Application of Critical Accounting Policies and Accounting Estimates

The Company’s significant accounting policies are described in Note 11: Summary of Significant Accounting Policies to the Consolidated Financial Statements included in its ~~2019~~2020 Annual Report on Form 10-K. Modifications to significant accounting policies, if made during the year, are described in Note 11: Summary of Significant Accounting Policies 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 that the Company's most critical accounting ~~policies as:~~

•policy is the allowance for credit losses on loans and ~~leases; and~~

•~~realizability~~leases not only because of ~~deferred tax assets.~~

~~These particular accounting policies are considered most critical in that they are important~~its importance to the Company’s financial condition and operating results, ~~and they require~~but also the fact that it requires management’s subjective and complex judgment ~~as a result of~~surrounding the need to make estimates about the effects of matters that are inherently uncertain.

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 ~~2019~~2020 Form 10-K, and Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this report.

Recently Issued Accounting Standards Updates (ASUs)

Refer to Note 1: Summary of Significant Accounting Policies in the accompanying Notes to Condensed Consolidated Financial Statements contained elsewhere in this report for a summary of recently issued ASUs and the expected impact on the Company's consolidated financial statements.

~~Supervision and Regulation~~

The following information is intended to update, and should be read in conjunction with, the information contained under the caption “Supervision and Regulation” in both the Company’s Annual Report on Form 10-K and the supplemental disclosure related thereto contained its Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

~~CARES Act~~

The CARES Act, signed into law by the President on March 27, 2020, provided approximately $2.2 trillion in direct economic relief in response to the public health and economic impacts of COVID-19. Many of the CARES Act’s programs are dependent upon the direct involvement of U.S. financial institutions like the Company and Webster Bank. These programs have been implemented through rules and guidance adopted by federal departments and agencies, including the U.S. Department of Treasury, the Federal Reserve, and other federal bank regulatory authorities, including those with direct supervisory jurisdiction over the Company and Webster Bank. Furthermore, as the COVID-19 pandemic evolves, federal regulatory authorities continue to issue additional guidance with respect to the implementation, lifecycle, and eligibility requirements for the various CARES Act programs as well as industry-specific recovery procedures for COVID-19. In addition, it is possible that Congress will enact supplementary COVID-19 response legislation, including new bills comparable in scope to the CARES Act, prior to the end of 2020.

Set forth below is a brief overview of select provisions of the CARES Act and other regulations and supervisory guidance related to the COVID-19 pandemic that are applicable to the operations and activities of the Company and its subsidiaries, including Webster Bank. The following description is qualified in its entirety by reference to the full text of the CARES Act and the statutes, regulations, and policies described herein. Future legislation and/or amendments to the provisions of the CARES Act or changes to any of the statutes, regulations, or regulatory policies applicable to the Company and its subsidiaries could have a material effect on the Company. Such legislation and related regulations and supervisory guidance will be implemented over time and will remain subject to review by Congress and the implementing regulations issued by federal regulatory authorities. The Company continues to assess the impact of the CARES Act, the potential impact of new COVID-19 legislation, and other statutes, regulations, and supervisory guidance related to the COVID-19 pandemic.

~~Paycheck Protection Program.~~ The CARES Act amended the SBA’s loan program, in which Webster Bank participates, to create a guaranteed, unsecured loan program, the PPP, to fund operational costs of eligible businesses, organizations and self-employed persons during COVID-19. On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act into law, which among other things, gave borrowers additional time and flexibility to use PPP loan proceeds. Shortly thereafter, and due to the evolving impact of the COVID-19 pandemic, the President signed additional legislation authorizing the SBA to resume accepting PPP applications on July 6, 2020 and extending the PPP application deadline to August 8, 2020. It is anticipated that additional revisions to the SBA’s interim final rules on forgiveness and loan review procedures will be forthcoming to address these and related changes. As a participating lender in the PPP, Webster Bank continues to monitor legislative, regulatory, and supervisory developments related thereto.

3128

~~Troubled Debt Restructuring and Loan Modifications for Affected Borrowers.~~ The CARES Act permits banks to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that would otherwise be characterized as TDRs and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the COVID-19 emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019. Federal bank regulatory authorities also issued guidance to encourage banks to make loan modifications for borrowers affected by COVID-19 and to assure banks that they will not be criticized by examiners for doing so. The Company is applying this guidance to qualifying loan modifications. For additional information, see Note 1: Summary of Significant Accounting Policies in the Notes to Condensed Consolidated Financial Statements contained elsewhere in this report.

~~Federal Reserve Programs and Other Recent Initiatives~~

~~Main Street Lending Program~~. The CARES Act encouraged the Federal Reserve, in coordination with the Secretary of the Treasury, to establish or implement various programs to help midsize businesses, nonprofits, and municipalities. On April 9, 2020, the Federal Reserve proposed the creation of the MSLP to implement certain of these recommendations. On June 15, 2020, the Federal Reserve Bank of Boston opened the MSLP for lender registration. The MSLP supports lending to small and medium-sized businesses that were in sound financial condition before the onset of the COVID-19 pandemic. The MSLP operates through three facilities: the Main Street New Loan Facility, the Main Street Priority Loan Facility, and the Main Street Expanded Loan Facility. The Federal Reserve is currently working to refine the MSLP’s operational infrastructure and facilities and is expected to release further rules and operational guidance. The Bank has registered as a lender under the MSLP and continues to monitor developments related thereto.

~~Temporary Regulatory Capital Relief related to Impact of CECL~~. Concurrent with enactment of the CARES Act, the federal bank regulatory authorities issued an interim final rule that delays the estimated impact on regulatory capital resulting from the adoption of CECL. The interim final rule provides banking organizations that implement CECL before the end of 2020 the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay. The Company has elected this capital relief and delayed the regulatory capital impact of adopting CECL during the first quarter of 2020. As a result, capital ratios and amounts as of June 30, 2020 exclude the impact of the increased allowance for credit losses on loans, held-to-maturity debt securities, and unfunded loan commitments attributed to the adoption of CECL, adjusted for an approximation of the after-tax provision for credit losses attributable to CECL relative to the incurred loss methodology during the deferral period.

~~Supervisory Developments~~. On June 25, 2020, the Federal Reserve announced that it would take several actions to ensure large banks remain resilient despite the ongoing economic impact of COVID-19. Specifically, in the third quarter, the Federal Reserve will require large banks to preserve capital by suspending share repurchases, capping dividend payments, and allowing dividends according to a formula based on recent income. The Company and Webster Bank continue to monitor these developments to assess what effect, if any, they will have, but does not anticipate any material impact at this time.

~~Modification of the Volcker Rule~~. Also on June 25, 2020, the Federal Reserve, along with the Commodity Futures Trading Commission, FDIC, the Office of the Comptroller of the Currency, and the SEC issued a final rule modifying the Volcker Rule’s prohibition on banking entities investing in or sponsoring hedge funds or private equity funds, commonly known as covered funds. The Volcker Rule generally prohibits banking entities from engaging in proprietary trading and from acquiring or retaining ownership interests in, sponsoring or having certain relationships with a hedge fund or private equity fund. The final rule modifies three areas of the Volcker Rule by: (i) streamlining the covered funds portion of the rule; (ii) addressing the extraterritorial treatment of certain foreign funds; and (iii) permitting banking entities to offer financial services and engage in other activities that do not raise concerns that the Volcker Rule was intended to address. The new rule becomes effective October 1, 2020. The Company and Webster Bank are currently reviewing this new rule to determine what effect, if any, it will have, but does not anticipate any material impact at this time.

ITEM 1. FINANCIAL STATEMENTS

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30,
2020 December 31,
2019
(In thousands, except share data) (Unaudited)
Assets:
Cash and due from banks $ 198,680 $ 185,341
Interest-bearing deposits 104,444 72,554
Investment securities available-for-sale, at fair value 3,183,624 2,925,833
Investment securities held-to-maturity (fair value of $5,745,559 and $5,380,653) 5,477,126 5,293,918
Allowance for credit losses on investment securities held-to-maturity (309) —
Investment securities held-to-maturity, net 5,476,817 5,293,918
Federal Home Loan Bank and Federal Reserve Bank stock 94,495 149,046
Loans held for sale (valued under fair value option $46,446 and $35,750) 46,446 36,053
Loans and leases 21,802,517 20,036,986
Allowance for credit losses on loans and leases (358,522) (209,096)
Loans and leases, net 21,443,995 19,827,890
Deferred tax assets, net 77,145 61,975
Premises and equipment, net 258,392 270,413
Goodwill 538,373 538,373
Other intangible assets, net 19,994 21,917
Cash surrender value of life insurance policies 557,325 550,651
Accrued interest receivable and other assets 708,887 455,380
Total assets $ 32,708,617 $ 30,389,344
Liabilities and shareholders' equity:
Deposits:
Non-interest-bearing $ 6,193,757 $ 4,446,463
Interest-bearing 20,162,240 18,878,283
Total deposits 26,355,997 23,324,746
Securities sold under agreements to repurchase and other borrowings 1,688,805 1,040,431
Federal Home Loan Bank advances 523,321 1,948,476
Long-term debt 570,029 540,364
Operating lease liabilities 170,731 174,396
Accrued expenses and other liabilities 224,955 153,161
Total liabilities 29,533,838 27,181,574
Shareholders’ equity:
Preferred stock, $0.01 par value; Authorized - 3,000,000 shares:
Series F issued and outstanding (6,000 shares) 145,037 145,037
Common stock, $0.01 par value; Authorized - 200,000,0000 shares:
Issued (93,686,311 shares) 937 937
Paid-in capital 1,103,756 1,113,250
Retained earnings 2,024,487 2,061,352
Treasury stock, at cost (3,492,707 and 1,659,749 shares) (140,883) (76,734)
Accumulated other comprehensive income (loss), net of tax 41,445 (36,072)
Total shareholders' equity 3,174,779 3,207,770
Total liabilities and shareholders' equity $ 32,708,617 $ 30,389,344


	June 30, 2021		December 31, 2020
(In thousands, except share data)	(Unaudited)
Assets:
Cash and due from banks	$	193,430	$	193,501
Interest-bearing deposits	1,386,463		69,603
Investment securities available-for-sale, at fair value	3,262,893		3,326,776


Investment securities held-to-maturity, net of allowance for credit losses of $382 and $299	5,623,243		5,567,889
Federal Home Loan Bank and Federal Reserve Bank stock	76,874		77,594
Loans held for sale (valued under fair value option $4,335 and $14,000)	4,335		14,012
Loans and leases	21,475,001		21,641,215
Allowance for credit losses on loans and leases	(307,945)		(359,431)
Loans and leases, net	21,167,056		21,281,784
Deferred tax assets, net	78,268		81,286
Premises and equipment, net	215,716		226,743
Goodwill	538,373		538,373
Other intangible assets, net	20,112		22,383
Cash surrender value of life insurance policies	570,380		564,195
Accrued interest receivable and other assets	616,609		626,551
Total assets	$	33,753,752	$	32,590,690
Liabilities and shareholders' equity:
Deposits:
Non-interest-bearing	$	6,751,373	$	6,155,592
Interest-bearing	22,095,593		21,179,844
Total deposits	28,846,966		27,335,436
Securities sold under agreements to repurchase and other borrowings	507,124		995,355
Federal Home Loan Bank advances	138,444		133,164
Long-term debt	565,297		567,663
Operating lease liabilities	154,461		158,280
Accrued expenses and other liabilities	211,755		166,167
Total liabilities	30,424,047		29,356,065
Shareholders’ equity:
Preferred stock, $0.01 par value; Authorized - 3,000,000 shares:
Series F issued and outstanding (6,000 shares)	145,037		145,037
Common stock, $0.01 par value; Authorized - 200,000,0000 shares:
Issued (93,686,311 shares)	937		937
Paid-in capital	1,101,126		1,109,532
Retained earnings	2,203,160		2,077,522
Treasury stock, at cost (3,092,351 and 3,487,389 shares)	(126,445)		(140,659)
Accumulated other comprehensive income, net of tax	5,890		42,256
Total shareholders' equity	3,329,705		3,234,625
Total liabilities and shareholders' equity	$	33,753,752	$	32,590,690

See accompanying Notes to Condensed Consolidated Financial Statements.

3329

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Three months ended June 30, Six months ended June 30,
(In thousands, except per share data) 2020 2019 2020 2019
Interest Income:
Interest and fees on loans and leases $ 196,521 $ 235,949 $ 412,708 $ 464,713
Taxable interest and dividends on investments 50,069 50,634 102,691 102,510
Non-taxable interest on investment securities 5,501 5,529 10,987 10,931
Loans held for sale 184 145 359 293
Total interest income 252,275 292,257 526,745 578,447
Interest Expense:
Deposits 18,805 32,757 46,648 63,777
Securities sold under agreements to repurchase and other borrowings 980 3,904 4,710 6,656
Federal Home Loan Bank advances 3,748 7,772 10,617 15,557
Long-term debt 4,335 6,037 9,562 9,119
Total interest expense 27,868 50,470 71,537 95,109
Net interest income 224,407 241,787 455,208 483,338
Provision for credit losses 40,000 11,900 116,000 20,500
Net interest income after provision for credit losses 184,407 229,887 339,208 462,838
Non-interest Income:
Deposit service fees 35,839 43,118 78,409 86,142
Loan and lease related fees 6,968 6,558 13,464 14,377
Wealth and investment services 7,102 8,309 15,841 15,960
Mortgage banking activities 4,205 932 7,098 1,696
Increase in cash surrender value of life insurance policies 3,624 3,650 7,204 7,234
Gain on sale of investment securities, net — — 8 —
Other income 2,338 13,286 11,430 19,056
Total non-interest income 60,076 75,853 133,454 144,465
Non-interest Expense:
Compensation and benefits 99,731 98,527 201,618 196,312
Occupancy 14,245 14,019 28,730 28,715
Technology and equipment 27,468 25,767 55,305 51,464
Intangible assets amortization 962 962 1,924 1,924
Marketing 3,286 4,243 6,788 7,571
Professional and outside services 6,158 5,634 11,821 11,682
Deposit insurance 5,015 4,453 9,740 8,883
Other expense 19,719 27,035 39,494 49,775
Total non-interest expense 176,584 180,640 355,420 356,326
Income before income tax expense 67,899 125,100 117,242 250,977
Income tax expense 14,802 26,451 25,946 52,592
Net income 53,097 98,649 91,296 198,385
Preferred stock dividends and other (2,368) (2,456) (4,530) (4,902)
Earnings applicable to common shareholders $ 50,729 $ 96,193 $ 86,766 $ 193,483
Earnings per common share:
Basic $ 0.57 $ 1.05 $ 0.96 $ 2.11
Diluted 0.57 1.05 0.96 2.11


	Three months ended June 30,				Six months ended June 30,
(In thousands, except per share data)	2021		2020		2021		2020
Interest Income:
Interest and fees on loans and leases	$	185,919	$	196,521	$	376,455	$	412,708
Taxable interest and dividends on investments	40,303		50,069		79,917		102,691
Non-taxable interest on investment securities	5,283		5,501		10,616		10,987
Loans held for sale	53		184		144		359
Total interest income	231,558		252,275		467,132		526,745
Interest Expense:
Deposits	5,094		18,805		11,533		46,648
Securities sold under agreements to repurchase and other borrowings	860		980		1,495		4,710
Federal Home Loan Bank advances	534		3,748		1,047		10,617
Long-term debt	4,218		4,335		8,441		9,562
Total interest expense	10,706		27,868		22,516		71,537
Net interest income	220,852		224,407		444,616		455,208
Provision for credit losses	(21,500)		40,000		(47,250)		116,000
Net interest income after provision for credit losses	242,352		184,407		491,866		339,208
Non-interest Income:
Deposit service fees	41,439		35,839		81,908		78,409
Loan and lease related fees	7,862		6,968		16,175		13,464
Wealth and investment services	10,087		7,102		19,490		15,841
Mortgage banking activities	1,319		4,205		3,961		7,098
Increase in cash surrender value of life insurance policies	3,603		3,624		7,136		7,204
Gain on sale of investment securities, net	0		0		0		8

Other income	8,392		2,338		20,789		11,430
Total non-interest income	72,702		60,076		149,459		133,454
Non-interest Expense:
Compensation and benefits	97,754		99,731		205,354		201,618
Occupancy	14,010		14,245		29,660		28,730
Technology and equipment	27,124		27,468		55,640		55,305
Intangible assets amortization	1,132		962		2,271		1,924
Marketing	3,227		3,286		5,731		6,788
Professional and outside services	21,025		6,158		30,801		11,821
Deposit insurance	3,749		5,015		7,705		9,740
Other expense	19,007		19,719		37,848		39,494
Total non-interest expense	187,028		176,584		375,010		355,420
Income before income tax expense	128,026		67,899		266,315		117,242
Income tax expense	33,991		14,802		64,202		25,946
Net income	94,035		53,097		202,113		91,296
Preferred stock dividends and other	(2,480)		(2,368)		(5,028)		(4,530)
Earnings applicable to common shareholders	$	91,555	$	50,729	$	197,085	$	86,766

Earnings per common share:
Basic	$	1.02	$	0.57	$	2.19	$	0.96
Diluted	1.01		0.57		2.19		0.96

See accompanying Notes to Condensed Consolidated Financial Statements.

3430

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

Three months ended June 30, Six months ended June 30,
(In thousands) 2020 2019 2020 2019
Net income $ 53,097 $ 98,649 $ 91,296 $ 198,385
Other comprehensive income, net of tax:
Investment securities available-for-sale 61,914 34,409 46,225 61,968
Derivative instruments 3,601 186 29,833 382
Defined benefit pension and other postretirement benefit plans 730 1,056 1,459 2,112
Other comprehensive income, net of tax 66,245 35,651 77,517 64,462
Comprehensive income $ 119,342 $ 134,300 $ 168,813 $ 262,847


	Three months ended June 30,				Six months ended June 30,
(In thousands)	2021		2020		2021		2020
Net income	$	94,035	$	53,097	$	202,113	$	91,296
Other comprehensive (loss) income, net of tax:
Investment securities available-for-sale	(1,473)		61,914		(31,826)		46,225
Derivative instruments	(1,652)		3,601		(6,024)		29,833
Defined benefit pension and other postretirement benefit plans	741		730		1,484		1,459
Other comprehensive (loss) income, net of tax	(2,384)		66,245		(36,366)		77,517
Comprehensive income	$	91,651	$	119,342	$	165,747	$	168,813

See accompanying Notes to Condensed Consolidated Financial Statements.

3531

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

At or for the three months ended June 30, 2020
(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 March 31, 2020 $ 145,037 $ 937 $ 1,101,324 $ 2,009,541 $ (141,797) $ (24,800) $ 3,090,242
Cumulative effect of changes in accounting principles — — — — — — —
Net income — — — 53,097 — — 53,097
Other comprehensive income, net of tax — — — — — 66,245 66,245
Common stock dividends/equivalents $0.40 per share — — — (36,182) — — (36,182)
Series F preferred stock dividends $328.125 per share — — — (1,969) — — (1,969)
Stock-based compensation — — 2,432 — 973 — 3,405
Exercise of stock options — — — — — — —
Common shares acquired from stock compensation plan activity — — — — (59) — (59)
Common stock repurchase program — — — — — — —
Balance at June 30, 2020 $ 145,037 $ 937 $ 1,103,756 $ 2,024,487 $ (140,883) $ 41,445 $ 3,174,779
At or for the three months ended June 30, 2019
(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 March 31, 2019 $ 145,037 $ 937 $ 1,113,107 $ 1,895,870 $ (86,855) $ (101,841) $ 2,966,255
Cumulative effect of changes in accounting principles — — — — — — —
Net income — — — 98,649 — — 98,649
Other comprehensive income, net of tax — — — — — 35,651 35,651
Common stock dividends/equivalents $0.40 per share — — — (36,892) — — (36,892)
Series F preferred stock dividends $328.125 per share — — — (1,969) — — (1,969)
Stock-based compensation — — 1,528 275 1,637 — 3,440
Exercise of stock options — — (742) — 959 — 217
Common shares acquired from stock compensation plan activity — — — — (134) — (134)
Common stock repurchase program — — — — — — —
Balance at June 30, 2019 $ 145,037 $ 937 $ 1,113,893 $ 1,955,933 $ (84,393) $ (66,190) $ 3,065,217
At or for the six months ended June 30, 2020
(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, 2019 $ 145,037 $ 937 $ 1,113,250 $ 2,061,352 $ (76,734) $ (36,072) $ 3,207,770
Cumulative effect of changes in accounting principles — — — (51,213) — — (51,213)
Net income — — — 91,296 — — 91,296
Other comprehensive income, net of tax — — — — — 77,517 77,517
Common stock dividends/equivalents $0.80 per share — — — (73,010) — — (73,010)
Series F preferred stock dividends $656.250 per share — — — (3,938) — — (3,938)
Stock-based compensation — — (9,389) — 15,403 — 6,014
Exercise of stock options — — (105) — 223 — 118
Common shares acquired from stock compensation plan activity — — — — (3,219) — (3,219)
Common stock repurchase program — — — — (76,556) — (76,556)
Balance at June 30, 2020 $ 145,037 $ 937 $ 1,103,756 $ 2,024,487 $ (140,883) $ 41,445 $ 3,174,779
At or for the six months ended June 30, 2019
(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, 2018 $ 145,037 $ 937 $ 1,114,394 $ 1,828,303 $ (71,504) $ (130,652) $ 2,886,515
Cumulative effect of changes in accounting principles — — — (515) — — (515)
Net income — — — 198,385 — — 198,385
Other comprehensive income, net of tax — — — — — 64,462 64,462
Common stock dividends/equivalents $0.73 per share — — — (67,481) — — (67,481)
Series F preferred stock dividends $656.250 per share — — — (3,938) — — (3,938)
Stock-based compensation — — 1,528 1,179 3,709 — 6,416
Exercise of stock options — — (2,029) — 2,650 — 621
Common shares acquired from stock compensation plan activity — — — — (6,245) — (6,245)
Common stock repurchase program — — — — (13,003) — (13,003)
Balance at June 30, 2019 $ 145,037 $ 937 $ 1,113,893 $ 1,955,933 $ (84,393) $ (66,190) $ 3,065,217


	At or for the three months ended June 30, 2021
(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 March 31, 2021	$	145,037	$	937	$	1,105,137	$	2,147,436	$	(133,893)	$	8,274	$	3,272,928

Net income	—		—		—		94,035		—		—		94,035
Other comprehensive (loss), net of tax	—		—		—		—		—		(2,384)		(2,384)
Common stock dividends/equivalents $0.40 per share	—		—		—		(36,342)		—		—		(36,342)
Series F preferred stock dividends $328.125 per share	—		—		—		(1,969)		—		—		(1,969)
Stock-based compensation	—		—		(3,960)		0		7,428		—		3,468
Exercise of stock options	—		—		(51)		—		123		—		72
Common shares acquired from stock compensation plan activity	—		—		—		—		(103)		—		(103)

Balance at June 30, 2021	$	145,037	$	937	$	1,101,126	$	2,203,160	$	(126,445)	$	5,890	$	3,329,705

	At or for the three months ended June 30, 2020
(In thousands, except per share data)	Preferred Stock		Common Stock		Paid-In Capital		Retained Earnings		Treasury Stock, at cost		Accumulated Other Comprehensive (Loss) Income, Net of Tax		Total Shareholders' Equity
Balance at March 31, 2020	$	145,037	$	937	$	1,101,324	$	2,009,541	$	(141,797)	$	(24,800)	$	3,090,242

Net income	—		—		—		53,097		—		—		53,097
Other comprehensive income, net of tax	—		—		—		—		—		66,245		66,245
Common stock dividends/equivalents $0.40 per share	—		—		—		(36,182)		—		—		(36,182)
Series F preferred stock dividends $328.125 per share	—		—		—		(1,969)		—		—		(1,969)
Stock-based compensation	—		—		2,432		0		973		—		3,405

Common shares acquired from stock compensation plan activity	—		—		—		—		(59)		—		(59)

Balance at June 30, 2020	$	145,037	$	937	$	1,103,756	$	2,024,487	$	(140,883)	$	41,445	$	3,174,779

	At or for the six months ended June 30, 2021
(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, 2020	$	145,037	$	937	$	1,109,532	$	2,077,522	$	(140,659)	$	42,256	$	3,234,625

Net income	—		—		—		202,113		—		—		202,113
Other comprehensive (loss), net of tax	—		—		—		—		—		(36,366)		(36,366)
Common stock dividends/equivalents $0.80 per share	—		—		—		(72,537)		—		—		(72,537)
Series F preferred stock dividends $656.250 per share	—		—		—		(3,938)		—		—		(3,938)
Stock-based compensation	—		—		(3,311)		0		9,744		—		6,433
Exercise of stock options	—		—		(5,095)		—		8,481		—		3,386
Common shares acquired from stock compensation plan activity	—		—		—		—		(4,011)		—		(4,011)

Balance at June 30, 2021	$	145,037	$	937	$	1,101,126	$	2,203,160	$	(126,445)	$	5,890	$	3,329,705

	At or for the six months ended June 30, 2020
(In thousands, except per share data)	Preferred Stock		Common Stock		Paid-In Capital		Retained Earnings		Treasury Stock, at cost		Accumulated Other Comprehensive (Loss) Income, Net of Tax		Total Shareholders' Equity
Balance at December 31, 2019	$	145,037	$	937	$	1,113,250	$	2,061,352	$	(76,734)	$	(36,072)	$	3,207,770
Cumulative effect of changes in accounting principles	0		0		0		(51,213)		0		0		(51,213)
Net income	—		—		—		91,296		—		—		91,296
Other comprehensive income, net of tax	—		—		—		—		—		77,517		77,517
Common stock dividends/equivalents $0.80 per share	—		—		—		(73,010)		—		—		(73,010)
Series F preferred stock dividends $656.250 per share	—		—		—		(3,938)		—		—		(3,938)
Stock-based compensation	—		—		(9,389)		0		15,403		—		6,014
Exercise of stock options	—		—		(105)		—		223		—		118
Common shares acquired from stock compensation plan activity	—		—		—		—		(3,219)		—		(3,219)
Common stock repurchase program	—		—		—		—		(76,556)		—		(76,556)
Balance at June 30, 2020	$	145,037	$	937	$	1,103,756	$	2,024,487	$	(140,883)	$	41,445	$	3,174,779

See accompanying Notes to Condensed Consolidated Financial Statements.

3632

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Six months ended June 30,
(In thousands) 2020 2019
Operating Activities:
Net income $ 91,296 $ 198,385
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses 116,000 20,500
Deferred tax (benefit) expense (27,020) 514
Depreciation and amortization 18,110 18,884
Amortization of premiums/discounts, net 27,996 22,785
Stock-based compensation 6,014 6,416
Gain on sale, net of write-down, on foreclosed and repossessed assets (664) (635)
Loss on sale, net of write-down, on premises and equipment 256 482
Gain on the sale of investment securities, net (8) —
Increase in cash surrender value of life insurance policies (7,204) (7,234)
Gain from life insurance policies (348) (3,412)
Mortgage banking activities (7,098) (1,696)
Proceeds from sale of loans held for sale 170,168 63,464
Origination of loans held for sale (175,228) (74,076)
Net change in right-of-use lease assets 3,395 (888)
Net increase in derivative contract assets net of liabilities (256,780) (115,498)
Net decrease (increase) in accrued interest receivable and other assets 14,755 (28,485)
Net increase (decrease) in accrued expenses and other liabilities 67,239 (1,545)
Net cash provided by operating activities 40,879 97,961
Investing Activities:
Purchases of available-for-sale investment securities (479,330) (255,885)
Proceeds from available-for-sale investment securities maturities/principle repayments 266,704 251,957
Proceeds from sales of available for sale investment securities 8,963 —
Purchases of held-to-maturity investment securities (529,233) (567,118)
Proceeds from held-to-maturity investment securities maturities/principle repayments 382,903 242,511
Net proceeds from Federal Home Loan Bank stock 54,551 30,915
Alternative investments capital call, net (1,103) (3,316)
Net increase in loans (1,797,719) (847,143)
Proceeds from loans not originated for sale 3,606 20,012
Proceeds from life insurance policies 1,019 2,270
Proceeds from the sale of foreclosed and repossessed assets 4,667 8,191
Additions to premises and equipment (7,817) (12,698)
Net cash used for investing activities (2,092,789) (1,130,304)
See accompanying Notes to Condensed Consolidated Financial Statements.


	Six months ended June 30,
(In thousands)	2021		2020
Operating Activities:
Net income	$	202,113	$	91,296
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	(47,250)		116,000
Deferred tax expense (benefit)	16,012		(27,020)
Depreciation and amortization	18,683		18,110
Amortization of premiums/discounts, net	66,312		27,996
Stock-based compensation	6,433		6,014
Gain on sale, net of write-down, of foreclosed and repossessed assets	(141)		(664)
Loss on disposal of premises and equipment	724		256

Gain on sale of investment securities, net	0		(8)
Increase in cash surrender value of life insurance policies	(7,136)		(7,204)
Gain from life insurance policies	(805)		(348)
Mortgage banking activities	(3,961)		(7,098)
Proceeds from sale of loans held for sale	147,735		170,168
Originations of loans held for sale	(135,930)		(175,228)
Net change in right-of-use lease assets	1,336		3,395
Net decrease (increase) in derivative contract assets net of liabilities	106,759		(256,780)
Gain on sale of banking centers	(533)		0
Net (increase) decrease in accrued interest receivable and other assets	(91,177)		14,755
Net increase in accrued expenses and other liabilities	34,057		67,239
Net cash provided by operating activities	313,231		40,879
Investing Activities:
Purchases of available-for-sale investment securities	(504,286)		(479,330)
Proceeds from available-for-sale investment securities maturities/principal repayments	510,484		266,704
Proceeds from sales of available-for-sale investment securities	0		8,963
Purchases of held-to-maturity investment securities	(775,673)		(529,233)
Proceeds from held-to-maturity investment securities maturities/principal repayments	694,951		382,903
Net decrease in Federal Home Loan Bank/Federal Reserve Bank stock	720		54,551
Alternative investments capital call, net	(5,568)		(1,103)
Net decrease (increase) in loans	84,886		(1,797,719)
Proceeds from loans not originated for sale	49,122		3,606

Proceeds from life insurance policies	2,683		1,019
Proceeds from sale of foreclosed and repossessed assets	523		4,667
Proceeds from sale of banking centers	2,413		0
Additions to premises and equipment	(7,407)		(7,817)

Net cash provided by (used for) investing activities	52,848		(2,092,789)

See accompanying Notes to Condensed Consolidated Financial Statements.

3733

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited), continued
Six months ended June 30,
(In thousands) 2020 2019
Financing Activities:
Net increase in deposits 3,030,321 738,802
Proceeds from Federal Home Loan Bank advances 3,450,000 3,700,000
Repayments of Federal Home Loan Bank advances (4,875,155) (4,100,152)
Net increase in securities sold under agreements to repurchase and other borrowings 648,374 375,046
Issuance of long-term debt — 300,000
Debt issuance costs — (3,642)
Dividends paid to common shareholders (72,806) (67,165)
Dividends paid to preferred shareholders (3,938) (3,938)
Exercise of stock options 118 621
Common stock repurchase program (76,556) (13,003)
Common shares purchased related to stock compensation plan activity (3,219) (6,245)
Net cash provided by financing activities 2,097,139 920,324
Net increase (decrease) in cash and cash equivalents 45,229 (112,019)
Cash and cash equivalents at beginning of period 257,895 329,499
Cash and cash equivalents at end of period $ 303,124 $ 217,480
Supplemental disclosure of cash flow information:
Interest paid $ 77,757 $ 87,129
Income taxes paid 11,353 69,759
Noncash investing and financing activities:
Transfer of loans and leases to foreclosed properties and repossessed assets $ 2,857 $ 5,880
Transfer of loans from loans and leases to loans-held-for-sale 3,036 15,438
Right-of-use lease assets recorded upon ASU adoption — 157,234
Lessee operating lease liabilities recorded upon ASU adoption — 178,208


WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited), continued

	Six months ended June 30,
(In thousands)	2021		2020
Financing Activities:
Net increase in deposits	1,510,573		3,030,321
Proceeds from Federal Home Loan Bank advances	180,470		3,450,000
Repayments of Federal Home Loan Bank advances	(175,190)		(4,875,155)
Net (decrease) increase in securities sold under agreements to repurchase and other borrowings	(488,231)		648,374



Dividends paid to common shareholders	(72,349)		(72,806)
Dividends paid to preferred shareholders	(3,938)		(3,938)
Exercise of stock options	3,386		118

Common stock repurchase program	0		(76,556)
Common shares purchased related to stock compensation plan activity	(4,011)		(3,219)

Net cash provided by financing activities	950,710		2,097,139
Net increase in cash and cash equivalents	1,316,789		45,229
Cash and cash equivalents at beginning of period	263,104		257,895
Cash and cash equivalents at end of period	$	1,579,893	$	303,124

Supplemental disclosure of cash flow information:
Interest paid	$	23,113	$	77,757
Income taxes paid	80,873		11,353
Noncash investing and financing activities:
Transfer of loans and leases to foreclosed properties and repossessed assets	$	829	$	2,857
Transfer of loans from loans and leases to loans-held-for-sale	48,395		3,036

See accompanying Notes to Condensed Consolidated Financial Statements.

3834

Note 1: Summary of Significant Accounting Policies

Nature of Operations

Webster Financial Corporation ~~(the Holding Company)~~ is a bank holding company and financial holding company under the ~~Bank Holding Company~~BHC Act, incorporated under the laws of Delaware in 1986, and headquartered in Waterbury, Connecticut. Webster Bank ~~National Association (Webster Bank)~~ is the principal consolidated subsidiary of Webster Financial Corporation. Webster Bank, ~~and~~including its HSA Bank division, deliver a wide range of banking, investment, and financial services to individuals, families, and businesses.

Webster Bank serves consumer and business customers with mortgage lending, financial planning, trust, and investment services through a distribution network consisting of banking centers, ATMs, a customer care center, and a full range of web and mobile-based banking services throughout southern New England and Westchester County, New York. It also offers equipment financing, commercial real estate lending, asset-based lending, and treasury and payment solutions primarily in the eastern U.S. HSA Bank is a leading provider of HSAs, while also delivering health reimbursement arrangements, and flexible spending and commuter benefit account administration services to employers and individuals in all 50 states.

Basis of Presentation

The ~~accounting and reporting policies of the Company that materially affect its financial statements conform with U.S. GAAP. The~~ accompanying unaudited Condensed Consolidated Financial Statements of the Company have been prepared in ~~conformity~~accordance with GAAP for interim financial information and 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 related Notes thereto, for the year ended December 31, ~~2019,~~2020, included in our Form 10-K filed with the SEC. In the opinion of management, all necessary adjustments are reflected to present fairly the financial position and results of operations as of the dates and for the periods shown. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of results that may be attained during the full year ending December 31, 2021, or any future period. There have been no changes to the Company's significant accounting policies from those described within that Form 10-K, except as described within the Recently Adopted Accounting Standards Updates section of this note.

Certain prior period amounts have been reclassified to conform to the current year's presentation. These reclassifications ~~had an immaterial effect~~did not have a significant impact on the Company's consolidated financial statements.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities ~~as well as income~~ and ~~expense~~disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Economic and market assumptions are key factors in developing estimates. Declining economic activity and volatile market conditions related to the COVID-19 pandemic have impacted and may continue to impact accounting estimates. Actual results could differ ~~significantly~~ from assumptions previously used resulting in material changes for impacted accounting estimates in future periods. 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.

~~Loan Modifications Under the CARES Act and Interagency Statement~~

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Section 4013, and the Revised Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus.

On March 27, 2020, the CARES Act, which provides relief from certain requirements under GAAP, was signed into law. Section 4013 of the CARES Act gives entities temporary relief from the accounting and disclosure requirements for troubled debt restructurings (TDRs) under ASC 310-40 in certain situations.

In addition, on April 7, 2020, certain regulatory banking agencies issued an interagency statement that offers practical expedients for evaluating whether loan modifications in response to the COVID-19 pandemic are TDRs. The interagency statement was originally issued on March 22, 2020, but was revised to address the relationship between their original TDR guidance and the guidance in Section 4013 of the CARES Act.

To qualify for TDR accounting and disclosure relief under the CARES Act, the applicable loan must not have been more than 30 days past due as of December 31, 2019, and the modification must be executed during the period beginning on March 1, 2020, and ending on the earlier of December 31, 2020, or the date that is 60 days after the termination date of the national emergency declared by the president on March 13, 2020, under the National Emergencies Act related to the outbreak of COVID-19. The CARES Act applies to modifications made as a result of COVID-19 including: forbearance agreements, interest rate modifications, repayment plans, and other arrangements to defer or delay payment of principal or interest.

The interagency statement does not require the modification to be completed within a certain time period if it is related to COVID-19 and the loan was not more than 30 days past due as of the date of the Company’s implementation of its modification programs. Moreover, the interagency statement applies to short-term modifications including payment deferrals, fee waivers, extensions of repayment terms, or other insignificant payment delays as a result of COVID-19.

The Company continues to apply section 4013 of the CARES Act and the interagency statement in connection with applicable modifications. For modifications that qualify under either the CARES Act or the interagency statement, TDR accounting and reporting is suspended through the period of the modification; however, the Company will continue to apply its existing non-accrual policies including consideration of the loan's past due status which is determined on the basis of the contractual terms of the loan. Once a loan has been contractually modified, the past due status is generally based on the updated terms including payment deferrals.those estimates.

Recently Adopted Accounting Standards Updates

~~Effective January 1, 2020, the following new accounting guidance was adopted by the Company:~~

~~ASU No. 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting.~~

The Update provides optional expedients and exceptions available to contracts, hedging relationships, and other transactions affected by reference rate reform. In addition to expedients for contract modifications, the Update allows for a one-time transfer or sale of held-to-maturity securities that reference an eligible rate. The Company will consider this one-time securities transfer along with other expedients available under the Update as the Company proceeds with reference rate reform activities. For additional information on reference rate reform refer to the risk factors previously disclosed in Webster's Annual Report on Form 10-K for the year ended December 31, 2019.

The Update became effective during the first quarter 2020, and applies to contract modifications and amendments made as of the beginning of the reporting period including the Update issuance date, March 12, 2020, and applies through December 31, 2022. The adoption of this guidance did not have a material effect on the Company's consolidated financial statements.

~~ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.~~

The Update amends guidance on credit losses, hedge accounting, and recognition and measurement of financial instruments. The changes provide clarifications and codification improvements in relation to recently issued accounting updates. The amendments to the guidance on credit losses are considered in the paragraphs below related to our adoption of ASU 2016-13, and has been adopted concurrently with those Updates.

~~The Company adopted the Update during the first quarter 2020 on a prospective basis. The adoption of this guidance did not have a material effect on the Company's consolidated financial statements.~~

ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.

~~The~~Update aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The updated guidance also requires an entity to amortize the capitalized implementation costs as an expense over the term of the hosting arrangement and to present in the same income statement line item as the fees associated with the hosting arrangement.

The Company adopted the Update during the first quarter 2020 on a prospective basis to all implementation costs incurred after the date of adoption. The adoption of this guidance did not have a material effect on the Company's consolidated financial statements.

~~ASU No. 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.~~

The Update modifies the disclosure requirements for fair value measurements. The updated guidance no longer requires entities to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy. However, it requires public companies to disclose changes in unrealized gains and losses for the period included in other comprehensive income (OCI) for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 measurements.

~~ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment.~~

The Update simplifies quantitative goodwill impairment testing by requiring entities to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for any amount by which the carrying amount exceeds the fair value of a reporting unit, up to but not exceeding the amount of goodwill allocated to the reporting unit.

The Update changes current guidance by eliminating the second step of the goodwill impairment analysis which involves calculating the implied fair value of goodwill determined in the same manner as the amount of goodwill recognized in a business combination upon acquisition. Entities still have the option to first perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.

~~ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments and subsequent ASUs issued to clarify this Topic.~~

The Updates replace the existing incurred loss approach for recognizing credit losses with a new credit loss methodology known as the current expected credit loss (CECL) model. The CECL methodology requires earlier recognition of credit losses using a lifetime credit loss measurement approach for financial assets carried at amortized cost. The Updates also revised the accounting for credit losses on available-for-sale debt securities, which is outside the scope of the CECL methodology.

The CECL accounting model applies to all assets measured at amortized cost including loans, net investments in leases, off balance sheet credit exposures, and held-to-maturity debt securities. CECL requires recognition of credit losses at purchase or origination using a lifetime credit loss measurement approach. The allowance for credit losses is based on the composition, characteristics, and credit quality of the loan and securities portfolios as of the reporting date and includes consideration of current economic conditions and reasonable and supportable forecasts at that date. The CECL methodology also requires consideration of a broader range of reasonable and supportable information to determine the allowance for credit losses including economic forecasts.

~~Allowance for credit losses on loans and leases.~~ Under CECL the Company determines its allowance for credit losses on loans and leases collectively, using pools of assets with similar risk characteristics. Loans that no longer match the risk profile of the pool are individually assessed for credit losses. Collective assessments are performed based on 2 portfolio segments, commercial loans and leases, and consumer loans. Expected losses within the commercial and consumer portfolios are collectively assessed using PD/LGD models based on the portfolio or class of financing receivable.

The Company’s lifetime credit loss models are based on historical data and incorporate forecasts of macroeconomic variables, expected prepayments and recoveries. Outside of the model, non-economic qualitative factors are applied to further refine the expected loss calculation for each portfolio.A two year reasonable and supportable forecast period is currently used for all loan and lease portfolios. The expected loss models revert to historical loss rates on a linear basis over a one year period.

When the risk characteristics of a loan no longer match the characteristics of the collective pool, the loan is removed from the pool and individually assessed for credit losses. Generally, all non-accrual loans, TDRs, potential TDRs, loans with a charge-off, and collateral dependent loans are individually assessed.

The individual assessment for credit impairment is generally based on a discounted cash flow approach unless the asset is collateral dependent. A loan is considered collateral dependent when repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Collateral dependent loans are individually assessed and the expected credit loss is based on the fair value of the collateral. The fair value is reduced for estimated costs to sell if the value of the collateral is expected to be realized through sale.

The Company has elected to present accrued interest receivable separately from the amortized cost basis on the balance sheet and is not estimating an allowance for credit loss on accrued interest. This election applies to loans and leases as well as debt securities. The Company's non-accrual policies have not changed as a result of adopting the Updates.

~~Allowance for credit losses on investment securities held-to-maturity.~~ Held-to-maturity debt securities follow the CECL accounting model. Expected losses are calculated on a pooled basis using statistical models which include forecasted scenarios of future economic conditions. The forecasts revert to long-run loss rates implicitly through the economic scenario, generally over three years. If the risk of an held-to-maturity debt security no longer matches the collective assessment pool, it is removed and individually assessed for credit deterioration. A zero credit loss assumption is maintained for U.S. Treasuries and agency-backed securities in both the held-to-maturity and available-for-sale portfolios. The zero loss assumption is re-considered on a quarterly basis to ensure it is still appropriate.

Securities are placed on non-accrual status when collection of principal and interest in accordance with contractual terms is doubtful, generally when principal or interest payments become 90 days delinquent unless the security is well secured and in process of collection, or sooner if management concludes circumstances indicate that the borrower may be unable to meet contractual principal or interest payments.

~~Allowance for credit losses on unfunded loan commitments.~~ Accounting for unfunded loan commitments also follows the CECL model, with an allowance recorded on commitments that are not unconditionally cancellable by the Company. The calculation of the allowance includes the probability of funding to occur and a corresponding estimate of expected lifetime credit losses on amounts assumed to be funded. The allowance for credit losses on unfunded loan commitments is included in accrued expenses and other liabilities on the consolidated balance sheet and the related credit expense is recorded in other non-interest expense in the consolidated statements of income.

~~Accounting for available-for-sale debt securities.~~ The Updates revised the accounting for available-for-sale debt securities by eliminating the other-than-temporary impairment model, and requiring credit losses be presented as an allowance rather than a direct write-down of available-for-sale debt securities under certain circumstances.Available-for-sale debt securities continue to be recorded at fair value with changes in fair value reflected in OCI. When the fair value of an available-for-sale debt security falls below the amortized cost basis it is evaluated to determine if any of the decline in value is attributable to credit loss. Decreases in fair value attributable to credit loss are recorded directly to earnings with a corresponding allowance for credit losses, limited to the amount that the fair value is less than the amortized cost basis. If the credit quality subsequently improves the allowance is reversed up to a maximum of the previously recorded credit losses. Available-for-sale debt securities follow the same non-accrual policy as held-to-maturity debt securities. When the Company intends to sell an impaired available-for-sale debt security, or if it is more likely than not that the Company will be required to sell the security prior to recovering the amortized cost basis, the entire fair value adjustment will immediately be recognized in earnings with no corresponding allowance for credit losses.

~~Impact of Adoption~~. The Company adopted the Updates during the first quarter 2020, using the modified retrospective method. Upon adoption, the Company recorded an increase in its allowance for credit losses as a cumulative effect adjustment. This adjustment, net of tax, reduced the Company's beginning total shareholders' equity at January 1, 2020. Upon adoption, the Company's allowance for credit losses reflected all credit losses expected over the lifetime of the Company's financial assets held at amortized cost. The total increase in allowance and corresponding decrease in equity did not have a material impact to the Company's regulatory capital amounts and ratios. Periods prior to January 1, 2020, are reported in accordance with previously applicable GAAP.

~~The impact of the January 1, 2020, adoption entry is summarized in the table below:~~

December 31, 2019 January 1, 2020
(In thousands) Pre-ASC 326 Adoption Impact of Adoption Reported Under ASC 326
Assets:
Allowance for credit losses on investment securities held-to-maturity $ — $ (397) $ (397)
Allowance for credit losses on loans and leases (209,096) (57,568) (266,664)
Deferred tax assets, net 61,975 15,891 77,866
Liabilities and shareholders' equity:
Accrued expenses and other liabilities 153,161 9,139 162,300
Retained earnings 2,061,352 (51,213) 2,010,139

~~For additional information on accounting for credit losses refer to Note 3: Investment Securities and Note 4: Loans and Leases.~~

~~Accounting Standards Issued But Not Yet Adopted~~

~~The following new accounting guidance, applicable to the Company, has been issued by the Financial Accounting Standards Board (FASB) but is pending adoption:~~

ASU No. 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes.

The Accounting Standards Update (the Update) provides simplification to the accounting for income taxes related to a variety of topics and makes minor codification improvements. Changes include a requirement that the effects of an enacted change in tax law be reflected in the computation of the annual effective tax rate in the first interim period that includes the enactment date of the new ~~legislation.~~legislation and clarification on presentation of non-income based taxes.

The ~~Update will be effective for~~Company adopted the ~~Company~~Update on January 1, ~~2021.~~2021 on a prospective basis. The ~~Company does~~adoption of this guidance did not ~~expect this Update to~~ have a material impact on ~~its~~the Company's consolidated financial statements.

ASU No. ~~2018-14, Compensation-Retirement Benefits~~2021-01, Reference Rate Reform (Topic 848) - ~~Defined Benefit Plan - General (Subtopic 715-20) - Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans.~~Scope.

The Update ~~modifies disclosure requirements~~clarifies that certain optional expedients and exceptions provided for ~~employers~~in ASU No. 2020-04 for applying GAAP to contract modifications and hedging relationships apply to derivatives that ~~sponsor defined benefit pension~~are affected by the discounting transition. The amendments are elective and ~~other postretirement plans.~~apply to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The Update was effective upon issuance for application on either a retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 22, 2020, or on a prospective basis beginning on January 7, 2021.

The Company adopted the Update ~~will be effective for the Company~~ on ~~January 1, 2021.~~a prospective basis. The ~~Company does~~adoption of this guidance did not ~~expect this Update to~~ have a material impact on ~~its~~the Company's consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

The Company has adopted all applicable Accounting Standards Updates issued by the Financial Accounting Standards Board (FASB) as of June 30, 2021.

Note 2: Variable Interest Entities

The Company has an investment interest in the following entities that meet the definition of a variable interest entity (VIE).

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.

~~Invested assets~~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 most 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, on the ~~consolidated balance sheet.~~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, inon the ~~consolidated income statement.~~accompanying Condensed Consolidated Statement of Income. Refer to Note ~~14:~~15: Fair Value Measurements for additional information.

Non-Consolidated

Tax Credit - Finance Investments. The Company makes non-marketable equity investments in entities that finance affordable housing and other community development projects and provide a return primarily through the realization of tax benefits. In most instances, the investments require the funding of capital commitments in the future. While the Company's investment in an entity may exceed 50% of its outstanding equity interests, the entity is not consolidated as ~~Webster~~the Company is not ~~involved in its management. For these investments,~~ the primary beneficiary. 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.~~VIEs and the Company does not have the obligation to absorb expected losses or the right to receive residual returns. The Company applies the proportional amortization method to account for its investments in qualified affordable housing projects.

At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the aggregate carrying value of the Company's tax credit-finance investments was ~~$39.9~~$44.7 million and ~~$42.5~~$37.2 million, respectively, which represents the Company's maximum exposure to loss. At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, unfunded commitments have been recognized, totaling ~~$14.4~~$12.7 million and ~~$15.1~~$10.2 million, respectively, and are included in accrued expenses and other liabilities on the ~~consolidated balance sheet.~~accompanying Condensed Consolidated Balance Sheets.

Webster Statutory Trust. The Company owns all the outstanding common stock of Webster Statutory Trust, a financial vehicle that has issued, and in the future may issue, trust preferred securities. The trust is a VIE in which the Company is not the primary beneficiary. 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 on the ~~consolidated balance sheet,~~accompanying Condensed Consolidated Balance Sheets, and the related interest expense is reported as interest expense on long-term debt inon the ~~consolidated income statement.~~accompanying Condensed Consolidated Statements of Income. Refer to Note 10: Borrowings for additional information.

Other Non-Marketable Investments. The Company invests in various alternative investments in which it holds a variable interest. These 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 June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the aggregate carrying value of the Company's other non-marketable investments in VIEs was ~~$24.7~~$44.7 million and ~~$21.8~~$34.3 million, respectively, and the ~~total~~maximum exposure to loss of the Company's other non-marketable investments in VIEs, including unfunded commitments, was ~~$70.1~~$78.2 million and ~~$64.2~~$72.7 million, respectively. Refer to Note ~~14:~~15: Fair Value Measurements for additional information.

The Company's equity interests in Other Non-Marketable Investments, as well as Tax Credit-Finance Investments and Webster Statutory Trust, are included in accrued interest receivable and other assets inon the ~~consolidated balance sheet.~~accompanying Condensed Consolidated Balance Sheets. For a description of the Company's accounting policy regarding the consolidation of VIEs, refer to Note 1 to the Consolidated Financial Statements included in its Form 10-K for the year ended December 31, ~~2019.~~2020.

4336

Note 3: Business Developments

Pending Merger

On April 19, 2021, Webster and Sterling announced that their boards of directors approved by unanimous vote a definitive agreement under which the two companies will combine in an all-stock transaction. Under the terms of the agreement, Sterling will merge into Webster, and Sterling's shareholders will receive a fixed exchange ratio of 0.463 of a Webster common share for each share of Sterling common stock owned. In addition, at the effective time of the merger, each outstanding share of Sterling's Series A non-cumulative perpetual preferred stock will be converted into the right to receive a newly created series of Webster preferred stock having substantially the same terms.

The merger is expected to close in the fourth quarter of 2021, subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals and approval by the shareholders of Webster and Sterling. In connection with the proposed transaction, the Company incurred $17.1 million of merger-related expenses during the three months ended June 30, 2021, primarily consisting of professional fees for investment banking, legal, accounting, and employee retention costs. Merger-related expenses are recorded as either professional and outside services, compensation and benefits, or other non-interest expense on the accompanying Condensed Consolidated Statements of Income, and are presented in the Corporate and Reconciling category for segment reporting purposes.

Strategic Initiatives

During the fourth quarter of 2020, the Company launched a strategic plan to drive incremental revenue and cost savings measures across the organization through the consolidation of banking centers and corporate facilities, process automation, ancillary spend reduction, and other organizational actions.

The following table presents the changes in reserves associated with the Company's strategic initiatives for the three and six months ended June 30, 2021:


	Three months ended June 30, 2021
(In thousands)	Severance		ROU Asset		Other		Total
Beginning balance	$	18,370	$	0	$	4,545	$	22,915
Charged to earnings	45		30		1,063		1,138

Charged against assets	0		(30)		(332)		(362)
Cash payments	(4,451)		0		(3,046)		(7,497)
Ending balance	$	13,964	$	0	$	2,230	$	16,194

	Six months ended June 30, 2021
	Severance		ROU Asset		Other		Total
Beginning balance	$	17,675	$	0	$	2,120	$	19,795
Charged to earnings	2,105		209		8,265		10,579

Charged against assets	0		(209)		(1,966)		(2,175)
Cash payments	(5,816)		0		(6,189)		(12,005)
Ending balance	$	13,964	$	0	$	2,230	$	16,194

The reserves associated with strategic initiatives are included in accrued expenses and other liabilities on the accompanying Condensed Consolidated Balance Sheets. Severance costs are recorded as compensation and benefits, Right-of-Use (ROU) lease asset charges are recorded as occupancy expense, and Other is recorded as either occupancy, technology and equipment, professional and outside services, or other non-interest expense on the accompanying Condensed Consolidated Statements of Income. Strategic initiative costs are presented in the Corporate and Reconciling category for segment reporting purposes.

Note 3:4: Investment Securities

Held-to-Maturity Securities

A summary of the amortized cost, fair value, and allowance for credit losses on investment securities held-to-maturity is presented below:


		At June 30, 2020																							At June 30, 2021
(In thousands)	(In thousands)	Amortized Cost ⁽¹⁾		Unrealized Gains		Unrealized Losses		Fair Value		Allowance ⁽²⁾		Net Carrying Value		(In thousands)	Amortized Cost (1)		Unrealized Gains		Unrealized Losses		Fair Value		Allowance		Net Carrying Value
Agency CMO	Agency CMO	$	138,529	$	3,469	$	(223)	$	141,775	$	—	$	138,529	Agency CMO	$	61,080	$	1,425	$	(63)	$	62,442	$	0	$	61,080
Agency MBS	Agency MBS	2,766,764		148,003		(73)		2,914,694		—		2,766,764		Agency MBS	2,562,863		96,187		(3,684)		2,655,366		0		2,562,863
Agency CMBS	Agency CMBS	1,585,929		60,543		—		1,646,472		—		1,585,929		Agency CMBS	2,105,924		30,491		(16,545)		2,119,870		0		2,105,924
Municipal bonds and notes	Municipal bonds and notes	752,537		49,298		—		801,835		309		752,228		Municipal bonds and notes	715,195		56,218		0		771,413		382		714,813
CMBS	CMBS	233,367		7,416		—		240,783		—		233,367		CMBS	178,563		6,501		0		185,064		0		178,563
Held-to-maturity securities	Held-to-maturity securities	$	5,477,126	$	268,729	$	(296)	$	5,745,559	$	309	$	5,476,817	Held-to-maturity securities	$	5,623,625	$	190,822	$	(20,292)	$	5,794,155	$	382	$	5,623,243

At December 31, 2019
(In thousands) Unpaid
Principal
Balance Amortized Cost Amortized Cost No Allowance Amortized Cost With Allowance Related
Valuation
Allowance
Commercial non-mortgage $ 140,096 $ 102,254 $ 29,739 $ 72,515 $ 7,862
Asset-based 465 139 — 139 5
Commercial real estate 29,292 23,297 14,818 8,479 1,143
Equipment financing 5,591 5,433 2,159 3,274 418
Residential 98,790 90,096 56,231 33,865 3,618
Home equity 38,503 35,191 27,672 7,519 1,203
Other consumer ⁽¹⁾
— — — — —
Total $ 312,737 $ 256,410 $ 130,619 $ 125,791 $ 14,249

~~(1)Partially charged-off other consumer loans were included in collectively evaluated for impairment at December 31, 2019.~~

The following table summarizes average amortized cost and interest income recognized for individually assessed loans and leases:

Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
(In thousands) Average
Amortized Cost Accrued
Interest
Income Cash Basis Interest Income Average
Amortized Cost Accrued
Interest
Income Cash Basis Interest Income Average
Amortized Cost Accrued
Interest
Income Cash Basis Interest Income Average
Amortized Cost Accrued
Interest
Income Cash Basis Interest Income
Commercial non-mortgage $ 136,483 $ 875 $ — $ 106,753 $ 844 $ — $ 115,903 $ 1,928 $ — $ 98,511 $ 1,764 $ —
Asset-based 138 — — 201 — — 139 — — 204 — —
Commercial real estate 26,017 169 — 13,070 61 — 25,411 315 — 12,354 134 —
Equipment financing 8,373 — — 4,451 — — 6,613 — — 5,132 — —
Residential 121,488 781 230 101,245 912 282 113,806 1,611 860 101,850 1,820 546
Home equity 50,573 309 413 38,092 287 241 43,863 700 1,243 38,238 556 521
Other consumer 1,121 — — — — — 609 17 — — — —
Total $ 344,193 $ 2,134 $ 643 $ 263,812 $ 2,104 $ 523 $ 306,344 $ 4,571 $ 2,103 $ 256,289 $ 4,274 $ 1,067


	Three months ended June 30,												Six months ended June 30,
	2021						2020						2021						2020
(In thousands)	Average Amortized Cost		Accrued Interest Income		Cash Basis Interest Income		Average Amortized Cost		Accrued Interest Income		Cash Basis Interest Income		Average Amortized Cost		Accrued Interest Income		Cash Basis Interest Income		Average Amortized Cost		Accrued Interest Income		Cash Basis Interest Income

Commercial non-mortgage	$	105,811	$	682	$	0	$	136,483	$	875	$	0	$	108,577	$	1,541	$	0	$	115,903	$	1,928	$	0
Asset-based	2,389		0		0		138		0		0		2,485		0		0		139		0		0
Commercial real estate	23,721		126		0		26,017		169		0		27,505		308		0		25,411		315		0
Equipment financing	7,121		0		0		8,373		0		0		7,730		0		0		6,613		0		0
Residential	80,670		577		168		121,488		781		230		83,494		1,216		441		113,806		1,611		860
Home equity	44,120		287		302		50,573		309		413		44,118		509		516		43,863		700		1,243
Other consumer	504		0		0		1,121		0		0		533		0		0		609		17		0
Total	$	264,336	$	1,672	$	470	$	344,193	$	2,134	$	643	$	274,442	$	3,574	$	957	$	306,344	$	4,571	$	2,103

Collateral Dependent Loans and Leases. A loan is considered collateral dependent when the borrower is experiencing financial difficulty and itrepayment is substantially expected ~~to be repaid substantially~~ through the operation or sale ~~or operation~~ of ~~the~~ collateral. A collateral dependent loan is individually assessed based on the fair value of the collateral, less costs to sell, as of the reporting date. Commercial non-mortgage, asset based, and equipment financing loans are collateralized by equipment, inventory, receivables, or other non-real estate assets. Commercial real estate, residential, and home equity loans are collateralized by real estate. Collateral value on collateral dependent loans and leases was ~~$143.6~~$107.0 million at June 30, ~~2020~~2021 and ~~$109.8~~$150.3 million at December 31, ~~2019.~~2020.

The following table summarizes whether, or not, individually assessed loans and leases are collateral dependent:

June 30, 2020 December 31, 2019
(In thousands) Collateral Dependent Not Considered Collateral Dependent Total Collateral Dependent Not Considered Collateral Dependent Total
Commercial non-mortgage $ 16,028 $ 113,524 $ 129,552 $ 10,682 $ 91,572 $ 102,254
Asset-based — 138 138 — 139 139
Commercial real estate 19,146 8,380 27,526 14,097 9,200 23,297
Equipment financing — 7,794 7,794 — 5,433 5,433
Residential 37,708 69,064 106,772 17,635 72,461 90,096
Home equity 30,493 19,664 50,157 17,136 18,055 35,191
Other consumer — 1,217 1,217 — — —
Total amortized cost of CDA $ 103,375 $ 219,781 $ 323,156 $ 59,550 $ 196,860 $ 256,410


	At June 30, 2021						At December 31, 2020
(In thousands)	Collateral Dependent		Not Considered Collateral Dependent		Total		Collateral Dependent		Not Considered Collateral Dependent		Total
Commercial non-mortgage	$	18,496	$	78,774	$	97,270	$	11,074	$	108,810	$	119,884
Asset-based	2,375		0		2,375		2,504		90		2,594
Commercial real estate	17,598		3,532		21,130		28,482		5,397		33,879
Equipment financing	0		8,162		8,162		0		7,298		7,298
Residential	17,649		51,174		68,823		33,980		64,184		98,164
Home equity	22,494		18,792		41,286		26,796		20,154		46,950
Other consumer	0		412		412		0		653		653
Total amortized cost	$	78,612	$	160,846	$	239,458	$	102,836	$	206,586	$	309,422

Troubled Debt Restructurings

The following table summarizes information for TDRs:


(In thousands)	At June 30, 2021		At December 31, 2020
Accrual status	$	119,707	$	140,089
Non-accrual status	64,636		95,338
Total TDRs	$	184,343	$	235,427

Specific reserves for TDRs included in the balance of ACL on loans and leases	$	11,726	$	12,728
Additional funds committed to borrowers in TDR status	13,512		12,895

(In thousands) At June 30,
2020 At December 31, 2019
Accrual status $ 147,950 $ 136,449
Non-accrual status 113,496 100,989
Total TDRs $ 261,446 $ 237,438
Specific reserves for TDRs included in the balance of ACL on loans and leases $ 15,027 $ 12,956
Additional funds committed to borrowers in TDR status 15,547 4,856

The portion of TDRs deemed to be uncollectible, ~~$1.9~~$0.3 million and ~~$4.2~~$1.9 million for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$3.1~~$2.2 million and ~~$5.6~~$3.1 million for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, were charged off.

The following table provides information on the type of concession for loans ~~and leases~~ modified as TDRs:

Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
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)
Commercial non-mortgage
Extended Maturity 4 $ 403 4 $ 69 6 $ 507 6 $ 193
Adjusted Interest Rate — — 1 100 — — 1 100
Maturity/Rate Combined — — 2 46 5 274 3 71
Other ⁽²⁾
13 12,985 4 12,029 23 40,122 19 34,056
Commercial real estate
Extended Maturity 1 72 — — 1 72 — —
Maturity/Rate Combined — — — — 1 278 — —
Other ⁽²⁾
— — — — — — 2 2,636
Residential
Extended Maturity 1 87 3 421 2 351 4 940
Maturity/Rate Combined 2 255 8 1,397 5 698 13 1,848
Other ⁽²⁾
17 3,062 2 281 20 3,675 4 542
Consumer
Extended Maturity 2 157 2 225 2 157 4 370
Maturity/Rate Combined — — 2 110 1 13 2 110
Other ⁽²⁾
63 4,399 6 466 74 5,512 19 1,220
Total TDRs 103 $ 21,420 34 $ 15,144 140 $ 51,659 77 $ 42,086


	Three months ended June 30,						Six months ended June 30,
	2021			2020			2021			2020
	Number of Loans	Post- Modification Recorded Investment (1)		Number of Loans	Post- Modification Recorded Investment (1)		Number of Loans	Post- Modification Recorded Investment (1)		Number of Loans	Post- Modification Recorded Investment (1)
(Dollars in thousands)
Commercial portfolio
Extended Maturity	1	$	50	5	$	475	8	$	740	7	$	579

Maturity/Rate Combined	5	173		0	0		6	210		6	552
Other (2)	1	1		13	12,985		3	114		23	40,122
Consumer portfolio
Extended Maturity	0	0		3	244		2	127		4	508
Maturity/Rate Combined	3	415		2	255		8	1,426		6	711
Other (2)	7	535		80	7,461		16	1,201		94	9,187
Total TDRs	17	$	1,174	103	$	21,420	43	$	3,818	140	$	51,659

(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.

There were 0 significant amounts of loans ~~and leases~~ modified as TDRs within the previous 12 months and for which there was a payment default for the three and six months ended June 30, ~~2020~~2021 and ~~2019.~~2020.

TDRs in commercial non-mortgage, commercial real estate, and equipment financing segregated by risk rating exposure is as follows:

(In thousands) At June 30, 2020 At December 31, 2019
(1) - (6) Pass $ 3,362 $ 3,952
(7) Special Mention — 63
(8) Substandard 131,498 104,277
(9) Doubtful 3,547 3,860
Total $ 138,407 $ 112,152


(In thousands)	At June 30, 2021		At December 31, 2020
Pass	$	8,740	$	12,462
Special Mention	8,670		0
Substandard	72,996		105,070
Doubtful	0		163
Total	$	90,406	$	117,695

5349

Note 5:6: 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. Residential mortgage origination fees, adjustments for changes in fair value, and ~~gain~~gains or ~~loss~~losses on loans sold are included as mortgage banking activities inon the ~~consolidated statement~~accompanying Condensed Consolidated Statements of ~~income.~~Income.

The Company may be required to repurchase a loan in the event of certain breaches of the representations and warranties, or in the event of default of the borrower within 90 days of sale, as provided for in the sale agreements. A reserve for loan repurchases provides for estimated losses pertaining to the potential repurchase of loans associated with the Company’s mortgage banking activities. The reserve reflects loan repurchase requests received by the Company for which management evaluates 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 loan repurchase requests for which the Company has not yet been notified. The provision recorded at the time of the loan sale is netted from the gain or loss recorded in mortgage banking activities, while any incremental provision, post loan sale, is recorded in other non-interest expense in the ~~consolidated income statement.~~accompanying Condensed Consolidated Statements of Income.

The following table provides a summary of activity in the reserve for loan repurchases:


	Three months ended June 30,				Six months ended June 30,
(In thousands)	2021		2020		2021		2020
Beginning balance	$	770	$	633	$	747	$	508
Provision charged to expense	20		27		43		49
(Charge-offs/settlements) recoveries, net	(8)		(5)		(8)		98
Ending balance	$	782	$	655	$	782	$	655

Three months ended June 30, Six months ended June 30,
(In thousands) 2020 2019 2020 2019
Beginning balance $ 633 $ 676 $ 508 $ 674
Provision charged to expense 27 1,813 49 1,820
(Charge-offs/settlements, net) recoveries, net (5) (1,805) 98 (1,810)
Ending balance $ 655 $ 684 $ 655 $ 684

The following table provides information for mortgage banking activities:

Three months ended June 30, Six months ended June 30,
(In thousands) 2020 2019 2020 2019
Residential mortgage loans held for sale:
Proceeds from sale $ 94,574 $ 42,851 $ 170,168 $ 63,464
Loans sold with servicing rights retained 89,687 39,465 161,778 56,813
Net gain on sale 2,824 700 5,343 858
Ancillary fees 824 320 1,225 581
Fair value option adjustment 557 (88) 530 257


	Three months ended June 30,				Six months ended June 30,
(In thousands)	2021		2020		2021		2020
Residential mortgage loans held for sale:
Proceeds from sale	$	68,427	$	94,574	$	147,735	$	170,168
Loans sold with servicing rights retained	66,087		89,687		141,778		161,778

Net gain on sale	1,351		2,824		3,460		5,343
Ancillary fees	377		824		918		1,225
Fair value option adjustment	(409)		557		(417)		530

Additionally, certain commercial and consumer loans not originated for sale were sold ~~approximately at carrying value~~ for cash proceeds of ~~$3.6~~$49.1 million for the six months ended June 30, 2021, resulting in a gain of ~~approximately $256~~$718 thousand, ~~for certain commercial loans~~and $3.6 million for the six months ended June 30, 2020, ~~and $4.0 million for certain residential loans and $16.1 million,~~ resulting in a gain of ~~approximately $615 thousand, for certain commercial loans for the six months ended June 30, 2019.~~$256 thousand.

The Company services residential mortgage loans for other entities totaling ~~$2.4~~$2.2 billion at ~~both~~ June 30, ~~2020~~2021 and $2.3 billion at December 31, ~~2019.~~2020.

The following table presents the changes in carrying value for mortgage servicing assets:

Three months ended June 30, Six months ended June 30,
(In thousands) 2020 2019 2020 2019
Beginning balance $ 16,391 $ 19,785 $ 17,484 $ 21,215
Additions 779 791 1,968 1,253
Amortization (1,669) (1,864) (3,376) (3,756)
Valuation allowance (575) — (1,150) —
Ending balance $ 14,926 $ 18,712 $ 14,926 $ 18,712


	Three months ended June 30,				Six months ended June 30,
(In thousands)	2021		2020		2021		2020
Beginning balance	$	12,327	$	16,391	$	13,422	$	17,484
Additions	616		779		1,202		1,968
Amortization	(1,442)		(1,669)		(2,932)		(3,376)
Adjustment to valuation allowance	0		(575)		(191)		(1,150)
Ending balance	$	11,501	$	14,926	$	11,501	$	14,926

Loan servicing fees, net of mortgage servicing rights amortization, were ~~$0.3~~$0.2 million and ~~$0.4~~$0.3 million for the three months ended June 30, 2021 and 2020, respectively, and $0.6 million and $0.8 ~~million and $0.9~~ million for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and are included ~~as a component of~~within loan and lease related fees inon the ~~consolidated statement~~accompanying Condensed Consolidated Statements of ~~income.~~Income.

Refer to Note ~~14:~~15: Fair Value Measurements for additional information on loans held for sale and mortgage servicing assets.

5450

Note 6:7: Leasing

The Company enters into operating leases, as lessee, primarily for office space, banking centers, and certain other operational assets. ~~These leases are generally classified as operating leases, however, an insignificant amount are classified as finance leases.~~ The Company's operating leases generally have lease terms for periods of 5 to 20 years with various renewal options. The Company does not have any material sub-lease agreements.

The following table summarizes lessee information related to the Company’s operating ROU lease assets and lease ~~liability:~~

liabilities:

At June 30, ~~2020~~2021

(In thousands)

Operating Leases

Condensed Consolidated Balance Sheet Line Item Location

ROU lease assets

~~151,805~~126,145

Premises and equipment, net

Lease liabilities

~~170,731~~154,461

Operating lease liabilities

The components of operating lease cost and other related information are as follows:


	At or for the three months ended June 30,				At or for the six months ended June 30,
(In thousands)	2021		2020		2021		2020
Lease Cost:
Operating lease costs	$	6,554	$	7,407	$	13,111	$	14,831
Variable lease costs	1,351		1,493		2,651		2,920
Sublease income	(140)		(142)		(271)		(287)
Total operating lease cost	$	7,765	$	8,758	$	15,491	$	17,464
Other Information:
Cash paid for amounts included in the measurement of lease liabilities	$	7,672	$	7,778	$	15,505	$	15,536
ROU lease assets obtained in exchange for new operating lease liabilities	4,160		30		9,558		8,696

At or for the three months ended June 30, At or for the six months ended June 30,
(In thousands) 2020 2019 2020 2019
Lease Cost:
Operating lease costs $ 7,407 $ 7,487 $ 14,831 $ 14,872
Variable lease costs 1,493 1,068 2,920 2,321
Sublease income (142) (155) (287) (295)
Total operating lease cost $ 8,758 $ 8,400 $ 17,464 $ 16,898
Other Information:
Cash paid for amounts included in the measurement of lease liabilities $ 7,778 $ 7,738 $ 15,536 $ 15,411
ROU lease assets obtained in exchange for new operating lease liabilities 30 6,296 8,696 12,934

The undiscounted scheduled maturities reconciled to total operating lease liabilities are as follows:


(In thousands)	At June 30, 2021
Remainder of 2021	$	12,611
2022	28,144
2023	25,900
2024	23,120
2025	21,154
Thereafter	65,902
Total operating lease liability payments	176,831
Less: Present value adjustment	22,370
Lease liabilities	$	154,461

Weighted-average remaining lease term, in years	7.82
Weighted-average discount rate	3.10%

(In thousands) At June 30, 2020
Remainder of 2020 $ 13,089
2021 30,955
2022 27,803
2023 24,880
2024 21,432
Thereafter 79,784
Total operating lease liability payments 197,943
Less: Present value adjustment 27,212
Lease liabilities $ 170,731
Weighted-average remaining lease term - operating leases, in years 8.24
Weighted-average discount rate - operating leases 3.26 %

~~See~~Refer to Note 4:5: Loans and Leases for information relating to leases included within the equipment financing portfolio in which the Company is the lessor.

5551

Note 7:8: Goodwill and Other Intangible Assets

There has been no change during ~~2020~~the three and six months ended June 30, 2021 in the carrying ~~amounts~~amount for goodwill. For ~~additional information on~~ goodwill by reportable segment, refer to ~~the Company's Annual Report on Form 10-K for the year ended December 31, 2019.~~Note 17: Segment Reporting.

Other intangible assets by reportable segment consisted of the following:


	At June 30, 2021						At December 31, 2020
(In thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
HSA Bank - Core deposits	$	26,625	$	17,080	$	9,545	$	26,625	$	15,618	$	11,007
HSA Bank - Customer relationships	21,000		10,433		10,567		21,000		9,624		11,376
Total other intangible assets	$	47,625	$	27,513	$	20,112	$	47,625	$	25,242	$	22,383

At June 30, 2020 At December 31, 2019
(In thousands) Gross Carrying
Amount Accumulated
Amortization Net Carrying
Amount Gross Carrying
Amount Accumulated
Amortization Net Carrying
Amount
HSA Bank - Core deposits $ 22,000 $ 14,189 $ 7,811 $ 22,000 $ 13,073 $ 8,927
HSA Bank - Customer relationships 21,000 8,817 12,183 21,000 8,010 12,990
Total other intangible assets $ 43,000 $ 23,006 $ 19,994 $ 43,000 $ 21,083 $ 21,917

At June 30, ~~2020,~~2021, the remaining estimated aggregate future amortization expense for other intangible assets is as follows:

(In thousands)
Remainder of 2020 $ 1,924
2021 3,847
2022 3,847
2023 3,847
2024 1,615
Thereafter 4,914


(In thousands)
Remainder of 2021	$	2,242
2022	4,411
2023	4,315
2024	2,084
2025	2,084
Thereafter	4,976

Note 8:9: Deposits

A summary of deposits by type is as follows:


(In thousands)	At June 30, 2021		At December 31, 2020
Non-interest-bearing:
Demand	$	6,751,373	$	6,155,592
Interest-bearing:
Health savings accounts	7,323,421		7,120,017
Checking	3,843,725		3,652,763
Money market	3,442,319		2,940,215
Savings	5,471,584		4,979,031
Time deposits	2,014,544		2,487,818
Total interest-bearing	$	22,095,593	$	21,179,844
Total deposits	$	28,846,966	$	27,335,436

Time deposits and interest-bearing checking obtained through brokers (included in above balances)	$	112,732	$	720,440
Time deposits that exceed the FDIC limit (included in above balance)	337,866		504,543
Deposit overdrafts reclassified as loan balances	1,050		2,007

(In thousands) At June 30,
2020 At December 31,
2019
Non-interest-bearing:
Demand $ 6,193,757 $ 4,446,463
Interest-bearing:
Health savings accounts 6,786,845 6,416,135 ��
Checking 3,280,125 2,689,734
Money market 2,686,650 2,312,840
Savings 4,742,573 4,354,809
Time deposits 2,666,047 3,104,765
Total interest-bearing $ 20,162,240 $ 18,878,283
Total deposits $ 26,355,997 $ 23,324,746
Time deposits and interest-bearing checking, included in above balances, obtained through brokers $ 718,404 $ 652,151
Time deposits, included in above balance, that exceed the FDIC limit 519,812 661,334
Deposit overdrafts reclassified as loan balances 791 1,721

The scheduled maturities of time deposits are as follows:

(In thousands) At June 30,
2020
Remainder of 2020 $ 1,753,705
2021 717,029
2022 107,744
2023 38,726
2024 22,333
Thereafter 26,510
Total time deposits $ 2,666,047


(In thousands)	At June 30, 2021
Remainder of 2021	$	1,253,018
2022	566,946
2023	91,793
2024	39,125
2025	50,983
Thereafter	12,679
Total time deposits	$	2,014,544

5652

Note 9:10: Borrowings

Total borrowings of ~~$2.8~~$1.2 billion at June 30, ~~2020~~2021 and ~~$3.5~~$1.7 billion at December 31, ~~2019~~2020 are described in detail below.

The following table summarizes securities sold under agreements to repurchase and other borrowings:

At June 30,
2020 At December 31,
2019
(Dollars in thousands) Amount Rate Amount Rate
Securities sold under agreements to repurchase ⁽¹⁾:
Original maturity of one year or less $ 312,691 0.20 % $ 240,431 0.19 %
Original maturity of greater than one year, non-callable 200,000 0.68 200,000 1.78
Total securities sold under agreements to repurchase 512,691 0.39 440,431 0.91
Fed funds purchased 740,000 0.08 600,000 1.59
Paycheck Protection Program Liquidity Facility 436,114 0.35 — —
Securities sold under agreements to repurchase and other borrowings $ 1,688,805 0.24 $ 1,040,431 1.30


	At June 30, 2021				At December 31, 2020
(Dollars in thousands)	Total Outstanding		Rate		Total Outstanding		Rate
Securities sold under agreements to repurchase (1):
Original maturity of one year or less	$	307,124	0.11	%	$	269,330	0.13	%
Original maturity of greater than one year, non-callable	200,000		1.47		200,000		0.84
Total securities sold under agreements to repurchase	507,124		0.65		469,330		0.43
Fed funds purchased	0		0		526,025		0.08

Securities sold under agreements to repurchase and other borrowings	$	507,124	0.65		$	995,355	0.25

(1)The Company has 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.

Repurchase agreements are used as a source of borrowed funds and are collateralized by ~~U.S. Government~~ agency mortgage-backed securities. Repurchase agreement counterparties are limited to primary dealers in government securities and commercial/municipal customers through the Corporate Treasury function. To bolster the effectiveness of the PPP, the Federal Reserve began supplying liquidity to participating financial institutions through the Paycheck Protection Program Liquidity Facility which extends credit to eligible financial institutions that originate PPP loans, taking the loans as collateral at face value. The Company began utilizing this facility in the second quarter 2020.

The following table provides information for FHLB advances:

At June 30, 2020 At December 31, 2019
(Dollars in thousands) Amount Weighted-
Average Contractual Coupon Rate Amount Weighted-
Average Contractual Coupon Rate
Maturing within 1 year $ 265,000 1.35 % $ 1,690,000 1.79 %
After 1 but within 2 years 150,000 1.24 200,000 2.53
After 2 but within 3 years 120 — 130 —
After 3 but within 4 years 222 2.95 229 2.95
After 4 but within 5 years 100,000 1.50 50,000 1.59
After 5 years 7,979 2.66 8,117 2.66
FHLB advances $ 523,321 1.37 $ 1,948,476 1.87
Aggregate carrying value of assets pledged as collateral $ 7,168,851 $ 7,318,748
Remaining borrowing capacity 4,166,323 2,937,644


	At June 30, 2021				At December 31, 2020
(Dollars in thousands)	Total Outstanding		Weighted- Average Contractual Coupon Rate		Total Outstanding		Weighted- Average Contractual Coupon Rate
Maturing within 1 year	$	25,000	0.33	%	$	25,000	0.38	%
After 1 but within 2 years	100		0		110		0
After 2 but within 3 years	208		2.95		215		2.95
After 3 but within 4 years	100,000		1.50		50,000		1.59
After 4 but within 5 years	0		0		50,000		1.42
After 5 years	13,136		2.56		7,839		2.66
FHLB advances	$	138,444	1.39		$	133,164	1.36

Aggregate carrying value of assets pledged as collateral	$	7,004,625			$	7,387,054
Remaining borrowing capacity	4,528,972				4,689,642

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 June 30,
2020 At December 31,
2019
4.375% Senior fixed-rate notes due February 15, 2024 $ 150,000 $ 150,000
4.100%
Senior fixed-rate notes due March 25, 2029 ⁽¹⁾
346,841 317,486
Junior subordinated debt Webster Statutory Trust I floating-rate notes due September 17, 2033 ⁽²⁾
77,320 77,320
Total notes and subordinated debt 574,161 544,806
Discount on senior fixed-rate notes (1,303) (1,412)
Debt issuance cost on senior fixed-rate notes (2,829) (3,030)
Long-term debt $ 570,029 $ 540,364


(Dollars in thousands)		At June 30, 2021		At December 31, 2020
4.375%	Senior fixed-rate notes due February 15, 2024	$	150,000	$	150,000
4.100%	Senior fixed-rate notes due March 25, 2029 (1)	341,488		344,164
Junior subordinated debt Webster Statutory Trust I floating-rate notes due September 17, 2033 (2)		77,320		77,320
Total notes and subordinated debt		568,808		571,484
Discount on senior fixed-rate notes		(1,084)		(1,193)
Debt issuance cost on senior fixed-rate notes		(2,427)		(2,628)
Long-term debt		$	565,297	$	567,663

(1)The Company ~~has~~ de-designated its fair value hedging relationship on ~~the~~these notes. A ~~$46.8 million~~ basis adjustment is included in the carrying value, ~~will be~~which is being amortized over the remaining life of the notes.

(2)The interest rate on Webster Statutory Trust I floating-rate notes, which varies quarterly based on 3-month ~~London Interbank Offered Rate~~LIBOR plus 2.95%, was ~~3.25%~~3.07% at June 30, ~~2020~~2021 and ~~4.85%~~3.18% at December 31, ~~2019.~~2020.

5753

Note ~~10:~~11: Accumulated Other Comprehensive Income, Net of Tax

The following ~~tables summarize~~table summarizes the changes in each component of accumulated other comprehensive income (loss), net of ~~tax, by component:~~tax:


	Three months ended June 30, 2021								Six months ended June 30, 2021
(In thousands)	Securities Available For Sale		Derivative Instruments		Defined Benefit Pension and Other Postretirement Benefit Plans		Total		Securities Available For Sale		Derivative Instruments		Defined Benefit Pension and Other Postretirement Benefit Plans		Total
Beginning balance	$	37,071	$	15,546	$	(44,343)	$	8,274	$	67,424	$	19,918	$	(45,086)	$	42,256
Other comprehensive (loss) before reclassifications	(1,473)		(2,475)		0		(3,948)		(31,826)		(7,645)		0		(39,471)
Amounts reclassified from accumulated other comprehensive (loss)	0		823		741		1,564		0		1,621		1,484		3,105
Net current-period other comprehensive (loss) income, net of tax	(1,473)		(1,652)		741		(2,384)		(31,826)		(6,024)		1,484		(36,366)
Ending balance	$	35,598	$	13,894	$	(43,602)	$	5,890	$	35,598	$	13,894	$	(43,602)	$	5,890


	Three months ended June 30, 2020								Six months ended June 30, 2020
(In thousands)	Securities Available For Sale		Derivative Instruments		Defined Benefit Pension and Other Postretirement Benefit Plans		Total		Securities Available For Sale		Derivative Instruments		Defined Benefit Pension and Other Postretirement Benefit Plans		Total
Beginning balance	$	1,562	$	17,048	$	(43,410)	$	(24,800)	$	17,251	$	(9,184)	$	(44,139)	$	(36,072)
Other comprehensive income before reclassifications	61,914		2,186		0		64,100		46,231		26,965		0		73,196
Amounts reclassified from accumulated other comprehensive income	0		1,415		730		2,145		(6)		2,868		1,459		4,321
Net current-period other comprehensive income, net of tax	61,914		3,601		730		66,245		46,225		29,833		1,459		77,517
Ending balance	$	63,476	$	20,649	$	(42,680)	$	41,445	$	63,476	$	20,649	$	(42,680)	$	41,445

Three months ended June 30, 2020 Six months ended June 30, 2020
(In thousands) Securities Available For Sale Derivative Instruments Defined Benefit Pension and Other Postretirement Benefit Plans Total Securities Available For Sale Derivative Instruments Defined Benefit Pension and Other Postretirement Benefit Plans Total
Beginning balance $ 1,562 $ 17,048 $ (43,410) $ (24,800) $ 17,251 $ (9,184) $ (44,139) $ (36,072)
OCI before reclassifications 61,914 2,186 — 64,100 46,231 26,965 — 73,196
Amounts reclassified from AOCI — 1,415 730 2,145 (6) 2,868 1,459 4,321
Net current-period OCI 61,914 3,601 730 66,245 46,225 29,833 1,459 77,517
Ending balance $ 63,476 $ 20,649 $ (42,680) $ 41,445 $ 63,476 $ 20,649 $ (42,680) $ 41,445

Three months ended June 30, 2019 Six months ended June 30, 2019
(In thousands) Securities Available For Sale Derivative Instruments Defined Benefit Pension and Other Postretirement Benefit Plans Total Securities Available For Sale Derivative Instruments Defined Benefit Pension and Other Postretirement Benefit Plans Total
Beginning balance $ (43,815) $ (9,117) $ (48,909) $ (101,841) $ (71,374) $ (9,313) $ (49,965) $ (130,652)
OCI/OCL before reclassifications 34,409 (870) — 33,539 61,968 (1,709) — 60,259
Amounts reclassified from AOCL — 1,056 1,056 2,112 — 2,091 2,112 4,203
Net current-period OCI 34,409 186 1,056 35,651 61,968 382 2,112 64,462
Ending balance $ (9,406) $ (8,931) $ (47,853) $ (66,190) $ (9,406) $ (8,931) $ (47,853) $ (66,190)

The following table ~~provides information for~~further details the ~~items~~amounts reclassified from ~~AOCI/AOCL:~~

(In thousands) Three months ended June 30, Six months ended June 30, Associated Line Item in the Condensed Consolidated Statements of Income
AOCI/AOCL Components 2020 2019 2020 2019
Securities available-for-sale:
Unrealized gains on investment securities $ — $ — $ 8 $ — Gain on sale of investment securities, net
Tax expense — — (2) — Income tax expense
Net of tax $ — $ — $ 6 $ —
Derivative instruments:
Premium amortization and hedge terminations $ (1,088) $ (1,408) $ (2,261) $ (2,799) Interest expense
Premium amortization (828) (12) (1,622) (12) Interest income
Tax benefit 501 364 1,015 720 Income tax expense
Net of tax $ (1,415) $ (1,056) $ (2,868) $ (2,091)
Defined benefit pension and other postretirement benefit plans:
Amortization of net loss $ (990) $ (1,429) $ (1,980) $ (2,859) Other non-interest expense
Tax benefit 260 373 521 747 Income tax expense
Net of tax $ (730) $ (1,056) $ (1,459) $ (2,112)
accumulated other comprehensive income (loss):


(In thousands)	Three months ended June 30,				Six months ended June 30,				Associated Line Item on the Condensed Consolidated Statements of Income
AOCI (AOCL) Component	2021		2020		2021		2020
Securities available-for-sale:
Unrealized gains on investment securities	$	0	$	0	$	0	$	8	Gain on sale of investment securities, net


Tax expense	0		0		0		(2)		Income tax expense
Net of tax	$	0	$	0	$	0	$	6
Derivative instruments:
Hedge terminations	$	(1,037)	$	(1,088)	$	(2,042)	$	(2,261)	Interest expense
Premium amortization	(77)		(828)		(153)		(1,622)		Interest income
Tax benefit	291		501		574		1,015		Income tax expense
Net of tax	$	(823)	$	(1,415)	$	(1,621)	$	(2,868)
Defined benefit pension and other postretirement benefit plans:
Amortization of net loss	$	(1,007)	$	(990)	$	(2,015)	$	(1,980)	Other non-interest expense
Tax benefit	266		260		531		521		Income tax expense
Net of tax	$	(741)	$	(730)	$	(1,484)	$	(1,459)

5854

Note ~~11:~~12: 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 either 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.

Total risk-based capital is comprised of three categories as defined by Basel III capital rules: ~~common equity Tier 1~~CET1 capital, ~~(CET1 capital),~~ Tier 1 capital, and Tier 2 capital. CET1 capital includes common shareholders' equity, less deductions for goodwill, other intangibles, and certain deferred tax adjustments. For purposes of CET1 capital, common shareholders' equity excludes ~~AOCL~~AOCI (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 June 30, 2021
	Actual (1)				Minimum Requirement				Well Capitalized
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Webster Financial Corporation
CET1 risk-based capital	$	2,664,879	11.66	%	$	1,028,123	4.5	%	$	1,485,067	6.5	%
Total risk-based capital	3,130,000		13.70		1,827,774		8.0		2,284,718		10.0
Tier 1 risk-based capital	2,809,916		12.30		1,370,831		6.0		1,827,774		8.0
Tier 1 leverage capital	2,809,916		8.53		1,317,538		4.0		1,646,923		5.0
Webster Bank
CET1 risk-based capital	$	2,897,545	12.69	%	$	1,027,620	4.5	%	$	1,484,340	6.5	%
Total risk-based capital	3,140,309		13.75		1,826,881		8.0		2,283,601		10.0
Tier 1 risk-based capital	2,897,545		12.69		1,370,160		6.0		1,826,881		8.0
Tier 1 leverage capital	2,897,545		8.80		1,317,166		4.0		1,646,458		5.0

At June 30, 2020

Actual ⁽¹⁾
Minimum Requirement Well Capitalized
(Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
Webster Financial Corporation
CET1 risk-based capital $ 2,485,301 11.17 % $ 1,001,376 4.5 % $ 1,446,431 6.5 %
Total risk-based capital 2,985,837 13.42 1,780,223 8.0 2,225,279 10.0
Tier 1 risk-based capital 2,630,338 11.82 1,335,167 6.0 1,780,223 8.0
Tier 1 leverage capital 2,630,338 8.33 1,262,430 4.0 1,578,038 5.0
Webster Bank
CET1 risk-based capital $ 2,666,184 11.99 % $ 1,001,034 4.5 % $ 1,445,938 6.5 %
Total risk-based capital 2,944,269 13.24 1,779,616 8.0 2,224,519 10.0
Tier 1 risk-based capital 2,666,184 11.99 1,334,712 6.0 1,779,616 8.0
Tier 1 leverage capital 2,666,184 8.45 1,261,937 4.0 1,577,421 5.0


		At December 31, 2019																							At December 31, 2020
		Actual						Minimum Requirement						Well Capitalized					Actual				Minimum Requirement				Well Capitalized
(Dollars in thousands)	(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Webster Financial Corporation	Webster Financial Corporation													Webster Financial Corporation
CET1 risk-based capital	CET1 risk-based capital	$	2,516,361	11.56	%	$	979,739	4.5	%	$	1,415,179	6.5	%	CET1 risk-based capital	$	2,543,131	11.35	%	$	1,008,512	4.5	%	$	1,456,739	6.5	%
Total risk-based capital	Total risk-based capital	2,950,181		13.55		1,741,758		8.0		2,177,198		10.0		Total risk-based capital	3,045,652		13.59		1,792,910		8.0		2,241,137		10.0
Tier 1 risk-based capital	Tier 1 risk-based capital	2,661,398		12.22		1,306,319		6.0		1,741,758		8.0		Tier 1 risk-based capital	2,688,168		11.99		1,344,682		6.0		1,792,910		8.0
Tier 1 leverage capital	Tier 1 leverage capital	2,661,398		8.96		1,188,507		4.0		1,485,634		5.0		Tier 1 leverage capital	2,688,168		8.32		1,291,980		4.0		1,614,975		5.0
Webster Bank	Webster Bank													Webster Bank
CET1 risk-based capital	CET1 risk-based capital	$	2,527,645	11.61	%	$	979,497	4.5	%	$	1,414,829	6.5	%	CET1 risk-based capital	$	2,791,474	12.46	%	$	1,008,027	4.5	%	$	1,456,039	6.5	%
Total risk-based capital	Total risk-based capital	2,739,108		12.58		1,741,328		8.0		2,176,660		10.0		Total risk-based capital	3,071,505		13.71		1,792,048		8.0		2,240,060		10.0
Tier 1 risk-based capital	Tier 1 risk-based capital	2,527,645		11.61		1,305,996		6.0		1,741,328		8.0		Tier 1 risk-based capital	2,791,474		12.46		1,344,036		6.0		1,792,048		8.0
Tier 1 leverage capital	Tier 1 leverage capital	2,527,645		8.51		1,187,953		4.0		1,484,941		5.0		Tier 1 leverage capital	2,791,474		8.65		1,291,415		4.0		1,614,268		5.0


Delaware						06-1187536
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


Title of each class	Trading Symbols	Name of Exchange on which registered
Common Stock, ~~$0.01~~ par value $0.01 per share	WBS	New York Stock Exchange
~~Depository~~Depositary Shares, each representing 1/1000th interest in a share	WBS PrF	New York Stock Exchange
of 5.25% Series F Non-Cumulative Perpetual Preferred Stock


ACL			Allowance for credit losses
Agency CMBS			Agency commercial mortgage-backed securities
Agency CMO			Agency collateralized mortgage obligations
Agency MBS			Agency mortgage-backed securities
ALCO			Asset/Liability Committee
AOCI (AOCL)			Accumulated other comprehensive income (loss)
ASC			Accounting Standards Codification
ASU or the Update			Accounting Standards Update
Basel III			Capital rules under a global regulatory framework developed by the Basel Committee on Banking Supervision
BHC Act			Bank Holding Company Act of 1956, as amended
CARES Act			The Coronavirus Aid, Relief, and Economic Security Act
CECL			Current expected credit losses
CET1 capital			Common Equity Tier 1 Capital, defined by Basel III capital rules
CFPB			Consumer Financial Protection Bureau
CLO			Collateralized loan obligations
CMBS			Non-agency commercial mortgage-backed securities
CME			Chicago Mercantile Exchange
COVID-19			Coronavirus
CVA (DVA)			Credit (debit) valuation adjustment
DTA			Deferred tax asset
FASB			Financial Accounting Standards Board
FDIC			Federal Deposit Insurance Corporation
FHLB			Federal Home Loan Bank
FICO			Fair Isaac Corporation
FRB			Federal Reserve Bank
FTP			Funds Transfer Pricing, a matched maturity funding concept
GAAP			U.S. Generally Accepted Accounting Principles
Holding Company			Webster Financial Corporation
HSA			Health savings account
HSA Bank			HSA Bank, a division of Webster Bank, National Association
LGD			Loss given default
NAV			Net asset value
NII			Net interest income
OCC			Office of the Comptroller of the Currency
OCI (OCL)			Other comprehensive income (loss)
OREO			Other real estate owned
PD			Probability of default
PPNR			Pretax, pre-provision net revenue
ROU			Right-of-use
PPP			Small Business Administration Paycheck Protection Program
SEC			United States Securities and Exchange Commission
SERP			Supplemental executive defined benefit retirement plan
Sterling			Sterling Bancorp, collectively with its consolidated subsidiaries
TDR			Troubled debt restructuring, defined in ASC 310-40 "Receivables - Troubled Debt Restructurings by Creditors"
TPA			Third-party administrator
VIE			Variable interest entity, defined in ASC 810-10 "Consolidation - Overall"
Webster Bank or the Bank			Webster Bank, National Association, a wholly-owned subsidiary of Webster Financial Corporation
Webster or the Company			Webster Financial Corporation, collectively with its consolidated subsidiaries


~~ACL~~			~~Allowance for credit losses~~
~~Agency CMO~~			~~Agency collateralized mortgage obligations~~
~~Agency MBS~~			~~Agency mortgage-backed securities~~
~~ALCO~~			~~Asset/Liability Committee~~
~~AOCI/AOCL~~			~~Accumulated other comprehensive income income (loss), net of tax~~
~~ASC~~			~~Accounting Standards Codification~~
~~ASU or the Update~~			~~Accounting Standards Update~~
~~Basel III~~			~~Capital rules under a global regulatory framework developed by the Basel Committee on Banking Supervision~~
~~CARES Act~~			~~The Coronavirus Aid, Relief, and Economic Security Act~~
~~CECL~~			~~Current expected credit losses~~
~~CET1 capital~~			~~Common Equity Tier 1 Capital, defined by Basel III capital rules~~
~~CFPB~~			~~Consumer Financial Protection Bureau~~
~~CLO~~			~~Collateralized loan obligation securities~~
~~CMBS~~			~~Commercial mortgage-backed securities~~
~~CME~~			~~Chicago Mercantile Exchange~~
~~CRA~~			~~Community Reinvestment Act~~
~~CVA~~			~~Credit valuation adjustments~~
~~DTA~~			~~Deferred tax asset~~
~~FASB~~			~~Financial Accounting Standards Board~~
~~FDIC~~			~~Federal Deposit Insurance Corporation~~
~~FHFA~~			~~Federal Housing Finance Agency~~
~~FHLB~~			~~Federal Home Loan Bank~~
~~FICO~~			~~Fair Isaac Corporation~~
~~FRB~~			~~Federal Reserve Bank~~
~~FTP~~			~~Funds Transfer Pricing, a matched maturity funding concept~~
~~GAAP~~			~~U.S. Generally Accepted Accounting Principles~~
~~GDP~~			~~Gross domestic product~~
~~Holding Company~~			~~Webster Financial Corporation~~
~~HSA~~			~~Health savings account~~
~~HSA Bank~~			~~A division of Webster Bank, National Association~~

~~LGD~~			~~Loss given default~~
~~LPL~~			~~LPL Financial Holdings Inc.~~
~~MSLP~~			~~Main Street Lending Program~~
~~NAV~~			~~Net asset value~~
~~NII~~			~~Net interest income~~
~~NOL~~			~~Net operating loss~~
~~OCC~~			~~Office of the Comptroller of the Currency~~
~~OCI/OCL~~			~~Other comprehensive income (loss)~~
~~OREO~~			~~Other real estate owned~~
PD			~~Probability of default~~
~~PPNR~~			~~Pretax, pre-provision net revenue~~
~~PPP~~			~~Small Business Administration Paycheck Protection Program~~
~~ROU asset~~			~~Right-of-use asset~~
~~RPA~~			~~Risk participation agreement~~
~~SEC~~			~~United States Securities and Exchange Commission~~
~~SERP~~			~~Supplemental defined benefit retirement plan~~
~~TDR~~			~~Troubled debt restructuring, defined in ASC 310-40 "Receivables-Troubled Debt Restructurings by Creditors"~~
~~VIE~~			~~Variable interest entity, defined in ASC 810-10 "Consolidation-Overall"~~
~~Webster Bank or the Bank~~			~~Webster Bank, National Association, a wholly-owned subsidiary of Webster Financial Corporation~~
~~Webster or the Company~~			~~Webster Financial Corporation, collectively with its consolidated subsidiaries~~


	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)	2021			2020			2021			2020
Earnings:
Net interest income	$	220,852		$	224,407		$	444,616		$	455,208
Provision for credit losses	(21,500)			40,000			(47,250)			116,000
Total non-interest income	72,702			60,076			149,459			133,454
Total non-interest expense	187,028			176,584			375,010			355,420
Net income	94,035			53,097			202,113			91,296
Earnings applicable to common shareholders	91,555			50,729			197,085			86,766
Share Data:
Weighted-average common shares outstanding - diluted	90,221			89,570			90,164			90,391
Diluted earnings per common share	$	1.01		$	0.57		$	2.19		$	0.96
Dividends and dividend equivalents declared per common share	0.40			0.40			0.80			0.80
Dividends declared per preferred share	328.13			328.13			656.25			656.25
Book value per common share	35.15			33.59			35.15			33.59
Tangible book value per common share (non-GAAP)	28.99			27.40			28.99			27.40
Selected Ratios:
Net interest margin	2.82		%	2.99		%	2.87		%	3.11		%
Return on average assets (annualized basis)	1.12			0.65			1.21			0.58
Return on average common shareholders' equity (annualized basis)	11.63			6.79			12.63			5.77
CET1 risk-based capital	11.66			11.17			11.66			11.17
Tangible common equity ratio (non-GAAP)	7.91			7.69			7.91			7.69
Return on average tangible common shareholders' equity (annualized basis) (non-GAAP)	14.26			8.47			15.51			7.20
Efficiency ratio (non-GAAP)	56.64			60.04			57.56			59.01


	At June 30,
(Dollars and shares in thousands, except per share data)	2020			2019
Tangible book value per common share (non-GAAP):
Shareholders' equity (GAAP)	$	3,174,779		$	3,065,217
Less: Preferred stock (GAAP)	145,037			145,037
Goodwill and other intangible assets (GAAP)	558,367			562,214
Tangible common shareholders' equity (non-GAAP)	$	2,471,375		$	2,357,966
Common shares outstanding	90,194			92,007
Tangible book value per common share (non-GAAP)	$	27.40		$	25.63

Tangible common equity ratio (non-GAAP):
Tangible common shareholders' equity (non-GAAP)	$	2,471,375		$	2,357,966
Total Assets (GAAP)	$	32,708,617		$	28,942,043
Less: Goodwill and other intangible assets (GAAP)	558,367			562,214
Tangible assets (non-GAAP)	$	32,150,250		$	28,379,829
Tangible common equity ratio (non-GAAP)	7.69		%	8.31		%


	Three months ended June 30,													Six months ended June 30,
									Increase (decrease)										Increase (decrease)
(Dollars in thousands)	2020		2019		Amount		Percent			2020		2019			Amount		Percent
Deposit service fees	$	35,839	$	43,118	$	(7,279)	(16.9)	%		$	78,409	$	86,142		$	(7,733)	(9.0)	%
Loan and lease related fees	6,968		6,558		410		6.3			13,464		14,377			(913)		(6.4)
Wealth and investment services	7,102		8,309		(1,207)		(14.5)			15,841		15,960			(119)		(0.7)
Mortgage banking activities	4,205		932		3,273		351.2			7,098		1,696			5,402		318.5
Increase in cash surrender value of life insurance policies	3,624		3,650		(26)		(0.7)			7,204		7,234			(30)		(0.4)
Gain on sale of investment securities, net	—		—		—		n/m			8		—			8		n/m

Other income	2,338		13,286		(10,948)		(82.4)			11,430		19,056			(7,626)		(40.0)
Total non-interest income	$	60,076	$	75,853	$	(15,777)	(20.8)			$	133,454	$	144,465		$	(11,011)	(7.6)


(In thousands)	At June 30, 2020		At December 31, 2019
Loans and leases	$	12,485,078	$	11,499,573
Deposits	5,400,036		4,382,051

Assets under administration/management (off-balance sheet)	2,181,697		2,304,350


	At June 30, 2020		At December 31, 2019
Non-performing loans and leases as a percentage of loans and leases	0.79	%	0.75	%
Non-performing assets as a percentage of loans and leases plus other real estate owned (OREO)	0.82		0.79
Non-performing assets as a percentage of total assets	0.55		0.52
ACL on loans and leases as a percentage of non-performing loans and leases	207.17		138.56
ACL on loans and leases as a percentage of loans and leases	1.64		1.04
Net charge-offs as a percentage of average loans and leases ⁽¹⁾	0.23		0.21
Ratio of ACL on loans and leases to net charge-offs ⁽¹⁾	7.40x		5.09x


	Short End of the Yield Curve							Long End of the Yield Curve
NII	-100bp	-50bp	+50bp	+100bp	-100bp	-50bp	+50bp	+100bp
June 30, 2020	n/a	n/a	0.3%	1.1%	n/a	(1.5)%	1.6%	3.2%
December 31, 2019	(5.1)%	(2.5)%	1.0 %	2.1 %	(4.7)%	(2.2)%	1.7 %	2.9 %


(Dollars in thousands)	(Dollars in thousands)	Book Value		Estimated Economic Value		Estimated Economic Value Change								(Dollars in thousands)	Book Value		Estimated Economic Value	Estimated Economic Value Change
																						Book Value	Estimated Economic Value	Estimated Economic Value Change
																		Book Value			Estimated Economic Value
June 30, 2020
June 30, 2021												June 30, 2021
Assets	Assets	$	32,708,617	$	32,715,483	n/a			$	(685,909)		Assets	$	33,753,752	$	33,481,272	n/a	$	(726,608)
Liabilities	Liabilities	29,533,838		29,812,710		n/a			(976,880)			Liabilities	30,424,047		29,437,861		n/a	(1,010,173)
Net	Net	$	3,174,779	$	2,902,773	n/a			$	290,971		Net	$	3,329,705	$	4,043,411	n/a	$	283,565
Net change as % base net economic value	Net change as % base net economic value					n/a			10.0		%	Net change as % base net economic value					n/a	7.0		%

December 31, 2019
December 31, 2020												December 31, 2020
Assets	Assets	$	30,389,344	$	29,984,052	$	598,578		$	(720,572)		Assets	$	32,590,690	$	32,546,388	n/a	$	(625,173)
Liabilities	Liabilities	27,181,574		26,226,758		839,154			(708,815)			Liabilities	29,356,065		29,357,878		n/a	(1,058,460)
Net	Net	$	3,207,770	$	3,757,294	$	(240,576)		$	(11,757)		Net	$	3,234,625	$	3,188,510	n/a	$	433,287
Net change as % base net economic value	Net change as % base net economic value					(6.4)		%	(0.3)		%	Net change as % base net economic value					n/a	13.6		%


	June 30, 2020		December 31, 2019
(In thousands, except share data)	(Unaudited)
Assets:
Cash and due from banks	$	198,680	$	185,341
Interest-bearing deposits	104,444		72,554
Investment securities available-for-sale, at fair value	3,183,624		2,925,833
Investment securities held-to-maturity (fair value of $5,745,559 and $5,380,653)	5,477,126		5,293,918
Allowance for credit losses on investment securities held-to-maturity	(309)		—
Investment securities held-to-maturity, net	5,476,817		5,293,918
Federal Home Loan Bank and Federal Reserve Bank stock	94,495		149,046
Loans held for sale (valued under fair value option $46,446 and $35,750)	46,446		36,053
Loans and leases	21,802,517		20,036,986
Allowance for credit losses on loans and leases	(358,522)		(209,096)
Loans and leases, net	21,443,995		19,827,890
Deferred tax assets, net	77,145		61,975
Premises and equipment, net	258,392		270,413
Goodwill	538,373		538,373
Other intangible assets, net	19,994		21,917
Cash surrender value of life insurance policies	557,325		550,651
Accrued interest receivable and other assets	708,887		455,380
Total assets	$	32,708,617	$	30,389,344
Liabilities and shareholders' equity:
Deposits:
Non-interest-bearing	$	6,193,757	$	4,446,463
Interest-bearing	20,162,240		18,878,283
Total deposits	26,355,997		23,324,746
Securities sold under agreements to repurchase and other borrowings	1,688,805		1,040,431
Federal Home Loan Bank advances	523,321		1,948,476
Long-term debt	570,029		540,364
Operating lease liabilities	170,731		174,396
Accrued expenses and other liabilities	224,955		153,161
Total liabilities	29,533,838		27,181,574
Shareholders’ equity:
Preferred stock, $0.01 par value; Authorized - 3,000,000 shares:
Series F issued and outstanding (6,000 shares)	145,037		145,037
Common stock, $0.01 par value; Authorized - 200,000,0000 shares:
Issued (93,686,311 shares)	937		937
Paid-in capital	1,103,756		1,113,250
Retained earnings	2,024,487		2,061,352
Treasury stock, at cost (3,492,707 and 1,659,749 shares)	(140,883)		(76,734)
Accumulated other comprehensive income (loss), net of tax	41,445		(36,072)
Total shareholders' equity	3,174,779		3,207,770
Total liabilities and shareholders' equity	$	32,708,617	$	30,389,344


	December 31, 2019				January 1, 2020
(In thousands)	Pre-ASC 326 Adoption		Impact of Adoption		Reported Under ASC 326
Assets:
Allowance for credit losses on investment securities held-to-maturity	$	—	$	(397)	$	(397)
Allowance for credit losses on loans and leases	(209,096)		(57,568)		(266,664)
Deferred tax assets, net	61,975		15,891		77,866

Liabilities and shareholders' equity:
Accrued expenses and other liabilities	153,161		9,139		162,300
Retained earnings	2,061,352		(51,213)		2,010,139


		Three months ended		Six months ended
		June 30, 2020		June 30, 2020			Three months ended June 30,				Six months ended June 30,
(In thousands)	(In thousands)	Municipal bonds and notes		Municipal bonds and notes		(In thousands)	2021		2020		2021		2020
Balance beginning of period	Balance beginning of period	$	312	$	—	Balance beginning of period	$	308	$	312	$	299	$	0
Adoption of ASU No. 2016-13 (CECL)	Adoption of ASU No. 2016-13 (CECL)	—		397		Adoption of ASU No. 2016-13 (CECL)	0		0		0		397
Recovery of credit losses		(3)		(88)
Provision (benefit) for credit losses						Provision (benefit) for credit losses	74		(3)		83		(88)
Balance end of period	Balance end of period	$	309	$	309	Balance end of period	$	382	$	309	$	382	$	309


		Investment Grade																																	Investment Grade
(In thousands)	(In thousands)	Aaa		Aa1		Aa2		Aa3		A1		A2		A3		Baa2		Not Rated		(In thousands)	Aaa		Aa1		Aa2		Aa3		A1		A2		A3		Baa2		Not Rated
Agency CMOs	Agency CMOs	$	—	$	138,529	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Agency CMOs	$	0	$	61,080	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Agency MBS	Agency MBS	—		2,766,764		—		—		—		—		—		—		—		Agency MBS	0		2,562,863		0		0		0		0		0		0		0
Agency CMBS	Agency CMBS	—		1,585,929		—		—		—		—		—		—		—		Agency CMBS	0		2,105,924		0		0		0		0		0		0		0
Municipal bonds and notes	Municipal bonds and notes	210,126		165,467		201,773		117,544		42,227		8,667		2,066		285		4,382		Municipal bonds and notes	208,615		120,173		227,856		108,619		36,087		8,468		2,066		190		3,121
CMBS	CMBS	233,367		—		—		—		—		—		—		—		—		CMBS	178,563		0		0		0		0		0		0		0		0
Total held-to-maturity	Total held-to-maturity	$	443,493	$	4,656,689	$	201,773	$	117,544	$	42,227	$	8,667	$	2,066	$	285	$	4,382	Total held-to-maturity	$	387,178	$	4,850,040	$	227,856	$	108,619	$	36,087	$	8,468	$	2,066	$	190	$	3,121


	At June 30, 2020					At December 31, 2019
(Dollars in thousands)	Amount		%	Amount		%
Commercial non-mortgage	$	7,070,220	32.4	$	5,313,989	26.5
Asset-based	943,187		4.3	1,049,978		5.2
Commercial real estate	6,217,065		28.5	5,959,969		29.7
Equipment financing	587,224		2.7	533,048		2.7
Residential	4,890,550		22.5	4,944,480		24.7
Home equity	1,908,289		8.8	1,998,631		10.0
Other consumer	202,449		0.9	219,266		1.1
Net deferred fees/costs and net premiums/discounts ⁽¹⁾	(16,467)		(0.1)	17,625		0.1
Total loans and leases	$	21,802,517	100.0	$	20,036,986	100.0


	At June 30, 2020
(In thousands)	Amortized Cost		Fair Value
Due in one year or less	$	1,085	$	1,089
Due after one year through five years	5,833		6,130
Due after five through ten years	264,751		277,660
Due after ten years	5,205,457		5,460,680
Total held-to-maturity debt securities	$	5,477,126	$	5,745,559


	At June 30, 2020
(In thousands)	Amortized Cost⁽¹⁾		Unrealized Gains		Unrealized Losses		Fair Value⁽²⁾

Agency CMO	$	182,484	$	7,339	$	(220)	$	189,603
Agency MBS	1,512,525		75,054		(343)		1,587,236
Agency CMBS	827,782		27,131		—		854,913
CMBS	472,418		433		(16,597)		456,254
CLO	86,705		6		(2,228)		84,483
Corporate debt	14,544		—		(3,409)		11,135
Available-for-sale securities	$	3,096,458	$	109,963	$	(22,797)	$	3,183,624

	At December 31, 2019
(In thousands)	Amortized Cost⁽¹⁾		Unrealized Gains		Unrealized Losses		Fair Value⁽²⁾

Agency CMO	$	184,500	$	2,218	$	(917)	$	185,801
Agency MBS	1,580,743		35,456		(4,035)		1,612,164
Agency CMBS	587,974		513		(6,935)		581,552
CMBS	432,085		38		(252)		431,871
CLO	92,628		45		(468)		92,205
Corporate debt	23,485		—		(1,245)		22,240
Available-for-sale securities	$	2,901,415	$	38,270	$	(13,852)	$	2,925,833


	At June 30, 2021
(In thousands)	Amortized Cost(1)		Unrealized Gains		Unrealized Losses		Fair Value(2)

Agency CMO	$	115,985	$	4,366	$	(23)	$	120,328
Agency MBS	1,339,769		47,666		(4,905)		1,382,530
Agency CMBS	939,055		10,509		(8,167)		941,397
CMBS	754,192		1,008		(230)		754,970
CLO	50,000		8		(44)		49,964
Corporate debt	14,569		11		(876)		13,704
Available-for-sale securities	$	3,213,570	$	63,568	$	(14,245)	$	3,262,893

	At December 31, 2020
(In thousands)	Amortized Cost(1)		Unrealized Gains		Unrealized Losses		Fair Value(2)

Agency CMO	$	148,711	$	6,000	$	(98)	$	154,613
Agency MBS	1,389,100		68,598		(289)		1,457,409
Agency CMBS	1,092,430		26,317		(1,514)		1,117,233
CMBS	512,759		1,082		(5,823)		508,018
CLO	76,693		0		(310)		76,383
Corporate debt	14,557		0		(1,437)		13,120
Available-for-sale securities	$	3,234,250	$	101,997	$	(9,471)	$	3,326,776


		At June 30, 2020																									At June 30, 2021
		Less Than Twelve Months						Twelve Months or Longer					Total									Less Than Twelve Months			Twelve Months or Longer				Total
(Dollars in thousands)	(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		# of Holdings	Fair Value		Unrealized Losses		(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		# of Holdings	Fair Value		Unrealized Losses

Agency CMO	Agency CMO	$	13,657	$	(118)	$	9,339	$	(102)	3	$	22,996	$	(220)	Agency CMO	$	3,879	$	(8)	$	2,580	$	(15)	3	$	6,459	$	(23)
Agency MBS	Agency MBS	28,377		(149)		13,154		(194)		27	41,531		(343)		Agency MBS	224,986		(4,687)		15,482		(218)		46	240,468		(4,905)
Agency CMBS	Agency CMBS	—		—		—		—		—	—		—		Agency CMBS	421,812		(8,167)		0		0		11	421,812		(8,167)
CMBS	CMBS	424,793		(16,204)		7,107		(393)		40	431,900		(16,597)		CMBS	285,792		(125)		117,796		(105)		29	403,588		(230)
CLO	CLO	64,791		(1,509)		17,982		(719)		4	82,773		(2,228)		CLO	—		—		24,956		(44)		1	24,956		(44)
Corporate debt	Corporate debt	3,480		(779)		7,655		(2,630)		3	11,135		(3,409)		Corporate debt	0		0		9,422		(876)		2	9,422		(876)
Available-for-sale in unrealized loss position	Available-for-sale in unrealized loss position	$	535,098	$	(18,759)	$	55,237	$	(4,038)	77	$	590,335	$	(22,797)	Available-for-sale in unrealized loss position	$	936,469	$	(12,987)	$	170,236	$	(1,258)	92	$	1,106,705	$	(14,245)


	At June 30, 2020
(In thousands)	30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		90 or More Days Past Due and Accruing		Non-accrual		Total Past Due and Non-accrual		Current		Total Loans and Leases
Commercial non-mortgage	$	6,931	$	579	$	—	$	67,542	$	75,052	$	6,939,355	$	7,014,407
Asset-based	—		—		—		138		138		940,386		940,524
Commercial real estate	1,206		1,165		198		15,902		18,471		6,188,843		6,207,314
Equipment financing	5,590		855		—		7,793		14,238		577,600		591,838
Residential	7,445		8,064		—		46,579		62,088		4,859,485		4,921,573
Home equity	4,603		1,764		—		34,022		40,389		1,883,624		1,924,013
Other consumer	845		670		—		1,217		2,732		200,116		202,848
Total	$	26,620	$	13,097	$	198	$	173,193	$	213,108	$	21,589,409	$	21,802,517


	At June 30, 2021
(In thousands)	Unpaid Principal Balance		Amortized Cost		Amortized Cost No Allowance		Amortized Cost With Allowance		Related Allowance
Commercial non-mortgage	$	122,891	$	97,270	$	43,936	$	53,334	$	8,488
Asset-based	2,499		2,375		2,375		0		0
Commercial real estate	24,581		21,130		7,329		13,801		1,808
Equipment financing	8,621		8,162		2,538		5,624		1,241
Residential	72,749		68,823		36,092		32,731		2,770
Home equity	46,364		41,286		30,162		11,124		1,668
Other consumer	412		412		6		406		122
Total	$	278,117	$	239,458	$	122,438	$	117,020	$	16,097


(In thousands)	At June 30, 2020
Remainder of 2020	$	13,089
2021	30,955
2022	27,803
2023	24,880
2024	21,432
Thereafter	79,784
Total operating lease liability payments	197,943
Less: Present value adjustment	27,212
Lease liabilities	$	170,731

Weighted-average remaining lease term - operating leases, in years	8.24
Weighted-average discount rate - operating leases	3.26		%


	Three months ended June 30, 2019														Six months ended June 30, 2019
(In thousands)	Securities Available For Sale		Derivative Instruments		Defined Benefit Pension and Other Postretirement Benefit Plans		Total		Securities Available For Sale		Derivative Instruments		Defined Benefit Pension and Other Postretirement Benefit Plans		Total
Beginning balance	$	(43,815)	$	(9,117)	$	(48,909)	$	(101,841)	$	(71,374)	$	(9,313)	$	(49,965)	$	(130,652)
OCI/OCL before reclassifications	34,409		(870)		—		33,539		61,968		(1,709)		—		60,259
Amounts reclassified from AOCL	—		1,056		1,056		2,112		—		2,091		2,112		4,203
Net current-period OCI	34,409		186		1,056		35,651		61,968		382		2,112		64,462
Ending balance	$	(9,406)	$	(8,931)	$	(47,853)	$	(66,190)	$	(9,406)	$	(8,931)	$	(47,853)	$	(66,190)


	At June 30, 2020
	Actual ⁽¹⁾						Minimum Requirement						Well Capitalized
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Webster Financial Corporation
CET1 risk-based capital	$	2,485,301	11.17	%	$	1,001,376	4.5	%	$	1,446,431	6.5	%
Total risk-based capital	2,985,837		13.42		1,780,223		8.0		2,225,279		10.0
Tier 1 risk-based capital	2,630,338		11.82		1,335,167		6.0		1,780,223		8.0
Tier 1 leverage capital	2,630,338		8.33		1,262,430		4.0		1,578,038		5.0
Webster Bank
CET1 risk-based capital	$	2,666,184	11.99	%	$	1,001,034	4.5	%	$	1,445,938	6.5	%
Total risk-based capital	2,944,269		13.24		1,779,616		8.0		2,224,519		10.0
Tier 1 risk-based capital	2,666,184		11.99		1,334,712		6.0		1,779,616		8.0
Tier 1 leverage capital	2,666,184		8.45		1,261,937		4.0		1,577,421		5.0


	At June 30, 2020															At December 31, 2019
	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:
Interest rate derivatives ⁽¹⁾	$	1,150,000	$	48,793	$	75,000	$	331	$	1,225,000	$	11,855		$	300,000	$	3,153
Not designated as hedging instruments:
Interest rate derivatives ⁽¹⁾	4,565,049		363,143		4,517,068		17,874		4,869,139		133,455			4,090,522		9,732
Mortgage banking derivatives ⁽²⁾	94,812		1,846		224		1		27,873		329			57,000		110
Other ⁽³⁾	99,637		270		313,020		1,332		76,544		398			275,279		818
Total not designated as hedging instruments	4,759,498		365,259		4,830,312		19,207		4,973,556		134,182			4,422,801		10,660
Gross derivative instruments, before netting	$	5,909,498	414,052		$	4,905,312	19,538		$	6,198,556	146,037			$	4,722,801	13,813
Less: Master netting agreements			12,318				12,318				4,779					4,779
Cash collateral			36,739				6,313				8,100					1,871
Total derivative instruments, after netting			$	364,995			$	907			$	133,158				$	7,163


	At June 30, 2020
(In thousands)	Gross Amount		Offset Amount		Net Amount on Balance Sheet		Amounts Not Offset		Net Amounts
Asset derivatives	$	49,104	$	49,057	$	47	$	487	$	534
Liability derivatives	18,691		18,631		60		111		171

	At December 31, 2019
(In thousands)	Gross Amount		Offset Amount		Net Amount on Balance Sheet		Amounts Not Offset		Net Amounts
Asset derivatives	$	13,012	$	12,879	$	133	$	299	$	432
Liability derivatives	6,710		6,650		60		329		389


	Recognized In	Three months ended June 30,				Six months ended June 30,
(In thousands)	Net Interest Income	2021		2020		2021		2020




Interest rate derivatives	Long-term debt	$	123	$	1,228	$	244	$	2,349
Interest rate derivatives	Interest and fees on loans and leases	(2,645)		(1,837)		(5,227)		(1,097)
Net recognized on cash flow hedges		$	(2,522)	$	(609)	$	(4,983)	$	1,252


Condensed Consolidated Balance Sheet Line Item in Which Hedged Item is Located	Carrying Amount of Previously Hedged Item				Cumulative Amount of Fair Value Hedging Adjustment Included in Carrying Amount
(In thousands)	At June 30, 2021		At December 31, 2020		At June 30, 2021		At December 31, 2020
Long-term debt	$	341,488	$	344,164	$	41,488	$	44,164


Consolidated Balance Sheet Line Item in Which Hedged Item is Located	Carrying Amount of Hedged Item						Cumulative Amount of Fair Value Hedging Adjustment Included in Carrying Amount ⁽¹⁾
(In thousands)	At June 30, 2020		At December 31, 2019		At June 30, 2020		At December 31, 2019
Long-term debt	$	346,841	$	317,486	$	46,841	$	17,486


	At June 30, 2021
(In thousands)	Level 1		Level 2		Level 3		Total
Financial assets held at fair value:

Agency CMO	$	0	$	120,328	$	0	$	120,328
Agency MBS	0		1,382,530		0		1,382,530
Agency CMBS	0		941,397		0		941,397
CMBS	0		754,970		0		754,970
CLO	0		49,964		0		49,964
Corporate debt	0		13,704		0		13,704
Total available-for-sale investment securities	0		3,262,893		0		3,262,893
Gross derivative instruments, before netting (1)	317		225,917		0		226,234
Originated loans held for sale	0		4,335		0		4,335
Investments held in Rabbi Trust	3,617		0		0		3,617
Alternative investments (2)	0		0		0		18,002
Total financial assets held at fair value	$	3,934	$	3,493,145	$	0	$	3,515,081
Financial liabilities held at fair value:
Gross derivative instruments, before netting (1)	$	51	$	16,241	$	0	$	16,292


(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling		Consolidated Total
At June 30, 2020	$	12,527,397	$	77,992	$	10,150,431	$	9,952,797	$	32,708,617
At December 31, 2019	11,541,803		80,176		9,348,727		9,418,638		30,389,344


	At June 30, 2021
(In thousands)	Commercial Banking		HSA Bank		Retail Banking		Corporate and Reconciling		Consolidated Total
Goodwill	$	131,000	$	21,813	$	385,560	$	0	$	538,373
Total assets	$	14,837,710	$	78,054	$	7,432,340	$	11,405,648	$	33,753,752

	At December 31, 2020
(In thousands)	Commercial Banking		HSA Bank		Retail Banking		Corporate and Reconciling		Consolidated Total
Goodwill	$	131,000	$	21,813	$	385,560	$	0	$	538,373
Total assets	$	14,732,792	$	80,352	$	7,726,287	$	10,051,259	$	32,590,690


Period	Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Amount Available for Repurchase Under the Plans or Programs ⁽²⁾		Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Amount Available for Repurchase Under the Plans or Programs (2)
April	April	560	$	23.29	—	$	123,443,785	April	1,580	$	55.24	—	$	123,443,785
May	May	869	24.61		—	123,443,785		May	—	—		—	123,443,785
June	June	836	29.65		—	123,443,785		June	275	56.92		—	123,443,785
Total	Total	2,265	26.14		—	123,443,785		Total	1,855	55.49		—	123,443,785