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Table of Contents


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 

FORM 10-Q

_________________________________________________________________________________________________________________________________________-___________________________________________________________________________________________________
☑☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ending Septemberended June 30, 20172023
or
☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ____ to ____
Commission File Number: 001-31486


WEBSTER FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
 _____________________________________________________________________________________________________________________________________________________________________
Delaware06-1187536
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

145 Bank200 Elm Street, Waterbury,Stamford, Connecticut 0670206902
(Address and zip code of principal executive offices)

(203) 578-2202
(Registrant's telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolsName of each exchange on which registered
Common Stock, par value $0.01 per shareWBSNew York Stock Exchange
Depositary Shares, each representing 1/1000th interest in a shareWBS-PrFNew York Stock Exchange
of 5.25% Series F Non-Cumulative Perpetual Preferred Stock
Depositary Shares, each representing 1/40th interest in a shareWBS-PrGNew York Stock Exchange
of 6.50% Series G Non-Cumulative Perpetual Preferred Stock
Indicate by check mark whether the registrant:registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☑☒  Yes☐No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☑☒  Yes    ☐No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”,filer,” “smaller reporting company”company,” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated Filer☑☒Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transactiontransition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act Rule 12b-2)Act). ☐Yes☑   ☒ No
The number of shares of common stock, par value $.01 per share, outstanding as of OctoberJuly 31, 20172023 was 92,074,790.173,254,930.



INDEX
INDEX
Page No.
Key to Acronyms and Terms
ii
Forward-Looking Statements
iii
Page No.
Key to Acronyms and TermsItem 1.
35
PART I – FINANCIAL INFORMATION
Item 1.2.
1
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
401
Item 3.
6883
Item 4.
6883
Item 1.
6984
Item 1A.
6984
Item 2.
6984
Item 3.
7085
Item 4.
7085
Item 5.
7085
Item 6.
7086
7186
7287




i


WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
FOWARD-LOOKINGKEY TO ACRONYMS AND TERMS
ACLAllowance for credit losses
Agency CMBSAgency commercial mortgage-backed securities
Agency CMOAgency collateralized mortgage obligations
Agency MBSAgency mortgage-backed securities
ALCOAsset/Liability Committee
AOCIAccumulated other comprehensive income
ASCAccounting Standards Codification
ASU or the UpdateAccounting Standards Update
Basel IIICapital rules under a global regulatory framework developed by the Basel Committee on Banking Supervision
BendBend Financial, Inc.
BHC ActBank Holding Company Act of 1956, as amended
CECLCurrent expected credit losses
CET1 capitalCommon Equity Tier 1 Capital, defined by Basel III capital rules
CFPBConsumer Financial Protection Bureau
CLOCollateralized loan obligations
CMBSNon-agency commercial mortgage-backed securities
COVID-19Coronavirus
CRACommunity Reinvestment Act of 1977
DTADeferred tax asset
EADExposure at default
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
FHLBFederal Home Loan Bank
FICOFair Isaac Corporation
FRBFederal Reserve Bank
FTEFully tax-equivalent
FTPFunds Transfer Pricing, a matched maturity funding concept
GAAPU.S. Generally Accepted Accounting Principles
Holding CompanyWebster Financial Corporation
HSAHealth savings account
HSA BankHSA Bank, a division of Webster Bank, National Association
interLINKInterlink Insured Sweep LLC
IRAInflation Reduction Act
ITGCInformation technology general controls
LGDLoss given default
LIBORLondon Interbank Offered Rate
LIHTCLow-income housing tax credit
MBSNon-agency mortgage-backed securities
NAVNet asset value
OCCOffice of the Comptroller of the Currency
OPEBOther post-employment medical and life insurance benefits
OREOOther real estate owned
PCDPurchased credit-deteriorated
PDProbability of default
PPNRPre-tax, pre-provision net revenue
ROURight-of-use
S&PStandard and Poor's Rating Services
SECUnited States Securities and Exchange Commission
SERPSupplemental executive defined benefit retirement plan
SOFRSecured overnight financing rate
SterlingSterling Bancorp, collectively with its consolidated subsidiaries
TDRTroubled debt restructuring, defined in ASC 310-40 "Receivables - Troubled Debt Restructurings by Creditors"
Webster Bank or the BankWebster Bank, National Association, a wholly-owned subsidiary of Webster Financial Corporation
Webster or the CompanyWebster Financial Corporation, collectively with its consolidated subsidiaries
ii

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
FORWARD-LOOKING STATEMENTS and FACTORS THAT COULD AFFECT FUTURE RESULTS
This Quarterly Report on Form 10-Q contains "forward-looking“forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "believes," "anticipates," "expects," "intends," "targeted," "continue," "remain," "will," "should," "may," "plans," "estimates"“believes,” “anticipates,” “expects,” “intends,” “targeted,” “continue,” “remain,” “will,” “should,” “may,” “plans,” “estimates,” and similar references to future periods; however, suchperiods. However, these words are not the exclusive means of identifying such statements. References to the "Company," " Webster," "we," "our," or "us" mean Webster Financial Corporation and its consolidated subsidiaries.
Examples of forward-looking statements include, but are not limited to:
▪projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items;
▪statements of plans, objectives and expectations of Webster or its management or Board of Directors;
▪statements of future economic performance; and
▪statements of assumptions underlying such statements.
▪projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items;
▪statements of plans, objectives, and expectations of the Company or its management or Board of Directors;
▪statements of future economic performance; and
▪statements of assumptions underlying such statements.
Forward-looking statements are based on Webster’sthe Company’s current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Webster’sThe Company’s actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance.
Factors that could cause our actual results to differ from those discussed in theany forward-looking statements include, but are not limited to:
▪local, regional, national and international economic conditions and the impact they may have on us and our customers and our assessment of that impact;
▪volatility and disruption in national and international financial markets;
▪government intervention in the U.S. financial system;
▪changes in the level of non-performing assets and charge-offs;
▪changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements;
▪adverse conditions in the securities markets that lead to impairment in the value of our investment securities;
▪inflation, interest rate, securities market and monetary fluctuations;
▪the timely development and acceptance of new products and services and perceived overall value of these products and services by customers;
▪changes in consumer spending, borrowings and savings habits;
▪technological changes and cyber-security matters;
▪the ability to increase market share and control expenses;
▪changes in the competitive environment among banks, financial holding companies and other financial services providers;
▪the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which we and our subsidiaries must comply, including the Dodd-Frank Act;
▪the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters;
▪the costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; and
▪our success at managing the risks involved in the foregoing items.
▪our ability to successfully integrate the operations of Webster and Sterling and realize the anticipated benefits of the merger, including validation of our recently completed core conversion and any issues that may arise therefrom;
▪our ability to successfully execute our business plan and strategic initiatives, and manage any risks or uncertainties;
▪volatility in our stock price due to investor sentiment, including following bank failures during the first and second fiscal quarters of 2023, and the acquisition of such failed banks (or their assets), by other banks within the U.S. banking system;
▪local, regional, national, and international economic conditions, and the impact they may have on us or our customers;
▪volatility and disruption in national and international financial markets, including as a result of geopolitical conflict, such as the war between Russia and Ukraine;
▪unforeseen events, such as pandemics or natural disasters, and any governmental or societal responses thereto;
▪changes in laws and regulations, or existing laws and regulations that we become subject to, including those concerning banking, taxes, dividends, securities, insurance, and healthcare, with which we and our subsidiaries must comply;
▪adverse conditions in the securities markets that could lead to impairment in the value of our securities portfolio;
▪inflation, monetary fluctuations, the possibility of a recession, and changes in interest rates, including the impact of such changes on economic conditions, customer behavior, funding costs, and our loans and leases and securities portfolios;
▪the replacement of, and transition from, LIBOR to SOFR as the primary interest rate benchmark;
▪the timely development and acceptance of new products and services, and the perceived value of those products and services by customers;
▪changes in deposit flows, consumer spending, borrowings, and savings habits;
▪our ability to implement new technologies and maintain secure and reliable technology systems;
▪the effects of any cyber threats, attacks or events, or fraudulent activity, including those that involve our third-party vendors and service providers;
▪performance by our counterparties and third-party vendors;
▪our ability to increase market share and control expenses;
▪changes in the competitive environment among banks, financial holding companies, and other traditional and non-traditional financial service providers;
▪our ability to maintain adequate sources of funding and liquidity;
▪changes in the level of non-performing assets and charge-offs;
▪changes in estimates of future reserve requirements based upon periodic review under relevant regulatory and accounting requirements;
▪the effect of changes in accounting policies and practices applicable to us, including impacts of recently adopted accounting guidance;
▪our inability to remediate the material weaknesses in our internal control related to ineffective ITGCs;
▪legal and regulatory developments, including the resolution of legal proceedings or regulatory or other governmental inquiries, and the results of regulatory examinations or reviews; and
▪our ability to appropriately address any environmental, social, governmental, and sustainability concerns that may arise from our business activities.
Any forward-looking statements made by the Companystatement in this Quarterly Report on Form 10-Q speaks only as of the date they areon which it is made. Factors or events that could cause the Company’sCompany's actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as may be required by law.

ii

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
KEY TO ACRONYMS AND TERMS
Agency CMBSAgency commercial mortgage-backed securities
Agency CMOAgency collateralized mortgage obligations
Agency MBSAgency mortgage-backed securities
ALCOAsset/Liability Committee
ALLLAllowance for loan and lease losses
AOCLAccumulated other comprehensive loss, net of tax
ASCAccounting Standards Codification
ASUAccounting Standards Update
Basel IIICapital rules under a global regulatory framework developed by the Basel Committee on Banking Supervision
CDICore deposit intangible assets
CET1 capitalCommon Equity Tier 1 Capital, defined by Basel III capital rules
CLOCollateralized loan obligation securities
CMBSNon-agency commercial mortgage-backed securities
Dodd-Frank ActDodd-Frank Wall Street Reform and Consumer Protection Act of 2010
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
FHLBFederal Home Loan Bank
FICOFair Isaac Corporation
FINRAFinancial Industry Regulatory Authority
FRBFederal Reserve Bank
FTPFunds Transfer Pricing, a matched maturity funding concept
GAAPU.S. Generally Accepted Accounting Principles
Holding CompanyWebster Financial Corporation
HSA BankA division of Webster Bank, National Association
ISDAInternational Swaps Derivative Association
LBPLook back period
LEPLoss emergence period
LGDLoss given default
LIBORLondon Interbank Offered Rate
LPLLPL Financial Holdings Inc.
NIINet interest income
OCCOffice of the Comptroller of the Currency
OCI/OCLOther comprehensive income (loss)
OREOOther real estate owned
OTTIOther-than-temporary impairment
PDProbability of default
PPNRPre-tax, pre-provision net revenue
RPARisk participation agreement
SECUnited States Securities and Exchange Commission
SERPSupplemental defined benefit retirement plan
SIPCSecurities Investor Protection Corporation
TDRTroubled debt restructuring, defined in ASC 310-40 "Receivables-Troubled Debt Restructurings by Creditors"
VIEVariable interest entity, defined in ASC 810-10 "Consolidation-Overall"
Webster BankWebster Bank, National Association, a wholly-owned subsidiary of Webster Financial Corporation
Webster or the CompanyWebster Financial Corporation, collectively with its consolidated subsidiaries


iii

Table of Contents

PART I.I – FINANCIAL INFORMATION
ITEM 1.2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTSCONDITION AND RESULTS OF OPERATIONS
WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30,
2017		 December 31,
2016
(In thousands, except share data)(Unaudited)  
Assets:   
Cash and due from banks$215,244
 $190,663
Interest-bearing deposits26,992
 29,461
Investment securities available-for-sale, at fair value2,591,162
 2,991,091
Investment securities held-to-maturity (fair value of $4,481,675 and $4,125,125)4,497,311
 4,160,658
Federal Home Loan Bank and Federal Reserve Bank stock136,340
 194,646
Loans held for sale (valued under fair value option $32,855 and $60,260)32,855
 67,577
Loans and leases17,446,421
 17,026,588
Allowance for loan and lease losses(201,803) (194,320)
Loans and leases, net17,244,618
 16,832,268
Deferred tax assets, net82,895
 84,391
Premises and equipment, net130,358
 137,413
Goodwill538,373
 538,373
Other intangible assets, net30,589
 33,674
Cash surrender value of life insurance policies528,136
 517,852
Accrued interest receivable and other assets295,309
 294,462
Total assets$26,350,182
 $26,072,529
Liabilities and shareholders' equity:   
Deposits:   
Non-interest-bearing$4,138,206
 $4,021,061
Interest-bearing16,717,029
 15,282,796
Total deposits20,855,235
 19,303,857
Securities sold under agreements to repurchase and other borrowings902,902
 949,526
Federal Home Loan Bank advances1,507,681
 2,842,908
Long-term debt225,704
 225,514
Accrued expenses and other liabilities219,873
 223,712
Total liabilities23,711,395
 23,545,517
Shareholders’ equity:   
Preferred stock, $.01 par value; Authorized - 3,000,000 shares:   
Series E issued and outstanding (5,060 shares)122,710
 122,710
Common stock, $.01 par value; Authorized - 200,000,000 shares:   
Issued (93,679,599 and 93,651,601 shares)937
 937
Paid-in capital1,123,685
 1,125,937
Retained earnings1,535,585
 1,425,320
Treasury stock, at cost (1,764,131 and 1,899,502 shares)(75,032) (70,899)
Accumulated other comprehensive loss, net of tax(69,098) (76,993)
Total shareholders' equity2,638,787
 2,527,012
Total liabilities and shareholders' equity$26,350,182
 $26,072,529
See accompanying NotesThe following discussion and analysis provides information that management believes is necessary to understand the Company's financial condition, results of operations, and cash flows for the three and six months ended June 30, 2023, as compared to 2022. This information should be read in conjunction with the Condensed Consolidated Financial Statements.

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
 Three months ended September 30, Nine months ended September 30,
(In thousands, except per share data)2017 2016 2017 2016
Interest Income:       
Interest and fees on loans and leases$181,130
 $157,071
 $523,394
 $459,050
Taxable interest and dividends on investments43,819
 43,384
 136,167
 136,734
Non-taxable interest on investment securities5,765
 4,820
 17,103
 13,691
Loans held for sale307
 440
 826
 1,006
Total interest income231,021
 205,715
 677,490
 610,481
Interest Expense:       
Deposits16,760
 12,594
 44,874
 37,267
Securities sold under agreements to repurchase and other borrowings3,847
 3,447
 10,970
 10,999
Federal Home Loan Bank advances6,894
 6,979
 22,543
 21,517
Long-term debt2,616
 2,498
 7,748
 7,444
Total interest expense30,117
 25,518
 86,135
 77,227
Net interest income200,904
 180,197
 591,355
 533,254
Provision for loan and lease losses10,150
 14,250
 27,900
 43,850
Net interest income after provision for loan and lease losses190,754
 165,947
 563,455
 489,404
Non-interest Income:       
Deposit service fees38,321
 35,734
 113,519
 105,553
Loan and lease related fees6,346
 9,253
 19,898
 20,563
Wealth and investment services7,750
 7,593
 22,900
 21,992
Mortgage banking activities2,421
 4,322
 8,038
 11,335
Increase in cash surrender value of life insurance policies3,720
 3,743
 10,943
 11,060
Gain on sale of investment securities, net—
 —
 —
 414
Impairment loss on investment securities recognized in earnings—
 —
 (126) (149)
Other income7,288
 5,767
 18,267
 23,093
Total non-interest income65,846
 66,412
 193,439
 193,861
Non-interest Expense:       
Compensation and benefits89,192
 83,148
 264,822
 244,089
Occupancy14,744
 15,004
 46,957
 44,915
Technology and equipment22,580
 19,753
 66,646
 59,067
Intangible assets amortization1,002
 1,493
 3,085
 4,570
Marketing4,045
 4,622
 14,101
 14,215
Professional and outside services4,030
 4,795
 11,813
 11,360
Deposit insurance6,344
 6,177
 19,701
 19,596
Other expense19,886
 21,105
 62,901
 63,508
Total non-interest expense161,823
 156,097
 490,026
 461,320
Income before income tax expense94,777
 76,262
 266,868
 221,945
Income tax expense30,281
 24,445
 81,322
 72,478
Net income64,496
 51,817
 185,546
 149,467
Preferred stock dividends and other(2,070) (2,183) (6,284) (6,540)
Earnings applicable to common shareholders$62,426
 $49,634
 $179,262
 $142,927
        
Earnings per common share:       
Basic$0.68
 $0.54
 $1.95
 $1.57
Diluted0.67
 0.54
 1.94
 1.56
SeeStatements, and accompanying Notes to Condensedthereto, contained in Part I - Item 1. Financial Statements of this report, and the Consolidated Financial Statements.


WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
 Three months ended September 30, Nine months ended September 30,
(In thousands)2017 2016 2017 2016
Net income$64,496
 $51,817
 $185,546
 $149,467
Other comprehensive income, net of tax:       
Total securities available-for-sale and transferred872
 1,218
 1,847
 19,988
Total derivative instruments1,111
 2,015
 2,921
 1,589
Total defined benefit pension and other postretirement benefit plans1,001
 1,125
 3,127
 3,376
Other comprehensive income, net of tax2,984
 4,358
 7,895
 24,953
Comprehensive income$67,480
 $56,175
 $193,441
 $174,420
SeeStatements, and accompanying Notes to Condensed Consolidatedthereto, contained in Part II - Item 8. Financial Statements.Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on
March 10, 2023. The Company's financial condition, results of operations, and cash flows for the three and six months ended June 30, 2023, are not necessarily indicative of future results that may be attained for the entire year or other interim periods.


WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(In thousands, except per share data)
Preferred
Stock
Common
Stock
Paid-In
Capital
Retained
Earnings
Treasury
Stock, at cost
Accumulated
Other
Comprehensive
Loss, Net of Tax
Total
Shareholders'
Equity
Balance at December 31, 2016$122,710
$937
$1,125,937
$1,425,320
$(70,899)$(76,993)$2,527,012
Net income—
—
—
185,546
—
—
185,546
Other comprehensive income, net of tax—
—
—
—
—
7,895
7,895
Dividends and dividend equivalents declared on common stock $0.77 per share—
—
124
(71,096)—
—
(70,972)
Dividends paid on Series E preferred stock $1,200.00 per share—
—
—
(6,072)—
—
(6,072)
Stock-based compensation—
—
—
1,887
9,070
—
10,957
Exercise of stock options—
—
(2,376)—
7,677
—
5,301
Common shares acquired related to stock compensation plan activity—
—
—
—
(9,295)—
(9,295)
Common stock repurchase program—
—
—
—
(11,585)—
(11,585)
Balance at September 30, 2017$122,710
$937
$1,123,685
$1,535,585
$(75,032)$(69,098)$2,638,787
        
(In thousands, except per share data)
Preferred
Stock
Common
Stock
Paid-In
Capital
Retained
Earnings
Treasury
Stock, at cost
Accumulated
Other
Comprehensive
Loss, Net of Tax
Total
Shareholders'
Equity
Balance at December 31, 2015$122,710
$937
$1,124,325
$1,315,948
$(71,854)$(78,106)$2,413,960
Net income—
—
—
149,467
—
—
149,467
Other comprehensive income, net of tax—
—
—
—
—
24,953
24,953
Dividends and dividend equivalents declared on common stock $0.73 per share—
—
109
(67,088)—
—
(66,979)
Dividends paid on Series E preferred stock $1,200.00 per share—
—
—
(6,072)—
—
(6,072)
Stock-based compensation, net of tax impact—
—
2,413
245
8,031
—
10,689
Exercise of stock options—
—
(1,307)—
3,679
—
2,372
Common shares acquired related to stock compensation plan activity—
—
—
—
(5,392)—
(5,392)
Common stock repurchase program—
—
—
—
(11,206)—
(11,206)
Common stock warrants repurchased—
—
(163)—
—
—
(163)
Balance at September 30, 2016$122,710
$937
$1,125,377
$1,392,500
$(76,742)$(53,153)$2,511,629
See accompanying Notes to Condensed Consolidated Financial Statements.

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 Nine months ended September 30,
(In thousands)2017 2016
Operating Activities:   
Net income$185,546
 $149,467
Adjustments to reconcile net income to net cash provided by operating activities:   
Provision for loan and lease losses27,900
 43,850
Deferred tax (benefit) expense(3,241) 14,425
Depreciation and amortization28,060
 27,342
Amortization of earning assets and funding, premiums/discounts, net33,338
 42,855
Stock-based compensation9,050
 8,558
Gain on sale, net of write-down, on foreclosed and repossessed assets(551) (744)
Write-down (gain on sale), net on premises and equipment218
 (713)
Impairment loss on investment securities recognized in earnings126
 149
Gain on the sale of investment securities, net—
 (414)
Increase in cash surrender value of life insurance policies(10,943) (11,060)
Mortgage banking activities(8,038) (11,335)
Proceeds from sale of loans held for sale262,029
 298,840
Origination of loans held for sale(227,435) (320,739)
Net decrease (increase) in derivative contract assets net of liabilities11,235
 (73,765)
Net (increase) decrease in accrued interest receivable and other assets(19,405) 51,270
Net increase (decrease) in accrued expenses and other liabilities12,386
 (30,419)
Net cash provided by operating activities300,275
 187,567
Investing Activities:   
Net decrease in interest-bearing deposits2,469
 133,969
Purchases of available for sale investment securities(305,309) (615,174)
Proceeds from maturities and principal payments of available for sale investment securities695,595
 430,099
Proceeds from sales of available for sale investment securities—
 259,283
Purchases of held-to-maturity investment securities(887,240) (640,218)
Proceeds from maturities and principal payments of held-to-maturity investment securities525,499
 517,513
Net proceeds of Federal Home Loan Bank stock58,306
 3,243
Alternative investments return of capital (capital call), net107
 (649)
Net increase in loans(446,454) (1,010,423)
Proceeds from loans not originated for sale7,445
 20,764
Proceeds from life insurance policies746
 —
Proceeds from the sale of foreclosed and repossessed assets5,651
 6,900
Proceeds from the sale of premises and equipment2,182
 1,550
Additions to premises and equipment(20,034) (31,250)
Proceeds from redemption of other assets7,581
 —
Net cash used for investing activities(353,456) (924,393)
    
See accompanying Notes to Condensed Consolidated Financial Statements.
    

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited), continued
 
 Nine months ended September 30,
(In thousands)2017 2016
Financing Activities:   
Net increase in deposits1,551,987
 1,248,710
Proceeds from Federal Home Loan Bank advances9,245,000
 14,150,000
Repayments of Federal Home Loan Bank advances(10,580,218) (14,226,147)
Net decrease in securities sold under agreements to repurchase and other borrowings(46,624) (350,695)
Dividends paid to common shareholders(70,732) (66,648)
Dividends paid to preferred shareholders(6,072) (6,072)
Exercise of stock options5,301
 2,372
Excess tax benefits from stock-based compensation—
 2,363
Common stock repurchase program(11,585) (11,206)
Common shares purchased related to stock compensation plan activity(9,295) (5,392)
Common stock warrants repurchased—
 (163)
Net cash provided by financing activities77,762
 737,122
Net increase in cash and due from banks24,581
 296
Cash and due from banks at beginning of period190,663
 199,693
Cash and due from banks at end of period$215,244
 $199,989
    
Supplemental disclosure of cash flow information:   
Interest paid$85,242
 $79,054
Income taxes paid78,832
 61,639
Noncash investing and financing activities:   
Transfer of loans and leases to foreclosed properties and repossessed assets$6,503
 $4,917
Transfer of loans from loans and leases to loans-held-for-sale—
 20,547
See accompanying Notes to Condensed Consolidated Financial Statements.

Note 1: Summary of Significant Accounting PoliciesExecutive Overview
Nature of Operations
Webster Financial Corporation is a bank holding company and financial holding company under the Bank Holding CompanyBHC Act, incorporated under the laws of Delaware in 1986, and headquartered in Waterbury,Stamford, Connecticut. At September 30, 2017, Webster Financial Corporation's principal assetBank, along with its HSA Bank division, is alla leading commercial bank in the Northeast that delivers a wide range of the outstanding capital stock of Webster Bank.
Webster deliversdigital and traditional financial servicessolutions to businesses, individuals, families, and businesses primarily withinpartners across its regionalthree differentiated lines of business: Commercial Banking, HSA Bank, and Consumer Banking. While its core footprint spans from New York to Massachusetts. Webster provides businessRhode Island and consumer banking, mortgage lending, financial planning, trust, and investment services through banking offices, ATMs, mobile banking, and its internet website (www.websterbank.com or www.wbst.com). Webster also offers equipment financing, commercial real estate lending, and asset-based lending primarily across the Northeast. On a nationwide basis, through itsMassachusetts, certain businesses operate in extended geographies. HSA Bank division, Webster Bank offers and administers health savings accounts, flexible spending accounts, health reimbursement accounts, and commuter benefits.
Basis of Presentation
The accounting and reporting policiesis one of the Company that materially affect its financial statements conform with GAAP. The accompanying unaudited Condensed Consolidated Financial Statementslargest providers of the Company have been prepared in conformity with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements and should be read in conjunction with the Company's Consolidated Financial Statements, and Notes thereto, for the year ended December 31, 2016, includedemployee benefit solutions in the Company's Annual Report on Form 10-K filed with the SEC on March 1, 2017.United States.
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities as of the date of the financial statements as well as income and expense during the period. Actual results could differ from those estimates. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for the full year or any future period.Recent Industry Developments
Certain prior period amounts have been reclassified to conform to the current year's presentation. These reclassifications had an immaterial effect on non-interest income, non-interest expense, net cash provided by operating activities, and net cash used for investing activities.
Significant Accounting Policy Updates
Centrally Cleared Derivatives
Effective duringDuring the first quarter and into the second quarter of 2016,2023, the Company offsetbanking industry experienced significant volatility with multiple high-profile bank failures and industry-wide concerns related to liquidity, deposit outflows, unrealized losses on securities, and eroding consumer confidence in the variation margin pertaining to derivatives reported onbanking system. Despite these negative industry developments, the Company's total deposits at June 30, 2023, were $58.7 billion, representing a net basis, subject to a legally enforceable master netting arrangement, with the same counterparty against the net derivative position on the Company's balance sheets. The Chicago Mercantile Exchange has amended their rulebooks to legally characterize variation margin payments for over-the-counter derivatives that clear, as settlements rather than collateral, effective January 3, 2017.
The Company has updated its significant accounting policies to classify variation margin deemed to be legal settlements as a single unit of account with the derivative, for accounting and presentation purposes. The policy update does not result in a change in the presentation of the Company's balance sheets as the Company previously offset the variation margin pertaining to derivatives reporting on a net basis, subject to a legally enforceable master netting arrangement, with the same counterparty against the net derivative position.
Accounting Standards Adopted during 2017
Effective January 1, 2017, the following new accounting guidance was adopted by the Company:
ASU No. 2016-09, Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share Based Payment Accounting
The Update impacted the accounting for employee share-based payment transactions, including the income tax consequences, and classification on the statement of cash flows. The Update requires the Company to recognize the income tax effects of awards in the income statement on a prospective basis when the awards vest or are settled,$4.7 billion increase compared to within additional paid-in capital. As a result, applicable excess tax benefits and tax deficiencies are recorded as an income tax benefit or expense, respectively. The Company elected to present the classification on the statement of cash flows on a prospective basis to better align this presentation with the income tax effects.
The impact of the Update will vary from period to period based on the Company's stock price and the quantity of shares that vest or are settled within a given period.

The Update also requires the Company to elect the accounting for forfeitures of share-based payments by either (i) recognizing forfeitures of awards as they occur or (ii) estimating the number of awards expected to be forfeited and adjusting the estimate when it is likely to change, as is currently required. The Company elected to account for forfeitures of share-based payments by estimating the number of awards expected to be forfeited and adjusting the estimate when it is likely to change, which is in accordance with the Company's previous accounting practices.
The adoption of this accounting standard did not have a material impact on the Company's financial statements.
ASU No. 2016-06, Derivatives and Hedging (Topic 815) - Contingent Put and Call Options in Debt Instruments.
The Update clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. The Update requires the assessment of embedded call (put) options solely in accordance with the four-step decision sequence. The Update clarified that companies are not required to assess whether the event triggering the ability to exercise the call/put option was also clearly and closely related.
The adoption of this accounting standard did not have a material impact on the Company's financial statements, as the Company has not performed the additional step of assessing whether the event triggering the ability to exercise the call (put) option was clearly and closely related, which was deemed not required by the Update.
Accounting Standards Issued but not yet Adopted
The following list identifies ASUs applicable to the Company that have been issued by the FASB but are not yet effective:
ASU No. 2017-12, Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities.
The purpose of the Update is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The update requires a modified retrospective transition method in which the Company will recognize a cumulative effect of the change on the opening balance for each affected component of equity in the financial statements as of the date of adoption.
The Company is in the process of assessing all potential impacts of the standard.
The Update is effective for the first quarter of 2019, early adoption is permitted. The Company is evaluating the potential to early adopt the Update.
ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20) - Premium Amortization on Purchased Callable Debt Securities.
The Update is intended to enhance the accounting for the amortization of premiums for purchased callable debt securities. Specifically, the Update shortens the amortization period for certain investments in callable debt securities purchased at a premium by requiring that the premium be amortized to the earliest call date. The Update is being issued in response to concerns from stakeholders that, current GAAP excludes certain callable debt securities from consideration of early repayment of principal even if the holder is certain that the call will be exercised.
The Update, upon adoption, is expected to accelerate the Company’s recognition of premium amortization on debt securities held within the portfolio. The amendments in the Update will be applied on a modified retrospective basis through a cumulative-effect adjustment directly through retained earnings upon adoption.
Management is in the process of evaluating the full impact of adopting the Update including, but not limited to the following:
Modifying system amortization requirements;
Evaluation of premiums associated with debt securities to determine the appropriate cumulative-effect adjustment; and
Establishing new accounting policies pertaining to premium amortization on purchased callable debt securities.
The Update is effective for the first quarter of 2019, early adoption is permitted. The Company is evaluating the potential to early adopt the Update.
ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715) - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.
The Update requires the Company to disaggregate the current-service-cost component from the other components of net benefit cost (the “other components”) and present it with other current compensation costs for related employees in the income statement and present the other components elsewhere in the income statement and outside of income from operations if that subtotal is presented. In addition, the Update requires entities to disclose the income statement lines that contain the other components if they are not presented on appropriately described separate lines.
The new guidance will be applied on a retrospective basis. The Company intends to adopt the Update for the first quarter of 2018. The Company does not expect this guidance to have a material impact on its consolidated financial statements.

ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment.
The Update eliminates Step 2 from the goodwill impairment analysis. Step 2, requires the Company to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities). Under current guidance, Step 2 testing would be performed only if Step 1 testing indicated the fair value of the reporting unit is below the reporting unit’s carrying amount.
Once effective the Update will require the Company to record an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, eliminating the Step 2 requirements. The Company intends to adopt the Update for the first quarter of 2020. Adoption is not anticipated to have a material impact on the Company's financial statements.
ASU No. 2016-15, Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments.
The Update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The Update addresses the following eight issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle.
The Company intends to adopt the Update for the first quarter of 2018. The Company does not expect this guidance to have a material impact on its consolidated financial statements.
ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.
Current GAAP requires an "incurred loss" methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. Both financial institutions and users of their financial statements expressed concern that current GAAP restricts the ability to record credit losses that are expected, but do not yet meet the "probable" threshold.
The main objective of this Update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates.
The Change from an "incurred loss" method to an "expected loss" method represents a fundamental shift from existing GAAP, and is likely to result in a material increase to the Company's accounting for credit losses on financial instruments. The Company has established a project lead and identified a working group comprised of members from different disciplines including Credit, Finance and Information Technology. The Company is in the early stages of evaluation of the effect that this ASU will have on its financial statements and related disclosures, but has begun to develop a roadmap which includes a consideration of external resources that may be required, use of existing and new models, data availability and system solutions to facilitate implementation. The ASU will be effective for the Company as of the first quarter 2020. While we are currently unable to reasonably estimate the impact of adopting the Update, we expect the impact of adoption will be significantly influenced by the composition, characteristics and quality of our loan and securities portfolios as well as the economic conditions as of the adoption date.
ASU No. 2016-02, Leases (Topic 842).
The Update introduces a lessee model that brings most leases on the balance sheet. The Update also aligns certain of the underlying principles of the new lessor model with those in ASC 606 "Revenue from Contracts with Customers", the FASB’s new revenue recognition standard (e.g., evaluating how collectability should be considered and determining when profit can be recognized).
Furthermore, the Update addresses other concerns including the elimination of the required use of bright-line tests for determining lease classification. Lessors are required to provide additional transparency into the exposure to the changes in value of their residual assets and how they manage that exposure.
The Company intends to adopt the Update for the first quarter of 2019 using the modified retrospective method. The Company is in the early assessment stage and will continue to review the existing lease portfolio to evaluate the impact of the new accounting guidance on the financial statements.

ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities.
Equity investments not accounted for under the equity method or those that do not result in consolidation of the investee are to be measured at fair value with changes in the fair value recognized through net income. Entities are to present separately in other comprehensive income, the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when an election to measure the liability at fair value in accordance with the fair value option for financial instruments has been made. Also, the requirement to disclose the method(s) and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet has been eliminated.
The Company intends to adopt the Update for the first quarter of 2018. Adoption is not anticipated to have a material impact on the Company's financial statements.
ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). Also, subsequent ASUs issued to clarify this Topic.
The Update requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The Update excludes the Company's revenue associated with net interest income, and certain non-interest income lines items (loan and lease related fees, mortgage banking activities, increase in cash surrender value of life insurance policies, gain on sale of investment securities, net, impairment loss on securities recognized in earnings, and a majority of other income). As a result a substantial amount of the Company's revenue will not be affected.
The Company's deposit service fees, wealth and investment services, and certain other non-interest income items are within the scope of the Update. The Company's evaluation of the impacted revenue streams and associated customer contracts is near completion. While the assessment is not complete, the timing of the Company's revenue recognition is not expected to materially change.
The disclosure objective of the Update is to provide users of the financial statement with sufficient information to understand the nature, amount, timing and uncertainty of revenue, certain costs, and cash flows arising from contracts with customers. The Company expects to provide expanded qualitative disclosure pertaining to significant judgments, accounting policy elections and the nature, timing, and uncertainty of revenue arising from contracts with customers. Further the Company expects to provide expanded quantitative disclosure pertaining to the disaggregation of revenue arising from contracts with customers. The Company continues to assess the impact of the changes in disclosure required by guidance.
The Company intends to adopt the Update for the first quarter of 2018 utilizing the modified retrospective application with a cumulative effect adjustment to opening retained earnings, if necessary. The Company's evaluations are not final and are subject to change.

Note 2: Investment Securities
A summary of the amortized cost and fair value of investment securities is presented below:
 At September 30, 2017 At December 31, 2016
(In thousands)
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value 
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
Available-for-sale:



  


U.S. Treasury Bills$3,596
$—
$—
$3,596
 $734
$—
$—
$734
Agency CMO332,341
2,573
(3,116)331,798
 419,865
3,344
(3,503)419,706
Agency MBS923,819
3,214
(14,056)912,977
 969,460
4,398
(19,509)954,349
Agency CMBS599,165
—
(14,205)584,960
 587,776
63
(14,567)573,272
CMBS402,015
1,539
(121)403,433
 473,974
4,093
(702)477,365
CLO273,172
1,572
(161)274,583
 425,083
2,826
(519)427,390
Trust preferred30,463
676
(202)30,937
 30,381
—
(1,748)28,633
Corporate debt48,334
674
(130)48,878
 108,490
1,502
(350)109,642
Available-for-sale$2,612,905
$10,248
$(31,991)$2,591,162
 $3,015,763
$16,226
$(40,898)$2,991,091
Held-to-maturity:



     
Agency CMO$276,367
$1,138
$(3,030)$274,475
 $339,455
$1,977
$(3,824)$337,608
Agency MBS2,549,500
24,275
(30,012)2,543,763
 2,317,449
26,388
(41,768)2,302,069
Agency CMBS708,229
280
(3,549)704,960
 547,726
694
(1,348)547,072
Municipal bonds and notes705,411
5,213
(13,150)697,474
 655,813
4,389
(25,749)634,453
CMBS257,361
3,394
(197)260,558
 298,538
4,107
(411)302,234
Private Label MBS443
2
—
445
 1,677
12
—
1,689
Held-to-maturity$4,497,311
$34,302
$(49,938)$4,481,675
 $4,160,658
$37,567
$(73,100)$4,125,125

Other-Than-Temporary Impairment
The balance of OTTI, included in the amortized cost columns above, is related to certain CLO positions that were previously considered Covered Funds as defined by Section 619 of the Dodd-Frank Act, commonly known as the Volcker Rule. The Company has taken measures to bring its CLO positions into conformance with the Volcker Rule.
During the nine months ended September 30, 2017, OTTI of $126 thousand, related toprincipal held back in conjunction with the exercise of a clean-up call option for a Private Label MBS security, was recognized. To the extent that changes occur in interest rates, credit movements, and other factors that impact fair value and expected recovery of amortized cost of its investment securities, the Company may, in future periods, be required to recognize OTTI in earnings.
The following table presents the changes in OTTI:
 Three months ended September 30, Nine months ended September 30,
(In thousands)2017 2016 2017 2016
Beginning balance$3,231
 $3,437
 $3,243
 $3,288
Reduction for investment securities sold or called(1,028) (30) (1,166) (30)
Additions for OTTI not previously recognized in earnings—
 —
 126
 149
Ending balance$2,203
 $3,407
 $2,203
 $3,407


Fair Value and Unrealized Losses
The following tables provide information on fair value and unrealized losses for the individual investment securities with an unrealized loss, aggregated by classification and length of time that the individual investment securities have been in a continuous unrealized loss position:
 At September 30, 2017
 Less Than Twelve Months Twelve Months or Longer Total
(Dollars in thousands)
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
 
# of
Holdings
Fair
Value
Unrealized
Losses
Available-for-sale:         
Agency CMO$75,042
$(1,002) $70,167
$(2,114) 16$145,209
$(3,116)
Agency MBS464,031
(5,169) 303,770
(8,887) 104767,801
(14,056)
Agency CMBS306,025
(6,240) 278,935
(7,965) 34584,960
(14,205)
CMBS39,775
(121) —
—
 539,775
(121)
CLO82,989
(161) —
—
 582,989
(161)
Trust preferred12,570
(97) 4,574
(105) 317,144
(202)
Corporate debt5,797
(87) 1,825
(43) 27,622
(130)
Available-for-sale in an unrealized loss position$986,229
$(12,877) $659,271
$(19,114) 169$1,645,500
$(31,991)
Held-to-maturity:         
Agency CMO$82,839
$(880) $83,103
$(2,150) 19$165,942
$(3,030)
Agency MBS870,376
(7,948) 775,331
(22,064) 1571,645,707
(30,012)
Agency CMBS570,781
(3,504) 4,730
(45) 45575,511
(3,549)
Municipal bonds and notes123,965
(1,745) 226,545
(11,405) 140350,510
(13,150)
CMBS40,150
(197) 250
—
 540,400
(197)
Held-to-maturity in an unrealized loss position$1,688,111
$(14,274) $1,089,959
$(35,664) 366$2,778,070
$(49,938)
 At December 31, 2016
 Less Than Twelve Months Twelve Months or Longer Total
(Dollars in thousands)
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
 
# of
Holdings
Fair
Value
Unrealized
Losses
Available-for-sale:         
Agency CMO$107,853
$(2,168) $67,351
$(1,335) 15$175,204
$(3,503)
Agency MBS512,075
(10,503) 252,779
(9,006) 97764,854
(19,509)
Agency CMBS554,246
(14,567) —
—
 32554,246
(14,567)
CMBS12,427
(24) 63,930
(678) 1276,357
(702)
CLO49,946
(54) 50,237
(465) 5100,183
(519)
Trust preferred—
—
 28,633
(1,748) 528,633
(1,748)
Corporate debt—
—
 7,384
(350) 27,384
(350)
Available-for-sale in an unrealized loss position$1,236,547
$(27,316) $470,314
$(13,582) 168$1,706,861
$(40,898)
Held-to-maturity:         
Agency CMO$163,439
$(3,339) $17,254
$(485) 16$180,693
$(3,824)
Agency MBS1,394,623
(32,942) 273,779
(8,826) 1501,668,402
(41,768)
Agency CMBS347,725
(1,348) —
—
 25347,725
(1,348)
Municipal bonds and notes384,795
(25,745) 1,192
(4) 196385,987
(25,749)
CMBS60,768
(411) —
—
 860,768
(411)
Held-to-maturity in an unrealized loss position$2,351,350
$(63,785) $292,225
$(9,315) 395$2,643,575
$(73,100)


Impairment Analysis
The following impairment analysis by investment security type, summarizes the basis for evaluating if investment securities within the Company’s available-for-sale and held-to-maturity portfolios have been impacted by OTTI. Unless otherwise noted for an investment security type, management does not intend to sell these investment securities and has determined, based upon available evidence, that it is more likely than not that the Company will not be required to sell these investment securities before the recovery of their amortized cost. As such, based on the following impairment analysis, the Company does not consider these investment securities, in unrealized loss positions, to be other-than-temporarily impaired at September 30, 2017.
Available-for-Sale
Agency CMO. There were unrealized losses of $3.1 million on the Company’s investment in Agency CMO at September 30, 2017, compared to $3.5 milliondeposits at December 31, 2016. Unrealized losses decreased due to lower principal balances for this asset class2022. The Holding Company's and the Bank's regulatory capital ratios at SeptemberJune 30, 2017 compared to December 31, 2016. Market prices2023, also remained essentially unchanged. These investments are issued by a government agency or a government-sponsored agency and, therefore, are backed by certain government guarantees, either direct or indirect. The contractual cash flows for these investments are performing as expected, and there has been no change in the underlying credit quality.
Agency MBS. There were unrealized losses of $14.1 million on the Company’s investment in Agency MBS at September 30, 2017, compared to $19.5 million at December 31, 2016. Unrealized losses decreased due to lower principal balances for this asset class at September 30, 2017 compared to December 31, 2016. Market prices remained essentially unchanged. These investments are issued by a government agency or a government-sponsored agency and, therefore, are backed by certain government guarantees, either direct or indirect. The contractual cash flows for these investments are performing as expected, and there has been no change in the underlying credit quality.
Agency CMBS. There were unrealized losses of $14.2 million on the Company's investment in Agency CMBS at September 30, 2017, compared to $14.6 million at December 31, 2016. Unrealized losses decreased while principal balances remained essentially unchanged. Market prices were slightly higher at September 30, 2017 compared to December 31, 2016. These investments are issued by a government agency or a government-sponsored agency and, therefore, are backed by certain government guarantees, either direct or indirect. The contractual cash flows for these investments are performing as expected, and there has been no change in the underlying credit quality.
CMBS. There were unrealized losses of $0.1 million on the Company’s investment in CMBS at September 30, 2017, compared to $0.7 million at December 31, 2016. The portfolio of mainly floating rate CMBS experienced lower principal balances and lower market spreads which resulted in higher security prices and smaller unrealized losses at September 30, 2017 compared to December 31, 2016. Internal and external metrics are considered when evaluating potential OTTI. Internal stress tests are performed on individual bonds to monitor potential losses under stress scenarios. Contractual cash flows for these investments are performing as expected.
CLO. There were unrealized losses of $0.2 million on the Company's investment in CLO at September 30, 2017, compared to $0.5 million at December 31, 2016. Unrealized losses decreased due to lower principal balances and lower market spreads for the CLO portfolio at September 30, 2017 compared to December 31, 2016. Internal and external metrics are considered when evaluating potential OTTI. Contractual cash flows for these investments are performing as expected.
Trust preferred. There were unrealized losses of $0.2 million on the Company's investment in trust preferred at September 30, 2017, compared to $1.7 million at December 31, 2016. Unrealized losses decreased due to lower market spreads for this asset class, which resulted in higher security prices compared to December 31, 2016. The trust preferred portfolio consists of three floating rate investments issued by two different large capitalization money center financial institutions, which continue to service the debt. The Company performs periodic credit reviewsexcess of the issuer to assess the likelihood for ultimate recovery of amortized cost.
Corporate debt. There were $0.1 million unrealized losses on the Company's corporate debt at September 30, 2017, compared to $0.4 million at December 31, 2016. Unrealized losses decreased due to lower principal balances for this asset class at September 30, 2017 compared to December 31, 2016. Market prices remained essentially unchanged. The Company performs periodic credit reviews of the issuer to assess the likelihood for ultimate recovery of amortized cost.
Held-to-Maturity
Agency CMO. There were unrealized losses of $3.0 million on the Company’s investment in Agency CMO at September 30, 2017 compared to $3.8 million at December 31, 2016. Unrealized losses decreased due to lower principal balances for this asset class at September 30, 2017 compared to December 31, 2016. Market prices remained essentially unchanged. These investments are issued by a government agency or a government-sponsored agency and, therefore, are backed by certain government guarantees, either direct or indirect. The contractual cash flows for these investments are performing as expected, and there has been no change in the underlying credit quality.

Agency MBS. There were unrealized losses of $30.0 million on the Company’s investment in Agency MBS at September 30, 2017, compared to $41.8 million at December 31, 2016. Unrealized losses decreased due to lower principal balances for this asset class at September 30, 2017 compared to December 31, 2016. Market prices remained essentially unchanged. These investments are issued by a government agency or a government-sponsored agency and, therefore, are backed by certain government guarantees, either direct or indirect. There has been no change in the underlying credit quality, and the contractual cash flows are performing as expected.
Agency CMBS. There were unrealized losses of $3.5 million on the Company's investment in Agency CMBS at September 30, 2017, compared to $1.3 million at December 31, 2016. Unrealized losses increased due to lower prices on recently purchased ACMBS as principal balances increased at September 30, 2017 compared to December 31, 2016. These investments are issued by a government agency or a government-sponsored agency and, therefore, are backed by certain government guarantees, either direct or indirect. There has been no change in the underlying credit quality, and the contractual cash flows are performing as expected.
Municipal bonds and notes. There were unrealized losses of $13.2 million on the Company’s investment in municipal bonds and notes at September 30, 2017, compared to $25.7 million at December 31, 2016. Unrealized losses decreased due to lower market rates which resulted in higher prices at September 30, 2017. The Company performs periodic credit reviews of the issuers and these investments are currently performing as expected.
CMBS. There were unrealized losses of $0.2 million on the Company’s investment in CMBS at September 30, 2017, compared to $0.4 million at December 31, 2016. Unrealized losses were approximately the same, for the portfolio comprised mainly of seasoned fixed rate conduit transactions, at September 30, 2017 compared to December 31, 2016. Internal and external metrics are considered when evaluating potential OTTI. Internal stress tests are performed on individual bonds to monitor potential losses under stress scenarios. The contractual cash flows for these investments are performing as expected.
Sales of Available-for Sale Investment Securities

There were no sales during the three and nine months ended September 30, 2017, or the three months ended September 30, 2016. For the nine months ended September 30, 2016, there were sales resulting in proceeds of $259.3 million, with the related gross realized gains and gross realized losses of $2.9 million and $2.5 million, respectively.
Contractual Maturities
The amortized cost and fair value of debt securities by contractual maturity are set forth below:
 At September 30, 2017
 Available-for-Sale Held-to-Maturity
(In thousands)
Amortized
Cost
Fair
Value
 
Amortized
Cost
Fair
Value
Due in one year or less$18,668
$18,714
 $40,146
$40,753
Due after one year through five years40,246
40,748
 13,410
13,684
Due after five through ten years381,547
383,721
 38,323
39,102
Due after ten years2,172,444
2,147,979
 4,405,432
4,388,136
Total debt securities$2,612,905
$2,591,162
 $4,497,311
$4,481,675

For the maturity schedule above, mortgage-backed securities and CLO, which are not due at a single maturity date, have been categorized based on the maturity date of the underlying collateral. Actual principal cash flows may differ from this maturity date presentation as borrowers have the right to prepay obligations with or without prepayment penalties.
At September 30, 2017, the Company had a carrying value of $1.2 billion in callable investment securities in its CMBS, CLO, and municipal bond portfolios. The Company considers prepayment risk in the evaluation of its interest rate risk profile. These maturities may not reflect actual durations, which may be impacted by prepayments.
Investment securities with a carrying value totaling $2.8 billion at September 30, 2017 and $2.5 billion at December 31, 2016 were pledged to secure public funds, trust deposits, repurchase agreements, and for other purposes, as required or permitted by law.

Note 3: Variable Interest Entities
The Company has an investment interest in several entities that meet the definition of a VIE. The following discussion provides information about the Company's VIEs.
Consolidated
Rabbi Trust. The Company established a Rabbi Trust to meet the obligations due under its Deferred Compensation Plan for Directors and Officers and to mitigate the expense volatility of the aforementioned plan. The funding of the Rabbi Trust and the discontinuation of the Deferred Compensation Plan for Directors and Officers occurred during 2012.
Investments held in the Rabbi Trust primarily consist of mutual funds that invest in equity and fixed income securities. The Company is considered the primary beneficiary of the Rabbi Trust as it has the power to direct the activities of the Rabbi Trust that significantly affect the VIE's economic performance and it has the obligation to absorb losses of the VIE that could potentially be significant to the VIE.
The Company consolidates the invested assets of the trust along with the total deferred compensation obligations and includes them in accrued interest receivable and other assets and accrued expenses and other liabilities, respectively, in the accompanying Condensed Consolidated Balance Sheets. Earnings in the Rabbi Trust, including appreciation or depreciation, are reflected as other non-interest income, and changes in the corresponding liability are reflected as compensation and benefits, in the accompanying Condensed Consolidated Statements of Income.
Non-Consolidated
Securitized Investments. The Company, through normal investment activities, makes passive investments in securities issued by VIEs for which Webster is not the manager. The investment securities consist of Agency CMO, Agency MBS, Agency CMBS, CLO and trust preferred. The Company has not provided financial or other support with respect to these investment securities other than its original investment. For these investment securities, the Company determined it is not the primary beneficiary due to the relative size of its investment in comparison to the principal amount of the structured securities issued by the VIEs, the level of credit subordination which reduces the Company’s obligation to absorb losses or right to receive benefits and its inability to direct the activities that most significantly impact the economic performance of the VIEs. The Company’s maximum exposure to loss is limited to the amount of its investment in the VIEs. Refer to Note 2: Investment Securities for additional information.
Tax Credit - Finance Investments. The Company makes equity investments in entities that finance affordable housing and other community development projects and provide a return primarily through the realization of tax benefits. In most instances the investments require the funding of capital commitments in the future. While the Company's investment in an entity may exceed 50% of its outstanding equity interests, the entity is not consolidated as Webster is not involved in its management. For these investments, the Company determined it is not the primary beneficiary due to its inability to direct the activities that most significantly impact the economic performance of the VIEs.
At September 30, 2017 and December 31, 2016, the aggregate carrying value of the Company's tax credit-finance investments were $35.7 million and $22.8 million, respectively. At September 30, 2017 and December 31, 2016, unfunded commitments have been recognized, totaling $24.3 million and $14.0 million, respectively, and are included in accrued expenses and other liabilities in the accompanying Condensed Consolidated Balance Sheets.
Webster Statutory Trust. The Company owns all of the outstanding common stock of Webster Statutory Trust, which is a financial vehicle that has issued, and may issue in the future, trust preferred securities. The trust is a VIE in which the Company is not the primary beneficiary and therefore, is not consolidated. The trust's only assets are junior subordinated debentures issued by the Company, which were acquired by the trust using the proceeds from the issuance of the trust preferred securities and common stock. The junior subordinated debentures are included in long-term debt in the accompanying Condensed Consolidated Balance Sheets, and the related interest expense is reported as interest expense on long-term debt in the accompanying Condensed Consolidated Statements of Income.
Other Investments. The Company invests in various alternative investments in which it holds a variable interest. Alternative investments are non-public entities which cannot be redeemed since the Company’s investment is distributed as the underlying equity is liquidated. For these investments, the Company has determined it is not the primary beneficiary due to its inability to direct the activities that most significantly impact the economic performance of the VIEs.
At September 30, 2017 and December 31, 2016, the aggregate carrying value of the Company's other investments in VIEs were $13.0 million and $12.3 million, respectively, and the total exposure of the Company's other investments in VIEs, including unfunded commitments, were $22.4 million and $19.9 million, respectively.
The Company's equity interests in Tax Credit-Finance Investments, Webster Statutory Trust, and Other Investments are included in accrued interest receivable and other assets in the accompanying Condensed Consolidated Balance Sheets. For a further description of the Company's accounting policies regarding the consolidation of a VIE, refer to Note 1 to the Consolidated Financial Statements for the year ended December 31, 2016 included in its 2016 Form 10-K.

Note 4: Loans and Leases
The following table summarizes loans and leases:
(In thousands)At September 30,
2017		 At December 31, 2016
Residential$4,499,441
 $4,254,682
Consumer2,566,983
 2,684,500
Commercial5,348,303
 4,940,931
Commercial Real Estate4,464,917
 4,510,846
Equipment Financing566,777
 635,629
Loans and leases (1) (2)
$17,446,421
 $17,026,588

(1)Loans and leases include net deferred fees and net premiums/discounts of $20.8 million and $17.3 million at September 30, 2017 and December 31, 2016, respectively.
(2)At September 30, 2017, the Company had pledged $6.7 billion of eligible residential, consumer and commercial loans as collateral to support borrowing capacity at the FHLB Boston and the FRB of Boston.
Loans and Leases Aging
The following tables summarize the aging of loans and leases:
 At September 30, 2017
(In thousands)
30-59 Days
Past Due and
Accruing
60-89 Days
Past Due and
Accruing
90 or More Days Past Due
and Accruing
Non-accrualTotal Past Due and Non-accrualCurrentTotal Loans
and Leases
Residential$8,069
$3,654
$—
$45,676
$57,399
$4,442,042
$4,499,441
Consumer:       
Home equity7,613
4,685
—
37,105
49,403
2,269,468
2,318,871
Other consumer2,224
1,454
—
1,859
5,537
242,575
248,112
Commercial:       
Commercial non-mortgage1,948
364
934
58,915
62,161
4,402,543
4,464,704
Asset-based—
—
—
8,558
8,558
875,041
883,599
Commercial real estate:       
Commercial real estate1,347
444
—
10,603
12,394
4,161,572
4,173,966
Commercial construction—
—
—
477
477
290,474
290,951
Equipment financing818
49
—
570
1,437
565,340
566,777
Total$22,019
$10,650
$934
$163,763
$197,366
$17,249,055
$17,446,421
 At December 31, 2016
(In thousands)30-59 Days
Past Due and
Accruing
60-89 Days
Past Due and
Accruing
90 or More Days Past Due
and Accruing		Non-accrualTotal Past Due and Non-accrualCurrentTotal Loans
and Leases
Residential$8,631
$2,609
$—
$47,279
$58,519
$4,196,163
$4,254,682
Consumer:       
Home equity8,831
5,782
—
35,926
50,539
2,359,354
2,409,893
Other consumer2,233
1,485
—
1,663
5,381
269,226
274,607
Commercial:       
Commercial non-mortgage1,382
577
749
38,190
40,898
4,094,727
4,135,625
Asset-based—
—
—
—
—
805,306
805,306
Commercial real estate:       
Commercial real estate6,357
1,816
—
9,871
18,044
4,117,742
4,135,786
Commercial construction—
—
—
662
662
374,398
375,060
Equipment financing903
693
—
225
1,821
633,808
635,629
Total$28,337
$12,962
$749
$133,816
$175,864
$16,850,724
$17,026,588
Interest on non-accrual loans and leases that would have been recorded as additional interest income had the loans and leases been current in accordance with the original terms totaled $2.8 million and $3.7 million for the three months ended September 30, 2017 and 2016, respectively, and $6.4 million and $8.4 million for the nine months ended September 30, 2017 and 2016, respectively.

Allowance for Loan and Lease Losses
The following tables summarize the activity in, as well as the loan and lease balances that were evaluated for, the ALLL:
 At or for the three months ended September 30, 2017
 ResidentialConsumerCommercial
Commercial
Real Estate
Equipment
Financing
Total
ALLL:      
Balance, beginning of period$18,427
$42,488
$79,964
$52,402
$6,297
$199,578
(Benefit) provision charged to expense(348)(41)12,166
(2,129)502
10,150
Charge-offs(585)(6,197)(3,002)(749)(121)(10,654)
Recoveries280
1,894
466
10
79
2,729
Balance, end of period$17,774
$38,144
$89,594
$49,534
$6,757
$201,803
       
 At or for the three months ended September 30, 2016
(In thousands)ResidentialConsumerCommercial
Commercial
Real Estate
Equipment
Financing
Total
ALLL:      
Balance, beginning of period$24,413
$42,956
$73,822
$33,622
$5,615
$180,428
Provision charged to expense1,076
4,985
4,351
2,953
885
14,250
Charge-offs(1,304)(5,259)(2,561)—
(300)(9,424)
Recoveries554
1,313
370
194
240
2,671
Balance, end of period$24,739
$43,995
$75,982
$36,769
$6,440
$187,925
       
 At or for the nine months ended September 30, 2017
(In thousands)ResidentialConsumerCommercial
Commercial
Real Estate
Equipment
Financing
Total
ALLL:      
Balance, beginning of period$23,226
$45,233
$71,905
$47,477
$6,479
$194,320
(Benefit) provision charged to expense(4,436)6,847
21,905
2,987
597
27,900
Charge-offs(1,940)(18,273)(5,321)(951)(425)(26,910)
Recoveries924
4,337
1,105
21
106
6,493
Balance, end of period$17,774
$38,144
$89,594
$49,534
$6,757
$201,803
Individually evaluated for impairment$4,925
$1,689
$10,844
$290
$38
$17,786
Collectively evaluated for impairment$12,849
$36,455
$78,750
$49,244
$6,719
$184,017
       
Loan and lease balances:      
Individually evaluated for impairment$116,706
$46,224
$85,385
$18,199
$3,642
$270,156
Collectively evaluated for impairment4,382,735
2,520,759
5,262,918
4,446,718
563,135
17,176,265
Loans and leases$4,499,441
$2,566,983
$5,348,303
$4,464,917
$566,777
$17,446,421
 At or for the nine months ended September 30, 2016
(In thousands)ResidentialConsumerCommercial
Commercial
Real Estate
Equipment
Financing
Total
ALLL:      
Balance, beginning of period$25,876
$42,052
$66,686
$34,889
$5,487
$174,990
Provision charged to expense991
12,458
25,447
3,921
1,033
43,850
Charge-offs(3,536)(14,236)(17,294)(2,521)(521)(38,108)
Recoveries1,408
3,721
1,143
480
441
7,193
Balance, end of period$24,739
$43,995
$75,982
$36,769
$6,440
$187,925
Individually evaluated for impairment$9,443
$3,005
$6,579
$467
$9
$19,503
Collectively evaluated for impairment$15,296
$40,990
$69,403
$36,302
$6,431
$168,422
       
Loan and lease balances:      
Individually evaluated for impairment$122,020
$46,208
$58,197
$24,423
$6,863
$257,711
Collectively evaluated for impairment4,112,027
2,661,135
4,721,605
4,256,090
614,833
16,365,690
Loans and leases$4,234,047
$2,707,343
$4,779,802
$4,280,513
$621,696
$16,623,401


Impaired Loans and Leases
The following tables summarize impaired loans and leases:
 At September 30, 2017
(In thousands)
Unpaid
Principal
Balance
Total
Recorded
Investment
Recorded
Investment
No Allowance
Recorded
Investment
With Allowance
Related
Valuation
Allowance
Residential$127,986
$116,706
$27,961
$88,745
$4,925
Consumer - home equity51,496
46,225
21,833
24,392
1,689
Commercial :     
Commercial non-mortgage88,221
76,827
28,124
48,703
10,844
Asset-based8,558
8,558
8,558
—
—
Commercial real estate:     
Commercial real estate19,026
17,725
12,894
4,831
271
Commercial construction580
474
—
474
19
Equipment financing3,721
3,642
3,004
638
38
Total$299,588
$270,157
$102,374
$167,783
$17,786
 At December 31, 2016
(In thousands)
Unpaid
Principal
Balance
Total
Recorded
Investment
Recorded
Investment
No Allowance
Recorded
Investment
With Allowance
Related
Valuation
Allowance
Residential$131,468
$119,424
$21,068
$98,356
$8,090
Consumer - home equity52,432
45,719
22,746
22,973
2,903
Commercial :     
Commercial non-mortgage57,732
53,037
26,006
27,031
7,422
Asset-based—
—
—
—
—
Commercial real estate:     
Commercial real estate24,146
23,568
19,591
3,977
169
Commercial construction1,188
1,187
1,187
—
—
Equipment financing6,398
6,420
6,197
223
9
Total$273,364
$249,355
$96,795
$152,560
$18,593

The following table summarizes the average recorded investment and interest income recognized for impaired loans and leases:
 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
(In thousands)
Average
Recorded
Investment
Accrued
Interest
Income
Cash Basis Interest Income Average
Recorded
Investment		Accrued
Interest
Income		Cash Basis Interest Income 
Average
Recorded
Investment
Accrued
Interest
Income		Cash Basis Interest Income 
Average
Recorded
Investment
Accrued
Interest
Income		Cash Basis Interest Income
Residential$118,841
$1,027
$285
 $124,993
$1,070
$304
 $118,065
$3,133
$986
 $128,234
$3,309
$918
Consumer - home equity46,753
341
246
 46,892
336
238
 45,972
998
808
 47,317
1,029
754
Commercial               
Commercial Non-Mortgage81,816
249
—
 58,874
352
—
 64,932
704
—
 57,389
1,299
—
Asset based4,279
—
—
 —
—
—
 4,279


—
 —
—
—
Commercial real estate:               
Commercial real estate20,249
96
—
 23,930
77
—
 20,647
329
—
 26,689
374
—
Commercial construction828
—
—
 4,386
12
—
 831
12
—
 5,171
81
—
Equipment financing4,895
30
—
 3,642
107
—
 5,031
168
—
 3,642
109
—
Total$277,661
$1,743
$531
 $262,717
$1,954
$542
 $259,757
$5,344
$1,794
 $268,442
$6,201
$1,672


Credit Quality Indicators. To measure credit risk for the commercial, commercial real estate, and equipment financing portfolios, the Company employs a dual grade credit risk grading system for estimating the probability of borrower default and the loss given default. The credit risk grade system assigns a rating to each borrower and to the facility, which together form a Composite Credit Risk Profile. The credit risk grade system categorizes borrowers by common financial characteristics that measure the credit strength of borrowers and facilities by common structural characteristics. The Composite Credit Risk Profile has ten grades, with each grade corresponding to a progressively greater risk of default. Grades (1) - (6) are considered pass ratings, and (7) - (10) are considered criticized,well-capitalized minimum as defined by the regulatory agencies. Risk ratings, assigned to differentiate risk within the portfolio, are reviewed on an ongoing basis and revised to reflect changes in a borrower's current financial position and outlook, risk profile, and the related collateral and structural position. Loan officers review updated financial information on at least an annual basis for all pass rated loans to assess the accuracy of the risk grade. Criticized loans undergo more frequent reviews and enhanced monitoring.
A (7) "Special Mention" credit has the potential weakness that, if left uncorrected, may result in deterioration of the repayment prospects for the asset. An (8) "Substandard" asset has a well defined weakness that jeopardizes the full repayment of the debt. An asset rated (9) "Doubtful" has all of the same weaknesses as a substandard credit with the added characteristic that the weakness makes collection or liquidation in full, given current facts, conditions, and values, improbable. Assets classified as (10) "Loss" in accordance with regulatory guidelines are considered uncollectible and charged off.
The following table summarizes commercial, commercial real estate and equipment financing loans and leases segregated by risk rating exposure:
 Commercial Commercial Real Estate Equipment Financing
(In thousands)At September 30,
2017		 At December 31,
2016		 At September 30,
2017		 At December 31,
2016		 At September 30,
2017		 At December 31,
2016
(1) - (6) Pass$5,037,439
 $4,655,007
 $4,266,658
 $4,357,458
 $548,298
 $618,084
(7) Special Mention108,828
 56,240
 85,926
 69,023
 3,557
 1,324
(8) Substandard192,161
 226,603
 112,333
 84,365
 14,922
 16,221
(9) Doubtful9,875
 3,081
 —
 —
 —
 —
Total$5,348,303
 $4,940,931
 $4,464,917
 $4,510,846
 $566,777
 $635,629

For residential and consumer loans, the Company considers factors such as past due status, updated FICO scores, employment status, collateral, geography, loans discharged in bankruptcy, and the status of first lien position loans on second lien position loans as credit quality indicators. On an ongoing basis for portfolio monitoring purposes, the Company estimates the current value of property secured as collateral for both home equity and residential first mortgage lending products. The estimate is based on home price indices compiled by the S&P/Case-Shiller Home Price Indices. The trend data is applied to the loan portfolios taking into account the age of the most recent valuation and geographic area.
Troubled Debt Restructurings
The following table summarizes information for TDRs:
(Dollars in thousands)At September 30,
2017		 At December 31, 2016
Accrual status$135,774
 $147,809
Non-accrual status82,576
 75,719
Total recorded investment of TDRs$218,350
 $223,528
Specific reserves for TDRs included in the balance of ALLL$11,837
 $14,583
Additional funds committed to borrowers in TDR status3,944
 459

For the portion of TDRs deemed to be uncollectible, Webster charged off $0.4 million and $3.0 million for the three months ended September 30, 2017 and 2016, respectively, and $3.0 million, and $17.9 million for the nine months ended September 30, 2017 and 2016, respectively.

The following table provides information on the type of concession for loans and leases modified as TDRs:
 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
 Number of
Loans and
Leases
Post-
Modification
Recorded
Investment(1)
 Number of
Loans and
Leases
Post-
Modification
Recorded
Investment(1)
 Number of
Loans and
Leases
Post-
Modification
Recorded
Investment(1)
 Number of
Loans and
Leases
Post-
Modification
Recorded
Investment(1)
(Dollars in thousands) 
Residential:           
Extended Maturity—
$—
 4
$967
 9$1,390
 11$1,969
Adjusted Interest Rate—
—
 1
292
 2335
 2528
Maturity/Rate Combined4
570
 3
290
 91,416
 101,185
Other (2)
6
1,357
 3
299
 325,471
 183,190
Consumer - home equity           
Extended Maturity2
158
 2
89
 8822
 9381
Adjusted Interest Rate1
247
 —
—
 1247
 ——
Maturity/Rate Combined2
399
 3
264
 133,212
 11923
Other (2)
12
839
 8
270
 553,733
 371,447
Commercial non - mortgage   

       
Extended Maturity—
—
 2
213
 8813
 1114,862
Maturity/Rate Combined8
299
 —
—
 139,153
 2648
Other (2)
—
—
 4
1,265
 14
 111,639
Commercial real estate:           
Extended Maturity—
—
 1
109
 ——
 1109
Maturity/Rate Combined—
—
 1
291
 ——
 2335
Other (2)
—
—
 —
—
 ——
 1509
Equipment Financing           
Extended Maturity—
—
 6
6,638
 ——
 76,642
Total TDRs35
$3,869
 38
$10,987
 151$26,596
 133$34,367

(1)Post-modification balances approximate pre-modification balances. The aggregate amount of charge-offs as a result of the restructurings was not significant.
(2)Other includes covenant modifications, forbearance, loans discharged under Chapter 7 bankruptcy, or other concessions.
Loans and leases modified as TDRs within the previous 12 months and for which there was a payment default, consisted of one residential loan with a recorded investment of $248 thousand for both the three and nine months ended September 30, 2017. There were no such loans and leases for both the three and nine months ended September 30, 2016.

The recorded investment of TDRs in commercial, commercial real estate, and equipment financing segregated by risk rating exposure is as follows:
(In thousands)At September 30, 2017 At December 31, 2016
(1) - (6) Pass$8,902
 $10,210
(7) Special Mention360
 7
(8) Substandard46,157
 45,509
(9) Doubtful—
 2,738
Total$55,419
 $58,464


Note 5: Transfers of Financial Assets
The Company sells financial assets in the normal course of business, primarily residential mortgage loans sold to government-sponsored enterprises through established programs and securitizations. The gain or loss on residential mortgage loans sold and the related origination fee income, and the fair value adjustment to loans held-for-sale are included as mortgage banking activities in the accompanying Condensed Consolidated Statements of Income.
The Company may be required to repurchase a loan in the event of certain breaches of the representations and warranties, or in the event of default of the borrower within 90 days of sale, as provided for in the sale agreements. A reserve for loan repurchases provides for estimated losses pertaining to the potential repurchase of loans associated with the Company’s mortgage banking activities. The reserve reflects management’s evaluation of the identity of the counterparty, the vintage of the loans sold, the amount of open repurchase requests, specific loss estimates for each open request, the current level of loan losses in similar vintages held in the residential loan portfolio, and estimated recoveries on the underlying collateral. The reserve also reflects management’s expectation of losses from repurchase requests for which the Company has not yet been notified, as the performance of loans sold and the quality of the servicing provided by the acquirer also may impact the reserve. The provision recorded at the time of the loan sale is netted from the gain or loss recorded in mortgage banking activities, while any incremental provision, post loan sale, is recorded in other non-interest expense in the accompanying Condensed Consolidated Statements of Income.
The following table provides a summary of activity in the reserve for loan repurchases:
 Three months ended September 30, Nine months ended September 30,
(In thousands)2017 2016 2017 2016
Beginning balance$843
 $992
 $790
 $1,192
Provision (benefit) charged to expense25
 37
 78
 (64)
Repurchased loans and settlements charged off(18) —
 (18) (99)
Ending balance$850
 $1,029
 $850
 $1,029

The following table provides information for mortgage banking activities:
 Three months ended September 30, Nine months ended September 30,
(In thousands)2017 2016 2017 2016
Residential mortgage loans held for sale:       
Proceeds from sale$88,691
 $128,268
 $262,029
 $298,840
Loans sold with servicing rights retained79,690
 115,822
 239,357
 273,827
        
Net gain on sale1,979
 3,324
 4,356
 6,749
Ancillary fees682
 1,046
 2,091
 2,485
Fair value option adjustment(240) (48) 1,591
 2,101

The Company has retained servicing rights on residential mortgage loans totaling $2.6 billion at both September 30, 2017 and December 31, 2016.
The following table presents the changes in carrying value for mortgage servicing assets:
 Three months ended September 30, Nine months ended September 30,
(In thousands)2017 2016 2017 2016
Beginning balance$24,708
 $21,946
 $24,466
 $20,698
Additions2,576
 3,338
 7,063
 8,198
Amortization(2,144) (1,900) (6,389) (5,512)
Ending balance$25,140
 $23,384
 $25,140
 $23,384

Loan servicing fees, net of mortgage servicing rights amortization, were $0.2 million and $0.3 million for the three months ended September 30, 2017 and 2016, respectively, and $0.6 million and $0.9 million for the nine months ended September 30, 2017 and 2016, respectively, and are included as a component of loan related fees in the accompanying Condensed Consolidated Statements of Income.
See Note 13: Fair Value Measurements for a further discussion on the fair value of loans held for sale and mortgage servicing assets. Additionally, loans not originated for sale were sold approximately at carrying value, for cash proceeds of $7.4 million for certain residential loans and $20.8 million for certain commercial loans for the nine months ended September 30, 2017 and 2016, respectively.

Note 6: Goodwill and Other Intangible Assets
Goodwill and other intangible assets by reportable segment consisted of the following:
 At September 30, 2017 At December 31, 2016
(In thousands)
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
 
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Other intangible assets:       
HSA Bank CDI$22,000
$(8,036)$13,964
 $22,000
$(6,162)$15,838
HSA Bank Customer relationships21,000
(4,375)16,625
 21,000
(3,164)17,836
Total other intangible assets$43,000
$(12,411)$30,589
 $43,000
$(9,326)$33,674
        
Goodwill:       
Community Banking  $516,560
   $516,560
HSA Bank  21,813
   21,813
Total goodwill  $538,373
   $538,373

There was no change in the carrying amounts for goodwill since December 31, 2016.
As of September 30, 2017, the remaining estimated aggregate future amortization expense for intangible assets is as follows:
(In thousands) 
Remainder of 2017$978
20183,847
20193,847
20203,847
20213,847
Thereafter14,223

Note 7: Deposits
A summary of deposits by type follows:
(In thousands)At September 30,
2017
At December 31,
2016
Non-interest-bearing:   
Demand$4,138,206
 $4,021,061
Interest-bearing:   
Checking2,581,266
 2,528,274
Health savings accounts4,891,024
 4,362,503
Money market2,598,187
 2,047,121
Savings4,428,061
 4,320,090
Time deposits2,218,491
 2,024,808
Total interest-bearing16,717,029
 15,282,796
Total deposits$20,855,235
 $19,303,857
    
Time deposits and interest-bearing checking, included in above balances, obtained through brokers$913,042
 $848,618
Time deposits, included in above balance, that meet or exceed the FDIC limit613,012
 490,721
Deposit overdrafts reclassified as loan balances2,494
 1,885

The scheduled maturities of time deposits are as follows:
(In thousands)At September 30,
2017
Remainder of 2017$285,203
2018952,745
2019607,952
2020225,159
2021107,921
Thereafter39,511
Total time deposits$2,218,491


Note 8: Borrowings
Total borrowings of $2.6 billion at September 30, 2017 and $4.0 billion at December 31, 2016 are described in detail below.
The following table summarizes securities sold under agreements to repurchase and other borrowings:
 At September 30,
2017		 At December 31,
2016
(In thousands)AmountRate AmountRate
Securities sold under agreements to repurchase:     
Original maturity of one year or less$335,902
0.18% $340,526
0.16%
Original maturity of greater than one year, non-callable400,000
3.04
 400,000
3.09
Total securities sold under agreements to repurchase735,902
1.73
 740,526
1.82
Fed funds purchased167,000
1.12
 209,000
0.46
Securities sold under agreements to repurchase and other borrowings$902,902
1.62% $949,526
1.53%

Repurchase agreements are used as a source of borrowed funds and are collateralized by U.S. Government agency mortgage-backed securities. Repurchase agreement counterparties are limited to primary dealers in government securities and commercial/municipal customers through Webster’s Treasury Unit. Dealer counterparties have the right to pledge, transfer, or hypothecate purchased securities during the term of the transaction. The Company has right of offset with respect to all repurchase agreement assets and liabilities. Total securities sold under agreements to repurchase represents the gross amount for these transactions, as only liabilities are outstanding for the periods presented.
The following table provides information for FHLB advances:
 At September 30,
2017		 At December 31,
2016
(Dollars in thousands)Amount
Weighted-
Average Contractual Coupon Rate
 Amount
Weighted-
Average Contractual Coupon Rate
Maturing within 1 year$880,500
1.28% $2,130,500
0.71%
After 1 but within 2 years133,731
1.34
 200,000
1.36
After 2 but within 3 years259,295
1.79
 128,026
1.73
After 3 but within 4 years75,000
1.51
 175,000
1.77
After 4 but within 5 years150,061
2.23
 200,000
1.81
After 5 years9,091
2.61
 9,370
2.59
 1,507,678
1.49% 2,842,896
0.95%
Premiums on advances3
  12
 
Federal Home Loan Bank advances$1,507,681
  $2,842,908
 
      
Aggregate carrying value of assets pledged as collateral$6,388,102
  $5,967,318
 
Remaining borrowing capacity2,668,964
  1,192,758
 

Webster Bank is in compliance with FHLB collateral requirements for the periods presented. Eligible collateral, primarily certain residential and commercial real estate loans, has been pledged to secure FHLB advances.
The following table summarizes long-term debt:
(Dollars in thousands)At September 30,
2017		 At December 31,
2016
4.375%Senior fixed-rate notes due February 15, 2024$150,000
 $150,000
Junior subordinated debt Webster Statutory Trust I floating-rate notes due September 17, 2033 (1)
77,320
 77,320
Total notes and subordinated debt227,320
 227,320
Discount on senior fixed-rate notes(756) (845)
Debt issuance cost on senior fixed-rate notes(860) (961)
Long-term debt$225,704
 $225,514
(1)The interest rate on Webster Statutory Trust I floating-rate notes, which varies quarterly based on 3-month LIBOR plus 2.95%, was 4.27% at September 30, 2017 and 3.94% at December 31, 2016.

Note 9: Accumulated Other Comprehensive Loss, Net of Tax
The following tables summarize the changes in AOCL by component:
 Three months ended September 30, 2017 Nine months ended September 30, 2017
(In thousands)Securities Available For Sale and TransferredDerivative InstrumentsDefined Benefit Pension and Other Postretirement Benefit PlansTotal Securities Available For Sale and TransferredDerivative InstrumentsDefined Benefit Pension and Other Postretirement Benefit PlansTotal
Beginning balance$(14,501)$(15,258)$(42,323)$(72,082) $(15,476)$(17,068)$(44,449)$(76,993)
  OCI/OCL before reclassifications872
(34)—
838
 1,847
(445)—
1,402
  Amounts reclassified from AOCL—
1,145
1,001
2,146
 —
3,366
3,127
6,493
Net current-period OCI/OCL872
1,111
1,001
2,984
 1,847
2,921
3,127
7,895
Ending balance$(13,629)$(14,147)$(41,322)$(69,098) $(13,629)$(14,147)$(41,322)$(69,098)
 Three months ended September 30, 2016 Nine months ended September 30, 2016
(In thousands)Securities Available For Sale and TransferredDerivative InstrumentsDefined Benefit Pension and Other Postretirement Benefit PlansTotal Securities Available For Sale and TransferredDerivative InstrumentsDefined Benefit Pension and Other Postretirement Benefit PlansTotal
Beginning balance$12,363
$(23,406)$(46,468)$(57,511) $(6,407)$(22,980)$(48,719)$(78,106)
  OCI/OCL before reclassifications1,218
794
—
2,012
 20,156
(2,416)—
17,740
  Amounts reclassified from AOCL—
1,221
1,125
2,346
 (168)4,005
3,376
7,213
Net current-period OCI/OCL1,218
2,015
1,125
4,358
 19,988
1,589
3,376
24,953
Ending balance$13,581
$(21,391)$(45,343)$(53,153) $13,581
$(21,391)$(45,343)$(53,153)

The following tables provide information for the items reclassified from AOCL:
(In thousands)Three months ended September 30, Nine months ended September 30,Associated Line Item in the Condensed Consolidated Statements of Income
AOCL Components2017 2016 2017 2016
         
Securities available-for-sale and transferred:        
Unrealized gains (losses) on investment securities$—
 $—
 $—
 $414
Gain on sale of investment securities, net
Unrealized gains (losses) on investment securities—
 —
 —
 (149)Impairment loss recognized in earnings
Total before tax—
 —
 —
 265
 
Tax benefit (expense)—
 —
 —
 (97)Income tax expense
Net of tax$—
 $—
 $—
 $168
 
Derivative instruments:        
Cash flow hedges$(1,810) $(1,925) $(5,316) $(6,314)Total interest expense
Tax benefit665
 704
 1,950
 2,309
Income tax expense
Net of tax$(1,145) $(1,221) $(3,366) $(4,005) 
Defined benefit pension and other postretirement benefit plans:        
Amortization of net loss$(1,587) $(1,780) $(4,959) $(5,343)(1)
Prior service costs—
 (4) —
 (11)(1)
Total before tax(1,587) (1,784) (4,959) (5,354) 
Tax benefit586
 659
 1,832
 1,978
Income tax expense
Net of tax$(1,001) $(1,125) $(3,127) $(3,376) 

(1) These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost (see Note 14 - Retirement Benefit Plans for further details).

Note 10: Regulatory Matters
Capital Requirements
Webster Financial Corporation is subject to regulatory capital requirements administered by the Federal Reserve System, while Webster Bank is subject to regulatory capital requirements administered by the OCC. Regulatory authorities can initiate certain mandatory actions if Webster Financial Corporation or Webster Bank fail to meet minimum capital requirements, which could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, both Webster Financial Corporation and Webster Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. These quantitative measures require minimum amounts and ratios to ensure capital adequacy.
Basel III total risk-based capital is comprised of three categories: CET1 capital, additional Tier 1 capital, and Tier 2 capital. CET1 capital includes common shareholders' equity, less deductions for goodwill, other intangibles, and certain deferred tax liabilities. Common shareholders' equity, for purposes of CET1 capital, excludes AOCL components as permitted by the opt-out election taken by Webster upon adoption of Basel III. Tier 1 capital is comprised of CET1 capital plus perpetual preferred stock, while Tier 2 capital includes qualifying subordinated debt and qualifying allowance for credit losses, that together equal total capital.
The following table provides information on the capital ratios for Webster Financial Corporation and Webster Bank:
 At September 30, 2017
 Actual Minimum Requirement Well Capitalized
(Dollars in thousands)AmountRatio AmountRatio AmountRatio
Webster Financial Corporation        
CET1 risk-based capital$2,031,955
10.99% $832,149
4.5% $1,201,993
6.5%
Total risk-based capital2,436,332
13.17
 1,479,376
8.0
 1,849,220
10.0
Tier 1 risk-based capital2,154,665
11.65
 1,109,532
6.0
 1,479,376
8.0
Tier 1 leverage capital2,154,665
8.36
 1,030,973
4.0
 1,288,717
5.0
Webster Bank        
CET1 risk-based capital$2,061,764
11.16% $831,319
4.5% $1,200,794
6.5%
Total risk-based capital2,266,110
12.27
 1,477,900
8.0
 1,847,376
10.0
Tier 1 risk-based capital2,061,764
11.16
 1,108,425
6.0
 1,477,900
8.0
Tier 1 leverage capital2,061,764
8.00
 1,030,260
4.0
 1,287,825
5.0

 At December 31, 2016
 Actual Minimum Requirement Well Capitalized
(Dollars in thousands)AmountRatio AmountRatio AmountRatio
Webster Financial Corporation        
CET1 risk-based capital$1,932,171
10.52% $826,504
4.5% $1,193,840
6.5%
Total risk-based capital2,328,808
12.68
 1,469,341
8.0
 1,836,677
10.0
Tier 1 risk-based capital2,054,881
11.19
 1,102,006
6.0
 1,469,341
8.0
Tier 1 leverage capital2,054,881
8.13
 1,010,857
4.0
 1,263,571
5.0
Webster Bank        
CET1 risk-based capital$1,945,332
10.61% $825,228
4.5% $1,191,995
6.5%
Total risk-based capital2,141,939
11.68
 1,467,071
8.0
 1,833,839
10.0
Tier 1 risk-based capital1,945,332
10.61
 1,100,304
6.0
 1,467,071
8.0
Tier 1 leverage capital1,945,332
7.70
 1,010,005
4.0
 1,262,507
5.0

Dividend Restrictions
Webster Financial Corporation is dependent upon dividends from Webster Bank to provide funds for its cash requirements, including payments of dividends to shareholders. Banking regulations may limit the amount of dividends that may be paid. Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of Webster Bank to fall below specified minimum levels, or if dividends declared exceed the net income for that year combined with the undistributed net income for the preceding two years. In addition, the OCC has discretion to prohibit any otherwise permitted capital distribution on general safety and soundness grounds. Dividends paid by Webster Bank to Webster Financial Corporation totaled $80 million during the nine months ended September 30, 2017 compared to $115 million during the nine months ended September 30, 2016.
Cash Restrictions
Webster Bank is required by Federal Reserve System regulations to hold cash reserve balances on hand or with the Federal Reserve Bank. Pursuant to this requirement, Webster Bank held $76.7 million and $58.6 million at September 30, 2017 and December 31, 2016, respectively.

Note 11: Earnings Per Common Share
Reconciliation of the calculation of basic and diluted earnings per common share follows:
 Three months ended September 30, Nine months ended September 30,
(In thousands, except per share data)2017 2016 2017 2016
Earnings for basic and diluted earnings per common share:       
Net income$64,496
 $51,817
 $185,546
 $149,467
Less: Preferred stock dividends2,024
 2,024
 6,072
 6,072
Net income available to common shareholders62,472
 49,793
 179,474
 143,395
Less: Earnings applicable to participating securities46
 159
 212
 468
Earnings applicable to common shareholders$62,426
 $49,634
 $179,262
 $142,927
        
Shares:       
Weighted-average common shares outstanding - basic92,125
 91,365
 92,003
 91,298
Effect of dilutive securities:       
Stock options and restricted stock372
 465
 403
 452
Warrants6
 27
 6
 26
Weighted-average common shares outstanding - diluted92,503
 91,857
 92,412
 91,776
        
Earnings per common share:       
Basic$0.68
 $0.54
 $1.95
 $1.57
Diluted0.67
 0.54
 1.94
 1.56

Potential common shares excluded from the effect of dilutive securities because they would have been anti-dilutive, are as follows:
 Three months ended September 30, Nine months ended September 30,
(In thousands)2017 2016 2017 2016
Stock options (shares with exercise price greater than market price)—
 172
 —
 172
Restricted stock (due to performance conditions on non-participating shares)80
 —
 61
 161


Note 12: Derivative Financial Instruments
Risk Management Objective of Using Derivatives
Webster manages economic risks, such as interest rate, liquidity, and credit risks by managing the amount, sources, and duration of its debt funding in conjunction with the use of interest rate derivative financial instruments. Webster enters into interest rate derivatives to mitigate the exposure related to business activities that result in the future receipt or payment of, both known and uncertain, cash amounts that are impacted by interest rates. The primary objective for using interest rate derivatives is to add stability to interest expense by managing exposure to interest rate movements. To accomplish this objective, Webster uses interest rate swaps and interest rate caps as part of its interest rate risk management strategy.
Interest rate swaps and interest rate caps designated as cash flow hedges are designed to manage the risk associated with a forecasted event or an uncertain variable-rate cash flow. Forward-settle interest rate swaps protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows relating to interest payments on forecasted debt issuances. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for payment of an up-front premium.
Cash flow hedges are used to regulate the variable cash flows associated with existing variable-rate debt and forecasted issuances of debt. Derivative instruments designated as cash flow hedges are recorded on the balance sheet at fair value. The effective portion of the change in fair value of the derivatives which are designated as cash flow hedges, and that qualify for hedge accounting, is recorded to AOCL and is reclassified into earnings in the subsequent periods that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of these derivatives, attributable to the difference in the effective date of the hedge and the effective date of the debt issuance, is recognized directly in earnings. During the periods presented, there was no ineffectiveness to be recognized in earnings.
Certain fixed-rate obligations can be exposed to a change in fair value attributable to changes in benchmark interest rates. On occasion, interest rate swaps will be used to manage this exposure. An interest rate swap which involves the receipt of fixed-rate amounts from a counterparty in exchange for Webster making variable-rate payments over the life of the agreement, without the exchange of the underlying notional amount, is designated as a fair value hedge. For a qualifying derivative designated as a fair value hedge, the gain or loss on the derivative, as well as the gain or loss on the hedged item, is recognized in interest expense. During the periods presented, Webster did not have any interest rate derivative financial instruments designated as fair value hedges and as a result, there was no impact to interest expense.
Additionally, in order to address certain other risk management matters, the Company also utilizes derivative instruments that do not qualify for hedge accounting. These derivative instruments, which are recorded on the balance sheet at fair value, with changes in fair value recognized each period as other non-interest income in the accompanying Condensed Consolidated Statements of Income, are described in the following paragraphs.
Interest rate swap and cap contracts are sold to commercial and other customers who wish to modify loan interest rate sensitivity. These contracts are offset with dealer counterparty transactions structured with matching terms. As a result, there is minimal impact on earnings, except for fee income earned in such transactions.
RPAs are entered into as financial guarantees of performance on interest rate swap derivatives. The purchased (asset) or sold (liability) guarantee allows the Company to participate-in (fee received) or participate-out (fee paid) the risk associated with certain derivative positions executed with the borrower by the lead bank in a loan syndication.
Other derivatives include foreign currency forward contracts related to lending arrangements, a VISA equity swap transaction, and mortgage banking derivatives such as mortgage-backed securities related to residential loan commitments and loans held for sale. Mortgage banking derivatives are utilized by Webster in its efforts to manage risk of loss associated with its mortgage loan commitments and mortgage loans held for sale. Prior to closing and funding certain single-family residential mortgage loans interest rate lock commitments are generally extended to the borrowers. During the period from commitment date to closing date, Webster is subject to the risk that market rates of interest may change. If market rates rise, investors generally will pay less to purchase such loans causing a reduction in the anticipated gain on sale of the loans, or possibly resulting in a loss. In an effort to mitigate such risk, forward delivery sales commitments are established under which Webster agrees to deliver whole mortgage loans to various investors or issue mortgage-backed securities. Mandatory forward commitments establish the price to be received upon the sale of the related mortgage loan, thereby mitigating certain interest rate risk. There is, however, still certain execution risk specifically related to Webster’s ability to close and deliver to its investors the mortgage loans it has committed to sell.

Fair Value of Derivative Instruments
The following table presents the notional amounts and fair values of derivative positions:
 At September 30, 2017 At December 31, 2016

Asset Derivatives Liability Derivatives Asset Derivatives Liability Derivatives
(In thousands)Notional
Amounts		Fair
Value		 Notional
Amounts		Fair
Value		 Notional
Amounts		Fair
Value		 Notional
Amounts		Fair
Value
Designated as hedging instruments:           
Positions subject to a master netting agreement (1)
           
Interest rate derivatives$225,000
$1,972
 $100,000
$195
 $225,000
$3,270
 $100,000
$792
Not designated as hedging instruments:           
Positions subject to a master netting agreement (1)
           
Interest rate derivatives2,270,444
4,225
 1,125,953
3,224
 1,943,485
32,226
 1,242,937
24,388
Other8,595
260
 22,161
419
 10,634
231
 14,265
120
Positions not subject to a master netting agreement           
Interest rate derivatives1,738,527
35,065
 1,652,004
15,764
 1,734,679
38,668
 1,451,762
19,001
RPAs94,103
112
 99,538
136
 86,037
139
 87,273
166
Mortgage banking derivatives (2)
42,290
614
 60,698
128
 103,440
3,084
 59,895
711
Other262
2
 1,777
157
 1,438
19
 181
11
Total not designated as hedging instruments4,154,221
40,278
 2,962,131
19,828
 3,879,713
74,367
 2,856,313
44,397
Gross derivative instruments, before netting$4,379,221
42,250
 $3,062,131
20,023
 $4,104,713
77,637
 $2,956,313
45,189
Less: Legally enforceable master netting agreements
 2,915
  2,916
  24,252
  24,254
Less: Cash collateral posted 2,540
  766
  11,475
  600
Total derivative instruments, after netting $36,795
  $16,341
  $41,910
  $20,335
(1)One of Webster's counterparty relationships was impacted by a Chicago Mercantile Exchange rulebook amendment, resulting in the presentation of that relationship on a settlement basis, as a single unit of account at September 30, 2017, versus a netting basis at December 31, 2016.
(2)Notional amounts include mandatory forward commitments of $60.5 million, while notional amounts do not include approved floating rate commitments of $21.9 million, at September 30, 2017.
Changes in Fair Value
Changes in the fair value of derivatives not qualifying for hedge accounting treatment were recognized as follows:
 Three months ended September 30, Nine months ended September 30,
(In thousands)2017 2016 2017 2016
Interest rate derivatives$1,501
 $608
 $1,780
 $6,515
RPAs51
 110
 157
 (143)
Mortgage banking derivatives(219) 720
 (1,886) 357
Other(7) (285) (634) (582)
Total impact on other non-interest income$1,326
 $1,153
 $(583) $6,147

Amounts for the effective portion of changes in the fair value of derivatives qualifying for hedge accounting treatment are reclassified to interest expense as interest payments are made on Webster's variable-rate debt. Over the next twelve months, the Company estimates that $1.2 million will be reclassified from AOCL as an increase to interest expense.
Webster records gains and losses related to hedge terminations to AOCL. These balances are subsequently amortized into interest expense over the respective terms of the hedged debt instruments. At September 30, 2017, the remaining unamortized loss on the termination of cash flow hedges is $16.5 million. Over the next twelve months, the Company estimates that $6.4 million will be reclassified from AOCL as an increase to interest expense.action.
Additional information about cash flow hedge activity impacting AOCL,regarding regulatory capital ratios can be found within Note 10: Regulatory Capital and the related amounts reclassified to interest expense is provided in Note 9: Accumulated Other Comprehensive Loss, Net of Tax. Information about the valuation methods used to measure the fair value of derivatives is provided in Note 13: Fair Value Measurements.

Offsetting Derivatives
Webster has entered into transactions with counterparties that are subject to a legally enforceable master netting agreement. Derivatives subject to a legally enforceable master netting agreement are reported on a net basis, net of cash collateral. Net gain positions are recorded as assets and are included in accrued interest receivable and other assets, while, net loss positions are recorded as liabilities and are included in accrued expenses and other liabilities,Restrictions in the accompanyingNotes to Condensed Consolidated Balance Sheets.
The following table is presented on a gross basis, prior to the application of counterparty netting agreements:
 At September 30, 2017 At December 31, 2016
(In thousands)
Gross
Amount
Relationship OffsetCash Collateral Offset
Net
Amount
 
Gross
Amount
Relationship OffsetCash Collateral Offset
Net
Amount
Derivative instrument gains:         
Hedge accounting$1,972
$292
$1,051
$629
 $3,270
$2,335
$935
$—
Non-hedge accounting4,452
2,623
1,489
340
 32,457
21,917
10,540
—
Total assets$6,424
$2,915
$2,540
$969
 $35,727
$24,252
$11,475
$—
          
Derivative instrument losses:         
Hedge accounting$195
$195
$—
$—
 $792
$792
$—
$—
Non-hedge accounting3,643
2,721
766
156
 24,508
23,462
600
446
Total liabilities$3,838
$2,916
$766
$156
 $25,300
$24,254
$600
$446

Counterparty Credit Risk
Use of derivative contracts may expose the bank to counterparty credit risk. The Company has ISDA master agreements, including a Credit Support Annex, with all derivative counterparties. The ISDA master agreements provide that on each payment date, all amounts otherwise owing the same currency under the same transaction are netted so that only a single amount is owed in that currency. The ISDA provides, if the parties so elect, for such netting of amounts in the same currency among all transactions identified as being subject to such election that have common payment dates and booking offices. Under the Credit Support Annex, daily net exposure in excess of a negotiated threshold is secured by posted cash collateral. The Company has negotiated a zero threshold with the majority of its approved financial institution counterparties. In accordance with Webster policies, institutional counterparties must be analyzed and approved through the Company’s credit approval process.
The Company’s credit exposure on interest rate derivatives with non-dealer counterparties is limited to the net favorable value, including accrued interest, of all such instruments, reduced by the amount of collateral pledged by the counterparties. The Company's credit exposure related to derivatives with dealer counterparties is significantly mitigated with cash collateral equal to, or in excess of, the market value of the instrument updated daily.
In accordance with counterparty credit agreements and derivative clearing rules, the Company had approximately $20.7 million in net margin collateral posted with financial counterparties at September 30, 2017, comprised of $30.5 million in initial margin and $9.8 million in variation margin collateral received from financial counterparties or the derivative clearing organization. Collateral levels for approved financial institution counterparties are monitored daily and adjusted as necessary. In the event of default, should the collateral not be returned, the exposure would be offset by terminating the transaction.
The Company regularly evaluates the credit risk of its counterparties, taking into account the likelihood of default, net exposures, and remaining contractual life, among other related factors. The Company's net current credit exposure relating to interest rate derivatives with Webster Bank customers was $35.1 million at September 30, 2017. In addition, the Company monitors potential future exposure, representing its best estimate of exposure to remaining contractual maturity. The potential future exposure relating to interest rate derivatives with Webster Bank customers totaled $27.7 million at September 30, 2017. Credit risk exposure is mitigated as transactions with customers are generally secured by the same collateral of the underlying transactions being hedged.

Note 13: Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined using quoted market prices. However, in many instances, quoted market prices are not available. In such instances, fair values are determined using appropriate valuation techniques. Various assumptions and observable inputs must be relied upon in applying these techniques. Accordingly, categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. As such, the fair value estimates may not be realized in an immediate transfer of the respective asset or liability.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings or any part of a particular financial instrument. Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These factors are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair Value Hierarchy
The three levels within the fair value hierarchy are as follows:
•
Level 1: Valuation is based upon unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
•
Level 2: Fair value is calculated using significant inputs other than quoted market prices that are directly or indirectly observable for the asset or liability. The valuation may rely on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit ratings, etc.), or inputs that are derived principally or corroborated by market data, by correlation, or other means.
•
Level 3: Inputs for determining the fair value of the respective assets or liabilities are not observable. Level 3 valuations are reliant upon pricing models and techniques that require significant management judgment or estimation.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Available-for-Sale Investment Securities. When quoted prices are available in an active market, the Company classifies investment securities within Level 1 of the valuation hierarchy. U.S. Treasury Bills are classified within Level 1 of the fair value hierarchy.
When quoted market prices are not available, the Company employs an independent pricing service that utilizes matrix pricing to calculate fair value. Such fair value measurements consider observable data such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayments speeds, credit information, and respective terms and conditions for debt instruments. Management maintains procedures to monitor the pricing service's assumptions and establishes processes to challenge the pricing service's valuations that appear unusual or unexpected. Available-for-Sale investment securities which include Agency CMO, Agency MBS, Agency CMBS, CMBS, CLO, trust preferred, and corporate debt, are classified within Level 2 of the fair value hierarchy.
Derivative Instruments. Foreign exchange contracts are valued based on unadjusted quoted prices in active markets and classified within Level 1 of the fair value hierarchy. Derivative instruments are valued using third-party valuation software, which considers the present value of cash flows discounted using observable forward rate assumptions. The Chicago Mercantile Exchange have amended their rulebooks to legally characterize variation margin payments for over-the-counter derivatives that clear as settlements rather than collateral, effective January 3, 2017. One of Webster's counterparty relationships was impacted by this change, resulting in the fair value of the instrument including cash collateral as a single unit of account.
The resulting fair values are validated against valuations performed by independent third parties and are classified within Level 2 of the fair value hierarchy. In determining if any fair value adjustment related to credit risk is required, Webster evaluates the credit risk of its counterparties by considering factors such as the likelihood of default by the counterparties, its net exposures, the remaining contractual life, as well as the amount of collateral securing the position. Webster reviews its counterparty exposure on a regular basis, and, when necessary, appropriate business actions are taken to adjust the exposure. When determining fair value, Webster applies the portfolio exception with respect to measuring counterparty credit risk for all of its derivative transactions subject to a master netting arrangement. The change in value of derivative assets and liabilities attributable to credit risk was not significant during the reported periods.

Mortgage Banking Derivatives. Forward sales of mortgage loans and mortgage-backed securities are utilized by the Company in its efforts to manage risk of loss associated with its mortgage loan commitments and mortgage loans held for sale. Prior to closing and funding certain single-family residential mortgage loans, an interest rate lock commitment is generally extended to the borrower. During the period from commitment date to closing date, the Company is subject to the risk that market rates of interest may change. If market rates rise, investors generally will pay less to purchase such loans resulting in a reduction in the gain on sale of the loans or, possibly, a loss. In an effort to mitigate such risk, forward delivery sales commitments are established, under which the Company agrees to deliver whole mortgage loans to various investors or issue mortgage-backed securities. The fair value of mortgage banking derivatives is determined based on current market prices for similar assets in the secondary market and, therefore, classified within Level 2 of the fair value hierarchy.
Investments Held in Rabbi Trust. Investments held in the Rabbi Trust primarily include mutual funds that invest in equity and fixed income securities. Shares of mutual funds are valued based on net asset value, which represents quoted market prices for the underlying shares held in the mutual funds. Therefore, investments held in the Rabbi Trust are classified within Level 1 of the fair value hierarchy. Webster has elected to measure the investments held in the Rabbi Trust at fair value. The cost basis of the investments held in the Rabbi Trust is $2.9 million at September 30, 2017.
Alternative Investments. Alternative investments are non-public entities that cannot be redeemed since the Company’s investment is distributed as the underlying equity is liquidated. Alternative investments in which the ownership percentage is greater than 3% are fair valued on a recurring basis based upon the net asset value of the respective fund. Alternative investments in which the ownership percentage is less than 3% are fair valued on a non-recurring basis. These alternative investments are recorded at cost, subject to impairment testing. Both recurring and non-recurring alternative investments are classified within Level 3 of the fair value hierarchy, as they are non-public entities that cannot be redeemed since the Company's investment is distributed as the underlying investments are liquidated. At September 30, 2017, the alternative investments book value was $17.3 million and there was $9.4 million in remaining unfunded commitments.
Originated Loans Held For Sale. Residential mortgage loans typically are classified as held for sale upon origination based on management's intent to sell such loans. The Company generally records residential mortgage loans held for sale under the fair value option of ASC 825 "Financial Instruments". The fair value of residential mortgage loans held for sale is based on quoted market prices of similar loans sold in conjunction with securitization transactions. Accordingly, such loans are classified within Level 2 of the fair value hierarchy.

Summaries of the fair values of assets and liabilities measured at fair value on a recurring basis are as follows:
 At September 30, 2017
(In thousands)Level 1Level 2Level 3Total
Financial assets held at fair value:    
U.S. Treasury Bills$3,596
$—
$—
$3,596
Agency CMO—
331,798
—
331,798
Agency MBS—
912,977
—
912,977
Agency CMBS—
584,960
—
584,960
CMBS—
403,433
—
403,433
CLO—
274,583
—
274,583
Trust preferred—
30,937
—
30,937
Corporate debt—
48,878
—
48,878
Total available-for-sale investment securities3,596
2,587,566
—
2,591,162
Gross derivative instruments, before netting (1)
262
41,988
—
42,250
Investments held in Rabbi Trust5,278
—
—
5,278
Alternative investments—
—
6,986
6,986
Originated loans held for sale—
32,855
—
32,855
Total financial assets held at fair value$9,136
$2,662,409
$6,986
$2,678,531
Financial liabilities held at fair value:    
Gross derivative instruments, before netting (1)
$562
$19,461
$—
$20,023
 At December 31, 2016
(In thousands)Level 1Level 2Level 3Total
Financial assets held at fair value:    
U.S. Treasury Bills$734
$—
$—
$734
Agency CMO—
419,706
—
419,706
Agency MBS—
954,349
—
954,349
Agency CMBS—
573,272
—
573,272
CMBS—
477,365
—
477,365
CLO—
427,390
—
427,390
Trust preferred—
28,633
—
28,633
Corporate debt—
109,642
—
109,642
Total available-for-sale investment securities734
2,990,357
—
2,991,091
Gross derivative instruments, before netting (1)
250
77,387
—
77,637
Investments held in Rabbi Trust5,119
—
—
5,119
Alternative investments—
—
5,502
5,502
Originated loans held for sale—
60,260
—
60,260
Total financial assets held at fair value$6,103
$3,128,004
$5,502
$3,139,609
Financial liabilities held at fair value:    
Gross derivative instruments, before netting (1)
$120
$45,069
$—
$45,189
(1)For information relating to the impact of netting derivative assets and derivative liabilities as well as the impact from offsetting cash collateral paid to the same derivative counterparties see Note 12: Derivative Financial Instruments.
The following table presents the changes in Level 3 assets and liabilities that are measured at fair value on a recurring basis:
(In thousands)Alternative Investments
Balance at January 1, 2017$5,502
Unrealized gain included in net income639
Purchases/capital funding899
Payments(54)
Balance at September 30, 2017$6,986


Assets Measured at Fair Value on a Non-Recurring Basis
Certain assets are measured at fair value on a non-recurring basis; that is, the assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, for example, when there is evidence of impairment. The following is a description of valuation methodologies used for assets measured on a non-recurring basis.
Transferred Loans Held For Sale. Certain loans are transferred to loans held for sale once a decision has been made to sell such loans. These loans are accounted for at the lower of cost or market and are considered to be recognized at fair value when they are recorded at below cost. This activity is primarily commercial loans with observable inputs and is classified within Level 2. On the occasion should these loans include adjustments for changes in loan characteristics using unobservable inputs, the loans would be classified within Level 3.
Collateral Dependent Impaired Loans and Leases. Impaired loans and leases for which repayment is expected to be provided solely by the value of the underlying collateral are considered collateral dependent and are valued based on the estimated fair value of such collateral using customized discounting criteria. As such, collateral dependent impaired loans and leases are classified as Level 3 of the fair value hierarchy.
Other Real Estate Owned and Repossessed Assets. The total book value of OREO and repossessed assets was $5.3 million at September 30, 2017. OREO and repossessed assets are accounted for at the lower of cost or market and are considered to be recognized at fair value when they are recorded at below cost. The fair value of OREO is based on independent appraisals or internal valuation methods, less estimated selling costs. The valuation may consider available pricing guides, auction results, and price opinions. Certain assets require assumptions about factors that are not observable in an active market in the determination of fair value; as such, OREO and repossessed assets are classified within Level 3 of the fair value hierarchy.
The table below presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis as of September 30, 2017:
(Dollars in thousands) 
AssetFair ValueValuation MethodologyUnobservable InputsRange of Inputs
Collateral dependent impaired loans and leases$15,955
Real Estate AppraisalsDiscount for appraisal type0%-20%
   Discount for costs to sell0%-15%
OREO$2,587
Real Estate AppraisalsDiscount for appraisal type0%-20%
   Discount for costs to sell8%

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

Securities Sold Under Agreements to Repurchase and Other Borrowings. The carrying value is an estimate of fair value for those securities sold under agreements to repurchase and other borrowings that mature within 90 days. The fair values of all other borrowings are estimated using discounted cash flow analysis based on current market rates adjusted, as appropriate, for associated credit risks. Securities sold under agreements to repurchase and other borrowings are classified within Level 2 of the fair value hierarchy.
Federal Home Loan Bank Advances and Long-Term Debt. The fair value of FHLB advances and long-term debt is estimated using a discounted cash flow technique. Discount rates are matched with the time period of the expected cash flow and are adjusted, as appropriate, to reflect credit risk. FHLB advances and long-term debt are classified within Level 2 of the fair value hierarchy.
Mortgage Servicing Assets. Mortgage servicing assets are accounted for at cost, subject to impairment testing. Mortgage servicing assets are considered to be recognized at fair value when they are recorded at below cost. Changes in fair value are included as a component of other non-interest income in the accompanying Condensed Consolidated Statements of Income. Fair value is calculated as the present value of estimated future net servicing income and relies on market based assumptions for loan prepayment speeds, servicing costs, discount rates, and other economic factors; as such, the primary risk inherent in valuing mortgage servicing assets is the impact of fluctuating interest rates on the servicing revenue stream. Mortgage servicing assets are classified within Level 3 of the fair value hierarchy.
The estimated fair values of selected financial instruments and servicing assets are as follows:
 At September 30, 2017 At December 31, 2016
(In thousands)
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Assets:       
Level 2       
Held-to-maturity investment securities$4,497,311
 $4,481,675
 $4,160,658
 $4,125,125
Transferred loans held for sale—
 —
 7,317
 7,444
Level 3       
Loans and leases, net17,244,618
 17,155,002
 16,832,268
 16,678,106
Mortgage servicing assets25,140
 44,992
 24,466
 52,075
Alternative investments10,296
 12,539
 11,034
 13,189
Liabilities:       
Level 2       
Deposit liabilities$18,636,744
 $18,636,744
 $17,279,049
 $17,279,049
Time deposits2,218,491
 2,213,155
 2,024,808
 2,024,395
Securities sold under agreements to repurchase and other borrowings902,902
 905,249
 949,526
 955,660
FHLB advances (1)
1,507,681
 1,512,203
 2,842,908
 2,825,101
Long-term debt (1)
225,704
 235,686
 225,514
 225,514
(1)The following adjustments to the carrying amount are not included for determination of fair value, see Note 8: Borrowings:
•FHLB advances - unamortized premiums on advances
•Long-term debt - unamortized discount and debt issuance cost on senior fixed-rate notes

Note 14: Retirement Benefit Plans
Defined benefit pension and other postretirement benefits
The following table summarizes the components of net periodic benefit cost:
 Three months ended September 30,
 2017 2016
(In thousands)Pension PlanSERPOther Benefits Pension PlanSERPOther Benefits
Service cost$12
$—
$—
 $11
$—
$—
Interest cost on benefit obligations1,829
96
19
 2,110
98
32
Expected return on plan assets(3,074)—
—
 (3,067)—
—
Amortization of prior service cost—
—
—
 —
—
4
Recognized net loss1,466
136
(15) 1,666
106
8
Net periodic benefit cost$233
$232
$4
 $720
$204
$44

 Nine months ended September 30,
 2017 2016
(In thousands)Pension PlanSERPOther Benefits Pension PlanSERPOther Benefits
Service cost$37
$—
$—
 $34
$—
$—
Interest cost on benefit obligations5,486
281
69
 6,331
292
94
Expected return on plan assets(9,222)—
—
 (8,596)—
—
Amortization of prior service cost—
—
—
 —
—
11
Recognized net loss4,398
561
—
 4,998
319
26
Net periodic benefit cost$699
$842
$69
 $2,767
$611
$131


Note 15: Share-Based Plans
Stock compensation plans
Webster maintains stock compensation plans under which non-qualified stock options, incentive stock options, restricted stock, restricted stock units, or stock appreciation rights may be granted to employees and directors. The Company believes these share awards better align the interests of its employees with those of its shareholders. Stock compensation cost is recognized over the required service vesting period for the awards, based on the grant-date fair value, net of estimated forfeitures, and is included as a component of compensation and benefits reflected in non-interest expense.
The following table provides a summary of stock compensation expense recognized in the accompanying Condensed Consolidated Statements of Income:
 Three months ended September 30, Nine months ended September 30,
(In thousands)2017 2016 2017 2016
Stock options$—
 $—
 $—
 $43
Restricted stock3,007
 2,944
 9,050
 8,515
Total stock compensation expense$3,007
 $2,944
 $9,050
 $8,558

At September 30, 2017 there was $16.7 million of unrecognized stock compensation expense for restricted stock expected to be recognized over a weighted-average period of 2.0 years.
The following table provides a summary of the stock compensation plans activity for the nine months ended September 30, 2017:
 Restricted Stock Awards Outstanding Stock Options Outstanding
 Time-Based Performance-Based 
 
Number of
Shares
Weighted-Average
Grant Date
Fair Value
 
Number of
Units
Weighted-Average
Grant Date
Fair Value
 
Number of
Shares
Weighted-Average
Grant Date
Fair Value
 
Number  of
Shares
Weighted-Average
Exercise Price
Outstanding, at January 1, 2017253,361
$32.24
 2,158
$32.89
 116,184
$33.62
 1,072,974
$21.24
Granted164,953
54.79
 8,129
56.07
 89,581
56.18
 —
—
Exercised options—
—
 —
—
 —
—
 279,344
25.80
Vested restricted stock awards (1)
155,390
36.36
 6,900
48.82
 87,982
40.74
 —
—
Forfeited14,586
36.44
 —
—
 6,276
42.72
 —
—
Outstanding and exercisable, at September 30, 2017248,338
$43.96
 3,387
$56.07
 111,507
$45.61
 793,630
$19.63
(1)Vested for purposes of recording compensation expense.
Time-based restricted stock. Time-based restricted stock awards vest over the applicable service period ranging from 1 to 5 years. The number of time-based awards that may be granted to an eligible individual in a calendar year is limited to 100,000 shares. Compensation expense is recorded over the vesting period based on a fair value, which is measured using the Company's common stock closing price at the date of grant.
Performance-based restricted stock. Performance-based restricted stock awards vest after a 3 year performance period. The awards vest with a share quantity dependent on that performance, in a range from 0 to 150%. The performance criteria for 50% of the shares granted in 2017 is based upon Webster's ranking for total shareholder return versus Webster's compensation peer group companies and the remaining 50% is based upon Webster's average of return on equity during the three year vesting period. The compensation peer group companies are utilized because they represent the financial institutions that best compare with Webster. The Company records compensation expense over the vesting period, based on a fair value calculated using the Monte-Carlo simulation model, which allows for the incorporation of the performance condition for the 50% of the performance-based shares tied to total shareholder return versus the compensation peer group, and based on a fair value of the market price on the date of grant for the remaining 50% of the performance-based shares tied to Webster's return on equity. Compensation expense is subject to adjustment based on management's assessment of Webster's return on equity performance relative to the target number of shares condition.
Stock options. Stock option awards have an exercise price equal to the market price of Webster Financial Corporation's stock on the date of grant. Each option grants the holder the right to acquire a share of Webster Financial Corporation common stock over a contractual life of up to 10 years. All awarded options have vested. There were 735,785 non-qualified stock options and 57,845 incentive stock options outstanding at September 30, 2017.

Note 16: Segment Reporting
Webster’s operations are organized into three reportable segments that represent its primary businesses - Commercial Banking, Community Banking and HSA Bank. These three segments reflect how executive management responsibilities are assigned, the primary businesses, the products and services provided, the type of customer served, and how discrete financial information is currently evaluated. The Corporate Treasury unit of the Company, along with the amounts required to reconcile profitability metrics to amounts reported in accordance with GAAP, are included in the Corporate and Reconciling category.
Description of Segment Reporting Methodology
Webster’s reportable segment results are intended to reflect each segment as if it were a stand-alone business. Webster uses an internal profitability reporting system to generate information by operating segment, which is based on a series of management estimates and allocations regarding funds transfer pricing, provision for loan and lease losses, non-interest expense, income taxes, and equity capital. These estimates and allocations, certain of which are subjective in nature, are periodically reviewed and refined. Changes in estimates and allocations that affect the reported results of any operating segment do not affect the consolidated financial position or results of operations of Webster as a whole. The full profitability measurement reports, which are prepared for each operating segment, reflect non-GAAP reporting methodologies. The differences between full profitability and GAAP results are reconciled in the Corporate and Reconciling category.
Webster allocates interest income and interest expense to each business, while also transferring the primary interest rate risk exposures to the Corporate and Reconciling category, using a matched maturity funding concept called Funds Transfer Pricing. The allocation process considers the specific interest rate risk and liquidity risk of financial instruments and other assets and liabilities in each line of business. The matched maturity funding concept considers the origination date and the earlier of the maturity date or the repricing date of a financial instrument to assign an FTP rate for loans and deposits originated each day. Loans are assigned an FTP rate for funds used and deposits are assigned an FTP rate for funds provided. This process is executed by the Company’s Financial Planning and Analysis division and is overseen by ALCO.
Webster allocates the provision for loan and lease losses to each segment based on management’s estimate of the inherent loss content in each of the specific loan and lease portfolios. Provision expense for certain elements of risk that are not deemed specifically attributable to a reportable segment, such as the provision for the consumer liquidating portfolio, is shown as part of the Corporate and Reconciling category.
Webster allocates a majority of non-interest expense to each reportable segment using a full-absorption costing process. Costs, including corporate overhead, are analyzed, pooled by process, and assigned to the appropriate reportable segment. Income tax expense is allocated to each reportable segment based on the consolidated effective income tax rate for the period shown.
Segment Reporting Modifications
The 2016 segment results have been adjusted for comparability to the 2017 segment presentation for the following changes.
To further strengthen Webster's ability to deliver the totality of its products and services to the owners and executives of commercial clients and other high net worth individuals, an organizational change was made during the second quarter of 2017. Effective April 1, 2017, the head of Private Banking reports directly to the head of Commercial Banking. The current organizational structure reflects how executive management responsibilities are assigned and reviewed. As a result of this change, the Private Banking and Commercial Banking operating segments are aggregated into one reportable segment, Commercial Banking.
In late 2007 Webster discontinued its indirect residential construction lending and its indirect home equity lending outside of its primary New England market area referred to as National Wholesale Lending. Webster placed these two portfolios into a liquidating loan portfolio included within the Corporate and Reconciling category. The balance of the home equity liquidating loan portfolio was $65.0 million at December 31, 2016. As the remainder of this portfolio has been performing in the same manner as the continuing home equity portfolio, management has decided to combine the liquidating loan portfolio with the continuing home equity loan portfolio. The combined portfolio is included in the Community Banking reportable segment.
The following table presents total assets for Webster's reportable segments and the Corporate and Reconciling category:
 Total Assets
(In thousands)
Commercial
Banking
Community
Banking
HSA
Bank
Corporate and
Reconciling
Consolidated
Total
At September 30, 2017$9,428,676
$8,881,322
$76,090
$7,964,094
$26,350,182
At December 31, 20169,069,445
8,721,046
83,987
8,198,051
26,072,529

The following tables present the operating results, including all appropriate allocations, for Webster’s reportable segments and the Corporate and Reconciling category:
 Three months ended September 30, 2017
(In thousands)
Commercial
Banking
Community Banking
HSA
Bank
Corporate and
Reconciling
Consolidated
Total
Net interest income (expense)$81,925
$96,859
$26,713
$(4,593)$200,904
Provision (benefit) for loan and lease losses12,073
(1,923)—
—
10,150
Net interest income (expense) after provision for loan and lease losses69,852
98,782
26,713
(4,593)190,754
Non-interest income13,207
27,079
19,371
6,189
65,846
Non-interest expense38,339
92,478
27,222
3,784
161,823
Income (loss) before income tax expense44,720
33,383
18,862
(2,188)94,777
Income tax expense (benefit)14,363
10,605
6,006
(693)30,281
Net income (loss)$30,357
$22,778
$12,856
$(1,495)$64,496
 Three months ended September 30, 2016
(In thousands)
Commercial
Banking
Community Banking
HSA
Bank
Corporate and
Reconciling
Consolidated
Total
Net interest income (expense)$74,265
$91,995
$20,560
$(6,623)$180,197
Provision for loan and lease losses7,876
6,374
—
—
14,250
Net interest income (expense) after provision for loan and lease losses66,389
85,621
20,560
(6,623)165,947
Non-interest income15,916
29,130
16,900
4,466
66,412
Non-interest expense35,793
92,508
23,021
4,775
156,097
Income (loss) before income tax expense46,512
22,243
14,439
(6,932)76,262
Income tax expense (benefit)14,957
7,122
4,624
(2,258)24,445
Net income (loss)$31,555
$15,121
$9,815
$(4,674)$51,817
 Nine months ended September 30, 2017
(In thousands)
Commercial
Banking
Community
Banking
HSA
Bank
Corporate and
Reconciling
Consolidated
Total
Net interest income (expense)$239,118
$286,351
$76,339
$(10,453)$591,355
Provision for loan and lease losses29,562
(1,662)—
—
27,900
Net interest income (expense) after provision for loan and lease losses209,556
288,013
76,339
(10,453)563,455
Non-interest income39,163
80,516
58,392
15,368
193,439
Non-interest expense113,767
281,979
84,211
10,069
490,026
Income (loss) before income tax expense134,952
86,550
50,520
(5,154)266,868
Income tax expense (benefit)41,125
26,374
15,395
(1,572)81,322
Net income (loss)$93,827
$60,176
$35,125
$(3,582)$185,546
 Nine months ended September 30, 2016
(In thousands)
Commercial
Banking
Community
Banking
HSA
Bank
Corporate and
Reconciling
Consolidated
Total
Net interest income (expense)$211,422
$274,186
$60,484
$(12,838)$533,254
Provision for loan and lease losses29,765
14,085
—
—
43,850
Net interest income (expense) after provision for loan and lease losses181,657
260,101
60,484
(12,838)489,404
Non-interest income41,819
83,248
54,969
13,825
193,861
Non-interest expense103,336
276,045
71,966
9,973
461,320
Income (loss) before income tax expense120,140
67,304
43,487
(8,986)221,945
Income tax expense (benefit)39,233
21,979
14,201
(2,935)72,478
Net income (loss)$80,907
$45,325
$29,286
$(6,051)$149,467


Note 17: Commitments and Contingencies
Credit-Related Financial Instruments
The Company offers credit-related financial instruments in the normal course of business to meet certain financing needs of its customers, that involve off-balance sheet risk. These transactions may include an unused commitment to extend credit, standby letter of credit, or commercial letter of credit. Such transactions involve, to varying degrees, elements of credit risk.
The following table summarizes the outstanding amounts of credit-related financial instruments with off-balance sheet risk:
(In thousands)At September 30, 2017 At December 31, 2016
Commitments to extend credit$5,043,151
 $5,224,280
Standby letter of credit159,485
 128,985
Commercial letter of credit42,007
 46,497
Total credit-related financial instruments with off-balance sheet risk$5,244,643
 $5,399,762

Commitments to Extend Credit. The Company makes commitments under various terms to lend funds to customers at a future point in time. These commitments include revolving credit arrangements, term loan commitments, and short-term borrowing agreements. Most of these loans have fixed expiration dates or other termination clauses where a fee may be required. Since commitments routinely expire without being funded, or after required availability of collateral occurs, the total commitment amount does not necessarily represent future liquidity requirements.
Standby Letter of Credit.A standby letter of credit commits the Company to make payments on behalf of customers if certain specified future events occur. The Company has recourse against the customer for any amount required to be paid to a third party under a standby letter of credit, which is often part of a larger credit agreement under which security is provided. Historically, a large percentage of standby letters of credit expire without being funded. The contractual amount of a standby letter of credit represents the maximum amount of potential future payments the Company could be required to make, and is the Company's maximum credit risk.
Commercial Letter of Credit.A commercial letter of credit is issued to facilitate either domestic or foreign trade arrangements for customers. As a general rule, drafts are committed to be drawn when the goods underlying the transaction are in transit. Similar to a standby letter of credit, a commercial letter of credit is often secured by an underlying security agreement including the assets or inventory to which they relate.
These commitments subject the Company to potential exposure in excess of the amounts recorded in the financial statements, and therefore, management maintains a specific reserve for unfunded credit commitments. This reserve is reported as a component of accrued expenses and other liabilities in the accompanying Condensed Consolidated Balance Sheets.
The following table provides a summary of activity in the reserve for unfunded credit commitments:
 Three months ended September 30, Nine months ended September 30,
(In thousands)2017 2016 2017 2016
Beginning balance$2,544
 $2,319
 $2,287
 $2,119
Provision charged to expense—
 172
 257
 372
Ending balance$2,544
 $2,491
 $2,544
 $2,491

Litigation
Webster is involved in routine legal proceedings occurring in the ordinary course of business and is subject to loss contingencies related to such litigation and claims arising therefrom. Webster evaluates these contingencies based on information currently available, including advice of counsel and assessment of available insurance coverage. Webster establishes an accrual for litigation and claims when a loss contingency is considered probable and the related amount is reasonably estimable. This accrual is periodically reviewed and may be adjusted as circumstances change. Webster also estimates certain loss contingencies for possible litigation and claims, whether or not there is an accrued probable loss. Webster believes it has defenses to all the claims asserted against it in existing litigation matters and intends to defend itself in all matters.
Based upon its current knowledge, after consultation with counsel and after taking into consideration its current litigation accrual, Webster believes that at September 30, 2017 any reasonably possible losses, in addition to amounts accrued, are not material to Webster’s consolidated financial condition. However, in light of the uncertainties involved in such actions and proceedings, there is no assurance that the ultimate resolution of these matters will not significantly exceed the amounts currently accrued by Webster or that the Company’s litigation accrual will not need to be adjusted in future periods. Such an outcome could be material to the Company’s operating results in a particular period, depending on, among other factors, the size of the loss or liability imposed and the level of the Company’s income for that period.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company’s Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.
interLINK Acquisition
On January 11, 2023, Webster acquired interLINK, a technology-enabled deposit management platform that administers over $9 billion of deposits from FDIC-insured cash sweep programs between banks and broker/dealers and clearing firms. The acquisition expanded the Company's core deposit funding sources and scalable liquidity and added another technology-enabled channel to its already differentiated, omnichannel deposit gathering capabilities. At June 30, 2023, interLINK provided the Company with an additional $4.3 billion of money market deposits.
Additional information regarding the acquisition of interLINK can be found within Note 2: Mergers and Acquisitions in the Notes thereto, forto Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.
Sterling Integration Update
On January 31, 2022, Webster completed its merger with Sterling. Significant progress on integration and conversion efforts was made throughout the year ended December 31, 2016, included2022, and the Company remains on track with key project milestones as of the second quarter of 2023, with a continued focus on business-as-usual operations.
The significant accomplishments achieved as of the end of the second quarter of 2023 were as follows:
1.The completion of final preparations for core conversion, including additional systems integrations and data validation exercises, user acceptance testing, financial center staffing and training plans, three mock conversions, employee training on new systems and processes, and customer communications;
2.The consolidation of bank routing numbers;
3.The connection of the ATM network to the go-forward environment; and
4.The implementation of a new call center interactive voice response system.
As originally planned, the core conversion of legacy Webster and legacy Sterling was completed in July 2023.
1

LIBOR Transition Update
The Company has a LIBOR transition plan in place that is commensurate with identified LIBOR transition risks and exposures, and is aligned with regulatory guidance and ARRC best practices. In preparation for the June 30, 2023 deadline for LIBOR cessations, management made significant progress on its 2016 Form 10-K,LIBOR transition plan throughout the first and in conjunctionsecond quarters of 2023, addressing emerging issues and risks as they arose, while closely monitoring legislative and regulatory guidance associated with the Condensed Consolidated Financial StatementsLIBOR transition.
Effective July 1, 2023, LIBOR is no longer published for the overnight, one-month, three-month, six-month, and Notes thereto included in Item 1twelve-month settings. Alternative reference rates, including Federal fall-backs, which are to be used to various products, have been incorporated into the Company's LIBOR remediation plans. As of the date of this report. Operating results forQuarterly Report on Form 10-Q, the three and nine months ended September 30, 2017 are not necessarily indicativeCompany remains focused on its remediation of the results for the full year ending December 31, 2017, or any future period.final remaining legacy LIBOR contracts, which are to transition to their applicable alternate reference rate at their first rate reset date after June 30, 2023. The Company also continues to monitor and respond to market developments, and regulatory and accounting requirements.
Application of Critical Accounting Policies and Accounting Estimates
The Company’s significant accounting policies are described in Note 1 to the Consolidated Financial Statements included in its 2016 Form 10-K. Modifications to significant accounting policies made during the year are described in Note 1 to the Condensed Consolidated Financial Statements included in Item 1 of this report. The preparation of the Condensed Consolidated Financial Statements in accordance with GAAP and practices generally applicable to the financial services industry requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and to disclose contingent assets and liabilities. Actual results could differ from those estimates.
Management has identified the Company's most critical accounting policies as:
allowance for loan and lease losses;
fair value measurements for valuation of investments and other financial instruments;
evaluation for impairment of goodwill and other intangible assets; and
assessing the realizability of deferred tax assets and the measurement of uncertain tax positions.
These particular significant accounting policies are considered most critical in that they are important to the Company’s financial condition and results, and they require management’s subjective and complex judgment as a result of the need to make estimates about the effects of matters that are inherently uncertain. The accounting policies and estimates, including the nature of the estimates and types of assumptions used, are described throughout Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Webster's 2016 Form 10-K and Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this report.
Results of Operations
SelectedThe following table summarizes selected financial highlights are presented inand key performance indicators:
 At or for the three months ended June 30,At or for the six months ended June 30,
(In thousands, except per share and ratio data)2023202220232022
Income and performance ratios:
Net income$234,968 $182,311 $455,972 $165,564 
Net income available to common stockholders230,806 178,148 447,647 157,970 
Earnings per diluted common share1.32 1.00 2.57 0.97 
Return on average assets (annualized)1.23 %1.10 %1.23 %0.55 %
Return on average tangible common stockholders' equity (annualized) (non-GAAP)18.12 14.50 17.89 7.11 
Return on average common stockholders' equity (annualized)11.38 9.09 11.16 4.42 
Non-interest income as a percentage of total revenue13.28 19.90 11.96 20.34 
Asset quality:
ACL on loans and leases$628,911 $571,499 $628,911 $571,499 
Non-performing assets (1)
222,215 250,242 222,215 250,242 
ACL on loans and leases / total loans and leases1.22 %1.25 %1.22 %1.25 %
Net charge-offs / average loans and leases (annualized)0.16 0.09 0.18 0.09 
Non-performing loans and leases / total loans and leases (1)
0.42 0.54 0.42 0.54 
Non-performing assets / total loans and leases plus OREO (1)
0.43 0.55 0.43 0.55 
ACL on loans and leases / non-performing loans and leases (1)
287.35 230.88 287.35 230.88 
Other ratios:
Tangible common equity (non-GAAP)7.23 %7.68 %7.23 %7.68 %
Tier 1 risk-based capital11.16 11.65 11.16 11.65 
Total risk-based capital13.25 13.91 13.25 13.91 
CET1 risk-based capital10.65 11.09 10.65 11.09 
Stockholders' equity / total assets11.18 11.83 11.18 11.83 
Net interest margin3.35 3.28 3.50 3.24 
Efficiency ratio (non-GAAP)42.20 45.25 41.92 46.82 
Equity and share related:
Common equity$7,995,747 $7,713,809 $7,995,747 $7,713,809 
Book value per common share46.15 43.82 46.15 43.82 
Tangible book value per common share (non-GAAP)29.69 28.31 29.69 28.31 
Common stock closing price37.75 42.15 37.75 42.15 
Dividends and equivalents declared per common share0.40 0.40 0.80 0.80 
Common shares outstanding173,261 176,041 173,261 176,041 
Weighted-average common shares outstanding - basic172,739 175,845 172,752 161,698 
Weighted-average common shares outstanding - diluted172,803 175,895 172,839 161,785 
(1)Non-performing asset balances and related asset quality ratios exclude the following table:impact of net unamortized (discounts)/premiums and net unamortized deferred (fees)/costs on loans and leases.
2

 At or for the three months ended September 30, At or for the nine months ended September 30,
(In thousands, except per share and ratio data)2017 2016 2017 2016
Earnings:       
Net interest income$200,904
 $180,197
 $591,355
 $533,254
Provision for loan and lease losses10,150
 14,250
 27,900
 43,850
Total non-interest income65,846
 66,412
 193,439
 193,861
Total non-interest expense161,823
 156,097
 490,026
 461,320
Net income64,496
 51,817
 185,546
 149,467
Earnings applicable to common shareholders62,426
 49,634
 179,262
 142,927
Share Data:       
Weighted-average common shares outstanding - diluted92,503
 91,857
 92,412
 91,776
Diluted earnings per common share$0.67
 $0.54
 $1.94
 $1.56
Dividends and dividend equivalents declared per common share0.26
 0.25
 0.77
 0.73
Dividends declared per Series E preferred share400.00
 400.00
 1,200.00
 1,200.00
Book value per common share27.34
 26.06
 27.34
 26.06
Tangible book value per common share (non-GAAP)
21.16
 19.80
 21.16
 19.80
Selected Ratios:       
Net interest margin3.30% 3.10% 3.27% 3.10%
Return on average assets (annualized basis)
0.98
 0.82
 0.95
 0.80
Return on average common shareholders' equity (annualized basis)
9.95
 8.36
 9.67
 8.16
CET1 risk-based capital10.99
 10.48
 10.99
 10.48
Tangible common equity ratio (non-GAAP)
7.55
 7.25
 7.55
 7.25
Return on average tangible common shareholders' equity (annualized basis) (non-GAAP)
12.99
 11.24
 12.71
 11.04
Efficiency ratio (non-GAAP)
59.18
 61.43
 60.62
 61.63

Non-GAAP Financial Measures
The non-GAAP financial measures identified in the preceding table provide both management and investors with information useful in understanding Webster's financial position, results of operations, the Company's financial performance, performance trendsstrength of its capital position, and financial position.overall business performance. These measures are used by management for internal planning and forecasting purposes, as well as by securities analysts, investors, and other interested parties to compareassess peer company operating performance. Management believes that thethis presentation, together with the accompanying reconciliations, provides investors with a more complete understanding of the factors and trends affecting the Company's business and allows investors to view 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 measures 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 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.
These non-GAAP financial measures should not be considered a substitute for GAAP basis measures and results.financial measures. Because
non-GAAP financial measures are not standardized, it may not be possible to compare these measures with other companies that present financial measures having the same or similar names.
The following tables reconcile the non-GAAP financial measures withto the most comparable financial measures defined by GAAP:
At June 30,
(Dollars and shares in thousands, except per share data)20232022
Tangible book value per common share:
Stockholders' equity$8,279,726 $7,997,788 
Less: Preferred stock283,979 283,979 
Common stockholders' equity$7,995,747 $7,713,809 
Less: Goodwill and other intangible assets2,852,117 2,729,551 
Tangible common stockholders' equity$5,143,630 $4,984,258 
Common shares outstanding173,261 176,041 
Tangible book value per common share$29.69 $28.31 
Book value per common share (GAAP)$46.15 $43.82 
Tangible common equity ratio:
Tangible common stockholders' equity$5,143,630 $4,984,258 
Total assets$74,038,243 $67,595,021 
Less: Goodwill and other intangible assets2,852,117 2,729,551 
Tangible assets$71,186,126 $64,865,470 
Tangible common equity ratio7.23 %7.68 %
Total common stockholders' equity to total assets (GAAP)10.80 %11.41 %
3

 At September 30,
(Dollars and shares in thousands, except per share data)2017 2016
Tangible book value per common share (non-GAAP):   
Shareholders' equity (GAAP)$2,638,787
 $2,511,629
Less: Preferred stock (GAAP)122,710
 122,710
         Goodwill and other intangible assets (GAAP)568,962
 573,129
Tangible common shareholders' equity (non-GAAP)$1,947,115
 $1,815,790
Common shares outstanding92,034
 91,687
Tangible book value per common share (non-GAAP)$21.16
 $19.80
    
Tangible common equity ratio (non-GAAP):   
Tangible common shareholders' equity (non-GAAP)$1,947,115
 $1,815,790
Total Assets (GAAP)$26,350,182
 $25,633,617
Less: Goodwill and other intangible assets (GAAP)568,962
 573,129
Tangible assets (non-GAAP)$25,781,220
 $25,060,488
Tangible common equity ratio (non-GAAP)7.55% 7.25%
Three months ended June 30,Six months ended June 30,
(Dollars in thousands)2023202220232022
Return on average tangible common stockholders' equity:
Net income$234,968 $182,311 $455,972 $165,564 
Less: Preferred stock dividends4,162 4,163 8,325 7,594 
Add: Intangible assets amortization, tax-effected7,262 6,954 14,765 11,999 
Income adjusted for preferred stock dividends and
intangible assets amortization		$238,068 $185,102 $462,412 $169,969 
Income adjusted for preferred stock dividends and
intangible assets amortization (annualized)		$952,272 $740,408 $924,824 $339,938 
Average stockholders' equity$8,395,298 $8,125,518 $8,305,983 $7,412,465 
Less: Average preferred stock283,979 283,979 283,979 260,183 
 Average goodwill and other intangible assets2,856,581 2,733,827 2,853,146 2,372,554 
Average tangible common stockholders' equity$5,254,738 $5,107,712 $5,168,858 $4,779,728 
Return on average tangible common stockholders' equity (annualized)18.12 %14.50 %17.89 %7.11 %
Return on average common stockholders' equity (annualized) (GAAP)11.38 %9.09 %11.16 %4.42 %
Efficiency ratio:
Non-interest expense$344,089 $358,227 $676,556 $718,012 
Less: Foreclosed property activity(432)(358)(694)(433)
 Intangible assets amortization9,193 8,802 18,690 15,189 
Operating lease depreciation1,639 2,425 3,523 4,057 
 Merger-related expenses40,840 66,640 70,213 175,135 
Strategic initiatives charges— (152)— (4,292)
Non-interest expense$292,849 $280,870 $584,824 $528,356 
Net interest income$583,829 $486,660 $1,179,112 $880,908 
Add: Tax-equivalent adjustment17,292 11,732 33,203 19,890 
 Non-interest income89,374 120,933 160,140 224,968 
 Other income (1)
5,035 3,805 9,346 6,887 
Less: Operating lease depreciation1,639 2,425 3,523 4,057 
         (Loss) on sale of investment securities(48)— (16,795)— 
Income$693,939 $620,705 $1,395,073 $1,128,596 
Efficiency ratio42.20 %45.25 %41.92 %46.82 %
Non-interest expense as a percentage of total revenue (GAAP)51.11 %58.96 %50.52 %64.93 %
(1)Other income (non-GAAP) includes the taxable equivalent of net income generated from LIHTC investments.
4
 Three months ended September 30, Nine months ended September 30,
(Dollars in thousands)2017 2016 2017 2016
Return on average tangible common shareholders' equity (non-GAAP):       
Net income (GAAP)$64,496
 $51,817
 $185,546
 $149,467
Less: Preferred stock dividends (GAAP)2,024
 2,024
 6,072
 6,072
Add: Intangible assets amortization, tax-affected at 35% (GAAP)651
 970
 2,005
 2,971
Income adjusted for preferred stock dividends and intangible assets amortization (non-GAAP)$63,123
 $50,763
 $181,479
 $146,366
Income adjusted for preferred stock dividends and intangible assets amortization, annualized (non-GAAP)$252,492
 $203,052
 $241,972
 $195,155
Average shareholders' equity (non-GAAP)$2,635,312
 $2,503,960
 $2,597,574
 $2,466,414
Less: Average preferred stock (non-GAAP)122,710
 122,710
 122,710
 122,710
 Average goodwill and other intangible assets (non-GAAP)569,538
 573,978
 570,562
 575,491
Average tangible common shareholders' equity (non-GAAP)$1,943,064
 $1,807,272
 $1,904,302
 $1,768,213
Return on average tangible common shareholders' equity (non-GAAP)12.99% 11.24% 12.71% 11.04%
        
Efficiency ratio (non-GAAP):       
Non-interest expense (GAAP)$161,823
 $156,097
 $490,026
 $461,320
Less: Foreclosed property activity (GAAP)(72) 45
 (141) (236)
 Intangible assets amortization (GAAP)1,002
 1,493
 3,085
 4,570
 Other expense (non-GAAP)213
 793
 2,923
 2,270
Non-interest expense (non-GAAP)$160,680
 $153,766
 $484,159
 $454,716
Net interest income (GAAP)$200,904
 $180,197
 $591,355
 $533,254
Add: Tax-equivalent adjustment (non-GAAP)4,340
 3,478
 12,509
 9,735
 Non-interest income (GAAP)65,846
 66,412
 193,439
 193,861
Less: Gain on sale of investment securities, net (GAAP)—
 —
 —
 414
 Other (non-GAAP)(431) (236) (1,377) (1,372)
Income (non-GAAP)$271,521
 $250,323
 $798,680
 $737,808
Efficiency ratio (non-GAAP)59.18% 61.43% 60.62% 61.63%


Net Interest Income
Financial Performance
Comparison to Prior Year Quarter
For the three months ended September 30, 2017, income before income tax expense of $94.8 million increased $18.5 million, or 24.3%, compared to the three months ended September 30, 2016. Net interest income increased 11.5%,is the provision for loanCompany's primary source of revenue, representing 86.7% and lease losses decreased 28.8%, non-interest income decreased 0.9%, and non-interest expense increased 3.7%.
After income tax expense88.0% of $30.3 million and $24.4 milliontotal revenues for the three and six months ended SeptemberJune 30, 20172023, respectively, and 2016, respectively, net income was $64.5 million80.1% and diluted earnings per share was $0.6779.7% of total revenues for the three and six months ended SeptemberJune 30, 2017 compared to net income of $51.8 million and diluted earnings per share of $0.54 for the three months ended September 30, 2016.
Comparison to Prior Year to Date
For the nine months ended September 30, 2017, income before income tax expense of $266.9 million increased $44.9 million, or 20.2%, compared to the nine months ended September 30, 2016. Net interest income increased 10.9%, the provision for loan and lease losses decreased 36.4%, non-interest income was flat, and non-interest expense increased 6.2%.
After income tax expense of $81.3 million and $72.5 million for the nine months ended September 30, 2017 and 2016, respectively, net income was $185.5 million and diluted earnings per share was $1.94 for the nine months ended September 30, 2017 compared to net income of $149.5 million and diluted earnings per share of $1.56 for the nine months ended September 30, 2016.

The following tables summarize daily average balances, interest, yield/rate, and net interest margin on a fully tax-equivalent basis:
 Three months ended September 30,
 2017 2016
(Dollars in thousands)Average
Balance		InterestYield/Rate Average
Balance		InterestYield/Rate
        
Assets       
Interest-earning assets:       
Loans and leases$17,364,519
$182,269
4.14% $16,423,642
$157,926
3.80%
Investment securities (based upon historical amortized cost)
6,994,661
51,130
2.92
 6,784,652
49,282
2.91
FHLB and FRB stock135,943
1,482
4.33
 185,104
1,478
3.18
Interest-bearing deposits58,193
173
1.17
 53,852
67
0.49
Loans held for sale34,939
307
3.51
 58,299
440
3.02
Total interest-earning assets24,588,255
$235,361
3.78% 23,505,549
$209,193
3.53%
Non-interest-earning assets1,721,591
   1,752,981
  
Total Assets$26,309,846
   $25,258,530
  
        
Liabilities and Shareholders' Equity       
Interest-bearing liabilities:       
Demand deposits$4,201,723
$—
—% $4,011,712
$—
—%
Savings, checking, & money market deposits14,577,673
10,229
0.28
 13,257,559
7,005
0.21
Time deposits2,155,743
6,531
1.20
 2,009,433
5,589
1.11
Total deposits20,935,139
16,760
0.32
 19,278,704
12,594
0.26
        
Securities sold under agreements to repurchase and other borrowings904,854
3,847
1.66
 909,560
3,447
1.48
FHLB advances1,362,165
6,894
1.98
 2,158,911
6,979
1.26
Long-term debt225,673
2,616
4.64
 225,414
2,498
4.43
Total borrowings2,492,692
13,357
2.11
 3,293,885
12,924
1.54
Total interest-bearing liabilities23,427,831
$30,117
0.51% 22,572,589
$25,518
0.45%
Non-interest-bearing liabilities246,703
   181,981
  
Total liabilities23,674,534
   22,754,570
�� 
        
Preferred stock122,710
   122,710
  
Common shareholders' equity2,512,602
   2,381,250
  
Total shareholders' equity2,635,312
   2,503,960
  
Total Liabilities and Shareholders' Equity$26,309,846
   $25,258,530
  
Tax-equivalent net interest income $205,244
   $183,675
 
Less: Tax-equivalent adjustments (4,340)   (3,478) 
Net interest income $200,904
   $180,197
 
Net interest margin  3.30%   3.10%
 

 Nine months ended September 30,
 2017 2016
(Dollars in thousands)Average
Balance		InterestYield/Rate Average
Balance		InterestYield/Rate
        
Assets       
Interest-earning assets:       
Loans and leases$17,225,217
$526,419
4.05% $16,101,807
$461,399
3.79%
Investment securities (based upon historical amortized cost)
7,031,738
157,550
2.98
 6,861,128
153,280
2.98
FHLB and FRB stock160,911
4,732
3.93
 188,692
4,315
3.05
Interest-bearing deposits63,684
472
0.98
 57,692
216
0.49
Loans held for sale31,373
826
3.51
 40,739
1,006
3.29
Total interest-earning assets24,512,923
$689,999
3.73% 23,250,058
$620,216
3.54%
Non-interest-earning assets1,666,080
   1,768,426
  
Total Assets$26,179,003
   $25,018,484
  
        
Liabilities and Shareholders' Equity       
Interest-bearing liabilities:       
Demand deposits$4,039,738
$—
—% $3,802,873
$—
—%
Savings, checking & money market deposits14,315,225
26,732
0.25
 13,010,427
20,481
0.21
Time deposits2,079,021
18,142
1.17
 2,027,336
16,786
1.11
Total deposits20,433,984
44,874
0.29
 18,840,636
37,267
0.26
        
Securities sold under agreements to repurchase and other borrowings884,975
10,970
1.63
 943,458
10,999
1.53
FHLB advances1,829,175
22,543
1.63
 2,340,055
21,517
1.21
Long-term debt225,607
7,748
4.58
 225,651
7,444
4.40
Total borrowings2,939,757
41,261
1.85
 3,509,164
39,960
1.50
Total interest-bearing liabilities23,373,741
$86,135
0.49% 22,349,800
$77,227
0.46%
Non-interest-bearing liabilities207,688
   202,270
  
Total liabilities23,581,429
   22,552,070
  
        
Preferred stock122,710
   122,710
  
Common shareholders' equity2,474,864
   2,343,704
  
Total shareholders' equity2,597,574
   2,466,414
  
Total Liabilities and Shareholders' Equity$26,179,003
   $25,018,484
  
Tax-equivalent net interest income $603,864
   $542,989
 
Less: Tax-equivalent adjustments (12,509)   (9,735) 
Net interest income $591,355
   $533,254
 
Net interest margin  3.27%   3.10%
 

2022, respectively. Net interest income is the difference between interest income on earninginterest-earning assets such as(i.e., loans and investments,leases and investment securities) and interest expense on interest-bearing liabilities such as(i.e., deposits and borrowings,borrowings), which are used to fund those assets. Net interest income is the Company's largest source of revenue, representing 75.4% of total revenue for the nine months ended September 30, 2017.interest-earning assets and other activities. Net interest margin is calculated as the ratio of tax-equivalentFTE net interest income to average earning assets forinterest-earning assets.
Net interest income, net interest margin, yields, and ratios on a FTE basis are considered non-GAAP financial measures, and are used by management to evaluate the period.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%.
Net interest income and net interest margin are impactedinfluenced by the level of interest rates,volume and mix of assets earning and liabilities paying those interest rates, and the volume of interest-earning assets and interest-bearing liabilities.liabilities, changes in interest rate levels, re-pricing frequencies, contractual maturities, prepayment behavior, and the use of interest rate derivative financial instruments. These conditionsfactors are influencedaffected by changes in economic conditions, that impact interest rate policy, competitive conditions that impact loanwhich impacts monetary policies, competition for loans and deposit pricing strategies,deposits, as well as the extent of interest lost toon non-performing assets.
Webster manages the risk of changes in interest rates on net interest income and net interest margin through ALCO and through related interest rate risk monitoring and management policies. Four main tools are used for managing interest rate risk:
the size, duration and credit risk of the investment portfolio,
the size and duration of the wholesale funding portfolio,
off-balance sheet interest rate contracts, and
the pricing and structure of loans and deposits.
ALCO meets at least monthly to make decisions on the investment and funding portfolios based on the economic outlook, its interest rate expectations, the portfolio risk position, and other factors.
The Federal Open Market Committee increased the federal funds rate target range from 0.50-0.75% at December 31, 2016, to 0.75-1.00% effective March 16, 2017 and, to 1.00-1.25% effective June 15, 2017. See the "Asset/Liability Management and Market Risk" section for further discussion of Webster’s interest rate risk position.
Net Interest Income
Comparison to Prior Year Quarter
Net interest income totaled $200.9increased $97.1 million, or 20.0%, from $486.7 million for the three months ended SeptemberJune 30, 2017 compared2022, to $180.2$583.8 million for the three months ended SeptemberJune 30, 2016, an increase of $20.7 million.2023. On a fully tax-equivalentFTE basis, net interest income increased $21.6 million when compared to the same period in 2016. The increase$102.7 million. Net interest margin increased 7 basis points from 3.28% for the three months ended SeptemberJune 30, 2017 was primarily the result of a significant increase in loan balances and yield improvement of 34 basis points, while investment balances remained flat but the reinvestment spreads on those assets improved. Net interest margin increased 20 basis points2022, to 3.30%3.35% for the three months ended SeptemberJune 30, 20172023. These increases are primarily due to the higher interest rate environment.
Average total interest-earning assets increased $10.0 billion, or 16.7%, from 3.10%$60.1 billion for the three months ended SeptemberJune 30, 2016.2022, to $70.1 billion for the three months ended June 30, 2023, primarily due to increases of $7.1 billion, $3.0 billion, and $0.2 billion in average loans and leases, average interest-bearing deposits held at the FRB, and average FHLB and FRB stock, respectively, partially offset by a $0.4 billion decrease in average investment securities. The average yield on interest-earning assets increased 186 basis points from 3.46% for the three months ended June 30, 2022, to 5.32% for the three months ended June 30, 2023, primarily due to the higher interest rate environment, partially offset by a decrease in purchase accounting accretion on interest-earning assets that were acquired from Sterling.
Average loans and leases increased $7.1 billion, or 16.0%, from $44.1 billion for the three months ended June 30, 2022, to $51.2 billion for the three months ended June 30, 2023, primarily due to organic loan growth, partially offset by commercial loan sales. At June 30, 2023, and 2022, average loans and leases comprised 73.0% and 73.5% of total average interest-earning assets, respectively. The average yield on loans and leases increased 214 basis points from 3.92% for the three months ended June 30, 2022, to 6.06% for the three months ended June 30, 2023, primarily due to the higher interest rate environment, partially offset by a decrease in purchase accounting accretion on loans and leases that were acquired from Sterling.
Average interest-bearing deposits held at the FRB increased $3.0 billion, or 621.8%, from $0.5 billion for the three months ended June 30, 2022, to $3.5 billion for the three months ended June 30, 2023, which was a direct result of the Company's risk management approach to hold higher levels of on-balance sheet liquidity in the second quarter of 2023. At June 30, 2023, and 2022, average interest-bearing deposits held at the FRB comprised 5.0% and 0.8% of total average interest-earning assets, respectively. The average yield on interest-bearing deposits held at the FRB increased 426 basis points from 0.79% for the three months ended June 30, 2022, to 5.05% for the three months ended June 30, 2023, primarily due to the higher interest rate environment.
Average FHLB and FRB stock increased $0.2 billion, or 95.5%, from $0.3 billion for the three months ended June 30, 2022, to $0.5 billion for the three months ended June 30, 2023, primarily due to the additional FHLB stock investment required as a result of the increase in FHLB advances. At June 30, 2023, and 2022, average FHLB and FRB stock comprised 0.7% and 0.4% of total average interest-earning assets, respectively. The average yield on FHLB and FRB stock increased 205 basis points from 3.16% for the three months ended June 30, 2022, to 5.21% for the three months ended June 30, 2023, primarily due to the higher interest rate environment.
Average total investment securities decreased $0.4 billion, or 2.5%, from $15.2 billion for the three months ended June 30, 2022, to $14.8 billion for the three months ended June 30, 2023, primarily due to a higher volume of purchase activity in the second quarter of 2022, and the sale of U.S Treasury notes and Corporate debt securities at the end of the first quarter of 2023. At June 30, 2023, and 2022, the average total investment securities portfolio comprised 21.1% and 25.3% of total average interest-earning assets, respectively. The average yield on investment securities increased 77 basis points from 2.22% for the three months ended June 30, 2022, to 2.99% for the three months ended June 30, 2023, primarily due to the reinvestment of securities that either had matured or were sold at higher yields.

5

Average total interest-bearing liabilities increased $9.9 billion, or 17.5%, from $56.7 billion for the three months ended June 30, 2022, to $66.6 billion for the three months ended June 30, 2023, primarily due to increases of $5.5 billion and $5.2 billion in average FHLB advances and average total deposits, respectively, partially offset by decreases of $0.5 billion and $0.3 billion in average federal funds purchased and average securities sold under agreements to repurchase, respectively. The average rate on interest-bearing liabilities increased 191 basis points from 0.19% for the three months ended June 30, 2022, to 2.10% for the three months ended June 30, 2023, primarily due to the higher interest rate environment.
Average FHLB advances increased $5.5 billion, or 481.4%, from $1.2 billion for the three months ended June 30, 2022 to $6.7 billion for the three months ended June 30, 2023, primarily due to short-term funding needs and a direct result of the Company's risk management approach to hold higher levels of on-balance sheet liquidity in the second quarter of 2023. At June 30, 2023, and 2022, average FHLB advances comprised 10.1% and 2.0% of total average interest-bearing liabilities, respectively. The average rate on FHLB advances increased 413 basis points from 1.08% for the three months ended June 30, 2022, to 5.21% for the three months ended June 30, 2023, primarily due to the higher interest rate environment.
Average total deposits increased $5.2 billion, or 9.7%, from $53.4 billion for the three months ended June 30, 2022, to $58.6 billion for the three months ended June 30, 2023, reflecting a $7.2 billion increase in interest-bearing deposits, partially offset by a $2.0 billion decrease in non-interest-bearing deposits. The overall increase in deposits was primarily due to the acquisition of interLINK and organic deposit growth. At June 30, 2023, and 2022, average total deposits comprised 88.0% and 94.2% of total average interest-bearing liabilities, respectively. The average rate on deposits increased 163 basis points from 0.09% for the three months ended June 30, 2022, to 1.72% for the three months ended June 30, 2023, primarily due to the higher interest rate environment and growth in higher costing deposit products. Higher cost time deposits as a percentage of average total interest-bearing deposits increased from 6.7% for the three months ended June 30, 2022, to 15.2% for the three months ended June 30, 2023, primarily due to a shift in customer preferences from lower rate checking and savings products into higher rate certificates of deposit products.
Average federal funds purchased were $0.5 billion for the three months ended June 30, 2022, and had an average rate of 0.93%. There were no average federal funds purchased for the three months ended June 30, 2023. At June 30, 2022, average federal funds purchased comprised 0.9% of total average interest-bearing liabilities.
Average securities sold under agreements to repurchase decreased $0.3 billion, or 59.3%, from $0.5 billion for the three months ended June 30, 2022, to $0.2 billion for the three months ended June 30, 2023, primarily due to the Company's extinguishment of its two long-term structured repurchase agreements during the third quarter of 2022, and the overall timing of maturities. At June 30, 2023, and 2022, average securities sold under agreements to repurchase comprised 0.3% and 0.9% of total average interest-bearing liabilities, respectively. The average rate on securities sold under agreements to repurchase decreased 95 basis points from 1.06% for the three months ended June 30, 2022, to 0.11% for the three months ended June 30, 2023, primarily due to the Company's extinguishment of its two long-term structured repurchase agreements during the third quarter of 2022, which were contracted at a higher cost.
Comparison to Prior Year to Date
Net interest income totaled $591.4increased $298.2 million, or 33.9%, from $880.9 million for the ninesix months ended SeptemberJune 30, 2017 compared2022, to $533.3 million$1.2 billion for the ninesix months ended SeptemberJune 30, 2016, an increase of $58.1 million.2023. On a fully tax-equivalentFTE basis, net interest income increased $60.9 million when compared to the same period in 2016. The increase for the nine months ended September 30, 2017 was primarily the result of a significant increase in loan balances and yield improvement of 26 basis points, bearing greater weight on net interest margin than flat investment balances and reinvestment spreads on those assets.$311.5 million. Net interest margin increased 1726 basis points to 3.27%from 3.24% for the ninesix months ended SeptemberJune 30, 2017 from 3.10%2022, to 3.50% for the ninesix months ended SeptemberJune 30, 2016.2023. These increases are primarily attributed to the higher interest rate environment.
ChangesAverage total interest-earning assets increased $12.9 billion, or 23.4%, from $55.2 billion for the six months ended June 30, 2022, to $68.1 billion for the six months ended June 30, 2023, primarily due to increases of $10.6 billion, $1.6 billion, $0.4 billion, and $0.3 billion in Net Interest Incomeaverage loans and leases, average interest-bearing deposits held at the FRB, average investment securities, and average FHLB and FRB stock, respectively. The average yield on interest-earning assets increased 181 basis points from 3.40% for the six months ended June 30, 2022, to 5.21% for the six months ended June 30, 2023, primarily due to the higher interest rate environment, partially offset by a decrease in purchase accounting accretion on interest-earning assets that were acquired from Sterling.
Average loans and leases increased $10.6 billion, or 26.5%, from $40.0 billion for the six months ended June 30, 2022, to $50.6 billion for the six months ended June 30, 2023, primarily due to organic loan growth. At June 30, 2023, and 2022, average loans and leases comprised 74.4% and 72.5% of average total interest-earning assets, respectively. The average yield on loans and leases increased 202 basis points from 3.91% for the six months ended June 30, 2022, to 5.93% for the six months ended June 30, 2023, primarily due to the higher interest rate environment, partially offset by a decrease in purchase accounting accretion on loans and leases that were acquired from Sterling.
6

Average interest-bearing deposits held at the FRB increased $1.6 billion, or 245.3%, from $0.6 billion for the six months ended June 30, 2022, to $2.2 billion for the six months ended June 30, 2023, which was a direct result of the Company's risk management approach to hold higher levels of on-balance sheet liquidity in the second quarter of 2023. At June 30, 2023, and 2022, average interest-bearing deposits held at the FRB comprised 3.26% and 1.16% of total average interest-earnings assets, respectively. The average yield on interest-bearing deposits held at the FRB increased 452 basis points from 0.44% for the six months ended June 30, 2022, to 4.96% for the six months ended June 30, 2023, primarily due to the higher interest rate environment.
Average total investment securities increased $0.4 billion, or 2.9%, from $14.3 billion for the six months ended June 30, 2022, to $14.7 billion for the six months ended June 30, 2023, primarily due to purchases exceeding paydown activities.
At June 30, 2023, and 2022, the total average investment securities portfolio comprised 21.6% and 25.9% of total average interest-earning assets, respectively. The average yield on investment securities increased 77 basis points from 2.12% for the six months ended June 30, 2022, to 2.89% for the six months ended June 30, 2023, primarily due to the reinvestment of securities that either had matured or were sold in at higher yields.
Average FHLB and FRB stock increased $0.3 billion, or 126.6%, from $0.2 billion for the six months ended June 30, 2022, to $0.5 billion for the six months ended June 30, 2023, primarily due to the additional FHLB stock investment required as a result of the increase in FHLB advances. At June 30, 2023, and 2022, average FHLB and FRB stock comprised 0.7% and 0.4% of total average interest-earning assets, respectively. The average yield on FHLB and FRB stock increased 208 basis points from 2.72% for the six months ended June 30, 2022, to 4.80% for the six months ended June 30, 2023, primarily due to the higher interest rate environment.
Average total interest-bearing liabilities increased $12.5 billion, or 24.0%, from $52.0 billion for the six months ended June 30, 2022, to $64.5 billion for the six months ended June 30, 2023, primarily due to increases of $7.0 billion and $5.6 billion in average total deposits and average FHLB advances, respectively, partially offset by a $0.3 billion decrease in average securities sold under agreements to repurchase. The average rate on interest-bearing liabilities increased 166 basis points from 0.16% for the six months ended June 30, 2022, to 1.82% for the six months ended June 30, 2023, primarily due to the higher interest rate environment.
Average total deposits increased $7.0 billion, or 14.2%, from $49.7 billion for the six months ended June 30, 2022, to $56.7 billion for the six months ended June 30, 2023, primarily reflecting a $7.3 billion increase in interest-bearing deposits, partially offset by a $0.3 billion decrease in non-interest-bearing deposits. The overall increase in deposits was primarily due to the acquisition of interLINK and organic deposit growth, partially offset by the effect of customers rebalancing their deposit concentrations as a result of the high-profile bank failures in the first and second quarters of 2023. At June 30, 2023, and 2022, average total deposits comprised 87.9% and 95.4% of total average interest-bearing liabilities, respectively. The average rate on deposits increased 135 basis points from 0.08% for the six months ended June 30, 2022, to 1.43% for the six months ended June 30, 2023, primarily due to the higher interest rate environment and growth in higher costing deposit products. Higher cost time deposits as a percentage of average total interest-bearing deposits increased from 7.0% for the six months ended June 30, 2022, to 12.5% for the six months ended June 30, 2023, primarily due to a shift in customer preferences from lower rate checking and savings products into higher rate certificates of deposit products.
Average FHLB advances increased $5.6 billion, or 956.8%, from $0.6 billion for the six months ended June 30, 2022, to $6.2 billion for the six months ended June 30, 2023, primarily due to short-term funding needs and a direct result of the Company's risk management approach to hold higher levels of on-balance sheet liquidity in the second quarter of 2023. At June 30, 2023, and 2022, average FHLB advances comprised 9.6% and 1.1% of total average interest-bearing liabilities, respectively. The average rate on FHLB advances increased 393 basis points from 1.09% for the six months ended June 30, 2022, to 5.02% for the six months ended June 30, 2023, primarily due to the higher interest rate environment.
Average securities sold under agreements to repurchase decreased $0.3 billion, or 58.5%, from $0.5 billion for the six months ended June 30, 2022, to $0.2 billion for the six months ended June 30, 2023, primarily due to the Company's extinguishment of its two long-term structured repurchase agreements during the third quarter of 2022, and the overall timing of maturities. At June 30, 2023, and 2022, average securities sold under agreements to repurchase comprised 0.4% and 1.1% of total average interest-bearing liabilities, respectively. The average rate on securities sold under agreements to repurchase decreased 75 basis points from 0.86% for the six months ended June 30, 2022, to 0.11% for the six months ended June 30, 2023, primarily due to the Company's extinguishment of its two long-term structured repurchase agreements during the third quarter of 2022, which were contracted at a higher cost.
7

The following tables summarize daily average balances, interest, and average yield/rate by major category, and net interest margin on a FTE basis:
 Three months ended June 30,
 20232022
(Dollars in thousands)Average
Balance		Interest Income/ExpenseAverage Yield/RateAverage
Balance		Interest Income/ExpenseAverage Yield/Rate
Assets
Interest-earning assets:
Loans and leases (1)
$51,184,715 $782,557 6.06 %$44,120,698 $436,462 3.92 %
Investment securities: (2)
Taxable12,252,503 102,492 3.15 12,573,908 73,294 2.27 
Non-taxable2,527,754 13,535 2.14 2,591,606 12,664 1.95 
Total investment securities14,780,257 116,027 2.99 15,165,514 85,958 2.22 
FHLB and FRB stock513,559 6,675 5.21 262,695 2,072 3.16 
Interest-bearing deposits (3)
3,528,824 45,008 5.05 488,870 980 0.79 
Loans held for sale96,537 421 1.74 18,172 7 0.15 
Total interest-earning assets70,103,892 $950,688 5.32 %60,055,949 $525,479 3.46 %
Non-interest-earning assets6,128,636 6,016,193 
Total assets$76,232,528 $66,072,142 
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Demand deposits$11,375,059 $— — %$13,395,942 $— — %
Health savings accounts8,250,766 3,090 0.15 7,812,313 1,125 0.06 
Interest-bearing checking, money market and savings31,768,511 178,707 2.26 29,486,846 10,165 0.14 
Time deposits7,173,552 69,669 3.90 2,684,914 1,169 0.17 
Total deposits58,567,888 251,466 1.72 53,380,015 12,459 0.09 
Securities sold under agreements to repurchase215,874 63 0.11 529,786 1,423 1.06 
Federal funds purchased— — — 534,518 1,254 0.93 
FHLB advances6,724,139 88,556 5.21 1,156,449 3,164 1.08 
Long-term debt (2)
1,061,526 9,482 3.68 1,077,395 8,787 3.38 
Total interest-bearing liabilities66,569,427 $349,567 2.10 %56,678,163 $27,087 0.19 %
Non-interest-bearing liabilities1,267,803 1,268,461 
Total liabilities67,837,230 57,946,624 
Preferred stock283,979 283,979 
Common stockholders' equity8,111,319 7,841,539 
Total stockholders' equity8,395,298 8,125,518 
Total liabilities and stockholders' equity$76,232,528 $66,072,142 
Net interest income (FTE)$601,121 $498,392 
Less: FTE adjustment(17,292)(11,732)
Net interest income$583,829 $486,660 
Net interest margin (FTE)3.35 %3.28 %
(1)Non-accrual loans have been included in the computation of average balances.
(2)For the purposes of our average yield/rate and margin computations, unsettled trades on investment securities and unrealized gain (loss) balances on securities available-for-sale and senior fixed-rate note hedges are excluded.
(3)Interest-bearing deposits are included as a component of Cash and cash equivalents on the Condensed Consolidated Statements of Cash Flows included in Part I - Item 1. Financial Statements.
8

 Six months ended June 30,
 20232022
(Dollars in thousands)Average
Balance		Interest Income/ExpenseAverage Yield/RateAverage
Balance		Interest Income/ExpenseAverage Yield/Rate
Assets
Interest-earning assets:
Loans and leases (1)
$50,642,963 $1,508,100 5.93 %$40,039,437 $785,879 3.91 %
Investment securities: (2)
Taxable12,173,428 194,782 3.03 12,020,675 130,761 2.15 
Non-taxable2,533,729 27,219 2.15 2,277,672 22,466 1.97 
Total investment securities14,707,157 222,001 2.89 14,298,347 153,227 2.12 
FHLB and FRB stock486,617 11,585 4.80 214,792 2,893 2.72 
Interest-bearing deposits (3)
2,221,119 55,404 4.96 643,210 1,433 0.44 
Loans held for sale50,838 437 1.72 18,046 33 0.36 
Total interest-earning assets68,108,694 $1,797,527 5.21 %55,213,832 $943,465 3.40 %
Non-interest-earning assets6,176,650 5,257,642 
Total assets$74,285,344 $60,471,474 
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Demand deposits$11,999,028 $— — %$12,335,504 $— — %
Health savings accounts8,271,493 6,117 0.15 7,786,035 2,212 0.06 
Interest-bearing checking, money market and savings30,816,229 301,755 1.97 26,915,923 15,184 0.11 
Time deposits5,607,711 93,798 3.37 2,614,989 2,462 0.19 
Total deposits56,694,461 401,670 1.43 49,652,451 19,858 0.08 
Securities sold under agreements to repurchase229,784 130 0.11 553,282 2,379 0.86 
Federal funds purchased333,733 7,760 4.62 268,735 1,254 0.93 
Other borrowings— — — — 1 — 
FHLB advances6,201,884 156,682 5.02 586,857 3,220 1.09 
Long-term debt (2)
1,066,859 18,970 3.67 987,353 15,955 3.36 
Total interest-bearing liabilities64,526,721 $585,212 1.82 %52,048,678 $42,667 0.16 %
Non-interest-bearing liabilities1,452,640 1,010,331 
Total liabilities65,979,361 53,059,009 
Preferred stock283,979 260,183 
Common stockholders' equity8,022,004 7,152,282 
Total stockholders' equity8,305,983 7,412,465 
Total liabilities and stockholders' equity$74,285,344 $60,471,474 
Net interest income (FTE)$1,212,315 $900,798 
Less: FTE adjustment(33,203)(19,890)
Net interest income$1,179,112 $880,908 
Net interest margin (FTE)3.50 %3.24 %
(1)Non-accrual loans have been included in the computation of average balances.
(2)For the purposes of our average yield/rate and margin computations, unsettled trades on investment securities and unrealized gain (loss) balances on securities available-for-sale and senior fixed-rate note hedges are excluded.
(3)Interest-bearing deposits are included as a component of Cash and cash equivalents on the Condensed Consolidated Statements of Cash Flows included in Part I - Item 1. Financial Statements.


9

The following table presents the components ofsummarizes the change in net interest income attributable to changes in rate and volume, and reflects net interest income on a fully tax-equivalentFTE basis:
Three months ended June 30,Six months ended June 30,
2023 vs. 2022
Increase (decrease) due to
2023 vs. 2022
Increase (decrease) due to
(In thousands)
Rate (1)
VolumeTotal
Rate (1)
VolumeTotal
Change in interest on interest-earning assets:
Loans and leases$274,996 $71,099 $346,095 $507,977 $214,244 $722,221 
Investment securities32,109 (2,040)30,069 64,308 4,466 68,774 
FHLB and FRB stock2,625 1,978 4,603 5,031 3,661 8,692 
Interest bearing-deposits37,931 6,097 44,028 50,454 3,517 53,971 
Loans held for sale409 5 414 412 (8)404 
Total interest income$348,070 $77,139 $425,209 $628,182 $225,880 $854,062 
Change in interest on interest-bearing liabilities:
Health savings accounts$1,902 $63 $1,965 $3,767 $138 $3,905 
Interest-bearing checking, money market, and savings166,467 2,075 168,542 282,629 3,942 286,571 
Time deposits67,739 761 68,500 90,097 1,239 91,336 
Securities sold under agreements to repurchase(517)(843)(1,360)(858)(1,391)(2,249)
Federal funds purchased— (1,254)(1,254)6,202 304 6,506 
Other borrowings— — — (1)— (1)
FHLB advances70,159 15,233 85,392 122,658 30,804 153,462 
Long-term debt831 (136)695 1,680 1,335 3,015 
Total interest expense$306,581 $15,899 $322,480 $506,174 $36,371 $542,545 
Net change in net interest income$41,489 $61,240 $102,729 $122,008 $189,509 $311,517 
 Three months ended September 30, Nine months ended September 30,
 2017 vs. 2016
Increase (decrease) due to		 2017 vs. 2016
Increase (decrease) due to
(In thousands)
Rate (1)
VolumeTotal 
Rate (1)
VolumeTotal
Interest on interest-earning assets:       
Loans and leases$15,634
$8,708
$24,342
 $34,294
$30,725
$65,019
Loans held for sale47
(181)(134) 95
(215)(120)
Investments (2)
366
1,594
1,960
 897
3,987
4,884
Total interest income$16,047
$10,121
$26,168
 $35,286
$34,497
$69,783
Interest on interest-bearing liabilities:       
Deposits$3,104
$1,062
$4,166
 $5,067
$2,541
$7,608
Borrowings3,034
(2,601)433
 6,567
(5,267)1,300
Total interest expense$6,138
$(1,539)$4,599
 $11,634
$(2,726)$8,908
Net change in net interest income$9,909
$11,660
$21,569
 $23,652
$37,223
$60,875
(1)The change attributable to mix, a combined impact of rate and volume, is included with the change due to rate.

(1)The change attributable to mix, a combined impact of rate and volume, is included with the change due to rate.
(2)Investments include: Securities, FHLB and FRB stock, and Interest-bearing deposits.

Average loans and leases for the nine months ended September 30, 2017 increased $1.1 billion compared to the average for the nine months ended September 30, 2016. The loan and lease portfolio comprised 70.3% of the average interest-earning assets at September 30, 2017 compared to 69.3% of the average interest-earning assets at September 30, 2016. The loan and lease portfolio yield increased 26 basis points to 4.05% for the nine months ended September 30, 2017 compared to the loan and lease portfolio yield of 3.79% for the nine months ended September 30, 2016. The increase in the yield on the average loan and lease portfolio is due to increased yield on floating rate loans as well as increased spreads on loan originations.
Average investments for the nine months ended September 30, 2017 increased $148.8 million compared to the average for the nine months ended September 30, 2016. The investments portfolio comprised 29.6% of the average interest-earning assets at September 30, 2017 compared to 30.6% of the average interest-earning assets at September 30, 2016. The investments portfolio yield increased 3 basis points to 2.99% for the nine months ended September 30, 2017 compared to the investments portfolio yield of 2.96% for the nine months ended September 30, 2016. The increase in the yield on the investments portfolio is primarily due to a reduction in premium amortization from slower prepayment speeds and an increased yield on floating rate securities, more than offsetting lower current market rates on investment securities purchases compared to the yield on investment securities paydowns and maturities.
Average total deposits for the nine months ended September 30, 2017 increased $1.6 billion compared to the average for the nine months ended September 30, 2016. The increase is comprised of an increase of $236.9 million in non-interest-bearing deposits and an increase of $1.4 billion in interest-bearing deposits. The increase in average interest-bearing deposits, and an improved product mix to low-cost deposits, was primarily due to health savings account deposit growth. The average cost of deposits was 0.29% for the nine months ended September 30, 2017 compared to 0.26% for the nine months ended September 30, 2016. The slight increase in the average cost of deposits is mainly the result of an increase in the rate paid on public money market accounts. Higher cost time deposits, decreased to 12.7% for the nine months ended September 30, 2017 from 13.5% for the nine months ended September 30, 2016, as a percentage of total interest-bearing deposits.
Average total borrowings for the nine months ended September 30, 2017 decreased $569.4 million compared to the average for the nine months ended September 30, 2016. Average securities sold under agreements to repurchase and other borrowings decreased $58.5 million, and average FHLB advances decreased $510.9 million as utilization of advances maturing within one year declined significantly. The average cost of borrowings increased 35 basis point to 1.85% for the nine months ended September 30, 2017 from 1.50% for the nine months ended September 30, 2016. The increase in average cost of borrowings is the result of the federal funds rate being increased three times between December 2016 and June 2017.
Cash flow hedges impacted the average cost of borrowings as follows:
 Three months ended September 30, Nine months ended September 30,
(In thousands)20172016 20172016
Interest rate swaps on repurchase agreements$—
$—
 $—
$361
Interest rate swaps on FHLB advances1,657
2,099
 5,139
6,469
Interest rate swaps on senior fixed-rate notes76
76
 229
229
Interest rate swaps on brokered CDs and deposits195
195
 585
585
Net increase to interest expense on borrowings$1,928
$2,370
 $5,953
$7,644

Provision for Loan and LeaseCredit Losses
The provision for loan and lease losses is the expense necessary to maintain the allowance for loan and lease losses at levels appropriate to absorb estimated credit losses in the loan and lease portfolio.
Comparison to Prior Year Quarter
The provision for loan and leasecredit losses was $10.2increased $19.3 million, or 157.3%, from $12.2 million for the three months ended SeptemberJune 30, 2017, which decreased $4.1 million compared2022, to the three months ended September 30, 2016. The decrease in provision for loan and lease losses was primarily due to lower loan growth on a quarter comparative basis. Total net charge-offs was $7.9 million and $6.8$31.5 million for the three months ended SeptemberJune 30, 20172023. The increase is primarily due to the impact of the current macroeconomic environment on credit performance and 2016,organic loan growth, and losses recognized on commercial loan sales.
During the three months ended June 30, 2023, and 2022, total net charge-offs were $20.3 million and $9.6 million, respectively. HigherThe net increase of $10.7 million is primarily due to an increase in net charge-offs in the commercial real estate and commercialcategory, partially offset by a decrease in net charge-offs contributed $1.3 million toin the increase in net charge-offs.commercial non-mortgage category.
Comparison to Prior Year to Date
The provision for loancredit losses totaled $78.2 million and lease losses was $27.9$201.1 million for the ninesix months ended SeptemberJune 30, 2017, which decreased $16.0 million compared to2023, and 2022, respectively. The balance for the ninesix months ended SeptemberJune 30, 2016. The decrease2022, included the establishment of the initial ACL of $175.1 million for non-PCD loans and leases that were acquired from Sterling in the merger. Excluding this charge, the provision for loan and leasecredit losses wasincreased $52.2 million, primarily due to lowerthe impact of the current macroeconomic environment on credit performance, organic loan growth, as compared toand losses recognized on commercial loan sales.
During the rate for the same period in 2016. Totalsix months ended June 30, 2023, and 2022, total net charge-offs was $20.4were $44.8 million and $30.9$18.5 million, for the nine months ended September 30, 2017 and 2016, respectively. The decrease wasnet increase of $26.3 million is primarily due to loweran increase in net charge-offs in the asset-based lending and commercial real estate and othercategories, partially offset by a decrease in net charge-offs in the commercial loan related net charge-offs.non-mortgage category.
Allowance for Loan and Lease Losses
The ALLL is a significant accounting estimate that is determined through periodic and systematic detailed reviews ofAdditional information regarding the Company's loanprovision for credit losses and lease portfolio. The ALLL is determined based on an analysis which assessesACL can be found under the inherent risk for probable losses within the portfolio. Significant judgments and estimates are necessary in the determination of the ALLL. Significant judgments include, among others, loan risk ratings and classifications, the probability of loan defaults, the net loss exposure in the event of loan defaults, the loss emergence period, the determination and measurement of impaired loans, and other quantitative and qualitative considerations.
At September 30, 2017, the ALLL totaled $201.8 million, or 1.16% of total loans and leases, as compared to $194.3 million, or 1.14% of total loans and leases, at December 31, 2016.
See thesections captioned "Loans and Leases" through "Allowance for LoanCredit Losses on Loans and Lease Losses Methodology" sections for further details.Leases" contained elsewhere in this Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

10

Non-Interest Income
 Three months ended September 30,   Nine months ended September 30,  
  Increase (decrease)  Increase (decrease)
(Dollars in thousands)20172016 AmountPercent 20172016 AmountPercent
Deposit service fees$38,321
$35,734
 $2,587
7.2 % $113,519
$105,553
 $7,966
7.5 %
Loan related fees6,346
9,253
 (2,907)(31.4) 19,898
20,563
 (665)(3.2)
Wealth and investment services7,750
7,593
 157
2.1
 22,900
21,992
 908
4.1
Mortgage banking activities2,421
4,322
 (1,901)(44.0) 8,038
11,335
 (3,297)(29.1)
Increase in cash surrender value of life insurance policies3,720
3,743
 (23)(0.6) 10,943
11,060
 (117)(1.1)
Gain on sale of investment securities, net—
—
 —
n/m
 —
414
 (414)n/m
Impairment loss recognized in earnings—
—
 —
n/m
 (126)(149) 23
n/m
Other income7,288
5,767
 1,521
26.4
 18,267
23,093
 (4,826)(20.9)
Total non-interest income$65,846
$66,412
 $(566)(0.9)% $193,439
$193,861
 $(422)(0.2)%
n/m - not meaningful
Three months ended June 30,Six months ended June 30,
(Dollars in thousands)2023202220232022
Deposit service fees$45,418 $51,385 $90,854 $99,212 
Loan and lease related fees20,528 27,907 43,533 50,586 
Wealth and investment services7,391 11,244 13,978 21,841 
Mortgage banking activities129 102 188 530 
Cash surrender value of life insurance policies6,293 8,244 13,021 14,976 
(Loss) on sale of investment securities(48)— (16,795)— 
Other income9,663 22,051 15,361 37,823 
Total non-interest income$89,374 $120,933 $160,140 $224,968 
Comparison to Prior Year Quarter
Total non-interest income for the three months ended September 30, 2017 was $65.8 million, a decrease of $0.6decreased $31.5 million, or 0.9%26.1%, compared to $66.4from $120.9 million for the three months ended SeptemberJune 30, 2016. The decrease is primarily attributable2022, to reductions in loan related fees and mortgage banking activities, partially offset by deposit service fee growth and higher other income.
Deposit service fees totaled $38.3$89.4 million for the three months ended SeptemberJune 30, 2017, compared2023, primarily due to $35.7decreases in other income, loan and lease related fees, deposit service fees, and wealth and investment services.
Other income decreased $12.4 million, or 56.2%, from $22.1 million for the three months ended SeptemberJune 30, 2016. The increase is primarily due2022, to increased checking account service charges and check card interchange attributable to health savings account growth and usage activity.
Loan related fees totaled $6.3$9.7 million for the three months ended SeptemberJune 30, 2017, compared2023, primarily due to $9.3lower income generated from customer interest rate derivative activities.
Loan and lease related fees decreased $7.4 million, or 26.4%, from $27.9 million for the three months ended SeptemberJune 30, 2016. The decrease is primarily due2022, to a lower syndication activity, and to a lesser extent, increased mortgage servicing rights amortization.
Mortgage banking activities totaled $2.4$20.5 million for the three months ended SeptemberJune 30, 2017, compared2023, primarily due to $4.3lower loan servicing fee income, prepayment penalties, and syndication fees.
Deposit service fees decreased $6.0 million, or 11.6%, from $51.4 million for the three months ended SeptemberJune 30, 2016. The decrease is due2022, to lower sales volume of conforming residential mortgage originations, driven by a decrease in refinance activity.
Other income totaled $7.3$45.4 million for the three months ended SeptemberJune 30, 2017, compared2023, primarily due to $5.8lower customer account service and cash management and analysis fees, partially offset by higher interchange income.
Wealth and investment services decreased $3.8 million, or 34.3%, from $11.2 million for the three months ended SeptemberJune 30, 2016. The increase is2022, to $7.4 million for the three months ended June 30, 2023, primarily due to increased client hedging revenue.lower net investment services income, which is a direct result of the outsourcing of the consumer investment services platform effective as of the fourth quarter of 2022.
Comparison to Prior Year to Date
Total non-interest income for the nine months ended September 30, 2017 was $193.4decreased $64.9 million, a decrease of $422 thousand, or 0.2%28.8%, compared to $193.9from $225.0 million for the ninesix months ended SeptemberJune 30, 2016. The decrease is2022, to $160.1 million for the six months ended June 30, 2023, primarily attributabledue to a loss on sale of investment securities and decreases in mortgage bankingother income, deposit service fees, wealth and investment services, and loan and lease related fees.
Other income decreased $22.4 million, or 59.4%, from $37.8 million for the six months ended June 30, 2022, to $15.4 million for the six months ended June 30, 2023, primarily due to lower income generated from customer interest rate derivative activities and other income, partially offset by increases in deposit service fees.direct investments.
Deposit service fees totaled $113.5decreased $8.3 million, or 8.4%, from $99.2 million for the ninesix months ended SeptemberJune 30, 2017, compared2022, to $105.6$90.9 million for the ninesix months ended SeptemberJune 30, 2016. The increase is2023, primarily due to increased checkinglower customer account service charges and check cardcash management and analysis fees, partially offset by higher interchange attributable to health savings account growthincome.
Wealth and usage activity.
Mortgage banking activities totaled $8.0investment services decreased $7.8 million, or 36.0%, from $21.8 million for the ninesix months ended SeptemberJune 30, 2017, compared2022, to $11.3$14.0 million for the ninesix months ended SeptemberJune 30, 2016. The decrease is2023, primarily due to lower volumenet investment services income, which is a direct result of conforming residential mortgage originations, driven by a decrease in refinance activity.the outsourcing of the consumer investment services platform effective as of the fourth quarter of 2022.
Other income totaled $18.3Loan and lease related fees decreased $7.1 million, or 13.9%, from $50.6 million for the ninesix months ended SeptemberJune 30, 2017, compared2022, to $23.1$43.5 million for the ninesix months ended SeptemberJune 30, 2016. The decrease is2023, primarily due to a $2.7lower loan servicing fee income, prepayment penalties, and syndication fees.
During the six months ended June 30, 2023, the Company sold $418.8 million favorable adjustment toof U.S. Treasury notes, Corporate securities, and Municipal bonds and notes classified as available-for-sale for proceeds of $398.3 million, which resulted in $20.5 million of gross realized losses. The $16.8 million loss on sale of investment securities included in non-interest income represents the fair valueportion of the contingent receivable recognizedtotal charge that was not attributed to a decline in 2016, a decrease in net client interest rate hedging activities/hedging revenue, and partially offset by an increase in alternative investment gains.credit quality. There were no sales of available-for-sale securities during the six months ended June 30, 2022.
11


Non-Interest Expense
 Three months ended September 30,   Nine months ended September 30,  
  Increase (decrease)  Increase (decrease)
(Dollars in thousands)

20172016 AmountPercent 20172016 AmountPercent
Compensation and benefits$89,192
$83,148
 $6,044
7.3 % $264,822
$244,089
 $20,733
8.5 %
Occupancy14,744
15,004
 (260)(1.7) 46,957
44,915
 2,042
4.5
Technology and equipment22,580
19,753
 2,827
14.3
 66,646
59,067
 7,579
12.8
Intangible assets amortization1,002
1,493
 (491)(32.9) 3,085
4,570
 (1,485)(32.5)
Marketing4,045
4,622
 (577)(12.5) 14,101
14,215
 (114)(0.8)
Professional and outside services4,030
4,795
 (765)(16.0) 11,813
11,360
 453
4.0
Deposit insurance6,344
6,177
 167
2.7
 19,701
19,596
 105
0.5
Other expense19,886
21,105
 (1,219)(5.8) 62,901
63,508
 (607)(1.0)
Total non-interest expense$161,823
$156,097
 $5,726
3.7 % $490,026
$461,320
 $28,706
6.2 %
Three months ended June 30,Six months ended June 30,
(Dollars in thousands)2023202220232022
Compensation and benefits$173,305 $187,656 $346,505 $371,658 
Occupancy20,254 51,593 40,425 70,208 
Technology and equipment51,815 41,498 96,181 96,899 
Intangible assets amortization9,193 8,802 18,690 15,189 
Marketing5,160 3,441 8,636 6,950 
Professional and outside services29,385 15,332 61,819 69,423 
Deposit insurance13,723 6,748 26,046 11,970 
Other expense41,254 43,157 78,254 75,715 
Total non-interest expense$344,089 $358,227 $676,556 $718,012 
Comparison to Prior Year Quarter
Total non-interest expense for the three months ended September 30, 2017 was $161.8 million, an increase of $5.7decreased $14.1 million, or 3.7%3.9%, compared to $156.1from $358.2 million for the three months ended SeptemberJune 30, 2016. The increase is primarily attributable2022, to compensation and benefits, technology and equipment, and somewhat offset by other expense.
Compensation and benefits totaled $89.2$344.1 million for the three months ended SeptemberJune 30, 2017, compared2023, primarily due to $83.1decreases in occupancy and compensation and benefits, partially offset by increases in professional and outside services, technology and equipment, and deposit insurance.
Occupancy decreased $31.3 million, or 60.7%, from $51.6 million for the three months ended SeptemberJune 30, 2016. The increase is primarily due2022, to strategic hires and annual incentives increases.
Technology and equipment totaled $22.6$20.3 million for the three months ended SeptemberJune 30, 2017, compared2023, primarily due to $19.8the launch of the Company's corporate real estate consolidation plan in the second quarter of 2022, which resulted in a $23.1 million ROU asset impairment charge and a combined $7.7 million in related exit costs and accelerated depreciation on property and equipment during the three months ended June 30, 2022.
Compensation and benefits decreased $14.4 million, or 7.6%, from $187.7 million for the three months ended SeptemberJune 30, 2016. The increase is primarily due2022, to increased service contracts to support bank growth.
Other expense totaled $19.9$173.3 million for the three months ended SeptemberJune 30, 2017, compared2023, primarily due to $21.1a $17.4 million decrease in merger-related expenses, particularly as it relates to severance and retention, and the outsourcing of the consumer investment services platform effective as of the fourth quarter of 2022, partially offset by increases in salaries and deferred compensation.
Professional and outside services increased $14.1 million, or 91.7%, from $15.3 million for the three months ended SeptemberJune 30, 2016. The decrease is2022, to $29.4 million for the three months ended June 30, 2023, primarily due to a result$15.1 million increase in merger-related expenses, particularly as it relates to charges associated with core conversion activities.
Technology and equipment increased $10.3 million, or 24.9%, from $41.5 million for the three months ended June 30, 2022, to $51.8 million for the three months ended June 30, 2023, primarily due to a $6.0 million increase in merger-related expenses, particularly as it relates to charges associated with core conversion activities, and higher recurring technology service contract fees.
Deposit insurance increased $7.0 million, or 103.4%, from $6.7 million for the three months ended June 30, 2022, to $13.7 million for the three months ended June 30, 2023, primarily due to the increased initial base deposit insurance assessment rate schedules adopted by the FDIC, which took effect as of numerous items, nonethe first quarter of which were individually significant.2023 for all insured depository institutions, along with asset growth.
Comparison to Prior Year to Date
Total non-interest expense for the nine months ended September 30, 2017 was $490.0 million, an increase of $28.7decreased $41.4 million, or 6.2%5.8%, compared to $461.3from $718.0 million for the ninesix months ended SeptemberJune 30, 2016. The increase is2022, to $676.6 million for the six months ended June 30, 2023, primarily attributabledue to decreases in occupancy, compensation and benefits, occupancy, and technologyprofessional and equipment.outside services, partially offset by increases in deposit insurance, intangible assets amortization, and other expense.
Occupancy decreased $29.8 million, or 42.4%, from $70.2 million for the six months ended June 30, 2022, to $40.4 million for the six months ended June 30, 2023, primarily due to the launch of the Company's corporate real estate consolidation plan in the second quarter of 2022, which resulted in a $23.1 million ROU asset impairment charge and a combined $7.7 million in related exit costs and accelerated depreciation on property and equipment during the three months ended June 30, 2022.
Compensation and benefits totaled $264.8decreased $25.2 million, or 6.8%, from $371.7 million for the ninesix months ended SeptemberJune 30, 2017, compared2022, to $244.1$346.5 million for the ninesix months ended SeptemberJune 30, 2016. The increase is2023, primarily due to strategic hires$47.9 million decrease in merger-related expenses, particularly as wellit relates to severance and retention, and the outsourcing of the consumer investment services platform effective as an increase to annual meritof the fourth quarter of 2022, partially offset by increases in salaries and group insurance costs.deferred compensation.
Occupancy totaled $47.0
12

Professional and outside services decreased $7.6 million, or 11.0%, from $69.4 million for the ninesix months ended SeptemberJune 30, 2017, compared2022, to $44.9$61.8 million for the ninesix months ended SeptemberJune 30, 2016. The2023, primarily due to a $9.3 million decrease in merger-related expenses, particularly as it relates to advisory and legal fees, partially offset by charges associated with core conversion activities and an increase is essentially a result of charges related to banking center optimization.in other professional fees.
Technology and equipment totaled $66.6Deposit insurance increased $14.0 million, or 117.6%, from $12.0 million for the ninesix months ended SeptemberJune 30, 2017, compared2022, to $59.1$26.0 million for the ninesix months ended SeptemberJune 30, 2016. The increase is2023, primarily due to the increased service contracts and additional depreciation on infrastructure to support bankinitial base deposit insurance assessment rate schedules adopted by the FDIC, which took effect as of the first quarter of 2023 for all insured depository institutions, along with asset growth.
Intangible assets amortization increased $3.5 million, or 23.0%, from $15.2 million for the six months ended June 30, 2022, to $18.7 million for the six months ended June 30, 2023, primarily due to the amortization expense related to the broker dealer relationship and non-competition agreement intangible assets recorded in connection with the interLINK acquisition.
Other expense increased $2.6 million, or 3.4%, from $75.7 million for the six months ended June 30, 2022, to $78.3 million for the six months ended June 30, 2023, primarily due to an increase in net periodic pension and other postretirement benefit cost and higher check card expense, partially offset by a $3.6 million decrease in merger-related expenses, particularly as it relates to disposals on property and equipment and contract termination charges.
13

Income Taxes
WebsterComparison to Prior Year Quarter
For the three months ended June 30, 2023, and 2022, the Company recognized income tax expense of $30.3$62.6 million and $81.3$54.8 million, respectively, reflecting effective tax rates of 31.9%21.0% and 30.5% for the three and nine months ended September 30, 2017, respectively, compared to $24.4 million and $72.5 million and 32.1% and 32.7%23.1%, for the three and nine months ended September 30, 2016, respectively.
The increasesincrease in income tax expense for the three and nine months ended September 30, 2017 as comparedis due to 2016 principally reflect thea higher levelslevel of pre-tax income in 2017, while the decreases in the effective rates in those same periods principally reflect $5.9 million of excess tax benefits recognized under ASU No. 2016-09 in the nine months ended September 30, 2017, which includes $0.5 million during the three months ended SeptemberJune 30, 2017.
See “Accounting Standards Adopted During 2017” section of Note 1: Summary of Significant Accounting Policies2023. The decrease in the Noteseffective tax rate is primarily due to Condensed Consolidated Financial Statements contained elsewherean increase in this reporttax-exempt interest income and tax credits and a decrease in state and local tax in 2023 as compared to 2022, partially offset by the effects of higher pre-tax income and non-deductible FDIC premiums in 2023 as compared to 2022.
Comparison to Prior Year to Date
For the six months ended June 30, 2023, and 2022, the Company recognized income tax expense of $128.5 million and $21.2 million, respectively, reflecting effective tax rates of 22.0% and 11.4%, respectively.
The lower income tax expense recognized for the six months ended June 30, 2022, reflected the recognition of the pre-tax loss and $33.6 million income tax benefit in the first quarter of 2022 associated with the Sterling merger, which resulted in decreases to both income tax expense and the effective tax rate for the six months ended June 30, 2022, making comparisons to the current period not meaningful.
Additional information on adoption of ASU No. 2016-09. For additional information on Webster'sregarding the Company's income taxes, including its deferred tax assets and uncertain tax positions, seeDTAs, can be found within Note 8 -9: Income Taxes in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's 2016Annual Report on Form 10-K.10-K for the year ended December 31, 2022.

Segment Reporting
Webster’sThe Company's operations are organized into three reportable segments that represent its primary businesses -businesses: Commercial Banking, Community BankingHSA Bank, and HSA Bank.Consumer Banking. These three segments reflect how executive management responsibilities are assigned, the primary businesses, the products and services provided,how discrete financial information is evaluated, the type of customer served, and how discrete financial information is currently evaluated. The Corporateproducts and services are provided. Segments are evaluated using PPNR. Certain Treasury unitactivities, including the operations of the Company,interLINK, along with adjustmentsthe amounts required to reconcile profitability metrics to amountsthose reported in accordance with GAAP, are included in the Corporate and Reconciling category. Additional information regarding the Company's reportable segments and its segment reporting methodology can be found within Note 16: Segment Reporting in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.
The following is a description of the Company’s three reportable segments and their primary services:
Commercial Banking is comprisedserves businesses with more than $2 million of revenue through its Commercial Real Estate and Equipment Finance, Middle Market, Business Banking, Asset-Based Lending and Commercial Services, Public Sector Finance, Mortgage Warehouse, Sponsor and Specialty Finance, Verticals and Support, Private Banking, and Private Banking operating segments.
Commercial Banking provides commercial and industrial lending and leasing, commercial real estate lending, and treasury and payment solutions. Specifically, Webster Bank deploys lending through middle market, commercial real estate, equipment financing, asset-based lending and specialty lending units. These groups utilize a relationship approach model throughout its footprint when providing lending, deposit, and cash management services to middle market companies. In addition, Commercial Banking serves as a referral source within Commercial Banking and to the other lines of business.
Private Banking provides local, full relationship banking that serves high net worth clients, not-for-profit organizations, andTreasury Management business clients for asset management, financial planning services, trust services, loan products, and deposit products. These client relationships generate fee revenue on assets under management or administration, while a majority of the relationships also include lending and/or deposit accounts which provide net interest income and other ancillary fees.
Community Bankingunits. is comprised of Personal Banking and Business Banking operating segments.
Through a distribution network, consisting of 167 banking centers and 338 ATMs, a customer care center, and a full range of web and mobile-based banking services, it serves consumer and business customers primarily throughout southern New England and into Westchester County, New York.
Personal Banking offers consumer deposit and fee-based services, residential mortgages, home equity lines/loans, unsecured consumer loans, and credit card products. In addition, investment and securities-related services, including brokerage and investment advice is offered through a strategic partnership with LPL, a broker dealer registered with the SEC, a registered investment advisor under federal and applicable state laws, a member of the FINRA, and a member of the SIPC. Webster Bank has employees located throughout its banking center network, who, through LPL, are registered representatives.
Business Banking offers credit, deposit, and cash flow management products to businesses and professional service firms with annual revenues of up to $25 million. This group builds broad customer relationships through business bankers and business certified banking center managers, supported by a team of customer care center bankers and industry and product specialists.
HSA Bank offers health savings accounts,a comprehensive consumer-directed healthcare solution that includes HSAs, health reimbursement accounts,arrangements, flexible spending accounts, and other financial solutions. Health savings accountscommuter benefits. HSAs are used in conjunction with high deductible health plans in order to facilitate tax advantages for account holders with respect to health care spending and retirement savings, in accordance with applicable laws. Health savings accounts are offered through employers for the benefit of their employees or directly to individual consumers andHSAs are distributed nationwide directly orto employers and individual consumers, as well as through national and regional insurance carriers.
carriers, benefit consultants, and financial advisors. HSA Bank deposits provide long duration, low-cost funding that is used to minimize the Company’s use of wholesale funding in support of the Company’sits loan growth. As such, net interest income represents the difference between a funding credit allocation, reflecting the value of the duration funding, and the interest paid on deposits. In addition, non-interest revenue is generated predominantly through service fees and interchange income.
Segment Results
The 2016 segment results have been adjusted for comparability to the 2017 segment presentation for the following changes:
To further strengthen Webster's ability to deliver the totalityConsumer Banking serves individual customers and small businesses with less than $2 million of itsrevenues by offering consumer deposits, residential mortgages, home equity lines, secured and unsecured loans, debit and credit card products, and investment services. Consumer Banking operates a distribution network consisting of 199 banking centers and 350 ATMs, a customer care center, and a full range of web and mobile-based banking services, to the owners and executives of commercial clients and other high net worth individuals, an organizational change was made during the second quarter of 2017. Effective April 1, 2017, the head of Private Banking reports directly to the head of Commercial Banking. The current organizational structure reflects how executive management responsibilities are assigned and reviewed. As a result of this change, the Private Banking and Commercial Banking operating segments are aggregated into one reportable segment, Commercial Banking.
In late 2007 Webster discontinued its indirect residential construction lending and its indirect home equity lending outside of its primaryprimarily throughout southern New England market area, referred to as National Wholesale Lending. Webster placed these two portfolios into a liquidating loan portfolio included within the Corporate and Reconciling category. The balance of the home equity liquidating loan portfolio was $65.0 million at December 31, 2016. As the remainder of this portfolio has been performing in the same manner as the continuing home equity portfolio, management has decided to combine the liquidating loan portfolio with the continuing home equity loan portfolio. The combined portfolio is included in the Community Banking reportable segment.

The following tables present net income (loss), selected balance sheet information, and assets under administration/management for Webster’s reportable segments and the CorporateNew York Metro and Reconciling category for the periods presented:Suburban markets.
14
 Three months ended September 30, Nine months ended September 30,
(In thousands)2017 2016 2017 2016
Net income (loss):       
Commercial Banking$30,357
 $31,555
 $93,827
 $80,907
Community Banking22,778
 15,121
 60,176
 45,325
HSA Bank12,856
 9,815
 35,125
 29,286
Corporate and Reconciling(1,495) (4,674) (3,582) (6,051)
Total$64,496
 $51,817
 $185,546
 $149,467

 At September 30, 2017
(In thousands)Commercial
Banking		Community BankingHSA BankCorporate and
Reconciling		Total
Total assets$9,428,676
$8,881,322
$76,090
$7,964,094
$26,350,182
Loans and leases9,291,257
8,155,063
101
—
17,446,421
Goodwill—
516,560
21,813
—
538,373
Deposits4,251,470
11,331,767
4,891,024
380,974
20,855,235
Not included in above amounts:     
Assets under administration/management1,990,988
3,231,345
1,158,601
—
6,380,934
      
 At December 31, 2016
(In thousands)Commercial
Banking		Community BankingHSA BankCorporate and
Reconciling		Total
Total assets$9,069,445
$8,721,046
$83,987
$8,198,051
$26,072,529
Loans and leases9,066,905
7,959,558
125
—
17,026,588
Goodwill—
516,560
21,813
—
538,373
Deposits3,592,531
10,970,977
4,362,503
377,846
19,303,857
Not included in above amounts:     
Assets under administration/management1,781,840
2,980,113
878,190
—
5,640,143

Commercial Banking
Operating Results:
 Three months ended September 30, Nine months ended September 30,
(In thousands)2017 2016 2017 2016
Net interest income$81,925
 $74,265
 $239,118
 $211,422
Provision for loan and lease losses12,073
 7,876
 29,562
 29,765
Net interest income after provision69,852
 66,389
 209,556
 181,657
Non-interest income13,207
 15,916
 39,163
 41,819
Non-interest expense38,339
 35,793
 113,767
 103,336
Income before income taxes44,720
 46,512
 134,952
 120,140
Income tax expense14,363
 14,957
 41,125
 39,233
Net income$30,357
 $31,555
 $93,827
 $80,907
Three months ended June 30,Six months ended June 30,
(In thousands)2023202220232022
Net interest income$383,606 $333,421 $767,920 $620,490 
Non-interest income32,255 49,430 67,652 88,173 
Non-interest expense110,582 102,720 219,091 191,960 
Pre-tax, pre-provision net revenue$305,279 $280,131 $616,481 $516,703 
Comparison to Prior Year Quarter
Net income decreased $1.2Commercial Banking's PPNR increased $25.1 million, or 9.0%, for the three months ended SeptemberJune 30, 20172023, as compared to the same periodthree months ended June 30, 2022, due to an increase in 2016. Netnet interest income, increased $7.7partially offset by a decrease in non-interest income and an increase in non-interest expense. The $50.2 million increase in net interest income is primarily due to organic loan growth and the impact of the higher loan portfolio yield.interest rate environment. The provision for loan and lease losses increased $4.2$17.2 million due,decrease in part, to slight increases in allowance levels for certain portfolios. Non-interestnon-interest income decreased $2.7 millionis primarily due to greaterlower customer interest rate derivative activities, loan servicing fees, cash management fees, prepayment penalties, and syndication feesfees. The $7.9 million increase in the year ago period. Non-interestnon-interest expense increased $2.5 million, relatedis primarily due to strategic hiresan increase in both technology and investmentsemployee-related costs in product enhancements and infrastructure.order to support balance sheet growth.
Comparison to Prior Year to Date
Net incomeCommercial Banking's PPNR increased $12.9$99.8 million, or 19.3%, for the ninesix months ended SeptemberJune 30, 20172023, as compared to the same periodsix months ended June 30, 2022, due to an increase in 2016. Netnet interest income, increased $27.7partially offset by a decrease in non-interest income and an increase in non-interest expense. The $147.4 million increase in net interest income is primarily due to organic loan growth and the impact of the higher loan portfolio yield.interest rate environment. The provision for loan and lease losses decreased $0.2 million. Non-interest$20.5 million decrease in non-interest income decreased $2.7 million,is primarily due to greater syndicationlower customer interest rate derivative activities, prepayment penalties, loan servicing fees, cash management fees, and direct investment income. The $27.1 million increase in non-interest expense is primarily due to the year ago period. Non-interest expense increased $10.4 million, relatedfull year-to-date impact of expenses from the Sterling merger in 2023, as compared to strategic hiresthe five months impact in 2022, and investmentsan increase in product enhancementsboth technology and infrastructure.employee-related costs in order to support balance sheet growth.
Selected Balance Sheet Information and Assets Under Administration/Management:
(In thousands)At September 30,
2017		 At December 31,
2016
Total assets$9,428,676
 $9,069,445
Loans and leases9,291,257
 9,066,905
Deposits4,251,470
 3,592,531
Not included in above amounts:   
Assets under administration/management1,990,988
 1,781,840
Off-Balance Sheet Information:
(In thousands)At June 30,
2023		At December 31,
2022
Loans and leases$41,862,203 $40,115,067 
Deposits18,348,870 19,563,227 
Assets under administration / management (off-balance sheet)2,757,454 2,258,635 
Loans and leases increased $224.4 million$1.7 billion, or 4.4%, at SeptemberJune 30, 20172023, as compared to December 31, 2016. Loan2022, primarily due to organic growth in the commercial non-mortgage and commercial real estate categories, partially offset by net principal paydowns in the equipment finance and asset-based lending categories. Total portfolio originations were $2.3 billion for the ninesix months ended SeptemberJune 30, 2017 compared2023, and 2022, were $5.1 billion and $6.2 billion, respectively. The $1.1 billion decrease was primarily due to $2.1a decrease in commercial real estate and commercial non-mortgage originations, partially offset by an increase in equipment finance originations.
Deposits decreased $1.2 billion, for the nine months ended Septemberor 6.2%, at June 30, 2016. Management believes the reserve level is adequate to cover losses in the Commercial Banking portfolio. For additional discussion related to asset quality metrics, see the "Asset Quality" section elsewhere within this report. Deposits increased $658.9 million at September 30, 20172023, as compared to December 31, 20162022, primarily due to customers rebalancing their deposit concentrations as a result of the acquisitionhigh-profile bank failures in the first and second quarters of new clients and seasonality of government deposits.2023.
Commercial Banking held approximately $356.1 million$0.9 billion and $271.7 million$0.6 billion in assets under administration and $1.6$1.9 billion and $1.5$1.7 billion in assets under management at SeptemberJune 30, 20172023, and December 31, 2016, respectively, related to Private Bank clients.

Community Banking
Operating Results:
 Three months ended September 30, Nine months ended September 30,
(In thousands)2017 2016 2017 2016
Net interest income$96,859
 $91,995
 $286,351
 $274,186
(Benefit) provision for loan and lease losses(1,923) 6,374
 (1,662) 14,085
Net interest income after provision98,782
 85,621
 288,013
 260,101
Non-interest income27,079
 29,130
 80,516
 83,248
Non-interest expense92,478
 92,508
 281,979
 276,045
Income before income taxes33,383
 22,243
 86,550
 67,304
Income tax expense10,605
 7,122
 26,374
 21,979
Net income$22,778
 $15,121
 $60,176
 $45,325
Comparison to Prior Year Quarter
Net income increased $7.7 million for the three months ended September 30, 2017 as compared to the same period in 2016. Net interest income increased $4.9 million,2022, respectively. The combined increase of $0.5 billion, or 22.1%, was primarily due to growth in both loanscustomers shifting their deposits into investment accounts to purchase U.S. Treasury securities with government-backing, and deposits, coupled with improved spreads on deposits as a result of higher interest rates. The increase was partially offset by the effects of tightening spreads on the loan portfolio. A benefit in 2017 compared to a provision for loan and lease losses in 2016 resulted in a favorable impact of $8.3 million, primarily due to loan portfolio quality improvement. Non-interest income decreased $2.1 million resulting from decreases in fees from mortgage banking activities and loan servicing income. Non-interest expense was flat compared to the three months ended September 30, 2016.
Comparison to Prior Year to Date
Net income increased $14.9 million for the nine months ended September 30, 2017 as compared to the same period in 2016. Net interest income increased $12.2 million, primarily due to growth in both loans and deposits, coupled with improved spreads on deposits as a result of higher interest rates. The overall increase was partially offset by the effects of tightening spreads on the loan portfolio. A benefit in 2017 compared to a provision for loan and lease losses in 2016 resulted in a favorable impact of $15.7 million, primarily due to loan portfolio quality improvement. Non-interest income decreased $2.7 million, primarily due to lower fees from mortgage banking activities and client interest rate hedging activities; partially offset by increased fee income from investment management activity and deposit related service charges. Non-interest expense increased $5.9 million, primarily due to increased compensation and benefits, increased investment in technology infrastructure, charges related to banking center optimization, and net deposit fraud losses; partially offset by lower marketing, and the absence in 2017 of core deposit intangible amortization, which ended in 2016.
Selected Balance Sheet Information and Assets Under Administration:
(In thousands)At September 30,
2017		 At December 31,
2016
Total assets$8,881,322
 $8,721,046
Loans8,155,063
 7,959,558
Deposits11,331,767
 10,970,977
Not included in above amounts:   
Assets under administration3,231,345
 2,980,113
Loans increased $195.5 million to $8.2 billion at September 30, 2017 compared to December 31, 2016. The net increase is related to growth inresidential mortgages and business banking loans; partially offset by net decreasesvaluations in the equity and unsecured personal loans portfolios. Loan originations were $1.5 billion inmarkets during the ninesix months ended SeptemberJune 30, 2017 compared to $1.7 billion for the same period in 2016. Originations decreased by $127.3 million driven by less residential mortgage originations.2023.
15

Deposits increased $360.8 million at September 30, 2017 compared to December 31, 2016 due to the Boston expansion and continued growth in all major deposit product types.
Additionally, investment and securities-related services had assets under administration, in its strategic partnership with LPL, which increased $251.2 million to $3.2 billion at September 30, 2017, compared to December 31, 2016.

HSA Bank
Operating Results:
 Three months ended September 30, Nine months ended September 30,
(In thousands)2017 2016 2017 2016
Net interest income$26,713
 $20,560
 $76,339
 $60,484
Non-interest income19,371
 16,900
 58,392
 54,969
Non-interest expense27,222
 23,021
 84,211
 71,966
Income before income taxes18,862
 14,439
 50,520
 43,487
Income tax expense6,006
 4,624
 15,395
 14,201
Net income$12,856
 $9,815
 $35,125
 $29,286
Three months ended June 30,Six months ended June 30,
(In thousands)2023202220232022
Net interest income$75,421 $49,558 $147,151 $94,135 
Non-interest income23,023 26,552 47,090 53,510 
Non-interest expense42,643 37,540 86,343 73,949 
Pre-tax net revenue$55,801 $38,570 $107,898 $73,696 
Comparison to Prior Year Quarter
Net incomeHSA Bank's pre-tax net revenue increased $3.0$17.2 million, or 44.7%, for the three months ended SeptemberJune 30, 20172023, as compared to the same periodthree months ended June 30, 2022, due to an increase in 2016. Netnet interest income, increased $6.2partially offset by a decrease in non-interest income and an increase in non-interest expense. The $25.8 million reflectingincrease in net interest income is primarily due to an increase in the growthnet deposit interest rate spread and organic deposit growth. The $3.5 million decrease in depositsnon-interest income is primarily due to lower customer account service fees. The $5.1 million increase in non-interest expense is primarily due to an increase in compensation and improved deposit spread. Non-interest income increased $2.5 million due primarily to the growth in accounts. Non-interest expense increased $4.2 million primarily as a result of account growth and continued investment in key initiativesbenefits, higher service contract expenses related to continuous improvement, customer service,additional account holders, and expanded distribution.costs associated with the ongoing HSA Bank user experience build out.
Comparison to Prior Year to Date
Net incomeHSA Bank's pre-tax net revenue increased $5.8$34.2 million, or 46.4%, for the ninesix months ended SeptemberJune 30, 20172023, as compared to the same periodsix months ended June 30, 2022, due to an increase in 2016. Netnet interest income, partially offset by a decrease in non-interest income and an increase in non-interest expense. The $53.0 million increase in net interest income is primarily due to an increase in the net deposit interest rate spread and organic deposit growth. The $6.4 million decrease in non-interest income is primarily due to lower customer account service fees. The $12.4 million increase in non-interest expense is primarily due to an increase in compensation and benefits, higher service contract expenses related to additional account holders, and costs associated with the ongoing HSA Bank user experience build out.
Selected Balance Sheet and Off-Balance Sheet Information:
(In thousands)At June 30,
2023		At December 31,
2022
Deposits$8,208,490 $7,944,919 
Assets under administration, through linked investment accounts (off-balance sheet)4,122,898 3,393,832 
Deposits increased $15.9$0.3 billion, or 3.3%, at June 30, 2023, as compared to December 31, 2022, primarily due to an increase in the number of account holders and organic deposit growth. HSA deposits accounted for approximately 14.0% and 14.7% of the Company's total consolidated deposits at June 30, 2023, and December 31, 2022, respectively.
Assets under administration, through linked investment accounts, increased $0.7 billion, or 21.5%, at June 30, 2023, as compared to December 31, 2022, primarily due to additional account holders and higher valuations in the equity markets during the six months ended June 30, 2023.
16

Consumer Banking
Operating Results:
Three months ended June 30,Six months ended June 30,
(In thousands)2023202220232022
Net interest income$204,455 $179,287 $415,038 $315,964 
Non-interest income28,877 30,798 54,836 58,699 
Non-interest expense108,880 107,366 215,759 202,876 
Pre-tax, pre-provision net revenue$124,452 $102,719 $254,115 $171,787 
Comparison to Prior Year Quarter
Consumer Banking's PPNR increased $21.7 million, reflectingor 21.2%, for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, due to an increase in net interest income, partially offset by a decrease in non-interest income and an increase in non-interest expense. The $25.1 million increase in net interest income is primarily due to organic loan growth and the impact of the higher interest rate environment. The $1.9 million decrease in depositsnon-interest income is primarily due to lower net investment services income driven by the outsourcing of the consumer investment services platform in the fourth quarter of 2022, partially offset by higher deposit and improvedloan servicing fee income. The $1.5 million increase in
non-interest expense is primarily due to higher check card processing and marketing costs, partially offset by lower compensation and benefits expenses driven by the outsourcing of the consumer investment services platform effective as of the fourth quarter of 2022.
Comparison to Prior Year to Date
Consumer Banking's PPNR increased $82.3 million, or 47.9%, for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, due to an increase in net interest income, partially offset by a decrease in non-interest income and an increase in non-interest expense. The $99.1 million increase in net interest income is primarily due to organic loan growth and the impact of the higher interest rate environment. The $3.9 million decrease in non-interest income is primarily due to lower net investment services income driven by the outsourcing of the consumer investment services platform in the fourth quarter of 2022, partially offset by higher deposit spread. Non-interest incomeand loan servicing fee income. The $12.9 million increase in non-interest expense is primarily due to the full year-to-date impact of expenses from the Sterling merger in 2023, as compared to the five months impact in 2022, partially offset by lower compensation and benefits expenses driven by the outsourcing of the consumer investment services platform effective as of the fourth quarter of 2022.
Selected Balance Sheet and Off-Balance Sheet Information:
(In thousands)At June 30,
2023		At December 31,
2022
Loans$9,738,845 $9,624,465 
Deposits23,874,970 23,609,941 
Assets under administration (off-balance sheet)7,847,996 7,872,397 
Loans increased $3.4 million$0.1 billion, or 1.2%, at June 30, 2023, as compared to December 31, 2022, primarily due to growth in accounts. Non-interest expense increased $12.2 millionresidential mortgages and small business commercial loans, partially offset by net principal paydowns in home equity balances and the continued run-off of Lending Club loans. Total portfolio originations for the six months ended June 30, 2023, and 2022, were $0.7 billion and $1.4 billion, respectively. The $0.7 billion decrease was primarily due to increased compensation and benefit costs, increased processing coststhe increase in support of business growth as well as continued investmentmarket rates, which resulted in key initiatives related to continuous improvement, customer service, and expanded distribution.
Selected Balance Sheet Information and Assets Under Administration:
(In thousands)At September 30,
2017		 At December 31,
2016
Total assets$76,090
 $83,987
Deposits4,891,024
 4,362,503
Not included in above amounts:   
Assets under administration1,158,601
 878,190
lower residential mortgage originations.
Deposits increased $528.5 million$0.3 billion, or 1.1%, at SeptemberJune 30, 20172023, as compared to December 31, 2016, driven by organic growth. HSA Bank deposits accounted for 23.5%2022, as customer preferences shifted from lower rate checking and 22.6%savings products into higher rate certificates of the Company’s total deposits at September 30, 2017deposit and December 31, 2016, respectively.money market products.
Additionally, HSA Bank had $1.2Consumer Banking held approximately $7.8 billion and $7.9 billion in assets under administration through linked brokerage accounts, at SeptemberJune 30, 2017 compared2023, and December 31, 2022, respectively. The $24.4 million decrease was primarily due to $0.9customer investment outflows, partially offset by higher valuations in the equity markets during the six months ended June 30, 2023.
17

Financial Condition
Total assets increased $2.7 billion, or 3.9%, from $71.3 billion at December 31, 2016, as2022, to $74.0 billion at June 30, 2023. The change in total assets was primarily attributed to the numberfollowing, which experienced changes greater than $100 million dollars:
•Interest-bearing deposits increased $0.5 billion, primarily due to the Company's risk management approach to hold higher levels of account holders with investments continueson-balance sheet liquidity in the second quarter of 2023.
•Total investment securities, net increased $0.2 billion, reflecting a $0.3 billion increase in the held-to-maturity portfolio, partially offset by a $0.1 billion decrease in the available-for-sale portfolio. The overall increase in investment securities was primarily due to increase.
At September 30, 2017, there were $6.1purchases exceeding paydown activities, partially offset by the sale of $0.4 billion in total footings, comprisedU.S. Treasury notes, Corporate debt securities, and Municipal bonds and notes;
•Loans and leases increased $1.9 billion, primarily due to $5.8 billion of $4.9originations during the six months ended June 30, 2023, particularly across the commercial non-mortgage and commercial real estate categories, partially offset by net principal paydowns and commercial loan sales; and
•Goodwill and other net intangible assets increased a combined $138.7 million. Goodwill increased $117.4 million, which reflects the $143.2 million recognized in connection with the interLINK acquisition, partially offset by the impact of the Sterling merger measurement period adjustments recorded during the first quarter of 2023. The $21.3 million increase in other net intangible assets is primarily due to the $36.0 million broker dealer relationship and $4.0 million non-competition agreement recognized in connection with the interLINK acquisition, partially offset by year-to-date amortization charges.
Total liabilities increased $2.6 billion, in deposit balances and $1.2 billion in assets under administration balances.
Financial Condition
Webster had total assets of $26.4 billion at September 30, 2017 and $26.1or 4.0%, from $63.2 billion at December 31, 2016. Loans2022, to $65.8 billion at June 30, 2023. The change in total liabilities was primarily attributed to the following:
•Total deposits increased $4.7 billion, reflecting a $6.5 billion increase in interest-bearing deposits, partially offset by a $1.8 billion decrease in non-interest-bearing deposits. The overall increase in deposits is primarily due to the $4.3 billion of sweep money market deposits added as a result of the interLINK acquisition, partially offset by the impact of customers rebalancing their deposit concentrations as a result of the high-profile bank failures in the first and leasessecond quarters of $17.22023;
•Securities sold under agreements to repurchase and other borrowings decreased $0.9 billion, netprimarily due to $0.9 billion of ALLL of $201.8 million, at September 30, 2017 increased $0.4 billion compared to loans and leases of $16.8 billion, net of ALLL of $194.3 million,federal funds purchased at December 31, 2016. Total deposits of $20.9 billion at September 30, 2017 increased $1.6 billion2022, as compared to total depositsnone at June 30, 2023. The additional liquidity generated from the interLINK deposit sweep program allowed for the paydown of $19.3higher rate federal funds purchased during the first quarter of 2023;
•FHLB advances decreased $1.2 billion, primarily due to the maturity of the higher volume of advances borrowed in the first quarter of 2023, partially offset by the impact of the Company's risk management approach to hold higher levels of on-balance sheet liquidity in the second quarter of 2023;
•Long-term debt decreased $20.9 million, primarily due to the repurchase and retirement of $17.5 millionof the 4.375% Senior fixed-rate notes due February 15, 2024;
•Accrued expenses and other liabilities decreased $76.7 million, primarily due to the payment of accreted employee bonuses in the first quarter of 2023, and decreases in accrued taxes, treasury derivative liabilities, and operating lease liabilities, partially offset by increases in accrued interest payable and unfunded LIHTC commitments.
Total stockholders' equity increased $0.2 billion, or 2.8%, from $8.1 billion at December 31, 2016. Interest bearing deposits increased 9.4%, during2022, to $8.3 billion at
June 30, 2023. The change in total stockholders' equity was attributed to the period,following:
•The adoption of ASU No. 2022-02, which resulted in a $4.2 million cumulative-effect adjustment to retained earnings;
•Net income recognized of $456.0 million;
•Other comprehensive loss, net of tax, of $33.9 million, primarily due to growthmarket value decreases in health savingsthe Company's
available-for-sale securities portfolio and money market accounts.cash flow hedges;
At September 30, 2017, total shareholders' equity•Dividends paid to common and preferred stockholders of $2.6 billion increased $111.8$139.8 million compared to total shareholders' equityand $8.3 million, respectively;
•Employee stock-based compensation plan activity of $2.5 billion at December 31, 2016. Changes in shareholders' equity for the nine months ended September 30, 2017 included increases$25.8 million, inclusive of $185.5restricted stock amortization and forfeitures, and stock options exercised of $1.7 million; and
•Repurchases of common stock of $58.3 million in net income and $11.0 million for share-based award activity, partially offset by $71.0 million in common dividends, $6.1 million in preferred dividends, and $20.9 million purchases of treasury stock at cost.
The quarterly cash dividend to shareholders has been increased to $0.26 per common share since April 24, 2017. See the selected financial highlights under the "Results of Operations" sectionCompany's common stock repurchase program and Note 10: Regulatory Matters in the Notes$15.4 million related to Condensed Consolidated Financial Statements contained elsewhere in this report for information on regulatory capital levels and ratios.employee stock-based compensation plans.

18

Investment Securities
Webster Bank's investment securities are managed within regulatory guidelines and corporate policy, which include limitations on aspects such as concentrations in and type of investments as well as minimum risk ratings per type of security. The OCC may establish additional individual limits on a certain type of investment if the concentration in such investment presents a safety and soundness concern. In addition to the Bank, the Holding Company also may directly hold investment securities from time-to-time.
Webster maintains, throughThrough its Corporate Treasury Unit, investmentfunction, the Company maintains and invests in debt securities that are primarily structuredused to provide a source of liquidity for operating needs, to generate interest income, and as a means to manage the Company's
interest-rate risk. InvestmentThe Company's investment securities are classified into two major categories,categories: available-for-sale and
held-to-maturity.
The ALCO manages the Company's securities in accordance with regulatory guidelines and corporate policies, which include limitations on aspects such as concentrations in and types of investments, as well as minimum risk ratings per type of security. In addition, the OCC may further establish individual limits on certain types of investments if the concentration in such investment presents a safety and soundness concern. At June 30, 2023, and December 31, 2022, the Company had investment securities with a total net carrying value of $14.7 billion and $14.5 billion, respectively, with an average risk weighting for regulatory purposes of 17.8% and 19.0%, respectively. Although the Bank held the entirety of the Company's investment portfolio at both June 30, 2023, and December 31, 2022, the Holding Company may also directly hold investments.
The following table summarizes the balances and percentage composition of the Company's investment securities:
 At June 30, 2023At December 31, 2022
(In thousands)Amount%Amount%
Available-for-sale:
U.S. Treasury notes$384,0674.8 %$717,0409.1 %
Government agency debentures261,1013.4 258,3743.3 
Municipal bonds and notes1,604,15020.7 1,633,20220.7 
Agency CMO53,3600.7 59,9650.8 
Agency MBS2,184,90728.2 2,158,02427.3 
Agency CMBS1,734,92222.4 1,406,48617.8 
CMBS876,11911.3 896,64011.4 
CLO—— 2,107— 
Corporate debt608,7597.8 704,4128.9 
Private label MBS43,0500.6 44,2490.6 
Other8,9060.1 12,1980.1 
Total available-for-sale securities$7,759,341100.0 %$7,892,697100.0 %
Held-to-maturity:
Agency CMO$25,7910.4 %$28,3580.4 %
Agency MBS2,541,38436.6 2,626,11440.0 
Agency CMBS3,353,20548.3 2,831,94943.1 
Municipal bonds and notes (1)
919,11213.2 928,84514.2 
CMBS104,5081.5 149,6132.3 
Total held-to-maturity securities$6,944,000100.0 %$6,564,879100.0 %
Total investment securities$14,703,341$14,457,576
(1)The balances at both June 30, 2023, and December 31, 2022, exclude the $0.2 million ACL recorded on held-to-maturity securities.
Available-for-sale consistssecurities decreased $0.1 billion, or 1.7%, from $7.9 billion at December 31, 2022, to $7.8 billion at
June 30, 2023, primarily due to the sale of Agency CMO,$0.4 billion in U.S. Treasury notes, Corporate debt securities, and Municipal bonds and notes during the six months ended June 30, 2023, which resulted in $20.5 million of gross realized losses, $3.8 million of which was attributed to a decline in credit quality and has been included in the Provision for credit losses. This decrease was partially offset by purchases exceeding paydown activities, particularly across the Agency MBS, Agency CMBS, and CMBS categories. The average FTE yield in the available-for-sale portfolio was 2.98% and CLO. Held-to-maturity consists2.87% for the three and six months ended June 30, 2023, respectively, as compared to 2.20% and 2.10% for the three and six months ended June 30, 2022, respectively. The 78 and 77 basis point increases, respectively, are primarily of Agency CMO, Agency MBS, Agency CMBS, municipal bonds and notes, and CMBS. due to higher market rates on securities purchased in 2023.
At SeptemberJune 30, 2017, the Company had no holdings in obligations of individual states, counties, or municipalities which exceeded 10% of consolidated shareholders’ equity.
The combined carrying value of investment securities totaled $7.1 billion and $7.2 billion at September 30, 20172023, and December 31, 2016,2022, gross unrealized losses on available-for-sale securities were $883.0 million and $864.5 million, respectively. Available-for-sale investment securities decreased by $399.9The $18.5 million increase is primarily due to principal paydowns exceeding principal purchase activity. Held-to-maturity investmenthigher market rates. Available-for-sale securities increased by $336.7 million, primarily due to purchase activity exceeding principal paydowns. Onare evaluated for credit losses on a tax-equivalent basis,quarterly basis. No ACL was recorded on available-for-sale securities as of either period as each of the yieldsecurities in the Company's portfolio are investment grade, current as to principal and interest, and their price changes are consistent with interest and credit spreads when adjusting for convexity, rating, and industry differences. At June 30, 2023, based on current market conditions and the Company's current targeted balance sheet composition strategy, the Company intends to hold its available-for-sale securities portfolio for both the nine months ended September 30, 2017 and 2016 was 2.98%.
The Company held $4.4 billion in investment securities that are in an unrealized loss position at September 30, 2017. Approximately $2.7 billion of this total has been in an unrealized loss position for less than twelve months, whilepositions through the remainder, $1.7 billion, has been in an unrealized loss position for twelve months or longer. The total unrealized loss was $81.9 million at September 30, 2017. These investment securities were evaluated by management and were determined not to be other than temporarily impaired. The Company does not have the intent to sell these investment securities,anticipated recovery period, and it is more likely than notmore-likely-than-not that itthe Company will not have to sell these investmentavailable-for-sale securities before the recovery of theirthe entire amortized cost basis. To
19

Held-to-maturity securities increased $0.3 billion, or 5.8%, from $6.6 billion at December 31, 2022, to $6.9 billion at
June 30, 2023, primarily due to purchases exceeding paydown activities, particularly across the extent thatAgency MBS and Agency CMBS categories. The average FTE yield in the held-to-maturity portfolio was 2.99% and 2.91% for the three and six months ended June 30, 2023, respectively, as compared to 2.25% and 2.15% for the three and six months ended June 30, 2022, respectively. The 74 and 76 basis point increases, respectively, are primarily due to higher market rates on securities purchased in 2023.
At June 30, 2023, and December 31, 2022, gross unrealized losses on held-to-maturity securities were $878.6 million and $806.2 million, respectively. The $72.4 million increase is primarily due to higher market rates. Held-to-maturity securities are evaluated for credit movementslosses on a quarterly basis under the CECL methodology. At both June 30, 2023, and other related factors influenceDecember 31, 2022, the fair value of its investmentACL on held-to-maturity securities the Company may be required to record impairment charges for OTTI in future periods.was $0.2 million.
The following table summarizes the amortized cost and fairbook value of investment securities:securities by the earlier of either contractual maturity or call date, as applicable, along with the respective weighted-average yields:
At June 30, 2023
1 Year or Less1 - 5 Years5 - 10 YearsAfter 10 YearsTotal
(Dollars in thousands)Amount
Weighted-
Average
Yield (1)
Amount
Weighted-
Average
Yield (1)
Amount
Weighted-
Average
Yield (1)
Amount
Weighted-
Average
Yield (1)
Amount
Weighted-
Average
Yield (1)
Available-for-sale:
U.S. Treasury notes$— — %$384,067 1.28 %$— — %$— — %$384,067 1.28 %
Government agency debentures— — 74,003 2.41 — — 187,098 3.22 261,101 2.99 
Municipal bonds and notes26,562 2.42 151,327 1.61 680,529 1.55 745,732 1.59 1,604,150 1.59 
Agency CMO— — 415 2.71 5,074 3.08 47,871 2.86 53,360 2.88 
Agency MBS21 (4.18)17,713 1.30 143,716 1.73 2,023,457 2.57 2,184,907 2.50 
Agency CMBS1,592 0.42 108,479 1.10 23,120 2.15 1,601,731 3.11 1,734,922 2.97 
CMBS— — 68,492 6.67 42,400 6.59 765,227 6.65 876,119 6.65 
Corporate debt4,989 1.53 168,811 2.59 378,607 3.18 56,352 3.44 608,759 3.03 
Private label MBS— — — — — — 43,050 4.01 43,050 4.01 
Other— — 4,789 3.80 4,117 2.71 — — 8,906 3.30 
Total available-for-sale securities$33,164 2.19 %$978,096 2.01 %$1,277,563 2.24 %$5,470,518 3.21 %$7,759,341 2.89 %
Held-to-maturity:
Agency CMO$— — %$— — %$— — %$25,791 2.91 %$25,791 2.91 %
Agency MBS222 3.34 1,000 2.11 23,218 2.50 2,516,944 2.48 2,541,384 2.48 
Agency CMBS— — — — 125,304 2.68 3,227,901 3.08 3,353,205 3.06 
Municipal bonds and notes4,119 3.28 54,954 3.25 196,144 2.72 663,895 3.19 919,112 3.10 
CMBS— — — — — — 104,508 2.71 104,508 2.71 
Total held-to-maturity securities$4,341 3.28 %$55,954 3.23 %$344,666 2.69 %$6,539,039 2.85 %$6,944,000 2.85 %
Total investment securities$37,505 2.31 %$1,034,050 2.08 %$1,622,229 2.34 %$12,009,557 3.01 %$14,703,341 2.87 %
 At September 30, 2017 At December 31, 2016
(In thousands)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Available-for-sale:         
U.S. Treasury Bills$3,596
$—
$—
$3,596
 $734
$—
$—
$734
Agency CMO332,341
2,573
(3,116)331,798
 419,865
3,344
(3,503)419,706
Agency MBS923,819
3,214
(14,056)912,977
 969,460
4,398
(19,509)954,349
Agency CMBS599,165
—
(14,205)584,960
 587,776
63
(14,567)573,272
CMBS402,015
1,539
(121)403,433
 473,974
4,093
(702)477,365
CLO273,172
1,572
(161)274,583
 425,083
2,826
(519)427,390
Trust preferred30,463
676
(202)30,937
 30,381
—
(1,748)28,633
Corporate debt48,334
674
(130)48,878
 108,490
1,502
(350)109,642
Available-for-sale$2,612,905
$10,248
$(31,991)$2,591,162
 $3,015,763
$16,226
$(40,898)$2,991,091
Held-to-maturity:         
Agency CMO$276,367
$1,138
$(3,030)$274,475
 $339,455
$1,977
$(3,824)$337,608
Agency MBS2,549,500
24,275
(30,012)2,543,763
 2,317,449
26,388
(41,768)2,302,069
Agency CMBS708,229
280
(3,549)704,960
 547,726
694
(1,348)547,072
Municipal bonds and notes705,411
5,213
(13,150)697,474
 655,813
4,389
(25,749)634,453
CMBS257,361
3,394
(197)260,558
 298,538
4,107
(411)302,234
Private Label MBS443
2
—
445
 1,677
12
—
1,689
Held-to-maturity$4,497,311
$34,302
$(49,938)$4,481,675
 $4,160,658
$37,567
$(73,100)$4,125,125
(1)Weighted-average yields exclude FTE adjustments, and are calculated using the sum of the total book value multiplied by the yield divided by the sum of the total book value for each security, major type, and maturity bucket.
The benchmark 10-year U.S. Treasury rate decreased to 2.33% at September 30, 2017 from 2.45% at December 31, 2016. Webster Bank hasAdditional information regarding the ability to use itsCompany's investment securities, as well as interest-rate financial instrumentssecurities' portfolios can be found within internal policy guidelines, to hedge and manage interest-rate risk as part of its asset/liability strategy. See Note 12: Derivative Financial Instruments3: Investment Securities in the Notes to Condensed Consolidated Financial Statements contained elsewhere in this report for additional information concerning derivative financial instruments.

Alternative Investments
Investments in Private Equity Funds. The Company has investments in private equity funds. These investments, which totaled $11.0 million at September 30, 2017 and $10.8 million at December 31, 2016, are included in other assets in the accompanying Condensed Consolidated Balance Sheets. The majority of these funds are held at cost based on ownership percentage in the fund, while some are accounted for at fair value using a net asset value. See a further discussion of fair value in Note 13: Fair Value Measurements in the Notes to Condensed Consolidated Financial Statements contained elsewhere in this report. The Company recognized a net gain of $563 thousand and a net loss of $183 thousand for the three months ended September 30, 2017 and 2016, respectively, and a net gain of $2.2 million and $186 thousand for the nine months ended September 30, 2017 and 2016, respectively. These amounts are included in other non-interest income in the accompanying Condensed Consolidated Statements of Income.
Other Non-Marketable Investments. The Company holds certain non-marketable investments, which include preferred share ownership in other equity ventures. These investments, which totaled $6.3 million at September 30, 2017 and $5.7 million at December 31, 2016, are included in other assets in the accompanying Condensed Consolidated Balance Sheets. These funds are held at cost and subject to impairment testing. The Company recorded a net gain of $17 thousand and $8 thousand for the three months ended September 30, 2017 and 2016, respectively, and a net gain of $44 thousand and $35 thousand for the nine months ended September 30, 2017 and 2016, respectively. These amounts are included in other non-interest income in the accompanying Condensed Consolidated Statements of Income.
The Volcker Rule prohibits investments in private equity funds and non-public funds that are considered Covered Funds, as defined in the regulation. On May 4, 2017, the Federal Reserve approved Webster's illiquid funds extension request. As such, compliance with the rule provisions is required by July 21, 2022. See the "Supervision and Regulation" section ofPart I - Item 1. Business, contained in the Company's 2016 Form 10-K, for additional information on the Volcker Rule, including Covered Funds.Financial Statements.
20

Loans and Leases
The following table providessummarizes the amortized cost and percentage composition of the Company's loans and leases:
 At June 30, 2023At December 31, 2022
(Dollars in thousands)Amount%Amount%
Commercial non-mortgage$17,255,03633.4 %$16,392,79532.9 %
Asset-based1,718,2513.3 1,821,6423.7 
Commercial real estate13,542,25126.2 12,997,16326.1 
Multi-family7,118,82013.8 6,621,98213.3 
Equipment financing1,535,5643.0 1,628,3933.3 
Warehouse lending708,5601.4 641,9761.3 
Residential8,140,18215.8 7,963,42016.0 
Home equity1,552,8503.0 1,633,1073.3 
Other consumer54,5340.1 63,9480.1 
Total loans and leases (1)
$51,626,048100.0 %$49,764,426100.0 %
 At September 30, 2017 At December 31, 2016
(Dollars in thousands)Amount% Amount%
Residential$4,473,557
25.6 $4,232,771
24.9
Consumer:     
Home equity2,304,058
13.2 2,395,483
14.1
Other consumer247,855
1.4 274,336
1.6
Total consumer2,551,913
14.6 2,669,819
15.7
Commercial:     
Commercial non-mortgage4,482,191
25.7 4,151,740
24.4
Asset-based886,475
5.1 808,836
4.8
Total commercial5,368,666
30.8 4,960,576
29.1
Commercial real estate:     
Commercial real estate4,178,424
24.0 4,141,025
24.3
Commercial construction290,936
1.7 375,041
2.2
Total commercial real estate4,469,360
25.7 4,516,066
26.5
Equipment financing562,171
3.2 630,040
3.7
Net unamortized premiums14,780
0.1 9,402
0.1
Net deferred fees5,974
— 7,914
—
Total loans and leases$17,446,421
100.0 $17,026,588
100.0
Total residential loans were $4.5 billion(1)The amortized cost balances at SeptemberJune 30, 2017, an increase of $240.8 million from2023, and December 31, 2016. The net increase is a result of direct and correspondent originations of $632.8 million, partially offset by payments and payoffs.
Total consumer loans were $2.6 billion at September 30, 2017, a decrease of $117.9 million from December 31, 2016. The net decrease is primarily due to lower utilization of home equity lines.
Total commercial loans were $5.4 billion at September 30, 2017, an increase of $408.1 million from December 31, 2016. The net increase primarily related to originations of $1.8 billion, partially offset by payments and payoffs.
Total commercial real estate loans were $4.5 billion at September 30, 2017, a decrease of $46.7 million from December 31, 2016. The net decrease is a result of originations of $570.2 million, more than offset by payments and payoffs.
Equipment financing loans and leases were $562.2 million at September 30, 2017, a decrease of $67.9 million from December 31, 2016. The net decrease was primarily related to scheduled amortization and higher prepayments, partially offset by originations of $96.3 million.

Asset Quality
Management maintains asset quality within established risk tolerance levels through its underwriting standards, servicing, and management of loan and lease performance. Loans and leases, particularly where a heightened risk of loss has been identified, are regularly monitored to mitigate further deterioration which could potentially impact key measures of asset quality in future periods. Past due loans and leases, non-performing assets, and credit loss levels are considered to be key measures of asset quality.
The following table provides key asset quality ratios:
 At September 30, 2017 At December 31, 2016
Non-performing loans and leases as a percentage of loans and leases0.94% 0.79%
Non-performing assets as a percentage of loans and leases plus OREO0.97
 0.81
Non-performing assets as a percentage of total assets0.64
 0.53
Loans and leases over 30 days past due and accruing income as a percentage of loans and leases0.19
 0.25
ALLL as a percentage of non-performing loans and leases123.32
 144.98
ALLL as a percentage of loans and leases1.16
 1.14
Net charge-offs as a percentage of average loans and leases (1)
0.16
 0.23
Ratio of ALLL to net charge-offs (1)
7.41x
 5.25x
(1)Calculated for the September 30, 2017 period based2022, exclude the ACL recorded on the year-to-date net charge-offs, annualized.
Potential Problem Loans and Leases
Potential problem loans and leases are defined by management as certain loans and leases that, for;
commercial, commercial real estate, and equipment financing are performing loans and leases with a well defined weakness that jeopardizes the full repayment of the debt where there is also information which causes management to have serious concern about the ability of a borrower to comply with the present repayment terms in the future, and
residential and consumer are performing loans with a delinquency migration that approaches a period which would historically result in non-accrual status.
Potential problem loans and leases exclude loans and leases past due 90 days or more and accruing, non-accrual loans and leases, and TDRs. Management monitors potential problem loans and leases due to a higher degree of risk associated them. The current expectation of probable losses is included in the ALLL, however management cannot predict whether these potential problem loans and leases ultimately will become non-performing or result in a loss. In addition to loans and leases past due 90 days or more and accruing and TDRs, which are contained elsewhere within this section, the Company had potential problem loans and leases of $239.6$628.9 million at September 30, 2017 compared to $263.3and $594.7 million, at December 31, 2016.respectively.
Past Due Loans and Leases
The following table provides information regarding loans and leases past due 30 days or more and accruing income:
 At September 30, 2017 At December 31, 2016
(Dollars in thousands)Amount
% (1)
 Amount
% (1)
Residential$11,700
0.26 $11,202
0.26
Consumer:     
Home equity12,268
0.53 14,578
0.61
Other consumer3,674
1.48 3,715
1.35
Commercial non-mortgage2,302
0.05 1,949
0.05
Commercial real estate1,783
0.04 8,173
0.20
Equipment financing867
0.15 1,596
0.25
Loans and leases past due 30-89 days32,594
0.19 41,213
0.24
Loans and leases past due 90 days and accruing (2)
934
0.02 749
0.02
Total$33,528
0.19 $41,962
0.25
Deferred costs and unamortized premiums75
  86
 
Total loans and leases over 30 days past due and accruing income$33,603
  $42,048
 
(1)Represents the principal balance of loans and leases over 30 days past due and accruing income as a percentage of the outstanding principal balance within the comparable loan and lease category, and which excludes the impact of deferred costs and unamortized premiums.
(2)Loans and leases past due 90 days and accruing was exclusively commercial non-mortgage for the periods presented.

The balance of loans and leases past due 30 days or more and accruing income decreased $8.4 million at September 30, 2017 compared to December 31, 2016 and was centered in commercial real estate and consumer home equity. The ratio of loans and leases past due 30 days or more and accruing income as a percentage of loans and leases declined to 0.19% at September 30, 2017 as compared to 0.25% at December 31, 2016.
Non-performing Assets
The following table provides information regarding non-performing assets:
 At September 30, 2017 At December 31, 2016
(Dollars in thousands)Amount
% (1)
 Amount
% (1)
Residential$45,597
1.02 $47,201
1.12
Consumer:     
Home equity37,057
1.61 35,875
1.50
Other consumer1,858
0.75 1,663
0.61
Total consumer38,915
1.52 37,538
1.41
Commercial:     
Commercial non-mortgage58,942
1.32 38,550
0.93
Asset-based loans8,558
0.97 —
—
Total commercial67,500
1.26 38,550
0.78
Commercial real estate:     
Commercial real estate10,590
0.25 9,859
0.24
Commercial construction476
0.16 662
0.18
Total commercial real estate11,066
0.25 10,521
0.23
Equipment financing570
0.10 225
0.04
Total non-accrual loans and leases163,648
0.94 134,035
0.79
Deferred costs and unamortized premiums115
  (219) 
Total recorded investment in non-accrual loans and leases (2)
$163,763
  $133,816
 
      
Total non-accrual loans and leases$163,648
  $134,035
 
Foreclosed and repossessed assets:     
Residential and consumer4,986
  3,911
 
Commercial and equipment financing328
  —
 
Total foreclosed and repossessed assets$5,314
  $3,911
 
Total non-performing assets$168,962
  $137,946
 
(1)Represents the principal balance of non-accrual loans and leases as a percentage of the outstanding principal balance within the comparable loan and lease category, and which excludes the impact of deferred costs and unamortized premiums.
(2)Includes non-accrual TDRs of $82.6 million at September 30, 2017 and $75.7 million at December 31, 2016.
Non-performing assets increased $31.0 million at September 30, 2017 compared to December 31, 2016. The increase in non-performing assets at September 30, 2017 is primarily due to three middle market loans that were moved to non-accrual during the year and are being actively monitored and managed, with appropriate reserves established at the time of move to non-accrual. As a result, overall non-performing assets as a percentage of total assets increased to 0.64% at September 30, 2017 as compared to 0.53% at December 31, 2016.
The following table provides detail of non-performing loan and lease activity:
 Nine months ended September 30,
(In thousands)2017 2016
Beginning balance$134,035
 $139,941
Additions104,693
 73,990
Paydowns/draws(48,187) (46,778)
Charge-offs(21,002) (32,999)
Other reductions(5,891) (5,936)
Ending balance$163,648
 $128,218

Impaired Loans and Leases
Loans are considered impaired when it becomes probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impairment is evaluated on a pooled basis for smaller-balance loans of a similar nature. Consumer and residential loans for which the borrower has been discharged in Chapter 7 bankruptcy are considered collateral dependent impaired loans at the date of discharge. Commercial, commercial real estate, and equipment financing loans and leases over a specific dollar amount, risk rated substandard or worse and non-accruing, all TDRs, and all loans that have had a partial charge-off are evaluated individually for impairment.
To the extent that an impaired loan or lease balance is collateral dependent, the Company evaluates the fair value of the collateral. Impairment is calculated as the excess of the present value of estimated future cash flows using the original interest rate of the loan, or at the fair value of collateral, less estimated selling costs and other customized discounting criteria.
For residential and consumer collateral dependent loans, a third-party appraisal is obtained upon loan default. Fair value of the collateral for residential and consumer collateral dependent loans is reevaluated every six months. Fair value is also reassessed, with any excess amount charged off, for consumer loans that reach 180 days past due in accordance with Federal Financial Institutions Examination Council guidelines. For commercial, commercial real estate, and equipment financing collateral dependent loans and leases, The Company's impairment process requires obtaining a third-party appraisal or asset valuation, an interim valuation analysis, blue book reference, or other internal methods, when determining the fair value of the collateral. Fair value of the collateral for commercial loans is reevaluated quarterly. Whenever the Company has a third-party real estate appraisal performed by independent licensed appraisers, a licensed in-house appraisal officer or qualified reviewer reviews these appraisals for compliance with the Financial Institutions Reform Recovery and Enforcement Act and the Uniform Standards of Professional Appraisal Practice.
A fair value shortfall is recorded as an impairment reserve, thereby increasing the ALLL. Subsequent to an appraisal or other fair value estimate, should reliable information come to management's attention that the value has declined further, additional impairment reserves may be recorded to reflect the particular situation. Any impaired loan for which no specific valuation allowance was necessary is the result of either sufficient cash flow or sufficient collateral coverage of the book balance.
At September 30, 2017, there were 1,612 impaired loans and leases with a recorded investment balance of $270.2 million, which included loans and leases of $167.8 million with an impairment allowance of $17.8 million. This compares to 1,635 impaired loans and leases with a recorded investment balance of $249.4 million, which included loans and leases of $152.6 million, with an impairment allowance of $18.6 million at December 31, 2016. For additional information, see Note 4: Loans and Leases in the Notes to Condensed Consolidated Financial Statements contained elsewhere in this report.
Troubled Debt Restructurings
A modified loan is considered a TDR when two conditions are met: (i) the borrower is experiencing financial difficulties; and (ii) the modification constitutes a concession. Modified terms are dependent upon the financial position and needs of the individual borrower. The Company considers all aspects of the restructuring in determining whether a concession has been granted, including the debtor's ability to access market rate funds. In general, a concession exists when the modified terms of the loan are more attractive to the borrower than standard market terms. Common modifications include material changes in covenants, pricing, and forbearance. Loans for which the borrower has been discharged under Chapter 7 bankruptcy are considered collateral dependent TDRs and thus, impaired at the date of discharge and charged down to the fair value of collateral less cost to sell.
The Company’s policy is to place consumer loan TDRs, except those that were performing prior to TDR status, on non-accrual status for a minimum period of six months. Commercial TDRs are evaluated on a case-by-case basis for determination of accrual status. Loans qualify for return to accrual status once they have demonstrated performance with the restructured terms of the loan agreement for a minimum of six months. Initially, all TDRs are reported as impaired. Generally, a TDR is classified as an impaired loan and reported as a TDR for the remaining life of the loan. Impaired and TDR classification may be removed if the borrower demonstrates compliance with the modified terms for a minimum of six months and through one fiscal year-end, and the restructuring agreement specifies a market rate of interest equal to that which would be provided to a borrower with similar credit at the time of restructuring. In the limited circumstance that a loan is removed from TDR classification, it is the Company’s policy to continue to base its measure of loan impairment on the contractual terms specified by the loan agreement.

The following tables provide information for TDRs:
 Nine months ended September 30,
(In thousands)2017 2016
Beginning balance$223,528
 $272,690
Additions25,604
 32,996
Paydowns/draws(25,277) (49,906)
Charge-offs(2,999) (17,927)
Transfers to OREO(2,506) (1,853)
Ending balance$218,350
 $236,000
(In thousands)At September 30,
2017		 At December 31,
2016
Accrual status$135,774
 $147,809
Non-accrual status82,576
 75,719
Total recorded investment of TDRs$218,350
 $223,528
Specific reserves for TDRs included in the balance of ALLL$11,837
 $14,583
Additional funds committed to borrowers in TDR status3,944
 459
Overall, TDR balances decreased $5.2 million at September 30, 2017 compared to December 31, 2016. The September 30, 2017 specific reserves for TDRs declined from year end, and reflects management’s current assessment of reserve requirements.
Allowance for Loan and Lease Losses Methodology
The ALLL policy is considered a critical accounting policy. Executive management reviews and advises on the adequacy of the ALLL reserve, which is maintained at a level deemed sufficient by management to cover probable losses inherent within the loan and lease portfolios.
The quarterly process for estimating probable losses is based on predictive models, to measure the current risk profile of loan portfolio and combines other quantitative and qualitative factors together with the impairment reserve to determine the overall reserve requirement. Management's judgment and assumptions influence loss estimates and ALLL balances. Quantitative and qualitative factors that management considers include factors such as the nature and volume of portfolio growth, national and regional economic conditions and trends, other internal performance metrics, and how each of these factors is expected to impact near term loss trends. While actual future conditions and realized losses may vary significantly from assumptions, management believes the ALLL is adequate at September 30, 2017.
The Company’s methodology for assessing an appropriate level of the ALLL includes three key elements:
Impaired loans and leases are either analyzed on an individual or pooled basis and assessed for specific reserves measured based on the present value of expected future cash flows discounted at the effective interest rate of the loan or lease, except that as a practical expedient, impairment may be measured based on a loan or lease's observable market price, or the fair value of the collateral, if the loan or lease is collateral dependent. A loan or lease is collateral dependent if the repayment of the loan or lease is expected to be provided solely by the underlying collateral. The Company considers the pertinent facts and circumstances for each impaired loan or lease when selecting the appropriate method to measure impairment and evaluates, on a quarterly basis, each selection to ensure its continued appropriateness.
Loans and leases that are not considered impaired and have similar risk characteristics, are segmented into homogeneous pools and modeled using quantitative methods. The Company's loss estimate for its commercial portfolios utilizes an expected loss methodology that is based on PG and LGD models. The PD and LGD models are based on borrower and facility risk ratings assigned to each loan and are updated throughout the year as a borrower's financial condition changes. PD and LGD models are derived using the Company's portfolio specific historic data and are refreshed annually. Residential and consumer portfolio loss estimates are based on roll rate models that utilize the Company's historic delinquency and default data. For each segmentation the loss estimates incorporate a LEP model which represents an amount of time between when a loss event first occurs to when it is charged-off. An LEP is determined for each loan type based on the Company's historical experience and is reassessed at least annually.
The Company also considers qualitative factors, consistent with interagency regulatory guidance, that are not explicitly factored in the quantitative models but that can have an incremental or regressive impact on losses incurred in the current loan and lease portfolio.

At September 30, 2017 the ALLL was $201.8 million compared to $194.3 million at December 31, 2016. The increase of $7.5 million in the reserve at September 30, 2017 compared to December 31, 2016 is primarily due to growth in both commercial banking and community banking portfolios and increased reserves for certain impaired loans. The ALLL reserve remains adequate to cover inherent losses in the loan and lease portfolios. ALLL as a percentage of loans and leases, also known as the reserve coverage, increased to 1.16% at September 30, 2017 from 1.14% at December 31, 2016, reflecting an updated assessment of inherent losses and impaired reserves. ALLL as a percentage of non-performing loans and leases decreased to 123.32% at September 30, 2017 from 144.98% at December 31, 2016.
The following table provides an allocation of the ALLL by portfolio segment:
 At September 30, 2017 At December 31, 2016
(Dollars in thousands)Amount
% (1)
 Amount
% (1)
Residential$17,774
0.40 $23,226
0.55
Consumer38,144
1.49 45,233
1.68
Commercial89,594
1.68 71,905
1.46
Commercial real estate49,534
1.11 47,477
1.05
Equipment financing6,757
1.19 6,479
1.02
Total ALLL$201,803
1.16 $194,320
1.14
(1)Percentage represents allocated ALLL to total loans and leases within the comparable category. The allocation of a portion of the ALLL to one category of loans and leases does not preclude its availability to absorb losses in other categories.
The following table provides detail of activity in the ALLL:
 At or for the three months ended September 30, At or for the nine months ended September 30,
(In thousands)2017 2016 2017 2016
Beginning balance$199,578
 $180,428
 $194,320
 $174,990
Provision10,150
 14,250
 27,900
 43,850
Charge-offs:       
Residential(585) (1,304) (1,940) (3,536)
Consumer(6,197) (5,259) (18,273) (14,236)
Commercial(3,002) (2,561) (5,321) (17,294)
Commercial real estate(749) —
 (951) (2,521)
Equipment financing(121) (300) (425) (521)
Total charge-offs(10,654) (9,424) (26,910) (38,108)
Recoveries:       
Residential280
 554
 924
 1,408
Consumer1,894
 1,313
 4,337
 3,721
Commercial466
 370
 1,105
 1,143
Commercial real estate10
 194
 21
 480
Equipment financing79
 240
 106
 441
Total recoveries2,729
 2,671
 6,493
 7,193
Net charge-offs(7,925) (6,753) (20,417) (30,915)
Ending balance$201,803
 $187,925
 $201,803
 $187,925

The following table provides a summary of net charge-offs (recoveries) to averagesummarizes loans and leases by category:contractual maturity, along with the indication of whether interest rates are fixed or variable:
At June 30, 2023
(In thousands)1 Year or Less1 - 5 Years5 - 15 YearsAfter 15 YearsTotal
Fixed rate:
Commercial non-mortgage$249,988 $604,657 $2,190,938 $1,599,238 $4,644,821 
Asset-based30,270 21,029 — — 51,299 
Commercial real estate558,872 1,947,510 1,149,041 163,998 3,819,421 
Multi-family326,460 2,745,829 1,444,706 54,038 4,571,033 
Equipment financing161,832 1,088,613 285,119 — 1,535,564 
Residential480 57,500 403,343 5,039,001 5,500,324 
Home equity3,993 24,824 175,140 201,473 405,430 
Other consumer13,541 9,247 320 148 23,256 
Total fixed rate loans and leases$1,345,436 $6,499,209 $5,648,607 $7,057,896 $20,551,148 
Variable rate:
Commercial non-mortgage$3,853,686 $8,032,268 $654,184 $70,077 $12,610,215 
Asset-based377,792 1,283,846 5,314 — 1,666,952 
Commercial real estate1,971,819 4,854,512 2,214,080 682,419 9,722,830 
Multi-family324,937 997,645 1,196,139 29,066 2,547,787 
Warehouse lending687,034 21,526 — — 708,560 
Residential685 10,122 311,955 2,317,096 2,639,858 
Home equity2,079 6,666 143,518 995,157 1,147,420 
Other consumer7,857 14,851 2,542 6,028 31,278 
Total variable rate loans and leases$7,225,889 $15,221,436 $4,527,732 $4,099,843 $31,074,900 
Total loans and leases (1)
$8,571,325 $21,720,645 $10,176,339 $11,157,739 $51,626,048 
(1)Amounts due exclude total accrued interest receivable of $253.9 million.
21

 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
(Dollars in thousands)Amount
% (1)
 Amount
% (1)
 Amount
% (1)
 Amount
% (1)
Residential$305
0.03 $750
0.07 $1,016
0.03 $2,128
0.07
Consumer4,303
0.67 3,946
0.58 13,936
0.71 10,515
0.51
Commercial2,536
0.19 2,191
0.19 4,216
0.11 16,151
0.48
Commercial real estate739
0.07 (194)(0.02) 930
0.03 2,041
0.07
Equipment financing42
0.03 60
0.04 319
0.07 80
0.02
Net charge-offs$7,925
0.18 $6,753
0.16 $20,417
0.16 $30,915
0.26
(1)Net charge-offs (recoveries) to average loans and leases, percentage calculated based on period-to-date activity, annualized.
Net charge-offs increased $1.2 millionCredit Policies and decreased $10.5 million for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. Procedures
The decrease for nine months period is primarily due to improved asset quality in commercial loans. Webster Bank has credit policies and procedures in place designed to support its lending activityactivities within an acceptable level of risk. Management reviewsrisk, which are reviewed and approves these policiesapproved by management and proceduresthe Board of Directors on a regular basis. To assist with this process, management with its review,inspects reports generated by the Company's loan reporting systems related to loan production, loan quality, concentrations of credit, loan delinquencies, non-performing loans, and potential problem loans are generated by loan reporting systems.loans.
Commercial non-mortgage, asset-based, equipment finance, and warehouse lending loans are underwritten after evaluating and understanding the borrower’s ability to operate and service its debt. Underwriting standards are designed to focus onAssessment of the borrower's management is a critical element of the underwriting process and support the promotion of relationships rather than transactional banking.credit decision. Once it ishas been determined that the borrower’s management possesses sound ethics and a solid business acumen, the Company examines current and projected cash flows are examined to determine the ability of the borrower to repay obligations, as agreed.contracted. Commercial non-mortgage, asset-based, and industrialequipment finance loans are primarily made based on the identified cash flows of the borrower, and secondarily on the underlying collateral provided by the borrower. TheWarehouse lending loans are primarily made based on the borrower's ability to originate high-quality, first-mortgage residential loans that can be sold into the agency, government, or private jumbo markets, and secondarily on the underlying cash flows of borrowers; however,the borrower. However, the cash flows of borrowers may not be as expected, and the collateral securing these loans, as applicable, may fluctuate in value. Most commercial non-mortgage, asset-based, and industrialequipment finance loans are secured by the assets being financed and may incorporate personal guarantees of the principals.principal balance. Warehouse lending loans are generally uncommitted facilities.
Commercial real estate loans, including multi-family, are subject to underwriting standards and processes similar to those for commercial non-mortgage, asset-based, equipment finance, and industrial loans, in addition to those specific to real estatewarehouse lending loans. These loans are primarily viewed primarily as cash flow loans, and secondarily as loans secured by real estate. Repayment of thesecommercial real estate loans is largely dependent on the successful operation of the property securing the loan, the market in which the property is located, and the tenants of the property securing the loan. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type and geographic location, which reduces the Company's exposure to adverse economic events that may affect a particular market. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. All transactions are appraised to determine market value. Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. The Company alsoManagement periodically utilizes third-party experts to provide insight and guidance about economic conditions and trends affecting its commercial real estate loan portfolio.
Commercial constructionConsumer loans have uniqueare subject to policies and procedures developed to manage the specific risk characteristics and are provided to experienced developers/sponsors with strong track records of successful completion and sound financial condition and are underwritten utilizing feasibility studies, independent appraisals, sensitivity analysis of absorption and lease rates, and financial analysis of the developers and property owners. Commercial construction loans are generally based upon estimates of costs and value associated with the complete project.portfolio. These estimates may be subject to change as the construction project proceeds. In addition, these loans often include partial or full completion guarantees. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property, or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored with on-site inspections by third-party professionals and the Company's internal staff.
Policies and procedures are in place to manage consumer loan risk and are developed and modified, as needed. Policiespolicies and procedures, coupled with relatively small individual loan amounts and predominately collateralized loan structures, are spread across many individualdifferent borrowers, minimizeminimizing the level of credit risk. Trend and outlook reports are reviewed by management on a regular basis.basis, and policies and procedures are modified or developed, as needed. Underwriting factors for residential mortgage and home equity loans include the borrower’s FICO score, the loan amount relative to property value, and the borrower’s debt to income level and are also influenced by regulatory requirements. Additionally, Websterdebt-to-income level. The Bank originates both qualified mortgage and non-qualified mortgage loans, as defined by applicable CFPB rules.
Allowance for Credit Losses on Loans and Leases
The ACL on loans and leases increased $34.2 million, or 5.7%, from $594.7 million at December 31, 2022, to $628.9 million at June 30, 2023, due to the Consumerimpact of the current macroeconomic environment on credit performance and organic loan growth.
The following table summarizes the percentage allocation of the ACL across the loans and leases categories:
At June 30, 2023At December 31, 2022
(Dollars in thousands)Amount
% (1)
Amount
% (1)
Commercial non-mortgage$208,47433.1 %$197,95033.3 %
Asset-based17,5712.8 16,0942.7 
Commercial real estate235,64037.5 214,77136.1 
Multi-family85,53913.6 80,65213.6 
Equipment financing24,7923.9 23,0813.9 
Warehouse lending6370.1 5770.1 
Residential25,3984.0 26,9074.5 
Home equity28,8714.6 32,2965.4 
Other consumer1,9890.4 2,4130.4 
Total ACL on loans and leases$628,911100.0 %$594,741100.0 %
(1)The ACL allocated to a single loan and lease category does not preclude its availability to absorb losses in other categories.
22

Methodology
The Company's ACL on loans and leases is considered to be a critical accounting policy. The ACL on loans and leases is a contra-asset account that offsets the amortized cost basis of loans and leases for the credit losses that are expected to occur over the life of the asset. Executive management reviews and advises on the adequacy of the allowance, which is maintained at a level that management deems to be sufficient to cover expected losses within the loan and lease portfolios.
The ACL on loans and leases is determined using the CECL model, whereby an expected lifetime credit loss is recognized at the origination or purchase of an asset, including those acquired through a business combination, which is then reassessed at each reporting date over the contractual life of the asset. The calculation of expected credit losses includes consideration of past events, current conditions, and reasonable and supportable economic forecasts that affect the collectability of the reported amounts. Generally, expected credit losses are determined through a pooled, collective assessment of loans and leases with similar risk characteristics. However, if the risk characteristics of a loan or lease change such that it no longer matches that of the collectively assessed pool, it is removed from the population and individually assessed for credit losses. The total ACL on loans and leases recorded by management represents the aggregated estimated credit loss determined through both the collective and individual assessments.
Collectively Assessed Loans and Leases. Collectively assessed loans and leases are segmented based on product type, credit quality, risk ratings, and/or collateral types within its commercial and consumer portfolios, and expected losses are determined using a PD, LGD, and EAD, loss rate, or discounted cash flow framework.
For portfolios using the PD/LGD/EAD framework, credit losses are calculated as the product of the probability of a loan defaulting, expected loss given the occurrence of a default, and the expected exposure of a loan at default. Summing the product across loans over their lives yields the lifetime expected credit losses for a given portfolio. Management's PD and LGD calculations are predictive models that measure the current risk profile of the loan pools using forecasts of future macroeconomic conditions, historical loss information, loan-level risk attributes, and credit quality indicators. The calculation of EAD follows an iterative process to determine the expected remaining principal balance of a loan based on historical paydown rates for loans of a similar segment within the same portfolio. The calculation of portfolio exposure in future quarters incorporates expected losses, the loan's amortization schedule, and prepayment rates.
Under the loss rate method, expected credit losses are estimated using a loss rate that is multiplied by the amortized cost of the asset at the balance sheet date. For each loan segment identified above, management applies an expected historical loss trend based on third-party loss estimates, and correlates them to observed economic metrics and reasonable and supportable forecasts of economic conditions. Under the discounted cash flow method, expected credit losses are determined by comparing the amortized cost of the asset at the balance sheet date to the present value of estimated future principal and interest payments expected to be collected over the remaining life of the asset. The Company's loss model generates cash flow projections at the loan level based on reasonable and supportable projections, from which management estimates payment collections adjusted for accelerated payments, recovery time, PD, and LGD.
The Company's models incorporate a single economic forecast scenario and macroeconomic assumptions over a reasonable and supportable forecast period. The development of the reasonable and supportable forecast assumes each macroeconomic variable will revert to long-term expectations, with reversion characteristics unique to specific economic indicators and forecasts. Reversion towards long-term expectations generally begins two to three years from the forecast start date and is complete within three to five years. Certain models use output reversion and revert to mean historical portfolio loss rates on a
straight-line basis in the third year of the forecast. Other models use input reversion and revert to the mean of macroeconomic variables in reasonable and supportable forecasts.
The Company incorporates forecasts of macroeconomic variables in the determination of expected credit losses. Macroeconomic variables are selected for each class of financing receivable based on relevant factors, such as asset type and the correlation of the variables to credit losses, among others. Data from the forecast scenario of these variables is used as an input to the modeled loss calculation.
A portion of the collective ACL is comprised of qualitative adjustments for risk characteristics that are not reflected or captured in the quantitative models, but are likely to impact the measurement of estimated credit losses. Qualitative factors are based on management's judgement of the Company, market, industry, or business specific data including loan trends, portfolio segment composition, and loan rating or credit scores. Qualitative adjustments may be applied in relation to economic forecasts when relevant facts and circumstances are expected to impact credit losses, particularly in times of significant volatility in economic activity.
23

Individually Assessed Loans and Leases. If the risk characteristics of a loan or lease change such that it no longer matches the risk characteristics of the collectively assessed pool, it is removed from the population and individually assessed for credit losses. Generally, all non-accrual loans, loans with a charge-off, and collateral dependent loans where the borrower is experiencing financial difficulty, are individually assessed. The measurement method used to calculate the expected credit loss on an individually assessed loan or lease is dependent on the type and whether the loan or lease is considered to be collateral dependent. Methods for collateral dependent loans are either based on the fair value of the collateral less estimated cost to sell (when the basis of repayment is the sale of collateral), or the present value of the expected cash flows from the operation of the collateral. For non-collateral dependent loans, either a discounted cash flow method or other loss factor method is used. Any individually assessed loan or lease for which no specific valuation allowance is deemed necessary is either the result of sufficient cash flows or sufficient collateral coverage relative to the amortized cost of the asset.
Additional information regarding the Company's ACL methodology can be found within Note 1: Summary of Significant Accounting Policies in the Consolidated Financial Protection Bureau rulesStatements contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
Asset Quality Ratios
The Company manages asset quality using risk tolerance levels established through the Company's underwriting standards, servicing, and management of its loan and lease portfolio. Loans and leases for which a heightened risk of loss has been identified are regularly monitored to mitigate further deterioration and preserve asset quality in future periods. Non-performing assets, credit losses, and net charge-offs are considered by management to be key measures of asset quality.
The following table summarizes key asset quality ratios and their underlying components:
(Dollars in thousands)At June 30,
2023		At December 31, 2022
Non-performing loans and leases (1)
$218,869 $203,791 
Total loans and leases51,626,048 49,764,426 
Non-performing loans and leases as a percentage of loans and leases0.42 %0.41 %
Non-performing assets (1)
$222,215 $206,136 
Total loans and leases$51,626,048 $49,764,426 
Add: OREO3,346 2,345 
Total loans and leases plus OREO$51,629,394 $49,766,771 
Non-performing assets as a percentage of loans and leases plus OREO0.43 %0.41 %
Non-performing assets (1)
$222,215 $206,136 
Total assets74,038,243 71,277,521 
Non-performing assets as a percentage of total assets0.30 %0.29 %
ACL on loans and leases$628,911 $594,741 
Non-performing loans and leases (1)
218,869 203,791 
ACL on loans and leases as a percentage of non-performing loans and leases287.35 %291.84 %
ACL on loans and leases$628,911 $594,741 
Total loans and leases51,626,048 49,764,426 
ACL on loans and leases as a percentage of loans and leases1.22 %1.20 %
ACL on loans and leases$628,911$594,741
Net charge-offs89,54667,288
Ratio of ACL on loans and leases to net charge-offs (2)
7.02x8.84x
(1)Non-performing assets balances and related asset quality ratios exclude the impact of net unamortized (discounts)/premiums and net unamortized deferred (fees)/costs on loans and leases.
(2)Calculated for the June 30, 2023, period based on annualized year-to-date net charge-offs.
24

The following table summarizes net charge-offs (recoveries) as a percentage of average loans and leases for each category:
At or for the three months ended June 30,
20232022
(Dollars in thousands)Net
Charge-offs (Recoveries)		Average Balance
% (1)
Net
Charge-offs (Recoveries)		Average Balance
% (1)
Commercial non-mortgage$1,258$17,093,0330.03 %$8,972$13,446,2170.27 %
Asset-based—1,756,051— 31,851,956— 
Commercial real estate19,84213,508,5930.59 1,67811,984,5290.06 
Multi-family—7,009,762— 1935,771,6220.01 
Equipment financing(179)1,564,586(0.05)1461,850,9590.03 
Warehouse lending—562,816— —553,331— 
Residential(373)8,067,349(0.02)(508)6,905,509(0.03)
Home equity(812)1,568,635(0.21)(1,100)1,672,845(0.26)
Other consumer51653,8903.83 21683,7301.03 
Total$20,252$51,184,7150.16 %$9,600$44,120,6980.09 %
At or for the six months ended June 30,
20232022
(Dollars in thousands)Net
Charge-offs (Recoveries)		Average Balance
% (1)
Net
Charge-offs (Recoveries)		Average Balance
% (1)
Commercial non-mortgage$3,981$16,865,7150.05 %$17,635$12,161,9200.29 %
Asset-based13,1891,773,4251.49 (47)1,696,990(0.01)
Commercial real estate28,39313,384,8900.42 2,72610,083,8080.05 
Multi-family1,0336,860,9650.03 2035,671,8440.01 
Equipment financing(839)1,594,857(0.11)3591,596,7790.04 
Warehouse lending—486,621— —459,847— 
Residential(834)8,031,537(0.02)(552)6,615,613(0.02)
Home equity(1,233)1,588,421(0.16)(2,367)1,665,929(0.28)
Other consumer1,08356,5323.83 57286,7071.32 
Total$44,773$50,642,9630.18 %$18,529$40,039,4370.09 %
(1)Percentage represents annualized year-to-date net charge-offs (recoveries) to average loans and leases within the comparable category.
Net charge-offs as a percentage of average loans and leases were 0.16% and 0.09% for the three months ended June 30, 2023, and 2022, respectively, and 0.18% and 0.09% for the six months ended June 30, 2023, and 2022, respectively. The increased level of net charge-offs is primarily due to the impact of the current macroeconomic environment on credit performance and a loss on sale of commercial real estate loans, which were charged-off in the second quarter of 2023.
Liquidity and Capital Resources
The Company manages its cash flow requirements through proactive liquidity measures at both the Holding Company and the Bank. In order to maintain stable, cost-effective funding, and to promote overall balance sheet strength, the liquidity position of the Company is continuously monitored, and adjustments are made to balance sources and uses of funds, as appropriate.
At June 30, 2023, management is not aware of any events that went intoare reasonably likely to have a material adverse effect on January 10, 2014.the Company’s liquidity position, capital resources, or operating activities. Although regulatory agencies have not issued formal guidance mandating more stringent liquidity and capital requirements, the Company is anticipating a greater focus on the liquidity and capital adequacy of financial institutions in response to the high-profile bank failures that occurred during the first and second quarters of 2023, and has taken appropriate measures to mitigate the risk that such requirements, if implemented, may have on its business, financial positions, and results of operations.

Cash inflows are provided through a variety of sources, including principal and interest payments on loans and investments, unpledged securities that can be sold or utilized to secure funding, and new deposits. The Company is committed to maintaining a strong base of core deposits, which consists of demand, interest-bearing checking, savings, health savings, and money market accounts, to support growth in its loan portfolios. Management actively monitors the interest rate environment and makes adjustments to its deposit strategy in response to evolving market conditions, bank funding needs, and client relationship dynamics.
Sources of Funds and Liquidity
25

Sources of FundsHolding Company Liquidity. .The primary source of liquidity at the Holding Company is dividends from the Bank. To a lesser extent, investment income, net proceeds from investment sales, borrowings, and public offerings may provide additional liquidity. The Holding Company generally uses its funds for principal and interest payments on senior notes, subordinated notes, and junior subordinated debt, dividend payments to preferred and common stockholders, repurchases of its common stock, and purchases of investment securities, as applicable.
During the three and six months ended June 30, 2023, the Bank paid $100.0 million and $250.0 million in dividends to the Holding Company, respectively. At June 30, 2023, there was $708.8 million of retained earnings available for the payment of dividends by the Bank to the Holding Company. On July 19, 2023, the Bank was approved to pay the Holding Company $250.0 million in dividends for the third quarter of 2023.
There are certain restrictions on the Bank's payment of dividends to the Holding Company, which can be found within
Note 10: Regulatory Capital and Restrictions in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements of this report, and in the section captioned "Supervision and Regulation" in Part I - Item 1. Business of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
The quarterly cash dividend to common stockholders remained at $0.40 per common share during the three months ended
June 30, 2023. On July 19, 2023, it was announced that the Holding Company’s Board of Directors had declared a quarterly cash dividend of $0.40 per share on Webster common stock. For the Series F Preferred Stock and Series G Preferred Stock, quarterly cash dividends of $328.125 per share and $16.25 per share were declared, respectively. The Company continues to monitor economic forecasts, anticipated earnings, and its capital position in the determination of its dividend payments.
The Holding Company maintains a common stock repurchase program, which was approved by the Board of Directors, that authorizes management to purchase shares of its common stock in open market or privately negotiated transactions, through block trades, and pursuant to any adopted predetermined trading plan, subject to certain conditions. During the three months ended June 30, 2023, the Holding Company repurchased 1,465,673 shares under the program at a weighted-average price of $39.57 per share, totaling $58.0 million. The Holding Company's remaining purchase authority at June 30, 2023, was $343.3 million. In addition, the Company will periodically acquire common shares outside of the repurchase program related to employee stock compensation plan activity. During the three months ended June 30, 2023, the Company repurchased 8,750 shares at a weighted-average price of $34.79 per share, totaling $0.3 million for this purpose.
The IRA imposes a 1% excise tax on the value of net stock repurchased by certain publicly traded corporations, including the Company, after December 31, 2022. At June 30, 2023, the Company had recorded a $0.3 million liability for such excise tax owed, with an offset to Treasury stock on the Condensed Consolidated Balance Sheet.
Webster Bank Liquidity. The Bank's primary source of funding is core deposits. Including time deposits, the Bank had a loan to total deposit ratio of 87.9% and 92.1% at June 30, 2023, and December 31, 2022, respectively.
The Bank is required by OCC regulations to maintain a sufficient level of liquidity to ensure safe and sound operations. The adequacy of liquidity, as assessed by the OCC, depends on factors such as overall asset and liability structure, market conditions, competition, and the nature of the institution’s deposit and loan customers. At June 30, 2023, the Bank exceeded all regulatory liquidity requirements. The Company has designed a detailed contingency plan in order to respond to any liquidity concerns in a prompt and comprehensive manner, including early detection of potential problems and corrective action to address liquidity stress scenarios.
Capital Requirements. The Holding Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory actions by regulators that could have a direct material effect on the Company’s Consolidated Financial Statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, both the Holding Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated pursuant to regulatory directives. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require financial institutions to maintain minimum ratios of Common Equity Tier 1 Capital, defined by the Basel III capital rules (CET1 capital), Tier 1 capital, Total capital to risk-weighted assets, and Tier 1 capital to average tangible assets (as defined in the regulations). At June 30, 2023, both the Holding Company and the Bank were classified as well-capitalized. Management believes that no events or changes have occurred subsequent to quarter-end that would change this designation.
26

In accordance with regulatory capital rules, the Company elected an option to delay the estimated impact of the adoption of CECL on its regulatory capital over a two-year deferral period, which ended on January 1, 2022, and subsequent three-year transition period ending on December 31, 2024. During the three-year transition period, capital ratios will phase out the aggregate amount of the regulatory capital benefit provided from the delayed CECL adoption in the initial two years. For 2022, 2023, and 2024, the Company is allowed 75%, 50%, and 25%, respectively, of the regulatory capital benefit as of
December 31, 2021, with full absorption occurring in 2025. At June 30, 2023, the regulatory capital benefit allowed from the delayed CECL adoption resulted in a 6, 6, and 4 basis point increase to the Holding Company's and the Bank's CET1 capital to total risk-weighted assets (CET1 risk-based capital), Tier 1 capital to total risk-weighted assets (Tier 1 risk-based capital), and Tier 1 capital to average tangible assets (Tier 1 leverage capital), respectively, and a 1 basis point decrease to Total capital to total risk-weighted assets (Total risk-based capital). Both the Holding Company's and the Bank's regulatory ratios remain in excess of being well-capitalized, even without the regulatory capital benefit of the delayed CECL adoption impact.
Additional information regarding the required regulatory capital levels and ratios applicable to the Holding Company and the Bank can be found within Note 10: Regulatory Capital and Restrictions in the Notes to Condensed Consolidated Financial Statements contained in Part I -Item 1. Financial Statements.
27

Sources and Uses of Funds
Sources of Funds. Deposits are the primary source of cash flows for the Bank’s cash flow for use in lending activities and meeting its general operational needs is deposits. Operating activities, such as loanneeds. Loan and mortgage-backed securities repayments, proceeds from loans and other investment securities held for sale, proceeds and maturities also provide cash flow.flows. While scheduled loan and investment securitysecurities repayments are a relatively stable source of funds, loanprepayments and investment security prepayments andother deposit inflows are influenced by economic conditions and prevailing interest rates, and local economic conditions and arethe timing of which is inherently uncertain. Additional sources of funds are provided by both short-term and long-term borrowings, and to a lesser extent, dividends received as part of the Bank's membership with the FHLB and FRB.
Deposits. The Bank offers a wide variety of checking and savings deposit products designed to meet the transactional and investment needs of both its consumer and business customers. The Bank’s deposit services include, but are not limited to, ATM and debit card use, direct deposit, ACH payments, mobile banking, internet-based banking, banking by mail, account transfers, and overdraft protection, among others. The Bank manages the flow of funds in its deposit accounts and interest rates consistent with FDIC regulations. The Bank’s Consumer and Digital Pricing Committee and its Commercial and Institutional Liability and Loan Pricing Committee both meet regularly to determine pricing and marketing initiatives.
With the acquisition of interLINK during the first quarter of 2023, the Bank received $4.3 billion of money market deposits at June 30, 2023, which added a unique source of core deposit funding and scalable liquidity to the Company's already differentiated, omnichannel deposit gathering capabilities.
Total deposits were $58.7 billion and $54.0 billion at June 30, 2023, and December 31, 2022, respectively. The $4.7 billion increase was primarily due to the interLINK money market deposits and organic deposit growth, partially offset by customers rebalancing their deposit concentrations as a result of the high-profile bank failures in the first and second quarters of 2023. Customer preferences also shifted from lower rate checking and savings products into higher rate certificates of deposit products, which are currently more attractive in the higher interest rate environment.
The following table summarizes daily average balances of deposits by type and the weighted-average rates paid thereon:
Three months ended June 30,
20232022
(Dollars in thousands)Average
Balance		Average RateAverage
Balance		Average Rate
Non-interest-bearing:
Demand$11,375,059 — %$13,395,942 — %
Interest-bearing:
Checking8,893,332 1.36 9,401,810 0.12 
Health savings accounts8,250,766 0.15 7,812,313 0.06 
Money market15,443,540 3.52 11,424,317 0.22 
Savings7,431,639 0.71 8,660,719 0.05 
Time deposits7,173,552 3.90 2,684,914 0.17 
Total interest-bearing47,192,829 2.13 39,984,073 0.12 
Total average deposits$58,567,888 1.72 %$53,380,015 0.09 %
Six months ended June 30,
20232022
(Dollars in thousands)Average
Balance		Average RateAverage
Balance		Average Rate
Non-interest-bearing:
Demand$11,999,028 — %$12,335,504 — %
Interest-bearing:
Checking8,858,136 1.30 8,555,157 0.09 
Health savings accounts8,271,493 0.15 7,786,035 0.06 
Money market14,171,117 3.15 10,265,149 0.19 
Savings7,786,976 0.60 8,095,617 0.04 
Time deposits5,607,711 3.37 2,614,989 0.19 
Total interest-bearing44,695,433 1.80 37,316,947 0.11 
Total average deposits$56,694,461 1.43 %$49,652,451 0.08 %
28

Uninsured deposits represent the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit or similar state deposit insurance regime, and amounts in any other uninsured investment or deposit accounts that are classified as deposits and not subject to any federal or state deposit insurance regimes. The Company calculates its uninsured deposit balances based on the methodologies and assumptions used for regulatory reporting requirements, which includes an estimated portion, and affiliate deposits. At June 30, 2023, and December 31, 2022, total uninsured deposits as per regulatory reporting requirements and reported on Schedule RC-O of the Bank's Call Report were $21.0 billion and $22.5 billion, respectively.
The following table summarizes uninsured deposits information at June 30, 2023, after certain exclusions:
(In thousands)At June 30, 2023
Uninsured deposits, per regulatory reporting requirements$20,988,997
Less: Affiliate deposits(2,129,206)
         Collateralized deposits(4,459,545)
Uninsured deposits, after exclusions$14,400,246
Immediately available liquidity (1)
$17,946,687
Uninsured deposits coverage124.6%
(1)Reflects $11.6 billion and $3.6 billion of additional borrowing capacity from the FHLB and the FRB, respectively, and $2.8 billion in unencumbered liquid assets.
Uninsured deposits, after adjusting for affiliate deposits and collateralized deposits, represented 24.5% of total deposits at June 30, 2023. Management believes that this presentation provides a more accurate view of deposits at risk given that affiliate deposits are not customer facing, and therefore are eliminated upon consolidation, and collateralized deposits are secured by other means. As of the date of this Quarterly Report on Form 10-Q, the Company's uninsured deposits as a percentage of total deposits, adjusted for affiliate deposits and collateralized deposits, is consistent with the percentage reported at
June 30, 2023. In addition, the Company's immediately available liquidity continues to increase.
The following table summarizes the portion of U.S. time deposits in excess of the FDIC insurance limit and time deposits otherwise uninsured by contractual maturity:
(In thousands)June 30, 2023
Portion of U.S. time deposits in excess of insurance limit$2,908,203
Time deposits otherwise uninsured with a maturity of:
3 months or less$585,911
Over 3 months through 6 months1,872,380
Over 6 months through 12 months441,155
Over 12 months8,757
Additional information regarding period-end deposit balances and rates can be found within Note 7: Deposits in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.
Borrowings. The Bank's primary borrowing sources include securities sold under agreements to repurchase, federal funds purchased, FHLB advances, and long-term debt. Total borrowed funds were $5.6 billion and $7.7 billion at June 30, 2023, and December 31, 2022, respectively, and represented 7.6% and 10.8% of total assets, respectively. The $2.1 billion decrease is primarily due to a $1.2 billion decrease in FHLB advances and a $0.9 billion decrease in federal funds purchased.
The Bank had additional borrowing capacity from the FHLB of $11.6 billion and $4.3 billion at June 30, 2023, and December 31, 2022, respectively. The Bank also had additional borrowing capacity from the FRB of $3.6 billion and $1.2 billion at June 30, 2023, and December 31, 2022, respectively. Unpledged investment securities of $1.6 billion at
June 30, 2023, could have been used for collateral on borrowings or other borrowings.to increase borrowing capacity by either $1.4 billion with the FHLB or $1.7 billion with the FRB.
Securities sold under agreements to repurchase are generally a form of short-term funding for the Bank in which it sells securities to counterparties with an agreement to buy them back in the future at a fixed price. Securities sold under agreements to repurchase totaled $243.6 million and $282.0 million at June 30, 2023, and December 31, 2022, respectively. The $38.4 million decrease is primarily due to fluctuations in customers' overnight account balances.
The Bank may also purchase term and overnight federal funds to meet its short-term liquidity needs. There were no federal funds purchased at June 30, 2023, whereas federal funds purchased totaled $0.9 billion at December 31, 2022. The additional liquidity generated from the interLINK deposit sweep program allowed for the paydown during the first quarter of 2023 of higher rate federal funds purchased.
29

FHLB advances are not only utilized as a source of funding, but also for interest rate risk management purposes. FHLB advances totaled $4.3 billion and $5.5 billion at June 30, 2023, and December 31, 2022, respectively. The $1.2 billion decrease is primarily due to the maturity of the higher volume of advances borrowed in the first quarter of 2023, partially offset by the impact of the Company's risk management approach to hold higher levels of on-balance sheet liquidity in the second quarter of 2023.
Long-term debt consists of senior fixed-rate notes maturing in 2024 and 2029, subordinated fixed-to-floating-rate notes maturing in 2029 and 2030, and floating-rate junior subordinated notes maturing in 2033. Long-term debt remained relatively flat on a comparative basis, totaling approximately $1.1 billion at both June 30, 2023, and December 31, 2022, respectively.
The following table summarizes daily average balances of borrowings by type and the weighted-average rates paid thereon:
Three months ended June 30,
20232022
(Dollars in thousands)Average
Balance		Average RateAverage
Balance		Average Rate
Securities sold under agreements to repurchase$215,874 0.11 %$529,786 1.06 %
Federal funds purchased— — 534,518 0.93 
FHLB advances6,724,139 5.21 1,156,449 1.08 
Long-term debt1,061,526 3.68 1,077,395 3.38 
Total average borrowings$8,001,539 4.87 %$3,298,148 1.79 %
Six months ended June 30,
20232022
(Dollars in thousands)Average
Balance		Average RateAverage
Balance		Average Rate
Securities sold under agreements to repurchase$229,784 0.11 %$553,282 0.86 %
Federal funds purchased333,733 4.62 268,735 0.93 
FHLB advances6,201,884 5.02 586,857 1.09 
Long-term debt1,066,859 3.67 987,353 3.36 
Total average borrowings$7,832,260 4.68 %$2,396,227 1.93 %
Additional information regarding period-end borrowings balances and rates can be found within Note 8: Borrowings in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.
Federal Home Loan Bank and Federal Reserve Bank Stock. WebsterThe Bank is a member of the Federal Home Loan BankFHLB System, which consists of eleven district Federal Home Loan Banks, each of which is subject to the supervision and regulation of the Federal Housing Finance Agency. An activity-based FHLB capital stock investment in the FHLB is required in order for Websterthe Bank to maintain its membership and access to advances and other extensions of credit for sources of funds and liquidity purposes. The FHLB capital stock investment is restricted in thatas there is no market for it, and it can only be redeemed by the FHLB. The FHLB recently has initiated a process to redeem the holdings of its member banks in excess of their membership and activity requirements, based on current conditions. As a result, Webster Bank held $85.6 million of FHLB capital stock at September 30, 2017 compared to $143.9of $181.1 million and $221.4 million at June 30, 2023, and December 31, 2016, for its membership and for outstanding advances and other extensions of credit. On2022, respectively. The most recent FHLB quarterly cash dividend was paid on August 2, 2017, the FHLB paid a cash dividend2023, in an amount equal to an annual yield of 4.22%8.04%.
Additionally, WebsterThe Bank is also required to hold FRB stock equal to 6% of its capital and surplus, of which 50% is paid. The remaining 50% is subject to call when deemed necessary by the FRB. TheFederal Reserve System. Similar to FHLB stock, the FRB capital stock investment is restricted in thatas there is no market for it, and it can only be redeemed by the FRB. At both SeptemberThe Bank held FRB capital stock of $226.9 million and $224.5 million at June 30, 20172023, and December 31, 2016, Webster Bank held $50.7 million of2022, respectively. The most recent FRB capital stock. Beginningsemi-annual cash dividend was paid on June 30, 2023, in 2016, the semi-annual dividend payment from the FRB will be calculated as the lesser of three percent oran amount equal to an annual yield of the 10-year Treasury note auctioned at the last auction held prior to the payment3.79%.
30

Uses of the dividend.
Deposits. Webster Bank offers a wide variety of deposit products for checking and savings (including: ATM and debit card use, direct deposit, ACH payments, combined statements, mobile banking services, internet-based banking, bank by mail, as well as overdraft protection via line of credit or transfer from another deposit account) designed to meet the transactional, savings, and investment needs for both consumer and business customers throughout 167 banking centers within its primary market area. Webster Bank manages the flow of funds in its deposit accounts and provides a variety of accounts and rates consistent with FDIC regulations. Webster Bank’s Retail Pricing Committee and its Commercial and Institutional Liability Pricing Committee meet regularly to determine pricing and marketing initiatives.
Total deposits were $20.9 billion at September 30, 2017 compared to $19.3 billion at December 31, 2016. The increase is predominately related to an increase in health savings accounts of $0.5 billion and an increase in money market accounts of $0.6 billion. See Note 7: Deposits in the Notes to Condensed Consolidated Financial Statements contained elsewhere in this report for additional information.
Borrowings. Utilized as a source of funding for liquidity and interest rate risk management purposes, borrowings primarily consist of FHLB advances and securities sold under agreements to repurchase, whereby securities are delivered to counterparties under an agreement to repurchase the securities at a fixed price in the future. At September 30, 2017 and December 31, 2016, FHLB advances totaled $1.5 billion and $2.8 billion, respectively. Webster Bank had additional borrowing capacity from the FHLB of approximately $2.7 billion at September 30, 2017 compared to approximately $1.2 billion at December 31, 2016. Webster Bank also had additional borrowing capacity at the FRB of approximately $0.5 billion at September 30, 2017 and $0.6 billion at December 31, 2016. In addition, unpledged investment securities of $4.3 billion at September 30, 2017 could have been used to increase borrowing capacity by approximately $3.8 billion at the FHLB or approximately $3.8 billion at the FRB, or alternatively used for collateral on other borrowings, such as repurchase agreements.
In addition, Webster Bank may utilize term and overnight Fed funds to meet short-term liquidity needs. The Company's long-term debt consists of senior fixed-rate notes maturing in 2024 and junior subordinated notes maturing in 2033. Total borrowed funds were $2.6 billion at September 30, 2017 compared to $4.0 billion at December 31, 2016. Borrowings represented 10.0% and 15.4% of total assets at September 30, 2017 and December 31, 2016, respectively. The reduction in borrowings was primarily related to FHLB advances maturing within one year. For additional information, see Note 8: Borrowings in the Notes to Condensed Consolidated Financial Statements contained elsewhere in this report.

Liquidity. Webster meets its cash flow requirements at an efficient cost under various operating environments through proactive liquidity management at both the Holding Company and Webster Bank. Liquidity comes from a variety of cash flow sources such as operating activities, including principal and interest payments on loans and investments, or financing activities, including unpledged investment securities, which can be sold or utilized to secure funding, and new deposits. Webster is committed to maintaining a strong, increasing base of core deposits, consisting of demand, checking, savings, health savings, and money market accounts, to support growth in its loan and lease portfolio. Liquidity is reviewed and managed in order to maintain stable, cost effective funding to promote overall balance sheet strength. Net cash provided by operating activities was $300.3 million for the nine months ended September 30, 2017 as compared to $187.6 million for the nine months ended September 30, 2016. The increase is significantly a result of derivative activity and, to a lesser extent, mortgage banking activities.
Holding Company Liquidity.Funds. The primary source of liquidity at the Holding Company is dividends from Webster Bank. Webster Bank paid $80 million in dividends to the Holding Company during the nine months ended September 30, 2017. To a lesser extent, investment income, net proceeds from investment sales, borrowings, and public offerings may provide additional liquidity. The main uses of liquidity are the payment of principal and interest to holders of senior notes and capital securities, the payment of dividends to preferred and common shareholders, repurchases of its common stock, and purchases of available-for-sale investment securities. There are certain restrictions on the payment of dividends by Webster Bank to the Holding Company, which is described in the section captioned "Supervision and Regulation" in Item 1 of Webster’s 2016 Form 10-K. At September 30, 2017, there was $328.8 million of retained earnings available for the payment of dividends by Webster Bank to the Holding Company.
The Company has a common stock repurchase program authorized by the Board of Directors, with $3.9 million of remaining repurchase authority at September 30, 2017. In addition, Webster periodically acquires common shares outside of the repurchase program related to stock compensation plan activity. The Company records the purchase of shares of common stock at cost based on the settlement date for these transactions. During the nine months ended September 30, 2017, a total of 389,952 shares of common stock were repurchased for approximately $20.9 million, of which 222,000 shares were purchased under the common stock repurchase program at a cost of approximately $11.6 million, and 167,952 shares were purchased, at market prices, related to stock compensation plan activity for a cost of approximately $9.3 million.
Webster Bank Liquidity. Webster Bank's primary source of funding is core deposits. The primary use of this funding is for loan portfolio growth. Including time deposits, Webster Bank had a loan to total deposit ratio of 83.7% and 88.2% at September 30, 2017 and December 31, 2016, respectively.
Webster Bank is required by OCC regulations to maintain liquidity sufficient to ensure safe and sound operations. Whether liquidity is adequate, as assessed by the OCC, depends on such factors as the overall asset/liability structure, market conditions, competition, and the nature of the institution’s deposit and loan customers. Webster Bank exceeded all regulatory liquidity requirements as of September 30, 2017. The Company has a detailed liquidity contingency plan designed to respond to liquidity concerns in a prompt and comprehensive manner. The plan is designed to provide early detection of potential problems and details specific actions required to address liquidity stress scenarios.
Applicable OCC regulations require Webster Bank, as a commercial bank, to satisfy certain minimum leverage and risk-based capital requirements. As an OCC regulated commercial institution, it is also subject to a minimum tangible capital requirement. As of September 30, 2017, Webster Bank was in compliance with all applicable capital requirements and exceeded the FDIC requirements for a well-capitalized institution. See Note 10: Regulatory Matters in the Notes to Condensed Consolidated Financial Statements contained elsewhere in this report for a further discussion of regulatory requirements applicable to Webster Financial Corporation and Webster Bank.
The liquidity position of the Company is continuously monitored, and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Management is not aware of any events that are reasonably likely to have a material adverse effect on the Company’s liquidity, capital resources, or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity, which, if implemented, would have a material adverse effect on the Company.
Off-Balance Sheet Arrangements
Webster engages in a variety of financial transactions that, in accordance with GAAP, are not recorded in the financial statements or are recorded in amounts that differ from the notional amounts. Such transactions are utilizedenters into various contractual obligations in the normal course of business for general corporate purposesthat require future cash payments and that could impact its short-term and long-term liquidity and capital resource needs. The following table summarizes significant fixed and determinable contractual obligations at June 30, 2023. The actual timing and amounts of future cash payments may differ from the amounts presented. Based on the Company's current liquidity position, it is expected that our sources of funds will be sufficient to fulfill these obligations when they come due.
  
Payments Due by Period (1)
(In thousands)20232024202520262027ThereafterTotal
Senior notes$— $132,550 $— $— $— $300,000 $432,550 
Subordinated notes— — — — — 499,000 499,000 
Junior subordinated debt— — — — — 77,320 77,320 
FHLB advances4,300,180 — — — 244 9,947 4,310,371 
Securities sold under agreements to repurchase243,580 — — — — — 243,580 
Time deposits4,189,693 2,859,064 134,973 53,889 35,600 12,839 7,286,058 
Operating lease liabilities16,017 36,381 33,263 30,014 24,809 82,311 222,795 
Contingent consideration4,798 11,241 — — — — 16,039 
Royalty liabilities860 8,572 1,417 — — — 10,849 
Purchase obligations (2)
136,135 43,989 21,247 6,640 2,229 1,287 211,527 
Total contractual obligations$8,891,263 $3,091,797 $190,900 $90,543 $62,882 $982,704 $13,310,089 
(1)Interest payments on borrowings have been excluded.
(2)Purchase obligations represent agreements to purchase goods or for customerservices of $1.0 million or more that are enforceable and legally binding and specify all significant terms.
In addition, in the normal course of business, the Company offers financial instruments with off-balance sheet risk to meet the financing needs. Corporate purpose transactions are structured to manage credit, interest rate, and liquidity risks, or to optimize capital. Customer transactions are structured to manage their funding requirements or facilitate certain trade arrangements.needs of its customers. These transactions give riseinclude commitments to inextend credit, and commercial and standby letters of credit, which involve to a varying degrees,degree, elements of credit risk. Since many of these commitments are expected to expire unused or be only partially funded, the total commitment amount of $11.2 billion at June 30, 2023, does not necessarily reflect future cash payments.
The Company also enters into commitments to invest in venture capital and private equity funds, as well as LIHTC investments to assist the Bank in meeting its responsibilities under the CRA. The total unfunded commitment for these alternative investments was $490.7 million at June 30, 2023. However, the timing of capital calls cannot be reasonably estimated, and depending on the nature of the contract, the entirety of the capital committed by the Company may not be called.
Pension obligations are funded by the Company, as needed, to provide for participant benefit payments as it relates to the Company's frozen, non-contributory, qualified defined benefit pension plan. Decisions to contribute to the defined benefit pension plan are made based upon pension funding requirements under the Pension Protection Act, the maximum amount deductible under the Internal Revenue Code, the actual performance of plan assets, and trends in the regulatory environment. The Company does not currently anticipate that it will be required to contribute to the defined benefit pension plan in 2023. The Company's non-qualified supplemental executive retirement plans and other post-employment benefit plans are unfunded.
At June 30, 2023, the Company's Condensed Consolidated Balance Sheet reflects a liability for uncertain tax positions of $10.1 million and $2.3 million of accrued interest and penalties, respectively. The ultimate timing and amount of any related future cash settlements cannot be predicted with reasonable certainty.
On May 22, 2023, the FDIC published a proposed rule to charge certain banks a special assessment to recover losses incurred by protecting uninsured depositors of Silicon Valley Bank and Signature Bank upon their failure in March 2023. The proposed rule would levy a special assessment to certain banks at an annual rate of 12.5 basis points based on their uninsured deposits balance as of December 31, 2022, payable in eight quarterly installments beginning in the first quarter of 2024. Based on the proposed rule, the Company estimates that its total special assessment charge would be approximately $44.0 million. The FDIC has the authority to make further changes to the proposed rule before finalization, including changes to the underlying data or calculation methodology used to determine the special assessment. However, since the final rule has not yet been published in the Federal Register, no legal obligation has been incurred, and liquidity risk. For the nine months ended September 30, 2017, Webster did not engage in any off-balance sheet transactions that would have a material effect on itstherefore, no accrual has been recognized.
Additional information regarding credit-related financial condition. For additional information, see instruments and alternative investments can be found within
Note 17:18: Commitments and Contingencies and Note 11: Variable Interest Entities, respectively, in the Notes to the Condensed Consolidated Financial Statements contained elsewhere in Part I - Item 1. Financial Statements of this report. Additional information regarding defined benefit pension and other postretirement benefit plans and income taxes can be found within
Note 19: Retirement Benefit Plans and Note 9: Income Taxes, respectively, in the Notes to the Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

31

Asset/Liability Management and Market Risk
An effective asset/liability management process must balance the risks and rewards from both shortshort-term and long-term interest rate risks inrisk when determining managementthe Company's strategy and action. To facilitate and manage this process, interest rate sensitivity is monitored on an ongoing basis by ALCO. Thethe Company's ALCO, whose primary goal of ALCO is to manage interest rate risk toand maximize net income and net economic value over time in changing interest rate environments subjectenvironments. The ALCO meets frequently to Board of Director approved risk limits. The Board of Directors sets the policy limits for earnings at risk for parallel ramps in interest rates over twelve months of plus and minus 100 and 200 basis points as well as twist shocks of plus and minus 50 and 100 basis points. Economic value, or equity at risk, limits are set for parallel shocks in interest rates of plus and minus 100 and 200 basis points. Basedmake decisions on the near historic lows in short-term interest rates,Company's investment and funding portfolios based on the decliningeconomic outlook, its interest rate scenarios of minus 100 basis points or moreexpectations, the risk position, and other factors.
Four main tools are used for both earnings atmanaging interest rate risk:
•the size, duration, and credit risk and equity at risk were temporarily suspended per ALCO policy. Effective with September 30, 2017, these scenarios were re-instituted. The results of the re-instituted minus 100 basis point scenario is outsideinvestment portfolio;
•the size and duration of the established wholesale funding portfolio;
•interest rate risk limit due to contracts; and
•the impactpricing and structure of deposit floors. Due to the low probability of occurrenceloans and the current level of rates, the Board of Directors has approved a temporary exception to policy. ALCO also regularly reviews earnings at risk scenarios for customized changes in rates, as well as longer-term scenarios of up to four years in the future.deposits.
Management measures interest rate risk using simulation analysis and asset/liability modeling software to calculate the Company's earnings at risk and equity at risk. These risk measures are quantified using simulation software from one of the leading firms in the field of asset/liability modeling. Key assumptions relate to the behavior of interest rates and spreads, prepayment speeds, and the run-off of deposits are included in the simulation analysis. From such simulations, interest rate risk is quantified, and appropriate strategies are formulated and implemented.
Earnings at risk is defined as the change in earnings (excluding provision for loan and lease losses and income tax expense) due to changes in interest rates. Interest rates are generally assumed to change up or down in a parallel fashion, and earningsthe net interest income results in each scenario are compared to a flat rate scenario as a base.base scenario. The flat rate base scenario holds the end of the period yield curve constant over the twelve montha twelve-month forecast horizon. Earnings simulation analysis incorporates assumptions about balance sheet changes such as assetAt June 30, 2023, and liability growth, loanDecember 31, 2022, the flat rate base scenario assumed a federal funds rate of 5.25% and deposit pricing,4.50%, respectively. The federal funds rate target range was 5.00-5.25% at June 30, 2023, and changes to the mix of assets and liabilities. It is a measure of short-term interest rate risk. Equity4.25-4.50% at risk is defined as the change in the net economic value of assets and liabilities due to changes inDecember 31, 2022. Since interest rates compared to a base net economic value. Equity at risk analyzes sensitivityrose sharply in 2022 and into the present valuefirst quarter of cash flows over2023, and have since remained elevated, management has incorporated the expected life of existing assets, liabilities,up and off-balance sheet contracts. It is a measure of the long-term interestdown 300 basis point rate risk to future earnings streams embedded in the current balance sheet.
Asset sensitivity is defined as earnings or net economic value increasing compared to a base scenario when interest rates rise and decreasing when interest rates fall. In other words, assets are more sensitive to changing interest rates than liabilities and, therefore, re-price faster. Likewise, liability sensitivity is defined as earnings or net economic value decreasing compared to a base scenario when interest rates rise and increasing when interest rates fall.
Key assumptions underlying the present value of cash flows include the behavior of interest rates and spreads, asset prepayment speeds, and attrition rates on deposits. Cash flow projections from the model are compared to market expectations for similar collateral types and adjusted based on experience with Webster Bank's own portfolio. The model's valuation results are compared to observable market prices for similar instruments whenever possible. The behavior of deposit and loan customers is studied using historical time series analysis to model future customer behavior under varying interest rate environments.
The equity at risk simulation process uses multiple interest rate paths generated by an arbitrage-free trinomial lattice term structure model. The Base Case rate scenario, against which all others are compared, uses the month-end LIBOR/Swap yield curve as a starting point to derive forward rates for future months. Using interest rate swap option volatilities as inputs, the model creates multiple rate paths for this scenario with forward rates as the mean. In shock scenarios the starting yield curve is shocked up or down in a parallel fashion. Future rate paths are then constructed in a similar manner to the Base Case.
Cash flows for all instruments are generated using product specific prepayment models and account specific system data for properties such as maturity date, amortization type, coupon rate, repricing frequency, and repricing date. The asset/liability simulation software is enhanced with a mortgage prepayment model and a Collateralized Mortgage Obligation database. Instruments with explicit options such as caps, floors, puts and calls, and implicit options such as prepayment and early withdrawal ability require such a rate and cash flow modeling approach to more accurately quantify value and risk. On the asset side, risk is impacted the most by mortgage loans and mortgage-backed securities, which can typically prepay at any time without penalty and may have embedded caps and floors. In the loan portfolio, floors are a benefit to interest income in low rate environments. Floating-rate loans at floors pay a higher interest rate than a loan at a fully indexed rate without a floor, as with a floor there is a limit on how low the interest rate can fall. As market rates rise, however, the interest rate paid on these loans does not rise until the fully indexed rate rises through the contractual floor. On the liability side, there is a large concentration of customers with indeterminate maturity deposits who have options to add or withdraw funds from their accounts at any time. Implicit floors on deposits are modeled based upon historical data. Webster Bank also has the option to change the interest rate paid on these deposits at any time.

Webster's earnings at risk model incorporates net interest income, non-interest income and expense items, some of which vary with interest rates. These items include mortgage banking income, servicing rights, cash management fees, and derivative mark-to-market adjustments.
Four main tools are used for managing interest rate risk:
the size and duration of the investment portfolio,
the size and duration of the wholesale funding portfolio,
off-balance sheet interest rate contracts, and
the pricing and structure of loans and deposits.
ALCO meets at least monthly to make decisions on the investment and funding portfolios based on the economic outlook, the Committee's interest rate expectations, the risk position, and other factors. ALCO delegates pricing and product design responsibilities to individuals and sub-committees but monitors and influences their actions on a regular basis.
Various interest rate contracts, including futures and options, interest rate swaps, and interest rate caps and floors can be used to manage interest rate risk. These interest rate contracts involve, to varying degrees, credit risk and interest rate risk. Credit risk is the possibility that a loss may occur if a counterparty to a transaction fails to perform according to the terms of the contract. The notional amountback into its assessment of interest rate contracts is the amount upon which interest and other payments are based. The notional amount is not exchanged, and therefore, should not be taken as a measure of credit risk. See Note 12: Derivative Financial Instruments in the Notes to Condensed Consolidated Financial Statements contained elsewhere in this report for additional information.
Certain derivative instruments, primarily forward sales of mortgage-backed securities, are utilized by Webster Bank in its efforts to manage risk of loss associated with its mortgage banking activities. Prior to closing and funds disbursement, an interest-rate lock commitment is generally extended to the borrower. During such time, Webster Bank is subject to risk that market rates of interest may change impacting pricing on loan sales. In an effort to mitigate this risk, forward delivery sales commitments are established, thereby setting the sales price.
The following table summarizes the estimated impact that gradual parallel changes in income of 100 and 200 basis points, over a twelve month period starting September 30, 2017 and December 31, 2016, might have on Webster’s NII for the subsequent twelve month period compared to NII assuming no change in interest rates:
NII-200bp-100bp+100bp+200bp
September 30, 2017N/A(6.1)%3.5%6.5%
December 31, 2016N/AN/A2.4%4.7%
The following table summarizes the estimated impact that gradual parallel changes in interest rates of up and down 100, 200, and 200300 basis points might have on the Company's net interest income over a twelve monthtwelve-month period starting Septemberat June 30, 20172023, and December 31, 2016, might have on Webster’s PPNR for the subsequent twelve month period2022, as compared to PPNRactual net interest income and assuming no changechanges in interest rates:
-300bp-200bp-100bp+100bp+200bp+300bp
June 30, 2023(7.5)%(4.6)%(2.1)%1.5%3.2%5.4%
December 31, 2022n/a(6.9)%(3.3)%3.2%6.5%n/a
PPNR-200bp-100bp+100bp+200bp
September 30, 2017N/A(11.9)%5.5%10.7%
December 31, 2016N/AN/A2.9%6.3%
Interest rates are assumed to change up or down in a parallel fashion, and NII and PPNR results in each scenario are compared to a flat rate scenario as a base. The flat rate scenario holds the end of period yield curve constant over a twelve month forecast horizon. The flat rate scenario as of September 30, 2017 and December 31, 2016 assumed a Fed Funds rate of 1.25% and 0.75% respectively. Asset sensitivity for both NII and PPNR on Septemberin terms of net interest income decreased at June 30, 2017 was higher2023, as compared to December 31, 2016,2022, primarily due to growth in deposits, mainly health savings accounts, a reduction in borrowings and loans moving further away from floors.
Webster can also hold futures, options, and forward foreign currency contracts to minimize the price volatility of certain assets and liabilities. Changeschanges in the market valueoverall balance sheet composition, which included the addition of $4.3 billion in price-sensitive deposits from interLINK, an increase in interest paid on deposits, and the implementation of incremental asset sensitivity measures, such as hedges and collars, during the six months ended June 30, 2023. Loans at floors were $0.4 billion at both December 31, 2022, and June 30, 2023. While loans with floors, which are considered “in the money”, have the impact of reducing overall asset sensitivity, as interest rates continue to rise, these positions are recognized in earnings.loans will move through their floors and reprice accordingly.
The following table summarizes the estimated impact that yield curve twists or immediate non-parallel changes in interest rates of up and down 50 and 100 basis points might have on Webster’s NIIthe Company's net interest income for the subsequent twelve monthtwelve-month period starting Septemberat June 30, 20172023, and December 31, 2016:2022:
Short End of the Yield CurveLong End of the Yield Curve
-100bp-50bp+50bp+100bp-100bp-50bp+50bp+100bp
June 30, 2023(2.4)%(1.1)%0.5%0.9%(1.9)%(0.9)%1.0%2.0%
December 31, 2022(4.2)%(2.0)%1.7%3.3%(2.4)%(1.2)%1.3%2.6%
 Short End of the Yield Curve Long End of the Yield Curve
NII-100bp-50bp+50bp+100bp -100bp-50bp+50bp+100bp
September 30, 2017(8.6)%(4.3)%2.0%3.9% (4.1)%(1.8)%1.4%2.6%
December 31, 2016N/AN/A1.2%2.3% (3.8)%(1.6)%1.3%2.3%

The following table summarizes the estimated impact that immediate non-parallel changes in interest rates might have on Webster’s PPNR for the subsequent twelve month period starting September 30, 2017 and December 31, 2016:
 Short End of the Yield Curve Long End of the Yield Curve
PPNR-100bp-50bp+50bp+100bp -100bp-50bp+50bp+100bp
September 30, 2017(16.3)%(8.0)%3.2%6.3% (6.3)%(2.7)%2.3%4.5%
December 31, 2016N/AN/A1.4%2.7% (5.6)%(2.1)%1.7%3.7%
TheThese non-parallel scenarios are modeled with the short end of the yield curve moving up or down 50 and 100 basis points, while the long end of the yield curve remains unchanged, and vice versa. The short end of the yield curve is defined as terms of less than eighteen months and the long end of the yield curve is defined as terms of greater than eighteen months. TheseThe results above reflect the annualized impact of immediate interest rate changes.
Sensitivity to increases inboth the short end of the yield curve for NII and PPNR increased from December 31, 2016 due to higher forecasted health savings accounts balances, a reduction in borrowings and greater distance from loan floors. Sensitivity to decreases in the short end of the yield curve for NII and PPNR are much greater than sensitivity for increases due to the assumption of deposit floors. Sensitivity to both increases and decreases in the long end of the yield curve was essentially unchanged fromfor net interest income decreased at June 30, 2023, as compared to December 31, 20162022, primarily due to changes in both NII and PPNR.the overall balance sheet composition.
32

The following table summarizes the estimated economic value of financial assets, financial liabilities, and off-balance sheet contracts at September 30, 2017 and December 31, 2016financial instruments and the projectedcorresponding estimated change toin economic valuesvalue if interest rates were to instantaneously increase or decrease by 100 basis points:points at June 30, 2023, and December 31, 2022:
Book
Value
Estimated
Economic
Value
Estimated Economic Value Change
(Dollars in thousands)-100 bp+100 bp(Dollars in thousands)Book
Value		Estimated
Economic
Value		Estimated Economic Value Change
September 30, 2017 
(Dollars in thousands)Estimated Economic Value Change
(Dollars in thousands)Book
Value		Estimated
Economic
Value
Assets$26,350,182
$25,811,516
$518,087
$(631,956)$1,330,492 $(1,330,235)
Liabilities23,711,395
22,630,383
741,133
(633,646)Liabilities65,758,517 59,909,012 1,985,292 (1,726,114)
Net$2,638,787
$3,181,133
$(223,046)$1,690
Net$8,279,726 $9,153,097 $(654,800)$395,879 
Net change as % base net economic value (7.0)%0.1 %Net change as % base net economic value(7.2)%4.3 %
 
December 31, 2016 
December 31, 2022December 31, 2022
Assets$26,072,529
$25,527,648
N/A$(633,934)Assets$71,277,521 $67,920,989 $1,161,794 $(1,247,083)
Liabilities23,545,517
22,650,967
N/A(555,854)Liabilities63,221,335 55,951,495 1,959,399(1,716,697)
Net$2,527,012
$2,876,681
N/A$(78,080)Net$8,056,186 $11,969,494 $(797,605)$469,614 
Net change as % base net economic value N/A(2.7)%Net change as % base net economic value(6.7)%3.9 %
Changes in economic value can best be best described using duration. Durationthrough duration, which is a measure of the price sensitivity of financial instruments for smalldue to changes in interest rates. For fixed-rate financial instruments, it can also be thought of as the weighted-average expected time to receive future cash flows. Forflows, whereas for floating-rate financial instruments, it can be thought of as the
weighted-average expected time until the next rate reset. TheOverall, the longer the duration, the greater the price sensitivity for givendue to changes in interest rates. Generally, increases in interest rates reduce the economic value of fixed-rate financial assets as future discounted cash flows are worth less at higher interest rates. In a rising interest rate environment, the economic value of financial liabilities decreases for the same reason. A reduction in the economic value of financial liabilities is a benefit to the Company. Floating-rate financial instruments may have durations as short as one day, and therefore, may have very little price sensitivity due to changes in interest rates. Increases in interest rates typically reduce the value of fixed-rate assets as future discounted cash flows are worth less at higher discount rates. A liability's value decreases for the same reason in a rising rate environment. A reduction in value of a liability is a benefit to Webster.
Duration gap isrepresents the difference between the duration of financial assets and the duration offinancial liabilities. A duration gap at or near zero implieswould imply that the balance sheet is matched, and therefore, would exhibit no change in estimated economic value for a small changechanges in interest rates. Webster'sAt June 30, 2023, and December 31, 2022, the Company's duration gap was negative 0.91.1 years at September 30, 2017. At December 31, 2016, the duration gap wasand negative 0.4 years.1.4 years, respectively. A negative duration gap implies that the duration of financial liabilities areis longer than the duration of financial assets, and therefore, theyliabilities have more price sensitivity than assets and will reset their interest rates at a slower than assets.pace. Consequently, Webster'sthe Company's net estimated economic value would generally be expected to increase when interest rates rise, as the benefit of the decreased value of financial liabilities would more than offset the decreased value of financial assets. The opposite would generally be expected to occur when interest rates fall. Earnings would also generally be expected to increase when interest rates rise, and decrease when interest rates fall over the longerlong term, absent the effects of any new business booked in the future. The change in Webster's duration gap is due primarily to the increase in health savings accounts and demand deposit balances as of September 30, 2017.
These earnings and net economic value estimates are subject to factors that could cause actual results to differ, and also assume that management does not take any additional action to mitigate any positive or negative effects from changing interest rates. The earnings and economic values estimates are subject to factors that could cause actual results to differ. Management believes that Webster'sthe Company's interest rate risk position at SeptemberJune 30, 20172023, represents a reasonable level of risk given the current interest rate outlook. Management as always,continues to monitor interest rates and other relevant factors given recent market volatility and is prepared to acttake additional action, as necessary.
Additional information regarding the Company's asset/liability management process can be found under the section captioned "Asset/Liability Management and Market Risk" contained in Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of the event that interest rates do change rapidly.Company's Annual Report on Form 10-K for the year ended
December 31, 2022.

33
Impact of Inflation and Changing Prices

Critical Accounting Estimates
The preparation of the Company's Condensed Consolidated Financial Statements, and accompanying notes thereto, in accordance with GAAP and practices generally applicable to the financial services industry, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the disclosure of contingent assets and liabilities. While management's estimates are made based on historical experience, current available information, and other factors that are deemed to be relevant, actual results could significantly differ from those estimates.
Accounting estimates are necessary in the application of certain accounting policies and can be susceptible to significant change in the near term. Critical accounting estimates are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on the Company's financial condition or results of operations. Management has identified that the Company's most critical accounting estimates are those related datato the ACL on loans and leases and business combinations accounting policies. These accounting policies and their underlying estimates are discussed directly with the Audit Committee of the Board of Directors.
Allowance for Credit Losses on Loans and Leases
The ACL on loans and leases is a reserve established through a provision for credit losses charged to expense, which represents management’s best estimate of expected lifetime credit losses within the Company's loan and lease portfolios at the balance sheet date. The calculation of expected credit losses is determined using predictive methods and models that follow a
PD/LGD/EAD, loss rate, or discounted cash flow framework, and include consideration of past events, current conditions, macroeconomic variables (i.e., unemployment, gross domestic product, property values, and interest rate spreads), and reasonable and supportable economic forecasts that affect the collectability of the reported amounts. Changes to the ACL on loans and leases, and therefore, to the related provision for credit losses, can materially affect financial results.
The determination of the appropriate level of ACL on loans and leases inherently involves a high degree of subjectivity and requires the Company to make significant estimates of current credit risks and trends using existing qualitative and quantitative information, and reasonable and supportable forecasts of future economic conditions, all of which may undergo frequent and material changes. Changes in economic conditions affecting borrowers and macroeconomic variables that the Company is more susceptible to, unforeseen events such as natural disasters and pandemics, along with new information regarding existing loans, identification of additional problem loans, the fair value of underlying collateral, and other factors, both within and outside the Company's control, may indicate the need for an increase or decrease in the ACL on loans and leases.
It is difficult to estimate the sensitivity of how potential changes in any one economic factor or input might affect the overall reserve because a wide variety of factors and inputs are considered in estimating the ACL and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all product types. Further, changes in factors and inputs may also be directionally inconsistent, such that improvement in one factor may offset deterioration in others.
Executive management reviews and advises on the adequacy of the ACL on loans and leases on a quarterly basis. Although the overall balance is determined based on specific portfolio segments and individually assessed assets, the entire balance is available to absorb credit losses for any of the loan and lease portfolios.
Additional information regarding the determination of the ACL on loans and leases, including the Company's valuation methodology, can be found under the section captioned "Allowance for Credit Losses on Loans and Leases" contained elsewhere in this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, and within Note 1: Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements contained in
Part II - Item 8. Financial Statements and Supplementary Data included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
Business Combinations
The acquisition method of accounting generally requires that the identifiable assets acquired and liabilities assumed in business combinations are recorded at fair value as of the acquisition date. The determination of fair value often involves the use of internal or third-party valuation techniques, such as discounted cash flow analyses or appraisals. Particularly, the valuation techniques used to estimate the fair value of loans and leases and the core deposit intangible asset acquired in the Sterling merger include estimates related to discount rates, credit risk, and other relevant factors, which are inherently subjective. A description of the valuation methodologies used to estimate the fair values of the significant assets acquired and liabilities assumed from the Sterling merger can be found within Note 2: Mergers and Acquisitions in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
34

ITEM 1. FINANCIAL STATEMENTS
WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2023December 31, 2022
(In thousands, except share data)(Unaudited)
Assets:
Cash and due from banks$283,623 $264,118 
Interest-bearing deposits1,077,136 575,825 
Investment securities available-for-sale, at fair value7,759,341 7,892,697 
Investment securities held-to-maturity, net of allowance for credit losses of $216 and $1826,943,784 6,564,697 
Federal Home Loan Bank and Federal Reserve Bank stock407,968 445,900 
Loans held for sale ($1,800 and $1,991 valued under fair value option)10,963 1,991 
Loans and leases51,626,048 49,764,426 
Allowance for credit losses on loans and leases(628,911)(594,741)
Loans and leases, net50,997,137 49,169,685 
Deferred tax assets, net377,588 371,634 
Premises and equipment, net426,310 430,184 
Goodwill2,631,465 2,514,104 
Other intangible assets, net220,652 199,342 
Cash surrender value of life insurance policies1,239,077 1,229,169 
Accrued interest receivable and other assets1,663,199 1,618,175 
Total assets$74,038,243 $71,277,521 
Liabilities and stockholders' equity:
Deposits:
Non-interest-bearing$11,157,390 $12,974,975 
Interest-bearing47,590,142 41,079,365 
Total deposits58,747,532 54,054,340 
Securities sold under agreements to repurchase and other borrowings243,580 1,151,830 
Federal Home Loan Bank advances4,310,371 5,460,552 
Long-term debt1,052,258 1,073,128 
Accrued expenses and other liabilities1,404,776 1,481,485 
Total liabilities65,758,517 63,221,335 
Stockholders’ equity:
Preferred stock, $0.01 par value: Authorized—3,000,000 shares;
Series F issued and outstanding—6,000 shares
145,037 145,037 
Series G issued and outstanding—135,000 shares
138,942 138,942 
Common stock, $0.01 par value: Authorized—400,000,000 shares;
Issued—182,778,045 shares
1,828 1,828 
Paid-in capital6,150,713 6,173,240 
Retained earnings3,017,445 2,713,861 
Treasury stock, at cost—9,517,081 and 8,770,472 shares
(455,416)(431,762)
Accumulated other comprehensive (loss), net of tax(718,823)(684,960)
Total stockholders' equity8,279,726 8,056,186 
Total liabilities and stockholders' equity$74,038,243 $71,277,521 
See accompanying Notes to Condensed Consolidated Financial Statements.
35

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months endedSix months ended
June 30,June 30,
(In thousands, except per share data)2023202220232022
Interest Income:
Interest and fees on loans and leases$771,973 $431,538 $1,488,329 $777,814 
Taxable interest and dividends on investments147,467 69,538 248,339 123,262 
Non-taxable interest on investment securities13,535 12,664 27,219 22,466 
Loans held for sale421 7 437 33 
Total interest income933,396 513,747 1,764,324 923,575 
Interest Expense:
Deposits251,466 12,459 401,670 19,858 
Securities sold under agreements to repurchase and other borrowings63 2,677 7,890 3,634 
Federal Home Loan Bank advances88,556 3,164 156,682 3,220 
Long-term debt9,482 8,787 18,970 15,955 
Total interest expense349,567 27,087 585,212 42,667 
Net interest income583,829 486,660 1,179,112 880,908 
Provision for credit losses31,498 12,243 78,247 201,088 
Net interest income after provision for credit losses552,331 474,417 1,100,865 679,820 
Non-interest Income:
Deposit service fees45,418 51,385 90,854 99,212 
Loan and lease related fees20,528 27,907 43,533 50,586 
Wealth and investment services7,391 11,244 13,978 21,841 
Mortgage banking activities129 102 188 530 
Cash surrender value of life insurance policies6,293 8,244 13,021 14,976 
(Loss) on sale of investment securities(48)— (16,795)— 
Other income9,663 22,051 15,361 37,823 
Total non-interest income89,374 120,933 160,140 224,968 
Non-interest Expense:
Compensation and benefits173,305 187,656 346,505 371,658 
Occupancy20,254 51,593 40,425 70,208 
Technology and equipment51,815 41,498 96,181 96,899 
Intangible assets amortization9,193 8,802 18,690 15,189 
Marketing5,160 3,441 8,636 6,950 
Professional and outside services29,385 15,332 61,819 69,423 
Deposit insurance13,723 6,748 26,046 11,970 
Other expense41,254 43,157 78,254 75,715 
Total non-interest expense344,089 358,227 676,556 718,012 
Income before income taxes297,616 237,123 584,449 186,776 
Income tax expense62,648 54,812 128,477 21,212 
Net income234,968 182,311 455,972 165,564 
Preferred stock dividends4,162 4,163 8,325 7,594 
Net income available to common stockholders$230,806 $178,148 $447,647 $157,970 
Earnings per common share:
Basic$1.32 $1.00 $2.57 $0.97 
Diluted1.32 1.00 2.57 0.97 
See accompanying Notes to Condensed Consolidated Financial Statements.

36

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
Three months endedSix months ended
 June 30,June 30,
(In thousands)2023202220232022
Net income$234,968 $182,311 $455,972 $165,564 
Other comprehensive (loss) income, net of tax:
Investment securities available-for-sale(85,037)(205,273)(13,419)(450,152)
Derivative instruments(47,523)(308)(26,149)(8,152)
Defined benefit pension and other postretirement benefit plans1,757 (28)5,705 (448)
Other comprehensive (loss), net of tax(130,803)(205,609)(33,863)(458,752)
Comprehensive income (loss)$104,165 $(23,298)$422,109 $(293,188)
See accompanying Notes to Condensed Consolidated Financial Statements.

37

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
At or for the three months ended June 30, 2023
(In thousands, except per share data)Preferred StockCommon
Stock		Paid-In
Capital		Retained
Earnings		Treasury
Stock,
at cost		Accumulated Other
Comprehensive (Loss), Net of Tax		Total
Stockholders'
Equity
Balance at March 31, 2023$283,979 $1,828 $6,137,743 $2,856,745 $(397,981)$(588,020)$8,294,294 
Net income— — — 234,968 — — 234,968 
Other comprehensive (loss), net of tax— — — — — (130,803)(130,803)
Common stock dividends and equivalents—$0.40 per share
— — — (70,106)— — (70,106)
Series F preferred stock dividends���$328.125 per share
— — — (1,969)— — (1,969)
Series G preferred stock dividends—$16.25 per share
— — — (2,193)— — (2,193)
Stock-based compensation— — 12,970 — 1,196 — 14,166 
Common shares acquired from stock compensation plan activity— — — — (319)— (319)
Common stock repurchase program— — — — (58,312)— (58,312)
Balance at June 30, 2023$283,979 $1,828 $6,150,713 $3,017,445 $(455,416)$(718,823)$8,279,726 
At or for the three months ended June 30, 2022
(In thousands, except per share data)Preferred StockCommon
Stock		Paid-In
Capital		Retained
Earnings		Treasury
Stock,
at cost		Accumulated Other Comprehensive
(Loss), Net of Tax		Total
Stockholders'
Equity
Balance at March 31, 2022$283,979 $1,828 $6,129,440 $2,276,875 $(239,264)$(275,723)$8,177,135 
Net income— — — 182,311 — — 182,311 
Other comprehensive (loss), net of tax— — — — — (205,609)(205,609)
Common stock dividends and equivalents—$0.40 per share
— — — (71,386)— — (71,386)
Series F preferred stock dividends—$328.125 per share
— — — (1,969)— — (1,969)
Series G preferred stock dividends—$16.25 per share
— — — (2,193)— — (2,193)
Stock-based compensation— — 19,517 — 1,949 — 21,466 
Exercise of stock options— — (104)— 190 — 86 
Common shares acquired from stock compensation plan activity— — — — (2,128)— (2,128)
Common stock repurchase program— — — — (99,925)— (99,925)
Balance at June 30, 2022$283,979 $1,828 $6,148,853 $2,383,638 $(339,178)$(481,332)$7,997,788 
38

At or for the six months ended June 30, 2023
(In thousands, except per share data)Preferred
Stock		Common
Stock		Paid-In
Capital		Retained
Earnings		Treasury
Stock,
at cost		Accumulated Other Comprehensive
(Loss), Net of Tax		Total
Shareholders'
Equity
Balance at December 31, 2022$283,979 $1,828 $6,173,240 $2,713,861 $(431,762)$(684,960)$8,056,186 
Adoption of ASU No. 2022-02— — — (4,245)— — (4,245)
Net income— — — 455,972 — — 455,972 
Other comprehensive (loss), net of tax— — — — — (33,863)(33,863)
Common stock dividends and equivalents—$0.80 per share— — — (139,818)— — (139,818)
Series F preferred stock dividends—$656.25 per share— — — (3,938)— — (3,938)
Series G preferred stock dividends—$32.50 per share— — — (4,387)— — (4,387)
Stock-based compensation— — (20,501)— 46,313 — 25,812 
Exercise of stock options— — (2,026)— 3,749 — 1,723 
Common shares acquired from stock compensation plan activity— — — — (15,404)— (15,404)
Common stock repurchase program— — — — (58,312)— (58,312)
Balance at June 30, 2023$283,979 $1,828 $6,150,713 $3,017,445 $(455,416)$(718,823)$8,279,726 
At or for the six months ended June 30, 2022
(In thousands, except per share data)Preferred
Stock		Common
Stock		Paid-In
Capital		Retained
Earnings		Treasury
Stock,
at cost		Accumulated
Other Comprehensive Income, Net of Tax		Total
Shareholders'
Equity
Balance at December 31, 2021$145,037 $937 $1,108,594 $2,333,288 $(126,951)$(22,580)$3,438,325 
Net income— — — 165,564 — — 165,564 
Other comprehensive (loss), net of tax— — — — — (458,752)(458,752)
Common stock dividends and equivalents—$0.80 per share— — — (107,620)— — (107,620)
Series F preferred stock dividends—$656.25 per share— — — (3,938)— — (3,938)
Series G preferred stock dividends—$32.50 per share— — — (3,656)— — (3,656)
Issued in business combination138,942 891 5,040,291 — — — 5,180,124 
Stock-based compensation— — 419 — 30,050 — 30,469 
Exercise of stock options— — (451)— 948 — 497 
Common shares acquired from stock compensation plan activity— — — — (21,095)— (21,095)
Common stock repurchase program— — — — (222,130)— (222,130)
Balance at June 30, 2022$283,979 $1,828 $6,148,853 $2,383,638 $(339,178)$(481,332)$7,997,788 
See accompanying Notes to Condensed Consolidated Financial Statements.
39

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 Six months ended June 30,
(In thousands)20232022
Operating Activities:
Net income$455,972 $165,564 
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses78,247 201,088 
Deferred income tax expense (benefit)434 (44,293)
Stock-based compensation25,812 30,469 
Depreciation and amortization of property and equipment and intangible assets40,339 40,673 
(Accretion) and amortization of interest-earning assets and borrowings(10,924)(25,429)
Amortization of low-income housing tax credit investments36,295 26,449 
Amortization of mortgage servicing assets709 1,769 
Reduction of right-of-use lease assets15,340 39,865 
Net (gain) on sale, net of write-downs, of foreclosed properties and repossessed assets(799)(418)
Loss on disposal of property and equipment72 4,740 
Loss on sale of investment securities16,795 — 
(Gain) on extinguishment of long-term debt(698)— 
Originations of loans held for sale(8,301)(28,098)
Proceeds from sale of loans held for sale8,660 32,833 
Net (gain) on mortgage banking activities(168)(503)
Net (gain) on sale of loans not originated for sale(745)(3,173)
(Increase) in cash surrender value of life insurance policies(13,021)(14,976)
(Gain) from life insurance policies(1,418)(1,447)
Net decrease in derivative contract assets and liabilities22,238 336,819 
Net (increase) in accrued interest receivable and other assets(132,297)(57,705)
Net (decrease) in accrued expenses and other liabilities(68,880)(65,422)
Net cash provided by operating activities463,662 638,805 
Investing Activities:
Purchases of available-for-sale securities(569,053)(1,099,810)
Proceeds from principal payments, maturities, and calls of available-for-sale securities238,089 475,922 
Proceeds from sale of available-for-sale securities398,296 — 
Purchases of held-to-maturity securities(599,387)(847,534)
Proceeds from principal payments, maturities, and calls of held-to-maturity securities221,643 476,710 
Net decrease (increase) in Federal Home Loan Bank and Federal Reserve Bank stock37,932 (107,086)
Alternative investments (capital calls), net of distributions(8,724)(7,184)
Net (increase) in loans(2,316,751)(2,815,067)
Proceeds from sale of loans not originated for sale441,129 118,505 
Proceeds from sale of foreclosed properties and repossessed assets2,755 1,290 
Additions to property and equipment(19,661)(9,895)
Proceeds from life insurance policies— 11,576 
Net cash paid for acquisition of interLINK(157,646)— 
Net cash paid for acquisition of Bend— (54,407)
Net cash received in merger with Sterling— 513,960 
Net cash (used for) investing activities(2,331,378)(3,343,020)
See accompanying Notes to Condensed Consolidated Financial Statements.
40

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited), continued
 Six months ended June 30,
(In thousands)20232022
Financing Activities:
Net increase (decrease) in deposits4,683,761 (41,467)
Proceeds from Federal Home Loan Bank advances15,450,000 5,150,000 
Repayments of Federal Home Loan Bank advances(16,600,181)(2,650,187)
Net (decrease) increase in securities sold under agreements to repurchase and other borrowings(908,250)1,041,702 
Repayment of long-term debt(16,752)— 
Dividends paid to common stockholders(140,040)(107,469)
Dividends paid to preferred stockholders(8,325)(5,401)
Exercise of stock options1,723 497 
Common stock repurchase program(58,000)(222,130)
Common shares acquired related to stock compensation plan activity(15,404)(21,095)
Net cash provided by financing activities2,388,532 3,144,450 
Net increase in cash and cash equivalents520,816 440,235 
Cash and cash equivalents at beginning of period839,943 461,570 
Cash and cash equivalents at end of period$1,360,759 $901,805 
Supplemental disclosure of cash flow information:
Interest paid$544,704 $49,544 
Income taxes paid140,692 66,064 
Non-cash investing and financing activities:
Transfer of loans and leases to foreclosed properties and repossessed assets$2,958 $575 
Transfer of loans and leases to loans held-for-sale449,673 91,815 
Merger with Sterling: (1)
Tangible assets acquired17,607 26,919,975 
Goodwill and other intangible assets(25,561)2,149,532 
Liabilities assumed(7,954)24,403,343 
Common stock issued— 5,041,182 
Preferred stock exchanged— 138,942 
Acquisition of Bend: (1)
Tangible assets acquired294 15,731 
Goodwill and other intangible assets(294)38,966 
Liabilities assumed— 290 
Acquisition of interLINK:
Tangible assets acquired6,417 — 
Goodwill and other intangible assets183,216 — 
Liabilities assumed15,948 — 
Contingent consideration16,039 — 
(1)The non-cash merger and acquisition activities presented hereinfor 2023 reflect adjustments recorded within the one-year measurement period, which were identified as a result of extended information gathering and new information that arose from integration activities during the first quarter of 2023. Additional information regarding these amounts can be found within Note 2: Mergers and Acquisitions and Note 6: Goodwill and Other Intangible Assets.
See accompanying Notes to Condensed Consolidated Financial Statements.
41

Note 1: Summary of Significant Accounting Policies
Nature of Operations
Webster Financial Corporation is a bank holding company and financial holding company under the BHC Act, incorporated under the laws of Delaware in 1986, and headquartered in Stamford, Connecticut. Webster Bank, along with its HSA Bank division, is a leading commercial bank in the Northeast that delivers a wide range of digital and traditional financial solutions to businesses, individuals, families, and partners across its three differentiated lines of business: Commercial Banking, HSA Bank, and Consumer Banking. While its core footprint spans from New York to Rhode Island and Massachusetts, certain businesses operate in extended geographies. HSA Bank is one of the largest providers of employee benefit solutions in the United States.
Basis of Presentation
The unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with GAAP for interim financial information and Article 10 of Regulation S-X. Certain information and footnote disclosures required by GAAP for complete financial statements have been omitted or condensed. Therefore, the condensed consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2022. The results of operations for the six months ended June 30, 2023, are not necessarily indicative of the future results that may be attained for the entire year or other interim periods.
In the opinion of management, all necessary adjustments have been reflected to present fairly the financial position, results of operations, and cash flows for the reporting periods presented. Intercompany transactions and balances have been eliminated in consolidation. Assets under administration or assets under management that the Company holds or manages in a fiduciary or agency capacity for customers are not included in the Condensed Consolidated Financial Statements.
Use of Estimates
The preparation of the Condensed Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Accounting Standards Adopted in the Current Period
ASU No. 2022-02—Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures
In March 2022, the FASB issued ASU No. 2022-02, which eliminates the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance in paragraphs 310-20-35-9 through 35-11 to determine whether a modification results in a new loan or a continuation of an existing loan. In addition, the Update requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost in the vintage disclosures required by paragraph 326-20-50-6.
Modifications to borrowers experiencing financial difficulty include principal forgiveness, interest rate reductions, payment delays, term extensions, or combinations thereof. Expected losses or recoveries on loans where modifications have been granted to borrowers experiencing financial difficulty have been factored into the ACL on loans and leases. Upon adoption of ASU 2022-02, the Company is no longer required to use a discounted cash flow (or reconcilable) method to measure the ACL resulting from a modification with a borrower experiencing financial difficulty. Accordingly, the Company now applies the same credit loss methodology it uses for similar loans that were not modified.
The Company adopted the Update on January 1, 2023. The Company elected the option to apply the modified retrospective transition method related to the recognition and measurement of TDRs, which resulted in a $5.9 million increase to the Allowance for Credit Losses on Loans and Leases and a $1.7 million decrease to Deferred Tax Assets, net, with a corresponding $4.2 million cumulative-effect adjustment to retained earnings as of the adoption date. The enhanced disclosure requirements provided for by the Update were adopted on a prospective basis. Reporting periods prior to the adoption of the Update are accounted for and presented in accordance with the applicable GAAP.
Refer to Note 4: Loans and Leases for additional information regarding modifications granted to borrowers experiencing financial difficulty.

42

ASU No. 2022-01—Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method
In March 2022, the FASB issued ASU No. 2022-01—Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method, which expands the current last-of-layer method of hedge accounting that permits only one hedged layer to allow multiple hedged layers of a single closed portfolio. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. Additionally, the amendments in this Update: (i) expand the scope of the portfolio layer method to include non-prepayable assets; (ii) specify eligible hedging instruments in a single-layer hedge; (iii) provide additional guidance on the accounting for and disclosure of hedge basis adjustments; and (iv) specify how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. An entity may also reclassify debt securities classified in the held-to-maturity category at the date of adoption to the available-for-sale category only if the entity applies portfolio layer method hedging to one or more closed portfolios that include those debt securities within a 30-day period.
The Company adopted the Update on January 1, 2023 on a prospective basis. The adoption of this guidance did not have a material impact on the Company's Consolidated Financial Statements. The entity did not reclassify any debt securities from the held-to-maturity category to the available-for-sale category as permitted upon adoption.
ASU No. 2021-08—Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
In October 2021, the FASB issued ASU No. 2021-08—Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.
The Company adopted the Update on January 1, 2023 on a prospective basis. The adoption of this guidance did not have a material impact on the Company's Consolidated Financial Statements.
Relevant Accounting Standards Issued But Not Yet Adopted
ASU No. 2023-02—Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)
In March 2023, the FASB issued ASU No. 2023-02—Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force), which permits reporting entities to elect to account for their tax equity investments, regardless of the program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. A reporting entity may make an accounting policy election to apply the proportional amortization method in accordance with paragraph 323-740-25-4 on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments.
A reporting entity that applies the proportional amortization method to qualifying tax equity investments must account for the receipt of the investment tax credits using the flow-through method under Topic 740, Income Taxes, even if the entity applies the deferral method for other investment tax credit received. The amendments also remove certain guidance for Qualified Affordable Housing Project Investments, require the application of the delayed equity contribution guidance to all tax equity investments, and require specific disclosures that must be applied to all investments that generate income tax credits and other income tax benefits from a tax credit program for which the entity has elected to apply the proportional amortization method in accordance with Subtopic 323-740.
The Update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The amendments generally must be applied on either a modified retrospective or retrospective basis with a cumulative-effect adjustment to retained earnings reflecting the difference between the previous method used to account for the tax equity investment and the application of the proportional amortization method since the investment was entered into. The adoption of this guidance is not expected to have a material impact on the Consolidated Financial Statements as the Company's investments in tax credit structures are currently limited to LIHTC investments, which are already being accounted for using the proportional amortization method.
43

ASU No. 2023-01—Leases (Topic 842): Common Control Arrangements
In March 2023, the FASB issued ASU No. 2023-01—Leases (Topic 842): Common Control Arrangements, which requires that leasehold improvements associated with leases between entities under common control be: (i) amortized by the lessee over the useful live of the leasehold improvements to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset (the leased asset) through a lease; however, if the lessor obtained the right to control the use of the underlying asset through a lease with another entity not within the same common control group, the amortization period may not exceed the amortization period of the common control group; and (ii) accounted for as a transfer between entities under common control through an adjustment to equity, if, and when, the lessee no longer controls the use of the underlying asset. Additionally, those leasehold improvements are subject to the impairment guidance in Topic 360, Property, Plant, and Equipment.
The Update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The amendments either may be applied prospectively to all new and existing leasehold improvements recognized on or after the adoption date with any remaining unamortized balance of existing leasehold improvements amortized over their remaining useful life to the common control group determined at that date; or retrospectively to the beginning of the period in which the entity first applied Topic 842, with any leasehold improvements that otherwise would not have been amortized or impaired recognized through a cumulative-effect adjustment to the opening balance of retained earnings at the beginning of the earliest period presented in accordance with Topic 842. The Company is in the early assessment stages of evaluating the amendments and the impact of adoption on its Consolidated Financial Statements.
ASU No. 2022-03—Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions
In June 2022, the FASB issued ASU No. 2022-03—Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security, and therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction, and requires the following disclosures for equity securities subject to contractual sale restrictions: (i) the fair value of equity securities subject to contractual sale restrictions reflected on the balance sheet; (ii) the nature and remaining duration of the restriction(s); and (iii) the circumstances that could cause a lapse in the restriction(s).
The Update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. For all entities except investment companies, the amendments should be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. The adoption of this guidance is not expected to have a material impact on the Consolidated Financial Statements and disclosures. The Company does not currently consider contractual restrictions on the sale of an equity security in measuring fair value.
44

Note 2: Mergers and Acquisitions
interLINK Acquisition
On January 11, 2023, Webster acquired 100% ownership of interLINK from StoneCastle Partners LLC. interLINK is a technology-enabled deposit management platform that administers over $9 billion of deposits from FDIC-insured cash sweep programs between banks and broker/dealers and clearing firms. The acquisition provides the Company with access to a unique source of core deposit funding and scalable liquidity and adds another technology-enabled channel to its already differentiated, omnichannel deposit gathering capabilities.
The total purchase price of the acquisition was $174.6 million, which included cash paid of $158.6 million and $16.0 million of contingent consideration measured at fair value. The contingent consideration is payable in cash upon the achievement of discrete customer and deposit growth events within three years of the acquisition date. Additional information regarding the determination of fair value for contingent consideration liabilities can be found within Note 14: Fair Value Measurements.
The transaction has been accounted for as a business combination, and resulted in the addition of $31.4 million in net assets measured at fair value, which primarily comprised $36.0 million of broker dealer relationship intangible assets, $6.0 million of developed technology, a $4.0 million non-competition agreement intangible asset, and $15.9 million of royalty liabilities. The $143.2 million of goodwill recognized is deductible for tax purposes. The Company's valuations of the assets acquired and liabilities assumed in the interLINK acquisition were considered final as of June 30, 2023.
Bend Financial, Inc. Acquisition
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 of $55.3 million. The transaction was accounted for as a business combination, and resulted in the addition of $19.6 million in net assets measured at fair value, which primarily comprised $15.9 million of internal use software and a $3.0 million customer relationship intangible asset. The Company's valuations of the assets acquired and liabilities assumed in the Bend acquisition were considered final as of March 31, 2023.
Merger with Sterling Bancorp
On January 31, 2022, Webster completed its merger with Sterling. The transaction was accounted for as a business combination. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their fair values as of the merger effective date. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and are subject to change. Fair value estimates of the assets acquired and liabilities assumed were subject to adjustment during the one-year measurement period following the closing of the merger if new information was obtained about facts and circumstances that existed as of the merger effective date that, if known, would have affected the measurement of the amounts recognized as of that date. Measurement period adjustments made during the first quarter of 2023 totaled a net $25.6 million, which pertained to other assets and other liabilities and their related deferred tax impact. The Company's valuations of the assets acquired and liabilities assumed in the merger with Sterling were considered final as of March 31, 2023.
45

The following table summarizes the allocation of the purchase price to the fair value of the identifiable assets acquired and liabilities assumed from Sterling as of January 31, 2022:
(In thousands)Unpaid Principal BalanceFair Value
Purchase price consideration$5,180,300 
Assets:
Cash and due from banks510,929 
Interest-bearing deposits3,207 
Investment securities available-for-sale4,429,948 
Federal Home Loan Bank and Federal Reserve Bank Stock150,502 
Loans held for sale23,517 
Loans and leases:
Commercial non-mortgage$5,570,782 5,527,657 
Asset-based694,137 683,958 
Commercial real estate6,790,600 6,656,405 
Multi-family4,303,381 4,255,906 
Equipment financing1,350,579 1,314,311 
Warehouse lending647,767 643,754 
Residential1,313,785 1,281,637 
Home equity132,758 122,553 
Other consumer12,559 12,525 
Total loans and leases$20,816,348 20,498,706 
Deferred tax assets, net(59,716)
Premises and equipment264,421 
Other intangible assets210,100 
Bank-owned life insurance policies645,510 
Accrued interest receivable and other assets986,729 
Total assets acquired$27,663,853 
Liabilities:
Non-interest-bearing deposits$6,620,248 
Interest-bearing deposits16,643,755 
Securities sold under agreements to repurchase and other borrowings27,184 
Long-term debt516,881 
Accrued expenses and other liabilities589,689 
Total liabilities assumed$24,397,757 
Net assets acquired3,266,096 
Goodwill$1,914,204 
In connection with the merger with Sterling, the Company recorded $1.9 billion of goodwill, which represents the excess of the purchase price over the fair value of the net assets acquired. Information regarding the allocation of goodwill to the Company's reportable segments can be found within Note 16: Segment Reporting. For a description of the valuation methodologies used to estimate the fair values of the significant assets acquired and liabilities assumed, refer to Note 2: Mergers and Acquisitions of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
46

Merger-Related Expenses and Exit Activities
The following table summarizes total merger-related expenses, which were primarily incurred in connection with the merger with Sterling:
Three months ended June 30,Six months ended June 30,
(In thousands)2023202220232022
Compensation and benefits (1)
$6,675 $24,117 $17,787 $65,702 
Occupancy (2)
495 30,999 1,230 31,355 
Technology and equipment (3)
6,837 812 5,128 19,897 
Professional and outside services (4)
18,939 3,824 38,948 48,281 
Marketing826 84 961 135 
Other expense (5)
7,068 6,804 6,159 9,765 
Total merger-related expenses$40,840 $66,640 $70,213 $175,135 
(1)Comprised primarily of severance and employee retention costs, and executive synergy stock awards.
(2)Comprised primarily of charges associated with the Company's corporate real estate consolidation plan in 2022.
(3)Comprised primarily of technology contract termination costs, and charges to support core conversion activities in 2023.
The amount for the six months ended June 30, 2023, includes a reduction of $4.8 million to a previously recorded technology-related contract termination charge during the three months ended March 31, 2023, due to a change in the expected use of certain services after core conversion.
(4)Comprised primarily of advisory, accounting, and other professional fees, and charges to support core conversion activities in 2023. The amount for the six months ended June 30, 2023, includes a reduction of $1.7 million to a previously recorded contract termination charge during the three months ended March 31, 2023, due to a decrease in volume usage.
(5)Comprised primarily of contract termination costs, disposals on property and equipment, and other miscellaneous expenses.
The following tables summarize the change in accrued expenses and other liabilities as it relates to severance and contract termination costs, which were primarily incurred in connection with the merger with Sterling:
Three months ended June 30,
20232022
(In thousands)SeveranceContract TerminationTotalSeveranceContract TerminationTotal
Balance, beginning of period$5,961 $23,775 $29,736 $32,156 $17,704 $49,860 
Additions charged to expense1,988 — 1,988 7,808 — 7,808 
Cash payments(4,545)— (4,545)(15,029)— (15,029)
Other(235)— (235)(421)— (421)
Balance, end of period$3,169 $23,775 $26,944 $24,514 $17,704 $42,218 
Six months ended June 30,
20232022
(In thousands)SeveranceContract TerminationTotal
Severance (1)
Contract TerminationTotal
Balance, beginning of period$7,583 $30,362 $37,945 $10,835 $— $10,835 
Additions charged to expense8,184 — 8,184 34,779 17,704 52,483 
Cash payments(11,538)— (11,538)(16,795)— (16,795)
Other(1,060)(6,587)(7,647)(4,305)— (4,305)
Balance, end of period$3,169 $23,775 $26,944 $24,514 $17,704 $42,218 
(1)Other reflects the release of $4.3 million from the Company's severance accrual, as the Company re-evaluated its strategic priorities as a combined organization in connection with the Sterling merger, which resulted in modifications to the Company's strategic initiatives that were previously announced in December 2020.
47

Note 3: Investment Securities
Available-for-Sale
The following tables summarize the amortized cost and fair value of available-for-sale securities by major type:
 At June 30, 2023
(In thousands)
Amortized
Cost (1)
Unrealized
Gains		Unrealized
Losses		Fair Value
U.S. Treasury notes$407,555 $— $(23,488)$384,067 
Government agency debentures302,115 — (41,014)261,101 
Municipal bonds and notes1,678,826 5 (74,681)1,604,150 
Agency CMO58,529 — (5,169)53,360 
Agency MBS2,476,218 9 (291,320)2,184,907 
Agency CMBS2,041,431 44 (306,553)1,734,922 
CMBS907,602 — (31,483)876,119 
Corporate debt712,726 — (103,967)608,759 
Private label MBS47,485 — (4,435)43,050 
Other9,817 — (911)8,906 
Total available-for-sale securities$8,642,304 $58 $(883,021)$7,759,341 
At December 31, 2022
(In thousands)
Amortized
Cost (1)
Unrealized
Gains		Unrealized
Losses		Fair Value
U.S. Treasury notes$755,968 $— $(38,928)$717,040
Government agency debentures302,018 — (43,644)258,374
Municipal bonds and notes1,719,110 5 (85,913)1,633,202
Agency CMO64,984 — (5,019)59,965
Agency MBS2,461,337 26 (303,339)2,158,024
Agency CMBS1,664,600 — (258,114)1,406,486
CMBS929,588 — (32,948)896,640
CLO2,108 — (1)2,107
Corporate debt795,999 — (91,587)704,412
Private label MBS48,895 — (4,646)44,249
Other12,548 — (350)12,198
Total available-for-sale securities$8,757,155 $31 $(864,489)$7,892,697 
(1)Accrued interest receivable on available-for-sale securities of $37.1 million and $36.9 million at June 30, 2023, and December 31, 2022, respectively, is excluded from amortized cost and is included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets.
Unrealized Losses
The following tables summarize the gross unrealized losses and fair value of available-for-sale securities by length of time each major security type has been in a continuous unrealized loss position:
 At June 30, 2023
 Less Than 12 Months12 Months or MoreTotal
(Dollars in thousands)Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Number of
Holdings		Fair
Value		Unrealized
Losses
U.S. Treasury notes$— $— $384,067 $(23,488)14$384,067 $(23,488)
Government agency debentures32,481 (2,376)228,620 (38,638)19261,101 (41,014)
Municipal bonds and notes30,722 (506)1,554,918 (74,175)4201,585,640 (74,681)
Agency CMO7,018 (349)46,342 (4,820)3753,360 (5,169)
Agency MBS197,989 (4,220)1,986,029 (287,100)4652,184,018 (291,320)
Agency CMBS345,784 (10,832)1,347,550 (295,721)1421,693,334 (306,553)
CMBS48,536 (1,439)827,583 (30,044)51876,119 (31,483)
Corporate debt8,805 (1,297)599,954 (102,670)92608,759 (103,967)
Private label MBS11,880 (1,153)31,170 (3,282)343,050 (4,435)
Other4,789 (211)4,117 (700)28,906 (911)
Total$688,004 $(22,383)$7,010,350 $(860,638)1,245$7,698,354 $(883,021)
48

 At December 31, 2022
 Less Than Twelve MonthsTwelve Months or LongerTotal
(Dollars in thousands)Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Number of
Holdings		Fair
Value		Unrealized
Losses
U.S. Treasury notes$337,563 $(19,167)$379,477 $(19,761)23$717,040 $(38,928)
Government agency debentures258,374 (43,644)— — 19258,374 (43,644)
Municipal bonds and notes1,616,771 (85,913)— — 4441,616,771 (85,913)
Agency CMO55,693 (4,640)4,272 (379)3959,965 (5,019)
Agency MBS1,641,544 (206,412)515,206 (96,927)4602,156,750 (303,339)
Agency CMBS485,333 (68,674)921,153 (189,440)1321,406,486 (258,114)
CMBS273,150 (8,982)598,490 (23,966)52871,640 (32,948)
CLO— — 2,107 (1)12,107 (1)
Corporate debt692,990 (89,692)8,421 (1,895)105701,411 (91,587)
Private label MBS44,249 (4,646)— — 344,249 (4,646)
Other12,198 (350)— — 412,198 (350)
Total$5,417,865 $(532,120)$2,429,126 $(332,369)1,282$7,846,991 $(864,489)
The $18.5 million increase in gross unrealized losses from December 31, 2022, to June 30, 2023, is primarily due to higher market rates. The Company assesses each available-for-sale security that is in an unrealized loss position to determine whether the decline in fair value below the amortized cost basis is a result from a credit loss or other factors. At both June 30, 2023, and December 31, 2022, no ACL was recorded on available-for-sale securities as each of the securities in the Company's portfolio are investment grade, current as to principal and interest, and their price changes are consistent with interest and credit spreads when adjusting for convexity, rating, and industry differences.
At June 30, 2023, based on current market conditions and the Company's current targeted balance sheet composition strategy, the Company intends to hold its available-for-sale securities with unrealized loss positions through the anticipated recovery period, and it is more-likely-than-not that the Company will not have to sell these available-for-sale securities before the recovery of the entire amortized cost basis. The issuers of these available-for-sale securities have not, to the Company’s knowledge, established any cause for default. Market prices are expected to approach par as the securities approach maturity.
Contractual Maturities
The following table summarizes the amortized cost and fair value of available-for-sale securities by contractual maturity:
At June 30, 2023
(In thousands)Amortized CostFair Value
Maturing within 1 year$33,337 $33,164 
After 1 year through 5 years1,040,297 978,096 
After 5 through 10 years1,401,731 1,277,563 
After 10 years6,166,939 5,470,518 
Total available-for-sale securities$8,642,304 $7,759,341 
Available-for-sale securities that are not due at a single maturity date have been categorized based on the maturity date of the underlying collateral. Actual principal cash flows may differ from this categorization as borrowers have the right to repay their obligations with or without prepayment penalties.
Sales of Available-for Sale Securities
During the three and six months ended June 30, 2023, the Company sold U.S. Treasury notes, Corporate debt securities, and Municipal bonds and notes classified as available-for-sale for proceeds of $2.9 million and $398.3 million, respectively, which resulted in gross realized losses of $48 thousand and $20.5 million, respectively. Because $3.8 million of the total loss recognized for the six months ended June 30, 2023, was attributed to a decline in credit quality, those portions of the charges have been included in the Provision for credit losses on the accompanying Condensed Consolidated Statements of Income. There were no sales of available-for-sale securities during the three and six months ended June 30, 2022.
49

Other Information
The following table summarizes the carrying value of available-for-sale securities pledged for deposits, borrowings, and other purposes:
(In thousands)At June 30, 2023At December 31, 2022
Pledged for deposits$2,251,240$2,573,072
Pledged for borrowings and other4,211,7331,195,101
Total available-for-sale securities pledged$6,462,973$3,768,173
At June 30, 2023, the Company had callable available-for-sale securities with an aggregate carrying value of $2.6 billion.
Held-to-Maturity
The following tables summarize the amortized cost, fair value, and ACL on held-to-maturity securities by major type:
At June 30, 2023
(In thousands)
Amortized
Cost (1)
Unrealized
Gains		Unrealized
Losses		Fair ValueAllowanceNet Carrying Value
Agency CMO$25,791 $— $(2,133)$23,658 $— $25,791 
Agency MBS2,541,384 524 (325,432)2,216,476 — 2,541,384 
Agency CMBS3,353,205 — (505,510)2,847,695 — 3,353,205 
Municipal bonds and notes919,112 798 (36,263)883,647 216 918,896 
CMBS104,508 — (9,302)95,206 — 104,508 
Total held-to-maturity securities$6,944,000 $1,322 $(878,640)$6,066,682 $216 $6,943,784 
At December 31, 2022
(In thousands)
Amortized
Cost (1)
Unrealized
Gains		Unrealized
Losses		Fair ValueAllowanceNet Carrying Value
Agency CMO$28,358 $— $(2,060)$26,298 $— $28,358 
Agency MBS2,626,114 827 (339,592)2,287,349 — 2,626,114 
Agency CMBS2,831,949 845 (407,648)2,425,146 — 2,831,949 
Municipal bonds and notes928,845 1,098 (47,183)882,760 182 928,663 
CMBS149,613 — (9,713)139,900 — 149,613 
Total held-to-maturity securities$6,564,879 $2,770 $(806,196)$5,761,453 $182 $6,564,697 
(1)Accrued interest receivable on held-to-maturity securities of $24.5 million and $24.2 million at June 30, 2023, and December 31, 2022, respectively, is excluded from amortized cost and is included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets.
An ACL on held-to-maturity securities is recorded for certain Municipal bonds and notes to account for expected lifetime credit losses. Agency securities represent obligations issued by a U.S. government-sponsored enterprise or other federally-related entity and are either explicitly or implicitly guaranteed and therefore, assumed to be zero loss. Held-to-maturity securities with gross unrealized losses and no ACL are considered to be high credit quality, and therefore, zero credit loss has been recorded.
The following table summarizes the activity in the ACL on held-to-maturity securities:
Three months ended June 30,Six months ended June 30,
(In thousands)2023202220232022
Balance, beginning of period$282$204$182$214
(Benefit) provision for credit losses(66)634(4)
Balance, end of period$216$210$216$210
Contractual Maturities
The following table summarizes the amortized cost and fair value of held-to-maturity securities by contractual maturity:
At June 30, 2023
(In thousands)Amortized CostFair Value
Maturing within 1 year$4,341 $4,340 
After 1 year through 5 years55,954 56,141 
After 5 through 10 years344,666 326,276 
After 10 years6,539,039 5,679,925 
Total held-to-maturity securities$6,944,000 $6,066,682 
50

Held-to-maturity securities that are not due at a single maturity date have been categorized based on the maturity date of the underlying collateral. Actual principal cash flows may differ from this categorization as borrowers have the right to prepay their obligations with or without prepayment penalties.
Credit Quality Information
The Company monitors the credit quality of held-to-maturity securities through credit ratings provided by Standard & Poor's Rating Services, Moody's Investor Services, Fitch Ratings, Inc., Kroll Bond Rating Agency, or DBRS Inc. Credit ratings express opinions about the credit quality of a security, and are updated at each quarter end. Investment grade securities are rated BBB- or higher by S&P, or Baa3 or higher by Moody's, and are generally considered by the rating agencies and market participants to be of low credit risk. Conversely, securities rated below investment grade, which are labeled as speculative grade by the rating agencies, are considered to have distinctively higher credit risk than investment grade securities. There were no speculative grade held-to-maturity securities at June 30, 2023, or December 31, 2022. Held-to-maturity securities that are not rated are collateralized with U.S. Treasury obligations.
The following tables summarize the amortized cost of held-to-maturity securities based on their lowest publicly available credit rating:
June 30, 2023
Investment Grade
(In thousands)AaaAa1Aa2Aa3A1A2A3Not Rated
Agency CMO$— $25,791 $— $— $— $— $— $— 
Agency MBS— 2,541,384 — — — — — — 
Agency CMBS— 3,353,205 — — — — — — 
Municipal bonds and notes334,490 162,966 254,457 116,030 32,949 — 4,165 14,055 
CMBS104,508 — — — — — — — 
Total held-to-maturity securities$438,998 $6,083,346 $254,457 $116,030 $32,949 $— $4,165 $14,055 
December 31, 2022
Investment Grade
(In thousands)AaaAa1Aa2Aa3A1A2A3Not Rated
Agency CMO$— $28,358 $— $— $— $— $— $— 
Agency MBS— 2,626,114 — — — — — — 
Agency CMBS— 2,831,949 — — — — — — 
Municipal bonds and notes336,035 163,312 255,235 116,870 38,177 4,165 — 15,051 
CMBS149,613 — — — — — — — 
Total held-to-maturity securities$485,648 $5,649,733 $255,235 $116,870 $38,177 $4,165 $— $15,051 
At June 30, 2023, and December 31, 2022, there were no held-to-maturity securities past due under the terms of their agreements nor in non-accrual status.
Other Information
The following table summarizes the carrying value of held-to-maturity securities pledged for deposits, borrowings, and other purposes:
(In thousands)At June 30, 2023At December 31, 2022
Pledged for deposits$1,259,307$1,596,777
Pledged for borrowings and other5,080,928260,735
Total held-to-maturity securities pledged$6,340,235$1,857,512
At June 30, 2023, the Company had callable held-to-maturity securities with an aggregate carrying value of $0.9 billion.
51

Note 4: Loans and Leases
The following table summarizes loans and leases by portfolio segment and class:
(In thousands)At June 30,
2023		At December 31, 2022
Commercial non-mortgage$17,255,036 $16,392,795 
Asset-based1,718,251 1,821,642 
Commercial real estate13,542,251 12,997,163 
Multi-family7,118,820 6,621,982 
Equipment financing1,535,564 1,628,393 
Warehouse lending708,560 641,976 
Commercial portfolio41,878,482 40,103,951 
Residential8,140,182 7,963,420 
Home equity1,552,850 1,633,107 
Other consumer54,534 63,948 
Consumer portfolio9,747,566 9,660,475 
Loans and leases$51,626,048 $49,764,426 
The carrying amount of loans and leases at June 30, 2023, and December 31, 2022, includes net unamortized
(discounts)/premiums and net unamortized deferred (fees)/costs totaling $(49.8) million and $(68.7) million, respectively. Accrued interest receivable of $253.9 million and $226.3 million at June 30, 2023, and December 31, 2022, respectively, is excluded from the carrying amount of loans and leases and is included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets. At June 30, 2023, the Company had pledged $16.7 billion of eligible loans as collateral to support borrowing capacity at the FHLB.
Non-Accrual and Past Due Loans and Leases
The following tables summarize the aging of accrual and non-accrual loans and leases by class:
 At June 30, 2023
(In thousands)30-59 Days
Past Due and
Accruing		60-89 Days
Past Due and
Accruing		90 or More Days Past Due
and Accruing		Non-accrualTotal Past Due and Non-accrual
Current (1)
Total Loans
and Leases
Commercial non-mortgage$2,550 $24,664 $— $95,332 $122,546 $17,132,490 $17,255,036 
Asset-based— — — 9,428 9,428 1,708,823 1,718,251 
Commercial real estate750 249 — 40,272 41,271 13,500,980 13,542,251 
Multi-family1,023 — — 5,823 6,846 7,111,974 7,118,820 
Equipment financing3,459 1,368 28 11,353 16,208 1,519,356 1,535,564 
Warehouse lending— — — — — 708,560 708,560 
Commercial portfolio7,782 26,281 28 162,208 196,299 41,682,183 41,878,482 
Residential8,596 1,918 — 26,750 37,264 8,102,918 8,140,182 
Home equity3,305 2,926 — 26,213 32,444 1,520,406 1,552,850 
Other consumer406 104 1 72 583 53,951 54,534 
Consumer portfolio12,307 4,948 1 53,035 70,291 9,677,275 9,747,566 
Total$20,089 $31,229 $29 $215,243 $266,590 $51,359,458 $51,626,048 
(1)At June 30, 2023, there were $22.6 million of commercial loans that had either reached their contractual maturity or experienced administrative delays. These loans are classified as current in the table above. In July 2023, $19.0 million were resolved.
52

 At December 31, 2022
(In thousands)30-59 Days
Past Due and
Accruing		60-89 Days
Past Due and
Accruing		90 or More Days Past Due
and Accruing		Non-accrualTotal Past Due and Non-accrualCurrentTotal Loans
and Leases
Commercial non-mortgage$8,434 $821 $645 $71,884 $81,784 $16,311,011 $16,392,795 
Asset-based5,921 — — 20,024 25,945 1,795,697 1,821,642 
Commercial real estate1,494 23,492 68 39,057 64,111 12,933,052 12,997,163 
Multi-family1,157 — — 636 1,793 6,620,189 6,621,982 
Equipment financing806 9,988 — 12,344 23,138 1,605,255 1,628,393 
Warehouse lending— — — — — 641,976 641,976 
Commercial portfolio17,812 34,301 713 143,945 196,771 39,907,180 40,103,951 
Residential8,246 3,083 — 25,424 36,753 7,926,667 7,963,420 
Home equity5,293 2,820 — 27,924 36,037 1,597,070 1,633,107 
Other consumer1,028 85 13 148 1,274 62,674 63,948 
Consumer portfolio14,567 5,988 13 53,496 74,064 9,586,411 9,660,475 
Total$32,379 $40,289 $726 $197,441 $270,835 $49,493,591 $49,764,426 
The following table provides additional information on non-accrual loans and leases:
At June 30, 2023At December 31, 2022
(In thousands)Non-accrualNon-accrual with No AllowanceNon-accrualNon-accrual with No Allowance
Commercial non-mortgage$95,332 $14,097 $71,884 $12,598 
Asset-based9,428 1,330 20,024 1,491 
Commercial real estate40,272 1,461 39,057 90 
Multi-family5,823 5,823 636 — 
Equipment financing11,353 2,532 12,344 2,240 
Commercial portfolio162,208 25,243 143,945 16,419 
Residential26,750 10,656 25,424 10,442 
Home equity26,213 13,868 27,924 15,193 
Other consumer72 4 148 5 
Consumer portfolio53,035 24,528 53,496 25,640 
Total$215,243 $49,771 $197,441 $42,059 
Interest income on non-accrual loans and leases that would have been recognized had the loans and leases been current in accordance with their contractual terms totaled $6.9 million and $5.2 million for the three months ended June 30, 2023, and 2022, respectively, and $12.4 million and $8.6 million for the six months ended June 30, 2023, and 2022, respectively.
Allowance for Credit Losses on Loans and Leases
The following table summarizes the change in the ACL on loans and leases by portfolio segment:
At or for the three months ended June 30,
20232022
(In thousands)Commercial PortfolioConsumer PortfolioTotalCommercial PortfolioConsumer PortfolioTotal
ACL on loans and leases:
Balance, beginning of period$554,750 $59,164 $613,914 $510,696 $58,675 $569,371 
Provision (benefit)38,824 (3,575)35,249 12,041 (313)11,728 
Charge-offs(21,945)(1,085)(23,030)(18,757)(896)(19,653)
Recoveries1,024 1,754 2,778 7,765 2,288 10,053 
Balance, end of period$572,653 $56,258 $628,911 $511,745 $59,754 $571,499 
53

 At or for the six months ended June 30,
20232022
(In thousands)Commercial PortfolioConsumer PortfolioTotalCommercial PortfolioConsumer PortfolioTotal
ACL on loans and leases:
Balance, beginning of period$533,125 $61,616 $594,741 $257,877 $43,310 $301,187 
Adoption of ASU No. 2022-027,704 (1,831)5,873 — — — 
Initial allowance for PCD loans and leases (1)
— — — 78,376 9,669 88,045 
Provision (benefit)77,581 (4,511)73,070 196,368 4,428 200,796 
Charge-offs(48,355)(2,183)(50,538)(30,005)(2,016)(32,021)
Recoveries2,598 3,167 5,765 9,129 4,363 13,492 
Balance, end of period$572,653 $56,258 $628,911 $511,745 $59,754 $571,499 
Individually evaluated for credit losses46,215 7,513 53,728 38,847 4,450 43,297 
Collectively evaluated for credit losses$526,438 $48,745 $575,183 $472,898 $55,304 $528,202 
(1)Represents the establishment of the initial reserve for PCD loans and leases, which is reported net of $48.3 million of day one charge-offs recognized at the date of acquisition in accordance with GAAP.
Credit Quality Indicators
To measure credit risk for the commercial portfolio, the Company employs a dual grade credit risk grading system for estimating the PD and LGD. The credit risk grade system assigns a rating to each borrower and to the facility, which together form a Composite Credit Risk Profile. The credit risk grade system categorizes borrowers by common financial characteristics that measure the credit strength of borrowers and facilities by common structural characteristics. The Composite Credit Risk Profile has ten grades, with each grade corresponding to a progressively greater risk of loss. Grades (1) to (6) are considered pass ratings, and grades (7) to (10) are considered criticized, as defined by the regulatory agencies. A (7) "Special Mention" rating has a potential weakness that, if left uncorrected, may result in deterioration of the repayment prospects for the asset. A (8) "Substandard" rating has a well-defined weakness that jeopardizes the full repayment of the debt. A (9) "Doubtful" rating has all of the same weaknesses as a substandard asset with the added characteristic that the weakness makes collection or liquidation in full given current facts, conditions, and values improbable. Assets classified as a (10) "Loss" rating are considered uncollectible and are charged-off. Risk ratings, which are assigned to differentiate risk within the portfolio, are reviewed on an ongoing basis and revised to reflect changes in a borrower's current financial position and operating results inoutlook, risk profile, and the related collateral and structural position. Loan officers review updated financial information or other loan factors on at least an annual basis for all pass rated loans to assess the accuracy of the risk grade. Criticized loans undergo more frequent reviews and enhanced monitoring.
To measure credit risk for the consumer portfolio, the most relevant credit characteristic is the FICO score, which is a widely used credit scoring system that ranges from 300 to 850. A lower FICO score is indicative of higher credit risk and a higher FICO score is indicative of lower credit risk. FICO scores are updated on at least a quarterly basis.
54

The following tables summarize the amortized cost basis of commercial loans and leases by Composite Credit Risk Profile grade and origination year:
At June 30, 2023
(In thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Commercial non-mortgage:
Risk rating:
Pass$1,672,800 $4,814,327 $1,535,033 $814,981 $649,366 $1,081,197 $6,099,138 $16,666,842 
Special mention24,849 83,936 80,312 12,292 15,636 9,017 83,731 309,773 
Substandard23,672 60,311 15,390 32,278 45,315 36,438 65,017 278,421 
Total commercial non-mortgage1,721,321 4,958,574 1,630,735 859,551 710,317 1,126,652 6,247,886 17,255,036 
Current period gross write-offs324 329 535 511 178 3,675 — 5,552 
Asset-based:
Risk rating:
Pass10,964 8,284 — 1,565 9,427 56,838 1,487,079 1,574,157 
Special mention— — — — — 381 71,033 71,414 
Substandard— — — — 1,330 — 71,350 72,680 
Total asset-based10,964 8,284 — 1,565 10,757 57,219 1,629,462 1,718,251 
Current period gross write-offs— — — — 13,189 — — 13,189 
Commercial real estate:
Risk rating:
Pass1,488,568 3,589,054 1,912,030 1,356,330 1,329,052 3,397,728 149,322 13,222,084 
Special mention656 2,496 27,071 31,689 23,739 58,074 1,408 145,133 
Substandard15,936 512 16,658 15,447 54,635 71,846 — 175,034 
Total commercial real estate1,505,160 3,592,062 1,955,759 1,403,466 1,407,426 3,527,648 150,730 13,542,251 
Current period gross write-offs— — 2,574 3,813 1,059 21,094 — 28,540 
Multi-family:
Risk rating:
Pass992,039 1,911,526 1,003,245 449,847 607,503 2,077,167 1 7,041,328 
Special mention— — — 22,471 364 41,458 — 64,293 
Substandard— — — 373 — 12,826 — 13,199 
Total multi-family992,039 1,911,526 1,003,245 472,691 607,867 2,131,451 1 7,118,820 
Current period gross write-offs— — — — — 1,033 — 1,033 
Equipment financing:
Risk rating:
Pass201,925 348,890 284,909 253,271 243,348 124,924 — 1,457,267 
Special mention— — 11,296 8,751 13,031 7,207 — 40,285 
Substandard— 3,290 5,466 12,452 4,721 12,083 — 38,012 
Total equipment financing201,925 352,180 301,671 274,474 261,100 144,214 — 1,535,564 
Current period gross write-offs— — — — — 41 — 41 
Warehouse lending:
Risk rating:
Pass— — — — — — 708,560 708,560 
Total warehouse lending— — — — — — 708,560 708,560 
Current period gross write-offs— — — — — — — — 
Total commercial portfolio$4,431,409 $10,822,626 $4,891,410 $3,011,747 $2,997,467 $6,987,184 $8,736,639 $41,878,482 
Current period gross write-offs$324 $329 $3,109 $4,324 $14,426 $25,843 $— $48,355 
55

At December 31, 2022
(In thousands)20222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Commercial non-mortgage:
Pass$5,154,781 $1,952,158 $965,975 $792,977 $593,460 $780,200 $5,670,532 $15,910,083 
Special mention104,277 15,598 21,168 263 14,370 7,770 40,142 203,588 
Substandard28,203 11,704 69,954 36,604 70,634 16,852 41,917 275,868 
Doubtful— — — 1 — — 3,255 3,256 
Total commercial non-mortgage5,287,261 1,979,460 1,057,097 829,845 678,464 804,822 5,755,846 16,392,795 
Asset-based:
Pass19,659 3,901 9,424 14,413 5,163 55,553 1,551,250 1,659,363 
Special mention— — — — — — 80,476 80,476 
Substandard— — — 1,491 — — 80,312 81,803 
Total asset-based19,659 3,901 9,424 15,904 5,163 55,553 1,712,038 1,821,642 
Commercial real estate:
Pass3,420,635 2,246,672 1,556,185 1,605,869 1,058,730 2,681,052 97,832 12,666,975 
Special mention21,878 8,995 7,264 37,570 47,419 66,652 1,000 190,778 
Substandard519 2,459 216 31,163 47,021 57,997 — 139,375 
Doubtful— — — 1 — 34 — 35 
Total commercial real estate3,443,032 2,258,126 1,563,665 1,674,603 1,153,170 2,805,735 98,832 12,997,163 
Multi-family:
Pass1,992,980 1,057,705 507,065 694,066 444,564 1,748,337 51,655 6,496,372 
Special mention37,677 — — 95 40,307 726 8,838 87,643 
Substandard— — 382 — 12,681 24,904 — 37,967 
Total multi-family2,030,657 1,057,705 507,447 694,161 497,552 1,773,967 60,493 6,621,982 
Equipment financing:
Pass388,641 345,792 331,419 308,441 98,874 83,264 — 1,556,431 
Special mention— 185 — 11,965 6,775 25 — 18,950 
Substandard314 16,711 18,436 5,016 5,307 7,228 — 53,012 
Total equipment financing388,955 362,688 349,855 325,422 110,956 90,517 — 1,628,393 
Warehouse lending:
Pass— — — — — — 641,976 641,976 
Total warehouse lending— — — — — — 641,976 641,976 
Total commercial portfolio$11,169,564 $5,661,880 $3,487,488 $3,539,935 $2,445,305 $5,530,594 $8,269,185 $40,103,951 
56

The following tables summarize the amortized cost basis of consumer loans by FICO score and origination year:
At June 30, 2023
(In thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Residential:
Risk rating:
800+$83,586 $711,811 $1,063,248 $438,330 $158,719 $967,612 $— $3,423,306 
740-799215,262 834,914 843,118 331,838 101,576 697,162 — 3,023,870 
670-73975,016 334,227 302,307 87,497 56,903 366,022 — 1,221,972 
580-6696,654 49,107 52,155 14,510 5,893 124,153 — 252,472 
579 and below423 46,418 4,669 2,906 108,166 55,980 — 218,562 
Total residential380,941 1,976,477 2,265,497 875,081 431,257 2,210,929 — 8,140,182 
Current period gross write-offs— — 2 — — 273 — 275 
Home equity:
Risk rating:
800+13,079 27,754 35,706 26,457 7,471 61,655 414,584 586,706 
740-79913,347 24,237 30,998 16,481 6,992 38,169 374,503 504,727 
670-73910,007 16,092 15,479 5,914 3,724 30,021 248,766 330,003 
580-669943 2,931 2,872 1,246 1,200 11,552 71,317 92,061 
579 and below278 652 572 596 392 7,241 29,622 39,353 
Total home equity37,654 71,666 85,627 50,694 19,779 148,638 1,138,792 1,552,850 
Current period gross write-offs— — — — — 494 — 494 
Other consumer:
Risk rating:
800+386 516 260 402 622 180 22,092 24,458 
740-799704 715 2,354 1,011 1,515 581 4,443 11,323 
670-739377 640 430 1,447 2,403 362 8,350 14,009 
580-66957 178 132 280 566 91 1,221 2,525 
579 and below70 131 82 21 57 42 1,816 2,219 
Total other consumer1,594 2,180 3,258 3,161 5,163 1,256 37,922 54,534 
Current period gross write-offs750 7 3 176 232 246 — 1,414 
Total consumer portfolio$420,189 $2,050,323 $2,354,382 $928,936 $456,199 $2,360,823 $1,176,714 $9,747,566 
Current period gross write-offs$750 $7 $5 $176 $232 $1,013 $— $2,183 
At December 31, 2022
(In thousands)20222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Residential:
800+$527,408 $954,568 $469,518 $160,596 $28,361 $997,409 $— $3,137,860 
740-799963,026 946,339 311,295 111,913 43,684 689,771 — 3,066,028 
670-739381,515 350,671 103,999 62,365 18,451 384,687 — 1,301,688 
580-66940,959 49,648 14,484 5,836 2,357 138,107 — 251,391 
579 and below52,464 3,693 2,057 84,032 1,299 62,908 — 206,453 
Total residential1,965,372 2,304,919 901,353 424,742 94,152 2,272,882 — 7,963,420 
Home equity:
800+25,475 35,129 25,612 7,578 12,545 55,352 465,318 627,009 
740-79926,743 35,178 17,621 8,111 7,765 32,270 398,692 526,380 
670-73918,396 16,679 8,175 3,635 7,614 30,060 259,646 344,205 
580-6692,848 3,068 1,520 1,456 1,163 13,607 76,614 100,276 
579 and below426 386 651 661 563 4,736 27,814 35,237 
Total home equity73,888 90,440 53,579 21,441 29,650 136,025 1,228,084 1,633,107 
Other consumer:
800+495 218 544 1,045 247 56 19,196 21,801 
740-799888 2,624 1,959 2,494 941 364 12,218 21,488 
670-739977 603 2,480 4,238 1,041 118 6,107 15,564 
580-669211 117 337 801 173 54 2,223 3,916 
579 and below169 101 29 116 36 21 707 1,179 
Total other consumer2,740 3,663 5,349 8,694 2,438 613 40,451 63,948 
Total consumer portfolio$2,042,000 $2,399,022 $960,281 $454,877 $126,240 $2,409,520 $1,268,535 $9,660,475 
57

Collateral Dependent Loans and Leases
A loan or lease is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is substantially expected to be provided through the operation or sale of collateral. At June 30, 2023, and December 31, 2022, the carrying amount of collateral dependent commercial loans and leases totaled $31.9 million and $43.8 million, respectively, and the carrying amount of collateral dependent consumer loans totaled $39.2 million and $45.2 million, respectively. Commercial non-mortgage, asset-based, and equipment financing loans and leases are generally secured by machinery and equipment, inventory, receivables, or other non-real estate assets, whereas commercial real estate, multi-family, residential, home equity, and other consumer loans are secured by real estate. The ACL for collateral dependent loans and leases is individually assessed based on the fair value of the collateral less costs to sell. At June 30, 2023, and December 31, 2022, the collateral value associated with collateral dependent loans and leases totaled $91.8 million and $108.0 million, respectively.
Modifications for Borrowers Experiencing Financial Difficulty
On January 1, 2023, the Company adopted ASU 2022-02, which eliminates the accounting guidance for TDRs and enhances the disclosure requirements for certain loan modifications when a borrower is experiencing financial difficulty. For a description of the Company's accounting policies related to the accounting and reporting of TDRs, for which comparative period information is presented, refer to Note 1: Summary of Significant Accounting Policies of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
In certain circumstances, the Company enters into agreements to modify the terms of historical dollars without consideringloans to borrowers experiencing financial difficulty. A variety of solutions are offered to borrowers experiencing financial difficulty, including loan modifications that may result in principal forgiveness, interest rate reductions, payment delays, term extension, or a combination thereof. The following is a description of each of these types of modifications:
•Principal forgiveness – The outstanding principal balance of a loan may be reduced by a specified amount. Principal forgiveness may occur voluntarily as part of a negotiated agreement with a borrower, or involuntarily through a bankruptcy proceeding.
•Interest rate reductions – Includes modifications where the contractual interest rate of the loan has been reduced.
•Payment delays – Deferral arrangements which allow borrowers to delay a scheduled loan payment to a later date. Deferred loan payments do not affect the original contractual terms of the loan. Modifications that result in only an insignificant payment delay are not disclosed. The Company considers that a three month or less payment delay generally would be considered insignificant.
•Term extensions – Extensions of the original contractual maturity date of the loan.
•Combination – Combination includes loans that have undergone more than one of the above loan modification types.
Significant judgment is required to determine if a borrower is experiencing financial difficulty. These considerations vary by portfolio class. The Company has identified modifications to borrowers experiencing financial difficulty that are included in its disclosures as follows:
•Commercial: The Company evaluates modifications of loans to commercial borrowers that are rated substandard or worse, and includes the modifications in its disclosures to the extent that the modification is considered
other-than-insignificant.
•Consumer: The Company evaluates modifications of loans to consumer borrowers subject to its loss mitigation program and includes them in its disclosures to the extent that the modification is considered other-than-insignificant.
58

The following table summarizes the amortized cost basis at June 30, 2023, of loans modified to borrowers experiencing financial difficulty, disaggregated by class and type of concession granted:
For the three months ended June 30, 2023
(In thousands)Interest Rate ReductionTerm ExtensionPayment DelayCombination Term Extension and Interest Rate ReductionCombination Term Extension and Payment DelayTotal
% of Total Class (2)
Commercial non-mortgage$—$13,025$9,548$336$11,520$34,4290.2  %
Commercial real estate—11,522171——11,6930.1 
Equipment financing——1,408——1,4080.1 
Residential—1,1591,606——2,765— 
Home equity6452—145—261— 
Total (1)
$64$25,758$12,733$481$11,520$50,5560.1  %
For the six months ended June 30, 2023
(In thousands)Interest Rate ReductionTerm ExtensionPayment DelayCombination Term Extension and Interest Rate ReductionCombination Term Extension and Payment DelayTotal
% of Total Class (2)
Commercial non-mortgage$—$39,502$9,548$336$11,520$60,9060.4  %
Commercial real estate—14,762171——14,9330.1 
Equipment financing——1,408——1,4080.1 
Residential—1,1591,606——2,765— 
Home equity64108—209—381— 
Total (1)
$64$55,531$12,733$545$11,520$80,3930.2  %
(1)The total amortized cost excludes accrued interest receivable of $0.2 million for each reporting period.
(2)Represents the total amortized cost of the loans modified as a percentage of the total period end loan balance by class.
The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty:
For the three months ended June 30, 2023
Financial Effect
Interest Rate Reduction:
Home equityReduced weighted average interest rate by 0.5%
Term Extension:
Commercial non-mortgageExtended term by a weighted average of 1.8 years
Commercial real estateExtended term by a weighted average of 1.0 year
ResidentialExtended term by a weighted average of 1.4 years
Home equityExtended term by a weighted average of 14.4 years
Payment Delay:
Commercial non-mortgageProvided partial payment deferrals for a weighted average of 0.5 years
Commercial real estateProvided payment deferrals for a weighted average of 0.3 years to be received at contractual maturity
Equipment financingProvided partial payment deferrals for a weighted average of 0.5 years
ResidentialProvided payment deferrals for a weighted average of 1.0 year
Combination Term Extension and Interest Rate Reduction:
Commercial non-mortgageExtended term by a weighted average of 3.7 years and reduced weighted average interest rate by 1.3%
Home equityExtended term by a weighted average of 16.0 years and reduced weighted average interest rate by 1.4%
Combination Term Extension and Payment Delay:
Commercial non-mortgageExtended term by a weighted average of 1.0 year and provided payment deferrals for a weighted average of 1.3 years
59

For the six months ended June 30, 2023
Financial Effect
Interest Rate Reduction:
Home equityReduced weighted average interest rate by 0.5%
Term Extension:
Commercial non-mortgageExtended term by a weighted average of 0.9 years
Commercial real estateExtended term by a weighted average of 1.3 years
ResidentialExtended term by a weighted average of 1.4 years
Home equityExtended term by a weighted average of 11.5 years
Payment Delay:
Commercial non-mortgageProvided partial payment deferrals for a weighted average of 0.5 years
Commercial real estateProvided payment deferrals for a weighted average of 0.3 years to be received at contractual maturity
Equipment financingProvided partial payment deferrals for a weighted average of 0.5 years
ResidentialProvided payment deferrals for a weighted average of 1.0 year
Combination Term Extension and Rate Reduction:
Commercial non-mortgageExtended term by a weighted average of 3.7 years and reduced weighted average interest rate by 1.3%
Home equityExtended term by a weighted average of 12.7 years and reduced weighted average interest rate by 1.4%
Combination Term Extension and Payment Delay:
Commercial non-mortgageExtended term by a weighted average of 1.0 year and provided payment deferrals for a weighted average of 1.3 years
The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table summarizes the aging of loans that have been modified in the six months ended June 30, 2023:
At June 30, 2023
(In thousands)Current30-59 Days
Past Due		60-89 Days
Past Due		90+ Days
Past Due		Non-AccrualTotal
Commercial non-mortgage$25,006$—$—$—$35,900$60,906
Commercial real estate14,762171———14,933
Equipment financing1,408————1,408
Residential————2,7652,765
Home equity116———265381
Total$41,292$171$—$—$38,930$80,393
There were no loans made to borrowers experiencing financial difficulty that were modified during the three or six months ended June 30, 2023, and that subsequently defaulted. For the purposes of this disclosure, a payment default is defined as 90 or more days past due and still accruing. Non-accrual loans that are modified to borrowers experiencing financial difficulty remain on non-accrual status until the borrower has demonstrated performance under the modified terms. Commitments to lend additional funds to borrowers experiencing financial difficulty whose loans had been modified were not significant.
Troubled Debt Restructurings Prior to the Adoption of ASU 2022-02
The following table summarizes information related to TDRs:
(In thousands)At December 31, 2022
Accrual status$110,868 
Non-accrual status83,954 
Total TDRs$194,822 
Additional funds committed to borrowers in TDR status$1,724 
Specific reserves for TDRs included in the ACL on loans and leases:
Commercial portfolio$14,578 
Consumer portfolio3,559 
60

The following table summarizes loans and leases modified as TDRs by class and modification type during the three and six months ended June 30, 2022:
Three months ended June 30, 2022Six months ended June 30, 2022
(Dollars in thousands)Number of
Contracts
Recorded
Investment (1)
Number of
Contracts
Recorded
Investment (1)
Commercial non-mortgage
Term extension—$—2$97
Combination - Term extension and interest rate reduction33515443
Other (2)
122,964122,964
Equipment financing
Other (2)
11,15711,157
Residential
Extended maturity18931893
Other (2)
230862,762
Home equity
Adjusted interest rate174174
Combination - Term extension and interest rate reduction768011724
Other (2)
9399241,333
Total TDRs25$26,82652$30,447
(1)Post-modification balances approximated pre-modification balances. The aggregate amount of charge-offs due to restructurings was not significant.
(2)Other included covenant modifications, forbearance, discharges under Chapter 7 bankruptcy, or other concessions.
The portion of TDRs deemed to be uncollectible and charged-off totaled $1.0 million for the commercial portfolio and $0.1 million for the consumer portfolio for the three months ended June 30, 2022, and $10.0 million for the commercial portfolio and $0.1 million for the consumer portfolio for the six months ended June 30, 2022. There were no significant loans and leases modified as TDRs within the previous 12 months and for which there was a payment default during the three and six months ended June 30, 2022.
61

Note 5: Transfers and Servicing of Financial Assets
The Company originates and sells residential mortgage loans in the normal course of business, primarily to government-sponsored entities through established programs and securitizations. Residential mortgage origination fees, adjustments for changes in fair value, and any gain or loss recognized on residential mortgage loans sold are included in Mortgage banking activities on the accompanying Condensed Consolidated Statements of Income.
The following table summarizes information related to mortgage banking activities:
 Three months ended June 30,Six months ended June 30,
(In thousands)2023202220232022
Net gain on sale$91 $106 $168 $503 
Origination fees34 37 45 172 
Fair value adjustment4 (41)(25)(145)
Mortgage banking activities$129 $102 $188 $530 
Proceeds from sale$4,828 $6,080 $8,660 $32,833 
Loans sold with servicing rights retained4,119 4,954 5,348 30,317 
Under certain circumstances, the Company may decide to sell loans that were not originated or otherwise acquired with the intent to sell. During the three months ended June 30, 2023, and 2022, the Company sold commercial loans not originated for sale for proceeds of $334.4 million and $67.4 million, respectively, which resulted in net gains on sale of $0.6 million and $1.4 million, respectively. During the six months ended June 30, 2023, and 2022, the Company sold commercial loans not originated for sale for proceeds of $441.1 million and $118.5 million, respectively, which resulted in net gains on sale of $0.7 million and $3.2 million, respectively.
In addition, the Company may retain servicing rights on its residential mortgage loans sold in the normal course of business. At June 30, 2023, and December 31, 2022, the aggregate principal balance of residential mortgage loans serviced for others totaled $1.9 billion and $2.0 billion, respectively. Mortgage servicing rights are held at the lower of cost, net of accumulated amortization, or fair market value, and are included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets. The Company assesses mortgage servicing rights for impairment each quarter and establishes or adjusts the valuation allowance to the extent that amortized cost exceeds the estimated fair market value.
The following table presents the change in the carrying amount for mortgage servicing rights:
Three months ended June 30,Six months ended June 30,
(In thousands)2023202220232022
Balance, beginning of period$9,189 $9,735 $9,515 $9,237 
Acquired from Sterling— — — 859 
Additions37 56 52 265 
Amortization(368)(1,199)(709)(1,769)
Balance, end of period$8,858 $8,592 $8,858 $8,592 
Loan servicing fees, net of mortgage servicing rights amortization, were $1.3 million and $0.5 million for the three months ended June 30, 2023, and 2022, respectively, and $2.6 million and $1.6 million for the six months ended June 30, 2023, and 2022, respectively, and are included in Loan and lease related fees on the accompanying Condensed Consolidated Statements of Income. Information regarding the fair value of loans held for sale and mortgage servicing rights can be found within Note 14: Fair Value Measurements.
62

Note 6: Goodwill and Other Intangible Assets
Goodwill
The following table summarizes changes in the relative purchasing powercarrying amount of goodwill:
(In thousands)At June 30,
2023		At December 31,
2022
Balance, beginning of period$2,514,104 $538,373 
interLINK acquisition143,216 — 
Sterling merger (1)
(25,561)1,939,765 
Bend acquisition (1)
(294)35,966 
Balance, end of period$2,631,465 $2,514,104 
(1)The 2023 changes reflect adjustments recorded within the one-year measurement period, which were identified in the first quarter as a result of extended information gathering and new information that arose from integration activities. The allocation of the purchase price and goodwill calculations for both the Sterling merger and Bend acquisition were final as of March 31, 2023.
Information regarding goodwill by reportable segment can be found within Note 16: Segment Reporting.
Other Intangible Assets
The following table summarizes other intangible assets:
 At June 30, 2023At December 31, 2022
(In thousands)Gross Carrying
Amount		Accumulated
Amortization		Net Carrying
Amount		Gross Carrying
Amount		Accumulated
Amortization		Net Carrying
Amount
Core deposits$146,037 $45,623 $100,414 $146,037 $36,710 $109,327 
Customer relationships (1)
151,000 34,362 116,638 115,000 24,985 90,015 
Non-competition agreement (1)
4,000 400 3,600 — — — 
Total other intangible assets$301,037 $80,385 $220,652 $261,037 $61,695 $199,342 
(1)The increase in the gross carrying amount is attributed to the acquisition of interLINK in the first quarter of 2023, in which the Company identified and recorded a $36.0 million intangible asset for broker dealer relationships, which is being amortized on an accelerated basis over an estimated useful life of 10 years, and a $4.0 million non-competition agreement, which is being amortized on a straight-line basis over an estimated useful life of 5 years.
The remaining estimated aggregate future amortization expense for other intangible assets is as follows:
(In thousands)At June 30,
2023
Remainder of 2023$17,517 
202429,618 
202525,956 
202625,565 
202725,565 
Thereafter96,431 

63

Note 7: Deposits
The following table summarizes deposits by type:
(In thousands)At June 30,
2023		At December 31,
2022
Non-interest-bearing:
Demand$11,157,390 $12,974,975 
Interest-bearing:
Health savings accounts8,206,844 7,944,892 
Checking8,775,975 9,237,529 
Money market16,189,678 11,062,652 
Savings7,131,587 8,673,343 
Time deposits7,286,058 4,160,949 
Total interest-bearing$47,590,142 $41,079,365 
Total deposits$58,747,532 $54,054,340 
Time deposits, money market, and interest-bearing checking obtained through brokers (1)
$3,234,854 $1,964,873 
Aggregate amount of time deposit accounts that exceeded the FDIC limit3,553,953 1,894,950 
Demand deposit overdrafts reclassified as loan balances9,312 8,721 
(1)Excludes $4.3 billion of money market sweep deposits received through interLINK at June 30, 2023.
The following table summarizes the scheduled maturities of time deposits:
(In thousands)At June 30,
2023
Remainder of 2023$4,189,693 
20242,859,064 
2025134,973 
202653,889 
202735,600 
Thereafter12,839 
Total time deposits$7,286,058 
Note 8: Borrowings
The following table summarizes securities sold under agreements to repurchase and other borrowings:
At June 30, 2023At December 31, 2022
(Dollars in thousands)Total OutstandingRateTotal OutstandingRate
Securities sold under agreements to repurchase (1)
$243,580 0.11 %$282,005 0.11 %
Federal funds purchased— — 869,825 4.44 
Securities sold under agreements to repurchase and other borrowings$243,580 0.11 %$1,151,830 3.38 %
(1)The Company has the right of offset with respect to all repurchase agreement assets and liabilities. Total securities sold under agreements to repurchase are presented as gross transactions, as only liabilities are outstanding for the periods presented.
Securities sold under agreements to repurchase, all of which have an original maturity of one year or less for the periods presented, are used as a source of borrowed funds and are collateralized by Agency MBS and Corporate debt. The Company's repurchase agreement counterparties are limited to primary dealers in government securities, and commercial and municipal customers through the Corporate Treasury function. The Company may also purchase unsecured term and overnight federal funds to satisfy its short-term liquidity needs.
64

The following table summarizes information for FHLB advances:
At June 30, 2023At December 31, 2022
(Dollars in thousands)Total OutstandingWeighted-
Average Contractual Coupon Rate		Total OutstandingWeighted-
Average Contractual Coupon Rate
Maturing within 1 year$4,300,180 5.26 %$5,450,187 4.40 %
After 1 but within 2 years— — — — 
After 2 but within 3 years— — — — 
After 3 but within 4 years— — — — 
After 4 but within 5 years478 1.35 252 — 
After 5 years9,713 2.07 10,113 2.09 
Total FHLB advances$4,310,371 5.26 %$5,460,552 4.39 %
Aggregate carrying value of assets pledged as collateral$21,308,244 $13,692,379 
Remaining borrowing capacity at FHLB11,559,717 4,291,326 
The Bank may borrow up to the amount of eligible mortgages and securities that have been pledged as collateral to secure FHLB advances, which includes certain residential and commercial real estate loans, home equity lines of credit, CMBS, Agency MBS, Agency CMO, U.S. Treasury notes, and MBS. The Bank was in compliance with its FHLB collateral requirements at both June 30, 2023, and December 31, 2022.
The following table summarizes long-term debt:
(Dollars in thousands)At June 30,
2023		At December 31,
2022
4.375%
Senior fixed-rate notes due February 15, 2024 (2)
$132,550 $150,000 
4.100%
Senior fixed-rate notes due March 25, 2029 (3)
330,781 333,458 
4.000%Subordinated fixed-to-floating rate notes due December 30, 2029274,000 274,000 
3.875%Subordinated fixed-to-floating rate notes due November 1, 2030225,000 225,000 
Junior subordinated debt Webster Statutory Trust I floating-rate notes due September 17, 2033 (4)
77,320 77,320 
Total senior and subordinated debt1,039,651 1,059,778 
Discount on senior fixed-rate notes(647)(756)
Debt issuance cost on senior fixed-rate notes(1,612)(1,824)
Premium on subordinated fixed-to-floating rate notes14,866 15,930 
Long-term debt (1)
$1,052,258 $1,073,128 
(1)The classification of debt as long-term is based on the initial terms of greater than one year as of the date of issuance.
(2)During the three months ended June 30, 2023, the Company repurchased and retired $17.5 million of these senior notes at 96 cents on the dollar. The resulting $0.7 million gain recognized on extinguishment was recorded in Other income on the accompanying Condensed Consolidated Statements of Income.
(3)The Company de-designated its fair value hedging relationship on these senior notes in 2020. A basis adjustment of $30.8 million and $33.5 million at June 30, 2023, and December 31, 2022, respectively, is included in the carrying value and is being amortized over the remaining life of the senior notes.
(4)The interest rate on the Webster Statutory Trust I floating-rate notes at June 30, 2023, and December 31, 2022, was calculated based on 3-month LIBOR plus 2.95%, which yielded 8.46% and 7.69% respectively.
65

Note 9: Accumulated Other Comprehensive (Loss) Income, Net of Tax
The following tables summarize the changes in each component of accumulated other comprehensive (loss) income, net of tax:
Three months ended June 30, 2023Six months ended June 30, 2023
(In thousands)Securities Available For SaleDerivative InstrumentsDefined Benefit Pension and Other Postretirement Benefit PlansTotalSecurities Available
For Sale		Derivative InstrumentsDefined Benefit Pension and Other Postretirement Benefit PlansTotal
Balance, beginning of period$(559,542)$12,500 $(40,978)$(588,020)$(631,160)$(8,874)$(44,926)$(684,960)
Other comprehensive (loss) income before reclassifications(85,072)(48,123)— (133,195)(28,437)(27,341)3,553 (52,225)
Amounts reclassified from accumulated other comprehensive (loss) income35 600 1,757 2,392 15,018 1,192 2,152 18,362 
Other comprehensive (loss) income, net of tax(85,037)(47,523)1,757 (130,803)(13,419)(26,149)5,705 (33,863)
Balance, end of period$(644,579)$(35,023)$(39,221)$(718,823)$(644,579)$(35,023)$(39,221)$(718,823)
Three months ended June 30, 2022Six months ended June 30, 2022
(In thousands)Securities Available For SaleDerivative InstrumentsDefined Benefit Pension and Other Postretirement Benefit PlansTotalSecurities Available
For Sale		Derivative InstrumentsDefined Benefit Pension and Other Postretirement Benefit PlansTotal
Balance, beginning of period$(240,343)$(1,774)$(33,606)$(275,723)$4,536 $6,070 $(33,186)$(22,580)
Other comprehensive (loss)
before reclassifications		(205,273)(1,070)(328)(206,671)(450,152)(9,683)(1,047)(460,882)
Amounts reclassified from accumulated other comprehensive (loss) income— 762 300 1,062 — 1,531 599 2,130 
Other comprehensive (loss),
net of tax		(205,273)(308)(28)(205,609)(450,152)(8,152)(448)(458,752)
Balance, end of period$(445,616)$(2,082)$(33,634)$(481,332)$(445,616)$(2,082)$(33,634)$(481,332)
The following table further summarizes the amounts reclassified from accumulated other comprehensive (loss) income:
Accumulated Other Comprehensive
(Loss) Income Components		Three months endedSix months endedAssociated Line Item on the
Condensed Consolidated
Statements of Income
June 30,June 30,
2023202220232022
(In thousands)
Investment securities available-for-sale:
Net holding (losses)$(48)$— $(20,531)$— (Loss) on sale of investment securities
Tax benefit13 — 5,513 — Income tax expense
Net of tax$(35)$— $(15,018)$— 
Derivative instruments:
Hedge terminations$(99)$(76)$(175)$(153)Interest expense
Premium amortization(724)(969)(1,460)(1,947)Interest income
Tax benefit223 283 443 569 Income tax expense
Net of tax$(600)$(762)$(1,192)$(1,531)
Defined benefit pension and other postretirement benefit plans:
Actuarial net loss amortization$(2,410)$(411)$(2,952)$(822)Other expense
Tax benefit653 111 800 223 Income tax expense
Net of tax$(1,757)$(300)$(2,152)$(599)

66

Note 10: Regulatory Capital and Restrictions
Capital Requirements
The Holding Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory actions by regulators that could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and/or the regulatory framework for prompt corrective action (such provisions apply to the Bank only), both the Holding Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated pursuant to regulatory directives. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require the Company to maintain minimum 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. CET1 capital consists of common stockholders’ equity less deductions for goodwill and other intangible assets, and certain deferred tax adjustments. Upon adoption of the Basel III Capital Rules, the Company 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 permissible portions of subordinated debt and the ACL.
At June 30, 2023, and December 31, 2022, both the Holding Company and the Bank were classified as well-capitalized. Management believes that no events or changes have occurred subsequent to year-end that would change this designation.
The following tables provides information on the capital ratios for the Holding Company and the Bank:
At June 30, 2023
 
Actual (1)
Minimum RequirementWell Capitalized
(Dollars in thousands)AmountRatioAmountRatioAmountRatio
Webster Financial Corporation
CET1 risk-based capital$5,923,265 10.65 %$2,502,484 4.5 %$3,614,699 6.5 %
Total risk-based capital7,368,290 13.25 4,448,860 8.0 5,561,075 10.0 
Tier 1 risk-based capital6,207,244 11.16 3,336,645 6.0 4,448,860 8.0 
Tier 1 leverage capital6,207,244 8.36 2,969,294 4.0 3,711,617 5.0 
Webster Bank
CET1 risk-based capital$6,780,817 12.21 %$2,498,477 4.5 %$3,608,911 6.5 %
Total risk-based capital7,350,677 13.24 4,441,736 8.0 5,552,170 10.0 
Tier 1 risk-based capital6,780,817 12.21 3,331,302 6.0 4,441,736 8.0 
Tier 1 leverage capital6,780,817 9.14 2,967,209 4.0 3,709,012 5.0 
At December 31, 2022
 
Actual (1)
Minimum RequirementWell Capitalized
(Dollars in thousands)AmountRatioAmountRatioAmountRatio
Webster Financial Corporation
CET1 risk-based capital$5,822,369 10.71 %$2,446,344 4.5 %$3,533,608 6.5 %
Total risk-based capital7,203,029 13.25 4,349,056 8.0 5,436,320 10.0 
Tier 1 risk-based capital6,106,348 11.23 3,261,792 6.0 4,349,056 8.0 
Tier 1 leverage capital6,106,348 8.95 2,730,212 4.0 3,412,765 5.0 
Webster Bank
CET1 risk-based capital$6,661,504 12.28 %$2,442,058 4.5 %$3,527,417 6.5 %
Total risk-based capital7,165,935 13.20 4,341,437 8.0 5,426,796 10.0 
Tier 1 risk-based capital6,661,504 12.28 3,256,078 6.0 4,341,437 8.0 
Tier 1 leverage capital6,661,504 9.77 2,727,476 4.0 3,409,345 5.0 
(1)In accordance with regulatory capital rules, the Company elected an option to delay the estimated impact of the adoption of CECL on its regulatory capital over a two-year deferral period, which ended on January 1, 2022, and a subsequent three-year transition period ending on December 31, 2024. During the three-year transition period, regulatory capital ratios will phase out the aggregate amount of the regulatory capital benefit provided from the delayed CECL adoption in the initial two years. For 2022, 2023, and 2024, the Company is allowed 75%, 50%, and 25%, respectively, of the regulatory capital benefit as of December 31, 2021, with full absorption occurring in 2025.
67

Dividend Restrictions
The Holding Company is dependent upon dividends from the Bank to provide funds for the payment of dividends to stockholders and for other cash requirements. Dividends paid by the Bank are subject to various federal and state regulatory limitations. Express approval by the OCC is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels or if the amount would exceed net income for that year combined with undistributed net income for the preceding two years. The Bank paid the Holding Company $100.0 million and $250.0 million in dividends during the three and six months ended June 30, 2023, respectively, and $125.0 million in dividends during the three and six months ended June 30, 2022, for which no express approval from the OCC was required.
Cash Restrictions
The Bank is required under Federal Reserve regulations to maintain cash reserve balances in the form of vault cash or deposits held at a FRB to ensure that it is able to meet customer demands. The reserve requirement ratio is subject to adjustment as economic conditions warrant. Effective March 26, 2020, the Federal Reserve reset the requirement to zero in order to address liquidity concerns resulting from the COVID-19 pandemic. Pursuant to this action, the Bank has not been required to hold cash reserve balances since that date.
Note 11: Variable Interest Entities
The Company has an investment interest in the following entities that each meet the definition of a variable interest entity. Information regarding the Company's consolidation of variable interest entities can be found within Note 1: Summary of Significant Accounting Policies in the Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
Consolidated
Rabbi Trusts. The Company established a Rabbi Trust to meet its obligations due under the Webster Bank Deferred Compensation Plan for Directors and Officers and to mitigate expense volatility. The funding of the Rabbi Trust and the discontinuation of the Webster Bank Deferred Compensation Plan for Directors and Officers occurred during 2012. In connection with the Sterling merger in 2022, the Company acquired assets held in a separate Rabbi Trust that had been previously established to fund obligations due under the Greater New York Savings Bank Directors' Retirement Plan.
Investments held in the Rabbi Trusts consist primarily of mutual funds that invest in equity and fixed income securities. The Company is considered the primary beneficiary of these Rabbi Trusts as it has the power to direct the activities of the Rabbi Trusts that most significantly impact its economic performance and it has the obligation to absorb losses and/or the right to receive benefits of the Rabbi Trusts that could potentially be significant.
The Rabbi Trusts' assets are included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets. Investment earnings and any changes in fair value are included in Other income on the accompanying Condensed Consolidated Statements of Income. Additional information regarding the Rabbi Trusts' investments can be found within Note 14: Fair Value Measurements.
Non-Consolidated
Low-Income Housing Tax Credit Investments. The Company makes non-marketable equity investments in entities that sponsor affordable housing and other community development projects that qualify for the LIHTC Program pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is not only to assist the Bank in meeting its responsibilities under the CRA, but also to provide a return, primarily through the realization of tax benefits. While the Company's investment in an entity may exceed 50% of its outstanding equity interests, the entity is not consolidated as the Company is not the primary beneficiary. The Company has determined that it is not the primary beneficiary due to its inability to direct the activities that most significantly impact economic performance and the Company does not have the obligation to absorb losses and/or the right to receive benefits. The Company applies the proportional amortization method to subsequently measure its investments in qualified affordable housing projects.
The following table summarizes the Company's LIHTC investments and related unfunded commitments:
(In thousands)June 30, 2023December 31, 2022
Gross investment in LIHTC investments$868,459 $797,453 
Accumulated amortization(105,719)(69,424)
Net investment in LIHTC investments$762,740 $728,029 
Unfunded commitments for LIHTC investments$366,869 $335,959 
68

The aggregate carrying value of the Company's LIHTC investments is included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets, and represents the Company's maximum exposure to loss. The related unfunded commitments are included in Accrued expenses and other liabilities on the accompanying Condensed Consolidated Balance Sheets. There were $68.2 million and $76.7 million of net commitments approved to fund LIHTC investments during the six months ended June 30, 2023, and 2022, respectively.
Webster Statutory Trust. The Company owns all the outstanding common stock of Webster Statutory Trust, a financial vehicle that has issued, and in the future may issue, trust preferred securities. The Company is not the primary beneficiary of Webster Statutory Trust. Webster Statutory Trust's only assets are junior subordinated debentures that are issued by the Company, which were acquired using the proceeds from the issuance of trust preferred securities and common stock. The junior subordinated debentures are included in Long-term debt on the accompanying Condensed Consolidated Balance Sheets, and the related interest expense is included in Long-term debt on the accompanying Condensed Consolidated Statements of Income. Additional information regarding these junior subordinated debentures can be found within Note 8: Borrowings.
Other Non-Marketable Investments. The Company invests in alternative investments comprising interests in non-public entities that cannot be redeemed since the underlying equity is distributed as the investment is liquidated. The ultimate timing and amount of these distributions cannot be predicted with reasonable certainty. For each of these alternative investments that is classified as a variable interest entity, the Company has determined that it is not the primary beneficiary due to its inability to direct the activities that most significantly impact economic performance. The aggregate carrying value of the Company's other non-marketable investments was $170.1 million and $144.9 million at June 30, 2023, and December 31, 2022, respectively, which is included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets, and its maximum exposure to loss, including unfunded commitments, was $293.9 million and $243.9 million, respectively. Additional information regarding the fair value of other non-marketable investments can be found within
Note 14: Fair Value Measurements.
Note 12: Earnings Per Common Share
The following table summarizes the calculation of basic and diluted earnings per common share:
 Three months ended June 30,Six months ended June 30,
(In thousands, except per share data)2023202220232022
Net income$234,968 $182,311 $455,972 $165,564 
Less: Preferred stock dividends4,162 4,163 8,325 7,594 
Net income available to common stockholders230,806 178,148 447,647 157,970 
Less: Earnings allocated to participating securities2,235 1,718 4,073 1,456 
Earnings applicable to common stockholders$228,571 $176,430 $443,574 $156,514 
Weighted-average common shares outstanding - basic172,739 175,845 172,752 161,698 
Add: Effect of dilutive stock options and restricted stock64 50 87 87 
Weighted-average common shares outstanding - diluted172,803 175,895 172,839 161,785 
Basic earnings per common share$1.32 $1.00 $2.57 $0.97 
Diluted earnings per common share1.32 1.00 2.57 0.97 
Earnings per common share is calculated under the two-class method in which all earnings (distributed and undistributed) are allocated to common stock and participating securities based on their respective rights to receive dividends. The Company may grant restricted stock, restricted stock units, non-qualified stock options, incentive stock options, or stock appreciation rights to certain employees and directors under its stock-based compensation programs, which entitle recipients to receive
non-forfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock. These unvested awards meet the definition of participating securities.
Potential common shares from performance-based restricted stock that were not included in the computation of dilutive earnings per common share because they were anti-dilutive under the treasury stock method were 263,674 and 174,840 for the three and six months ended June 30, 2023, respectively, and 379,308 and 298,617 for the three and six months ended
June 30, 2022, respectively.
69

Note 13: Derivative Financial Instruments
Derivative Positions and Offsetting
Derivatives Designated as Hedging Instruments. Interest rate swaps allow the Company to change the fixed or variable nature of an interest rate without the exchange of the underlying notional amount. Certain pay fixed/receive variable interest rate swaps are designated as cash flow hedges to effectively convert variable-rate debt into fixed-rate debt, whereas certain receive fixed/pay variable interest rate swaps are designated as fair value hedges to effectively convert fixed-rate long-term debt into variable-rate debt. Certain purchased options are also designated as cash flow hedges. Purchased options allow the Company to limit the potential adverse impact of variable interest rates by establishing a cap rate or floor rate in exchange for an upfront premium. The purchased options designated as cash flow hedges represent interest rate caps where payment is received from the counterparty if interest rates rise above the cap rate, and interest rate floors where payment is received from the counterparty when interest rates fall below the floor rate.
Derivatives Not Designated as Hedging Instruments. The Company also enters into other derivative transactions to manage economic risks, but does not designate the instruments in hedge relationships. In addition, the Company enters into derivative contracts to accommodate customer needs. Derivative contracts with customers are offset with dealer counterparty transactions structured with matching terms to ensure minimal impact on earnings.
The following tables present the notional amounts and fair values, including accrued interest, of derivative positions:
At June 30, 2023
Asset DerivativesLiability Derivatives
(In thousands)Notional AmountsFair ValueNotional AmountsFair Value
Designated as hedging instruments:
Interest rate derivatives (1)
$1,000,000 $453 $4,750,000 $46,087 
Not designated as hedging instruments:
Interest rate derivatives (1)
7,322,980 375,350 7,329,236 387,261 
Mortgage banking derivatives (2)
798 5 — — 
Other (3)
230,315 153 683,669 348 
Total not designated as hedging instruments7,554,093 375,508 8,012,905 387,609 
Gross derivative instruments, before netting$8,554,093 375,961 $12,762,905 433,696 
Less: Master netting agreements52,273 52,273 
Cash collateral311,774 — 
Total derivative instruments, after netting$11,914 $381,423 
At December 31, 2022
Asset DerivativesLiability Derivatives
(In thousands)Notional AmountsFair ValueNotional AmountsFair Value
Designated as hedging instruments:
Interest rate derivatives (1)
$1,350,000 $1,515 $1,750,000 $9,632 
Not designated as hedging instruments:
Interest rate derivatives (1)
7,024,507 221,225 7,022,844 403,952 
Mortgage banking derivatives (2)
3,283 32 — — 
Other (3)
161,934 134 606,478 915 
Total not designated as hedging instruments7,189,724 221,391 7,629,322 404,867 
Gross derivative instruments, before netting$8,539,724 222,906 $9,379,322 414,499 
Less: Master netting agreements16,129 16,129 
Cash collateral184,095 — 
Total derivative instruments, after netting$22,682 $398,370 
(1)Balances related to clearing houses are presented as a single unit of account. In accordance with their rule books, clearing houses legally characterize variation margin payments as settlement of derivatives rather than collateral against derivative positions. At June 30, 2023, and December 31, 2022, notional amounts of interest rate swaps cleared through clearing houses include $0.6 billion and $2.7 billion for asset derivatives, respectively, and $0.1 billion and zero for liability derivatives, respectively. The related fair values approximate zero.
(2)Notional amounts related to residential loans exclude approved floating rate commitments of $4.1 million and $2.4 million at June 30, 2023, and December 31, 2022, respectively.
(3)Other derivatives include foreign currency forward contracts related to lending arrangements, a Visa equity swap transaction, and risk participation agreements. Notional amounts of risk participation agreements include $201.7 million and $125.6 million for asset derivatives and $648.2 million and $559.2 million for liability derivatives at June 30, 2023, and December 31, 2022, respectively, which have insignificant related fair values.
70

The following tables present fair value positions transitioned from gross to net upon applying counterparty netting agreements:
At June 30, 2023
(In thousands)Gross Amount RecognizedDerivative Offset AmountCash Collateral Received/PledgedNet Amount PresentedAmounts Not Offset
Asset derivatives$370,140 $52,273 $311,774 $6,093 $6,112 
Liability derivatives52,273 52,273 — — 3,386 
At December 31, 2022
(In thousands)Gross Amount RecognizedDerivative Offset AmountCash Collateral Received/PledgedNet Amount PresentedAmounts Not Offset
Asset derivatives$217,246 $16,129 $184,095 $17,022 $17,392 
Liability derivatives16,129 16,129 — — 1,545 
Derivative Activity
The following table summarizes the income statement effect of derivatives designated as hedging instruments:
Recognized InThree months ended June 30,Six months ended June 30,
(In thousands)Net Interest Income2023202220232022
Fair value hedges:
Interest rate derivativesDeposits interest expense$10,928 $— $693 $— 
Hedged itemDeposits interest expense(10,152)— 275 — 
Net recognized on fair value hedges$(776)$— $(968)$— 
Cash flow hedges:
Interest rate derivativesLong-term debt interest expense$99 $77 $175 $153 
Interest rate derivativesInterest and fees on loans and leases(724)1,244 (1,460)3,803 
Net recognized on cash flow hedges$(823)$1,167 $(1,635)$3,650 
The following table summarizes information related to fair value hedging adjustments:
Condensed Consolidated Balance Sheet Line Item in Which Hedged Item is LocatedCarrying Amount of Hedged ItemCumulative Amount of Fair Value Hedging Adjustment Included in Carrying Amount
(In thousands)At June 30,
2023		At December 31,
2022		At June 30,
2023		At December 31,
2022
Deposits$400,275 $— $275 $— 
Long-term debt (1)
330,781 333,458 30,781 33,458 
(1)The Company de-designated its fair value hedging relationship on its long-term debt in 2020. The basis adjustment included in the carrying amount is being amortized into interest expense over the remaining life of the long-term debt.
The following table summarizes the income statement effect of derivatives not designated as hedging instruments:
Recognized InThree months ended June 30,Six months ended June 30,
(In thousands)Non-interest Income2023202220232022
Interest rate derivativesOther income$(194)$12,814 $(3,881)$19,259 
Mortgage banking derivativesMortgage banking activities(12)(29)(28)(78)
OtherOther income(921)1,027 (1,656)1,424 
Total not designated as hedging instruments$(1,127)$13,812 $(5,565)$20,605 
Time-value premiums, which are amortized on a straight-line basis, are excluded from the assessment of hedge effectiveness for purchased options designated as cash flow hedges. At June 30, 2023, the remaining unamortized balance of time-value premiums was $1.4 million. Over the next twelve months, an estimated decrease to interest income of $34.4 million will be reclassified from AOCI relating to cash flow hedge gain/loss, and an estimated increase to interest expense of $0.2 million will be reclassified from AOCI relating to cash flow hedge terminations. At June 30, 2023, the remaining unamortized loss on terminated cash flow hedges was $0.2 million. The maximum length of time over which forecasted transactions are hedged is 4.7 years. Additional information regarding cash flow hedge activity impacting AOCI and the related amounts reclassified to net income can be found within Note 9: Accumulated Other Comprehensive (Loss) Income, Net of Tax.

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Derivative Exposure. At June 30, 2023, the Company had $4.6 million in initial margin collateral posted at clearing houses. In addition, $315.2 million of cash collateral received is included in Cash and due from banks on the accompanying Condensed Consolidated Balance Sheets. The Company regularly evaluates the credit risk of its derivative customers, taking into account the likelihood of default, net exposures, and remaining contractual life, among other related factors. Credit risk exposure is mitigated as transactions with customers are generally secured by the same collateral of the underlying transactions. Current net credit exposure relating to derivatives with the Bank's customers was $5.8 million at June 30, 2023. In addition, the Company monitors potential future exposure, representing its best estimate of exposure to remaining contractual maturity. The potential future exposure relating to derivatives with the Bank's customers totaled $101.8 million at June 30, 2023. The Company has incorporated a valuation adjustment to reflect non-performance risk in the fair value measurement of its derivatives, which totaled $6.6 million and $8.4 million at June 30, 2023, and December 31, 2022, respectively. Various factors impact changes in the valuation adjustment over time, such as changes in the credit spreads of the contracted parties, and changes in market rates and volatilities, which affect the total expected exposure of the derivative instruments.
Note 14: Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The determination of fair value may require the use of estimates when quoted market prices are not available. Fair value estimates made at a specific point in time are based on management’s judgments regarding future expected losses, current economic conditions, the risk characteristics of each financial instrument, and other subjective factors that cannot be determined with precision.
The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels within the fair value hierarchy are as follows:
•Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date.
•Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, rate volatility, prepayment speeds, and credit ratings), or inputs that are derived principally from or corroborated by market data, correlation, or other means.
•Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. This includes certain pricing models or other similar techniques that require significant management judgment or estimation.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Available-for-Sale Securities. When unadjusted quoted prices are available in an active market, the Company classifies its available-for-sale investment securities within Level 1 of the fair value hierarchy. U.S. Treasury notes have a readily determinable fair value, and accordingly, are classified within Level 1 of the fair value hierarchy.
When quoted market prices are not available, the Company employs an independent pricing service that utilizes matrix pricing to calculate fair value. These fair value measurements consider observable data, such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayments speeds, credit information, and the respective terms and conditions for debt instruments. Management maintains procedures to monitor the pricing service's results and has a process in place to challenge their valuations and methodologies that appear unusual or unexpected. Government agency debentures, Municipal bonds and notes, Agency CMO, Agency MBS, Agency CMBS, CMBS, CLO, Corporate debt, Private label MBS, and Other available-for-sale securities are classified within Level 2 of the fair value hierarchy.
Derivative Instruments. The fair values presented for derivative instruments include any accrued interest. Foreign exchange contracts are valued based on unadjusted quoted prices in active markets, and accordingly, are classified within Level 1 of the fair value hierarchy. Except for mortgage banking derivatives, all other derivative instruments are valued using third-party valuation software, which considers the present value of cash flows discounted using observable forward rate assumptions. The resulting fair value is then validated against valuations performed by independent third parties. These derivative instruments are classified within Level 2 of the fair value hierarchy.
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Mortgage Banking Derivatives. The Company uses forward sales of mortgage loans and mortgage-backed securities to manage the risk of loss associated with its mortgage loan commitments and mortgage loans held for sale. Prior to closing and funding certain single-family residential mortgage loans, an interest rate lock commitment is generally extended to the borrower. During this in-between time period, the Company is subject to the risk that market interest rates may change. If rates rise, investors generally will pay less to purchase mortgage loans, which would result in a reduction in the gain on sale of the loans, or possibly a loss. In an effort to mitigate this risk, forward delivery sales commitments are established in which the Company agrees to either deliver whole mortgage loans to various investors or issue mortgage-backed securities. The fair value of mortgage banking derivatives is determined based on current market prices for similar assets in the secondary market. Accordingly, mortgage banking derivatives are classified within Level 2 of the fair value hierarchy.
Originated Loans Held For Sale.The Company has elected to measure originated loans held for sale at fair value under the fair value option per ASC Topic 825, Financial Instruments. Electing to measure originated loans held for sale at fair value reduces certain timing differences and better reflects the price the Company would expect to receive from the sale of these loans. The fair value of originated loans held for sale is based on quoted market prices of similar loans sold in conjunction with securitization transactions. Accordingly, originated loans held for sale are classified within Level 2 of the fair value hierarchy.
The following table compares the fair value to the unpaid principal balance of originated loans held for sale:
At June 30, 2023At December 31, 2022
(In thousands)Fair ValueUnpaid Principal BalanceDifferenceFair ValueUnpaid Principal BalanceDifference
Originated loans held for sale$1,800 $1,322 $478 $1,991 $1,631 $360 
Rabbi Trust Investments.Investments held in each of the Company's Rabbi Trusts consist primarily of mutual funds that invest in equity and fixed income securities. Shares of these mutual funds are valued based on the NAV as reported by the trustee of the funds, which represents quoted prices in active markets. The Company has elected to measure the Rabbi Trusts' investments at fair value. Accordingly, the Rabbi Trusts' investments are classified within Level 1 of the fair value hierarchy. At June 30, 2023, and December 31, 2022, the total cost basis of the investments held in the Rabbi Trusts was $10.2 million and $10.0 million, respectively.
Alternative Investments. Equity investments have a readily determinable fair value when unadjusted quoted prices are available in an active market for identical assets. Accordingly, these alternative investments are classified within Level 1 of the fair value hierarchy. At June 30, 2023, and December 31, 2022, equity investments with a readily determinable fair value had a total carrying amount of $0.6 million and $0.4 million, respectively, with no remaining unfunded commitment. During the three and six months ended June 30, 2023, there were total write-ups in fair value of $0.1 million and $0.2 million, respectively, associated with these alternative investments.
Equity investments that do not have a readily determinable fair value may qualify for the NAV practical expedient if they meet certain requirements. The Company's alternative investments measured at NAV consist of investments in non-public entities that cannot be redeemed since investments are distributed as the underlying equity is liquidated. Alternative investments measured at NAV are not classified within the fair value hierarchy. At June 30, 2023, and December 31, 2022, these alternative investments had a total carrying amount of $28.5 million and $89.2 million, respectively, and a remaining unfunded commitment of $27.0 million and $82.7 million, respectively.
Contingent Consideration. The Company recorded $16.0 million of contingent consideration at fair value related to two earn-out agreements associated with the acquisition of interLINK on January 11, 2023. The terms of the purchase agreement specified that the seller would receive earn-outs based on the ability of the Company to: (i) re-sign the existing broker dealers under contract, and (ii) generate $2.5 billion in new broker dealer deposit programs within three years of the acquisition date. The estimated fair values of the contingent consideration liabilities are measured on a recurring basis and determined using an income approach considering management’s evaluation of the probability of achievement, forecasted achievement date (payment term), and a discount rate equivalent to the counterparty cost of debt. These significant inputs, which are the responsibility of management and were initially calculated with the assistance of a third-party valuation specialist, are not observable and accordingly, are classified within Level 3 of the fair value hierarchy.
The following table summarizes the unobservable inputs used to derive the estimated fair value of the Company’s contingent consideration liabilities at June 30, 2023 (dollars in thousands):
AgreementMaximum AmountProbability of AchievementPayment Term
(in years)		Discount RateFair Value
(i) Re-sign broker dealers$4,82699.0 %0.225.50 %$4,798
(ii) Deposit program growth$12,500100.0 %1.975.50 %$11,241

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Contingent consideration liabilities are included within Accrued expenses and other liabilities on the accompanying Condensed Consolidated Balance Sheets. Any fair value adjustments to contingent consideration liabilities are included in Other expense on the accompanying Condensed Consolidated Statements of Income.
The following tables summarize the fair values of assets and liabilities measured at fair value on a recurring basis:
 At June 30, 2023
(In thousands)Level 1Level 2Level 3Total
Financial Assets:
Available-for-sale securities:
U.S. Treasury notes$384,067 $— $— $384,067 
Government agency debentures— 261,101 — 261,101 
Municipal bonds and notes— 1,604,150 — 1,604,150 
Agency CMO— 53,360 — 53,360 
Agency MBS— 2,184,907 — 2,184,907 
Agency CMBS— 1,734,922 — 1,734,922 
CMBS— 876,119 — 876,119 
Corporate debt— 608,759 — 608,759 
Private label MBS— 43,050 — 43,050 
Other— 8,906 — 8,906 
Total available-for-sale securities384,067 7,375,274 — 7,759,341 
Gross derivative instruments, before netting (1)
67 375,894 — 375,961 
Originated loans held for sale— 1,800 — 1,800 
Investments held in Rabbi Trusts12,347 — — 12,347 
Alternative investments (2)
567 — — 29,023 
Total financial assets$397,048 $7,752,968 $— $8,178,472 
Financial Liabilities:
Gross derivative instruments, before netting (1)
$262 $433,434 $— $433,696 
Contingent consideration— — 16,039 16,039 
Total financial liabilities$262 $433,434 $16,039 $449,735 
 At December 31, 2022
(In thousands)Level 1Level 2Level 3Total
Financial Assets:
Available-for-sale securities:
U.S. Treasury notes$717,040 $— $— $717,040 
Government agency debentures— 258,374 — 258,374 
Municipal bonds and notes— 1,633,202 — 1,633,202 
Agency CMO— 59,965 — 59,965 
Agency MBS— 2,158,024 — 2,158,024 
Agency CMBS— 1,406,486 — 1,406,486 
CMBS— 896,640 — 896,640 
CLO— 2,107 — 2,107 
Corporate debt— 704,412 — 704,412 
Private label MBS— 44,249 — 44,249 
Other— 12,198 — 12,198 
Total available-for-sale securities717,040 7,175,657 — 7,892,697 
Gross derivative instruments, before netting (1)
79 222,827 — 222,906 
Originated loans held for sale— 1,991 — 1,991 
Investments held in Rabbi Trusts12,103 — — 12,103 
Alternative investments (2)
430 — — 89,678 
Total financial assets$729,652 $7,400,475 $— $8,219,375 
Financial Liabilities:
Gross derivative instruments, before netting (1)
$843 $413,656 $— $414,499 
(1)Additional information regarding the impact of netting derivative assets and derivative liabilities, as well as the impact from offsetting cash collateral paid to the same derivative counterparties, can be found within Note 13: Derivative Financial Instruments.
(2)Certain alternative investments are recorded at NAV. Assets measured at NAV are not classified within the fair value hierarchy.
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Assets Measured at Fair Value on a Non-Recurring Basis
The Company measures certain assets at fair value on a non-recurring basis. The following is a description of the valuation methodologies used for assets measured at fair value on a non-recurring basis.
Alternative Investments. The measurement alternative has been elected for alternative investments without readily determinable fair values that do not qualify for the NAV practical expedient. The measurement alternative requires investments to be measured at cost minus impairment, if any, plus or minus adjustments resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. Accordingly, these alternative investments are classified within Level 2 of the fair value hierarchy. At June 30, 2023, and December 31, 2022, the carrying amount of these alternative investments was $48.4 million and $42.8 million, respectively, of which $1.9 million and $5.9 million, respectively, were considered to be measured at fair value. During the three and six months ended June 30, 2023, there were $0.3 million in total write-ups due to inflation.observable price changes, and zero write-downs due to impairment.
Unlike most industrialLoans Transferred to Held for Sale. Once a decision has been made to sell loans not previously classified as held for sale, these loans are transferred into the held for sale category and carried at the lower of cost or fair value, less estimated costs to sell. At the time of transfer into held for sale classification, any amount by which cost exceeds fair value is accounted for as a valuation allowance. This activity generally pertains to loans with observable inputs, and therefore, are classified within Level 2 of the fair value hierarchy. However, should these loans include adjustments for changes in loan characteristics based on unobservable inputs, the loans would then be classified within Level 3 of the fair value hierarchy. At June 30, 2023, and December 31, 2022, there were $9.2 million and zero loans that were transferred to held for sale on the Condensed Consolidated Balance Sheet.
Collateral Dependent Loans and Leases. Loans and leases for which repayment is substantially expected to be provided through the operation or sale of collateral are considered collateral dependent, and are valued based on the estimated fair value of the collateral, less estimated costs to sell at the reporting date, using customized discounting criteria. Accordingly, collateral dependent loans and leases are classified within Level 3 of the fair value hierarchy.
Other Real Estate Owned and Repossessed Assets. OREO and repossessed assets are held at the lower of cost or fair value and are considered to be measured at fair value when recorded below cost. The fair value of OREO is calculated using independent appraisals or internal valuation methods, less estimated selling costs, and may consider available pricing guides, auction results, and price opinions. Certain repossessed assets may also require assumptions about factors that are not observable in an active market when determining fair value. Accordingly, OREO and repossessed assets are classified within Level 3 of the fair value hierarchy. At June 30, 2023, and December 31, 2022, the total book value of OREO and repossessed assets was $3.3 million and $2.3 million, respectively. In addition, the amortized cost of consumer loans secured by residential real estate property that were in process of foreclosure at June 30, 2023, was $21.5 million.
Estimated Fair Values of Financial Instruments and Mortgage Servicing Assets
The Company is required to disclose the estimated fair values of certain financial instruments and mortgage servicing rights. The following is a description of the valuation methodologies used to estimate fair value for those assets and liabilities.
Cash and Cash Equivalents.Given the short time frame to maturity, the carrying amount of cash and cash equivalents, which comprises cash and due from banks and interest-bearing deposits, approximates fair value. Cash and cash equivalents are classified within Level 1 of the fair value hierarchy.
Held-to-Maturity Securities. When quoted market prices are not available, the Company employs an independent pricing service that utilizes matrix pricing to calculate fair value. These fair value measurements consider observable data, such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the respective terms and conditions for debt instruments. Management maintains procedures to monitor the pricing service's results and has a process in place to challenge their valuations and methodologies that appear unusual or unexpected. Held-to-maturity securities, which include Agency CMO, Agency MBS, Agency CMBS, Municipal bonds and notes, and CMBS, are classified within Level 2 of the fair value hierarchy.
Loans and Leases, net. Except for collateral dependent loans and leases, the fair value of loans and leases held for investment is estimated using a discounted cash flow methodology, based on future prepayments and market interest rates inclusive of an illiquidity premium for comparable loans and leases. The associated cash flows are then adjusted for associated credit risks and other potential losses, as appropriate. Loans and leases are classified within Level 3 of the fair value hierarchy.
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Mortgage Servicing Rights. Mortgage servicing rights are initially measured at fair value and subsequently measured using the amortization method. The Company assesses mortgage servicing rights for impairment each quarter and establishes or adjusts the valuation allowance to the extent that amortized cost exceeds the estimated fair market value. Fair value is calculated as the present value of estimated future net servicing income and relies on market based assumptions for loan prepayment speeds, servicing costs, discount rates, and other economic factors. Accordingly, the primary risk inherent in valuing mortgage servicing rights is the impact of fluctuating interest rates on the related servicing revenue stream. Mortgage servicing rights are classified within Level 3 of the fair value hierarchy.
Deposit Liabilities. The fair value of deposit liabilities, which comprises demand deposits, interest-bearing checking, savings, health savings, and money market accounts, reflects the amount payable on demand at the reporting date. Deposit liabilities are classified within Level 2 of the fair value hierarchy.
Time Deposits. The fair value of fixed-maturity certificates of deposit is estimated using rates that are currently offered for deposits with similar remaining maturities. Time deposits are classified within Level 2 of the fair value hierarchy.
Securities Sold Under Agreements to Repurchase and Other Borrowings. The fair value of securities sold under agreements to repurchase and other borrowings that mature within 90 days approximates their carrying value. The fair value of securities sold under agreements to repurchase and other borrowings that mature after 90 days is estimated using a discounted cash flow methodology based on current market rates and adjusted for associated credit risks, as appropriate. Securities sold under agreements to repurchase and other borrowings are classified within Level 2 of the fair value hierarchy.
Federal Home Loan Bank Advances and Long-Term Debt. The fair value of FHLB advances and long-term debt is estimated using a discounted cash flow methodology in which discount rates are matched with the time period of the expected cash flows and adjusted for associated credit risks, as appropriate. FHLB advances and long-term debt are classified within Level 2 of the fair value hierarchy.
The following table summarizes the carrying amounts, estimated fair values, and classifications within the fair value hierarchy of selected financial instruments and mortgage servicing rights:
 At June 30, 2023At December 31, 2022
(In thousands)Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
Assets:
Level 1
Cash and cash equivalents$1,360,759 $1,360,759 $839,943 $839,943 
Level 2
Held-to-maturity investment securities6,943,784 6,066,682 6,564,697 5,761,453 
Level 3
Loans and leases, net50,997,137 49,027,570 49,169,685 47,604,463 
Mortgage servicing assets8,858 25,520 9,515 27,043 
Liabilities:
Level 2
Deposit liabilities$51,461,474 $51,461,474 $49,893,391 $49,893,391 
Time deposits7,286,058 7,189,837 4,160,949 4,091,979 
Securities sold under agreements to repurchase and other borrowings243,580 243,548 1,151,830 1,151,797 
FHLB advances4,310,371 4,310,259 5,460,552 5,459,218 
Long-term debt (1)
1,052,258 971,751 1,073,128 1,001,779 
(1)Any unamortized premiums/discounts, debt issuance costs, or basis adjustments to long-term debt, as applicable, are excluded from the determination of fair value.
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Note 15: Retirement Benefit Plans
Defined Benefit Pension and Other Postretirement Benefits
The following tables summarize the components of net periodic benefit cost (income):
Three months ended June 30,
20232022
(In thousands)PensionSERPOPEBPensionSERPOPEB
Service cost$— $— $7 $— $— $9 
Interest cost2,211 47 263 1,380 17 213 
Expected return on plan assets(2,699)— — (3,668)— — 
Amortization of actuarial loss (gain)1,216 2 (677)423 6 (19)
Net periodic benefit cost (income)$728 $49 $(407)$(1,865)$23 $203 
Six months ended June 30,
20232022
(In thousands)PensionSERPOPEBPensionSERPOPEB
Service cost$— $— $14 $— $— $15 
Interest cost4,422 114 643 2,757 32 357 
Expected return on plan assets(5,398)— — (7,337)— — 
Amortization of actuarial loss (gain)2,432 3 (1,352)845 13 (37)
Net periodic benefit cost (income)$1,456 $117 $(695)$(3,735)$45 $335 
The components of net periodic benefit cost (income) are included in Other expense on the accompanying Condensed Consolidated Statements of Income. The weighted-average expected long-term rate of return on plan assets for the three and six months ended June 30, 2023, was 5.50%, as determined at the beginning of the year.
Note 16: Segment Reporting
The Company's operations are organized into three reportable segments that represent its primary businesses: Commercial Banking, HSA Bank, and Consumer Banking. These segments reflect how executive management responsibilities are assigned, how discrete financial information is evaluated, the type of customer served, and how products and services are provided. Certain Treasury activities, including the operations of interLINK, along with the amounts required to reconcile profitability metrics to those reported in accordance with GAAP, are included in the Corporate and Reconciling category.
In connection with the acquisition of interLINK on January 11, 2023, the $143.2 million of goodwill recorded was allocated entirely to Commercial Banking. In addition, as previously discussed in Note 2: Mergers and Acquisitions and
Note 6: Goodwill and Other Intangible Assets, the allocation of the purchase price for both the Sterling merger and Bend acquisition was final as of March 31, 2023. As a result, of the total $1.9 billion in goodwill recorded in connection with the Sterling merger, $1.7 billion and $0.2 billion was allocated to Commercial Banking and Consumer Banking, respectively. The $35.7 million of goodwill recorded in connection with the Bend acquisition was allocated entirely to HSA Bank.
Segment Reporting Methodology
The Company uses an internal profitability reporting system to generate information by reportable segment, which is based on a series of management estimates for funds transfer pricing, and allocations for non-interest expense, provision for credit losses, income taxes, and equity capital. These estimates and allocations, certain of which are subjective in nature, are periodically reviewed and refined. Changes in estimates and allocations that affect the results of any reportable segment do not affect the consolidated financial position or results of operations of the Company as a whole. The full profitability measurement reports, which are prepared for each reportable segment, reflect non-GAAP reporting methodologies. The differences between full profitability and GAAP results are reconciled in the Corporate and Reconciling category.
The Company allocates interest income and interest expense to each business through an internal matched maturity FTP process. The goal of the FTP allocation is to encourage loan and deposit growth consistent with the Company’s overall profitability objectives. The FTP process considers the specific interest rate risk and liquidity risk of financial instruments and other assets and liabilities in each line of business. Loans are assigned an FTP rate for funds used and deposits are assigned an FTP rate for funds provided. The allocation considers the origination date and the earlier of the maturity date or the repricing date of a financial instrument to assign an FTP rate for loans and deposits originated each day. The FTP process transfers the corporate interest rate risk exposure to the Treasury function included within the Corporate and Reconciling category where such exposures are centrally managed.
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The Company allocates a majority of non-interest expense to each reportable segment using an activity and driver-based costing process. Costs, including shared services and back-office support areas, are analyzed, pooled by process, and assigned to the appropriate reportable segment. The combination of direct revenue, direct expenses, funds transfer pricing, and allocations of non-interest expense produces PPNR, which is the basis the segments are reviewed by executive management. The Company also allocates the provision for credit losses to each reportable segment based on management's estimate of the expected loss content in each of the specific loan and lease portfolios. The ACL on loans and leases is included in total assets within the Corporate and Reconciling category. Business development expenses, such as merger-related and strategic initiatives costs, are also generally included in the Corporate and Reconciling category.
The following tables present balance sheet information, including the appropriate allocations, for the Company's reportable segments and the Corporate and Reconciling category:
At June 30, 2023
(In thousands)Commercial BankingHSA BankConsumer BankingCorporate and ReconcilingConsolidated Total
Goodwill$2,029,204 $57,485 $544,776 $— $2,631,465 
Total assets46,426,949 120,295 10,725,344 16,765,655 74,038,243 
At December 31, 2022
(In thousands)Commercial BankingHSA BankConsumer BankingCorporate and ReconcilingConsolidated Total
Goodwill$1,904,291 $57,779 $552,034 $— $2,514,104 
Total assets44,380,582 122,729 10,625,334 16,148,876 71,277,521 
The following tables present operating results, including the appropriate allocations, for the Company’s reportable segments and the Corporate and Reconciling category:
 Three months ended June 30, 2023
(In thousands)Commercial BankingHSA BankConsumer BankingCorporate and ReconcilingConsolidated Total
Net interest income$383,606 $75,421 $204,455 $(79,653)$583,829 
Non-interest income32,255 23,023 28,877 5,219 89,374 
Non-interest expense110,582 42,643 108,880 81,984 344,089 
Pre-tax, pre-provision net revenue305,279 55,801 124,452 (156,418)329,114 
Provision for credit losses34,480 — 769 (3,751)31,498 
Income before income taxes270,799 55,801 123,683 (152,667)297,616 
Income tax expense67,971 15,066 32,652 (53,041)62,648 
Net income$202,828 $40,735 $91,031 $(99,626)$234,968 
 Three months ended June 30, 2022
(In thousands)Commercial BankingHSA BankConsumer BankingCorporate and ReconcilingConsolidated Total
Net interest income$333,421 $49,558 $179,287 $(75,606)$486,660 
Non-interest income49,430 26,552 30,798 14,153 120,933 
Non-interest expense102,720 37,540 107,366 110,601 358,227 
Pre-tax, pre-provision net revenue280,131 38,570 102,719 (172,054)249,366 
Provision (benefit) for credit losses22,782 — (11,053)514 12,243 
Income before income taxes257,349 38,570 113,772 (172,568)237,123 
Income tax expense64,337 10,337 29,581 (49,443)54,812 
Net income$193,012 $28,233 $84,191 $(123,125)$182,311 
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Six months ended June 30, 2023
(In thousands)Commercial BankingHSA BankConsumer BankingCorporate and ReconcilingConsolidated Total
Net interest income$767,920 $147,151 $415,038 $(150,997)$1,179,112 
Non-interest income67,652 47,090 54,836 (9,438)160,140 
Non-interest expense219,091 86,343 215,759 155,363 $676,556 
Pre-tax, pre-provision net revenue616,481 $107,898 254,115 (315,798)662,696 
Provision for credit losses70,517 — 2,553 5,177 78,247 
Income before income tax expense545,964 107,898 251,562 (320,975)584,449 
Income tax expense137,037 29,132 66,412 (104,104)128,477 
Net income$408,927 $78,766 $185,150 $(216,871)$455,972 
Six months ended June 30, 2022
(In thousands)Commercial BankingHSA BankConsumer BankingCorporate and ReconcilingConsolidated Total
Net interest income$620,490 $94,135 $315,964 $(149,681)$880,908 
Non-interest income88,173 53,510 58,699 24,586 224,968 
Non-interest expense191,960 73,949 202,876 249,227 718,012 
Pre-tax, pre-provision net revenue516,703 73,696 171,787 (374,322)387,864 
Provision (benefit) for credit losses204,713 — (3,917)292 201,088 
Income before income tax expense311,990 73,696 175,704 (374,614)186,776 
Income tax expense74,392 19,751 45,634 (118,565)21,212 
Net income$237,598 $53,945 $130,070 $(256,049)$165,564 
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Note 17: Revenue from Contracts with Customers
The following tables summarize revenues recognized in accordance with ASC Topic 606, Revenue from Contracts with Customers. These disaggregated amounts, together with sources of other non-interest income that are subject to other GAAP topics, have been reconciled to non-interest income by reportable segment as presented within Note 16: Segment Reporting.
Three months ended June 30, 2023
(In thousands)Commercial BankingHSA BankConsumer BankingCorporate and
Reconciling		Consolidated
Total
Non-interest Income:
Deposit service fees$5,582 $20,986 $19,181 $(331)$45,418 
Loan and lease related fees (1)
4,323 — — — 4,323 
Wealth and investment services (2)
2,873 — 4,525 (7)7,391 
Other income— 2,037 1,198 1,122 4,357 
Revenue from contracts with customers12,778 23,023 24,904 784 61,489 
Other sources of non-interest income19,477 — 3,973 4,435 27,885 
Total non-interest income$32,255 $23,023 $28,877 $5,219 $89,374 
Three months ended June 30, 2022
(In thousands)Commercial BankingHSA BankConsumer BankingCorporate and
Reconciling		Consolidated
Total
Non-interest Income:
Deposit service fees$7,647 $24,949 $18,366 $423 $51,385 
Loan and lease related fees (1)
6,077 — — — 6,077 
Wealth and investment services2,770 — 8,479 (5)11,244 
Other income— 1,603 285 — 1,888 
Revenue from contracts with customers16,494 26,552 27,130 418 70,594 
Other sources of non-interest income32,936 — 3,668 13,735 50,339 
Total non-interest income$49,430 $26,552 $30,798 $14,153 $120,933 
Six months ended June 30, 2023
(In thousands)Commercial BankingHSA BankConsumer BankingCorporate and
Reconciling		Consolidated
Total
Non-interest Income:
Deposit service fees$10,972 $43,078 $37,205 $(401)$90,854 
Loan and lease related fees (1)
8,750 — — — 8,750 
Wealth and investment services (2)
5,640 — 8,353 (15)13,978 
Other income— 4,012 1,556 2,054 7,622 
Revenue from contracts with customers25,362 47,090 47,114 1,638 121,204 
Other sources of non-interest income42,290 — 7,722 (11,076)38,936 
Total non-interest income$67,652 $47,090 $54,836 $(9,438)$160,140 
Six months ended June 30, 2022
(In thousands)Commercial BankingHSA BankConsumer BankingCorporate and
Reconciling		Consolidated
Total
Non-interest Income:
Deposit service fees$14,332 $50,083 $34,329 $468 $99,212 
Loan and lease related fees (1)
10,575 — — — 10,575 
Wealth and investment services5,904 — 15,950 (13)21,841 
Other income— 3,427 670 — 4,097 
Revenue from contracts with customers30,811 53,510 50,949 455 135,725 
Other sources of non-interest income57,362 — 7,750 24,131 89,243 
Total non-interest income$88,173 $53,510 $58,699 $24,586 $224,968 
(1)A portion of loan and lease related fees comprises income generated from factored receivables and payroll financing activities that is within the scope of ASC Topic 606.
(2)Effective as of the fourth quarter of 2022, the wealth and investment services revenue stream was impacted by the restructuring of a process in which the Company offers brokerage, investment advisory, and certain insurance-related services to customers. The staff providing these services, who had previously been employees of the Bank, are now employees of a third-party service provider. As a result, the Company now recognizes income from this program on a net basis, which thereby reduces gross reported wealth and investment services non-interest income and the related compensation and benefits non-interest expense on the accompanying Condensed Consolidated Statements of Income.
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Contracts with customers did not generate significant contract assets and liabilities at June 30, 2023, or December 31, 2022.
Major Revenue Streams
Deposit service fees consist of fees earned from commercial and consumer customer deposit accounts, such as account maintenance and cash management/analysis fees, as well as other transactional service charges (i.e., insufficient funds, wire transfers, stop payment fees, etc.). Performance obligations for account maintenance services and cash management/analysis fees are satisfied on a monthly basis at a fixed transaction price, whereas performance obligations for other deposit service charges that result from various customer-initiated transactions are satisfied at a point-in-time when the service is rendered. Payment for deposit service fees is generally received immediately or in the following month through a direct charge to the customers' accounts. Certain commercial customer contracts include credit clauses, whereby the Company will grant credit upon the customer meeting pre-determined conditions, which can be used to offset fees. On occasion, the Company may also waive certain fees. Fee waivers are recognized as a reduction to revenue in the period the waiver is granted to the customer.
The deposit service fees revenue stream also includes interchange fees earned from debit and credit card transactions. The transaction price for interchange services is based on the transaction value and the interchange rate set by the card network. Performance obligations for interchange fees are satisfied at a point-in-time when the cardholder's transaction is authorized and settled. Payment for interchange fees is generally received immediately or in the following month.
Factored receivables non-interest income consists of fees earned from accounts receivable management services. The Company factors accounts receivable, with and without recourse, for customers whereby the Company purchases their accounts receivable at a discount and assumes the risk, as applicable, and ownership of the assets through direct cash receipt from the end consumer. Factoring services are performed in exchange for a non-refundable fee at a transaction price based on a percentage of the gross invoice amount of each receivable purchased, subject to a minimum required amount. The performance obligation for factoring services is generally satisfied at a point-in-time when the receivable is assigned to the Company. However, should the commission earned not meet or exceed the minimum required annual amount, the difference between that and the actual amount is recognized at the end of the contract term. Other fees associated with factoring receivables may include wire transfer and technology fees, field examination fees, and Uniform Commercial Code fees, where the performance obligations are satisfied at a point-in-time when the services are rendered. Payment from the customer for factoring services is generally received immediately or within the following month.
Payroll finance non-interest income consists of fees earned from performing payroll financing and business process outsourcing services, including full back-office technology and tax accounting services, along with payroll preparation, making payroll tax payments, invoice billings, and collections for independently-owned temporary staffing companies substantiallynationwide. Performance obligations for payroll finance and business processing activities are either satisfied upon completion of the support services or as payroll remittances are made on behalf of customers to fund their employee payroll, which generally occurs on a weekly basis. The agreed-upon transaction price is based on a fixed-percentage per the terms of the contract, which could be subject to a hold-back reserve to provide for any balances that are assessed to be at risk of collection. When the Company collects on amounts due from end consumers on behalf of its customers and at the time of financing payroll, the Company retains the agreed-upon transaction price payable for the performance of its services and remits an amount to the customer net of any advances and payroll tax withholdings, as applicable.
Wealth and investment services consist of fees earned from asset management, trust administration, and investment advisory services, and through facilitating securities transactions. Performance obligations for asset management and trust administration services are satisfied on a monthly or quarterly basis at a transaction price based on a percentage of the period-end market value of the assets under administration. Payment for asset management and trust administration services is generally received a few days after period-end through a direct charge to the customers' accounts. Performance obligations for investment advisory services are satisfied over the period in which the services are provided through a time-based measurement of progress, and the agreed-upon transaction price with the customer varies depending on the nature of the services performed. Performance obligations for facilitating securities transactions are satisfied at a point-in-time when the securities are sold at a transaction price that is based on a percentage of the contract value. Payment for both investment advisory services and facilitating securities transactions may be received in advance of the service, but generally is received immediately or in the following period, in arrears.
Note 18: Commitments and Contingencies
Credit-Related Financial Instruments
In the normal course of business, the Company offers financial instruments with off-balance sheet risk to meet the financing needs of its customers. These transactions include commitments to extend credit, standby letters of credit, and commercial letters of credit, which involve, to varying degrees, elements of credit risk.
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The following table summarizes the outstanding amounts of credit-related financial instruments with off-balance sheet risk:
(In thousands)At June 30,
2023		At December 31, 2022
Commitments to extend credit$10,706,088 $11,237,496 
Standby letters of credit426,658 380,655 
Commercial letters of credit54,196 53,512 
Total credit-related financial instruments with off-balance sheet risk$11,186,942 $11,671,663 
The Company enters into contractual commitments to extend credit to its customers (i.e., revolving credit arrangements, term loan commitments, and short-term borrowing agreements), generally with fixed expiration dates or other termination clauses and that require payment of a fee. Substantially all of the assetsCompany's commitments to extend credit are contingent upon its customers maintaining specific credit standards at the time of loan funding, and liabilitiesare often secured by real estate collateral. Since the majority of the Company's commitments typically expire without being funded, the total contractual amount does not necessarily represent the Company's future payment requirements.
Standby letters of credit are written conditional commitments issued by the Company to guarantee its customers' performance to a banking institutionthird party. In the event the customer does not perform in accordance with the terms of its agreement with a third-party, the Company would be required to fund the commitment. The contractual amount of each standby letter of credit represents the maximum amount of potential future payments the Company could be required to make. Historically, the majority of the Company's standby letters of credit expire without being funded. However, if the commitment were funded, the Company has recourse against the customer. The Company's standby letter of credit agreements are monetary in nature.often secured by cash or other collateral.
Commercial letters of credit are issued to finance either domestic or foreign customer trade arrangements. As a result, interest ratesgeneral rule, drafts are committed to be drawn when the goods underlying the transaction are in transit. Similar to standby letters of credit, the Company's commercial letter of credit agreements are often secured by the underlying goods subject to trade.
Allowance for Credit Losses on Unfunded Loan Commitments
An ACL is recorded under the CECL methodology and included in Accrued expenses and other liabilities on the accompanying Condensed Consolidated Balance Sheets to provide for the unused portion of commitments to lend that are not unconditionally cancellable by the Company. At June 30, 2023, and December 31, 2022, the ACL on unfunded loan commitments totaled $22.4 million and $27.7 million, respectively.
Litigation
The Company is subject to certain legal proceedings and unasserted claims and assessments in the ordinary course of business. Legal contingencies are evaluated based on information currently available, including advice of counsel and assessment of available insurance coverage. The Company establishes an accrual for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Once established, each accrual is adjusted to reflect any subsequent developments. Legal contingencies are subject to inherent uncertainties, and unfavorable rulings may occur that could cause the Company to either adjust its litigation accrual or incur actual losses that exceed the current estimate, which ultimately could have a more significant impact on Webster's performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same directionmaterial adverse effect, either individually or in the same magnitudeaggregate, on its business, financial condition, or operating results. The Company will consider settlement of cases when it is in the best interests of the Company and its stakeholders. The Company intends to defend itself in all claims asserted against it, and management currently believes that the outcome of these contingencies will not be material, either individually or in the aggregate, to the Company or its consolidated financial position.
Federal Deposit Insurance Corporation Special Assessment
On May 22, 2023, the FDIC published a proposed rule to charge certain banks a special assessment to recover losses incurred by protecting uninsured depositors of Silicon Valley Bank and Signature Bank upon their failure in March 2023. The proposed rule would levy a special assessment to certain banks at an annual rate of 12.5 basis points based on their uninsured deposits balance as of December 31, 2022, payable in eight quarterly installments beginning in the pricefirst quarter of goods2024. Based on the proposed rule, the Company estimates that its total special assessment charge would be approximately $44.0 million.
The FDIC has the authority to make further changes to the proposed rule before finalization, including changes to the underlying data and services.calculation methodology used to determine the special assessment. The comment period on the proposed rule expired on July 21, 2023, and no final rule has been published in the Federal Register as of the date of this Quarterly Report on Form 10-Q. Accordingly, no legal obligation has been incurred, and therefore, no accrual has been recognized.
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Note 19: Subsequent Events
The Company has evaluated subsequent events from the date of the Condensed Consolidated Financial Statements, and accompanying Notes thereto, through the date of issuance, and determined that no significant events were identified requiring recognition or disclosure.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The required information is set forth above,Information regarding quantitative and qualitative disclosures about market risk can be found in Part I within Note 13: Derivative Financial Instruments in the Notes to the Consolidated Financial Statements contained in Item 1. Financial Statements, and under the section captioned "Asset/Liability Management and Market Risk" contained in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, see the section captioned "Asset/Liability Management and Market Risk," which isare incorporated herein by reference.
ITEM 4. CONTROLS AND PROCEDURES
AsEvaluation of September 30, 2017, the Company carried out an evaluation,Disclosure Controls and Procedures
Our management, under the supervision and with the participation of the Company's management, including its Chief Executive Officer (who is our principal executive officer) and its Chief Financial Officer of(who is our principal financial officer), evaluated the effectiveness of the Company'sour disclosure controls and procedures, (asas defined in Rulesin Rule 13a-15(e) orand 15d-15(e) of the Securities Exchange Act of 1934). 1934, as amended (the "Exchange Act"), as of June 30, 2023. The term "disclosure controls and procedures" means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Based on thisthat evaluation, managementour Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2023, our disclosure controls and procedures andwere not effective due to the un-remediated material weaknesses in internal control over financial reporting were not effective as of September 30, 2017 as a result of an identified material weakness, as describedrelated to certain general information technology controls specific to logical access, which was previously disclosed in the Company's 2016Annual Report on Form 10-K resulting fromfor the aggregationyear ended December 31, 2022. Prior to the filing of control deficienciesthis Quarterly Report on Form 10-Q (this "Form 10-Q"), we completed substantive procedures for the quarter ended June 30, 2023. Based on these procedures, management believes that our Condensed Consolidated Financial Statements included in management’s review of the allowance for loan loss model including certain process level controls preventing unapproved changesthis Form 10-Q have been prepared in modeling assumptions as well as the precision of management’s review over the valuation of allowance for loan and lease losses balance. This material weakness did not result in any misstatementaccordance with GAAP. For additional information, please refer to Part II - Item 9A. of the Company's consolidated financial statementsAnnual Report on Form 10-K for anythe year ended December 31, 2022.
Remediation
Management is in process of implementing measures designed to ensure that the control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include: (i) designing and implementing controls related to deprovisioning, privileged access, and user access reviews, (ii) developing an enhanced risk assessment process to evaluate logical access, and (iii) improving the existing training program associated with control design and implementation. We believe that these actions will remediate the material weaknesses. The material weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period presented. The Company'sof time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of these material weaknesses will be completed prior to the end of 2023.
Changes in Internal Control Over Financial Reporting
Other than the ongoing remediation efforts related to this material weakness are ongoing.
During the quarter ended September 30, 2017, the company implemented a new accounting system which streamlines trade input and valuation activities related to its investment securities and derivative portfolios. The change in how transactions are processed has further enhanced process controls and procedures. In addition, as further described below, the Company continued to enhance its control environment in connection with its allowance for loan and lease loss process. Excluding these changes,above, there were no changes in the Company’sour internal control over financial reporting that occurred(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), during the period covered by this reportquarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’sour internal control over financial reporting.
Remediation Plan for Material Weakness in Internal Control Over Financial ReportingLimitations on Effectiveness of Controls and Procedures
In response to the material weakness identified above, the Company has implemented changes toBecause of its inherent limitations, management does not expect that our disclosure controls and procedures or our internal control over financial reporting includingwill prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Further, no evaluation of controls can provide absolute assurance that misstatements due to personnel responsible for the allowance for loan loss process, strengthening the designerror or fraud will not occur or that all control issues and instances of the ALLL internal controls and enhancing communication protocols. The Company has engaged the use of a third party expert to test the operating effectiveness of the ALLL internal control environment. As of the date of this filing,fraud, if any, within the Company has not concluded that the material weakness hashave been fully remediated.detected.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, Webster and its subsidiaries are subject to certainInformation regarding legal proceedings can be found within Note 18: Commitments and claimsContingencies in the ordinary course of business. Management presently believes that the ultimate outcome of these proceedings, individually andNotes to Consolidated Financial Statements contained in the aggregate, will not be material to Webster or its consolidated financial position. Webster establishes an accrual for specific legal matters when it determines that the likelihood of an unfavorable outcomePart I - Item 1. Financial Statements, which is probable and the loss is reasonably estimable. Legal proceedings are subject to inherent uncertainties, and unfavorable rulings could occur that could cause Webster to adjust its litigation accrual or could have, individually or in the aggregate, a material adverse effect on its business, financial condition, or operating results.incorporated herein by reference.
ITEM 1A. RISK FACTORS
DuringIn addition to the nine months ended September 30, 2017, there were no material changes toother information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors previously disclosedcontained in Webster'sPart I - Item 1A. Risk Factors of the Company's Annual Report on Form 10-K for the year ended
December 31, 2016.2022, which could materially affect our business, results of operations, or financial condition. For the six months ended June 30, 2023, the Company made updates to the following risk factor:
Our stock price can be volatile.
Stock price volatility may make it more difficult for stockholders to resell their common stock when they want and at prices that they find attractive. Our stock price can fluctuate significantly in response to a variety of factors including, among other things:
•actual or anticipated variations in results of operations;
•recommendations or projections by securities analysts;
•operating and stock price performance of other companies that investors deem comparable to us;
•news reports relating to trends, concerns, and other issues in the financial services and healthcare industries;
•perceptions in the marketplace regarding us and/or our competitors;
•new technology used, or services offered, by competitors;
•significant acquisitions or business combinations, strategic partnerships, joint ventures, or capital commitments by or involving us or our competitors, including those of competitor failed banks acquired by other competitors;
•changes in dividends and capital returns;
•issuance of additional shares of Webster common stock;
•changes in government regulations; and
•geopolitical conditions such as acts or threats of terrorism or military conflicts, including any military conflict between Russia and Ukraine.
General market fluctuations, including real or anticipated changes in the strength of the economy, industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes, credit loss trends, among other factors, could also cause our stock price to decrease regardless of operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table provides information with respect to any purchase of equity securities of Webster Financial Corporation'sfor the Company's common stock made by or on behalf of Websterthe Company or any "affiliated“affiliated purchaser,"” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, during the three months ended SeptemberJune 30, 2017:2023:
Period
Total
Number of
Shares
Purchased (1)
Average Price
Paid Per Share (2)
Total Number of
Shares Purchased
as Part of Publicly Announced Plans
or Programs
Maximum Dollar Amount Available for Purchase Under the Plans or Programs (3)
April 1, 2023 - April 30, 2023529$38.13—$401,340,164
May 1, 2023 - May 31, 20236,74733.83—401,340,164
June 1, 2023 - June 30, 20231,467,14739.571,465,673343,340,118
Total1,474,42339.541,465,673343,340,118
Period
Total
Number of
Shares
Purchased (1)
Average Price
Paid
Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum
Dollar Amount Available for Repurchase
Under the Plans
or Programs (1)
 
Total
Number of
Warrants
Purchased (2)
Average Price
Paid
Per Warrant
July 1-31, 2017128,464
$52.22
128,238
$8,792,599
 —
$—
August 1-31, 201793,762
52.14
93,762
3,903,923
 —
—
September 1-30, 2017—
—
—
3,903,923
 —
—
Total222,226
52.18
222,000
3,903,923
 —
—
(1)The maximum dollar amount available for repurchase under the plans or programs, at September 30, 2017, in the table above, reflects the amount remaining under the common stock repurchase program authorized by the Company's Board(1)During the three months ended June 30, 2023, 8,750 of Directors on December 6, 2012. In addition, on October 24, 2017, the Company's Board of Directors approved a new common stock repurchase program which authorizes management to repurchase, in open market or privately negotiated transactions, subject to market conditions and other factors, up to a maximum of $100 million of common stock. Both programs will remain in effect until fully utilized or until modified, superseded, or terminated.
Of the total number of shares purchased during the three months ended September 30, 2017, 226 shares were acquired outside of the repurchase program related to stock compensation plan activity, at market prices.
(2)On June 3, 2011, the Company announced that, with approval from its Board of Directors, it had repurchased a significant number of the warrants issued as part of Webster's participation in the U.S. Treasury's Capital Purchase Program in a public auction conducted on behalf of the U.S. Treasury. The Board approved plan provides for additional repurchases from time-to-time, as permitted by securities laws and other legal requirements. There remain 9,777 outstanding warrants to purchase a share (1:1) of the Company's common stock, which carry an exercise price of $18.28 per share and expire on November 21, 2018.
Restrictions on Dividends
Holdersprices outside of the Company's common stock are entitledrepurchase program and related to receive such dividends asemployee share-based compensation plan activity.
(2)The average price paid per share is calculated on a trade date basis and excludes commissions and other transaction costs.
(3)The Company maintains a common stock repurchase program, which was approved by the Board of Directors may declare outon October 24, 2017, that authorizes management to purchase shares of funds legally available for such payments. Also, as a bank holding company, the ability to declare and pay dividends is dependent on certain federal regulatory considerations. See Note 10: Regulatory Matters in the Notes to Condensed Consolidated Financial Statements contained elsewhere in this report for additional information.
The Company has 5,060,000 outstanding Depository Shares, each representing 1/1000th interest in a share of 6.40% Series E Non-Cumulative Perpetual Preferred Stock, par value $.01 per share, with a liquidation preference of $25,000 per share (or $25 per depository share). The Series E Preferred Stock is redeemable at Webster's option, in whole or in part, on December 15, 2017, or any dividend payment date thereafter, or in whole but not in part, upon a "regulatory capital treatment event" as defined in the Prospectus Supplement. The terms of the Series E Preferred Stock prohibit the Company from declaring or paying any cash dividends on itsWebster common stock unlessin open market or privately negotiated transactions, through block trades, and pursuant to any adopted predetermined trading plan, subject to the availability and trading price of stock, general market conditions, alternative uses for capital, regulatory considerations, and the Company's financial performance. On April 27, 2022, the Board of Directors increased management's authority to repurchase shares of Webster has declared and paid full dividends oncommon stock under the Series E Preferred Stock for the most recently completed dividend period.repurchase program by $600.0 million in shares. This existing repurchase program will remain in effect until fully utilized or until modified, superseded, or terminated.

84

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION
Not applicableDuring the three months ended June 30, 2023, no director or officer of the Company adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 401(a) of Regulation S-K.
85

ITEM 6. EXHIBITS
TheA list of exhibits to this Quarterly Report on Form 10-Q areis set forth on the below.
Exhibit NumberExhibit DescriptionExhibit IncludedIncorporated by Reference
FormExhibitFiling Date
28-K2.14/23/2021
3Certificate of Incorporation and Bylaws.
3.110-Q3.18/9/2016
3.28-K3.22/1/2022
3.38-K3.14/28/2023
3.48-K3.16/11/2008
3.58-K3.111/24/2008
3.68-K3.17/31/2009
3.78-K3.27/31/2009
3.88-A12B3.312/4/2012
3.98-A12B3.312/12/2017
3.108-A12B3.42/1/2022
3.118-K3.13/17/2020
3.128-K3.52/1/2022
10.1DEF 14AA3/15/2023
31.1X
31.2X
32.1
X (1)
32.2
X (1)
101The following financial information from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted in Inline Extensible Business Reporting Language (iXBRL) includes: (i) Cover Page, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements Of Income, (iv) Condensed Consolidated Statements Of Comprehensive Income, (v) Condensed Consolidated Statements Of Stockholders' Equity, (vi) Condensed Consolidated Statements Of Cash Flows, and (vii) Notes to Condensed Consolidated Financial Statements, tagged in summary and in detail.X
104Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101)X
(1)Exhibit Index immediately preceding such exhibitsis furnished herewith and are incorporated herein by reference.

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
WEBSTER FINANCIAL CORPORATION
Registrant
Date: November 6, 2017By:/s/ James C. Smith
James C. Smith
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: November 6, 2017By:/s/ Glenn I. MacInnes
Glenn I. MacInnes
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: November 6, 2017By:/s/ Albert J. Wang
Albert J. Wang
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)


WEBSTER FINANCIAL CORPORATION
EXHIBIT INDEX
Exhibit Number Exhibit Description Filed Herewith Incorporated by Reference
   Form Exhibit Filing Date
3 Certificate of Incorporation and Bylaws.        
3.1 
Fourth Amended and Restated Certificate of Incorporation
   10-Q 3.1 8/9/2016
3.2 
Certificate of Designations establishing the rights of the Company's 8.50% Series A Non-Cumulative Perpetual Convertible Preferred Stock
   8-K 3.1 6/11/2008
3.3 
Certificate of Designations establishing the rights of the Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series B
   8-K 3.1 11/24/2008
3.4 
Certificate of Designations establishing the rights of the Company's Perpetual Participating Preferred Stock, Series C
   8-K 3.1 7/31/2009
3.5 
Certificate of Designations establishing the rights of the Company's Non-Voting Perpetual Participating Preferred Stock, Series D
   8-K 3.2 7/31/2009
3.6 
Certificate of Designations establishing the rights of the Company's 6.40% Series E Non-Cumulative Perpetual Preferred Stock
   8-A12B 3.3 12/4/2012
3.7 
Bylaws, as amended effective June 9, 2014
   8-K 3.1 6/12/2014
10.1 * 
Retirement and Advisory Services Agreement, dated as of September 17, 2017, by and between Webster Financial Corporation and James C. Smith
   8-K 10.1 9/19/2017
31.1 
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer.
 X      
31.2 
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by the Chief Financial Officer.
 X      
32.1 + 
Written statement pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer.
 X      
32.2 + 
Written statement pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Financial Officer.
 X      
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embeded within the Inline XBRL document        
101.SCH XBRL Taxonomy Extension Schema Document X      
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X      
101.DEF XBRL Taxonomy Extension Definitions Linkbase Document X      
101.LAB XBRL Taxonomy Extension Label Linkbase Document X      
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X      
* This exhibit is a management contract, or compensatory plan, or arrangement in which directors or executive officers are eligible to participate.
+ This exhibit shall not be deemed "filed"filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

72
86

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
WEBSTER FINANCIAL CORPORATION
(Registrant)
Date: August 8, 2023By:/s/ John R. Ciulla
John R. Ciulla
President, Chief Executive Officer, and Director
(Principal Executive Officer)
Date: August 8, 2023By:/s/ Glenn I. MacInnes
Glenn I. MacInnes
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: August 8, 2023By:/s/ Albert J. Wang
Albert J. Wang
Executive Vice President and Chief Accounting Officer
(Principal Accounting Officer)

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