4,801
Alternative investments—
—
7,460
7,460
Originated loans held for sale—
20,888
—
20,888
Total financial assets held at fair value$6,306
$2,689,935
$7,460
$2,703,701
Financial liabilities held at fair value:    
Gross derivative instruments, before netting (1)
$587
$27,836
$—
$28,423

 At December 31, 2018
(In thousands)Level 1Level 2Level 3NAVTotal
Financial assets held at fair value:
U.S. Treasury Bills$7,550  $—  $—  $—  $7,550  
Agency CMO—  234,923  —  —  234,923  
Agency MBS—  1,481,089  —  —  1,481,089  
Agency CMBS—  566,237  —  —  566,237  
CMBS—  445,581  —  —  445,581  
CLO—  112,771  —  —  112,771  
Corporate debt—  50,579  —  —  50,579  
Total available-for-sale investment securities7,550  2,891,180  —  —  2,898,730  
Gross derivative instruments, before netting (1)
758  45,520  —  —  46,278  
Originated loans held for sale—  7,908  —  —  7,908  
Investments held in Rabbi Trust4,307  —  —  —  4,307  
Alternative investments—  —  —  2,563  2,563  
Total financial assets held at fair value$12,615  $2,944,608  $—  $2,563  $2,959,786  
Financial liabilities held at fair value:
Gross derivative instruments, before netting (1)
$588  $38,422  $—  $—  $39,010  
 At December 31, 2016
(In thousands)Level 1Level 2Level 3Total
Financial assets held at fair value:    
U.S. Treasury Bills$734
$—
$—
$734
Agency CMO—
419,706
—
419,706
Agency MBS—
954,349
—
954,349
Agency CMBS—
573,272
—
573,272
CMBS—
477,365
—
477,365
CLO—
427,390
—
427,390
Single issuer-trust preferred—
28,633
—
28,633
Corporate debt—
109,642
—
109,642
Total available-for-sale investment securities734
2,990,357
—
2,991,091
Gross derivative instruments, before netting (1)
250
77,387
—
77,637
Investments held in Rabbi Trust5,119
—
—
5,119
Alternative investments—
—
5,502
5,502
Originated loans held for sale—
60,260
—
60,260
Total financial assets held at fair value$6,103
$3,128,004
$5,502
$3,139,609
Financial liabilities held at fair value:    
Gross derivative instruments, before netting (1)
$120
$45,069
$—
$45,189
(1)(1)For information relating to the impact of netting derivative assets and derivative liabilities as well as the impact from offsetting cash collateral paid to the same derivative counterparties see Note 15: Derivative Financial Instruments.
The following table presents the changes in Level 3 assets and derivative liabilities that are measured at fair value on a recurring basis:as well as the impact from offsetting cash collateral paid to the same derivative counterparties refer to Note 16: Derivative Financial Instruments.
(In thousands)Alternative Investments
Balance at January 1, 2017$5,502
Unrealized gain included in net income613
Purchases/capital funding1,399
Payments(54)
Balance at December 31, 2017$7,460
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Assets Measured at Fair Value on a Non-Recurring Basis
Certain assets are measured at fair value on a non-recurring basis; that is, the assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, for example, when there is evidence of impairment. At December 31, 2019, no significant assets classified within Level 3 were identified and measured under this basis. The following is a description of valuation methodologies used for assets measured on a non-recurring basis.
Alternative Investments. The measurement alternative has been elected for alternative investments without readily determinable fair values that do not qualify for the NAV practical expedient. The measurement alternative requires investments to be accounted for at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. These alternative investments are investments in non-public entities that generally cannot be redeemed since the investment is distributed as the underlying equity is liquidated. Accordingly, these alternative investments are classified within Level 2 of the fair value hierarchy.The carrying amount of these alternative investments was $12.6 million at December 31, 2019. No reductions for impairments, or adjustments due to observable price changes, was identified during the year ended December 31, 2019.
Transferred Loans Held For Sale. Certain loans are transferred to loans held for sale once a decision has been made to sell such loans. These loans are accounted for at the lower of cost or marketfair value and are considered to be recognized at fair value when they are recorded at below cost. This activity is primarily consists of commercial loans with observable inputs and areis classified within Level 2. On the occasion shouldthat these loans should include adjustments for changes in loan characteristics using unobservable inputs, the loans would be classified within Level 3.
Collateral Dependent Impaired Loans and Leases.Impaired loans and leases for which repaymentare reported based on one of three measures: (i) the present value of expected future cash flows discounted at the loan's original effective interest rate; (ii) the loan's observable market price; or (iii) the fair value of the collateral, less estimated cost to sell, if the loan is collateral dependent. Accordingly, certain impaired loans and leases may be subject to measurement at fair value on a non-recurring basis. The Company has measured impairment generally based on the fair value of the loan’s collateral or using a discounted cash flow analysis. Impaired collateral dependent loans and leases are primarily expected to be providedrepaid solely by the value of the underlying collateral are considered collateral dependent and are valued based on the estimated fair value of such collateral using customized discounting criteria. As such, collateral dependent impaired loans and leases are classified aswithin Level 3 of the fair value hierarchy.
Other Real Estate Owned and Repossessed Assets. The total book value of OREO and repossessed assets was $6.1$6.5 million at December 31, 2017.2019. OREO and repossessed assets are accounted for at the lower of cost or marketfair value and are considered to be recognized at fair value when they are recorded at below cost. The fair value of OREO is based on independent appraisals or internal valuation methods, less estimated selling costs. The valuation may consider available pricing guides, auction results, and price opinions. Certain assets require assumptions about factors that are not observable in an active market in the determination of fair value,value; as such, OREO and repossessed assets are classified within Level 3 of the fair value hierarchy.
The table below presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis as of December 31, 2017:
(Dollars in thousands) 
AssetFair ValueValuation MethodologyUnobservable InputsRange of Inputs
Collateral dependent impaired loans and leases$12,556
Real Estate AppraisalsDiscount for appraisal type0%-15%
   Discount for costs to sell0%-8%
OREO$1,077
Real Estate AppraisalsDiscount for appraisal type0%-20%
   Discount for costs to sell8%

Fair Value of Financial Instruments and Servicing Assets
The Company is required to disclose the estimated fair value of financial instruments both assets and liabilities, for which it is practicable to estimate fair value.value, as well as servicing assets. The following is a description of valuation methodologies used for those assets and liabilities.
Cash, Due from Banks, and Interest-bearing Deposits.Deposits. The carrying amount of cash, due from banks, and interest-bearing deposits is used to approximate fair value, given the short time frame to maturity and, as such, these assets do not present unanticipated credit concerns. Cash, due from banks, and interest-bearing deposits are classified within Level 1 of the fair value hierarchy.
Held-to-Maturity Investment Securities.Securities. When quoted market prices are not available, the Company employs an independent pricing service that utilizes matrix pricing to calculate fair value. Such fair value measurements consider observable data such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayments speeds, credit information, and respective terms and conditions for debt instruments. Management maintains procedures to monitor the pricing service's assumptionsresults and establishes processeshas an established process to challenge the pricing service'stheir valuations, or methodologies, that appear unusual or unexpected. Held-to-Maturity investment securities, which include Agency CMO, Agency MBS, Agency CMBS, CMBS, and municipal bonds and notes, and private label MBS securities, are classified within Level 2 of the fair value hierarchy.
Loans and Leases, net.net. The estimated fair value of loans and leases held for investment is calculated using a discounted cash flow method, using future prepayments and market interest rates inclusive of an illiquidity premium for comparable loans and leases. The associated cash flows are adjusted for credit and other potential losses. Fair value for impaired loans and leases is estimated using the net present value of the expected cash flows. Loans and leases are classified within Level 3 of the fair value hierarchy.
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Deposit Liabilities.Liabilities. The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. Deposit liabilities are classified within Level 2 of the fair value hierarchy.
Time Deposits.Deposits. The fair value of a fixed-maturity certificate of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. Time deposits are classified within Level 2 of the fair value hierarchy.

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Securities Sold Under Agreements to Repurchase and Other Borrowings.Borrowings. The carrying value is an estimate of fair value for thoseof securities sold under agreements to repurchase and other borrowings that mature within 90 days. The fair values ofdays is the carrying value. Fair value for all other borrowingsbalances are estimated using discounted cash flow analysis based on current market rates adjusted as appropriate, for associated credit risks.risks, as appropriate. Securities sold under agreements to repurchase and other borrowings are classified within Level 2 of the fair value hierarchy.
Federal Home Loan Bank Advances and Long-Term Debt.Debt. The fair value of FHLB advances and long-term debt is estimated using a discounted cash flow technique. Discount rates are matched with the time period of the expected cash flow and are adjusted, as appropriate, to reflect credit risk. FHLB advances and long-term debt are classified within Level 2 of the fair value hierarchy.
Mortgage Servicing Assets.Assets. Mortgage servicing assets are accounted forinitially recorded at cost, subject to impairment testing.fair value and subsequently measured under the amortization method. Mortgage servicing assets are consideredsubject to be recognizedimpairment testing and thereafter carried at the lower of cost or fair value when they are recorded at below cost. Changes in fair valuevalue. Amortization and impairment charges, if any, are included as a component of other non-interest income in the accompanying Consolidated Statementsconsolidated statement of Income.income. Fair value is calculated as the present value of estimated future net servicing income and relies on market based assumptions for loan prepayment speeds, servicing costs, discount rates, and other economic factors; as such, the primary risk inherent in valuing mortgage servicing assets is the impact of fluctuating interest rates on the servicing revenue stream. Mortgage servicing assets are classified within Level 3 of the fair value hierarchy.
The estimated fair valuesFair value of selected financial instruments and servicing assets amounts are as follows:
 At December 31,
 2017 2016
(In thousands)
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 Fair
Value
Financial Assets:       
Level 2       
Held-to-maturity investment securities$4,487,392
 $4,456,350
 $4,160,658
 $4,125,125
Transferred loans held for sale—
 —
 7,317
 7,444
Level 3       
Loans and leases, net17,323,864
 17,211,619
 16,832,268
 16,678,106
Mortgage servicing assets25,139
 45,309
 24,466
 52,075
Alternative investments10,562
 12,940
 11,034
 13,189
Financial Liabilities:       
Level 2       
Deposit liabilities, other than time deposits$18,525,321
 $18,525,321
 $17,279,049
 $17,279,049
Time deposits2,468,408
 2,455,245
 2,024,808
 2,024,395
Securities sold under agreements to repurchase and other borrowings643,269
 644,084
 949,526
 955,660
FHLB advances (1)
1,677,105
 1,678,070
 2,842,908
 2,825,101
Long-term debt (1)
225,767
 234,359
 225,514
 225,514

(1)The following adjustments to the carrying amount are not included for determination of fair value, see Note 10: Borrowings:
•FHLB advances - unamortized premiums on advances
At December 31,
 20192018
(In thousands)Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
Financial Assets:
Level 2
Held-to-maturity investment securities$5,293,918  $5,380,653  $4,325,420  $4,209,121  
Level 3
Loans and leases, net19,827,890  19,961,632  18,253,136  18,155,798  
Mortgage servicing assets17,484  33,250  21,215  45,478  
Financial Liabilities:
Level 2
Deposit liabilities, other than time deposits$20,219,981  $20,219,981  $18,662,299  $18,662,299  
Time deposits3,104,765  3,102,316  3,196,546  3,175,948  
Securities sold under agreements to repurchase and other borrowings1,040,431  1,041,042  581,874  581,874  
FHLB advances1,948,476  1,950,035  1,826,808  1,826,381  
Long-term debt (1)
540,364  555,775  226,021  229,306  
•(1)Long-termAdjustments to the carrying amount of long-term debt -for basis adjustment, unamortized discount, and debt issuance cost on senior fixed-rate notes are not included for determination of fair value. Refer to Note 11: Borrowings for additional information.

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97


Note 17:18: Retirement Benefit Plans
Defined benefit pensionBenefit Pension and other postretirement benefitsOther Postretirement Benefits
Webster Bank offered a defined benefit noncontributory pension plan through December 31, 2007 for eligible employees who met certain minimum service and age requirements. Pension plan benefits are based upon employee earnings during the period of credited service. A supplemental defined benefit retirement plan (SERP) was also offered to certain employees who were at the Executive Vice President level or above through December 31, 2007. The SERP provides eligible participants with additional pension benefits. Webster Bank also provides other postretirement healthcare benefits to certain retired employees.
The Webster Bank Pension Plan and the SERP were frozen as of December 31, 2007. No additional benefits have been accrued since that time. Employees hired on or after January 1, 2007 receive no qualified or supplemental retirement income under the plans. All other employees accrue no additional qualified or supplemental retirement incomebenefits after January 1, 2008, and the amount of their qualified and supplemental retirement incomebenefits will not exceed the amount of benefits determined as of December 31, 2007.
There were $122 thousand and $124 thousand in company contributions to the SERPThe measurement date is December 31 for the years ended December 31, 2017Webster Bank Pension Plan, SERP, and 2016, respectively.
postretirement healthcare benefits. The mortality assumptions used in the pension liability assessment for the year ended December 31, 20172019 were the RP-2014 adjusted to 2006 datasetPri-2012 mortality table projected to measurement date with Mercer's mortality improvement scale MMP-2017.
The measurement date is December 31 for the Webster Bank Pension Plan, SERP, and other postretirement healthcare benefits.MP-2019.
The following table sets forth changes in benefit obligation, changes in plan assets, and the funded status of the defined benefit pension and other postretirement benefits at December 31:
  
Pension PlanSERPOther
(In thousands)201920182019201820192018
Change in benefit obligation:
Beginning balance$209,513  $229,318  $1,835  $13,096  $2,612  $3,094  
Interest cost7,941  7,212  65  103  85  78  
Actuarial loss (gain)33,157  (18,499) 163  —  (103) (352) 
Benefits paid and administrative expenses(9,207) (8,518) (128) (11,364) (195) (208) 
Ending balance (1)
241,404  209,513  1,935  1,835  2,399  2,612  
Change in plan assets:
Beginning balance191,972  216,225  —  —  — ��—  
Actual return on plan assets46,856  (15,735) —  —  —  —  
Employer contributions10,000  —  128  11,364  195  208  
Benefits paid and administrative expenses(9,207) (8,518) (128) (11,364) (195) (208) 
Ending balance239,621  191,972  —  —  —  —  
Funded status of the plan at year end (2)
$(1,783) $(17,541) $(1,935) $(1,835) $(2,399) $(2,612) 
  
Pension Plan SERP Other Benefits
(In thousands)20172016 20172016 20172016
Change in benefit obligation:        
Beginning balance$211,508
$203,645
 $11,806
$10,518
 $3,852
$3,853
Service cost50
45
 —
—
 —
—
Interest cost7,314
8,441
 375
389
 92
125
Actuarial loss (gain)18,396
6,108
 1,037
1,023
 (631)59
Benefits paid and administrative expenses(7,950)(6,731) (122)(124) (219)(185)
Ending balance (1)
229,318
211,508
 13,096
11,806
 3,094
3,852
Change in plan assets:        
Beginning balance192,922
161,369
 —
—
 —
—
Actual return on plan assets31,253
18,284
 —
—
 —
—
Employer contributions—
20,000
 122
124
 219
185
Benefits paid and administrative expenses(7,950)(6,731) (122)(124) (219)(185)
Ending balance216,225
192,922
 —
—
 —
—
Funded status of the plan at year end (2)
$(13,093)$(18,586) $(13,096)$(11,806) $(3,094)$(3,852)

(1)The total accumulated benefit obligation for the defined benefit pension and other postretirement benefits was $245.7 million and $214.0 million at December 31, 2019 and 2018, respectively.
(1)The accumulated benefit obligation for the defined benefit pension and other postretirement benefits was $245.5 million and $227.2 million at December 31, 2017 and 2016, respectively.
(2)The underfunded status amounts are included in accrued expense and other liabilities in the accompanying Consolidated Balance Sheets.
(2)The Company expects that $5.1 millionunderfunded status amounts are included in net actuarial loss will be recognized as a component of net periodic benefit costaccrued expense and other liabilities in 2018.the consolidated balance sheets.
The components offollowing table summarizes the impact on AOCL related to the defined benefit pension and other postretirement benefits at December 31, 2017 and 2016 are summarized below:31:
  
Pension Plan SERP Other Benefits
(In thousands)20172016 20172016 20172016
Net actuarial loss (gain)$59,433
$65,857
 $3,299
$3,009
 $(16)$616
Prior service cost—
—
 —
—
 —
—
Total pre-tax amounts included in AOCL59,433
65,857
 3,299
3,009
 (16)616
Deferred tax benefit13,407
23,727
 744
1,084
 (3)222
Amounts included in accumulated AOCL, net of tax$46,026
$42,130
 $2,555
$1,925
 $(13)$394


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Pension PlanSERPOther
(In thousands)201920182019201820192018
Net actuarial loss (gain) included in AOCL$56,555  $64,523  $602  $453  $(458) $(368) 
Deferred tax benefit (expense)12,528  14,623  133  103  (101) (83) 
Amounts included in accumulated AOCL, net of tax$44,027  $49,900  $469  $350  $(357) $(285) 
Expected future benefit payments for the defined benefit pension and other postretirement benefits are presented below:
(In thousands)Pension PlanSERPOther
2020$9,010  $131  $314  
20219,797  134  295  
202210,490  133  274  
202310,488  132  252  
202410,883  135  229  
2025-202959,126  627  815  
(In thousands)Pension PlanSERP
Other
Benefits
2018$9,009
$11,371
$354
20198,630
130
342
20209,065
132
328
20219,792
132
311
202210,425
131
292
2023-202755,206
651
1,125

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The components of the net periodic benefit cost (benefit) for the defined benefit pension and other postretirement benefits were as follows for the years ended December 31:
 Pension Plan SERP Other Benefits
(In thousands)201720162015 201720162015 201720162015
Service cost$50
$45
$45
 $—
$—
$—
 $—
$—
$—
Interest cost on benefit obligations7,314
8,441
8,008
 375
389
345
 92
125
123
Expected return on plan assets(12,296)(11,461)(11,873) —
—
—
 —
—
—
Amortization of prior service cost—
—
—
 —
—
—
 —
14
73
Recognized net loss5,864
6,665
5,724
 748
426
390
 —
35
47
Net periodic benefit cost (benefit)$932
$3,690
$1,904
 $1,123
$815
$735
 $92
$174
$243

Pension PlanSERPOther
(In thousands)201920182017201920182017201920182017
Service cost$—  $—  $50  $—  $—  $—  $—  $—  $—  
Interest cost on benefit obligations7,941  7,212  7,314  65  103  375  85  78  92  
Expected return on plan assets(11,436) (12,716) (12,296) —  —  —  —  —  —  
Recognized net loss (gain)5,705  4,862  5,864  14  2,846  748  (13) —  —  
Net periodic benefit cost (benefit)$2,210  $(642) $932  $79  $2,949  $1,123  $72  $78  $92  
Changes in funded status related to the defined benefit pension and other postretirement benefits and recognized as a component of OCI in the accompanying Consolidated Statementsconsolidated statement of Comprehensive Incomecomprehensive income as follows for the years ended December 31:
Pension PlanSERPOther
(In thousands)201920182017201920182017201920182017
Net (gain) loss$(2,263) $9,952  $(561) $164  $—  $1,037  $(103) $(352) $(631) 
Amounts reclassified from AOCL(5,705) (4,862) (5,864) (14) (2,846) (748) 13  —  —  
Total (gain) loss recognized in OCI$(7,968) $5,090  $(6,425) $150  $(2,846) $289  $(90) $(352) $(631) 
 Pension Plan SERP Other Benefits
(In thousands)201720162015 201720162015 201720162015
Net (gain) loss$(561)$(715)$8,525
 $1,037
$1,023
$372
 $(631)$60
$(178)
Amounts reclassified from AOCL(5,864)(6,665)(5,724) (748)(426)(390) —
(35)(47)
Amortization of prior service cost—
—
—
 —
—
—
 —
(14)(73)
Total (gain) loss recognized in OCI$(6,425)$(7,380)$2,801
 $289
$597
$(18) $(631)$11
$(298)

The Company expects a $4.1 million net actuarial loss will be recognized as a component of net periodic benefit cost in 2020.
Fair Value MeasurementsMeasurement
The following is a description of the valuation methodologies used forto measure the fair value of pension plan assets measured at fair value, includingand includes the general classification of suchthose instruments pursuant towithin the valuation hierarchy:
Registered investment companies.Exchange traded funds arefund. The exchange traded fund has quoted at market prices inon an exchange, andin an active market, which representrepresents the net asset valuesvalue of the shares held byin the plan at year end. Money market funds are shown at cost, which approximatesfund and is classified within Level 1 of the fair value.value hierarchy. The fair value for the exchange traded fund is benchmarked against the Standard & Poor's 500 Index.
Common collective trust funds. Money market fund.The net assetmoney market fund is carried at cost, which approximates fair value (NAV), as provided bygiven the trustee,short time frame to maturity for cash and cash equivalents and is used asclassified within Level 1 of the fair value of the investments. The NAV is based on the fair value of the underlyinghierarchy.
Common collective trusts. Common collective trusts hold investments held by the fund less its liabilities. Plan transactions (purchasesin fixed income and sales)equity funds. Transactions may occur daily. Were the Plan to initiatedaily within a trust. Should a full redemption of the collective trust be initiated, the investment adviseradvisor reserves the right to temporarily delay withdrawal from the trustwithdrawals in order to ensure that the liquidation of securities liquidations will beis carried out in an orderly business manner. TheA trustee for each common collective trust funds performanceprovides the net asset value of its underlying investments, less its liabilities, which represents the fair value of the trust under the NAV practical expedient. Common collective trusts are benchmarked against the Standard and Poor’s 500 Stock Index, the S&P 400 Mid Cap Index, the Russell 2000 Index, the MSCI ACWI ex U.S. Index, and the Barclays Capital U.S. Long Credit Index.
Investment contract with insurance company. These investments are valued at fair value by discounting the related cash flows based on current yields of similar instruments with comparable durations considering the credit-worthiness of the issuer. Holdings of insurance company investment contracts are classified as Level 3 investments.

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A summary of the fair value and hierarchy classification of financial assets of the pension plan is as follows:
At December 31,
  
20192018
(In thousands)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Exchange traded fund$36,552  $—  $—  $36,552  $30,641  $—  $—  $30,641  
Money market fund1,225  —  —  1,225  1,695  —  —  1,695  
Investments measured at NAV (1)
—  —  —  201,844  —  —  —  159,636  
Total pension plan assets$37,777  $—  $—  239,621  $32,336  $—  $—  $191,972  
 At December 31,
  
2017 2016
(In thousands)Level 1Level 2Level 3Total Level 1Level 2Level 3Total
Registered investment companies:         
Exchange traded funds$37,848
$—
$—
$37,848
 $31,526
$—
$—
$31,526
Cash and cash equivalents1,115
—
—
1,115
 701
—
—
701
Common collective trust funds:         
Fixed Income funds—
107,430
—
107,430
 —
96,429
—
96,429
Equity Funds—
69,832
—
69,832
 —
63,285
—
63,285
Insurance company investment contract—
—
—
—
 —
—
793
793
Total$38,963
$177,262
$—
$216,225
 $32,227
$159,714
$793
$192,734

The following table sets forth a summary of changes in
(1)Common collective trust investments are recorded at NAV. Investments measured at NAV are not classified within the fair value of Level 3 assetshierarchy. The amounts presented in this table are intended to permit reconciliation of the total pension plan:
 Years ended December 31,
(In thousands)2017 2016
Beginning balance$793
 $934
Employer contributions78
 —
Unrealized gains relating to instruments still held at the reporting date—
 (10)
Benefit payments, administrative expenses(166) (131)
Asset sales(705) —
Ending balance$—
 $793
plan assets to amounts presented elsewhere for pension plan assets.
Asset Management
The following table presents the target allocation and the pension plan asset allocation for the periods indicated, by asset category:
  
Target AllocationPercentage of Pension Plan Assets
202020192018
Fixed income investments62 %61 %56 %
Equity investments38  38  43  
Cash and cash equivalents—  1  1  
Total100 %100 %100 %
  
Target Allocation Percentage of Pension Plan assets
 2018 2017 2016
Fixed income investments55% 50% 51%
Equity investments45
 50
 49
Total100% 100% 100%
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Table of Contents
The Retirement Plan Committee is a fiduciary under ERISA and is charged with the responsibility for directing and monitoring the investment management of the pension plan. To assist the Retirement Plan Committee in this function, it engages the services of investment managers and advisors who possess the necessary expertise to manage the pension plan assets within the established investment policy guidelines and objectives. The investment policy guidelines and objectives isare reviewed at a minimum annually by the Retirement Plan Committee.
The primary objective of the pension plan investment strategy is to provide long-term total return through capital appreciation and dividend and interest income. The Plan invests in registered investment companies and bank collective trusts. The volatility, as measured by standard deviation, of the pension plan assets should not exceed that of the Composite Index. The investment policy guidelines allow the pension plan assets to be invested in certain types of cash equivalents, fixed income securities, equity securities, mutual funds, and collective trusts. Investments in mutual funds and collective trust funds are substantially limited to funds with the securities characteristic of their assigned benchmarks.
The pension plan investment strategy is designed to maintain a diversified portfolio with a target average long-term rate of 6.50%5.75%, however, there is no certainty that the portfolio will perform to expectations. Asset allocations are monitored monthly and the portfolio is rebalanced as needed.re-balanced when appropriate.
Weighted-average assumptions used to determine benefit obligations at December 31 are as follows:
  
Pension Plan SERP Other Benefits
  
20172016 20172016 20172016
Discount rate3.50%4.01% 3.30%3.63% 3.00%3.27%
Rate of compensation increasen/a
n/a
 n/a
n/a
 n/a
n/a

110


  
Pension PlanSERPOther
  
201920182019201820192018
Discount rate3.07 %4.12 %2.82 %3.95 %2.50 %3.69 %
Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31 are as follows:
  
Pension Plan SERP Other Benefits
  
201720162015 201720162015 201720162015
Discount rate4.01%4.20%3.85% 3.63%3.75%3.50% 3.27%3.35%3.15%
Expected long-term return on assets6.50%7.00%7.00% n/a
n/a
n/a
 n/a
n/a
n/a
Rate of compensation increasen/a
n/a
n/a
 n/a
n/a
n/a
 n/a
n/a
n/a
Assumed healthcare cost trendn/a
n/a
n/a
 n/a
n/a
n/a
 7.50%8.25%8.00%

  
Pension PlanSERPOther
  
201920182017201920182017201920182017
Discount rate4.12 %3.50 %4.01 %3.95 %3.30 %3.63 %3.69 %3.00 %3.27 %
Expected long-term return on assets6.00 %6.00 %6.50 %n/an/an/an/an/an/a
Assumed healthcare cost trendn/an/an/an/an/an/a6.50 %7.00 %7.50 %
The assumed healthcare cost-trend rate for 2020 is 7.50% for 2017 and 2018,6.50%, declining 1.0%0.25% each year thereafter until 20242028 when the rate will be 4.60%. An increase of 1.0% in the assumed healthcare cost-trend rate for 20172019 would have increased the net periodic postretirement benefit cost by $5$3 thousand and increased the accumulated benefit obligation by $148$97 thousand. A decrease of 1.0% in the assumed healthcare cost trend rate for 20172019 would have decreased the net periodic postretirement benefit cost by $5$3 thousand and decreased the accumulated postretirement benefit obligation by $134$89 thousand.
Multiple-employer planMultiple-Employer Plan
Webster Bank, forFor the benefit of former employees of a bank acquired by the Company, the Bank is a sponsor of a multiple-employer pension plan that does not segregate the assets or liabilities of its employers participating in the plan. According toThe plan administrator confirmed Webster Bank’s portion of the plan administrator,is under-funded by $2.4 million as of July 1, 2017,2019, the date of the latest actuarial valuation, Webster Bank’s portion of this plan was under-funded by $0.8 million.valuation.
The following table sets forth contributions and funding status of Webster Bank's portion of this plan:
(Dollars in thousands)     Contributions by Webster Bank for the year ended December 31, Funded Status of the Plan at December 31,
Plan Name Employer Identification Number Plan Number 201720162015 20172016
Pentegra Defined Benefit Plan for Financial Institutions 13-5645888 333 $614$690$340 At least 80 percentAt least 80 percent

(Dollars in thousands)Contributions by Webster Bank for the year ended December 31,Funded Status of the Plan at December 31,
Plan NameEmployer Identification NumberPlan Number20192018201720192018
Pentegra Defined Benefit Plan for Financial Institutions13-5645888333$863  $679  $614  At least 80 percentAt least 80 percent
Multi-employer accounting is applied to the Fund. As a multiple-employer pension plan, there are no collective bargained contracts affecting its contribution or benefit provisions. Any shortfall amortization basis is being amortized over seven years, as required by the Pension Protection Act. All benefit accruals were frozen as of September 1, 2004. The Company's contributions to this plan did not exceed more than 5% of total contributions in the plan for the years ended December 31, 2017, 2016,2019, 2018, and 2015.2017.
Webster Bank Retirement Savings Plan
Webster Bank provides an employee retirement savings plan governed by section 401(k) of the Internal Revenue Code. Webster Bank matches 100% of the first 2% and 50% of the next 6% of employees’ pre-tax contributions based on annual compensation. If a participant fails to make a pre-tax contribution election within 90 days of his or her date of hire, automatic pre-tax contributions will commence 90 days after his or her date of hire at a rate equal to 3% of compensation.
Compensation and benefit expense included $12.0$13.2 million, $11.1$12.4 million, and $10.9$12.0 million for the years ended December 31, 2019, 2018, and 2017, 2016, and 2015, respectively, forof employer contributions.

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100


Note 18:19: Share-Based Plans
Stock compensation plansCompensation Plans
Webster maintains stock compensation plans under which non-qualified stock options, incentive stock options, restricted stock, restricted stock units, or stock appreciation rights may be granted to employees and directors. The Company believes these share awards better align the interests of its employees and directors with those of its shareholders. The Plans have shareholder approval for up to 13.4 million shares of common stock. At December 31, 2019, there were 1.6 million common shares remaining available for grant, while 0 stock appreciation rights have been granted. Stock compensation cost is recognized over the required service vesting period for the awards, based on the grant-date fair value, net of estimated forfeitures, and is included as a component of compensation and benefits reflected in non-interest expense. The Plans have shareholder approval
Stock compensation expense for up to 13.4restricted stock of $12.6 million, shares$11.6 million, and $12.3 million, and an income tax benefit of common stock.$6.1 million, $8.5 million, and $11.8 million, was recognized for the years ended December 31, 2019, 2018, and 2017, respectively. At December 31, 2017, there were 2.6 million common shares remaining available for grant, while no stock appreciation rights have been granted.
The following table provides a summary of stock compensation expense and income tax benefits associated with stock compensation recognized in the accompanying Consolidated Statements of Income:
 Years ended December 31,
(In thousands)2017 2016 2015
Stock options$—
 $43
 $379
Restricted stock12,276
 11,395
 10,556
Total stock compensation expense$12,276
 $11,438
 $10,935
      
Income tax benefit (1)
$11,849
 $4,132
 $3,903

(1)The income tax benefit in 2017 includes $7.1 million of excess tax benefits recognized under ASU No. 2016-09, Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share Based Payment Accounting, which the Company adopted effective January 1, 2017.
At December 31, 20172019 there was $13.5$15.7 million of unrecognized stock compensation expense for restricted stock, expected to be recognized over a weighted-average period of 1.9 years.
The following table provides a summary ofsummarizes the activity under the stock compensation plans for the year ended December 31, 2017:2019:
Unvested Restricted Stock Awards OutstandingStock Options Outstanding
Time-BasedPerformance-Based
Number of
Shares		Weighted-Average
Grant Date
Fair Value		Number of
Shares		Weighted-Average
Grant Date
Fair Value		Number  of
Shares		Weighted-Average
Exercise Price
Balance at January 1, 2019464,831  $47.48  270,044  $44.34  480,792  $21.73  
Granted189,894  55.40  123,514  56.14  —  —  
Vested190,199  38.05  160,254  32.75  —  —  
Forfeited14,302  56.26  —  —  —  —  
Exercised—  —  —  —  59,861  10.36  
Balance at December 31, 2019450,224  54.53  233,304  54.94  420,931  23.35  
 Unvested Restricted Stock Awards Stock Options Outstanding
 Time-Based Performance-Based 
 
Number of
Shares
Weighted-Average
Grant Date
Fair Value
 
Number of
Units
Weighted-Average
Grant Date
Fair Value
 
Number of
Shares
Weighted-Average
Grant Date
Fair Value
 
Number  of
Shares
Weighted-Average
Exercise Price
Balance at January 1, 2017253,361
$32.24
 2,158
$32.89
 116,184
$33.62
 1,072,974
$21.24
Granted168,369
54.76
 8,129
56.07
 89,581
56.18
 —
—
Exercised options—
—
 —
—
 —
—
 399,935
25.42
Vested restricted stock awards (1)
194,986
37.16
 10,287
51.21
 117,695
42.09
 —
—
Forfeited18,944
35.58
 —
—
 9,154
43.10
 —
—
Balance at December 31, 2017207,800
$43.16
 —
$—
 78,916
$45.35
 673,039
$18.75

(1)Vested for purposes of recording compensation expense.
Time-based restricted stock. Time-based restricted stock awards vest over the applicable service period ranging from 1 to 53 years. The number of time-based awards that may be granted to an eligible individual in a calendar year is limited to 100,000 shares. Compensation expense is recorded over the vesting period based on fair value, which is measured using the Company's common stock closing price at the date of grant.
Performance-based restricted stock. Performance-based restricted stock awards vest after a 3 year performance period. The awards vest with a share quantity dependent on that performance, in a range from zero0 to 150%. ForThe performance criteria for 50% of the performance-based shares granted in 2017, 50% vest2019 is based upon Webster's ranking for total shareholder return versus Webster's compensation peer group companies and the remaining 50% vestis based upon Webster's average of return on equity during the 3 year vesting period. The compensation peer group companies are utilized because they represent the financial institutions that best compare with Webster. The Company records compensation expense over the vesting period, based on a fair value calculated using the Monte-Carlo simulation model, which allows for the incorporation of the performance condition for the 50% of the performance-based shares tied to total shareholder return versus the compensation peer group, and based on a fair value of the market price on the date of grant for the remaining 50% of the performance-based shares tied to Webster's return on equity. Compensation expense is subject to adjustment based on management's assessment of Webster's return on equity performance relative to the target number of shares condition.

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The total fair value of restricted stock awards vested during the years ended December 31, 2019, 2018, and 2017 2016, and 2015 was $12.7$12.5 million, $11.6$11.1 million, and $11.6$12.7 million, respectively.
Stock options. Stock option awards have an exercise price equal to the market price of Webster'sWebster Financial Corporation's stock on the date of grant. Each option grants the holder the right to acquire a share of Webster Financial Corporation common stock over a contractual life of up to 10 years. There have been no0 stock options granted since 2013. All awardedAt December 31, 2019, there was stock options have vested. There were 639,151outstanding for 420,931 shares of common stock, all of which are exercisable, with a weighted-average exercise price of $23.35 and a weighted-average remaining contractual life of 2.7 years, comprised of 387,043 non-qualified stock options and 33,888 incentive stock options outstanding at December 31, 2017.options.
Aggregate intrinsic value represents the totalTotal pretax intrinsic value, (thewhich is the difference between Webster's closing stock price on the last trading day of the year and the weighted-average exercise price multiplied by the number of shares)shares, represents aggregate intrinsic value that would have been received by the option holders had they all exercised their options at that time. At December 31, 2017,2019, as all awarded options have vested, all of the outstanding options are exercisable, and the aggregate intrinsic value of these options was $25.2$12.6 million. The total intrinsic value of options exercised during the years ended December 31, 2019, 2018, and 2017 2016,was $2.4 million, $9.7 million, and 2015 was $11.1 million, $6.4 million, and $4.3 million, respectively.
The following table summarizes information for options, all of which are both outstanding and exercisable, at December 31, 2017:
Range of Exercise PricesNumber of SharesWeighted-Average Remaining Contractual Life (years)Weighted-Average Exercise Price
$ 5.14 - 12.85222,947
1.2$9.43
$ 22.04 - 25.15450,092
4.523.37
 673,039
3.4$18.75
101


113


Note 19:20: Segment Reporting
Webster’s operations are organized into three3 reportable segments that represent its primary businesses - Commercial Banking, HSA Bank, and Community Banking. These three segments reflect how executive management responsibilities are assigned, the primary businesses, thetype of customer served, how products and services are provided, the type of customer served, and how discrete financial information is currently evaluated. TheCertain Corporate Treasury unit of the Company,activities, along with the amounts required to reconcile profitability metrics to amounts reported in accordance with GAAP, are included in the Corporate and Reconciling category.
Description of Segment Reporting Methodology
Webster’s reportable segment results are intended to reflect each segment as if it were a stand-alone business. Webster uses an internal profitability reporting system to generate information by operating segment, which is based on a series of management estimates and allocations regardingfor funds transfer pricing, and allocations for non-interest expense, provision for loan and lease losses, non-interest expense, income taxes, and equity capital. These estimates and allocations, certain of which are subjective in nature, are periodically reviewed and refined. Changes in estimates and allocations that affect the reported results of any operating segment do not affect the consolidated financial position or results of operations of Webster as a whole. The full profitability measurement reports, which are prepared for each operating segment, reflect non-GAAP reporting methodologies. The differences between full profitability and GAAP results are reconciled in the Corporate and Reconciling category.
Webster allocates interest income and interest expense to each business, while also transferringany mismatch associated with the primary interest rate risk exposures to the Corporate and Reconciling category, using a matched maturity funding concept called Funds Transfer Pricing.Pricing is absorbed in the Corporate Treasury function. The allocation process considers the specific interest rate risk and liquidity risk of financial instruments and other assets and liabilities in each line of business. The matched maturity funding concept considers the origination date and the earlier of the maturity date or the repricing date of a financial instrument to assign an FTPa Funds Transfer Pricing (FTP) rate for loans and deposits originated each day. Loans are assigned an FTP rate for funds used and deposits are assigned an FTP rate for funds provided. This process is executed by the Company’s Financial Planning and Analysis division and is overseen by ALCO.
Webster allocates the provision for loan and lease losses to each segment based on management’s estimate of the inherent loss content in each of the specific loan and lease portfolios. Provision expense for certain elements of risk that are not deemed specifically attributable to a reportable segment, such as the provision for the consumer liquidating portfolio, is shown as part of the Corporate and Reconciling category.
Webster allocates a majority of non-interest expense to each reportable segment using a full-absorption costing process. Costs, including corporate overhead, are analyzed, pooled by process, and assigned to the appropriate reportable segment. Income tax
The results of funds transfer pricing and allocations for non-interest expense, is allocatedas well as non-interest income produces pre-tax, pre-provision net revenue, under which basis the segments are reviewed by executive management.
Webster also allocates the provision for loan and lease losses to each reportable segment based on management’s estimate of the consolidated effectiveinherent loss content in each of the specific loan and lease portfolios. During the three months ended June 30, 2019, Webster refined and improved the precision of this allocation approach. Prior period provision for loan and lease losses amounts, and resulting impacts from income tax rateexpense were revised accordingly. Allowance for the period shown.
Segment Reporting Modifications
The 2016 segment results have been adjusted for comparability to the 2017 segment presentation for the following changes.
To further strengthen Webster's ability to deliver the totality of its productsloan and services to the owners and executives of commercial clients and other high net worth individuals, an organizational change was made during the second quarter of 2017. Effective April 1, 2017, the head of Private Banking reports directly to the head of Commercial Banking. The current organizational structure reflects how executive management responsibilitieslease losses are assigned and reviewed. As a result of this change, the Private Banking and Commercial Banking operating segments are aggregated into one reportable segment, Commercial Banking.
In late 2007 Webster discontinued its indirect residential construction lending and its indirect home equity lending outside of its primary New England market area referred to as National Wholesale Lending. Webster placed these two portfolios into a liquidating loan portfolio included within the Corporate and Reconciling category.category’s total assets.
Beginning in 2018, income tax expense is estimated for each reportable segment individually. The balance of2017 income tax expense was estimated for all segments using the home equity liquidating loan portfolio was $65.0 million at December 31, 2016. Asconsolidated effective tax rate.
The following table presents total assets for Webster's reportable segments and the remainder of this portfolio has been performing in the same manner as the continuing home equity portfolio, management has decided to combine the liquidating loan portfolio with the continuing home equity loan portfolio. The combined portfolio is included in the Community Banking reportable segment.Corporate and Reconciling category:
 Total Assets
(In thousands)Commercial
Banking		HSA
Bank		Community BankingCorporate and
Reconciling		Consolidated
Total
At December 31, 2019$11,541,803  $80,176  $9,348,727  $9,418,638  $30,389,344  
At December 31, 201810,477,050  70,826  8,727,335  8,335,104  27,610,315  

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Table of Contents

The following tables present the operating results, including all appropriate allocations, for Webster’s reportable segments and the Corporate and Reconciling category:
 Year ended December 31, 2019
(In thousands)Commercial
Banking		HSA
Bank		Community BankingCorporate and
Reconciling		Consolidated
Total
Net interest income$372,845  $167,239  $400,744  $14,299  $955,127  
Non-interest income59,063  97,041  109,270  19,941  285,315  
Non-interest expense181,580  135,586  388,399  10,385  715,950  
Pre-tax, pre-provision net revenue250,328  128,694  121,615  23,855  524,492  
Provision for loan and lease losses25,407  —  12,393  —  37,800  
Income before income tax expense224,921  128,694  109,222  23,855  486,692  
Income tax expense55,331  33,460  21,735  (6,557) 103,969  
Net income$169,590  $95,234  $87,487  $30,412  $382,723  
 Year ended December 31, 2017
(In thousands)Commercial
Banking		Community BankingHSA BankCorporate and
Reconciling		Consolidated
Total
Net interest income (loss)$322,393
$383,700
$104,704
$(14,510)$796,287
Provision (benefit) for loan and lease losses38,518
2,382
—
—40,900
Net interest income (loss) after provision for loan and lease losses283,875
381,318
104,704
(14,510)755,387
Non-interest income55,194
107,368
77,378
19,538259,478
Non-interest expense154,037
373,081
113,143
20,814661,075
Income (loss) before income tax expense185,032
115,605
68,939
(15,786)353,790
Income tax expense (benefit)51,438
32,137
19,165
(4,389)98,351
Net income (loss)$133,594
$83,468
$49,774
$(11,397)$255,439
 Year ended December 31, 2016
(In thousands)Commercial
Banking		Community BankingHSA BankCorporate and
Reconciling		Consolidated
Total
Net interest income (loss)$287,596
$367,137
$81,451
$(17,671)$718,513
Provision (benefit) for loan and lease losses37,455
18,895
—
—
56,350
Net interest income (loss) after provision for loan and lease losses250,141
348,242
81,451
(17,671)662,163
Non-interest income57,253
110,197
71,710
25,318
264,478
Non-interest expense138,379
369,132
97,152
18,528
623,191
Income (loss) before income tax expense169,015
89,307
56,009
(10,881)303,450
Income tax expense (benefit)53,649
28,348
17,779
(3,453)96,323
Net income (loss)$115,366
$60,959
$38,230
$(7,428)$207,127
 Year ended December 31, 2015
(In thousands)Commercial
Banking		Community BankingHSA BankCorporate and
Reconciling		Consolidated
Total
Net interest income (loss)$266,085
$356,881
$73,433
$(31,774)$664,625
Provision (benefit) for loan and lease losses30,546
18,754
—
—
49,300
Net interest income (loss) after provision for loan and lease losses235,539
338,127
73,433
(31,774)615,325
Non-interest income46,967
108,647
62,475
19,688
237,777
Non-interest expense129,499
335,834
81,449
8,559
555,341
Income (loss) before income tax expense153,007
110,940
54,459
(20,645)297,761
Income tax expense (benefit)47,804
34,605
17,016
(6,393)93,032
Net income (loss)$105,203
$76,335
$37,443
$(14,252)$204,729
The following table presents total assets for Webster's reportable segments and the Corporate and Reconciling category:
 Total Assets
(In thousands)Commercial
Banking		Community BankingHSA BankCorporate and
Reconciling		Consolidated
Total
At December 31, 2017$9,350,028
$8,909,671
$76,308
$8,151,638
$26,487,645
At December 31, 20169,069,445
8,721,046
83,987
8,198,051
26,072,529

Year ended December 31, 2018
(In thousands)Commercial
Banking		HSA
Bank		Community BankingCorporate and
Reconciling		Consolidated
Total
Net interest income$356,509  $143,255  $404,869  $2,048  $906,681  
Non-interest income64,765  89,323  109,669  18,811  282,568  
Non-interest expense174,054  124,594  384,599  22,369  705,616  
Pre-tax, pre-provision net revenue247,220  107,984  129,939  (1,510) 483,633  
Provision for loan and lease losses32,388  —  9,612  —  42,000  
Income before income tax expense214,832  107,984  120,327  (1,510) 441,633  
Income tax expense52,849  28,076  23,945  (23,655) 81,215  
Net income$161,983  $79,908  $96,382  $22,145  $360,418  

Year ended December 31, 2017
(In thousands)Commercial
Banking		HSA
Bank		Community BankingCorporate and
Reconciling		Consolidated
Total
Net interest income$322,393  $104,704  $383,700  $(14,510) $796,287  
Non-interest income55,194  77,378  107,368  19,538  259,478  
Non-interest expense154,037  113,143  373,081  20,814  661,075  
Pre-tax, pre-provision net revenue223,550  68,939  117,987  (15,786) 394,690  
Provision for loan and lease losses34,066  —  6,834  —  40,900  
Income before income tax expense189,484  68,939  111,153  (15,786) 353,790  
Income tax expense52,676  19,165  30,899  (4,389) 98,351  
Net income$136,808  $49,774  $80,254  $(11,397) $255,439  


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103

Note 21: Revenue from Contracts with Customers
The following tables present revenues within the scope of ASC 606, Revenue from Contracts with Customers and the net amount of other sources of non-interest income that is within the scope of other GAAP topics:
Year ended December 31, 2019
(In thousands)Commercial
Banking		HSA
Bank		Community
Banking		Corporate and
Reconciling		Consolidated
Total
Non-interest Income:
Deposit service fees$12,136  $92,096  $63,572  $218  $168,022  
Wealth and investment services10,330  —  22,637  (35) 32,932  
Other—  4,945  2,394  —  7,339  
Revenue from contracts with customers22,466  97,041  88,603  183  208,293  
Other sources of non-interest income36,597  —  20,667  19,758  77,022  
Total non-interest income$59,063  $97,041  $109,270  $19,941  $285,315  

Year ended December 31, 2018
(In thousands)Commercial
Banking		HSA
Bank		Community
Banking		Corporate and
Reconciling		Consolidated
Total
Non-interest Income:
Deposit service fees$12,775  $85,809  $63,522  $77  $162,183  
Wealth and investment services10,145  —  22,732  (34) 32,843  
Other—  3,514  2,133  —  5,647  
Revenue from contracts with customers22,920  89,323  88,387  43  200,673  
Other sources of non-interest income41,845  —  21,282  18,768  81,895  
Total non-interest income$64,765  $89,323  $109,669  $18,811  $282,568  

Year ended December 31, 2017
(In thousands)Commercial
Banking		HSA
Bank		Community
Banking		Corporate and
Reconciling		Consolidated
Total
Non-interest Income:
Deposit service fees$12,203  $74,448  $64,194  $292  $151,137  
Wealth and investment services9,817  —  21,274  (36) 31,055  
Other—  2,930  823  —  3,753  
Revenue from contracts with customers22,020  77,378  86,291  256  185,945  
Other sources of non-interest income33,174  —  21,077  19,282  73,533  
Total non-interest income$55,194  $77,378  $107,368  $19,538  $259,478  
The major types of revenue streams that are within the scope of ASC 606 are described below:
Deposit service fees, predominately consist of fees earned from deposit accounts and interchange fees. Fees earned from deposit accounts relate to event-driven services and periodic account maintenance activities. Webster's obligations for event-driven services are satisfied at the time the service is delivered, while the obligations for maintenance services is satisfied monthly. Interchange fees are assessed as the performance obligation is satisfied, which is at the point in time the card transaction is authorized.
Wealth and investment services, consists of fees earned from investment and securities-related services, trust and other related services. Obligations for wealth and investment services are generally satisfied over time through a time-based measurement of progress, but certain obligations may be satisfied at points in time for activities that are transactional in nature.
These disaggregated amounts are reconciled to non-interest income as presented in Note 20: Segment Reporting. Contracts with customers did not generate significant contract assets and liabilities.



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Note 20:22: Commitments and Contingencies
Lease Commitments
Webster is obligated under various non-cancelable operating leases for properties used as banking centers and other office facilities. The leases contain renewal options and escalation clauses which provide for increased rental expense, or for equipment upgrades. Rental expense under the leases was $31.1 million, $30.4 million, and $21.5 million for the years ended December 31, 2017, 2016, and 2015, respectively, and is recorded as a component of occupancy expense in the accompanying Consolidated Statements of Income.
Rental income from sub-leases on certain of these properties is netted as a component of occupancy expense, while rental income under various non-cancelable operating leases for properties owned is recorded as a component of other non-interest income in the accompanying Consolidated Statements of Income. Rental income was $0.7 million, $0.8 million, and $0.8 million for the years ended December 31, 2017, 2016, and 2015.
The following table summarizes future minimum rental payments and receipts under lease agreements:
 At December 31, 2017
(In thousands)Rental Payments Rental Receipts
2018$29,181
 $717
201928,035
 592
202026,254
 488
202124,552
 395
202220,885
 353
Thereafter77,541
 1,438
Total future minimum rental payments and receipts$206,448
 $3,983

Credit-Related Financial Instruments
The Company offers credit-related financial instruments, in the normal course of business to meet certain financing needs of its customers, that involve off-balance sheet risk. These transactions may include an unused commitment to extend credit, standby letter of credit, or commercial letter of credit. Such transactions involve, to varying degrees, elements of credit risk.
The following table summarizes the outstanding amounts of credit-related financial instruments with off-balance sheet risk:
 At December 31,
(In thousands)2017 2016
Commitments to extend credit$5,567,687
 $5,224,280
Standby letter of credit195,902
 128,985
Commercial letter of credit43,200
 46,497
Total credit-related financial instruments with off-balance sheet risk$5,806,789
 $5,399,762

Commitments to Extend Credit. The Company makes commitments under various terms to lend funds to customers at a future point in time. These commitments include revolving credit arrangements, term loan commitments, and short-term borrowing agreements. Most of these loans have fixed expiration dates or other termination clauses where a fee may be required. Since commitments routinely expire without being funded, or after required availability of collateral occurs, the total commitment amount does not necessarily represent future liquidity requirements.
Standby Letter of Credit. A standby letter of credit commits the Company to make payments on behalf of customers if certain specified future events occur. The Company has recourse against the customer for any amount required to be paid to a third party under a standby letter of credit, which is often part of a larger credit agreement under which security is provided. Historically, a large percentage of standby letters of credit expire without being funded. The contractual amount of a standby letter of credit represents the maximum amount of potential future payments the Company could be required to make, and is the Company's maximum credit risk.
Commercial Letter of Credit. A commercial letter of credit is issued to facilitate either domestic or foreign trade arrangements for customers. As a general rule, drafts are committed to be drawn when the goods underlying the transaction are in transit. Similar to a standby letter of credit, a commercial letter of credit is often secured by an underlying security agreement including the assets or inventory they relate to.

The following table summarizes the outstanding amounts of credit-related financial instruments with off-balance sheet risk:
116


At December 31,
(In thousands)20192018
Commitments to extend credit$6,162,658  $5,840,585  
Standby letter of credit188,103  189,040  
Commercial letter of credit29,180  21,181  
Total credit-related financial instruments with off-balance sheet risk$6,379,941  $6,050,806  
These commitments subject the Company to potential exposure in excess of amounts recorded in the financial statements, and therefore, management maintains a specific reserve for unfunded credit commitments. This reserve is reported as a component of accrued expenses and other liabilities in the accompanying Consolidated Balance Sheets.consolidated balance sheet.
The following table provides a summary of activity in the reserve for unfunded credit commitments:
Years ended December 31,
(In thousands)201920182017
Beginning balance$2,506  $2,362  $2,287  
(Benefit) provision(139) 144  75  
Ending balance$2,367  $2,506  $2,362  
 Years ended December 31,
(In thousands)2017 2016 2015
Beginning balance$2,287
 $2,119
 $5,151
Provision (benefit)75
 168
 (3,032)
Ending balance$2,362
 $2,287
 $2,119

The change in the provision is attributable to a benefit recorded in 2015. The benefit was the result of a change in a key assumption used in calculating expected incremental utilization of credit. The updated assumption is based on a more detailed analysis of customer behavior and performance in the months prior to a charge-off, rather than a general overall utilization rate, which should result in a better estimate of potential loss on credit-related financial instruments.
Litigation
Webster is involved in routine legal proceedings occurring in the ordinary course of business and is subject to loss contingencies related to such litigation and claims arising therefrom. Webster evaluates these contingencies based on information currently available, including advice of counsel and assessment of available insurance coverage. Webster establishes accruals for litigation and claims when a loss contingency is considered probable and the related amount is reasonably estimable. These accruals are periodically reviewed and may be adjusted as circumstances change. Webster also estimates certain loss contingencies for possible litigation and claims, whether or not there is an accrued probable loss. Webster believes it has defenses to all the claims asserted against it in existing litigation matters and intends to defend itself in all matters.
Based upon its current knowledge, after consultation with counsel and after taking into consideration its current litigation accruals, Webster believes that at December 31, 2017 any reasonably possible losses, in addition to amounts accrued, are not material to Webster’s consolidated financial condition. However, in light of the uncertainties involved in such actions and proceedings, there is no assurance that the ultimate resolution of these matters will not significantly exceed the amounts currently accrued by Webster or that the Company’s litigation accrual will not need to be adjusted in future periods. Such an outcome could be material to the Company’s operating results in a particular period, depending on, among other factors, the size of the loss or liability imposed and the level of the Company’s income for that period.

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Note 21:23: Parent Company Information
Financial information for the Parent Company only is presented in the following tables:
Condensed Balance Sheets  
  
December 31,
(In thousands)20192018
Assets:
Cash and due from banks$510,940  $317,473  
Intercompany debt securities150,000  150,000  
Investment in subsidiaries3,079,549  2,633,848  
Due from subsidiaries—  36  
Alternative investments5,356  3,252  
Other assets13,537  12,003  
Total assets$3,759,382  $3,116,612  
Liabilities and shareholders’ equity:
Senior notes$463,044  $148,701  
Junior subordinated debt77,320  77,320  
Accrued interest payable6,057  2,664  
Due to subsidiaries52  —  
Other liabilities5,139  1,412  
Total liabilities551,612  230,097  
Shareholders’ equity3,207,770  2,886,515  
Total liabilities and shareholders’ equity$3,759,382  $3,116,612  
Condensed Balance Sheets   
  
December 31,
(In thousands)2017 2016
Assets:   
Cash and due from banks$181,085
 $152,947
Intercompany debt securities150,000
 150,000
Investment in subsidiaries2,585,955
 2,425,398
Alternative investments2,939
 4,275
Other assets13,252
 24,659
Total assets$2,933,231
 $2,757,279
Liabilities and shareholders’ equity:   
Senior notes$148,447
 $148,194
Junior subordinated debt77,320
 77,320
Accrued interest payable2,616
 2,589
Due to subsidiaries575
 365
Other liabilities2,315
 1,799
Total liabilities231,273
 230,267
Shareholders’ equity2,701,958
 2,527,012
Total liabilities and shareholders’ equity$2,933,231
 $2,757,279

Condensed Statements of Income
  
  
  
  
Years ended December 31,
(In thousands)201920182017
Operating Income:
Dividend income from bank subsidiary$360,000  $290,000  $120,000  
Interest on securities and deposits10,728  7,342  4,477  
Alternative investments (loss) income(256) 290  1,504  
Other non-interest income382  805  204  
Total operating income370,854  298,437  126,185  
Operating Expense:
Interest expense on borrowings21,062  11,127  10,380  
Non-interest expense15,527  19,105  23,008  
Total operating expense36,589  30,232  33,388  
Income before income tax benefit and equity in undistributed earnings of subsidiaries334,265  268,205  92,797  
Income tax benefit4,671  2,207  3,004  
Equity in undistributed earnings of subsidiaries43,787  90,006  159,638  
Net income$382,723  $360,418  $255,439  
Condensed Statements of Income
  
 
  
 
  
  
Years ended December 31,
(In thousands)2017 2016 2015
Operating Income:     
Dividend income from bank subsidiary$120,000
 $145,000
 $110,000
Interest on securities and deposits4,477
 1,911
 546
Loss on sale of investment securities—
 (2,410) —
Alternative investments income1,504
 176
 2,274
Other non-interest income204
 7,485
 152
Total operating income126,185
 152,162
 112,972
Operating Expense:     
Interest expense on borrowings10,380
 9,981
 9,665
Compensation and benefits12,425
 11,461
 10,965
Other non-interest expense10,583
 6,278
 6,005
Total operating expense33,388
 27,720
 26,635
Income before income tax benefit and equity in undistributed earnings of subsidiaries and associated companies92,797
 124,442
 86,337
Income tax benefit3,004
 3,086
 2,929
Equity in undistributed earnings of subsidiaries and associated companies159,638
 79,599
 115,463
Net income$255,439
 $207,127
 $204,729
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Condensed Statements of Comprehensive Income
  
  
  
  
Years ended December 31,
(In thousands)201920182017
Net income$382,723  $360,418  $255,439  
Other comprehensive income (loss), net of tax:
Net unrealized gains on derivative instruments1,479  1,447  1,216  
Other comprehensive income (loss) of subsidiaries93,101  (40,568) (106) 
Other comprehensive income (loss), net of tax94,580  (39,121) 1,110  
Comprehensive income$477,303  $321,297  $256,549  


Condensed Statements of Cash Flows
  
  
  
 Years ended December 31,
(In thousands)201920182017
Net cash provided by operating activities$362,617  $282,986  $115,957  
Investing activities:
Alternative investments capital call(1,850) —  —  
Investment in subsidiaries(296,000) —  —  
Proceeds from the sale of other assets—  —  7,581  
Net cash (used for) provided by investing activities(297,850) —  7,581  
Financing activities:
Issuance of long-term debt296,358  —  —  
Preferred stock issued—  —  145,056  
Preferred stock redeemed—  —  (122,710) 
Cash dividends paid to common shareholders(140,783) (114,959) (94,630) 
Cash dividends paid to preferred shareholders(7,875) (7,875) (8,096) 
Exercise of stock options619  2,173  8,259  
Common stock repurchased and acquired from stock compensation plan activity(19,619) (25,937) (23,279) 
Net cash provided by (used for) financing activities128,700  (146,598) (95,400) 
Increase in cash and due from banks193,467  136,388  28,138  
Cash and due from banks at beginning of year317,473  181,085  152,947  
Cash and due from banks at end of year$510,940  $317,473  $181,085  
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Condensed Statements of Comprehensive Income
  
 
  
 
  
  
Years ended December 31,
(In thousands)2017 2016 2015
Net income$255,439
 $207,127
 $204,729
Other comprehensive income (loss), net of tax:     
Net unrealized gains (losses) on available for sale securities—
 584
 (2,109)
Net unrealized gains (losses) on derivative instruments1,216
 1,223
 1,223
Other comprehensive loss of subsidiaries and associated companies(106) (694) (20,959)
Other comprehensive income (loss), net of tax1,110
 1,113
 (21,845)
Comprehensive income$256,549
 $208,240
 $182,884

Condensed Statements of Cash Flows
  
 
  
 
  
 Years ended December 31,
(In thousands)2017 2016 2015
Operating activities:     
Net income$255,439
 $207,127
 $204,729
Adjustments to reconcile net income to net cash provided by operating activities:     
Equity in undistributed earnings of subsidiaries and associated companies(159,638) (79,599) (115,463)
Stock-based compensation12,276
 11,438
 10,935
Gain on redemption of other assets—
 (7,331) —
Other, net7,880
 (3,736) 9,066
Net cash provided by operating activities115,957
 127,899
 109,267
Investing activities:     
Proceeds from sale of available for sale securities—
 1,089
 —
Purchases of intercompany debt securities—
 (150,000) —
Proceeds from the sale of other assets7,581
 —
 —
Net cash provided by (used for) investing activities7,581
 (148,911) —
Financing activities:     
Preferred stock issued145,056
 —
 —
Preferred stock redeemed(122,710) —
 —
Cash dividends paid to common shareholders(94,630) (89,522) (80,964)
Cash dividends paid to preferred shareholders(8,096) (8,096) (8,711)
Exercise of stock options8,259
 11,762
 3,060
Excess tax benefits from stock-based compensation—
 3,204
 2,338
Common stock repurchased/shares acquired related to employee share-based plans(23,279) (22,870) (17,815)
Common stock warrants repurchased—
 (163) (23)
Net cash used for financing activities(95,400) (105,685) (102,115)
Increase (decrease) in cash and due from banks28,138
 (126,697) 7,152
Cash and due from banks at beginning of year152,947
 279,644
 272,492
Cash and due from banks at end of year$181,085
 $152,947
 $279,644


119


Note 22:24: Selected Quarterly Consolidated Financial Information (Unaudited)
2017
2019
(In thousands, except per share data)First Quarter Second Quarter Third Quarter Fourth Quarter(In thousands, except per share data)First QuarterSecond QuarterThird QuarterFourth Quarter
Interest income$219,680
 $226,789
 $231,021
 $236,115
Interest income$286,190  $292,257  $294,136  $282,000  
Interest expense27,016
 29,002
 30,117
 31,183
Interest expense44,639  50,470  53,597  50,750  
Net interest income192,664
 197,787
 200,904
 204,932
Net interest income241,551  241,787  240,539  231,250  
Provision for loan and lease losses10,500
 7,250
 10,150
 13,000
Provision for loan and lease losses8,600  11,900  11,300  6,000  
Non-interest income63,042
 64,551
 65,846
 66,039
Non-interest income68,612  75,853  69,931  70,919  
Non-interest expense163,784
 164,419
 161,823
 171,049
Non-interest expense175,686  180,640  179,894  179,730  
Income before income tax expense81,422
 90,669
 94,777
 86,922
Income before income tax expense125,877  125,100  119,276  116,439  
Income tax expense21,951
 29,090
 30,281
 17,029
Income tax expense26,141  26,451  25,411  25,966  
Net income$59,471
 $61,579
 $64,496
 $69,893
Net income$99,736  $98,649  $93,865  $90,473  
       
Earnings applicable to common shareholders$57,342
 $59,485
 $62,426
 $67,710
Earnings applicable to common shareholders$97,549  $96,193  $91,442  $88,066  
       
Earnings per common share:       Earnings per common share:
Basic$0.62
 $0.65
 $0.68
 $0.74
Basic$1.06  $1.05  $1.00  $0.96  
Diluted0.62
 0.64
 0.67
 0.73
Diluted1.06  1.05  1.00  0.96  
 
 2018
(In thousands, except per share data)First QuarterSecond QuarterThird QuarterFourth Quarter
Interest income$245,921  $260,491  $268,363  $280,392  
Interest expense31,753  35,481  37,991  43,261  
Net interest income214,168  225,010  230,372  237,131  
Provision for loan and lease losses11,000  10,500  10,500  10,000  
Non-interest income68,747  68,374  72,284  73,163  
Non-interest expense171,615  180,459  178,783  174,759  
Income before income tax expense100,300  102,425  113,373  125,535  
Income tax expense20,075  20,743  13,700  26,697  
Net income$80,225  $81,682  $99,673  $98,838  
Earnings applicable to common shareholders$78,083  $79,489  $97,460  $96,666  
Earnings per common share:
Basic$0.85  $0.87  $1.06  $1.05  
Diluted0.85  0.86  1.06  1.05  
 2016
(In thousands, except per share data)First Quarter Second Quarter Third Quarter Fourth Quarter
Interest income$202,335
 $202,431
 $205,715
 $211,432
Interest expense26,183
 25,526
 25,518
 26,173
Net interest income176,152
 176,905
 180,197
 185,259
Provision for loan and lease losses15,600
 14,000
 14,250
 12,500
Non-interest income62,374
 65,075
 66,412
 70,617
Non-interest expense152,445
 152,778
 156,097
 161,871
Income before income tax expense70,481
 75,202
 76,262
 81,505
Income tax expense23,434
 24,599
 24,445
 23,845
Net income$47,047
 $50,603
 $51,817
 $57,660
        
Earnings applicable to common shareholders$44,921
 $48,398
 $49,634
 $55,501
        
Earnings per common share:       
Basic$0.49
 $0.53
 $0.54
 $0.61
Diluted0.49
 0.53
 0.54
 0.60


Note 23:25: Subsequent Events
The Company has evaluated events from the date of the Consolidated Financial Statements and accompanying Notes thereto, December 31, 2017,2019, through the issuance of this Annual Report on Form 10-K and determined that no significant events were identified requiring recognition or disclosure.disclosure in this report.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of Webster’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, management, including the Chief Executive Officer and Chief Financial Officer, concluded that Webster’s disclosure controls and procedures were effective as of the end of the period covered by this report.
Internal Control over Financial Reporting
Webster’s management has issued a report on its assessment of the effectiveness of Webster’s internal control over financial reporting as of December 31, 2017.2019.
Webster’s independent registered public accounting firm has issued a report, expressing an unqualified opinion, on the effectiveness of Webster’s internal control over financial reporting as of December 31, 2017. The report expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017.2019.
During the year ended December 31, 2016, management identified a material weakness resulting from the aggregation of control deficiencies in management’s review of the allowance for loan loss model including certain process level controls preventing unapproved changes in modeling assumptions as well as the precision of management’s review over the valuation of allowance for loan and lease losses balance. This material weakness did not result in any misstatement of the Company’s consolidated financial statements for any period presented.
To remediate the material weakness described above, we designed and implemented controls ensuring the review of all modeling assumptions as well as enhanced the design of management’s review over the valuation of allowance for loan and lease losses balance. During the fourth quarter of fiscal 2017, we successfully completed the testing necessary to conclude that the controls were appropriately designed and operating effectively and have concluded that the material weakness has been remediated.
Except for the changes referenced in the prior paragraph, thereThere were no changes made in Webster’s internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The reports of Webster’s management and of Webster’s independent registered public accounting firm follow.
Management’s Report on Internal Control over Financial Reporting
The management of Webster Financial Corporation and its Subsidiaries ("Webster" or the "Company") is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule13a-15(f) under the Securities Exchange Act of 1934, as amended). Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles.
A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.
Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 20172019 based on criteria established in Internal Control-IntegratedControl - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management concluded that the Company's internal control over financial reporting was effective as of December 31, 2017.2019.
KPMG LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Corporation included in this Annual Report on Form 10-K, has issued an attestation report on the effectiveness of the Corporation's internal control over financial reporting as of December 31, 2017.2019. The report, which expresses an unqualified opinion on the effectiveness of the Corporation's internal control over financial reporting as of December 31, 2017,2019, is included below under the heading Report of Independent Registered Public Accounting Firm.

/s/ John R. Ciulla/s/ Glenn I. MacInnes
John R. CiullaGlenn I. MacInnes
President and Chief Executive OfficerExecutive Vice President and Chief Financial Officer

February 28, 2020
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Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Webster Financial Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Webster Financial Corporation and subsidiaries’ (the "Company")Company) internal control over financial reporting as of December 31, 2017,2019, based on criteria established inInternal Control ‑– Integrated Framework (2013) (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2019, based on criteria established in Internal Control ‑– Integrated Framework (2013) (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB")(PCAOB), the consolidated balance sheets of the Company as of December 31, 20172019 and 2016,2018, the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2017,2019, and the related notes (collectively, the consolidated financial statements), and our report dated March 1, 2018February 28, 2020 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’sManagement's Report on Internal Control over Financial Reporting.Reporting. Our responsibility is to express an opinion on the Company'sCompany’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal controlscontrol over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company'scompany’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


/s/ KPMG LLP


Hartford, Connecticut
March 1, 2018February 28, 2020


122


ITEM 9B. OTHER INFORMATION
Not applicable

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Table of Contents
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Executive Officers of the Registrant
NameAge at December 31, 2017Positions Held
John R. Ciulla52President, Chief Executive Officer and Director
Glenn I. MacInnes56Executive Vice President and Chief Financial Officer
Daniel H. Bley49Executive Vice President and Chief Risk Officer
Colin D. Eccles59Executive Vice President and Chief Information Officer
Bernard M. Garrigues59Executive Vice President and Chief Human Resources Officer
Nitin J. Mhatre47Executive Vice President, Community Banking
Dawn C. Morris50Executive Vice President and Chief Marketing Officer
Christopher J. Motl47Executive Vice President, Commercial Banking
Brian R. Runkle49Executive Vice President, Bank Operations
Charles L. Wilkins56Executive Vice President, HSA Bank
Harriet Munrett Wolfe64Executive Vice President, General Counsel and Secretary
Albert J. Wang42Chief Accounting Officer
Webster’s executive officers are each appointed to serve for a one-year period. Information concerning their principal occupation during at least the last five years is set forth below.
John R. Ciulla, 54, is President and Chief Executive Officer and a director of Webster Financial Corporation and Webster Bank. He was appointed as Chief Executive Officer and a director of Webster Financial Corporation in January 2018. Mr. Ciulla joined Webster in 2004 and has served in a variety of management positions at the Company, including Chief Credit Risk Officer and Senior Vice President, Commercial Banking, where he was responsible for several business units. He was promoted from Executive Vice President and Head of Middle Market Banking to lead Commercial Banking in January 2014 and to President in October 2015. Prior to joining Webster, Mr. Ciullahe was Managing Director of The Bank of New York, where he worked from 1997 to 2004. Mr. Ciulla serves on the Federal Reserve System’s Federal Advisory Council as a representative of the Federal Reserve Bank of Boston. He also serves on the board of the Connecticut Business and Industry Association (CBIA) and is the immediate past chairman. Mr. Ciulla is also a member of the board of the Business Council of Fairfield County.
Glenn I. MacInnes, 58, is Executive Vice President and Chief Financial Officer of Webster Financial Corporation and Webster Bank. He joined Webster in May 2011. Prior to joining Webster, Mr. MacInnes was Chief Financial Officer at New Alliance Bancshares for two years and was employed for 11 years at Citigroup in a series of senior positions, including deputyDeputy CFO for Citibank North America and CFO of Citibank (West) FSB. Mr. MacInnes serves on the Board of Wellmore Behavioral Health, Inc.
Daniel H. Bley, 51, is Executive Vice President and Chief Risk Officer of Webster Financial Corporation and Webster Bank since August of 2010. Prior to joining Webster, Mr. Bley worked at ABN AMRO and Royal Bank of Scotland from 1990 to 2010, having served as Managing Director of Financial Institutions Credit Risk and Group Senior Vice President, Head of Financial Institutions and Trading Credit Risk Management. Mr. Bley currently serves on the Board of Directors of Junior Achievement of Western Connecticut.
Colin D. Eccles is Executive Vice President and Chief Information Officer of Webster Financial Corporation and Webster Bank. He joined Webster in January 2013. Prior to joining Webster, Mr. Eccles served as CIO for Umpqua Holdings in Portland, OR. Before that, he worked for Washington Mutual Bank from 2002 to 2009 and was the CIO for the Retail Bank. He worked for Hogan Systems in Dallas, TX from 1994 to 2002.Greater Fairfield County.
Bernard M. Garrigues, 61, is Executive Vice President and Chief Human Resources Officer of Webster Financial Corporation and Webster Bank. Mr. Garrigues joined Webster in April 2014. Prior to joining Webster, Mr. Garrigues was with TIMEX Group in Middlebury, CT,Connecticut, where he was the Chief Human Resources Officer having comprehensive global HR responsibility for several thousand employees in 22 countries. Previously, he worked 21 years for General Electric where he served as global head of HR with a number of GE businesses, including GE Commercial Finance, GE Capital Real Estate, GE Capital IT Solutions and Healthcare in both the United States and Europe. Mr. Garrigues is Six Sigma Green Belt certified, a published author, and a seasoned guest lecturer.

123

TableKaren A. Higgins-Carter, 50,is Executive Vice President and Chief Information Officer of ContentsWebster and Webster Bank. Ms. Higgins-Carter joined Webster in July 2018. Prior to joining Webster, Ms. Higgins-Carter was Managing Director and Head of the Office of the Chief Information and Operations Officer for the Americas at Mitsubishi UFJ (MUFG) Financial Group from November 2016 to July 2018, where she was responsible for developing and leading the execution of the company’s IT strategic plan, IT governance, information risk management, communications, employee development and engagement. Prior to Mitsubishi UFJ, Ms. Higgins-Carter served as Technology General Manager at Bridgewater Associates from November 2014 to November 2016, and as Managing Director and Head of Consumer Risk Technology at JP Morgan Chase from June 2012 to August 2014.

Nitin J. Mhatre, 49, is Executive Vice President, Head of Community Banking of Webster Financial Corporation and Webster Bank. He joined Webster in October 2008 as Executive Vice President, Consumer Lending of Webster Bank and was appointed Executive Vice President, Consumer Finance in January 2009. He was promoted to his current position in August of 2013. Prior to joining Webster, Mr. Mhatre worked at Citigroup across multiple geographies including St. Louis, MO,Missouri, Stamford, CT,Connecticut, Guam, USA and India, in various capacities. In his most recent position, he was the Managing Director for the Home Equity Retail business for CitiMortgage based in Stamford, CT.Connecticut. Mr. Mhatre is a board memberChairman of the Board for the Consumer Bankers Association headquartered in Washington, D.C., and also serves on the board of Junior Achievement of Southwest New England.
Dawn C. Morris is Executive Vice President, Chief Marketing Officer of Webster Financial Corporation and Webster Bank. She joined Webster in March 2014. Prior to joining Webster, Ms. Morris was with Citizens Bank in Dedham, MA, where she served in a variety of roles, including head of customer segment management, product and segment marketing, and business banking product management. Earlier in her career, Ms. Morris worked in a number of business line and marketing roles at RBC Bank in North Carolina. Ms. Morris serves as co-chair with Governor Dannel Malloy on the Governor’s Prevention Partnership, and serves on the boards of The Hartford Stage, Marketing EDGE, and the Girl Scouts of Connecticut.
Christopher J. Motl, 49, is Executive Vice President, Head of Commercial Banking of Webster Financial Corporation and Webster Bank. He joined Webster in 2004 and was responsible for establishing and growing the Sponsor and Specialty Banking Group and was most recently Executive Vice President and Director of Middle Market Banking. Prior to joining Webster, Mr. Motl worked at CoBank, where he was Vice President and Relationship Manager. Mr. Motl is on the board of Special Olympics of Connecticut and the Travelers Championship.
111

Table of Contents
Brian R. Runkle, 51, is Executive Vice President of Bank Operations of Webster Financial Corporation and Webster Bank. Mr. Runkle joined Webster in August 2016. Prior to joining Webster, Mr. Runkle served in several leadership roles at General Electric across the country from 1999 to 2016, including Managing Director, Risk for GE Capital. He is Six Sigma Master Black Belt certified. Mr. Runkle was a volunteer team leader and campaign member for United Way in Connecticut.
Charles L. Wilkins, 58, is Executive Vice President of Webster and Webster Bank and Head of HSA Bank. He joined Webster in January 2014. Prior to joining Webster, he was presidentPresident of his own consulting practice specializing in healthcare and financial services from June 2012 to December 2013. Prior to this, Mr. Wilkins was General Manager and Chief Executive Officer of OptumHealth Financial Services, a division of UnitedHealth Group in Minnesota from 2007 to 2012. He is on the Executive Committee for the American Heart Association's Greater Milwaukee Heart and Stroke Walk/5K Run and an active volunteer with the American Diabetes Foundation.
Harriet Munrett Wolfe, 66, is Executive Vice President, General Counsel and Corporate Secretary of Webster Financial Corporation and Webster Bank. She joined Webster in March 1997 as Senior Vice President and Counsel, was appointed Secretary in June 1997, and General Counsel in September 1999. In January 2003, she was appointed Executive Vice President. Prior to this, Ms. Wolfe was in private practice. Ms. Wolfe serves as a board member of the University of Connecticut Foundation, Inc., and as a member of the Foundation'sFoundation’s Audit Committee; she previously served as a member of the Executive Committee, Audit Committee, and Chair of the Real Estate Committee.
Albert J. Wang, 44, is Chief Accounting Officer of Webster Financial Corporation and Webster Bank. He joined Webster in September 2017 and he oversees corporateis responsible for Webster’s accounting, functions including corporate tax regulatoryand financial reporting and accounting policy.activities. Prior to joining Webster, Mr. Wang served as Executive Vice President and Chief Accounting Officer offor the Banc of California. EarlierCalifornia from July 2016 to September 2017. Previously, Mr. Wang served in his career, he heldvarious leadership positions of increasing responsibility atwith Santander Bank N.A.,from December 2010 to July 2016, most recently as Senior Vice President and Chief Accounting Officer, andOfficer. Mr. Wang’s earlier management roles included those at PricewaterhouseCoopers LLP.from June 2004 until December 2010, where he provided assurance and business advisory services to depository and lending institutions. Mr. Wang is a Certified Public Accountant.Accountant with over 20 years of accounting and finance experience working with domestic and offshore companies.
Directors and Corporate Governance
Webster has adopted a Code of Business Conduct and Ethics that applies to all directors, officers and employees, including the principal executive officers, principal financial officer and principal accounting officer. The Company has also adopted corporate governance guidelines and charters for the Audit, Compensation, Nominating and Corporate Governance, Executive, and Risk Committees of the Board of Directors. The corporate governance guidelines and the charters of the Audit, Compensation, and Nominating and Corporate Governance Committees can be found on the Company'sCompany’s website (www.websterbank.com).
A printed copy of any of these documents may be obtained without charge directly from the Company at the following address:
Webster Financial Corporation
145 Bank Street
Waterbury, Connecticut 06702
Attn: Investor Relations
Telephone: (203) 578-2202
Additional information required under this item may be found under the sections captioned "Information“Information as to Nominees"Nominees,” "Corporate Governance'" and "Section“Delinquent Section 16(a) Beneficial Ownership Reporting Compliance"Reports” in the Proxy Statement, which will be filed with the Securities and Exchange Commission no later than 120 days after the close of the fiscal year ended December 31, 2017,2019, and is incorporated herein by reference.

124


ITEM 11. EXECUTIVE COMPENSATION
Information regarding compensation of executive officers and directors is omitted from this report and may be found in the Proxy Statement under the sections captioned "Compensation“Compensation Discussion and Analysis"Analysis” and "Compensation“Compensation of Directors,"” and the information included therein is incorporated herein by reference.
112

Table of Contents
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Stock-Based Compensation Plans
Information regarding stock-based compensation plans as of December 31, 2017,2019, is presented in the table below:
Plan Category
Number of Shares to be Issued Upon Exercise of Outstanding Awards (1)
Weighted-Average
Exercise Price of
Outstanding Awards		Number of Shares Available for Future Grants
Plans approved by shareholders420,931  $23.35  2,346,565  
Plans not approved by shareholders—  —  —  
Total420,931  $23.35  2,346,565  
Plan Category
Number of
Shares to be Issued Upon
Exercise of
Outstanding
Awards
 
Weighted-
Average
Exercise
Price of
Outstanding
Awards
 
Number of
Shares Available
for Future
Grants
Plans approved by shareholders673,039
 $18.75
 2,626,866
Plans not approved by shareholders—
 —
 —
Total673,039
 $18.75
 2,626,866
(1)Does not include performance-based restricted shares of 349,956, for which there is no exercise price.
Further information required by this Item is omitted herewith and may be found under the sections captioned "Stock“Stock Owned by Management"Management” and "Principal“Principal Holders of Voting Securities of Webster"Webster” in the Proxy Statement and such information included therein is incorporated herein by reference.
Additional information is presented in Note 18:19: Share-Based Plans in the Notes to Consolidated Financial Statements contained elsewhere in this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information regarding certain relationships and related transactions, and director independence is omitted from this report and may be found under the sections captioned "Certain“Certain Relationships," "Compensation” “Compensation Committee Interlocks and Insider Participation"Participation” and "Corporate Governance"“Corporate Governance” in the Proxy Statement and the information included therein is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information regarding principal accounting fees and services is omitted from this report and may be found under the section captioned "Auditor“Auditor Fee Information"Information” in the Proxy Statement and the information included therein is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Financial Statements
The Company’s Consolidated Financial Statements and the accompanying Notes thereto, and the report of the independent registered public accounting firm thereon, are included in Part II - Item 8. Financial Statements and Supplementary Data of this Form 10-K.
Financial Statement Schedules
All financial statement schedules for the Company have been included in the consolidated financial statements, or the notes thereto, or have been omitted because they are either inapplicable or not required.
Exhibits
A list of exhibits to this Form 10-K is set forth below.
(a)The following documents are filed as part of the Annual Report on Form 10-K:
(1)Consolidated Financial Statements of Registrant and its subsidiaries are included within Item 8 of Part II of this report.
(2)Consolidated Financial Statement schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted because they are not applicable or the required information is included in the Consolidated Financial Statements or Notes thereto included within Item 8 of Part II of this report.
(3)The exhibits to this Annual Report on Form 10-K are set forth on the Exhibit Index immediately preceding such exhibits and is incorporated herein by reference.
(b)Exhibits to this Form 10-K are attached or incorporated herein by reference as stated above.
(c)Not applicable
ITEM 16. FORM 10-K SUMMARY
Not applicable

125
113


SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 1, 2018.
Exhibit NumberExhibit DescriptionExhibit IncludedIncorporated by Reference
FormExhibitFiling Date
3Certificate of Incorporation and Bylaws
3.1
Fourth Amended and Restated Certificate of Incorporation
10-Q3.18/9/2016
3.2
Certificate of Designations establishing the rights of the Company's 8.50% Series A Non-Cumulative Perpetual Convertible Preferred Stock
8-K3.16/11/2008
3.3
Certificate of Designations establishing the rights of the Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series B
8-K3.111/24/2008
3.4
Certificate of Designations establishing the rights of the Company's Perpetual Participating Preferred Stock, Series C
8-K3.17/31/2009
3.5
Certificate of Designations establishing the rights of the Company's Non-Voting Perpetual Participating Preferred Stock, Series D
8-K3.27/31/2009
3.6
Certificate of Designations establishing the rights of the Company's 6.40% Series E Non-Cumulative Perpetual Preferred Stock
8-A12B3.312/4/2012
3.7
Certificate of Designations establishing the rights of the Company's 5.25% Series F Non-Cumulative Perpetual Preferred Stock
8-A12B3.312/12/2017
3.8
Bylaws, as amended effective June 9, 2014
8-K3.16/12/2014
4Instruments Defining the Rights of Security Holders
4.1X
4.2
Specimen common stock certificate
10-K4.13/10/2006
4.3
Junior Subordinated Indenture, dated as of January 29, 1997, between the Company and The Bank of New York, as trustee, relating to the Company's Junior Subordinated Deferrable Interest Debentures
10-K10.413/27/1997
4.4
Deposit Agreement, dated as of December 12, 2017, by and among the Company, Computershare Shareowner Services LLC, as Depositary, and the Holders of Depositary Receipts
8-K4.112/12/2017
4.5
Senior Debt Indenture, dated as of February 11, 2014, between the Company and The Bank of New York Mellon, as trustee
8-K4.12/11/2014
4.6
Supplemental Indenture, dated as of February 11, 2014, between the Company and The Bank of New York Mellon, as trustee, relating to the Company’s 4.375% Senior Notes due February 15, 2024
8-K4.22/11/2014
4.7
Form of specimen stock certificate for the Company's 5.25% Series F Non-Cumulative Perpetual Preferred Stock
8-A12B4.312/12/2017
4.88-K4.13/25/2019
4.98-K4.23/25/2019
10
Material Contracts (1)
10.1
Amended and Restated 1992 Stock Option Plan
DEF 14A10.13/18/2016
10.2
Amended and Restated Deferred Compensation Plan for Directors and Officers of Webster Bank effective January 1, 2005
8-K10.212/21/2007
10.3
Supplemental Retirement Plan for Employees of Webster Bank, as amended and restated effective January 1, 2005
8-K10.112/21/2007
10.4
Qualified Performance-Based Compensation Plan
DEF 14AA3/15/2013
10.5
Employee Stock Purchase Plan, as amended and restated effective April 1, 2019
10-Q10.15/7/2019
10.6
Description of Arrangement for Directors Fees
10-K10.63/1/2017
10.7
Form of Change in Control Agreement, effective as of December 31, 2012, by and between Webster Financial Corporation and Glenn I. MacInnes
8-K10.112/27/2012
10.8
Non-Competition Agreement, dated as of February 22, 2017, between Webster Bank, N.A., and Glenn I. MacInnes
10-K10.203/1/2017
10.9
Non-Competition Agreement, dated as of April 3, 2017, between Webster Financial Corporation, and Daniel Bley
10-Q10.15/5/2017
10.1010-K10.132/28/2013
114
WEBSTER FINANCIAL CORPORATION
By/s/ John R. Ciulla
John R. Ciulla
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 1, 2018.
Signature:Title:
/s/ John R. CiullaPresident and Chief Executive Officer, and Director
John R. Ciulla(Principal Executive Officer)
/s/ Glenn I. MacInnesExecutive Vice President and Chief Financial Officer
Glenn I. MacInnes(Principal Financial Officer)
/s/ Albert J. WangSenior Vice President and Chief Accounting Officer
Albert J. Wang(Principal Accounting Officer)
/s/ James C. SmithChairman of the Board of Directors
James C. Smith
/s/ John J. CrawfordLead Director
John J. Crawford
/s/ William L. AtwellDirector
William L. Atwell
/s/ Joel S. BeckerDirector
Joel S. Becker
/s/ Elizabeth E. FlynnDirector
Elizabeth E. Flynn
/s/ Laurence C. MorseDirector
Laurence C. Morse
/s/ Karen R. OsarDirector
Karen R. Osar
/s/ Mark PettieDirector
Mark Pettie
/s/ Charles W. ShiveryDirector
Charles W. Shivery
/s/ Lauren C. StatesDirector
Lauren C. States


126


Exhibit NumberExhibit DescriptionExhibit IncludedIncorporated by Reference
FormExhibitFiling Date
10.1110-K10.222/28/2013
10.12
Change in Control Agreement, effective as of January 3, 2014, by and between Webster Financial Corporation and Charles L. Wilkins
10-K10.132/28/2014
10.13
Non-Competition Agreement, dated as of April 3, 2017, between Webster Financial Corporation, and Charles Wilkins
10-Q10.55/5/2017
10.14
Change in Control Agreement, dated as of April 28, 2014, by and between Webster Financial Corporation and Bernard Garrigues
10-Q10.18/6/2014
10.15
Non-Solicitation Agreement, dated as of April 28, 2014, by and between Webster Financial Corporation and Bernard Garrigues
10-Q10.28/6/2014
10.16
Change in Control Agreement, dated as of February 26, 2018, by and between Webster Financial Corporation and John Ciulla
10-K10.183/1/2018
10.17
Non-Competition Agreement, dated as of April 3, 2017, between Webster Financial Corporation, and John Ciulla
10-Q10.25/5/2017
10.18
Non-Competition Agreement, dated as of April 3, 2017, between Webster Financial Corporation, and Nitin Mhatre
10-Q10.35/5/2017
10.19
Non-Competition Agreement, dated as of April 3, 2017, between Webster Financial Corporation, and Christopher Motl
10-Q10.45/5/2017
10.208-K10.19/19/2017
10.21
Change in Control Agreement, dated as of February 26, 2018, by and between Webster Financial Corporation and Brian Runkle
10-K10.233/1/2018
10.22
Non-Solicitation Agreement, dated as of February 26, 2018 by and between Webster Financial Corporation and Brian Runkle
10-K10.243/1/2018
10.2310-Q10.258/3/2018
10.2410-Q10.2611/5/2018
21
Subsidiaries
X
23
Consent of KPMG LLP
X
31.1
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer
X
31.2
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by the Chief Financial Officer
X
32.1
Written statement pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer
X (2)
32.2
Written statement pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Financial Officer
X (2)
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHXBRL Taxonomy Extension Schema DocumentX
101.CALXBRL Taxonomy Extension Calculation Linkbase DocumentX
101.DEFXBRL Taxonomy Extension Definitions Linkbase DocumentX
101.LABXBRL Taxonomy Extension Label Linkbase DocumentX
101.PREXBRL Taxonomy Extension Presentation Linkbase DocumentX
WEBSTER FINANCIAL CORPORATION
EXHIBIT INDEX
Exhibit Number Exhibit Description Filed Herewith Incorporated by Reference
   Form Exhibit Filing Date
3 Certificate of Incorporation and Bylaws.        
3.1 
Fourth Amended and Restated Certificate of Incorporation
   10-Q 3.1 8/9/2016
3.2 
Certificate of Designations establishing the rights of the Company's 8.50% Series A Non-Cumulative Perpetual Convertible Preferred Stock
   8-K 3.1 6/11/2008
3.3 
Certificate of Designations establishing the rights of the Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series B
   8-K 3.1 11/24/2008
3.4 
Certificate of Designations establishing the rights of the Company's Perpetual Participating Preferred Stock, Series C
   8-K 3.1 7/31/2009
3.5 
Certificate of Designations establishing the rights of the Company's Non-Voting Perpetual Participating Preferred Stock, Series D
   8-K 3.2 7/31/2009
3.6 
Certificate of Designations establishing the rights of the Company's 6.40% Series E Non-Cumulative Perpetual Preferred Stock
   8-A12B 3.3 12/4/2012
3.7 
Certificate of Designations establishing the rights of the Company's 5.25% Series F Non-Cumulative Perpetual Preferred Stock
   8-A12B 3.3 12/12/2017
3.8 
Bylaws, as amended effective June 9, 2014
   8-K 3.1 6/12/2014
4 Instruments Defining the Rights of Security Holders.        
4.1 
Specimen common stock certificate
   10-K 4.1 3/10/2006
4.2 
Junior Subordinated Indenture, dated as of January 29, 1997, between the Company and The Bank of New York, as trustee, relating to the Company's Junior Subordinated Deferrable Interest Debentures
   10-K 10.41 3/27/1997
4.3 
Warrant to purchase shares of Corporation common stock
   8-K 4.2 11/24/2008
4.4 
Deposit Agreement, dated as of December 12, 2017, by and among the Company, Computershare Shareowner Services LLC, as Depositary, and the Holders of Depositary Receipts
   8-K 4.1 12/12/2017
4.5 
Senior Debt Indenture, dated as of February 11, 2014, between the Company and The Bank of New York Mellon, as trustee
   8-K 4.1 2/11/2014
4.6 
Supplemental Indenture, dated as of February 11, 2014, between the Company and The Bank of New York Mellon, as trustee, relating to the Company’s 4.375% Senior Notes due February 15, 2024
   8-K 4.2 2/11/2014
4.7 
Form of specimen stock certificate for the Company's 5.25% Series F Non-Cumulative Perpetual Preferred Stock
   8-A12B 4.3 12/12/2017
10 Material Contracts        
10.1 
Amended and Restated 1992 Stock Option Plan
   10-Q 10.1 5/2/2012
10.2 
Amended and Restated Deferred Compensation Plan for Directors and Officers of Webster Bank effective January 1, 2005
   8-K 10.2 12/21/2007
10.3 
Supplemental Retirement Plan for Employees of Webster Bank, as amended and restated effective January 1, 2005
   8-K 10.1 12/21/2007
10.4 
Qualified Performance-Based Compensation Plan
   DEF 14A A 3/7/2008
10.5 
Employee Stock Purchase Plan
   DEF 14A A 3/23/2000
10.6 
Description of Arrangement for Directors Fees.
 X      
10.7 
Form of Change in Control Agreement, effective as of December 31, 2012, by and between Webster Financial Corporation and Glenn I. MacInnes
   8-K 10.1 12/27/2012

127


Exhibit Number Exhibit Description Filed Herewith Incorporated by Reference
   Form Exhibit Filing Date
10.8 
Non-Competition Agreement, dated as of February 22, 2017, between Webster Bank, N.A., and Glenn I. MacInnes
   10-K 10.20 3/1/2017
10.9 
Non-Competition Agreement, dated as of April 3, 2017, between Webster Financial Corporation, and Daniel Bley
   10-Q 10.1 5/5/2017
10.10 
Form of Change in Control Agreement, effective as of February 1, 2013, by and between Webster Financial Corporation and Daniel H. Bley, Colin D. Eccles, Nitin J. Mhatre and Harriet Munrett Wolfe
   10-K 10.13 2/28/2013
10.11 
Form of Non-Solicitation Agreement, effective as of February 1, 2013, by and between Webster Financial Corporation and Colin D. Eccles and Harriet Munrett Wolfe
   10-K 10.22 2/28/2013
10.12 
Change in Control Agreement, effective as of January 3, 2014, by and between Webster Financial Corporation and Charles L. Wilkins
   10-K 10.13 2/28/2014
10.13 
Non-Competition Agreement, dated as of April 3, 2017, between Webster Financial Corporation, and Charles Wilkins
   10-Q 10.5 5/5/2017
10.14 
Change in Control Agreement, dated as of March 10, 2014, by and between Webster Financial Corporation and Dawn C. Morris
   10-Q 10.3 5/7/2014
10.15 
Non-Solicitation Agreement, dated as of March 10, 2014, by and between Webster Financial Corporation and Dawn C. Morris
   10-Q 10.4 5/7/2014
10.16 
Change in Control Agreement, dated as of April 28, 2014, by and between Webster Financial Corporation and Bernard Garrigues
   10-Q 10.1 8/6/2014
10.17 
Non-Solicitation Agreement, dated as of April 28, 2014, by and between Webster Financial Corporation and Bernard Garrigues
   10-Q 10.2 8/6/2014
10.18 
Change in Control Agreement, dated as of February 26, 2018, by and between Webster Financial Corporation and John Ciulla
 X      
10.19 
Non-Competition Agreement, dated as of April 3, 2017, between Webster Financial Corporation, and John Ciulla
   10-Q 10.2 5/5/2017
10.20 
Non-Competition Agreement, dated as of April 3, 2017, between Webster Financial Corporation, and Nitin Mhatre
   10-Q 10.3 5/5/2017
10.21 
Non-Competition Agreement, dated as of April 3, 2017, between Webster Financial Corporation, and Christopher Motl
   10-Q 10.4 5/5/2017
10.22 
Retirement and Advisory Services Agreement, dated as of September 17, 2017, by and between Webster Financial Corporation and James C. Smith
   8-K 10.1 9/19/2017
10.23 
Change in Control Agreement, dated as of February 26, 2018, by and between Webster Financial Corporation and Brian Runkle
 X      
10.24 
Non-Solicitation Agreement, dated as of February 26, 2018 by and between Webster Financial Corporation and Brian Runkle
 X      
           
21 
Subsidiaries.
 X      
23 
Consent of KPMG LLP.
 X      
31.1 
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer.
 X      
31.2 
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by the Chief Financial Officer.
 X      
32.1 + 
Written statement pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer.
 X      
32.2 + 
Written statement pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Financial Officer.
 X      
           

128


Exhibit NumberExhibit DescriptionFiled HerewithIncorporated by Reference
FormExhibitFiling Date
101.INS
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

X
101.SCHXBRL Taxonomy Extension Schema DocumentX
101.CALXBRL Taxonomy Extension Calculation Linkbase DocumentX
101.DEFXBRL Taxonomy Extension Definitions Linkbase DocumentX
101.LABXBRL Taxonomy Extension Label Linkbase DocumentX
101.PREXBRL Taxonomy Extension Presentation Linkbase DocumentX
Note: Exhibit numbers 10.1 – 10.26(1) Material contracts are management contracts, or compensatory plans, or arrangements in which directors or executive officers are eligible to participate.
+ This exhibit(2) Exhibit is furnished herewith and shall not be deemed "filed"“filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

ITEM 16. FORM 10-K SUMMARY
Not applicable
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115

Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 28, 2020.
WEBSTER FINANCIAL CORPORATION
By/s/ John R. Ciulla
John R. Ciulla
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 28, 2020.
Signature:Title:
/s/ John R. CiullaPresident and Chief Executive Officer, and Director
John R. Ciulla(Principal Executive Officer)
/s/ Glenn I. MacInnesExecutive Vice President and Chief Financial Officer
Glenn I. MacInnes(Principal Financial Officer)
/s/ Albert J. WangSenior Vice President and Chief Accounting Officer
Albert J. Wang(Principal Accounting Officer)
/s/ James C. SmithChairman of the Board of Directors
James C. Smith
/s/ William L. AtwellLead Director
William L. Atwell
/s/ John J. CrawfordDirector
John J. Crawford
/s/ Elizabeth E. FlynnDirector
Elizabeth E. Flynn
/s/ E. Carol HaylesDirector
E. Carol Hayles
/s/ Laurence C. MorseDirector
Laurence C. Morse
/s/ Karen R. OsarDirector
Karen R. Osar
/s/ Mark PettieDirector
Mark Pettie
/s/ Lauren C. StatesDirector
Lauren C. States

116