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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 September 30, 2022

or

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

For the transition period from ____ to ____

Commission File Number: 001-31486

_______________________________________________________________________________________

WEBSTER FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 ______________________________________________________________________________________

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: (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 growth 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 October 28, 2022, the number of shares of common stock, par value $.01 per share, outstanding was 174,009,423.

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INDEX

						Page No.
Key to Acronyms and Terms						ii
Forward-Looking Statements						iii
PART I – FINANCIAL INFORMATION
Item 1.			Financial Statements			35
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			1
Item 3.			Quantitative and Qualitative Disclosures about Market Risk			81
Item 4.			Controls and Procedures			81
PART II – OTHER INFORMATION
Item 1.			Legal Proceedings			82
Item 1A.			Risk Factors			82
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			82
Item 3.			Defaults Upon Senior Securities			82
Item 4.			Mine Safety Disclosures			82
Item 5.			Other Information			82
Item 6.			Exhibits			83
EXHIBIT INDEX						83
SIGNATURES						84

i

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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			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
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
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
IRA			Inflation Reduction Act
LGD			Loss given default
LIBOR			London Interbank Offered Rate
LIHTC			Low income housing tax-credit
Moody's			Moody's Investor Services
NAV			Net asset value
OCC			Office of the Comptroller of the Currency
OREO			Other real estate owned
PCD			Purchased 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

ii

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WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains "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," 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) 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 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 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;

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

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

▪changes in laws and regulations, 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 lead to impairment in the value of our investment securities and goodwill;

▪inflation, monetary fluctuations, 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) to the Secured Overnight Financing Rate (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;

▪performance by our counterparties and 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 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;

▪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 actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Webster 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.

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PART I – FINANCIAL INFORMATION

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

Introduction

This discussion and analysis provides information that management believes is necessary to understand Webster's financial condition, changes in financial condition, results of operations, and cash flows for the three and nine months ended September 30, 2022, as compared to 2021. The following 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 in Part I - Item 1. Financial Statements of this report. The results of operations for the three and nine months ended September 30, 2022, are not necessarily indicative of the future results that may be attained for the entire year or other interim periods.

Executive Summary

Nature of Operations

Webster Financial Corporation (the Holding Company) is a bank holding company and financial holding company under the Bank Holding Company 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 its HSA Bank division (HSA Bank), deliver a wide range of banking, investment, and financial services to individuals, families, and businesses. Webster Bank serves consumer and business customers with mortgage lending, financial planning, trust, and investment services through a distribution network consisting of banking centers, ATMs, a customer care center, and a full range of web and mobile-based banking services throughout the northeastern U.S. from New York to Massachusetts, with certain businesses operating 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 in the northeastern U.S. At September 30, 2022, the combined company had $69.1 billion in assets, $47.8 billion in loans and leases, and $54.0 billion in deposits, and operated 201 banking centers throughout southern New England and metro and suburban New York. In addition, on February 18, 2022, Webster acquired 100% of the equity interests of Bend Financial, Inc. (Bend), a cloud-based platform solution provider for HSAs, in exchange for cash. The Bend acquisition accelerated 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 September 30, 2022, include the rebranding of branches and digital assets, the coordination of credit policies and procedures, the selection of certain key operating systems, the consolidation of commercial credit risk management systems and commercial client pricing tools, as well as 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 participation of senior Company leaders and managers at culture-shaping workshops, with plans for Company-wide participation in such workshops to be completed during the fourth quarter of 2022. Other 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, Webster developed and launched a corporate real estate consolidation strategy during the second quarter of 2022 in which the Company arranged to close 14 locations, primarily throughout New York and Connecticut, in order to reduce its corporate facility square footage by approximately 45% by the end of the year. As of the nine months ended
September 30, 2022, Webster has recognized $23.1 million in right-of-use (ROU) asset impairment charges and a combined $12.0 million in related exit costs and accelerated depreciation on property and equipment related to this corporate real estate consolidation strategy.

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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 nine months ended
September 30, 2022, with a corresponding adjustment to earnings.

Additional information regarding Webster's mergers and acquisitions and related integration initiatives 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.

Results of Operations

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

			At or for the three months ended September 30,												At or for the nine months ended September 30,
(In thousands, except per share and ratio data)			2022						2021						2022						2021
Income and performance ratios:
Net income			$	233,968					$	95,713					$	399,532					$	297,826
Net income available to common shareholders			229,806						93,745						387,776						291,920
Earnings per diluted common share			1.31						1.03						2.32						3.22
Return on average assets (annualized)			1.38		%				1.10		%				0.85		%				1.17		%
Return on average tangible common shareholders' equity (annualized) (non-GAAP)			18.62						14.16						11.10						15.05
Return on average common shareholders' equity (annualized)			11.78						11.61						7.01						12.28
Non-interest income / total revenue			17.10						26.73						19.12						25.70
Asset quality:
Allowance for credit losses on loans and leases			$	574,325					$	314,922					$	574,325					$	314,922
Non-performing assets (1)			211,627						104,209						211,627						104,209
Allowance for credit losses on loans and leases / total loans and leases			1.20		%				1.46		%				1.20		%				1.46		%
Net charge-offs (recoveries) / average loans and leases (annualized)			0.25						0.02						0.15						0.03
Non-performing loans and leases / total loans and leases (1)			0.44						0.47						0.44						0.47
Non-performing assets / total loans and leases plus OREO (1)			0.44						0.48						0.44						0.48
Allowance for credit losses on loans and leases / non-performing loans and leases (1)			274.12						309.44						274.12						309.44
Other ratios:
Tangible common equity (non-GAAP)			7.27						7.71						7.27						7.71
Tier 1 risk-based capital			11.35						12.39						11.35						12.39
Total risk-based capital			13.38						13.79						13.38						13.79
CET1 risk-based capital			10.80						11.77						10.80						11.77
Shareholders' equity / total assets			11.33						9.57						11.33						9.57
Net interest margin			3.54						2.80						3.35						2.85
Efficiency ratio (non-GAAP)			41.17						54.84						44.68						56.62
Equity and share related:
Common equity			$	7,542,431					$	3,241,152					$	7,542,431					$	3,241,152
Book value per common share			43.32						35.78						43.32						35.78
Tangible book value per common share (non-GAAP)			27.69						29.63						27.69						29.63
Common stock closing price			45.20						54.46						45.20						54.46
Dividends and equivalents declared per common share			0.40						0.40						1.20						1.20
Common shares outstanding			174,116						90,588						174,116						90,588
Weighted-average common shares outstanding - basic			173,868						90,038						165,743						89,960
Weighted-average common shares outstanding - diluted			173,944						90,232						165,813						90,186

(1)Non-performing asset balances and related asset quality ratios exclude the impact of net unamortized (discounts)/premiums and net unamortized deferred (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 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 a complete understanding of the factors and trends affecting Webster's business and allows investors to view its performance in a similar manner.

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Tangible book value per common share represents shareholders’ 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 capital position. The annualized return on average tangible common shareholders' equity is calculated using net income available to common shareholders, 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 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 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.

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

			At September 30,
(Dollars and shares in thousands, except per share data)			2022						2021
Tangible book value per common share:
Shareholders' equity			$	7,826,410					$	3,386,189
Less: Preferred stock			283,979						145,037
Goodwill and other intangible assets			2,721,040						557,360
Tangible common shareholders' equity			$	4,821,391					$	2,683,792
Common shares outstanding			174,116						90,588
Tangible book value per common share			$	27.69					$	29.63
Tangible common equity ratio:
Tangible common shareholders' equity			$	4,821,391					$	2,683,792
Total assets			69,052,566						35,374,258
Less: Goodwill and other intangible assets			2,721,040						557,360
Tangible assets			$	66,331,526					$	34,816,898
Tangible common equity ratio			7.27		%				7.71		%

			Three months ended September 30,												Nine months ended September 30,
(Dollars in thousands)			2022						2021						2022						2021
Return on average tangible common shareholders' equity:
Net income			$	233,968					$	95,713					$	399,532					$	297,826
Less: Preferred stock dividends			4,162						1,968						11,756						5,906
Add: Intangible assets amortization, tax-effected			6,724						888						18,723						2,682
Adjusted income			$	236,530					$	94,633					$	406,499					$	294,602
Adjusted income (annualized)			$	946,120					$	378,532					$	541,999					$	392,803
Average shareholders' equity			$	8,090,044					$	3,375,401					$	7,640,807					$	3,314,114
Less: Average preferred stock			283,979						145,037						268,202						145,037
Average goodwill and other intangible assets			2,725,200						557,902						2,491,394						559,027
Average tangible common shareholders' equity			$	5,080,865					$	2,672,462					$	4,881,211					$	2,610,050
Return on average tangible common shareholders' equity			18.62		%				14.16		%				11.10		%				15.05		%
Efficiency ratio:
Non-interest expense			$	330,071					$	180,237					$	1,048,083					$	555,247
Less: Foreclosed property activity			(393)						(142)						(826)						(188)
Intangible assets amortization			8,511						1,124						23,700						3,395
Operating lease depreciation			2,115						—						6,172						—
Merger-related expenses			25,536						9,847						200,671						26,894
Common stock contribution to charitable foundation			10,500						—						10,500						—
Other expense (1)			1,117						(4,011)						(3,175)						6,568
Non-interest expense			$	282,685					$	173,419					$	811,041					$	518,578
Net interest income			$	551,003					$	229,691					$	1,431,911					$	674,307
Add: Tax-equivalent adjustment			13,247						2,434						33,137						7,416
Non-interest income			113,636						83,775						338,604						233,234
Other income (2)			11,186						327						18,073						913
Less: Operating lease depreciation			2,115						—						6,172						—
(Loss) on sale of investment securities, net			(2,234)						—						(2,234)						—
Gain on extinguishment of borrowings			2,548						—						2,548						—
Income			$	686,643					$	316,227					$	1,815,239					$	915,870
Efficiency ratio			41.17		%				54.84		%				44.68		%				56.62		%

(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) investments.

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Net Interest Income

Net interest income is Webster's primary source of revenue, representing 82.9% and 80.9% of total revenue for the three and nine months ended September 30, 2022, respectively, and 73.3% and 74.3% of total revenue for the three and nine months ended September 30, 2021, respectively. Net interest income is the difference between interest income on interest-earning assets, such as loans and leases and investment securities, and interest expense on interest-bearing liabilities, such as deposits and borrowings, which are used to fund interest-earning assets and other activities. Net interest margin is calculated as the ratio of tax-equivalent net interest income to average interest-earning assets. Tax-equivalent 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 $321.3 million, or 139.9%, from $229.7 million for the three months ended September 30, 2021, to $551.0 million for the three months ended September 30, 2022. On a fully tax-equivalent basis, net interest income increased $332.1 million. Net interest margin increased 74 basis points from 2.80% for the three months ended September 30, 2021, to 3.54% for the three months ended September 30, 2022. The increase, which includes net purchase accounting accretion from acquired loans and leases, investment securities, and interest-bearing liabilities, is primarily attributed to the merger with Sterling, along with the rising interest rate environment.

Average interest-earning assets increased $29.3 billion, or 89.2%, from $32.9 billion for the three months ended
September 30, 2021, to $62.2 billion for the three months ended September 30, 2022, primarily due to increases of $24.7 billion and $6.1 billion in average loans and leases and average total investment securities, respectively, which were partially offset by a $1.7 billion decrease in average interest-bearing deposits held at the Federal Reserve Bank (FRB). The average yield on interest-earning assets increased 104 basis points from 2.92% for the three months ended September 30, 2021, to 3.96% for the three months ended September 30, 2022. The increase in interest-earning assets and the increase in average yield were both impacted by the Sterling merger, as well as higher market rates.

Average loans and leases increased $24.7 billion, or 114.6%, from $21.5 billion for the three months ended
September 30, 2021, to $46.2 billion for the three months ended September 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 Paycheck Protection Program (PPP) loan balances and commercial portfolio loan sales. At September 30, 2022, and 2021, the loan and lease portfolio comprised 74.3% and 65.5% of total average interest-earning assets, respectively. The average yield on loans and leases increased 92 basis points from 3.60% for the three months ended September 30, 2021, to 4.52% for the three months ended September 30, 2022, primarily due to a higher yield on the acquired Sterling loans and leases, net purchase accounting accretion, and higher market rates.

Average total investment securities increased $6.1 billion, or 68.8%, from $8.9 billion for the three months ended September 30, 2021, to $15.0 billion for the three months ended September 30, 2022, primarily due to the merger with Sterling. At September 30, 2022, and 2021, the investment securities portfolio comprised 24.2% and 27.1% of total average
interest-earning assets, respectively. The average yield on investment securities increased 39 basis points from 2.01% for the three months ended September 30, 2021, to 2.40% for the three months ended September 30, 2022. The increase was primarily due to the reinvestment of maturing securities at higher yields and a higher yield on the acquired Sterling investment securities portfolio net of purchase premium amortization.

Average interest-bearing deposits held at the FRB decreased $1.7 billion, or 74.9%, from $2.3 billion for the three months ended September 30, 2021, to $0.6 billion for the three months ended September 30, 2022, primarily due to excess customer liquidity in the prior period as a result of government stimulus and reduced spending. At September 30, 2022, and 2021, interest-bearing deposits held at the FRB comprised 0.9% and 7.1% of total average interest-earning assets, respectively. The average yield on interest-bearing deposits held at the FRB increased 204 basis points from 0.15% for the three months ended September 30, 2021, to 2.19% for the three months ended September 30, 2022, primarily due to higher market rates.

Average interest-bearing liabilities increased $27.7 billion, or 89.2%, from $31.1 billion for the three months ended September 30, 2021, to $58.8 billion for the three months ended September 30, 2022, primarily due to increases of $24.1 billion, $0.9 billion, $2.3 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 32 basis points from 0.13% for the three months ended September 30, 2021, to 0.45% for the three months ended September 30, 2022, primarily due to the purchase of higher yielding federal funds and FHLB advances, and the subordinated debt assumed from Sterling in the merger.

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Average total deposits increased $24.2 billion, or 80.8%, from $29.8 billion for the three months ended September 30, 2021, to $54.0 billion for the three months ended September 30, 2022, reflecting increases of $6.4 billion and $17.7 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 both commercial and consumer customers, and HSA growth. At September 30, 2022, and 2021, deposits comprised 91.8% and 96.0% of total average interest-bearing liabilities, respectively. The average rate on deposits increased 22 basis points from 0.06% for the three months ended
September 30, 2021, to 0.28% for the three months ended September 30, 2022, primarily due to the rising interest rate environment. Time deposits as a percentage of total interest-bearing deposits decreased from 8.6% for the three months ended September 30, 2021, to 6.7% for the three months ended September 30, 2022, primarily due to customer preferences to hold more liquid deposit products.

Average federal funds purchased were $0.9 billion for the three months ended September 30, 2022, and had an average rate of 2.24%. There were no average federal funds purchased for the three months ended September 30, 2021. At September 30, 2022, federal funds purchased comprised 1.5% of total average interest-bearing liabilities.

Average FHLB advances increased $2.3 billion, from $0.1 billion for the three months ended September 30, 2021 to $2.4 billion for the three months ended September 30, 2022, primarily due to short-term funding needs. At
September 30, 2022, and 2021, FHLB advances comprised 4.09% and 0.39% of total average interest-bearing liabilities, respectively. The average rate on FHLB advances increased 66 basis points from 1.59% for the three months ended September 30, 2021, to 2.25% for the three months ended September 30, 2022, primarily due to higher market rates on new short-term borrowings.

Average long-term debt increased $0.5 billion, or 90.5%, from $0.6 billion for the three months ended September 30, 2021, to $1.1 billion for the three months ended September 30, 2022, primarily due to the merger with Sterling. At both
September 30, 2022, and 2021, long-term debt comprised 1.8% of total average interest-bearing liabilities. The average rate on long-term debt increased 25 basis points from 3.22% for the three months ended September 30, 2021, to 3.47% for the three months ended September 30, 2022, primarily due to the subordinated debt assumed from Sterling in the merger.

Comparison to Prior Year to Date

Net interest income increased $757.6 million, or 112.4%, from $674.3 million for the nine months ended September 30, 2021, to $1.4 billion for the nine months ended September 30, 2022. On a fully tax-equivalent basis, net interest income increased $783.3 million. Net interest margin increased 50 basis points from 2.85% for the nine months ended September 30, 2021, to 3.35% for the nine months ended September 30, 2022. The increase which includes net purchase accounting accretion from acquired loans and leases, investment securities, and interest-bearing liabilities, is primarily attributed to the merger with Sterling, along with the rising interest rate environment.

Average interest-earning assets increased $25.7 billion, or 80.6%, from $31.9 billion for the nine months ended
September 30, 2021, to $57.6 billion for the nine months ended September 30, 2022, primarily due to increases of $20.6 billion and $5.6 billion in average loans and leases and average total investment securities, respectively, which were partially offset by a $810.7 million decrease in interest-bearing deposits held at the FRB. The average yield on interest-earning assets increased
62 basis points from 2.98% for the nine months ended September 30, 2021, to 3.60% for the nine months ended
September 30, 2022. The increase in interest-earning assets and the increase in average yield were both impacted by the Sterling merger, as well as higher market rates.

Average loans and leases increased $20.6 billion, or 96.1%, from $21.5 billion for the nine months ended September 30, 2021, to $42.1 billion for the nine months ended September 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 and commercial portfolio loan sales. At September 30, 2022, and 2021, the loan and lease portfolio comprised 73.2% and 67.4% of total average interest-earning assets, respectively. The average yield on loans and leases increased 60 basis points from 3.54% for the nine months ended September 30, 2021, to 4.14% for the nine months ended September 30, 2022, primarily due to a higher yield on the acquired Sterling loans and leases, net purchase accounting accretion, and higher market rates.

Average total investment securities increased $5.6 billion, or 63.9%, from $8.9 billion for the nine months ended
September 30, 2021, to $14.5 billion for the nine months ended September 30, 2022, primarily due to the merger with Sterling, as well as the deployment of excess liquidity. At September 30, 2022, and 2021, the investment securities portfolio comprised 25.3% and 27.9% of total average interest-earning assets, respectively. The average yield on investment securities increased
13 basis points from 2.09% for the nine months ended September 30, 2021, to 2.22% for the nine months ended
September 30, 2022. This was primarily due to the reinvestment of maturing securities at higher yields.

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Average interest-bearing deposits held at the FRB decreased $810.7 million, or 56.5% from $1.4 billion for the nine months ended September 30, 2021, to $623.9 million for the nine months ended September 30, 2022, primarily due to excess customer liquidity in the prior period as a result of government stimulus and reduced spending. At September 30, 2022, and 2021, interest-bearing deposits held at the FRB comprised 1.08% and 4.50% of total average interest-earnings assets, respectively. The average yield on interest-bearing deposits held at the FRB increased 87 basis points from 0.13% for the nine months ended September 30, 2021 to 1.00% for the nine months ended September 30, 2022, primarily due to higher market rates.

Average interest-bearing liabilities increased $24.1 billion, or 80.1%, from $30.2 billion for the nine months ended September 30, 2021, to $54.3 billion for the nine months ended September 30, 2022, primarily due to increases of $22.2 billion, $0.5 billion, $1.1 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 13 basis points from 0.14% for the nine months ended September 30, 2021, to 0.27% for the nine months ended September 30, 2022, primarily due to higher market rates and the mix of funding sources.

Average total deposits increased $22.2 billion, or 76.6%, from $28.9 billion for the nine months ended September 30, 2021, to $51.1 billion for the nine months ended September 30, 2022, reflecting increases of $6.0 billion and $16.2 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 September 30, 2022, and 2021, deposits comprised 94.1% and 96.0% of total average interest-bearing liabilities, respectively. The average rate on deposits increased 8 basis points from 0.07% for the nine months ended September 30, 2021, to 0.15% for the nine months ended September 30, 2022, primarily due to the rising interest rate environment, which was partially offset by the run-off of time deposits. Time deposits as a percentage of total interest-bearing deposits decreased from 9.7% for the nine months ended September 30, 2021, to 6.9% for the nine months ended September 30, 2022, primarily due to customer preferences to hold more liquid deposit products.

Average federal funds purchased increased $456.6 million, from $21.4 million for the nine months ended September 30, 2021, to $478.0 million for the nine months ended September 30, 2022, primarily due to short-term funding needs. At
September 30, 2022, and 2021, federal funds purchased comprised 0.9% and 0.1% of total average interest-bearing liabilities, respectively. The average rate on federal funds purchased increased 167 basis points from 0.08% for the nine months ended September 30, 2021, to 1.75% for the nine months ended September 30, 2022, primarily due to higher market rates.

Average FHLB advances increased $1.1 billion, or 810.9%, from $0.1 billion for the nine months ended September 30, 2021, to $1.2 billion for the nine months ended September 30, 2022, primarily due to short-term funding needs. At
September 30, 2022, and 2021, FHLB advances comprised 2.2% and 0.4% of total average interest-bearing liabilities, respectively. The average rate on FHLB advances increased 33 basis points from 1.54% for the nine months ended September 30, 2021, to 1.87% for the nine months ended September 30, 2022, primarily due to higher market rates on new short-term borrowings.

Average long-term debt increased $0.4 billion, or 79.7%, from $0.6 billion for the nine months ended September 30, 2021, to $1.0 billion for the nine months ended September 30, 2022, primarily due to the merger with Sterling. At both
September 30, 2022, and 2021, long-term debt comprised 1.9% of total average interest-bearing liabilities. The average rate on long-term debt increased 18 basis points from 3.22% for the nine months ended September 30, 2021, to 3.40% for the nine months ended September 30, 2022, primarily due to the subordinated debt assumed from Sterling in the merger.

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The following tables present daily average balances, interest, yield/rate, and net interest margin on a fully tax-equivalent basis:

			Three months ended September 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)			$	46,229,678		$	532,062		4.52		%				$	21,538,513		$	197,015		3.60		%
Investment securities: (2)
Taxable			12,336,926			79,562			2.47						8,199,640			38,714			1.93
Non-taxable			2,702,584			13,999			2.07						711,651			5,154			2.90
Total investment securities			15,039,510			93,561			2.40						8,911,291			43,868			2.01
FHLB and FRB stock			326,860			1,875			2.28						76,212			290			1.51
Interest-bearing deposits (3)			585,807			3,278			2.19						2,334,986			896			0.15
Loans held for sale			580			40			27.73						11,328			57			2.03
Total interest-earning assets			62,182,435			$	630,816		3.96		%				32,872,330			$	242,126		2.92		%
Non-interest-earning assets			5,823,755												2,021,962
Total assets			$	68,006,190											$	34,894,292
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Demand deposits			$	13,590,667		$	—		—		%				$	7,182,116		$	—		—		%
Health savings accounts			7,854,425			1,146			0.06						7,346,239			1,463			0.08
Interest-bearing checking, money market and savings			29,798,562			33,808			0.45						13,363,703			1,794			0.05
Time deposits			2,716,885			2,538			0.37						1,957,286			1,314			0.27
Total deposits			53,960,539			37,492			0.28						29,849,344			4,571			0.06
Securities sold under agreements to repurchase			479,308			1,158			0.95						544,311			721			0.52
Federal funds purchased			889,818			5,084			2.24						—			—			—
FHLB advances			2,402,596			13,814			2.25						120,714			492			1.59
Long-term debt (2)			1,075,683			9,018			3.47						564,692			4,217			3.22
Total borrowings			4,847,405			29,074			2.38						1,229,717			5,430			1.82
Total interest-bearing liabilities			58,807,944			$	66,566		0.45		%				31,079,061			$	10,001		0.13		%
Non-interest-bearing liabilities			1,108,202												439,830
Total liabilities			59,916,146												31,518,891
Preferred stock			283,979												145,037
Common shareholders' equity			7,806,065												3,230,364
Total shareholders' equity			8,090,044												3,375,401
Total liabilities and shareholders' equity			$	68,006,190											$	34,894,292
Tax-equivalent net interest income						$	564,250											$	232,125
Less: Tax-equivalent adjustments						(13,247)												(2,434)
Net interest income						$	551,003											$	229,691
Net interest margin (4)									3.54		%										2.80		%

(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 was 3.63% and 2.82% for the three months ended September 30, 2022 and 2021, respectively.

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			Nine months ended September 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)			$	42,125,526		$	1,317,941		4.14		%				$	21,477,967		$	574,984		3.54		%
Investment securities: (2)
Taxable			12,127,249			210,323			2.26						8,153,074			120,957			2.01
Non-taxable			2,420,867			36,465			2.01						725,746			15,770			2.90
Total investment securities			14,548,116			246,788			2.22						8,878,820			136,727			2.09
FHLB and FRB stock			252,559			4,768			2.52						77,040			909			1.58
Interest-bearing deposits (3)			623,866			4,711			1.00						1,434,552			1,419			0.13
Loans held for sale			12,160			73			0.80						11,515			201			2.33
Total interest-earning assets			57,562,227			$	1,574,281		3.60		%				31,879,894			$	714,240		2.98		%
Non-interest-earning assets			5,448,419												1,968,707
Total assets			$	63,010,646											$	33,848,601
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Demand deposits			$	12,758,489		$	—		—		%				$	6,800,456		$	—		—		%
Health savings accounts			7,809,082			3,358			0.06						7,414,332			4,720			0.09
Interest-bearing checking, money market and savings			27,887,362			48,992			0.23						12,579,762			5,117			0.05
Time deposits			2,649,328			5,000			0.25						2,146,218			6,267			0.39
Total deposits			51,104,261			57,350			0.15						28,940,768			16,104			0.07
Securities sold under agreements to repurchase			528,353			3,537			0.88						501,198			2,203			0.58
Federal funds purchased			478,038			6,338			1.75						21,440			13			0.08
Other borrowings			—			1			—						—			—			—
FHLB advances			1,198,754			17,034			1.87						131,606			1,539			1.54
Long-term debt (2)			1,017,120			24,973			3.40						565,866			12,658			3.22
Total borrowings			3,222,265			51,883			2.16						1,220,110			16,413			1.85
Total interest-bearing liabilities			54,326,526			$	109,233		0.27		%				30,160,878			$	32,517		0.14		%
Non-interest-bearing liabilities			1,043,313												373,609
Total liabilities			55,369,839												30,534,487
Preferred stock			268,202												145,037
Common shareholders' equity			7,372,605												3,169,077
Total shareholders' equity			7,640,807												3,314,114
Total liabilities and shareholders' equity			$	63,010,646											$	33,848,601
Tax-equivalent net interest income						$	1,465,048											$	681,723
Less: Tax-equivalent adjustments						(33,137)												(7,416)
Net interest income						$	1,431,911											$	674,307
Net interest margin (4)									3.35		%										2.85		%

(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 was 3.39% and 2.85% for the nine months ended September 30, 2022 and 2021, respectively.

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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 basis:

			Three months ended September 30,												Nine months ended September 30,
			2022 vs. 2021 Increase (decrease) due to												2022 vs. 2021 Increase (decrease) due to
(In thousands)			Rate (1)			Volume			Total						Rate (1)			Volume			Total
Interest on interest-earning assets:
Loans and leases			$	152,744		$	182,304		$	335,048					$	312,980		$	429,978		$	742,958
Investment securities			22,221			27,472			49,693						31,046			79,015			110,061
FHLB and FRB stock			628			957			1,585						1,786			2,072			3,858
Interest bearing-deposits			3,053			(671)			2,382						4,094			(802)			3,292
Loans held for sale			38			(56)			(18)						50			(178)			(128)
Total interest income			$	178,684		$	210,006		$	388,690					$	349,956		$	510,085		$	860,041
Interest on interest-bearing liabilities:
Health savings accounts			$	(418)		$	101		$	(317)					$	(1,614)		$	251		$	(1,363)
Interest-bearing checking, money market, and savings			32,126			(113)			32,013						43,613			262			43,875
Time deposits			1,542			(318)			1,224						277			(1,544)			(1,267)
Securities sold under agreements to repurchase			523			(86)			437						1,215			119			1,334
Federal funds purchased			5,083			—			5,083						6,049			276			6,325
Other borrowings			—			—			—						1			—			1
FHLB advances			4,027			9,295			13,322						3,019			12,476			15,495
Long-term debt			690			4,113			4,803						1,410			10,906			12,316
Total interest expense			$	43,573		$	12,992		$	56,565					$	53,970		$	22,746		$	76,716
Net change in net interest income			$	135,111		$	197,014		$	332,125					$	295,986		$	487,339		$	783,325

(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 $28.7 million, or 371.4%, from $7.8 million for the three months ended
September 30, 2021, to $36.5 million for the three months ended September 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 as the COVID-19 pandemic receded, as well as organic loan growth and commercial portfolio optimization initiatives. During the three months ended September 30, 2022, and 2021, total net charge-offs were $28.5 million and $0.9 million, respectively. The $27.6 million increase is primarily attributed to commercial portfolio optimization initiatives, as well as favorable credit performance in 2021 as the economy benefited from the support of federal stimulus programs.

Comparison to Prior Year to Date

The provision for credit losses increased $277.1 million, or 701.6%, from a benefit of $39.5 million for the nine months ended September 30, 2021, to an expense of $237.6 million for the nine months ended September 30, 2022. The increase is primarily attributed to the establishment of the initial ACL of $175.1 million for non-purchased credit deteriorated (PCD) loans and leases that were acquired from Sterling, as well as organic loan growth and commercial portfolio optimization initiatives. During the nine months ended September 30, 2022, and 2021, total net charge-offs were $47.1 million and $5.1 million, respectively. The $42.0 million increase is primarily attributed to commercial portfolio optimization initiatives, as well as favorable credit performance in 2021 as the economy benefited from the support of federal stimulus programs.

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" contained elsewhere in Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

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Non-Interest Income

			Three months ended September 30,																		Nine months ended September 30,
(Dollars in thousands)			2022						2021															2022						2021
Deposit service fees			$	50,807					$	40,258														$	150,019					$	122,166
Loan and lease related fees			26,769						10,881															77,355						27,056
Wealth and investment services			11,419						9,985															33,260						29,475
Mortgage banking activities			86						1,525															616						5,486
Increase in cash surrender value of life insurance policies			7,718						3,666															22,694						10,802
(Loss) on sale of investment securities, net			(2,234)						—															(2,234)						—
Other income			19,071						17,460															56,894						38,249
Total non-interest income			$	113,636					$	83,775														$	338,604					$	233,234

Comparison to Prior Year Quarter

Total non-interest income increased $29.8 million, or 35.6%, from $83.8 million for the three months ended
September 30, 2021 to $113.6 million for the three months ended September 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 and a net loss on sale of investment securities.

Deposit service fees increased $10.5 million, or 26.2%, from $40.3 million for the three months ended September 30, 2021 to $50.8 million for the three months ended September 30, 2022, primarily due to the merger with Sterling, particularly as it relates to cash management fees, overdraft fees, and account service charges, as well as higher interchange revenue.

Loan and lease related fees increased $15.9 million, or 146.0%, from $10.9 million for the three months ended
September 30, 2021 to $26.8 million for the three months ended September 30, 2022, primarily due to the merger with Sterling, which included $2.7 million of operating lease income, and an increase in loan servicing fees net of mortgage servicing amortization.

Wealth and investment services increased $1.4 million, or 14.4%, from $10.0 million for the three months ended
September 30, 2021 to $11.4 million for the three months ended September 30, 2022, primarily due to the merger with Sterling.

Mortgage banking activities decreased $1.4 million, or 94.4%, from $1.5 million for the three months ended
September 30, 2021 to $0.1 million for the three months ended September 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 $4.0 million, or 110.5%, from $3.7 million for the three months ended September 30, 2021 to $7.7 million for the three months ended September 30, 2022, primarily due to the additional
bank-owned life insurance policies acquired in the merger with Sterling.

Net loss on sale of investment securities, totaled $2.2 million for the three months ended September 30, 2022, as Webster sold $67.5 million of Municipal bonds and notes classified as available-for-sale for proceeds of $65.3 million. There were no sales of investment securities during the three months ended September 30, 2021.

Other income increased $1.6 million, or 9.2%, from $17.5 million for the three months ended September 30, 2021 to $19.1 million for the three months ended September 30, 2022, primarily due to an overall increase in other income due to the impact of the merger with Sterling, higher income from client interest rate derivative activities, and a $2.5 million net gain on the extinguishment of borrowings, partially offset by a decrease in direct investment income.

Comparison to Prior Year to Date

Total non-interest income increased $105.4 million, or 45.2%, from $233.2 million for the nine months ended
September 30, 2021 to $338.6 million for the nine months ended September 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 and a net loss on sale of investment securities.

Deposit service fees increased $27.8 million, or 22.8%, from $122.2 million for the nine months ended September 30, 2021 to $150.0 million for the nine months ended September 30, 2022, primarily due to the merger with Sterling, particularly as it relates to cash management fees, overdraft fees, and account service charges, as well as higher interchange revenue.

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Loan and lease related fees increased $50.3 million, or 185.9%, from $27.1 million for the nine months ended
September 30, 2021 to $77.4 million for the nine months ended September 30, 2022, primarily due to the merger with Sterling, which included $8.0 million of operating lease income, as well as increases in loan servicing fees net of mortgage servicing amortization, prepayment penalties, and syndication fees.

Wealth and investment services increased $3.8 million, or 12.8%, from $29.5 million for the nine months ended
September 30, 2021 to $33.3 million for the nine months ended September 30, 2022, primarily due to the merger with Sterling.

Mortgage banking activities decreased $4.9 million, or 88.8%, from $5.5 million for the nine months ended September 30, 2021 to $0.6 million for the nine months ended September 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 $11.9 million, or 110.1%, from $10.8 million for the nine months ended September 30, 2021 to $22.7 million for the nine months ended September 30, 2022, primarily due to the additional bank-owned life insurance policies acquired in the merger with Sterling.

Net loss on sale of investment securities, totaled $2.2 million for the nine months ended September 30, 2022, as Webster sold $67.5 million of Municipal bonds and notes classified as available-for-sale for proceeds of $65.3 million. There were no sales of investment securities during the nine months ended September 30, 2021.

Other income increased $18.7 million, or 48.7%, from $38.2 million for the nine months ended September 30, 2021 to $56.9 million for the nine months ended September 30, 2022, primarily due to an overall increase in other income due to the impact of the merger with Sterling, higher income from client interest rate derivative activities, gains on sale of commercial loans not originated for sale, and a $2.5 million net gain on the extinguishment of borrowings, partially offset by a decrease in direct investment income.

Non-Interest Expense

			Three months ended September 30,																		Nine months ended September 30,
(Dollars in thousands)			2022						2021															2022						2021
Compensation and benefits			$	173,983					$	105,352														$	545,641					$	310,706
Occupancy			23,517						12,430															93,725						42,090
Technology and equipment			45,283						28,441															142,182						84,081
Intangible assets amortization			8,511						1,124															23,700						3,395
Marketing			3,918						3,721															10,868						9,452
Professional and outside services			21,618						7,074															91,041						37,875
Deposit insurance			8,026						3,855															19,996						11,560
Other expense			45,215						18,240															120,930						56,088
Total non-interest expense			$	330,071					$	180,237														$	1,048,083					$	555,247

Comparison to Prior Year Quarter

Total non-interest expense increased $149.9 million, or 83.1%, from $180.2 million for the three months ended
September 30, 2021 to $330.1 million for the three months ended September 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 $68.6 million, or 65.1%, from $105.4 million for the three months ended
September 30, 2021 to $174.0 million for the three months ended September 30, 2022, primarily due to incremental salaries and incentives related to the increase in employees as a result of the merger with Sterling, and the $3.9 million reversal of severance in the prior period due to changes in retention assumptions associated with the Company's strategic initiatives announced in December 2020, partially offset by a $2.0 million decrease in merger-related expenses.

Occupancy increased $11.1 million, or 89.2%, from $12.4 million for the three months ended September 30, 2021 to $23.5 million for the three months ended September 30, 2022, primarily due to the Company's consolidation plan to reduce its corporate facility square footage, which resulted in a combined $4.3 million in related exit costs and accelerated depreciation on property and equipment, in addition to incremental operating lease costs and depreciation related to the acquired Sterling banking centers and corporate offices.

Technology and equipment increased $16.9 million, or 59.2%, from $28.4 million for the three months ended
September 30, 2021 to $45.3 million for the three months ended September 30, 2022, primarily due to an overall increase in technology and equipment due to the impact of the merger with Sterling.

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Intangible assets amortization increased $7.4 million, or 657.2%, from $1.1 million for the three months ended
September 30, 2021 to $8.5 million for the three months ended September 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 increased $14.5 million, or 205.6%, from $7.1 million for the three months ended September 30, 2021 to $21.6 million for the three months ended September 30, 2022, primarily due to an $8.8 million increase in merger-related expenses, particularly as it relates to advisory, legal, and consulting fees, and an increase in other professional service costs due to the impact of the merger with Sterling.

Deposit insurance increased $4.1 million, or 108.2%, from $3.9 million for the three months ended September 30, 2021 to $8.0 million for the three months ended September 30, 2022, primarily due to an increase in the Company's deposit insurance assessment base resulting from the merger with Sterling.

Other expense increased $27.0 million, or 147.9%, from $18.2 million for the three months ended September 30, 2021 to $45.2 million for the three months ended September 30, 2022, primarily due to an overall increase in other expenses due to the impact of the merger with Sterling, which includes $2.1 million of operating lease depreciation, as well as a $10.5 million common stock contribution to the Webster Bank Charitable Foundation, and a $3.0 million increase in merger-related expenses, particularly as it relates to disposals of property and equipment.

Comparison to Prior Year to Date

Total non-interest expense increased $492.8 million, or 88.8%, from $555.2 million for the nine months ended
September 30, 2021 to $1.0 billion for the nine months ended September 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 $234.9 million, or 75.6%, from $310.7 million for the nine months ended
September 30, 2021 to $545.6 million for the nine months ended September 30, 2022, primarily due to incremental salaries and incentives related to the increase in employees as a result of the merger with Sterling, and a $63.3 million increase in
merger-related expenses, particularly as it relates to severance, retention, and restricted stock awards.

Occupancy increased $51.6 million, or 122.7%, from $42.1 million for the nine months ended September 30, 2021 to $93.7 million for the nine months ended September 30, 2022, primarily due to the Company's consolidation plan to reduce its corporate facility square footage, which resulted in $23.1 million ROU asset impairment charges and a combined $12.0 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 $58.1 million, or 69.1%, from $84.1 million for the nine months ended
September 30, 2021 to $142.2 million for the nine months ended September 30, 2022, primarily due to a $21.3 million increase in merger-related expenses, particularly as it relates to contract termination costs, and an overall increase in technology and equipment due to the impact of the merger with Sterling.

Intangible assets amortization increased $20.3 million, or 598.1%, from $3.4 million for the nine months ended
September 30, 2021 to $23.7 million for the nine months ended September 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 increased $53.1 million, or 140.4%, from $37.9 million for the nine months ended September 30, 2021 to $91.0 million for the nine months ended September 30, 2022, primarily due to a $40.8 million increase in merger-related expenses, particularly as it relates to advisory, legal, and consulting fees, and an increase in other professional service costs due to the impact of the merger with Sterling, partially offset by a decrease in strategic initiative charges.

Deposit insurance increased $8.4 million, or 73.0%, from $11.6 million for the nine months ended September 30, 2021 to $20.0 million for the nine months ended September 30, 2022, primarily due to an increase in the Company's deposit insurance assessment base resulting from the merger with Sterling.

Other expense increased $64.8 million, or 115.6%, from $56.1 million for the nine months ended September 30, 2021 to $120.9 million for the nine months ended September 30, 2022, primarily due to an overall increase in other expenses due to the impact of the merger with Sterling, which includes $6.2 million of operating lease depreciation, along with a $12.5 million increase in merger-related expenses, particularly as it relates to disposals of property and equipment, and a $10.5 million common stock contribution to the Webster Bank Charitable Foundation.

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Income Taxes

Comparison to Prior Year Quarter

Webster recognized income tax expense of $64.1 million and $29.8 million for the three months ended September 30, 2022, and 2021, respectively, reflecting effective tax rates of 21.5% and 23.7%, respectively.

The increase in income tax expense is due to a higher level of pre-tax income recognized during the three months ended September 30, 2022, resulting from the impact of the Company's merger with Sterling. The decrease in the effective tax rate primarily reflects increased tax-exempt income and net benefits from tax credits in 2022 as compared to 2021 (including increases in the amounts estimated for the full year 2022 in Webster's estimated annual effective tax rate computation at September 30, 2022), resulting from the merger with Sterling. These factors were 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, and a $2.9 million deferred SALT expense recognized during the three months ended September 30, 2022, each also resulting from the merger with Sterling.

Comparison to Prior Year to Date

Webster recognized income tax expense of $85.3 million and $94.0 million for the nine months ended September 30, 2022, and 2021, respectively, reflecting effective tax rates of 17.6% and 24.0%, respectively.

The decrease in both income tax expense and the effective tax rate primarily reflects the one-time charges incurred by the Company during the nine months ended September 30, 2022, as a result of the merger with Sterling, along with a $10.9 million net deferred SALT benefit recognized during the nine months ended September 30, 2022, associated with the merger with Sterling, which includes a $9.9 million benefit recognized during the three months ended March 31, 2022, related to a change in management's estimate about the realizability of its SALT deferred tax assets (DTAs) due to an estimated increase in future taxable income.

At September 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 September 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
September 30, 2022, and December 31, 2021, Webster's gross DTAs included $67.1 million and $64.4 million, respectively, applicable to SALT net operating loss carryforwards that are available to offset future taxable income. The $67.1 million at September 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 September 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 September 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.

On August 16, 2022, the Inflation Reduction Act (IRA) was signed into law. The IRA includes various tax provisions, which are generally effective for tax years beginning on or after January 1, 2023. While Webster is still evaluating these tax law changes, it does not expect them to have a material impact on the Company's consolidated financial statements.

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

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Segment Reporting

Webster'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). Certain Treasury activities, 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 three reportable segments and their primary services:

Commercial Banking serves corporate customers with more than $2 million of revenues through its Commercial Real Estate, Business Banking, Capital Finance, Middle Market, Public Sector Finance, Sponsor and Specialty Finance, Mortgage Warehouse Lending, Private Banking, and Treasury Management components.

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 201 banking centers and 354 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.

Management anticipates that the presentation of Consumer Banking's operating results in the fourth quarter of 2022 will be impacted by a restructuring of the process by which the Company offers brokerage, investment advisory, and certain
insurance-related services to customers. The staff providing these services, which had previously been employees of Webster Bank at September 30, 2022, will now be employees of a third-party service provider. As a result, Webster will recognize income from this program on a net basis, which will reduce gross reported non-interest income and corresponding compensation non-interest expense. This restructuring is not expected to have a significant net impact on PPNR.

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Commercial Banking

Operating Results:

			Three months ended September 30,												Nine months ended September 30,
(In thousands)			2022						2021						2022						2021
Net interest income			$	333,554					$	152,012					$	954,044					$	434,087
Non-interest income			40,497						22,782						128,670						59,536
Non-interest expense			102,415						50,244						294,375						142,803
Pre-tax, pre-provision net revenue			$	271,636					$	124,550					$	788,339					$	350,820

Comparison to Prior Year Quarter

Commercial Banking's PPNR increased $147.1 million, or 118.1%, for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021, due to increases 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 $181.6 million increase in net interest income is primarily attributed to incremental loan and deposit balances acquired from Sterling, loan and deposit growth, and higher interest rates. The $17.7 million increase in non-interest income is primarily attributed to incremental fee income due to the merger, partially offset by lower direct investment income. The $52.2 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.

Comparison to Prior Year to Date

Commercial Banking's PPNR increased $437.5 million, or 124.7%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, due to increases 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 $520.0 million increase in net interest income is primarily attributed to incremental loan and deposit balances acquired from Sterling, loan and deposit growth, and higher interest rates. The $69.1 million increase in non-interest income is primarily attributed to incremental fee income due to the merger, as well as increased client hedging activity and loan and lease related fees, partially offset by lower direct investment income. The $151.6 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.

Selected Balance Sheet and Off-Balance Sheet Information:

(In thousands)			At September 30, 2022						At December 31, 2021
Loans and leases			$	38,493,281					$	15,209,515
Deposits			20,828,493						9,519,362
Assets under administration / management (off-balance sheet)			2,121,313						2,869,385

Loans and leases increased $23.3 billion, or 153.1%, at September 30, 2022 as compared to December 31, 2021, primarily due to the merger with Sterling, as well as growth within the commercial real estate and the commercial non-mortgage categories. Total portfolio originations for the nine months ended September 30, 2022 and 2021 were $10.6 billion and $3.9 billion, respectively. The $6.7 billion increase was primarily attributed to the merger with Sterling, along with increased commercial non-mortgage and commercial real estate originations.

Deposits increased $11.3 billion, or 118.8%, at September 30, 2022 as compared to December 31, 2021, primarily due to the merger with Sterling.

Commercial Banking held $0.5 billion and $0.8 billion in assets under administration and $1.6 billion and $2.1 billion in assets under management at September 30, 2022 and December 31, 2021, respectively. The combined decrease of $0.8 billion, or 26.1%, was primarily due to lower valuations in the equity markets during the nine months ended September 30, 2022.

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HSA Bank

Operating Results:

			Three months ended September 30,												Nine months ended September 30,
(In thousands)			2022						2021						2022						2021
Net interest income			$	58,567					$	42,074					$	152,702					$	126,376
Non-interest income			25,842						24,756						79,352						78,315
Non-interest expense			36,725						32,374						110,674						100,802
Pre-tax net revenue			$	47,684					$	34,456					$	121,380					$	103,889

Comparison to Prior Year Quarter

HSA Bank's pre-tax net revenue increased $13.2 million, or 38.4%, for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021, due to increases in both net interest income and non-interest income, partially offset by an increase in non-interest expense. The $16.5 million increase in net interest income is primarily attributed to an increase in the net interest rate spread on deposits and overall deposit growth. The $1.1 million increase in
non-interest income is primarily due to higher interchange income from increased debit card spending. The $4.4 million increase in non-interest expense is primarily attributed to incremental expenses from Bend's acquired business, as well as an increase in compensation, temporary help, and travel expenses.

Comparison to Prior Year to Date

HSA Bank's pre-tax net revenue increased $17.5 million, or 16.8%, for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, due to increases in both net interest income and non-interest income, partially offset by an increase in non-interest expense. The $26.3 million increase in net interest income is primarily attributed to an increase in the net interest rate spread on deposits and overall deposit growth. The $1.1 million increase in
non-interest income is primarily due to higher interchange income from increased debit card spending. The $9.9 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.

Selected Balance Sheet and Off-Balance Sheet Information:

(In thousands)			At September 30, 2022						At December 31, 2021
Deposits			$	7,889,296					$	7,397,997
Assets under administration, through linked investment accounts (off-balance sheet)			3,232,793						3,718,610

Deposits increased $491.3 million, or 6.6%, at September 30, 2022 as compared to December 31, 2021, 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. HSA Bank's deposits accounted for approximately 14.6% and 24.8% of Webster's total consolidated deposits at September 30, 2022 and December 31, 2021, respectively, with the lower mix driven by the inflow of deposits as a result of the merger with Sterling.

Assets under administration, through linked investment accounts, decreased $485.8 million, or 13.1%, at September 30, 2022 as compared to December 31, 2021, primarily due to lower valuations in the equity markets during the nine months ended September 30, 2022, which was partially offset by additional account holders and balances from the acquisition of Bend.

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Consumer Banking

Operating Results:

			Three months ended September 30,												Nine months ended September 30,
(In thousands)			2022						2021						2022						2021
Net interest income			$	195,748					$	98,572					$	511,712					$	281,012
Non-interest income			33,842						24,292						92,541						71,262
Non-interest expense			109,588						73,212						312,464						222,672
Pre-tax, pre-provision net revenue			$	120,002					$	49,652					$	291,789					$	129,602

Comparison to Prior Year Quarter

Consumer Banking's PPNR increased $70.4 million, or 141.7%, for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021, due to increases 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 $97.2 million increase in net interest income is primarily attributed to incremental loan and deposit balances acquired from Sterling, loan and deposit growth, and higher interest rates. The $9.6 million increase in non-interest income is primarily attributed to incremental fee income due to the merger, coupled with higher deposit servicing fees, loan and lease related fees, and investment services income, partially offset by lower mortgage banking activities. The $36.4 million increase in non-interest expense is primarily attributed to incremental expenses incurred related to the acquired Sterling consumer business, partially offset by lower shared services charges.

Comparison to Prior Year to Date

Consumer Banking's PPNR increased $162.2 million, or 125.1%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, due to increases 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 $230.7 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 $21.3 million increase in non-interest income is primarily attributed to incremental fee income due to the merger, as well as higher deposit servicing and loan and lease related fees, partially offset by lower mortgage banking activities. The $89.8 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 cost savings initiatives implemented over the course of 2021.

Selected Balance Sheet and Off-Balance Sheet Information:

(In thousands)			At September 30, 2022						At December 31, 2021
Loans			$	9,302,048					$	7,062,182
Deposits			23,859,373						12,926,302
Assets under administration (off-balance sheet)			7,369,382						4,332,901

Loans increased $2.2 billion, or 31.7%, at September 30, 2022 as compared to December 31, 2021, primarily due to the merger with Sterling and growth in residential mortgages, partially offset by the forgiveness of PPP loans and the continued run-off of consumer Lending Club loans. Total portfolio originations for the nine months ended September 30, 2022 and 2021 were $2.1 billion and $2.5 billion, respectively. The $0.4 billion decrease was primarily attributed to increased market rates, which resulted in lower residential mortgage loan originations, as well as the cessation of PPP loan originations effective
May 31, 2021.

Deposits increased $10.9 billion, or 84.6%, at September 30, 2022 as compared to December 31, 2021, primarily due to the merger with Sterling, partially offset by attrition from maturing certificates of deposits.

Consumer Banking held $7.4 billion and $4.3 billion in assets under administration at September 30, 2022, and
December 31, 2021, respectively. The $3.1 billion increase was primarily due to the merger with Sterling, partially offset by lower valuations in the equity markets during the nine months ended September 30, 2022.

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Financial Condition

Total assets increased $34.2 billion, or 97.8%, from $34.9 billion at December 31, 2021 to $69.1 billion at September 30, 2022. The change in total assets was primarily attributed to the following:

•Total investment securities, net increased $4.2 billion, with increases of $3.9 billion and $0.3 billion in the available-for-sale and held-to-maturity portfolios, respectively, primarily due 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, and purchases exceeding paydown activities, partially offset by an increase in net unrealized losses within the available-for-sale portfolio;

•Loans and leases increased $25.6 billion, with increases of $23.3 billion and $2.3 billion in the commercial and consumer portfolios, respectively, primarily due to $20.5 billion of gross loans and leases acquired from Sterling in the merger, which included a $317.6 million purchase discount. Webster also originated $12.7 billion of loans and leases during the nine months ended September 30, 2022, particularly across the commercial non-mortgage and commercial real estate categories. These increases were partially offset by net paydowns, commercial portfolio loan sales, the forgiveness of PPP 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 $273.1 million increase in the ACL on loans and leases.

•Goodwill and other net intangible assets increased a combined $2.2 billion. Goodwill increased $2.0 billion, which reflects the $1.9 billion and $36.0 million recognized in connection with the Sterling merger and Bend acquisition, respectively. The $189.4 million increase in other net intangible assets is due to the $119.1 million core deposit and $94.0 million customer relationship intangible assets acquired from Sterling and Bend, respectively, partially offset by year to date amortization charges; and

•Accrued interest receivable and other assets increased $937.5 million, primarily due to $959.5 million of balances acquired from Sterling in the merger. Notable increases include $153.5 million in accrued interest receivable, $61.9 million in alternative investments, $607.3 million in LIHTC investments, and a combined $41.2 million in accounts receivable and prepaid expenses. These increases were partially offset by a decrease of $84.7 million in treasury derivative assets.

Total liabilities increased $29.7 billion, or 94.5%, from $31.5 billion at December 31, 2021 to $61.2 billion at
September 30, 2022. The change in total liabilities was primarily attributed to the following:

•Total deposits increased $24.2 billion, with increases of $6.8 billion and $17.4 billion in non-interest bearing deposits and interest-bearing deposits, respectively, primarily due to $23.3 billion of deposits assumed from Sterling in the merger;

•Securities sold under agreements to repurchase and other borrowings increased $0.6 billion, primarily due to the purchase of $1.0 billion in federal funds, partially offset by a decrease of $0.4 billion in securities sold under agreements to repurchase resulting from the extinguishment of two $100 million structured repurchase agreements and the timing of maturities during the third quarter of 2022;

•FHLB advances increased $3.5 billion, primarily due to short-term funding needs.

•Long-term debt increased $511.9 million, primarily due to $499.0 million aggregate par value of subordinated notes assumed from Sterling in the merger, adjusted for a $17.9 million purchase premium, which is being amortized over the remaining lives of the subordinated notes; and

•Accrued expenses and other liabilities increased $984.9 million, primarily due to $595.3 million of balances assumed from Sterling in the merger, and the timing of payments for compensation and benefits and professional services. Other notable increases include $424.4 million in treasury derivative liabilities, $99.3 million in operating lease liabilities, and $300.2 million in unfunded commitments for LIHTC investments.

Total shareholders' equity increased $4.4 billion, or 127.6%, from $3.4 billion at December 31, 2021 to $7.8 billion at September 30, 2022. The change in total shareholders' equity was attributed to the following:

•Common shares issued in the merger with Sterling totaling approximately $5.0 billion, of which $43.9 million pertained 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;

•Net income recognized of $399.5 million;

•Dividends paid to common and preferred shareholders of $178.0 million and $11.8 million, respectively;

•Other comprehensive loss, net of tax, of $714.3 million, primarily due to market value decreases in the Company's available-for-sale securities portfolio and cash flow hedges;

•A common stock contribution of $10.5 million to the Webster Bank Charitable Foundation;

•Employee share-based compensation plan activity of $43.2 million, inclusive of restricted stock amortization and forfeitures, and stock options exercised of $0.6 million; and

•Repurchases of common stock of $319.3 million under the Company's common stock repurchase program and $22.5 million related to employee share-based compensation plans.

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Investment Securities

Through its Corporate Treasury function, Webster 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 securities are classified into two major categories: available-for-sale and held-to-maturity.

The Asset/Liability Committee (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) may further establish individual limits on certain types of investments if the concentration in such investment presents a safety and soundness concern. At September 30, 2022 and December 31, 2021, Webster had investment securities with a total net carrying value of $14.6 billion and $10.4 billion, respectively, with an average risk weighting for regulatory purposes of 19.2% and 12.5%, respectively. Although the Bank held the entirety of Webster's investment portfolio at both September 30, 2022 and December 31, 2021, the Holding Company may also directly hold investments.

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

			At September 30, 2022									At December 31, 2021
(In thousands)			Amount			%						Amount			%
Available-for-sale:
U.S. Treasury notes			$	713,263		8.8		%				$	396,966		9.4		%
Government agency debentures			269,028			3.3						—			—
Municipal bonds and notes			1,697,145			21.0						—			—
Agency CMO			63,861			0.8						90,384			2.2
Agency MBS			2,197,349			27.2						1,593,403			37.6
Agency CMBS			1,455,919			18.0						1,232,541			29.1
CMBS			922,928			11.4						886,263			20.9
CLO			7,203			0.1						21,847			0.5
Corporate debt			702,172			8.7						13,450			0.3
Private label MBS			44,310			0.6						—			—
Other			11,866			0.1						—			—
Total available-for-sale			$	8,085,044		100.0		%				$	4,234,854		100.0		%
Held-to-maturity:
Agency CMO			$	29,854		0.5		%				$	42,405		0.7		%
Agency MBS			2,701,984			41.5						2,901,593			46.8
Agency CMBS			2,691,955			41.4						2,378,475			38.4
Municipal bonds and notes (1)			930,390			14.3						705,918			11.4
CMBS			151,864			2.3						169,948			2.7
Total held-to-maturity			$	6,506,047		100.0		%				$	6,198,339		100.0		%
Total investment securities			$	14,591,091								$	10,433,193

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

Available-for-sale debt securities increased $3.9 billion, or 90.9%, from $4.2 billion at December 31, 2021 to $8.1 billion at September 30, 2022, primarily due to the merger with Sterling, as the Company acquired $4.4 billion of debt securities at fair value on January 31, 2022, all of which were classified as available-for-sale based on Webster's intent at closing. The debt securities acquired from Sterling resulted in a $221.6 million net purchase premium over par value accounted for as a yield adjustment using the effective interest method. Webster also purchased an additional $1.1 billion of available-for sale debt securities during the nine months ended September 30, 2022. These increases were partially offset by an increase in net unrealized losses, as well as paydowns, maturities, sales, and net premium amortization activities during the nine months ended September 30, 2022, particularly across the Agency MBS, Agency CMBS, Municipal bonds and notes, and CMBS categories.

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The tax-equivalent yield in the available-for-sale portfolio was 2.38% for the three months ended September 30, 2022 and 2.20% for the nine months ended September 30, 2022, as compared to 1.74% for the three months ended September 30, 2021 and 1.80% for the nine months ended September 30, 2021. The 64 basis point and 40 basis point increases, respectively, are attributed to higher rates on securities purchased during the nine months ended September 30, 2022. Available-for-sale debt securities are evaluated for credit losses on a quarterly basis. At September 30, 2022 and December 31, 2021, gross unrealized losses were $941.8 million and $34.3 million, respectively. The $907.5 million increase 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, no ACL was recorded during the current period. At September 30, 2022, Webster did not intend to sell these investment securities, and it is more likely than not that the Company will not be required to sell these securities prior to the anticipated recovery of their cost basis.

Held-to-maturity investment securities increased $0.3 billion, or 5.0%, from $6.2 billion at December 31, 2021 to $6.5 billion at September 30, 2022, primarily due to purchases exceeding paydowns, maturities, and net premium amortization, particularly across the Agency CMBS, Agency MBS, and Municipal bonds and notes categories. The tax-equivalent yield in the
held-to-maturity portfolio was 2.43% for the three months ended September 30, 2022, as compared to 2.17% for the three months ended September 30, 2021. The 26 basis point increase is attributed to higher rates on securities purchased in the current period. The tax equivalent yield in the held-to-maturity portfolio remained flat at 2.25% for the nine months ended September 30, 2022 and 2021. Held-to-maturity debt securities are evaluated for credit losses on a quarterly basis under the current expected credit losses (CECL) methodology. At September 30, 2022 and December 31, 2021, gross unrealized losses were $856.8 million and $55.7 million, respectively. The $801.1 million increase is primarily due to higher market rates. The ACL on held-to-maturity debt securities was $0.2 million at both September 30, 2022 and December 31, 2021.

The following table summarizes the amortized cost of investment securities by contractual maturity, along with the respective weighted-average yields:

			At September 30, 2022
			1 Year or Less						1 - 5 Years						5 - 10 Years						After 10 Years						Total
(Dollars in thousands)			Amount			Weighted- Average Yield (1)			Amount			Weighted- Average Yield (1)			Amount			Weighted- Average Yield (1)			Amount			Weighted- Average Yield (1)			Amount			Weighted- Average Yield (1)
Available-for-sale:
U.S. Treasury notes			$	—		—		%	$	713,263		1.05		%	$	—		—		%	$	—		—		%	$	713,263		1.05		%
Government agency debentures			9,992			0.47			72,995			2.42			—			—			186,041			3.22			269,028			2.90
Municipal bonds and notes			31,145			1.13			194,575			1.42			624,713			1.48			846,712			1.58			1,697,145			1.51
Agency CMO			—			—			643			2.69			3,762			2.72			59,456			2.63			63,861			2.63
Agency MBS			31			(2.16)			7,737			1.15			152,775			1.52			2,036,806			2.20			2,197,349			2.15
Agency CMBS			—			—			87,421			1.05			43,676			1.40			1,324,822			2.07			1,455,919			1.98
CMBS			—			—			67,462			3.88			49,188			4.22			806,278			4.38			922,928			4.33
CLO			—			—			7,203			4.26			—			—			—			—			7,203			4.26
Corporate debt			14,942			1.48			205,176			2.26			428,059			3.17			53,995			2.99			702,172			2.86
Private label MBS			—			—			—			—			—			—			44,310			4.01			44,310			4.01
Other			2,714			5.20			4,923			3.80			4,229			2.71			—			—			11,866			3.73
Total available-for-sale			$	58,824		1.29		%	$	1,361,398		1.53		%	$	1,306,402		2.15		%	$	5,358,420		2.46		%	$	8,085,044		2.24		%
Held-to-maturity:
Agency CMO			$	—		—		%	$	—		—		%	$	—		—		%	$	29,854		2.52		%	$	29,854		2.52		%
Agency MBS			5			4.30			2,158			2.44			25,608			2.27			2,674,213			2.27			2,701,984			2.27
Agency CMBS			—			—			—			—			136,809			2.67			2,555,146			2.09			2,691,955			2.12
Municipal bonds and notes			2,153			3.10			50,225			3.27			171,648			2.74			706,364			3.18			930,390			3.10
CMBS			—			—			—			—			—			—			151,864			2.72			151,864			2.72
Total held-to-maturity			$	2,158		3.10		%	$	52,383		3.24		%	$	334,065		2.67		%	$	6,117,441		2.31		%	$	6,506,047		2.34		%
Total investment securities			$	60,982		1.35		%	$	1,413,781		1.59		%	$	1,640,467		2.25		%	$	11,475,861		2.38		%	$	14,591,091		2.29		%

(1)Weighted-average yields were calculated using amortized cost on a fully-tax equivalent basis, assuming a 21% tax rate.

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.

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Loans and Leases

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

			At September 30, 2022									At December 31, 2021
(Dollars in thousands)			Amount			%						Amount			%
Commercial non-mortgage			$	15,148,507		31.7		%				$	6,882,480		30.9		%
Asset-based			1,803,719			3.8						1,067,248			4.8
Commercial real estate			12,742,888			26.6						5,463,321			24.5
Multi-family			6,119,731			12.8						1,139,859			5.1
Equipment financing			1,764,289			3.7						627,058			2.8
Warehouse lending			894,438			1.9						—			—
Residential			7,617,955			15.9						5,412,905			24.3
Home equity			1,662,756			3.5						1,593,559			7.2
Other consumer			69,592			0.1						85,299			0.4
Total loans and leases (1)			$	47,823,875		100.0		%				$	22,271,729		100.0		%

(1)The amortized cost balances at September 30, 2022 and December 31, 2021, exclude the ACL recorded on loans and leases of $574.3 million and $301.2 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 September 30, 2022
(In thousands)			1 Year or Less			1 - 5 Years			5 - 15 Years			After 15 Years			Total
Fixed rate:
Commercial non-mortgage			$	164,247		$	505,879		$	1,830,429		$	1,515,495		$	4,016,050
Asset-based			—			58,777			—			—			58,777
Commercial real estate			576,688			1,625,871			1,080,643			119,083			3,402,285
Multi-family			229,342			1,662,819			1,550,600			42,389			3,485,150
Equipment financing			180,853			1,260,801			313,144			—			1,754,798
Residential			986			60,817			438,798			4,881,671			5,382,272
Home equity			4,320			24,743			182,684			184,411			396,158
Other consumer			14,603			18,622			415			2,515			36,155
Total fixed rate loans and leases			$	1,171,039		$	5,218,329		$	5,396,713		$	6,745,564		$	18,531,645
Variable rate:
Commercial non-mortgage			$	2,423,709		$	7,825,876		$	764,243		$	118,629		$	11,132,457
Asset-based			435,209			1,304,263			5,470			—			1,744,942
Commercial real estate			1,666,556			4,726,929			2,237,022			710,096			9,340,603
Multi-family			438,516			826,859			1,272,258			96,948			2,634,581
Equipment financing			1,838			7,653			—			—			9,491
Warehouse lending			782,624			111,814			—			—			894,438
Residential			753			11,340			330,087			1,893,503			2,235,683
Home equity			3,711			8,209			166,924			1,087,754			1,266,598
Other consumer			3,582			21,091			1,165			7,599			33,437
Total variable rate loans and leases			$	5,756,498		$	14,844,034		$	4,777,169		$	3,914,529		$	29,292,230
Total loans and leases (1)			$	6,927,537		$	20,062,363		$	10,173,882		$	10,660,093		$	47,823,875

(1)Amounts due exclude total accrued interest receivable of $175.8 million.

Credit Policies and Procedures

Webster 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.

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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 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) score, the loan amount relative to property value, and the borrower’s debt-to-income level. Webster Bank originates both qualified mortgage and non-qualified mortgage loans, as defined by applicable Consumer Financial Protection Bureau (CFPB) rules.

Allowance for Credit Losses on Loans and Leases

The ACL on loans and leases increased $273.1 million, or 90.7%, from $301.2 million at December 31, 2021, to $574.3 million at September 30, 2022, primarily 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, as well as organic loan growth and commercial portfolio optimization initiatives. The establishment of the initial ACL for PCD loans and leases is net of $48.3 million in charge-offs, which were recognized upon completion of the merger in accordance with GAAP.

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

			At September 30, 2022									At December 31, 2021
(Dollars in thousands)			Amount			% (1)						Amount			% (1)
Commercial non-mortgage			$	182,657		31.8		%				$	111,351		37.0		%
Asset-based			20,411			3.6						6,481			2.2
Commercial real estate			218,086			38.0						114,493			38.0
Multi-family			68,969			12.0						19,414			6.4
Equipment financing			25,387			4.4						6,138			2.0
Warehouse lending			805			0.1						—			—
Residential			23,084			4.0						15,628			5.2
Home equity			32,342			5.6						23,523			7.8
Other consumer			2,584			0.5						4,159			1.4
Total ACL on loans and leases			$	574,325		100.0		%				$	301,187		100.0		%

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

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Methodology

Webster'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), and Exposure at Default (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 an expected historical loss trend based on third-party loss estimates, correlate 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 loss model generates cash flow projections at the loan level based on reasonable and supportable projections, from which we estimate payment collections adjusted for curtailments, recovery time, PD and LGD.

Webster'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 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 judgement of the company, market, industry, or business specific data including loan trends, portfolio segment composition, and loan rating or credit scores. Qualitative adjustments may be applied in relation to economic forecasts when relevant facts and circumstances are expected to impact credit losses, particularly in times of significant volatility in economic activity.

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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 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.

Asset Quality Ratios

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

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

(Dollars in thousands)			At September 30, 2022						At December 31, 2021
Non-performing loans and leases (1)			$	209,516					$	109,778
Total loans and leases			47,823,875						22,271,729
Non-performing loans and leases as a percentage of loans and leases			0.44		%				0.49		%
Non-performing assets (1)			$	211,627					$	112,590
Total loans and leases			$	47,823,875					$	22,271,729
Add: OREO			2,111						2,812
Total loans and leases plus OREO			$	47,825,986					$	22,274,541
Non-performing assets as a percentage of loans and leases plus OREO			0.44		%				0.51		%
Non-performing assets (1)			$	211,627					$	112,590
Total assets			69,052,566						34,915,599
Non-performing assets as a percentage of total assets			0.31		%				0.32		%
ACL on loans and leases			$	574,325					$	301,187
Non-performing loans and leases (1)			209,516						109,778
ACL on loans and leases as a percentage of non-performing loans and leases			274.12		%				274.36		%
ACL on loans and leases			$	574,325					$	301,187
Total loans and leases			47,823,875						22,271,729
ACL on loans and leases as a percentage of loans and leases			1.20		%				1.35		%
ACL on loans and leases			$	574,325					$	301,187
Net charge-offs			62,740						3,829
Ratio of ACL on loans and leases to net charge-offs (2)			9.15x						78.66x

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

(2)Calculated for the September 30, 2022 period based on annualized year-to-date net charge-offs.

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

			At or for the three months ended September 30,
			2022												2021
(Dollars in thousands)			Net Charge-offs (Recoveries)			Average Balance			% (1)						Net Charge-offs (Recoveries)			Average Balance			% (1)
Commercial non-mortgage			$	24,388		$	14,404,363		0.68		%				$	1,558		$	6,660,084		0.09		%
Asset-based			(1)			1,811,073			—						—			956,535			—
Commercial real estate			4,684			12,430,026			0.15						12			5,344,168			—
Multi-family			201			6,073,051			0.01						—			1,165,932			—
Equipment financing			671			1,741,214			0.15						11			620,174			0.01
Warehouse lending			—			635,203			—						—			—			—
Residential			(515)			7,384,704			(0.03)						(584)			5,036,329			(0.05)
Home equity			(1,285)			1,673,477			(0.31)						(636)			1,651,219			(0.15)
Other consumer			383			76,567			2.00						560			104,072			2.15
Total			$	28,526		$	46,229,678		0.25		%				$	921		$	21,538,513		0.02		%
			At or for the nine months ended September 30,
			2022												2021
(Dollars in thousands)			Net Charge-offs (Recoveries)			Average Balance			% (1)						Net Charge-offs (Recoveries)			Average Balance			% (1)
Commercial non-mortgage			$	42,023		$	12,917,615		0.43		%				$	2,035		$	6,877,938		0.04		%
Asset-based			(48)			1,735,435			—						(1,426)			930,290			(0.20)
Commercial real estate			7,410			10,850,895			0.09						5,319			5,339,430			0.13
Multi-family			404			5,830,630			0.01						—			1,054,557			—
Equipment financing			1,030			1,645,453			0.08						96			612,714			0.02
Warehouse lending			—			518,941			—						—			—			—
Residential			(1,067)			6,874,793			(0.02)						(1,039)			4,833,120			(0.03)
Home equity			(3,652)			1,668,474			(0.29)						(2,870)			1,705,826			(0.22)
Other consumer			955			83,290			1.53						2,959			124,092			3.18
Total			$	47,055		$	42,125,526		0.15		%				$	5,074		$	21,477,967		0.03		%

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

Net charge-offs as a percentage of average loans and leases were 0.25% and 0.15% for the three and nine months ended September 30, 2022, respectively, and 0.02% and 0.03% for the three and nine months ended September 30, 2021, respectively. The increased level of net charge-offs is primarily attributed to commercial portfolio optimization initiatives, as well as favorable credit performance in 2021 as the economy benefited from the support of federal stimulus programs.

Liquidity and Capital Resources

Webster manages its cash flow requirements through proactive liquidity measures at both the Holding Company and Webster Bank in order to maintain stable, cost-effective funding and to promote overall balance sheet strength. The liquidity position of the Company is continuously monitored and adjustments are made to balance sources and uses of funds, as needed. At September 30, 2022, 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 is not aware of any regulatory recommendations regarding liquidity, that if implemented, would have a material adverse effect on the Company.

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 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 and lease portfolio.

Holding Company Liquidity. The primary source of liquidity at the Holding Company is dividends from Webster 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, repurchases of its common stock, and purchases of investment securities, as applicable.

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There are certain restrictions on Webster Bank's payment of dividends to the Holding Company, which are described within Note 10: Regulatory Capital and Restrictions in the Notes to Condensed Consolidated Financial Statements contained in
Part I - Item 1. Financial Statements, 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. During the nine months ended
September 30, 2022, Webster Bank paid $375.0 million in dividends to the Holding Company. At September 30, 2022, there were $544.5 million of retained earnings available for the payment of dividends by Webster Bank to the Holding Company. On October 25, 2022, Webster Bank was approved to pay the Holding Company $100.0 million in dividends during the fourth quarter of 2022.

The quarterly cash dividend to common shareholders remained at $0.40 per common share during the three months ended September 30, 2022. On October 25, 2022, it was announced that Webster’s Board of Directors had declared a quarterly cash dividend of $0.40 per share on its common stock. For its Series F Preferred Stock and Series G Preferred Stock, Webster declared quarterly cash dividends of $328.125 per share and $16.25 per share, respectively. Webster continues to monitor economic forecasts, anticipated earnings, and its capital position in the determination of its dividend payments.

Webster maintains a common stock repurchase program, which was approved by the Board of Directors, that authorizes management to purchase shares of its common stock in open market or privately negotiated transactions, through block trades, and pursuant to any adopted predetermined trading plan subject to certain conditions. 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 nine months ended September 30, 2022, the Company repurchased 6,336,742 shares under the program at a weighted-average price of $50.38 per share totaling $319.3 million. The remaining purchase authority at September 30, 2022 was $404.2 million. In addition, the Company will periodically acquire common shares outside of the repurchase program related to stock compensation plan activity. During the nine months ended September 30, 2022, a total of 392,670 shares were repurchased at a weighted-average price of $57.40 per share totaling $22.5 million for this purpose.

The IRA, which was signed into law on August 16, 2022, imposes a 1% excise tax on net repurchases of stock by certain publicly traded corporations, including Webster. The excise tax is to be imposed on the value of the net stock repurchased, or treated as repurchased, and will apply to the Company's stock repurchases that occur after December 31, 2022.

On July 8, 2022, the Holding Company made an unrestricted and unconditional contribution of 242,270 Webster common shares to the Webster Bank Charitable Foundation, a nonprofit charitable organization with a focus on education and community development that serves communities in the Greater New York City, Lower Hudson Valley, Long Island, and New Jersey areas. The fair value of these shares based on their closing price on the contribution date was $10.5 million.

Webster Bank Liquidity. Webster Bank's primary source of funding is core deposits. Including time deposits, Webster Bank had a loan to total deposit ratio of 88.5% and 74.6% at September 30, 2022 and December 31, 2021, respectively. The 13.9% point increase is attributed to loan growth exceeding deposit growth.

Webster 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 September 30, 2022, Webster Bank exceeded all regulatory liquidity requirements. Webster 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 and Webster 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 the regulatory framework for prompt corrective action, both Webster Financial Corporation and Webster Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated 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 Common Equity Tier 1 Capital, defined by 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 September 30, 2022, both Webster Financial Corporation and Webster Bank were classified as well-capitalized. Management believes that no events or changes have occurred subsequent to quarter-end that would change this designation.

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In accordance with regulatory capital rules, Webster 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 the initial two years. For 2022, 2023, and 2024, Webster is allowed 75%, 50%, and 25% of the regulatory capital benefit as of December 31, 2021, respectively, with full absorption occurring in 2025. At September 30, 2022, the benefit allowed from the delayed CECL adoption resulted in a 9, 9, and 6 basis point increase to Webster Financial Corporation's and Webster 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 2 basis point decrease to Total capital to total risk-weighted assets (Total risk-based capital). Both Webster Financial Corporation's and Webster Bank's regulatory ratios remain in excess of being well-capitalized, even without the benefit of the delayed CECL adoption impact.

Additional information regarding the required regulatory capital levels and ratios applicable to Webster Financial Corporation and Webster 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. The primary source of cash flows for Webster Bank’s use in its lending activities and general operational needs is deposits. Operating activities, such as 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 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) regulations. Both Webster Bank’s Retail Pricing Committee and its Commercial and Institutional Liability Pricing Committee meet regularly to determine pricing and marketing initiatives.

Total deposits were $54.0 billion and $29.8 billion at September 30, 2022 and December 31, 2021, respectively. The $24.2 billion increase was primarily attributed to the deposits assumed from Sterling 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 1.0% and 0.9% of total deposits at September 30, 2022 and December 31, 2021, respectively.

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The following tables summarize daily average balances of deposits by type and the weighted-average rates paid thereon:

			Three months ended September 30,
			2022									2021
(Dollars in thousands)			Average Balance			Average Rate						Average Balance			Average Rate
Non-interest-bearing:
Demand			$	13,590,667		—		%				$	7,182,116		—		%
Interest-bearing:
Checking			9,274,538			0.37						4,047,823			0.04
Health savings accounts			7,854,425			0.06						7,346,239			0.08
Money market			11,287,581			0.71						3,839,594			0.11
Savings			9,236,443			0.22						5,476,286			0.02
Time deposits			2,716,885			0.37						1,957,286			0.27
Total interest-bearing			40,369,872			0.37						22,667,228			0.08
Total average deposits			$	53,960,539		0.28		%				$	29,849,344		0.06		%
			Nine months ended September 30,
			2022									2021
(Dollars in thousands)			Average Balance			Average Rate						Average Balance			Average Rate
Non-interest-bearing:
Demand			$	12,758,489		—		%				$	6,800,456		—		%
Interest-bearing:
Checking			8,797,586			0.19						3,841,335			0.04
Health savings accounts			7,809,082			0.06						7,414,332			0.09
Money market			10,609,705			0.37						3,418,564			0.11
Savings			8,480,071			0.10						5,319,863			0.02
Time deposits			2,649,328			0.25						2,146,218			0.39
Total interest-bearing			38,345,772			0.20						22,140,312			0.10
Total average deposits			$	51,104,261		0.15		%				$	28,940,768		0.07		%

The following table summarizes total uninsured deposits:

(In thousands)			At September 30, 2022						At December 31, 2021
Uninsured deposits (1)			$	22,129,266					$	10,936,416

(1)A portion of Webster’s total uninsured deposits are estimated based on the same methodologies and assumptions used for regulatory reporting requirements.

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)			September 30, 2022
Portion of U.S. time deposits in excess of insurance limit			$	377,882
Time deposits otherwise uninsured with a maturity of: (1)
3 months or less			$	98,503
Over 3 months through 6 months			281,208
Over 6 months through 12 months			33,845
Over 12 months			9,688

(1)Includes $45.4 million of Eurodollar deposits, all of which are due within 3 months or less.

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 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 $5.8 billion and $1.2 billion at September 30, 2022 and December 31, 2021, respectively, and represented 8.5% and 3.6% of total assets, respectively. The $4.6 billion increase is primarily attributed to increases of $3.5 billion, $1.0 billion, and $0.5 billion in FHLB advances, federal funds purchased, and long-term debt, respectively, partially offset by a $0.4 billion decrease in securities sold under agreements to repurchase.

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Webster Bank had additional borrowing capacity from the FHLB of $3.5 billion and $5.1 billion at September 30, 2022 and December 31, 2021, respectively. The Bank also had additional borrowing capacity from the FRB of $1.1 billion and $1.5 billion at September 30, 2022 and December 31, 2021, respectively. Unpledged investment securities of $6.5 billion at September 30, 2022 could have been used for collateral on borrowings or to increase borrowing capacity by either $6.0 billion with the FHLB or $6.3 billion with the FRB.

Securities sold under agreements to repurchase are generally a form of short-term funding in which the Bank 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 $0.3 billion and $0.7 billion at September 30, 2022 and December 31, 2021, respectively. The $0.4 billion decrease is primarily attributed to the extinguishment of two $100 million structured repurchase agreements during the third quarter of 2022, and the overall timing of maturities.

The Bank may also purchase term and overnight federal funds to meet its short-term liquidity needs. Federal funds purchased totaled $1.0 billion at September 30, 2022. There were no federal funds purchased at December 31, 2021.

FHLB advances are not only utilized as a source of funding, but also for interest rate risk management purposes. FHLB advances totaled $3.5 billion and $11.0 million at September 30, 2022 and December 31, 2021, respectively. The $3.5 billion increase is primarily attributed short-term funding needs.

Long-term debt consists of senior fixed-rate notes maturing in 2024 and 2029, subordinated fixed-to-floating-rate notes maturing in 2029 and 2039, and floating-rate junior subordinated notes maturing in 2033. Long-term debt totaled $1.1 billion and $0.6 billion at September 30, 2022 and December 31, 2021, respectively. The $0.5 billion increase is primarily attributed to the subordinated notes assumed from Sterling in the merger.

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

			Three months ended September 30,
			2022									2021
(Dollars in thousands)			Average Balance			Average Rate						Average Balance			Average Rate
FHLB advances			$	2,402,596		2.25		%				$	120,714		1.59		%
Securities sold under agreements to repurchase			479,308			0.95						544,311			0.52
Federal funds purchased			889,818			2.24						—			—
Long-term debt			1,075,683			3.47						564,692			3.22
Total average borrowings			$	4,847,405		2.38		%				$	1,229,717		1.82		%
			Nine months ended September 30,
			2022									2021
(Dollars in thousands)			Average Balance			Average Rate						Average Balance			Average Rate
FHLB advances			$	1,198,754		1.87		%				$	131,606		1.54		%
Securities sold under agreements to repurchase			528,353			0.88						501,198			0.58
Federal funds purchased			478,038			1.75						21,440			0.08
Long-term debt			1,017,120			3.40						565,866			3.22
Total average borrowings			$	3,222,265		2.16		%				$	1,220,110		1.85		%

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 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 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 Bank held FHLB capital stock of $148.9 million and $11.3 million at September 30, 2022 and December 31, 2021, respectively. The most recent FHLB quarterly cash dividend was paid on November 2, 2022 in an amount equal to an annual yield of 5.16%.

Webster 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 Bank held FRB capital stock of $224.1 million and $60.5 million at September 30, 2022 and December 31, 2021, respectively. The most recent FRB semi-annual cash dividend was paid on June 30, 2022 in an amount equal to an annual yield of 3.03%.

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.

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

			Payments Due by Period (1)
(In thousands)			Less than one year			1-3 years			3-5 years			After 5 years			Total
Senior notes			$	—		$	150,000		$	—		$	334,796		$	484,796
Subordinated notes			—			—			—			499,000			499,000
Junior subordinated debt			—			—			—			77,320			77,320
FHLB advances			3,500,145			122			—			10,450			3,510,717
Securities sold under agreements to repurchase			312,089			—			—			—			312,089
Federal funds purchased			953,325			—			—			—			953,325
Deposits with stated maturity dates			827,351			1,514,650			193,992			33,601			2,569,594
Operating lease liabilities			9,758			73,924			59,442			100,972			244,096
Total contractual obligations			$	5,602,668		$	1,738,696		$	253,434		$	1,056,139		$	8,650,937

(1)Interest payments on borrowings have been excluded.

In addition, in the normal course of business, Webster 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 $11.2 billion at September 30, 2022 does not necessarily reflect future cash payments.

Webster also enters into commitments to invest in venture capital and private equity funds, as well as low income housing tax credit investments to assist the Bank in meeting its responsibilities under the CRA. The total unfunded commitment for these alternative investments was $406.1 million at September 30, 2022. 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 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 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 does not currently anticipate that it will make a contribution in 2022. Webster's non-qualified supplemental executive retirement plans and other post employment benefit plans, including those acquired from Sterling in the merger, are unfunded.

At September 30, 2022, Webster's condensed consolidated balance sheet reflects a liability for uncertain tax positions of $10.4 million and $2.3 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, alternative investments, defined benefit pension and other postretirement benefit plans, and income taxes can be found within Note 18: Commitments and Contingencies, 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 and Part I - Item. 2 Management's Discussion and Analysis of Financial Condition and Results of Operations, respectively.

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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 when determining management's strategy and action. To facilitate this, interest rate sensitivity is monitored on an ongoing basis by the ALCO. The 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. ALCO meets at least monthly to make decisions on the 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 to calculate Webster's earnings at risk and equity at risk. Essentially, interest rates are 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 scenario. The flat rate scenario holds the end of period yield curve constant over a twelve month forecasted horizon. At September 30, 2022 and December 31, 2021, the flat rate scenario assumed a federal funds rate of 3.25% and 0.25%, respectively. The federal funds rate target range was 3.00-3.25% at September 30, 2022 and 0-0.25% at December 31, 2021. Since interest rates have begun to rise, management has incorporated both the down 100 and 200 basis point rate scenarios back into its assessment of interest rate risk. As interest rates continue to rise, scenarios that include upward and downward shifts of greater magnitude will also be incorporated.

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

			-200bp			-100bp			+100bp			+200bp
September 30, 2022			(7.5)%			(3.6)%			3.7%			8.0%
December 31, 2021			n/a			n/a			4.9%			10.7%

Asset sensitivity in terms of net interest income decreased at September 30, 2022 as compared to December 31, 2021, primarily due to changes 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. Loans at floors have decreased $4.3 billion, from $4.5 billion at December 31, 2021 to $0.2 billion at September 30, 2022. While loans with floors, which are considered "in the money", have the impact of reducing overall asset sensitivity, as interest rates start 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 might have on Webster's net interest income for the subsequent twelve month period starting at September 30, 2022 and December 31, 2021:

			Short End of the Yield Curve															Long End of the Yield Curve
			-100bp			-50bp			+50bp			+100bp						-100bp			-50bp			+50bp			+100bp
September 30, 2022			(5.2)%			(2.4)%			2.1%			4.3%						(2.0)%			(1.1)%			0.8%			1.9%
December 31, 2021			n/a			n/a			3.2%			7.3%						(3.1)%			(1.4)%			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 the short end and long end of the yield curve for net interest income decreased at September 30, 2022 as compared to December 31, 2021, 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 yield curve, which in turn, extends the duration for mortgage-backed securities and residential mortgage loans.

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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 September 30, 2022 and December 31, 2021:

(Dollars in thousands)			Book Value			Estimated Economic Value			Estimated Economic Value Change
									-100 bp			+100 bp
September 30, 2022
Assets			$	69,052,566		$	65,316,826		$	1,289,617		$	(1,286,543)
Liabilities			61,226,156			52,888,246			2,342,346			(1,300,747)
Net			$	7,826,410		$	12,428,580		$	(1,052,729)		$	14,204
Net change as % base net economic value									(8.5)		%	0.1		%
December 31, 2021
Assets			$	34,915,599		$	34,515,422		n/a			$	(801,524)
Liabilities			31,477,274			30,015,357			n/a			(988,401)
Net			$	3,438,325		$	4,500,065		n/a			$	186,877
Net change as % base net economic value									n/a			4.2		%

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. 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 September 30, 2022 and December 31, 2021, Webster's duration gap was negative 1.4 years and negative 1.8 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 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 September 30, 2022, long-term rates have risen by 230 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.

These earnings and economic values 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 September 30, 2022 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 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.

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Critical Accounting Estimates

The preparation of Webster'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, 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 important to the portrayal of the Company's financial condition and results of operations, and that require management to make difficult, subjective, and complex judgments about matters that are inherently uncertain, and which could potentially result in materially different amounts using different assumptions or under different conditions.

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 financial condition or results of operations. Webster's most critical accounting policies and accounting estimates are those related to the ACL on loans and leases and business combinations. These critical accounting policies, including its 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 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 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 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 is more susceptible to, unforeseen events such as natural disasters and pandemics, along with new information regarding existing loans, identification of additional problems 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.

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 I - Item 1. Financial Statements.

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ITEM 1. FINANCIAL STATEMENTS

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

			September 30, 2022						December 31, 2021
(In thousands, except share data)			(Unaudited)
Assets:
Cash and due from banks			$	286,487					$	137,385
Interest-bearing deposits			326,638						324,185
Investment securities available-for-sale, at fair value			8,085,044						4,234,854
Investment securities held-to-maturity, net of allowance for credit losses of $209 and $214			6,505,838						6,198,125
Federal Home Loan Bank and Federal Reserve Bank stock			373,044						71,836
Loans held for sale (valued under fair value option)			898						4,694
Loans and leases			47,823,875						22,271,729
Allowance for credit losses on loans and leases			(574,325)						(301,187)
Loans and leases, net			47,249,550						21,970,542
Deferred tax assets, net			369,737						109,405
Premises and equipment, net			434,721						204,557
Goodwill			2,513,771						538,373
Other intangible assets, net			207,269						17,869
Cash surrender value of life insurance policies			1,230,641						572,305
Accrued interest receivable and other assets			1,468,928						531,469
Total assets			$	69,052,566					$	34,915,599
Liabilities and shareholders' equity:
Deposits:
Non-interest-bearing			$	13,849,812					$	7,060,488
Interest-bearing			40,159,075						22,786,541
Total deposits			54,008,887						29,847,029
Securities sold under agreements to repurchase and other borrowings			1,265,414						674,896
Federal Home Loan Bank advances			3,510,717						10,997
Long-term debt			1,074,844						562,931
Accrued expenses and other liabilities			1,366,294						381,421
Total liabilities			61,226,156						31,477,274
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
Paid-in capital			6,161,297						1,108,594
Retained earnings			2,543,015						2,333,288
Treasury stock, at cost (8,661,764 and 3,102,690 shares)			(426,808)						(126,951)
Accumulated other comprehensive (loss), net of tax			(736,901)						(22,580)
Total shareholders' equity			7,826,410						3,438,325
Total liabilities and shareholders' equity			$	69,052,566					$	34,915,599

See accompanying Notes to Condensed Consolidated Financial Statements.

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WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

			Three months ended												Nine months ended
			September 30,												September 30,
(In thousands, except per share data)			2022						2021						2022						2021
Interest Income:
Interest and fees on loans and leases			$	525,960					$	196,273					$	1,303,774					$	572,728
Taxable interest and dividends on investments			77,570						38,208						200,832						118,125
Non-taxable interest on investment securities			13,999						5,154						36,465						15,770
Loans held for sale			40						57						73						201
Total interest income			617,569						239,692						1,541,144						706,824
Interest Expense:
Deposits			37,492						4,571						57,350						16,104
Securities sold under agreements to repurchase and other borrowings			6,242						721						9,876						2,216
Federal Home Loan Bank advances			13,814						492						17,034						1,539
Long-term debt			9,018						4,217						24,973						12,658
Total interest expense			66,566						10,001						109,233						32,517
Net interest income			551,003						229,691						1,431,911						674,307
Provision (benefit) for credit losses			36,531						7,750						237,619						(39,500)
Net interest income after provision (benefit) for credit losses			514,472						221,941						1,194,292						713,807
Non-interest Income:
Deposit service fees			50,807						40,258						150,019						122,166
Loan and lease related fees			26,769						10,881						77,355						27,056
Wealth and investment services			11,419						9,985						33,260						29,475
Mortgage banking activities			86						1,525						616						5,486
Increase in cash surrender value of life insurance policies			7,718						3,666						22,694						10,802
(Loss) on sale of investment securities, net			(2,234)						—						(2,234)						—
Other income			19,071						17,460						56,894						38,249
Total non-interest income			113,636						83,775						338,604						233,234
Non-interest Expense:
Compensation and benefits			173,983						105,352						545,641						310,706
Occupancy			23,517						12,430						93,725						42,090
Technology and equipment			45,283						28,441						142,182						84,081
Intangible assets amortization			8,511						1,124						23,700						3,395
Marketing			3,918						3,721						10,868						9,452
Professional and outside services			21,618						7,074						91,041						37,875
Deposit insurance			8,026						3,855						19,996						11,560
Other expense			45,215						18,240						120,930						56,088
Total non-interest expense			330,071						180,237						1,048,083						555,247
Income before income taxes			298,037						125,479						484,813						391,794
Income tax expense			64,069						29,766						85,281						93,968
Net income			233,968						95,713						399,532						297,826
Preferred stock dividends			4,162						1,968						11,756						5,906
Net income available to common shareholders			$	229,806					$	93,745					$	387,776					$	291,920
Earnings per common share:
Basic			$	1.31					$	1.03					$	2.32					$	3.23
Diluted			1.31						1.03						2.32						3.22

See accompanying Notes to Condensed Consolidated Financial Statements.

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WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

			Three months ended												Nine months ended
			September 30,												September 30,
(In thousands)			2022						2021						2022						2021
Net income			$	233,968					$	95,713					$	399,532					$	297,826
Other comprehensive (loss) income, net of tax:
Investment securities available-for-sale			(242,231)						(3,394)						(692,383)						(35,220)
Derivative instruments			(13,699)						(1,731)						(21,851)						(7,755)
Defined benefit pension and other postretirement benefit plans			361						743						(87)						2,227
Other comprehensive (loss), net of tax			(255,569)						(4,382)						(714,321)						(40,748)
Comprehensive (loss) income			$	(21,601)					$	91,331					$	(314,789)					$	257,078

See accompanying Notes to Condensed Consolidated Financial Statements.

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

			At or for the three months ended September 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 June 30, 2022			$	283,979		$	1,828		$	6,148,853		$	2,383,638		$	(339,178)		$	(481,332)		$	7,997,788
Net income			—			—			—			233,968			—			—			233,968
Other comprehensive (loss), net of tax			—			—			—			—			—			(255,569)			(255,569)
Common stock dividends and equivalents $0.40 per share			—			—			—			(70,429)			—			—			(70,429)
Series F preferred stock dividends $328.125 per share			—			—			—			(1,968)			—			—			(1,968)
Series G preferred stock dividends $16.25 per share			—			—			—			(2,194)			—			—			(2,194)
Common stock contribution to charitable foundation			—			—			(1,701)			—			12,201			—			10,500
Stock-based compensation			—			—			14,307			—			(1,545)			—			12,762
Exercise of stock options			—			—			(162)			—			300			—			138
Common shares acquired from stock compensation plan activity			—			—			—			—			(1,450)			—			(1,450)
Common stock repurchase program			—			—			—			—			(97,136)			—			(97,136)
Balance at September 30, 2022			$	283,979		$	1,828		$	6,161,297		$	2,543,015		$	(426,808)		$	(736,901)		$	7,826,410
			At or for the three months ended September 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 June 30, 2021			$	145,037		$	937		$	1,101,126		$	2,203,160		$	(126,445)		$	5,890		$	3,329,705
Net income			—			—			—			95,713			—			—			95,713
Other comprehensive (loss), net of tax			—			—			—			—			—			(4,382)			(4,382)
Common stock dividends and equivalents $0.40 per share			—			—			—			(36,345)			—			—			(36,345)
Series F preferred stock dividends $328.125 per share			—			—			—			(1,968)			—			—			(1,968)
Stock-based compensation			—			—			3,819			—			(176)			—			3,643
Exercise of stock options			—			—			(60)			—			143			—			83
Common shares acquired from stock compensation plan activity			—			—			—			—			(260)			—			(260)
Balance at September 30, 2021			$	145,037		$	937		$	1,104,885		$	2,260,560		$	(126,738)		$	1,508		$	3,386,189

			At or for the nine months ended September 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			—			—			—			399,532			—			—			399,532
Other comprehensive (loss), net of tax			—			—			—			—			—			(714,321)			(714,321)
Common stock dividends and equivalents $1.20 per share			—			—			—			(178,049)			—			—			(178,049)
Series F preferred stock dividends $984.38 per share			—			—			—			(5,906)			—			—			(5,906)
Series G preferred stock dividends $48.75 per share			—			—			—			(5,850)			—			—			(5,850)
Issued in business combination			138,942			891			5,040,291			—			—			—			5,180,124
Common stock contribution to charitable foundation			—			—			(1,701)			—			12,201			—			10,500
Stock-based compensation			—			—			14,726			—			28,505			—			43,231
Exercise of stock options			—			—			(613)			—			1,248			—			635
Common shares acquired from stock compensation plan activity			—			—			—			—			(22,545)			—			(22,545)
Common stock repurchase program			—			—			—			—			(319,266)			—			(319,266)
Balance at September 30, 2022			$	283,979		$	1,828		$	6,161,297		$	2,543,015		$	(426,808)		$	(736,901)		$	7,826,410
			At or for the nine months ended September 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			—			—			—			297,826			—			—			297,826
Other comprehensive (loss), net of tax			—			—			—			—			—			(40,748)			(40,748)
Common stock dividends and equivalents $1.20 per share			—			—			—			(108,882)			—			—			(108,882)
Series F preferred stock dividends $984.38 per share			—			—			—			(5,906)			—			—			(5,906)
Stock-based compensation			—			—			508			—			9,568			—			10,076
Exercise of stock options			—			—			(5,155)			—			8,624			—			3,469
Common shares acquired from stock compensation plan activity			—			—			—			—			(4,271)			—			(4,271)
Balance at September 30, 2021			$	145,037		$	937		$	1,104,885		$	2,260,560		$	(126,738)		$	1,508		$	3,386,189

See accompanying Notes to Condensed Consolidated Financial Statements.

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

			Nine months ended September 30,
(In thousands)			2022						2021
Operating Activities:
Net income			$	399,532					$	297,826
Adjustments to reconcile net income to net cash provided by operating activities:
Provision (benefit) for credit losses			237,619						(39,500)
Deferred income tax (benefit)			(49,239)						(692)
Stock-based compensation expense			43,231						10,076
Common stock contribution to charitable foundation			10,500						—
Depreciation and amortization of property and equipment and intangible assets			62,403						27,071
(Accretion) and amortization of interest-earning assets and borrowings			(27,025)						102,648
Amortization of low-income housing tax credit investments			31,671						2,942
Amortization of mortgage servicing assets			2,151						4,295
Reduction of right-of-use lease assets			47,874						4,074
Net (gain) on sale, net of write-downs, of foreclosed properties and repossessed assets			(1,010)						(367)
Net loss (gain) on sale, net of write-downs, of property and equipment			6,507						(98)
Net loss on sale of investment securities			2,234						—
Originations of loans held for sale			(29,628)						(192,948)
Proceeds from sale of loans held for sale			33,886						199,991
Net (gain) on mortgage banking activities			(529)						(4,523)
Net (gain) on sale of loans not originated for sale			(3,135)						(1,278)
(Increase) in cash surrender value of life insurance policies			(22,694)						(10,802)
(Gain) from life insurance policies			(2,494)						(1,350)
Net decrease in derivative contract assets and liabilities			539,257						140,991
Net (increase) in accrued interest receivable and other assets			(51,300)						(84,781)
Net (decrease) increase in accrued expenses and other liabilities			(169,146)						10,594
Net cash provided by operating activities			1,060,665						464,169
Investing Activities:
Purchases of available-for-sale securities			(1,099,810)						(857,820)
Proceeds from principal payments, maturities, and calls of available-for-sale securities			612,783						729,877
Proceeds from sale of available-for-sale securities			65,330						—
Purchases of held-to-maturity securities			(963,655)						(1,203,951)
Proceeds from principal payments, maturities, and calls of held-to-maturity securities			627,887						1,007,842
Net (increase) decrease in Federal Home Loan Bank and Federal Reserve Bank stock			(150,706)						1,658
Alternative investments (capital calls), net of distributions			(7,811)						(8,897)
Net (increase) in loans			(5,526,220)						(66,526)
Proceeds from sale of loans not originated for sale			648,573						61,274
Proceeds from sale of foreclosed properties and repossessed assets			2,071						1,285
Proceeds from sale of property and equipment			300						2,912
Additions to property and equipment			(18,526)						(11,229)
Proceeds from life insurance policies			17,002						5,074
Net cash paid for acquisition of Bend			(54,407)						—
Net cash received in merger with Sterling			513,960						—
Net cash (used for) investing activities			(5,333,229)						(338,501)
See accompanying Notes to Condensed Consolidated Financial Statements.

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WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited), continued
			Nine months ended September 30,
(In thousands)			2022						2021
Financing Activities:
Net increase in deposits			889,964						2,689,995
Proceeds from Federal Home Loan Bank advances			13,150,000						180,470
Repayments of Federal Home Loan Bank advances			(9,650,280)						(200,300)
Proceeds from extinguishment of borrowings			2,548						—
Net increase (decrease) in securities sold under agreements to repurchase and other borrowings			560,786						(339,484)
Dividends paid to common shareholders			(178,161)						(108,586)
Dividends paid to preferred shareholders			(9,562)						(5,906)
Exercise of stock options			635						3,469
Common stock repurchase program			(319,266)						—
Common shares acquired related to stock compensation plan activity			(22,545)						(4,271)
Net cash provided by financing activities			4,424,119						2,215,387
Net increase in cash and cash equivalents			151,555						2,341,055
Cash and cash equivalents at beginning of period			461,570						263,104
Cash and cash equivalents at end of period			$	613,125					$	2,604,159
Supplemental disclosure of cash flow information:
Interest paid			$	114,542					$	42,567
Income taxes paid			129,926						107,812
Non-cash investing and financing activities:
Transfer of loans and leases to foreclosed properties and repossessed assets			$	163					$	1,048
Transfer of loans and leases to loans-held-for-sale			621,922						74,923
Unsettled purchases of investment securities			—						284,713
Merger with Sterling:
Tangible assets acquired			27,434,111						—
Goodwill and other intangible assets			2,149,532						—
Liabilities assumed			24,403,343						—
Common stock issued			5,041,182						—
Preferred stock exchanged			138,942						—
Acquisition of Bend:
Tangible assets acquired			16,597						—
Goodwill and other intangible assets			38,966						—
Liabilities assumed			290						—

See accompanying Notes to Condensed Consolidated Financial Statements.

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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 its HSA Bank division, deliver a wide range of banking, investment, and financial services to individuals, families, and businesses. Webster Bank serves consumer and business customers with mortgage lending, financial planning, trust, and investment services through a distribution network consisting of banking centers, ATMs, a customer care center, and a full range of web and mobile-based banking services throughout the northeastern U.S. from New York to Massachusetts, with certain businesses operating 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 HSAs, and delivers health reimbursement arrangements and flexible spending and commuter benefit account administration services to employers and individuals in all 50 states.

Basis of Presentation

The unaudited condensed consolidated financial statements of Webster 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 Annual Report on Form 10-K for the year ended December 31, 2021. The results of operations for the three and nine months ended September 30, 2022 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 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.

Use of Estimates

The preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the 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 included 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 ACL 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.

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Relevant Accounting Standards Issued But Not Yet Adopted

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) 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 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.

ASU No. 2022-02 is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. The amendments should be applied prospectively, however, an entity has the option to apply a modified retrospective transition method related to the recognition and measurement of TDRs, which would result in a cumulative-effect adjustment to retained earnings in the period of adoption. Webster is currently evaluating the impact of adoption on the Company's consolidated financial statements and disclosures.

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 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 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 is currently evaluating the impact of adoption on the Company's consolidated financial statements and disclosures.

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Note 2: Mergers and Acquisitions

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. 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 one 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 any dividend payment date, 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. As of the date of this Quarterly Report on
Form 10-Q, Webster has no plans to redeem its Series G Preferred Stock.

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 $2.6 million and $16.4 million of stock compensation expense related to the replacement equity awards during the three and nine months ended September 30, 2022, respectively.

The merger was accounted for as a business combination. Accordingly, the purchase price has been 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 period up to one year (the measurement period) from the closing date of the merger if new information is 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.

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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 at 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 connection with the merger, Webster 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.

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

Cash and due from banks and interest-bearing deposits. The carrying amount 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 based 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 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

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Supplemental Pro Forma Financial Information (Unaudited)

The following table summarizes supplemental pro forma financial information giving effect to the merger as if it had been completed on January 1, 2021:

			Three months ended September 30,												Nine months ended September 30,
(In thousands)			2022						2021						2022						2021
Net interest income			$	538,125					$	440,300					$	1,436,867					$	1,344,827
Non-interest income			113,636						120,961						349,405						347,928
Net income			239,569						181,980						636,174						368,051

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 September 30,												Nine months ended September 30,
(In thousands)			2022						2021						2022						2021
Compensation and benefits (1)			$	5,770					$	7,731					$	71,472					$	8,197
Occupancy (2)			4,389						—						35,744						—
Technology and equipment (3)			1,478						33						21,375						33
Professional and outside services (4)			10,792						2,028						59,073						18,315
Marketing			64						—						199						—
Other expense (5)			3,043						55						12,808						349
Total merger-related expenses			$	25,536					$	9,847					$	200,671					$	26,894

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

(2)Comprised primarily of charges associated with 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. During the three and nine months ended September 30, 2022, respectively, the Company recognized a combined $4.3 million and $12.0 million in related exit costs and accelerated depreciation on property and equipment. The amount for the nine months ended September 30, 2022 also includes $23.1 million in ROU asset impairment charges, which 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.

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

(5)Comprised primarily of disposals on property and equipment, transfer tax, and other miscellaneous expenses.

Webster's operating results for the three and nine months ended September 30, 2022 includes the operating results of acquired assets and assumed liabilities of Sterling subsequent to the merger on January 31, 2022. Due to the various conversions of Sterling systems during the three and nine months ended September 30, 2022, as well 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 for as a business combination, and resulted in the addition of $19.3 million in net assets, which primarily comprises $15.9 million of internal use software and a $3.0 million customer relationship intangible asset.

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Note 3: Investment Securities

Available-for-Sale

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

			At September 30, 2022
(In thousands)			Amortized Cost			Unrealized Gains			Unrealized Losses			Fair Value (1)
U.S. Treasury notes			$	755,414		$	—		$	(42,151)		$	713,263
Government agency debentures			311,982			—			(42,954)			269,028
Municipal bonds and notes			1,842,985			—			(145,840)			1,697,145
Agency CMO			68,886			—			(5,025)			63,861
Agency MBS			2,533,669			21			(336,341)			2,197,349
Agency CMBS			1,697,243			—			(241,324)			1,455,919
CMBS			949,535			—			(26,607)			922,928
CLO			7,219			—			(16)			7,203
Corporate debt			797,931			—			(95,759)			702,172
Private label MBS			49,408			—			(5,098)			44,310
Other			12,532			—			(666)			11,866
Available-for-sale debt securities			$	9,026,804		$	21		$	(941,781)		$	8,085,044
			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

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

The increase of $3.9 billion in available-for-sale debt securities from December 31, 2021 to September 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, and purchases exceeding paydown activities, partially offset by an increase in net unrealized losses. Accrued interest receivable of $42.8 million and $7.5 million at September 30, 2022 and December 31, 2021, respectively, is excluded from amortized cost and is reported within accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets.

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Unrealized Losses

The following 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 September 30, 2022
			Less Than 12 Months									12 Months or More									Total
(Dollars in thousands)			Fair Value			Unrealized Losses						Fair Value			Unrealized Losses						Number of Holdings			Fair Value			Unrealized Losses
U.S. Treasury notes			$	713,263		$	(42,151)					$	—		$	—					23			$	713,263		$	(42,151)
Government agency debentures			269,028			(42,954)						—			—						20			269,028			(42,954)
Municipal bonds and notes			1,696,419			(145,840)						—			—						499			1,696,419			(145,840)
Agency CMO			62,951			(5,013)						910			(12)						39			63,861			(5,025)
Agency MBS			1,794,195			(252,060)						401,864			(84,281)						460			2,196,059			(336,341)
Agency CMBS			991,740			(154,725)						464,179			(86,599)						132			1,455,919			(241,324)
CMBS			534,261			(14,954)						388,667			(11,653)						53			922,928			(26,607)
CLO			—			—						7,203			(16)						1			7,203			(16)
Corporate debt			693,493			(94,125)						8,679			(1,634)						106			702,172			(95,759)
Private label MBS			44,310			(5,098)						—			—						3			44,310			(5,098)
Other			11,866			(666)						—			—						4			11,866			(666)
Available-for-sale debt securities in unrealized loss position			$	6,811,526		$	(757,586)					$	1,271,502		$	(184,195)					1,340			$	8,083,028		$	(941,781)

			At December 31, 2021
			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			$	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 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 from a credit loss or other factors. The increase in unrealized losses from December 31, 2021 to September 30, 2022 is primarily due to increased portfolio size from the merger with Sterling, and higher market rates. Market prices will approach par as the securities approach maturity.

At September 30, 2022, Webster had the intent to hold available-for-sale debt securities with unrealized losses through the anticipated recovery period, and it was more-likely-than-not that the Company would not have to sell these securities before recovery of their amortized cost basis. The issuers of these securities have not, to the Company’s knowledge, established any cause for default on these securities. As a result, 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 September 30, 2022 and December 31, 2021.

Contractual Maturities

The following table summarizes the amortized cost and fair value of available-for-sale debt securities by contractual maturity:

			At September 30, 2022
(In thousands)			Amortized Cost						Fair Value
Due in one year or less			$	59,790					$	58,824
Due after one year through five years			1,452,511						1,361,398
Due after five through ten years			1,437,643						1,306,402
Due after ten years			6,076,860						5,358,420
Total available-for-sale debt securities			$	9,026,804					$	8,085,044

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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 and nine months ended September 30, 2022, Webster sold Municipal bonds and notes classified as
available-for-sale for proceeds of $65.3 million, which resulted in net realized losses on sale of $2.2 million. There were no sales during three and nine months ended September 30, 2021.

Other Information

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

(In thousands)			At September 30, 2022						At December 31, 2021
Available-for-sale debt securities pledged for deposits, at fair value			$	3,678,364					$	855,323
Available-for-sale debt securities pledged for borrowings and other, at fair value			1,282,501						924,841
Total available-for-sale debt securities pledged			$	4,960,865					$	1,780,164

At September 30, 2022, Webster had callable available-for-sale debt securities with an aggregate carrying value of $3.0 billion.

Held-to-Maturity

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

			At September 30, 2022
(In thousands)			Amortized Cost			Unrealized Gains			Unrealized Losses			Fair Value						Allowance			Net Carrying Value
Agency CMO			$	29,854		$	—		$	(2,063)		$	27,791					$	—		$	29,854
Agency MBS			2,701,984			674			(379,332)			2,323,326						—			2,701,984
Agency CMBS			2,691,955			—			(372,838)			2,319,117						—			2,691,955
Municipal bonds and notes			930,390			208			(92,284)			838,314						209			930,181
CMBS			151,864			—			(10,293)			141,571						—			151,864
Held-to-maturity debt securities			$	6,506,047		$	882		$	(856,810)		$	5,650,119					$	209		$	6,505,838

			At December 31, 2021
(In thousands)			Amortized Cost			Unrealized Gains			Unrealized Losses			Fair Value						Allowance			Net Carrying Value
Agency CMO			$	42,405		$	655		$	(25)		$	43,035					$	—		$	42,405
Agency MBS			2,901,593			71,444			(11,788)			2,961,249						—			2,901,593
Agency CMBS			2,378,475			11,202			(43,844)			2,345,833						—			2,378,475
Municipal bonds and notes			705,918			51,572			—			757,490						214			705,704
CMBS			169,948			3,381			—			173,329						—			169,948
Held-to-maturity debt securities			$	6,198,339		$	138,254		$	(55,657)		$	6,280,936					$	214		$	6,198,125

Accrued interest receivable of $19.7 million and $21.2 million at September 30, 2022 and December 31, 2021, respectively, is excluded from amortized cost and is reported in 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 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 September 30, 2022.

The following table summarizes the activity in the ACL on held-to-maturity debt securities:

			Three months ended September 30,												Nine months ended September 30,
(In thousands)			2022						2021						2022						2021
Balance, beginning of period			$	210					$	382					$	214					$	299
(Benefit) for credit losses			(1)						(148)						(5)						(65)
Balance, end of period			$	209					$	234					$	209					$	234

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Contractual Maturities

The following table summarizes the amortized cost and fair value of held-to-maturity debt securities by contractual maturity:

			At September 30, 2022
(In thousands)			Amortized Cost						Fair Value
Due in one year or less			$	2,158					$	2,155
Due after one year through five years			52,383						52,315
Due after five years through ten years			334,065						312,347
Due after ten years			6,117,441						5,283,302
Total held-to-maturity debt securities			$	6,506,047					$	5,650,119

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 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 September 30, 2022 and
December 31, 2021. Held-to-maturity debt securities that are not rated are collateralized with U.S. Treasury obligations.

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

			September 30, 2022
			Investment Grade
(In thousands)			Aaa			Aa1			Aa2			Aa3			A1			A2			A3			Baa2						Not Rated
Agency CMO			$	—		$	29,854		$	—		$	—		$	—		$	—		$	—		$	—					$	—
Agency MBS			—			2,701,984			—			—			—			—			—			—						—
Agency CMBS			—			2,691,955			—			—			—			—			—			—						—
Municipal bonds and notes			336,528			163,482			255,616			117,095			38,349			4,165			—			95						15,060
CMBS			151,864			—			—			—			—			—			—			—						—
Held-to-maturity debt securities			$	488,392		$	5,587,275		$	255,616		$	117,095		$	38,349		$	4,165		$	—		$	95					$	15,060

			December 31, 2021
			Investment Grade
(In thousands)			Aaa			Aa1			Aa2			Aa3			A1			A2			A3			Baa2						Not Rated
Agency CMO			$	—		$	42,405		$	—		$	—		$	—		$	—		$	—		$	—					$	—
Agency MBS			—			2,901,593			—			—			—			—			—			—						—
Agency CMBS			—			2,378,475			—			—			—			—			—			—						—
Municipal bonds and notes			207,426			119,804			227,106			104,232			35,878			8,260			—			95						3,117
CMBS			169,948			—			—			—			—			—			—			—						—
Held-to-maturity debt securities			$	377,374		$	5,442,277		$	227,106		$	104,232		$	35,878		$	8,260		$	—		$	95					$	3,117

At September 30, 2022 and December 31, 2021, there were no held-to-maturity debt securities past due under the terms of their agreements or 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 September 30, 2022						At December 31, 2021
Held-to-maturity debt securities pledged for deposits, at amortized cost			$	2,026,305					$	1,834,117
Held-to-maturity debt securities pledged for borrowings and other, at amortized cost			269,920						1,243,139
Total held-to-maturity debt securities pledged			$	2,296,225					$	3,077,256

At September 30, 2022, Webster had callable held-to-maturity debt securities with an aggregate carrying value of $0.9 billion.

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Note 4: Loans and Leases

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

(In thousands)			At September 30, 2022						At December 31, 2021
Commercial non-mortgage			$	15,148,507					$	6,882,480
Asset-based			1,803,719						1,067,248
Commercial real estate			12,742,888						5,463,321
Multi-family			6,119,731						1,139,859
Equipment financing			1,764,289						627,058
Warehouse lending			894,438						—
Commercial portfolio			38,473,572						15,179,966
Residential			7,617,955						5,412,905
Home equity			1,662,756						1,593,559
Other consumer			69,592						85,299
Consumer portfolio			9,350,303						7,091,763
Loans and leases			$	47,823,875					$	22,271,729

The increase of $25.6 billion in loans and leases from December 31, 2021 to September 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 September 30, 2022 and December 31, 2021 includes net unamortized
(discounts)/premiums and net unamortized deferred (fees)/costs totaling $(83.4) million and $12.3 million, respectively. Accrued interest receivable of $175.8 million and $50.7 million at September 30, 2022 and December 31, 2021, respectively, is excluded from the carrying amount of loans and leases and is reported within accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets. At September 30, 2022, Webster had pledged $10.0 billion of eligible loans as collateral to support borrowing capacity at the FHLB.

Non-Accrual and Past Due Loans and Leases

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

			At September 30, 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			$	12,270		$	3,958		$	703		$	61,598		$	78,529		$	15,069,978		$	15,148,507
Asset-based			—			—			—			25,093			25,093			1,778,626			1,803,719
Commercial real estate			5,172			134			—			41,961			47,267			12,695,621			12,742,888
Multi-family			677			86			—			1,972			2,735			6,116,996			6,119,731
Equipment financing			3,261			1,358			—			13,328			17,947			1,746,342			1,764,289
Warehouse lending			—			—			—			—			—			894,438			894,438
Commercial portfolio			21,380			5,536			703			143,952			171,571			38,302,001			38,473,572
Residential			8,969			3,527			—			25,309			37,805			7,580,150			7,617,955
Home equity			4,083			1,157			—			30,700			35,940			1,626,816			1,662,756
Other consumer			321			169			—			272			762			68,830			69,592
Consumer portfolio			13,373			4,853			—			56,281			74,507			9,275,796			9,350,303
Total			$	34,753		$	10,389		$	703		$	200,233		$	246,078		$	47,577,797		$	47,823,875

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			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 September 30, 2022									At December 31, 2021
(In thousands)			Non-accrual			Non-accrual with No Allowance						Non-accrual			Non-accrual with No Allowance
Commercial non-mortgage			$	61,598		$	27,002					$	59,607		$	4,802
Asset-based			25,093			1,525						2,086			2,086
Commercial real estate			41,961			4,028						5,046			4,310
Multi-family			1,972			1,111						—			—
Equipment financing			13,328			1,955						3,728			—
Commercial portfolio			143,952			35,621						70,467			11,198
Residential			25,309			9,540						15,747			10,584
Home equity			30,700			17,416						23,489			18,920
Other consumer			272			3						224			2
Consumer portfolio			56,281			26,959						39,460			29,506
Total			$	200,233		$	62,580					$	109,927		$	40,704

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 $7.6 million and $2.4 million for the three months ended September 30, 2022 and 2021, respectively, and $14.1 million and $7.2 million for the nine months ended September 30, 2022 and 2021, respectively.

Allowance for Credit Losses on Loans and Leases

The following tables summarize the change in the ACL on loans and leases by portfolio segment:

			At or for the three months ended September 30,
			2022												2021
(In thousands)			Commercial Portfolio			Consumer Portfolio			Total						Commercial Portfolio			Consumer Portfolio			Total
ACL on loans and leases:
Balance, beginning of period			$	511,745		$	59,754		$	571,499					$	263,071		$	44,874		$	307,945
Provision (benefit)			34,513			(3,161)			31,352						7,681			217			7,898
Charge-offs			(31,356)			(1,453)			(32,809)						(1,723)			(2,053)			(3,776)
Recoveries			1,413			2,870			4,283						142			2,713			2,855
Balance, end of period			$	516,315		$	58,010		$	574,325					$	269,171		$	45,751		$	314,922

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			At or for the nine months ended September 30,
			2022												2021
(In thousands)			Commercial Portfolio			Consumer Portfolio			Total						Commercial Portfolio			Consumer Portfolio			Total
ACL on loans and leases:
Balance, beginning of period			$	257,877		$	43,310		$	301,187					$	312,244		$	47,187		$	359,431
Initial allowance for PCD loans and leases (1)			78,376			9,669			88,045						—			—			—
Provision (benefit)			230,881			1,267			232,148						(37,049)			(2,386)			(39,435)
Charge-offs			(61,361)			(3,469)			(64,830)						(8,638)			(7,835)			(16,473)
Recoveries			10,542			7,233			17,775						2,614			8,785			11,399
Balance, end of period			$	516,315		$	58,010		$	574,325					$	269,171		$	45,751		$	314,922
Individually evaluated for impairment			36,394			13,278			49,672						7,791			4,308			12,099
Collectively evaluated for impairment			$	479,921		$	44,732		$	524,653					$	261,380		$	41,443		$	302,823

(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.

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

			At September 30, 2022
(In thousands)			2022			2021			2020			2019			2018			Prior			Revolving Loans Amortized Cost Basis			Total
Commercial non-mortgage:
Pass			$	4,106,108		$	2,132,870		$	1,120,386		$	883,826		$	685,660		$	890,405		$	4,906,060		$	14,725,315
Special mention			73,417			13,288			—			310			1,118			14,781			43,220			146,134
Substandard			25,231			1,442			72,161			38,086			71,694			18,809			46,113			273,536
Doubtful			—			4			—			—			—			—			3,518			3,522
Commercial non-mortgage			4,204,756			2,147,604			1,192,547			922,222			758,472			923,995			4,998,911			15,148,507
Asset-based:
Pass			8,072			7,610			16,883			15,729			14,561			56,370			1,563,434			1,682,659
Special mention			—			—			—			—			—			—			40,279			40,279
Substandard			—			—			10,017			1,525			—			—			69,239			80,781
Asset-based			8,072			7,610			26,900			17,254			14,561			56,370			1,672,952			1,803,719
Commercial real estate:
Pass			2,428,963			2,248,840			1,760,942			1,803,958			1,128,337			2,873,117			107,178			12,351,335
Special mention			21,974			8,267			33,548			22,300			91,283			60,346			—			237,718
Substandard			—			1,502			8,904			29,282			24,376			89,736			—			153,800
Doubtful			—			—			—			1			—			34			—			35
Commercial real estate			2,450,937			2,258,609			1,803,394			1,855,541			1,243,996			3,023,233			107,178			12,742,888
Multi-family:
Pass			1,309,097			1,123,973			453,324			698,885			489,177			1,843,835			68,623			5,986,914
Special mention			—			37,668			—			95			40,506			9,915			9,276			97,460
Substandard			—			—			386			919			12,760			21,292			—			35,357
Multi-family			1,309,097			1,161,641			453,710			699,899			542,443			1,875,042			77,899			6,119,731
Equipment financing:
Pass			328,553			382,901			378,176			364,598			127,688			126,879			—			1,708,795
Special mention			—			195			573			1,691			6,826			1,128			—			10,413
Substandard			481			5,854			18,694			5,758			5,884			8,410			—			45,081
Equipment financing			329,034			388,950			397,443			372,047			140,398			136,417			—			1,764,289
Warehouse lending:
Pass			—			—			—			—			—			—			894,438			894,438
Warehouse lending			—			—			—			—			—			—			894,438			894,438
Commercial portfolio			$	8,301,896		$	5,964,414		$	3,873,994		$	3,866,963		$	2,699,870		$	6,015,057		$	7,751,378		$	38,473,572

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			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 at least on a quarterly basis.

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

			At September 30, 2022
(In thousands)			2022			2021			2020			2019			2018			Prior			Revolving Loans Amortized Cost Basis			Total
Residential:
800+			$	334,705		$	911,161		$	449,160		$	161,434		$	33,136		$	1,006,403		$	—		$	2,895,999
740-799			786,495			1,008,396			336,307			119,615			39,329			769,948			—			3,060,090
670-739			308,253			359,002			115,708			59,946			18,853			407,928			—			1,269,690
580-669			32,779			44,896			14,772			8,598			3,283			150,773			—			255,101
579 and below			10,329			4,800			1,401			60,694			1,453			58,398			—			137,075
Residential			1,472,561			2,328,255			917,348			410,287			96,054			2,393,450			—			7,617,955
Home equity:
800+			19,190			34,258			27,296			8,379			12,193			55,519			482,328			639,163
740-799			21,246			37,099			18,237			7,772			10,382			36,451			417,840			549,027
670-739			13,616			18,679			8,092			3,693			7,218			33,343			256,835			341,476
580-669			2,016			2,832			1,383			1,616			1,114			13,264			75,542			97,767
579 and below			443			390			659			590			707			5,047			27,487			35,323
Home equity			56,511			93,258			55,667			22,050			31,614			143,624			1,260,032			1,662,756
Other consumer:
800+			363			246			783			1,229			425			108			21,121			24,275
740-799			646			2,761			2,544			3,227			1,287			889			10,816			22,170
670-739			820			770			3,404			5,281			1,535			281			5,321			17,412
580-669			169			211			424			1,019			263			72			1,560			3,718
579 and below			54			116			110			200			62			31			1,444			2,017
Other consumer			2,052			4,104			7,265			10,956			3,572			1,381			40,262			69,592
Consumer portfolio			$	1,531,124		$	2,425,617		$	980,280		$	443,293		$	131,240		$	2,538,455		$	1,300,294		$	9,350,303

			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

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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 September 30, 2022 and
December 31, 2021, the carrying amount of collateral dependent commercial loans and leases totaled $77.2 million and $16.6 million, respectively, and the carrying amount of collateral dependent consumer loans totaled $46.3 million and $34.9 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. At September 30, 2022 and December 31, 2021, the collateral value associated with collateral dependent loans and leases totaled $147.9 million and $86.0 million, respectively.

Troubled Debt Restructurings

The following table summarizes information related to TDRs:

(In thousands)			At September 30, 2022						At December 31, 2021
Accrual status			$	105,703					$	110,625
Non-accrual status			65,041						52,719
Total TDRs			$	170,744					$	163,344
Additional funds committed to borrowers in TDR status			$	1,193					$	5,975
Specific reserves for TDRs included in the ACL on loans and leases:
Commercial portfolio			$	7,274					$	9,017
Consumer portfolio			3,863						3,745

The respective portions of commercial and consumer TDRs deemed to be uncollectible and charged off were zero and $0.1 million during the three months ended September 30, 2022, and $1.1 million and zero during the three months ended September 30, 2021. The respective portions of commercial and consumer TDRs deemed to be uncollectible and charged off were $10.0 million and $0.2 million during the nine months ended September 30, 2022, and $3.0 million and $0.3 million during the nine months ended September 30, 2021.

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The following table summarizes loans and leases modified as TDRs by class and modification type:

			Three months ended September 30,																		Nine months ended September 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			$	24					1			$	48					3			$	121					8			$	605
Maturity/rate combined			3			322						2			94						8			765						8			304
Other (2)			15			17,408						—			—						16			40,372						3			114
Commercial real estate
Extended maturity			—			—						—			—						—			—						1			183
Equipment financing
Other (2)			—			—						—			—						1			1,157						—			—
Residential
Extended maturity			—			—						—			—						1			893						1			99
Maturity/rate combined			1			124						—			—						1			124						2			401
Other (2)			1			298						—			—						7			3,060						2			233
Home equity
Extended maturity			—			—						—			—						—			—						1			28
Adjusted interest rate			—			—						—			—						1			74						—			—
Maturity/rate combined			3			1,515						—			—						14			2,239						6			1,025
Other (2)			6			444						3			153						30			1,777						17			1,121
Total TDRs			30			$	20,135					6			$	295					82			$	50,582					49			$	4,113

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

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

For the three and nine months ended September 30, 2022, there were 5 loans and leases with an aggregated amortized cost of $0.9 million that were modified as TDRs within the previous 12 months and for which there was a payment default. For the three and nine months ended September 30, 2021, there were no significant loans and leases modified as TDRs within the previous 12 months and for which there was a payment default.

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Note 5: Transfers and Servicing of Financial Assets

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

The following table summarizes information related to mortgage banking activities:

			Three months ended September 30,												Nine months ended September 30,
(In thousands)			2022						2021						2022						2021
Net gain on sale			$	26					$	1,063					$	529					$	4,523
Origination fees			22						313						194						1,231
Fair value adjustment			38						149						(107)						(268)
Mortgage banking activities			$	86					$	1,525					$	616					$	5,486
Proceeds from sale			$	1,053					$	52,256					$	33,886					$	199,991
Loans sold with servicing rights retained			147						50,643						30,464						192,421

Under certain circumstances, Webster may decide to sell loans that were not originated or otherwise acquired with the intent to sell. During the three months ended September 30, 2022 and 2021, Webster sold commercial loans not originated for sale for proceeds of $530.1 million and $12.2 million, respectively, which resulted in net (losses) gains on sale of $(0.1) million and $0.6 million, respectively. During the nine months ended September 30, 2022 and 2021, Webster sold commercial loans not originated for sale for proceeds of $648.6 million and $61.3 million, respectively, which resulted in net gains on sale of $3.1 million and $1.3 million, respectively.

In addition, Webster may retain servicing rights on its residential mortgage loans sold in the normal course of business. At both September 30, 2022 and December 31, 2021, the aggregate principal balance of residential mortgage loans serviced for others totaled $2.0 billion. Mortgage servicing assets are held at the lower of cost, net of accumulated amortization, or fair market value, and are included in accrued interest receivable and other assets on the accompanying Consolidated Balance Sheets. Webster assesses mortgage servicing assets 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:

			Three months ended September 30,												Nine months ended September 30,
(In thousands)			2022						2021						2022						2021
Beginning balance			$	8,592					$	11,501					$	9,237					$	13,422
Additions (1)			1,627						483						2,751						1,685
Amortization (2)			(382)						(1,363)						(2,151)						(4,295)
Adjustment to valuation allowance			—						(454)						—						(645)
Ending balance			$	9,837					$	10,167					$	9,837					$	10,167

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

Loan servicing fees, net of mortgage servicing rights amortization, were $1.3 million and $0.4 million for the three months ended September 30, 2022 and 2021, respectively, and $2.9 million and $1.2 million for the nine months ended
September 30, 2022 and 2021, respectively, and are included in loan and lease related fees on the accompanying Condensed Consolidated Statements of Income. Information regarding the fair value of loans held for sale and mortgage servicing assets can be found within Note 14: Fair Value Measurements.

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Note 6: Goodwill and Other Intangible Assets

Goodwill

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

(In thousands)									At September 30, 2022						At December 31, 2021
Balance, beginning of period															$	538,373					$	538,373
Sterling merger															1,939,432						—
Bend acquisition															35,966						—
Balance, end of period															$	2,513,771					$	538,373

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 September 30, 2022												At December 31, 2021
(In thousands)			Gross Carrying Amount (1)			Accumulated Amortization			Net Carrying Amount						Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount
Core deposits			$	145,725		$	32,022		$	113,703					$	26,625		$	18,516		$	8,109
Customer relationships			115,000			21,434			93,566						21,000			11,240			9,760
Total other intangible assets			$	260,725		$	53,456		$	207,269					$	47,625		$	29,756		$	17,869

(1)In connection with the Sterling merger and Bend acquisition, Webster recorded a $119.1 million core deposit intangible and $94.0 million of customer relationship intangibles, all of which are being amortized on an accelerated basis over a period of
10 years.

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

(In thousands)			Amortization Expense
Remainder of 2022			$	8,230
2023			30,315
2024			24,442
2025			21,455
2026			21,455
Thereafter			101,372

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Note 7: Deposits

The following table summarizes deposits by type:

(In thousands)			At September 30, 2022						At December 31, 2021
Non-interest-bearing:
Demand			$	13,849,812					$	7,060,488
Interest-bearing:
Health savings accounts			7,889,310						7,397,582
Checking			9,203,220						4,182,497
Money market			11,156,579						3,718,953
Savings			9,340,372						5,689,739
Time deposits			2,569,594						1,797,770
Total interest-bearing			$	40,159,075					$	22,786,541
Total deposits			$	54,008,887					$	29,847,029
Time deposits, money market, and interest-bearing checking obtained through brokers			$	613,305					$	120,392
Aggregate amount of time deposit accounts that exceeded the FDIC limit			551,132						256,522
Demand deposit overdrafts reclassified as loan balances			9,148						1,577

The following table summarizes the scheduled maturities of time deposits:

(In thousands)			At September 30, 2022
Remainder of 2022			$	827,351
2023			1,353,411
2024			161,239
2025			134,877
2026			59,115
Thereafter			33,601
Total time deposits			$	2,569,594

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Note 8: Borrowings

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

			At September 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			$	312,089		0.11		%				$	474,896		0.11		%
Original maturity of greater than one year, non-callable (2)			—			—						200,000			1.32
Total securities sold under agreements to repurchase (1)			312,089			0.11						674,896			0.47
Federal funds purchased			953,325			3.17						—			—
Securities sold under agreements to repurchase and other borrowings			$	1,265,414		2.41						$	674,896		0.47

(1)Webster 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.

(2)During the three months September 30, 2022, Webster and its repurchase agreement counterparty agreed to fully extinguish two $100 million long-term, structured repurchase agreements. As a result, a net fee of $2.5 million was paid to Webster, which was recognized as a gain and recorded within other non-interest income on the Condensed Consolidated Statements of Operations.

Securities sold under agreements to repurchase are used as a source of borrowed funds and are collateralized by Agency MBS and corporate bonds. 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 may also purchase unsecured term and overnight federal funds to satisfy its short-term liquidity needs.

The following table summarizes information for FHLB advances:

			At September 30, 2022									At December 31, 2021
(Dollars in thousands)			Total Outstanding			Weighted- Average Contractual Coupon Rate						Total Outstanding			Weighted- Average Contractual Coupon Rate
Maturing within 1 year			$	3,500,145		3.03		%				$	90		—		%
After 1 but within 2 years			122			2.51						202			2.95
After 2 but within 3 years			—			—						—			—
After 3 but within 4 years			—			—						—			—
After 4 but within 5 years			—			—						—			—
After 5 years			10,450			2.03						10,705			2.03
Total FHLB advances			$	3,510,717		3.03						$	10,997		2.03
Aggregate carrying value of assets pledged as collateral			$	9,973,866								$	7,556,034
Remaining borrowing capacity at FHLB			3,513,563									5,087,294

Webster 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 certain residential and commercial real estate loans and home equity lines of credit. Webster Bank was in compliance with its FHLB collateral requirements at both September 30, 2022 and December 31, 2021.

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The following table summarizes long-term debt:

(Dollars in thousands)						At September 30, 2022						At December 31, 2021
4.375%			Senior fixed-rate notes due February 15, 2024			$	150,000					$	150,000
4.100%			Senior fixed-rate notes due March 25, 2029 (1)			334,796						338,811
4.000%			Subordinated fixed-to-floating rate notes due December 30, 2029			274,000						—
3.875%			Subordinated fixed-to-floating rate notes due November 1, 2030			225,000						—
Junior subordinated debt Webster Statutory Trust I floating-rate notes due September 17, 2033 (2)						77,320						77,320
Total senior and subordinated debt						1,061,116						566,131
Discount on senior fixed-rate notes						(811)						(974)
Debt issuance cost on senior fixed-rate notes						(1,924)						(2,226)
Premium on subordinated fixed-to-floating rate notes						16,463						—
Long-term debt						$	1,074,844					$	562,931

(1)Webster de-designated its fair value hedging relationship on these senior notes in 2020. A basis adjustment of $34.8 million and $38.8 million at September 30, 2022 and December 31, 2021, respectively, is included in the carrying value and is being amortized over the remaining life of the senior notes.

(2)The interest rate on the Webster Statutory Trust I floating-rate notes, which varies quarterly based on 3-month LIBOR plus 2.95%, was 6.48% and 3.17% at September 30, 2022 and December 31, 2021, 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.

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

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

			Three months ended September 30, 2022															Nine months ended September 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			$	(445,616)		$	(2,082)		$	(33,634)		$	(481,332)					$	4,536		$	6,070		$	(33,186)		$	(22,580)
Other comprehensive (loss) before reclassifications			(243,872)			(14,416)			(248)			(258,536)						(694,024)			(24,099)			(1,295)			(719,418)
Amounts reclassified from accumulated other comprehensive (loss)			1,641			717			609			2,967						1,641			2,248			1,208			5,097
Other comprehensive (loss) income, net of tax			(242,231)			(13,699)			361			(255,569)						(692,383)			(21,851)			(87)			(714,321)
Balance, end of period			$	(687,847)		$	(15,781)		$	(33,273)		$	(736,901)					$	(687,847)		$	(15,781)		$	(33,273)		$	(736,901)

			Three months ended September 30, 2021															Nine months ended September 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			$	35,598		$	13,894		$	(43,602)		$	5,890					$	67,424		$	19,918		$	(45,086)		$	42,256
Other comprehensive (loss) before reclassifications			(3,394)			(2,560)			—			(5,954)						(35,220)			(10,205)			—			(45,425)
Amounts reclassified from accumulated other comprehensive (loss)			—			829			743			1,572						—			2,450			2,227			4,677
Other comprehensive (loss) income, net of tax			(3,394)			(1,731)			743			(4,382)						(35,220)			(7,755)			2,227			(40,748)
Balance, end of period			$	32,204		$	12,163		$	(42,859)		$	1,508					$	32,204		$	12,163		$	(42,859)		$	1,508

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

			Three months ended												Nine months ended									Associated Line Item on the Condensed Consolidated Statements of Income
Accumulated Other Comprehensive (Loss) Income Components			September 30,												September 30,
			2022						2021						2022						2021
(In thousands)
Securities available-for-sale:
Net realized (losses)			$	(2,234)					$	—					$	(2,234)					$	—		(Loss) on sale of investment securities, net
Tax benefit			593						—						593						—			Income tax expense
Net of tax			$	(1,641)					$	—					$	(1,641)					$	—
Derivative instruments:
Hedge terminations			$	(76)					$	(76)					$	(229)					$	(229)		Interest expense
Premium amortization			(909)						(1,046)						(2,856)						(3,088)			Interest income
Tax benefit			268						293						837						867			Income tax expense
Net of tax			$	(717)					$	(829)					$	(2,248)					$	(2,450)
Defined benefit pension and other postretirement benefit plans:
Actuarial loss amortization			$	(835)					$	(1,008)					$	(1,657)					$	(3,023)		Other non-interest expense
Tax benefit			226						265						449						796			Income tax expense
Net of tax			$	(609)					$	(743)					$	(1,208)					$	(2,227)

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Note 10: Regulatory Capital and Restrictions

Capital Requirements

Webster Financial Corporation and Webster 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 the regulatory framework for prompt corrective action, both Webster Financial Corporation and Webster Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated 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’ equity less deductions for goodwill and other intangible assets, and certain deferred tax adjustments. Upon adoption of the Basel III Capital Rules, Webster elected to opt-out of the requirement to include certain components of accumulated other comprehensive income 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 September 30, 2022 and December 31, 2021, Webster Financial Corporation and Webster Bank were both classified as
well-capitalized. Management believes that no events or changes have occurred subsequent to quarter-end that would change this designation.

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

			At September 30, 2022
			Actual (1)									Minimum Requirement									Well Capitalized
(Dollars in thousands)			Amount			Ratio						Amount			Ratio						Amount			Ratio
Webster Financial Corporation
CET1 risk-based capital			$	5,637,725		10.80		%				$	2,348,463		4.5		%				$	3,392,224		6.5		%
Total risk-based capital			6,984,237			13.38						4,175,045			8.0						5,218,807			10.0
Tier 1 risk-based capital			5,921,704			11.35						3,131,284			6.0						4,175,045			8.0
Tier 1 leverage capital			5,921,704			8.98						2,637,840			4.0						3,297,301			5.0
Webster Bank
CET1 risk-based capital			$	6,487,577		12.46		%				$	2,342,827		4.5		%				$	3,384,084		6.5		%
Total risk-based capital			6,957,328			13.36						4,165,026			8.0						5,206,283			10.0
Tier 1 risk-based capital			6,487,577			12.46						3,123,770			6.0						4,165,026			8.0
Tier 1 leverage capital			6,487,577			9.85						2,634,102			4.0						3,292,628			5.0

			At December 31, 2021
			Actual (1)									Minimum Requirement									Well Capitalized
(Dollars in thousands)			Amount			Ratio						Amount			Ratio						Amount			Ratio
Webster Financial Corporation
CET1 risk-based capital			$	2,804,290		11.72		%				$	1,076,871		4.5		%				$	1,555,480		6.5		%
Total risk-based capital			3,265,064			13.64						1,914,436			8.0						2,393,046			10.0
Tier 1 risk-based capital			2,949,327			12.32						1,435,827			6.0						1,914,436			8.0
Tier 1 leverage capital			2,949,327			8.47						1,393,607			4.0						1,742,008			5.0
Webster Bank
CET1 risk-based capital			$	3,034,883		12.69		%				$	1,075,920		4.5		%				$	1,554,107		6.5		%
Total risk-based capital			3,273,300			13.69						1,912,747			8.0						2,390,934			10.0
Tier 1 risk-based capital			3,034,883			12.69						1,434,560			6.0						1,912,747			8.0
Tier 1 leverage capital			3,034,883			8.72						1,392,821			4.0						1,741,026			5.0

(1)In accordance with regulatory capital rules, Webster 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, the December 31, 2021 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 capital benefit provided in the initial two years. For 2022, 2023, and 2024, Webster is allowed 75%, 50%, and 25% of the capital benefit as of December 31, 2021, respectively, with full absorption occurring in 2025.

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Dividend Restrictions

Webster Financial Corporation is dependent upon dividends from Webster Bank to provide funds for the payment of dividends to shareholders 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 Bank paid $250.0 million and $375.0 million in dividends to Webster Financial Corporation for the three and nine months ended September 30, 2022, and $40.0 million and $160.0 million for the three and nine months ended September 30, 2021, respectively, for which no express approval from the OCC was required.

Cash Restrictions

Webster 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 not required to hold cash reserve balances at both September 30, 2022 and December 31, 2021.

Note 11: Variable Interest Entities

Webster has an investment interest in the following entities that meet the definition of a variable interest entity.

Consolidated

Rabbi Trust. The Company established a Rabbi Trust to meet the obligations due under its Deferred Compensation Plan for Directors and Officers and to mitigate expense volatility. The funding of the Rabbi Trust and the discontinuation of the Deferred Compensation Plan for Directors and Officers occurred during 2012. In connection with the Sterling merger, Webster 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.

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

The Rabbi Trusts' assets are included in accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets. Investment earnings are included in other non-interest 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 regarding the fair value of the Rabbi Trusts' investments can be found within Note 14: Fair Value Measurements.

Non-Consolidated

Tax Credit Finance Investments. Webster 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) 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 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 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 applies the proportional amortization method to subsequently measure its investments in qualified affordable housing projects.

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

(In thousands)			September 30, 2022						December 31, 2021
Gross investment in LIHTC (1)			$	707,619					$	68,635
Accumulated amortization			(56,887)						(25,216)
Net investment in LIHTC			$	650,732					$	43,419
Unfunded commitments for LIHTC investments (1)			$	311,282					$	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.

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The aggregate carrying value of Webster's LIHTC investments is included in accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets, and represents the Company's maximum exposure to loss. The related unfunded commitments are included in accrued expenses and other liabilities on the accompanying Condensed Consolidated Balance Sheets. In addition to those acquired from Sterling, there were $123.4 million of net commitments approved to fund LIHTC investments during the nine months ended September 30, 2022, and $10.6 million during the nine months ended September 30, 2021.

Webster Statutory Trust. Webster owns all the outstanding common stock of Webster Statutory Trust, a financial vehicle that has issued, and in the future may issue, trust preferred securities. The Company is not the primary beneficiary of Webster Statutory Trust. Webster Statutory Trust's only assets are junior subordinated debentures that are issued by the Company, which were acquired using the proceeds from the issuance of trust preferred securities and common stock. The junior subordinated debentures are included in long-term debt on the accompanying Condensed Consolidated Balance Sheets, and the related interest expense is reported as interest expense on 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 invests in alternative investments comprising interests in non-public entities that cannot be redeemed since the investment is distributed as the underlying equity 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 other non-marketable investments was $124.3 million and $61.5 million at September 30, 2022 and December 31, 2021, respectively, which is included in accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets, and its maximum exposure to loss, including unfunded commitments, was $219.1 million and $95.9 million, respectively. 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 September 30,												Nine months ended September 30,
(In thousands, except per share data)			2022						2021						2022						2021
Net income			$	233,968					$	95,713					$	399,532					$	297,826
Less: Preferred stock dividends			4,162						1,968						11,756						5,906
Net income available to common shareholders			229,806						93,745						387,776						291,920
Less: Earnings allocated to participating securities			2,128						574						3,562						1,661
Earnings applicable to common shareholders			$	227,678					$	93,171					$	384,214					$	290,259
Weighted-average common shares outstanding - basic			173,868						90,038						165,743						89,960
Effect of dilutive securities			76						194						70						226
Weighted-average common shares outstanding - diluted			173,944						90,232						165,813						90,186
Basic earnings per common share			$	1.31					$	1.03					$	2.32					$	3.23
Diluted earnings per common share			1.31						1.03						2.32						3.22

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 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 97,294 and 330,688 for the three and nine months ended September 30, 2022, respectively, and zero and 47,161 for the three and nine months ended September 30, 2021, respectively.

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Note 13: Derivative Financial Instruments

Derivative Positions and Offsetting

Derivatives Designated in Hedge Relationships. 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 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 designated as cash flow hedges. Purchased options allow the Company to limit the potential adverse impact of variable interest rates by establishing a cap 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. The Company also enters into other derivative transactions to manage economic risks but does not designate the instruments in hedge relationships. Further, the Company enters into derivative contracts to accommodate customer needs. Derivative contracts with customers are offset with dealer counterparty transactions structured with matching terms to ensure minimal impact on earnings.

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

			At September 30, 2022
			Asset Derivatives									Liability Derivatives
(In thousands)			Notional Amounts			Fair Value						Notional Amounts			Fair Value
Designated as hedging instruments:
Interest rate derivatives (1)			$	850,000		$	243					$	2,000,000		$	16,377
Not designated as hedging instruments:
Interest rate derivatives (1)			6,731,008			217,613						6,721,716			409,950
Mortgage banking derivatives (2)			4,445			36						476			3
Other (3)			155,206			1,601						485,375			447
Total not designated as hedging instruments			6,890,659			219,250						7,207,567			410,400
Gross derivative instruments, before netting			$	7,740,659		219,493						$	9,207,567		426,777
Less: Master netting agreements						16,877									16,877
Cash collateral						185,968									—
Total derivative instruments, after netting						$	16,648								$	409,900
			At December 31, 2021
			Asset Derivatives									Liability Derivatives
(In thousands)			Notional Amounts			Fair Value						Notional Amounts			Fair Value
Designated as hedging instruments:
Interest rate derivatives (1)			$	1,000,000		$	17,583					$	—		$	—
Not designated as hedging instruments:
Interest rate derivatives (1)			4,463,048			141,243						4,372,846			21,570
Mortgage banking derivatives (2)			14,212			80						—			—
Other (3)			76,755			211						374,688			214
Total not designated as hedging instruments			4,554,015			141,534						4,747,534			21,784
Gross derivative instruments, before netting			$	5,554,015		159,117						$	4,747,534		21,784
Less: Master netting agreements						6,364									6,364
Cash collateral						19,272									2,119
Total derivative instruments, after netting						$	133,481								$	13,301

(1)Balances related to clearing houses are presented as a single unit of account. In accordance with their rule books, clearing houses legally characterize variation margin payments as settlement of derivatives rather than collateral against derivative positions. At September 30, 2022 and December 31, 2021, notional amounts of interest rate swaps cleared through clearing houses include $2.9 billion and $0.4 billion for asset derivatives, respectively, and zero and $2.6 billion for liability derivatives, respectively. The related fair values approximate zero.

(2)Notional amounts related to residential loans exclude approved floating rate commitments of $2.8 million and $1.0 million at September 30, 2022 and December 31, 2021, 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 $103.7 million and $66.0 million for asset derivatives and $464.7 million and $338.2 million for liability derivatives at September 30, 2022 and December 31, 2021, respectively, that have insignificant related fair values.

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

			At September 30, 2022
(In thousands)			Gross Amount Recognized			Derivative Offset Amount			Cash Collateral Received/Pledged			Net Amount Presented						Amounts Not Offset
Asset derivatives			$	219,245		$	16,877		$	185,968		$	16,400					$	16,771
Liability derivatives			16,877			16,877			—			—						852
			At December 31, 2021
(In thousands)			Gross Amount Recognized			Derivative Offset Amount			Cash Collateral Received/Pledged			Net Amount Presented						Amounts Not Offset
Asset derivatives			$	25,636		$	6,364		$	19,272		$	—					$	51
Liability derivatives			8,483			6,364			2,119			—						428

Derivative Activity

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

			Recognized In			Three months ended September 30,												Nine months ended September 30,
(In thousands)			Net Interest Income			2022						2021						2022						2021
Interest rate derivatives			Long-term debt			$	(76)					$	(90)					$	(229)					$	(334)
Interest rate derivatives			Interest and fees on loans and leases			(483)						2,706						3,320						7,933
Net recognized on cash flow hedges						$	(559)					$	2,616					$	3,091					$	7,599

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

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)			At September 30, 2022						At December 31, 2021						At September 30, 2022						At December 31, 2021
Long-term debt			$	334,796					$	338,811					$	34,796					$	38,811

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

			Recognized In			Three months ended September 30,												Nine months ended September 30,
(In thousands)			Non-interest Income			2022						2021						2022						2021
Interest rate derivatives			Other income			$	6,032					$	2,727					$	25,291					$	7,132
Mortgage banking derivatives			Mortgage banking activities			31						38						(47)						(556)
Other			Other income			3,196						611						4,620						780
Total not designated as hedging instruments						$	9,259					$	3,376					$	29,864					$	7,356

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. At September 30, 2022, the remaining unamortized balance of time-value premiums was $3.5 million. Over the next twelve months, an estimated $2.8 million decrease to interest expense will be reclassified from (AOCL) AOCI relating to cash flow hedges, and an estimated $0.3 million increase to interest expense will be reclassified from (AOCL) AOCI relating to hedge terminations. At September 30, 2022, the remaining unamortized loss on terminated cash flow hedges is $0.4 million. The maximum length of time over which forecasted transactions are hedged is 4.5 years. Additional information about cash flow hedge activity impacting (AOCL) AOCI and the related amounts reclassified to interest expense is provided in Note 9: Accumulated Other Comprehensive (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 September 30, 2022, the Company had $64.8 million in initial margin collateral posted at clearing houses. In addition, $186.8 million of cash collateral received is included in cash and due from banks on the accompanying Condensed Consolidated Balance Sheets. Webster 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 customers was $0.2 million at
September 30, 2022. In addition, the Company monitors potential future exposure, representing its best estimate of exposure to remaining contractual maturity. The potential future exposure relating to interest rate derivatives with Webster Bank customers totaled $85.9 million at September 30, 2022. Webster has incorporated a valuation adjustment to reflect nonperformance risk in the fair value measurement of its derivatives, which totaled $9.5 million and $(0.4) million at September 30, 2022 and December 31, 2021, respectively. Various factors impact changes in the valuation adjustment over time, including changes in the credit spreads of the parties to the contracts, as well as changes in market rates and volatilities, which affect the total expected exposure of the derivative instruments.

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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 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 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 classifies 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 are classified within Level 1 of the fair value hierarchy.

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

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

Mortgage Banking Derivatives. Webster 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 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 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. Webster 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 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.

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

			At September 30, 2022																		At December 31, 2021
(In thousands)			Fair Value						Unpaid Principal Balance						Difference						Fair Value						Unpaid Principal Balance						Difference
Originated loans held for sale			$	898					$	1,080					$	(182)					$	4,694					$	5,034					$	(340)

Rabbi Trust Investments. Investments held in each of the 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) as reported by the trustee of the funds, which represents quoted prices in active markets. Webster 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 September 30, 2022, the cost basis of the Rabbi Trusts' investments was $10.3 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 September 30, 2022, equity investments with a readily determinable fair value had a carrying amount of $0.5 million and no remaining unfunded commitment. During the three and nine months ended September 30, 2022, there were write-downs in fair value of $0.2 million and $1.4 million, respectively, associated with these alternative investments.

Equity investments that do not have a readily available fair value may qualify for the NAV practical expedient if they meet certain requirements. Webster'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 September 30, 2022, these alternative investments had a carrying amount of $75.2 million and a remaining unfunded commitment of $76.1 million.

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

			At September 30, 2022
(In thousands)			Level 1			Level 2			Level 3						Total
Financial Assets:
Available-for-sale investment securities:
U.S. Treasury notes			$	713,263		$	—		$	—					$	713,263
Government agency debentures			—			269,028			—						269,028
Municipal bonds and notes			—			1,697,145			—						1,697,145
Agency CMO			—			63,861			—						63,861
Agency MBS			—			2,197,349			—						2,197,349
Agency CMBS			—			1,455,919			—						1,455,919
CMBS			—			922,928			—						922,928
CLO			—			7,203			—						7,203
Corporate debt			—			702,172			—						702,172
Private label MBS			—			44,310			—						44,310
Other			—			11,866			—						11,866
Total available-for-sale investment securities			713,263			7,371,781			—						8,085,044
Gross derivative instruments, before netting (1)			1,591			217,902			—						219,493
Originated loans held for sale			—			898			—						898
Investments held in Rabbi Trust			12,250			—			—						12,250
Alternative investments (2)			522			—			—						75,728
Total financial assets			$	727,626		$	7,590,581		$	—					$	8,393,413
Financial Liabilities:
Gross derivative instruments, before netting (1)			$	296		$	426,481		$	—					$	426,777

			At December 31, 2021
(In thousands)			Level 1			Level 2			Level 3						Total
Financial Assets:
Available-for-sale investment securities:
U.S. Treasury notes			$	396,966		$	—		$	—					$	396,966
Agency CMO			—			90,384			—						90,384
Agency MBS			—			1,593,403			—						1,593,403
Agency CMBS			—			1,232,541			—						1,232,541
CMBS			—			886,263			—						886,263
CLO			—			21,847			—						21,847
Corporate debt			—			13,450			—						13,450
Total available-for-sale investment securities			396,966			3,837,888			—						4,234,854
Gross derivative instruments, before netting (1)			187			158,930			—						159,117
Originated loans held for sale			—			4,694			—						4,694
Investments held in Rabbi Trust			3,416			—			—						3,416
Alternative investments (2)			1,877			—			—						27,732
Total financial assets			$	402,446		$	4,001,512		$	—					$	4,429,813
Financial Liabilities:
Gross derivative instruments, before netting (1)			$	141		$	21,643		$	—					$	21,784

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

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

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Assets Measured at Fair Value on a Non-Recurring Basis

Webster 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 September 30, 2022, the carrying amount of these alternative investments was $31.1 million. There were $0.5 million of net write-ups due to observable price changes and $0.2 million of write-downs due to impairment during both the three and nine months ended September 30, 2022.

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. 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 September 30, 2022, there were no loans transferred to held for sale on the Condensed Consolidated Balance Sheet.

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

Other Real Estate Owned and Repossessed Assets. Other real estate owned (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 September 30, 2022, the total book value of OREO and repossessed assets was $2.1 million. In addition, the amortized cost of consumer loans secured by residential real estate property that were in process of foreclosure at September 30, 2022 was $9.7 million.

Estimated Fair Values of Financial Instruments and Mortgage Servicing Assets

Webster is required to disclose the estimated fair values of certain financial instruments and mortgage servicing assets. 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 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. Held-to-maturity investment securities, which include Agency CMO, Agency MBS, Agency CMBS, municipal bonds and notes, and CMBS are classified within Level 2 of the fair value hierarchy.

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

Mortgage Servicing Assets. Mortgage servicing assets are initially measured at fair value and subsequently measured using the amortization method. Webster assess mortgage servicing assets 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 is the impact of fluctuating interest rates on the related servicing revenue stream. Mortgage servicing assets are classified within Level 3 of the fair value hierarchy.

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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:

			At September 30, 2022												At December 31, 2021
(In thousands)			Carrying Amount						Fair Value						Carrying Amount						Fair Value
Assets:
Level 1
Cash and cash equivalents			$	613,125					$	613,125					$	461,570					$	461,570
Level 2
Held-to-maturity investment securities			6,505,838						5,650,119						6,198,125						6,280,936
Level 3
Loans and leases, net			47,249,550						45,896,000						21,970,542						21,702,732
Mortgage servicing assets			9,837						27,550						9,237						12,527
Liabilities:
Level 2
Deposit liabilities			$	51,439,293					$	51,439,293					$	28,049,259					$	28,049,259
Time deposits			2,569,594						2,503,396						1,797,770						1,794,829
Securities sold under agreements to repurchase and other borrowings			1,265,414						1,243,251						674,896						676,581
FHLB advances			3,510,717						3,509,221						10,997						11,490
Long-term debt (1)			1,074,844						1,030,390						562,931						515,912

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

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Note 15: Retirement Benefit Plans

Defined Benefit Pension and Other Postretirement Benefits

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

			Three months ended September 30,
			2022												2021
(In thousands)			Pension Plan			SERP			OPEB						Pension Plan			SERP			OPEB
Service cost			$	—		$	—		$	9					$	—		$	—		$	—
Interest cost			1,441			17			194						1,166			7			4
Expected return on plan assets			(3,669)			—			—						(3,595)			—			—
Amortization of actuarial loss (gain)			821			7			7						1,019			8			(20)
Net periodic benefit (income) cost			$	(1,407)		$	24		$	210					$	(1,410)		$	15		$	(16)

			Nine months ended September 30,
			2022												2021
(In thousands)			Pension Plan			SERP			Other Benefits						Pension Plan			SERP			Other Benefits
Service cost			$	—		$	—		$	24					$	—		$	—		$	—
Interest cost			4,198			49			551						3,498			20			12
Expected return on plan assets			(11,006)			—			—						(10,786)			—			—
Amortization of actuarial loss (gain)			1,667			20			(30)						3,058			25			(60)
Net periodic benefit (income) cost			$	(5,141)		$	69		$	545					$	(4,230)		$	45		$	(48)

The components of net periodic benefit (income) cost are included within other non-interest expense on the accompanying Condensed Consolidated Statements of Income. The weighted-average expected long-term rate of return on plan assets for the nine months ended September 30, 2022 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 operations are organized into three reportable segments that represent its primary businesses: Commercial Banking, HSA Bank, and Consumer Banking. These segments reflect how executive management responsibilities are assigned, how discrete financial information is evaluated, the type of customer served, and how products and services are provided. Certain Treasury activities, 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 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 recasted accordingly to reflect the realignment.

As discussed in Note 2: Mergers and Acquisitions, Webster acquired Sterling on January 31, 2022, and the allocation of the purchase price is considered preliminary. Accordingly, of the total $1.9 billion in preliminary goodwill recorded, $1.7 billion and $0.2 million was preliminarily allocated to Commercial Banking and Consumer Banking, respectively. The $36.0 million of goodwill recorded in connection with the Bend acquisition was allocated entirely to HSA Bank.

Segment Reporting Methodology

Webster 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 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.

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Webster allocates interest income and interest expense to each business through an internal matched maturity Funds Transfer Pricing (FTP) process. The goal of the FTP allocation is to encourage loan and deposit growth consistent with the Webster’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 function included within the Corporate and Reconciling category, where such exposures are centrally managed.

Webster 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 also allocates the provision for credit losses to each reportable segment based on management's estimate of the inherent 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 expenses and strategic initiatives charges are also generally included in the Corporate and Reconciling category.

The following tables present balance sheet information, including the appropriate allocations, for Webster's reportable segments and the Corporate and Reconciling category:

			At September 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			40,907,410			122,112			10,120,063									17,902,981			69,052,566
			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

The following tables present results of operations, including the appropriate allocations, for Webster’s reportable segments and the Corporate and Reconciling category:

			Three months ended September 30, 2022
(In thousands)			Commercial Banking			HSA Bank			Consumer Banking						Corporate and Reconciling			Consolidated Total
Net interest income			$	333,554		$	58,567		$	195,748					$	(36,866)		$	551,003
Non-interest income			40,497			25,842			33,842						13,455			113,636
Non-interest expense			102,415			36,725			109,588						81,343			330,071
Pre-tax, pre-provision net revenue			271,636			47,684			120,002						(104,754)			334,568
Provision (benefit) for credit losses			33,341			—			(1,989)						5,179			36,531
Income (loss) before income taxes			238,295			47,684			121,991						(109,933)			298,037
Income tax expense (benefit)			59,574			12,779			31,718						(40,002)			64,069
Net income (loss)			$	178,721		$	34,905		$	90,273					$	(69,931)		$	233,968

			Three months ended September 30, 2021
(In thousands)			Commercial Banking			HSA Bank			Consumer Banking						Corporate and Reconciling			Consolidated Total
Net interest income			$	152,012		$	42,074		$	98,572					$	(62,967)		$	229,691
Non-interest income			22,782			24,756			24,292						11,945			83,775
Non-interest expense			50,244			32,374			73,212						24,407			180,237
Pre-tax, pre-provision net revenue			124,550			34,456			49,652						(75,429)			133,229
Provision (benefit) for credit losses			5,099			—			2,799						(148)			7,750
Income (loss) before income taxes			119,451			34,456			46,853						(75,281)			125,479
Income tax expense (benefit)			30,579			9,199			11,151						(21,163)			29,766
Net income (loss)			$	88,872		$	25,257		$	35,702					$	(54,118)		$	95,713

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			Nine months ended September 30, 2022
(In thousands)			Commercial Banking			HSA Bank			Consumer Banking						Corporate and Reconciling			Consolidated Total
Net interest income			$	954,044		$	152,702		$	511,712					$	(186,547)		$	1,431,911
Non-interest income			128,670			79,352			92,541						38,041			338,604
Non-interest expense			294,375			110,674			312,464						330,570			$	1,048,083
Pre-tax, pre-provision net revenue			788,339			$	121,380		291,789						(479,076)			722,432
Provision (benefit) for credit losses			238,054			—			(5,906)						5,471			237,619
Income (loss) before income tax expense			550,285			121,380			297,695						(484,547)			484,813
Income tax expense (benefit)			133,966			32,530			77,352						(158,567)			85,281
Net income (loss)			$	416,319		$	88,850		$	220,343					$	(325,980)		$	399,532

			Nine months ended September 30, 2021
(In thousands)			Commercial Banking			HSA Bank			Consumer Banking						Corporate and Reconciling			Consolidated Total
Net interest income			$	434,087		$	126,376		$	281,012					$	(167,168)		$	674,307
Non-interest income			59,536			78,315			71,262						24,121			233,234
Non-interest expense			142,803			100,802			222,672						88,970			555,247
Pre-tax, pre-provision net revenue			350,820			103,889			129,602						(232,017)			352,294
(Benefit) for credit losses			(37,602)			—			(1,833)						(65)			(39,500)
Income (loss) before income tax expense			388,422			103,889			131,435						(231,952)			391,794
Income tax expense (benefit)			99,436			27,738			31,282						(64,488)			93,968
Net income (loss)			$	288,986		$	76,151		$	100,153					$	(167,464)		$	297,826

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Note 17: Revenue from Contracts with Customers

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

			Three months ended September 30, 2022
(In thousands)			Commercial Banking			HSA Bank			Consumer Banking			Corporate and Reconciling			Consolidated Total
Non-interest Income:
Deposit service fees			$	7,573		$	24,008		$	18,728		$	498		$	50,807
Loan and lease related fees (1)			5,623			—			—			—			5,623
Wealth and investment services			2,672			—			8,756			(9)			11,419
Other income			—			1,834			413			—			2,247
Revenue from contracts with customers			15,868			25,842			27,897			489			70,096
Other sources of non-interest income			24,629			—			5,945			12,966			43,540
Total non-interest income			$	40,497		$	25,842		$	33,842		$	13,455		$	113,636

			Three months ended September 30, 2021
(In thousands)			Commercial Banking			HSA Bank			Consumer Banking			Corporate and Reconciling			Consolidated Total
Non-interest Income:
Deposit service fees			$	4,206		$	22,886		$	13,079		$	87		$	40,258
Wealth and investment services			3,067			—			6,926			(8)			9,985
Other income			—			1,870			626			—			2,496
Revenue from contracts with customers			7,273			24,756			20,631			79			52,739
Other sources of non-interest income			15,509			—			3,661			11,866			31,036
Total non-interest income			$	22,782		$	24,756		$	24,292		$	11,945		$	83,775

			Nine months ended September 30, 2022
(In thousands)			Commercial Banking			HSA Bank			Consumer Banking			Corporate and Reconciling			Consolidated Total
Non-interest Income:
Deposit service fees			$	21,905		$	74,091		$	53,057		$	966		$	150,019
Loan and lease related fees (1)			16,198			—			—			—			16,198
Wealth and investment services			8,576			—			24,706			(22)			33,260
Other income			—			5,261			1,083			—			6,344
Revenue from contracts with customers			46,679			79,352			78,846			944			205,821
Other sources of non-interest income			81,991			—			13,695			37,097			132,783
Total non-interest income			$	128,670		$	79,352		$	92,541		$	38,041		$	338,604

			Nine months ended September 30, 2021
(In thousands)			Commercial Banking			HSA Bank			Consumer Banking			Corporate and Reconciling			Consolidated Total
Non-interest Income:
Deposit service fees			$	12,400		$	72,382		$	37,127		$	257		$	122,166
Wealth and investment services			9,029			—			20,472			(26)			29,475
Other income			—			5,933			1,753			—			7,686
Revenue from contracts with customers			21,429			78,315			59,352			231			159,327
Other sources of non-interest income			38,107			—			11,910			23,890			73,907
Total non-interest income			$	59,536		$	78,315		$	71,262		$	24,121		$	233,234

(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 as of the first quarter of 2022 due to the businesses acquired in connection with the Sterling merger.

Contracts with customers did not generate significant contract assets and liabilities at September 30, 2022 and
December 31, 2021.

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Revenue Streams

Deposit service fees consist of fees earned from customer deposit accounts, such as account maintenance fees, insufficient funds, and other transactional service charges. Performance obligations for account maintenance services are satisfied on a monthly basis at a fixed transaction price, whereas performance obligations for other deposit service charges resulting 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. On occasion, Webster may waive certain fees for its customers. 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' 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 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. 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 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 offers financial instruments with off-balance sheet risk to meet the financing needs of its customers. These transactions include commitments to extend credit, standby letters of credit, and commercial letters of credit, which involve, to varying degrees, elements of credit risk.

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

(In thousands)			At September 30, 2022						At December 31, 2021
Commitments to extend credit			$	10,809,256					$	6,870,095
Standby letters of credit			382,988						224,061
Commercial letters of credit			57,368						58,175
Total credit-related financial instruments with off-balance sheet risk			$	11,249,612					$	7,152,331

Webster enters into contractual commitments to extend credit to its customers, such as revolving credit arrangements, term loan commitments, and short-term borrowing agreements, generally with fixed expiration dates or other termination clauses and that require payment of a fee. Substantially all of the 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 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 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 standby letters of credit expire without being funded. However, if the commitment were funded, the Company has recourse against the customer. Webster'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 commercial letter of credit agreements are often secured by the underlying goods subject to trade.

An ACL is recorded within 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 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 the ACL on unfunded loan commitments:

			Three months ended September 30,												Nine months ended September 30,
(In thousands)			2022						2021						2022						2021
Balance, beginning of period			$	20,149					$	11,974					$	13,104					$	12,755
ACL assumed from Sterling			—						—						6,749						—
Provision (benefit) for credit losses			5,180						196						5,476						(585)
Balance, end of period			$	25,329					$	12,170					$	25,329					$	12,170

Litigation

Webster 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 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 will consider settlement of cases when it is in the best interests of the Company and its stakeholders. Webster 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 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.

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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, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures, as defined in Rules 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 controls and procedures designed to ensure that (i) the information required to be disclosed in the reports the Company files under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and (ii) such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure, were effective for the quarter ended September 30, 2022.

Changes in Internal Control over Financial Reporting

On January 31, 2022, Webster completed its previously announced merger with Sterling. During 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 of changes to processes, technology systems, and other components of internal control over financial reporting related to the Sterling acquired business is ongoing.

There were no changes to Webster's internal control over financial reporting during the quarter ended September 30, 2022, that materially affected, or would be reasonably likely to materially affect, Webster's internal control over financial reporting.

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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 to the risk factors previously disclosed in Webster's Annual Report on Form 10-K for the year ended December 31, 2021.

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 common stock made by or on behalf of Webster or any "affiliated purchaser," as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, during the three months ended September 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)
July 1, 2022 - July 31, 2022			418,187			$	45.38		414,369			$	482,504,803
August 1, 2022 - August 31, 2022			653,842			46.21			651,538			452,403,960
September 1, 2022 - September 30, 2022			1,050,373			46.28			1,042,283			404,177,442
Total			2,122,402			46.08			2,108,190			404,177,442

(1)Out of the total shares purchased during the three months ended September 30, 2022, 14,212 shares were acquired at market prices outside of Webster'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 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 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 financial performance. On April 27, 2022, the Company announced that its Board of Directors had increased Webster's authority to repurchase shares of its 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

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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 September 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

(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.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

WEBSTER FINANCIAL CORPORATION

Registrant

Date: November 4, 2022

By:

/s/ John R. Ciulla

John R. Ciulla

President, Chief Executive Officer, and Director

(Principal Executive Officer)

Date: November 4, 2022

By:

/s/ Glenn I. MacInnes

Glenn I. MacInnes

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Date: November 4, 2022

By:

/s/ Albert J. Wang

Albert J. Wang

Executive Vice President and Chief Accounting Officer

(Principal Accounting Officer)

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