Part III: DefinitivePortions of the Proxy Statement (the “Proxy Statement”) for the Annual Meeting of ShareholdersStockholders to be held on April 23, 2020.

INDEX

PART 1I

Webster Financial Corporation is a bank holding company and financial holding company under the Bank Holding CompanyBHC Act, of 1956, as amended (BHC Act), incorporated under the laws of Delaware in 1986, and headquartered in Waterbury,Stamford, Connecticut. At December 31, 2019, Webster had assetsBank, along with its HSA Bank Division, is a leading commercial bank in the Northeast that delivers a wide range of $30.4 billion, net loansdigital and leasestraditional financial solutions to businesses, individuals, families, and partners across its three differentiated lines of $19.8 billion, deposits of $23.3 billion,business: Commercial Banking, HSA Bank, and shareholders’ equity of $3.2 billion.

The Company files reports with the SEC, and investor relations internet address is www.wbst.com. Webster makes available, free of charge, on these websiteswithin the investor relations section of its internet website (http://investors.websterbank.com) 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 documentsreports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the United States SecuritiesSEC. The SEC also maintains an internet website (http://www.sec.gov) that contains reports, proxy and Exchange Commission (SEC). These documents are also available toinformation statements, and other information regarding issuers that file electronically with the publicSEC. Information contained on the Internet at the SEC’s website at www.sec.gov. Information on Webster’s website and its investor relationsCompany's website is not incorporated by reference into this report.

Subsidiaries of Webster Financial Corporationand Reportable Segments

Webster Financial Corporation’sThe Holding Company's principal consolidated subsidiary is the Bank. The Bank's significant wholly-owned subsidiaries include: Webster Bank (the Bank). Its other directly consolidated subsidiaries areServicing LLC, Webster Public Finance Corporation, Sterling National Funding Corporation, Webster Mortgage Investment Corporation, Sterling Business Credit LLC, Webster Wealth Advisors, Inc., Webster Licensing, LLC, Bend Financial, Inc., Interlink Insured Sweep LLC, Webster Investment Services, Inc., Webster Preferred Capital Corporation, and Webster Licensing, LLC.Community Development Corporation. 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.

Additional information regarding the Company's reportable segments can be found in Part II under the section captioned "Segment Reporting" contained in Item 7. Management's Discussion and business certified banking center managers, supportedAnalysis of Financial Condition and Results of Operations, and within Note 21: Segment Reporting in the Notes to Consolidated Financial Statements contained in Item 8. Financial Statements and Supplementary Data.

As a values-driven organization, the Company's employees are the cornerstone of its success. At December 31, 2022, the Company had 4,065 full-time employees and 128 part-time employees, which comprised 63% female and 37% male, along with 553 temporary workers. None of the Company's employees were represented by a collective bargaining agreement.

The Company believes that its focus on DEIB is a critical component of how it supports the increasingly different perspectives of its employees, clients, and communities. It is not only key to long-term growth, but also having a workforce comprised of diverse identities, backgrounds, and experiences better helps the clients and communities that the Company serves to achieve their financial goals. The Company's commitment to DEIB starts with the senior leadership team, who continuously works to ensure that DEIB is embedded into the way the Company does business. The Company has established a DEIB Council, which serves as a platform where senior leaders, partners, and representatives of customer care center bankersvarious internal business resource groups shape the strategy and actions of our DEIB efforts. The Council currently comprises 39 employee members across the organization and is co-chaired by the Chief Executive Officer and Executive Vice President of Business Banking, both of whom make recommendations on ways to integrate DEIB in the areas of education and awareness, talent recruitment and development, and employee, client, and community engagement. The Company's Managing Director of DEIB works to expand DEIB initiatives and programs, as well as grow partnerships within local communities, while promoting a diverse, equitable workforce in an open, inclusive environment.

The Company is focused on investing in its current and future talent by actively supporting the success, growth, and career progression of its employees. Employees have access to more than 400 courses offered through Webster Bank University, the Company's internal learning resource that offers on-demand webinars, e-learning modules, and in-person learning programs. The Company also provides unlimited access to self-directed online courses taught by industry and product specialists.experts with curated learning paths that are designed specifically for their professional interests.

Competition

WebsterThe Company is subject to strong competition from banks, thrifts, credit unions, non-bank health savings account trustees, consumer finance companies, investment companies, insurance companies, and 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.the Company. Competition could intensify in the future as a result of industry consolidation, the increasing availability of products and services from non-bank entities,organizations including financial technology companies, greater technological developments in the industry, and continued bank regulatory reforms.

WebsterThe Company 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. Competition for deposits comes from other commercial banks, thrifts, credit unions, non-bank health savings account trustees, money market mutual funds, financial technology companies, and other investment alternatives.non-bank financial services companies. The primary factors in competing for consumercommercial and commercialconsumer loans are interest rates, loan origination fees, ease and convenience of loan origination channels, the quality and range of lending services, personalized service, and the ability to close within customers’each customer's desired time frame. Competition for the origination of loans comes primarily from commercial banks, non-bank lenders, savings institutions, mortgage banking firms, mortgage brokers, online lenders, and insurance companies. Other factors whichthat affect competition include the general and local economic conditions, current interest rate levels, and volatility in the lending markets.

Supervision and Regulation

WebsterThe Holding Company and its bank and non-bank subsidiaries are subject to comprehensiveextensive regulation under federal and state laws. The regulatory framework applicable to bank holding companies and their subsidiary banksdepository institutions is intended to protect depositors, the Federal Deposit Insurance Fund (DIF),FDIF, consumers, and the U.S. banking system as a whole. This system is not designed to protect equity investors

Set forth in bank holding companies. Set forththe paragraphs below is a summary of the significant elements of the laws and regulations applicable to Websterthe Holding Company 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. SuchBanking statutes, regulations, and policies are subject to ongoingcontinually under review by Congress, state legislatures, and federal and state regulatory agencies. A changeChanges in any of the statutes, regulations, or regulatory policies applicable to Websterthe Holding Company and its bank and non-bank subsidiaries, including how they are implemented or interpreted, could have a material effect on the results of the Company.

The Holding Company is a separate and distinct legal entity from Websterthe Bank and its other subsidiaries. As a registered bank holding company and a financial holding company, itWebster Financial Corporation is subject to regulation under the BHC Act and to inspection, examination, and supervision by its primary federal regulator, the Board of Governors of the Federal Reserve System and is regulated under the BHC Act.System. As a publicly-traded company, Webster is under the jurisdiction of the SEC and isalso 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, asboth of which are administered by the SEC. As a publicly-traded company with securities listed on the NYSE, 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 subject to oversight by state attorneys general for compliance with state consumer protection laws. Webster’s non-bank subsidiaries are subject to federal and state laws and regulations, including regulations of the Federal Reserve System.NYSE.

The Holding Company’s non-bank subsidiaries are insuredalso subject to regulation by the FDIC up to the applicable deposit insurance limits in accordance with FDIC laws and regulations.

Bank Holding Company RegulationActivities

Webster Financial Corporation is a bank holding company as defined underIn general, 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.banking. Bank holding companies that have electedqualify and elect 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, dealing and dealing,market making, sponsoring mutual funds and investment companies, insurance underwriting, and making merchant banking investments.banking. If a financial holding company or its bank ceases to be well capitalized or well managed, the Board of Governors of the Federal Reserve System may impose corrective capital and managerial requirements and activity restrictions.

TheUnder the BHC Act, prior approval from the Board of Governors of the Federal Reserve System is required in order for any bank holding company to (i) acquire direct or indirect ownership or control of more than 5% of the voting shares of any bank, (ii) acquire all or substantially all of the assets of a bank, or (iii) merge or consolidate with any other bank holding company. Generally, the Holding Company is not required to obtain prior approval from the Board of Governors of the Federal Reserve System to acquire a non-bank that engages in activities that are financial in nature or incidental to activities that are financial in nature, as long as the Holding Company meets the capital, managerial, and CRA requirements to qualify as a financial holding company. However, the Holding Company is required to receive prior approval from the Board of Governors of the Federal Reserve System for an acquisition in which the total consolidated assets to be acquired exceeds $10 billion.

Pursuant to Section 18(c) of the FDIA, more commonly known as the Bank Merger Act, and for national banks relying on certain other sources of merger authority, prior written approval from a bank's primary federal regulator is required before any insured depository institution may consummate a merger transaction, which includes a merger, consolidation, assumption of deposit liabilities, and state statutes regulatecertain asset transfers between or among two or more institutions. Prior written approval of a bank's primary federal regulator is also required for merger transactions between or among affiliated institutions, as well as for merger transactions between or among non-affiliated institutions. Transactions that do not involve a transfer of deposit liabilities typically do not require prior approval under the direct and indirectBank Merger Act, unless the transaction involves the acquisition of all or substantially all of an institution's assets. When evaluating and acting on proposed merger transactions, regulators consider the extent of existing competition between and among the merging institutions, other depository institutions. The BHC Act requires Federal Reserve System prior approval for a bank holding companyinstitutions, and other providers of similar or equivalent services in the relevant product and geographic markets, the convenience and needs of the community to acquire, directly or indirectly, 5% or more of any class of voting securities of a commercial bank or its parent holding company,be served, capital adequacy and for a companyearnings prospects, and the effectiveness the merger institutions in combating money-laundering activities, among other than a bank holding company to acquire 25% or more of any class of voting securities of a bank or bank holding company.  Underfactors.

Further, the Change in Bank Control Act of 1978 generally prohibits any person, or company may not acquire,acting directly or indirectly or in concert with other persons, from acquiring control of a bankcovered institution without providing at least 60 days prior written notice to the FDIC or upon receipt of written notice that the FDIC does not disapprove of the acquisition.

The Board of Governors of the Federal Reserve System, the OCC, and receiving a non-objection from the appropriate federal banking agency. FDIC have adopted the regulatory capital standards in accordance with Basel III, as developed by the Basel Committee on Banking Supervision. The Basel III Capital Rules strengthened international capital adequacy standards by increasing institutions' minimum capital requirements and holdings of
high-quality liquid assets, and decreasing bank leverage.

Under the Bank Merger Act,Basel III Capital Rules, the prior approvalCompany's assets, exposures, and certain off-balance sheet commitments and obligations are subject to risk weights used to determine risk-weighted assets. Risk weights can range from 0% for U.S. government securities to 1,250% for certain tranches of complex securitization or equity exposures. Risk-weighted assets serve as the base against which regulatory capital is measured, and are used to calculate the Holding Company's and the Banks' minimum capital ratios of CET1 capital to total risk-weighted assets (CET1 risk-based capital), Tier 1 capital to total risk-weighted assets (Tier 1 risk-based capital), Total capital to total risk-weighted assets (Total risk-based capital), and Tier 1 capital to average tangible assets (Tier 1 leverage capital), as defined in the regulations, which the Company is required to maintain. CET1 capital consists of common stockholders' equity less deductions for goodwill and other intangible assets, and certain deferred tax adjustments. At the time of initial adoption of the Basel III Capital Rules, the Company had elected to opt-out of the requirement to include certain components of AOCI in CET1 capital. Tier 1 capital consists of CET1 capital plus preferred stock. Total capital consists of Tier 1 capital and Tier 2 capital, as defined in the regulations. Tier 2 capital includes qualifying subordinated debt and the permissible portion of the ACL.

In addition, an insured depository institution with a ratio of tangible equity less than or equal to 2% is considered to be critically under capitalized. If an insured depository institution has been determined, after notice and opportunity for a hearing, to be in an unsafe or unsound condition, or if it receives a less-than-satisfactory rating for asset quality, management, earnings, or liquidity in its most recent examination, the appropriate federal banking agency is required formay downgrade a well capitalized, adequately capitalized, or under capitalized insured depository institution to the next lower capital category.

All insured depository institutions, regardless of their capital category, are prohibited from making capital distributions or paying management fees if such distributions or payments would result in the insured depository institution becoming under capitalized, unless it is shown that the capital distribution would improve financial condition or the management fee is being paid to mergea person or enter into purchaseentity without a controlling interest in the insured depository institution. Restrictions are placed on certain brokered deposit activity and assumption transactions.  In reviewing applications seeking approval of mergeron deposit rates offered as the capital category declines below well capitalized. Further, if an insured depository institution receives notice that it is under capitalized, significantly under capitalized, or purchase and assumption transactions,critically under capitalized, the insured depository institution generally must file a written capital restoration plan with the appropriate federal banking agencies will consider, among other things, the competitive effect and public benefitsagency within 45 days of the transactions, the capital position of the combined banks, the applicant’s performance record under the Community Reinvestment Act of 1977 (CRA),receipt, and the effectivenessbank holding company must guarantee the performance of the merging banks in combating money laundering.that plan.

Section 165The Board of Dodd-Frank imposes enhanced prudential standards on larger banking organizations. However, EGRRCPA makes bank holding companies with less than $100 billion in 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. However, while the federal banking agencies will not require company-run stress testing, the capital planning and risk management practices of the Company will continue to be reviewed through regular supervisory processesGovernors of the Federal Reserve System established enhanced prudential standards for larger bank holding companies based on size and certain risk-based indicators. On October 10, 2019, the OCC. TheFederal Reserve Board, along with other federal bank regulatory agencies, tailored these prudential standards allowing bank holding companies with total consolidated assets of $250 billion or less to be exempt from certain enhanced capital and liquidity prudential standards, including company-run stress testing, capital planning, liquidity coverage ratio, and resolution planning requirements, among others. Although the Holding Company's total consolidated assets are beneath the $250 billion threshold, the Company will continue to performperforms certain stress tests internally and incorporateincorporates the economic models and information developed through its stress testing program into its risk management and businesscapital planning activities.activities, which continue to be subject to the regular supervisory processes of the Federal Reserve System and the OCC.

The Volcker Rule prohibits banking entities, such as the Holding Company and the Bank, from (i) engaging in short-term proprietary trading of certain securities, derivatives, commodity futures, and options on these investments for their own account, and (ii) imposes limits on investments in, and other relationships with hedge funds or private equity funds. The Volcker Rule provides exemptions for certain activities, including market making, underwriting, hedging, trading in government obligations, insurance company activities, and organizing and offering hedge funds or private equity funds. The Volcker rule also clarifies that certain activities are not prohibited, including acting as agent, broker, or custodian. Banking entities with significant trading operations (those with $20 billion or more in average trading assets and liabilities) are required to establish a previouslydetailed compliance program to which their Chief Executive Officers are required to attest that the program is reasonably designed to achieve compliance with the Volcker Rule. The Company has a Volcker Rule compliance program in place that covers all of its subsidiaries and affiliates.

On June 25, 2020, the Federal Reserve System, Commodity Futures Trading Commission, FDIC, OCC, and SEC issued a final rule that modified the Volcker Rule's prohibition on banking entities investing in or sponsoring hedge funds or private equity funds, known as covered funds. The final rule, which became effective on October 1, 2020, modified three areas of the Volcker Rule by (i) streamlining the covered funds portion of the rule, (ii) addressing the extraterritorial treatment of certain foreign funds, and (iii) permitting banking entities to offer financial services and engage in other activities that do not raise concerns that the Volcker Rule was intended to address. The Federal Reserve System had granted the Company an extension until July 21, 2022 to bring its holdings into compliance with the Volcker Rule. The Company dissolved its remaining holdings in illiquid covered funds during 2021, and believes its holdings to be fully compliant with the Volcker Rule as of December 31, 2022.

Further, as a national bank and a member of the Federal Reserve System, implementing enhanced prudential standardsWebster Bank is required to subscribe to the capital stock of its district FRB in an amount equal to 6% of its capital and surplus, of which 50% is paid. The remaining 50% is subject to call by Dodd-Frank,the Board of Governors of the Federal Reserve System. At December 31, 2022, the Bank held a FRB of New York stock investment of $224.5 million.

Bank holding companies are required to serve as a source of financial strength to their subsidiary banks and commit resources to support each of their subsidiary banks. This support may be required at times when the Holding Company is not in a financial position to provide such resources without adversely affecting its ability to meet other obligations. The Federal Reserve System may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices if it fails to commit resources to such a subsidiary bank, or if it undertakes actions that the Federal Reserve System believes might jeopardize the bank holding company's ability to commit resources to such subsidiary bank. Capital loans by banking holding companies to its subsidiary banks would be subordinate in right of payment to deposits and certain other debts of the subsidiary bank. In the event of bankruptcy, any commitment by a bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank would be assumed by the bankruptcy trustee and entitled to a priority of payment.

The CFPB is responsible for implementing, enforcing, and examining compliance with federal consumer financial protection laws. As an insured depository institution with more than $10 billion in total assets, werethe Bank is subject to certain rules, includingsupervision by the CFPB. There are a requirement to establish a separate risk committeenumber of independent directors to manage enterprise-wide risk. EGRRCPA subsequently increased the asset threshold for requiring a bank holding company to establish a separate risk committee of independent directors from $10 billion to $50 billion. Notwithstanding the changes implemented by EGRRCPA,federal laws, which the Company has retained its Risk Committee of the Board of Directors.

On December 7, 2021, the transaction's value. The Federal Reserve System separatelyCFPB issued a final rule that also allows a fraud-prevention adjustmentamending Regulation Z, which implements the Truth in Lending Act, to address the anticipated sunset of one-cent per transaction conditioned upon an issuer developing, implementing,LIBOR for consumer financial products, which is expected to be discontinued for most USD tenors in June 2023. Information regarding the Company's LIBOR transition plan and updating reasonably designed fraud-prevention policiesrisk factors associated with the discontinuation of LIBOR, can be found under the section captioned "LIBOR Transition" contained in Part II - Item 7. Management's Discussion and procedures.Analysis of Financial Condition and Results of Operations, and in Part I - Item 1A. Risk Factors.

The SEC and the Commodity Futures Trading Commission (CFTC) jointly issued final rules and guidelines implementing the provisions of Dodd-Frank which require certain regulated entities to establish programs to address risks of identity theft. The rules require financialTransactions between insured depository institutions and creditors to developtheir affiliates are governed by Sections 23A 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 jurisdiction23B 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.

In addition, Section 22(h) of the FRA and Federal Reserve Regulation O restricts loans to directors, executive officers, and principal stockholders or insiders. Pursuant to Section 22(h), 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 paymentinstitution's employees and does not give preference to the insider over the employees. Further, loans to insiders and their related interests may not exceed, together with all other outstanding loans to such persons and affiliated entities, the institution’s total capital and surplus. Loans to insiders above specified amounts must receive prior approval from the Company's Board of dividends would be an unsafe or unsound practice andDirectors. Section 22(g) of the FRA places additional limitations on loans to prohibit payment thereof. The federal banking agencies have indicated that paying dividends that deplete a bank’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.executive officers.

Federal Reserve System regulations require depository institutions to maintain cash reserves against their transaction accounts, primarily interest-bearingThe CFPB is responsible for implementing, enforcing, 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 (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 $16.3 million at December 31, 2019. Effective January 16, 2020, amounts greater than $16.9 million up to and including $127.5 million have a reserve requirement of 3% and amounts in excess of $127.5 million have a reserve requirement of 10%. Webster Bank is inexamining compliance with these cash reserve requirements.

On December 7, 2021, the performanceCFPB issued a final rule amending Regulation Z, which implements the Truth in Lending Act, to address the anticipated sunset of that plan.

Transactions with Affiliates and Insiders

Under federal law, transactionsTransactions between insured depository institutions and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act (FRA)FRA and Federal Reserve Regulation W. In a bank holding company context, at a minimum, the parent holding company of a national bank, and any companies whichthat are controlled by such parent holding company, are considered 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 (i) limiting the extent to which a bankan institution or its subsidiaries may engage in covered transactions with any one affiliate and with all affiliates of the bank in the aggregate, and (ii) requiring that all such transactions be on terms consistent with safesubstantially the same, or at least favorable, to the institution or subsidiary as those provided to a non-affiliate. The term covered transaction includes the making of loans, purchase of assets, the issuance of a guarantee, and sound banking practices.similar types of transactions. Certain covered transactions must be collateralized according to a schedule set forth in the statue.

Further,In addition, Section 22(h) of the FRA and its implementingFederal Reserve Regulation O restricts loans to directors, executive officers, and principal stockholders or insiders. UnderPursuant to 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’s total capital and surplus. Loans to insiders above specified amounts must receive the prior approval of the Board of 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’sinstitution's employees and does not give preference to the insider over the employees. Further, loans to insiders and their related interests may not exceed, together with all other outstanding loans to such persons and affiliated entities, the institution’s total capital and surplus. Loans to insiders above specified amounts must receive prior approval from the Company's Board of Directors. Section 22(g) of the FRA places additional limitations on loans to executive officers.

Consumer Protection and Consumer Financial Protection Bureau Supervision

Dodd-Frank centralized responsibility for consumer financial protection by creating theThe CFPB an independent agency charged with responsibilityis responsible for implementing, enforcing, and examining compliance with federal consumer financial protection laws. TheAs an insured depository institution with more than $10 billion in total assets, the Bank is subject to supervision by the CFPB. There are a number of federal laws, which the Company is subject to, a number of federal and state lawsthat are designed to protect borrowers and promote lending, including, but not limited 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 2010,2010.

On December 7, 2021, the CFPB issued a final rule amending Regulation Z, which is part of Dodd-Frank. Dodd-Frank 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.

Certain regulated entities are required to issueestablish programs to address risks of identity theft. In accordance with these rules, financial institutions and amend rules implementingcreditors are required to develop and implement a written identity theft prevention program designed to detect, prevent, and mitigate identity theft in connection with certain existing accounts or the consumer financial protection laws,opening of new accounts. The Company has an Identity Theft Prevention Program in place, which may impact Webster Bank’s operations.is approved by the Board of Directors, satisfying its compliance with these requirements.

Financial Privacy and Data Security

WebsterThe Company is subject to federal laws, including the Gramm-Leach-Bliley Act and certain state laws and regulations containing consumer privacy and data protection provisions. These provisions limitaddressing the abilitytreatment of banks and other financial institutions to disclose nonpublic personal information about consumers to affiliated and non-affiliated third parties and limit the reuse of certain consumer information received from non-affiliatedby financial institutions. These provisions require notice of privacy policiesSubject to consumers and, in some circumstances, allow consumers to prevent disclosure of certain exceptions, financial institutions are prohibited from disclosing nonpublic personal information about a consumer to affiliates or non-affiliatednonaffiliated third parties, by meansunless the institution satisfies various notice and opt-out requirements and the consumer has not elected to opt out of opt-out or opt-in authorizations.the disclosure. Regardless as to whether a financial institution shares nonpublic personal information, the institution must provide notice of its privacy policies and practices to its consumers, and must follow redisclosure and reuse limitations on any nonpublic personal information it receives from a nonaffiliated financial institution.

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. Federalfederal banking regulatory agencies have also adopted guidelines for establishing information security standards and programs to protect such information. These guidelines, alonginformation, with related regulatory materials, increasinglyan increased focus on risk management and processes related to information technology, and the use of third-parties inthird-parties. The expectation from the provision of financial products and services. The federal bankbanking regulatory agencies expectis that financial institutions to establishhave established lines of defense and to ensure that their risk management processes address the riskrisks posed by compromised customer credentials, and also expectthat the financial institutions to maintaininstitution has sufficient business continuity planning processes to ensure rapid recovery, resumption, and maintenance of the institution’s operations after a cyber attack.cyber-attack.

Community Reinvestment Act and Fair Lending Laws

WebsterThe 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’s discretion to develop the types of products andor services that it believes are best suited to its particular community. TheIn connection with its examination, the OCC examines Websterassesses the Bank’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. WebsterThe Bank’s failure to comply with the provisions of the CRA could, at a minimum, result in regulatory restrictions on its activities, andas well as the activities of Webster Financial Corporation. Websterthe Company. Further, the Bank’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’s latest OCCThe Bank received a CRA rating was Outstanding.of Outstanding in its most recent examination.

The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, for each account ownership category. The FDIF is funded mainly through quarterly assessments on insured depository institutions, such as the OCCBank, and provides insurance coverage for certain deposits up to this maximum amount.

The Bank's assessment is calculated in accordance with the FDIC's standardized risk-based methodology by multiplying its assessment rate by its assessment base, which are determined and paid each quarter. The assessment base equals the Bank's average consolidated total assets less average tangible equity during the assessment period. As a large bank, or generally one with $10 billion or more in assets, Webster Bank is assigned an individual rate based on a scorecard, which combines CAMELS (capital adequacy, asset quality, management, earnings, liquidity, and sensitivity) component ratings, financial measures used to measure a bank's ability to withstand asset-related and funding-related stress, and a measure of loss severity that estimates the relative magnitude of potential losses to the FDIC in the event of the bank's failure, to produce a score that is then converted to an assessment rate.

Assessment rates are subject to adjustment by the FDIC. For instance, assessment rates could (i) decrease for the issuance of long-term unsecured debt, including senior unsecured debt and subordinated debt, (ii) increase for holdings of long-term unsecured or subordinated debt issued a joint noticeby other banks, or (iii) increase for significant holdings of proposed rulemaking to modernizebrokered deposits for large banks that are not well rated or not well capitalized. On October 18, 2022, the regulations implementingFDIC increased the CRA. The proposed rule, if finalized, will apply toinitial deposit base deposit insurance assessment rate schedules uniformly by 2 basis points for all insured banks, suchdepository institutions, beginning in the first quarterly assessment period of 2023. The increase in assessment rate schedules is intended to increase the likelihood that the reserve ratio of the FDIF reaches the statutory minimum of 1.35 percent by the statutory deadline of September 30, 2028.

In the event of the liquidation or other resolution of an insured depository institution, including the Bank, the claims of depositors of the institution (including the claims of the FDIC as Webster Bank. Undersubrogee of insured depositors) and certain claims for administrative expenses of the rulemaking,FDIC as a receiver will have priority over other general unsecured claims against 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 transparentinstitution. If an insured depository institution fails, claims of insured 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 developmentsuninsured depositors, along with claims of the FDIC, would have priority in payment ahead of unsecured, non-deposit creditors, including the Holding Company, with respect to this rulemakingany extensions of credit they have made to such insured depository institution.

A major focus of U.S. federal governmental policy as it relates to financial institutions is aimed at combating money laundering and assessterrorist financing. The failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with the impact,relevant laws and regulations, could have serious legal and reputational consequences for the financial institutions, including causing the applicable bank regulatory authorities to not approve merger or acquisition transactions or to prohibit such transactions even if any, of changes to the CRA regulations proposed by the federal banking agencies.prior approval is not required.

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. WebsterThe Company 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.

The Board of Governors of the Federal Reserve System requires that the amount of any interchange transaction fee that a debit card issuer may receive or charge with respect to an electronic debit transaction shall be reasonable and proportional to the cost incurred by the debit card issuer with respect to the transaction, and imposes requirements regarding routing and exclusivity of electronic debit transactions and the usability of debit cards across networks. Interchange fees for certain electronic debit transactions are capped at 21 cents plus 0.05% of the transaction value for issuers with over $10 billion in consolidated assets, such as the Bank. The regulation also allows covered debit card issuers to receive 1 cent per transaction for fraud-prevention costs, provided that the debit card issuer meets the fraud-prevention standards established by the FRB. HSA Bank's interchange revenue is not subject to these rules.

The Company defines risk as the potential that events, expected or unexpected, may have an adverse effect on its earnings, capital, or franchise/enterprise value. The Company maintains a structured risk management framework that provides an integrated, forward-looking approach to identifying, prioritizing, and managing all risk categories across the organization: Information, Reputational, Operational, Credit, Compliance, Financial, and Strategic.

The risk management framework includes a Three Lines Model with the following roles and responsibilities:

The Company has established and maintains a Risk Appetite Statement which provides guidance to management regarding the nature and level of residual risk that it is willing to take in pursuit of its objectives. The appetite balances a qualitative risk appetite statement, which is approved annually by the Board of Directors. TheDirectors, with quantitative metrics in the form of board-level and management-level scorecards comprising key risk appetite statement is supportedindicators with established risk tolerance levels. Tolerance levels are periodically reviewed by board and business level scorecards with defined risk tolerances that indicate the level of risk that the Company is willing to accept. The risk appetite is refreshed annuallyrespective oversight committees to ensure the alignment of risk appetite with Webster’s strategythe Company’s risk profile.

The Company has established operating and financial plan.

The ERMC, which is chaired by the Chief Risk Officer, and is comprised of Webster’s executivethe management and senior risk officers.

The Corporate Treasurer, who reportsincreased use of technology to store and process information, particularly the Chief Financial Officer,ability to conduct financial transactions on mobile devices and cloud technologies, exposes the Company to moderate risk of potential operational disruption or information security incidents, whether caused by deliberate or accidental acts. The Company is responsible for overseeing market, liquidity,committed to preventing, detecting, and capital risk management activities. The Chief Information Officer, who reportsresponding timely to incidents that may impact the Chief Executive Officer, is responsible for overseeingconfidentiality, integrity, and availability of information assets through its information security and technology risk programs, which are managed under the direction of the Chief Information Security Officer and Senior Managing Director of Information Risk Management. The Information Risk Committee provides primary oversight to Information Risk.

Reputational risk is managed through strong corporate governance, risk culture, and a Code of Ethics. Setting the tone at the top, the Board of Directors and executive leadership actively support risk awareness by mandating accurate and timely management information and communication. The Company's ethical standards are reinforced through recruiting, training, and performance management. The Company also maintains strong fair and responsible banking practices, which permeate interactions with clients, vendors, and counterparties. The ERMC provides primary oversight to Reputational risk.

The Company mitigates Operational risk through the establishment of an Operational Risk Management Program, which provides for a set of tools to identify, assess, monitor, and report operational risk activities. The program enables the lines of business and corporate functions to establish accountability for performance and execution, and allows for timely and effective management of identified risks, control failures, or other related gap/deficiencies that are reinforced through incentive structures. The Company seeks to control operational risk within an acceptable range, which is determined by the types of businesses in which it engages, and the volume of activity within those lines of business. Control of operational losses depends on identifying the types of transactions and operational risks faced at the enterprise and business level, and ensuring effective internal control processes are in place to mitigate these risks. The Operational Risk Management Committee provides primary oversight to Operational risk as a whole. The Litigation Risk Committee provides primary oversight to Legal risk.

Webster managesCredit risk is defined as the risk of loss resulting from the failure of a borrower or counterparty to honor its financial or contractual obligations to the Company. Credit risk arises in the Company's lending operations, and controls credit risk in its loanfunding and investment portfolios through established underwriting practices, adherenceactivities where counterparties have repayment or other obligations to standards, and utilizationthe Company. Credit risk can also arise from other solutions or services that involve customer obligations for the transfer 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 disclosurefunds.

The overall focus of policy exceptions.

Diversification of the supervisionloan portfolio across commercial and industrial, specialty finance, and real estate lending is important in managing credit risk. Accordingly, management aims to actively measure and management concentrations by portfolio, industry sector and specific sub-sectors, geography, single obligor, and other guidelines. The Company is primarily a relationship lender. In addition, the Company will only assume credit risk when it can effectively manage from an infrastructure or operational perspective, and it has industry, product, and market expertise.

The Credit Risk Management Program is led by the Chief Credit Officer, who reports to the Chief Risk Officer. The Chief Credit Officer andalong with a team of credit executives who are independent of the loan production and treasury 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.

Financial risk encompasses Treasury and Accounting risk. Treasury risk includes the risk (i) of capital levels falling below supervisory expectations or being incommensurate with the level of risk; (ii) that meets regularlya value of a security or investment will decrease; (iii) changes in interest rates could contribute to review key credita reduction in earnings and net worth; and (iv) from decreases or changes in funding sources. Accounting risk topics, issues,includes the risks that arise from the inability to (i) comply with GAAP and policies. regulatory laws/guidelines; (ii) ensure a high integrity financial reporting process; and (iii) disclose appropriate information.

The CreditTreasury components of Financial risk are managed through interest rate, liquidity, and capital scenario analysis and stress testing. Accounting risk is managed through internal control over financial reporting. The Company's Treasury and Accounting Risk ManagementPrograms are respectively managed by the Treasurer and Chief Accounting Officer. The Asset Liability Committee reviews Webster’s creditprovides primary oversight of Treasury risk. The Disclosure and SOX Committees, both of which are subcommittees of the Audit Committee, provide primary oversight of Accounting risk.

Strategic risk scorecard, which covers keyis defined as the risk indicatorsto the Company's current or projected financial condition, expected returns and limits establishedresilience arising from the inability to select and execute strategic choices, suboptimal company positioning, ineffective organizational structures, poor implementation of priorities and initiatives, inadequate risk management infrastructure, or the lack of responsiveness to changes in the financial services ecosystem and operating environment.

The long-range strategic planning process ensures that strategic choices and initiatives are viewed with the overarching goal of allocating capital and resources to support strategies that create value for customers and sustainably grow economic profit over time. The impact of a strategy on the Company's risk appetite and risk profile is evaluated as part of the Company’s risk appetite framework.strategic planning process. The Credit Risk Management Committeelong-range strategic planning process is chairedmanaged 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 theCorporate Strategy Officer. The ERMC and Risk Committee of the Board of Directors.

Additional information onregarding risks and uncertainties, and additionalrelevant risk factors that could affectimpact the Company’sCompany's business, results of operations, or financial condition can be found in Part I - Item 1A1A. Risk Factors and elsewhere withinthroughout Part II of this Form 10-K for the year ended December 31, 2019, and in other reports Webster Financial Corporation files with the SEC.report.

ITEM 1A. RISK FACTORS

Investment in our securitiesWebster stock 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 in the paragraphs below addresses the material risks and uncertainties, of which we are currently aware, that could adversely affect our business, and impact results of operations, or 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 thethese events or circumstances described in the following risks factors actually occurs, our business, results of operations, or financial condition could be harmedsignificantly impacted.

A failure or breach of our information systems, or those of our third-party vendors and service providers, including as a result.

As a financial institution, we depend on our ability to process, record, and monitor a large number of customer transactions. 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 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 robust information security procedures and controls in place, disruptions or failures in the financial markets mayphysical 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 they use to access our products and services, could result in customer attrition, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensation costs, which could have a materially adverse effect on our results of operations and financial condition.

The market transition away from LIBOR to alternative reference rates is complex and could have a range of adverse effects on our business, financial condition, and results of operations.

The transition from LIBOR to doSOFR requires the transition to or development of appropriate systems, models, and analytics to effectively transition our risk management and other processes from LIBOR-based products to those based on SOFR. Webster has developed a Working Group, Steering Committee, and LIBOR transition plan aligned with regulatory guidance and ARRC best practices and is actively working to develop processes, systems, and personnel to support this transition. Timelines and priorities include assessing the impact on our customers and assessing system requirements for operational processes. There can be no guarantee that our efforts will successfully mitigate the operational risks associated with transitioning from LIBOR to SOFR as the alternative reference rate. The effect of these developments on our funding costs, loan, investment, and securities portfolios is uncertain and could adversely impact our business and increase operational and legal costs.

Third parties perform significant operational services on our behalf. For instance, we depend on our vendor-provided core banking processing systems to process a large number of increasingly complex transactions on a daily basis. Accordingly, we are exposed to the risk that vendors and third-party service providers might not perform in accordance with ustheir contracts or service agreements, whether due to changes in their organizational structure, strategic focus, support for existing products, technology, services, financial condition, or for any other reason. Their 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. Although we require third-party service providers to have business continuity and disaster recovery plans that are aligned with our plans, such plans may decline, whethernot operate successfully or in a timely manner so as to prevent any such material adverse impact.

As a financial institution, we are inherently exposed to risk in the form of theft and other fraudulent activities by employees, customers, or other third parties targeting Webster or Webster’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 a decreased demand for loansfraud.

Our internal controls may be ineffective, circumvented, or other financial productsfail.

Climate change manifesting as physical or transition risks could adversely affect our business.operations, businesses, and customers.

A significant percentageThere is an increasing concern over the risks of climate change and related environmental sustainability matters. The physical risks of climate change include discrete events, such as flooding and wildfires, and longer-term shifts in climate patterns, such as extreme heat, sea level rise, and more frequent and prolonged drought. Such events could disrupt our operations, those of our loans are secured by real estate, primarily across the Northeast. Our success depends in part upon economic conditions in Southern New Englandcustomers, or third parties on which we rely, including through direct damage to assets and our other geographic markets. Adverseindirect impacts from supply chain disruption and market volatility. In addition, transitioning to a low-carbon economy may entail extensive policy, legal, technological, and market initiatives. Transition risks, including changes in such local marketsconsumer preferences and additional regulatory requirements or taxes, could reduceincrease our growthexpenses and undermine our strategies. Our reputation and client relationships may be damaged as a result of our practices related to climate change, including our direct or indirect involvement in loans and deposits, impaircertain industries or projects associated with causing or exacerbating climate change, as well as any decisions we make to conduct or change our activities in response to managing climate risk. Further, our ability to collectattract and retain employees may also be harmed if our loans, increase problemresponse to climate change is perceived as ineffective or insufficient. We have developed and continue to enhance processes to assess and monitor the Bank's exposure to climate risk. However, because the timing and impact of climate change have limited predictability, our risk management strategies may not be effective in mitigating climate risk exposure.

Our allowance for credit losses on loans and charges-offs,leases may be insufficient.

We maintain an ACL on loans and otherwise negatively affectleases, which is a reserve established through a provision for credit losses charged to expense, that represents management’s best estimate of probable credit losses over the life of the loan or lease within our performanceexisting portfolio. The determination of the appropriate level of ACL on loans and leases inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and trends using existing qualitative and quantitative information and reasonable supportable forecasts of future economic conditions, all of which may undergo frequent and material changes. Changes in economic conditions affecting borrowers, the softening of macroeconomic variables that we are more susceptible to, along with new information regarding existing loans, identification of additional problems loans, and other factors, both within and outside our control, may indicate the need for an increase in the ACL on loans and leases.

Bank regulatory agencies also periodically review our ACL and may require an increase in the provision for credit losses or the recognition of additional loan charge-offs, based on judgments different than those of management. In addition, if charge-offs in future periods exceed the ACL, we may need, depending on an analysis of the adequacy of the ACL, additional provisions to increase the ACL. An increase in the ACL would result in a decrease in net income, and could have a material adverse effect on our financial condition.condition, results of operations, and regulatory capital position.

The soundness of other financial institutions could adversely affect 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 companiesinstitutions 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,in general, have led, and may further lead to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. Many of these transactions could expose us to credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbatedimpacted 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 derivativefinancial instrument’s exposure due to us. There is no assurance that anyAny such losses would notcould materially andor adversely affect our business, financial condition, or results of operations.

We are subject to the risk of default by our counterparties and clients, particularly with respect to certain types of loans.

Many of our routine transactions expose us to credit risk in the event of default of our counterparties or clients. Our credit risk may not pay dividends ifbe exacerbated when the collateral held cannot be realized or is liquidated at prices insufficient to cover the full amount of the loan or derivative exposure to us. In deciding whether to extend credit or enter into other transactions, we may rely on information furnished by or on behalf of counterparties and clients, including financial statements, credit reports, and other information. We may also rely on representations of those counterparties, clients, or other third parties, such as independent auditors, as to the accuracy and completeness of that information. The inaccuracy of that information or those representations affects our ability to evaluate the default risk of a counterparty or client accurately and could cause us to enter into unfavorable transactions, which could have a material adverse effect on our financial condition and results of operations.

In addition, we consider our commercial real estate loans and commercial and industrial loans to be higher risk categories in our loan portfolio because these loans are not ableparticularly sensitive to receive dividends from our subsidiary, Webster Bank.

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.operations.

We are subject to extensive federal and applicable state regulation and supervision, primarily through Webster Bank and certain non-bank subsidiaries, are subject to extensive federal and state regulation and supervision.subsidiaries. Banking regulations are primarily intended to protect depositors’ funds,depositors, the DIF,Federal Deposit Insurance Fund, and the safety and soundness of the U.S banking system as a whole, not shareholders.stockholders. These regulations affect our lending practices, capital structure, investment practices, dividend policy, and growth, among other things. Congress and federal regulatory agencies continuallycontinuously review banking laws, regulations, and policies for possible changes.changes, and proposed changes are to be expected from the current presidential administration. Changes to statutes, regulations, or regulatory policies, including changes in interpretation or implementation of statutes, regulations, or policies,thereof, could affect us in substantial and unpredictable ways. SuchFor example, such changes could subject us to additional costs, limit the types of financial services and products we may offer, and/or limitand restrict what we mayare able to 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 and EGRRCPA, have and will continue to affect the lending, investment, trading, and operating activities of financial institutions and their holding companies. Dodd-Frank imposed additional regulatory obligations and increased scrutiny from federal banking agencies. In general, we expect this focus to continue and compliance requirements can be costly to implement. Compliance personnel and resources may increase our costs of operations and adversely impact our earnings.

We face risks related to the section captioned “Supervisionadoption of future legislation and Regulation”potential changes in Item 1federal regulatory agency leadership, policies, and priorities.

Under the current presidential administration, financial institutions have recently become subject to increased scrutiny and therefore, it is expected that the banking sector will be subject to more extensive legal and regulatory requirements within the next few years than under the prior presidential and congressional regime. In addition, changes in key personnel at the regulatory agencies, including the federal banking regulators, may result in differing interpretations of this reportexisting rules and guidelines, including more stringent enforcement and more severe penalties than previously. Disagreements between the current congressional regime and the presidential administration on federal budgetary matters, including the debt ceiling, may lead to total or partial government shutdowns, which can create economic instability and negatively affect our business and financial performance. Additionally, a return of recessionary conditions may create the potential for further information.increased regulation, new federal or state laws and regulations regarding lending and funding practices and liquidity standards that could negatively impact Webster Bank’s business operations, increase the cost of compliance, and adversely affect profitability.

Changes in accounting standards and policies could materiallyfederal, state, or local tax laws may negatively impact how we report our results of operations and financial condition.

We are subject to changes in tax laws that could increase our effective tax rates or cause an increase or decrease in our income tax liabilities. These law changes may be retroactive to previous periods and as a result, could negatively impact our current and future financial performance. For example, on September 13, 2021, the House Ways and Means Committee released a draft of its proposed tax reform legislation, which includes an increase in the federal corporate tax rate from 21% to 26.5% for corporations earning more than $5 million, and alters selected provisions of the Internal Revenue Code, among other changes. At this time, we are unable to predict whether this change or any other proposed tax law will ultimately be enacted. Additionally, those bodies may change prior interpretations or positions on how these standards should be applied.August 16, 2022, the IRA was signed into law, which made several changes to the Internal Revenue Code, including a 15% corporate minimum tax on certain large companies and a 1% excise tax on stock buybacks by publicly traded corporations. The Company is currently evaluating the impact of these changes can be difficulttax law changes.

We are subject to predictexaminations and can materially impact howchallenges by taxing authorities.

We are subject to federal and applicable state and local income tax regulations. Income tax regulations are often complex and require interpretation. In the normal course of business, we report our resultsare routinely subject to examinations and challenges from federal and applicable state and local taxing authorities regarding the amount of operationstaxes due in connection with investments we have made and the businesses in which we have engaged. Recently, federal and state and local taxing authorities have been increasingly aggressive in challenging tax positions taken by financial condition. We could be requiredinstitutions. These tax positions may relate to apply new or revised guidance retrospectively, whichcompliance, sales and use, franchise, gross receipts, payroll, property, and income tax issues such as tax base, apportionment, and tax credit planning. The challenges made by taxing authorities 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 extenttiming or amount of taxable income or deductions, or the estimate for “expected lifetime credit losses”allocation of income among tax jurisdictions. If any such challenges are made and are not resolved in our favor, they could 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 discussionmaterial adverse effect on our financial condition and results of accounting standards recently adopted and issued but not yet adopted, including CECL, can be found in Note 1 to the Consolidated Financial Statements.operations.

Health care reformsreform could adversely affect our HSA Bank division, revenues, financial position and results of operations.division.

The enactment of future health care reformsreform affecting health savings accountsHSAs at the federal or state level may affect our HSA Bank division which isas a bank custodian of health savings accounts.HSAs. We cannot predict if any such reforms will occur, ultimately become law, or if enacted, what theirthe terms or the regulations promulgated pursuant to such laws will be. Any health care reformsreform 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.

Difficult conditions or volatility in the U.S. economy and financial and reputational risks from potential liability arising from lawsuits.

As 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 affectcompany, our business resultsand overall financial performance is highly dependent upon the U.S. economy and strength of operations,its financial markets. Difficult economic and prospects.

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, both within and beyond our financial markets, many of which are larger and may have more financial resources than we do. Such traditional competitors primarily include national, regional, community, and communityinternet 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 servicesthese organizations with which the Company competes are not subject to the same degree of regulation asthat is imposed on bank holding companies and federally insured depository institutions, which may give them certain advantages over the Companygreater flexibility in accessing funding and in providing various services. Moreover, organizations that are larger than we are may be able to achieve greater economies of scale or offer a broader range of products and services, or better pricing on products and services, than what we can offer.

The financial services industry could become even more competitive as a result of legislative regulatory, and technologicalregulatory changes, and continued consolidation. TechnologyIn addition, as customer preferences and expectations continue to evolve, technology has lowered barriers to entry and has made it possible for non-banks to offer products and services traditionally provided by banks. Additionally, dueThe financial services industry also faces increasing competitive pressure from the introduction of disruptive new technologies, such as blockchain and digital payments, often by non-traditional competitors and financial technology companies. Among other things, technology and other changes are allowing customers to their size, many competitors may be able to achieve economiescomplete financial transactions that historically have involved banks at one or both ends 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.the transaction.

Our ability to compete successfully depends on a number of factors, including, among other things:

Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which,and 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. In particular, health plan partners who provide high deductible health plan options are a significant source of new and existing health savings accountHSA holders. If these health plan partners or other partners choose to align with our competitors or develop their own solutions, our business, financial condition, and results of operations business, and prospects could be adversely affected.

On January 31, 2022, Webster completed its merger with Sterling in an all-stock transaction valued at $5.2 billion. The merger expanded the Company's geographic footprint and combined two complementary organizations to attractcreate one of the largest commercial banks in the northeastern U.S. At December 31, 2022, the Company had $71.3 billion in total assets, $49.8 billion in loans and retain skilled people.leases, and $54.0 billion in total deposits, and operated 201 banking centers throughout southern New England and metro and suburban New York. In addition, on February 18, 2022, Webster acquired 100% of the equity interests of Bend, a cloud-based platform solution provider for HSAs, in exchange for cash. The Bend acquisition accelerated the Company’s efforts underway to deliver enhanced user experiences at HSA Bank. Financial results for historical reporting periods reflect only the results of the Company's operations prior to the corresponding merger or acquisition.

Our successThe successful integration of Webster’s and Sterling’s operations depends in large part on ourthe Company’s ability to attractsuccessfully consolidate business operations, management teams, corporate cultures, operating systems, and retaincontrols procedures, and eliminate costs and redundancies. At December 31, 2022, noteworthy accomplishments include: (i) the rebranding of branches and digital assets, (ii) the coordination of credit policies and procedures, (iii) the selection of key people. Competitionoperating systems, (iv) the consolidation of cloud data centers, commercial credit risk management systems and commercial client pricing tools, as well as mortgage servicing, payroll, and treasury platforms, (v) the completed transfer of consumer wealth and investment services operations to a third-party provider, (vi) the finalization of governance and executive management structures, (vii) the establishment of a corporate responsibility office to oversee community engagement, philanthropy, and sustainability, and (viii) Company-wide participation at culture-shaping workshops. Other key operating systems and process integration activities are ongoing, and the Company remains well-positioned to successfully execute its core conversion targeted for mid-2023.

In addition, the best people in most activitiesCompany developed and launched a corporate real estate consolidation strategy during the second quarter of 2022 in which we engagethe Company arranged to close 14 locations, primarily throughout New York and Connecticut, in order to reduce its corporate facility square footage by approximately 45% by the end of the year. The Company successfully completed its corporate real estate consolidation strategy in 2022, as planned. During the year ended December 31, 2022, the Company recognized $23.1 million in ROU asset impairment charges and a combined $12.3 million in related exit costs and accelerated depreciation on property and equipment related to this corporate real estate consolidation strategy.

Additional information regarding the Company's mergers and acquisitions can be intensefound within Note 2: Mergers and we may not be ableAcquisitions in the Notes to hire people or retain them. The unexpected loss of services of key personnel could have a material adverse impact on the business as we would lose their skills, knowledge of the market,Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and years of industry experience, and may have difficulty promptly finding qualified replacement personnel.Supplementary Data.

The failureCompany established a LIBOR transition plan in 2019 commensurate with identified LIBOR transition risks and exposures, which is aligned with regulatory guidance and ARRC best practices. Management continues to understandexecute according to its LIBOR transition plan, addressing emerging issues and adaptrisks as they arise, while closely monitoring legislative and regulatory guidance associated with the LIBOR transition.

Accordingly, the Company has set up a governance structure to these changes could negatively impact our business.

The Company adopted the Term SOFR rate and related conventions associated with the product line as the LIBOR replacement index and implemented the ARRC recommended fallback language for impacted contracts, as well as the recommended spread adjustments for legacy loans and/or derivative products. The Company began offering SOFR-based loans and derivatives to its customers in operations. ManyOctober 2021, and both Webster and Sterling had achieved SOFR readiness by the December 31, 2021, regulatory deadline, prior to the merger. As of our competitors, becauseJanuary 1, 2022, the Company no longer originated new contracts using any LIBOR index, as defined by regulatory guidance.

Throughout the year ended December 31, 2022, management completed several of their larger sizeits key transition plan milestones, including but not limited to: an assessment of system readiness through user acceptance testing, the distribution of training materials to relationship managers on fallback rates and conventions, the development of operational procedures for the actual transitioning of LIBOR contracts to SOFR post-June 2023, and the deployment of contract remediation. A Contract Remediation SharePoint site has been established for Commercial Bank colleagues to assist with the tracking of contract remediation for LIBOR-based loans maturing post June 30, 2023. In order to identify the population of LIBOR exposures subject to contract remediation, parallel reporting was established. Management continues to pursue system upgrades to expand SOFR conventions (e.g., SOFR in-arrears) 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 paceclients by collaborating 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.

The non-GAAP financial measures identified in the preceding table provide both management and investors with information useful in understanding the Company's financial position, results of operations, the strength of its capital position, and overall business or new productsperformance. These measures are used by management for internal planning and services may subject usforecasting purposes, as well as by securities analysts, investors, and other interested parties to additional risks. A failureassess peer company operating performance. Management believes that this presentation, together with the accompanying reconciliations, provides a complete understanding of the factors and trends affecting the Company's business and allows investors to successfully manageview its performance in a similar manner.

Tangible book value per common share represents stockholders’ equity less preferred stock and goodwill and other intangible assets (tangible common equity) divided by common shares outstanding at the end of the reporting period. The tangible common equity ratio represents tangible common equity divided by total assets less goodwill and other intangible assets (tangible assets). Both of these risks may havemeasures are used by management to evaluate the Company's capital position. The annualized return on average tangible common stockholders' equity is calculated using net income available to common stockholders, adjusted for the annualized tax-effected amortization of intangible assets, as a material adverse effect on our business.percentage of average tangible common equity. This measure is used by management to assess the Company's performance against its peer financial institutions. The efficiency ratio, which represents the costs expended to generate a dollar of revenue, is calculated excluding certain non-operational items in order to measure how well the Company is managing its recurring operating expenses.

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 marketsThese non-GAAP financial measures should not be considered a substitute for GAAP basis financial measures. Because
non-GAAP financial measures 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 servicesstandardized, it may not be achieved, and price and profitability targets may not prove attainable. External factors, such as compliancepossible to compare these with regulations, competitive alternatives, and shifting market preferences, may also impactother companies that present financial measures having the successful implementation of a new line of businesssame or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact onsimilar names.

The following tables reconcile non-GAAP financial measures to 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, andmost comparable financial condition.measures defined by GAAP:

Net interest income is the Company's primary source of revenue, representing 82.2%, and 73.6% of total revenues for the years ended December 31, 2022, and 2021, respectively. Net interest income is the difference between interest income on
interest-earning assets (i.e., loans and leases and investment securities) and interest expense on interest-bearing liabilities
(i.e., deposits and borrowings), which are used to Accounting Estimatesfund interest-earning assets and other activities. Net interest margin is calculated as the ratio of FTE net interest income to average interest-earning assets.

Our allowance for loanNet interest income, net interest margin, yields, and lease losses may be insufficient.ratios on a FTE basis are considered non-GAAP financial measures, and are used by management to evaluate the comparability of the Company's revenue arising from both taxable and non-taxable sources. FTE adjustments are determined assuming a statutory federal income tax rate of 21%.

Our business is subject to periodic fluctuations based on nationalNet interest income and local economic conditions. These fluctuationsnet interest margin are not predictable, cannot be controlledinfluenced by the volume and may have a material adverse impact on our operationsmix of interest-earning assets and financial condition. For example, declinesinterest-bearing liabilities, changes in housing activity including declines in building permits, 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 factorsinterest rate levels, re-pricing frequencies, contractual maturities, prepayment behavior, and the resultinguse of interest rate derivative financial instruments. These factors are affected by changes in economic conditions which impacts monetary policies, competition for loans and deposits, as well as the extent of interest lost on non-performing assets.

Net interest income increased $1.1 billion, or 125.8%, from $0.9 billion for the year ended December 31, 2021, to $2.0 billion for the year ended December 31, 2022. On a FTE basis, net interest income increased $1.2 billion from December 31, 2021, to December 31, 2022. Net interest margin increased 65 basis points from 2.84% for the year ended December 31, 2021, to 3.49% for the year ended December 31, 2022. These increases, which include net purchase accounting accretion from loans and leases, investment securities, time deposits, and long-term debt acquired/assumed from Sterling, are primarily attributed to the merger, as well as the impact from the higher interest rate environment.

Average total interest-earning assets increased $26.9 billion, or 83.3%, from $32.3 billion for the year ended
December 31, 2021, to $59.2 billion for the year ended December 31, 2022, primarily due to increases of $22.2 billion and $5.3 billion in average loans and leases and average total investment securities, respectively, partially offset by a $0.8 billion decrease in average interest-bearing deposits held at the FRB. The average yield on our borrowers. A declining economy could negatively affect employment levels and impactinterest-earning assets increased 94 basis points from 2.97% for the ability of our borrowersyear ended December 31, 2021, to service their debt. Bank regulatory agencies also periodically review our allowance3.91% 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. Anyyear ended December 31, 2022. The 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 methodologyaverage total interest-earnings assets and the resulting impact toaverage yield on interest-earning assets were both impacted by the Company.

The Company maintains its headquarters in Waterbury, Connecticut. This owned facility housesAverage total investment securities increased $5.3 billion, or 57.4%, from $9.2 billion for the Company’s executive and primary administrative functions,year ended December 31, 2021, to $14.5 billion for the year ended December 31, 2022, primarily due to the merger with Sterling, as well as the principaldeployment of excess Company liquidity. At December 31, 2022, and 2021, average total investment securities comprised 24.6% and 28.6% of average total interest-earning assets, respectively. The average yield on investment securities increased 28 basis points from 2.03% for the year ended December 31, 2021, to 2.31% for the year ended December 31, 2022, primarily due to the reinvestment of maturing securities at higher yields.