The non-GAAP financial measures identified in the preceding table provide both management and investors with information useful in understanding Webster'sthe Company's financial position, results of operations, the strength of its capital position, and overall business performance. These measures are used by management for internal planning and forecasting purposes, as well as by securities analysts, investors, and other interested parties to assess peer company operating performance. Management believes that this presentation, together with the accompanying reconciliations, provides investors with a more complete understanding of the factors and trends affecting Webster'sthe Company's business and allows investors to view its performance in a similar manner.

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

These non-GAAP financial measures should not be considered a substitute for GAAP basis financial measures. Because
non-GAAP financial measures are not standardized, it may not be possible to compare these with other companies that present financial measures having the same or similar names.

Net interest income is Webster'sthe Company's primary source of revenue, representing 79.1%89.4% and 74.5%79.1% of total revenues for the three months ended March 31, 2023, and 2022, and 2021, respectively, andrespectively. Net interest income is the difference between interest income on interest-earning assets such as(i.e., loans and leases and investment securities,securities) and interest expense on interest-bearing liabilities such as
(i.e., deposits and borrowings,borrowings), which are used to fund interest-earning assets and other activities. Net interest margin is calculated as the ratio of tax-equivalentFTE net interest income to average interest-earning assets. Tax-equivalent

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

Net interest income and net interest margin are influenced by the volume and mix of interest-earning assets and interest-bearing liabilities, changes in interest rate levels, re-pricing frequencies, contractual maturities, prepayment behavior, and the use of interest rate derivative financial instruments. These factors are affected by changes in economic conditions, which impacts monetary policies, competition for loans and deposits, as well as the extent of interest lost on non-performing assets.

Net interest income increased $170.4$201.1 million, or 76.2%51.0%, from $223.8 million for the three months ended March 31, 2021, to $394.2 million for the three months ended March 31, 2022. On a fully tax-equivalent basis, net interest income increased $176.1 million. Net interest margin increased 29 basis points from 2.92%2022, to $595.3 million for the three months ended March 31, 2021, to2023. On a FTE basis, net interest income increased $208.8 million. Net interest margin increased 45 basis points from 3.21% for the three months ended March 31, 2022. The increase is primarily attributed2022, to the merger with Sterling, and includes net purchase accounting accretion from acquired loans and leases, investment securities, and interest-bearing liabilities.

Average total interest-earning assets increased $15.8 billion, or 31.3%, from $50.3 billion for the three months ended March 31, 2022, to $66.1 billion for the three months ended March 31, 2023, primarily due to increases of $14.4$14.2 billion, $1.2 billion, $0.3 billion, and $4.5$0.1 billion, in average loans and leases, and average investment securities, average FHLB and FRB stock, and average interest-bearing deposits held at the FRB, respectively. The average yield on interest-earning assets increased 25175 basis points from 3.08% for the three months ended March 31, 2021, to 3.33% for the three months ended March 31, 2022. The increase2022, to 5.08% for the three months ended March 31, 2023, primarily due to the higher interest rate environment, partially offset by a decrease in purchase accounting accretion on interest-earning assets and the increase in average yieldthat were both impacted by the Sterling merger.acquired from Sterling.

Average interest-bearing liabilitiesloans and leases increased $17.9$14.2 billion, or 60.7%39.5%, from $29.5$35.9 billion for the three months ended March 31, 2021,2022, to $50.1 billion for the three months ended March 31, 2023, primarily due to the full quarter impact of the Sterling merger on balances in 2023 as compared to the two-thirds impact for the quarter in 2022, and organic loan growth. At March 31, 2023, and 2022, average loans and leases comprised 75.8% and 71.4% of average total interest-earning assets, respectively. The average yield on loans and leases increased 190 basis points from 3.90% for the three months ended March 31, 2022, to 5.80% for the three months ended March 31, 2023, primarily due to the higher interest rate environment, partially offset by a decrease in purchase accounting accretion on loans and leases that were acquired from Sterling.

Average total interest-bearing liabilities increased $15.1 billion, or 31.9%, from $47.4 billion for the three months ended March 31, 2022, to $62.5 billion for the three months ended March 31, 2023, primarily due to increases of $17.6$8.9 billion, $5.7 billion, $0.7 billion, and $0.3$0.2 billion in average total deposits, average FHLB advances, average federal funds purchased, and average long-term debt, partially offset by a $0.4 billion decrease of $124.9 million in average FHLB advances. Average deposit growth was primarily impacted by the merger with Sterling and the strong liquidity position of retail and commercial customers.securities sold under agreements to repurchase. The average rate on interest-bearing liabilities decreased 3increased 139 basis points from 0.16% for the three months ended March 31, 2021, to 0.13% for the three months ended March 31, 2022, to 1.52% for the three months ended March 31, 2023, primarily due to customers' migrationthe higher interest rate environment.

Average total deposits increased $8.9 billion, or 19.4%, from higher cost time$45.9 billion for the three months ended March 31, 2022, to $54.8 billion for the three months ended March 31, 2023, reflecting increases of $1.4 billion and $7.5 billion in
non-interest-bearing deposits and interest-bearing deposits, respectively. The overall increase in deposits was primarily due to more liquid, lower cost deposit products, which wasthe full quarter impact of the Sterling merger on balances in 2023 as compared to the two-thirds impact for the quarter in 2022, and the acquisition of interLINK, partially offset by the effect of customers rebalancing their deposit concentrations due to the current banking environment. At March 31, 2023, and 2022, average total deposits comprised 87.7% and 96.9% of total average interest-bearing liabilities, respectively. The average rate on deposits increased 104 basis points from 0.07% for the three months ended March 31, 2022, to 1.11% for the three months ended March 31, 2023, primarily due to the higher interest rate environment and growth in higher costing deposit products. Higher cost time deposits as a percentage of average total
interest-bearing deposits increased from 7.3% for the three months ended March 31, 2022, to 9.5% for the three months ended March 31, 2023, primarily due to a shift in customer preferences from lower rate checking and savings products into higher rate certificates of deposit products.

Average long-term debt increased $0.2 billion, or 19.6%, from $0.9 billion for the three months ended March 31, 2022, to $1.1 billion for the three months ended March 31, 2023, primarily due to the full quarter impact of the Sterling merger on balances in 2023 as compared to the two-thirds impact for the quarter in 2022. At March 31, 2023, and 2022, average long-term debt comprised 1.7% and 1.9% of average total interest-bearing liabilities, respectively. The average rate on long-term debt increased 31 basis points from 3.34% for the three months ended March 31, 2022, to 3.65% for the three months ended March 31, 2023, primarily due to the full quarter rate impact in 2023 of the subordinated debt assumed from Sterling as compared to the two-thirds impact for the quarter in 2022.

Average securities sold under agreements to repurchase decreased $0.4 billion, or 57.7% from $0.6 billion for the merger.

The provision for credit losses increased $214.6totaled $46.7 million or 833.4%, from a benefit of $25.8 million for the three months ended March 31, 2021 to an expense ofand $188.8 million for the three months ended March 31, 2022.2023, and 2022, respectively. The increase is primarily attributed tobalance for the three months ended March 31, 2022, included the establishment of the initial ACL of $175.1 million for non-purchased credit-deteriorated (PCD)non-PCD loans and leases that were acquired from Sterling. Sterling in the merger. Excluding this charge, the provision for credit losses increased $33.0 million, primarily due to the impact of the current macroeconomic environment on credit performance and organic loan growth.

During the three months ended March 31, 20222023, and 2021,2022, total net charge-offs were $8.9$24.5 million and $5.3$8.9 million, respectively. The $3.6net increase of $15.6 million increase is primarily attributeddue to an increased volume ofincrease in net charge-offs in the asset-based lending and commercial real estate categories, partially offset by a decrease in net charge-offs in the commercial non-mortgage portfolio, partially offset by a decreased volume of net charge-offs in the commercial real estate and other consumer portfolios.category.

Additional information regarding the Company's provision for credit losses and ACL can be found under the sections captioned "Loans and Leases" through "Allowance for Credit Losses"Losses on Loans and Leases" contained elsewhere in this
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Total non-interest income increased $27.3decreased $33.2 million, or 35.5%32.0%, from $76.8 million for the three months ended March 31, 2021 to $104.0 million for the three months ended March 31, 2022, primarily due to increases in deposit service fees, loan and lease related fees, the cash surrender value of life insurance policies, and other income, all of which were primarily driven by the merger with Sterling, partially offset by a decrease in mortgage banking activities.

Deposit service fees decreased $2.4 million, or 5.0%, from $47.8 million for the three months ended March 31, 2022, primarily due to the merger with Sterling, as well as higher interchange income from increased debit card spending in the HSA and Consumer Banking segments.

Total non-interest expense increased $171.8decreased $27.3 million, or 91.4%7.6%, from $188.0 million for the three months ended March 31, 2021 to $359.8 million for the three months ended March 31, 2022, primarily due to increases in compensation and benefits, occupancy, technology and equipment, intangible assets amortization, professional and outside services, and other expense, all of which were primarily driven by the merger with Sterling.

Compensation and benefits decreased $10.8 million, or 5.9%, from $184.0 million for the three months ended March 31, 2022, primarily due to $41.6 million of merger-related expenses, which included $26.9 million and $11.9 million of severance and retention, respectively, and higher salaries and incentives related to the increase in employees as a result of the merger, partially offset by a decrease in strategic initiatives severance charges.

Other expense increased $4.4 million, or 13.6%, from $32.6 million for the three months ended March 31, 2022, primarily due to the additional operating lease costs and depreciation related to the acquired Sterling branches and corporate offices, partially offset by a decrease in strategic initiatives charges.

Deposit insurance increased $7.1 million, or 136.0%, from $5.2 million for the three months ended March 31, 2022, primarily due to $19.1 million of merger-related expenses, which included $17.7 million in contract termination costs, and an increase in technology and equipment service contracts due to the impact of the merger with Sterling.

Intangible assets amortization increased $3.1 million, or 48.7%, from $6.4 million for the three months ended March 31, 2022, to $9.5 million for the three months ended March 31, 2023, due to the additional amortization expense related to the broker dealer relationship and non-competition agreement intangible assets recorded in connection with the interLINK acquisition, and the full quarter impact in 2023 of accelerated amortization on core deposits and customer relationship intangible assets acquiredrecorded in connection with the Sterling merger and Bend acquisition.

WebsterThe Company recognized income tax (benefit) expense of $(33.6)$65.8 million and $30.2an income tax benefit of $33.6 million for the three months ended March 31, 2022,2023, and 2021,2022, respectively, reflecting an effective tax rate of 23.0% for the three months ended March 31, 2023, and an effective tax benefit rate of 66.7% for the three months ended March 31, 2022, and an effective tax expense rate of 21.8% for the three months ended March 31, 2021.2022.

The income tax benefit and related effective tax benefit rateof $33.6 million for the three months ended March 31,first quarter of 2022 reflectsreflected the effectsrecognition of the pre-tax net loss as well as tax-exempt income and the tax credits recognized during the period, and a $13.7 million deferred state and local tax (SALT) benefitbenefits associated with the merger with Sterling, making comparisons to the current period not meaningful. The $65.8 million of which $9.9 million related to a change in management's estimate aboutincome tax expense and the realizability23.0% effective tax rate for the first quarter of its SALT deferred tax assets (DTAs) due to2023 reflects the application of an estimated increase in future taxable income. These effects were partially offset byannual effective tax rate of 22.3% for 2023 and the effectrecognition of $21.0 million of merger-related expenses recognizeddiscrete items during the period that were estimated to be nondeductible for income tax purposes.

Additional information regarding Webster'sthe Company's income taxes, including its DTAs, can be found within Note 11:9: Income Taxes in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2021.2022.

Webster'sThe Company's operations are organized into three reportable segments that represent its primary businesses: Commercial Banking, HSA Bank, and Consumer Banking. These segments reflect how executive management responsibilities are assigned, how discrete financial information is evaluated, the type of customer served, and how products and services are provided. Segments are evaluated using pre-tax, pre-provision net revenue (PPNR).PPNR. Certain Treasury activities, including the operations of interLINK, along with the amounts required to reconcile profitability metrics to those reported in accordance with GAAP, are included in the Corporate and Reconciling category. Additional information regarding the Company's reportable segments and its segment reporting methodology can be found within Note 17:16: Segment Reporting in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.

The following is a description of Webster’sthe Company’s three reportable segments and their primary services:

Commercial Banking's PPNR increased $123.0$74.6 million, or 108.3%31.5%, for the three months ended March 31, 20222023, as compared to the three months ended March 31, 2021,2022, due to increasesan increase in both net interest income and non-interest income, partially offset by a decrease in non-interest income and an increase in non-interest expense, all of which were primarily driven by the merger with Sterling.expense. The $145.6$97.2 million increase in net interest income is primarily attributeddue to incrementalthe full quarter impact of the Sterling merger on balances in 2023 as compared to the two-thirds impact for the quarter in 2022, organic loan growth, and deposit balances acquired from Sterling, and loan and deposit growth.the higher interest rate environment. The $20.4$3.3 million increasedecrease in non-interest income is primarily attributed to incremental fee income due to the merger,lower prepayment penalties, cash management fees, and loan and lease relatedcustomer interest rate derivative activities, partially offset by higher syndication fees. The $43.0$19.3 million increase in non-interest expense is primarily attributed to incremental expenses incurred relateddue to the acquiredfull quarter impact of expenses from the Sterling commercial business, which was partially offset bymerger in 2023 as compared to the benefits of costs savings initiatives implemented overtwo-thirds impact for the course of 2021.quarter in 2022.

Loans and leases increased $19.7$1.2 billion, or 129.6%2.9%, at March 31, 2022,2023, as compared to December 31, 2021,2022, primarily due to organic growth in the merger with Sterlingcommercial non-mortgage and growth withincommercial real estate categories, partially offset by net principal paydowns in the sponsorwarehouse lending, equipment finance, and specialty line of business.asset-based lending categories. Total portfolio originations for the three months ended March 31, 2023, and 2022, and 2021 were $2.0$3.0 billion and $1.0$2.0 billion, respectively. The $1.0 billion increase was primarily attributeddue to the timing of the Sterling merger with Sterling, along with increasedin 2022, and an increase in commercial non-mortgage originations.

Deposits increased $12.0decreased $1.3 billion, or 126.1%6.5%, at March 31, 2022,2023, as compared to December 31, 2021,2022, primarily resulting from customers rebalancing their deposit concentrations due to the merger with Sterling, along with seasonality of municipal deposit products and client acquisitions.current banking environment.

Commercial Banking held $0.7$0.8 billion and $0.8$0.6 billion in assets under administration and $2.0$1.9 billion and $2.1$1.7 billion in assets under management at March 31, 2022,2023, and December 31, 2021,2022, respectively. The combined $0.2increase of $0.4 billion, decrease, or 6.2%18.2%, was primarily due to customers shifting their deposits into investment accounts to purchase U.S. Treasury securities with government-backing, and higher valuations in the equity markets during the three months ended March 31, 2022.2023.

HSA Bank's pre-tax net revenue increased $2.0$17.0 million, or 6.1%48.3%, for the three months ended March 31, 20222023, as compared to the three months ended March 31, 2021,2022, primarily due to an increase in net interest income, which was partially offset by a decrease in non-interest income and an increase in non-interest expense. Non-interest income remained flat on a comparative basis. The $2.5$27.2 million increase in net interest income is primarily attributeddue to an increase in the net deposit interest rate spread on deposits and overallorganic deposit growth. The $0.4$2.9 million decrease in non-interest income is primarily due to lower customer account service fees. The $7.3 million increase in non-interest expense is primarily attributeddue to incrementalan increase in compensation costs, higher service contract expenses related to additional account holders, and the full quarter of expenses expenses from Bend's acquired business, which was partially offset by lower compensation and benefits costs.the Bend acquisition in 2023 compared to the one-half impact for the quarter in 2022.

Deposits increased $406.8 million,$0.3 billion, or 5.5%4.1%, at March 31, 2022,2023, as compared to December 31, 2021,2022, primarily due to an increase in the number of account holders and organic deposit growth, which was partially offset by a decrease in third party administrator deposits.growth. HSA deposits accounted for approximately 14.4%15.0% and 24.8%14.7% of Webster'sthe Company's total consolidated deposits at March 31, 2022,2023, and December 31, 2021, respectively, with the lower mix driven by the inflow of deposits as a result of the merger with Sterling.2022, respectively.

Assets under administration, through linked investment accounts, increased $42.8 million,$0.4 billion, or 1.1%11.3%, at March 31, 2022,2023, as compared to December 31, 2021,2022, primarily due to additional account holders and balances from the acquisition of Bend, which was partially offset byhigher valuations in the equity markets during the three months ended March 31, 2022.2023.

Consumer Banking's PPNR increased $31.8$60.6 million, or 86.1%87.7%, for the three months ended March 31, 20222023, as compared to the three months ended March 31, 2021,2022, due to increasesan increase in both net interest income and non-interest income, partially offset by a decrease in non-interest income and an increase in non-interest expense, all of which were primarily driven by the merger with Sterling.expense. The $47.2$73.9 million increase in net interest income is primarily attributeddue to incremental loanthe full quarter impact of the Sterling merger on balances in 2023 as compared to the two-thirds impact for the quarter in 2022, and deposit balances acquired from Sterling, and loan and deposit growth.the higher interest rate environment. The $5.0$1.9 million increasedecrease in non-interest income is primarily attributed to incremental fee income due to lower net investment services income driven by the merger, and loan and lease related fees.outsourcing of the consumer investment services platform in the fourth quarter of 2022, partially offset by higher deposit service fee income. The $20.4$11.4 million increase in non-interest expense is primarily attributed to incremental expenses incurred relateddue to the acquiredfull quarter impact of expenses from the Sterling consumer business, which wasmerger in 2023 as compared to the two-thirds impact for the quarter in 2022, partially offset by thelower compensation and benefits of costs savings initiatives implemented over the course of 2021.expenses.

Loans increased $1.5 billion,decreased $7.4 million, or 21.6%0.1%, at March 31, 2022,2023, as compared to December 31, 2021,2022, primarily due to the merger with Sterling and residential mortgage loan growth, partially offset by net principal paydowns in home equity loans,balances and the continued run-off of consumer Lending Club loans.loans, partially offset by growth in residential mortgages. Total portfolio originations during the three months ended March 31, 2023, and 2022, and 2021 were $0.6$0.3 billion and $0.8$0.6 billion, respectively. The $0.3 billion decrease was primarily attributeddue to anthe increase in market rates, which resulted in lower residential mortgage loan originations.

Deposits increased $11.2$0.1 billion, or 86.6%0.4%, at March 31, 20222023, as compared to December 31, 2021,2022, as customer preferences shifted from lower rate checking and savings products into higher rate certificates of deposit products.

Assets under administration decreased $0.1 billion, or 1.6% at March 31, 2023, as compared to at December 31, 2022, primarily due to the merger with Sterling. Customer preferences for maintaining liquidity resulted in higher balances in small business and consumer transaction accounts, particularly across savings accounts and money markets, as account holders with maturing certificates of deposit migrated to more liquid deposit products.

Through its Corporate Treasury function, Websterthe Company maintains and invests in debt securities that are primarily used to provide a source of liquidity for operating needs, to generate interest income, and as a means to manage the Company's
interest-rate risk. Webster's debtThe Company's investment securities are classified into two major categories: available-for-sale and
held-to-maturity.

The ALCO manages the Company's debt securities in accordance with regulatory guidelines and corporate policies, which include limitations on aspects such as concentrations in and types of investments, as well as minimum risk ratings per type of security. In addition, the OCC may further establish individual limits on certain types of investments if the concentration in such investment presents a safety and soundness concern. At March 31, 20222023, and December 31, 2021, Webster2022, the Company had investment securities with a total net carrying value of $15.1$14.9 billion and $10.4$14.5 billion, respectively, with an average risk weighting for regulatory purposes of 19.5%17.4% and 12.5%19.0%, respectively. Although the Bank held the entirety of Webster'sthe Company's investment portfolio at both March 31, 20222023, and December 31, 2021,2022, the Holding Company may also directly hold investments.