~~0000801337us-gaap:OperatingSegmentsMemberwbs:HSABankMember2021-04-012021-06-30~~

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

_________________________________________________________________________________________________________________________________________-___________________________________________________________________________________________________

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~June 30, 2022~~March 31, 2023

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____ to ____

Commission File Number: 001-31486

WEBSTER FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

______________________________________________________________________________________


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

200 Elm Street, Stamford, Connecticut 06902

(Address and zip code of principal executive offices)

(203) 578-2202

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock, par value $0.01 per share	WBS	New York Stock Exchange
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
Depositary Shares, each representing 1/40th interest in a share	WBS-PrG	New York Stock Exchange
of 6.50% Series G Non-Cumulative Perpetual Preferred Stock

Indicate by check mark whether the ~~registrant:~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and ~~"emerging~~“emerging growth ~~company"~~company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

~~At July 29, 2022, the~~The number of shares of common stock, par value $.01 per share, outstanding as of April 28, 2023 was ~~175,833,610.~~174,744,977.

INDEX


		Page No.

Key to Acronyms and Terms		ii
Forward-Looking Statements		iii

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3430

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7873

Item 4.	Controls and Procedures	7873

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	7975

Item 1A.	Risk Factors	7975

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7975

Item 3.	Defaults Upon Senior Securities	7976

Item 4.	Mine Safety Disclosures	7976

Item 5.	Other Information	7976

Item 6.	Exhibits	8077

EXHIBIT INDEX		8077

SIGNATURES		8178

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

KEY TO ACRONYMS AND TERMS


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
~~(AOCL)~~ AOCI			Accumulated other comprehensive ~~(loss)~~ income
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
Bend			Bend Financial, Inc.
BHC Act			Bank Holding Company Act of 1956, as amended
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
COVID-19			Coronavirus
CRA			Community Reinvestment Act of 1977
DTA			Deferred tax asset
EAD			Exposure at default
FASB			Financial Accounting Standards Board
FDIC			Federal Deposit Insurance Corporation
FHLB			Federal Home Loan Bank
FICO			Fair Isaac Corporation
FRB			Federal Reserve Bank
FTE			Fully tax-equivalent
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

interLINK			Interlink Insured Sweep LLC
IRA			Inflation Reduction Act
ITGC			Information technology general controls
LGD			Loss given default
LIBOR			London Interbank Offered Rate
LIHTC			~~Low income~~Low-income housing tax credit
~~Moody's~~MBS			~~Moody's Investor Services~~Non-agency mortgage-backed securities
NAV			Net asset value
OCC			Office of the Comptroller of the Currency
OPEB			Other post-employment medical and life insurance benefits
OREO			Other real estate owned
PCD			Purchased ~~credit deteriorated~~credit-deteriorated
PD			Probability of default
PPNR			Pre-tax, pre-provision net revenue
PPP			Small Business Administration Paycheck Protection Program
~~ROU~~			~~Right-of-use~~
~~S&P~~			~~Standard and Poor's Rating Services~~
SALT			State and local tax
SEC			United States Securities and Exchange Commission
SERP			Supplemental executive defined benefit retirement plan
SOFR			Secured overnight financing rate
Sterling			Sterling Bancorp, collectively with its consolidated subsidiaries
TDR			Troubled debt restructuring, defined in ASC 310-40 "Receivables - Troubled Debt Restructurings by Creditors"
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

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains ~~"forward-looking~~“forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as ~~"believes," "anticipates," "expects," "intends," "targeted," "continue," "remain," "will," "should," "may," "plans," "estimates,"~~“believes,” “anticipates,” “expects,” “intends,” “targeted,” “continue,” “remain,” “will,” “should,” “may,” “plans,” “estimates,” and similar references to future periods. However, these words are not the exclusive means of identifying such statements.

Examples of forward-looking statements include, but are not limited to:

▪projections of revenues, expenses, income or loss, earnings or loss per share, ~~allowance for credit losses (ACL), expense savings,~~ and other financial items;

▪statements of plans, objectives, and expectations of ~~Webster Financial Corporation (Webster)~~the Company or its management or Board of Directors;

▪statements of future economic performance; and

▪statements of assumptions underlying such statements.

Forward-looking statements are based on ~~Webster’s~~the Company’s current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. ~~Webster’s~~The Company’s actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Factors that could cause our actual results to differ from those discussed in any forward-looking statements include, but are not limited to:

▪our ability to successfully integrate the operations of Webster and Sterling ~~Bancorp (Sterling)~~ and realize the anticipated benefits of the merger, including our ability to successfully complete our core conversion in the anticipated ~~timeframe and the consolidation of our corporate real estate;~~timeframe;

▪our ability to successfully execute our business plan and strategic initiatives, and manage any risks or uncertainties;

▪volatility in our stock price due to investor sentiment, including following bank failures during the first fiscal quarter of 2023, and the acquisition of such failed banks (or their assets), by stronger banks within the U.S. banking system;

▪local, regional, national, and international economic conditions, and the impact they may have on us or our customers;

▪volatility and disruption in national and international financial markets, including as a result of geopolitical conflict, such as the war between Russia and Ukraine;

▪the continued effects from the COVID-19 pandemic, or the potential adverse effects ~~of the ongoing novel coronavirus (COVID-19) pandemic, or other unusual and infrequently occurring events,~~from future pandemics, and any governmental or societal responses thereto;

▪unforeseen events, such as natural disasters;

▪changes in laws and regulations, or existing laws and regulations that we become subject to, including those concerning banking, taxes, dividends, securities, insurance, and healthcare, with which we and our subsidiaries must comply;

▪adverse conditions in the securities markets that could lead to impairment in the value of our ~~investment~~ securities ~~and goodwill;~~portfolio;

▪inflation, monetary fluctuations, the possibility of a recession, and changes in interest rates, including the impact of such changes on economic conditions, customer behavior, funding costs, and our loans and leases and securities portfolios;

▪the replacement of, and transition from, ~~the London Interbank Offered Rate (LIBOR)~~LIBOR to ~~the Secured Overnight Financing Rate (SOFR)~~SOFR as the primary interest rate benchmark;

▪the timely development and acceptance of new products and services, and the perceived value of those products and services by customers;

▪changes in deposit flows, consumer spending, borrowings, and savings habits;

▪our ability to implement new technologies and maintain secure and reliable technology systems;

▪the effects of any cyber threats, attacks or events, or fraudulent ~~activity;~~activity, including those that involve our third-party vendors and service providers;

▪performance by our counterparties and third-party vendors;

▪our ability to increase market share and control expenses;

▪changes in the competitive environment among banks, financial holding companies, and other traditional and non-traditional financial ~~services~~service providers;

▪our ability to maintain adequate sources of funding and liquidity;

▪changes in the level of non-performing assets and charge-offs;

▪changes in estimates of future reserve requirements based upon ~~the~~ periodic review ~~thereof~~ under relevant regulatory and accounting requirements;

▪the effect of changes in accounting policies and practices applicable to us, including impacts of recently adopted accounting guidance;

▪our inability to remediate the material weaknesses in our internal control related to ineffective ITGCs;

▪legal and regulatory developments, including the resolution of legal proceedings or regulatory or other governmental inquiries, and the results of regulatory examinations or reviews; and

▪our ability to appropriately address any environmental, social, governmental, and sustainability concerns that may arise from our business activities.

Any forward-looking statement in this Quarterly Report on Form 10-Q speaks only as of the date on which it is made. Factors or events that could cause ~~Webster's~~the Company's actual results to differ may emerge from time to time, and it is not possible for usthe Company to predict all of them. ~~Webster~~The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as may be required by law.

iii

PART I – FINANCIAL INFORMATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Introduction~~

~~This~~The following discussion and analysis provides information that management believes is necessary to understand ~~Webster's financial condition, changes in~~the Company's financial condition, results of operations, and cash flows for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, as compared to ~~2021. The following~~2022. This information should be read in conjunction with the Company's Consolidated Financial Statements, and accompanying Notes thereto, for the year ended December 31, 2021, included in Webster Financial Corporation's Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (SEC) on February 25, 2022, and in conjunction with the Condensed Consolidated Financial Statements, and accompanying Notes thereto, ~~included~~contained in Part I - Item 1. Financial ~~Statements.~~Statements of this report, and the Consolidated Financial Statements, and accompanying Notes thereto, contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 10, 2023. The Company's financial condition, results of operations, and cash flows for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, are not necessarily indicative of ~~the~~ future results that may be attained for the entire year or other interim periods.

Executive ~~Summary~~Overview

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, ~~of 1956, as amended (BHC Act),~~ incorporated under the laws of Delaware in 1986, and headquartered in Stamford, Connecticut. Webster Bank, ~~National Association (Webster Bank) is the principal consolidated subsidiary of Webster Financial Corporation. Webster Bank, and~~along with its HSA Bank division, ~~(HSA Bank), deliver~~is a leading commercial bank in the Northeast that delivers a wide range of ~~banking, investment,~~digital and traditional financial ~~services~~solutions to businesses, individuals, families, and ~~businesses. Webster~~partners across its three differentiated lines of business: Commercial Banking, HSA 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 the northeastern U.S.Consumer Banking. While its core footprint spans from New York to Rhode Island and Massachusetts, ~~with~~ certain businesses ~~operating~~operate in extended geographies. ~~Webster Bank also offers equipment financing, warehouse lending, commercial real estate lending, asset-based lending, and treasury management solutions.~~ HSA Bank is a leading provider of health savings accounts (HSAs), and delivers health reimbursement arrangements and flexible spending and commuter benefit account administration services to employers and individuals in all 50 states.

~~Business Developments~~

On January 31, 2022, Webster completed its previously announced merger with Sterling in an all-stock transaction valued at $5.2 billion. The merger expanded Webster's geographic footprint and combined two complementary organizations to create one of the largest ~~commercial banks~~providers of employee benefit solutions in the ~~northeastern U.S. At June 30, 2022,~~United States.

Recent Industry Developments

During the ~~combined company had $67.6 billion in assets, $45.6 billion in loans~~first quarter and leases, and $53.1 billion in deposits, and operated 202 financial centers throughout southern New England and metro and suburban New York. In addition, on February 18, 2022, Webster acquired 100% of the equity interests of Bend Financial, Inc. (Bend), a cloud-based platform solution provider for HSAs, in exchange for cash. The Bend acquisition accelerates Webster’s efforts underway to deliver enhanced user experiences at HSA Bank. Financial results for historical reporting periods reflect only the results of Webster's operations prior to the corresponding merger or acquisition.

The successful integration of Webster’s and Sterling’s operations depends on the Company’s ability to successfully consolidate business operations, management teams, corporate cultures, operating systems, and controls procedures, and eliminate costs and redundancies. Noteworthy accomplishments as of June 30, 2022, include the rebranding of branches and digital assets, the coordination of credit policies and procedures, the selection of certain key operating systems and the completed consolidation of mortgage servicing, payroll, and treasury platforms, the finalization of governance and executive management structures, the establishment of a corporate responsibility office to oversee community engagement, philanthropy, and sustainability, and the launch of culture-shaping offsite workshops, which have been attended by the Company’s senior leaders and managers, with a planned rollout to the entirety of employees in the second half of 2022. Key operating systems and process integration activities are ongoing, and Webster remains well-positioned to successfully execute its core conversion targeted for mid-2023.

~~In addition, during~~into the second quarter of ~~2022, Webster developed~~2023, the banking industry experienced significant volatility with multiple high-profile bank failures and ~~launched~~industry-wide concerns related to liquidity, deposit outflows, unrealized losses on securities, and eroding consumer confidence in the banking system. Despite these negative industry developments, the Company's total deposits at March 31, 2023, were $55.3 billion, representing a ~~corporate real estate consolidation strategy,~~net $1.2 billion increase compared to its total deposits at December 31, 2022. Additionally, the Holding Company's and the Bank's regulatory capital ratios at
March 31, 2023, remained in ~~which the Company has arranged to close 14 locations, primarily throughout New York and Connecticut, in order to reduce its corporate facility square footage by approximately 45% by the end~~excess of the year. During the three months ended June 30, 2022, Webster recognized $23.1 million in right-of-use (ROU) asset impairment charges and a combined $7.7 million in related exist costs and accelerated depreciation on property and equipment, related to this corporate real estate consolidation strategy.

Furthermore, in connection with the Sterling merger, Webster re-evaluated its strategic priorities as a combined organization, which resulted in modifications to the Company's strategic initiatives that were announced in December 2020. As a result, the Company released $4.1 million from its previously recorded severance accrual during the first half of 2022, with a corresponding adjustment to earnings.

"well-capitalized" minimum. Additional information regarding ~~Webster's mergers~~regulatory capital ratios can be found within Note 10: Regulatory Capital and ~~acquisitions~~Restrictions in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.

interLINK Acquisition

On January 11, 2023, Webster acquired interLINK, a technology-enabled deposit management platform that administers over $9 billion of deposits from FDIC-insured cash sweep programs between banks and ~~related integration initiatives~~broker/dealers and clearing firms. The acquisition expanded the Company's core deposit funding sources and scalable liquidity and added another technology-enabled channel to its already differentiated, omnichannel deposit gathering capabilities. At March 31, 2023, interLINK provided the Company with an additional $2.9 billion of money market deposits. Additional information regarding the acquisition of interLINK can be found within Note 2: Mergers and Acquisitions in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.

Sterling Integration Update

On January 31, 2022, Webster completed its merger with Sterling. Significant progress on integration and conversion efforts were made throughout the year ended December 31, 2022, and the Company remains on track with key project milestones as of the first quarter of 2023, with a continued focus on business-as-usual operations. The significant accomplishments achieved as of the end of the first quarter of 2023 included: (i) additional systems integrations and data validation exercises; (ii) the completion of user acceptance testing; (iii) the finalization of financial center staffing and training plans; and (iv) the consolidation of bank routing numbers. The Company is prepared to complete several mock conversions in the second quarter of 2023 as it progresses towards core conversion targeted for mid-2023.

LIBOR Transition Update

The Company has a LIBOR transition plan in place that is commensurate with identified LIBOR transition risks and exposures, and is aligned with regulatory guidance and ARRC best practices. Management continued to execute according to its LIBOR transition plan during the first quarter of 2023, addressing emerging issues and risks as they arise, while closely monitoring legislative and regulatory guidance associated with the LIBOR transition.

As of the date of this Quarterly Report on Form 10-Q, the Company's main focus continues to be on the remediation of legacy LIBOR contracts, the integration of legacy Webster and legacy Sterling systems and processes, monitoring and responding to market developments, and addressing regulatory and accounting requirements. The Company will execute its actual transition of remaining LIBOR contracts to SOFR at the first rate reset date after June 30, 2023.

Results of Operations

The following table summarizes selected financial highlights and key performance indicators:


		At or for the three months ended June 30,						At or for the six months ended June 30,							At or for the three months ended March 31,
(In thousands, except per share and ratio data)	(In thousands, except per share and ratio data)	2022			2021			2022			2021			(In thousands, except per share and ratio data)	2023			2022
Income and performance ratios:	Income and performance ratios:													Income and performance ratios:
Net income		$	182,311		$	94,035		$	165,564		$	202,113
Net income available to common shareholders		178,148			92,066			157,970			198,175
Earnings per diluted common share		1.00			1.01			0.97			2.19
Net income (loss)														Net income (loss)	$	221,004		$	(16,747)
Net income (loss) available to common stockholders														Net income (loss) available to common stockholders	216,841			(20,178)
Earnings (loss) per diluted common share														Earnings (loss) per diluted common share	1.24			(0.14)
Return on average assets (annualized)	Return on average assets (annualized)	1.10		%	1.12		%	0.55		%	1.21		%	Return on average assets (annualized)	1.22		%	(0.12)		%
Return on average tangible common shareholders' equity (annualized) (non-GAAP)		14.50			14.26			7.11			15.51
Return on average common shareholders' equity (annualized)		9.09			11.63			4.42			12.63
Non-interest income / total revenue		19.90			24.77			20.34			25.16
Return on average tangible common stockholders' equity (annualized) (non-GAAP)														Return on average tangible common stockholders' equity (annualized) (non-GAAP)	17.66			(1.36)
Return on average common stockholders' equity (annualized)														Return on average common stockholders' equity (annualized)	10.94			(1.25)
Non-interest income as a percentage of total revenue														Non-interest income as a percentage of total revenue	10.62			20.88
Asset quality:	Asset quality:													Asset quality:
Allowance for credit losses on loans and leases		$	571,499		$	307,945		$	571,499		$	307,945
ACL on loans and leases														ACL on loans and leases	$	613,914		$	569,371
Non-performing assets (1)	Non-performing assets (1)	250,242			123,497			250,242			123,497			Non-performing assets (1)	186,551			251,206
Allowance for credit losses on loans and leases / total loans and leases		1.25		%	1.43		%	1.25		%	1.43		%
Net charge-offs (recoveries) / average loans and leases (annualized)		0.09			(0.02)			0.09			0.04
ACL on loans and leases / total loans and leases														ACL on loans and leases / total loans and leases	1.21		%	1.31		%
Net charge-offs / average loans and leases (annualized)														Net charge-offs / average loans and leases (annualized)	0.20			0.10
Non-performing loans and leases / total loans and leases (1)	Non-performing loans and leases / total loans and leases (1)	0.54			0.56			0.54			0.56			Non-performing loans and leases / total loans and leases (1)	0.36			0.57
Non-performing assets / total loans and leases plus OREO (1)	Non-performing assets / total loans and leases plus OREO (1)	0.55			0.57			0.55			0.57			Non-performing assets / total loans and leases plus OREO (1)	0.37			0.58
Allowance for credit losses on loans and leases / non-performing loans and leases (1)		230.88			255.05			230.88			255.05
ACL on loans and leases / non-performing loans and leases (1)														ACL on loans and leases / non-performing loans and leases (1)	331.81			229.48
Other ratios:	Other ratios:													Other ratios:
Tangible equity (non-GAAP)		8.12		%	8.35		%	8.12		%	8.35		%

Tangible common equity (non-GAAP)	Tangible common equity (non-GAAP)	7.68			7.91			7.68			7.91			Tangible common equity (non-GAAP)	7.15		%	8.26		%
Tier 1 risk-based capital	Tier 1 risk-based capital	11.65			12.30			11.65			12.30			Tier 1 risk-based capital	10.93			12.05
Total risk-based capital	Total risk-based capital	13.91			13.70			13.91			13.70			Total risk-based capital	12.99			14.41
CET1 risk-based capital	CET1 risk-based capital	11.09			11.66			11.09			11.66			CET1 risk-based capital	10.42			11.46
Shareholders' equity / total assets		11.83			9.86			11.83			9.86
Stockholders' equity / total assets														Stockholders' equity / total assets	11.08			12.55
Net interest margin	Net interest margin	3.28			2.82			3.24			2.87			Net interest margin	3.66			3.21
Efficiency ratio (non-GAAP)	Efficiency ratio (non-GAAP)	45.25			56.64			46.82			57.56			Efficiency ratio (non-GAAP)	41.64			48.73
Equity and share related:	Equity and share related:													Equity and share related:
Common equity	Common equity	$	7,713,809		$	3,184,668		$	7,713,809		$	3,184,668		Common equity	$	8,010,315		$	7,893,156
Book value per common share	Book value per common share	43.82			35.15			43.82			35.15			Book value per common share	45.85			44.32
Tangible book value per common share (non-GAAP)	Tangible book value per common share (non-GAAP)	28.31			28.99			28.31			28.99			Tangible book value per common share (non-GAAP)	29.47			28.94
Common stock closing price	Common stock closing price	42.15			53.34			42.15			53.34			Common stock closing price	39.42			56.12
Dividends and equivalents declared per common share	Dividends and equivalents declared per common share	0.40			0.40			0.80			0.80			Dividends and equivalents declared per common share	0.40			0.40
Common shares outstanding		176,041			90,594			176,041			90,594
Common shares issued and outstanding														Common shares issued and outstanding	174,712			178,102
Weighted-average common shares outstanding - basic	Weighted-average common shares outstanding - basic	175,845			90,027			161,698			89,918			Weighted-average common shares outstanding - basic	172,766			147,394
Weighted-average common shares outstanding - diluted	Weighted-average common shares outstanding - diluted	175,895			90,221			161,785			90,164			Weighted-average common shares outstanding - diluted	172,883			147,394

(1)Non-performing ~~asset balances~~assets and the related asset quality ratios exclude the impact of net unamortized (discounts)/premiums and net unamortized deferred ~~(costs)~~(fees)/~~fees~~costs on loans and leases.

Non-GAAP Financial Measures

The non-GAAP financial measures identified in the preceding table provide both management and investors with information useful in understanding ~~Webster's~~the 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's~~the 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 ~~Webster's~~the Company'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's~~the Company's performance against its peer financial institutions. The efficiency ratio, which represents the costs expended to generate a dollar of revenue, is calculated excluding certain non-operational items in order to measure how well ~~Webster~~the 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.

The following tables reconcile non-GAAP financial measures to the most comparable financial measures defined by GAAP:


		At June 30,							At March 31,
(Dollars and shares in thousands, except per share data)	(Dollars and shares in thousands, except per share data)	2022			2021			(Dollars and shares in thousands, except per share data)	2023			2022
Tangible book value per common share:	Tangible book value per common share:							Tangible book value per common share:
Shareholders' equity		$	7,997,788		$	3,329,705
Stockholders' equity								Stockholders' equity	$	8,294,294		$	8,177,135
Less: Preferred stock	Less: Preferred stock	283,979			145,037			Less: Preferred stock	283,979			283,979
Goodwill and other intangible assets		2,729,551			558,485
Tangible common shareholders' equity		$	4,984,258		$	2,626,183
Common stockholders' equity								Common stockholders' equity	$	8,010,315		$	7,893,156
Less: Goodwill and other intangible assets								Less: Goodwill and other intangible assets	2,861,310			2,738,353
Tangible common stockholders' equity								Tangible common stockholders' equity	$	5,149,005		$	5,154,803
Common shares outstanding	Common shares outstanding	176,041			90,594			Common shares outstanding	174,712			178,102
Tangible book value per common share	Tangible book value per common share	$	28.31		$	28.99		Tangible book value per common share	$	29.47		$	28.94
Book value per common share (GAAP)								Book value per common share (GAAP)	$	45.85		$	44.32

Tangible common equity ratio:	Tangible common equity ratio:							Tangible common equity ratio:
Tangible common shareholders' equity		$	4,984,258		$	2,626,183
Tangible common stockholders' equity								Tangible common stockholders' equity	$	5,149,005		$	5,154,803
Total assets	Total assets	67,595,021			33,753,752			Total assets	$	74,844,395		$	65,131,484
Less: Goodwill and other intangible assets	Less: Goodwill and other intangible assets	2,729,551			558,485			Less: Goodwill and other intangible assets	2,861,310			2,738,353
Tangible assets	Tangible assets	$	64,865,470		$	33,195,267		Tangible assets	$	71,983,085		$	62,393,131
Tangible common equity ratio	Tangible common equity ratio	7.68		%	7.91		%	Tangible common equity ratio	7.15		%	8.26		%
Total common stockholders' equity to total assets (GAAP)								Total common stockholders' equity to total assets (GAAP)	10.70		%	12.12		%


		Three months ended June 30,						Six months ended June 30,							Three months ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2022			2021			2022			2021			(Dollars in thousands)	2023			2022
Return on average tangible common shareholders' equity:
Return on average tangible common stockholders' equity:														Return on average tangible common stockholders' equity:
Net income	Net income	$	182,311		$	94,035		$	165,564		$	202,113		Net income	$	221,004		$	(16,747)
Less: Preferred stock dividends	Less: Preferred stock dividends	4,163			1,969			7,594			3,938			Less: Preferred stock dividends	4,163			3,431
Add: Intangible assets amortization, tax-effected	Add: Intangible assets amortization, tax-effected	6,954			894			11,999			1,794			Add: Intangible assets amortization, tax-effected	7,503			5,046
Income adjusted for preferred stock dividends and intangible assets amortization		$	185,102		$	92,960		$	169,969		$	199,969
Income adjusted for preferred stock dividends and intangible assets amortization (annualized)		$	740,408		$	371,840		$	339,938		$	399,938
Average shareholders' equity		$	8,125,518		$	3,311,406		$	7,412,465		$	3,282,962
Income (loss) adjusted for preferred stock dividends and intangible assets amortization														Income (loss) adjusted for preferred stock dividends and intangible assets amortization	$	224,344		$	(15,132)
Income (loss) adjusted for preferred stock dividends and intangible assets amortization (annualized)														Income (loss) adjusted for preferred stock dividends and intangible assets amortization (annualized)	$	897,376		$	(60,528)
Average stockholders' equity														Average stockholders' equity	$	8,215,676		$	6,691,490
Less: Average preferred stock	Less: Average preferred stock	283,979			145,037			260,183			145,037			Less: Average preferred stock	283,979			236,121
Average goodwill and other intangible assets	Average goodwill and other intangible assets	2,733,827			559,032			2,372,554			559,599			Average goodwill and other intangible assets	2,849,673			2,007,266
Average tangible common shareholders' equity		$	5,107,712		$	2,607,337		$	4,779,728		$	2,578,326
Return on average tangible common shareholders' equity		14.50		%	14.26		%	7.11		%	15.51		%
Average tangible common stockholders' equity														Average tangible common stockholders' equity	$	5,082,024		$	4,448,103
Return on average tangible common stockholders' equity														Return on average tangible common stockholders' equity	17.66		%	(1.36)		%
Return on average common stockholders' equity (annualized) (GAAP)														Return on average common stockholders' equity (annualized) (GAAP)	10.94		%	(1.25)		%

Efficiency ratio:	Efficiency ratio:													Efficiency ratio:
Non-interest expense	Non-interest expense	$	358,227		$	187,028		$	718,012		$	375,010		Non-interest expense	$	332,467		$	359,785
Less: Foreclosed property activity		(358)			(137)			(433)			(46)
Less: Foreclosed property activities														Less: Foreclosed property activities	(262)			(75)
Intangible assets amortization	Intangible assets amortization	8,802			1,132			15,189			2,271			Intangible assets amortization	9,497			6,387
Operating lease depreciation	Operating lease depreciation	2,425			—			4,057			—			Operating lease depreciation	1,884			1,632
Merger-related expenses	Merger-related expenses	66,640			17,047			175,135			17,047			Merger-related expenses	29,373			108,495
Other expense (1)		(152)			1,138			(4,292)			10,579
Strategic initiatives charges														Strategic initiatives charges	—			(4,140)
Non-interest expense	Non-interest expense	$	280,870		$	167,848		$	528,356		$	345,159		Non-interest expense	$	291,975		$	247,486
Net interest income	Net interest income	$	486,660		$	220,852		$	880,908		$	444,616		Net interest income	$	595,283		$	394,248
Add: Tax-equivalent adjustment		11,732			2,487			19,890			4,982
Add: FTE adjustment														Add: FTE adjustment	15,911			8,158
Non-interest income	Non-interest income	120,933			72,702			224,968			149,459			Non-interest income	70,766			104,035
Other income (2)		3,805			309			6,887			586
Other income (1)														Other income (1)	4,311			3,082
Less: Operating lease depreciation														Less: Operating lease depreciation	1,884			1,632
(Loss) on sale of investment securities														(Loss) on sale of investment securities	(16,747)			—

Less: Operating lease depreciation		2,425			—			4,057			—
Income	Income	$	620,705		$	296,350		$	1,128,596		$	599,643		Income	$	701,134		$	507,891
Efficiency ratio	Efficiency ratio	45.25		%	56.64		%	46.82		%	57.56		%	Efficiency ratio	41.64		%	48.73		%
Non-interest expense as a percentage of total revenue (GAAP)														Non-interest expense as a percentage of total revenue (GAAP)	49.92		%	72.20		%

(1)~~Other expense (non-GAAP) includes the net charges associated with the strategic initiatives announced in December 2020.~~

~~(2)~~Other income (non-GAAP) includes the taxable equivalent of net income generated from ~~low income housing tax-credit (LIHTC)~~LIHTC investments.

Net Interest Income

Net interest income is ~~Webster's~~the Company's primary source of revenue, representing ~~80.1%~~89.4% and ~~79.7%~~79.1% of total ~~revenue~~revenues for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023, and 2022, ~~respectively, and 75.2% and 74.8% of total revenue for the three and six months ended June 30, 2021,~~ respectively. 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-equivalent~~FTE 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.

~~Comparison to Prior Year Quarter~~

Net interest income increased ~~$265.8~~$201.1 million, or ~~120.4%~~51.0%, from ~~$220.9~~$394.2 million for the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~$486.7~~$595.3 million for the three months ended ~~June 30, 2022.~~March 31, 2023. On a ~~fully tax-equivalent~~FTE basis, net interest income increased ~~$275.1~~$208.8 million. Net interest margin increased 4645 basis points from ~~2.82%~~3.21% for the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~3.28%~~3.66% for the three months ended ~~June 30, 2022. The increase is~~March 31, 2023. These increases are both primarily ~~attributed~~driven by the full quarter impact of the Sterling merger on
balances in 2023 as compared to the ~~merger with Sterling,~~two-thirds impact for the quarter in 2022, and ~~includes net purchase accounting accretion from acquired loans and leases, investment securities, and interest-bearing liabilities.~~the higher interest rate environment.

Average total interest-earning assets increased ~~$28.5~~$15.8 billion, or ~~90.0%~~31.3%, from ~~$31.6~~$50.3 billion for the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~$60.1~~$66.1 billion for the three months ended ~~June 30, 2022,~~March 31, 2023, primarily due to increases of ~~$22.7~~$14.2 billion, $1.2 billion, $0.3 billion, and ~~$6.4~~$0.1 billion, in average loans and leases, ~~and~~ average ~~total~~ investment securities, ~~respectively, which were partially offset by a $0.8 billion decrease in~~average FHLB and FRB stock, and average interest-bearing deposits held at the ~~Federal Reserve Bank (FRB).~~FRB, respectively. The average yield on interest-earning assets increased 51175 basis points from ~~2.95%~~3.33% for the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~3.46%~~5.08% for the three months ended ~~June 30, 2022. The increase~~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 yield~~that were ~~both impacted by the Sterling merger.~~acquired from Sterling.

Average loans and leases increased ~~$22.7~~$14.2 billion, or ~~106.0%~~39.5%, from ~~$21.4~~$35.9 billion for the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~$44.1~~$50.1 billion for the three months ended ~~June 30, 2022, which was~~March 31, 2023, primarily due to the full quarter impact of the Sterling merger ~~with Sterling,~~on balances in 2023 as ~~well as loan growth across~~compared to the ~~commercial non-mortgage and commercial real estate categories. This growth was partially offset by lower Paycheck Protection Program (PPP) loan balances. At June 30,~~two-thirds impact for the quarter in 2022, and ~~2021, the~~organic loan growth. At March 31, 2023, and ~~lease portfolio~~2022, average loans and leases comprised ~~73.5%~~75.8% and ~~67.8%~~71.4% of average total ~~average~~ interest-earning assets, respectively. The average yield on loans and leases increased 46190 basis points from ~~3.46%~~3.90% for the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~3.92%~~5.80% for the three months ended ~~June 30, 2022,~~March 31, 2023, primarily due to the higher interest rate environment, partially offset by a ~~higher yield~~decrease in purchase accounting accretion on ~~the acquired Sterling~~ loans and leases ~~net purchase accounting accretion, and higher market rates.~~that were acquired from Sterling.

Average total investment securities increased ~~$6.4~~$1.2 billion, or ~~71.7%~~9.0%, from ~~$8.8~~$13.4 billion for the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~$15.2~~$14.6 billion for the three months ended ~~June 30, 2022,~~March 31, 2023, primarily due to the full quarter impact of the Sterling merger ~~with Sterling.~~on balances in 2023 as compared to the two-thirds impact for the quarter in 2022. At ~~June 30,~~March 31, 2023, and 2022, ~~and 2021,~~ the average total investment securities portfolio comprised ~~25.3%~~22.1% and ~~28.0%~~26.7% of average total interest-earning assets, respectively. The average yield on total investment securities increased 77 basis points from 2.02% for the three months ended March 31, 2022, to 2.79% for the three months ended March 31, 2023, primarily due to the reinvestment of securities that had matured or were sold in the current period at higher yields.

Average FHLB and FRB stock increased $0.3 billion, or 176.1%, from $0.2 billion for the three months ended March 31, 2022, to $0.5 billion for the three months ended March 31, 2023, primarily due to the additional FHLB stock investment required as a result of the increase in FHLB advances. At March 31, 2023, and 2022, average FHLB and FRB stock comprised 0.7% and 0.3% of total average interest-earning assets, respectively. The average yield on ~~investment securities~~average FHLB and FRB stock increased 9234 basis points from ~~2.13%~~2.00% for the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~2.22%~~4.34% for the three months ended ~~June 30, 2022. The increase was~~March 31, 2023, primarily due to the ~~rising~~higher interest rate ~~environment and a higher yield on the acquired Sterling investment securities portfolio net of purchase premium amortization.~~environment.

Average interest-bearing deposits held at the FRB ~~decreased~~increased $0.1 billion, or 12.5%, from $0.8 billion ~~or 61.5%, from $1.3~~for three months ended March 31, 2022, to $0.9 billion for the three months ended ~~June 30, 2021, to $0.5 billion for the three months ended June 30, 2022,~~March 31, 2023, primarily due to ~~excess customer liquidity in~~ the ~~prior period as a result of government stimulus~~strategic decision to maintain additional liquidity. At March 31, 2023, and ~~reduced spending. At June 30,~~ 2022, ~~and 2021,~~average interest-bearing deposits held at the FRB comprised ~~0.81%~~1.4% and ~~4.02%~~1.6% of total average interest-earning assets, respectively. The average yield on interest-bearing deposits held at the FRB increased 68440 basis points from ~~0.11%~~0.23% for the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~0.79%~~4.63% for the three months ended ~~June 30, 2022, primarily due to higher market rates.~~

Average interest-bearing liabilities increased $26.8 billion, or 89.5%, from $29.9 billion for the three months ended June 30, 2021, to $56.7 billion for the three months ended June 30, 2022, primarily due to increases of $24.7 billion, $0.5 billion, $1.1 billion, and $0.5 billion, in average total deposits, average federal funds purchased, average Federal Home Loan Bank (FHLB) advances, and average long-term debt, respectively. The average rate on interest-bearing liabilities increased 5 basis points from 0.14% for the three months ended June 30, 2021, to 0.19% for the three months ended June 30, 2022,March 31, 2023, primarily due to the subordinated debt assumed from Sterling in the merger and the purchase of federal funds in the current period, which were partially offset by customer preferences to hold more liquid, lower cost deposit products.higher interest rate environment.

Average total ~~deposits~~interest-bearing liabilities increased ~~$24.7~~$15.1 billion, or ~~86.0%~~31.9%, from ~~$28.7~~$47.4 billion for the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~$53.4~~$62.5 billion for the three months ended ~~June 30,~~March 31, 2023, primarily due to increases of $8.9 billion, $5.7 billion, $0.7 billion, and $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 in average securities sold under agreements to repurchase. The average rate on interest-bearing liabilities increased 139 basis points from 0.13% for the three months ended March 31, 2022, to 1.52% for the three months ended March 31, 2023, primarily due to the higher interest rate environment.

Average total deposits increased $8.9 billion, or 19.4%, from $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 ~~$6.6~~$1.4 billion and ~~$18.1~~$7.5 billion in
non-interest-bearing deposits and interest-bearing deposits, respectively. The overall increase in deposits was primarily due to the full quarter impact of the Sterling merger ~~with Sterling,~~on balances in 2023 as ~~well as~~compared to the ~~strong liquidity position of both commercial and consumer customers, and HSA growth. At June 30,~~two-thirds impact for the quarter in 2022, and ~~2021,~~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 ~~94.2%~~87.7% and ~~96.0%~~96.9% of total average interest-bearing liabilities, respectively. The average rate on deposits increased 2104 basis points from 0.07% for the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~0.09%~~1.11% for the three months ended ~~June 30, 2022,~~March 31, 2023, primarily due to the ~~rising~~higher interest rate environment ~~which was partially offset by the run-off of~~and growth in higher costing deposit products. Higher cost time ~~deposits. Time~~ deposits as a percentage of average total
interest-bearing deposits ~~decreased~~increased from ~~9.6%~~7.3% for the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~6.7%~~9.5% for the three months ended ~~June 30, 2022,~~March 31, 2023, primarily due to a shift in customer preferences ~~to hold more liquid,~~from lower ~~cost~~rate checking and savings products into higher rate certificates of deposit products.

Average FHLB advances increased $5.7 billion, from $10.9 million for the three months ended March 31, 2022, to $5.7 billion for the three months ended March 31, 2023, primarily due to short-term funding needs and the strategic decision to maintain additional liquidity. At March 31, 2023, and 2022, average FHLB advances comprised 9.1% and less than one percent of average total interest-bearing liabilities, respectively. The average rate on FHLB advances to repurchase increased 277 basis points from 2.03% for the three months ended March 31, 2022, to 4.80% for the three months ended March 31, 2023, primarily due to the higher interest rate environment.

Average federal funds purchased were ~~$0.5~~$0.7 billion for the three months ended ~~June 30, 2022,~~March 31, 2023, and had an average rate of ~~0.93%~~4.62%. There were no average federal funds purchased for the three months ended ~~June 30, 2021.~~March 31, 2022. At ~~June 30, 2022,~~March 31, 2023, average federal funds purchased comprised ~~0.94%~~1.1% of average total ~~average~~ interest-bearing liabilities.

Average ~~FHLB advances~~long-term debt increased ~~$1.1~~$0.2 billion, or ~~735.1%~~19.6%, from ~~$0.1~~$0.9 billion for the three months ended ~~June 30, 2021~~March 31, 2022, to ~~$1.2~~$1.1 billion for the three months ended ~~June 30, 2022,~~March 31, 2023, primarily due to ~~short-term funding needs.~~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 ~~June 30,~~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 three months ended March 31, 2022, to $0.2 billion for the three months ended March 31, 2023, primarily due to the Company's extinguishment of its two long-term structured repurchase agreements during the third quarter of 2022, and ~~2021, FHLB advances~~the timing of maturities. At March 31, 2023, and 2022, average securities sold under agreements to repurchase comprised ~~2.04%~~0.4% and ~~0.46%~~1.2% of total average interest-bearing liabilities, respectively. The average rate on ~~FHLB advances~~securities sold under agreements to repurchase decreased 4455 basis points from ~~1.52%~~0.66% for the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~1.08%~~0.11% for the three months ended ~~June 30, 2022, primarily due to market rates on new borrowings.~~

~~Average long-term debt increased $0.5 billion, or 90.4%, from $0.6 billion for the three months ended June 30, 2021, to $1.1 billion for the three months ended June 30, 2022,~~March 31, 2023, primarily due to the ~~merger with Sterling. At both June 30, 2022 and 2021,~~Company's extinguishment of its two long-term ~~debt comprised 1.9%~~structured repurchase agreements during the third quarter of total average interest-bearing liabilities. The average rate on long-term debt increased 16 basis points from 3.22% for the three months ended June 30, 2021, to 3.38% for the three months ended June 30, 2022, primarily due to the subordinated debt assumed from Sterling in the merger.

~~Comparison to Prior Year to Date~~

Net interest income increased $436.3 million, or 98.1%, from $444.6 million for the six months ended June 30, 2021, to $880.9 million for the six months ended June 30, 2022. On a fully tax-equivalent basis, net interest income increased $451.2 million. Net interest margin increased 37 basis points from 2.87% for the six months ended June 30, 2021, to 3.24% for the six months ended June 30, 2022. The increase is primarily attributed to the merger with Sterling, and includes net purchase accounting accretion from acquired loans and leases, investment securities, and interest-bearing liabilities.

Average interest-earning assets increased $23.8 billion, or 76.0%, from $31.4 billion for the six months ended June 30, 2021, to $55.2 billion for the six months ended June 30, 2022, primarily due to increases of $18.6 billion and $5.4 billion in average loans and leases and average total investment securities, respectively. The average yield on interest-earning assets increased 39 basis points from 3.01% for the six months ended June 30, 2021, to 3.40% for the six months ended June 30, 2022. The increase in interest-earning assets and the increase in average yield were both impacted by the Sterling merger.

~~Average loans and leases increased $18.6 billion, or 86.7%, from $21.4 billion for the six months ended June 30, 2021, to $40.0 billion for the six months ended June 30,~~ 2022, which was primarily due to the merger with Sterling, as well as loan growth across the commercial non-mortgage and commercial real estate categories. This growth was partially offset by lower PPP loan balances. At June 30, 2022, and 2021, the loan and lease portfolio comprised 72.5% and 68.4% of total average interest-earning assets, respectively. The average yield on loans and leases increased 40 basis points from 3.51% for the six months ended June 30, 2021, to 3.91% for the six months ended June 30, 2022, primarily due towere contracted at a higher ~~yield on the acquired Sterling loans and leases, net purchase accounting accretion, and higher market rates.~~

Average total investment securities increased $5.4 billion, or 61.3%, from $8.9 billion for the six months ended June 30, 2021, to $14.3 billion for the six months ended June 30, 2022, primarily due to the merger with Sterling, as well as the deployment of excess liquidity. At June 30, 2022, and 2021, the investment securities portfolio comprised 25.9% and 28.2% of total average interest-earning assets, respectively. The average yield on investment securities decreased 1 basis points from 2.13% for the six months ended June 30, 2021, to 2.12% for the six months ended June 30, 2022. This was primarily due to the reinvestment of maturing securities at lower yields.

Average interest-bearing liabilities increased $22.3 billion, or 75.3%, from $29.7 billion for the six months ended June 30, 2021, to $52.0 billion for the six months ended June 30, 2022, primarily due to increases of $21.2 billion, $0.3 billion, $0.5 billion, and $0.4 billion in average total deposits, average federal funds purchased, average FHLB advances, and average long-term debt, respectively. The average rate on interest-bearing liabilities increased 1 basis point from 0.15% for the six months ended June 30, 2021, to 0.16% for the six months ended June 30, 2022, primarily due to higher market interest rates and the mix of funding sources.

cost.

Average total deposits increased $21.2 billion, or 74.3%, from $28.5 billion for the six months ended June 30, 2021, to $49.7 billion for the six months ended June 30, 2022, reflecting increases of $5.7 billion and $15.4 billion in non-interest-bearing deposits and interest-bearing deposits, respectively. The overall increase in deposits was primarily due to the merger with Sterling, as well as the strong liquidity position of retail and commercial customers, and HSA growth. At June 30, 2022, and 2021, deposits comprised 95.4% and 95.9% of total average interest-bearing liabilities, respectively. The average rate on deposits remained flat at 0.08% for the six months ended June 30, 2022, and 2021. Time deposits as a percentage of total interest-bearing deposits decreased from 10.3% for the six months ended June 30, 2021, to 7.0% for the six months ended June 30, 2022, primarily due to customer preferences to hold more liquid, lower cost deposit products.

Average federal funds purchased increased $0.3 billion, or 731.0%, from $32.3 million for the six months ended June 30, 2021, to $0.3 billion for the six months ended June 30, 2022, primarily due to short-term funding needs. At June 30, 2022, and 2021, federal funds purchased comprised 0.52% and 0.11% of total average interest-bearing liabilities, respectively. The average rate on federal funds purchased increased 85 basis points from 0.08% for the six months ended June 30, 2021, to 0.93% for the six months ended June 30, 2022, primarily due to market interest rates.

Average FHLB advances increased $0.5 billion, or 327.92%, from $0.1 billion for the six months ended June 30, 2021, to $0.6 billion for the six months ended June 30, 2022, primarily due short-term funding needs. At June 30, 2022, and 2021, FHLB advances comprised 1.1% and 0.5% of total average interest-bearing liabilities, respectively. The average rate on FHLB advances decreased 43 basis points from 1.52% for the six months ended June 30, 2021, to 1.09% for the six months ended June 30, 2022, primarily due to the maturity of borrowings with higher yields.

Average long-term debt increased $0.4 billion, or 74.3%, from $0.6 billion for the six months ended June 30, 2021, to $1.0 billion for the six months ended June 30, 2022, primarily due to the merger with Sterling. At both June 30, 2022, and 2021, long-term debt comprised 1.9% of total average interest-bearing liabilities. The average rate on long-term debt increased 14 basis points from 3.22% for the six months ended June 30, 2021, to 3.36% for the six months ended June 30, 2022, primarily due to the subordinated debt assumed from Sterling in the merger.

The following ~~tables present~~table summarizes daily average balances, interest, and average yield/rate by major category, and net interest margin on a ~~fully tax-equivalent~~FTE basis:


		Three months ended June 30,													Three months ended March 31,
		2022						2021							2023						2022
(Dollars in thousands)	(Dollars in thousands)	Average Balance		Interest Income/Expense		Average Yield/Rate		Average Balance		Interest Income/Expense		Average Yield/Rate		(Dollars in thousands)	Average Balance		Interest Income/Expense		Average Yield/Rate		Average Balance		Interest Income/Expense		Average Yield/Rate

Assets	Assets													Assets
Interest-earning assets:	Interest-earning assets:													Interest-earning assets:
Loans and leases (1)	Loans and leases (1)	$	44,120,698	$	436,462	3.92	%	$	21,413,439	$	186,681	3.46	%	Loans and leases (1)	$	50,095,192	$	725,543	5.80	%	$	35,912,829	$	349,417	3.90	%
Investment securities: (2)	Investment securities: (2)													Investment securities: (2)
Taxable	Taxable	12,573,908		73,294		2.27		8,106,310		41,299		2.06		Taxable	12,093,477		92,290		2.91		11,461,292		57,467		2.02
Non-taxable	Non-taxable	2,591,606		12,664		1.95		728,549		5,283		2.90		Non-taxable	2,539,768		13,684		2.16		1,960,251		9,802		2.00
Total investment securities	Total investment securities	15,165,514		85,958		2.22		8,834,859		46,582		2.13		Total investment securities	14,633,245		105,974		2.79		13,421,543		67,269		2.02
FHLB and FRB stock	FHLB and FRB stock	262,695		2,072		3.16		77,292		382		1.98		FHLB and FRB stock	459,375		4,910		4.34		166,357		821		2.00
Interest-bearing deposits (3)	Interest-bearing deposits (3)	488,870		980		0.79		1,270,121		347		0.11		Interest-bearing deposits (3)	898,884		10,396		4.63		799,265		453		0.23

Loans held for sale	Loans held for sale	18,172		7		0.15		8,898		53		2.37		Loans held for sale	4,630		16		1.39		17,918		26		0.58
Total interest-earning assets	Total interest-earning assets	60,055,949		$	525,479	3.46	%	31,604,609		$	234,045	2.95	%	Total interest-earning assets	66,091,326		$	846,839	5.08	%	50,317,912		$	417,986	3.33	%

Non-interest-earning assets	Non-interest-earning assets	6,016,193						1,901,412						Non-interest-earning assets	6,225,199						4,490,665
Total assets	Total assets	$	66,072,142					$	33,506,021					Total assets	$	72,316,525					$	54,808,577

Liabilities and Shareholders' Equity
Liabilities and Stockholders' Equity														Liabilities and Stockholders' Equity
Interest-bearing liabilities:	Interest-bearing liabilities:													Interest-bearing liabilities:
Demand deposits	Demand deposits	$	13,395,942	$	—	—	%	$	6,774,206	$	—	—	%	Demand deposits	$	12,629,928	$	—	—	%	$	11,263,282	$	—	—	%
Health savings accounts	Health savings accounts	7,812,313		1,125		0.06		7,446,735		1,650		0.09		Health savings accounts	8,292,450		3,027		0.15		7,759,465		1,087		0.06
Interest-bearing checking, money market and savings		29,486,846		10,165		0.14		12,365,074		1,603		0.05
Interest-bearing checking, money market, and savings														Interest-bearing checking, money market, and savings	29,853,370		123,048		1.67		24,316,436		5,019		0.08
Time deposits	Time deposits	2,684,914		1,169		0.17		2,114,889		1,841		0.35		Time deposits	4,024,472		24,129		2.43		2,544,286		1,293		0.21
Total deposits	Total deposits	53,380,015		12,459		0.09		28,700,904		5,094		0.07		Total deposits	54,800,220		150,204		1.11		45,883,469		7,399		0.07

Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	529,786		1,423		1.06		500,638		860		0.68		Securities sold under agreements to repurchase	243,848		67		0.11		577,039		956		0.66
Federal funds purchased	Federal funds purchased	534,518		1,254		0.93		—		—		—		Federal funds purchased	671,175		7,760		4.62		—		—		—

Other borrowings														Other borrowings	—		—		—		—		1		—
FHLB advances	FHLB advances	1,156,449		3,164		1.08		138,483		534		1.52		FHLB advances	5,673,826		68,126		4.80		10,936		56		2.03
Long-term debt (2)	Long-term debt (2)	1,077,395		8,787		3.38		565,874		4,218		3.22		Long-term debt (2)	1,072,252		9,488		3.65		896,310		7,168		3.34
Total borrowings		3,298,148		14,628		1.79		1,204,995		5,612		1.93

Total interest-bearing liabilities	Total interest-bearing liabilities	56,678,163		$	27,087	0.19	%	29,905,899		$	10,706	0.14	%	Total interest-bearing liabilities	62,461,321		$	235,645	1.52	%	47,367,754		$	15,580	0.13	%
Non-interest-bearing liabilities	Non-interest-bearing liabilities	1,268,461						288,716						Non-interest-bearing liabilities	1,639,528						749,333
Total liabilities	Total liabilities	57,946,624						30,194,615						Total liabilities	64,100,849						48,117,087

Preferred stock	Preferred stock	283,979						145,037						Preferred stock	283,979						236,121
Common shareholders' equity		7,841,539						3,166,369
Total shareholders' equity		8,125,518						3,311,406
Total liabilities and shareholders' equity		$	66,072,142					$	33,506,021
Tax-equivalent net interest income				$	498,392					$	223,339
Less: Tax-equivalent adjustments				(11,732)						(2,487)
Common stockholders' equity														Common stockholders' equity	7,931,697						6,455,369
Total stockholders' equity														Total stockholders' equity	8,215,676						6,691,490
Total liabilities and stockholders' equity														Total liabilities and stockholders' equity	$	72,316,525					$	54,808,577
Net interest income (FTE)														Net interest income (FTE)			$	611,194					$	402,406
Less: FTE adjustment														Less: FTE adjustment			(15,911)						(8,158)
Net interest income	Net interest income			$	486,660					$	220,852			Net interest income			$	595,283					$	394,248
Net interest margin (4)						3.28	%					2.82	%
Net interest margin (FTE)														Net interest margin (FTE)					3.66	%					3.21	%

(1)Non-accrual loans have been included in the computation of average balances.

(2)For the purposes of our average yield/rate and margin computations, unsettled trades on investment securities and unrealized gain (loss) balances on available-for-sale securities ~~available-for-sale~~ and ~~de-designated~~ senior fixed-rate ~~notes~~note hedges are excluded.

(3)Interest-bearing deposits are included as a component of ~~cash~~Cash and cash equivalents on the Condensed Consolidated Statements of Cash Flows included in Part I - Item 1. Financial Statements.

~~(4)Tax-equivalent net interest margin approximates net interest margin for all periods presented.~~

Six months ended June 30,
2022 2021
(Dollars in thousands) Average
Balance Interest Income/Expense Average Yield/Rate Average
Balance Interest Income/Expense Average Yield/Rate
Assets
Interest-earning assets:
Loans and leases (1)
$ 40,039,437 $ 785,879 3.91 % $ 21,447,192 $ 377,969 3.51 %
Investment securities: (2)
Taxable 12,020,675 130,761 2.15 8,129,404 82,243 2.06
Non-taxable 2,277,672 22,466 1.97 732,910 10,616 2.90
Total investment securities 14,298,347 153,227 2.12 8,862,314 92,859 2.13
FHLB and FRB stock 214,792 2,893 2.72 77,461 619 1.61
Interest-bearing deposits (3)
643,210 1,433 0.44 976,873 523 0.11
Loans held for sale 18,046 33 0.36 11,610 144 2.48
Total interest-earning assets 55,213,832 $ 943,465 3.40 % 31,375,450 $ 472,114 3.01 %
Non-interest-earning assets 5,257,642 1,941,640
Total assets $ 60,471,474 $ 33,317,090
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Demand deposits $ 12,335,504 $ — — % $ 6,606,464 $ — — %
Health savings accounts 7,786,035 2,212 0.06 7,448,943 3,257 0.09
Interest-bearing checking, money market and savings 26,915,923 15,184 0.11 12,181,295 3,323 0.06
Time deposits 2,614,989 2,462 0.19 2,242,250 4,953 0.45
Total deposits 49,652,451 19,858 0.08 28,478,952 11,533 0.08
Securities sold under agreements to repurchase 553,282 2,379 0.86 479,285 1,482 0.61
Federal funds purchased 268,735 1,254 0.93 32,337 13 0.08
Other borrowings — 1 — — — —
FHLB advances 586,857 3,220 1.09 137,143 1,047 1.52
Long-term debt (2)
987,353 15,955 3.36 566,462 8,441 3.22
Total borrowings 2,396,227 22,809 1.93 1,215,227 10,983 1.87
Total interest-bearing liabilities 52,048,678 $ 42,667 0.16 % 29,694,179 $ 22,516 0.15 %
Non-interest-bearing liabilities 1,010,331 339,949
Total liabilities 53,059,009 30,034,128
Preferred stock 260,183 145,037
Common shareholders' equity 7,152,282 3,137,925
Total shareholders' equity 7,412,465 3,282,962
Total liabilities and shareholders' equity $ 60,471,474 $ 33,317,090
Tax-equivalent net interest income $ 900,798 $ 449,598
Less: Tax-equivalent adjustments (19,890) (4,982)
Net interest income $ 880,908 $ 444,616
Net interest margin (4)
3.24 % 2.87 %

~~(1)Non-accrual loans have been included in the computation of average balances.~~

~~(2)~~For the purposes of our average yield/rate and margin computations, unsettled trades on investment securities and unrealized gain (loss) balances on securities available-for-sale and de-designated senior fixed-rate notes hedges are excluded.

~~(3)Interest-bearing deposits are a component of cash and cash equivalents on the Condensed Consolidated Statements of Cash Flows included in Part I - Item 1. Financial Statements.~~

~~(4)Tax-equivalent net interest margin approximates net interest margin for all periods presented.~~

The following table summarizes the change in net interest income attributable to changes in rate and volume, and reflects net interest income on a ~~fully tax-equivalent~~FTE basis:


		Three months ended June 30,						Six months ended June 30,							Three months ended March 31,
		2022 vs. 2021 Increase (decrease) due to						2022 vs. 2021 Increase (decrease) due to							2023 vs. 2022 Increase (decrease) due to
(In thousands)	(In thousands)	Rate (1)		Volume		Total		Rate (1)		Volume		Total		(In thousands)	Rate (1)		Volume		Total
Interest on interest-earning assets:
Change in interest on interest-earning assets:														Change in interest on interest-earning assets:
Loans and leases	Loans and leases	$	97,892	$	151,889	$	249,781	$	158,127	$	249,784	$	407,911	Loans and leases	$	232,942	$	143,184	$	376,126
Investment securities	Investment securities	9,481		29,895		39,376		8,976		51,392		60,368		Investment securities	32,571		6,134		38,705

FHLB and FRB stock	FHLB and FRB stock	774		915		1,689		1,177		1,097		2,274		FHLB and FRB stock	2,642		1,447		4,089
Interest bearing-deposits		847		(214)		633		1,089		(179)		910
Interest-bearing deposits														Interest-bearing deposits	9,887		56		9,943
Loans held for sale	Loans held for sale	10		(56)		(46)		5		(116)		(111)		Loans held for sale	1		(11)		(10)
Total interest income	Total interest income	$	109,004	$	182,429	$	291,433	$	169,374	$	301,978	$	471,352	Total interest income	$	278,043	$	150,810	$	428,853
Interest on interest-bearing liabilities:
Change in interest on interest-bearing liabilities:														Change in interest on interest-bearing liabilities:

Health savings accounts	Health savings accounts	$	(606)	$	81	$	(525)	$	(1,193)	$	147	$	(1,046)	Health savings accounts	$	1,865	$	75	$	1,940
Interest-bearing checking, money market, and savings	Interest-bearing checking, money market, and savings	8,464		99		8,563		11,471		391		11,862		Interest-bearing checking, money market, and savings	116,121		1,908		118,029
Time deposits	Time deposits	(232)		(441)		(673)		(1,254)		(1,237)		(2,491)		Time deposits	22,374		462		22,836
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	514		50		564		669		229		898		Securities sold under agreements to repurchase	(337)		(552)		(889)
Federal funds purchased	Federal funds purchased	1,254		—		1,254		1,147		95		1,242		Federal funds purchased	7,760		—		7,760
Other borrowings	Other borrowings	—		—		—		1		—		1		Other borrowings	(1)		—		(1)
FHLB advances	FHLB advances	(1,289)		3,920		2,631		(1,260)		3,433		2,173		FHLB advances	39,304		28,766		68,070
Long-term debt	Long-term debt	445		4,121		4,566		728		6,785		7,513		Long-term debt	850		1,470		2,320
Total interest expense	Total interest expense	$	8,550	$	7,830	$	16,380	$	10,309	$	9,843	$	20,152	Total interest expense	$	187,936	$	32,129	$	220,065
Net change in net interest income	Net change in net interest income	$	100,454	$	174,599	$	275,053	$	159,065	$	292,135	$	451,200	Net change in net interest income	$	90,107	$	118,681	$	208,788

(1)The change attributable to mix, a combined impact of rate and volume, is included with the change due to rate.

Provision for Credit Losses

~~Comparison to Prior Year Quarter~~

The provision for credit losses ~~increased $33.7~~totaled $46.7 million ~~or 156.9%, from a benefit of $21.5~~and $188.8 million for the three months ended ~~June 30, 2021, to an expense of $12.2 million~~March 31, 2023, and 2022, respectively. The balance for the three months ended June 30, 2022. The increase is primarily attributed to the release of reserves in the prior period as a result of improvements in the forecasted economic outlook and favorable credit trends at June 30, 2021, as the COVID-19 pandemic receded. During the three months ended June 30,March 31, 2022, and 2021, total net charge-offs (recoveries) were $9.6 million and $(1.2) million, respectively. The $10.8 million increase is primarily attributed to an increase in net charge-offs in the commercial non-mortgage, commercial real estate, and home equity categories, due to favorable credit performance in the prior period, as the economy benefited from the support of federal stimulus programs.

~~Comparison to Prior Year to Date~~

The provision for credit losses increased $248.4 million, or 525.6%, from a benefit of $47.3 million for the six months ended June 30, 2021, to an expense of $201.1 million for the six months ended June 30, 2022. The increase is primarily attributed toincluded 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 ~~as well as~~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 ~~six~~three months ended ~~June 30,~~March 31, 2023, and 2022, ~~and 2021,~~ total net charge-offs were ~~$18.5~~$24.5 million and ~~$4.2~~$8.9 million, respectively. The ~~$14.3~~net increase of $15.6 million ~~increase~~ is primarily ~~attributed~~due to an increase in net charge-offs in the asset-based lending and commercial ~~non-mortgage category,~~real estate categories, partially offset by a decrease in net charge-offs in the commercial ~~real estate and other consumer categories, due to favorable credit performance in the prior period, as the economy benefited from the support of federal stimulus programs.~~non-mortgage 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 ~~Part I -~~ this
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

107

Non-Interest Income
Three months ended June 30, Six months ended June 30,
(Dollars in thousands) 2022 2021 2022 2021
Deposit service fees $ 51,385 $ 41,439 $ 99,212 $ 81,908
Loan and lease related fees 27,907 7,862 50,586 16,175
Wealth and investment services 11,244 10,087 21,841 19,490
Mortgage banking activities 102 1,319 530 3,961
Increase in cash surrender value of life insurance policies 8,244 3,603 14,976 7,136
Other income 22,051 8,392 37,823 20,789
Total non-interest income $ 120,933 $ 72,702 $ 224,968 $ 149,459

~~Comparison to Prior Year Quarter~~


	Three months ended March 31,
(In thousands)	2023		2022
Deposit service fees	$	45,436	$	47,827
Loan and lease related fees	23,005		22,679
Wealth and investment services	6,587		10,597
Mortgage banking activities	59		428
Increase in cash surrender value of life insurance policies	6,728		6,732
(Loss) on sale of investment securities	(16,747)		—

Other income	5,698		15,772
Total non-interest income	$	70,766	$	104,035

Total non-interest income ~~increased $48.2~~decreased $33.2 million, or ~~66.3%~~32.0%, from ~~$72.7~~$104.0 million for the three months ended ~~June 30, 2021~~March 31, 2022, to ~~$120.9~~$70.8 million for the three months ended ~~June 30, 2022,~~March 31, 2023, primarily due to ~~increases~~a loss on sale of investment securities and decreases in ~~deposit service fees, loan and lease related fees,~~other income, wealth and investment services, and deposit service fees.

During the ~~cash surrender value~~three months ended March 31, 2023, the Company sold $415.9 million of ~~life insurance policies,~~U.S. Treasury notes and ~~other~~Corporate debt securities classified as available-for-sale for proceeds of $395.4 million, which resulted in $20.5 million of gross realized losses. The $16.7 million loss on sale of investment securities included in non-interest income represents the ~~majority~~portion of ~~which~~the total charge that was not attributed to a decline in credit quality. There were ~~primarily driven by~~no sales of available-for-sale securities during the ~~merger with Sterling, partially offset by a decrease in mortgage banking activities.~~three months ended March 31, 2022.

~~Deposit service fees increased $10.0~~Other income decreased $10.1 million, or ~~24.0%~~63.9%, from ~~$41.4~~$15.8 million for the three months ended ~~June 30, 2021~~March 31, 2022, to ~~$51.4~~$5.7 million for the three months ended ~~June 30, 2022,~~March 31, 2023, primarily due to ~~the merger with Sterling, as well as higher interchange~~lower income generated from ~~increased debit card spending in the HSA~~customer interest rate derivative activities and ~~Consumer Banking segments.~~direct investments.

~~Loan~~Wealth and ~~lease related fees increased $20.0~~investment services decreased $4.0 million, or ~~255.0%~~37.8%, from ~~$7.9~~$10.6 million for the three months ended ~~June 30, 2021~~March 31, 2022, to ~~$27.9~~$6.6 million for the three months ended ~~June 30, 2022,~~March 31, 2023, primarily due to ~~the merger with Sterling, which included $3.1 million of operating lease income, as well as an increase in prepayment penalties, syndication fees, and other loan related fees.~~

~~Wealth and~~lower net investment services ~~increased $1.1~~income, which is a direct result of the outsourcing of the consumer investment services platform effective as of the fourth quarter of 2022.

Deposit service fees decreased $2.4 million, or ~~11.5%~~5.0%, from ~~$10.1~~$47.8 million for the three months ended ~~June 30, 2021~~March 31, 2022, to ~~$11.2~~$45.4 million for the three months ended ~~June 30, 2022,~~March 31, 2023, primarily due to ~~the merger with Sterling.~~lower customer account service and cash management/analysis fees, partially offset by higher interchange income.

~~Mortgage banking activities~~

Non-Interest Expense


	Three months ended March 31,
(In thousands)	2023		2022
Compensation and benefits	$	173,200	$	184,002
Occupancy	20,171		18,615
Technology and equipment	44,366		55,401
Intangible assets amortization	9,497		6,387
Marketing	3,476		3,509
Professional and outside services	32,434		54,091
Deposit insurance	12,323		5,222
Other expense	37,000		32,558
Total non-interest expense	$	332,467	$	359,785

Total non-interest expense decreased ~~$1.2~~$27.3 million, or ~~92.3%~~7.6%, from ~~$1.3~~$359.8 million for the three months ended ~~June 30, 2021~~March 31, 2022, to ~~$0.1~~$332.5 million for the three months ended ~~June 30, 2022,~~March 31, 2023, primarily due to ~~lower originations for sale, as the Company continues to execute on its strategic decision to originate residential mortgage loans for investment rather than for sale.~~decreases in professional and outside services, technology and equipment, and compensation and benefits, partially offset by increases in other expense, deposit insurance, and intangible assets amortization.

~~The cash surrender value of life insurance policies increased $4.6~~Professional and outside services decreased $21.7 million, or ~~128.8%~~40.0%, from ~~$3.6~~$54.1 million for the three months ended ~~June 30, 2021~~March 31, 2022, to ~~$8.2~~$32.4 million for the three months ended ~~June 30, 2022, primarily due to the additional bank-owned life insurance policies acquired in the merger with Sterling.~~

Other income increased $13.7 million, or 162.8%, from $8.4 million for the three months ended June 30, 2021 to $22.1 million for the three months ended June 30, 2022, primarily due to higher income from client interest rate derivative activities.

~~Comparison to Prior Year to Date~~

Total non-interest income increased $75.5 million, or 50.5%, from $149.5 million for the six months ended June 30, 2021 to $225.0 million for the six months ended June 30, 2022, due to increases in deposit service fees, loan and lease related fees, wealth and investment services, the cash surrender value of life insurance policies, and other income, the majority of which were primarily driven by the merger with Sterling, partially offset by a decrease in mortgage banking activities.

Deposit service fees increased $17.3 million, or 21.1%, from $81.9 million for the six months ended June 30, 2021 to $99.2 million for the six months ended June 30, 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.

Loan and lease related fees increased $34.4 million, or 212.7%, from $16.2 million for the six months ended June 30, 2021 to $50.6 million for the six months ended June 30, 2022, primarily due to the merger with Sterling, which included $5.3 million of operating lease income, as well as an increase in prepayment penalties, syndication fees, and other loan related fees.

Wealth and investment services increased $2.3 million, or 12.1%, from $19.5 million for the six months ended June 30, 2021 to $21.8 million for the six months ended June 30, 2022, primarily due to the merger with Sterling.

Mortgage banking activities decreased $3.5 million, or 86.6%, from $4.0 million for the six months ended June 30, 2021 to $0.5 million for the six months ended June 30, 2022, primarily due to lower originations for sale, as the Company continues to execute on its strategic decision to originate residential mortgage loans for investment rather than for sale.

The cash surrender value of life insurance policies increased $7.9 million, or 109.9%, from $7.1 million for the six months ended June 30, 2021 to $15.0 million for the six months ended June 30, 2022, primarily due to the additional bank-owned life insurance policies acquired in the merger with Sterling.

Other income increased $17.0 million, or 81.9%, from $20.8 million for the six months ended June 30, 2021 to $37.8 million for the six months ended June 30, 2022, primarily due to an increase in income due to the impact of the merger with Sterling, higher income from client interest rate derivative activities, and gains on sale of loans not originated for sale.

~~Non-Interest Expense~~
Three months ended June 30, Six months ended June 30,
(Dollars in thousands) 2022 2021 2022 2021
Compensation and benefits $ 187,656 $ 97,754 $ 371,658 $ 205,354
Occupancy 51,593 14,010 70,208 29,660
Technology and equipment 41,498 27,124 96,899 55,640
Intangible assets amortization 8,802 1,132 15,189 2,271
Marketing 3,441 3,227 6,950 5,731
Professional and outside services 15,332 21,025 69,423 30,801
Deposit insurance 6,748 3,749 11,970 7,705
Other expense 43,157 19,007 75,715 37,848
Total non-interest expense $ 358,227 $ 187,028 $ 718,012 $ 375,010

~~Comparison to Prior Year Quarter~~

Total non-interest expense increased $171.2 million, or 91.5%, from $187.0 million for the three months ended June 30, 2021 to $358.2 million for the three months ended June 30, 2022, primarily due to increases in compensation and benefits, occupancy, technology and equipment, intangible assets amortization, deposit insurance, and other expense, all of which were primarily driven by the merger with Sterling, partially offset by a decrease in professional and outside services.

~~Compensation and benefits increased $89.9 million, or 92.0%, from $97.8 million for the three months ended June 30, 2021 to $187.7 million for the three months ended June 30, 2022,~~March 31, 2023, primarily due to a $23.7 million increase in merger-related expenses, particularly as it relates to severance, retention, and executive synergy stock awards, and higher salaries and incentives related to the increase in employees as a result of the merger.

Occupancy increased $37.6 million, or 268.3%, from $14.0 million for the three months ended June 30, 2021 to $51.6 million for the three months ended June 30, 2022, primarily due to the Company's consolidation plan to reduce its corporate facility square footage, which resulted in a $23.1 million ROU asset impairment charge in the second quarter of 2022, and a combined $7.7 million in related exit costs and accelerated depreciation on property and equipment, as well as additional operating lease costs and depreciation related to the acquired Sterling banking centers and corporate offices.

Technology and equipment increased $14.4 million, or 53.0%, from $27.1 million for the three months ended June 30, 2021 to $41.5 million for the three months ended June 30, 2022, primarily due to an increase in technology and equipment service contracts due to the impact of the merger with Sterling.

Intangible assets amortization increased $7.7 million, or 677.6%, from $1.1 million for the three months ended June 30, 2021 to $8.8 million for the three months ended June 30, 2022, due to the additional amortization expense related to the core deposit and customer relationship intangible assets acquired in connection with the Sterling merger and Bend acquisition.

Professional and outside services decreased $5.7 million, or 27.1%, from $21.0 million for the three months ended June 30, 2021 to $15.3 million for the three months ended June 30, 2022, primarily due to a $12.5$24.4 million decrease in merger-related expenses, particularly as it relates to advisory ~~legal,~~ and ~~consulting~~legal fees, partially offset by an increase in other professional ~~service costs due to the impact of the merger with Sterling.~~fees.

~~Deposit insurance increased $3.0~~Technology and equipment decreased $11.0 million, or ~~80.0%~~19.9%, from ~~$3.7~~$55.4 million for the three months ended ~~June 30, 2021~~March 31, 2022, to ~~$6.7~~$44.4 million for the three months ended ~~June 30, 2022,~~March 31, 2023, primarily due to ~~an increase~~a $20.8 million decrease in merger-related expenses, particularly as it relates to contract termination costs. Included in the ~~Company's deposit insurance assessment base~~balance for the three months ended
March 31, 2023, is a reduction of $4.8 million to a previously recorded technology-related contract termination charge resulting from a change in the ~~merger with Sterling.~~expected use of certain services post core conversion.

~~Other expense increased $24.2~~Compensation and benefits decreased $10.8 million, or ~~127.1%~~5.9%, from ~~$19.0~~$184.0 million for the three months ended ~~June 30, 2021~~March 31, 2022, to ~~$43.2~~$173.2 million for the three months ended ~~June 30, 2022,~~March 31, 2023, primarily due to ~~an increase~~a $30.5 million decrease in merger-related expenses, particularly as it relates to severance and retention, and the outsourcing of the consumer investment services platform effective as of the fourth quarter of 2022, partially offset by the full quarter impact in 2023 of salaries and incentives from the Sterling merger compared to a two-thirds impact for the quarter in 2022.

Other expense increased $4.4 million, or 13.6%, from $32.6 million for the three months ended March 31, 2022, to $37.0 million for the three months ended March 31, 2023, primarily due to the full quarter impact in 2023 of other expenses from the Sterling merger ~~with Sterling, which included $2.4~~compared to the two-thirds impact for the quarter in 2022, partially offset by a $3.9 million ~~of operating lease depreciation, and a $6.6 million increase~~decrease in merger-related expenses, particularly as it relates to disposals ofon property and ~~equipment and litigation costs.~~equipment. Included in the balance reported for the three months ended March 31, 2023, is a reduction of $1.7 million to a previously recorded contract termination charge resulting from a decrease in volume usage.

~~Comparison to Prior Year to Date~~

~~Total non-interest expense~~Deposit insurance increased ~~$343.0~~$7.1 million, or ~~91.5%~~136.0%, from ~~$375.0~~$5.2 million for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022, to ~~$718.0~~$12.3 million for the ~~six~~three months ended June 30, 2022, primarily due to increases in compensation and benefits, occupancy, technology and equipment, intangible assets amortization, professional and outside services, deposit insurance, and other expense, all of which were primarily driven by the merger with Sterling.

Compensation and benefits increased $166.3 million, or 81.0%, from $205.4 million for the six months ended June 30, 2021 to $371.7 million for the six months ended June 30, 2022, primarily due to a $65.2 million increase in merger-related expenses, particularly as it relates to severance, retention, and executive synergy stock awards, 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 charges.

~~Occupancy increased $40.5 million, or 136.7%, from $29.7 million for the six months ended June 30, 2021 to $70.2 million for the six months ended June 30, 2022,~~March 31, 2023, primarily due to the ~~Company's consolidation plan to reduce its corporate facility square footage,~~increased initial base deposit insurance assessment rate schedules adopted by the FDIC, which ~~resulted in a $23.1 million ROU asset impairment charge in~~took effect as of the ~~second~~first quarter of ~~2022,~~2023 for all insured depository institutions, and a combined $7.7 million in related exit costs and accelerated depreciation on property and equipment, as well as additional operating lease costs and depreciation related to the acquired Sterling banking centers and corporate offices. These increases were partially offset by a decrease in strategic initiatives charges.

Technology and equipment increased $41.3 million, or 74.2%, from $55.6 million for the six months ended June 30, 2021 to $96.9 million for the six months ended June 30, 2022, primarily due to a $19.9 million increase in 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.asset growth.

Intangible assets amortization increased ~~$12.9~~$3.1 million, or ~~568.8%~~48.7%, from ~~$2.3~~$6.4 million for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022, to ~~$15.2~~$9.5 million for the ~~six~~three months ended ~~June 30, 2022,~~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 ~~deposit~~deposits and customer relationship intangible assets ~~acquired~~recorded in connection with the Sterling merger and Bend acquisition.

Professional and outside services increased $38.6 million, or 125.4%, from $30.8 million for the six months ended June 30, 2021 to $69.4 million for the six months ended June 30, 2022, primarily due to a $32.0 million increase in merger-related expenses, particularly as it relates to advisory, legal, and consulting fees, and an increase in professional service costs due to the impact of the merger with Sterling, partially offset by a decrease in strategic initiative charges.

Deposit insurance increased $4.3 million, or 55.4%, from $7.7 million for the six months ended June 30, 2021 to $12.0 million for the six months ended June 30, 2022, primarily due to an increase in the Company's deposit insurance assessment base resulting from the merger with Sterling.

Other expense increased $37.9 million, or 100.1%, from $37.8 million for the six months ended June 30, 2021 to $75.7 million for the six months ended June 30, 2022, primarily due to an increase in expenses due to the impact of the merger with Sterling, which included $4.1 million of operating lease depreciation, and a $9.6 million increase in merger-related expenses, particularly as it relates to disposals of property and equipment, litigation costs, and transfer taxes.

Income Taxes

~~Comparison to Prior Year Quarter~~

~~Webster~~The Company recognized income tax expense of ~~$54.8~~$65.8 million and ~~$34.0~~an income tax benefit of $33.6 million for the three months ended ~~June 30,~~March 31, 2023, and 2022, ~~and 2021,~~ respectively, reflecting ~~effective tax rates of 23.1% and 26.6%, respectively.~~

The increase in income tax expense is due to a higher level of pre-tax income recognized during the three months ended June 30, 2022, resulting from the impact of the Company's merger with Sterling. The decrease in thean effective tax rate ~~primarily reflects a reduction in merger-related expenses recognized during the three months ended June 30, 2022, that were estimated to be nondeductible~~of 23.0% for income tax purposes, as compared to the three months ended June 30, 2021, which also reflected a lower level of pre-tax income. The decrease in the effective tax rate also reflects increased tax-exempt income and tax credits, partially offset by the effects of a higher level of pre-tax income and rate of state and local tax (SALT) in 2022 as compared to 2021, resulting from the merger with Sterling.

~~Comparison to Prior Year to Date~~

Webster recognized income tax expense of $21.2 million and $64.2 million for the six months ended June 30, 2022, and 2021, respectively, reflecting effective tax rates of 11.4% and 24.1%, respectively.

~~The decrease in both income tax expense and the effective tax rate primarily reflects the Company's $50.3 million pre-tax loss recognized during~~ the three months ended March 31, ~~2022, which was driven by the one-time charges incurred as a result~~2023, and an effective tax benefit rate of ~~the merger with Sterling. These decreases also reflect the $13.7 million deferred SALT benefit recognized during~~66.7% for the three months ended March 31, 2022.

The income tax benefit of $33.6 million for the first quarter of 2022 reflected the recognition of the pre-tax net loss and the tax benefits 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 about~~income tax expense and the ~~realizability~~23.0% effective tax rate for the first quarter of ~~its SALT deferred tax assets (DTAs) due to~~2023 reflects the application of an estimated ~~increase in future taxable income. These effects were partially offset by~~annual effective tax rate of 22.3% for 2023 and the ~~effect~~recognition of ~~$28.4 million of merger-related expenses recognized~~discrete items during the ~~six months ended June 30, 2022 that were estimated to be nondeductible for income tax purposes, as compared to $16.1 million recognized during the six months ended June 30, 2021.~~

At June 30, 2022, and December 31, 2021, Webster recorded a valuation allowance on its DTAs of $29.2 million and $37.4 million, respectively. The $29.2 million at June 30, 2022, reflects a reduction of $9.9 million for the change in estimate discussed above, and includes a $1.7 million valuation allowance related to the Bend acquisition. At June 30, 2022, and December 31, 2021, Webster's gross DTAs included $68.7 million and $64.4 million, respectively, applicable to SALT net operating loss carryforwards that are available to offset future taxable income. The $68.7 million at June 30, 2022, includes $5.6 million related to the Sterling merger and $1.1 million related to the Bend acquisition. Webster's total gross DTAs at June 30, 2022, also included $5.6 million and $0.5 million, respectively, of federal net operating loss and credit carryforwards related to the Sterling merger and Bend acquisition, which are subject to annual limitations on utilization.

The ultimate realization of DTAs is dependent on the generation of future taxable income during the periods in which the net operating loss and credit carryforwards are available. In making its assessment, management considers the Company's forecasted future results of operations, estimates the content and apportionment of its income by legal entity over the near term for SALT purposes, and also applies longer-term growth rate assumptions. Based on its estimates, management believes it is more likely than not that the Company will realize its DTAs, net of the valuation allowance, at June 30, 2022. However, it is possible that some or all of Webster's net operating loss and credit carryforwards could expire unused or that more net operating loss and credit carryforwards could be utilized than estimated, either as a result of changes in future forecasted levels of taxable income or if future economic or market conditions or interest rates were to vary significantly from the Company's forecasts and, in turn, impact its future results of operations.period.

Additional information regarding ~~Webster's~~the Company's income taxes, including its DTAs, can be found within Note ~~10:~~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.

Segment Reporting

~~Webster's~~The Company's operations are organized into three reportable segments that represent its primary businesses: Commercial Banking, HSA Bank, and Consumer Banking. These segments reflect how executive management responsibilities are assigned, how discrete financial information is evaluated, the type of customer served, and how products and services are provided. 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 16: Segment Reporting in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.

Effective January 1, 2022, Webster realigned its investment services operations from Commercial Banking to Consumer Banking to better serve its customers and deliver operational efficiencies. Under this realignment, $125.4 million of deposits and $4.3 billion of assets under administration (off-balance sheet) were reassigned from Commercial Banking to Consumer Banking. There was no goodwill reallocation nor goodwill impairment as a result of the reorganization. In addition, the non-interest expense allocation methodology was modified to exclude certain overhead and merger-related costs that are not directly related to segment performance. Prior period results of operations have been recast accordingly to reflect the realignment.

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

Commercial Banking serves ~~corporate customers~~businesses with more than $2 million of ~~revenues~~revenue through its Commercial Real Estate ~~Business Banking, Capital~~and Equipment Finance, Middle Market, Business Banking, Asset-Based Lending and Commercial Services, Public Sector Finance, Mortgage Warehouse, Sponsor and Specialty Finance, ~~Mortgage Warehouse Lending,~~Verticals and Support, Private Banking, and Treasury Management ~~components.~~business units.

HSA Bank offers a comprehensive consumer-directed healthcare solution that includes HSAs, health reimbursement arrangements, flexible spending accounts, and commuter benefits. HSAs are used in conjunction with high deductible health plans in order to facilitate tax advantages for account holders with respect to health care spending and savings, in accordance with applicable laws. HSAs are distributed nationwide directly to employers and individual consumers, as well as through national and regional insurance carriers, benefit consultants, and financial advisors. HSA Bank deposits provide long duration, low-cost funding that is used to minimize the Company’s use of wholesale funding in support of its loan growth. In addition, non-interest revenue is generated predominantly through service fees and interchange income.

Consumer Banking serves individual customers and small businesses with less than $2 million of revenues by offering consumer deposits, residential mortgages, home equity lines, secured and unsecured loans, debit and credit card products, and investment services. Consumer Banking operates a distribution network consisting of ~~202~~201 banking centers and ~~359~~351 ATMs, a customer care center, and a full range of web and mobile-based banking services, primarily throughout southern New England and the New York Metro and Suburban markets.

1410

Commercial Banking

Operating Results:
Three months ended June 30, Six months ended June 30,
(In thousands) 2022 2021 2022 2021
Net interest income $ 333,421 $ 140,589 $ 620,490 $ 282,075
Non-interest income 49,430 18,378 88,173 36,754
Non-interest expense 102,720 46,275 191,960 92,559
Pre-tax, pre-provision net revenue $ 280,131 $ 112,692 $ 516,703 $ 226,270

~~Comparison to Prior Year Quarter~~


	Three months ended March 31,
(In thousands)	2023		2022
Net interest income	$	384,314	$	287,069
Non-interest income	35,397		38,743
Non-interest expense	108,509		89,240
Pre-tax, pre-provision net revenue	$	311,202	$	236,572

Commercial Banking's PPNR increased ~~$167.4~~$74.6 million, or ~~148.6%~~31.5%, for the three months ended ~~June 30, 2022,~~March 31, 2023, as compared to the three months ended ~~June 30, 2021,~~March 31, 2022, due to ~~increases~~an 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 ~~$192.8~~$97.2 million increase in net interest income is primarily ~~attributed~~due to ~~incremental~~the 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 ~~and deposit balances acquired from Sterling, loan and deposit~~ growth, and the higher interest ~~rates.~~rate environment. The ~~$31.1~~$3.3 million ~~increase~~decrease in non-interest income is primarily ~~attributed to incremental fee income~~ due to ~~the merger, increased client hedging activity,~~lower prepayment penalties, cash management fees, and ~~loan and lease related~~customer interest rate derivative activities, partially offset by higher syndication fees. The ~~$56.4~~$19.3 million increase in non-interest expense is primarily ~~attributed to incremental expenses incurred related~~due to the ~~acquired~~full quarter impact of expenses from the Sterling ~~commercial business, and costs to support growth within the loan and deposit portfolios.~~

~~Comparison to Prior Year to Date~~

~~Commercial Banking's PPNR increased $290.4 million, or 128.4%, for the six months ended June 30, 2022~~merger in 2023 as compared to the ~~six months ended June 30, 2021, due to increases~~two-thirds impact for the quarter in both net interest income and non-interest income, partially offset by an increase in non-interest expense, all of which were primarily driven by the merger with Sterling. The $338.4 million increase in net interest income is primarily attributed to incremental loan and deposit balances acquired from Sterling, and loan and deposit growth. The $51.4 million increase in non-interest income is primarily attributed to incremental fee income due to the merger, increased client hedging activity, and loan and lease related fees. The $99.4 million increase in non-interest expense is primarily attributed to incremental expenses incurred related to the acquired Sterling commercial business, and costs to support growth within the loan and deposit portfolios.2022.

Selected Balance Sheet and Off-Balance Sheet Information:


(In thousands)	(In thousands)	At June 30, 2022		At December 31, 2021		(In thousands)	At March 31, 2023		At December 31, 2022
Loans and leases	Loans and leases	$	36,635,027	$	15,209,515	Loans and leases	$	41,286,860	$	40,115,067
Deposits	Deposits	20,501,166		9,519,362		Deposits	18,297,574		19,563,227

Assets under administration / management (off-balance sheet)	Assets under administration / management (off-balance sheet)	2,266,476		2,869,385		Assets under administration / management (off-balance sheet)	2,670,273		2,258,635

Loans and leases increased ~~$21.4~~$1.2 billion, or ~~140.9%~~2.9%, at ~~June 30, 2022~~March 31, 2023, as compared to December 31, ~~2021,~~2022, primarily due to ~~the merger with Sterling and~~organic growth ~~within~~in the sponsor and specialty line of business. Total portfolio originations for the six months ended June 30, 2022 and 2021 were $6.2 billion and $2.6 billion, respectively. The $3.6 billion increase was primarily attributed to the merger with Sterling, along with increased commercial non-mortgage and commercial real estate categories, partially offset by net principal paydowns in the warehouse lending, equipment finance, and asset-based lending categories. Total portfolio originations for the three months ended March 31, 2023, and 2022, were $3.0 billion and $2.0 billion, respectively. The $1.0 billion increase was primarily due to the timing of the Sterling merger in 2022, and an increase in commercial non-mortgage originations.

Deposits ~~increased $11.0~~decreased $1.3 billion, or ~~115.4%~~6.5%, at ~~June 30, 2022~~March 31, 2023, as compared to December 31, ~~2021,~~2022, primarily resulting from customers rebalancing their deposit concentrations due to the ~~merger with Sterling.~~current banking environment.

Commercial Banking held ~~$0.6~~$0.8 billion and ~~$0.8~~$0.6 billion in assets under administration and ~~$1.7~~$1.9 billion and ~~$2.1~~$1.7 billion in assets under management at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, respectively. The combined ~~decrease~~increase of ~~$602.9 million,~~$0.4 billion, or ~~21.0%~~18.2%, was primarily due to ~~lower~~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 ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023.

1511

HSA Bank

Operating Results:
Three months ended June 30, Six months ended June 30,
(In thousands) 2022 2021 2022 2021
Net interest income $ 49,558 $ 42,193 $ 94,135 $ 84,302
Non-interest income 26,552 26,554 53,510 53,559
Non-interest expense 37,540 32,423 73,949 68,428
Pre-tax net revenue $ 38,570 $ 36,324 $ 73,696 $ 69,433

~~Comparison to Prior Year Quarter~~


	Three months ended March 31,
(In thousands)	2023		2022
Net interest income	$	71,730	$	44,577
Non-interest income	24,067		26,958
Non-interest expense	43,700		36,409
Pre-tax net revenue	$	52,097	$	35,126

HSA Bank's pre-tax net revenue increased ~~$2.2~~$17.0 million, or ~~6.2%~~48.3%, for the three months ended ~~June 30, 2022,~~March 31, 2023, as compared to the three months ended ~~June 30, 2021,~~March 31, 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 ~~$7.4~~$27.2 million increase in net interest income is primarily ~~attributed~~due to an increase in ~~the~~ net deposit interest rate spread ~~on deposits~~ and ~~overall~~organic deposit growth. The ~~$5.1~~$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 ~~attributed to incremental expenses from Bend's acquired business, as well as an increase in temporary help, consulting, and travel expenses.~~

~~Comparison to Prior Year to Date~~

~~HSA Bank's pre-tax net revenue increased $4.3 million, or 6.1%, for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, primarily~~ due to an increase in net interest income, which was partially offset by an increase in non-interest expense. Non-interest income remained flat on a comparative basis. The $9.8 million increase in net interest income is primarily attributedcompensation costs, higher service contract expenses related to ~~an increase in~~additional account holders, and the ~~net interest rate spread on deposits and overall deposit growth. The $5.5 million increase in non-interest expense is primarily attributed to incremental~~full quarter of expenses expenses from ~~Bend's acquired business, as well as an increase~~the Bend acquisition in ~~temporary help, consulting, and travel expenses.~~2023 compared to the one-half impact for the quarter in 2022.

Selected Balance Sheet and Off-Balance Sheet Information:


(In thousands)	(In thousands)	At June 30, 2022		At December 31, 2021		(In thousands)	At March 31, 2023		At December 31, 2022
Deposits	Deposits	$	7,777,853	$	7,397,997	Deposits	$	8,272,534	$	7,944,919

Assets under administration, through linked investment accounts (off-balance sheet)	Assets under administration, through linked investment accounts (off-balance sheet)	3,277,359		3,718,610		Assets under administration, through linked investment accounts (off-balance sheet)	3,775,869		3,393,832

Deposits increased ~~$379.9 million,~~$0.3 billion, or ~~5.1%~~4.1%, at ~~June 30, 2022~~March 31, 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 ~~Bank~~ deposits accounted for approximately 15.0% and 14.7% ~~and 24.8%~~ of ~~Webster's~~the Company's total consolidated deposits at ~~June 30, 2022~~March 31, 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, ~~decreased $441.3 million,~~increased $0.4 billion, or ~~11.9%~~11.3%, at ~~June 30, 2022~~March 31, 2023, as compared to December 31, ~~2021,~~2022, primarily due to ~~lower~~additional account holders and higher valuations in the equity markets during the ~~six~~three months ended ~~June 30, 2022, which was partially offset by additional account holders and balances from the acquisition of Bend.~~March 31, 2023.

1612

Consumer Banking

Operating Results:
Three months ended June 30, Six months ended June 30,
(In thousands) 2022 2021 2022 2021
Net interest income $ 179,067 $ 93,075 $ 315,647 $ 182,440
Non-interest income 30,784 24,098 58,676 46,970
Non-interest expense 107,312 74,149 203,059 149,460
Pre-tax, pre-provision net revenue $ 102,539 $ 43,024 $ 171,264 $ 79,950

~~Comparison to Prior Year Quarter~~


	Three months ended March 31,
(In thousands)	2023		2022
Net interest income	$	210,583	$	136,677
Non-interest income	25,959		27,901
Non-interest expense	106,879		95,510
Pre-tax, pre-provision net revenue	$	129,663	$	69,068

Consumer Banking's PPNR increased ~~$59.5~~$60.6 million, or ~~138.3%~~87.7%, for the three months ended ~~June 30, 2022~~March 31, 2023, as compared to the three months ended ~~June 30, 2021,~~March 31, 2022, due to ~~increases~~an 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 ~~$86.0~~$73.9 million increase in net interest income is primarily ~~attributed~~due to ~~incremental loan~~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 ~~deposit balances acquired from Sterling, loan and deposit growth, and~~the higher interest ~~rates.~~rate environment. The ~~$6.7~~$1.9 million ~~increase~~decrease in non-interest income is primarily ~~attributed to incremental fee income~~ due to lower net investment services income driven by the ~~merger, and increased deposit servicing and loan and lease related fees, which were~~outsourcing of the consumer investment services platform in the fourth quarter of 2022, partially offset by ~~lower mortgage banking activities and investment~~higher deposit service ~~fees.~~fee income. The ~~$33.2~~$11.4 million increase in non-interest expense is primarily ~~attributed to incremental expenses incurred related~~due to the ~~acquired~~full quarter impact of expenses from the Sterling ~~consumer business, which was partially offset by the benefits of costs savings initiatives implemented over the course of 2021.~~

~~Comparison to Prior Year to Date~~

~~Consumer Banking's PPNR increased $91.3 million, or 114.2%, for the six months ended June 30, 2022~~merger in 2023 as compared to the ~~six months ended June 30, 2021, due to increases~~two-thirds impact for the quarter in both net interest income and non-interest income, partially offset by an increase in non-interest expense, all of which were primarily driven by the merger with Sterling. The $133.2 million increase in net interest income is primarily attributed to incremental loan and deposit balances acquired from Sterling, loan and deposit growth, and lower interest paid on deposits. The $11.7 million increase in non-interest income is primarily attributed to incremental fee income due to the merger, and increased deposit servicing and loan and lease related fees, which were2022, partially offset by lower ~~mortgage banking activities~~compensation and investment service fees. The $53.6 million increase in non-interest expense is primarily attributed to incremental expenses incurred related to the acquired Sterling consumer business, which was partially offset by the benefits ~~of costs savings initiatives implemented over the course of 2021.~~expenses.

Selected Balance Sheet and Off-Balance Sheet Information:


(In thousands)	(In thousands)	At June 30, 2022		At December 31, 2021		(In thousands)	At March 31, 2023		At December 31, 2022
Loans	Loans	$	8,964,922	$	7,062,182	Loans	$	9,617,093	$	9,624,465
Deposits	Deposits	23,841,133		12,926,302		Deposits	23,698,094		23,609,941
Assets under administration (off-balance sheet)	Assets under administration (off-balance sheet)	7,535,824		4,332,901		Assets under administration (off-balance sheet)	7,750,020		7,872,397

Loans ~~increased $1.9 billion,~~decreased $7.4 million, or ~~26.9%~~0.1%, at ~~June 30, 2022~~March 31, 2023, as compared to December 31, ~~2021,~~2022, primarily due to ~~the merger with Sterling and growth~~net principal paydowns in ~~residential mortgage and~~ home equity ~~loans, partially offset by the forgiveness of PPP loans,~~balances and the continued run-off of ~~consumer~~ Lending Club ~~loans.~~loans, partially offset by growth in residential mortgages. Total portfolio originations ~~for~~during the ~~six~~three months ended ~~June 30,~~March 31, 2023, and 2022, ~~and 2021~~ were ~~$1.4~~$0.3 billion and ~~$1.7~~$0.6 billion, respectively. The $0.3 billion decrease was primarily ~~attributed~~due to ~~increased~~the increase in market rates, which resulted in lower residential mortgage ~~loan originations, as well as the cessation of PPP loan originations effective May 31, 2021.~~originations.

Deposits increased ~~$10.9~~$0.1 billion, or ~~84.4%~~0.4%, at ~~June 30, 2022~~March 31, 2023, 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.

Consumer Banking held $7.5 billion and $4.3 billion in assets under administration at June 30, 2022, and December 31, 2021, respectively. The $3.2 billion increase was primarily due to the merger with Sterling,customer investment outflows, partially offset by ~~lower~~higher valuations in the equity markets during the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023.

1713

Financial Condition

Total assets increased ~~$32.7~~$3.5 billion, or ~~93.6%~~5.0%, from ~~$34.9~~$71.3 billion at December 31, ~~2021~~2022, to ~~$67.6~~$74.8 billion at ~~June 30, 2022.~~March 31, 2023. The change in total assets was primarily attributed to the ~~following:~~following, which experienced changes greater than $100 million dollars:

•Interest-bearing deposits increased $1.7 billion, primarily due to the strategic decision to maintain additional liquidity;

•Total investment securities, net increased ~~$4.8~~$0.4 billion, ~~with increases of $4.4~~reflecting a $0.5 billion ~~and $349.9 million~~increase in the held-to-maturity portfolio, partially offset by a $0.1 billion decrease in the available-for-sale ~~and held-to-maturity portfolios, respectively,~~portfolio. The overall increase in investment securities was primarily due to ~~$4.4~~purchases exceeding paydown activities and a favorable market value adjustment on
available-for-sale securities, partially offset by the sale of $415.9 million in Corporate debt and U.S. Treasury notes;

•FHLB and FRB stock increased $138.8 million, primarily due to the additional FHLB stock investment required as a result of the increase in FHLB advances during the first quarter of 2023;

•Loans held for sale increased $0.2 billion, ~~of investment securities acquired from Sterling~~primarily due to the Company's current balance sheet composition strategy, which resulted in the ~~merger, all~~increased transfer of ~~which were classified as available-for-sale based on Webster's intent at closing, and purchases of held-to-maturity~~commercial loans from held for investment ~~securities exceeding paydowns, calls/maturities, and net premium amortization;~~to held for sale in the current period;

•Loans and leases increased ~~$23.4~~$1.2 billion, ~~with increases of $21.5 billion and $1.9 billion in the commercial and consumer portfolios, respectively,~~ primarily due to ~~$20.5~~$3.3 billion of ~~gross loans and leases acquired from Sterling in the merger, which included a $317.6 million purchase discount. Webster also originated $7.6 billion of loans and leases~~originations during the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, particularly across the commercial non-mortgage and commercial real estate ~~categories. These increases were~~categories, partially offset by ~~the forgiveness of PPP loans,~~ net principal paydowns ~~in home equity loans,~~ and the run-off of consumer Lending Club loans. In addition, Webster recorded $88.0 million and $175.1 million of initial ACL for the PCD and non-PCD loans and leases acquired from Sterling, respectively, which primarily contributed to the $270.3 million increase in the ACL on loans and leases;commercial portfolio loan sales.

•Goodwill and other net intangible assets increased a combined ~~$2.2 billion.~~$147.9 million. Goodwill increased ~~$2.0 billion,~~$117.4 million, which reflects the ~~$1.9 billion and $36.0~~$143.2 million recognized in connection with the interLINK acquisition, partially offset by the impact of the Sterling merger ~~and Bend acquisition, respectively.~~measurement period adjustments recorded during the first quarter of 2023. The ~~$197.9~~$30.5 million increase in other net intangible assets is primarily due to the ~~$119.1~~$36.0 million ~~core deposit~~broker dealer relationship and ~~$94.0~~$4.0 million ~~customer relationship intangible assets acquired from Sterling and Bend, respectively,~~non-competition agreement recognized in connection with the interLINK acquisition, partially offset by ~~year to date~~year-to-date amortization ~~charges; and~~

•Accrued interest receivable and other assets increased $892.9 million, primarily due to $959.5 million of balances acquired from Sterling in the merger. Notable increases include $114.6 million in accrued interest receivable, $60.1 million in alternative investments, $565.9 million in LIHTC investments, and a combined $43.4 million in accounts receivable and prepaid expenses. These increases were partially offset by a decrease of $96.8 million in treasury derivative assets.charges.

Total liabilities increased ~~$28.1~~$3.3 billion, or ~~89.3%~~5.3%, from ~~$31.5~~$63.2 billion at December 31, ~~2021~~2022, to ~~$59.6~~$66.5 billion at ~~June 30, 2022.~~March 31, 2023. The change in total liabilities was primarily attributed to the following:

•Total deposits increased ~~$23.2~~$1.2 billion, ~~with increases of $6.5~~reflecting a $2.2 billion ~~and $16.7 billion~~increase in ~~non-interest bearing deposits and~~ interest-bearing deposits, ~~respectively,~~partially offset by a $1.0 billion decrease in non-interest-bearing deposits. The overall increase in deposits is primarily due to ~~$23.3~~the $2.9 billion of sweep money market deposits ~~assumed from Sterling~~added as a result of the interLINK acquisition, partially offset by the impact of customers rebalancing their deposit concentrations in the ~~merger;~~current banking environment.

•Securities sold under agreements to repurchase and other borrowings ~~increased $1.1~~decreased $0.8 billion, primarily due to ~~the purchase~~$0.9 billion of ~~$1.2 billion in~~ federal funds purchased at December 31, 2022, as compared to none at March 31, 2023. The additional liquidity generated from the interLINK deposit sweep program allowed for the paydown of higher rate federal funds purchased during the ~~three months ended June 30, 2022, partially offset by a decrease~~first quarter of ~~$168.5 million in securities sold under agreements to repurchase;~~2023;

•~~Long-term debt~~FHLB advances increased ~~$513.6 million,~~$3.1 billion, primarily due to ~~$499.0 million aggregate par value of subordinated notes assumed from Sterling in~~short-term funding needs and the ~~merger, adjusted for a $17.9 million purchase premium, which is being amortized over the remaining lives of the subordinated notes;~~strategic decision to maintain additional liquidity; and

•Accrued expenses and other liabilities ~~increased $807.5 million,~~decreased $0.2 billion, primarily due to ~~$595.3~~decreases of $111.6 million ~~of balances assumed from Sterling in the merger,~~ and ~~the timing of payments for merger-related expenses, particularly as it relates to compensation and benefits and professional services. Notable increases include $196.5~~
$83.1 million in treasury derivative liabilities ~~$108.4 million in operating lease liabilities,~~ and ~~$299.8 million in unfunded commitments for LIHTC investments.~~accrued annual employee bonuses, respectively.

Total ~~shareholders'~~stockholders' equity increased ~~$4.6~~$0.2 billion, or ~~132.6%~~3.0%, from ~~$3.4~~$8.1 billion at December 31, ~~2021~~2022, to ~~$8.0~~$8.3 billion at ~~June 30, 2022.~~
March 31, 2023. The change in total ~~shareholders'~~stockholders' equity was attributed to the following:

•~~Common shares issued~~The adoption of ASU No. 2022-02, which resulted in ~~the merger with Sterling totaling approximately $5.0 billion, of which $43.9~~a $4.2 million ~~pertained~~cumulative-effect adjustment to ~~replacement share-based compensation awards;~~

•~~The conversion of Sterling Series A preferred stock into Webster Series G preferred stock at a fair value of $138.9 million;~~retained earnings;

•Net income recognized of ~~$165.6~~$221.0 million;

•Dividends paid to common and preferred ~~shareholders~~stockholders of ~~$107.6~~$69.7 million and ~~$7.6~~$4.2 million, respectively;

•Other comprehensive ~~loss,~~income, net of tax, of ~~$458.8~~$96.9 million, primarily due to favorable market value ~~decreases in the Company's~~ adjustments on
available-for-sale securities ~~portfolio~~ and cash flow ~~hedges;~~hedges driven by decreases in long-term interest rates;

•Employee ~~share-based~~stock-based compensation plan activity of ~~$30.5~~$11.6 million, inclusive of restricted stock amortization and forfeitures, and stock options exercised of ~~$0.5~~$1.7 million; and

•Repurchases of common stock of ~~$222.1 million under the Company's common stock repurchase program and $21.1~~$15.1 million related to employee ~~share-based~~stock-based compensation plans.

1814

Investment Securities

Through its Corporate Treasury function, ~~Webster~~the 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 debt~~The Company's investment securities are classified into two major categories: available-for-sale and
held-to-maturity.

~~Asset/Liability Committee (ALCO)~~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 ~~Office of the Comptroller of the Currency (OCC)~~OCC may further establish individual limits on certain types of investments if the concentration in such investment presents a safety and soundness concern. At ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021, Webster~~2022, the Company had investment securities with a total net carrying value of ~~$15.2~~$14.9 billion and ~~$10.4~~$14.5 billion, respectively, with an average risk weighting for regulatory purposes of ~~19.2%~~17.4% and ~~12.5%~~19.0%, respectively. Although the Bank held the entirety of ~~Webster's~~the Company's investment portfolio at both ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, the Holding Company may also directly hold investments.

The following table summarizes the balances and percentage composition of ~~Webster's~~the Company's investment securities:


		At June 30, 2022				At December 31, 2021					At March 31, 2023				At December 31, 2022
(In thousands)	(In thousands)	Amount		%		Amount		%		(In thousands)	Amount		%		Amount		%
Available-for-sale:	Available-for-sale:									Available-for-sale:
U.S. Treasury notes	U.S. Treasury notes	$	726,484	8.4	%	$	396,966	9.4	%	U.S. Treasury notes	$	386,772	4.9	%	$	717,040	9.1	%
Government agency debentures	Government agency debentures	291,203		3.4		—		—		Government agency debentures	262,342		3.4		258,374		3.3
Municipal bonds and notes	Municipal bonds and notes	1,830,630		21.2		—		—		Municipal bonds and notes	1,645,228		21.1		1,633,202		20.7
Agency CMO	Agency CMO	71,247		0.8		90,384		2.2		Agency CMO	57,462		0.7		59,965		0.8
Agency MBS	Agency MBS	2,421,333		28.0		1,593,403		37.6		Agency MBS	2,230,850		28.6		2,158,024		27.3
Agency CMBS	Agency CMBS	1,561,505		18.1		1,232,541		29.1		Agency CMBS	1,635,252		21.0		1,406,486		17.8
CMBS	CMBS	929,103		10.8		886,263		20.9		CMBS	902,058		11.6		896,640		11.4
CLO	CLO	10,147		0.1		21,847		0.5		CLO	—		—		2,107		—
Corporate debt	Corporate debt	736,520		8.5		13,450		0.3		Corporate debt	625,523		8.0		704,412		8.9
Private label MBS	Private label MBS	48,303		0.6		—		—		Private label MBS	44,262		0.6		44,249		0.6
Other	Other	11,883		0.1		—		—		Other	9,228		0.1		12,198		0.1
Total available-for-sale		$	8,638,358	100.0	%	$	4,234,854	100.0	%
Total available-for-sale securities										Total available-for-sale securities	$	7,798,977	100.0	%	$	7,892,697	100.0	%

Held-to-maturity:	Held-to-maturity:									Held-to-maturity:
Agency CMO	Agency CMO	$	32,469	0.5	%	$	42,405	0.7	%	Agency CMO	$	27,101	0.4	%	$	28,358	0.4	%
Agency MBS	Agency MBS	2,795,607		42.7		2,901,593		46.8		Agency MBS	2,613,113		37.0		2,626,114		40.0
Agency CMBS	Agency CMBS	2,677,183		40.9		2,378,475		38.4		Agency CMBS	3,364,186		47.6		2,831,949		43.1
Municipal bonds and notes (1)	Municipal bonds and notes (1)	879,433		13.4		705,918		11.4		Municipal bonds and notes (1)	927,501		13.1		928,845		14.2
CMBS	CMBS	163,516		2.5		169,948		2.7		CMBS	131,604		1.9		149,613		2.3
Total held-to-maturity		$	6,548,208	100.0	%	$	6,198,339	100.0	%
Total held-to-maturity securities										Total held-to-maturity securities	$	7,063,505	100.0	%	$	6,564,879	100.0	%
Total investment securities	Total investment securities	$	15,186,566			$	10,433,193			Total investment securities	$	14,862,482			$	14,457,576

(1)The balances at ~~both June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, exclude the ACL recorded on held-to-maturity ~~debt~~ securities of $0.3 million and $0.2 ~~million.~~million, respectively.

Available-for-sale ~~debt~~ securities ~~increased $4.4~~decreased $0.1 billion, or ~~104.0%~~1.2%, from ~~$4.2~~$7.9 billion at December 31, ~~2021~~2022, to ~~$8.6~~$7.8 billion at ~~June 30, 2022,~~March 31, 2023, primarily due to the ~~merger with Sterling, as the Company acquired $4.4~~sale of $0.4 billion ofin U.S. Treasury notes and Corporate debt securities, ~~at fair value on January 31, 2022, all~~which resulted in $20.5 million of gross realized losses, $3.8 million of which ~~were classified as available-for-sale based on Webster's intent at closing. The debt securities acquired from Sterling resulted~~was attributed to a decline in ~~a $221.6 million net purchase premium over par value accounted~~credit quality and has been included in the Provision for ~~as a yield adjustment using the effective interest method. Webster also purchased an additional $1.2 billion of available-for sale debt securities during the six months ended June 30, 2022.~~credit losses. This ~~purchase activity~~decrease was partially offset by ~~net unrealized losses, paydowns, and net premium amortization,~~purchases exceeding paydown activities, particularly across the Agency MBS, Agency CMBS, and CMBS ~~categories.~~

categories, and a favorable market value adjustment. The ~~tax-equivalent~~average FTE yield in the available-for-sale portfolio was ~~2.20%~~2.76% for the three months ended ~~June 30, 2022 and 2.10% for the six months ended June 30, 2022,~~March 31, 2023, as compared to ~~1.82%~~1.98% for the three months ended ~~June 30, 2021 and 1.83% for the six months ended June 30, 2021.~~March 31, 2022. The 3878 basis point ~~and 27 basis point increases, respectively, are attributed~~increase is primarily due to ~~lower premium amortization and~~ higher market rates on securities purchased ~~during~~in the ~~six months ended June 30, 2022.~~current period.

At March 31, 2023, and December 31, 2022, gross unrealized losses on available-for-sale securities were $770.3 million and $864.5 million, respectively. The $94.2 million decrease is primarily due to a decline in long-term market rates. Available-for-sale ~~debt~~ securities are evaluated for credit losses on a quarterly basis. At June 30, 2022 and December 31, 2021, gross unrealized losses on available-for-sale debt securities were $609.9 million and $34.3 million, respectively. The $575.6 million increase in unrealized losses is primarily due to the increased portfolio size from the merger with Sterling, and higher market rates. Because these unrealized losses were attributable to factors other than credit deterioration, noNo ACL was recorded ~~during~~on available-for-sale securities as of either period as each of the ~~period.~~securities in the Company's portfolio are investment grade, current as to principal and interest, and their price changes are consistent with interest and credit spreads when adjusting for convexity, rating, and industry differences. At ~~June 30, 2022, Webster did not intend~~March 31, 2023, based on current market conditions and the Company's current targeted balance sheet composition strategy, the Company has the intent to ~~sell these investment~~hold its available-for-sale securities in unrealized loss positions through the anticipated recovery period, and it is ~~more likely than not~~more-likely-than-not that the Company will not ~~be required~~have to sell these available-for-sale securities ~~prior to~~before the ~~anticipated~~ recovery of ~~their~~the entire amortized cost basis.

1915

Held-to-maturity ~~investment~~ securities increased ~~$349.9 million,~~$0.5 billion, or ~~5.6%~~7.6%, from ~~$6.2~~$6.6 billion at December 31, ~~2021~~2022, to ~~$6.5~~$7.1 billion at ~~June 30, 2022,~~
March 31, 2023, primarily due to purchases exceeding ~~paydowns, calls, and net premium amortization,~~paydown activities, particularly across the Agency ~~CMBS~~MBS and Agency ~~MBS~~CMBS categories. The ~~tax-equivalent~~average FTE yield in the held-to-maturity portfolio was ~~2.25%~~2.82% for the three months ended ~~June 30, 2022, and 2.15% for the six months ended June 30, 2022,~~March 31, 2023, as compared to ~~2.31%~~2.06% for the three months ended ~~June 30, 2021, and 2.30% for the six months ended June 30, 2021.~~March 31, 2022. The ~~6 and 15~~76 basis point ~~decreases, respectively, are attributed~~increase is primarily due to higher ~~premium amortization and lower~~market rates on securities purchased ~~over~~in the ~~past year.~~current period.

At March 31, 2023, and December 31, 2022, gross unrealized losses on held-to-maturity securities were $751.0 million and $806.2 million, respectively. The $55.2 million decrease is primarily due to a decline in long-term market rates. Held-to-maturity ~~debt~~ securities are evaluated for credit losses on a quarterly basis under ~~current expected credit losses (CECL).~~the CECL methodology. At ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021, gross unrealized losses on held-to-maturity debt securities were $545.3 million and $55.7 million, respectively. The increase in unrealized losses is primarily due to higher market rates. The~~2022, the ACL on held-to-maturity ~~debt~~ securities was $0.3 million and $0.2 million, ~~at both June 30, 2022 and December 31, 2021.~~respectively.

The following table summarizes the ~~amortized cost~~book value of investment securities by the earlier of either contractual maturity or call date, as applicable, along with the respective weighted-average yields:


		At June 30, 2022																					At March 31, 2023
		1 Year or Less				1 - 5 Years				5 - 10 Years				After 10 Years				Total					1 Year or Less				1 - 5 Years				5 - 10 Years				After 10 Years				Total
(Dollars in thousands)	(Dollars in thousands)	Amount		Weighted- Average Yield (1)		Amount		Weighted- Average Yield (1)		Amount		Weighted- Average Yield (1)		Amount		Weighted- Average Yield (1)		Amount		Weighted- Average Yield (1)		(Dollars in thousands)	Amount		Weighted- Average Yield (1)		Amount		Weighted- Average Yield (1)		Amount		Weighted- Average Yield (1)		Amount		Weighted- Average Yield (1)		Amount		Weighted- Average Yield (1)
Available-for-sale:	Available-for-sale:																					Available-for-sale:
U.S. Treasury notes	U.S. Treasury notes	$	—	—	%	$	726,484	1.05	%	$	—	—	%	$	—	—	%	$	726,484	1.05	%	U.S. Treasury notes	$	—	—	%	$	386,772	1.28	%	$	—	—	%	$	—	—	%	$	386,772	1.28	%
Government agency debentures	Government agency debentures	10,000		0.47		76,695		2.42		—		—		204,508		3.22		291,203		2.91		Government agency debentures	—		—		74,620		2.42		—		—		187,722		3.22		262,342		2.99
Municipal bonds and notes	Municipal bonds and notes	18,217		1.20		273,330		1.30		633,465		1.48		905,618		1.58		1,830,630		1.50		Municipal bonds and notes	34,763		1.18		103,056		1.69		708,492		1.52		798,917		1.58		1,645,228		1.55
Agency CMO	Agency CMO	—		—		748		4.07		4,172		2.70		66,327		2.51		71,247		2.54		Agency CMO	—		—		483		2.68		5,544		3.01		51,435		2.85		57,462		2.86
Agency MBS	Agency MBS	60		(2.52)		7,771		1.22		166,113		1.45		2,247,389		2.10		2,421,333		2.05		Agency MBS	8		(5.27)		16,304		1.31		151,944		1.71		2,062,594		2.48		2,230,850		2.42
Agency CMBS	Agency CMBS	3,479		1.38		56,229		1.20		81,427		1.42		1,420,370		2.08		1,561,505		2.01		Agency CMBS	1,599		0.42		86,325		0.90		44,459		1.40		1,502,869		2.73		1,635,252		2.59
CMBS	CMBS	—		—		67,210		2.37		49,244		3.40		812,649		2.90		929,103		2.89		CMBS	—		—		68,771		6.16		49,165		6.08		784,122		6.19		902,058		6.19
CLO		—		—		10,147		2.61		—		—		—		—		10,147		2.61

Corporate debt	Corporate debt	—		—		209,514		2.18		466,528		3.14		60,478		2.75		736,520		2.84		Corporate debt	4,973		1.54		162,524		2.56		400,466		3.17		57,560		3.33		625,523		3.02
Private label MBS	Private label MBS	—		—		—		—		—		—		48,303		4.01		48,303		4.01		Private label MBS	—		—		—		—		—		—		44,262		4.01		44,262		4.01
Other	Other	2,690		5.20		4,932		3.80		4,261		2.72		—		—		11,883		3.73		Other	250		3.77		4,810		3.80		4,168		2.71		—		—		9,228		3.31
Total available-for-sale		$	34,446	1.31	%	$	1,433,060	1.43	%	$	1,405,210	2.10	%	$	5,765,642	2.19	%	$	8,638,358	2.05	%
Total available-for-sale securities																						Total available-for-sale securities	$	41,593	1.21	%	$	903,665	2.00	%	$	1,364,238	2.19	%	$	5,489,481	3.00	%	$	7,798,977	2.73	%
Held-to-maturity:	Held-to-maturity:																					Held-to-maturity:
Agency CMO	Agency CMO	$	—	—	%	$	—	—	%	$	—	—	%	$	32,469	2.17	%	$	32,469	2.17	%	Agency CMO	$	—	—	%	$	—	—	%	$	—	—	%	$	27,101	2.91	%	$	27,101	2.91	%
Agency MBS	Agency MBS	—		—		2,518		2.43		24,380		2.17		2,768,709		2.19		2,795,607		2.19		Agency MBS	2		3.55		1,494		2.41		24,550		2.51		2,587,067		2.47		2,613,113		2.47
Agency CMBS	Agency CMBS	—		—		—		—		146,199		2.69		2,530,984		2.02		2,677,183		2.06		Agency CMBS	—		—		—		—		126,854		2.68		3,237,332		3.07		3,364,186		3.05
Municipal bonds and notes	Municipal bonds and notes	4,404		3.33		50,304		3.27		154,607		2.76		670,118		3.11		879,433		3.05		Municipal bonds and notes	6,091		3.27		51,399		3.28		186,949		2.72		683,062		3.19		927,501		3.10
CMBS	CMBS	—		—		—		—		—		—		163,516		2.70		163,516		2.70		CMBS	—		—		—		—		—		—		131,604		2.70		131,604		2.70
Total held-to-maturity		$	4,404	3.33	%	$	52,822	3.23	%	$	325,186	2.68	%	$	6,165,796	2.24	%	$	6,548,208	2.27	%
Total held-to-maturity securities																						Total held-to-maturity securities	$	6,093	3.27	%	$	52,893	3.26	%	$	338,353	2.69	%	$	6,666,166	2.84	%	$	7,063,505	2.84	%
Total investment securities	Total investment securities	$	38,850	1.54	%	$	1,485,882	1.49	%	$	1,730,396	2.21	%	$	11,931,438	2.21	%	$	15,186,566	2.14	%	Total investment securities	$	47,686	1.47	%	$	956,558	2.07	%	$	1,702,591	2.29	%	$	12,155,647	2.91	%	$	14,862,482	2.78	%

(1)Weighted-average yields ~~were~~exclude FTE adjustments, and are calculated using ~~amortized cost on a fully-tax equivalent basis, assuming a 21% tax rate.~~the sum of the total book value multiplied by the yield divided by the sum of the total book value for each security, major type, and maturity bucket.

Additional information regarding the Company's ~~available-for-sale and held-to-maturity~~ investment securities' portfolios can be found within Note 3: Investment Securities in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.

2016

Loans and Leases

The following table summarizes the amortized cost and percentage composition of ~~Webster's~~the Company's loans and leases:


		At June 30, 2022				At December 31, 2021					At March 31, 2023				At December 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Amount		%		Amount		%		(Dollars in thousands)	Amount		%		Amount		%
Commercial non-mortgage	Commercial non-mortgage	$	13,935,450	30.5	%	$	6,882,480	30.9	%	Commercial non-mortgage	$	16,939,373	33.3	%	$	16,392,795	32.9	%
Asset-based	Asset-based	1,892,278		4.1		1,067,248		4.8		Asset-based	1,760,527		3.5		1,821,642		3.7
Commercial real estate	Commercial real estate	12,365,451		27.1		5,463,321		24.5		Commercial real estate	13,499,139		26.5		12,997,163		26.1
Multi-family	Multi-family	5,776,219		12.7		1,139,859		5.1		Multi-family	7,014,599		13.8		6,621,982		13.3
Equipment financing	Equipment financing	1,778,326		3.9		627,058		2.8		Equipment financing	1,601,109		3.1		1,628,393		3.3
Warehouse lending	Warehouse lending	914,541		2.0		—		—		Warehouse lending	474,328		0.9		641,976		1.3
Residential	Residential	7,223,728		15.8		5,412,905		24.3		Residential	8,001,563		15.7		7,963,420		16.0
Home equity	Home equity	1,681,610		3.7		1,593,559		7.2		Home equity	1,580,569		3.1		1,633,107		3.3
Other consumer	Other consumer	79,140		0.2		85,299		0.4		Other consumer	55,316		0.1		63,948		0.1
Total loans and leases (1)	Total loans and leases (1)	$	45,646,743	100.0	%	$	22,271,729	100.0	%	Total loans and leases (1)	$	50,926,523	100.0	%	$	49,764,426	100.0	%

(1)The amortized cost balances at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, exclude the ACL recorded on loans and leases of ~~$571.5~~$613.9 million and ~~$301.2~~$594.7 million, respectively.

The following table summarizes loans and leases by contractual maturity, along with the indication of whether interest rates are fixed or variable:

At June 30, 2022
(In thousands) 1 Year or Less 1 - 5 Years 5 - 15 Years After 15 Years Total
Fixed rate:
Commercial non-mortgage $ 152,969 $ 436,262 $ 1,762,157 $ 1,344,225 $ 3,695,613
Asset-based — 57,202 — — 57,202
Commercial real estate 472,671 1,596,791 1,130,201 112,450 3,312,113
Multi-family 273,788 1,572,561 1,502,736 33,188 3,382,273
Equipment financing 142,014 1,342,009 272,267 — 1,756,290
Residential 994 64,131 448,064 4,618,559 5,131,748
Home equity 5,108 25,463 185,858 182,622 399,051
Other consumer 7,289 25,267 426 189 33,171
Total fixed rate loans and leases $ 1,054,833 $ 5,119,686 $ 5,301,709 $ 6,291,233 $ 17,767,461
Variable rate:
Commercial non-mortgage $ 2,080,076 $ 7,428,532 $ 660,182 $ 71,047 $ 10,239,837
Asset-based 466,034 1,363,522 5,520 — 1,835,076
Commercial real estate 1,589,819 4,643,612 2,139,192 680,715 9,053,338
Multi-family 449,475 880,541 1,028,089 35,841 2,393,946
Equipment financing 1,807 20,229 — — 22,036
Warehouse lending 725,796 188,745 — — 914,541
Residential 726 11,341 2,079,913 — 2,091,980
Home equity 5,058 6,940 177,057 1,093,504 1,282,559
Other consumer 10,436 27,983 1,402 6,148 45,969
Total variable rate loans and leases $ 5,329,227 $ 14,571,445 $ 6,091,355 $ 1,887,255 $ 27,879,282
Total loans and leases (1)
$ 6,384,060 $ 19,691,131 $ 11,393,064 $ 8,178,488 $ 45,646,743


	At March 31, 2023
(In thousands)	1 Year or Less		1 - 5 Years		5 - 15 Years		After 15 Years		Total
Fixed rate:
Commercial non-mortgage	$	222,804	$	598,021	$	2,131,003	$	1,549,094	$	4,500,922
Asset-based	24,048		31,264		—		—		55,312
Commercial real estate	599,026		1,821,401		1,184,930		141,016		3,746,373
Multi-family	353,747		2,112,410		1,751,446		42,595		4,260,198
Equipment financing	150,270		1,153,565		295,814		—		1,599,649

Residential	405		58,084		414,759		4,992,444		5,465,692
Home equity	4,379		23,829		175,658		195,046		398,912
Other consumer	10,858		11,924		387		153		23,322
Total fixed rate loans and leases	$	1,365,537	$	5,810,498	$	5,953,997	$	6,920,348	$	20,050,380
Variable rate:
Commercial non-mortgage	$	3,455,439	$	8,239,753	$	675,115	$	68,144	$	12,438,451
Asset-based	451,406		1,248,442		5,367		—		1,705,215
Commercial real estate	1,789,853		5,026,956		2,228,039		707,918		9,752,766
Multi-family	426,953		1,009,039		1,288,677		29,732		2,754,401
Equipment financing	1,460		—		—		—		1,460
Warehouse lending	474,328		—		—		—		474,328
Residential	722		10,905		319,947		2,204,297		2,535,871
Home equity	2,253		7,215		150,431		1,021,758		1,181,657
Other consumer	6,574		16,873		2,554		5,993		31,994
Total variable rate loans and leases	$	6,608,988	$	15,559,183	$	4,670,130	$	4,037,842	$	30,876,143
Total loans and leases (1)	$	7,974,525	$	21,369,681	$	10,624,127	$	10,958,190	$	50,926,523

(1)Amounts due exclude total accrued interest receivable of ~~$140.2~~$246.1 million.

Credit Policies and Procedures

~~Webster~~The Bank has credit policies and procedures in place designed to support its lending activities within an acceptable level of risk, which are reviewed and approved by management and the Board of Directors on a regular basis. To assist with this process, management inspects reports generated by the Company's loan reporting systems related to loan production, loan quality, concentrations of credit, loan delinquencies, non-performing loans, and potential problem loans.

Commercial non-mortgage, asset-based, equipment finance, and warehouse lending loans are underwritten after evaluating and understanding the borrower’s ability to operate and service its debt. Assessment of the borrower's management is a critical element of the underwriting process and credit decision. Once it has been determined that the borrower’s management possesses sound ethics and a solid business acumen, current and projected cash flows are examined to determine the ability of the borrower to repay obligations, as contracted. Commercial non-mortgage, asset-based, and equipment finance loans are primarily made based on the identified cash flows of the borrower, and secondarily on the underlying collateral provided by the borrower. Warehouse lending loans are primarily made based on the borrower's ability to originate high-quality, first-mortgage residential loans that can be sold into the agency, government, or private jumbo markets, and secondarily on the underlying cash flows of the borrower. However, the cash flows of borrowers may not be as expected, and the collateral securing these loans, as applicable, may fluctuate in value. Most commercial non-mortgage, asset-based, and equipment finance loans are secured by the assets being financed and may incorporate personal guarantees of the principal balance. Warehouse lending loans are generally uncommitted facilities.

Commercial real estate loans, including multi-family, are subject to underwriting standards and processes similar to those for commercial non-mortgage, asset-based, equipment finance, and warehouse lending loans. These loans are primarily viewed as cash flow loans, and secondarily as loans secured by real estate. Repayment of commercial real estate loans is largely dependent on the successful operation of the property securing the loan, the market in which the property is located, and the tenants of the property securing the loan. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type and geographic location, which reduces the Company's exposure to adverse economic events that may affect a particular market. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. All transactions are appraised to ~~validate~~determine market value. Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. Management periodically utilizes third-party experts to provide insight and guidance about economic conditions and trends affecting its commercial real estate loan portfolio.

Consumer loans are subject to policies and procedures developed to manage the specific risk characteristics of the portfolio. These policies and procedures, coupled with relatively small individual loan amounts and predominately collateralized loan structures, are spread across many different borrowers, minimizing the level of credit risk. Trend and outlook reports are reviewed by management on a regular basis, and policies and procedures are modified or developed, as needed. Underwriting factors for residential mortgage and home equity loans include the borrower’s ~~Fair Isaac Corporation (FICO)~~FICO score, the loan amount relative to property value, and the borrower’s debt-to-income level. ~~Webster~~The Bank originates both qualified mortgage and non-qualified mortgage loans, as defined by applicable ~~Consumer Financial Protection Bureau (CFPB)~~CFPB rules.

Allowance for Credit Losses on Loans and Leases

The ACL on loans and leases increased ~~$270.3~~$19.2 million, or ~~89.7%~~3.2%, from ~~$301.2~~$594.7 million at December 31, ~~2021,~~2022, to ~~$571.5~~$613.9 million at ~~June 30, 2022, primarily~~March 31, 2023, due to the ~~initial ACL of $88.0 million and $175.1 million recorded for PCD and non-PCD loans and leases, respectively, that were acquired from Sterling. The establishment~~impact of the ~~initial ACL for PCD loans~~current macroeconomic environment on credit performance and ~~leases is net of $48.3 million in charge-offs, which were recognized upon completion of the merger in accordance with GAAP.~~organic loan growth.

The following table summarizes the percentage allocation of the ACL across the loans and leases categories:


		At June 30, 2022				At December 31, 2021					At March 31, 2023				At December 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Amount		% (1)		Amount		% (1)		(Dollars in thousands)	Amount		% (1)		Amount		% (1)
Commercial non-mortgage	Commercial non-mortgage	$	174,975	30.6	%	$	111,351	37.0	%	Commercial non-mortgage	$	196,019	31.9	%	$	197,950	33.3	%
Asset-based	Asset-based	21,536		3.8		6,481		2.2		Asset-based	21,546		3.5		16,094		2.7
Commercial real estate	Commercial real estate	223,485		39.1		114,493		38.0		Commercial real estate	230,020		37.5		214,771		36.1
Multi-family	Multi-family	64,473		11.3		19,414		6.4		Multi-family	83,264		13.6		80,652		13.6
Equipment financing	Equipment financing	26,452		4.6		6,138		2.0		Equipment financing	23,474		3.8		23,081		3.9
Warehouse lending	Warehouse lending	824		0.1		—		—		Warehouse lending	427		0.1		577		0.1
Residential	Residential	23,472		4.1		15,628		5.2		Residential	25,869		4.2		26,907		4.5
Home equity	Home equity	33,512		5.9		23,523		7.8		Home equity	31,126		5.1		32,296		5.4
Other consumer	Other consumer	2,770		0.5		4,159		1.4		Other consumer	2,169		0.3		2,413		0.4
Total ACL on loans and leases	Total ACL on loans and leases	$	571,499	100.0	%	$	301,187	100.0	%	Total ACL on loans and leases	$	613,914	100.0	%	$	594,741	100.0	%

(1)The ACL allocated to a single loan and lease category does not preclude its availability to absorb losses in other categories.

2218

Methodology

~~Webster's~~The Company's ACL on loans and leases is considered to be a critical accounting policy. The ACL on loans and leases is a contra-asset account that offsets the amortized cost basis of loans and leases for the credit losses that are expected to occur over the life of the asset. Executive management reviews and advises on the adequacy of the allowance, which is maintained at a level that management deems to be sufficient to cover expected losses within the loan and lease portfolios.

The ACL on loans and leases is determined using the CECL model, whereby an expected lifetime credit loss is recognized at the origination or purchase of an asset, including those acquired through a business combination, which is then reassessed at each reporting date over the contractual life of the asset. The calculation of expected credit losses includes consideration of past events, current conditions, and reasonable and supportable economic forecasts that affect the collectability of the reported amounts. Generally, expected credit losses are determined through a pooled, collective assessment of loans and leases with similar risk characteristics. However, if the risk characteristics of a loan or lease change such that it no longer matches that of the collectively assessed pool, it is removed from the population and individually assessed for credit losses. The total ACL on loans and leases recorded by management represents the aggregated estimated credit loss determined through both the collective and individual assessments.

Collectively Assessed Loans and Leases. Collectively assessed loans and leases are segmented based on product type, credit quality, risk ratings, and/or collateral types within its commercial and consumer portfolios, and expected losses are determined using a ~~Probability of Default (PD), Loss Given Default (LGD),~~PD, LGD, and ~~Exposure at Default (EAD),~~EAD, loss rate, or discounted cash flow framework.

For portfolios using the PD/LGD/EAD framework, credit losses are calculated as the product of the probability of a loan defaulting, expected loss given the occurrence of a default, and the expected exposure of a loan at default. Summing the product across loans over their lives yields the lifetime expected credit losses for a given portfolio. Management's PD and LGD calculations are predictive models that measure the current risk profile of the loan pools using forecasts of future macroeconomic conditions, historical loss information, loan-level risk attributes, and credit quality indicators. The calculation of EAD follows an iterative process to determine the expected remaining principal balance of a loan based on historical paydown rates for loans of a similar segment within the same portfolio. The calculation of portfolio exposure in future quarters incorporates expected losses, the loan's amortization schedule, and prepayment rates.

Under the loss rate method, expected credit losses are estimated using a loss rate that is multiplied by the amortized cost of the asset at the balance sheet date. For each loan segment identified above, ~~we apply~~management applies an expected historical loss trend based on third-party loss estimates, ~~correlate~~and correlates them to observed economic metrics and reasonable and supportable forecasts of economic conditions. Under the discounted cash flow method, expected credit losses are determined by comparing the amortized cost of the asset at the balance sheet date to the present value of estimated future principal and interest payments expected to be collected over the remaining life of the asset. ~~Our~~The Company's loss model generates cash flow projections at the loan level based on reasonable and supportable projections, from which ~~we estimate~~management estimates payment collections adjusted for ~~curtailments,~~accelerated payments, recovery time, PD, and LGD.

~~Webster's~~The Company's models incorporate a single economic forecast scenario and macroeconomic assumptions over a reasonable and supportable forecast period. The development of the reasonable and supportable forecast assumes each macroeconomic variable will revert to long-term expectations, with reversion characteristics unique to specific economic indicators and forecasts. Reversion towards long-term expectations generally begins two to three years from the forecast start date and is complete within three to five years. Certain models use output reversion and revert to mean historical portfolio loss rates on a
straight-line basis in the third year of the forecast. Other models use input reversion and revert to the mean of macroeconomic variables in reasonable and supportable forecasts.

~~Webster~~The Company incorporates forecasts of macroeconomic variables in the determination of expected credit losses. Macroeconomic variables are selected for each class of financing receivable based on relevant factors, such as asset type and the correlation of the variables to credit losses, among others. Data from the forecast scenario of these variables is used as an input to the modeled loss calculation.

A portion of the collective ACL is comprised of qualitative adjustments for risk characteristics that are not reflected or captured in the quantitative models, but are likely to impact the measurement of estimated credit losses. Qualitative factors are based on ~~our~~management's judgement of the ~~company,~~Company, market, industry, or business specific data including loan trends, portfolio segment composition, and loan rating or credit scores. Qualitative adjustments may be applied in relation to economic forecasts when relevant facts and circumstances are expected to impact credit losses, particularly in times of significant volatility in economic activity.

2319

Individually Assessed Loans and Leases. If the risk characteristics of a loan or lease change such that it no longer matches the risk characteristics of the collectively assessed pool, it is removed from the population and individually assessed for credit losses. Generally, all non-accrual loans, ~~troubled debt restructures (TDRs), potential TDRs,~~ loans with a charge-off, and collateral dependent loans where the borrower is experiencing financial difficulty, are individually assessed. The measurement method used to calculate the expected credit loss on an individually assessed loan or lease is dependent on the type and whether the loan or lease is considered to be collateral dependent. Methods for collateral dependent loans are either based on the fair value of the collateral less estimated cost to sell (when the basis of repayment is the sale of collateral), or the present value of the expected cash flows from the operation of the collateral. For non-collateral dependent loans, either a discounted cash flow method or other loss factor method is used. Any individually assessed loan or lease for which no specific valuation allowance is deemed necessary is either the result of sufficient cash flows or sufficient collateral coverage relative to the amortized cost of the asset.

Additional information regarding ~~Webster's~~the Company's ACL methodology can be found within Note 1: Summary of Significant Accounting Policies in the Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Asset Quality Ratios

~~Webster~~The Company manages asset quality using risk tolerance levels established through the Company's underwriting standards, servicing, and management of its loan and lease portfolio. Loans and leases for which a heightened risk of loss has been identified are regularly monitored to mitigate further deterioration and preserve asset quality in future periods. Non-performing assets, credit losses, and net charge-offs are considered by management to be key measures of asset quality.

The following table summarizes key asset quality ratios and their underlying components:


(Dollars in thousands)	(Dollars in thousands)	At June 30, 2022			At December 31, 2021			(Dollars in thousands)	At March 31, 2023			At December 31, 2022
Non-performing loans and leases (1)	Non-performing loans and leases (1)	$	247,530		$	109,778		Non-performing loans and leases (1)	$	185,020		$	203,791
Total loans and leases	Total loans and leases	45,646,743			22,271,729			Total loans and leases	50,926,523			49,764,426
Non-performing loans and leases as a percentage of loans and leases	Non-performing loans and leases as a percentage of loans and leases	0.54		%	0.49		%	Non-performing loans and leases as a percentage of loans and leases	0.36		%	0.41		%

Non-performing assets (1)	Non-performing assets (1)	$	250,242		$	112,590		Non-performing assets (1)	$	186,551		$	206,136
Total loans and leases	Total loans and leases	$	45,646,743		$	22,271,729		Total loans and leases	$	50,926,523		$	49,764,426
Add: OREO	Add: OREO	2,712			2,812			Add: OREO	1,531			2,345
Total loans and leases plus OREO	Total loans and leases plus OREO	$	45,649,455		$	22,274,541		Total loans and leases plus OREO	$	50,928,054		$	49,766,771
Non-performing assets as a percentage of loans and leases plus OREO	Non-performing assets as a percentage of loans and leases plus OREO	0.55		%	0.51		%	Non-performing assets as a percentage of loans and leases plus OREO	0.37		%	0.41		%

Non-performing assets (1)	Non-performing assets (1)	$	250,242		$	112,590		Non-performing assets (1)	$	186,551		$	206,136
Total assets	Total assets	67,595,021			34,915,599			Total assets	74,844,395			71,277,521
Non-performing assets as a percentage of total assets	Non-performing assets as a percentage of total assets	0.37		%	0.32		%	Non-performing assets as a percentage of total assets	0.25		%	0.29		%

ACL on loans and leases	ACL on loans and leases	$	571,499		$	301,187		ACL on loans and leases	$	613,914		$	594,741
Non-performing loans and leases (1)	Non-performing loans and leases (1)	247,530			109,778			Non-performing loans and leases (1)	185,020			203,791
ACL on loans and leases as a percentage of non-performing loans and leases	ACL on loans and leases as a percentage of non-performing loans and leases	230.88		%	274.36		%	ACL on loans and leases as a percentage of non-performing loans and leases	331.81		%	291.84		%

ACL on loans and leases	ACL on loans and leases	$	571,499		$	301,187		ACL on loans and leases	$	613,914		$	594,741
Total loans and leases	Total loans and leases	45,646,743			22,271,729			Total loans and leases	50,926,523			49,764,426
ACL on loans and leases as a percentage of loans and leases	ACL on loans and leases as a percentage of loans and leases	1.25		%	1.35		%	ACL on loans and leases as a percentage of loans and leases	1.21		%	1.20		%

ACL on loans and leases	ACL on loans and leases	$	571,499		$	301,187		ACL on loans and leases	$	613,914		$	594,741
Net charge-offs	Net charge-offs	37,058			3,829			Net charge-offs	98,084			67,288
Ratio of ACL on loans and leases to net charge-offs (2)	Ratio of ACL on loans and leases to net charge-offs (2)	15.42x			78.66x			Ratio of ACL on loans and leases to net charge-offs (2)	6.26x			8.84x

(1)Non-performing assets balances and related asset quality ratios exclude the impact of net unamortized (discounts)/premiums and net unamortized deferred ~~(costs)~~(fees)/~~fees~~costs on loans and leases.

(2)Calculated for the ~~June 30, 2022~~March 31, 2023, period based on annualized year-to-date net charge-offs.

2420

The following table summarizes net charge-offs (recoveries) as a percentage of average loans and leases for each category:


		At or for the three months ended June 30,													At or for the three months ended March 31,
		2022						2021							2023						2022
(Dollars in thousands)	(Dollars in thousands)	Net Charge-offs (Recoveries)		Average Balance		% (1)		Net Charge-offs (Recoveries)		Average Balance		% (1)		(Dollars in thousands)	Net Charge-offs (Recoveries)		Average Balance		% (1)		Net Charge-offs (Recoveries)		Average Balance		% (1)
Commercial non-mortgage	Commercial non-mortgage	$	8,972	$	13,446,217	0.27	%	$	(393)	$	6,929,981	(0.02)	%	Commercial non-mortgage	$	2,723	$	16,635,874	0.07	%	$	8,663	$	10,863,354	0.32	%
Asset-based	Asset-based	3		1,851,956		—		(2)		937,580		—		Asset-based	13,189		1,790,992		2.95		(50)		1,540,301		(0.01)
Commercial real estate	Commercial real estate	1,678		11,984,529		0.06		153		5,272,771		0.01		Commercial real estate	8,551		13,260,223		0.26		1,048		9,738,181		0.04
Multi-family	Multi-family	193		5,771,622		0.01		—		1,093,059		—		Multi-family	1,033		6,710,103		0.06		10		3,994,744		—
Equipment financing	Equipment financing	146		1,850,959		0.03		—		615,417		—		Equipment financing	(660)		1,625,463		(0.16)		213		1,339,775		0.06
Warehouse lending	Warehouse lending	—		553,331		—		—				—		Warehouse lending	—		409,580		—		—		365,325		—
Residential	Residential	(508)		6,905,509		(0.03)		323		4,738,859		0.03		Residential	(461)		7,995,327		(0.02)		(44)		6,322,495		—
Home equity	Home equity	(1,100)		1,672,845		(0.26)		(2,204)		1,701,529		(0.52)		Home equity	(421)		1,608,428		(0.10)		(1,267)		1,658,938		(0.31)
Other consumer	Other consumer	216		83,730		1.03		955		124,243		3.07		Other consumer	567		59,202		3.83		356		89,716		1.59
Total	Total	$	9,600	$	44,120,698	0.09	%	$	(1,168)	$	21,413,439	(0.02)	%	Total	$	24,521	$	50,095,192	0.20	%	$	8,929	$	35,912,829	0.10	%

		At or for the six months ended June 30,
		2022						2021
(Dollars in thousands)		Net Charge-offs (Recoveries)		Average Balance		% (1)		Net Charge-offs (Recoveries)		Average Balance		% (1)
Commercial non-mortgage		$	17,635	$	12,161,920	0.29	%	$	477	$	6,988,670	0.01	%
Asset-based		(47)		1,696,990		(0.01)		(1,426)		916,951		(0.31)
Commercial real estate		2,726		10,083,808		0.05		5,307		5,252,713		0.20
Multi-family		203		5,671,844		0.01		—		1,082,256		—
Equipment financing		359		1,596,779		0.04		85		608,922		0.03
Warehouse lending		—		459,847		—		—				—
Residential		(552)		6,615,613		(0.02)		(455)		4,729,831		(0.02)
Home equity		(2,367)		1,665,929		(0.28)		(2,234)		1,733,582		(0.26)
Other consumer		572		86,707		1.32		2,399		134,267		3.57
Total		$	18,529	$	40,039,437	0.09	%	$	4,153	$	21,447,192	0.04	%

(1)Percentage represents annualized year-to-date net charge-offs (recoveries) to average loans and leases within the comparable category.

~~Comparison to Prior Quarter to Date~~

Net charge-offs (recoveries) as a percentage of average loans and leases were 0.09% and (0.02)% for the three months ended June 30, 2022 and 2021, respectively. The 0.11% increase is primarily attributed to an increase in net charge-offs in the commercial non-mortgage, commercial real estate, and home equity categories, due to favorable credit performance in the prior period, as the economy benefited from the support of federal stimulus programs.

~~Comparison to Prior Year to Date~~

Net charge-offs as a percentage of average loans and leases were ~~0.09% and 0.04%~~0.20% for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023, and ~~2021, respectively.~~0.10% for the three months ended March 31, 2022. The ~~0.05% increase~~increased level of net charge-offs is primarily ~~attributed~~due to ~~an increase in~~a full quarter impact of the Sterling merger on net charge-offs in 2023 as compared to the ~~commercial non-mortgage category, partially offset by a decrease~~two-thirds impact for the quarter in ~~net charge-offs in~~2022, and the ~~commercial real estate and other consumer categories, due to favorable credit performance in the prior period, as the economy benefited from the support of federal stimulus programs.~~Company's current balance sheet composition strategy.

Liquidity and Capital Resources

~~Webster~~The Company manages its cash flow requirements through proactive liquidity measures at both the Holding Company and ~~Webster Bank in~~the Bank. In order to maintain stable, cost-effective funding, and to promote overall balance sheet ~~strength. The~~strength, the liquidity position of the Company is continuously monitored, and adjustments are made to balance sources and uses of funds, as ~~needed.~~appropriate. At ~~June 30, 2022,~~March 31, 2023, management is not aware of any events that are reasonably likely to have a material adverse effect on the Company’s liquidity position, capital resources, or operating activities. ~~Further, management~~Although regulatory agencies have not issued formal guidance mandating more stringent liquidity and capital requirements, the Company is ~~not aware~~anticipating a greater focus on the liquidity and capital adequacy of ~~any regulatory recommendations regarding liquidity,~~financial institutions in response to the recent high-profile bank failures that occurred during the first quarter of 2023, and has taken appropriate measures to mitigate the risk that such requirements, if implemented, ~~would~~may have ~~a material adverse effect~~ on ~~the Company.~~

its business, financial positions, and results of operations.

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

Holding Company Liquidity. The primary source of liquidity at the Holding Company is dividends from ~~Webster~~the Bank. To a lesser extent, investment income, net proceeds from investment sales, borrowings, and public offerings may provide additional liquidity. The Holding Company generally uses its funds for principal and interest payments on senior notes, subordinated notes, and junior subordinated debt, dividend payments to preferred and common ~~shareholders,~~stockholders, repurchases of its common stock, and purchases of investment securities, as applicable.

There are certain restrictions on ~~Webster~~the Bank's payment of dividends to the Holding Company, which ~~are described~~can be found within
Note 10: Regulatory Capital and Restrictions in the Notes to Condensed Consolidated Financial Statements contained in
Part I - Item 1. Financial Statements of this report, and in the section captioned "Supervision and Regulation" in Part I - Item 1. Business of the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. During the ~~six~~three months ended ~~June 30, 2022, Webster~~March 31, 2023, the Bank paid ~~$125.0~~$150.0 million in dividends to the Holding Company. At ~~June 30, 2022,~~March 31, 2023, there were ~~$551.9~~$561.9 million of retained earnings available for the payment of dividends by ~~Webster~~the Bank to the Holding Company. On ~~July 18, 2022, Webster~~April 26, 2023, the Bank was approved to pay the Holding Company ~~$250.0~~$100.0 million in dividends during the ~~third~~second quarter of ~~2022.~~2023.

The quarterly cash dividend to common ~~shareholders~~stockholders remained at $0.40 per common share during the three months ended ~~June 30, 2022.~~March 31, 2023. On ~~July 18, 2022,~~April 26, 2023, it was announced that ~~Webster Financial Corporation’s~~the Company’s Board of Directors had declared a quarterly cash dividend of $0.40 per share on ~~its~~Webster common stock. For ~~its~~the Series F Preferred Stock and Series G Preferred Stock, ~~Webster declared~~ quarterly cash dividends of $328.125 per share and $16.25 per share were declared, respectively. ~~Webster~~The Company continues to monitor economic forecasts, anticipated earnings, and its capital position in the determination of its dividend payments.

~~Webster~~The Company maintains a common stock repurchase program, which was approved by the Board of Directors, that authorizes management to purchase shares of ~~its~~Webster common stock in open market or privately negotiated transactions, through block trades, and pursuant to any adopted predetermined trading plan, subject to certain conditions. ~~On April 27, 2022, the Board of Directors increased Webster's authority to repurchase shares of its common stock under the repurchase program by $600.0 million in shares.~~ During the three months ended ~~June 30, 2022,~~March 31, 2023, the Company ~~repurchased 2,054,616~~did not repurchase any shares of Webster common stock under the ~~program at a weighted-average price of $48.63 per share totaling $99.9 million. The remaining purchase authority at June 30, 2022 was $501.3 million.~~program. In addition, the Company will periodically acquire common shares outside of the repurchase program related to employee stock compensation plan activity. During the three months ended ~~June 30, 2022, a total of 41,708~~March 31, 2023, the Company repurchased 284,725 shares ~~were repurchased~~ at a ~~weighted average~~weighted-average price of ~~$50.85~~$52.90 per share, totaling ~~$2.1~~$15.1 million for this purpose.

Webster Bank Liquidity. ~~Webster~~The Bank's primary source of funding is core deposits. Including time deposits, ~~Webster~~the Bank had a loan to total deposit ratio of ~~86.0% and 74.6%~~92.1% at ~~June 30, 2022~~both March 31, 2023, and December 31, ~~2021, respectively. The 11.4% point increase is attributed to loan growth exceeding deposit growth, both within the legacy and acquired Sterling portfolios.~~2022.

~~Webster~~The Bank is required by OCC regulations to maintain a sufficient level of liquidity to ensure safe and sound operations. The adequacy of liquidity, as assessed by the OCC, depends on factors such as overall asset and liability structure, market conditions, competition, and the nature of the institution’s deposit and loan customers. At ~~June 30, 2022, Webster~~March 31, 2023, the Bank exceeded all regulatory liquidity requirements. ~~Webster~~The Company has designed a detailed contingency plan in order to respond to any liquidity concerns in a prompt and comprehensive manner, including early detection of potential problems and corrective action to address liquidity stress scenarios.

Capital Requirements. ~~Webster Financial Corporation~~The Holding Company and ~~Webster~~the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory actions by regulators that could have a direct material effect on the Company’s ~~financial statements.~~Consolidated Financial Statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, both ~~Webster Financial Corporation~~the Holding Company and ~~Webster~~the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated pursuant to regulatory directives. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require ~~the Company~~financial institutions to maintain minimum ratios of Common Equity Tier 1 Capital, defined by the Basel III capital rules (CET1 capital), Tier 1 capital, Total capital to risk-weighted assets, and Tier 1 capital to average tangible assets (as defined in the regulations). At ~~June 30, 2022,~~March 31, 2023, both ~~Webster Financial Corporation~~the Holding Company and ~~Webster~~the Bank were classified as well-capitalized. Management believes that no events or changes have occurred subsequent to quarter-end that would change this designation.

In accordance with regulatory capital rules, ~~Webster~~the Company elected an option to delay the estimated impact of the adoption of CECL on its regulatory capital over a two-year deferral period, which ended on January 1, 2022, and subsequent three-year transition period ending on December 31, 2024. During the three-year transition period, capital ratios will ~~begin to~~ phase out the aggregate amount of the regulatory capital benefit provided from the delayed CECL adoption ~~during~~in the initial two years. For 2022, 2023, and 2024, ~~Webster~~the Company is allowed 75%, 50%, and 25%, respectively, of the regulatory capital benefit as of December 31, 2021, ~~respectively,~~ with full absorption occurring in 2025. At ~~June 30, 2022,~~March 31, 2023, the regulatory capital benefit allowed from the delayed CECL adoption resulted in a ~~9, 9,~~6, 6, and 64 basis point increase to ~~Webster Financial Corporation's~~the Holding Company's and ~~Webster~~the Bank's CET1 capital to total risk-weighted assets (CET1 risk-based capital), Tier 1 capital to total risk-weighted assets (Tier 1 risk-based capital), and Tier 1 capital to average tangible assets (Tier 1 leverage capital), respectively, and a 21 basis point decrease to Total capital to total risk-weighted assets (Total risk-based capital). Both ~~Webster Financial Corporation's~~the Holding Company's and ~~Webster~~the Bank's regulatory ratios remain in excess of being well-capitalized, even without the regulatory capital benefit of the delayed CECL adoption impact.

Additional information regarding the required regulatory capital levels and ratios applicable to ~~Webster Financial Corporation~~the Holding Company and ~~Webster~~the Bank can be found within Note 10: Regulatory Capital and Restrictions in the Notes to Condensed Consolidated Financial Statements contained in Part I -Item 1. Financial Statements.

Sources and Uses of Funds

Sources of ~~Funds~~.Funds. ~~The~~Deposits are the primary source of cash flows for ~~Webster~~the Bank’s ~~use in its~~ lending activities and general operational ~~needs is deposits. Operating activities, such as loan~~needs. Loan and securities repayments, proceeds from loans and securities held for sale, and maturities also provide cash flows. While scheduled loan and securities repayments are a relatively stable source of funds, prepayments and other deposit inflows are influenced by economic conditions and prevailing interest rates, the timing of which is inherently uncertain. Additional sources of funds are provided by both short-term and long-term borrowings, and to a lesser extent, dividends received as part of the Bank's membership with the FHLB and FRB.

Deposits. ~~Webster~~The Bank offers a wide variety of checking and savings deposit products designed to meet the transactional and investment needs of both its consumer and business customers. The Bank’s deposit services include, but are not limited to, ATM and debit card use, direct deposit, ACH payments, mobile banking, internet-based banking, banking by mail, account transfers, and overdraft protection, among others. The Bank manages the flow of funds in its deposit accounts and interest rates consistent with ~~Federal Deposit Insurance Corporation (FDIC)~~FDIC regulations. ~~Both Webster~~The Bank’s ~~Retail~~Consumer and Digital Pricing Committee and its Commercial and Institutional Liability and Loan Pricing Committee both meet regularly to determine pricing and marketing initiatives.

With the acquisition of interLINK during the first quarter of 2023, the Bank received $2.9 billion of money market deposits at March 31, 2023, which added a unique source of core deposit funding and scalable liquidity to the Company's already differentiated, omnichannel deposit gathering capabilities.

Total deposits were ~~$53.1~~$55.3 billion and ~~$29.8~~$54.1 billion at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, respectively. The ~~$23.3~~$1.2 billion increase was primarily ~~attributed~~due to the interLINK deposits, ~~assumed~~partially offset by customers rebalancing their deposit concentrations as a result of the current banking environment. Customer preferences also shifted from ~~Sterling~~lower rate checking and savings products into higher rate certificates of deposit products, which are currently more attractive in the ~~merger. Customer preferences for maintaining liquidity resulted in~~ higher balances across savings and money market accounts, as customers with maturing time deposits opted to migrate to more liquid products. The aggregate amount of time deposits accounts that exceeded the FDIC limit of $250,000 represented 0.6% and 0.9% of total deposits at June 30, 2022 and December 31, 2021, respectively.

interest rate environment.

The following table summarizes daily average balances of deposits by type and the weighted-average rates paid thereon:
Three months ended June 30,
2022 2021
(Dollars in thousands) Average
Balance Average Rate Average
Balance Average Rate
Non-interest-bearing:
Demand $ 13,395,942 — % $ 6,774,206 — %
Interest-bearing:
Checking 9,401,810 0.12 3,797,321 0.04
Health savings accounts 7,812,313 0.06 7,446,735 0.09
Money market 11,424,317 0.22 3,176,981 0.11
Savings 8,660,719 0.05 5,390,772 0.02
Time deposits 2,684,914 0.17 2,114,889 0.35
Total interest-bearing 39,984,073 0.12 21,926,698 0.09
Total average deposits $ 53,380,015 0.09 % $ 28,700,904 0.07 %
Six months ended June 30,
2022 2021
(Dollars in thousands) Average
Balance Average Rate Average
Balance Average Rate
Non-interest-bearing:
Demand $ 12,335,504 — % $ 6,606,464 — %
Interest-bearing:
Checking 8,555,157 0.09 3,736,380 0.05
Health savings accounts 7,786,035 0.06 7,448,943 0.09
Money market 10,265,149 0.19 3,204,560 0.12
Savings 8,095,617 0.04 5,240,355 0.02
Time deposits 2,614,989 0.19 2,242,250 0.45
Total interest-bearing 37,316,947 0.11 21,872,488 0.11
Total average deposits $ 49,652,451 0.08 % $ 28,478,952 0.08 %
















	Three months ended March 31,
	2023				2022
(Dollars in thousands)	Average Balance		Average Rate		Average Balance		Average Rate
Non-interest-bearing:
Demand	$	12,629,928	—	%	$	11,263,282	—	%
Interest-bearing:
Checking	8,822,549		1.44		7,699,097		0.06
Health savings accounts	8,292,450		0.15		7,759,465		0.06
Money market	12,884,558		2.57		9,093,101		0.15
Savings	8,146,263		0.49		7,524,238		0.03
Time deposits	4,024,472		2.43		2,544,286		0.21
Total interest-bearing	42,170,292		1.42		34,620,187		0.09
Total average deposits	$	54,800,220	1.11	%	$	45,883,469	0.07	%

~~The following table summarizes total uninsured deposits:~~
(In thousands) At June 30, 2022 At December 31, 2021
Uninsured deposits (1)
$ 21,720,887 $ 10,936,416

~~(1)~~AUninsured deposits represent the portion of ~~Webster’s total~~deposit accounts in U.S. offices that exceed the FDIC insurance limit or similar state deposit insurance regime, and amounts in any other uninsured investment or deposit accounts that are classified as deposits ~~are estimated~~and not subject to any federal or state deposit insurance regimes. The Company calculates its uninsured deposit balances based on the ~~same~~ methodologies and assumptions used for regulatory reporting ~~requirements.~~requirements, which includes an estimated portion, and affiliate deposits. At March 31, 2023, and December 31, 2022, total uninsured deposits as per regulatory reporting requirements and reported on Schedule RC-O of the Bank's Call Report were $20.8 billion and $22.5 billion, respectively.

The following table summarizes uninsured deposits information at March 31, 2023, after certain exclusions:



(In thousands)	At March 31, 2023
Uninsured deposits, per regulatory reporting requirements	$	20,827,690
Less: Affiliate deposits	(1,671,727)
Collateralized deposits	(5,269,060)
Uninsured deposits, after exclusions	$	13,886,903

Immediately available liquidity (1)	$	13,380,214
Uninsured deposits coverage	96.4%

(1)Reflects $6.5 billion and $2.9 billion of additional borrowing capacity from the FHLB and FRB, respectively, and $4.0 billion in unencumbered liquid assets.

Uninsured deposits, after adjusting for affiliate deposits and collateralized deposits, represented 25.1% of total deposits at March 31, 2023. Management believes that this presentation provides a more accurate view of deposits at risk given that affiliate deposits are not customer facing, and therefore are eliminated upon consolidation, and collateralized deposits are secured by other means. As of the date of this Quarterly Report on Form 10-Q, the Company's uninsured deposits as a percentage of total deposits, adjusted for affiliate deposits and and collateralized deposits, is consistent with the percentage reported at March 31, 2023. In addition, the Company's immediately available liquidity has, and continues, to increase.

The following table summarizes the portion of U.S. time deposits in excess of the FDIC insurance limit and time deposits otherwise uninsured by contractual maturity:
(In thousands) June 30, 2022
Portion of U.S. time deposits in excess of insurance limit $ 128,388
Time deposits otherwise uninsured with a maturity of: (1)
3 months or less $ 143,701
Over 3 months through 6 months 21,315
Over 6 months through 12 months 20,289
Over 12 months 7,656

~~(1)Includes $64.6 million of Eurodollar deposits, all of which are due within 3 months or less.~~


(In thousands)	March 31, 2023
Portion of U.S. time deposits in excess of insurance limit	$	984,289
Time deposits otherwise uninsured with a maturity of:
3 months or less	$	647,647
Over 3 months through 6 months	86,226
Over 6 months through 12 months	242,277
Over 12 months	8,139

Additional information regarding period-end deposit balances and rates can be found within Note 7: Deposits in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.

Borrowings.~~Webster~~ The Bank's primary borrowing sources include securities sold under agreements to repurchase, federal funds purchased, FHLB advances, and long-term debt. Total borrowed funds were ~~$5.3~~$9.9 billion and ~~$1.2~~$7.7 billion at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, and represented ~~7.9%~~13.3% and ~~3.6%~~10.8% of total assets, respectively. The ~~$4.1~~$2.2 billion increase is primarily ~~attributed~~due to ~~increases of $2.5~~a $3.1 billion ~~$1.2 billion, and $0.5 billion~~increase in FHLB advances, ~~federal funds purchased, and long-term debt, respectively,~~ partially offset by a ~~$0.2~~$0.9 billion decrease in ~~securities sold under agreements to repurchase.~~federal funds purchased.

~~Webster~~The Bank had additional borrowing capacity from the FHLB of ~~$3.2~~$6.5 billion and ~~$5.1~~$4.3 billion at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, respectively. The Bank also had additional borrowing capacity from the FRB of ~~$1.1~~$2.9 billion and ~~$1.5~~$1.2 billion at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, respectively. Unpledged investment securities of ~~$7.8~~$1.1 billion at ~~June 30, 2022~~March 31, 2023, could have been used for collateral on borrowings or to increase borrowing capacity by ~~$6.6~~either $0.8 billion with the FHLB or ~~$7.5~~$1.1 billion with the FRB.

Securities sold under agreements to repurchase are generally a form of short-term funding for the Bank in which it sells securities to counterparties with an agreement to buy them back in the future at a fixed price. Securities sold under agreements to repurchase totaled ~~$0.5 billion and $0.7~~$0.3 billion at ~~June 30, 2022~~both March 31, 2023, and December 31, ~~2021, respectively. The $0.2 billion decrease is primarily attributed to the utilization of borrowings for short-term funding needs.~~2022.

The Bank may also purchase term and overnight federal funds to meet its short-term liquidity needs. ~~Federal funds purchased totaled $1.2 billion at June 30, 2022.~~ There were no federal funds purchased at March 31, 2023, whereas federal funds purchased totaled $0.9 billion at December 31, ~~2021.~~2022. The additional liquidity generated from the interLINK deposit sweep program allowed for the paydown during the first quarter of 2023 of higher rate federal funds purchased.

FHLB advances are not only utilized as a source of funding, but also for interest rate risk management purposes. FHLB advances totaled ~~$2.5~~$8.6 billion and ~~$11.0 million~~$5.5 billion at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, respectively. The ~~$2.5~~$3.1 billion increase is primarily ~~attributed~~due to short-term funding ~~needs.~~needs and the strategic decision to maintain additional liquidity.

Long-term debt consists of senior fixed-rate notes maturing in 2024 and 2029, subordinated fixed-to-floating-rate notes maturing in 2029 and 2030, and floating-rate junior subordinated notes maturing in 2033. Long-term debt totaled $1.1 billion ~~and $0.6 billion~~ at ~~June 30, 2022~~both March 31, 2023, and December 31, ~~2021, respectively. The $0.5 billion increase is primarily attributed to the subordinated notes assumed from Sterling in the merger.~~2022.

The following table summarizes daily average balances of borrowings by type and the weighted-average rates paid thereon:


		Three months ended June 30,									Three months ended March 31,
		2022				2021					2023				2022
(Dollars in thousands)	(Dollars in thousands)	Average Balance		Average Rate		Average Balance		Average Rate		(Dollars in thousands)	Average Balance		Average Rate		Average Balance		Average Rate
FHLB advances		$	1,156,449	1.08	%	$	138,483	1.52	%
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	529,786		1.06		500,638		0.68		Securities sold under agreements to repurchase	$	243,848	0.11	%	$	577,039	0.66	%
Federal funds purchased	Federal funds purchased	534,518		0.93		—		—		Federal funds purchased	671,175		4.62		—		—
FHLB advances										FHLB advances	5,673,826		4.80		10,936		2.03
Long-term debt	Long-term debt	1,077,395		3.38		565,874		3.22		Long-term debt	1,072,252		3.65		896,310		3.34

Total average borrowings	Total average borrowings	$	3,298,148	1.79	%	$	1,204,995	1.93	%	Total average borrowings	$	7,661,101	4.48	%	$	1,484,285	2.26	%

		Six months ended June 30,
		2022				2021
(Dollars in thousands)		Average Balance		Average Rate		Average Balance		Average Rate
FHLB advances		$	586,857	1.09	%	$	137,143	1.52	%
Securities sold under agreements to repurchase		553,282		0.86		479,285		0.61
Federal funds purchased		268,735		0.93		32,337		0.08
Long-term debt		987,353		3.36		566,462		3.22

Total average borrowings		$	2,396,227	1.93	%	$	1,215,227	1.87	%

Additional information regarding period-end borrowings balances and rates can be found within Note 8: Borrowings in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.

Federal Home Loan Bank and Federal Reserve Bank Stock. ~~Webster~~The Bank is a member of the FHLB System, which consists of eleven district Federal Home Loan Banks, each of which is subject to the supervision and regulation of the Federal Housing Finance Agency. An activity-based capital stock investment in the FHLB is required in order for ~~Webster~~the Bank to maintain its membership and access to advances and other extensions of credit for sources of funds and liquidity purposes. The FHLB capital stock investment is restricted as there is no market for it, and it can only be redeemed by the FHLB. ~~Webster~~The Bank held FHLB capital stock of ~~$105.9~~$359.9 million and ~~$11.3~~$221.4 million at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, respectively. The most recent FHLB quarterly cash dividend was paid on ~~August~~May 2, ~~2022~~2023, in an amount equal to an annual yield of ~~3.72%~~7.55%.

~~Webster~~The Bank is also required to hold FRB stock equal to 6% of its capital and surplus, of which 50% is paid. The remaining 50% is subject to call when deemed necessary by the Federal Reserve System. Similar to FHLB stock, the FRB capital stock investment is restricted as there is no market for it, and it can only be redeemed by the FRB. ~~Webster~~The Bank held FRB capital stock of ~~$223.5~~$224.8 million and ~~$60.5~~$224.5 million at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, respectively. The most recent FRB
semi-annual cash dividend was paid on ~~June 30,~~December 31, 2022, in an amount equal to an annual yield of ~~3.03%~~3.63%.

~~Webster Bank changed its location for the purposes of Federal Reserve Regulation D from the Federal Reserve District of Boston to the Federal Reserve District of New York effective June 1, 2022.~~

Uses of Funds. ~~Webster~~The Company enters into various contractual obligations in the normal course of business that require future cash payments and that could impact ~~the Company's~~its short-term and long-term liquidity and capital resource needs. The following table summarizes significant fixed and determinable contractual obligations at ~~June 30, 2022.~~March 31, 2023. The actual timing and amounts of future cash payments may differ from the amounts presented. Based on ~~Webster's~~the Company's current liquidity position, it is expected that our sources of funds will be sufficient to fulfill these obligations when they come due.


		Payments Due by Period (1)											Payments Due by Period (1)
(In thousands)	(In thousands)	Less than one year		1-3 years		3-5 years		After 5 years		Total		(In thousands)	2023		2024		2025		2026		2027		Thereafter		Total
Senior notes	Senior notes	$	—	$	150,000	$	—	$	336,134	$	486,134	Senior notes	$	—	$	150,000	$	—	$	—	$	—	$	300,000	$	450,000
Subordinated notes	Subordinated notes	—		—		—		499,000		499,000		Subordinated notes	—		—		—		—		—		499,000		499,000
Junior subordinated debt	Junior subordinated debt	—		—		—		77,320		77,320		Junior subordinated debt	—		—		—		—		—		77,320		77,320
FHLB advances	FHLB advances	2,500,080		194		—		10,536		2,510,810		FHLB advances	8,550,183		—		—		—		248		10,030		8,560,461
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	306,382		200,000		—		—		506,382		Securities sold under agreements to repurchase	306,154		—		—		—		—		—		306,154
Federal funds purchased		1,237,400		—		—		—		1,237,400
Deposits with stated maturity dates		1,597,832		737,703		194,147		24,420		2,554,102

Time deposits												Time deposits	3,168,801		1,132,496		132,543		53,306		36,616		6,017		4,529,779
Operating lease liabilities	Operating lease liabilities	36,315		70,792		55,519		90,581		253,207		Operating lease liabilities	25,520		35,817		32,625		29,568		24,584		81,932		230,046

Contingent consideration												Contingent consideration	4,798		11,241		—		—		—		—		16,039
Royalty liabilities												Royalty liabilities	1,035		8,572		1,417		—		—		—		11,024
Purchase obligations (2)												Purchase obligations (2)	120,718		25,329		13,087		5,895		2,229		1,287		168,545
Total contractual obligations	Total contractual obligations	$	5,678,009	$	1,158,689	$	249,666	$	1,037,991	$	8,124,355	Total contractual obligations	$	12,177,209	$	1,363,455	$	179,672	$	88,769	$	63,677	$	975,586	$	14,848,368

(1)Interest payments on borrowings have been excluded.

(2)Purchase obligations represent agreements to purchase goods or services of $1.0 million or more that are enforceable and legally binding and specify all significant terms.

In addition, in the normal course of business, ~~Webster~~the Company offers financial instruments with off-balance sheet risk to meet the financing needs of its customers. These transactions include commitments to extend credit, and commercial and standby letters of credit, which involve to a varying degree, elements of credit risk. Since many of these commitments are expected to expire unused or be only partially funded, the total commitment amount of ~~$10.8~~$12.1 billion at ~~June 30, 2022~~March 31, 2023, does not necessarily reflect future cash payments.

~~Webster~~The Company also enters into commitments to invest in venture capital and private equity funds, as well as ~~low income housing tax credit~~LIHTC investments to assist the Bank in meeting its responsibilities under the CRA. The total unfunded commitment for these alternative investments was ~~$360.4~~$437.0 million at ~~June 30, 2022.~~March 31, 2023. However, the timing of capital calls cannot be reasonably estimated, and depending on the nature of the contract, the entirety of the capital committed by ~~Webster~~the Company may not be called.

Pension obligations are funded by the Company, as needed, to provide for participant benefit payments as it relates to ~~Webster's~~the Company's frozen, non-contributory, qualified defined benefit pension plan. Decisions to contribute to the defined benefit pension plan are made based upon pension funding requirements under the Pension Protection Act, the maximum amount deductible under the Internal Revenue Code, the actual performance of plan assets, and trends in the regulatory environment. ~~Webster~~The Company does not currently anticipate that it will ~~make a contribution~~be required to contribute to the defined benefit pension plan in ~~2022. Webster's~~2023. The Company's non-qualified supplemental executive retirement plans and other ~~post employment~~post-employment benefit plans ~~including those acquired from Sterling in the merger,~~ are unfunded.

At ~~June 30, 2022, Webster's condensed consolidated balance sheet~~March 31, 2023, the Company's Condensed Consolidated Balance Sheet reflects a liability for uncertain tax positions of ~~$10.7~~$9.9 million and ~~$2.8~~$2.1 million of accrued interest and penalties. The ultimate timing and amount of any related future cash settlements cannot be predicted with reasonable certainty.

Additional information regarding credit-related financial instruments and alternative investments ~~defined benefit pension and other postretirement benefit plans, and income taxes~~ can be found within
Note 18: Commitments and Contingencies and Note 11: Variable Interest Entities, ~~Note 15: Retirement Benefit Plans, and the under the section captioned "Income Taxes",~~ respectively, in the Notes to the Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements of this report. Additional information regarding defined benefit pension and other postretirement benefit plans and income taxes can be found within
Note 19: Retirement Benefit Plans and Note 9: Income Taxes, respectively, in the Notes to the Consolidated Financial Statements contained in Part III - ~~Item. 2 Management's Discussion~~Item 8. Financial Statements and ~~Analysis~~Supplementary Data of ~~Financial Condition and Results of Operations, respectively.~~the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

3026

Asset/Liability Management and Market Risk

An effective asset/liability management process must balance the risks and rewards from both short-term and long-term interest rate ~~risks~~risk when determining ~~management's~~the Company's strategy and action. To facilitate this process, interest rate sensitivity is monitored on an ongoing basis by the ~~ALCO. The~~Company's ALCO, whose primary goal ~~of ALCO~~ is to manage interest rate risk and to maximize net income and net economic value over time in changing interest rate environments. The ALCO meets ~~at least monthly~~frequently to make decisions on the Company's investment ~~securities~~ and funding portfolios based on the economic outlook, its interest rate expectations, the ~~portfolio~~ risk position, and other factors.

Four main tools are used for managing interest rate risk:

•the size, duration, and credit risk of the investment portfolio;

•the size and duration of the wholesale funding portfolio;

•interest rate contracts; and

•the pricing and structure of loans and deposits.

Management measures interest rate risk using simulation analysis and asset/liability modeling software to calculate ~~Webster's~~the Company's earnings at risk and equity at risk. ~~Essentially, interest~~Interest rates are generally assumed to change up or down in a parallel fashion, and the net interest income results in each scenario are compared to a flat rate ~~based~~base scenario. The flat rate base scenario holds the end of period yield curve constant over a ~~twelve month forecasted~~twelve-month forecast horizon. At ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, the flat rate base scenario assumed a federal funds rate of ~~1.75%~~5.00% and ~~0.25%~~4.50%, respectively. The federal funds rate target range was ~~1.50-1.75%~~4.75-5.00% at ~~June 30, 2022~~March 31, 2023, and ~~0-0.25%~~4.25-4.50% at December 31, ~~2021.~~2022. Since interest rates rose sharply in 2022, and have ~~begun~~continued to rise during the first quarter of 2023, management has incorporated the up and down ~~100~~300 basis point rate ~~scenario~~scenarios back into its assessment of interest rate risk. ~~As interest rates continue to rise, scenarios that include upward shifts of greater magnitude will also be incorporated.~~

The following table summarizes the estimated impact that gradual parallel changes in interest rates of up and down 100, 200, and ~~200~~300 basis points might have on ~~Webster's~~the Company's net interest income over a ~~twelve month~~twelve-month period starting at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, as compared to actual net interest income and assuming no changes in interest rates:

-200bp -100bp +100bp +200bp
June 30, 2022 n/a (4.5)% 4.1% 8.4%
December 31, 2021 n/a n/a 4.9% 10.7%


	-300bp	-200bp	-100bp	+100bp	+200bp	+300bp
March 31, 2023	(9.3)%	(5.9)%	(2.8)%	2.5%	5.3%	8.7%
December 31, 2022	n/a	(6.9)%	(3.3)%	3.2%	6.5%	n/a

Asset sensitivity in terms of net interest income decreased at ~~June 30, 2022~~March 31, 2023, as compared to December 31, ~~2021,~~2022, primarily due to ~~changes~~increased interest paid on deposits, the impact of additional customer cash flow hedges entered into during the quarter, and liquidity actions taken in ~~the overall composition and size of the balance sheet on a combined basis post-merger and the relative size and duration of the securities portfolio.~~response to bank failures. Loans at floors ~~have decreased $3.3 billion from $4.5~~were $0.4 billion at both December 31, ~~2021 to $1.2 billion at June 30, 2022.~~2022, and
March 31, 2023. While loans with floors, which are considered ~~"in~~“in the ~~money"~~money”, have the impact of reducing overall asset sensitivity, as interest rates ~~start~~continue to rise, these loans will move through their floors and ~~begin to~~ reprice accordingly.

The following table summarizes the estimated impact that yield curve twists or immediate non-parallel changes in interest rates of up and down 50 and 100 basis points might have on ~~Webster's~~the Company's net interest income for the subsequent ~~twelve month~~twelve-month period starting at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021:~~2022:

Short End of the Yield Curve Long End of the Yield Curve
-100bp -50bp +50bp +100bp -100bp -50bp +50bp +100bp
June 30, 2022 (7.1)% (3.5)% 2.8% 5.6% (1.6)% (0.8)% 0.8% 1.6%
December 31, 2021 n/a n/a 3.2% 7.3% (3.1)% (1.4)% 1.3% 2.6%


	Short End of the Yield Curve				Long End of the Yield Curve
	-100bp	-50bp	+50bp	+100bp	-100bp	-50bp	+50bp	+100bp
March 31, 2023	(3.3)%	(1.5)%	1.1%	2.3%	(2.3)%	(1.1)%	1.1%	2.3%
December 31, 2022	(4.2)%	(2.0)%	1.7%	3.3%	(2.4)%	(1.2)%	1.3%	2.6%

These non-parallel scenarios are modeled with the short end of the yield curve moving up or down 50 and 100 basis points, while the long end of the yield curve remains unchanged, and vice versa. The short end of the yield curve is defined as terms less than eighteen months and the long end of the yield curve is defined as terms greater than eighteen months. The results reflect the annualized impact of immediate interest rate changes.

Sensitivity to both the short end and the long end of the yield curve for net interest income decreased at ~~June 30, 2022~~March 31, 2023, as compared to December 31, ~~2021,~~2022, primarily due to changes in ~~the overall composition and size of the~~ balance sheet on a combined basis post-merger, as well as the relative size and duration of the securities portfolio and slower forecasted prepayment speeds as a result of increases in the long end of the yield curve, which in turn, extends the duration for mortgage-backed securities and residential mortgage loans.composition.

3127

The following table summarizes the estimated economic value of financial assets, financial liabilities, and off-balance sheet financial instruments and the corresponding estimated change in economic value if interest rates were to instantaneously increase or decrease by 100 basis points at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021:~~2022:


(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
																							(Dollars in thousands)	Book Value	Estimated Economic Value	Estimated Economic Value Change
						-100 bp			+100 bp								-100 bp			+100 bp
June 30, 2022
March 31, 2023												March 31, 2023
Assets	Assets	$	67,595,021	$	64,100,699	$	1,437,441		$	(1,310,966)		Assets	$	74,844,395	$	71,005,024	$	1,304,906		$	(1,300,939)
Liabilities	Liabilities	59,597,233		53,030,727		2,938,171			(1,604,178)			Liabilities	66,550,101		60,711,526		2,020,093			(1,745,742)
Net	Net	$	7,997,788	$	11,069,972	$	(1,500,730)		$	293,212		Net	$	8,294,294	$	10,293,498	$	(715,187)		$	444,803
Net change as % base net economic value	Net change as % base net economic value					(13.6)		%	2.6		%	Net change as % base net economic value					(6.9)		%	4.3		%

December 31, 2021
December 31, 2022												December 31, 2022
Assets	Assets	$	34,915,599	$	34,515,422	n/a			$	(801,524)		Assets	$	71,277,521	$	67,920,989	$1,161,794			$	(1,247,083)
Liabilities	Liabilities	31,477,274		30,015,357		n/a			(988,401)			Liabilities	63,221,335		55,951,495		1,959,399			(1,716,697)
Net	Net	$	3,438,325	$	4,500,065	n/a			$	186,877		Net	$	8,056,186	$	11,969,494	$(797,605)			$	469,614
Net change as % base net economic value	Net change as % base net economic value					n/a			4.2		%	Net change as % base net economic value					(6.7)%			3.9		%

Changes in economic value can best be described through duration, which is a measure of the price sensitivity of financial instruments due to changes in interest rates. For fixed-rate financial instruments, it can be thought of as the weighted-average expected time to receive future cash flows, whereas for floating-rate financial instruments, it can be thought of as the
weighted-average expected time until the next rate reset. Overall, the longer the duration, the greater the price sensitivity due to changes in interest rates. Generally, increases in interest rates reduce the economic value of fixed-rate financial assets as future discounted cash flows are worth less at higher interest rates. In a rising interest rate environment, the economic value of financial liabilities decreases for the same reason. A reduction in the economic value of financial liabilities is a benefit to ~~Webster.~~the Company. Floating-rate financial instruments may have durations as short as one day, and therefore, may have very little price sensitivity due to changes in interest rates.

Duration gap represents the difference between the duration of financial assets and financial liabilities. A duration gap at or near zero would imply that the balance sheet is matched, and therefore, would exhibit no change in estimated economic value for changes in interest rates. At ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021, Webster's~~2022, the Company's duration gap was negative ~~1.7~~1.2 years and negative ~~1.8~~1.4 years, respectively. A negative duration gap implies that the duration of financial liabilities is longer than the duration of financial assets, and therefore, liabilities have more price sensitivity than assets and will reset their interest rates at a slower pace. Consequently, ~~Webster's~~the Company's net estimated economic value would generally be expected to increase when interest rates rise, as the benefit of the decreased value of financial liabilities would more than offset the decreased value of financial assets. The opposite would generally be expected to occur when interest rates fall. Earnings would also generally be expected to increase when interest rates rise, and decrease when interest rates fall over the long term, absent the effects of any new business booked in the future. At ~~June 30, 2022,~~March 31, 2023, long-term rates ~~have risen~~fell by ~~151~~38 basis points as compared to December 31, ~~2021. This higher starting point extends financial asset duration by decreasing residential mortgage loans and mortgage-backed securities prepayment speeds.~~2022.

These earnings and net economic ~~values~~value estimates are subject to factors that could cause actual results to differ, and also assume that management does not take any additional action to mitigate any positive or negative effects from changing interest rates. Management believes that the Company's interest rate risk position at ~~June 30, 2022~~March 31, 2023, represents a reasonable level of risk given the current interest rate outlook. Management continues to monitor interest rates and other relevant factors given recent market volatility and is prepared to take additional action, as necessary.

Additional information regarding ~~Webster's~~the Company's asset/liability management process can be found under the section captioned "Asset/Liability Management and Market Risk" contained in Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company's Annual Report on Form 10-K for the year ended
December 31, ~~2021.~~2022.

3228

Critical Accounting Estimates

The preparation of ~~Webster's~~the Company's Condensed Consolidated Financial Statements, and accompanying notes thereto, ~~is based on the application of accounting policies, the most significant of which can be found within Note 1: Summary of Significant Accounting Policies~~ in ~~the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements,~~accordance with GAAP and in Note 1: Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. Critical accounting policies are defined as those that are most importantpractices generally applicable to the ~~portrayal of the Company's~~ financial ~~condition and results of operations, and that require~~services industry, requires management to make ~~difficult, subjective,~~estimates and ~~complex judgments about matters~~assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the disclosure of contingent assets and liabilities. While management's estimates are made based on historical experience, current available information, and other factors that are ~~inherently uncertain, and which~~deemed to be relevant, actual results could ~~potentially result in materially different amounts using different assumptions or under different conditions.~~significantly differ from those estimates.

Accounting estimates are necessary in the application of certain accounting policies and can be susceptible to significant change in the near term. Critical accounting estimates are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on ~~Webster's~~the Company's financial condition or results of operations. ~~Webster's~~Management has identified that the Company's most critical ~~accounting policies and~~ accounting estimates are those related to the ACL on loans and leases and business ~~combinations.~~combinations accounting policies. These ~~critical~~ accounting policies ~~including its~~and their underlying estimates are discussed directly with the Audit Committee of the Board of Directors.

Allowance for Credit Losses on Loans and Leases

The ACL on loans and leases is a reserve established through a provision for credit losses charged to expense, which represents management’s best estimate of expected lifetime credit losses within ~~Webster's~~the Company's loan and lease portfolios at the balance sheet date. The calculation of expected credit losses is determined using predictive methods and models that follow a
PD/LGD/EAD, loss rate, or discounted cash flow framework, and include consideration of past events, current conditions, macroeconomic variables ~~(such as~~(i.e., unemployment, gross domestic product, property values, and interest rate spreads), and reasonable and supportable economic forecasts that affect the collectability of the reported amounts. Changes to the ACL on loans and leases, and therefore, to the related provision for credit losses, can materially affect financial results.

The determination of the appropriate level of ACL on loans and leases inherently involves a high degree of subjectivity and requires ~~Webster~~the Company to make significant estimates of current credit risks and trends using existing qualitative and quantitative information, and reasonable and supportable forecasts of future economic conditions, all of which may undergo frequent and material changes. Changes in economic conditions affecting borrowers and macroeconomic variables that ~~Webster~~the Company is more susceptible to, unforeseen events such as natural disasters and pandemics, along with new information regarding existing loans, identification of additional ~~problems~~problem loans, the fair value of underlying collateral, and other factors, both within and outside the Company's control, may indicate the need for an increase or decrease in the ACL on loans and leases.

It is difficult to estimate the sensitivity of how potential changes in any one economic factor or input might affect the overall reserve because a wide variety of factors and inputs are considered in estimating the ACL and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all product types. Further, changes in factors and inputs may also be directionally inconsistent, such that improvement in one factor may offset deterioration in others.

Executive management reviews and advises on the adequacy of the ACL on loans and leases on a quarterly basis. Although the overall balance is determined based on specific portfolio segments and individually assessed assets, the entire balance is available to absorb credit losses for any of the loan and lease portfolios.

Additional information regarding the determination of the ACL on loans and leases, including the Company's valuation methodology, can be found under the section captioned "Allowance for Credit Losses on Loans and Leases" contained elsewhere in this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, and within Note 1: Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements contained in
Part II - Item 8. Financial Statements and Supplementary Data included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Business Combinations

The acquisition method of accounting generally requires that the identifiable assets acquired and liabilities assumed in business combinations are recorded at fair value as of the acquisition date. The determination of fair value often involves the use of internal or third-party valuation techniques, such as discounted cash flow analyses or appraisals. Particularly, the valuation techniques used to estimate the fair value of loans and leases and the core deposit intangible asset acquired in the Sterling merger include estimates related to discount rates, credit risk, and other relevant factors, which are inherently subjective. A description of the valuation methodologies used to estimate the fair values of the significant assets acquired and liabilities assumed from the Sterling merger can be found within Note 2: Mergers and Acquisitions in the Notes to ~~Condensed~~ Consolidated Financial Statements contained in Part III - Item 1.8. Financial ~~Statements.~~Statements and Supplementary Data included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

3329

ITEM 1. FINANCIAL STATEMENTS

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
(In thousands, except share data)	(In thousands, except share data)	(Unaudited)				(In thousands, except share data)	(Unaudited)
Assets:	Assets:					Assets:
Cash and due from banks	Cash and due from banks	$	294,482	$	137,385	Cash and due from banks	$	201,683	$	264,118
Interest-bearing deposits	Interest-bearing deposits	607,323		324,185		Interest-bearing deposits	2,232,388		575,825
Investment securities available-for-sale, at fair value	Investment securities available-for-sale, at fair value	8,638,358		4,234,854		Investment securities available-for-sale, at fair value	7,798,977		7,892,697

Investment securities held-to-maturity, net of allowance for credit losses of $210 and $214		6,547,998		6,198,125
Investment securities held-to-maturity, net of allowance for credit losses of $282 and $182						Investment securities held-to-maturity, net of allowance for credit losses of $282 and $182	7,063,223		6,564,697
Federal Home Loan Bank and Federal Reserve Bank stock	Federal Home Loan Bank and Federal Reserve Bank stock	329,424		71,836		Federal Home Loan Bank and Federal Reserve Bank stock	584,724		445,900
Loans held for sale (valued under fair value option)		388		4,694
Loans held for sale ($811 and $1,991 valued under fair value option)						Loans held for sale ($811 and $1,991 valued under fair value option)	210,724		1,991
Loans and leases	Loans and leases	45,646,743		22,271,729		Loans and leases	50,926,523		49,764,426
Allowance for credit losses on loans and leases	Allowance for credit losses on loans and leases	(571,499)		(301,187)		Allowance for credit losses on loans and leases	(613,914)		(594,741)
Loans and leases, net	Loans and leases, net	45,075,244		21,970,542		Loans and leases, net	50,312,609		49,169,685
Deferred tax assets, net	Deferred tax assets, net	269,790		109,405		Deferred tax assets, net	315,525		371,634
Premises and equipment, net	Premises and equipment, net	449,578		204,557		Premises and equipment, net	431,432		430,184
Goodwill	Goodwill	2,513,771		538,373		Goodwill	2,631,465		2,514,104
Other intangible assets, net	Other intangible assets, net	215,780		17,869		Other intangible assets, net	229,845		199,342
Cash surrender value of life insurance policies	Cash surrender value of life insurance policies	1,228,484		572,305		Cash surrender value of life insurance policies	1,233,994		1,229,169
Accrued interest receivable and other assets	Accrued interest receivable and other assets	1,424,401		531,469		Accrued interest receivable and other assets	1,597,806		1,618,175
Total assets	Total assets	$	67,595,021	$	34,915,599	Total assets	$	74,844,395	$	71,277,521
Liabilities and shareholders' equity:
Liabilities and stockholders' equity:						Liabilities and stockholders' equity:
Deposits:	Deposits:					Deposits:
Non-interest-bearing	Non-interest-bearing	$	13,576,152	$	7,060,488	Non-interest-bearing	$	12,007,387	$	12,974,975
Interest-bearing	Interest-bearing	39,501,005		22,786,541		Interest-bearing	43,290,092		41,079,365
Total deposits	Total deposits	53,077,157		29,847,029		Total deposits	55,297,479		54,054,340
Securities sold under agreements to repurchase and other borrowings	Securities sold under agreements to repurchase and other borrowings	1,743,782		674,896		Securities sold under agreements to repurchase and other borrowings	306,154		1,151,830
Federal Home Loan Bank advances	Federal Home Loan Bank advances	2,510,810		10,997		Federal Home Loan Bank advances	8,560,461		5,460,552
Long-term debt(1)	Long-term debt(1)	1,076,559		562,931		Long-term debt(1)	1,071,413		1,073,128
Accrued expenses and other liabilities	Accrued expenses and other liabilities	1,188,925		381,421		Accrued expenses and other liabilities	1,314,594		1,481,485
Total liabilities	Total liabilities	59,597,233		31,477,274		Total liabilities	66,550,101		63,221,335
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
Series G issued and outstanding (135,000 shares)		138,942		—
Common stock, $0.01 par value; Authorized - 400,000,000 shares:
Issued (182,778,045 and 93,686,311 shares)		1,828		937
Stockholders’ equity:						Stockholders’ equity:
Preferred stock, $0.01 par value: Authorized—3,000,000 shares;						Preferred stock, $0.01 par value: Authorized—3,000,000 shares;
Series F issued and outstanding—6,000 shares						Series F issued and outstanding—6,000 shares	145,037		145,037
Series G issued and outstanding—135,000 shares						Series G issued and outstanding—135,000 shares	138,942		138,942
Common stock, $0.01 par value: Authorized—400,000,000 shares;						Common stock, $0.01 par value: Authorized—400,000,000 shares;
Issued—182,778,045 shares						Issued—182,778,045 shares	1,828		1,828
Paid-in capital	Paid-in capital	6,148,853		1,108,594		Paid-in capital	6,137,743		6,173,240
Retained earnings	Retained earnings	2,383,638		2,333,288		Retained earnings	2,856,745		2,713,861
Treasury stock, at cost (6,737,091 and 3,102,690 shares)		(339,178)		(126,951)
Treasury stock, at cost—8,065,663 and 8,770,472 shares						Treasury stock, at cost—8,065,663 and 8,770,472 shares	(397,981)		(431,762)
Accumulated other comprehensive (loss), net of tax	Accumulated other comprehensive (loss), net of tax	(481,332)		(22,580)		Accumulated other comprehensive (loss), net of tax	(588,020)		(684,960)
Total shareholders' equity		7,997,788		3,438,325
Total liabilities and shareholders' equity		$	67,595,021	$	34,915,599
Total stockholders' equity						Total stockholders' equity	8,294,294		8,056,186
Total liabilities and stockholders' equity						Total liabilities and stockholders' equity	$	74,844,395	$	71,277,521

See accompanying Notes to Condensed Consolidated Financial Statements.

3430

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


											Three months ended
		Three months ended June 30,				Six months ended June 30,					March 31,
(In thousands, except per share data)	(In thousands, except per share data)	2022		2021		2022		2021		(In thousands, except per share data)		2023		2022
Interest Income:	Interest Income:									Interest Income:
Interest and fees on loans and leases	Interest and fees on loans and leases	$	431,538	$	185,919	$	777,814	$	376,455	Interest and fees on loans and leases		$	716,356	$	346,276
Taxable interest and dividends on investments	Taxable interest and dividends on investments	69,538		40,303		123,262		79,917		Taxable interest and dividends on investments		100,872		53,724
Non-taxable interest on investment securities	Non-taxable interest on investment securities	12,664		5,283		22,466		10,616		Non-taxable interest on investment securities		13,684		9,802
Loans held for sale	Loans held for sale	7		53		33		144		Loans held for sale		16		26
Total interest income	Total interest income	513,747		231,558		923,575		467,132		Total interest income		830,928		409,828
Interest Expense:	Interest Expense:									Interest Expense:
Deposits	Deposits	12,459		5,094		19,858		11,533		Deposits		150,204		7,399
Securities sold under agreements to repurchase and other borrowings	Securities sold under agreements to repurchase and other borrowings	2,677		860		3,634		1,495		Securities sold under agreements to repurchase and other borrowings		7,827		957
Federal Home Loan Bank advances	Federal Home Loan Bank advances	3,164		534		3,220		1,047		Federal Home Loan Bank advances		68,126		56
Long-term debt	Long-term debt	8,787		4,218		15,955		8,441		Long-term debt		9,488		7,168
Total interest expense	Total interest expense	27,087		10,706		42,667		22,516		Total interest expense		235,645		15,580
Net interest income	Net interest income	486,660		220,852		880,908		444,616		Net interest income		595,283		394,248
Provision (benefit) for credit losses		12,243		(21,500)		201,088		(47,250)
Net interest income after provision (benefit) for credit losses		474,417		242,352		679,820		491,866
Provision for credit losses										Provision for credit losses		46,749		188,845
Net interest income after provision for credit losses										Net interest income after provision for credit losses		548,534		205,403
Non-interest Income:	Non-interest Income:									Non-interest Income:
Deposit service fees	Deposit service fees	51,385		41,439		99,212		81,908		Deposit service fees		45,436		47,827
Loan and lease related fees	Loan and lease related fees	27,907		7,862		50,586		16,175		Loan and lease related fees		23,005		22,679
Wealth and investment services	Wealth and investment services	11,244		10,087		21,841		19,490		Wealth and investment services		6,587		10,597
Mortgage banking activities	Mortgage banking activities	102		1,319		530		3,961		Mortgage banking activities		59		428
Increase in cash surrender value of life insurance policies	Increase in cash surrender value of life insurance policies	8,244		3,603		14,976		7,136		Increase in cash surrender value of life insurance policies		6,728		6,732

(Loss) on sale of investment securities										(Loss) on sale of investment securities		(16,747)		—

Other income	Other income	22,051		8,392		37,823		20,789		Other income		5,698		15,772
Total non-interest income	Total non-interest income	120,933		72,702		224,968		149,459		Total non-interest income		70,766		104,035
Non-interest Expense:	Non-interest Expense:									Non-interest Expense:
Compensation and benefits	Compensation and benefits	187,656		97,754		371,658		205,354		Compensation and benefits		173,200		184,002
Occupancy	Occupancy	51,593		14,010		70,208		29,660		Occupancy		20,171		18,615
Technology and equipment	Technology and equipment	41,498		27,124		96,899		55,640		Technology and equipment		44,366		55,401
Intangible assets amortization	Intangible assets amortization	8,802		1,132		15,189		2,271		Intangible assets amortization		9,497		6,387
Marketing	Marketing	3,441		3,227		6,950		5,731		Marketing		3,476		3,509
Professional and outside services	Professional and outside services	15,332		21,025		69,423		30,801		Professional and outside services		32,434		54,091
Deposit insurance	Deposit insurance	6,748		3,749		11,970		7,705		Deposit insurance		12,323		5,222
Other expense	Other expense	43,157		19,007		75,715		37,848		Other expense		37,000		32,558
Total non-interest expense	Total non-interest expense	358,227		187,028		718,012		375,010		Total non-interest expense		332,467		359,785
Income before income taxes		237,123		128,026		186,776		266,315
Income tax expense		54,812		33,991		21,212		64,202
Net income		182,311		94,035		165,564		202,113
Income (loss) before income taxes										Income (loss) before income taxes		286,833		(50,347)
Income tax expense (benefit)										Income tax expense (benefit)		65,829		(33,600)
Net income (loss)										Net income (loss)		221,004		(16,747)
Preferred stock dividends	Preferred stock dividends	4,163		1,969		7,594		3,938		Preferred stock dividends		4,163		3,431
Net income available to common shareholders		$	178,148	$	92,066	$	157,970	$	198,175
Net income (loss) available to common stockholders										Net income (loss) available to common stockholders		$	216,841	$	(20,178)

Earnings per common share:
Earnings (loss) per common share:										Earnings (loss) per common share:
Basic	Basic	$	1.00	$	1.02	$	0.97	$	2.19	Basic		$	1.24	$	(0.14)
Diluted	Diluted	1.00		1.01		0.97		2.19		Diluted		1.24		(0.14)

See accompanying Notes to Condensed Consolidated Financial Statements.

3531

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)


											Three months ended
		Three months ended June 30,				Six months ended June 30,					March 31,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)		2023		2022
Net income		$	182,311	$	94,035	$	165,564	$	202,113
Other comprehensive (loss) income, net of tax:
Net income (loss)										Net income (loss)		$	221,004	$	(16,747)
Other comprehensive income (loss), net of tax:										Other comprehensive income (loss), net of tax:
Investment securities available-for-sale	Investment securities available-for-sale	(205,273)		(1,473)		(450,152)		(31,826)		Investment securities available-for-sale		71,618		(244,879)
Derivative instruments	Derivative instruments	(308)		(1,652)		(8,152)		(6,024)		Derivative instruments		21,374		(7,844)
Defined benefit pension and other postretirement benefit plans	Defined benefit pension and other postretirement benefit plans	(28)		741		(448)		1,484		Defined benefit pension and other postretirement benefit plans		3,948		(420)
Other comprehensive (loss), net of tax		(205,609)		(2,384)		(458,752)		(36,366)
Comprehensive (loss) income		$	(23,298)	$	91,651	$	(293,188)	$	165,747
Other comprehensive income (loss), net of tax										Other comprehensive income (loss), net of tax		96,940		(253,143)
Comprehensive income (loss)										Comprehensive income (loss)		$	317,944	$	(269,890)

See accompanying Notes to Condensed Consolidated Financial Statements.

3632

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)


	At or for the three months ended March 31, 2023
(In thousands, except per share data)	Preferred Stock		Common Stock		Paid-In Capital		Retained Earnings		Treasury Stock, at cost		Accumulated Other Comprehensive (Loss), Net of Tax		Total Stockholders' Equity
Balance at December 31, 2022	$	283,979	$	1,828	$	6,173,240	$	2,713,861	$	(431,762)	$	(684,960)	$	8,056,186
Adoption of ASU No. 2022-02	—		—		—		(4,245)		—		—		(4,245)
Net income	—		—		—		221,004		—		—		221,004
Other comprehensive income, net of tax	—		—		—		—		—		96,940		96,940
Common stock dividends and equivalents—$0.40 per share	—		—		—		(69,712)		—		—		(69,712)
Series F preferred stock dividends—$328.125 per share	—		—		—		(1,969)		—		—		(1,969)
Series G preferred stock dividends—$16.25 per share	—		—		—		(2,194)		—		—		(2,194)
Stock-based compensation	—		—		(33,471)		—		45,117		—		11,646
Exercise of stock options	—		—		(2,026)		—		3,749		—		1,723
Common shares acquired from stock compensation plan activity	—		—		—		—		(15,085)		—		(15,085)

Balance at March 31, 2023	$	283,979	$	1,828	$	6,137,743	$	2,856,745	$	(397,981)	$	(588,020)	$	8,294,294

	At or for the three months ended March 31, 2022
(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 Stockholders' Equity
Balance at December 31, 2021	$	145,037	$	937	$	1,108,594	$	2,333,288	$	(126,951)	$	(22,580)	$	3,438,325

Net (loss)	—		—		—		(16,747)		—		—		(16,747)
Other comprehensive (loss), net of tax	—		—		—		—		—		(253,143)		(253,143)
Common stock dividends and equivalents—$0.40 per share	—		—		—		(36,234)		—		—		(36,234)
Series F preferred stock dividends—$328.125 per share	—		—		—		(1,969)		—		—		(1,969)
Series G preferred stock dividends—$16.25 per share	—		—		—		(1,463)		—		—		(1,463)
Issued in business contribution	138,942		891		5,040,291		—		—		—		5,180,124
Stock-based compensation	—		—		(19,098)		—		28,101		—		9,003
Exercise of stock options	—		—		(347)		—		758		—		411
Common shares acquired from stock compensation plan activity	—		—		—		—		(18,967)		—		(18,967)
Common stock repurchase program	—		—		—		—		(122,205)		—		(122,205)
Balance at March 31, 2022	$	283,979	$	1,828	$	6,129,440	$	2,276,875	$	(239,264)	$	(275,723)	$	8,177,135

See accompanying Notes to Condensed Consolidated Financial Statements.

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

~~CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)~~
At or for the three months ended June 30, 2022
(In thousands, except per share data) Preferred Stock Common
Stock Paid-In
Capital Retained
Earnings Treasury
Stock,
at cost Accumulated Other
Comprehensive (Loss), Net of Tax Total
Shareholders'
Equity
Balance at March 31, 2022 $ 283,979 $ 1,828 $ 6,129,440 $ 2,276,875 $ (239,264) $ (275,723) $ 8,177,135
Net income — — — 182,311 — — 182,311
Other comprehensive (loss), net of tax — — — — — (205,609) (205,609)
Common stock dividends and equivalents $0.40 per share — — — (71,386) — — (71,386)
Series F preferred stock dividends $328.125 per share — — — (1,969) — — (1,969)
Series G preferred stock dividends $16.25 per share — — — (2,193) — — (2,193)
Stock-based compensation — — 19,517 1,949 — 21,466
Exercise of stock options — — (104) 190 — 86
Common shares acquired from stock compensation plan activity — — — — (2,128) — (2,128)
Common stock repurchase program — — — — (99,925) — (99,925)
Balance at June 30, 2022 $ 283,979 $ 1,828 $ 6,148,853 $ 2,383,638 $ (339,178) $ (481,332) $ 7,997,788
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
Income, 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 and 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) — 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 six months ended June 30, 2022
(In thousands, except per share data) Preferred
Stock Common
Stock Paid-In
Capital Retained
Earnings Treasury
Stock,
at cost Accumulated Other Comprehensive
(Loss), Net of Tax Total
Shareholders'
Equity
Balance at December 31, 2021 $ 145,037 $ 937 $ 1,108,594 $ 2,333,288 $ (126,951) $ (22,580) $ 3,438,325
Net income — — — 165,564 — — 165,564
Other comprehensive (loss), net of tax — — — — — (458,752) (458,752)
Common stock dividends and equivalents $0.80 per share — — — (107,620) — — (107,620)
Series F preferred stock dividends $656.25 per share — — — (3,938) — — (3,938)
Series G preferred stock dividends $32.50 per share — — — (3,656) — — (3,656)
Issued in business combination 138,942 891 5,040,291 — — — 5,180,124
Stock-based compensation — — 419 — 30,050 — 30,469
Exercise of stock options — — (451) — 948 — 497
Common shares acquired from stock compensation plan activity — — — — (21,095) — (21,095)
Common stock repurchase program — — — — (222,130) — (222,130)
Balance at June 30, 2022 $ 283,979 $ 1,828 $ 6,148,853 $ 2,383,638 $ (339,178) $ (481,332) $ 7,997,788
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 and equivalents $0.80 per share — — — (72,537) — — (72,537)
Series F preferred stock dividends $656.25 per share — — — (3,938) — — (3,938)
Stock-based compensation — — (3,311) — 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

~~See accompanying Notes to Condensed Consolidated Financial Statements.~~

~~WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES~~

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


		Six months ended June 30,					Three months ended March 31,
(In thousands)	(In thousands)	2022		2021		(In thousands)	2023		2022
Operating Activities:	Operating Activities:					Operating Activities:
Net income		$	165,564	$	202,113
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Provision (benefit) for credit losses		201,088		(47,250)
Deferred income tax (benefit) expense		(44,293)		16,012
Net income (loss)						Net income (loss)	$	221,004	$	(16,747)
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses						Provision for credit losses	46,749		188,845
Deferred income tax expense (benefit)						Deferred income tax expense (benefit)	13,911		(28,543)
Stock-based compensation expense	Stock-based compensation expense	30,469		6,433		Stock-based compensation expense	11,646		9,003

Depreciation and amortization of property and equipment and intangible assets	Depreciation and amortization of property and equipment and intangible assets	40,673		18,683		Depreciation and amortization of property and equipment and intangible assets	20,745		16,784
(Accretion) and amortization of net (premiums) discounts on earnings assets and borrowings		(25,429)		66,312
(Accretion) and amortization of interest-earning assets and borrowings						(Accretion) and amortization of interest-earning assets and borrowings	(4,388)		(19,854)
Amortization of low-income housing tax credit investments	Amortization of low-income housing tax credit investments	26,449		1,992		Amortization of low-income housing tax credit investments	21,478		10,377
Amortization of mortgage servicing assets	Amortization of mortgage servicing assets	1,769		2,932		Amortization of mortgage servicing assets	341		570
Reduction of right-of-use lease assets	Reduction of right-of-use lease assets	39,865		1,336		Reduction of right-of-use lease assets	7,525		7,928
Net (gain) on sale, net of write-downs, of foreclosed properties and repossessed assets	Net (gain) on sale, net of write-downs, of foreclosed properties and repossessed assets	(418)		(141)		Net (gain) on sale, net of write-downs, of foreclosed properties and repossessed assets	(323)		(103)
Net loss on sale, net of write-downs, of property and equipment		4,740		191

Loss on disposal of property and equipment						Loss on disposal of property and equipment	5		1,662
Loss on sale of investment securities						Loss on sale of investment securities	16,747		—
Originations of loans held for sale	Originations of loans held for sale	(28,098)		(135,930)		Originations of loans held for sale	(2,590)		(23,056)
Proceeds from sale of loans held for sale	Proceeds from sale of loans held for sale	32,833		147,735		Proceeds from sale of loans held for sale	3,832		26,753
Net (gain) on mortgage banking activities	Net (gain) on mortgage banking activities	(503)		(3,460)		Net (gain) on mortgage banking activities	(77)		(397)
Net (gain) on sale of loans not originated for sale	Net (gain) on sale of loans not originated for sale	(3,173)		(718)		Net (gain) on sale of loans not originated for sale	(95)		(1,816)
(Increase) in cash surrender value of life insurance policies	(Increase) in cash surrender value of life insurance policies	(14,976)		(7,136)		(Increase) in cash surrender value of life insurance policies	(6,728)		(6,732)
(Gain) from life insurance policies	(Gain) from life insurance policies	(1,447)		(805)		(Gain) from life insurance policies	(528)		(38)
Net decrease in derivative contract assets and liabilities		336,819		106,759
Net (increase) decrease in derivative contract assets and liabilities						Net (increase) decrease in derivative contract assets and liabilities	(48,570)		215,423

Net (increase) in accrued interest receivable and other assets	Net (increase) in accrued interest receivable and other assets	(57,705)		(95,884)		Net (increase) in accrued interest receivable and other assets	(8,150)		(69,651)
Net (decrease) increase in accrued expenses and other liabilities		(65,422)		34,057
Net (decrease) in accrued expenses and other liabilities						Net (decrease) in accrued expenses and other liabilities	(78,240)		(95,151)
Net cash provided by operating activities	Net cash provided by operating activities	638,805		313,231		Net cash provided by operating activities	214,294		215,257
Investing Activities:	Investing Activities:					Investing Activities:
Purchases of available-for-sale securities	Purchases of available-for-sale securities	(1,099,810)		(504,286)		Purchases of available-for-sale securities	(357,784)		(714,208)
Proceeds from principal payments, maturities, and calls of available-for-sale securities	Proceeds from principal payments, maturities, and calls of available-for-sale securities	475,922		510,484		Proceeds from principal payments, maturities, and calls of available-for-sale securities	119,033		283,474

Proceeds from sale of available-for-sale securities						Proceeds from sale of available-for-sale securities	395,358		—
Purchases of held-to-maturity securities	Purchases of held-to-maturity securities	(847,534)		(775,673)		Purchases of held-to-maturity securities	(599,387)		(456,139)
Proceeds from principal payments, maturities, and calls of held-to-maturity securities	Proceeds from principal payments, maturities, and calls of held-to-maturity securities	476,710		694,951		Proceeds from principal payments, maturities, and calls of held-to-maturity securities	99,992		280,080
Net (increase) decrease in Federal Home Loan Bank and Federal Reserve Bank stock	Net (increase) decrease in Federal Home Loan Bank and Federal Reserve Bank stock	(107,086)		720		Net (increase) decrease in Federal Home Loan Bank and Federal Reserve Bank stock	(138,824)		16,215
Alternative investments (capital calls), net of distributions	Alternative investments (capital calls), net of distributions	(7,184)		(5,568)		Alternative investments (capital calls), net of distributions	(3,184)		(5,661)
Net (increase) decrease in loans		(2,815,067)		84,886
Net (increase) in loans						Net (increase) in loans	(1,478,986)		(674,472)
Proceeds from sale of loans not originated for sale	Proceeds from sale of loans not originated for sale	118,505		49,122		Proceeds from sale of loans not originated for sale	106,779		51,127
Proceeds from sale of foreclosed properties and repossessed assets	Proceeds from sale of foreclosed properties and repossessed assets	1,290		523		Proceeds from sale of foreclosed properties and repossessed assets	1,745		231
Proceeds from sale of property and equipment		—		2,413

Additions to property and equipment	Additions to property and equipment	(9,895)		(7,407)		Additions to property and equipment	(10,293)		(4,644)
Proceeds from life insurance policies	Proceeds from life insurance policies	11,576		2,683		Proceeds from life insurance policies	—		7,793
Net cash paid for acquisition of interLINK						Net cash paid for acquisition of interLINK	(157,646)		—
Net cash paid for acquisition of Bend	Net cash paid for acquisition of Bend	(54,407)		—		Net cash paid for acquisition of Bend	—		(54,407)
Net cash received in merger with Sterling	Net cash received in merger with Sterling	513,960		—		Net cash received in merger with Sterling	—		513,960
Net cash (used for) provided by investing activities		(3,343,020)		52,848
Net cash (used for) investing activities						Net cash (used for) investing activities	(2,023,197)		(756,651)
											See accompanying Notes to Condensed Consolidated Financial Statements.

3834


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

		Six months ended June 30,					Three months ended March 31,
(In thousands)	(In thousands)	2022		2021		(In thousands)	2023		2022
Financing Activities:	Financing Activities:					Financing Activities:
Net (decrease) increase in deposits		(41,467)		1,510,573
Net increase in deposits						Net increase in deposits	1,236,463		1,235,442
Proceeds from Federal Home Loan Bank advances	Proceeds from Federal Home Loan Bank advances	5,150,000		180,470		Proceeds from Federal Home Loan Bank advances	15,450,000		—
Repayments of Federal Home Loan Bank advances	Repayments of Federal Home Loan Bank advances	(2,650,187)		(175,190)		Repayments of Federal Home Loan Bank advances	(12,350,091)		(94)
Net increase (decrease) in securities sold under agreements to repurchase and other borrowings		1,041,702		(488,231)

Net increase in securities sold under agreements to repurchase and other borrowings						Net increase in securities sold under agreements to repurchase and other borrowings	(845,676)		(183,347)

Dividends paid to common shareholders		(107,469)		(72,349)
Dividends paid to preferred shareholders		(5,401)		(3,938)
Dividends paid to common stockholders						Dividends paid to common stockholders	(70,140)		(36,234)
Dividends paid to preferred stockholders						Dividends paid to preferred stockholders	(4,163)		(1,969)
Exercise of stock options	Exercise of stock options	497		3,386		Exercise of stock options	1,723		411

Common stock repurchase program	Common stock repurchase program	(222,130)		—		Common stock repurchase program	—		(122,205)
Common shares acquired related to stock compensation plan activity	Common shares acquired related to stock compensation plan activity	(21,095)		(4,011)		Common shares acquired related to stock compensation plan activity	(15,085)		(18,967)

Net cash provided by financing activities	Net cash provided by financing activities	3,144,450		950,710		Net cash provided by financing activities	3,403,031		873,037
Net increase in cash and cash equivalents	Net increase in cash and cash equivalents	440,235		1,316,789		Net increase in cash and cash equivalents	1,594,128		331,643
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	461,570		263,104		Cash and cash equivalents at beginning of period	839,943		461,570
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	901,805	$	1,579,893	Cash and cash equivalents at end of period	$	2,434,071	$	793,213

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Interest paid	Interest paid	$	49,544	$	23,133	Interest paid	$	221,182	$	15,457
Income taxes paid	Income taxes paid	66,064		80,873		Income taxes paid	6,334		7,112
Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
Transfer of loans and leases to foreclosed properties and repossessed assets	Transfer of loans and leases to foreclosed properties and repossessed assets	$	575	$	829	Transfer of loans and leases to foreclosed properties and repossessed assets	$	607	$	213
Transfer of loans from portfolio to loans-held-for-sale		91,815		48,395
Merger with Sterling:
Transfer of loans and leases to loans held-for-sale						Transfer of loans and leases to loans held-for-sale	316,596		42,431

Merger with Sterling: (1)						Merger with Sterling: (1)
Tangible assets acquired	Tangible assets acquired	27,434,111		—		Tangible assets acquired	17,607		26,919,975
Goodwill and other intangible assets	Goodwill and other intangible assets	2,149,532		—		Goodwill and other intangible assets	(25,561)		2,149,532
Liabilities assumed	Liabilities assumed	24,403,343		—		Liabilities assumed	(7,954)		24,403,343
Common stock issued	Common stock issued	5,041,182		—		Common stock issued	—		5,041,182
Preferred stock exchanged	Preferred stock exchanged	138,942		—		Preferred stock exchanged	—		138,942
Acquisition of Bend:
Acquisition of Bend: (1)						Acquisition of Bend: (1)
Tangible assets acquired	Tangible assets acquired	16,597		—		Tangible assets acquired	294		15,731
Goodwill and other intangible assets	Goodwill and other intangible assets	38,966		—		Goodwill and other intangible assets	(294)		38,966
Liabilities assumed	Liabilities assumed	290		—		Liabilities assumed	—		290
Acquisition of interLINK:						Acquisition of interLINK:
Tangible assets acquired						Tangible assets acquired	6,417		—
Goodwill and other intangible assets						Goodwill and other intangible assets	183,216		—
Liabilities assumed						Liabilities assumed	15,948		—
Contingent consideration						Contingent consideration	16,039		—

(1)The activities presented for 2023 reflect adjustments recorded within the one-year measurement period, which were identified as a result of extended information gathering and new information that arose from integration activities. Additional information regarding these amounts can be found within Note 2: Mergers and Acquisitions and Note 6: Goodwill and Other Intangible Assets.

See accompanying Notes to Condensed Consolidated Financial Statements.

3935

Note 1: Summary of Significant Accounting Policies

Nature of Operations

Webster Financial Corporation is a bank holding company and financial holding company under the BHC Act, incorporated under the laws of Delaware in 1986, and headquartered in Stamford, Connecticut. Webster Bank, ~~is the principal consolidated subsidiary of Webster Financial Corporation. Webster Bank, and~~along with its HSA Bank division, ~~deliver~~is a leading commercial bank in the Northeast that delivers a wide range of ~~banking, investment,~~digital and traditional financial ~~services~~solutions to businesses, individuals, families, and ~~businesses. Webster~~partners across its three differentiated lines of business: Commercial Banking, HSA 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 the northeastern U.S.Consumer Banking. While its core footprint spans from New York to Rhode Island and Massachusetts, ~~with~~ certain businesses ~~operating~~operate in extended geographies. ~~Webster Bank also offers equipment financing, warehouse lending, commercial real estate lending, asset-based lending, and treasury management solutions.~~ HSA Bank is ~~a leading provider~~one of ~~HSAs, and delivers health reimbursement arrangements and flexible spending and commuter~~the largest providers of employee benefit ~~account administration services to employers and individuals~~solutions in ~~all 50 states.~~the United States.

Basis of Presentation

The unaudited ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements of ~~Webster~~the Company have been prepared in accordance with GAAP for interim financial information and Article 10 of Regulation S-X. Certain information and footnote disclosures required by GAAP for complete financial statements have been omitted or condensed. Therefore, the condensed consolidated financial statements should be read in conjunction with ~~Webster's~~the Company's Annual Report on Form 10-K for the year ended
December 31, ~~2021.~~2022. The results of operations for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023, are not necessarily indicative of the future results that may be attained for the entire year or other interim periods.

In the opinion of management, all necessary adjustments have been reflected to present fairly the financial position, results of operations, and cash flows for the reporting periods presented. Intercompany transactions and balances have been eliminated in consolidation. Assets under administration or assets under management that ~~Webster~~the Company holds or manages in a fiduciary or agency capacity for customers are not included in the ~~consolidated financial statements.~~

~~Reclassifications~~

Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications did not have a significant impact on the Company's consolidated financial statements.Condensed Consolidated Financial Statements.

Use of Estimates

The preparation of the ~~consolidated financial statements~~Condensed Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the ~~consolidated financial statements~~Condensed Consolidated Financial Statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

~~Business Combinations~~

Business combinations are accounted for under the acquisition method, in which the identifiable assets acquired and liabilities assumed are generally measured and recognized at fair value as of the acquisition date, with the excess of the purchase price over the fair value of the net assets acquired recognized as goodwill. Items such as acquired ROU lease assets and operating lease liabilities as lessee, employee benefit plans, and income-tax related balances are recognized in accordance with other applicable GAAP, which may result in measurements that differ from fair value. Business combinations are includedAccounting Standards Adopted in the consolidated financial statements from the respective dates of acquisition. Historical reporting periods reflect only the results of legacy Webster operations. Merger-related costs are expensed in the period incurred and presented within the applicable non-interest expense category. Additional information regarding Webster's mergers and acquisitions can be found within Note 2: Mergers and Acquisitions.

~~Purchased Credit-Deteriorated Loans and Leases~~

Purchased credit-deteriorated (PCD) loans and leases are defined as those that have experienced a more-than-insignificant deterioration in credit quality since origination. Webster considers a variety of factors to evaluate and identify whether acquired loans are PCD, including but not limited to, nonaccrual status, delinquency, TDR classification, partial charge-offs, decreases in FICO scores, risk rating downgrades, and other factors. Upon acquisition, expected credit losses are added to the fair value of individual PCD loans and leases to determine the amortized cost basis. After initial recognition, any changes to the estimate of expected credit losses, favorable or unfavorable, are recorded as a provision for credit loss during the period of change.

PCD accounting is also applied to loans and leases previously charged-off by the acquiree if Webster has contractual rights to the cash flows at the acquisition date. Webster recognizes an additional allowance for credit loss for amounts previously charged-off by the acquiree with a corresponding increase to the amortized costs basis of the acquired asset. Balances deemed to be uncollectible are immediately charged-off in accordance with Webster’s charge-off policies, resulting in the establishment of the initial ACL for PCD loans and leases to be recorded net of these uncollectible balances.

~~Relevant Accounting Standards Issued But Not Yet Adopted~~Current Period

ASU No. 2022-02—Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

In March 2022, the ~~Financial Accounting Standards Board (FASB)~~FASB issued ASU No. 2022-02, which eliminates the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance in paragraphs 310-20-35-9 through 35-11 to determine whether a modification results in a new loan or a continuation of an existing loan. In addition, ~~ASU No. 2022-02~~the Update requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost in the vintage disclosures required by paragraph 326-20-50-6.

Modifications to borrowers experiencing financial difficulty include principal forgiveness, interest rate reductions, payment delays, term extensions, or combinations thereof. Expected losses or recoveries on loans where modifications have been granted to borrowers experiencing financial difficulty have been factored into the ACL on loans and leases. Upon adoption of ASU 2022-02, the Company is no longer required to use a discounted cash flow (or reconcilable) method to measure the ACL resulting from a modification with a borrower experiencing financial difficulty. Accordingly, the Company now applies the same credit loss methodology it uses for similar loans that were not modified.

The Company adopted the Update on January 1, 2023. The Company elected the option to apply the modified retrospective transition method related to the recognition and measurement of TDRs, which resulted in a $5.9 million increase to the Allowance for Credit Losses on Loans and Leases and a $1.7 million decrease to Deferred Tax Assets, net, with a corresponding $4.2 million cumulative-effect adjustment to retained earnings as of the adoption date. The enhanced disclosure requirements provided for by the Update were adopted on a prospective basis. Reporting periods prior to the adoption of the Update are accounted for and presented in accordance with the applicable GAAP.

Refer to Note 4: Loans and Leases for additional information regarding modifications granted to borrowers experiencing financial difficulty.

ASU No. ~~2022-02~~2022-01—Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method

In March 2022, the FASB issued ASU No. 2022-01—Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method, which expands the current last-of-layer method of hedge accounting that permits only one hedged layer to allow multiple hedged layers of a single closed portfolio. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. Additionally, the amendments in this Update: (i) expand the scope of the portfolio layer method to include non-prepayable assets; (ii) specify eligible hedging instruments in a single-layer hedge; (iii) provide additional guidance on the accounting for and disclosure of hedge basis adjustments; and (iv) specify how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. An entity may also reclassify debt securities classified in the held-to-maturity category at the date of adoption to the available-for-sale category only if the entity applies portfolio layer method hedging to one or more closed portfolios that include those debt securities within a 30-day period.

The Company adopted the Update on January 1, 2023 on a prospective basis. The adoption of this guidance did not have a material impact on the Company's Consolidated Financial Statements. The entity did not reclassify any debt securities from the held-to-maturity category to the available-for-sale category as permitted upon adoption.

ASU No. 2021-08—Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

In October 2021, the FASB issued ASU No. 2021-08—Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.

The Company adopted the Update on January 1, 2023 on a prospective basis. The adoption of this guidance did not have a material impact on the Company's Consolidated Financial Statements.

Relevant Accounting Standards Issued But Not Yet Adopted

ASU No. 2023-02—Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)

In March 2023, the FASB issued ASU No. 2023-02—Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force), which permits reporting entities to elect to account for their tax equity investments, regardless of the program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. A reporting entity may make an accounting policy election to apply the proportional amortization method in accordance with paragraph 323-740-25-4 on a tax-credit-program-by-tax-credit-program basis rather than electing to applying the proportional amortization method at the reporting entity level or to individual investments.

A reporting entity that applies the proportional amortization method to qualifying tax equity investments must account for the receipt of the investment tax credits using the flow-through method under Topic 740, Income Taxes, even if the entity applies the deferral method for other investment tax credit received. The amendments also remove certain guidance for Qualified Affordable Housing Project Investments, require the application of the delayed equity contribution guidance to all tax equity investments, and require specific disclosures that must be applied to all investments that generate income tax credits and other income tax benefits from a tax credit program for which the entity has elected to apply the proportional amortization method in accordance with Subtopic 323-740.

The Update is effective for fiscal years beginning after December 15, ~~2022,~~2023, and interim periods within those fiscal years, with early adoption permitted. The amendments ~~should~~generally must be applied ~~prospectively, however, an entity has the option to apply~~on either a modified retrospective ~~transition method related to the recognition and measurement of TDRs, which would result in~~or retrospective basis with a cumulative-effect adjustment to retained earnings reflecting the difference between the previous method used to account for the tax equity investment and the application of the proportional amortization method since the investment was entered into. The Company is in the ~~period~~early assessment stages of ~~adoption. Webster is currently~~ evaluating the amendments and the impact of adoption on ~~the Company's consolidated financial statements~~its Consolidated Financial Statements and disclosures.

ASU No. 2023-01—Leases (Topic 842): Common Control Arrangements

In March 2023, the FASB issued ASU No. 2023-01—Leases (Topic 842): Common Control Arrangements, which requires that leasehold improvements associated with leases between entities under common control be: (i) amortized by the lessee over the useful live of the leasehold improvements to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset (the leased asset) through a lease; however, if the lessor obtained the right to control the use of the underlying asset through a lease with another entity not within the same common control group, the amortization period may not exceed the amortization period of the common control group; and (ii) accounted for as a transfer between entities under common control through an adjustment to equity, if, and when, the lessee no longer controls the use of the underlying asset. Additionally, those leasehold improvements are subject to the impairment guidance in Topic 360, Property, Plant, and Equipment.

The Update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The amendments either may be applied prospectively to all new and existing leasehold improvements recognized on or after the adoption date with any remaining unamortized balance of existing leasehold improvements amortized over their remaining useful life to the common control group determined at that date; or retrospectively to the beginning of the period in which the entity first applied Topic 842, with any leasehold improvements that otherwise would not have been amortized or impaired recognized through a cumulative-effect adjustment to the opening balance of retained earnings at the beginning of the earliest period presented in accordance with Topic 842. The Company is in the early assessment stages of evaluating the amendments and the impact of adoption on its Consolidated Financial Statements.

ASU No. 2022-03—Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

In June 2022, the FASB issued ASU No. 2022-03—Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security, and therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction, and ~~require~~requires the following disclosures for equity securities subject to contractual sale restrictions: (i) the fair value of equity securities subject to contractual sale restrictions reflected on the balance sheet; (ii) the nature and remaining duration of the restriction(s); and (iii) the circumstances that could cause a lapse in the restriction(s).

~~ASU No. 2022-03~~The Update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. For all entities except investment companies, the amendments should be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. ~~Webster~~The adoption of this guidance is ~~in the early assessment stages of evaluating the~~not expected to have a material impact ~~of adoption~~ on the ~~Company's consolidated financial statements and disclosures.~~Consolidated Financial Statements as the Company does not currently consider contractual restrictions on the sale of an equity security in measuring fair value.

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Note 2: Mergers and Acquisitions

interLINK Acquisition

On January 11, 2023, Webster acquired 100% ownership of interLINK from StoneCastle Partners LLC. interLINK is a technology-enabled deposit management platform that administers over $9 billion of deposits from FDIC-insured cash sweep programs between banks and broker/dealers and clearing firms. The acquisition provides the Company with access to a unique source of core deposit funding and scalable liquidity and adds another technology-enabled channel to its already differentiated, omnichannel deposit gathering capabilities.

The total purchase price of the acquisition was $174.6 million, which included cash paid of $158.6 million and $16.0 million of contingent consideration measured at fair value. The contingent consideration is payable in cash upon the achievement of discrete customer and deposit growth events within three years of the acquisition date. Additional information regarding the determination of fair value for contingent consideration liabilities can be found within Note 14: Fair Value Measurements.

The transaction has been accounted for as a business combination, and resulted in the addition of $31.4 million in net assets measured at fair value, which primarily comprised $36.0 million of broker dealer relationship intangible assets, $6.0 million of developed technology, a $4.0 million non-competition agreement intangible asset, and $15.9 million of royalty liabilities. Fair value estimates of the acquired assets and assumed liabilities are subject to adjustment during the one-year measurement period following the closing of the acquisition. The $143.2 million of preliminary goodwill recognized is deductible for tax purposes.

Bend Financial, Inc. Acquisition

On February 18, 2022, Webster acquired 100% of the equity interests of Bend, a cloud-based platform solution provider for HSAs, in exchange for cash of $55.3 million. The transaction was accounted for as a business combination, and resulted in the addition of $19.6 million in net assets measured at fair value, which primarily comprised $15.9 million of internal use software and a $3.0 million customer relationship intangible asset. The Company's valuations of the assets acquired and liabilities assumed in the Bend Acquisition were considered final as of March 31, 2023.

Merger with Sterling Bancorp

On January 31, 2022, Webster completed its ~~previously announced~~ merger with Sterling pursuant to an agreement and plan of merger dated as of April 18, 2021 (the merger agreement), in which Sterling merged with and into Webster, with Webster continuing as the surviving corporation. Following the merger, on February 1, 2022, Sterling National Bank, a wholly-owned subsidiary of Sterling, merged with and into Webster Bank, with Webster Bank continuing as the surviving bank. Sterling was a full-service regional bank headquartered in Pearl River, New York, that primarily served the Greater New York metropolitan area.Sterling. The ~~merger expanded Webster's geographic footprint and combined two complementary organizations to create one of the largest commercial banks in the northeast U.S.~~

Each share of Sterling common stock issued and outstanding immediately prior to the merger, other than certain shares held by Webster and Sterling, was converted into the right to receive a fixed 0.4630 share of Webster common stock. In connection with the completion of the merger and in accordance with the merger agreement, the number of authorized shares of Webster common stock was increased from 200.0 million shares to 400.0 million shares as of January 31, 2022. Cash was also paid to Sterling common shareholders in lieu of fractional shares, as applicable.

In addition, each share of Sterling 6.50% Series A Non-Cumulative Perpetual Preferred Stock issued and outstanding immediately prior to the merger was converted into the right to receive 1 share of newly created Webster 6.50% Series G Non-Cumulative Perpetual Preferred Stock, having substantially the same terms. On January 31, 2022, Webster registered and issued 5,400,000 depositary shares, each representing 1/40th interest in a share of 6.50% Series G Non-Cumulative Preferred Perpetual Stock, par value $0.01 per share, with a liquidation preference equal to $1,000 per share (equivalent to $25 per depositary share) (the Series G Preferred Stock). The Series G Preferred Stock ranks on parity with Webster 5.25% Series F Non-Cumulative Preferred Perpetual Stock, par value $0.01 per share, with a liquidation preference of $25,000 per share (equivalent to $25 per depositary share), and senior to Webster common stock, with respect to the payment of dividends and distributions upon the liquidation, dissolution, or winding-up of Webster.

Series G Preferred Stock dividends are payable quarterly on the fifteenth day of each January, April, July, and October, if and when declared by the Board of Directors. Webster may redeem the Series G Preferred Stock at its option, in whole or in part, subject to the approval of Federal Reserve Board, on October 15, 2022, or any dividend payment date occurring thereafter, or in whole but not in part, upon the occurrence of a regulatory capital treatment event, at a redemption price equal to the liquidation preference plus any declared and unpaid dividends, without accumulation of any undeclared dividends.

Further, certain equity awards granted under Sterling's equity compensation plans were converted into a corresponding award with respect to Webster common stock, generally subject to the same terms and conditions, with the number of shares underlying such awards adjusted based on the 0.4630 fixed exchange ratio.

~~The following table summarizes the determination of the purchase price consideration:~~


~~(In thousands, except share and price per share data)~~
~~Webster common stock issued~~	~~87,965,239~~
~~Price per share of Webster common stock on January 31, 2022~~	$	~~56.81~~
~~Consideration for outstanding common stock~~	~~4,997,305~~
~~Consideration for preferred stock exchanged~~	~~138,942~~
~~Consideration for replacement equity awards~~ ~~(1)~~	~~43,877~~
~~Cash in lieu of fractional shares~~	~~176~~
~~Total purchase price consideration~~	$	~~5,180,300~~

~~(1)~~The fair value of the replacement equity awards issued by Webster and included in the consideration transferred pertain to services performed prior to the merger effective date. The fair value attributed to services performed after the merger effective date will be recognized over the required service vesting period for each award and recorded as compensation and benefits expense on the consolidated statements of income. Webster recognized an incremental $11.0 million and $13.8 million of stock compensation expense related to the replacement equity awards during the three and six months ended June 30, 2022, respectively.

~~The merger~~transaction was accounted for as a business combination. Accordingly, the purchase price ~~has been~~was allocated to the assets acquired and liabilities assumed based on their fair values as of the merger effective date. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and are subject to change. Fair value estimates of the assets acquired and liabilities assumed ~~may be adjusted for a~~were subject to adjustment during the one-year measurement period ~~up to one year (the measurement period) from~~following the closing ~~date~~ of the merger if new information iswas obtained about facts and circumstances that existed as of the merger effective date that, if known, would have affected the measurement of the amounts recognized as of that date. Measurement period adjustments made during the first quarter of 2023 totaled a net $25.6 million, which pertained to other assets and other liabilities and their related deferred tax impact. The Company's valuations of the assets acquired and liabilities assumed in the merger with Sterling were considered final as of March 31, 2023.

4239

Webster considers its valuations of loans and leases, tax receivables and payables, and certain other assets and other liabilities to be preliminary, as management continues to identify and assess information regarding the nature of these assets acquired and liabilities assumed, including extended information gathering, management review procedures, and any new information that may arise as a result of integration activities. Accordingly, the amounts recorded for current and DTAs and liabilities are also considered preliminary, as Webster continues to evaluate the nature and extent of permanent and temporary differences between the book and tax bases of the assets acquired and liabilities assumed. While the Company believes that the information available as of January 31, 2022, provides a reasonable basis for estimating fair value, it is possible that additional information may become available during the measurement period that would result in changes to the fair values presented. Any measurement period adjustments identified would be recognized in the corresponding reporting period.

The following table summarizes the ~~preliminary~~ allocation of the purchase price to the fair value of the identifiable assets acquired and liabilities assumed from Sterling atas of January 31, 2022:

(In thousands) Unpaid Principal Balance Fair Value
Purchase price consideration $ 5,180,300
Assets:
Cash and due from banks 510,929
Interest-bearing deposits 3,207
Investment securities available-for-sale 4,429,948
Federal Home Loan Bank and Federal Reserve Bank Stock 150,502
Loans held for sale 23,517
Loans and leases:
Commercial non-mortgage $ 5,570,782 5,527,657
Asset-based 694,137 683,958
Commercial real estate 6,790,600 6,656,405
Multi-family 4,303,381 4,255,906
Equipment financing 1,350,579 1,314,311
Warehouse lending 647,767 643,754
Residential 1,313,785 1,281,637
Home equity 132,758 122,553
Other consumer 12,559 12,525
Total loans and leases $ 20,816,348 20,498,706
Deferred tax assets, net (52,130)
Premises and equipment (1)
264,421
Other intangible assets 210,100
Bank-owned life insurance policies 645,510
Accrued interest receivable and other assets 959,501
Total assets acquired $ 27,644,211
Liabilities:
Non-interest-bearing deposits $ 6,620,248
Interest-bearing deposits 16,643,755
Securities sold under agreements to repurchase and other borrowings 27,184
Long-term debt 516,881
Accrued expenses and other liabilities (1)
595,275
Total liabilities assumed $ 24,403,343
Net assets acquired 3,240,868
Goodwill $ 1,939,432

~~(1)Includes $100.0 million of~~ ~~ROU lease assets~~ ~~and $106.9 million of~~ ~~operating lease liabilities~~ reported within premises and equipment and accrued expenses and other liabilities, respectively, which were measured based upon the estimated present value of the remaining lease payments. In addition, ROU lease assets were adjusted for favorable and unfavorable terms of the lease when compared to market terms, as applicable.


(In thousands)	Unpaid Principal Balance		Fair Value
Purchase price consideration			$	5,180,300
Assets:
Cash and due from banks			510,929
Interest-bearing deposits			3,207
Investment securities available-for-sale			4,429,948
Federal Home Loan Bank and Federal Reserve Bank Stock			150,502
Loans held for sale			23,517
Loans and leases:
Commercial non-mortgage	$	5,570,782	5,527,657
Asset-based	694,137		683,958
Commercial real estate	6,790,600		6,656,405
Multi-family	4,303,381		4,255,906
Equipment financing	1,350,579		1,314,311
Warehouse lending	647,767		643,754
Residential	1,313,785		1,281,637
Home equity	132,758		122,553
Other consumer	12,559		12,525
Total loans and leases	$	20,816,348	20,498,706
Deferred tax assets, net			(59,716)
Premises and equipment			264,421
Other intangible assets			210,100
Bank-owned life insurance policies			645,510
Accrued interest receivable and other assets			986,729
Total assets acquired			$	27,663,853
Liabilities:
Non-interest-bearing deposits			$	6,620,248
Interest-bearing deposits			16,643,755
Securities sold under agreements to repurchase and other borrowings			27,184
Long-term debt			516,881

Accrued expenses and other liabilities			589,689
Total liabilities assumed			$	24,397,757
Net assets acquired			3,266,096
Goodwill			$	1,914,204

In connection with the merger ~~Webster~~with Sterling, the Company recorded $1.9 billion of goodwill, which represents the excess of the purchase price over the fair value of the net assets acquired. Information regarding the allocation of goodwill to the Company's reportable segments ~~as well as the carrying amounts and amortization of the core deposit intangible and customer relationship intangible assets,~~ can be found within Note 16: Segment ~~Reporting and Note 6: Goodwill and Other Intangible Assets, respectively.~~

~~The following is~~Reporting. For a description of the valuation methodologies used to estimate the fair values of the significant assets acquired and liabilities ~~assumed:~~

~~Cash~~assumed, refer to Note 2: Mergers and ~~due from banks and interest-bearing deposits.~~ ~~The carrying amount~~Acquisitions of ~~these assets is a reasonable estimate of fair value based on the short-term nature of these assets.~~

~~Investment securities available-for-sale.~~ The fair values for investment securities available-for-sale were based on quoted market prices, where available. If quoted market prices were not available, fair value estimates are based on observable inputs, including quoted market prices for similar instruments. Investment securities held-to-maturity were reclassified to investment securities available-for-sale based on the Company's ~~intent at closing.~~

~~Loans and leases.~~ The fair values for loans and leases were estimated using a discounted cash flow methodology that considered factors including the type of loan or lease and the related collateral, classification status, fixed or variable interest rate, remaining term, amortization status, and current discount rates. In addition, the PD, LGD, and prepayment assumptions that were derived basedAnnual Report on loan and lease characteristics, historical loss experience, comparable market data, and current and forecasted economic conditions were used to estimate expected credit losses. Loans and leases generally were valued individually. The discount rates used for loans and leases were based on current market rates for new originations or comparable loans and leases and include adjustments for liquidity. The discount rate did not include credit losses as that was included as a reduction to the estimated cash flows.

~~Premises and equipment.~~ The fair values for land and buildings were based on appraised values using the cost approach, which estimates the price a buyer would pay if they were to rebuild or reconstruct a similar property on a comparable piece of land.

~~Intangible assets.~~ A core deposit intangible asset represents the value of relationships with deposit clients. The fair value of the core deposit intangible asset was estimated using a net cost savings method, a form of discounted cash flow methodology that gave appropriate consideration to expected client attrition rates and other applicable adjustments to the projected deposit balance, the interest cost and net maintenance cost associated with the client deposit base, alternative cost of funds, and a discount rate used to discount the future economic benefits of the core deposit intangible asset to present value. The core deposit intangible asset is being amortized on an accelerated basis over 10 years based upon the period over which the estimated economic benefits are estimated to be received. Customer relationship intangible assets for payroll finance, factoring receivables finance, and wealth businesses were estimated using a discounted cash flow methodology that reflects the estimated value of the future net earnings for each relationship with adjustments for attrition. The customer relationship intangible assets are being amortized on an accelerated basis over their estimated useful life of 10 years.

~~Bank-owned life insurance policies.~~ ~~The cash surrender value of these insurance policies is a reasonable estimate of fair value since it reflects the amount that would be realized by the contract owner upon discontinuance or surrender.~~

~~Deposits.~~ ~~The fair values used~~Form 10-K for the demand and savings deposits by definition equal the amount payable on demand at the merger date. The fair values for time deposits were estimated using a discounted cash flow methodology that applies interest rates currently being offered to the contractual interest rates on such time deposits.

~~Securities sold under agreements to repurchase and other borrowings.~~ ~~The carrying amount of these liabilities is a reasonable estimate of fair value based on the short-term nature of these liabilities.~~

~~Long-term debt.~~The fair values of long-term debt instruments are estimated based on quoted market prices for the instrument, if available, or for similar instruments, if not available, or by using a discounted cash flow methodology based on current incremental borrowing rates for similar types of instruments.

~~PCD Loans and Leases~~

Purchased loans and leases that have experienced more-than-insignificant deterioration in credit quality since origination are considered PCD. For PCD loans and leases, the initial estimate of expected credit losses was established through an adjustment to the unpaid principal balance and non-credit discount at acquisition. Subsequent to the merger effective date, Webster recorded an ACL for non-PCD loans and leases of $175.1 million through an increase to the provision for credit losses. There was no carryover of Sterling's previously recorded ACL on loans and leases.

~~The following table reconciles the unpaid principal balance to the fair value of PCD loans and leases by portfolio segment:~~

(In thousands) Commercial Consumer Total
Unpaid principal balance $ 3,394,963 $ 541,471 $ 3,936,434
ACL at acquisition (115,464) (20,852) (136,316)
Non-credit (discount) (40,947) (2,784) (43,731)
Fair value 3,238,552 517,835 3,756,387
year ended December 31, 2022.

4440

~~Supplemental Pro Forma Financial Information (Unaudited)~~Merger-Related Expenses and Exit Activities

The following table summarizes ~~supplemental pro forma financial information giving effect to~~total merger-related expenses, which were primarily incurred in connection with the merger ~~as if it had been completed on January 1, 2021:~~

Three months ended June 30, Six months ended June 30,
(In thousands) 2022 2021 2022 2021
Net interest income $ 465,392 $ 440,538 $ 898,741 $ 904,528
Non-interest income 120,933 110,659 235,769 226,967
Net income 213,438 164,073 396,605 186,071

~~The supplemental pro forma financial information does not necessarily reflect the results of operations that would have occurred had Webster merged~~ with Sterling on January 1, 2021. The supplemental pro forma financial information includes the impact of (i) accreting and amortizing the discounts and premiums associated with the estimated fair value adjustments to acquired loans and leases, investment securities, deposits, and long-term debt, (ii) the amortization of recognized intangible assets, (iii) the elimination of Sterling's historical accretion and amortization of discounts and premiums and deferred origination fees and costs on loans and leases, (iv) the elimination of Sterling's historical accretion and amortization of discounts and premiums on investment securities, and (v) the related estimated income tax effects. Costs savings and other business synergies related to the merger are not included in the supplemental pro forma financial information.

~~In addition, the supplemental pro forma financial information was adjusted for merger-related expenses, as follows:~~

Three months ended June 30, Six months ended June 30,
(In thousands) 2022
2021 (6)
2022
2021 (6)
Compensation and benefits (1)
$ 24,117 $ 466 $ 65,702 $ 466
Occupancy (2)
30,999 — 31,355 —
Technology and equipment (3)
812 — 19,897 —
Professional and outside services (4)
3,824 16,287 48,281 16,287
Marketing 84 — 135 —
Other expense (5)
6,804 294 9,765 294
Total merger-related expenses $ 66,640 $ 17,047 $ 175,135 $ 17,047
Sterling:


	Three months ended March 31,
(In thousands)		2023		2022
Compensation and benefits (1)		$	11,112	$	41,585
Occupancy		735		356
Technology and equipment (2)		(1,709)		19,085
Professional and outside services (3)		20,009		44,457
Marketing		135		—
Other expense (4)		(909)		3,012
Total merger-related expenses		$	29,373	$	108,495

(1)Comprised primarily of severance and employee retention costs, and executive synergy stock awards.

(2)Comprised primarily of $23.1 million in ROU asset impairment charges and a combined $7.7 million in related exit costs and accelerated depreciation on property and equipment related to Webster’s corporate real estate consolidation strategy, which was developed and launched in the second quarter of 2022. Under the consolidation plan, Webster has arranged to close 14 locations in order to reduce the Company's corporate real estate facility square footage by approximately 45% by the end of the year. ROU asset impairment charges were calculated as the difference between the estimated fair value of the assets determined using a discounted cash flow technique, relative to their book value.

~~(3)Comprised primarily of~~ technology contract termination ~~fees.~~costs. Includes a reduction of $4.8 million to a previously recorded technology-related contract termination charge during the three months ended March 31, 2023, due to a change in the expected use of certain services post core conversion.

~~(4)~~(3)Comprised primarily of advisory, legal, accounting, and other professional fees.

~~(5)~~(4)Comprised primarily of contract termination costs, disposals on property and equipment, ~~transfer tax,~~ and other miscellaneous expenses.

~~(6)~~Webster did not incur any merger-related expenses during the three-months ended March 31, 2021. Therefore, amounts recognized as merger-related expenses for the three and six months ended June 30, 2021 are equal.

~~Webster's operating results for the three and six months ended June 30, 2022 includes the operating results~~ Includes a reduction of ~~acquired assets and assumed liabilities of Sterling subsequent~~$1.7 million to ~~the merger on January 31, 2022. Due to the various conversions of Sterling systems~~a previously recorded contract termination charge during the three ~~and six~~ months ended ~~June 30, 2022,~~
March 31, 2023, due to a decrease in volume usage.

The following tables summarize the change in accrued expenses and other liabilities as ~~well~~it relates to severance and contract termination costs, which were primarily incurred in connection with the merger with Sterling:


	Three months ended March 31, 2023
(In thousands)	Severance		Contract Termination		Total
Balance, beginning of period	$	7,583	$	30,362	$	37,945
Additions charged to expense	6,196		—		6,196
Cash payments	(6,993)		—		(6,993)
Other	(825)		(6,587)		(7,412)
Balance, end of period	$	5,961	$	23,775	$	29,736

	Three months ended March 31, 2022
(In thousands)	Severance		Contract Termination		Total
Balance, beginning of period	$	10,835	$	—	$	10,835
Additions charged to expense	26,971		17,704		44,675
Cash payments	(1,766)		—		(1,766)
Other (1)	(3,884)		—		(3,884)
Balance, end of period	$	32,156	$	17,704	$	49,860

(1)Reflects the release of $3.9 million from the Company's severance accrual, as ~~other streamlining and integration of operating activities into those of~~ the Company historical reporting for the former Sterling operations after January 31, 2022 is impracticable, and thus disclosures of Sterling's revenue and earnings since the merger effective date that are included in the condensed consolidated statements of income for the reporting period is impracticable.

~~Bend Financial, Inc. Acquisition~~

On February 18, 2022, Webster acquired 100% of the equity interests of Bend, a cloud-based platform solution provider for HSAs, in exchange for cash of $55.3 million. The acquisition accelerates Webster’s efforts underway to deliver enhanced user experiences at HSA Bank. The transaction was accounted forre-evaluated its strategic priorities as a ~~business combination, and~~combined organization in connection with the Sterling merger, which resulted in modifications to the ~~addition of $19.3 million~~Company's strategic initiatives that were previously announced in ~~net assets, which primarily comprises $15.9 million of internal use software and a $3.0 million customer relationship intangible asset.~~

December 2020.

4541

Note 3: Investment Securities

Available-for-Sale

The following ~~table summarizes~~tables summarize the amortized cost and fair value of available-for-sale ~~debt~~ securities by major type:


												At March 31, 2023
(In thousands)											(In thousands)	Amortized Cost (1)		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury notes											U.S. Treasury notes	$	407,224	$	—	$	(20,452)	$	386,772
Government agency debentures											Government agency debentures	302,067		—		(39,725)		262,342
Municipal bonds and notes											Municipal bonds and notes	1,707,779		7		(62,558)		1,645,228
Agency CMO											Agency CMO	61,728		—		(4,266)		57,462
Agency MBS											Agency MBS	2,496,654		368		(266,172)		2,230,850
Agency CMBS											Agency CMBS	1,889,561		3,542		(257,851)		1,635,252
CMBS											CMBS	927,591		—		(25,533)		902,058

Corporate debt											Corporate debt	714,359		—		(88,836)		625,523
Private label MBS											Private label MBS	48,325		—		(4,063)		44,262
Other											Other	10,061		—		(833)		9,228
Total available-for-sale securities											Total available-for-sale securities	$	8,565,349	$	3,917	$	(770,289)	$	7,798,977

		At June 30, 2022								At December 31, 2022
(In thousands)	(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value (1)			(In thousands)	Amortized Cost (1)		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury notes	U.S. Treasury notes	$	754,860	$	—	$	(28,376)	$	726,484		U.S. Treasury notes	$	755,968	$	—	$	(38,928)	$	717,040
Government agency debentures	Government agency debentures	311,972		5		(20,774)		291,203			Government agency debentures	302,018		—		(43,644)		258,374
Municipal bonds and notes	Municipal bonds and notes	1,924,630		9		(94,009)		1,830,630			Municipal bonds and notes	1,719,110		5		(85,913)		1,633,202
Agency CMO	Agency CMO	73,730		20		(2,503)		71,247			Agency CMO	64,984		—		(5,019)		59,965
Agency MBS	Agency MBS	2,622,211		125		(201,003)		2,421,333			Agency MBS	2,461,337		26		(303,339)		2,158,024
Agency CMBS	Agency CMBS	1,732,222		—		(170,717)		1,561,505			Agency CMBS	1,664,600		—		(258,114)		1,406,486
CMBS	CMBS	956,078		—		(26,975)		929,103			CMBS	929,588		—		(32,948)		896,640
CLO	CLO	10,185		—		(38)		10,147			CLO	2,108		—		(1)		2,107
Corporate debt	Corporate debt	799,866		—		(63,346)		736,520			Corporate debt	795,999		—		(91,587)		704,412
Private label MBS	Private label MBS	49,875		—		(1,572)		48,303			Private label MBS	48,895		—		(4,646)		44,249
Other	Other	12,515		—		(632)		11,883			Other	12,548		—		(350)		12,198
Available-for-sale debt securities		$	9,248,144	$	159	$	(609,945)	$	8,638,358

		At December 31, 2021
(In thousands)		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value (1)
U.S. Treasury notes		$	398,664	$	—	$	(1,698)	$	396,966
Agency CMO		88,109		2,326		(51)		90,384
Agency MBS		1,568,293		36,130		(11,020)		1,593,403
Agency CMBS		1,248,548		2,537		(18,544)		1,232,541
CMBS		887,640		506		(1,883)		886,263
CLO		21,860		—		(13)		21,847
Corporate debt		14,583		—		(1,133)		13,450
Available-for-sale debt securities		$	4,227,697	$	41,499	$	(34,342)	$	4,234,854
Total available-for-sale securities											Total available-for-sale securities	$	8,757,155	$	31	$	(864,489)	$	7,892,697

(1)Fair value represents net carrying value. No ACL has been recorded on available-for-sale debt securities at June 30, 2022 and December 31, 2021, as the securities held are high credit quality and investment grade.

The increase of $4.4 billion in available-for-sale debt securities from December 31, 2021 to June 30, 2022, is primarily attributed to $4.4 billion of investment securities acquired from Sterling in the merger, all of which were classified as available-for-sale based on Webster's intent at closing. Accrued interest receivable on available-for-sale securities of ~~$38.9~~$41.4 million and ~~$7.5~~$36.9 million at ~~June 30, 2022~~March 31, 2023, and
December 31, ~~2021,~~2022, respectively, is excluded from amortized cost and is ~~reported within accrued~~included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets.

Unrealized Losses

The following ~~table summarizes~~tables summarize the gross unrealized losses and fair value of available-for-sale ~~debt~~ securities by length of time each major security type has been in a continuous unrealized loss position:


		At June 30, 2022														At March 31, 2023
		Less Than 12 Months				12 Months or More				Total						Less Than 12 Months				12 Months or More				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		Number of Holdings	Fair Value		Unrealized Losses
U.S. Treasury notes	U.S. Treasury notes	$	726,484	$	(28,376)	$	—	$	—	23	$	726,484	$	(28,376)	U.S. Treasury notes	$	—	$	—	$	386,772	$	(20,452)	14	$	386,772	$	(20,452)
Government agency debentures	Government agency debentures	276,348		(20,774)		—		—		19	276,348		(20,774)		Government agency debentures	71,134		(3,714)		191,208		(36,011)		19	262,342		(39,725)
Municipal bonds and notes	Municipal bonds and notes	1,818,328		(94,009)		—		—		483	1,818,328		(94,009)		Municipal bonds and notes	15,479		(239)		1,598,253		(62,319)		430	1,613,732		(62,558)
Agency CMO	Agency CMO	64,760		(2,496)		1,187		(7)		33	65,947		(2,503)		Agency CMO	7,915		(228)		49,547		(4,038)		38	57,462		(4,266)
Agency MBS	Agency MBS	2,254,680		(173,815)		157,559		(27,188)		451	2,412,239		(201,003)		Agency MBS	86,133		(3,319)		2,045,564		(262,853)		459	2,131,697		(266,172)
Agency CMBS	Agency CMBS	1,232,473		(125,931)		329,032		(44,786)		133	1,561,505		(170,717)		Agency CMBS	64,576		(933)		1,397,565		(256,918)		133	1,462,141		(257,851)
CMBS	CMBS	741,574		(21,775)		187,529		(5,200)		53	929,103		(26,975)		CMBS	155,493		(2,056)		746,565		(23,477)		51	902,058		(25,533)
CLO		—		—		10,147		(38)		1	10,147		(38)

Corporate debt	Corporate debt	728,159		(61,396)		8,360		(1,950)		106	736,519		(63,346)		Corporate debt	13,041		(1,158)		612,482		(87,678)		92	625,523		(88,836)
Private label MBS	Private label MBS	48,303		(1,572)		—		—		3	48,303		(1,572)		Private label MBS	44,262		(4,063)		—		—		3	44,262		(4,063)
Other	Other	11,883		(632)		—		—		4	11,883		(632)		Other	4,810		(190)		4,168		(643)		2	8,978		(833)
Available-for-sale debt securities in unrealized loss position		$	7,902,992	$	(530,776)	$	693,814	$	(79,169)	1,309	$	8,596,806	$	(609,945)
Total															Total	$	462,843	$	(15,900)	$	7,032,124	$	(754,389)	1,241	$	7,494,967	$	(770,289)

At December 31, 2021
Less Than Twelve Months Twelve Months or Longer Total
(Dollars in thousands) Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses # of
Holdings Fair
Value Unrealized
Losses
U.S. Treasury notes $ 396,966 $ (1,698) $ — $ — 8 $ 396,966 $ (1,698)
Agency CMO 7,895 (51) — — 2 7,895 (51)
Agency MBS 506,602 (7,354) 110,687 (3,666) 70 617,289 (11,020)
Agency CMBS 632,213 (6,163) 335,480 (12,381) 28 967,693 (18,544)
CMBS 724,762 (1,744) 81,253 (139) 50 806,015 (1,883)
CLO — — 21,848 (13) 1 21,848 (13)
Corporate debt 4,203 (76) 9,247 (1,057) 3 13,450 (1,133)
Available-for-sale debt securities in unrealized loss position $ 2,272,641 $ (17,086) $ 558,515 $ (17,256) 162 $ 2,831,156 $ (34,342)

~~Webster~~


	At December 31, 2022
	Less Than Twelve Months				Twelve Months or Longer				Total
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Number of Holdings	Fair Value		Unrealized Losses
U.S. Treasury notes	$	337,563	$	(19,167)	$	379,477	$	(19,761)	23	$	717,040	$	(38,928)
Government agency debentures	258,374		(43,644)		—		—		19	258,374		(43,644)
Municipal bonds and notes	1,616,771		(85,913)		—		—		444	1,616,771		(85,913)
Agency CMO	55,693		(4,640)		4,272		(379)		39	59,965		(5,019)
Agency MBS	1,641,544		(206,412)		515,206		(96,927)		460	2,156,750		(303,339)
Agency CMBS	485,333		(68,674)		921,153		(189,440)		132	1,406,486		(258,114)
CMBS	273,150		(8,982)		598,490		(23,966)		52	871,640		(32,948)
CLO	—		—		2,107		(1)		1	2,107		(1)
Corporate debt	692,990		(89,692)		8,421		(1,895)		105	701,411		(91,587)
Private label MBS	44,249		(4,646)		—		—		3	44,249		(4,646)
Other	12,198		(350)		—		—		4	12,198		(350)
Total	$	5,417,865	$	(532,120)	$	2,429,126	$	(332,369)	1,282	$	7,846,991	$	(864,489)

The $94.2 million decrease in gross unrealized losses from December 31, 2022, to March 31, 2023, is primarily due to a decline in long-term market rates. The Company assesses each available-for-sale ~~debt~~ security that is in an unrealized loss position to determine whether the decline in fair value below the amortized cost basis ~~resulted~~is a result from a credit loss or other factors. ~~The increase in unrealized losses from~~At both March 31, 2023, and December 31, ~~2021 to June 30,~~ 2022, ~~is primarily due to increased portfolio size from the merger with Sterling, and higher market rates. Market prices will approach par~~no ACL was recorded on available-for-sale securities as each of the securities ~~approach maturity.~~in the Company's portfolio are investment grade, current as to principal and interest, and their price changes are consistent with interest and credit spreads when adjusting for convexity, rating, and industry differences.

At ~~June 30, 2022, Webster had~~March 31, 2023, based on current market conditions and the Company's current targeted balance sheet composition strategy, the Company has the intent to hold its available-for-sale ~~debt~~ securities with unrealized ~~losses~~loss positions through the anticipated recovery period, and it ~~was~~is more-likely-than-not that the Company ~~would~~will not have to sell these available-for-sale securities before the recovery of ~~their~~the entire amortized cost basis. The issuers of these available-for-sale securities have not, to the Company’s knowledge, established any cause for ~~default on these securities. As a result,~~default. Market prices are expected to approach par as the ~~Company expects to recover the securities' entire amortized cost basis. Accordingly, no available-for-sale debt~~ securities ~~were in non-accrual status and there was no ACL recorded at both June 30, 2022 and December 31, 2021.~~approach maturity.

Contractual Maturities

The following table summarizes the amortized cost and fair value of available-for-sale ~~debt~~ securities by contractual maturity:
At June 30, 2022
(In thousands) Amortized Cost Fair Value
Due in one year or less $ 34,632 $ 34,446
Due after one year through five years 1,489,470 1,433,060
Due after five through ten years 1,489,030 1,405,210
Due after ten years 6,235,012 5,765,642
Total available-for-sale debt securities $ 9,248,144 $ 8,638,358


	At March 31, 2023
(In thousands)	Amortized Cost		Fair Value
Maturing within 1 year	$	41,886	$	41,593
After 1 year through 5 years	953,221		903,665
After 5 through 10 years	1,469,500		1,364,238
After 10 years	6,100,742		5,489,481
Total available-for-sale securities	$	8,565,349	$	7,798,977

Available-for-sale ~~debt~~ securities that are not due at a single maturity date have been categorized based on the maturity date of the underlying collateral. Actual principal cash flows may differ from this categorization as borrowers have the right to repay their obligations with or without prepayment penalties.

Sales of Available-for Sale ~~Debt~~ Securities

During the three months ended March 31, 2023, the Company sold U.S. Treasury notes and Corporate debt securities classified as available-for-sale for proceeds of $395.4 million, which resulted in gross realized losses of $20.5 million. Because $3.8 million of the total loss recognized was attributed to a decline in credit quality, that portion of the charge has been included in the Provision for credit losses on the accompanying Condensed Consolidated Statements of Income. There were no sales of available-for-sale ~~debt~~ securities during the three ~~and six~~ months ended ~~June 30, 2022, nor during the six and months ended June 30, 2021.~~March 31, 2022.

Other Information

The following table summarizes available-for-sale ~~debt~~ securities pledged for deposits, borrowings, and other purposes:

(In thousands) At June 30, 2022 At December 31, 2021
Available-for-sale debt securities pledged for deposits, at fair value $ 3,523,591 $ 855,323
Available-for-sale debt securities pledged for borrowings and other, at fair value 783,370 924,841
Total available-for-sale debt securities pledged $ 4,306,961 $ 1,780,164


(In thousands)	At March 31, 2023		At December 31, 2022
Pledged for deposits	$	2,868,000	$	2,573,072
Pledged for borrowings and other	3,848,039		1,195,101
Total available-for-sale securities pledged	$	6,716,039	$	3,768,173

At ~~June 30, 2022, Webster~~March 31, 2023, the Company had callable available-for-sale ~~debt~~ securities with an aggregate carrying value of ~~$3.2~~$2.8 billion.

Held-to-Maturity

The following ~~table summarizes~~tables summarize the amortized cost, fair value, and ACL on held-to-maturity ~~debt~~ securities by major type:


		At June 30, 2022													At March 31, 2023
(In thousands)	(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		Allowance		Net Carrying Value		(In thousands)	Amortized Cost (1)		Unrealized Gains		Unrealized Losses		Fair Value		Allowance		Net Carrying Value
Agency CMO	Agency CMO	$	32,469	$	27	$	(1,095)	$	31,401	$	—	$	32,469	Agency CMO	$	27,101	$	—	$	(1,727)	$	25,374	$	—	$	27,101
Agency MBS	Agency MBS	2,795,607		2,801		(235,217)		2,563,191		—		2,795,607		Agency MBS	2,613,113		1,458		(300,457)		2,314,114		—		2,613,113
Agency CMBS	Agency CMBS	2,677,183		434		(264,433)		2,413,184		—		2,677,183		Agency CMBS	3,364,186		3,790		(410,763)		2,957,213		—		3,364,186
Municipal bonds and notes	Municipal bonds and notes	879,433		2,698		(36,734)		845,397		210		879,223		Municipal bonds and notes	927,501		2,957		(29,188)		901,270		282		927,219
CMBS	CMBS	163,516		1		(7,841)		155,676		—		163,516		CMBS	131,604		—		(8,893)		122,711		—		131,604
Held-to-maturity debt securities		$	6,548,208	$	5,961	$	(545,320)	$	6,008,849	$	210	$	6,547,998
Total held-to-maturity securities														Total held-to-maturity securities	$	7,063,505	$	8,205	$	(751,028)	$	6,320,682	$	282	$	7,063,223


		At December 31, 2021													At December 31, 2022
(In thousands)	(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		Allowance		Net Carrying Value		(In thousands)	Amortized Cost (1)		Unrealized Gains		Unrealized Losses		Fair Value		Allowance		Net Carrying Value
Agency CMO	Agency CMO	$	42,405	$	655	$	(25)	$	43,035	$	—	$	42,405	Agency CMO	$	28,358	$	—	$	(2,060)	$	26,298	$	—	$	28,358
Agency MBS	Agency MBS	2,901,593		71,444		(11,788)		2,961,249		—		2,901,593		Agency MBS	2,626,114		827		(339,592)		2,287,349		—		2,626,114
Agency CMBS	Agency CMBS	2,378,475		11,202		(43,844)		2,345,833		—		2,378,475		Agency CMBS	2,831,949		845		(407,648)		2,425,146		—		2,831,949
Municipal bonds and notes	Municipal bonds and notes	705,918		51,572		—		757,490		214		705,704		Municipal bonds and notes	928,845		1,098		(47,183)		882,760		182		928,663
CMBS	CMBS	169,948		3,381		—		173,329		—		169,948		CMBS	149,613		—		(9,713)		139,900		—		149,613
Held-to-maturity debt securities		$	6,198,339	$	138,254	$	(55,657)	$	6,280,936	$	214	$	6,198,125
Total held-to-maturity securities														Total held-to-maturity securities	$	6,564,879	$	2,770	$	(806,196)	$	5,761,453	$	182	$	6,564,697

(1)Accrued interest receivable on held-to-maturity securities of ~~$22.0~~$20.2 million and ~~$21.2~~$24.2 million at ~~June 30, 2022~~March 31, 2023, and
December 31, ~~2021,~~2022, respectively, is excluded from amortized cost and is ~~reported~~included in ~~accrued~~Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets.

An ACL on held-to-maturity ~~debt~~ securities is recorded for certain ~~municipal~~Municipal bonds and notes to account for expected lifetime credit losses. Agency securities represent obligations issued by a U.S. government-sponsored enterprise or other federally-related entity and are either explicitly or implicitly guaranteed and therefore, assumed to be zero loss. Held-to-maturity ~~debt~~ securities with gross unrealized losses and no ACL are considered to be of high credit quality, and therefore, zero credit loss ~~is recorded as of June 30, 2022. The current period unrealized loss position of certain Agency CMBS is primarily attributed to the changing interest rate environment.~~has been recorded.

The following table summarizes the activity in the ACL on held-to-maturity ~~debt~~ securities:
Three months ended June 30, Six months ended June 30,
(In thousands) 2022 2021 2022 2021
Balance, beginning of period $ 204 $ 308 $ 214 $ 299
(Benefit) provision for credit losses 6 74 (4) 83
Balance, end of period $ 210 $ 382 $ 210 $ 382


	Three months ended March 31,
(In thousands)		2023		2022
Balance, beginning of period		$	182	$	214

Provision (benefit) for credit losses		100		(10)
Balance, end of period		$	282	$	204

Contractual Maturities

The following table summarizes the amortized cost and fair value of held-to-maturity ~~debt~~ securities by contractual maturity:
At June 30, 2022
(In thousands) Amortized Cost Fair Value
Due in one year or less $ 4,404 $ 4,426
Due after one year through five years 52,822 54,317
Due after five years through ten years 325,186 316,818
Due after ten years 6,165,796 5,633,288
Total held-to-maturity debt securities $ 6,548,208 $ 6,008,849


	At March 31, 2023
(In thousands)	Amortized Cost		Fair Value
Maturing within 1 year	$	6,093	$	6,115
After 1 year through 5 years	52,893		53,722
After 5 through 10 years	338,353		324,864
After 10 years	6,666,166		5,935,981
Total held-to-maturity securities	$	7,063,505	$	6,320,682

Held-to-maturity ~~debt~~ securities that are not due at a single maturity date have been categorized based on the maturity date of the underlying collateral. Actual principal cash flows may differ from this categorization as borrowers have the right to ~~repay~~prepay their obligations with or without prepayment penalties.

Credit Quality Information

The Company monitors the credit quality of held-to-maturity ~~debt~~ securities through credit ratings provided by Standard & Poor's Rating Services, ~~(S&P),~~ Moody's Investor Services, ~~(Moody's),~~ Fitch Ratings, Inc., Kroll Bond Rating Agency, or DBRS Inc. Credit ratings express opinions about the credit quality of a ~~debt~~ security, and are updated at each quarter end. Investment grade ~~debt~~ securities are rated BBB- or higher by S&P, or Baa3 or higher by Moody's, and are generally considered by the rating agencies and market participants to be of low credit risk. Conversely, ~~debt~~ securities rated below investment grade, which are labeled as speculative grade by the rating agencies, are considered to have distinctively higher credit risk than investment grade ~~debt~~ securities. There were no speculative grade held-to-maturity ~~debt~~ securities at ~~June 30, 2022 and~~March 31, 2023, or December 31, ~~2021.~~2022. Held-to-maturity ~~debt~~ securities that are not rated are collateralized with U.S. Treasury obligations.

The following ~~table summarizes~~tables summarize the amortized cost ~~basis~~ of held-to-maturity ~~debt~~ securities based on their lowest publicly available credit rating:


	March 31, 2023
	Investment Grade
(In thousands)	Aaa		Aa1		Aa2		Aa3		A1		A2		Not Rated
Agency CMO	$	—	$	27,101	$	—	$	—	$	—	$	—	$	—
Agency MBS	—		2,613,113		—		—		—		—		—
Agency CMBS	—		3,364,186		—		—		—		—		—
Municipal bonds and notes	350,578		163,138		254,843		116,343		38,134		4,165		300
CMBS	131,604		—		—		—		—		—		—
Total held-to-maturity securities	$	482,182	$	6,167,538	$	254,843	$	116,343	$	38,134	$	4,165	$	300

June 30, 2022
Investment Grade
(In thousands) Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa2 Not Rated
Agency CMO $ — $ 32,469 $ — $ — $ — $ — $ — $ — $ —
Agency MBS — 2,795,607 — — — — — — —
Agency CMBS — 2,677,183 — — — — — — —
Municipal bonds and notes 202,273 132,273 202,666 199,903 101,058 27,691 — — 13,569
CMBS 163,516 — — — — — — — —
Held-to-maturity debt securities $ 365,789 $ 5,637,532 $ 202,666 $ 199,903 $ 101,058 $ 27,691 $ — $ — $ 13,569


		December 31, 2021																			December 31, 2022
		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		Not Rated
Agency CMO	Agency CMO	$	—	$	42,405	$	—	$	—	$	—	$	—	$	—	$	—	$	��	Agency CMO	$	—	$	28,358	$	—	$	—	$	—	$	—	$	—
Agency MBS	Agency MBS	—		2,901,593		—		—		—		—		—		—		—		Agency MBS	—		2,626,114		—		—		—		—		—
Agency CMBS	Agency CMBS	—		2,378,475		—		—		—		—		—		—		—		Agency CMBS	—		2,831,949		—		—		—		—		—
Municipal bonds and notes	Municipal bonds and notes	207,426		119,804		227,106		104,232		35,878		8,260		—		95		3,117		Municipal bonds and notes	336,035		163,312		255,235		116,870		38,177		4,165		15,051
CMBS	CMBS	169,948		—		—		—		—		—		—		—		—		CMBS	149,613		—		—		—		—		—		—
Held-to-maturity debt securities		$	377,374	$	5,442,277	$	227,106	$	104,232	$	35,878	$	8,260	$	—	$	95	$	3,117
Total held-to-maturity securities																				Total held-to-maturity securities	$	485,648	$	5,649,733	$	255,235	$	116,870	$	38,177	$	4,165	$	15,051

At ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, there were no held-to-maturity ~~debt~~ securities past due under the terms of their agreements ornor in non-accrual status.

Other Information

The following table summarizes held-to-maturity ~~debt~~ securities pledged for deposits, borrowings, and other purposes:

(In thousands) At June 30, 2022 At December 31, 2021
Held-to-maturity debt securities pledged for deposits, at amortized cost $ 1,646,707 $ 1,834,117
Held-to-maturity debt securities pledged for borrowing and other, at amortized cost 753,593 1,243,139
Total held-to-maturity debt securities pledged $ 2,400,300 $ 3,077,256


(In thousands)	At March 31, 2023		At December 31, 2022
Pledged for deposits	$	1,573,285	$	1,596,777
Pledged for borrowings and other	5,057,769		260,735
Total held-to-maturity securities pledged	$	6,631,054	$	1,857,512

At ~~June 30, 2022, Webster~~March 31, 2023, the Company had callable held-to-maturity ~~debt~~ securities with an aggregate carrying value of $0.9 billion.

4945

Note 4: Loans and Leases

The following table summarizes loans and leases by portfolio segment and class:


(In thousands)	(In thousands)	At June 30, 2022		At December 31, 2021		(In thousands)	At March 31, 2023		At December 31, 2022
Commercial non-mortgage	Commercial non-mortgage	$	13,935,450	$	6,882,480	Commercial non-mortgage	$	16,939,373	$	16,392,795
Asset-based	Asset-based	1,892,278		1,067,248		Asset-based	1,760,527		1,821,642
Commercial real estate	Commercial real estate	12,365,451		5,463,321		Commercial real estate	13,499,139		12,997,163
Multi-family	Multi-family	5,776,219		1,139,859		Multi-family	7,014,599		6,621,982
Equipment financing	Equipment financing	1,778,326		627,058		Equipment financing	1,601,109		1,628,393
Warehouse lending	Warehouse lending	914,541		—		Warehouse lending	474,328		641,976
Commercial portfolio	Commercial portfolio	36,662,265		15,179,966		Commercial portfolio	41,289,075		40,103,951
Residential	Residential	7,223,728		5,412,905		Residential	8,001,563		7,963,420
Home equity	Home equity	1,681,610		1,593,559		Home equity	1,580,569		1,633,107
Other consumer	Other consumer	79,140		85,299		Other consumer	55,316		63,948
Consumer portfolio	Consumer portfolio	8,984,478		7,091,763		Consumer portfolio	9,637,448		9,660,475
Loans and leases	Loans and leases	$	45,646,743	$	22,271,729	Loans and leases	$	50,926,523	$	49,764,426

The increase of $23.4 billion in loans and leases from December 31, 2021 to June 30, 2022 is primarily attributed to the $20.5 billion of gross loans and leases acquired from Sterling in the merger, which included a $317.6 million purchase discount. The carrying amount of loans and leases at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021~~2022, includes net unamortized
(discounts)/premiums and net unamortized deferred ~~(costs)~~(fees)/~~fees~~costs totaling ~~$(103.7)~~$(58.6) million and ~~$12.3~~$(68.7) million, respectively. Accrued interest receivable of ~~$140.2~~$246.1 million and ~~$50.7~~$226.3 million at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, respectively, is excluded from the carrying amount of loans and leases and is ~~reported within accrued~~included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets. At ~~June 30, 2022, Webster~~March 31, 2023, the Company had pledged ~~$8.3~~$15.0 billion of eligible loans as collateral to support borrowing capacity at the FHLB.

Non-Accrual and Past Due Loans and Leases

The following ~~table summarizes~~tables summarize the aging of accrual and non-accrual loans and leases by class:


		At June 30, 2022															At March 31, 2023
(In thousands)	(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		(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	Commercial non-mortgage	$	4,494	$	720	$	8	$	91,672	$	96,894	$	13,838,556	$	13,935,450	Commercial non-mortgage	$	6,916	$	162	$	215	$	69,129	$	76,422	$	16,862,951	$	16,939,373
Asset-based	Asset-based	—		—		—		25,840		25,840		1,866,438		1,892,278		Asset-based	—		—		—		9,428		9,428		1,751,099		1,760,527
Commercial real estate	Commercial real estate	546		11,021		—		44,461		56,028		12,309,423		12,365,451		Commercial real estate	15,171		—		175		33,966		49,312		13,449,827		13,499,139
Multi-family	Multi-family	231		12,380		—		354		12,965		5,763,254		5,776,219		Multi-family	1,929		—		—		—		1,929		7,012,670		7,014,599
Equipment financing	Equipment financing	137		633		—		14,995		15,765		1,762,561		1,778,326		Equipment financing	2,472		105		—		13,018		15,595		1,585,514		1,601,109
Warehouse lending	Warehouse lending	—		—		—		—		—		914,541		914,541		Warehouse lending	—		—		—		—		—		474,328		474,328
Commercial portfolio	Commercial portfolio	5,408		24,754		8		177,322		207,492		36,454,773		36,662,265		Commercial portfolio	26,488		267		390		125,541		152,686		41,136,389		41,289,075
Residential	Residential	6,998		3,606		—		26,490		37,094		7,186,634		7,223,728		Residential	7,112		3,347		—		25,291		35,750		7,965,813		8,001,563
Home equity	Home equity	3,972		1,266		—		32,061		37,299		1,644,311		1,681,610		Home equity	3,977		1,649		—		28,873		34,499		1,546,070		1,580,569
Other consumer	Other consumer	3,876		156		—		125		4,157		74,983		79,140		Other consumer	415		104		213		106		838		54,478		55,316
Consumer portfolio	Consumer portfolio	14,846		5,028		—		58,676		78,550		8,905,928		8,984,478		Consumer portfolio	11,504		5,100		213		54,270		71,087		9,566,361		9,637,448
Total	Total	$	20,254	$	29,782	$	8	$	235,998	$	286,042	$	45,360,701	$	45,646,743	Total	$	37,992	$	5,367	$	603	$	179,811	$	223,773	$	50,702,750	$	50,926,523


	At December 31, 2022
(In thousands)	30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		90 or More Days Past Due and Accruing		Non-accrual		Total Past Due and Non-accrual		Current		Total Loans and Leases
Commercial non-mortgage	$	8,434	$	821	$	645	$	71,884	$	81,784	$	16,311,011	$	16,392,795
Asset-based	5,921		—		—		20,024		25,945		1,795,697		1,821,642
Commercial real estate	1,494		23,492		68		39,057		64,111		12,933,052		12,997,163
Multi-family	1,157		—		—		636		1,793		6,620,189		6,621,982
Equipment financing	806		9,988		—		12,344		23,138		1,605,255		1,628,393
Warehouse lending	—		—		—		—		—		641,976		641,976
Commercial portfolio	17,812		34,301		713		143,945		196,771		39,907,180		40,103,951
Residential	8,246		3,083		—		25,424		36,753		7,926,667		7,963,420
Home equity	5,293		2,820		—		27,924		36,037		1,597,070		1,633,107
Other consumer	1,028		85		13		148		1,274		62,674		63,948
Consumer portfolio	14,567		5,988		13		53,496		74,064		9,586,411		9,660,475
Total	$	32,379	$	40,289	$	726	$	197,441	$	270,835	$	49,493,591	$	49,764,426

5046

At December 31, 2021
(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 $ 3,729 $ 4,524 $ 1,977 $ 59,607 $ 69,837 $ 6,812,643 $ 6,882,480
Asset-based — — — 2,086 2,086 1,065,162 1,067,248
Commercial real estate 508 417 519 5,046 6,490 5,456,831 5,463,321
Multi-family — — — — — 1,139,859 1,139,859
Equipment financing 1,034 — — 3,728 4,762 622,296 627,058
Commercial portfolio 5,271 4,941 2,496 70,467 83,175 15,096,791 15,179,966
Residential 3,212 368 — 15,747 19,327 5,393,578 5,412,905
Home equity 3,467 1,600 — 23,489 28,556 1,565,003 1,593,559
Other consumer 379 181 — 224 784 84,515 85,299
Consumer portfolio 7,058 2,149 — 39,460 48,667 7,043,096 7,091,763
Total $ 12,329 $ 7,090 $ 2,496 $ 109,927 $ 131,842 $ 22,139,887 $ 22,271,729

The following table provides additional information on non-accrual loans and leases:


		At June 30, 2022				At December 31, 2021					At March 31, 2023				At December 31, 2022
(In thousands)	(In thousands)	Non-accrual		Non-accrual with No Allowance		Non-accrual		Non-accrual with No Allowance		(In thousands)	Non-accrual		Non-accrual with No Allowance		Non-accrual		Non-accrual with No Allowance
Commercial non-mortgage	Commercial non-mortgage	$	91,672	$	22,438	$	59,607	$	4,802	Commercial non-mortgage	$	69,129	$	12,382	$	71,884	$	12,598
Asset-based	Asset-based	25,840		1,933		2,086		2,086		Asset-based	9,428		1,330		20,024		1,491
Commercial real estate	Commercial real estate	44,461		4,133		5,046		4,310		Commercial real estate	33,966		1,502		39,057		90
Multi-family	Multi-family	354		285		—		—		Multi-family	—		—		636		—
Equipment financing	Equipment financing	14,995		2,304		3,728		—		Equipment financing	13,018		1,895		12,344		2,240

Commercial portfolio	Commercial portfolio	177,322		31,093		70,467		11,198		Commercial portfolio	125,541		17,109		143,945		16,419
Residential	Residential	26,490		11,660		15,747		10,584		Residential	25,291		10,674		25,424		10,442
Home equity	Home equity	32,061		17,137		23,489		18,920		Home equity	28,873		15,114		27,924		15,193
Other consumer	Other consumer	125		2		224		2		Other consumer	106		4		148		5
Consumer portfolio	Consumer portfolio	58,676		28,799		39,460		29,506		Consumer portfolio	54,270		25,792		53,496		25,640
Total	Total	$	235,998	$	59,892	$	109,927	$	40,704	Total	$	179,811	$	42,901	$	197,441	$	42,059

Interest on non-accrual loans and leases that would have been recognized as additional interest income had the loans and leases been current in accordance with their original terms totaled ~~$5.2~~$6.1 million and ~~$2.9~~$4.4 million for the three months ended ~~June 30,~~
March 31, 2023, and 2022, ~~and 2021, respectively, and $8.6 million and $6.1 million for the six months ended June 30, 2022 and 2021,~~ respectively.

Allowance for Credit Losses on Loans and Leases

The following table summarizes the change in the ACL on loans and leases by portfolio segment:

At or for the three months ended June 30,
2022 2021
(In thousands) Commercial Portfolio Consumer Portfolio Total Commercial Portfolio Consumer Portfolio Total
ACL on loans and leases:
Balance, beginning of period $ 510,696 $ 58,675 $ 569,371 $ 283,906 $ 44,445 $ 328,351
Provision (benefit) 12,041 (313) 11,728 (21,077) (497) (21,574)
Charge-offs (18,757) (896) (19,653) (594) (2,808) (3,402)
Recoveries 7,765 2,288 10,053 836 3,734 4,570
Balance, end of period $ 511,745 $ 59,754 $ 571,499 $ 263,071 $ 44,874 $ 307,945


		At or for the six months ended June 30,													At or for the three months ended March 31,
		2022						2021							2023						2022
(In thousands)	(In thousands)	Commercial Portfolio		Consumer Portfolio		Total		Commercial Portfolio		Consumer Portfolio		Total		(In thousands)	Commercial Portfolio		Consumer Portfolio		Total		Commercial Portfolio		Consumer Portfolio		Total
ACL on loans and leases:	ACL on loans and leases:													ACL on loans and leases:
Balance, beginning of period	Balance, beginning of period	$	257,877	$	43,310	$	301,187	$	312,244	$	47,187	$	359,431	Balance, beginning of period	$	533,125	$	61,616	$	594,741	$	257,877	$	43,310	$	301,187

Adoption of ASU No. 2022-02														Adoption of ASU No. 2022-02	7,704		(1,831)		5,873		—		—		—
Initial allowance for PCD loans and leases (1)	Initial allowance for PCD loans and leases (1)	78,376		9,669		88,045		—		—		—		Initial allowance for PCD loans and leases (1)	—		—		—		78,376		9,669		88,045
Provision (benefit)	Provision (benefit)	196,368		4,428		200,796		(44,730)		(2,603)		(47,333)		Provision (benefit)	38,757		(936)		37,821		184,327		4,741		189,068
Charge-offs	Charge-offs	(30,005)		(2,016)		(32,021)		(6,915)		(5,782)		(12,697)		Charge-offs	(26,410)		(1,098)		(27,508)		(11,248)		(1,120)		(12,368)
Recoveries	Recoveries	9,129		4,363		13,492		2,472		6,072		8,544		Recoveries	1,574		1,413		2,987		1,364		2,075		3,439
Balance, end of period	Balance, end of period	$	511,745	$	59,754	$	571,499	$	263,071	$	44,874	$	307,945	Balance, end of period	$	554,750	$	59,164	$	613,914	$	510,696	$	58,675	$	569,371
Individually evaluated for impairment		38,847		4,450		43,297		11,537		4,560		16,097
Collectively evaluated for impairment		$	472,898	$	55,304	$	528,202	$	251,534	$	40,314	$	291,848
Individually evaluated for credit losses														Individually evaluated for credit losses	27,459		8,590		36,049		32,736		12,057		44,793
Collectively evaluated for credit losses														Collectively evaluated for credit losses	$	527,291	$	50,574	$	577,865	$	477,960	$	46,618	$	524,578

(1)Represents the establishment of the initial reserve for PCD loans and leases, which is reported net of $48.3 million of day one charge-offs recognized at the date of acquisition in accordance with GAAP.

Credit Quality Indicators

To measure credit risk for the commercial portfolio, the Company employs a dual grade credit risk grading system for estimating the PD and LGD. The credit risk grade system assigns a rating to each borrower and to the facility, which together form a Composite Credit Risk Profile. The credit risk grade system categorizes borrowers by common financial characteristics that measure the credit strength of borrowers and facilities by common structural characteristics. The Composite Credit Risk Profile has ten grades, with each grade corresponding to a progressively greater risk of loss. Grades (1) to (6) are considered pass ratings, and grades (7) to (10) are considered criticized, as defined by the regulatory agencies. A (7) "Special Mention" rating has a potential weakness that, if left uncorrected, may result in deterioration of the repayment prospects for the asset. A (8) "Substandard" rating has a well-defined weakness that jeopardizes the full repayment of the debt. A (9) "Doubtful" rating has all of the same weaknesses as a substandard asset with the added characteristic that the weakness makes collection or liquidation in full given current facts, conditions, and values improbable. Assets classified as a (10) "Loss" rating are considered uncollectible and are charged-off. Risk ratings, which are assigned to differentiate risk within the portfolio, are reviewed on an ongoing basis and revised to reflect changes in a borrower's current financial position and outlook, risk profile, and the related collateral and structural position. Loan officers review updated financial information or other loan factors on at least an annual basis for all pass rated loans to assess the accuracy of the risk grade. Criticized loans undergo more frequent reviews and enhanced monitoring.

~~The following tables summarize the amortized cost basis of commercial loans and leases by Composite Credit Risk Profile grade and origination year:~~

At June 30, 2022
(In thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Total
Commercial non-mortgage:
Pass $ 2,783,533 $ 2,377,368 $ 1,255,766 $ 1,047,819 $ 771,853 $ 951,184 $ 4,324,838 $ 13,512,361
Special mention 14,564 48,990 12,726 22,577 981 15,070 28,107 143,015
Substandard 19,113 4,127 88,531 38,579 59,418 23,359 43,228 276,355
Doubtful — — — — — — 3,719 3,719
Commercial non-mortgage 2,817,210 2,430,485 1,357,023 1,108,975 832,252 989,613 4,399,892 13,935,450
Asset-based:
Pass — — 4,239 10,292 1,135 32,105 1,711,416 1,759,187
Special mention — — — — — — 16,905 16,905
Substandard — 1,335 10,296 — — — 104,555 116,186
Asset-based — 1,335 14,535 10,292 1,135 32,105 1,832,876 1,892,278
Commercial real estate:
Pass 1,505,254 2,323,635 1,839,428 1,950,358 1,234,799 2,957,244 73,024 11,883,742
Special mention 63,057 — 33,736 46,305 73,722 67,057 — 283,877
Substandard — 1,502 11,956 29,264 40,396 114,714 — 197,832
Commercial real estate 1,568,311 2,325,137 1,885,120 2,025,927 1,348,917 3,139,015 73,024 12,365,451
Multi-family:
Pass 783,584 1,147,014 519,451 693,701 533,588 1,925,280 48,650 5,651,268
Special mention — — — 96 40,703 27,263 9,690 77,752
Substandard — — 391 13,299 6,872 25,448 1,189 47,199
Multi-family 783,584 1,147,014 519,842 707,096 581,163 1,977,991 59,529 5,776,219
Equipment financing:
Pass 176,328 419,545 418,902 407,760 144,014 148,275 — 1,714,824
Special mention — 211 810 3,889 10,329 4,571 — 19,810
Substandard 564 6,199 17,626 6,492 4,626 8,185 — 43,692
Equipment financing 176,892 425,955 437,338 418,141 158,969 161,031 — 1,778,326
Warehouse lending:
Pass — — — — — — 914,541 914,541
Warehouse lending — — — — — — 914,541 914,541
Commercial portfolio $ 5,345,997 $ 6,329,926 $ 4,213,858 $ 4,270,431 $ 2,922,436 $ 6,299,755 $ 7,279,862 $ 36,662,265

At December 31, 2021
(In thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total
Commercial non-mortgage:
Pass $ 2,270,320 $ 1,179,620 $ 757,343 $ 581,633 $ 292,637 $ 275,789 $ 1,182,562 $ 6,539,904
Special mention 14,216 22,892 37,877 15,575 9,721 15,399 27,808 143,488
Substandard 3,660 46,887 30,437 69,963 5,255 19,483 23,403 199,088
Commercial non-mortgage 2,288,196 1,249,399 825,657 667,171 307,613 310,671 1,233,773 6,882,480
Asset-based:
Pass 7,609 19,141 12,810 13,456 6,113 25,850 920,496 1,005,475
Special mention — — — 675 — — 59,012 59,687
Substandard — — 2,086 — — — — 2,086
Asset-based 7,609 19,141 14,896 14,131 6,113 25,850 979,508 1,067,248
Commercial real estate:
Pass 1,152,431 733,220 1,146,149 594,180 384,664 1,136,384 55,044 5,202,072
Special mention 95 3,084 — 84,475 51,536 79,096 — 218,286
Substandard — 82 227 373 13,874 28,407 — 42,963
Commercial real estate 1,152,526 736,386 1,146,376 679,028 450,074 1,243,887 55,044 5,463,321
Multi-family:
Pass 222,875 135,924 185,087 322,688 17,054 203,558 566 1,087,752
Special mention — — — 35,201 — — — 35,201
Substandard — 400 — 6,933 — 9,573 — 16,906
Multi-family 222,875 136,324 185,087 364,822 17,054 213,131 566 1,139,859
Equipment financing:
Pass 231,762 188,031 93,547 41,276 14,864 32,588 — 602,068
Special mention — 108 2,229 3,341 — 600 — 6,278
Substandard — 8,388 4,756 2,612 332 2,624 — 18,712
Equipment financing 231,762 196,527 100,532 47,229 15,196 35,812 — 627,058
Commercial portfolio $ 3,902,968 $ 2,337,777 $ 2,272,548 $ 1,772,381 $ 796,050 $ 1,829,351 $ 2,268,891 $ 15,179,966

To measure credit risk for the consumer portfolio, the most relevant credit characteristic is the FICO score, which is a widely used credit scoring system that ranges from 300 to 850. A lower FICO score is indicative of higher credit risk and a higher FICO score is indicative of lower credit risk. FICO scores are updated on at least on a quarterly basis.

5447

The following tables summarize the amortized cost basis of commercial loans and leases by Composite Credit Risk Profile grade and origination year:


	At March 31, 2023
(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial non-mortgage:
Risk rating:
Pass	$	867,446	$	5,084,158	$	1,781,158	$	864,566	$	708,271	$	1,156,948	$	5,992,440	$	16,454,987
Special mention	25,083		62,638		24,644		12,727		15,640		8,631		30,522		179,885
Substandard	22,393		59,838		15,155		46,558		35,660		56,930		67,967		304,501

Total commercial non-mortgage	914,922		5,206,634		1,820,957		923,851		759,571		1,222,509		6,090,929		16,939,373
Current period gross write-offs	324		103		101		395		169		2,105		—		3,197
Asset-based:
Risk rating:
Pass	2,000		21,486		—		8,868		10,585		51,172		1,514,179		1,608,290
Special mention	—		—		—		—		—		495		66,053		66,548
Substandard	—		—		—		—		1,330		—		84,359		85,689
Total asset-based	2,000		21,486		—		8,868		11,915		51,667		1,664,591		1,760,527
Current period gross write-offs	—		—		—		—		13,189		—		—		13,189
Commercial real estate:
Risk rating:
Pass	921,252		3,438,768		1,999,831		1,481,136		1,547,577		3,591,701		139,886		13,120,151
Special mention	4,225		22,788		43,548		42,519		51,379		74,390		4,499		243,348
Substandard	—		515		2,453		212		31,137		101,323		—		135,640

Total commercial real estate	925,477		3,462,071		2,045,832		1,523,867		1,630,093		3,767,414		144,385		13,499,139
Current period gross write-offs	—		—		—		—		—		8,950		—		8,950
Multi-family:
Risk rating:
Pass	508,429		1,930,324		1,051,536		449,185		666,060		2,189,520		93,523		6,888,577
Special mention	—		37,686		—		13,243		370		40,800		8,402		100,501
Substandard	—		—		—		377		—		25,144		—		25,521


Total multi-family	508,429		1,968,010		1,051,536		462,805		666,430		2,255,464		101,925		7,014,599
Current period gross write-offs	—		—		—		—		—		1,033		—		1,033
Equipment financing:
Risk rating:
Pass	132,662		367,476		316,521		295,379		277,878		145,561		—		1,535,477
Special mention	—		—		170		—		11,583		6,540		—		18,293
Substandard	—		3,183		14,918		12,013		4,527		12,698		—		47,339
Total equipment financing	132,662		370,659		331,609		307,392		293,988		164,799		—		1,601,109
Current period gross write-offs	—		—		—		—		—		41		—		41
Warehouse lending:
Risk rating:
Pass	—		—		—		—		—		—		474,328		474,328
Total warehouse lending	—		—		—		—		—		—		474,328		474,328
Current period gross write-offs	—		—		—		—		—		—		—		—
Total commercial portfolio	$	2,483,490	$	11,028,860	$	5,249,934	$	3,226,783	$	3,361,997	$	7,461,853	$	8,476,158	$	41,289,075
Current period gross write-offs	$	324	$	103	$	101	$	395	$	13,358	$	12,129	$	—	$	26,410


	At December 31, 2022
(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial non-mortgage:
Pass	$	5,154,781	$	1,952,158	$	965,975	$	792,977	$	593,460	$	780,200	$	5,670,532	$	15,910,083
Special mention	104,277		15,598		21,168		263		14,370		7,770		40,142		203,588
Substandard	28,203		11,704		69,954		36,604		70,634		16,852		41,917		275,868
Doubtful	—		—		—		1		—		—		3,255		3,256
Total commercial non-mortgage	5,287,261		1,979,460		1,057,097		829,845		678,464		804,822		5,755,846		16,392,795
Asset-based:
Pass	19,659		3,901		9,424		14,413		5,163		55,553		1,551,250		1,659,363
Special mention	—		—		—		—		—		—		80,476		80,476
Substandard	—		—		—		1,491		—		—		80,312		81,803
Total asset-based	19,659		3,901		9,424		15,904		5,163		55,553		1,712,038		1,821,642
Commercial real estate:
Pass	3,420,635		2,246,672		1,556,185		1,605,869		1,058,730		2,681,052		97,832		12,666,975
Special mention	21,878		8,995		7,264		37,570		47,419		66,652		1,000		190,778
Substandard	519		2,459		216		31,163		47,021		57,997		—		139,375
Doubtful	—		—		—		1		—		34		—		35
Total commercial real estate	3,443,032		2,258,126		1,563,665		1,674,603		1,153,170		2,805,735		98,832		12,997,163
Multi-family:
Pass	1,992,980		1,057,705		507,065		694,066		444,564		1,748,337		51,655		6,496,372
Special mention	37,677		—		—		95		40,307		726		8,838		87,643
Substandard	—		—		382		—		12,681		24,904		—		37,967
Total multi-family	2,030,657		1,057,705		507,447		694,161		497,552		1,773,967		60,493		6,621,982
Equipment financing:
Pass	388,641		345,792		331,419		308,441		98,874		83,264		—		1,556,431
Special mention	—		185		—		11,965		6,775		25		—		18,950
Substandard	314		16,711		18,436		5,016		5,307		7,228		—		53,012
Total equipment financing	388,955		362,688		349,855		325,422		110,956		90,517		—		1,628,393
Warehouse lending:
Pass	—		—		—		—		—		—		641,976		641,976




Total warehouse lending	—		—		—		—		—		—		641,976		641,976
Total commercial portfolio	$	11,169,564	$	5,661,880	$	3,487,488	$	3,539,935	$	2,445,305	$	5,530,594	$	8,269,185	$	40,103,951

The following tables summarize the amortized cost basis of consumer loans by FICO score and origination year:

At June 30, 2022
(In thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Total
Residential:
800+ $ 164,672 $ 837,754 $ 443,548 $ 162,252 $ 31,583 $ 956,038 $ — $ 2,595,847
740-799 543,948 1,115,053 362,292 131,927 43,086 871,037 — 3,067,343
670-739 180,392 360,598 111,903 60,984 18,295 454,271 — 1,186,443
580-669 14,711 36,678 18,426 7,379 5,496 166,899 — 249,589
579 and below 12,051 1,609 2,463 45,707 722 61,954 — 124,506
Residential 915,774 2,351,692 938,632 408,249 99,182 2,510,199 — 7,223,728
Home equity:
800+ 16,548 36,338 28,476 9,258 13,236 56,108 477,736 637,700
740-799 15,217 38,181 19,301 7,482 10,935 41,745 442,455 575,316
670-739 9,187 18,704 7,887 5,063 7,230 34,952 249,804 332,827
580-669 1,903 1,922 1,481 1,083 1,435 14,767 81,025 103,616
579 and below 109 394 670 552 614 5,385 24,427 32,151
Home equity 42,964 95,539 57,815 23,438 33,450 152,957 1,275,447 1,681,610
Other consumer:
800+ 167 2,083 979 1,503 563 137 18,546 23,978
740-799 471 1,122 3,217 4,476 1,731 536 16,891 28,444
670-739 503 790 4,391 6,957 2,226 289 4,468 19,624
580-669 93 287 640 1,665 365 244 1,992 5,286
579 and below 64 79 48 149 100 39 1,329 1,808
Other consumer 1,298 4,361 9,275 14,750 4,985 1,245 43,226 79,140
Consumer portfolio $ 960,036 $ 2,451,592 $ 1,005,722 $ 446,437 $ 137,617 $ 2,664,401 $ 1,318,673 $ 8,984,478

At December 31, 2021
(In thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total
Residential:
800+ $ 590,238 $ 428,118 $ 161,664 $ 35,502 $ 105,198 $ 735,517 $ — $ 2,056,237
740-799 1,083,608 421,380 154,960 32,172 95,662 456,722 — 2,244,504
670-739 374,460 135,146 73,499 25,099 34,550 227,863 — 870,617
580-669 38,644 13,782 9,348 3,056 9,000 71,811 — 145,641
579 and below 9,478 1,051 49,252 390 2,519 33,216 — 95,906
Residential 2,096,428 999,477 448,723 96,219 246,929 1,525,129 — 5,412,905
Home equity:
800+ 35,678 30,157 9,591 16,347 11,068 58,189 463,334 624,364
740-799 42,430 22,030 9,413 13,317 7,711 33,777 409,518 538,196
670-739 17,493 9,162 5,889 8,220 5,802 31,160 233,744 311,470
580-669 1,773 1,397 1,298 1,066 1,329 15,042 66,361 88,266
579 and below 380 446 725 1,060 434 5,666 22,552 31,263
Home equity 97,754 63,192 26,916 40,010 26,344 143,834 1,195,509 1,593,559
Other consumer:
800+ 463 1,343 2,398 916 231 118 10,160 15,629
740-799 2,588 5,408 8,303 2,985 379 77 9,528 29,268
670-739 1,061 7,034 13,602 3,859 607 412 5,644 32,219
580-669 256 1,083 2,550 735 216 211 1,267 6,318
579 and below 147 87 215 159 40 21 1,196 1,865
Other consumer 4,515 14,955 27,068 8,654 1,473 839 27,795 85,299
Consumer portfolio $ 2,198,697 $ 1,077,624 $ 502,707 $ 144,883 $ 274,746 $ 1,669,802 $ 1,223,304 $ 7,091,763


	At March 31, 2023
(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total
Residential:
Risk rating:
800+	$	15,014	$	681,916	$	1,043,662	$	468,357	$	150,282	$	993,219	$	—	$	3,352,450
740-799	69,297		866,867		863,689		308,974		111,803		716,299		—		2,936,929
670-739	18,719		346,423		326,999		91,487		62,585		393,008		—		1,239,221
580-669	63		46,328		52,355		14,004		10,532		125,882		—		249,164
579 and below	—		53,275		3,563		3,963		99,840		63,158		—		223,799
Total residential	103,093		1,994,809		2,290,268		886,785		435,042		2,291,566		—		8,001,563
Current period gross write-offs	—		—		—		—		—		211		—		211
Home equity:
Risk rating:
800+	6,211		26,483		35,954		25,557		8,524		63,613		434,492		600,834
740-799	4,088		29,016		31,860		18,237		6,556		38,748		375,534		504,039
670-739	4,421		15,017		17,246		6,262		4,153		34,796		257,878		339,773
580-669	408		2,984		2,504		1,483		903		13,456		74,873		96,611
579 and below	202		419		766		643		529		6,120		30,633		39,312
Total home equity	15,330		73,919		88,330		52,182		20,665		156,733		1,173,410		1,580,569
Current period gross write-offs	—		—		—		—		—		108		—		108
Other consumer:
Risk rating:
800+	140		443		207		479		843		266		17,207		19,585
740-799	266		782		2,589		1,332		1,933		570		7,675		15,147
670-739	154		838		409		1,815		3,117		975		8,836		16,144
580-669	58		304		216		297		694		159		1,294		3,022
579 and below	22		120		43		41		127		55		1,010		1,418
Total other consumer	640		2,487		3,464		3,964		6,714		2,025		36,022		55,316
Current period gross write-offs	435		—		3		114		126		101		—		779
Total consumer portfolio	$	119,063	$	2,071,215	$	2,382,062	$	942,931	$	462,421	$	2,450,324	$	1,209,432	$	9,637,448
Current period gross write-offs	$	435	$	—	$	3	$	114	$	126	$	420	$	—	$	1,098


	At December 31, 2022
(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Residential:
800+	$	527,408	$	954,568	$	469,518	$	160,596	$	28,361	$	997,409	$	—	$	3,137,860
740-799	963,026		946,339		311,295		111,913		43,684		689,771		—		3,066,028
670-739	381,515		350,671		103,999		62,365		18,451		384,687		—		1,301,688
580-669	40,959		49,648		14,484		5,836		2,357		138,107		—		251,391
579 and below	52,464		3,693		2,057		84,032		1,299		62,908		—		206,453
Total residential	1,965,372		2,304,919		901,353		424,742		94,152		2,272,882		—		7,963,420
Home equity:
800+	25,475		35,129		25,612		7,578		12,545		55,352		465,318		627,009
740-799	26,743		35,178		17,621		8,111		7,765		32,270		398,692		526,380
670-739	18,396		16,679		8,175		3,635		7,614		30,060		259,646		344,205
580-669	2,848		3,068		1,520		1,456		1,163		13,607		76,614		100,276
579 and below	426		386		651		661		563		4,736		27,814		35,237
Total home equity	73,888		90,440		53,579		21,441		29,650		136,025		1,228,084		1,633,107
Other consumer:
800+	495		218		544		1,045		247		56		19,196		21,801
740-799	888		2,624		1,959		2,494		941		364		12,218		21,488
670-739	977		603		2,480		4,238		1,041		118		6,107		15,564
580-669	211		117		337		801		173		54		2,223		3,916
579 and below	169		101		29		116		36		21		707		1,179
Total other consumer	2,740		3,663		5,349		8,694		2,438		613		40,451		63,948
Total consumer portfolio	$	2,042,000	$	2,399,022	$	960,281	$	454,877	$	126,240	$	2,409,520	$	1,268,535	$	9,660,475

5550

Collateral Dependent Loans and Leases

A loan or lease is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is substantially expected to be provided through the operation or sale of collateral. At ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, the carrying amount of collateral dependent commercial loans and leases totaled ~~$52.2~~$28.1 million and ~~$16.6~~$43.8 million, respectively, and the carrying amount of collateral dependent consumer loans totaled ~~$17.4~~$40.4 million and ~~$34.9~~$45.2 million, respectively. Commercial non-mortgage, asset-based, and equipment financing loans and leases are generally secured by machinery and equipment, inventory, receivables, or other non-real estate assets, whereas commercial real estate, multi-family, ~~warehouse lending,~~ residential, home equity, and other consumer loans are secured by real estate. The ACL for collateral dependent loans and leases is individually assessed based on the fair value of the collateral less costs to ~~sell at the reporting date.~~sell. At ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, the collateral value associated with collateral dependent loans and leases totaled ~~$115.3~~$79.1 million and ~~$86.0~~$108.0 million, respectively.

Modifications for Borrowers Experiencing Financial Difficulty

On January 1, 2023, the Company adopted ASU 2022-02, which eliminates the accounting guidance for TDRs and enhances the disclosure requirements for certain loan modifications when a borrower is experiencing financial difficulty. For a description of the Company's accounting policies related to the accounting and reporting of TDRs, for which comparative period information is presented, refer to Note 1: Summary of Significant Accounting Policies of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

In certain circumstances, the Company enters into agreements to modify the terms of loans to borrowers experiencing financial difficulty. A variety of solutions are offered to borrowers experiencing financial difficulty, including loan modifications that may result in principal forgiveness, interest rate reductions, payment delays, term extension, or a combination thereof. The following is a description of each of these types of modifications:

•Principal forgiveness – The outstanding principal balance of a loan may be reduced by a specified amount. Principal forgiveness may occur voluntarily as part of a negotiated agreement with a borrower, or involuntarily through a bankruptcy proceeding.

•Interest rate reductions – Includes modifications where the contractual interest rate of the loan has been reduced.

•Payment delays – Deferral arrangements which allow borrowers to delay a scheduled loan payment to a later date. Deferred loan payments do not affect the original contractual terms of the loan. Modifications that result in only an insignificant payment delay are not disclosed. The Company considers that a three month or less payment delay generally would be considered insignificant.

•Term extensions – Extensions of the original contractual maturity date of the loan.

•Combination – Combination includes loans that have undergone more than one of the above loan modification types.

Significant judgment is required to determine if a borrower is experiencing financial difficulty. These considerations vary by portfolio class. The Company has identified modifications to borrowers experiencing financial difficulty that are included in its disclosures as follows:

•Commercial: The Company evaluates modifications of loans to commercial borrowers that are rated substandard or worse, and includes the modifications in its disclosures to the extent that the modification is considered
other-than-insignificant.

•Consumer: The Company evaluates modifications of loans to consumer borrowers subject to its loss mitigation program and includes them in its disclosures to the extent that the modification is considered other-than-insignificant.

The following table summarizes the amortized cost basis of loans modified to borrowers experiencing financial difficulty, disaggregated by class and type of concession granted during the three months ended March 31, 2023:


(In thousands)	Interest Rate Reduction		Term Extension		Combination - Term Extension and Interest Rate Reduction		Total		% of Total Class (2)
Commercial non-mortgage	$	7	$	29,884	$	—	$	29,891	0.2	%

Commercial real estate	—		17,116		—		17,116		0.1




Home equity	—		57		64		121		—

Total (1)	$	7	$	47,057	$	64	$	47,128	0.1	%

(1)The total amortized cost excludes accrued interest receivable of $0.2 million.

(2)Represents the amortized cost of loans modified during the reporting period as a percentage of the period-end loan balance by class.

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2023:


			Financial Effect
Interest Rate Reduction:
Commercial non-mortgage			Reduced weighted average interest rate by 4.5%

Term Extension:
Commercial non-mortgage			Extended term by a weighted average 0.6 years
Commercial real estate			Extended term by a weighted average 1.0 year
Home equity			Extended term by a weighted average 8.8 years

Combination:
Home equity			Extended term by a weighted average 5.1 years and reduced weighted average interest rate by 1.5%

The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table summarizes the aging of loans that have been modified during the three months ended March 31, 2023:


(In thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Non-Accrual		Total
Commercial non-mortgage	$	3,562	$	—	$	—	$	—	$	26,329	$	29,891

Commercial real estate	17,116		—		—		—		—		17,116




Home equity	23		—		—		—		98		121

Total	$	20,701	$	—	$	—	$	—	$	26,427	$	47,128

There were no loans made to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2023, and that subsequently defaulted. For the purposes of this disclosure, a payment default is defined as 90 or more days past due and still accruing. Non-accrual loans that are modified to borrowers experiencing financial difficulty remain on non-accrual status until the borrower has demonstrated performance under the modified terms. Commitments to lend additional funds to borrowers experiencing financial difficulty whose loans had been modified were not significant.

Troubled Debt Restructurings Prior to the Adoption of ASU 2022-02

The following table summarizes information related to TDRs:
(In thousands) At June 30,
2022 At December 31, 2021
Accrual status $ 100,080 $ 110,625
Non-accrual status 58,093 52,719
Total TDRs $ 158,173 $ 163,344
Additional funds committed to borrowers in TDR status $ 906 $ 5,975
Specific reserves for TDRs included in the ACL on loans and leases:
Commercial portfolio $ 7,138 $ 9,017
Consumer portfolio 3,908 3,745

The respective portions of commercial and consumer TDRs deemed to be uncollectible and charged off were $1.0 million and $0.1 million during the three months ended June 30, 2022, and $0.3 million and zero during the three months ended June 30, 2021. The respective portions of commercial and consumer TDRs deemed to be uncollectible and charged off were $10.0 million and $0.1 million during the six months ended June 30, 2022, and $1.9 million and $0.3 million during the six months ended June 30, 2021.


(In thousands)	At December 31, 2022
Accrual status	$	110,868
Non-accrual status	83,954
Total TDRs	$	194,822

Additional funds committed to borrowers in TDR status	$	1,724
Specific reserves for TDRs included in the ACL on loans and leases:
Commercial portfolio	$	14,578
Consumer portfolio	3,559

The following table summarizes loans and leases modified as TDRs by class and modification ~~type:~~type during the three months ended March 31, 2022:
Three months ended June 30, Six months ended June 30,
2022 2021 2022 2021
(Dollars in thousands) Number of
Contracts
Recorded
Investment (1)
Number of
Contracts
Recorded
Investment (1)
Number of
Contracts
Recorded
Investment (1)
Number of
Contracts
Recorded
Investment (1)
Commercial non-mortgage
Extended maturity — $ — 1 $ 50 2 $ 97 7 $ 557
Maturity/rate combined 3 351 5 173 5 443 6 210
Other (2)
1 22,964 1 1 1 22,964 3 114
Commercial real estate
Extended maturity — — — — — — 1 183
Equipment financing
Other (2)
1 1,157 — — 1 1,157 — —
Residential
Extended maturity 1 893 — — 1 893 1 99
Maturity/rate combined — — 2 401 — — 2 401
Other (2)
2 308 — — 6 2,762 2 233
Home equity
Extended maturity — — — — — — 1 28
Adjusted interest rate 1 74 — — 1 74 — —
Maturity/rate combined 7 680 1 14 11 724 6 1,025
Other (2)
9 399 7 535 24 1,333 14 968
Total TDRs 25 $ 26,826 17 $ 1,174 52 $ 30,447 43 $ 3,818




(Dollars in thousands)	Number of Contracts	Recorded Investment (1)
Commercial non-mortgage
Term extension	2	$	98

Combination - Term extension and interest rate reduction	2	92









Residential


Other (2)	5	2,985
Home equity


Combination - Term extension and interest rate reduction	4	44
Other (2)	17	1,242
Total TDRs	30	$	4,461

(1)Post-modification balances ~~approximate~~approximated pre-modification balances. The aggregate amount of charge-offs due to restructurings was not significant.

(2)Other ~~includes~~included covenant modifications, forbearance, discharges under Chapter 7 bankruptcy, or other concessions.

~~For~~During the three ~~and six~~ months ended ~~June 30,~~March 31, 2022, the portion of TDRs deemed to uncollectible and ~~2021, there~~charged-off totaled $9.1 million for the commercial portfolio and $0.1 million for the consumer portfolio. There were no significant loans and leases modified as TDRs within the previous 12twelve months and for which there was a payment ~~default.~~

default during the three months ended March 31, 2022.

5753

Note 5: Transfers and Servicing of Financial Assets

~~Webster~~The Company originates and sells residential mortgage loans in the normal course of business, primarily to
government-sponsored entities through established programs and securitizations. Residential mortgage origination fees, adjustments for changes in fair value, and any gain or loss recognized on residential mortgage loans sold are included in ~~mortgage~~Mortgage banking activities on the accompanying Condensed Consolidated Statements of Income.

The following table summarizes information related to mortgage banking activities:


		Three months ended June 30,				Six months ended June 30,					Three months ended March 31,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)		2023		2022
Net gain on sale	Net gain on sale	$	106	$	1,351	$	503	$	3,460	Net gain on sale		$	77	$	397
Origination fees	Origination fees	37		377		172		918		Origination fees		11		135
Fair value adjustment	Fair value adjustment	(41)		(409)		(145)		(417)		Fair value adjustment		(29)		(104)
Mortgage banking activities	Mortgage banking activities	$	102	$	1,319	$	530	$	3,961	Mortgage banking activities		$	59	$	428

Proceeds from sale	Proceeds from sale	$	6,080	$	68,427	$	32,833	$	147,735	Proceeds from sale		$	3,832	$	26,753
Loans sold with servicing rights retained	Loans sold with servicing rights retained	4,954		66,087		30,317		141,778		Loans sold with servicing rights retained		1,229		25,363

Under certain circumstances, ~~Webster~~the Company may decide to sell loans that were not originated or otherwise acquired with the intent to sell. During the three months ended ~~June 30,~~March 31, 2023, and 2022, ~~and 2021, Webster~~the Company sold commercial loans not originated for sale for proceeds of ~~$67.4~~$106.7 million and ~~$32.3~~$51.1 million, respectively, which resulted in net gains on sale of ~~$1.4~~$0.1 million and $0.5 million, respectively. During the six months ended June 30, 2022 and 2021, Webster sold commercial loans not originated for sale for proceeds of $118.5 million and $49.1 million, respectively, which resulted in net gains on sale of $3.2 million and $0.7
$1.8 million, respectively.

In addition, ~~Webster~~the Company may retain servicing rights on its residential mortgage loans sold in the normal course of business. At ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, the aggregate principal balance of residential mortgage loans serviced for others totaled ~~$2.1~~$1.9 billion and $2.0 billion, respectively. Mortgage servicing ~~assets~~rights are held at the lower of cost, net of accumulated amortization, or fair market value, and are included in ~~accrued~~Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets. ~~Webster~~The Company assesses mortgage servicing ~~assets~~rights for impairment each quarter and establishes or adjusts the valuation allowance to the extent that amortized cost exceeds the estimated fair market value.

The following table presents the change in the carrying amount for mortgage servicing ~~assets:~~rights:
Three months ended June 30, Six months ended June 30,
(In thousands) 2022 2021 2022 2021
Beginning balance $ 9,735 $ 12,327 $ 9,237 $ 13,422
Additions (1)
56 616 1,124 1,202
Amortization (1,199) (1,442) (1,769) (2,932)
Adjustment to valuation allowance — — — (191)
Ending balance $ 8,592 $ 11,501 $ 8,592 $ 11,501

~~(1)In connection with the Sterling merger, Webster acquired $0.9 million of mortgage servicing assets on January 31, 2022.~~


	Three months ended March 31,
(In thousands)		2023		2022
Balance, beginning of period		$	9,515	$	9,237
Acquired from Sterling		—		859
Additions		15		209
Amortization		(341)		(570)

Balance, end of period		$	9,189	$	9,735

Loan servicing fees, net of mortgage servicing rights amortization, were ~~$0.5~~$1.3 million and ~~$0.2~~$1.1 million for the three months ended ~~June 30,~~March 31, 2023, and 2022, ~~and 2021, respectively, and $1.6 million and $0.6 million for the six months ended June 30, 2022 and 2021,~~ respectively, and are included in ~~loan~~Loan and lease related fees on the accompanying Condensed Consolidated Statements of Income. Information regarding the fair value of loans held for sale and mortgage servicing ~~assets~~rights can be found within Note 14: Fair Value Measurements.

5854

Note 6: Goodwill and Other Intangible Assets

Goodwill

The following table summarizes changes in the carrying amount of goodwill:


(In thousands)	(In thousands)	At June 30, 2022	At December 31, 2021		(In thousands)				At March 31, 2023	At December 31, 2022
Balance, beginning of period	Balance, beginning of period		$	538,373		$	538,373	Balance, beginning of period			$	2,514,104	$	538,373
Sterling merger			1,939,432			—
Bend acquisition			35,966			—
interLINK acquisition								interLINK acquisition			143,216		—
Sterling merger (1)								Sterling merger (1)			(25,561)		1,939,765
Bend acquisition (1)								Bend acquisition (1)			(294)		35,966
Balance, end of period	Balance, end of period		$	2,513,771		$	538,373	Balance, end of period			$	2,631,465	$	2,514,104

(1)Reflects adjustments recorded within the one-year measurement period, which were identified as a result of extended information gathering and new information that arose from integration activities. The allocation of the purchase price and goodwill calculations for both the Sterling merger and Bend acquisition are final as of March 31, 2023.

Information regarding goodwill by reportable segment can be found within Note 16: Segment Reporting.

Other Intangible Assets

The following table summarizes other intangible assets:


		At June 30, 2022						At December 31, 2021							At March 31, 2023						At December 31, 2022
(In thousands)	(In thousands)	Gross Carrying Amount (1)		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		(In thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Core deposits	Core deposits	$	145,725	$	27,185	$	118,540	$	26,625	$	18,516	$	8,109	Core deposits	$	146,037	$	41,237	$	104,800	$	146,037	$	36,710	$	109,327
Customer relationships(1)	Customer relationships(1)	115,000		17,760		97,240		21,000		11,240		9,760		Customer relationships(1)	151,000		29,755		121,245		115,000		24,985		90,015
Non-competition agreement (1)														Non-competition agreement (1)	4,000		200		3,800		—		—		—
Total other intangible assets	Total other intangible assets	$	260,725	$	44,945	$	215,780	$	47,625	$	29,756	$	17,869	Total other intangible assets	$	301,037	$	71,192	$	229,845	$	261,037	$	61,695	$	199,342

(1)~~In connection with~~The increase in the ~~Sterling merger~~gross carrying amount is attributed to the acquisition of interLINK, in which the Company identified and ~~Bend acquisition, Webster~~ recorded a ~~$119.1~~$36.0 million ~~core deposit~~ intangible ~~and $94.0 million of customer relationship intangibles, all of~~asset for broker dealer relationships, which ~~are~~is being amortized on an accelerated basis over ~~a period~~an estimated useful life of 10 years, and a $4.0 million non-competition agreement, which is being amortized on a straight-line basis over an estimated useful life of 5 years.

The remaining estimated aggregate future amortization expense for other intangible assets ~~as of June 30, 2022~~ is as follows:


(In thousands)	(In thousands)	Amortization Expense		(In thousands)	At March 31, 2023
Remainder of 2022		$	16,741
2023		30,315
Remainder of 2023				Remainder of 2023	$	26,710
2024	2024	24,442		2024	29,618
2025	2025	21,455		2025	25,956
2026	2026	21,455		2026	25,565
2027				2027	25,565
Thereafter	Thereafter	101,372		Thereafter	96,431

5955

Note 7: Deposits

The following table summarizes deposits by type:


(In thousands)	(In thousands)	At June 30, 2022		At December 31, 2021		(In thousands)	At March 31, 2023		At December 31, 2022
Non-interest-bearing:	Non-interest-bearing:					Non-interest-bearing:
Demand	Demand	$	13,576,152	$	7,060,488	Demand	$	12,007,387	$	12,974,975
Interest-bearing:	Interest-bearing:					Interest-bearing:
Health savings accounts	Health savings accounts	7,777,786		7,397,582		Health savings accounts	8,272,507		7,944,892
Checking	Checking	9,547,749		4,182,497		Checking	8,560,750		9,237,529
Money market	Money market	10,884,656		3,718,953		Money market	14,203,858		11,062,652
Savings	Savings	8,736,712		5,689,739		Savings	7,723,198		8,673,343
Time deposits	Time deposits	2,554,102		1,797,770		Time deposits	4,529,779		4,160,949
Total interest-bearing	Total interest-bearing	$	39,501,005	$	22,786,541	Total interest-bearing	$	43,290,092	$	41,079,365
Total deposits	Total deposits	$	53,077,157	$	29,847,029	Total deposits	$	55,297,479	$	54,054,340

Time deposits, money market, and interest-bearing checking obtained through brokers(1)	Time deposits, money market, and interest-bearing checking obtained through brokers(1)	$	126,444	$	120,392	Time deposits, money market, and interest-bearing checking obtained through brokers(1)	$	1,268,506	$	1,964,873
Aggregate amount of time deposit accounts that exceeded the FDIC limit	Aggregate amount of time deposit accounts that exceeded the FDIC limit	322,888		256,522		Aggregate amount of time deposit accounts that exceeded the FDIC limit	1,457,289		1,894,950
Demand deposit overdrafts reclassified as loan balances	Demand deposit overdrafts reclassified as loan balances	8,376		1,577		Demand deposit overdrafts reclassified as loan balances	6,832		8,721

(1)Excludes $2.9 billion of money market sweep deposits received through interLINK at March 31, 2023.

The following table summarizes the scheduled maturities of time deposits:


(In thousands)	(In thousands)	At June 30, 2022		(In thousands)	At March 31, 2023
Remainder of 2022		$	1,597,832
2023		600,936
Remainder of 2023				Remainder of 2023	$	3,168,801
2024	2024	136,767		2024	1,132,496
2025	2025	133,719		2025	132,543
2026	2026	60,428		2026	53,306
2027				2027	36,616
Thereafter	Thereafter	24,420		Thereafter	6,017
Total time deposits	Total time deposits	$	2,554,102	Total time deposits	$	4,529,779

Note 8: Borrowings

The following table summarizes securities sold under agreements to ~~repurchase:~~repurchase and other borrowings:
At June 30, 2022 At December 31, 2021
(Dollars in thousands) Total Outstanding Rate Total Outstanding Rate
Securities sold under agreements to repurchase (1):
Original maturity of one year or less $ 306,382 0.11 % $ 474,896 0.11 %
Original maturity of greater than one year, non-callable 200,000 2.98 200,000 1.32
Total securities sold under agreements to repurchase (1)
506,382 1.24 674,896 0.47
Federal funds purchased 1,237,400 1.64 — —
Securities sold under agreements to repurchase and other borrowings $ 1,743,782 1.52 $ 674,896 0.47


	At March 31, 2023				At December 31, 2022
(Dollars in thousands)	Total Outstanding		Rate		Total Outstanding		Rate



Securities sold under agreements to repurchase (1)	$	306,154	0.11	%	$	282,005	0.11	%
Federal funds purchased	—		—		869,825		4.44

Securities sold under agreements to repurchase and other borrowings	$	306,154	0.11	%	$	1,151,830	3.38	%

(1)~~Webster~~The Company has the right of offset with respect to all repurchase agreement assets and liabilities. Total securities sold under agreements to repurchase are presented as gross transactions, as only liabilities are outstanding for the periods presented.

Securities sold under agreements to repurchase, all of which have an original maturity of one year or less for the periods presented, are used as a source of borrowed funds and are collateralized by Agency MBS and ~~corporate bonds.~~Corporate debt. The Company's repurchase agreement counterparties are limited to primary dealers in government securities, and commercial and municipal customers through the Corporate Treasury function. ~~Webster~~The Company may also purchase unsecured term and overnight federal funds to satisfy its short-term liquidity needs.

6056

The following table summarizes information for FHLB advances:


		At June 30, 2022				At December 31, 2021					At March 31, 2023				At December 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Total Outstanding		Weighted- Average Contractual Coupon Rate		Total Outstanding		Weighted- Average Contractual Coupon Rate		(Dollars in thousands)	Total Outstanding		Weighted- Average Contractual Coupon Rate		Total Outstanding		Weighted- Average Contractual Coupon Rate
Maturing within 1 year	Maturing within 1 year	$	2,500,080	1.60	%	$	90	—	%	Maturing within 1 year	$	8,550,183	5.18	%	$	5,450,187	4.40	%
After 1 but within 2 years	After 1 but within 2 years	194		2.96		202		2.95		After 1 but within 2 years	—		—		—		—
After 2 but within 3 years	After 2 but within 3 years	—		—		—		—		After 2 but within 3 years	—		—		—		—
After 3 but within 4 years	After 3 but within 4 years	—		—		—		—		After 3 but within 4 years	—		—		—		—
After 4 but within 5 years	After 4 but within 5 years	—		—		—		—		After 4 but within 5 years	486		1.35		252		—
After 5 years	After 5 years	10,536		2.03		10,705		2.03		After 5 years	9,792		2.07		10,113		2.09
Total FHLB advances	Total FHLB advances	$	2,510,810	1.60		$	10,997	2.03		Total FHLB advances	$	8,560,461	5.18	%	$	5,460,552	4.39	%

Aggregate carrying value of assets pledged as collateral	Aggregate carrying value of assets pledged as collateral	$	8,280,906			$	7,556,034			Aggregate carrying value of assets pledged as collateral	$	19,778,232			$	13,692,379
Remaining borrowing capacity at FHLB	Remaining borrowing capacity at FHLB	3,219,016				5,087,294				Remaining borrowing capacity at FHLB	6,509,929				4,291,326

~~Webster~~The Bank may borrow up to the amount of eligible mortgages and securities that have been pledged as collateral to secure FHLB advances, which ~~primarily include~~includes certain residential and commercial real estate loans, ~~and~~ home equity lines of ~~credit. Webster~~credit, CMBS, Agency MBS, Agency CMO, U.S. Treasury notes, and MBS. The Bank was in compliance with its FHLB collateral requirements at both ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021.~~2022.

The following table summarizes long-term debt:


(Dollars in thousands)	(Dollars in thousands)		At June 30, 2022		At December 31, 2021		(Dollars in thousands)		At March 31, 2023		At December 31, 2022
4.375%	4.375%	Senior fixed-rate notes due February 15, 2024	$	150,000	$	150,000	4.375%	Senior fixed-rate notes due February 15, 2024	$	150,000	$	150,000
4.100%	4.100%	Senior fixed-rate notes due March 25, 2029 (1)	336,134		338,811		4.100%	Senior fixed-rate notes due March 25, 2029 (1)	332,119		333,458
4.000%	4.000%	Subordinated fixed-to-floating rate notes due December 30, 2029	274,000		—		4.000%	Subordinated fixed-to-floating rate notes due December 30, 2029	274,000		274,000
3.875%	3.875%	Subordinated fixed-to-floating rate notes due November 1, 2030	225,000		—		3.875%	Subordinated fixed-to-floating rate notes due November 1, 2030	225,000		225,000
Junior subordinated debt Webster Statutory Trust I floating-rate notes due September 17, 2033 (2)	Junior subordinated debt Webster Statutory Trust I floating-rate notes due September 17, 2033 (2)		77,320		77,320		Junior subordinated debt Webster Statutory Trust I floating-rate notes due September 17, 2033 (2)		77,320		77,320
Total senior and subordinated debt	Total senior and subordinated debt		1,062,454		566,131		Total senior and subordinated debt		1,058,439		1,059,778
Discount on senior fixed-rate notes	Discount on senior fixed-rate notes		(865)		(974)		Discount on senior fixed-rate notes		(701)		(756)
Debt issuance cost on senior fixed-rate notes	Debt issuance cost on senior fixed-rate notes		(2,024)		(2,226)		Debt issuance cost on senior fixed-rate notes		(1,723)		(1,824)
Premium on subordinated fixed-to-floating rate notes	Premium on subordinated fixed-to-floating rate notes		16,994		—		Premium on subordinated fixed-to-floating rate notes		15,398		15,930
Long-term debt(1)	Long-term debt(1)		$	1,076,559	$	562,931	Long-term debt(1)		$	1,071,413	$	1,073,128

(1)~~Webster~~The classification of debt as long-term is based on the initial terms of greater than one year as of the date of issuance.

(2)The Company de-designated its fair value hedging relationship on these senior notes in 2020. A basis adjustment of ~~$36.1~~$32.1 million and ~~$38.8~~$33.5 million at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, respectively, is included in the carrying value and is being amortized over the remaining life of the senior notes.

~~(2)~~(3)The interest rate on the Webster Statutory Trust I floating-rate notes, which varies quarterly based on 3-month LIBOR plus 2.95%, was ~~4.98%~~7.86% and ~~3.17%~~7.69% at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, respectively.

Webster assumed $274.0 million in aggregate principal amount of 4.00% fixed-to-floating rate subordinated notes due on December 30, 2029 (the 2029 subordinated notes) in connection with the Sterling merger. The 2029 subordinated notes were issued by Sterling on December 16, 2019 through a public offering, and are redeemable at a price equal to the total principal amount plus any accrued and unpaid interest thereon, in whole or in part by Webster on December 30, 2024, or any interest payment date thereafter, upon the occurrence of certain specified events. Until December 30, 2024, the interest rate is fixed at 4.00% and payable semi-annually in arrears on each June 30 and December 30. From December 30, 2024 through the earlier of maturity or redemption, the 2029 subordinated notes will bear interest at a floating rate per annum equal to three-month term SOFR plus 253 basis points, payable quarterly in arrears on each March 30, June 30, September 30, and December 30.

In addition, Webster assumed $225.0 million in aggregate principal amount of 3.875% fixed-to-floating rate subordinated notes due on November 1, 2030 (the 2030 subordinated notes) in connection with the Sterling merger. The 2030 subordinated notes were issued by Sterling on October 30, 2020 through a public offering, and are redeemable at a price equal to the total principal amount plus any accrued and unpaid interest thereon, in whole or in part by Webster on December 30, 2024, or any interest payment date thereafter, upon the occurrence of certain specified events. Until November 1, 2025, the interest rate is fixed at 3.875% and payable semi-annually in arrears on each May 1 and December 30. From November 1, 2025 through the earlier of maturity or redemption, the 2030 subordinated notes will bear interest at a floating rate per annum equal to three-month term SOFR plus 369 basis points, payable quarterly in arrears on each February 1, May 1, August 1, and November 1.

Webster recorded the 2029 and 2030 subordinated notes at their estimated fair value of $281.0 million and $235.9 million, respectively, on the merger effective date. The purchase premiums are being amortized into interest expense over the remaining lives of the subordinated notes.

6157

Note 9: Accumulated Other Comprehensive Income (Loss) ~~Income,~~, Net of Tax

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

Three months ended June 30, 2022 Six months ended June 30, 2022
(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
Balance, beginning of period $ (240,343) $ (1,774) $ (33,606) $ (275,723) $ 4,536 $ 6,070 $ (33,186) $ (22,580)
Other comprehensive (loss) before reclassifications (205,273) (1,070) (328) (206,671) (450,152) (9,683) (1,047) (460,882)
Amounts reclassified from accumulated other comprehensive (loss) income — 762 300 1,062 — 1,531 599 2,130
Other comprehensive (loss),
net of tax (205,273) (308) (28) (205,609) (450,152) (8,152) (448) (458,752)
Balance, end of period $ (445,616) $ (2,082) $ (33,634) $ (481,332) $ (445,616) $ (2,082) $ (33,634) $ (481,332)
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
Balance, beginning of period $ 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) — (3,948) (31,826) (7,645) — (39,471)
Amounts reclassified from accumulated other comprehensive income (loss) — 823 741 1,564 — 1,621 1,484 3,105
Other comprehensive (loss) income, net of tax (1,473) (1,652) 741 (2,384) (31,826) (6,024) 1,484 (36,366)
Balance, end of period $ 35,598 $ 13,894 $ (43,602) $ 5,890 $ 35,598 $ 13,894 $ (43,602) $ 5,890



	Three months ended March 31, 2023
(In thousands)		Securities Available For Sale		Derivative Instruments		Defined Benefit Pension and Other Postretirement Benefit Plans		Total
Balance, beginning of period		$	(631,160)	$	(8,874)	$	(44,926)	$	(684,960)
Other comprehensive income before reclassifications		56,635		20,782		3,553		80,970
Amounts reclassified from accumulated other comprehensive (loss)		14,983		592		395		15,970
Other comprehensive income, net of tax		71,618		21,374		3,948		96,940
Balance, end of period		$	(559,542)	$	12,500	$	(40,978)	$	(588,020)


	Three months ended March 31, 2022
(In thousands)		Securities Available For Sale		Derivative Instruments		Defined Benefit Pension and Other Postretirement Benefit Plans		Total
Balance, beginning of period		$	4,536	$	6,070	$	(33,186)	$	(22,580)
Other comprehensive (loss) before reclassifications		(244,879)		(8,613)		(719)		(254,211)
Amounts reclassified from accumulated other comprehensive income (loss)		—		769		299		1,068
Other comprehensive (loss), net of tax		(244,879)		(7,844)		(420)		(253,143)
Balance, end of period		$	(240,343)	$	(1,774)	$	(33,606)	$	(275,723)

The following table further summarizes the amounts reclassified from accumulated other comprehensive income (loss) ~~income:~~:


Accumulated Other Comprehensive (Loss) Income Components		Three months ended June 30,				Six months ended June 30,				Associated Line Item on the Condensed Consolidated Statements of Income
		2022		2021		2022		2021
Accumulated Other Comprehensive Income (Loss) Components											Accumulated Other Comprehensive Income (Loss) Components	Three months ended			Associated Line Item on the Condensed Consolidated Statements of Income
												March 31,
													2023					2022
(In thousands)	(In thousands)										(In thousands)
Investment securities available-for-sale:											Investment securities available-for-sale:
Net holding (losses)											Net holding (losses)		$	(20,483)		$	—	(Loss) on sale of investment securities

Tax benefit											Tax benefit		5,500			—		Income tax expense
Net of tax											Net of tax		$	(14,983)		$	—
Derivative instruments:	Derivative instruments:										Derivative instruments:
Hedge terminations	Hedge terminations	$	(76)	$	(77)	$	(153)	$	(153)	Interest expense	Hedge terminations		$	(76)		$	(77)	Interest expense
Premium amortization	Premium amortization	(969)		(1,037)		(1,947)		(2,042)		Interest income	Premium amortization		(736)			(978)		Interest income
Tax benefit	Tax benefit	283		291		569		574		Income tax expense	Tax benefit		220			286		Income tax expense
Net of tax	Net of tax	$	(762)	$	(823)	$	(1,531)	$	(1,621)		Net of tax		$	(592)		$	(769)
Defined benefit pension and other postretirement benefit plans:	Defined benefit pension and other postretirement benefit plans:										Defined benefit pension and other postretirement benefit plans:
Actuarial loss amortization		$	(411)	$	(1,007)	$	(822)	$	(2,015)	Other non-interest expense
Actuarial net loss amortization											Actuarial net loss amortization		$	(542)		$	(411)	Other expense
Tax benefit	Tax benefit	111		266		223		531		Income tax expense	Tax benefit		147			112		Income tax expense
Net of tax	Net of tax	$	(300)	$	(741)	$	(599)	$	(1,484)		Net of tax		$	(395)		$	(299)

6258

Note 10: Regulatory Capital and Restrictions

Capital Requirements

~~Webster Financial Corporation~~The Holding Company and ~~Webster~~the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory actions by regulators that could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines ~~and~~and/or the regulatory framework for prompt corrective action (such provisions apply to the Bank only), both ~~Webster Financial Corporation~~the Holding Company and ~~Webster~~the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated pursuant to regulatory directives. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require the Company to maintain minimum ratios of CET1 capital to total risk-weighted assets (CET1 risk-based capital), Tier 1 capital to total risk-weighted assets (Tier 1 risk-based capital), Total capital to total risk-weighted assets (Total risk-based capital), and Tier 1 capital to average tangible assets (Tier 1 leverage capital), as defined in the regulations.

CET1 capital consists of common ~~shareholders’~~stockholders’ equity less deductions for goodwill and other intangible assets, and certain deferred tax adjustments. Upon adoption of the Basel III Capital Rules, ~~Webster~~the Company elected to opt-out of the requirement to include certain components of ~~accumulated other comprehensive income~~AOCI in CET1 capital. Tier 1 capital consists of CET1 capital plus preferred stock. Total capital consists of Tier 1 capital and Tier 2 capital, as defined in the regulations. Tier 2 capital includes permissible portions of subordinated debt and the ACL.

At ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021, Webster Financial Corporation~~2022, both the Holding Company and ~~Webster~~the Bank were ~~both~~ classified as well-capitalized. Management believes that no events or changes have occurred subsequent to ~~quarter-end~~year-end that would change this designation.

The following ~~table~~tables provides information on the capital ratios for ~~Webster Financial Corporation~~the Holding Company and ~~Webster~~the Bank:


		At June 30, 2022													At March 31, 2023
		Actual (1)				Minimum Requirement				Well Capitalized					Actual (1)				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	$	5,543,209	11.09	%	$	2,249,952	4.5	%	$	3,249,931	6.5	%	CET1 risk-based capital	$	5,796,578	10.42	%	$	2,503,935	4.5	%	$	3,616,794	6.5	%
Total risk-based capital	Total risk-based capital	6,955,295		13.91		3,999,915		8.0		4,999,893		10.0		Total risk-based capital	7,229,512		12.99		4,451,439		8.0		5,564,299		10.0
Tier 1 risk-based capital	Tier 1 risk-based capital	5,827,188		11.65		2,999,936		6.0		3,999,915		8.0		Tier 1 risk-based capital	6,080,557		10.93		3,338,580		6.0		4,451,439		8.0
Tier 1 leverage capital	Tier 1 leverage capital	5,827,188		9.12		2,555,095		4.0		3,193,869		5.0		Tier 1 leverage capital	6,080,557		8.65		2,812,832		4.0		3,516,040		5.0
Webster Bank	Webster Bank													Webster Bank
CET1 risk-based capital	CET1 risk-based capital	$	6,473,249	12.97	%	$	2,246,277	4.5	%	$	3,244,623	6.5	%	CET1 risk-based capital	$	6,605,427	11.89	%	$	2,500,320	4.5	%	$	3,611,573	6.5	%
Total risk-based capital	Total risk-based capital	7,008,042		14.04		3,993,382		8.0		4,991,727		10.0		Total risk-based capital	7,162,664		12.89		4,445,013		8.0		5,556,266		10.0
Tier 1 risk-based capital	Tier 1 risk-based capital	6,473,249		12.97		2,995,036		6.0		3,993,382		8.0		Tier 1 risk-based capital	6,605,427		11.89		3,333,760		6.0		4,445,013		8.0
Tier 1 leverage capital	Tier 1 leverage capital	6,473,249		10.15		2,551,728		4.0		3,189,660		5.0		Tier 1 leverage capital	6,605,427		9.40		2,810,676		4.0		3,513,345		5.0


		At December 31, 2021													At December 31, 2022
		Actual (1)				Minimum Requirement				Well Capitalized					Actual (1)				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	$	2,804,290	11.72	%	$	1,076,871	4.5	%	$	1,555,480	6.5	%	CET1 risk-based capital	$	5,822,369	10.71	%	$	2,446,344	4.5	%	$	3,533,608	6.5	%
Total risk-based capital	Total risk-based capital	3,265,064		13.64		1,914,436		8.0		2,393,046		10.0		Total risk-based capital	7,203,029		13.25		4,349,056		8.0		5,436,320		10.0
Tier 1 risk-based capital	Tier 1 risk-based capital	2,949,327		12.32		1,435,827		6.0		1,914,436		8.0		Tier 1 risk-based capital	6,106,348		11.23		3,261,792		6.0		4,349,056		8.0
Tier 1 leverage capital	Tier 1 leverage capital	2,949,327		8.47		1,393,607		4.0		1,742,008		5.0		Tier 1 leverage capital	6,106,348		8.95		2,730,212		4.0		3,412,765		5.0
Webster Bank	Webster Bank													Webster Bank
CET1 risk-based capital	CET1 risk-based capital	$	3,034,883	12.69	%	$	1,075,920	4.5	%	$	1,554,107	6.5	%	CET1 risk-based capital	$	6,661,504	12.28	%	$	2,442,058	4.5	%	$	3,527,417	6.5	%
Total risk-based capital	Total risk-based capital	3,273,300		13.69		1,912,747		8.0		2,390,934		10.0		Total risk-based capital	7,165,935		13.20		4,341,437		8.0		5,426,796		10.0
Tier 1 risk-based capital	Tier 1 risk-based capital	3,034,883		12.69		1,434,560		6.0		1,912,747		8.0		Tier 1 risk-based capital	6,661,504		12.28		3,256,078		6.0		4,341,437		8.0
Tier 1 leverage capital	Tier 1 leverage capital	3,034,883		8.72		1,392,821		4.0		1,741,026		5.0		Tier 1 leverage capital	6,661,504		9.77		2,727,476		4.0		3,409,345		5.0

(1)In accordance with regulatory capital rules, ~~Webster~~the Company elected an option to delay the estimated impact of the adoption of CECL on its regulatory capital over a two-year deferral period, which ended on January 1, 2022, and a subsequent three-year transition period ending on December 31, 2024. ~~Therefore,~~During the ~~December 31, 2021~~three-year transition period, regulatory capital ratios and amounts exclude the impact of the increased ACL on loans and leases, held-to-maturity debt securities, and unfunded loan commitments related to the adoption of CECL on January 1, 2020, 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. During the three year transition period, capital ratios will ~~begin to~~ phase out the aggregate amount of the regulatory capital benefit provided from the delayed CECL adoption in the initial two years. For 2022, 2023, and 2024, ~~Webster~~the Company is allowed 75%, 50%, and 25%, respectively, of the regulatory capital benefit as of December 31, 2021, ~~respectively,~~ with full absorption occurring in 2025.

6359

Dividend Restrictions

~~Webster Financial Corporation~~The Holding Company is dependent upon dividends from ~~Webster~~the Bank to provide funds for the payment of dividends to ~~shareholders~~stockholders and ~~to provide~~ for other cash requirements. Dividends paid by the Bank are subject to various federal and state regulatory limitations. Express approval by the OCC is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels or if the amount would exceed ~~the~~ net income for that year combined with ~~the~~ undistributed net income for the preceding two years. ~~Webster~~The Bank paid ~~$125.0~~the Holding Company $150.0 million in dividends ~~to Webster Financial Corporation for~~during the three ~~and six~~ months ended ~~June 30, 2022, and $60.0 million and $120.0 million for the three and six months ended June 30, 2021, respectively,~~March 31, 2023, for which no express approval from the OCC was required. No dividends were paid by the Bank to the Holding Company during the three months ended March 31, 2022.

Cash Restrictions

~~Webster~~The Bank is required under Federal Reserve regulations to maintain cash reserve balances in the form of vault cash or deposits held at a FRB to ensure that it is able to meet customer demands. The reserve requirement ratio is subject to adjustment as economic conditions warrant. Effective March 26, 2020, the Federal Reserve reset the requirement to zero in order to address liquidity concerns resulting from the COVID-19 pandemic. Pursuant to this action, the Bank ~~was~~has not been required to hold cash reserve balances ~~at both June 30, 2022 and December 31, 2021.~~since that date.

Note 11: Variable Interest Entities

~~Webster~~The Company has an investment interest in the following entities that each meet the definition of a variable interest entity. Information regarding the Company's consolidation of variable interest entities can be found within Note 1: Summary of Significant Accounting Policies in the Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Consolidated

Rabbi ~~Trust.~~Trusts. The Company established a Rabbi Trust to meet ~~the~~its obligations due under ~~its~~the Webster Bank Deferred Compensation Plan for Directors and Officers and to mitigate expense volatility. The funding of the Rabbi Trust and the discontinuation of the Webster Bank Deferred Compensation Plan for Directors and Officers occurred during 2012. In connection with the Sterling merger ~~Webster~~in 2022, the Company acquired assets held in a separate Rabbi Trust that had been previously established to fund obligations due under the Greater New York Savings Bank Directors' Retirement ~~Plan, which was also assumed from Sterling.~~Plan.

Investments held in the Rabbi Trusts consist primarily of mutual funds that invest in equity and fixed income securities. ~~Webster~~The Company is considered the primary beneficiary of these Rabbi Trusts as it has the power to direct the activities of the Rabbi Trusts that most significantly impact its economic performance and it has the obligation to absorb losses and/or the right to receive benefits of the Rabbi Trusts that could potentially be significant.

The Rabbi Trusts' assets are included in ~~accrued~~Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets. Investment earnings and any changes in fair value are included in ~~other non-interest~~Other income ~~and depending on the nature of the underlying assets in the Rabbi Trusts, fair value changes are either recognized in other non-interest income or in other comprehensive (loss) income, net of tax,~~ on the accompanying Condensed Consolidated Statements of ~~Income or on the accompanying Condensed Consolidated Statements of Comprehensive Income, respectively. Information~~Income. Additional information regarding ~~the fair value of~~ the Rabbi Trusts' investments can be found within Note 14: Fair Value Measurements.

Non-Consolidated

Low-Income Housing Tax Credit ~~Finance~~ Investments. ~~Webster~~The Company makes non-marketable equity investments in entities that sponsor affordable housing and other community development projects that qualify for the ~~Low Income Housing Tax Credit (LIHTC)~~LIHTC Program pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is not only to assist the Bank in meeting its responsibilities under the CRA, but also to provide a return, primarily through the realization of tax benefits. While ~~Webster's~~the Company's investment in an entity may exceed 50% of its outstanding equity interests, the entity is not consolidated as the Company is not the primary beneficiary. ~~Webster~~The Company has determined that it is not the primary beneficiary due to its inability to direct the activities that most significantly impact economic performance and the Company does not have the obligation to absorb losses and/or the right to receive benefits. ~~Webster~~The Company applies the proportional amortization method to subsequently measure its investments in qualified affordable housing projects.

The following table summarizes ~~Webster's~~the Company's LIHTC investments and related unfunded commitments:

(In thousands) June 30, 2022 December 31, 2021
Gross investment in LIHTC (1)
$ 660,963 $ 68,635
Accumulated amortization (51,665) (25,216)
Net investment in LIHTC $ 609,298 $ 43,419
Unfunded commitments for LIHTC investments (1)
$ 310,881 $ 11,106

~~(1)In connection with the Sterling merger, Webster acquired $515.6 million of LIHTC investments and assumed $267.3 million of unfunded commitments for LIHTC investments on January 31, 2022.~~


(In thousands)	March 31, 2023		December 31, 2022
Gross investment in LIHTC investments	$	798,085	$	797,453
Accumulated amortization	(90,902)		(69,424)
Net investment in LIHTC investments	$	707,183	$	728,029

Unfunded commitments for LIHTC investments	$	329,023	$	335,959

6460

The aggregate carrying value of ~~Webster's~~the Company's LIHTC investments is included in ~~accrued~~Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets, and represents the Company's maximum exposure to loss. The related unfunded commitments are included in ~~accrued~~Accrued expenses and other liabilities on the accompanying Condensed Consolidated Balance Sheets. ~~In addition to those acquired from Sterling, there~~There were ~~$76.7 million of net~~no commitments approved to fund LIHTC investments during the ~~six~~three months ended ~~June 30, 2022, and $10.6 million during the six months ended June 30, 2021.~~March 31, 2023, or 2022.

Webster Statutory Trust.~~Webster~~ The Company owns all the outstanding common stock of Webster Statutory Trust, a financial vehicle that has issued, and in the future may issue, trust preferred securities. The Company is not the primary beneficiary of Webster Statutory Trust. Webster Statutory Trust's only assets are junior subordinated debentures that are issued by the Company, which were acquired using the proceeds from the issuance of trust preferred securities and common stock. The junior subordinated debentures are included in ~~long-term~~Long-term debt on the accompanying Condensed Consolidated Balance Sheets, and the related interest expense is ~~reported as interest expense on long-term~~included in Long-term debt on the accompanying Condensed Consolidated Statements of Income. Additional information regarding these junior subordinated debentures can be found within Note 8: Borrowings.

Other Non-Marketable Investments.~~Webster~~ The Company invests in alternative investments comprising interests in non-public entities that cannot be redeemed since the ~~investment~~underlying equity is distributed as the ~~underlying equity~~investment is liquidated. The ultimate timing and amount of these distributions cannot be predicted with reasonable certainty. For each of these alternative investments that is classified as a variable interest entity, the Company has determined that it is not the primary beneficiary due to its inability to direct the activities that most significantly impact economic performance. The aggregate carrying value of ~~Webster's~~the Company's other non-marketable investments was ~~$122.2~~$165.1 million and ~~$61.5~~$144.9 million at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, respectively, which is included in ~~accrued~~Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets, and its maximum exposure to loss, including unfunded commitments, was ~~$171.7~~$273.0 million and ~~$95.9~~$243.9 million, respectively. ~~Information~~Additional information regarding the fair value of other non-marketable investments can be found within
Note 14: Fair Value Measurements.

Additional Information regarding Webster's consolidation of variable interest entities can be found within Note 1: Summary of Significant Accounting Policies in the Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Reporting on Form 10-K for the year ended December 31, 2021.

Note 12: Earnings Per Common Share

The following table summarizes the calculation of basic and diluted earnings per common share:


		Three months ended June 30,				Six months ended June 30,					Three months ended March 31,
(In thousands, except per share data)	(In thousands, except per share data)	2022		2021		2022		2021		(In thousands, except per share data)		2023		2022
Net income	Net income	$	182,311	$	94,035	$	165,564	$	202,113	Net income		$	221,004	$	(16,747)
Less: Preferred stock dividends	Less: Preferred stock dividends	4,163		1,969		7,594		3,938		Less: Preferred stock dividends		4,163		3,431
Net income available to common shareholders		178,148		92,066		157,970		198,175
Net income available to common stockholders										Net income available to common stockholders		216,841		(20,178)
Less: Earnings allocated to participating securities	Less: Earnings allocated to participating securities	1,718		511		1,456		1,090		Less: Earnings allocated to participating securities		1,845		—
Earnings applicable to common shareholders		$	176,430	$	91,555	$	156,514	$	197,085
Earnings applicable to common stockholders										Earnings applicable to common stockholders		$	214,996	$	(20,178)

Weighted-average common shares outstanding - basic	Weighted-average common shares outstanding - basic	175,845		90,027		161,698		89,918		Weighted-average common shares outstanding - basic		172,766		147,394
Effect of dilutive securities		50		194		87		246
Add: Effect of dilutive stock options and restricted stock										Add: Effect of dilutive stock options and restricted stock		117		—
Weighted-average common shares outstanding - diluted	Weighted-average common shares outstanding - diluted	175,895		90,221		161,785		90,164		Weighted-average common shares outstanding - diluted		172,883		147,394

Basic earnings per common share	Basic earnings per common share	$	1.00	$	1.02	$	0.97	$	2.19	Basic earnings per common share		$	1.24	$	(0.14)
Diluted earnings per common share	Diluted earnings per common share	1.00		1.01		0.97		2.19		Diluted earnings per common share		1.24		(0.14)

Earnings per common share is calculated under the two-class method in which all earnings (distributed and undistributed) are allocated to common stock and participating securities based on their respective rights to receive dividends. ~~Webster~~The Company may grant restricted stock, restricted stock units, non-qualified stock options, incentive stock options, or stock appreciation rights to certain employees and directors under its stock-based compensation programs, which entitle recipients to receive
non-forfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock. These unvested awards meet the definition of participating securities.

Potential common shares from ~~stock options and~~ performance-based restricted stock ~~awards~~ that were not included in the computation of dilutive earnings per common share because they were anti-dilutive under the treasury stock method were ~~379,308~~85,033 and ~~298,617~~341,904 for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023, and 2022, ~~respectively, and 55,027 and 27,666 for the three and six months ended June 30, 2021,~~ respectively.

6561

Note 13: Derivative Financial Instruments

Derivative Positions and Offsetting

Derivatives Designated ~~in Hedge Relationships~~as Hedging Instruments. Interest rate swaps allow the Company to change the fixed or variable nature of an interest rate without the exchange of the underlying notional amount. Certain pay fixed/receive variable interest rate swaps are designated as cash flow hedges to effectively convert variable-rate debt into fixed-rate debt, ~~while~~whereas certain receive fixed/pay variable interest rate swaps are designated as fair value hedges to effectively convert fixed-rate long-term debt into variable-rate debt. Certain purchased options are also designated as cash flow hedges. Purchased options allow the Company to limit the potential adverse impact of variable interest rates by establishing a cap rate or floor rate in exchange for an upfront premium. The purchased options designated as cash flow hedges represent interest rate caps where payment is received from the counterparty if interest rates rise above the cap rate, and interest rate floors where payment is received from the counterparty when interest rates fall below the floor rate.

Derivatives Not Designated ~~in Hedge Relationships.~~as Hedging Instruments. The Company also enters into other derivative transactions to manage economic risks, but does not designate the instruments in hedge relationships. ~~Further,~~In addition, the Company enters into derivative contracts to accommodate customer needs. Derivative contracts with customers are offset with dealer counterparty transactions structured with matching terms to ensure minimal impact on earnings.

The following ~~table presents~~tables present the notional amounts and fair values, including accrued interest, of derivative positions:


		At June 30, 2022									At March 31, 2023
		Asset Derivatives				Liability Derivatives					Asset Derivatives				Liability Derivatives
(In thousands)	(In thousands)	Notional Amounts		Fair Value		Notional Amounts		Fair Value		(In thousands)	Notional Amounts		Fair Value		Notional Amounts		Fair Value
Designated as hedging instruments:	Designated as hedging instruments:									Designated as hedging instruments:
Interest rate derivatives (1)	Interest rate derivatives (1)	$	2,000,000	$	3,843	$	500,000	$	193	Interest rate derivatives (1)	$	3,750,000	$	25,892	$	1,750,000	$	5,493
Not designated as hedging instruments:	Not designated as hedging instruments:									Not designated as hedging instruments:
Interest rate derivatives (1)	Interest rate derivatives (1)	6,922,130		121,351		6,390,965		212,078		Interest rate derivatives (1)	7,417,679		219,149		7,411,878		323,123
Mortgage banking derivatives (2)	Mortgage banking derivatives (2)	223		2		—		—		Mortgage banking derivatives (2)	1,973		16		—		—
Other (3)	Other (3)	169,356		820		482,326		280		Other (3)	169,276		171		659,603		651
Total not designated as hedging instruments	Total not designated as hedging instruments	7,091,709		122,173		6,873,291		212,358		Total not designated as hedging instruments	7,588,928		219,336		8,071,481		323,774
Gross derivative instruments, before netting	Gross derivative instruments, before netting	$	9,091,709	126,016		$	7,373,291	212,551		Gross derivative instruments, before netting	$	11,338,928	245,228		$	9,821,481	329,267
Less: Master netting agreements	Less: Master netting agreements			11,722				11,722		Less: Master netting agreements			30,506				30,506
Cash collateral	Cash collateral			89,220				100		Cash collateral			181,853				400
Total derivative instruments, after netting	Total derivative instruments, after netting			$	25,074			$	200,729	Total derivative instruments, after netting			$	32,869			$	298,361

		At December 31, 2021									At December 31, 2022
		Asset Derivatives				Liability Derivatives					Asset Derivatives				Liability Derivatives
(In thousands)	(In thousands)	Notional Amounts		Fair Value		Notional Amounts		Fair Value		(In thousands)	Notional Amounts		Fair Value		Notional Amounts		Fair Value
Designated as hedging instruments:	Designated as hedging instruments:									Designated as hedging instruments:
Interest rate derivatives (1)	Interest rate derivatives (1)	$	1,000,000	$	17,583	$	—	$	—	Interest rate derivatives (1)	$	1,350,000	$	1,515	$	1,750,000	$	9,632
Not designated as hedging instruments:	Not designated as hedging instruments:									Not designated as hedging instruments:
Interest rate derivatives (1)	Interest rate derivatives (1)	4,463,048		141,243		4,372,846		21,570		Interest rate derivatives (1)	7,024,507		221,225		7,022,844		403,952
Mortgage banking derivatives (2)	Mortgage banking derivatives (2)	14,212		80		—		—		Mortgage banking derivatives (2)	3,283		32		—		—
Other (3)	Other (3)	76,755		211		374,688		214		Other (3)	161,934		134		606,478		915
Total not designated as hedging instruments	Total not designated as hedging instruments	4,554,015		141,534		4,747,534		21,784		Total not designated as hedging instruments	7,189,724		221,391		7,629,322		404,867
Gross derivative instruments, before netting	Gross derivative instruments, before netting	$	5,554,015	159,117		$	4,747,534	21,784		Gross derivative instruments, before netting	$	8,539,724	222,906		$	9,379,322	414,499
Less: Master netting agreements	Less: Master netting agreements			6,364				6,364		Less: Master netting agreements			16,129				16,129
Cash collateral	Cash collateral			19,272				2,119		Cash collateral			184,095				—
Total derivative instruments, after netting	Total derivative instruments, after netting			$	133,481			$	13,301	Total derivative instruments, after netting			$	22,682			$	398,370

(1)Balances related to clearing houses are presented as a single unit of account. In accordance with their rule books, clearing houses legally characterize variation margin payments as settlement of derivatives rather than collateral against derivative positions. ~~Notional~~At March 31, 2023, and December 31, 2022, notional amounts of interest rate swaps cleared through clearing houses include ~~$2.7~~$2.4 billion and ~~$0.4~~$2.7 billion for asset derivatives, respectively, and ~~$0.4 billion~~$1.9 million and ~~$2.6 billion~~zero for liability derivatives, ~~at June 30, 2022 and December 31, 2021,~~ respectively. The related fair values approximate zero.

(2)Notional amounts related to residential loans exclude approved floating rate commitments of ~~$0.2~~$3.8 million and ~~$1.0~~$2.4 million at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, respectively.

(3)Other derivatives include foreign currency forward contracts related to lending arrangements, ~~and customer hedging activity,~~ a Visa equity swap transaction, and risk participation agreements. Notional amounts of risk participation agreements include ~~$131.7~~$154.9 million and ~~$66.0~~$125.6 million for asset derivatives and ~~$463.8~~$589.7 million and ~~$338.2~~$559.2 million for liability derivatives at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, respectively, ~~that~~which have insignificant related fair values.

6662

The following ~~table presents~~tables present fair value positions transitioned from gross to net upon applying counterparty netting agreements:


		At June 30, 2022											At March 31, 2023
(In thousands)	(In thousands)	Gross Amount Recognized		Derivative Offset Amount		Cash Collateral Received/Pledged		Net Amount Presented		Amounts Not Offset		(In thousands)	Gross Amount Recognized		Derivative Offset Amount		Cash Collateral Received/Pledged		Net Amount Presented		Amounts Not Offset
Asset derivatives	Asset derivatives	$	107,886	$	11,722	$	89,220	$	6,944	$	7,314	Asset derivatives	$	220,259	$	30,506	$	181,853	$	7,900	$	8,270
Liability derivatives	Liability derivatives	11,855		11,722		100		33		1,614		Liability derivatives	31,360		30,506		400		454		5,032

		At December 31, 2021											At December 31, 2022
(In thousands)	(In thousands)	Gross Amount Recognized		Derivative Offset Amount		Cash Collateral Received/Pledged		Net Amount Presented		Amounts Not Offset		(In thousands)	Gross Amount Recognized		Derivative Offset Amount		Cash Collateral Received/Pledged		Net Amount Presented		Amounts Not Offset
Asset derivatives	Asset derivatives	$	25,636	$	6,364	$	19,272	$	—	$	51	Asset derivatives	$	217,246	$	16,129	$	184,095	$	17,022	$	17,392
Liability derivatives	Liability derivatives	8,483		6,364		2,119		—		428		Liability derivatives	16,129		16,129		—		—		1,545

Derivative Activity

The following table summarizes the income statement effect of derivatives designated as ~~cash flow hedges:~~hedging instruments:


		Recognized In	Three months ended June 30,				Six months ended June 30,					Recognized In	Three months ended March 31,
(In thousands)	(In thousands)	Net Interest Income	2022		2021		2022		2021		(In thousands)	Net Interest Income		2023		2022
Fair value hedges:											Fair value hedges:
Recognized on derivatives											Recognized on derivatives	Deposits		$	(10,235)	$	—
Recognized on hedged items											Recognized on hedged items	Deposits		10,427		—
Net recognized on fair value hedges											Net recognized on fair value hedges			$	(192)	$	—

Cash flow hedges:											Cash flow hedges:
Interest rate derivatives	Interest rate derivatives	Long-term debt	$	77	$	123	$	153	$	244	Interest rate derivatives	Long-term debt		$	76	$	76
Interest rate derivatives	Interest rate derivatives	Interest and fees on loans and leases	(1,244)		(2,645)		(3,803)		(5,227)		Interest rate derivatives	Interest and fees on loans and leases		(736)		2,559
Net recognized on cash flow hedges	Net recognized on cash flow hedges		$	(1,167)	$	(2,522)	$	(3,650)	$	(4,983)	Net recognized on cash flow hedges			$	(812)	$	2,483

The following table summarizes information related to a fair value hedging ~~adjustment:~~adjustments:


Condensed Consolidated Balance Sheet Line Item in Which Hedged Item is Located	Condensed 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				Condensed 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
(In thousands)	(In thousands)	At June 30, 2022		At December 31, 2021		At June 30, 2022		At December 31, 2021		(In thousands)	At March 31, 2023		At December 31, 2022		At March 31, 2023		At December 31, 2022
Long-term debt		$	336,134	$	338,811	$	36,134	$	38,811
Deposits										Deposits	$	410,254	$	—	$	10,254	$	—
Long-term debt (1)										Long-term debt (1)	332,119		333,458		32,119		33,458

(1)The Company de-designated its fair value hedging relationship on its long-term debt in 2020. The basis adjustment included in the carrying amount is being amortized into interest expense over the remaining life of the long-term debt.

The following table summarizes the income statement effect of derivatives not designated as hedging instruments:


		Recognized In	Three months ended June 30,				Six months ended June 30,					Recognized In	Three months ended March 31,
(In thousands)	(In thousands)	Non-interest Income	2022		2021		2022		2021		(In thousands)	Non-interest Income		2023		2022
Interest rate derivatives	Interest rate derivatives	Other income	$	12,814	$	(239)	$	19,259	$	4,405	Interest rate derivatives	Other income		$	(3,687)	$	6,445
Mortgage banking derivatives	Mortgage banking derivatives	Mortgage banking activities	(29)		(212)		(78)		(594)		Mortgage banking derivatives	Mortgage banking activities		(16)		(49)
Other	Other	Other income	1,027		(303)		1,424		169		Other	Other income		(735)		397
Total not designated as hedging instruments	Total not designated as hedging instruments		$	13,812	$	(754)	$	20,605	$	3,980	Total not designated as hedging instruments			$	(4,438)	$	6,793

~~Purchased~~Time-value premiums, which are amortized on a straight-line basis, are excluded from the assessment of hedge effectiveness for purchased options designated as cash flow ~~hedges exclude time-value premiums from the assessment of hedge effectiveness. Time-value premiums are amortized on a straight-line basis.~~hedges. At ~~June 30, 2022,~~March 31, 2023, the remaining unamortized balance of time-value premiums was ~~$4.3~~$2.1 million. Over the next twelve months, an estimated ~~$3.1 million~~ decrease to interest ~~expense~~income of $9.5 million will be reclassified from ~~(AOCL)~~ AOCI relating to cash flow ~~hedges,~~hedge gain/loss, and an estimated ~~$0.3 million~~ increase to interest expense of $0.3 million will be reclassified from ~~(AOCL)~~ AOCI relating to cash flow hedge terminations. At ~~June 30, 2022,~~March 31, 2023, the remaining unamortized loss on terminated cash flow hedges ~~is $0.5~~was $0.3 million. The maximum length of time over which forecasted transactions are hedged is ~~4.6~~4.9 years.

Additional information ~~about~~regarding cash flow hedge activity impacting ~~(AOCL)~~ AOCI and the related amounts reclassified to ~~interest expense is provided in~~net income can be found within Note 9: Accumulated Other Comprehensive Income (Loss) ~~Income,~~, Net of Tax. ~~Information about the valuation methods used to measure the fair value of derivatives is provided in Note 14: Fair Value Measurements.~~

Derivative Exposure. At ~~June 30, 2022,~~March 31, 2023, the Company had ~~$70.3~~$38.7 million in initial margin collateral posted at clearing houses. In addition, ~~$90.8~~$187.3 million of cash collateral received is included in ~~cash~~Cash and due from banks on the accompanying Condensed Consolidated Balance Sheets. ~~Webster~~The Company regularly evaluates the credit risk of its derivative customers, taking into account the likelihood of default, net exposures, and remaining contractual life, among other related factors. Credit risk exposure is mitigated as transactions with customers are generally secured by the same collateral of the underlying transactions. Current net credit exposure relating to interest rate derivatives with ~~Webster Bank~~the Bank's customers was ~~$18.1~~$24.9 million at ~~June 30, 2022.~~March 31, 2023. In addition, the Company monitors potential future exposure, representing its best estimate of exposure to remaining contractual maturity. The potential future exposure relating to interest rate derivatives with ~~Webster Bank~~the Bank's customers totaled ~~$55.7~~$97.8 million at ~~June 30, 2022. Webster~~
March 31, 2023. The Company has incorporated a valuation adjustment to reflect ~~nonperformance~~non-performance risk in the fair value measurement of its derivatives, which totaled ~~$6.1~~$5.3 million and ~~$(0.4)~~$8.4 million at ~~June 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, respectively. Various factors impact changes in the valuation adjustment over time, ~~including~~such as changes in the credit spreads of the contracted parties, ~~to the contracts, as well as~~and changes in market rates and volatilities, which affect the total expected exposure of the derivative instruments.

Note 14: Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The determination of fair value may require the use of estimates when quoted market prices are not available. Fair value estimates made at a specific point in time are based on management’s judgments regarding future expected losses, current economic conditions, the risk characteristics of each financial instrument, and other subjective factors that cannot be determined with precision.

The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels within the fair value hierarchy are as follows:

•Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that ~~Webster~~the Company has the ability to access at the measurement date.

•Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability ~~(such as~~(i.e., interest rates, rate volatility, prepayment speeds, and credit ratings), or inputs that are derived principally from or corroborated by market data, correlation, or other means.

•Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. This includes certain pricing models or other similar techniques that require significant management judgment or estimation.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Available-for-Sale ~~Investment~~ Securities.When unadjusted quoted prices are available in an active market, ~~Webster~~the Company classifies its available-for-sale investment securities within Level 1 of the fair value hierarchy. U.S. Treasury notes have a readily determinable fair value, and ~~therefore~~accordingly, are classified within Level 1 of the fair value hierarchy.

When quoted market prices are not available, ~~Webster~~the Company employs an independent pricing service that utilizes matrix pricing to calculate fair value. These fair value measurements consider observable data, such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayments speeds, credit information, and the respective terms and conditions for debt instruments. Management maintains procedures to monitor the pricing service's results and has a process in place to challenge their valuations and methodologies that appear unusual or unexpected. Government agency debentures, ~~municipal~~Municipal bonds and notes, Agency CMO, Agency MBS, Agency CMBS, CMBS, CLO, ~~corporate~~Corporate debt, ~~private~~Private label MBS, and ~~other~~Other available-for-sale securities ~~available-for-sale~~ are classified within Level 2 of the fair value hierarchy.

Derivative ~~Instruments~~Instruments. .The fair values presented for derivative instruments include any accrued interest. Foreign exchange contracts are valued based on unadjusted quoted prices in active markets, and accordingly, are classified within Level 1 of the fair value hierarchy. Except for mortgage banking derivatives, all other derivative instruments are valued using third-party valuation software, which considers the present value of cash flows discounted using observable forward rate assumptions. The resulting fair value is then validated against valuations performed by independent third parties. These derivative instruments are classified within Level 2 of the fair value hierarchy.

Mortgage Banking ~~Derivatives~~.Derivatives. ~~Webster~~The Company uses forward sales of mortgage loans and mortgage-backed securities to manage the risk of loss associated with its mortgage loan commitments and mortgage loans held for sale. Prior to closing and funding certain single-family residential mortgage loans, an interest rate lock commitment is generally extended to the borrower. During this in-between time period, ~~Webster~~the Company is subject to the risk that market interest rates may change. If rates rise, investors generally will pay less to purchase mortgage loans, which would result in a reduction in the gain on sale of the loans, or possibly a loss. In an effort to mitigate this risk, forward delivery sales commitments are established in which ~~Webster~~the Company agrees to either deliver whole mortgage loans to various investors or issue mortgage-backed securities. The fair value of mortgage banking derivatives is determined based on current market prices for similar assets in the secondary market. Accordingly, mortgage banking derivatives are classified within Level 2 of the fair value hierarchy.

Originated Loans Held For ~~Sale~~.Sale. ~~Webster~~The Company has elected to measure originated loans held for sale at fair value under the fair value option per ASC Topic 825, Financial Instruments. Electing to measure originated loans held for sale at fair value reduces certain timing differences and better reflects the price ~~Webster~~the Company would expect to receive from the sale of these loans. The fair value of originated loans held for sale is based on quoted market prices of similar loans sold in conjunction with securitization transactions. Accordingly, originated loans held for sale are classified within Level 2 of the fair value hierarchy.

The following table compares the fair value to the unpaid principal balance of originated loans held for sale:


		At June 30, 2022						At December 31, 2021							At March 31, 2023						At December 31, 2022
(In thousands)	(In thousands)	Fair Value		Unpaid Principal Balance		Difference		Fair Value		Unpaid Principal Balance		Difference		(In thousands)	Fair Value		Unpaid Principal Balance		Difference		Fair Value		Unpaid Principal Balance		Difference
Originated loans held for sale	Originated loans held for sale	$	388	$	378	$	10	$	4,694	$	5,034	$	(340)	Originated loans held for sale	$	811	$	684	$	127	$	1,991	$	1,631	$	360

Rabbi Trust Investments. Investments held in each of the Company's Rabbi Trusts consist primarily of mutual funds that invest in equity and fixed income securities. Shares of these mutual funds are valued based on the ~~net asset value (NAV)~~NAV as reported by the trustee of the funds, which represents quoted prices in active markets. ~~Webster~~The Company has elected to measure the Rabbi Trusts' investments at fair value. Accordingly, the Rabbi Trusts' investments are classified within Level 1 of the fair value hierarchy. At ~~June 30,~~both
March 31, 2023, and December 31, 2022, the total cost basis of the investments held in the Rabbi ~~Trusts' investments~~Trusts was ~~$8.9~~$10.0 million.

Alternative Investments. Equity investments have a readily determinable fair value when unadjusted quoted prices are available in an active market for identical assets. Accordingly, these alternative investments are classified within Level 1 of the fair value hierarchy. At ~~June 30,~~March 31, 2023, and December 31, 2022, equity investments with a readily determinable fair value had a total carrying amount of ~~$0.7~~$0.5 million and $0.4 million, respectively, with no remaining unfunded commitment. During the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, there were ~~write-downs~~total write-ups in fair value of ~~$0.4~~$0.1 million ~~and $1.2 million, respectively,~~ associated with these alternative investments.

Equity investments that do not have a readily ~~available~~determinable fair value may qualify for the NAV practical expedient if they meet certain requirements. ~~Webster's~~The Company's alternative investments measured at NAV consist of investments in non-public entities that cannot be redeemed since investments are distributed as the underlying equity is liquidated. Alternative investments measured at NAV are not classified within the fair value hierarchy. At ~~June 30,~~March 31, 2023, and December 31, 2022, these alternative investments had a total carrying amount of ~~$70.4~~$27.0 million and $89.2 million, respectively, and a remaining unfunded commitment of ~~$18.2 million.~~$28.5 million and $82.7 million, respectively.

Contingent Consideration. The Company recorded $16.0 million of contingent consideration at fair value related to two earn-out agreements associated with the acquisition of interLINK on January 11, 2023. The terms of the purchase agreement specified that the seller would receive earn-outs based on the ability of the Company to: (i) re-sign the existing broker dealers under contract, and (ii) generate $2.5 billion in new broker dealer deposit programs within three years of the acquisition date. The estimated fair values of the contingent consideration liabilities are measured on a recurring basis and determined using an income approach considering management’s evaluation of the probability of achievement, forecasted achievement date (payment term), and a discount rate equivalent to the counterparty cost of debt. These significant inputs, which are the responsibility of management and were initially calculated with the assistance of a third-party valuation specialist, are not observable and accordingly, are classified within Level 3 of the fair value hierarchy.

The following table summarizes the unobservable inputs used to derive the estimated fair value of the Company’s contingent consideration liabilities at March 31, 2023 (dollars in thousands):


Agreement	Maximum Amount		Probability of Achievement	Payment Term (in years)	Discount Rate	Fair Value
(i) Re-sign broker dealers	$	4,826	99.0 %	0.22	5.50 %	$	4,798
(ii) Deposit program growth	$	12,500	100.0 %	1.97	5.50 %	$	11,241

Contingent consideration liabilities are included within Accrued expenses and other liabilities on the accompanying Condensed Consolidated Balance Sheets. Any fair value adjustments to contingent consideration liabilities are included in Other expense on the accompanying Condensed Consolidated Statements of Income.

The following ~~table summarizes~~tables summarize the fair values of assets and liabilities measured at fair value on a recurring basis:


		At June 30, 2022								At March 31, 2023
(In thousands)	(In thousands)	Level 1		Level 2		Level 3		Total			(In thousands)	Level 1		Level 2		Level 3		Total
Financial Assets:	Financial Assets:										Financial Assets:
Available-for-sale investment securities:
Available-for-sale securities:											Available-for-sale securities:
U.S. Treasury notes	U.S. Treasury notes	$	726,484	$	—	$	—	$	726,484		U.S. Treasury notes	$	386,772	$	—	$	—	$	386,772
Government agency debentures	Government agency debentures	—		291,203		—		291,203			Government agency debentures	—		262,342		—		262,342
Municipal bonds and notes	Municipal bonds and notes	—		1,830,630		—		1,830,630			Municipal bonds and notes	—		1,645,228		—		1,645,228
Agency CMO	Agency CMO	—		71,247		—		71,247			Agency CMO	—		57,462		—		57,462
Agency MBS	Agency MBS	—		2,421,333		—		2,421,333			Agency MBS	—		2,230,850		—		2,230,850
Agency CMBS	Agency CMBS	—		1,561,505		—		1,561,505			Agency CMBS	—		1,635,252		—		1,635,252
CMBS	CMBS	—		929,103		—		929,103			CMBS	—		902,058		—		902,058
CLO		—		10,147		—		10,147

Corporate debt	Corporate debt	—		736,520		—		736,520			Corporate debt	—		625,523		—		625,523
Private label MBS	Private label MBS	—		48,303		—		48,303			Private label MBS	—		44,262		—		44,262
Other	Other	—		11,883		—		11,883			Other	—		9,228		—		9,228
Total available-for-sale investment securities		726,484		7,911,874		—		8,638,358
Total available-for-sale securities											Total available-for-sale securities	386,772		7,412,205		—		7,798,977
Gross derivative instruments, before netting (1)	Gross derivative instruments, before netting (1)	794		125,222		—		126,016			Gross derivative instruments, before netting (1)	82		245,146		—		245,228
Originated loans held for sale	Originated loans held for sale	—		388		—		388			Originated loans held for sale	—		811		—		811
Investments held in Rabbi Trust		12,621		—		—		12,621
Investments held in Rabbi Trusts											Investments held in Rabbi Trusts	11,992		—		—		11,992
Alternative investments (2)	Alternative investments (2)	718		—		—		71,074			Alternative investments (2)	476		—		—		27,486
Total financial assets	Total financial assets	$	740,617	$	8,037,484	$	—	$	8,848,457		Total financial assets	$	399,322	$	7,658,162	$	—	$	8,084,494
Financial Liabilities:	Financial Liabilities:										Financial Liabilities:
Gross derivative instruments, before netting (1)	Gross derivative instruments, before netting (1)	$	99	$	212,452	$	—	$	212,551		Gross derivative instruments, before netting (1)	$	557	$	328,710	$	—	$	329,267
Contingent consideration											Contingent consideration	—		—		16,039		16,039
Total financial liabilities											Total financial liabilities	$	557	$	328,710	$	16,039	$	345,306


		At December 31, 2021								At December 31, 2022
(In thousands)	(In thousands)	Level 1		Level 2		Level 3		Total			(In thousands)	Level 1		Level 2		Level 3		Total
Financial Assets:	Financial Assets:										Financial Assets:
Available-for-sale investment securities:
Available-for-sale securities:											Available-for-sale securities:
U.S. Treasury notes	U.S. Treasury notes	$	396,966	$	—	$	—	$	396,966		U.S. Treasury notes	$	717,040	$	—	$	—	$	717,040
Government agency debentures											Government agency debentures	—		258,374		—		258,374
Municipal bonds and notes											Municipal bonds and notes	—		1,633,202		—		1,633,202
Agency CMO	Agency CMO	—		90,384		—		90,384			Agency CMO	—		59,965		—		59,965
Agency MBS	Agency MBS	—		1,593,403		—		1,593,403			Agency MBS	—		2,158,024		—		2,158,024
Agency CMBS	Agency CMBS	—		1,232,541		—		1,232,541			Agency CMBS	—		1,406,486		—		1,406,486
CMBS	CMBS	—		886,263		—		886,263			CMBS	—		896,640		—		896,640
CLO	CLO	—		21,847		—		21,847			CLO	—		2,107		—		2,107
Corporate debt	Corporate debt	—		13,450		—		13,450			Corporate debt	—		704,412		—		704,412
Total available-for-sale investment securities		396,966		3,837,888		—		4,234,854
Private label MBS											Private label MBS	—		44,249		—		44,249
Other											Other	—		12,198		—		12,198
Total available-for-sale securities											Total available-for-sale securities	717,040		7,175,657		—		7,892,697
Gross derivative instruments, before netting (1)	Gross derivative instruments, before netting (1)	187		158,930		—		159,117			Gross derivative instruments, before netting (1)	79		222,827		—		222,906
Originated loans held for sale	Originated loans held for sale	—		4,694		—		4,694			Originated loans held for sale	—		1,991		—		1,991
Investments held in Rabbi Trust		3,416		—		—		3,416
Investments held in Rabbi Trusts											Investments held in Rabbi Trusts	12,103		—		—		12,103
Alternative investments (2)	Alternative investments (2)	1,877		—		—		27,732			Alternative investments (2)	430		—		—		89,678
Total financial assets	Total financial assets	$	402,446	$	4,001,512	$	—	$	4,429,813		Total financial assets	$	729,652	$	7,400,475	$	—	$	8,219,375
Financial Liabilities:	Financial Liabilities:										Financial Liabilities:
Gross derivative instruments, before netting (1)	Gross derivative instruments, before netting (1)	$	141	$	21,643	$	—	$	21,784		Gross derivative instruments, before netting (1)	$	843	$	413,656	$	—	$	414,499

(1)Additional information regarding the impact of netting derivative assets and derivative liabilities, as well as the impact from offsetting cash collateral paid to the same derivative counterparties, can be found within Note 13: Derivative Financial Instruments.

(2)Certain alternative investments are recorded at NAV. Assets measured at NAV are not classified within the fair value hierarchy.

Assets Measured at Fair Value on a Non-Recurring Basis

~~Webster~~The Company measures certain assets at fair value on a non-recurring basis. The following is a description of the valuation methodologies used for assets measured at fair value on a non-recurring basis.

Alternative Investments. The measurement alternative has been elected for alternative investments without readily determinable fair values that do not qualify for the NAV practical expedient. The measurement alternative requires investments to be measured at cost minus impairment, if any, plus or minus adjustments resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. Accordingly, these alternative investments are classified within Level 2 of the fair value hierarchy. At ~~June 30,~~March 31, 2023, and December 31, 2022, the carrying amount of these alternative investments was ~~$30.6 million. There~~$46.1 million and $42.8 million, respectively, of which none and $5.9 million, respectively, were ~~no write-ups due~~considered to ~~observable price changes or write-downs due to impairment during the three and six months ended June 30, 2022.~~be measured at fair value.

Loans Transferred to Held for Sale. Once a decision has been made to sell loans not previously classified as held for sale, these loans are transferred into the held for sale category and carried at the lower of cost or fair ~~value.~~value, less estimated costs to sell. At the time of transfer into held for sale classification, any amount by which cost exceeds fair value is accounted for as a valuation allowance. This activity generally pertains to ~~commercial~~ loans with observable inputs, and therefore, are classified within Level 2 of the fair value hierarchy. However, should these loans include adjustments for changes in loan characteristics based on unobservable inputs, the loans would then be classified within Level 3 of the fair value hierarchy. At ~~June 30,~~March 31, 2023, and December 31, 2022, ~~the carrying amount of~~there were $209.9 million and zero loans that were transferred to held for sale ~~was zero.~~on the Condensed Consolidated Balance Sheet.

Collateral Dependent Loans and Leases. Loans and leases for which repayment is substantially expected to be provided through the operation or sale of collateral are considered collateral dependent, and are valued based on the estimated fair value of the collateral, less estimated costs to sell at the reporting date, using customized discounting criteria. Accordingly, collateral dependent loans and leases are classified within Level 3 of the fair value hierarchy.

Other Real Estate Owned and Repossessed Assets. ~~Other real estate owned (OREO)~~OREO and repossessed assets are held at the lower of cost or fair value and are considered to be measured at fair value when recorded below cost. The fair value of OREO is calculated using independent appraisals or internal valuation methods, less estimated selling costs, and may consider available pricing guides, auction results, and price opinions. Certain repossessed assets may also require assumptions about factors that are not observable in an active market when determining fair value. Accordingly, OREO and repossessed assets are classified within Level 3 of the fair value hierarchy. At ~~June 30,~~March 31, 2023, and December 31, 2022, the total book value of OREO and repossessed assets was ~~$2.7 million.~~$1.5 million and $2.3 million, respectively. In addition, the amortized cost of consumer loans secured by residential real estate property that were in process of foreclosure at ~~June 30, 2022~~March 31, 2023, was ~~$15.2~~$16.4 million.

Estimated Fair Values of Financial Instruments and Mortgage Servicing Assets

~~Webster~~The Company is required to disclose the estimated fair values of certain financial instruments and mortgage servicing ~~assets.~~rights. The following is a description of the valuation methodologies used to estimate fair value for those assets and liabilities.

Cash and Cash Equivalents. Given the short time frame to maturity, the carrying amount of cash and cash equivalents, which comprises cash and due from banks and interest-bearing deposits, approximates fair value. Cash and cash equivalents are classified within Level 1 of the fair value hierarchy.

Held-to-Maturity ~~Investment~~ Securities. When quoted market prices are not available, ~~Webster~~the Company employs an independent pricing service that utilizes matrix pricing to calculate fair value. These fair value measurements consider observable data, such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus ~~prepayments~~prepayment speeds, credit information, and the respective terms and conditions for debt instruments. Management maintains procedures to monitor the pricing service's results and has a process in place to challenge their valuations and methodologies that appear unusual or unexpected. Held-to-maturity ~~investment~~ securities, which include Agency CMO, Agency MBS, Agency CMBS, ~~CMBS, and municipal~~Municipal bonds and notes, and CMBS, are classified within Level 2 of the fair value hierarchy.

Loans and Leases, net. Except for collateral dependent loans and leases, the fair value of loans and leases held for investment is estimated using a discounted cash flow methodology, based on future prepayments and market interest rates inclusive of an illiquidity premium for comparable loans and leases. The associated cash flows are then adjusted for associated credit risks and other potential losses, as appropriate. Loans and leases are classified within Level 3 of the fair value hierarchy.

Mortgage Servicing ~~Assets~~Rights. Mortgage servicing ~~assets~~rights are initially measured at fair value and subsequently measured using the amortization method. ~~Webster assess~~The Company assesses mortgage servicing ~~assets~~rights for impairment each quarter and establishes or adjusts the valuation allowance to the extent that amortized cost exceeds the estimated fair market value. Fair value is calculated as the present value of estimated future net servicing income and relies on market based assumptions for loan prepayment speeds, servicing costs, discount rates, and other economic factors. Accordingly, the primary risk inherent in valuing mortgage servicing ~~assets~~rights is the impact of fluctuating interest rates on the related servicing revenue stream. Mortgage servicing ~~assets~~rights are classified within Level 3 of the fair value hierarchy.

Deposit Liabilities. The fair value of deposit liabilities, which comprises demand deposits, interest-bearing checking, savings, health savings, and money market accounts, reflects the amount payable on demand at the reporting date. Deposit liabilities are classified within Level 2 of the fair value hierarchy.

Time Deposits. The fair value of fixed-maturity certificates of deposit is estimated using rates that are currently offered for deposits with similar remaining maturities. Time deposits are classified within Level 2 of the fair value hierarchy.

Securities Sold Under Agreements to Repurchase and Other Borrowings. The fair value of securities sold under agreements to repurchase and other borrowings that mature within 90 days approximates their carrying value. The fair value of securities sold under agreements to repurchase and other borrowings that mature after 90 days is estimated using a discounted cash flow methodology based on current market rates and adjusted for associated credit risks, as appropriate. Securities sold under agreements to repurchase and other borrowings are classified within Level 2 of the fair value hierarchy.

Federal Home Loan Bank Advances and Long-Term Debt. The fair value of FHLB advances and long-term debt is estimated using a discounted cash flow methodology in which discount rates are matched with the time period of the expected cash flows and adjusted for associated credit risks, as appropriate. FHLB advances and long-term debt are classified within Level 2 of the fair value hierarchy.

The following table summarizes the carrying amounts, estimated fair values, and classifications within the fair value hierarchy of selected financial instruments and mortgage servicing ~~assets:~~rights:


		At June 30, 2022				At December 31, 2021					At March 31, 2023				At December 31, 2022
(In thousands)	(In thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		(In thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:	Assets:									Assets:
Level 1	Level 1									Level 1
Cash and cash equivalents	Cash and cash equivalents	$	901,805	$	901,805	$	461,570	$	461,570	Cash and cash equivalents	$	2,434,071	$	2,434,071	$	839,943	$	839,943
Level 2	Level 2									Level 2
Held-to-maturity investment securities	Held-to-maturity investment securities	6,547,998		6,008,849		6,198,125		6,280,936		Held-to-maturity investment securities	7,063,223		6,320,682		6,564,697		5,761,453
Level 3	Level 3									Level 3
Loans and leases, net	Loans and leases, net	45,075,244		44,259,548		21,970,542		21,702,732		Loans and leases, net	50,312,609		48,825,894		49,169,685		47,604,463
Mortgage servicing assets	Mortgage servicing assets	8,592		28,125		9,237		12,527		Mortgage servicing assets	9,189		26,959		9,515		27,043
Liabilities:	Liabilities:									Liabilities:
Level 2	Level 2									Level 2
Deposit liabilities	Deposit liabilities	$	50,523,055	$	50,523,055	$	28,049,259	$	28,049,259	Deposit liabilities	$	50,767,700	$	50,767,700	$	49,893,391	$	49,893,391
Time deposits	Time deposits	2,554,102		2,503,875		1,797,770		1,794,829		Time deposits	4,529,779		4,471,757		4,160,949		4,091,979
Securities sold under agreements to repurchase and other borrowings	Securities sold under agreements to repurchase and other borrowings	1,743,782		1,716,119		674,896		676,581		Securities sold under agreements to repurchase and other borrowings	306,154		306,113		1,151,830		1,151,797
FHLB advances	FHLB advances	2,510,810		2,509,642		10,997		11,490		FHLB advances	8,560,461		8,560,329		5,460,552		5,459,218
Long-term debt (1)	Long-term debt (1)	1,076,559		995,476		562,931		515,912		Long-term debt (1)	1,071,413		1,005,178		1,073,128		1,001,779

(1)Any unamortized premiums/discounts, debt issuance costs, or basis adjustments to long-term debt, as applicable, are excluded from the determination of fair value.

Note 15: Retirement Benefit Plans

Defined Benefit Pension and Other Postretirement Benefits

The following ~~table summarizes~~tables summarize the components of net periodic benefit cost (income) ~~cost:~~:


		Three months ended June 30,													Three months ended March 31,
		2022						2021							2023						2022
(In thousands)	(In thousands)	Pension Plan		SERP		OPEB		Pension Plan		SERP		OPEB		(In thousands)	Pension		SERP		OPEB		Pension		SERP		OPEB
Service cost	Service cost	$	—	$	—	$	9	$	—	$	—	$	—	Service cost	$	—	$	—	$	7	$	—	$	—	$	6
Interest cost	Interest cost	1,380		17		213		1,166		6		4		Interest cost	2,211		67		380		1,377		15		144
Expected return on plan assets	Expected return on plan assets	(3,668)		—		—		(3,596)		—		—		Expected return on plan assets	(2,699)		—		—		(3,669)		—		—
Amortization of actuarial loss (gain)	Amortization of actuarial loss (gain)	423		6		(19)		1,020		9		(20)		Amortization of actuarial loss (gain)	1,216		1		(675)		422		7		(18)
Net periodic benefit (income) cost		$	(1,865)	$	23	$	203	$	(1,410)	$	15	$	(16)
Net periodic benefit cost (income)														Net periodic benefit cost (income)	$	728	$	68	$	(288)	$	(1,870)	$	22	$	132

Six months ended June 30,
2022 2021
(In thousands) Pension Plan SERP Other Benefits Pension Plan SERP Other Benefits
Service cost $ — $ — $ 15 $ — $ — $ —
Interest cost 2,757 32 357 2,332 13 8
Expected return on plan assets (7,337) — — (7,191) — —
Amortization of actuarial loss (gain) 845 13 (37) 2,039 17 (40)
Net periodic benefit (income) cost $ (3,735) $ 45 $ 335 $ (2,820) $ 30 $ (32)

The components of net periodic benefit cost (income) ~~cost~~ are included ~~within other non-interest~~in Other expense on the accompanying Condensed Consolidated Statements of Income. The weighted-average expected long-term rate of return on plan assets for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023, was 5.50%, as determined at the beginning of the year.

In connection with the Sterling merger, Webster assumed the benefit obligations of Sterling's pension and other postretirement benefit plans, which included the Astoria Excess and Supplemental Benefit Plans, Astoria Directors' Retirement Plan, Greater New York Savings Bank Directors' Retirement Plan, Astoria Bank Retiree Health Care Plan, and the Sterling Other Postretirement Life Insurance and Other Plans, totaling $30.5 million as of January 31, 2022. The underfunded status of these plans is included in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets.

Note 16: Segment Reporting

~~Webster's~~The Company's operations are organized into 3three reportable segments that represent its primary businesses: Commercial Banking, HSA Bank, and Consumer Banking. These segments reflect how executive management responsibilities are assigned, how discrete financial information is evaluated, the type of customer served, and how products and services are provided. Certain Treasury activities, including the operations of interLINK, along with the amounts required to reconcile profitability metrics to those reported in accordance with GAAP, are included in the Corporate and Reconciling category.

~~Effective~~In connection with the acquisition of interLINK on January 1, 2022, Webster realigned its investment services operations from Commercial Banking to Consumer Banking to better serve its customers and deliver operational efficiencies. Under this realignment, $125.411, 2023, the $143.2 million of ~~deposits and $4.3 billion of assets under administration (off-balance sheet) were reassigned from~~preliminary goodwill recorded has been allocated entirely to Commercial ~~Banking to Consumer~~ Banking. ~~There was no goodwill reallocation nor goodwill impairment as a result of the reorganization.~~ In addition, the non-interest expense allocation methodology was modified to exclude certain overhead and merger-related costs that are not directly related to segment performance. Prior period results of operations have been recasted accordingly to reflect the realignment.

Asas previously discussed in Note 2: Mergers and Acquisitions ~~Webster acquired Sterling on January 31, 2022,~~ and
Note 6: Goodwill and Other Intangible Assets, the allocation of the purchase price ~~is considered preliminary.~~for both the Sterling merger and Bend acquisition are final as of March 31, 2023. Accordingly, of the total $1.9 billion in ~~preliminary~~ goodwill recorded in connection with the Sterling merger, $1.7 billion and $0.2 ~~million was preliminarily~~billion has been allocated to Commercial Banking and Consumer Banking, respectively. The ~~$36.0~~$35.7 million of goodwill recorded in connection with the Bend acquisition ~~was~~has been allocated entirely to HSA Bank.

Segment Reporting Methodology

~~Webster~~The Company uses an internal profitability reporting system to generate information by reportable segment, which is based on a series of management estimates for funds transfer pricing, and allocations for non-interest expense, provision for credit losses, income taxes, and equity capital. These estimates and allocations, certain of which are subjective in nature, are periodically reviewed and refined. Changes in estimates and allocations that affect the results of any ~~one~~ reportable segment do not affect the consolidated financial position or results of operations of ~~Webster~~the Company as a whole. The full profitability measurement reports, which are prepared for each reportable segment, reflect non-GAAP reporting methodologies. The differences between full profitability and GAAP results are reconciled in the Corporate and Reconciling category.

~~Webster~~The Company allocates interest income and interest expense to each business through an internal matched maturity ~~Funds Transfer Pricing (FTP)~~FTP process. The goal of the FTP allocation is to encourage loan and deposit growth consistent with the ~~Webster’s~~Company’s overall profitability objectives. The FTP process considers the specific interest rate risk and liquidity risk of financial instruments and other assets and liabilities in each line of business. Loans ~~and leases~~ are assigned an FTP rate for funds used and deposits are assigned an FTP rate for funds provided. The allocation considers the origination date and the earlier of the maturity date or the repricing date of a financial instrument to assign an FTP rate for loans and ~~leases and~~ deposits originated each day. The FTP process transfers the corporate interest rate risk exposure to the ~~treasury~~Treasury function included within the Corporate and Reconciling category where such exposures are centrally managed.

~~Webster~~The Company allocates a majority of non-interest expense to each reportable segment using an activity and driver-based costing process. Costs, including shared services and back-office support areas, are analyzed, pooled by process, and assigned to the appropriate reportable segment. The combination of direct revenue, direct expenses, funds transfer pricing, and allocations of non-interest expense produces PPNR, which is the basis the segments are reviewed by executive management.

~~Webster~~ The Company also allocates the provision for credit losses to each reportable segment based on management's estimate of the ~~inherent~~expected loss content in each of the specific loan and lease portfolios. The ACL on loans and leases is included in total assets within the Corporate and Reconciling category. ~~Merger-related~~Business development expenses, such as merger-related and strategic initiatives ~~charges~~costs, are also generally included in the Corporate and Reconciling category.

~~The following table presents balance sheet information, including the appropriate allocations, for Webster's reportable segments and the Corporate and Reconciling category:~~
At June 30, 2022
(In thousands) Commercial Banking HSA Bank Consumer Banking Corporate and Reconciling Consolidated Total
Goodwill $ 1,865,887 $ 57,779 $ 590,105 $ — $ 2,513,771
Total assets 39,019,968 124,819 9,766,337 18,683,897 67,595,021
At December 31, 2021
(In thousands) Commercial Banking HSA Bank Consumer Banking Corporate and Reconciling Consolidated Total
Goodwill $ 131,000 $ 21,813 $ 385,560 $ — $ 538,373
Total assets 15,398,159 73,564 7,663,921 11,779,955 34,915,599

7369

The following tables present ~~results of operations,~~balance sheet information, including the appropriate allocations, for ~~Webster’s~~the Company's reportable segments and the Corporate and Reconciling category:
Three months ended June 30, 2022
(In thousands) Commercial Banking HSA Bank Consumer Banking Corporate and Reconciling Consolidated Total
Net interest income $ 333,421 $ 49,558 $ 179,067 $ (75,386) $ 486,660
Non-interest income 49,430 26,552 30,784 14,167 120,933
Non-interest expense 102,720 37,540 107,312 110,655 358,227
Pre-tax, pre-provision net revenue 280,131 38,570 102,539 (171,874) 249,366
Provision (benefit) for credit losses 22,782 — (11,053) 514 12,243
Income (loss) before income taxes 257,349 38,570 113,592 (172,388) 237,123
Income tax expense (benefit) 64,337 10,337 29,534 (49,396) 54,812
Net income (loss) $ 193,012 $ 28,233 $ 84,058 $ (122,992) $ 182,311


	At March 31, 2023
(In thousands)	Commercial Banking		HSA Bank		Consumer Banking		Corporate and Reconciling		Consolidated Total
Goodwill	$	2,029,204	$	57,485	$	544,776	$	—	$	2,631,465
Total assets	45,868,138		123,478		10,597,860		18,254,919		74,844,395

	At December 31, 2022
(In thousands)	Commercial Banking		HSA Bank		Consumer Banking		Corporate and Reconciling		Consolidated Total
Goodwill	$	1,904,291	$	57,779	$	552,034	$	—	$	2,514,104
Total assets	44,380,582		122,729		10,625,334		16,148,876		71,277,521

Three months ended June 30, 2021
(In thousands) Commercial Banking HSA Bank Consumer Banking Corporate and Reconciling Consolidated Total
Net interest income $ 140,589 $ 42,193 $ 93,075 $ (55,005) $ 220,852
Non-interest income 18,378 26,554 24,098 3,672 72,702
Non-interest expense 46,275 32,423 74,149 34,181 187,028
Pre-tax, pre-provision net revenue 112,692 36,324 43,024 (85,514) 106,526
(Benefit) provision for credit losses (23,328) — 1,754 74 (21,500)
Income (loss) before income taxes 136,020 36,324 41,270 (85,588) 128,026
Income tax expense (benefit) 34,822 9,699 9,823 (20,353) 33,991
Net income (loss) $ 101,198 $ 26,625 $ 31,447 $ (65,235) $ 94,035
The following tables present operating results, including the appropriate allocations, for the Company’s reportable segments and the Corporate and Reconciling category:



	Three months ended March 31, 2023
(In thousands)	Commercial Banking		HSA Bank		Consumer Banking		Corporate and Reconciling		Consolidated Total
Net interest income	$	384,314	$	71,730	$	210,583	$	(71,344)	$	595,283
Non-interest income	35,397		24,067		25,959		(14,657)		70,766
Non-interest expense	108,509		43,700		106,879		73,379		332,467
Pre-tax, pre-provision net revenue	311,202		52,097		129,663		(159,380)		333,582
Provision for credit losses	36,037		—		1,784		8,928		46,749
Income (loss) before income taxes	275,165		52,097		127,879		(168,308)		286,833
Income tax expense (benefit)	69,066		14,066		33,760		(51,063)		65,829
Net income (loss)	$	206,099	$	38,031	$	94,119	$	(117,245)	$	221,004


		Six months ended June 30, 2022											Three months ended March 31, 2022
(In thousands)	(In thousands)	Commercial Banking		HSA Bank		Consumer Banking		Corporate and Reconciling		Consolidated Total		(In thousands)	Commercial Banking		HSA Bank		Consumer Banking		Corporate and Reconciling		Consolidated Total
Net interest income	Net interest income	$	620,490	$	94,135	$	315,647	$	(149,364)	$	880,908	Net interest income	$	287,069	$	44,577	$	136,677	$	(74,075)	$	394,248
Non-interest income	Non-interest income	88,173		53,510		58,676		24,609		224,968		Non-interest income	38,743		26,958		27,901		10,433		104,035
Non-interest expense	Non-interest expense	191,960		73,949		203,059		249,044		$	718,012	Non-interest expense	89,240		36,409		95,510		138,626		359,785
Pre-tax, pre-provision net revenue	Pre-tax, pre-provision net revenue	516,703		$	73,696	171,264		(373,799)		387,864		Pre-tax, pre-provision net revenue	236,572		35,126		69,068		(202,268)		138,498
Provision (benefit) for credit losses	Provision (benefit) for credit losses	204,713		—		(3,917)		292		201,088		Provision (benefit) for credit losses	181,931		—		7,136		(222)		188,845
Income (loss) before income tax expense		311,990		73,696		175,181		(374,091)		186,776
Income (loss) before income taxes												Income (loss) before income taxes	54,641		35,126		61,932		(202,046)		(50,347)
Income tax expense (benefit)	Income tax expense (benefit)	74,392		19,751		45,498		(118,429)		21,212		Income tax expense (benefit)	10,055		9,414		16,053		(69,122)		(33,600)
Net income (loss)	Net income (loss)	$	237,598	$	53,945	$	129,683	$	(255,662)	$	165,564	Net income (loss)	$	44,586	$	25,712	$	45,879	$	(132,924)	$	(16,747)

Six months ended June 30, 2021
(In thousands) Commercial Banking HSA Bank Consumer Banking Corporate and Reconciling Consolidated Total
Net interest income $ 282,075 $ 84,302 $ 182,440 $ (104,201) $ 444,616
Non-interest income 36,754 53,559 46,970 12,176 149,459
Non-interest expense 92,559 68,428 149,460 64,563 375,010
Pre-tax, pre-provision net revenue 226,270 69,433 79,950 (156,588) 219,065
(Benefit) provision for credit losses (42,701) — (4,632) 83 (47,250)
Income (loss) before income tax expense 268,971 69,433 84,582 (156,671) 266,315
Income tax expense (benefit) 68,857 18,539 20,131 (43,325) 64,202
Net income (loss) $ 200,114 $ 50,894 $ 64,451 $ (113,346) $ 202,113

7470

Note 17: Revenue from Contracts with Customers

The following ~~table summarizes~~tables summarize revenues recognized in accordance with ASC Topic 606, Revenue from Contracts with Customers. These disaggregated amounts, together with sources of other non-interest income that are subject to other GAAP topics, have been reconciled to non-interest income by reportable segment as presented within Note 16: Segment Reporting.

Three months ended June 30, 2022
(In thousands) Commercial Banking HSA Bank Consumer Banking Corporate and
Reconciling Consolidated
Total
Non-interest Income:
Deposit service fees $ 7,647 $ 24,949 $ 18,352 $ 437 $ 51,385
Loan and lease related fees (1)
6,077 — — — 6,077
Wealth and investment services 2,770 — 8,479 (5) 11,244
Other income — 1,603 285 — 1,888
Revenue from contracts with customers 16,494 26,552 27,116 432 70,594
Other sources of non-interest income 32,936 — 3,668 13,735 50,339
Total non-interest income $ 49,430 $ 26,552 $ 30,784 $ 14,167 $ 120,933

Three months ended June 30, 2021
(In thousands) Commercial Banking HSA Bank Consumer Banking Corporate and
Reconciling Consolidated
Total
Non-interest Income:
Deposit service fees $ 4,104 $ 24,478 $ 12,734 $ 123 $ 41,439
Wealth and investment services 3,043 — 7,053 (9) 10,087
Other income — 2,076 579 — 2,655
Revenue from contracts with customers 7,147 26,554 20,366 114 54,181
Other sources of non-interest income 11,231 — 3,732 3,558 18,521
Total non-interest income $ 18,378 $ 26,554 $ 24,098 $ 3,672 $ 72,702

Six months ended June 30, 2022
(In thousands) Commercial Banking HSA Bank Consumer Banking Corporate and
Reconciling Consolidated
Total
Non-interest Income:
Deposit service fees $ 14,332 $ 50,083 $ 34,306 $ 491 $ 99,212
Loan and lease related fees (1)
10,575 — — — 10,575
Wealth and investment services 5,904 — 15,950 (13) 21,841
Other income — 3,427 670 — 4,097
Revenue from contracts with customers 30,811 53,510 50,926 478 135,725
Other sources of non-interest income 57,362 — 7,750 24,131 89,243
Total non-interest income $ 88,173 $ 53,510 $ 58,676 $ 24,609 $ 224,968

Six months ended June 30, 2021
(In thousands) Commercial Banking HSA Bank Consumer Banking Corporate and
Reconciling Consolidated
Total
Non-interest Income:
Deposit service fees $ 8,194 $ 49,496 $ 24,048 $ 170 $ 81,908
Wealth and investment services 5,962 — 13,546 (18) 19,490
Other income — 4,063 1,127 — 5,190
Revenue from contracts with customers 14,156 53,559 38,721 152 106,588
Other sources of non-interest income 22,598 — 8,249 12,024 42,871
Total non-interest income $ 36,754 $ 53,559 $ 46,970 $ 12,176 $ 149,459



	Three months ended March 31, 2023
(In thousands)	Commercial Banking		HSA Bank		Consumer Banking		Corporate and Reconciling		Consolidated Total
Non-interest Income:
Deposit service fees	$	5,390	$	22,092	$	18,024	$	(70)	$	45,436
Loan and lease related fees (1)	4,427		—		—		—		4,427
Wealth and investment services (2)	2,767		—		3,828		(8)		6,587
Other income	—		1,975		358		932		3,265
Revenue from contracts with customers	12,584		24,067		22,210		854		59,715
Other sources of non-interest income	22,813		—		3,749		(15,511)		11,051
Total non-interest income	$	35,397	$	24,067	$	25,959	$	(14,657)	$	70,766



	Three months ended March 31, 2022
(In thousands)	Commercial Banking		HSA Bank		Consumer Banking		Corporate and Reconciling		Consolidated Total
Non-interest Income:
Deposit service fees	$	6,685	$	25,134	$	15,963	$	45	$	47,827
Loan and lease related fees (1)	4,498		—		—		—		4,498
Wealth and investment services	3,134		—		7,471		(8)		10,597
Other income	—		1,824		385		—		2,209
Revenue from contracts with customers	14,317		26,958		23,819		37		65,131
Other sources of non-interest income	24,426		—		4,082		10,396		38,904
Total non-interest income	$	38,743	$	26,958	$	27,901	$	10,433	$	104,035

(1)A portion of loan and lease related fees comprises income generated from factored receivables and payroll financing activities that is within the scope of ASC Topic 606. ~~These revenue streams were new to Webster~~

(2)Effective as of the ~~first~~fourth quarter of 2022, ~~due~~the wealth and investment services revenue stream was impacted by the restructuring of a process in which the Company offers brokerage, investment advisory, and certain insurance-related services to customers. The staff providing these services, who had previously been employees of the ~~businesses acquired in connection with~~Bank, are now employees of a third-party service provider. As a result, the ~~Sterling merger.~~Company now recognizes income from this program on a net basis, which thereby reduces gross reported wealth and investment services non-interest income and the related compensation and benefits non-interest expense on the accompanying Condensed Consolidated Statements of Income.

Contracts with customers did not generate significant contract assets and liabilities at ~~June 30, 2022 and~~March 31, 2023, or December 31, ~~2021.~~2022.

Major Revenue Streams

Deposit service fees consist of fees earned from commercial and consumer customer deposit accounts, such as account maintenance and cash management/analysis fees, ~~insufficient funds, and~~as well as other transactional service ~~charges.~~charges (i.e., insufficient funds, wire transfers, stop payment fees, etc.). Performance obligations for account maintenance services and cash management/analysis fees are satisfied on a monthly basis at a fixed transaction price, whereas performance obligations for other deposit service charges ~~resulting~~that result from various customer-initiated transactions are satisfied at a point-in-time when the service is rendered. Payment for deposit service fees is generally received immediately or in the following month through a direct charge to the customers' accounts. Certain commercial customer contracts include credit clauses, whereby the Company will grant credit upon the customer meeting pre-determined conditions, which can be used to offset fees. On occasion, ~~Webster~~the Company may also waive certain ~~fees for its customers.~~fees. Fee waivers are recognized as a reduction to revenue in the period the waiver is granted to the customer. ~~Due to the insignificance of the amounts waived, Webster does not reduce its transaction price to reflect any variable consideration.~~

The deposit service fees revenue stream also includes interchange fees earned from debit and credit card transactions. The transaction price for interchange services is based on the transaction value and the interchange rate set by the card network. Performance obligations for interchange fees are satisfied at a point-in-time when the ~~cardholders'~~cardholder's transaction is authorized and settled. Payment for interchange fees is generally received immediately or in the following month.

Factored receivables non-interest income consists of fees earned from accounts receivable management services. ~~Webster~~The Company factors accounts receivable, with and without recourse, for customers whereby the Company purchases their accounts receivable at a discount and assumes the risk, as applicable, and ownership of the assets through direct cash receipt from the end consumer. Factoring services are performed in exchange for a non-refundable fee at a transaction price based on a percentage of the gross invoice amount of each receivable purchased, subject to a minimum required amount. The performance obligation for factoring services is generally satisfied at a point-in-time when the receivable is assigned to ~~Webster.~~the Company. However, should the commission earned not meet or exceed the minimum required annual amount, the difference between that and the actual amount is recognized at the end of the contract term. Other fees associated with factoring receivables may include wire transfer and technology fees, field examination fees, and Uniform Commercial Code fees, where the performance obligations are satisfied at a point-in-time when the services are rendered. Payment from the customer for factoring services is generally received immediately or within the following month.

Payroll finance non-interest income consists of fees earned from performing payroll financing and business process outsourcing services, including full back-office technology and tax accounting services, along with payroll preparation, making payroll tax payments, invoice billings, and collections for independently-owned temporary staffing companies nationwide. Performance obligations for payroll finance and business processing activities are either satisfied upon completion of the support services or as payroll remittances are made on behalf of customers to fund their employee payroll, which generally occurs on a weekly basis. The agreed-upon transaction price is based on a fixed-percentage per the terms of the contract, which could be subject to a hold-back reserve to provide for any balances that are assessed to be at risk of collection. When ~~Webster~~the Company collects on amounts due from end consumers on behalf of its customers and at the time of financing payroll, the Company retains the agreed-upon transaction price payable for the performance of its services and remits an amount to the customer net of any advances and payroll tax withholdings, as applicable.

Wealth and investment services consist of fees earned from asset management, trust administration, and investment advisory services, and through facilitating securities transactions. Performance obligations for asset management and trust administration services are satisfied on a monthly or quarterly basis at a transaction price based on a percentage of the period-end market value of the assets under administration. Payment for asset management and trust administration services is generally received a few days after period-end through a direct charge to the customers' accounts. Performance obligations for investment advisory services are satisfied over the period in which the services are provided through a time-based measurement of progress, and the agreed-upon transaction price with the customer varies depending on the nature of the services performed. Performance obligations for facilitating securities transactions are satisfied at a point-in-time when the securities are sold at a transaction price that is based on a percentage of the contract value. Payment for both investment advisory services and facilitating securities transactions may be received in advance of the service, but generally is received immediately or in the following period, in arrears.

Note 18: Commitments and Contingencies

Credit-Related Financial Instruments

In the normal course of business, ~~Webster~~the Company offers financial instruments with off-balance sheet risk to meet the financing needs of its customers. These transactions include commitments to extend credit, standby letters of credit, and commercial letters of credit, which involve, to varying degrees, elements of credit risk.

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


(In thousands)	(In thousands)	At June 30, 2022		At December 31, 2021		(In thousands)	At March 31, 2023		At December 31, 2022
Commitments to extend credit	Commitments to extend credit	$	10,388,769	$	6,870,095	Commitments to extend credit	$	11,711,880	$	11,237,496
Standby letters of credit	Standby letters of credit	381,772		224,061		Standby letters of credit	378,585		380,655
Commercial letters of credit	Commercial letters of credit	66,938		58,175		Commercial letters of credit	52,987		53,512
Total credit-related financial instruments with off-balance sheet risk	Total credit-related financial instruments with off-balance sheet risk	$	10,837,479	$	7,152,331	Total credit-related financial instruments with off-balance sheet risk	$	12,143,452	$	11,671,663

~~Webster~~The Company enters into contractual commitments to extend credit to its customers ~~such as~~(i.e., revolving credit arrangements, term loan commitments, and short-term borrowing ~~agreements,~~agreements), generally with fixed expiration dates or other termination clauses and that require payment of a fee. Substantially all of the Company's commitments to extend credit are contingent upon its customers maintaining specific credit standards at the time of loan funding, and are often secured by real estate collateral. Since the majority of the Company's commitments typically expire without being funded, the total contractual amount does not necessarily represent ~~Webster's~~the Company's future payment requirements.

Standby letters of credit are written conditional commitments issued by the Company to guarantee its customers' performance to a third party. In the event the customer does not perform in accordance with the terms of its agreement with a third-party, ~~Webster~~the Company would be required to fund the commitment. The contractual amount of each standby letter of credit represents the maximum amount of potential future payments the Company could be required to make. Historically, the majority of ~~Webster's~~the Company's standby letters of credit expire without being funded. However, if the commitment were funded, the Company has recourse against the customer. ~~Webster's~~The Company's standby letter of credit agreements are often secured by cash or other collateral.

Commercial letters of credit are issued to finance either domestic or foreign customer trade arrangements. As a general rule, drafts are committed to be drawn when the goods underlying the transaction are in transit. Similar to standby letters of credit, ~~Webster's~~the Company's commercial letter of credit agreements are often secured by the underlying goods subject to trade.

Allowance for Credit Losses on Unfunded Loan Commitments

An ACL is recorded ~~within accrued~~under the CECL methodology and included in Accrued expenses and other liabilities on the accompanying Condensed Consolidated Balance Sheets to provide for the unused portion of commitments to lend that are not unconditionally cancellable by ~~Webster. Under~~ the ~~CECL methodology, the calculation of the allowance generally includes the probability of funding to occur~~Company. At March 31, 2023, and a corresponding estimate of expected lifetime credit losses on amounts assumed to be funded. Loss calculation factors are consistent with those for funded loans using PD and LGD applied to the underlying borrower's risk and facility grades, a draw down factor applied to utilization rates, relevant forecast information, and management's qualitative factors.

~~The following table summarizes the activity in~~December 31, 2022, the ACL on unfunded loan ~~commitments:~~

Three months ended June 30, Six months ended June 30,
(In thousands) 2022 2021 2022 2021
Balance, beginning of period $ 19,640 $ 12,800 $ 13,104 $ 12,755
ACL assumed from Sterling — — 6,749 —
Provision (benefit) for credit losses 509 (826) 296 (781)
Balance, end of period $ 20,149 $ 11,974 $ 20,149 $ 11,974

commitments totaled $26.1 million and $27.7 million, respectively.

Litigation

~~Litigation~~

~~Webster~~The Company is subject to certain legal proceedings and unasserted claims and assessments in the ordinary course of business. Legal contingencies are evaluated based on information currently available, including advice of counsel and assessment of available insurance coverage. The Company establishes an accrual for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Once established, each accrual is adjusted to reflect any subsequent developments. Legal contingencies are subject to inherent uncertainties, and unfavorable rulings may occur that could cause ~~Webster~~the Company to either adjust its litigation accrual or incur actual losses that exceed the current estimate, which ultimately could have a material adverse effect, either individually or in the aggregate, on its business, financial condition, or operating results. ~~Webster~~The Company will consider settlement of cases when it is in the best interests of the Company and its stakeholders. ~~Webster~~The Company intends to defend itself in all claims asserted against it, and management currently believes that the outcome of these contingencies will not be material, either individually or in the aggregate, to ~~Webster~~the Company or its consolidated financial position.

Note 19: Subsequent Events

The Company has evaluated subsequent events from the date of the Condensed Consolidated Financial Statements, and accompanying Notes thereto, through the date of issuance, and determined that no significant events were identified requiring recognition or disclosure.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information regarding quantitative and qualitative disclosures about market risk can be found in Part I within
Note 13: Derivative Financial Instruments in the Notes to the Consolidated Financial Statements contained in Item 1. Financial Statements, and under the section captioned "Asset/Liability Management and Market Risk" contained in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, which are incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

~~Management has performed an evaluation,~~Our management, under the supervision and with the participation of the Chief Executive Officer (who is our principal executive officer) and Chief Financial Officer of(who is our principal financial officer), evaluated the effectiveness of ~~the Company's~~our disclosure controls and procedures, as defined i~~n Rules~~in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of ~~1934. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure~~1934, as amended (the "Exchange Act"), as of March 31, 2023. The term "disclosure controls and procedures" means controls and other procedures of a company that are designed to ensure that ~~(i) the~~ information required to be disclosed by a company in the reports ~~the Company~~that it files or submits under the ~~Securities~~ Exchange Act ~~of 1934~~ is recorded, processed, summarized and reported, within the time periods specified in the ~~SEC's~~SEC’s rules and ~~forms,~~forms. Disclosure controls and ~~(ii) such~~procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including ~~the Chief Executive Officer~~its principal executive and ~~Chief Financial Officer,~~principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2023, our disclosure controls and procedures were not effective due to the un-remediated material weaknesses in internal control over

financial reporting related to certain general information technology controls specific to logical access, which was previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. Prior to the filing of this Quarterly Report on Form 10-Q (this "Form 10-Q"), we completed substantive procedures for the quarter ended ~~June 30,~~March 31, 2023. Based on these procedures, management believes that our Condensed Consolidated Financial Statements included in this Form 10-Q have been prepared in accordance with GAAP. For additional information, please refer to Part II - Item 9A. of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Remediation

Management is in process of implementing measures designed to ensure that the control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include: (i) designing and implementing controls related to deprovisioning, privileged access, and user access reviews, (ii) developing an enhanced risk assessment process to evaluate logical access, and (iii) improving the existing training program associated with control design and implementation. We believe that these actions will remediate the material weaknesses. The material weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of these material weaknesses will be completed prior to the end of 2023.

Changes in Internal Control ~~over~~Over Financial Reporting

~~On January 31, 2022, Webster completed its previously announced merger with Sterling. During~~Other than the first quarter of 2022, management commenced an evaluation of the design and operating effectiveness of internal controls over financial reporting related to the Sterling acquired business. The evaluation ofongoing remediation efforts described above, there were no changes ~~to processes, technology systems, and other components of~~in our internal control over financial reporting ~~related~~(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to ~~the Sterling acquired business is ongoing.~~materially affect, our internal control over financial reporting.

~~There were no changes to Webster's~~Limitations on Effectiveness of Controls and Procedures

Because of its inherent limitations, management does not expect that our disclosure controls and procedures or our internal control over financial reporting ~~during~~will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the ~~quarter ended~~ ~~June 30, 2022~~,risk that ~~materially affected,~~controls may become inadequate because of changes in conditions, or ~~would be reasonably likely~~that the degree of compliance with the policies or procedures may deteriorate. Further, no evaluation of controls can provide absolute assurance that misstatements due to ~~materially affect, Webster's internal~~error or fraud will not occur or that all control ~~over financial reporting.~~issues and instances of fraud, if any, within the Company have been detected.

7874

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information regarding legal proceedings can be found within Note 18: Commitments and Contingencies in the Notes to Consolidated Financial Statements contained in Part I - Item 1. Financial Statements, which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

~~There have been no material changes~~In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors ~~previously disclosed~~contained in ~~Webster's~~Part I - Item 1A. Risk Factors of the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022, which could materially affect our business, results of operations, or financial condition. During the three months ended March 31, 2023, the Company made updates to the following risk factor:

Our stock price can be volatile.

Stock price volatility may make it more difficult for stockholders to resell their common stock when they want and at prices that they find attractive. Our stock price can fluctuate significantly in response to a variety of factors including, among other things:

•actual or anticipated variations in results of operations;

•recommendations or projections by securities analysts;

•operating and stock price performance of other companies that investors deem comparable to us;

•news reports relating to trends, concerns, and other issues in the financial services and healthcare industries;

•perceptions in the marketplace regarding us and/or our competitors;

•new technology used, or services offered, by competitors;

•significant acquisitions or business combinations, strategic partnerships, joint ventures, or capital commitments by or involving us or our competitors, including those of competitor "failed" banks acquired by other competitors;

•changes in dividends and capital returns;

•issuance of additional shares of Webster common stock;

•changes in government regulations; and

•geopolitical conditions such as acts or threats of terrorism or military conflicts, including any military conflict between Russia and Ukraine.

General market fluctuations, including real or anticipated changes in the strength of the economy, industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes, credit loss trends, among other factors, could also cause our stock price to decrease regardless of operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table provides information with respect to any purchase of equity securities for ~~Webster Financial Corporation's~~the Company's common stock made by or on behalf of ~~Webster~~the Company or any ~~"affiliated~~“affiliated purchaser,"” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, during the three months ended ~~June 30, 2022:~~

Period
Total
Number of
Shares
Purchased (1)
Average Price
Paid Per Share (2)
Total Number of
Shares Purchased
as Part of Publicly Announced Plans
or Programs
Maximum Dollar Amount Available for Repurchase Under the Plans or Programs (3)
April 1, 2022 - April 30, 2022 30,736 $ 51.23 — $ 601,238,298
May 1, 2022 - May 31, 2022 365,070 47.64 354,969 584,354,562
June 1, 2022 - June 30, 2022 1,700,518 48.85 1,699,647 501,313,634
Total 2,096,324 48.68 2,054,616 501,313,634
March 31, 2023:


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Amount Available for Purchase Under the Plans or Programs (3)
January 1, 2023 - January 31, 2023	22,744	$	47.53	—	$	401,340,164
February 1, 2023 - February 28, 2023	97,937	54.58		—	401,340,164
March 1, 2023 - March 31, 2023	164,044	52.63		—	401,340,164
Total	284,725	52.90		—	401,340,164

(1)~~Out~~All of the ~~total~~ shares purchased during the three months ended ~~June 30, 2022, 41,708 shares~~March 31, 2023, were acquired at market prices outside of ~~Webster's~~the Company's common stock repurchase program and related to employee share-based compensation plan activity.

(2)The average price paid per share is calculated on a trade date basis and excludes commissions and other transaction costs.

(3)~~Webster~~The Company maintains a common stock repurchase program, which was approved by the Board of Directors on October 24, 2017, that authorizes management to purchase shares of ~~its~~Webster common stock in open market or privately negotiated transactions, through block trades, and pursuant to any adopted predetermined trading plan, subject to the availability and trading price of stock, general market conditions, alternative uses for capital, regulatory considerations, and ~~Webster's~~the Company's financial performance. On April 27, 2022, the ~~Company announced that its~~ Board of Directors ~~had~~ increased ~~Webster's~~management's authority to repurchase shares of ~~its~~Webster common stock under the repurchase program by $600.0 million in shares. This existing repurchase program will remain in effect until fully utilized or until modified, superseded, or terminated.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

Not applicable

7976

ITEM 6. EXHIBITS

A list of exhibits to this Form 10-Q is set forth below.

Exhibit Number Exhibit Description Exhibit Included Incorporated by Reference
Form Exhibit Filing Date
2
Agreement and Plan of Merger, dated as of April 18, 2021, by and between Sterling Bancorp and Webster Financial Corporation
8-K 2.1 4/23/2021
3 Certificate of Incorporation and Bylaws.
3.1
Fourth Amended and Restated Certificate of Incorporation
10-Q 3.1 8/9/2016
3.2
Certificate of Amendment to Fourth Amended and Restated Certificate of Incorporation of Webster Financial Corporation, effective as of January 31, 2022
8-K 3.2 2/1/2022
3.3
Certificate of Designations establishing the rights of the Company's 8.50% Series A Non-Cumulative Perpetual Convertible Preferred Stock
8-K 3.1 6/11/2008
3.4
Certificate of Designations establishing the rights of the Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series B
8-K 3.1 11/24/2008
3.5
Certificate of Designations establishing the rights of the Company's Perpetual Participating Preferred Stock, Series C
8-K 3.1 7/31/2009
3.6
Certificate of Designations establishing the rights of the Company's Non-Voting Perpetual Participating Preferred Stock, Series D
8-K 3.2 7/31/2009
3.7
Certificate of Designations establishing the rights of the Company's 6.40% Series E Non-Cumulative Perpetual Preferred Stock
8-A12B 3.3 12/4/2012
3.8
Certificate of Designations establishing the rights of the Company's 5.25% Series F Non-Cumulative Perpetual Preferred Stock
8-A12B 3.3 12/12/2017
3.9
Certificate of Designations establishing the rights of the Company's 6.50% Series G Non-Cumulative Perpetual Preferred Stock
8-A12B 3.4 2/1/2022
3.10
Bylaws, as amended effective March 15, 2020
8-K 3.1 3/17/2020
3.11
Amendment to Bylaws of Webster Financial Corporation, effective as of January 31, 2022
8-K 3.5 2/1/2022
31.1
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer.
X
31.2
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by the Chief Financial Officer.
X
32.1
Written statement pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer.
X (1)
32.2
Written statement pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Financial Officer.
X (1)
101 The following financial information from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 formatted in Inline Extensible Business Reporting Language (iXBRL) includes: (i) Cover Page, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements Of Income, (iv) Condensed Consolidated Statements Of Comprehensive Income, (v) Condensed Consolidated Statements Of Shareholders' Equity, (vi) Condensed Consolidated Statements Of Cash Flows, and (vii) Notes to Condensed Consolidated Financial Statements, tagged in summary and in detail. X
104 Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101) X

Exhibit Number

Exhibit Description

Exhibit Included

Incorporated by Reference

Form

Exhibit

Filing Date

Agreement and Plan of Merger, dated as of April 18, 2021, by and between Sterling Bancorp and Webster Financial Corporation

8-K

2.1

4/23/2021

Certificate of Incorporation and Bylaws.

3.1

Fourth Amended and Restated Certificate of Incorporation

10-Q

3.1

8/9/2016

3.2

Certificate of Amendment to Fourth Amended and Restated Certificate of Incorporation of Webster Financial Corporation, effective as of January 31, 2022

8-K

3.2

2/1/2022

3.3

Certificate of Amendment to Fourth Amended and Restated Certificate of Incorporation of Webster Financial Corporation, effective as of April 28, 2023

8-K

3.1

4/28/2023

3.4

Certificate of Designations establishing the rights of the Company's 8.50% Series A Non-Cumulative Perpetual Convertible Preferred Stock

8-K

3.1

6/11/2008

3.5

Certificate of Designations establishing the rights of the Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series B

8-K

3.1

11/24/2008

3.6

Certificate of Designations establishing the rights of the Company's Perpetual Participating Preferred Stock, Series C

8-K

3.1

7/31/2009

3.7

Certificate of Designations establishing the rights of the Company's Non-Voting Perpetual Participating Preferred Stock, Series D

8-K

3.2

7/31/2009

3.8

Certificate of Designations establishing the rights of the Company's 6.40% Series E Non-Cumulative Perpetual Preferred Stock

8-A12B

3.3

12/4/2012

3.9

Certificate of Designations establishing the rights of the Company's 5.25% Series F Non-Cumulative Perpetual Preferred Stock

8-A12B

3.3

12/12/2017

3.10

Certificate of Designations establishing the rights of the Company's 6.50% Series G Non-Cumulative Perpetual Preferred Stock

8-A12B

3.4

2/1/2022

3.11

Bylaws, as amended effective March 15, 2020

8-K

3.1

3/17/2020

3.12

Amendment to Bylaws of Webster Financial Corporation, effective as of January 31, 2022

8-K

3.5

2/1/2022

10.1

Webster Financial Corporation 2021 Stock Incentive Plan (as amended and restated effective April 26, 2023)

DEF 14A

3/15/2023

31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer.

31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by the Chief Financial Officer.

32.1

Written statement pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer.

X (1)

32.2

Written statement pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Financial Officer.

X (1)

101

The following financial information from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in Inline Extensible Business Reporting Language (iXBRL) includes: (i) Cover Page, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements Of Income, (iv) Condensed Consolidated Statements Of Comprehensive Income, (v) Condensed Consolidated Statements Of Stockholders' Equity, (vi) Condensed Consolidated Statements Of Cash Flows, and (vii) Notes to Condensed Consolidated Financial Statements, tagged in summary and in detail.

104

Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101)

(1)Exhibit is furnished herewith and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

8077

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

WEBSTER FINANCIAL CORPORATION

~~Registrant~~(Registrant)

Date: ~~August 5, 2022~~May 8, 2023

By:

/s/ John R. Ciulla

John R. Ciulla

President, Chief Executive Officer, and Director

(Principal Executive Officer)

Date: ~~August 5, 2022~~May 8, 2023

By:

/s/ Glenn I. MacInnes

Glenn I. MacInnes

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Date: ~~August 5, 2022~~May 8, 2023

By:

/s/ Albert J. Wang

Albert J. Wang

Executive Vice President and Chief Accounting Officer

(Principal Accounting Officer)

8178


	At or for the six months ended June 30, 2022
(In thousands, except per share data)	Preferred Stock		Common Stock		Paid-In Capital		Retained Earnings		Treasury Stock, at cost		Accumulated Other Comprehensive (Loss), Net of Tax		Total Shareholders' Equity
Balance at December 31, 2021	$	145,037	$	937	$	1,108,594	$	2,333,288	$	(126,951)	$	(22,580)	$	3,438,325

Net income	—		—		—		165,564		—		—		165,564
Other comprehensive (loss), net of tax	—		—		—		—		—		(458,752)		(458,752)
Common stock dividends and equivalents $0.80 per share	—		—		—		(107,620)		—		—		(107,620)
Series F preferred stock dividends $656.25 per share	—		—		—		(3,938)		—		—		(3,938)
Series G preferred stock dividends $32.50 per share	—		—		—		(3,656)		—		—		(3,656)
Issued in business combination	138,942		891		5,040,291		—		—		—		5,180,124
Stock-based compensation	—		—		419		—		30,050		—		30,469
Exercise of stock options	—		—		(451)		—		948		—		497
Common shares acquired from stock compensation plan activity	—		—		—		—		(21,095)		—		(21,095)
Common stock repurchase program	—		—		—		—		(222,130)		—		(222,130)
Balance at June 30, 2022	$	283,979	$	1,828	$	6,148,853	$	2,383,638	$	(339,178)	$	(481,332)	$	7,997,788

	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 and equivalents $0.80 per share	—		—		—		(72,537)		—		—		(72,537)
Series F preferred stock dividends $656.25 per share	—		—		—		(3,938)		—		—		(3,938)
Stock-based compensation	—		—		(3,311)		—		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


(In thousands)	Commercial		Consumer		Total
Unpaid principal balance	$	3,394,963	$	541,471	$	3,936,434
ACL at acquisition	(115,464)		(20,852)		(136,316)
Non-credit (discount)	(40,947)		(2,784)		(43,731)
Fair value	3,238,552		517,835		3,756,387



	Three months ended June 30, 2022								Six months ended June 30, 2022
(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
Balance, beginning of period	$	(240,343)	$	(1,774)	$	(33,606)	$	(275,723)	$	4,536	$	6,070	$	(33,186)	$	(22,580)
Other comprehensive (loss) before reclassifications	(205,273)		(1,070)		(328)		(206,671)		(450,152)		(9,683)		(1,047)		(460,882)
Amounts reclassified from accumulated other comprehensive (loss) income	—		762		300		1,062		—		1,531		599		2,130
Other comprehensive (loss), net of tax	(205,273)		(308)		(28)		(205,609)		(450,152)		(8,152)		(448)		(458,752)
Balance, end of period	$	(445,616)	$	(2,082)	$	(33,634)	$	(481,332)	$	(445,616)	$	(2,082)	$	(33,634)	$	(481,332)


	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
Balance, beginning of period	$	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)		—		(3,948)		(31,826)		(7,645)		—		(39,471)
Amounts reclassified from accumulated other comprehensive income (loss)	—		823		741		1,564		—		1,621		1,484		3,105
Other comprehensive (loss) income, net of tax	(1,473)		(1,652)		741		(2,384)		(31,826)		(6,024)		1,484		(36,366)
Balance, end of period	$	35,598	$	13,894	$	(43,602)	$	5,890	$	35,598	$	13,894	$	(43,602)	$	5,890