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Webster Financial
WBS
#1804
Rank
$11.84 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$73.43
Share price
0.96%
Change (1 day)
26.08%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
  1. Webster Financial
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2023 Q1

Webster Financial - 10-Q quarterly report FY2023 Q1


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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 March 31, 2023
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 classTrading SymbolsName of each exchange on which registered
Common Stock, par value $0.01 per shareWBSNew York Stock Exchange
Depositary Shares, each representing 1/1000th interest in a shareWBS-PrFNew York Stock Exchange
of 5.25% Series F Non-Cumulative Perpetual Preferred Stock
Depositary Shares, each representing 1/40th interest in a shareWBS-PrGNew York Stock Exchange
of 6.50% Series G Non-Cumulative Perpetual Preferred Stock
Indicate by check mark whether the registrant (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
The number of shares of common stock, par value $.01 per share, outstanding as of April 28, 2023 was 174,744,977.


INDEX
  Page No.
Key to Acronyms and Terms
ii
Forward-Looking Statements
iii
Item 1.
30
Item 2.
1
Item 3.
73
Item 4.
73
Item 1.
75
Item 1A.
75
Item 2.
75
Item 3.
76
Item 4.
76
Item 5.
76
Item 6.
77
77
78



i

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
KEY TO ACRONYMS AND TERMS
ACLAllowance for credit losses
Agency CMBSAgency commercial mortgage-backed securities
Agency CMO
Agency collateralized mortgage obligations
Agency MBS
Agency mortgage-backed securities
ALCO
Asset/Liability Committee
AOCI
Accumulated other comprehensive income
ASC
Accounting Standards Codification
ASU or the Update
Accounting Standards Update
Basel III
Capital rules under a global regulatory framework developed by the Basel Committee on Banking Supervision
BendBend Financial, Inc.
BHC Act
Bank Holding Company Act of 1956, as amended
CECLCurrent expected credit losses
CET1 capital
Common Equity Tier 1 Capital, defined by Basel III capital rules
CFPBConsumer Financial Protection Bureau
CLO
Collateralized loan obligations
CMBS
Non-agency commercial mortgage-backed securities
COVID-19Coronavirus
CRACommunity Reinvestment Act of 1977
DTADeferred tax asset
EADExposure 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
FTEFully tax-equivalent
FTP
Funds Transfer Pricing, a matched maturity funding concept
GAAP
U.S. Generally Accepted Accounting Principles
Holding Company
Webster Financial Corporation
HSAHealth savings account
HSA Bank
HSA Bank, a division of Webster Bank, National Association
interLINKInterlink Insured Sweep LLC
IRAInflation Reduction Act
ITGCInformation technology general controls
LGDLoss given default
LIBORLondon Interbank Offered Rate
LIHTCLow-income housing tax credit
MBSNon-agency mortgage-backed securities
NAVNet asset value
OCCOffice of the Comptroller of the Currency
OPEBOther post-employment medical and life insurance benefits
OREOOther real estate owned
PCDPurchased credit-deteriorated
PDProbability of default
PPNRPre-tax, pre-provision net revenue
PPPSmall Business Administration Paycheck Protection Program
SALTState and local tax
SECUnited States Securities and Exchange Commission
SERPSupplemental executive defined benefit retirement plan
SOFRSecured overnight financing rate
SterlingSterling Bancorp, collectively with its consolidated subsidiaries
TDRTroubled debt restructuring, defined in ASC 310-40 "Receivables - Troubled Debt Restructurings by Creditors"
Webster Bank or the BankWebster Bank, National Association, a wholly-owned subsidiary of Webster Financial Corporation
Webster or the CompanyWebster Financial Corporation, collectively with its consolidated subsidiaries
ii

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
FORWARD-LOOKING STATEMENTS
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, and other financial items;
▪statements of plans, objectives, and expectations of the Company or its management or Board of Directors;
▪statements of future economic performance; and
▪statements of assumptions underlying such statements.
Forward-looking statements are based on the Company’s current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. The Company’s actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Factors that could cause our actual results to differ from those discussed in any forward-looking statements include, but are not limited to:
▪our ability to successfully integrate the operations of Webster and Sterling and realize the anticipated benefits of the merger, including our ability to successfully complete our core conversion in the anticipated timeframe;
▪our ability to successfully execute our business plan and strategic initiatives, and manage any risks or uncertainties;
▪volatility in our stock price due to investor sentiment, including following bank failures during the first fiscal quarter of 2023, and the acquisition of such failed banks (or their assets), by stronger banks within the U.S. banking system;
▪local, regional, national, and international economic conditions, and the impact they may have on us or our customers;
▪volatility and disruption in national and international financial markets, including as a result of geopolitical conflict, such as the war between Russia and Ukraine;
▪the continued effects from the COVID-19 pandemic, or the potential adverse effects from future pandemics, and any governmental or societal responses thereto;
▪unforeseen events, such as natural disasters;
▪changes in laws and regulations, or existing laws and regulations that we become subject to, including those concerning banking, taxes, dividends, securities, insurance, and healthcare, with which we and our subsidiaries must comply;
▪adverse conditions in the securities markets that could lead to impairment in the value of our securities portfolio;
▪inflation, monetary fluctuations, the possibility of a recession, and changes in interest rates, including the impact of such changes on economic conditions, customer behavior, funding costs, and our loans and leases and securities portfolios;
▪the replacement of, and transition from, LIBOR to SOFR as the primary interest rate benchmark;
▪the timely development and acceptance of new products and services, and the perceived value of those products and services by customers;
▪changes in deposit flows, consumer spending, borrowings, and savings habits;
▪our ability to implement new technologies and maintain secure and reliable technology systems;
▪the effects of any cyber threats, attacks or events, or fraudulent activity, including those that involve our third-party vendors and service providers;
▪performance by our counterparties and third-party vendors;
▪our ability to increase market share and control expenses;
▪changes in the competitive environment among banks, financial holding companies, and other traditional and non-traditional financial service providers;
▪our ability to maintain adequate sources of funding and liquidity;
▪changes in the level of non-performing assets and charge-offs;
▪changes in estimates of future reserve requirements based upon periodic review under relevant regulatory and accounting requirements;
▪the effect of changes in accounting policies and practices applicable to us, including impacts of recently adopted accounting guidance;
▪our inability to remediate the material weaknesses in our internal control related to ineffective ITGCs;
▪legal and regulatory developments, including the resolution of legal proceedings or regulatory or other governmental inquiries, and the results of regulatory examinations or reviews; and
▪our ability to appropriately address any environmental, social, governmental, and sustainability concerns that may arise from our business activities.
Any forward-looking 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 the Company's actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as may be required by law.
iii

PART I – FINANCIAL INFORMATION
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information that management believes is necessary to understand the Company's financial condition, results of operations, and cash flows for the three months ended March 31, 2023, as compared to 2022. This information should be read in conjunction with the Condensed Consolidated Financial Statements, and accompanying Notes thereto, contained in Part I - Item 1. Financial Statements of this report, and the Consolidated Financial Statements, and accompanying Notes thereto, contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 10, 2023. The Company's financial condition, results of operations, and cash flows for the three months ended March 31, 2023, are not necessarily indicative of future results that may be attained for the entire year or other interim periods.
Executive Overview
Nature of Operations
Webster Financial Corporation is a bank holding company and financial holding company under the BHC Act, incorporated under the laws of Delaware in 1986, and headquartered in Stamford, Connecticut. Webster Bank, along with its HSA Bank division, is a leading commercial bank in the Northeast that delivers a wide range of digital and traditional financial solutions to businesses, individuals, families, and partners across its three differentiated lines of business: Commercial Banking, HSA Bank, and Consumer Banking. While its core footprint spans from New York to Rhode Island and Massachusetts, certain businesses operate in extended geographies. HSA Bank is one of the largest providers of employee benefit solutions in the United States.
Recent Industry Developments
During the first quarter and into the second quarter of 2023, the banking industry experienced significant volatility with multiple high-profile bank failures and industry-wide concerns related to liquidity, deposit outflows, unrealized losses on securities, and eroding consumer confidence in the banking system. Despite these negative industry developments, the Company's total deposits at March 31, 2023, were $55.3 billion, representing a net $1.2 billion increase compared to its total deposits at December 31, 2022. Additionally, the Holding Company's and the Bank's regulatory capital ratios at
March 31, 2023, remained in excess of the "well-capitalized" minimum. Additional information regarding regulatory capital ratios 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.
interLINK Acquisition
On January 11, 2023, Webster acquired interLINK, a technology-enabled deposit management platform that administers over $9 billion of deposits from FDIC-insured cash sweep programs between banks and broker/dealers and clearing firms. The acquisition expanded the Company's core deposit funding sources and scalable liquidity and added another technology-enabled channel to its already differentiated, omnichannel deposit gathering capabilities. At March 31, 2023, interLINK provided the Company with an additional $2.9 billion of money market deposits. Additional information regarding the acquisition of interLINK can be found within Note 2: Mergers and Acquisitions in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.
Sterling Integration Update
On January 31, 2022, Webster completed its merger with Sterling. Significant progress on integration and conversion efforts were made throughout the year ended December 31, 2022, and the Company remains on track with key project milestones as of the first quarter of 2023, with a continued focus on business-as-usual operations. The significant accomplishments achieved as of the end of the first quarter of 2023 included: (i) additional systems integrations and data validation exercises; (ii) the completion of user acceptance testing; (iii) the finalization of financial center staffing and training plans; and (iv) the consolidation of bank routing numbers. The Company is prepared to complete several mock conversions in the second quarter of 2023 as it progresses towards core conversion targeted for mid-2023.
LIBOR Transition Update
The Company has a LIBOR transition plan in place that is commensurate with identified LIBOR transition risks and exposures, and is aligned with regulatory guidance and ARRC best practices. Management continued to execute according to its LIBOR transition plan during the first quarter of 2023, addressing emerging issues and risks as they arise, while closely monitoring legislative and regulatory guidance associated with the LIBOR transition.
As of the date of this Quarterly Report on Form 10-Q, the Company's main focus continues to be on the remediation of legacy LIBOR contracts, the integration of legacy Webster and legacy Sterling systems and processes, monitoring and responding to market developments, and addressing regulatory and accounting requirements. The Company will execute its actual transition of remaining LIBOR contracts to SOFR at the first rate reset date after June 30, 2023.
1

Results of Operations
The following table summarizes selected financial highlights and key performance indicators:
 At or for the three months ended March 31,
(In thousands, except per share and ratio data)20232022
Income and performance ratios:
Net income (loss)$221,004 $(16,747)
Net income (loss) available to common stockholders216,841 (20,178)
Earnings (loss) per diluted common share1.24 (0.14)
Return on average assets (annualized)1.22 %(0.12)%
Return on average tangible common stockholders' equity (annualized) (non-GAAP)17.66 (1.36)
Return on average common stockholders' equity (annualized)10.94 (1.25)
Non-interest income as a percentage of total revenue10.62 20.88 
Asset quality:
ACL on loans and leases$613,914 $569,371 
Non-performing assets (1)
186,551 251,206 
ACL on loans and leases / total loans and leases1.21 %1.31 %
Net charge-offs / average loans and leases (annualized)0.20 0.10 
Non-performing loans and leases / total loans and leases (1)
0.36 0.57 
Non-performing assets / total loans and leases plus OREO (1)
0.37 0.58 
ACL on loans and leases / non-performing loans and leases (1)
331.81 229.48 
Other ratios:
Tangible common equity (non-GAAP)7.15 %8.26 %
Tier 1 risk-based capital10.93 12.05 
Total risk-based capital12.99 14.41 
CET1 risk-based capital10.42 11.46 
Stockholders' equity / total assets11.08 12.55 
Net interest margin3.66 3.21 
Efficiency ratio (non-GAAP)41.64 48.73 
Equity and share related:
Common equity$8,010,315 $7,893,156 
Book value per common share45.85 44.32 
Tangible book value per common share (non-GAAP)29.47 28.94 
Common stock closing price39.42 56.12 
Dividends and equivalents declared per common share0.40 0.40 
Common shares issued and outstanding174,712 178,102 
Weighted-average common shares outstanding - basic172,766 147,394 
Weighted-average common shares outstanding - diluted172,883 147,394 
(1)Non-performing assets and the 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 the Company's financial position, results of operations, the strength of its capital position, and overall business performance. These measures are used by management for internal planning and forecasting purposes, as well as by securities analysts, investors, and other interested parties to assess peer company operating performance. Management believes that this presentation, together with the accompanying reconciliations, provides investors with a more complete understanding of the factors and trends affecting the Company's business and allows investors to view its performance in a similar manner.
Tangible book value per common share represents stockholders’ equity less preferred stock and goodwill and other intangible assets (tangible common equity) divided by common shares outstanding at the end of the reporting period. The tangible common equity ratio represents tangible common equity divided by total assets less goodwill and other intangible assets (tangible assets). Both of these measures are used by management to evaluate the Company's capital position. The annualized return on average tangible common stockholders' equity is calculated using net income available to common stockholders, adjusted for the annualized tax-effected amortization of intangible assets, as a percentage of average tangible common equity. This measure is used by management to assess the Company's performance against its peer financial institutions. The efficiency ratio, which represents the costs expended to generate a dollar of revenue, is calculated excluding certain non-operational items in order to measure how well the Company is managing its recurring operating expenses.
2

These non-GAAP financial measures should not be considered a substitute for GAAP basis financial measures. Because
non-GAAP financial measures are not standardized, it may not be possible to compare these with other companies that present financial measures having the same or similar names.
The following tables reconcile non-GAAP financial measures to the most comparable financial measures defined by GAAP:
At March 31,
(Dollars and shares in thousands, except per share data)20232022
Tangible book value per common share:
Stockholders' equity$8,294,294 $8,177,135 
Less: Preferred stock283,979 283,979 
Common stockholders' equity$8,010,315 $7,893,156 
Less: Goodwill and other intangible assets2,861,310 2,738,353 
Tangible common stockholders' equity$5,149,005 $5,154,803 
Common shares outstanding174,712 178,102 
Tangible book value per common share$29.47 $28.94 
Book value per common share (GAAP)$45.85 $44.32 
Tangible common equity ratio:
Tangible common stockholders' equity$5,149,005 $5,154,803 
Total assets$74,844,395 $65,131,484 
Less: Goodwill and other intangible assets2,861,310 2,738,353 
Tangible assets$71,983,085 $62,393,131 
Tangible common equity ratio7.15 %8.26 %
Total common stockholders' equity to total assets (GAAP)10.70 %12.12 %
Three months ended March 31,
(Dollars in thousands)20232022
Return on average tangible common stockholders' equity:
Net income$221,004 $(16,747)
Less: Preferred stock dividends4,163 3,431 
Add: Intangible assets amortization, tax-effected7,503 5,046 
Income (loss) adjusted for preferred stock dividends and intangible assets amortization$224,344 $(15,132)
Income (loss) adjusted for preferred stock dividends and intangible assets amortization (annualized)$897,376 $(60,528)
Average stockholders' equity$8,215,676 $6,691,490 
Less: Average preferred stock283,979 236,121 
 Average goodwill and other intangible assets2,849,673 2,007,266 
Average tangible common stockholders' equity$5,082,024 $4,448,103 
Return on average tangible common stockholders' equity17.66 %(1.36)%
Return on average common stockholders' equity (annualized) (GAAP)10.94 %(1.25)%
Efficiency ratio:
Non-interest expense$332,467 $359,785 
Less: Foreclosed property activities(262)(75)
Intangible assets amortization9,497 6,387 
Operating lease depreciation1,884 1,632 
Merger-related expenses29,373 108,495 
Strategic initiatives charges— (4,140)
Non-interest expense$291,975 $247,486 
Net interest income$595,283 $394,248 
Add: FTE adjustment15,911 8,158 
 Non-interest income70,766 104,035 
 Other income (1)
4,311 3,082 
Less: Operating lease depreciation1,884 1,632 
(Loss) on sale of investment securities(16,747)— 
Income$701,134 $507,891 
Efficiency ratio41.64 %48.73 %
Non-interest expense as a percentage of total revenue (GAAP)49.92 %72.20 %
(1)Other income (non-GAAP) includes the taxable equivalent of net income generated from LIHTC investments.
3

Net Interest Income
Net interest income is the Company's primary source of revenue, representing 89.4% and 79.1% of total revenues for the three months ended March 31, 2023, and 2022, respectively. Net interest income is the difference between interest income on interest-earning assets (i.e., loans and leases and investment securities) and interest expense on interest-bearing liabilities
(i.e., deposits and borrowings), which are used to fund interest-earning assets and other activities. Net interest margin is calculated as the ratio of FTE net interest income to average interest-earning assets.
Net interest income, net interest margin, yields, and ratios on a FTE basis are considered non-GAAP financial measures, and are used by management to evaluate the comparability of the Company's revenue arising from both taxable and non-taxable sources. FTE adjustments are determined assuming a statutory federal income tax rate of 21%.
Net interest income and net interest margin are influenced by the volume and mix of interest-earning assets and interest-bearing liabilities, changes in interest rate levels, re-pricing frequencies, contractual maturities, prepayment behavior, and the use of interest rate derivative financial instruments. These factors are affected by changes in economic conditions, which impacts monetary policies, competition for loans and deposits, as well as the extent of interest lost on non-performing assets.
Net interest income increased $201.1 million, or 51.0%, from $394.2 million for the three months ended March 31, 2022, to $595.3 million for the three months ended March 31, 2023. On a FTE basis, net interest income increased $208.8 million. Net interest margin increased 45 basis points from 3.21% for the three months ended March 31, 2022, to 3.66% for the three months ended March 31, 2023. These increases are both primarily driven by the full quarter impact of the Sterling merger on
balances in 2023 as compared to the two-thirds impact for the quarter in 2022, and the higher interest rate environment.
Average total interest-earning assets increased $15.8 billion, or 31.3%, from $50.3 billion for the three months ended March 31, 2022, to $66.1 billion for the three months ended March 31, 2023, primarily due to increases of $14.2 billion, $1.2 billion, $0.3 billion, and $0.1 billion, in average loans and leases, average investment securities, average FHLB and FRB stock, and average interest-bearing deposits held at the FRB, respectively. The average yield on interest-earning assets increased 175 basis points from 3.33% for the three months ended March 31, 2022, to 5.08% for the three months ended March 31, 2023, primarily due to the higher interest rate environment, partially offset by a decrease in purchase accounting accretion on interest-earning assets that were acquired from Sterling.
Average loans and leases increased $14.2 billion, or 39.5%, from $35.9 billion for the three months ended March 31, 2022, to $50.1 billion for the three months ended March 31, 2023, primarily due to the full quarter impact of the Sterling merger on balances in 2023 as compared to the two-thirds impact for the quarter in 2022, and organic loan growth. At March 31, 2023, and 2022, average loans and leases comprised 75.8% and 71.4% of average total interest-earning assets, respectively. The average yield on loans and leases increased 190 basis points from 3.90% for the three months ended March 31, 2022, to 5.80% for the three months ended March 31, 2023, primarily due to the higher interest rate environment, partially offset by a decrease in purchase accounting accretion on loans and leases that were acquired from Sterling.
Average total investment securities increased $1.2 billion, or 9.0%, from $13.4 billion for the three months ended March 31, 2022, to $14.6 billion for the three months ended March 31, 2023, primarily due to the full quarter impact of the Sterling merger on balances in 2023 as compared to the two-thirds impact for the quarter in 2022. At March 31, 2023, and 2022, the average total investment securities portfolio comprised 22.1% and 26.7% of average total interest-earning assets, respectively. The average yield on total investment securities increased 77 basis points from 2.02% for the three months ended March 31, 2022, to 2.79% for the three months ended March 31, 2023, primarily due to the reinvestment of securities that had matured or were sold in the current period at higher yields.
Average FHLB and FRB stock increased $0.3 billion, or 176.1%, from $0.2 billion for the three months ended March 31, 2022, to $0.5 billion for the three months ended March 31, 2023, primarily due to the additional FHLB stock investment required as a result of the increase in FHLB advances. At March 31, 2023, and 2022, average FHLB and FRB stock comprised 0.7% and 0.3% of total average interest-earning assets, respectively. The average yield on average FHLB and FRB stock increased 234 basis points from 2.00% for the three months ended March 31, 2022, to 4.34% for the three months ended March 31, 2023, primarily due to the higher interest rate environment.
Average interest-bearing deposits held at the FRB increased $0.1 billion, or 12.5%, from $0.8 billion for three months ended March 31, 2022, to $0.9 billion for the three months ended March 31, 2023, primarily due to the strategic decision to maintain additional liquidity. At March 31, 2023, and 2022, average interest-bearing deposits held at the FRB comprised 1.4% and 1.6% of total average interest-earning assets, respectively. The average yield on interest-bearing deposits held at the FRB increased 440 basis points from 0.23% for the three months ended March 31, 2022, to 4.63% for the three months ended March 31, 2023, primarily due to the higher interest rate environment.
4

Average total interest-bearing liabilities increased $15.1 billion, or 31.9%, from $47.4 billion for the three months ended March 31, 2022, to $62.5 billion for the three months ended March 31, 2023, primarily due to increases of $8.9 billion, $5.7 billion, $0.7 billion, and $0.2 billion in average total deposits, average FHLB advances, average federal funds purchased, and average long-term debt, partially offset by a $0.4 billion decrease in average securities sold under agreements to repurchase. The average rate on interest-bearing liabilities increased 139 basis points from 0.13% for the three months ended March 31, 2022, to 1.52% for the three months ended March 31, 2023, primarily due to the higher interest rate environment.
Average total deposits increased $8.9 billion, or 19.4%, from $45.9 billion for the three months ended March 31, 2022, to $54.8 billion for the three months ended March 31, 2023, reflecting increases of $1.4 billion and $7.5 billion in
non-interest-bearing deposits and interest-bearing deposits, respectively. The overall increase in deposits was primarily due to the full quarter impact of the Sterling merger on balances in 2023 as compared to the two-thirds impact for the quarter in 2022, and the acquisition of interLINK, partially offset by the effect of customers rebalancing their deposit concentrations due to the current banking environment. At March 31, 2023, and 2022, average total deposits comprised 87.7% and 96.9% of total average interest-bearing liabilities, respectively. The average rate on deposits increased 104 basis points from 0.07% for the three months ended March 31, 2022, to 1.11% for the three months ended March 31, 2023, primarily due to the higher interest rate environment and growth in higher costing deposit products. Higher cost time deposits as a percentage of average total
interest-bearing deposits increased from 7.3% for the three months ended March 31, 2022, to 9.5% for the three months ended March 31, 2023, primarily due to a shift in customer preferences from lower rate checking and savings products into higher rate certificates of deposit products.
Average FHLB advances increased $5.7 billion, from $10.9 million for the three months ended March 31, 2022, to $5.7 billion for the three months ended March 31, 2023, primarily due to short-term funding needs and the strategic decision to maintain additional liquidity. At March 31, 2023, and 2022, average FHLB advances comprised 9.1% and less than one percent of average total interest-bearing liabilities, respectively. The average rate on FHLB advances to repurchase increased 277 basis points from 2.03% for the three months ended March 31, 2022, to 4.80% for the three months ended March 31, 2023, primarily due to the higher interest rate environment.
Average federal funds purchased were $0.7 billion for the three months ended March 31, 2023, and had an average rate of 4.62%. There were no average federal funds purchased for the three months ended March 31, 2022. At March 31, 2023, average federal funds purchased comprised 1.1% of average total interest-bearing liabilities.
Average long-term debt increased $0.2 billion, or 19.6%, from $0.9 billion for the three months ended March 31, 2022, to $1.1 billion for the three months ended March 31, 2023, primarily due to the full quarter impact of the Sterling merger on balances in 2023 as compared to the two-thirds impact for the quarter in 2022. At March 31, 2023, and 2022, average long-term debt comprised 1.7% and 1.9% of average total interest-bearing liabilities, respectively. The average rate on long-term debt increased 31 basis points from 3.34% for the three months ended March 31, 2022, to 3.65% for the three months ended March 31, 2023, primarily due to the full quarter rate impact in 2023 of the subordinated debt assumed from Sterling as compared to the two-thirds impact for the quarter in 2022.
Average securities sold under agreements to repurchase decreased $0.4 billion, or 57.7% from $0.6 billion for the three months ended March 31, 2022, to $0.2 billion for the three months ended March 31, 2023, primarily due to the Company's extinguishment of its two long-term structured repurchase agreements during the third quarter of 2022, and the timing of maturities. At March 31, 2023, and 2022, average securities sold under agreements to repurchase comprised 0.4% and 1.2% of total average interest-bearing liabilities, respectively. The average rate on securities sold under agreements to repurchase decreased 55 basis points from 0.66% for the three months ended March 31, 2022, to 0.11% for the three months ended March 31, 2023, primarily due to the Company's extinguishment of its two long-term structured repurchase agreements during the third quarter of 2022, which were contracted at a higher cost.
5

The following table summarizes daily average balances, interest, and average yield/rate by major category, and net interest margin on a FTE basis:
 Three months ended March 31,
 20232022
(Dollars in thousands)Average
Balance		Interest Income/ExpenseAverage Yield/RateAverage
Balance		Interest Income/ExpenseAverage Yield/Rate
Assets
Interest-earning assets:
Loans and leases (1)
$50,095,192 $725,543 5.80 %$35,912,829 $349,417 3.90 %
Investment securities: (2)
Taxable12,093,477 92,290 2.91 11,461,292 57,467 2.02 
Non-taxable2,539,768 13,684 2.16 1,960,251 9,802 2.00 
Total investment securities14,633,245 105,974 2.79 13,421,543 67,269 2.02 
FHLB and FRB stock459,375 4,910 4.34 166,357 821 2.00 
Interest-bearing deposits (3)
898,884 10,396 4.63 799,265 453 0.23 
Loans held for sale4,630 16 1.39 17,918 26 0.58 
Total interest-earning assets66,091,326 $846,839 5.08 %50,317,912 $417,986 3.33 %
Non-interest-earning assets6,225,199 4,490,665 
Total assets$72,316,525 $54,808,577 
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Demand deposits$12,629,928 $— — %$11,263,282 $— — %
Health savings accounts8,292,450 3,027 0.15 7,759,465 1,087 0.06 
Interest-bearing checking, money market,
and savings		29,853,370 123,048 1.67 24,316,436 5,019 0.08 
Time deposits4,024,472 24,129 2.43 2,544,286 1,293 0.21 
Total deposits54,800,220 150,204 1.11 45,883,469 7,399 0.07 
Securities sold under agreements to repurchase243,848 67 0.11 577,039 956 0.66 
Federal funds purchased671,175 7,760 4.62 — — — 
Other borrowings— — — — 1 — 
FHLB advances5,673,826 68,126 4.80 10,936 56 2.03 
Long-term debt (2)
1,072,252 9,488 3.65 896,310 7,168 3.34 
Total interest-bearing liabilities62,461,321 $235,645 1.52 %47,367,754 $15,580 0.13 %
Non-interest-bearing liabilities1,639,528 749,333 
Total liabilities64,100,849 48,117,087 
Preferred stock283,979 236,121 
Common stockholders' equity7,931,697 6,455,369 
Total stockholders' equity8,215,676 6,691,490 
Total liabilities and stockholders' equity$72,316,525 $54,808,577 
Net interest income (FTE)$611,194 $402,406 
Less: FTE adjustment(15,911)(8,158)
Net interest income$595,283 $394,248 
Net interest margin (FTE)3.66 %3.21 %
(1)Non-accrual loans have been included in the computation of average balances.
(2)For the purposes of our average yield/rate and margin computations, unsettled trades on investment securities and unrealized gain (loss) balances on available-for-sale securities and senior fixed-rate note hedges are excluded.
(3)Interest-bearing deposits are included as a component of Cash and cash equivalents on the Condensed Consolidated Statements of Cash Flows included in Part I - Item 1. Financial Statements.
6

The following table summarizes the change in net interest income attributable to changes in rate and volume, and reflects net interest income on a FTE basis:
Three months ended March 31,
2023 vs. 2022
Increase (decrease) due to
(In thousands)
Rate (1)
VolumeTotal
Change in interest on interest-earning assets:
Loans and leases$232,942 $143,184 $376,126 
Investment securities32,571 6,134 38,705 
FHLB and FRB stock2,642 1,447 4,089 
Interest-bearing deposits9,887 56 9,943 
Loans held for sale1 (11)(10)
Total interest income$278,043 $150,810 $428,853 
Change in interest on interest-bearing liabilities:
Health savings accounts$1,865 $75 $1,940 
Interest-bearing checking, money market, and savings116,121 1,908 118,029 
Time deposits22,374 462 22,836 
Securities sold under agreements to repurchase(337)(552)(889)
Federal funds purchased7,760 — 7,760 
Other borrowings(1)— (1)
FHLB advances39,304 28,766 68,070 
Long-term debt850 1,470 2,320 
Total interest expense$187,936 $32,129 $220,065 
Net change in net interest income$90,107 $118,681 $208,788 
(1)The change attributable to mix, a combined impact of rate and volume, is included with the change due to rate.
Provision for Credit Losses
The provision for credit losses totaled $46.7 million and $188.8 million for the three months ended March 31, 2023, and 2022, respectively. The balance for the three months ended March 31, 2022, included the establishment of the initial ACL of $175.1 million for non-PCD loans and leases that were acquired from Sterling in the merger. Excluding this charge, the provision for credit losses increased $33.0 million, primarily due to the impact of the current macroeconomic environment on credit performance and organic loan growth.
During the three months ended March 31, 2023, and 2022, total net charge-offs were $24.5 million and $8.9 million, respectively. The net increase of $15.6 million is primarily due to an increase in net charge-offs in the asset-based lending and commercial real estate categories, partially offset by a decrease in net charge-offs in the commercial non-mortgage category.
Additional information regarding the Company's provision for credit losses and ACL can be found under the sections captioned "Loans and Leases" through "Allowance for Credit Losses on Loans and Leases" contained elsewhere in this
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
7

Non-Interest Income
 Three months ended March 31,
(In thousands)20232022
Deposit service fees$45,436 $47,827 
Loan and lease related fees23,005 22,679 
Wealth and investment services6,587 10,597 
Mortgage banking activities59 428 
Increase in cash surrender value of life insurance policies6,728 6,732 
(Loss) on sale of investment securities(16,747)— 
Other income5,698 15,772 
Total non-interest income$70,766 $104,035 
Total non-interest income decreased $33.2 million, or 32.0%, from $104.0 million for the three months ended March 31, 2022, to $70.8 million for the three months ended March 31, 2023, primarily due to a loss on sale of investment securities and decreases in other income, wealth and investment services, and deposit service fees.
During the three months ended March 31, 2023, the Company sold $415.9 million of U.S. Treasury notes and Corporate debt securities classified as available-for-sale for proceeds of $395.4 million, which resulted in $20.5 million of gross realized losses. The $16.7 million loss on sale of investment securities included in non-interest income represents the portion of the total charge that was not attributed to a decline in credit quality. There were no sales of available-for-sale securities during the three months ended March 31, 2022.
Other income decreased $10.1 million, or 63.9%, from $15.8 million for the three months ended March 31, 2022, to $5.7 million for the three months ended March 31, 2023, primarily due to lower income generated from customer interest rate derivative activities and direct investments.
Wealth and investment services decreased $4.0 million, or 37.8%, from $10.6 million for the three months ended March 31, 2022, to $6.6 million for the three months ended March 31, 2023, primarily due to lower net investment services income, which is a direct result of the outsourcing of the consumer investment services platform effective as of the fourth quarter of 2022.
Deposit service fees decreased $2.4 million, or 5.0%, from $47.8 million for the three months ended March 31, 2022, to $45.4 million for the three months ended March 31, 2023, primarily due to lower customer account service and cash management/analysis fees, partially offset by higher interchange income.

8

Non-Interest Expense
 Three months ended March 31,
(In thousands)20232022
Compensation and benefits$173,200 $184,002 
Occupancy20,171 18,615 
Technology and equipment44,366 55,401 
Intangible assets amortization9,497 6,387 
Marketing3,476 3,509 
Professional and outside services32,434 54,091 
Deposit insurance12,323 5,222 
Other expense37,000 32,558 
Total non-interest expense$332,467 $359,785 
Total non-interest expense decreased $27.3 million, or 7.6%, from $359.8 million for the three months ended March 31, 2022, to $332.5 million for the three months ended March 31, 2023, primarily due to decreases in professional and outside services, technology and equipment, and compensation and benefits, partially offset by increases in other expense, deposit insurance, and intangible assets amortization.
Professional and outside services decreased $21.7 million, or 40.0%, from $54.1 million for the three months ended March 31, 2022, to $32.4 million for the three months ended March 31, 2023, primarily due to a $24.4 million decrease in merger-related expenses, particularly as it relates to advisory and legal fees, partially offset by an increase in other professional fees.
Technology and equipment decreased $11.0 million, or 19.9%, from $55.4 million for the three months ended March 31, 2022, to $44.4 million for the three months ended March 31, 2023, primarily due to a $20.8 million decrease in merger-related expenses, particularly as it relates to contract termination costs. Included in the balance for the three months ended
March 31, 2023, is a reduction of $4.8 million to a previously recorded technology-related contract termination charge resulting from a change in the expected use of certain services post core conversion.
Compensation and benefits decreased $10.8 million, or 5.9%, from $184.0 million for the three months ended March 31, 2022, to $173.2 million for the three months ended March 31, 2023, primarily due to a $30.5 million decrease in merger-related expenses, particularly as it relates to severance and retention, and the outsourcing of the consumer investment services platform effective as of the fourth quarter of 2022, partially offset by the full quarter impact in 2023 of salaries and incentives from the Sterling merger compared to a two-thirds impact for the quarter in 2022.
Other expense increased $4.4 million, or 13.6%, from $32.6 million for the three months ended March 31, 2022, to $37.0 million for the three months ended March 31, 2023, primarily due to the full quarter impact in 2023 of other expenses from the Sterling merger compared to the two-thirds impact for the quarter in 2022, partially offset by a $3.9 million decrease in merger-related expenses, particularly as it relates to disposals on property and equipment. Included in the balance reported for the three months ended March 31, 2023, is a reduction of $1.7 million to a previously recorded contract termination charge resulting from a decrease in volume usage.
Deposit insurance increased $7.1 million, or 136.0%, from $5.2 million for the three months ended March 31, 2022, to $12.3 million for the three months ended March 31, 2023, primarily due to the increased initial base deposit insurance assessment rate schedules adopted by the FDIC, which took effect as of the first quarter of 2023 for all insured depository institutions, and asset growth.
Intangible assets amortization increased $3.1 million, or 48.7%, from $6.4 million for the three months ended March 31, 2022, to $9.5 million for the three months ended March 31, 2023, due to the amortization expense related to the broker dealer relationship and non-competition agreement intangible assets recorded in connection with the interLINK acquisition, and the full quarter impact in 2023 of accelerated amortization on core deposits and customer relationship intangible assets recorded in connection with the Sterling merger and Bend acquisition.
9

Income Taxes
The Company recognized income tax expense of $65.8 million and an income tax benefit of $33.6 million for the three months ended March 31, 2023, and 2022, respectively, reflecting an effective tax rate of 23.0% for the three months ended March 31, 2023, and an effective tax benefit rate of 66.7% for the three months ended March 31, 2022.
The income tax benefit of $33.6 million for the first quarter of 2022 reflected the recognition of the pre-tax net loss and the tax benefits associated with the merger with Sterling, making comparisons to the current period not meaningful. The $65.8 million of income tax expense and the 23.0% effective tax rate for the first quarter of 2023 reflects the application of an estimated annual effective tax rate of 22.3% for 2023 and the recognition of discrete items during the period.
Additional information regarding the Company's income taxes, including its DTAs, can be found within Note 9: Income Taxes in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
Segment Reporting
The Company's operations are organized into three reportable segments that represent its primary businesses: Commercial Banking, HSA Bank, and Consumer Banking. These segments reflect how executive management responsibilities are assigned, how discrete financial information is evaluated, the type of customer served, and how products and services are provided. Segments are evaluated using PPNR. Certain Treasury activities, including the operations of interLINK, along with the amounts required to reconcile profitability metrics to those reported in accordance with GAAP, are included in the Corporate and Reconciling category. Additional information regarding the Company's reportable segments and its segment reporting methodology can be found within Note 16: Segment Reporting in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.
The following is a description of the Company’s three reportable segments and their primary services:
Commercial Banking serves businesses with more than $2 million of revenue through its Commercial Real Estate and Equipment Finance, Middle Market, Business Banking, Asset-Based Lending and Commercial Services, Public Sector Finance, Mortgage Warehouse, Sponsor and Specialty Finance, Verticals and Support, Private Banking, and Treasury Management business units.
HSA Bank offers a comprehensive consumer-directed healthcare solution that includes HSAs, health reimbursement arrangements, flexible spending accounts, and commuter benefits. HSAs are used in conjunction with high deductible health plans in order to facilitate tax advantages for account holders with respect to health care spending and savings, in accordance with applicable laws. HSAs are distributed nationwide directly to employers and individual consumers, as well as through national and regional insurance carriers, benefit consultants, and financial advisors. HSA Bank deposits provide long duration, low-cost funding that is used to minimize the Company’s use of wholesale funding in support of its loan growth. In addition, non-interest revenue is generated predominantly through service fees and interchange income.
Consumer Banking serves individual customers and small businesses with less than $2 million of revenues by offering consumer deposits, residential mortgages, home equity lines, secured and unsecured loans, debit and credit card products, and investment services. Consumer Banking operates a distribution network consisting of 201 banking centers and 351 ATMs, a customer care center, and a full range of web and mobile-based banking services, primarily throughout southern New England and the New York Metro and Suburban markets.
10

Commercial Banking
Operating Results:
Three months ended March 31,
(In thousands)20232022
Net interest income$384,314 $287,069 
Non-interest income35,397 38,743 
Non-interest expense108,509 89,240 
Pre-tax, pre-provision net revenue$311,202 $236,572 
Commercial Banking's PPNR increased $74.6 million, or 31.5%, for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, due to an increase in net interest income, partially offset by a decrease in non-interest income and an increase in non-interest expense. The $97.2 million increase in net interest income is primarily due to the full quarter impact of the Sterling merger on balances in 2023 as compared to the two-thirds impact for the quarter in 2022, organic loan growth, and the higher interest rate environment. The $3.3 million decrease in non-interest income is primarily due to lower prepayment penalties, cash management fees, and customer interest rate derivative activities, partially offset by higher syndication fees. The $19.3 million increase in non-interest expense is primarily due to the full quarter impact of expenses from the Sterling merger in 2023 as compared to the two-thirds impact for the quarter in 2022.
Selected Balance Sheet and Off-Balance Sheet Information:
(In thousands)At March 31,
2023		At December 31,
2022
Loans and leases$41,286,860 $40,115,067 
Deposits18,297,574 19,563,227 
Assets under administration / management (off-balance sheet)2,670,273 2,258,635 
Loans and leases increased $1.2 billion, or 2.9%, at March 31, 2023, as compared to December 31, 2022, primarily due to organic growth in the commercial non-mortgage and commercial real estate categories, partially offset by net principal paydowns in the warehouse lending, equipment finance, and asset-based lending categories. Total portfolio originations for the three months ended March 31, 2023, and 2022, were $3.0 billion and $2.0 billion, respectively. The $1.0 billion increase was primarily due to the timing of the Sterling merger in 2022, and an increase in commercial non-mortgage originations.
Deposits decreased $1.3 billion, or 6.5%, at March 31, 2023, as compared to December 31, 2022, primarily resulting from customers rebalancing their deposit concentrations due to the current banking environment.
Commercial Banking held $0.8 billion and $0.6 billion in assets under administration and $1.9 billion and $1.7 billion in assets under management at March 31, 2023, and December 31, 2022, respectively. The combined increase of $0.4 billion, or 18.2%, was primarily due to customers shifting their deposits into investment accounts to purchase U.S. Treasury securities with government-backing, and higher valuations in the equity markets during the three months ended March 31, 2023.
11

HSA Bank
Operating Results:
Three months ended March 31,
(In thousands)20232022
Net interest income$71,730 $44,577 
Non-interest income24,067 26,958 
Non-interest expense43,700 36,409 
Pre-tax net revenue$52,097 $35,126 
HSA Bank's pre-tax net revenue increased $17.0 million, or 48.3%, for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, primarily due to an increase in net interest income, partially offset by a decrease in non-interest income and an increase in non-interest expense. The $27.2 million increase in net interest income is primarily due to an increase in net deposit interest rate spread and organic deposit growth. The $2.9 million decrease in non-interest income is primarily due to lower customer account service fees. The $7.3 million increase in non-interest expense is primarily due to an increase in compensation costs, higher service contract expenses related to additional account holders, and the full quarter of expenses expenses from the Bend acquisition in 2023 compared to the one-half impact for the quarter in 2022.
Selected Balance Sheet and Off-Balance Sheet Information:
(In thousands)At March 31,
2023		At December 31,
2022
Deposits$8,272,534 $7,944,919 
Assets under administration, through linked investment accounts (off-balance sheet)3,775,869 3,393,832 
Deposits increased $0.3 billion, or 4.1%, at March 31, 2023, as compared to December 31, 2022, primarily due to an increase in the number of account holders and organic deposit growth. HSA deposits accounted for approximately 15.0% and 14.7% of the Company's total consolidated deposits at March 31, 2023, and December 31, 2022, respectively.
Assets under administration, through linked investment accounts, increased $0.4 billion, or 11.3%, at March 31, 2023, as compared to December 31, 2022, primarily due to additional account holders and higher valuations in the equity markets during the three months ended March 31, 2023.
12

Consumer Banking
Operating Results:
Three months ended March 31,
(In thousands)20232022
Net interest income$210,583 $136,677 
Non-interest income25,959 27,901 
Non-interest expense106,879 95,510 
Pre-tax, pre-provision net revenue$129,663 $69,068 
Consumer Banking's PPNR increased $60.6 million, or 87.7%, for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, due to an increase in net interest income, partially offset by a decrease in non-interest income and an increase in non-interest expense. The $73.9 million increase in net interest income is primarily due to the full quarter impact of the Sterling merger on balances in 2023 as compared to the two-thirds impact for the quarter in 2022, and the higher interest rate environment. The $1.9 million decrease in non-interest income is primarily due to lower net investment services income driven by the outsourcing of the consumer investment services platform in the fourth quarter of 2022, partially offset by higher deposit service fee income. The $11.4 million increase in non-interest expense is primarily due to the full quarter impact of expenses from the Sterling merger in 2023 as compared to the two-thirds impact for the quarter in 2022, partially offset by lower compensation and benefits expenses.
Selected Balance Sheet and Off-Balance Sheet Information:
(In thousands)At March 31,
2023		At December 31,
2022
Loans$9,617,093 $9,624,465 
Deposits23,698,094 23,609,941 
Assets under administration (off-balance sheet)7,750,020 7,872,397 
Loans decreased $7.4 million, or 0.1%, at March 31, 2023, as compared to December 31, 2022, primarily due to net principal paydowns in home equity balances and the continued run-off of Lending Club loans, partially offset by growth in residential mortgages. Total portfolio originations during the three months ended March 31, 2023, and 2022, were $0.3 billion and $0.6 billion, respectively. The $0.3 billion decrease was primarily due to the increase in market rates, which resulted in lower residential mortgage originations.
Deposits increased $0.1 billion, or 0.4%, at March 31, 2023, as compared to December 31, 2022, as customer preferences shifted from lower rate checking and savings products into higher rate certificates of deposit products.
Assets under administration decreased $0.1 billion, or 1.6% at March 31, 2023, as compared to at December 31, 2022, primarily due to customer investment outflows, partially offset by higher valuations in the equity markets during the three months ended March 31, 2023.
13

Financial Condition
Total assets increased $3.5 billion, or 5.0%, from $71.3 billion at December 31, 2022, to $74.8 billion at March 31, 2023. The change in total assets was primarily attributed to the following, which experienced changes greater than $100 million dollars:
•Interest-bearing deposits increased $1.7 billion, primarily due to the strategic decision to maintain additional liquidity;
•Total investment securities, net increased $0.4 billion, reflecting a $0.5 billion increase in the held-to-maturity portfolio, partially offset by a $0.1 billion decrease in the available-for-sale portfolio. The overall increase in investment securities was primarily due to purchases exceeding paydown activities and a favorable market value adjustment on
available-for-sale securities, partially offset by the sale of $415.9 million in Corporate debt and U.S. Treasury notes;
•FHLB and FRB stock increased $138.8 million, primarily due to the additional FHLB stock investment required as a result of the increase in FHLB advances during the first quarter of 2023;
•Loans held for sale increased $0.2 billion, primarily due to the Company's current balance sheet composition strategy, which resulted in the increased transfer of commercial loans from held for investment to held for sale in the current period;
•Loans and leases increased $1.2 billion, primarily due to $3.3 billion of originations during the three months ended March 31, 2023, particularly across the commercial non-mortgage and commercial real estate categories, partially offset by net principal paydowns and commercial portfolio loan sales.
•Goodwill and other net intangible assets increased a combined $147.9 million. Goodwill increased $117.4 million, which reflects the $143.2 million recognized in connection with the interLINK acquisition, partially offset by the impact of the Sterling merger measurement period adjustments recorded during the first quarter of 2023. The $30.5 million increase in other net intangible assets is primarily due to the $36.0 million broker dealer relationship and $4.0 million non-competition agreement recognized in connection with the interLINK acquisition, partially offset by year-to-date amortization charges.
Total liabilities increased $3.3 billion, or 5.3%, from $63.2 billion at December 31, 2022, to $66.5 billion at March 31, 2023. The change in total liabilities was primarily attributed to the following:
•Total deposits increased $1.2 billion, reflecting a $2.2 billion increase in interest-bearing deposits, partially offset by a $1.0 billion decrease in non-interest-bearing deposits. The overall increase in deposits is primarily due to the $2.9 billion of sweep money market deposits added as a result of the interLINK acquisition, partially offset by the impact of customers rebalancing their deposit concentrations in the current banking environment.
•Securities sold under agreements to repurchase and other borrowings decreased $0.8 billion, primarily due to $0.9 billion of federal funds purchased at December 31, 2022, as compared to none at March 31, 2023. The additional liquidity generated from the interLINK deposit sweep program allowed for the paydown of higher rate federal funds purchased during the first quarter of 2023;
•FHLB advances increased $3.1 billion, primarily due to short-term funding needs and the strategic decision to maintain additional liquidity; and
•Accrued expenses and other liabilities decreased $0.2 billion, primarily due to decreases of $111.6 million and
$83.1 million in treasury derivative liabilities and accrued annual employee bonuses, respectively.
Total stockholders' equity increased $0.2 billion, or 3.0%, from $8.1 billion at December 31, 2022, to $8.3 billion at
March 31, 2023. The change in total stockholders' equity was attributed to the following:
•The adoption of ASU No. 2022-02, which resulted in a $4.2 million cumulative-effect adjustment to retained earnings;
•Net income recognized of $221.0 million;
•Dividends paid to common and preferred stockholders of $69.7 million and $4.2 million, respectively;
•Other comprehensive income, net of tax, of $96.9 million, primarily due to favorable market value adjustments on
available-for-sale securities and cash flow hedges driven by decreases in long-term interest rates;
•Employee stock-based compensation plan activity of $11.6 million, inclusive of restricted stock amortization and forfeitures, and stock options exercised of $1.7 million; and
•Repurchases of common stock of $15.1 million related to employee stock-based compensation plans.
14

Investment Securities
Through its Corporate Treasury function, the Company maintains and invests in debt securities that are primarily used to provide a source of liquidity for operating needs, to generate interest income, and as a means to manage the Company's
interest-rate risk. The Company's investment securities are classified into two major categories: available-for-sale and
held-to-maturity.
The ALCO manages the Company's securities in accordance with regulatory guidelines and corporate policies, which include limitations on aspects such as concentrations in and types of investments, as well as minimum risk ratings per type of security. In addition, the OCC may further establish individual limits on certain types of investments if the concentration in such investment presents a safety and soundness concern. At March 31, 2023, and December 31, 2022, the Company had investment securities with a total net carrying value of $14.9 billion and $14.5 billion, respectively, with an average risk weighting for regulatory purposes of 17.4% and 19.0%, respectively. Although the Bank held the entirety of the Company's investment portfolio at both March 31, 2023, and December 31, 2022, the Holding Company may also directly hold investments.
The following table summarizes the balances and percentage composition of the Company's investment securities:
 At March 31, 2023At December 31, 2022
(In thousands)Amount%Amount%
Available-for-sale:
U.S. Treasury notes$386,7724.9 %$717,0409.1 %
Government agency debentures262,3423.4 258,3743.3 
Municipal bonds and notes1,645,22821.1 1,633,20220.7 
Agency CMO57,4620.7 59,9650.8 
Agency MBS2,230,85028.6 2,158,02427.3 
Agency CMBS1,635,25221.0 1,406,48617.8 
CMBS902,05811.6 896,64011.4 
CLO—— 2,107— 
Corporate debt625,5238.0 704,4128.9 
Private label MBS44,2620.6 44,2490.6 
Other9,2280.1 12,1980.1 
Total available-for-sale securities$7,798,977100.0 %$7,892,697100.0 %
Held-to-maturity:
Agency CMO$27,1010.4 %$28,3580.4 %
Agency MBS2,613,11337.0 2,626,11440.0 
Agency CMBS3,364,18647.6 2,831,94943.1 
Municipal bonds and notes (1)
927,50113.1 928,84514.2 
CMBS131,6041.9 149,6132.3 
Total held-to-maturity securities$7,063,505100.0 %$6,564,879100.0 %
Total investment securities$14,862,482$14,457,576
(1)The balances at March 31, 2023, and December 31, 2022, exclude the ACL recorded on held-to-maturity securities of $0.3 million and $0.2 million, respectively.
Available-for-sale securities decreased $0.1 billion, or 1.2%, from $7.9 billion at December 31, 2022, to $7.8 billion at March 31, 2023, primarily due to the sale of $0.4 billion in U.S. Treasury notes and Corporate debt securities, which resulted in $20.5 million of gross realized losses, $3.8 million of which was attributed to a decline in credit quality and has been included in the Provision for credit losses. This decrease was partially offset by purchases exceeding paydown activities, particularly across the Agency MBS, Agency CMBS, and CMBS categories, and a favorable market value adjustment. The average FTE yield in the available-for-sale portfolio was 2.76% for the three months ended March 31, 2023, as compared to 1.98% for the three months ended March 31, 2022. The 78 basis point increase is primarily due to higher market rates on securities purchased in the current period.
At March 31, 2023, and December 31, 2022, gross unrealized losses on available-for-sale securities were $770.3 million and $864.5 million, respectively. The $94.2 million decrease is primarily due to a decline in long-term market rates. Available-for-sale securities are evaluated for credit losses on a quarterly basis. No ACL was recorded on available-for-sale securities as of either period as each of the securities in the Company's portfolio are investment grade, current as to principal and interest, and their price changes are consistent with interest and credit spreads when adjusting for convexity, rating, and industry differences. At March 31, 2023, based on current market conditions and the Company's current targeted balance sheet composition strategy, the Company has the intent to hold its available-for-sale securities in unrealized loss positions through the anticipated recovery period, and it is more-likely-than-not that the Company will not have to sell these available-for-sale securities before the recovery of the entire amortized cost basis.
15

Held-to-maturity securities increased $0.5 billion, or 7.6%, from $6.6 billion at December 31, 2022, to $7.1 billion at
March 31, 2023, primarily due to purchases exceeding paydown activities, particularly across the Agency MBS and Agency CMBS categories. The average FTE yield in the held-to-maturity portfolio was 2.82% for the three months ended March 31, 2023, as compared to 2.06% for the three months ended March 31, 2022. The 76 basis point increase is primarily due to higher market rates on securities purchased in the current period.
At March 31, 2023, and December 31, 2022, gross unrealized losses on held-to-maturity securities were $751.0 million and $806.2 million, respectively. The $55.2 million decrease is primarily due to a decline in long-term market rates. Held-to-maturity securities are evaluated for credit losses on a quarterly basis under the CECL methodology. At March 31, 2023, and December 31, 2022, the ACL on held-to-maturity securities was $0.3 million and $0.2 million, respectively.
The following table summarizes the book value of investment securities by the earlier of either contractual maturity or call date, as applicable, along with the respective weighted-average yields:
At March 31, 2023
1 Year or Less1 - 5 Years5 - 10 YearsAfter 10 YearsTotal
(Dollars in thousands)Amount
Weighted-
Average
Yield (1)
Amount
Weighted-
Average
Yield (1)
Amount
Weighted-
Average
Yield (1)
Amount
Weighted-
Average
Yield (1)
Amount
Weighted-
Average
Yield (1)
Available-for-sale:
U.S. Treasury notes$— — %$386,772 1.28 %$— — %$— — %$386,772 1.28 %
Government agency debentures— — 74,620 2.42 — — 187,722 3.22 262,342 2.99 
Municipal bonds and notes34,763 1.18 103,056 1.69 708,492 1.52 798,917 1.58 1,645,228 1.55 
Agency CMO— — 483 2.68 5,544 3.01 51,435 2.85 57,462 2.86 
Agency MBS8 (5.27)16,304 1.31 151,944 1.71 2,062,594 2.48 2,230,850 2.42 
Agency CMBS1,599 0.42 86,325 0.90 44,459 1.40 1,502,869 2.73 1,635,252 2.59 
CMBS— — 68,771 6.16 49,165 6.08 784,122 6.19 902,058 6.19 
Corporate debt4,973 1.54 162,524 2.56 400,466 3.17 57,560 3.33 625,523 3.02 
Private label MBS— — — — — — 44,262 4.01 44,262 4.01 
Other250 3.77 4,810 3.80 4,168 2.71 — — 9,228 3.31 
Total available-for-sale securities$41,593 1.21 %$903,665 2.00 %$1,364,238 2.19 %$5,489,481 3.00 %$7,798,977 2.73 %
Held-to-maturity:
Agency CMO$— — %$— — %$— — %$27,101 2.91 %$27,101 2.91 %
Agency MBS2 3.55 1,494 2.41 24,550 2.51 2,587,067 2.47 2,613,113 2.47 
Agency CMBS— — — — 126,854 2.68 3,237,332 3.07 3,364,186 3.05 
Municipal bonds and notes6,091 3.27 51,399 3.28 186,949 2.72 683,062 3.19 927,501 3.10 
CMBS— — — — — — 131,604 2.70 131,604 2.70 
Total held-to-maturity securities$6,093 3.27 %$52,893 3.26 %$338,353 2.69 %$6,666,166 2.84 %$7,063,505 2.84 %
Total investment securities$47,686 1.47 %$956,558 2.07 %$1,702,591 2.29 %$12,155,647 2.91 %$14,862,482 2.78 %
(1)Weighted-average yields exclude FTE adjustments, and are calculated using the sum of the total book value multiplied by the yield divided by the sum of the total book value for each security, major type, and maturity bucket.
Additional information regarding the Company's 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.
16

Loans and Leases
The following table summarizes the amortized cost and percentage composition of the Company's loans and leases:
 At March 31, 2023At December 31, 2022
(Dollars in thousands)Amount%Amount%
Commercial non-mortgage$16,939,37333.3 %$16,392,79532.9 %
Asset-based1,760,5273.5 1,821,6423.7 
Commercial real estate13,499,13926.5 12,997,16326.1 
Multi-family7,014,59913.8 6,621,98213.3 
Equipment financing1,601,1093.1 1,628,3933.3 
Warehouse lending474,3280.9 641,9761.3 
Residential8,001,56315.7 7,963,42016.0 
Home equity1,580,5693.1 1,633,1073.3 
Other consumer55,3160.1 63,9480.1 
Total loans and leases (1)
$50,926,523100.0 %$49,764,426100.0 %
(1)The amortized cost balances at March 31, 2023, and December 31, 2022, exclude the ACL recorded on loans and leases of $613.9 million and $594.7 million, respectively.
The following table summarizes loans and leases by contractual maturity, along with the indication of whether interest rates are fixed or variable:
At March 31, 2023
(In thousands)1 Year or Less1 - 5 Years5 - 15 YearsAfter 15 YearsTotal
Fixed rate:
Commercial non-mortgage$222,804 $598,021 $2,131,003 $1,549,094 $4,500,922 
Asset-based24,048 31,264 — — 55,312 
Commercial real estate599,026 1,821,401 1,184,930 141,016 3,746,373 
Multi-family353,747 2,112,410 1,751,446 42,595 4,260,198 
Equipment financing150,270 1,153,565 295,814 — 1,599,649 
Residential405 58,084 414,759 4,992,444 5,465,692 
Home equity4,379 23,829 175,658 195,046 398,912 
Other consumer10,858 11,924 387 153 23,322 
Total fixed rate loans and leases$1,365,537 $5,810,498 $5,953,997 $6,920,348 $20,050,380 
Variable rate:
Commercial non-mortgage$3,455,439 $8,239,753 $675,115 $68,144 $12,438,451 
Asset-based451,406 1,248,442 5,367 — 1,705,215 
Commercial real estate1,789,853 5,026,956 2,228,039 707,918 9,752,766 
Multi-family426,953 1,009,039 1,288,677 29,732 2,754,401 
Equipment financing1,460 — — — 1,460 
Warehouse lending474,328 — — — 474,328 
Residential722 10,905 319,947 2,204,297 2,535,871 
Home equity2,253 7,215 150,431 1,021,758 1,181,657 
Other consumer6,574 16,873 2,554 5,993 31,994 
Total variable rate loans and leases$6,608,988 $15,559,183 $4,670,130 $4,037,842 $30,876,143 
Total loans and leases (1)
$7,974,525 $21,369,681 $10,624,127 $10,958,190 $50,926,523 
(1)Amounts due exclude total accrued interest receivable of $246.1 million.
17

Credit Policies and Procedures
The Bank has credit policies and procedures in place designed to support its lending activities within an acceptable level of risk, which are reviewed and approved by management and the Board of Directors on a regular basis. To assist with this process, management inspects reports generated by the Company's loan reporting systems related to loan production, loan quality, concentrations of credit, loan delinquencies, non-performing loans, and potential problem loans.
Commercial non-mortgage, asset-based, equipment finance, and warehouse lending loans are underwritten after evaluating and understanding the borrower’s ability to operate and service its debt. Assessment of the borrower's management is a critical element of the underwriting process and credit decision. Once it has been determined that the borrower’s management possesses sound ethics and a solid business acumen, current and projected cash flows are examined to determine the ability of the borrower to repay obligations, as contracted. Commercial non-mortgage, asset-based, and equipment finance loans are primarily made based on the identified cash flows of the borrower, and secondarily on the underlying collateral provided by the borrower. Warehouse lending loans are primarily made based on the borrower's ability to originate high-quality, first-mortgage residential loans that can be sold into the agency, government, or private jumbo markets, and secondarily on the underlying cash flows of the borrower. However, the cash flows of borrowers may not be as expected, and the collateral securing these loans, as applicable, may fluctuate in value. Most commercial non-mortgage, asset-based, and equipment finance loans are secured by the assets being financed and may incorporate personal guarantees of the principal balance. Warehouse lending loans are generally uncommitted facilities.
Commercial real estate loans, including multi-family, are subject to underwriting standards and processes similar to those for commercial non-mortgage, asset-based, equipment finance, and warehouse lending loans. These loans are primarily viewed as cash flow loans, and secondarily as loans secured by real estate. Repayment of commercial real estate loans is largely dependent on the successful operation of the property securing the loan, the market in which the property is located, and the tenants of the property securing the loan. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type and geographic location, which reduces the Company's exposure to adverse economic events that may affect a particular market. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. All transactions are appraised to 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 FICO score, the loan amount relative to property value, and the borrower’s debt-to-income level. The Bank originates both qualified mortgage and non-qualified mortgage loans, as defined by applicable CFPB rules.
Allowance for Credit Losses on Loans and Leases
The ACL on loans and leases increased $19.2 million, or 3.2%, from $594.7 million at December 31, 2022, to $613.9 million at March 31, 2023, due to the impact of the current macroeconomic environment on credit performance and organic loan growth.
The following table summarizes the percentage allocation of the ACL across the loans and leases categories:
At March 31, 2023At December 31, 2022
(Dollars in thousands)Amount
% (1)
Amount
% (1)
Commercial non-mortgage$196,01931.9 %$197,95033.3 %
Asset-based21,5463.5 16,0942.7 
Commercial real estate230,02037.5 214,77136.1 
Multi-family83,26413.6 80,65213.6 
Equipment financing23,4743.8 23,0813.9 
Warehouse lending4270.1 5770.1 
Residential25,8694.2 26,9074.5 
Home equity31,1265.1 32,2965.4 
Other consumer2,1690.3 2,4130.4 
Total ACL on loans and leases$613,914100.0 %$594,741100.0 %
(1)The ACL allocated to a single loan and lease category does not preclude its availability to absorb losses in other categories.
18

Methodology
The Company's ACL on loans and leases is considered to be a critical accounting policy. The ACL on loans and leases is a contra-asset account that offsets the amortized cost basis of loans and leases for the credit losses that are expected to occur over the life of the asset. Executive management reviews and advises on the adequacy of the allowance, which is maintained at a level that management deems to be sufficient to cover expected losses within the loan and lease portfolios.
The ACL on loans and leases is determined using the CECL model, whereby an expected lifetime credit loss is recognized at the origination or purchase of an asset, including those acquired through a business combination, which is then reassessed at each reporting date over the contractual life of the asset. The calculation of expected credit losses includes consideration of past events, current conditions, and reasonable and supportable economic forecasts that affect the collectability of the reported amounts. Generally, expected credit losses are determined through a pooled, collective assessment of loans and leases with similar risk characteristics. However, if the risk characteristics of a loan or lease change such that it no longer matches that of the collectively assessed pool, it is removed from the population and individually assessed for credit losses. The total ACL on loans and leases recorded by management represents the aggregated estimated credit loss determined through both the collective and individual assessments.
Collectively Assessed Loans and Leases. Collectively assessed loans and leases are segmented based on product type, credit quality, risk ratings, and/or collateral types within its commercial and consumer portfolios, and expected losses are determined using a PD, LGD, and EAD, loss rate, or discounted cash flow framework.
For portfolios using the PD/LGD/EAD framework, credit losses are calculated as the product of the probability of a loan defaulting, expected loss given the occurrence of a default, and the expected exposure of a loan at default. Summing the product across loans over their lives yields the lifetime expected credit losses for a given portfolio. Management's PD and LGD calculations are predictive models that measure the current risk profile of the loan pools using forecasts of future macroeconomic conditions, historical loss information, loan-level risk attributes, and credit quality indicators. The calculation of EAD follows an iterative process to determine the expected remaining principal balance of a loan based on historical paydown rates for loans of a similar segment within the same portfolio. The calculation of portfolio exposure in future quarters incorporates expected losses, the loan's amortization schedule, and prepayment rates.
Under the loss rate method, expected credit losses are estimated using a loss rate that is multiplied by the amortized cost of the asset at the balance sheet date. For each loan segment identified above, management applies an expected historical loss trend based on third-party loss estimates, and correlates them to observed economic metrics and reasonable and supportable forecasts of economic conditions. Under the discounted cash flow method, expected credit losses are determined by comparing the amortized cost of the asset at the balance sheet date to the present value of estimated future principal and interest payments expected to be collected over the remaining life of the asset. The Company's loss model generates cash flow projections at the loan level based on reasonable and supportable projections, from which management estimates payment collections adjusted for accelerated payments, recovery time, PD, and LGD.
The Company's models incorporate a single economic forecast scenario and macroeconomic assumptions over a reasonable and supportable forecast period. The development of the reasonable and supportable forecast assumes each macroeconomic variable will revert to long-term expectations, with reversion characteristics unique to specific economic indicators and forecasts. Reversion towards long-term expectations generally begins two to three years from the forecast start date and is complete within three to five years. Certain models use output reversion and revert to mean historical portfolio loss rates on a
straight-line basis in the third year of the forecast. Other models use input reversion and revert to the mean of macroeconomic variables in reasonable and supportable forecasts.
The Company incorporates forecasts of macroeconomic variables in the determination of expected credit losses. Macroeconomic variables are selected for each class of financing receivable based on relevant factors, such as asset type and the correlation of the variables to credit losses, among others. Data from the forecast scenario of these variables is used as an input to the modeled loss calculation.
A portion of the collective ACL is comprised of qualitative adjustments for risk characteristics that are not reflected or captured in the quantitative models, but are likely to impact the measurement of estimated credit losses. Qualitative factors are based on management's judgement of the Company, market, industry, or business specific data including loan trends, portfolio segment composition, and loan rating or credit scores. Qualitative adjustments may be applied in relation to economic forecasts when relevant facts and circumstances are expected to impact credit losses, particularly in times of significant volatility in economic activity.
19

Individually Assessed Loans and Leases. If the risk characteristics of a loan or lease change such that it no longer matches the risk characteristics of the collectively assessed pool, it is removed from the population and individually assessed for credit losses. Generally, all non-accrual loans, loans with a charge-off, and collateral dependent loans where the borrower is experiencing financial difficulty, are individually assessed. The measurement method used to calculate the expected credit loss on an individually assessed loan or lease is dependent on the type and whether the loan or lease is considered to be collateral dependent. Methods for collateral dependent loans are either based on the fair value of the collateral less estimated cost to sell (when the basis of repayment is the sale of collateral), or the present value of the expected cash flows from the operation of the collateral. For non-collateral dependent loans, either a discounted cash flow method or other loss factor method is used. Any individually assessed loan or lease for which no specific valuation allowance is deemed necessary is either the result of sufficient cash flows or sufficient collateral coverage relative to the amortized cost of the asset.
Additional information regarding the Company's ACL methodology can be found within Note 1: Summary of Significant Accounting Policies in the Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
Asset Quality Ratios
The Company manages asset quality using risk tolerance levels established through the Company's underwriting standards, servicing, and management of its loan and lease portfolio. Loans and leases for which a heightened risk of loss has been identified are regularly monitored to mitigate further deterioration and preserve asset quality in future periods. Non-performing assets, credit losses, and net charge-offs are considered by management to be key measures of asset quality.
The following table summarizes key asset quality ratios and their underlying components:
(Dollars in thousands)At March 31,
2023		At December 31, 2022
Non-performing loans and leases (1)
$185,020 $203,791 
Total loans and leases50,926,523 49,764,426 
Non-performing loans and leases as a percentage of loans and leases 0.36 %0.41 %
Non-performing assets (1)
$186,551 $206,136 
Total loans and leases$50,926,523 $49,764,426 
Add: OREO1,531 2,345 
Total loans and leases plus OREO$50,928,054 $49,766,771 
Non-performing assets as a percentage of loans and leases plus OREO0.37 %0.41 %
Non-performing assets (1)
$186,551 $206,136 
Total assets74,844,395 71,277,521 
Non-performing assets as a percentage of total assets 0.25 %0.29 %
ACL on loans and leases$613,914 $594,741 
Non-performing loans and leases (1)
185,020 203,791 
ACL on loans and leases as a percentage of non-performing loans and leases331.81 %291.84 %
ACL on loans and leases$613,914 $594,741 
Total loans and leases50,926,523 49,764,426 
ACL on loans and leases as a percentage of loans and leases1.21 %1.20 %
ACL on loans and leases$613,914$594,741
Net charge-offs98,08467,288
Ratio of ACL on loans and leases to net charge-offs (2)
6.26x8.84x
(1)Non-performing assets balances and related asset quality ratios exclude the impact of net unamortized (discounts)/premiums and net unamortized deferred (fees)/costs on loans and leases.
(2)Calculated for the March 31, 2023, period based on annualized year-to-date net charge-offs.
20

The following table summarizes net charge-offs (recoveries) as a percentage of average loans and leases for each category:
At or for the three months ended March 31,
20232022
(Dollars in thousands)Net
Charge-offs (Recoveries)		Average Balance
% (1)
Net
Charge-offs (Recoveries)		Average Balance
% (1)
Commercial non-mortgage$2,723$16,635,8740.07 %$8,663$10,863,3540.32 %
Asset-based13,1891,790,9922.95 (50)1,540,301(0.01)
Commercial real estate8,55113,260,2230.26 1,0489,738,1810.04 
Multi-family1,0336,710,1030.06 103,994,744— 
Equipment financing(660)1,625,463(0.16)2131,339,7750.06 
Warehouse lending—409,580— —365,325— 
Residential(461)7,995,327(0.02)(44)6,322,495— 
Home equity(421)1,608,428(0.10)(1,267)1,658,938(0.31)
Other consumer56759,2023.83 35689,7161.59 
Total $24,521$50,095,1920.20 %$8,929$35,912,8290.10 %
(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 0.20% for the three months ended March 31, 2023, and 0.10% for the three months ended March 31, 2022. The increased level of net charge-offs is primarily due to a full quarter impact of the Sterling merger on net charge-offs in 2023 as compared to the two-thirds impact for the quarter in 2022, and the Company's current balance sheet composition strategy.
Liquidity and Capital Resources
The Company manages its cash flow requirements through proactive liquidity measures at both the Holding Company and the Bank. In order to maintain stable, cost-effective funding, and to promote overall balance sheet strength, the liquidity position of the Company is continuously monitored, and adjustments are made to balance sources and uses of funds, as appropriate. At March 31, 2023, management is not aware of any events that are reasonably likely to have a material adverse effect on the Company’s liquidity position, capital resources, or operating activities. Although regulatory agencies have not issued formal guidance mandating more stringent liquidity and capital requirements, the Company is anticipating a greater focus on the liquidity and capital adequacy of financial institutions in response to the recent high-profile bank failures that occurred during the first quarter of 2023, and has taken appropriate measures to mitigate the risk that such requirements, if implemented, may have on its business, financial positions, and results of operations.
Cash inflows are provided through a variety of sources, including principal and interest payments on loans and investments, unpledged securities that can be sold or utilized to secure funding, and new deposits. The Company is committed to maintaining a strong base of core deposits, which consists of demand, interest-bearing checking, savings, health savings, and money market accounts, to support growth in its loan portfolios. Management actively monitors the interest rate environment and makes adjustments to its deposit strategy in response to evolving market conditions, bank funding needs, and client relationship dynamics.
Holding Company Liquidity. The primary source of liquidity at the Holding Company is dividends from the Bank. To a lesser extent, investment income, net proceeds from investment sales, borrowings, and public offerings may provide additional liquidity. The Holding Company generally uses its funds for principal and interest payments on senior notes, subordinated notes, and junior subordinated debt, dividend payments to preferred and common stockholders, repurchases of its common stock, and purchases of investment securities, as applicable.
There are certain restrictions on the Bank's payment of dividends to the Holding Company, which can be found within
Note 10: Regulatory Capital and Restrictions in the Notes to Condensed Consolidated Financial Statements contained in
Part I - Item 1. Financial Statements of this report, and in the section captioned "Supervision and Regulation" in Part I - Item 1. Business of the Company's Annual Report on Form 10-K for the year ended December 31, 2022. During the three months ended March 31, 2023, the Bank paid $150.0 million in dividends to the Holding Company. At March 31, 2023, there were $561.9 million of retained earnings available for the payment of dividends by the Bank to the Holding Company. On April 26, 2023, the Bank was approved to pay the Holding Company $100.0 million in dividends during the second quarter of 2023.
21

The quarterly cash dividend to common stockholders remained at $0.40 per common share during the three months ended March 31, 2023. On April 26, 2023, it was announced that the Company’s Board of Directors had declared a quarterly cash dividend of $0.40 per share on Webster common stock. For the Series F Preferred Stock and Series G Preferred Stock, quarterly cash dividends of $328.125 per share and $16.25 per share were declared, respectively. The Company continues to monitor economic forecasts, anticipated earnings, and its capital position in the determination of its dividend payments.
The Company maintains a common stock repurchase program, which was approved by the Board of Directors, that authorizes management to purchase shares of Webster common stock in open market or privately negotiated transactions, through block trades, and pursuant to any adopted predetermined trading plan, subject to certain conditions. During the three months ended March 31, 2023, the Company did not repurchase any shares of Webster common stock under the program. In addition, the Company will periodically acquire common shares outside of the repurchase program related to employee stock compensation plan activity. During the three months ended March 31, 2023, the Company repurchased 284,725 shares at a weighted-average price of $52.90 per share, totaling $15.1 million for this purpose.
Webster Bank Liquidity. The Bank's primary source of funding is core deposits. Including time deposits, the Bank had a loan to total deposit ratio of 92.1% at both March 31, 2023, and December 31, 2022.
The Bank is required by OCC regulations to maintain a sufficient level of liquidity to ensure safe and sound operations. The adequacy of liquidity, as assessed by the OCC, depends on factors such as overall asset and liability structure, market conditions, competition, and the nature of the institution’s deposit and loan customers. At March 31, 2023, the Bank exceeded all regulatory liquidity requirements. The Company has designed a detailed contingency plan in order to respond to any liquidity concerns in a prompt and comprehensive manner, including early detection of potential problems and corrective action to address liquidity stress scenarios.
Capital Requirements. The Holding Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory actions by regulators that could have a direct material effect on the Company’s Consolidated Financial Statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, both the Holding Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated pursuant to regulatory directives. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require financial institutions to maintain minimum ratios of Common Equity Tier 1 Capital, defined by the Basel III capital rules (CET1 capital), Tier 1 capital, Total capital to risk-weighted assets, and Tier 1 capital to average tangible assets (as defined in the regulations). At March 31, 2023, both the Holding Company and the Bank were classified as well-capitalized. Management believes that no events or changes have occurred subsequent to quarter-end that would change this designation.
In accordance with regulatory capital rules, the Company elected an option to delay the estimated impact of the adoption of CECL on its regulatory capital over a two-year deferral period, which ended on January 1, 2022, and subsequent three-year transition period ending on December 31, 2024. During the three-year transition period, capital ratios will phase out the aggregate amount of the regulatory capital benefit provided from the delayed CECL adoption in the initial two years. For 2022, 2023, and 2024, the Company is allowed 75%, 50%, and 25%, respectively, of the regulatory capital benefit as of December 31, 2021, with full absorption occurring in 2025. At March 31, 2023, the regulatory capital benefit allowed from the delayed CECL adoption resulted in a 6, 6, and 4 basis point increase to the Holding Company's and the Bank's CET1 capital to total risk-weighted assets (CET1 risk-based capital), Tier 1 capital to total risk-weighted assets (Tier 1 risk-based capital), and Tier 1 capital to average tangible assets (Tier 1 leverage capital), respectively, and a 1 basis point decrease to Total capital to total risk-weighted assets (Total risk-based capital). Both the Holding Company's and the Bank's regulatory ratios remain in excess of being well-capitalized, even without the regulatory capital benefit of the delayed CECL adoption impact.
Additional information regarding the required regulatory capital levels and ratios applicable to the Holding Company and the Bank can be found within Note 10: Regulatory Capital and Restrictions in the Notes to Condensed Consolidated Financial Statements contained in Part I -Item 1. Financial Statements.
22

Sources and Uses of Funds
Sources of Funds. Deposits are the primary source of cash flows for the Bank’s lending activities and general operational needs. Loan and securities repayments, proceeds from loans and securities held for sale, and maturities also provide cash flows. While scheduled loan and securities repayments are a relatively stable source of funds, prepayments and other deposit inflows are influenced by economic conditions and prevailing interest rates, the timing of which is inherently uncertain. Additional sources of funds are provided by both short-term and long-term borrowings, and to a lesser extent, dividends received as part of the Bank's membership with the FHLB and FRB.
Deposits. The Bank offers a wide variety of checking and savings deposit products designed to meet the transactional and investment needs of both its consumer and business customers. The Bank’s deposit services include, but are not limited to, ATM and debit card use, direct deposit, ACH payments, mobile banking, internet-based banking, banking by mail, account transfers, and overdraft protection, among others. The Bank manages the flow of funds in its deposit accounts and interest rates consistent with FDIC regulations. The Bank’s Consumer and Digital Pricing Committee and its Commercial and Institutional Liability and Loan Pricing Committee both meet regularly to determine pricing and marketing initiatives.
With the acquisition of interLINK during the first quarter of 2023, the Bank received $2.9 billion of money market deposits at March 31, 2023, which added a unique source of core deposit funding and scalable liquidity to the Company's already differentiated, omnichannel deposit gathering capabilities.
Total deposits were $55.3 billion and $54.1 billion at March 31, 2023, and December 31, 2022, respectively. The $1.2 billion increase was primarily due to the interLINK deposits, partially offset by customers rebalancing their deposit concentrations as a result of the current banking environment. Customer preferences also shifted from lower rate checking and savings products into higher rate certificates of deposit products, which are currently more attractive in the higher interest rate environment.
The following table summarizes daily average balances of deposits by type and the weighted-average rates paid thereon:
Three months ended March 31,
20232022
(Dollars in thousands)Average
Balance		Average RateAverage
Balance		Average Rate
Non-interest-bearing:
Demand$12,629,928 — %$11,263,282 — %
Interest-bearing:
Checking8,822,549 1.44 7,699,097 0.06 
Health savings accounts8,292,450 0.15 7,759,465 0.06 
Money market12,884,558 2.57 9,093,101 0.15 
Savings8,146,263 0.49 7,524,238 0.03 
Time deposits4,024,472 2.43 2,544,286 0.21 
Total interest-bearing42,170,292 1.42 34,620,187 0.09 
Total average deposits$54,800,220 1.11 %$45,883,469 0.07 %
Uninsured deposits represent the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit or similar state deposit insurance regime, and amounts in any other uninsured investment or deposit accounts that are classified as deposits and not subject to any federal or state deposit insurance regimes. The Company calculates its uninsured deposit balances based on the methodologies and assumptions used for regulatory reporting requirements, which includes an estimated portion, and affiliate deposits. At March 31, 2023, and December 31, 2022, total uninsured deposits as per regulatory reporting requirements and reported on Schedule RC-O of the Bank's Call Report were $20.8 billion and $22.5 billion, respectively.
The following table summarizes uninsured deposits information at March 31, 2023, after certain exclusions:
(In thousands)At March 31, 2023
Uninsured deposits, per regulatory reporting requirements$20,827,690
Less: Affiliate deposits(1,671,727)
         Collateralized deposits(5,269,060)
Uninsured deposits, after exclusions$13,886,903
Immediately available liquidity (1)
$13,380,214
Uninsured deposits coverage96.4%
(1)Reflects $6.5 billion and $2.9 billion of additional borrowing capacity from the FHLB and FRB, respectively, and $4.0 billion in unencumbered liquid assets.
23

Uninsured deposits, after adjusting for affiliate deposits and collateralized deposits, represented 25.1% of total deposits at March 31, 2023. Management believes that this presentation provides a more accurate view of deposits at risk given that affiliate deposits are not customer facing, and therefore are eliminated upon consolidation, and collateralized deposits are secured by other means. As of the date of this Quarterly Report on Form 10-Q, the Company's uninsured deposits as a percentage of total deposits, adjusted for affiliate deposits and and collateralized deposits, is consistent with the percentage reported at March 31, 2023. In addition, the Company's immediately available liquidity has, and continues, to increase.
The following table summarizes the portion of U.S. time deposits in excess of the FDIC insurance limit and time deposits otherwise uninsured by contractual maturity:
(In thousands)March 31, 2023
Portion of U.S. time deposits in excess of insurance limit$984,289
Time deposits otherwise uninsured with a maturity of:
3 months or less$647,647
Over 3 months through 6 months86,226
Over 6 months through 12 months242,277
Over 12 months8,139
Additional information regarding period-end deposit balances and rates can be found within Note 7: Deposits in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.
Borrowings. The Bank's primary borrowing sources include securities sold under agreements to repurchase, federal funds purchased, FHLB advances, and long-term debt. Total borrowed funds were $9.9 billion and $7.7 billion at March 31, 2023 and December 31, 2022, respectively, and represented 13.3% and 10.8% of total assets, respectively. The $2.2 billion increase is primarily due to a $3.1 billion increase in FHLB advances, partially offset by a $0.9 billion decrease in federal funds purchased.
The Bank had additional borrowing capacity from the FHLB of $6.5 billion and $4.3 billion at March 31, 2023, and December 31, 2022, respectively. The Bank also had additional borrowing capacity from the FRB of $2.9 billion and $1.2 billion at March 31, 2023, and December 31, 2022, respectively. Unpledged investment securities of $1.1 billion at March 31, 2023, could have been used for collateral on borrowings or to increase borrowing capacity by either $0.8 billion with the FHLB or $1.1 billion with the FRB.
Securities sold under agreements to repurchase are generally a form of short-term funding for the Bank in which it sells securities to counterparties with an agreement to buy them back in the future at a fixed price. Securities sold under agreements to repurchase totaled $0.3 billion at both March 31, 2023, and December 31, 2022.
The Bank may also purchase term and overnight federal funds to meet its short-term liquidity needs. There were no federal funds purchased at March 31, 2023, whereas federal funds purchased totaled $0.9 billion at December 31, 2022. The additional liquidity generated from the interLINK deposit sweep program allowed for the paydown during the first quarter of 2023 of higher rate federal funds purchased.
FHLB advances are not only utilized as a source of funding, but also for interest rate risk management purposes. FHLB advances totaled $8.6 billion and $5.5 billion at March 31, 2023, and December 31, 2022, respectively. The $3.1 billion increase is primarily due to short-term funding needs and the strategic decision to maintain additional liquidity.
Long-term debt consists of senior fixed-rate notes maturing in 2024 and 2029, subordinated fixed-to-floating-rate notes maturing in 2029 and 2030, and floating-rate junior subordinated notes maturing in 2033. Long-term debt totaled $1.1 billion at both March 31, 2023, and December 31, 2022.
The following table summarizes daily average balances of borrowings by type and the weighted-average rates paid thereon:
Three months ended March 31,
20232022
(Dollars in thousands)Average
Balance		Average RateAverage
Balance		Average Rate
Securities sold under agreements to repurchase$243,848 0.11 %$577,039 0.66 %
Federal funds purchased671,175 4.62 — — 
FHLB advances5,673,826 4.80 10,936 2.03 
Long-term debt1,072,252 3.65 896,310 3.34 
Total average borrowings$7,661,101 4.48 %$1,484,285 2.26 %
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.
24

Federal Home Loan Bank and Federal Reserve Bank Stock. The Bank is a member of the FHLB System, which consists of eleven district Federal Home Loan Banks, each of which is subject to the supervision and regulation of the Federal Housing Finance Agency. An activity-based capital stock investment in the FHLB is required in order for the Bank to maintain its membership and access to advances and other extensions of credit for sources of funds and liquidity purposes. The FHLB capital stock investment is restricted as there is no market for it, and it can only be redeemed by the FHLB. The Bank held FHLB capital stock of $359.9 million and $221.4 million at March 31, 2023, and December 31, 2022, respectively. The most recent FHLB quarterly cash dividend was paid on May 2, 2023, in an amount equal to an annual yield of 7.55%.
The Bank is also required to hold FRB stock equal to 6% of its capital and surplus, of which 50% is paid. The remaining 50% is subject to call when deemed necessary by the Federal Reserve System. Similar to FHLB stock, the FRB capital stock investment is restricted as there is no market for it, and it can only be redeemed by the FRB. The Bank held FRB capital stock of $224.8 million and $224.5 million at March 31, 2023, and December 31, 2022, respectively. The most recent FRB
semi-annual cash dividend was paid on December 31, 2022, in an amount equal to an annual yield of 3.63%.
Uses of Funds. The Company enters into various contractual obligations in the normal course of business that require future cash payments and that could impact its short-term and long-term liquidity and capital resource needs. The following table summarizes significant fixed and determinable contractual obligations at March 31, 2023. The actual timing and amounts of future cash payments may differ from the amounts presented. Based on the Company's current liquidity position, it is expected that our sources of funds will be sufficient to fulfill these obligations when they come due.
  
Payments Due by Period (1)
(In thousands)20232024202520262027ThereafterTotal
Senior notes$— $150,000 $— $— $— $300,000 $450,000 
Subordinated notes— — — — — 499,000 499,000 
Junior subordinated debt— — — — — 77,320 77,320 
FHLB advances8,550,183 — — — 248 10,030 8,560,461 
Securities sold under agreements to repurchase306,154 — — — — — 306,154 
Time deposits3,168,801 1,132,496 132,543 53,306 36,616 6,017 4,529,779 
Operating lease liabilities25,520 35,817 32,625 29,568 24,584 81,932 230,046 
Contingent consideration4,798 11,241 — — — — 16,039 
Royalty liabilities1,035 8,572 1,417 — — — 11,024 
Purchase obligations (2)
120,718 25,329 13,087 5,895 2,229 1,287 168,545 
Total contractual obligations$12,177,209 $1,363,455 $179,672 $88,769 $63,677 $975,586 $14,848,368 
(1)Interest payments on borrowings have been excluded.
(2)Purchase obligations represent agreements to purchase goods or services of $1.0 million or more that are enforceable and legally binding and specify all significant terms.
In addition, in the normal course of business, the Company offers financial instruments with off-balance sheet risk to meet the financing needs of its customers. These transactions include commitments to extend credit, and commercial and standby letters of credit, which involve to a varying degree, elements of credit risk. Since many of these commitments are expected to expire unused or be only partially funded, the total commitment amount of $12.1 billion at March 31, 2023, does not necessarily reflect future cash payments.
The Company also enters into commitments to invest in venture capital and private equity funds, as well as LIHTC investments to assist the Bank in meeting its responsibilities under the CRA. The total unfunded commitment for these alternative investments was $437.0 million at March 31, 2023. However, the timing of capital calls cannot be reasonably estimated, and depending on the nature of the contract, the entirety of the capital committed by the Company may not be called.
Pension obligations are funded by the Company, as needed, to provide for participant benefit payments as it relates to the Company's frozen, non-contributory, qualified defined benefit pension plan. Decisions to contribute to the defined benefit pension plan are made based upon pension funding requirements under the Pension Protection Act, the maximum amount deductible under the Internal Revenue Code, the actual performance of plan assets, and trends in the regulatory environment. The Company does not currently anticipate that it will be required to contribute to the defined benefit pension plan in 2023. The Company's non-qualified supplemental executive retirement plans and other post-employment benefit plans are unfunded.
At March 31, 2023, the Company's Condensed Consolidated Balance Sheet reflects a liability for uncertain tax positions of $9.9 million and $2.1 million of accrued interest and penalties. The ultimate timing and amount of any related future cash settlements cannot be predicted with reasonable certainty.
25

Additional information regarding credit-related financial instruments and alternative investments can be found within
Note 18: Commitments and Contingencies and Note 11: Variable Interest Entities, respectively, in the Notes to the Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements of this report. Additional information regarding defined benefit pension and other postretirement benefit plans and income taxes can be found within
Note 19: Retirement Benefit Plans and Note 9: Income Taxes, respectively, in the Notes to the Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
26

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 risk when determining the Company's strategy and action. To facilitate this process, interest rate sensitivity is monitored on an ongoing basis by the Company's ALCO, whose primary goal is to manage interest rate risk and maximize net income and net economic value over time in changing interest rate environments. The ALCO meets frequently to make decisions on the Company's investment and funding portfolios based on the economic outlook, its interest rate expectations, the risk position, and other factors.
Four main tools are used for managing interest rate risk:
•the size, duration, and credit risk of the investment portfolio;
•the size and duration of the wholesale funding portfolio;
•interest rate contracts; and
•the pricing and structure of loans and deposits.
Management measures interest rate risk using simulation analysis and asset/liability modeling software to calculate the Company's earnings at risk and equity at risk. Interest rates are generally assumed to change up or down in a parallel fashion, and the net interest income results in each scenario are compared to a flat rate base scenario. The flat rate base scenario holds the end of period yield curve constant over a twelve-month forecast horizon. At March 31, 2023, and December 31, 2022, the flat rate base scenario assumed a federal funds rate of 5.00% and 4.50%, respectively. The federal funds rate target range was 4.75-5.00% at March 31, 2023, and 4.25-4.50% at December 31, 2022. Since interest rates rose sharply in 2022, and have continued to rise during the first quarter of 2023, management has incorporated the up and down 300 basis point rate scenarios back into its assessment of interest rate risk.
The following table summarizes the estimated impact that gradual parallel changes in interest rates of up and down 100, 200, and 300 basis points might have on the Company's net interest income over a twelve-month period starting at March 31, 2023, and December 31, 2022, as compared to actual net interest income and assuming no changes in interest rates:
-300bp-200bp-100bp+100bp+200bp+300bp
March 31, 2023(9.3)%(5.9)%(2.8)%2.5%5.3%8.7%
December 31, 2022n/a(6.9)%(3.3)%3.2%6.5%n/a
Asset sensitivity in terms of net interest income decreased at March 31, 2023, as compared to December 31, 2022, primarily due to increased interest paid on deposits, the impact of additional customer cash flow hedges entered into during the quarter, and liquidity actions taken in response to bank failures. Loans at floors were $0.4 billion at both December 31, 2022, and
March 31, 2023. While loans with floors, which are considered “in the money”, have the impact of reducing overall asset sensitivity, as interest rates continue to rise, these loans will move through their floors and reprice accordingly.
The following table summarizes the estimated impact that yield curve twists or immediate non-parallel changes in interest rates of up and down 50 and 100 basis points might have on the Company's net interest income for the subsequent twelve-month period starting at March 31, 2023, and December 31, 2022:
Short End of the Yield CurveLong End of the Yield Curve
-100bp-50bp+50bp+100bp-100bp-50bp+50bp+100bp
March 31, 2023(3.3)%(1.5)%1.1%2.3%(2.3)%(1.1)%1.1%2.3%
December 31, 2022(4.2)%(2.0)%1.7%3.3%(2.4)%(1.2)%1.3%2.6%
These non-parallel scenarios are modeled with the short end of the yield curve moving up or down 50 and 100 basis points, while the long end of the yield curve remains unchanged, and vice versa. The short end of the yield curve is defined as terms less than eighteen months and the long end of the yield curve is defined as terms greater than eighteen months. The results reflect the annualized impact of immediate interest rate changes.
Sensitivity to both the short end and the long end of the yield curve for net interest income decreased at March 31, 2023, as compared to December 31, 2022, primarily due to changes in balance sheet composition.
27

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 March 31, 2023, and December 31, 2022:
(Dollars in thousands)Book
Value		Estimated
Economic
Value		Estimated Economic Value Change
-100 bp+100 bp
March 31, 2023
Assets$74,844,395 $71,005,024 $1,304,906 $(1,300,939)
Liabilities66,550,101 60,711,526 2,020,093 (1,745,742)
Net$8,294,294 $10,293,498 $(715,187)$444,803 
Net change as % base net economic value(6.9)%4.3 %
December 31, 2022
Assets$71,277,521 $67,920,989 $1,161,794$(1,247,083)
Liabilities63,221,335 55,951,495 1,959,399(1,716,697)
Net$8,056,186 $11,969,494 $(797,605)$469,614 
Net change as % base net economic value(6.7)%3.9 %
Changes in economic value can best be described through duration, which is a measure of the price sensitivity of financial instruments due to changes in interest rates. For fixed-rate financial instruments, it can be thought of as the weighted-average expected time to receive future cash flows, whereas for floating-rate financial instruments, it can be thought of as the
weighted-average expected time until the next rate reset. Overall, the longer the duration, the greater the price sensitivity due to changes in interest rates. Generally, increases in interest rates reduce the economic value of fixed-rate financial assets as future discounted cash flows are worth less at higher interest rates. In a rising interest rate environment, the economic value of financial liabilities decreases for the same reason. A reduction in the economic value of financial liabilities is a benefit to the Company. Floating-rate financial instruments may have durations as short as one day, and therefore, may have very little price sensitivity due to changes in interest rates.
Duration gap represents the difference between the duration of financial assets and financial liabilities. A duration gap at or near zero would imply that the balance sheet is matched, and therefore, would exhibit no change in estimated economic value for changes in interest rates. At March 31, 2023, and December 31, 2022, the Company's duration gap was negative 1.2 years and negative 1.4 years, respectively. A negative duration gap implies that the duration of financial liabilities is longer than the duration of financial assets, and therefore, liabilities have more price sensitivity than assets and will reset their interest rates at a slower pace. Consequently, the Company's net estimated economic value would generally be expected to increase when interest rates rise, as the benefit of the decreased value of financial liabilities would more than offset the decreased value of financial assets. The opposite would generally be expected to occur when interest rates fall. Earnings would also generally be expected to increase when interest rates rise, and decrease when interest rates fall over the long term, absent the effects of any new business booked in the future. At March 31, 2023, long-term rates fell by 38 basis points as compared to December 31, 2022.
These earnings and net economic value estimates are subject to factors that could cause actual results to differ, and also assume that management does not take any additional action to mitigate any positive or negative effects from changing interest rates. Management believes that the Company's interest rate risk position at March 31, 2023, represents a reasonable level of risk given the current interest rate outlook. Management continues to monitor interest rates and other relevant factors given recent market volatility and is prepared to take additional action, as necessary.
Additional information regarding the Company's asset/liability management process can be found under the section captioned "Asset/Liability Management and Market Risk" contained in Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company's Annual Report on Form 10-K for the year ended
December 31, 2022.
28

Critical Accounting Estimates
The preparation of the Company's Condensed Consolidated Financial Statements, and accompanying notes thereto, in accordance with GAAP and practices generally applicable to the financial services industry, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the disclosure of contingent assets and liabilities. While management's estimates are made based on historical experience, current available information, and other factors that are deemed to be relevant, actual results could significantly differ from those estimates.
Accounting estimates are necessary in the application of certain accounting policies and can be susceptible to significant change in the near term. Critical accounting estimates are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on the Company's financial condition or results of operations. Management has identified that the Company's most critical accounting estimates are those related to the ACL on loans and leases and business combinations accounting policies. These accounting policies and their underlying estimates are discussed directly with the Audit Committee of the Board of Directors.
Allowance for Credit Losses on Loans and Leases
The ACL on loans and leases is a reserve established through a provision for credit losses charged to expense, which represents management’s best estimate of expected lifetime credit losses within the Company's loan and lease portfolios at the balance sheet date. The calculation of expected credit losses is determined using predictive methods and models that follow a
PD/LGD/EAD, loss rate, or discounted cash flow framework, and include consideration of past events, current conditions, macroeconomic variables (i.e., unemployment, gross domestic product, property values, and interest rate spreads), and reasonable and supportable economic forecasts that affect the collectability of the reported amounts. Changes to the ACL on loans and leases, and therefore, to the related provision for credit losses, can materially affect financial results.
The determination of the appropriate level of ACL on loans and leases inherently involves a high degree of subjectivity and requires the Company to make significant estimates of current credit risks and trends using existing qualitative and quantitative information, and reasonable and supportable forecasts of future economic conditions, all of which may undergo frequent and material changes. Changes in economic conditions affecting borrowers and macroeconomic variables that the Company is more susceptible to, unforeseen events such as natural disasters and pandemics, along with new information regarding existing loans, identification of additional problem loans, the fair value of underlying collateral, and other factors, both within and outside the Company's control, may indicate the need for an increase or decrease in the ACL on loans and leases.
It is difficult to estimate the sensitivity of how potential changes in any one economic factor or input might affect the overall reserve because a wide variety of factors and inputs are considered in estimating the ACL and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all product types. Further, changes in factors and inputs may also be directionally inconsistent, such that improvement in one factor may offset deterioration in others.
Executive management reviews and advises on the adequacy of the ACL on loans and leases on a quarterly basis. Although the overall balance is determined based on specific portfolio segments and individually assessed assets, the entire balance is available to absorb credit losses for any of the loan and lease portfolios.
Additional information regarding the determination of the ACL on loans and leases, including the Company's valuation methodology, can be found under the section captioned "Allowance for Credit Losses on Loans and Leases" contained elsewhere in this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, and within Note 1: Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements contained in
Part II - Item 8. Financial Statements and Supplementary Data included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
Business Combinations
The acquisition method of accounting generally requires that the identifiable assets acquired and liabilities assumed in business combinations are recorded at fair value as of the acquisition date. The determination of fair value often involves the use of internal or third-party valuation techniques, such as discounted cash flow analyses or appraisals. Particularly, the valuation techniques used to estimate the fair value of loans and leases and the core deposit intangible asset acquired in the Sterling merger include estimates related to discount rates, credit risk, and other relevant factors, which are inherently subjective. A description of the valuation methodologies used to estimate the fair values of the significant assets acquired and liabilities assumed from the Sterling merger can be found within Note 2: Mergers and Acquisitions in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
29

ITEM 1. FINANCIAL STATEMENTS
WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31,
2023		December 31,
2022
(In thousands, except share data)(Unaudited)
Assets:
Cash and due from banks$201,683 $264,118 
Interest-bearing deposits2,232,388 575,825 
Investment securities available-for-sale, at fair value7,798,977 7,892,697 
Investment securities held-to-maturity, net of allowance for credit losses of $282 and $182
7,063,223 6,564,697 
Federal Home Loan Bank and Federal Reserve Bank stock584,724 445,900 
Loans held for sale ($811 and $1,991 valued under fair value option)
210,724 1,991 
Loans and leases50,926,523 49,764,426 
Allowance for credit losses on loans and leases(613,914)(594,741)
Loans and leases, net50,312,609 49,169,685 
Deferred tax assets, net315,525 371,634 
Premises and equipment, net431,432 430,184 
Goodwill2,631,465 2,514,104 
Other intangible assets, net229,845 199,342 
Cash surrender value of life insurance policies1,233,994 1,229,169 
Accrued interest receivable and other assets1,597,806 1,618,175 
Total assets$74,844,395 $71,277,521 
Liabilities and stockholders' equity:
Deposits:
Non-interest-bearing$12,007,387 $12,974,975 
Interest-bearing43,290,092 41,079,365 
Total deposits55,297,479 54,054,340 
Securities sold under agreements to repurchase and other borrowings306,154 1,151,830 
Federal Home Loan Bank advances8,560,461 5,460,552 
Long-term debt (1)
1,071,413 1,073,128 
Accrued expenses and other liabilities1,314,594 1,481,485 
Total liabilities66,550,101 63,221,335 
Stockholders’ equity:
Preferred stock, $0.01 par value: Authorized—3,000,000 shares;
Series F issued and outstanding—6,000 shares
145,037 145,037 
Series G issued and outstanding—135,000 shares
138,942 138,942 
Common stock, $0.01 par value: Authorized—400,000,000 shares;
Issued—182,778,045 shares
1,828 1,828 
Paid-in capital6,137,743 6,173,240 
Retained earnings2,856,745 2,713,861 
Treasury stock, at cost—8,065,663 and 8,770,472 shares
(397,981)(431,762)
Accumulated other comprehensive (loss), net of tax(588,020)(684,960)
Total stockholders' equity8,294,294 8,056,186 
Total liabilities and stockholders' equity$74,844,395 $71,277,521 
See accompanying Notes to Condensed Consolidated Financial Statements.
30

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended
March 31,
(In thousands, except per share data)20232022
Interest Income:
Interest and fees on loans and leases$716,356 $346,276 
Taxable interest and dividends on investments100,872 53,724 
Non-taxable interest on investment securities13,684 9,802 
Loans held for sale16 26 
Total interest income830,928 409,828 
Interest Expense:
Deposits150,204 7,399 
Securities sold under agreements to repurchase and other borrowings7,827 957 
Federal Home Loan Bank advances68,126 56 
Long-term debt9,488 7,168 
Total interest expense235,645 15,580 
Net interest income595,283 394,248 
Provision for credit losses46,749 188,845 
Net interest income after provision for credit losses548,534 205,403 
Non-interest Income:
Deposit service fees45,436 47,827 
Loan and lease related fees23,005 22,679 
Wealth and investment services6,587 10,597 
Mortgage banking activities59 428 
Increase in cash surrender value of life insurance policies6,728 6,732 
(Loss) on sale of investment securities(16,747)— 
Other income5,698 15,772 
Total non-interest income70,766 104,035 
Non-interest Expense:
Compensation and benefits173,200 184,002 
Occupancy20,171 18,615 
Technology and equipment44,366 55,401 
Intangible assets amortization9,497 6,387 
Marketing3,476 3,509 
Professional and outside services32,434 54,091 
Deposit insurance12,323 5,222 
Other expense37,000 32,558 
Total non-interest expense332,467 359,785 
Income (loss) before income taxes286,833 (50,347)
Income tax expense (benefit)65,829 (33,600)
Net income (loss)221,004 (16,747)
Preferred stock dividends4,163 3,431 
Net income (loss) available to common stockholders$216,841 $(20,178)
Earnings (loss) per common share:
Basic$1.24 $(0.14)
Diluted1.24 (0.14)
See accompanying Notes to Condensed Consolidated Financial Statements.

31

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
Three months ended
 March 31,
(In thousands)20232022
Net income (loss)$221,004 $(16,747)
Other comprehensive income (loss), net of tax:
Investment securities available-for-sale71,618 (244,879)
Derivative instruments21,374 (7,844)
Defined benefit pension and other postretirement benefit plans3,948 (420)
Other comprehensive income (loss), net of tax96,940 (253,143)
Comprehensive income (loss)$317,944 $(269,890)
See accompanying Notes to Condensed Consolidated Financial Statements.

32

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
At or for the three months ended March 31, 2023
(In thousands, except per share data)Preferred StockCommon
Stock		Paid-In
Capital		Retained
Earnings		Treasury
Stock,
at cost		Accumulated Other
Comprehensive (Loss), Net of Tax		Total
Stockholders'
Equity
Balance at December 31, 2022$283,979 $1,828 $6,173,240 $2,713,861 $(431,762)$(684,960)$8,056,186 
Adoption of ASU No. 2022-02— — — (4,245)— — (4,245)
Net income— — — 221,004 — — 221,004 
Other comprehensive income, net of tax— — — — — 96,940 96,940 
Common stock dividends and equivalents—$0.40 per share
— — — (69,712)— — (69,712)
Series F preferred stock dividends—$328.125 per share
— — — (1,969)— — (1,969)
Series G preferred stock dividends—$16.25 per share
— — — (2,194)— — (2,194)
Stock-based compensation— — (33,471)— 45,117 — 11,646 
Exercise of stock options— — (2,026)— 3,749 — 1,723 
Common shares acquired from stock compensation plan activity— — — — (15,085)— (15,085)
Balance at March 31, 2023$283,979 $1,828 $6,137,743 $2,856,745 $(397,981)$(588,020)$8,294,294 
At or for the three months ended March 31, 2022
(In thousands, except per share data)Preferred StockCommon
Stock		Paid-In
Capital		Retained
Earnings		Treasury
Stock,
at cost		Accumulated Other Comprehensive
(Loss), Net of Tax		Total
Stockholders'
Equity
Balance at December 31, 2021$145,037 $937 $1,108,594 $2,333,288 $(126,951)$(22,580)$3,438,325 
Net (loss)— — — (16,747)— — (16,747)
Other comprehensive (loss), net of tax— — — — — (253,143)(253,143)
Common stock dividends and equivalents—$0.40 per share
— — — (36,234)— — (36,234)
Series F preferred stock dividends—$328.125 per share
— — — (1,969)— — (1,969)
Series G preferred stock dividends—$16.25 per share
— — — (1,463)— — (1,463)
Issued in business contribution138,942 891 5,040,291 — — — 5,180,124 
Stock-based compensation— — (19,098)— 28,101 — 9,003 
Exercise of stock options— — (347)— 758 — 411 
Common shares acquired from stock compensation plan activity— — — — (18,967)— (18,967)
Common stock repurchase program— — — — (122,205)— (122,205)
Balance at March 31, 2022$283,979 $1,828 $6,129,440 $2,276,875 $(239,264)$(275,723)$8,177,135 
See accompanying Notes to Condensed Consolidated Financial Statements.
33

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 Three months ended March 31,
(In thousands)20232022
Operating Activities:
Net income (loss)$221,004 $(16,747)
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses46,749 188,845 
Deferred income tax expense (benefit)13,911 (28,543)
Stock-based compensation expense11,646 9,003 
Depreciation and amortization of property and equipment and intangible assets20,745 16,784 
(Accretion) and amortization of interest-earning assets and borrowings(4,388)(19,854)
Amortization of low-income housing tax credit investments21,478 10,377 
Amortization of mortgage servicing assets341 570 
Reduction of right-of-use lease assets7,525 7,928 
Net (gain) on sale, net of write-downs, of foreclosed properties and repossessed assets(323)(103)
Loss on disposal of property and equipment5 1,662 
Loss on sale of investment securities16,747 — 
Originations of loans held for sale(2,590)(23,056)
Proceeds from sale of loans held for sale3,832 26,753 
Net (gain) on mortgage banking activities(77)(397)
Net (gain) on sale of loans not originated for sale(95)(1,816)
(Increase) in cash surrender value of life insurance policies(6,728)(6,732)
(Gain) from life insurance policies(528)(38)
Net (increase) decrease in derivative contract assets and liabilities(48,570)215,423 
Net (increase) in accrued interest receivable and other assets(8,150)(69,651)
Net (decrease) in accrued expenses and other liabilities(78,240)(95,151)
Net cash provided by operating activities214,294 215,257 
Investing Activities:
Purchases of available-for-sale securities(357,784)(714,208)
Proceeds from principal payments, maturities, and calls of available-for-sale securities119,033 283,474 
Proceeds from sale of available-for-sale securities395,358 — 
Purchases of held-to-maturity securities(599,387)(456,139)
Proceeds from principal payments, maturities, and calls of held-to-maturity securities99,992 280,080 
Net (increase) decrease in Federal Home Loan Bank and Federal Reserve Bank stock(138,824)16,215 
Alternative investments (capital calls), net of distributions(3,184)(5,661)
Net (increase) in loans(1,478,986)(674,472)
Proceeds from sale of loans not originated for sale106,779 51,127 
Proceeds from sale of foreclosed properties and repossessed assets1,745 231 
Additions to property and equipment(10,293)(4,644)
Proceeds from life insurance policies— 7,793 
Net cash paid for acquisition of interLINK(157,646)— 
Net cash paid for acquisition of Bend— (54,407)
Net cash received in merger with Sterling— 513,960 
Net cash (used for) investing activities(2,023,197)(756,651)
See accompanying Notes to Condensed Consolidated Financial Statements.
34

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited), continued
 Three months ended March 31,
(In thousands)20232022
Financing Activities:
Net increase in deposits1,236,463 1,235,442 
Proceeds from Federal Home Loan Bank advances15,450,000 — 
Repayments of Federal Home Loan Bank advances(12,350,091)(94)
Net increase in securities sold under agreements to repurchase and other borrowings(845,676)(183,347)
Dividends paid to common stockholders(70,140)(36,234)
Dividends paid to preferred stockholders(4,163)(1,969)
Exercise of stock options1,723 411 
Common stock repurchase program— (122,205)
Common shares acquired related to stock compensation plan activity(15,085)(18,967)
Net cash provided by financing activities3,403,031 873,037 
Net increase in cash and cash equivalents1,594,128 331,643 
Cash and cash equivalents at beginning of period839,943 461,570 
Cash and cash equivalents at end of period$2,434,071 $793,213 
Supplemental disclosure of cash flow information:
Interest paid$221,182 $15,457 
Income taxes paid6,334 7,112 
Non-cash investing and financing activities:
Transfer of loans and leases to foreclosed properties and repossessed assets$607 $213 
Transfer of loans and leases to loans held-for-sale316,596 42,431 
Merger with Sterling: (1)
Tangible assets acquired17,607 26,919,975 
Goodwill and other intangible assets(25,561)2,149,532 
Liabilities assumed(7,954)24,403,343 
Common stock issued— 5,041,182 
Preferred stock exchanged— 138,942 
Acquisition of Bend: (1)
Tangible assets acquired294 15,731 
Goodwill and other intangible assets(294)38,966 
Liabilities assumed— 290 
Acquisition of interLINK:
Tangible assets acquired6,417 — 
Goodwill and other intangible assets183,216 — 
Liabilities assumed15,948 — 
Contingent consideration16,039 — 
(1)The activities presented for 2023 reflect adjustments recorded within the one-year measurement period, which were identified as a result of extended information gathering and new information that arose from integration activities. Additional information regarding these amounts can be found within Note 2: Mergers and Acquisitions and Note 6: Goodwill and Other Intangible Assets.
See accompanying Notes to Condensed Consolidated Financial Statements.
35

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

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ASU No. 2022-01—Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method
In March 2022, the FASB issued ASU No. 2022-01—Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method, which expands the current last-of-layer method of hedge accounting that permits only one hedged layer to allow multiple hedged layers of a single closed portfolio. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. Additionally, the amendments in this Update: (i) expand the scope of the portfolio layer method to include non-prepayable assets; (ii) specify eligible hedging instruments in a single-layer hedge; (iii) provide additional guidance on the accounting for and disclosure of hedge basis adjustments; and (iv) specify how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. An entity may also reclassify debt securities classified in the held-to-maturity category at the date of adoption to the available-for-sale category only if the entity applies portfolio layer method hedging to one or more closed portfolios that include those debt securities within a 30-day period.
The Company adopted the Update on January 1, 2023 on a prospective basis. The adoption of this guidance did not have a material impact on the Company's Consolidated Financial Statements. The entity did not reclassify any debt securities from the held-to-maturity category to the available-for-sale category as permitted upon adoption.
ASU No. 2021-08—Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
In October 2021, the FASB issued ASU No. 2021-08—Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.
The Company adopted the Update on January 1, 2023 on a prospective basis. The adoption of this guidance did not have a material impact on the Company's Consolidated Financial Statements.
Relevant Accounting Standards Issued But Not Yet Adopted
ASU No. 2023-02—Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)
In March 2023, the FASB issued ASU No. 2023-02—Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force), which permits reporting entities to elect to account for their tax equity investments, regardless of the program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. A reporting entity may make an accounting policy election to apply the proportional amortization method in accordance with paragraph 323-740-25-4 on a tax-credit-program-by-tax-credit-program basis rather than electing to applying the proportional amortization method at the reporting entity level or to individual investments.
A reporting entity that applies the proportional amortization method to qualifying tax equity investments must account for the receipt of the investment tax credits using the flow-through method under Topic 740, Income Taxes, even if the entity applies the deferral method for other investment tax credit received. The amendments also remove certain guidance for Qualified Affordable Housing Project Investments, require the application of the delayed equity contribution guidance to all tax equity investments, and require specific disclosures that must be applied to all investments that generate income tax credits and other income tax benefits from a tax credit program for which the entity has elected to apply the proportional amortization method in accordance with Subtopic 323-740.
The Update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The amendments generally must be applied on either a modified retrospective or retrospective basis with a cumulative-effect adjustment to retained earnings reflecting the difference between the previous method used to account for the tax equity investment and the application of the proportional amortization method since the investment was entered into. The Company is in the early assessment stages of evaluating the amendments and the impact of adoption on its Consolidated Financial Statements and disclosures.
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ASU No. 2023-01—Leases (Topic 842): Common Control Arrangements
In March 2023, the FASB issued ASU No. 2023-01—Leases (Topic 842): Common Control Arrangements, which requires that leasehold improvements associated with leases between entities under common control be: (i) amortized by the lessee over the useful live of the leasehold improvements to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset (the leased asset) through a lease; however, if the lessor obtained the right to control the use of the underlying asset through a lease with another entity not within the same common control group, the amortization period may not exceed the amortization period of the common control group; and (ii) accounted for as a transfer between entities under common control through an adjustment to equity, if, and when, the lessee no longer controls the use of the underlying asset. Additionally, those leasehold improvements are subject to the impairment guidance in Topic 360, Property, Plant, and Equipment.
The Update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The amendments either may be applied prospectively to all new and existing leasehold improvements recognized on or after the adoption date with any remaining unamortized balance of existing leasehold improvements amortized over their remaining useful life to the common control group determined at that date; or retrospectively to the beginning of the period in which the entity first applied Topic 842, with any leasehold improvements that otherwise would not have been amortized or impaired recognized through a cumulative-effect adjustment to the opening balance of retained earnings at the beginning of the earliest period presented in accordance with Topic 842. The Company is in the early assessment stages of evaluating the amendments and the impact of adoption on its Consolidated Financial Statements.
ASU No. 2022-03—Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions
In June 2022, the FASB issued ASU No. 2022-03—Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security, and therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction, and requires the following disclosures for equity securities subject to contractual sale restrictions: (i) the fair value of equity securities subject to contractual sale restrictions reflected on the balance sheet; (ii) the nature and remaining duration of the restriction(s); and (iii) the circumstances that could cause a lapse in the restriction(s).
The Update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. For all entities except investment companies, the amendments should be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. The adoption of this guidance is not expected to have a material impact on the Consolidated Financial Statements as the Company does not currently consider contractual restrictions on the sale of an equity security in measuring fair value.
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Note 2: Mergers and Acquisitions
interLINK Acquisition
On January 11, 2023, Webster acquired 100% ownership of interLINK from StoneCastle Partners LLC. interLINK is a technology-enabled deposit management platform that administers over $9 billion of deposits from FDIC-insured cash sweep programs between banks and broker/dealers and clearing firms. The acquisition provides the Company with access to a unique source of core deposit funding and scalable liquidity and adds another technology-enabled channel to its already differentiated, omnichannel deposit gathering capabilities.
The total purchase price of the acquisition was $174.6 million, which included cash paid of $158.6 million and $16.0 million of contingent consideration measured at fair value. The contingent consideration is payable in cash upon the achievement of discrete customer and deposit growth events within three years of the acquisition date. Additional information regarding the determination of fair value for contingent consideration liabilities can be found within Note 14: Fair Value Measurements.
The transaction has been accounted for as a business combination, and resulted in the addition of $31.4 million in net assets measured at fair value, which primarily comprised $36.0 million of broker dealer relationship intangible assets, $6.0 million of developed technology, a $4.0 million non-competition agreement intangible asset, and $15.9 million of royalty liabilities. Fair value estimates of the acquired assets and assumed liabilities are subject to adjustment during the one-year measurement period following the closing of the acquisition. The $143.2 million of preliminary goodwill recognized is deductible for tax purposes.
Bend Financial, Inc. Acquisition
On February 18, 2022, Webster acquired 100% of the equity interests of Bend, a cloud-based platform solution provider for HSAs, in exchange for cash of $55.3 million. The transaction was accounted for as a business combination, and resulted in the addition of $19.6 million in net assets measured at fair value, which primarily comprised $15.9 million of internal use software and a $3.0 million customer relationship intangible asset. The Company's valuations of the assets acquired and liabilities assumed in the Bend Acquisition were considered final as of March 31, 2023.
Merger with Sterling Bancorp
On January 31, 2022, Webster completed its merger with Sterling. The transaction was accounted for as a business combination. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their fair values as of the merger effective date. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and are subject to change. Fair value estimates of the assets acquired and liabilities assumed were subject to adjustment during the one-year measurement period following the closing of the merger if new information was obtained about facts and circumstances that existed as of the merger effective date that, if known, would have affected the measurement of the amounts recognized as of that date. Measurement period adjustments made during the first quarter of 2023 totaled a net $25.6 million, which pertained to other assets and other liabilities and their related deferred tax impact. The Company's valuations of the assets acquired and liabilities assumed in the merger with Sterling were considered final as of March 31, 2023.
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The following table summarizes the allocation of the purchase price to the fair value of the identifiable assets acquired and liabilities assumed from Sterling as of January 31, 2022:
(In thousands)Unpaid Principal BalanceFair Value
Purchase price consideration$5,180,300 
Assets:
Cash and due from banks510,929 
Interest-bearing deposits3,207 
Investment securities available-for-sale4,429,948 
Federal Home Loan Bank and Federal Reserve Bank Stock150,502 
Loans held for sale23,517 
Loans and leases:
Commercial non-mortgage$5,570,782 5,527,657 
Asset-based694,137 683,958 
Commercial real estate6,790,600 6,656,405 
Multi-family4,303,381 4,255,906 
Equipment financing1,350,579 1,314,311 
Warehouse lending647,767 643,754 
Residential1,313,785 1,281,637 
Home equity132,758 122,553 
Other consumer12,559 12,525 
Total loans and leases$20,816,348 20,498,706 
Deferred tax assets, net(59,716)
Premises and equipment264,421 
Other intangible assets210,100 
Bank-owned life insurance policies645,510 
Accrued interest receivable and other assets986,729 
Total assets acquired$27,663,853 
Liabilities:
Non-interest-bearing deposits$6,620,248 
Interest-bearing deposits16,643,755 
Securities sold under agreements to repurchase and other borrowings27,184 
Long-term debt516,881 
Accrued expenses and other liabilities589,689 
Total liabilities assumed$24,397,757 
Net assets acquired3,266,096 
Goodwill$1,914,204 
In connection with the merger with Sterling, the Company recorded $1.9 billion of goodwill, which represents the excess of the purchase price over the fair value of the net assets acquired. Information regarding the allocation of goodwill to the Company's reportable segments can be found within Note 16: Segment Reporting. For a description of the valuation methodologies used to estimate the fair values of the significant assets acquired and liabilities assumed, refer to Note 2: Mergers and Acquisitions of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
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Merger-Related Expenses and Exit Activities
The following table summarizes total merger-related expenses, which were primarily incurred in connection with the merger with Sterling:
Three months ended March 31,
(In thousands)20232022
Compensation and benefits (1)
$11,112 $41,585 
Occupancy735 356 
Technology and equipment (2)
(1,709)19,085 
Professional and outside services (3)
20,009 44,457 
Marketing135 — 
Other expense (4)
(909)3,012 
Total merger-related expenses$29,373 $108,495 
(1)Comprised primarily of severance and employee retention costs, and executive synergy stock awards.
(2)Comprised primarily of technology contract termination costs. Includes a reduction of $4.8 million to a previously recorded technology-related contract termination charge during the three months ended March 31, 2023, due to a change in the expected use of certain services post core conversion.
(3)Comprised primarily of advisory, legal, accounting, and other professional fees.
(4)Comprised primarily of contract termination costs, disposals on property and equipment, and other miscellaneous expenses. Includes a reduction of $1.7 million to a previously recorded contract termination charge during the three months ended
March 31, 2023, due to a decrease in volume usage.
The following tables summarize the change in accrued expenses and other liabilities as it relates to severance and contract termination costs, which were primarily incurred in connection with the merger with Sterling:
Three months ended March 31, 2023
(In thousands)SeveranceContract TerminationTotal
Balance, beginning of period$7,583 $30,362 $37,945 
Additions charged to expense6,196 — 6,196 
Cash payments(6,993)— (6,993)
Other(825)(6,587)(7,412)
Balance, end of period$5,961 $23,775 $29,736 
Three months ended March 31, 2022
(In thousands)SeveranceContract TerminationTotal
Balance, beginning of period$10,835 $— $10,835 
Additions charged to expense26,971 17,704 44,675 
Cash payments(1,766)— (1,766)
Other (1)
(3,884)— (3,884)
Balance, end of period$32,156 $17,704 $49,860 
(1)Reflects the release of $3.9 million from the Company's severance accrual, as the Company re-evaluated its strategic priorities as a combined organization in connection with the Sterling merger, which resulted in modifications to the Company's strategic initiatives that were previously announced in December 2020.
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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 securities by major type:
 At March 31, 2023
(In thousands)
Amortized
Cost (1)
Unrealized
Gains		Unrealized
Losses		Fair Value
U.S. Treasury notes$407,224 $— $(20,452)$386,772 
Government agency debentures302,067 — (39,725)262,342 
Municipal bonds and notes1,707,779 7 (62,558)1,645,228 
Agency CMO61,728 — (4,266)57,462 
Agency MBS2,496,654 368 (266,172)2,230,850 
Agency CMBS1,889,561 3,542 (257,851)1,635,252 
CMBS927,591 — (25,533)902,058 
Corporate debt714,359 — (88,836)625,523 
Private label MBS48,325 — (4,063)44,262 
Other10,061 — (833)9,228 
Total available-for-sale securities$8,565,349 $3,917 $(770,289)$7,798,977 
At December 31, 2022
(In thousands)
Amortized
Cost (1)
Unrealized
Gains		Unrealized
Losses		Fair Value
U.S. Treasury notes$755,968 $— $(38,928)$717,040
Government agency debentures302,018 — (43,644)258,374
Municipal bonds and notes1,719,110 5 (85,913)1,633,202
Agency CMO64,984 — (5,019)59,965
Agency MBS2,461,337 26 (303,339)2,158,024
Agency CMBS1,664,600 — (258,114)1,406,486
CMBS929,588 — (32,948)896,640
CLO2,108 — (1)2,107
Corporate debt795,999 — (91,587)704,412
Private label MBS 48,895 — (4,646)44,249
Other12,548 — (350)12,198
Total available-for-sale securities$8,757,155 $31 $(864,489)$7,892,697 
(1)Accrued interest receivable on available-for-sale securities of $41.4 million and $36.9 million at March 31, 2023, and
December 31, 2022, respectively, is excluded from amortized cost and is included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets.
Unrealized Losses
The following tables summarize the gross unrealized losses and fair value of available-for-sale securities by length of time each major security type has been in a continuous unrealized loss position:
 At March 31, 2023
 Less Than 12 Months12 Months or MoreTotal
(Dollars in thousands)Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Number of
Holdings		Fair
Value		Unrealized
Losses
U.S. Treasury notes$— $— $386,772 $(20,452)14$386,772 $(20,452)
Government agency debentures71,134 (3,714)191,208 (36,011)19262,342 (39,725)
Municipal bonds and notes15,479 (239)1,598,253 (62,319)4301,613,732 (62,558)
Agency CMO7,915 (228)49,547 (4,038)3857,462 (4,266)
Agency MBS86,133 (3,319)2,045,564 (262,853)4592,131,697 (266,172)
Agency CMBS64,576 (933)1,397,565 (256,918)1331,462,141 (257,851)
CMBS155,493 (2,056)746,565 (23,477)51902,058 (25,533)
Corporate debt13,041 (1,158)612,482 (87,678)92625,523 (88,836)
Private label MBS44,262 (4,063)— — 344,262 (4,063)
Other4,810 (190)4,168 (643)28,978 (833)
Total$462,843 $(15,900)$7,032,124 $(754,389)1,241$7,494,967 $(770,289)
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 At December 31, 2022
 Less Than Twelve MonthsTwelve Months or LongerTotal
(Dollars in thousands)Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Number of
Holdings		Fair
Value		Unrealized
Losses
U.S. Treasury notes$337,563 $(19,167)$379,477 $(19,761)23$717,040 $(38,928)
Government agency debentures258,374 (43,644)— — 19258,374 (43,644)
Municipal bonds and notes 1,616,771 (85,913)— — 4441,616,771 (85,913)
Agency CMO55,693 (4,640)4,272 (379)3959,965 (5,019)
Agency MBS1,641,544 (206,412)515,206 (96,927)4602,156,750 (303,339)
Agency CMBS485,333 (68,674)921,153 (189,440)1321,406,486 (258,114)
CMBS273,150 (8,982)598,490 (23,966)52871,640 (32,948)
CLO— — 2,107 (1)12,107 (1)
Corporate debt692,990 (89,692)8,421 (1,895)105701,411 (91,587)
Private label MBS44,249 (4,646)— — 344,249 (4,646)
Other12,198 (350)— — 412,198 (350)
Total$5,417,865 $(532,120)$2,429,126 $(332,369)1,282$7,846,991 $(864,489)
The $94.2 million decrease in gross unrealized losses from December 31, 2022, to March 31, 2023, is primarily due to a decline in long-term market rates. The Company assesses each available-for-sale security that is in an unrealized loss position to determine whether the decline in fair value below the amortized cost basis is a result from a credit loss or other factors. At both March 31, 2023, and December 31, 2022, no ACL was recorded on available-for-sale securities as each of the securities in the Company's portfolio are investment grade, current as to principal and interest, and their price changes are consistent with interest and credit spreads when adjusting for convexity, rating, and industry differences.
At March 31, 2023, based on current market conditions and the Company's current targeted balance sheet composition strategy, the Company has the intent to hold its available-for-sale securities with unrealized loss positions through the anticipated recovery period, and it is more-likely-than-not that the Company will not have to sell these available-for-sale securities before the recovery of the entire amortized cost basis. The issuers of these available-for-sale securities have not, to the Company’s knowledge, established any cause for default. Market prices are expected to approach par as the securities approach maturity.
Contractual Maturities
The following table summarizes the amortized cost and fair value of available-for-sale securities by contractual maturity:
At March 31, 2023
(In thousands)Amortized CostFair Value
Maturing within 1 year$41,886 $41,593 
After 1 year through 5 years953,221 903,665 
After 5 through 10 years1,469,500 1,364,238 
After 10 years6,100,742 5,489,481 
Total available-for-sale securities$8,565,349 $7,798,977 
Available-for-sale securities that are not due at a single maturity date have been categorized based on the maturity date of the underlying collateral. Actual principal cash flows may differ from this categorization as borrowers have the right to repay their obligations with or without prepayment penalties.
Sales of Available-for Sale Securities
During the three months ended March 31, 2023, the Company sold U.S. Treasury notes and Corporate debt securities classified as available-for-sale for proceeds of $395.4 million, which resulted in gross realized losses of $20.5 million. Because $3.8 million of the total loss recognized was attributed to a decline in credit quality, that portion of the charge has been included in the Provision for credit losses on the accompanying Condensed Consolidated Statements of Income. There were no sales of available-for-sale securities during the three months ended March 31, 2022.
Other Information
The following table summarizes available-for-sale securities pledged for deposits, borrowings, and other purposes:
(In thousands)At March 31, 2023At December 31, 2022
Pledged for deposits$2,868,000$2,573,072
Pledged for borrowings and other3,848,0391,195,101
Total available-for-sale securities pledged$6,716,039$3,768,173
At March 31, 2023, the Company had callable available-for-sale securities with an aggregate carrying value of $2.8 billion.
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Held-to-Maturity
The following tables summarize the amortized cost, fair value, and ACL on held-to-maturity securities by major type:
At March 31, 2023
(In thousands)
Amortized
Cost (1)
Unrealized
Gains		Unrealized
Losses		Fair ValueAllowanceNet Carrying Value
Agency CMO$27,101 $— $(1,727)$25,374 $— $27,101 
Agency MBS2,613,113 1,458 (300,457)2,314,114 — 2,613,113 
Agency CMBS3,364,186 3,790 (410,763)2,957,213 — 3,364,186 
Municipal bonds and notes927,501 2,957 (29,188)901,270 282 927,219 
CMBS131,604 — (8,893)122,711 — 131,604 
Total held-to-maturity securities$7,063,505 $8,205 $(751,028)$6,320,682 $282 $7,063,223 
At December 31, 2022
(In thousands)
Amortized
Cost (1)
Unrealized
Gains		Unrealized
Losses		Fair ValueAllowanceNet Carrying Value
Agency CMO$28,358 $— $(2,060)$26,298 $— $28,358 
Agency MBS2,626,114 827 (339,592)2,287,349 — 2,626,114 
Agency CMBS2,831,949 845 (407,648)2,425,146 — 2,831,949 
Municipal bonds and notes928,845 1,098 (47,183)882,760 182 928,663 
CMBS149,613 — (9,713)139,900 — 149,613 
Total held-to-maturity securities$6,564,879 $2,770 $(806,196)$5,761,453 $182 $6,564,697 
(1)Accrued interest receivable on held-to-maturity securities of $20.2 million and $24.2 million at March 31, 2023, and
December 31, 2022, respectively, is excluded from amortized cost and is included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets.
An ACL on held-to-maturity securities is recorded for certain Municipal bonds and notes to account for expected lifetime credit losses. Agency securities represent obligations issued by a U.S. government-sponsored enterprise or other federally-related entity and are either explicitly or implicitly guaranteed and therefore, assumed to be zero loss. Held-to-maturity securities with gross unrealized losses and no ACL are considered to be high credit quality, and therefore, zero credit loss has been recorded.
The following table summarizes the activity in the ACL on held-to-maturity securities:
Three months ended March 31,
(In thousands)20232022
Balance, beginning of period$182$214
Provision (benefit) for credit losses100(10)
Balance, end of period$282$204
Contractual Maturities
The following table summarizes the amortized cost and fair value of held-to-maturity securities by contractual maturity:
At March 31, 2023
(In thousands)Amortized CostFair Value
Maturing within 1 year$6,093 $6,115 
After 1 year through 5 years52,893 53,722 
After 5 through 10 years338,353 324,864 
After 10 years6,666,166 5,935,981 
Total held-to-maturity securities$7,063,505 $6,320,682 
Held-to-maturity securities that are not due at a single maturity date have been categorized based on the maturity date of the underlying collateral. Actual principal cash flows may differ from this categorization as borrowers have the right to prepay their obligations with or without prepayment penalties.
44

Credit Quality Information
The Company monitors the credit quality of held-to-maturity securities through credit ratings provided by Standard & Poor's Rating Services, Moody's Investor Services, Fitch Ratings, Inc., Kroll Bond Rating Agency, or DBRS Inc. Credit ratings express opinions about the credit quality of a security, and are updated at each quarter end. Investment grade securities are rated BBB- or higher by S&P, or Baa3 or higher by Moody's, and are generally considered by the rating agencies and market participants to be of low credit risk. Conversely, securities rated below investment grade, which are labeled as speculative grade by the rating agencies, are considered to have distinctively higher credit risk than investment grade securities. There were no speculative grade held-to-maturity securities at March 31, 2023, or December 31, 2022. Held-to-maturity securities that are not rated are collateralized with U.S. Treasury obligations.
The following tables summarize the amortized cost of held-to-maturity securities based on their lowest publicly available credit rating:
March 31, 2023
Investment Grade
(In thousands)AaaAa1Aa2Aa3A1A2Not Rated
Agency CMO$— $27,101 $— $— $— $— $— 
Agency MBS— 2,613,113 — — — — — 
Agency CMBS— 3,364,186 — — — — — 
Municipal bonds and notes350,578 163,138 254,843 116,343 38,134 4,165 300 
CMBS131,604 — — — — — — 
Total held-to-maturity securities$482,182 $6,167,538 $254,843 $116,343 $38,134 $4,165 $300 
December 31, 2022
Investment Grade
(In thousands)AaaAa1Aa2Aa3A1A2Not Rated
Agency CMO$— $28,358 $— $— $— $— $— 
Agency MBS— 2,626,114 — — — — — 
Agency CMBS— 2,831,949 — — — — — 
Municipal bonds and notes336,035 163,312 255,235 116,870 38,177 4,165 15,051 
CMBS149,613 — — — — — — 
Total held-to-maturity securities$485,648 $5,649,733 $255,235 $116,870 $38,177 $4,165 $15,051 
At March 31, 2023, and December 31, 2022, there were no held-to-maturity securities past due under the terms of their agreements nor in non-accrual status.
Other Information
The following table summarizes held-to-maturity securities pledged for deposits, borrowings, and other purposes:
(In thousands)At March 31, 2023At December 31, 2022
Pledged for deposits$1,573,285$1,596,777
Pledged for borrowings and other5,057,769260,735
Total held-to-maturity securities pledged$6,631,054$1,857,512
At March 31, 2023, the Company had callable held-to-maturity securities with an aggregate carrying value of $0.9 billion.
45

Note 4: Loans and Leases
The following table summarizes loans and leases by portfolio segment and class:
(In thousands)At March 31,
2023		At December 31, 2022
Commercial non-mortgage$16,939,373 $16,392,795 
Asset-based1,760,527 1,821,642 
Commercial real estate13,499,139 12,997,163 
Multi-family7,014,599 6,621,982 
Equipment financing1,601,109 1,628,393 
Warehouse lending474,328 641,976 
Commercial portfolio41,289,075 40,103,951 
Residential8,001,563 7,963,420 
Home equity1,580,569 1,633,107 
Other consumer55,316 63,948 
Consumer portfolio9,637,448 9,660,475 
Loans and leases$50,926,523 $49,764,426 
The carrying amount of loans and leases at March 31, 2023, and December 31, 2022, includes net unamortized
(discounts)/premiums and net unamortized deferred (fees)/costs totaling $(58.6) million and $(68.7) million, respectively. Accrued interest receivable of $246.1 million and $226.3 million at March 31, 2023, and December 31, 2022, respectively, is excluded from the carrying amount of loans and leases and is included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets. At March 31, 2023, the Company had pledged $15.0 billion of eligible loans as collateral to support borrowing capacity at the FHLB.
Non-Accrual and Past Due Loans and Leases
The following tables summarize the aging of accrual and non-accrual loans and leases by class:
 At March 31, 2023
(In thousands)30-59 Days
Past Due and
Accruing		60-89 Days
Past Due and
Accruing		90 or More Days Past Due
and Accruing		Non-accrualTotal Past Due and Non-accrualCurrentTotal Loans
and Leases
Commercial non-mortgage$6,916 $162 $215 $69,129 $76,422 $16,862,951 $16,939,373 
Asset-based— — — 9,428 9,428 1,751,099 1,760,527 
Commercial real estate15,171 — 175 33,966 49,312 13,449,827 13,499,139 
Multi-family1,929 — — — 1,929 7,012,670 7,014,599 
Equipment financing2,472 105 — 13,018 15,595 1,585,514 1,601,109 
Warehouse lending— — — — — 474,328 474,328 
Commercial portfolio26,488 267 390 125,541 152,686 41,136,389 41,289,075 
Residential7,112 3,347 — 25,291 35,750 7,965,813 8,001,563 
Home equity3,977 1,649 — 28,873 34,499 1,546,070 1,580,569 
Other consumer415 104 213 106 838 54,478 55,316 
Consumer portfolio11,504 5,100 213 54,270 71,087 9,566,361 9,637,448 
Total$37,992 $5,367 $603 $179,811 $223,773 $50,702,750 $50,926,523 
 At December 31, 2022
(In thousands)30-59 Days
Past Due and
Accruing		60-89 Days
Past Due and
Accruing		90 or More Days Past Due
and Accruing		Non-accrualTotal Past Due and Non-accrualCurrentTotal Loans
and Leases
Commercial non-mortgage$8,434 $821 $645 $71,884 $81,784 $16,311,011 $16,392,795 
Asset-based5,921 — — 20,024 25,945 1,795,697 1,821,642 
Commercial real estate1,494 23,492 68 39,057 64,111 12,933,052 12,997,163 
Multi-family1,157 — — 636 1,793 6,620,189 6,621,982 
Equipment financing806 9,988 — 12,344 23,138 1,605,255 1,628,393 
Warehouse lending— — — — — 641,976 641,976 
Commercial portfolio17,812 34,301 713 143,945 196,771 39,907,180 40,103,951 
Residential8,246 3,083 — 25,424 36,753 7,926,667 7,963,420 
Home equity5,293 2,820 — 27,924 36,037 1,597,070 1,633,107 
Other consumer1,028 85 13 148 1,274 62,674 63,948 
Consumer portfolio14,567 5,988 13 53,496 74,064 9,586,411 9,660,475 
Total$32,379 $40,289 $726 $197,441 $270,835 $49,493,591 $49,764,426 
46

The following table provides additional information on non-accrual loans and leases:
At March 31, 2023At December 31, 2022
(In thousands)Non-accrualNon-accrual with No AllowanceNon-accrualNon-accrual with No Allowance
Commercial non-mortgage$69,129 $12,382 $71,884 $12,598 
Asset-based9,428 1,330 20,024 1,491 
Commercial real estate33,966 1,502 39,057 90 
Multi-family— — 636 — 
Equipment financing13,018 1,895 12,344 2,240 
Commercial portfolio125,541 17,109 143,945 16,419 
Residential25,291 10,674 25,424 10,442 
Home equity28,873 15,114 27,924 15,193 
Other consumer106 4 148 5 
Consumer portfolio54,270 25,792 53,496 25,640 
Total $179,811 $42,901 $197,441 $42,059 
Interest on non-accrual loans and leases that would have been recognized as additional interest income had the loans and leases been current in accordance with their original terms totaled $6.1 million and $4.4 million for the three months ended
March 31, 2023, and 2022, respectively.
Allowance for Credit Losses on Loans and Leases
The following table summarizes the change in the ACL on loans and leases by portfolio segment:
 At or for the three months ended March 31,
20232022
(In thousands)Commercial PortfolioConsumer PortfolioTotalCommercial PortfolioConsumer PortfolioTotal
ACL on loans and leases:
Balance, beginning of period$533,125 $61,616 $594,741 $257,877 $43,310 $301,187 
Adoption of ASU No. 2022-027,704 (1,831)5,873 — — — 
Initial allowance for PCD loans and leases (1)
— — — 78,376 9,669 88,045 
Provision (benefit)38,757 (936)37,821 184,327 4,741 189,068 
Charge-offs(26,410)(1,098)(27,508)(11,248)(1,120)(12,368)
Recoveries1,574 1,413 2,987 1,364 2,075 3,439 
Balance, end of period$554,750 $59,164 $613,914 $510,696 $58,675 $569,371 
Individually evaluated for credit losses27,459 8,590 36,049 32,736 12,057 44,793 
Collectively evaluated for credit losses$527,291 $50,574 $577,865 $477,960 $46,618 $524,578 
(1)Represents the establishment of the initial reserve for PCD loans and leases, which is reported net of $48.3 million of day one charge-offs recognized at the date of acquisition in accordance with GAAP.
Credit Quality Indicators
To measure credit risk for the commercial portfolio, the Company employs a dual grade credit risk grading system for estimating the PD and LGD. The credit risk grade system assigns a rating to each borrower and to the facility, which together form a Composite Credit Risk Profile. The credit risk grade system categorizes borrowers by common financial characteristics that measure the credit strength of borrowers and facilities by common structural characteristics. The Composite Credit Risk Profile has ten grades, with each grade corresponding to a progressively greater risk of loss. Grades (1) to (6) are considered pass ratings, and grades (7) to (10) are considered criticized, as defined by the regulatory agencies. A (7) "Special Mention" rating has a potential weakness that, if left uncorrected, may result in deterioration of the repayment prospects for the asset. A (8) "Substandard" rating has a well-defined weakness that jeopardizes the full repayment of the debt. A (9) "Doubtful" rating has all of the same weaknesses as a substandard asset with the added characteristic that the weakness makes collection or liquidation in full given current facts, conditions, and values improbable. Assets classified as a (10) "Loss" rating are considered uncollectible and are charged-off. Risk ratings, which are assigned to differentiate risk within the portfolio, are reviewed on an ongoing basis and revised to reflect changes in a borrower's current financial position and outlook, risk profile, and the related collateral and structural position. Loan officers review updated financial information or other loan factors on at least an annual basis for all pass rated loans to assess the accuracy of the risk grade. Criticized loans undergo more frequent reviews and enhanced monitoring.
To measure credit risk for the consumer portfolio, the most relevant credit characteristic is the FICO score, which is a widely used credit scoring system that ranges from 300 to 850. A lower FICO score is indicative of higher credit risk and a higher FICO score is indicative of lower credit risk. FICO scores are updated on at least a quarterly basis.
47

The following tables summarize the amortized cost basis of commercial loans and leases by Composite Credit Risk Profile grade and origination year:
At March 31, 2023
(In thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Commercial non-mortgage:
Risk rating:
Pass$867,446 $5,084,158 $1,781,158 $864,566 $708,271 $1,156,948 $5,992,440 $16,454,987 
Special mention25,083 62,638 24,644 12,727 15,640 8,631 30,522 179,885 
Substandard22,393 59,838 15,155 46,558 35,660 56,930 67,967 304,501 
Total commercial non-mortgage914,922 5,206,634 1,820,957 923,851 759,571 1,222,509 6,090,929 16,939,373 
Current period gross write-offs324 103 101 395 169 2,105 — 3,197 
Asset-based:
Risk rating:
Pass2,000 21,486 — 8,868 10,585 51,172 1,514,179 1,608,290 
Special mention— — — — — 495 66,053 66,548 
Substandard— — — — 1,330 — 84,359 85,689 
Total asset-based2,000 21,486 — 8,868 11,915 51,667 1,664,591 1,760,527 
Current period gross write-offs— — — — 13,189 — — 13,189 
Commercial real estate:
Risk rating:
Pass921,252 3,438,768 1,999,831 1,481,136 1,547,577 3,591,701 139,886 13,120,151 
Special mention4,225 22,788 43,548 42,519 51,379 74,390 4,499 243,348 
Substandard— 515 2,453 212 31,137 101,323 — 135,640 
Total commercial real estate925,477 3,462,071 2,045,832 1,523,867 1,630,093 3,767,414 144,385 13,499,139 
Current period gross write-offs— — — — — 8,950 — 8,950 
Multi-family:
Risk rating:
Pass508,429 1,930,324 1,051,536 449,185 666,060 2,189,520 93,523 6,888,577 
Special mention— 37,686 — 13,243 370 40,800 8,402 100,501 
Substandard— — — 377 — 25,144 — 25,521 
Total multi-family508,429 1,968,010 1,051,536 462,805 666,430 2,255,464 101,925 7,014,599 
Current period gross write-offs— — — — — 1,033 — 1,033 
Equipment financing:
Risk rating:
Pass132,662 367,476 316,521 295,379 277,878 145,561 — 1,535,477 
Special mention— — 170 — 11,583 6,540 — 18,293 
Substandard— 3,183 14,918 12,013 4,527 12,698 — 47,339 
Total equipment financing132,662 370,659 331,609 307,392 293,988 164,799 — 1,601,109 
Current period gross write-offs— — — — — 41 — 41 
Warehouse lending:
Risk rating:
Pass— — — — — — 474,328 474,328 
Total warehouse lending— — — — — — 474,328 474,328 
Current period gross write-offs— — — — — — — — 
Total commercial portfolio$2,483,490 $11,028,860 $5,249,934 $3,226,783 $3,361,997 $7,461,853 $8,476,158 $41,289,075 
Current period gross write-offs$324 $103 $101 $395 $13,358 $12,129 $— $26,410 
48

At December 31, 2022
(In thousands)20222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Commercial non-mortgage:
Pass$5,154,781 $1,952,158 $965,975 $792,977 $593,460 $780,200 $5,670,532 $15,910,083 
Special mention104,277 15,598 21,168 263 14,370 7,770 40,142 203,588 
Substandard28,203 11,704 69,954 36,604 70,634 16,852 41,917 275,868 
Doubtful— — — 1 — — 3,255 3,256 
Total commercial non-mortgage5,287,261 1,979,460 1,057,097 829,845 678,464 804,822 5,755,846 16,392,795 
Asset-based:
Pass19,659 3,901 9,424 14,413 5,163 55,553 1,551,250 1,659,363 
Special mention— — — — — — 80,476 80,476 
Substandard— — — 1,491 — — 80,312 81,803 
Total asset-based19,659 3,901 9,424 15,904 5,163 55,553 1,712,038 1,821,642 
Commercial real estate:
Pass3,420,635 2,246,672 1,556,185 1,605,869 1,058,730 2,681,052 97,832 12,666,975 
Special mention21,878 8,995 7,264 37,570 47,419 66,652 1,000 190,778 
Substandard519 2,459 216 31,163 47,021 57,997 — 139,375 
Doubtful— — — 1 — 34 — 35 
Total commercial real estate3,443,032 2,258,126 1,563,665 1,674,603 1,153,170 2,805,735 98,832 12,997,163 
Multi-family:
Pass1,992,980 1,057,705 507,065 694,066 444,564 1,748,337 51,655 6,496,372 
Special mention37,677 — — 95 40,307 726 8,838 87,643 
Substandard— — 382 — 12,681 24,904 — 37,967 
Total multi-family2,030,657 1,057,705 507,447 694,161 497,552 1,773,967 60,493 6,621,982 
Equipment financing:
Pass388,641 345,792 331,419 308,441 98,874 83,264 — 1,556,431 
Special mention— 185 — 11,965 6,775 25 — 18,950 
Substandard314 16,711 18,436 5,016 5,307 7,228 — 53,012 
Total equipment financing388,955 362,688 349,855 325,422 110,956 90,517 — 1,628,393 
Warehouse lending:
Pass— — — — — — 641,976 641,976 
Total warehouse lending— — — — — — 641,976 641,976 
Total commercial portfolio$11,169,564 $5,661,880 $3,487,488 $3,539,935 $2,445,305 $5,530,594 $8,269,185 $40,103,951 
49

The following tables summarize the amortized cost basis of consumer loans by FICO score and origination year:
At March 31, 2023
(In thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Residential:
Risk rating:
800+$15,014 $681,916 $1,043,662 $468,357 $150,282 $993,219 $— $3,352,450 
740-79969,297 866,867 863,689 308,974 111,803 716,299 — 2,936,929 
670-73918,719 346,423 326,999 91,487 62,585 393,008 — 1,239,221 
580-66963 46,328 52,355 14,004 10,532 125,882 — 249,164 
579 and below— 53,275 3,563 3,963 99,840 63,158 — 223,799 
Total residential103,093 1,994,809 2,290,268 886,785 435,042 2,291,566 — 8,001,563 
Current period gross write-offs— — — — — 211 — 211 
Home equity:
Risk rating:
800+6,211 26,483 35,954 25,557 8,524 63,613 434,492 600,834 
740-7994,088 29,016 31,860 18,237 6,556 38,748 375,534 504,039 
670-7394,421 15,017 17,246 6,262 4,153 34,796 257,878 339,773 
580-669408 2,984 2,504 1,483 903 13,456 74,873 96,611 
579 and below202 419 766 643 529 6,120 30,633 39,312 
Total home equity15,330 73,919 88,330 52,182 20,665 156,733 1,173,410 1,580,569 
Current period gross write-offs— — — — — 108 — 108 
Other consumer:
Risk rating:
800+140 443 207 479 843 266 17,207 19,585 
740-799266 782 2,589 1,332 1,933 570 7,675 15,147 
670-739154 838 409 1,815 3,117 975 8,836 16,144 
580-66958 304 216 297 694 159 1,294 3,022 
579 and below22 120 43 41 127 55 1,010 1,418 
Total other consumer640 2,487 3,464 3,964 6,714 2,025 36,022 55,316 
Current period gross write-offs435 — 3 114 126 101 — 779 
Total consumer portfolio$119,063 $2,071,215 $2,382,062 $942,931 $462,421 $2,450,324 $1,209,432 $9,637,448 
Current period gross write-offs$435 $— $3 $114 $126 $420 $— $1,098 
At December 31, 2022
(In thousands)20222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Residential:
800+$527,408 $954,568 $469,518 $160,596 $28,361 $997,409 $— $3,137,860 
740-799963,026 946,339 311,295 111,913 43,684 689,771 — 3,066,028 
670-739381,515 350,671 103,999 62,365 18,451 384,687 — 1,301,688 
580-66940,959 49,648 14,484 5,836 2,357 138,107 — 251,391 
579 and below52,464 3,693 2,057 84,032 1,299 62,908 — 206,453 
Total residential1,965,372 2,304,919 901,353 424,742 94,152 2,272,882 — 7,963,420 
Home equity:
800+25,475 35,129 25,612 7,578 12,545 55,352 465,318 627,009 
740-79926,743 35,178 17,621 8,111 7,765 32,270 398,692 526,380 
670-73918,396 16,679 8,175 3,635 7,614 30,060 259,646 344,205 
580-6692,848 3,068 1,520 1,456 1,163 13,607 76,614 100,276 
579 and below426 386 651 661 563 4,736 27,814 35,237 
Total home equity73,888 90,440 53,579 21,441 29,650 136,025 1,228,084 1,633,107 
Other consumer:
800+495 218 544 1,045 247 56 19,196 21,801 
740-799888 2,624 1,959 2,494 941 364 12,218 21,488 
670-739977 603 2,480 4,238 1,041 118 6,107 15,564 
580-669211 117 337 801 173 54 2,223 3,916 
579 and below169 101 29 116 36 21 707 1,179 
Total other consumer2,740 3,663 5,349 8,694 2,438 613 40,451 63,948 
Total consumer portfolio$2,042,000 $2,399,022 $960,281 $454,877 $126,240 $2,409,520 $1,268,535 $9,660,475 
50

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 March 31, 2023, and December 31, 2022, the carrying amount of collateral dependent commercial loans and leases totaled $28.1 million and $43.8 million, respectively, and the carrying amount of collateral dependent consumer loans totaled $40.4 million and $45.2 million, respectively. Commercial non-mortgage, asset-based, and equipment financing loans and leases are generally secured by machinery and equipment, inventory, receivables, or other non-real estate assets, whereas commercial real estate, multi-family, residential, home equity, and other consumer loans are secured by real estate. The ACL for collateral dependent loans and leases is individually assessed based on the fair value of the collateral less costs to sell. At March 31, 2023, and December 31, 2022, the collateral value associated with collateral dependent loans and leases totaled $79.1 million and $108.0 million, respectively.
Modifications for Borrowers Experiencing Financial Difficulty
On January 1, 2023, the Company adopted ASU 2022-02, which eliminates the accounting guidance for TDRs and enhances the disclosure requirements for certain loan modifications when a borrower is experiencing financial difficulty. For a description of the Company's accounting policies related to the accounting and reporting of TDRs, for which comparative period information is presented, refer to Note 1: Summary of Significant Accounting Policies of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
In certain circumstances, the Company enters into agreements to modify the terms of loans to borrowers experiencing financial difficulty. A variety of solutions are offered to borrowers experiencing financial difficulty, including loan modifications that may result in principal forgiveness, interest rate reductions, payment delays, term extension, or a combination thereof. The following is a description of each of these types of modifications:
•Principal forgiveness – The outstanding principal balance of a loan may be reduced by a specified amount. Principal forgiveness may occur voluntarily as part of a negotiated agreement with a borrower, or involuntarily through a bankruptcy proceeding.
•Interest rate reductions – Includes modifications where the contractual interest rate of the loan has been reduced.
•Payment delays – Deferral arrangements which allow borrowers to delay a scheduled loan payment to a later date. Deferred loan payments do not affect the original contractual terms of the loan. Modifications that result in only an insignificant payment delay are not disclosed. The Company considers that a three month or less payment delay generally would be considered insignificant.
•Term extensions – Extensions of the original contractual maturity date of the loan.
•Combination – Combination includes loans that have undergone more than one of the above loan modification types.
Significant judgment is required to determine if a borrower is experiencing financial difficulty. These considerations vary by portfolio class. The Company has identified modifications to borrowers experiencing financial difficulty that are included in its disclosures as follows:
•Commercial: The Company evaluates modifications of loans to commercial borrowers that are rated substandard or worse, and includes the modifications in its disclosures to the extent that the modification is considered
other-than-insignificant.
•Consumer: The Company evaluates modifications of loans to consumer borrowers subject to its loss mitigation program and includes them in its disclosures to the extent that the modification is considered other-than-insignificant.
The following table summarizes the amortized cost basis of loans modified to borrowers experiencing financial difficulty, disaggregated by class and type of concession granted during the three months ended March 31, 2023:
(In thousands)Interest Rate ReductionTerm ExtensionCombination - Term Extension and Interest Rate ReductionTotal
% of Total Class (2)
Commercial non-mortgage$7$29,884$—$29,8910.2  %
Commercial real estate—17,116—17,1160.1 
Home equity—5764121— 
Total (1)
$7$47,057$64$47,1280.1  %
(1)The total amortized cost excludes accrued interest receivable of $0.2 million.
(2)Represents the amortized cost of loans modified during the reporting period as a percentage of the period-end loan balance by class.
51

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2023:
Financial Effect
Interest Rate Reduction:
Commercial non-mortgage
Reduced weighted average interest rate by 4.5%
Term Extension:
Commercial non-mortgage
Extended term by a weighted average 0.6 years
Commercial real estate
Extended term by a weighted average 1.0 year
Home equity
Extended term by a weighted average 8.8 years
Combination:
Home equity
Extended term by a weighted average 5.1 years and reduced weighted average interest rate by 1.5%
The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table summarizes the aging of loans that have been modified during the three months ended March 31, 2023:
(In thousands)Current30-59 Days
Past Due		60-89 Days
Past Due		90+ Days
Past Due		Non-AccrualTotal
Commercial non-mortgage$3,562$—$—$—$26,329$29,891
Commercial real estate17,116————17,116
Home equity23———98121
Total$20,701$—$—$—$26,427$47,128
There were no loans made to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2023, and that subsequently defaulted. For the purposes of this disclosure, a payment default is defined as 90 or more days past due and still accruing. Non-accrual loans that are modified to borrowers experiencing financial difficulty remain on non-accrual status until the borrower has demonstrated performance under the modified terms. Commitments to lend additional funds to borrowers experiencing financial difficulty whose loans had been modified were not significant.
52

Troubled Debt Restructurings Prior to the Adoption of ASU 2022-02
The following table summarizes information related to TDRs:
(In thousands)At December 31, 2022
Accrual status$110,868 
Non-accrual status83,954 
Total TDRs$194,822 
Additional funds committed to borrowers in TDR status$1,724 
Specific reserves for TDRs included in the ACL on loans and leases:
Commercial portfolio$14,578 
Consumer portfolio3,559 
The following table summarizes loans and leases modified as TDRs by class and modification type during the three months ended March 31, 2022:
(Dollars in thousands)Number of
Contracts
Recorded
Investment (1)
Commercial non-mortgage
Term extension2$98
Combination - Term extension and interest rate reduction292
Residential
Other (2)
52,985
Home equity
Combination - Term extension and interest rate reduction444
Other (2)
171,242
Total TDRs30$4,461
(1)Post-modification balances approximated pre-modification balances. The aggregate amount of charge-offs due to restructurings was not significant.
(2)Other included covenant modifications, forbearance, discharges under Chapter 7 bankruptcy, or other concessions.
During the three months ended March 31, 2022, the portion of TDRs deemed to uncollectible and charged-off totaled $9.1 million for the commercial portfolio and $0.1 million for the consumer portfolio. There were no significant loans and leases modified as TDRs within the previous twelve months and for which there was a payment default during the three months ended March 31, 2022.
53

Note 5: Transfers and Servicing of Financial Assets
The Company originates and sells residential mortgage loans in the normal course of business, primarily to
government-sponsored entities through established programs and securitizations. Residential mortgage origination fees, adjustments for changes in fair value, and any gain or loss recognized on residential mortgage loans sold are included in Mortgage banking activities on the accompanying Condensed Consolidated Statements of Income.
The following table summarizes information related to mortgage banking activities:
 Three months ended March 31,
(In thousands)20232022
Net gain on sale$77 $397 
Origination fees11 135 
Fair value adjustment(29)(104)
Mortgage banking activities$59 $428 
Proceeds from sale$3,832 $26,753 
Loans sold with servicing rights retained1,229 25,363 
Under certain circumstances, the Company may decide to sell loans that were not originated or otherwise acquired with the intent to sell. During the three months ended March 31, 2023, and 2022, the Company sold commercial loans not originated for sale for proceeds of $106.7 million and $51.1 million, respectively, which resulted in net gains on sale of $0.1 million and
$1.8 million, respectively.
In addition, the Company may retain servicing rights on its residential mortgage loans sold in the normal course of business. At March 31, 2023, and December 31, 2022, the aggregate principal balance of residential mortgage loans serviced for others totaled $1.9 billion and $2.0 billion, respectively. Mortgage servicing rights are held at the lower of cost, net of accumulated amortization, or fair market value, and are included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets. The Company assesses mortgage servicing rights for impairment each quarter and establishes or adjusts the valuation allowance to the extent that amortized cost exceeds the estimated fair market value.
The following table presents the change in the carrying amount for mortgage servicing rights:
Three months ended March 31,
(In thousands)20232022
Balance, beginning of period$9,515 $9,237 
Acquired from Sterling— 859 
Additions15 209 
Amortization(341)(570)
Balance, end of period$9,189 $9,735 
Loan servicing fees, net of mortgage servicing rights amortization, were $1.3 million and $1.1 million for the three months ended March 31, 2023, and 2022, respectively, and are included in Loan and lease related fees on the accompanying Condensed Consolidated Statements of Income. Information regarding the fair value of loans held for sale and mortgage servicing rights can be found within Note 14: Fair Value Measurements.
54

Note 6: Goodwill and Other Intangible Assets
Goodwill
The following table summarizes changes in the carrying amount of goodwill:
(In thousands)At March 31,
2023		At December 31,
2022
Balance, beginning of period$2,514,104 $538,373 
interLINK acquisition143,216 — 
Sterling merger (1)
(25,561)1,939,765 
Bend acquisition (1)
(294)35,966 
Balance, end of period$2,631,465 $2,514,104 
(1)Reflects adjustments recorded within the one-year measurement period, which were identified as a result of extended information gathering and new information that arose from integration activities. The allocation of the purchase price and goodwill calculations for both the Sterling merger and Bend acquisition are final as of March 31, 2023.
Information regarding goodwill by reportable segment can be found within Note 16: Segment Reporting.
Other Intangible Assets
The following table summarizes other intangible assets:
 At March 31, 2023At December 31, 2022
(In thousands)Gross Carrying
Amount		Accumulated
Amortization		Net Carrying
Amount		Gross Carrying
Amount		Accumulated
Amortization		Net Carrying
Amount
Core deposits$146,037 $41,237 $104,800 $146,037 $36,710 $109,327 
Customer relationships (1)
151,000 29,755 121,245 115,000 24,985 90,015 
Non-competition agreement (1)
4,000 200 3,800 — — — 
Total other intangible assets$301,037 $71,192 $229,845 $261,037 $61,695 $199,342 
(1)The increase in the gross carrying amount is attributed to the acquisition of interLINK, in which the Company identified and recorded a $36.0 million intangible asset for broker dealer relationships, which is being amortized on an accelerated basis over an estimated useful life of 10 years, and a $4.0 million non-competition agreement, which is being amortized on a straight-line basis over an estimated useful life of 5 years.
The remaining estimated aggregate future amortization expense for other intangible assets is as follows:
(In thousands)At March 31,
2023
Remainder of 2023$26,710 
202429,618 
202525,956 
202625,565 
202725,565 
Thereafter96,431 

55

Note 7: Deposits
The following table summarizes deposits by type:
(In thousands)At March 31,
2023		At December 31,
2022
Non-interest-bearing:
Demand$12,007,387 $12,974,975 
Interest-bearing:
Health savings accounts8,272,507 7,944,892 
Checking8,560,750 9,237,529 
Money market14,203,858 11,062,652 
Savings7,723,198 8,673,343 
Time deposits4,529,779 4,160,949 
Total interest-bearing$43,290,092 $41,079,365 
Total deposits$55,297,479 $54,054,340 
Time deposits, money market, and interest-bearing checking obtained through brokers (1)
$1,268,506 $1,964,873 
Aggregate amount of time deposit accounts that exceeded the FDIC limit1,457,289 1,894,950 
Demand deposit overdrafts reclassified as loan balances6,832 8,721 
(1)Excludes $2.9 billion of money market sweep deposits received through interLINK at March 31, 2023.
The following table summarizes the scheduled maturities of time deposits:
(In thousands)At March 31,
2023
Remainder of 2023$3,168,801 
20241,132,496 
2025132,543 
202653,306 
202736,616 
Thereafter6,017 
Total time deposits$4,529,779 

Note 8: Borrowings
The following table summarizes securities sold under agreements to repurchase and other borrowings:
At March 31, 2023At December 31, 2022
(Dollars in thousands)Total OutstandingRateTotal OutstandingRate
Securities sold under agreements to repurchase (1)
$306,154 0.11 %$282,005 0.11 %
Federal funds purchased— — 869,825 4.44 
Securities sold under agreements to repurchase and other borrowings$306,154 0.11 %$1,151,830 3.38 %
(1)The Company has the right of offset with respect to all repurchase agreement assets and liabilities. Total securities sold under agreements to repurchase are presented as gross transactions, as only liabilities are outstanding for the periods presented.
Securities sold under agreements to repurchase, all of which have an original maturity of one year or less for the periods presented, are used as a source of borrowed funds and are collateralized by Agency MBS and Corporate debt. The Company's repurchase agreement counterparties are limited to primary dealers in government securities, and commercial and municipal customers through the Corporate Treasury function. The Company may also purchase unsecured term and overnight federal funds to satisfy its short-term liquidity needs.
56

The following table summarizes information for FHLB advances:
At March 31, 2023At December 31, 2022
(Dollars in thousands)Total OutstandingWeighted-
Average Contractual Coupon Rate		Total OutstandingWeighted-
Average Contractual Coupon Rate
Maturing within 1 year$8,550,183 5.18 %$5,450,187 4.40 %
After 1 but within 2 years— — — — 
After 2 but within 3 years— — — — 
After 3 but within 4 years— — — — 
After 4 but within 5 years486 1.35 252 — 
After 5 years9,792 2.07 10,113 2.09 
Total FHLB advances$8,560,461 5.18 %$5,460,552 4.39 %
Aggregate carrying value of assets pledged as collateral$19,778,232 $13,692,379 
Remaining borrowing capacity at FHLB6,509,929 4,291,326 
The Bank may borrow up to the amount of eligible mortgages and securities that have been pledged as collateral to secure FHLB advances, which includes certain residential and commercial real estate loans, home equity lines of credit, CMBS, Agency MBS, Agency CMO, U.S. Treasury notes, and MBS. The Bank was in compliance with its FHLB collateral requirements at both March 31, 2023, and December 31, 2022.
The following table summarizes long-term debt:
(Dollars in thousands)At March 31,
2023		At December 31,
2022
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)
332,119 333,458 
4.000%Subordinated fixed-to-floating rate notes due December 30, 2029274,000 274,000 
3.875%Subordinated fixed-to-floating rate notes due November 1, 2030225,000 225,000 
Junior subordinated debt Webster Statutory Trust I floating-rate notes due September 17, 2033 (2)
77,320 77,320 
Total senior and subordinated debt1,058,439 1,059,778 
Discount on senior fixed-rate notes(701)(756)
Debt issuance cost on senior fixed-rate notes(1,723)(1,824)
Premium on subordinated fixed-to-floating rate notes15,398 15,930 
Long-term debt (1)
$1,071,413 $1,073,128 
(1)The classification of debt as long-term is based on the initial terms of greater than one year as of the date of issuance.
(2)The Company de-designated its fair value hedging relationship on these senior notes in 2020. A basis adjustment of $32.1 million and $33.5 million at March 31, 2023, and December 31, 2022, respectively, is included in the carrying value and is being amortized over the remaining life of the senior notes.
(3)The interest rate on the Webster Statutory Trust I floating-rate notes, which varies quarterly based on 3-month LIBOR plus 2.95%, was 7.86% and 7.69% at March 31, 2023, and December 31, 2022, respectively.
57

Note 9: Accumulated Other Comprehensive Income (Loss), Net of Tax
The following tables summarize the changes in each component of accumulated other comprehensive income (loss), net of tax:
Three months ended March 31, 2023
(In thousands)Securities Available
For Sale		Derivative InstrumentsDefined Benefit Pension and Other Postretirement Benefit PlansTotal
Balance, beginning of period$(631,160)$(8,874)$(44,926)$(684,960)
Other comprehensive income before reclassifications56,635 20,782 3,553 80,970 
Amounts reclassified from accumulated other comprehensive (loss)14,983 592 395 15,970 
Other comprehensive income, net of tax71,618 21,374 3,948 96,940 
Balance, end of period$(559,542)$12,500 $(40,978)$(588,020)
Three months ended March 31, 2022
(In thousands)Securities Available
For Sale		Derivative InstrumentsDefined Benefit Pension and Other Postretirement Benefit PlansTotal
Balance, beginning of period$4,536 $6,070 $(33,186)$(22,580)
Other comprehensive (loss) before reclassifications(244,879)(8,613)(719)(254,211)
Amounts reclassified from accumulated other comprehensive income (loss)— 769 299 1,068 
Other comprehensive (loss), net of tax(244,879)(7,844)(420)(253,143)
Balance, end of period$(240,343)$(1,774)$(33,606)$(275,723)
The following table further summarizes the amounts reclassified from accumulated other comprehensive income (loss):
Accumulated Other Comprehensive
Income (Loss) Components		Three months endedAssociated Line Item on the
Condensed Consolidated
Statements of Income
March 31,
20232022
(In thousands)
Investment securities available-for-sale:
Net holding (losses)$(20,483)$— (Loss) on sale of investment securities
Tax benefit5,500 — Income tax expense
Net of tax$(14,983)$— 
Derivative instruments:
Hedge terminations$(76)$(77)Interest expense
Premium amortization(736)(978)Interest income
Tax benefit220 286 Income tax expense
Net of tax$(592)$(769)
Defined benefit pension and other postretirement benefit plans:
Actuarial net loss amortization$(542)$(411)Other expense
Tax benefit147 112 Income tax expense
Net of tax$(395)$(299)

58

Note 10: Regulatory Capital and Restrictions
Capital Requirements
The Holding Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory actions by regulators that could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and/or the regulatory framework for prompt corrective action (such provisions apply to the Bank only), both the Holding Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated pursuant to regulatory directives. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require the Company to maintain minimum ratios of CET1 capital to total risk-weighted assets (CET1 risk-based capital), Tier 1 capital to total risk-weighted assets (Tier 1 risk-based capital), Total capital to total risk-weighted assets (Total risk-based capital), and Tier 1 capital to average tangible assets (Tier 1 leverage capital), as defined in the regulations. CET1 capital consists of common stockholders’ equity less deductions for goodwill and other intangible assets, and certain deferred tax adjustments. Upon adoption of the Basel III Capital Rules, the Company elected to opt-out of the requirement to include certain components of AOCI in CET1 capital. Tier 1 capital consists of CET1 capital plus preferred stock. Total capital consists of Tier 1 capital and Tier 2 capital, as defined in the regulations. Tier 2 capital includes permissible portions of subordinated debt and the ACL.
At March 31, 2023, and December 31, 2022, both the Holding Company and the Bank were classified as well-capitalized. Management believes that no events or changes have occurred subsequent to year-end that would change this designation.
The following tables provides information on the capital ratios for the Holding Company and the Bank:
At March 31, 2023
 
Actual (1)
Minimum RequirementWell Capitalized
(Dollars in thousands)AmountRatioAmountRatioAmountRatio
Webster Financial Corporation
CET1 risk-based capital$5,796,578 10.42 %$2,503,935 4.5 %$3,616,794 6.5 %
Total risk-based capital7,229,512 12.99 4,451,439 8.0 5,564,299 10.0 
Tier 1 risk-based capital6,080,557 10.93 3,338,580 6.0 4,451,439 8.0 
Tier 1 leverage capital 6,080,557 8.65 2,812,832 4.0 3,516,040 5.0 
Webster Bank
CET1 risk-based capital$6,605,427 11.89 %$2,500,320 4.5 %$3,611,573 6.5 %
Total risk-based capital7,162,664 12.89 4,445,013 8.0 5,556,266 10.0 
Tier 1 risk-based capital6,605,427 11.89 3,333,760 6.0 4,445,013 8.0 
Tier 1 leverage capital 6,605,427 9.40 2,810,676 4.0 3,513,345 5.0 
At December 31, 2022
 
Actual (1)
Minimum RequirementWell Capitalized
(Dollars in thousands)AmountRatioAmountRatioAmountRatio
Webster Financial Corporation
CET1 risk-based capital$5,822,369 10.71 %$2,446,344 4.5 %$3,533,608 6.5 %
Total risk-based capital7,203,029 13.25 4,349,056 8.0 5,436,320 10.0 
Tier 1 risk-based capital6,106,348 11.23 3,261,792 6.0 4,349,056 8.0 
Tier 1 leverage capital 6,106,348 8.95 2,730,212 4.0 3,412,765 5.0 
Webster Bank
CET1 risk-based capital$6,661,504 12.28 %$2,442,058 4.5 %$3,527,417 6.5 %
Total risk-based capital7,165,935 13.20 4,341,437 8.0 5,426,796 10.0 
Tier 1 risk-based capital6,661,504 12.28 3,256,078 6.0 4,341,437 8.0 
Tier 1 leverage capital 6,661,504 9.77 2,727,476 4.0 3,409,345 5.0 
(1)In accordance with regulatory capital rules, the Company elected an option to delay the estimated impact of the adoption of CECL on its regulatory capital over a two-year deferral period, which ended on January 1, 2022, and a subsequent three-year transition period ending on December 31, 2024. During the three-year transition period, regulatory capital ratios will phase out the aggregate amount of the regulatory capital benefit provided from the delayed CECL adoption in the initial two years. For 2022, 2023, and 2024, the Company is allowed 75%, 50%, and 25%, respectively, of the regulatory capital benefit as of December 31, 2021, with full absorption occurring in 2025.
59

Dividend Restrictions
The Holding Company is dependent upon dividends from the Bank to provide funds for the payment of dividends to stockholders and for other cash requirements. Dividends paid by the Bank are subject to various federal and state regulatory limitations. Express approval by the OCC is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels or if the amount would exceed net income for that year combined with undistributed net income for the preceding two years. The Bank paid the Holding Company $150.0 million in dividends during the three months ended March 31, 2023, for which no express approval from the OCC was required. No dividends were paid by the Bank to the Holding Company during the three months ended March 31, 2022.
Cash Restrictions
The Bank is required under Federal Reserve regulations to maintain cash reserve balances in the form of vault cash or deposits held at a FRB to ensure that it is able to meet customer demands. The reserve requirement ratio is subject to adjustment as economic conditions warrant. Effective March 26, 2020, the Federal Reserve reset the requirement to zero in order to address liquidity concerns resulting from the COVID-19 pandemic. Pursuant to this action, the Bank has not been required to hold cash reserve balances since that date.
Note 11: Variable Interest Entities
The Company has an investment interest in the following entities that each meet the definition of a variable interest entity. Information regarding the Company's consolidation of variable interest entities can be found within Note 1: Summary of Significant Accounting Policies in the Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
Consolidated
Rabbi Trusts. The Company established a Rabbi Trust to meet its obligations due under the Webster Bank Deferred Compensation Plan for Directors and Officers and to mitigate expense volatility. The funding of the Rabbi Trust and the discontinuation of the Webster Bank Deferred Compensation Plan for Directors and Officers occurred during 2012. In connection with the Sterling merger in 2022, the Company acquired assets held in a separate Rabbi Trust that had been previously established to fund obligations due under the Greater New York Savings Bank Directors' Retirement Plan.
Investments held in the Rabbi Trusts consist primarily of mutual funds that invest in equity and fixed income securities. The Company is considered the primary beneficiary of these Rabbi Trusts as it has the power to direct the activities of the Rabbi Trusts that most significantly impact its economic performance and it has the obligation to absorb losses and/or the right to receive benefits of the Rabbi Trusts that could potentially be significant.
The Rabbi Trusts' assets are included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets. Investment earnings and any changes in fair value are included in Other income on the accompanying Condensed Consolidated Statements of Income. Additional information regarding the Rabbi Trusts' investments can be found within Note 14: Fair Value Measurements.
Non-Consolidated
Low-Income Housing Tax Credit Investments. The Company makes non-marketable equity investments in entities that sponsor affordable housing and other community development projects that qualify for the LIHTC Program pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is not only to assist the Bank in meeting its responsibilities under the CRA, but also to provide a return, primarily through the realization of tax benefits. While the Company's investment in an entity may exceed 50% of its outstanding equity interests, the entity is not consolidated as the Company is not the primary beneficiary. The Company has determined that it is not the primary beneficiary due to its inability to direct the activities that most significantly impact economic performance and the Company does not have the obligation to absorb losses and/or the right to receive benefits. The Company applies the proportional amortization method to subsequently measure its investments in qualified affordable housing projects.
The following table summarizes the Company's LIHTC investments and related unfunded commitments:
(In thousands)March 31, 2023December 31, 2022
Gross investment in LIHTC investments$798,085 $797,453 
Accumulated amortization(90,902)(69,424)
Net investment in LIHTC investments$707,183 $728,029 
Unfunded commitments for LIHTC investments$329,023 $335,959 
60

The aggregate carrying value of the Company's LIHTC investments is included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets, and represents the Company's maximum exposure to loss. The related unfunded commitments are included in Accrued expenses and other liabilities on the accompanying Condensed Consolidated Balance Sheets. There were no commitments approved to fund LIHTC investments during the three months ended March 31, 2023, or 2022.
Webster Statutory Trust. The Company owns all the outstanding common stock of Webster Statutory Trust, a financial vehicle that has issued, and in the future may issue, trust preferred securities. The Company is not the primary beneficiary of Webster Statutory Trust. Webster Statutory Trust's only assets are junior subordinated debentures that are issued by the Company, which were acquired using the proceeds from the issuance of trust preferred securities and common stock. The junior subordinated debentures are included in Long-term debt on the accompanying Condensed Consolidated Balance Sheets, and the related interest expense is included in Long-term debt on the accompanying Condensed Consolidated Statements of Income. Additional information regarding these junior subordinated debentures can be found within Note 8: Borrowings.
Other Non-Marketable Investments. The Company invests in alternative investments comprising interests in non-public entities that cannot be redeemed since the underlying equity is distributed as the investment is liquidated. The ultimate timing and amount of these distributions cannot be predicted with reasonable certainty. For each of these alternative investments that is classified as a variable interest entity, the Company has determined that it is not the primary beneficiary due to its inability to direct the activities that most significantly impact economic performance. The aggregate carrying value of the Company's other non-marketable investments was $165.1 million and $144.9 million at March 31, 2023, and December 31, 2022, respectively, which is included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets, and its maximum exposure to loss, including unfunded commitments, was $273.0 million and $243.9 million, respectively. Additional information regarding the fair value of other non-marketable investments can be found within
Note 14: Fair Value Measurements.
Note 12: Earnings Per Common Share
The following table summarizes the calculation of basic and diluted earnings per common share:
 Three months ended March 31,
(In thousands, except per share data)20232022
Net income$221,004 $(16,747)
Less: Preferred stock dividends4,163 3,431 
Net income available to common stockholders216,841 (20,178)
Less: Earnings allocated to participating securities1,845 — 
Earnings applicable to common stockholders$214,996 $(20,178)
Weighted-average common shares outstanding - basic172,766 147,394 
Add: Effect of dilutive stock options and restricted stock117 — 
Weighted-average common shares outstanding - diluted172,883 147,394 
Basic earnings per common share$1.24 $(0.14)
Diluted earnings per common share1.24 (0.14)
Earnings per common share is calculated under the two-class method in which all earnings (distributed and undistributed) are allocated to common stock and participating securities based on their respective rights to receive dividends. The Company may grant restricted stock, restricted stock units, non-qualified stock options, incentive stock options, or stock appreciation rights to certain employees and directors under its stock-based compensation programs, which entitle recipients to receive
non-forfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock. These unvested awards meet the definition of participating securities.
Potential common shares from performance-based restricted stock that were not included in the computation of dilutive earnings per common share because they were anti-dilutive under the treasury stock method were 85,033 and 341,904 for the three months ended March 31, 2023, and 2022, respectively.
61

Note 13: Derivative Financial Instruments
Derivative Positions and Offsetting
Derivatives Designated as Hedging Instruments. Interest rate swaps allow the Company to change the fixed or variable nature of an interest rate without the exchange of the underlying notional amount. Certain pay fixed/receive variable interest rate swaps are designated as cash flow hedges to effectively convert variable-rate debt into fixed-rate debt, whereas certain receive fixed/pay variable interest rate swaps are designated as fair value hedges to effectively convert fixed-rate long-term debt into variable-rate debt. Certain purchased options are also designated as cash flow hedges. Purchased options allow the Company to limit the potential adverse impact of variable interest rates by establishing a cap rate or floor rate in exchange for an upfront premium. The purchased options designated as cash flow hedges represent interest rate caps where payment is received from the counterparty if interest rates rise above the cap rate, and interest rate floors where payment is received from the counterparty when interest rates fall below the floor rate.
Derivatives Not Designated as Hedging Instruments. The Company also enters into other derivative transactions to manage economic risks, but does not designate the instruments in hedge relationships. In addition, the Company enters into derivative contracts to accommodate customer needs. Derivative contracts with customers are offset with dealer counterparty transactions structured with matching terms to ensure minimal impact on earnings.
The following tables present the notional amounts and fair values, including accrued interest, of derivative positions:
At March 31, 2023
Asset DerivativesLiability Derivatives
(In thousands)Notional AmountsFair ValueNotional AmountsFair Value
Designated as hedging instruments:
Interest rate derivatives (1)
$3,750,000 $25,892 $1,750,000 $5,493 
Not designated as hedging instruments:
Interest rate derivatives (1)
7,417,679 219,149 7,411,878 323,123 
Mortgage banking derivatives (2)
1,973 16 — — 
Other (3)
169,276 171 659,603 651 
Total not designated as hedging instruments7,588,928 219,336 8,071,481 323,774 
Gross derivative instruments, before netting$11,338,928 245,228 $9,821,481 329,267 
Less: Master netting agreements30,506 30,506 
Cash collateral181,853 400 
Total derivative instruments, after netting$32,869 $298,361 
At December 31, 2022
Asset DerivativesLiability Derivatives
(In thousands)Notional AmountsFair ValueNotional AmountsFair Value
Designated as hedging instruments:
Interest rate derivatives (1)
$1,350,000 $1,515 $1,750,000 $9,632 
Not designated as hedging instruments:
Interest rate derivatives (1)
7,024,507 221,225 7,022,844 403,952 
Mortgage banking derivatives (2)
3,283 32 — — 
Other (3)
161,934 134 606,478 915 
Total not designated as hedging instruments7,189,724 221,391 7,629,322 404,867 
Gross derivative instruments, before netting$8,539,724 222,906 $9,379,322 414,499 
Less: Master netting agreements16,129 16,129 
Cash collateral184,095 — 
Total derivative instruments, after netting$22,682 $398,370 
(1)Balances related to clearing houses are presented as a single unit of account. In accordance with their rule books, clearing houses legally characterize variation margin payments as settlement of derivatives rather than collateral against derivative positions. At March 31, 2023, and December 31, 2022, notional amounts of interest rate swaps cleared through clearing houses include $2.4 billion and $2.7 billion for asset derivatives, respectively, and $1.9 million and zero for liability derivatives, respectively. The related fair values approximate zero.
(2)Notional amounts related to residential loans exclude approved floating rate commitments of $3.8 million and $2.4 million at March 31, 2023, and December 31, 2022, respectively.
(3)Other derivatives include foreign currency forward contracts related to lending arrangements, a Visa equity swap transaction, and risk participation agreements. Notional amounts of risk participation agreements include $154.9 million and $125.6 million for asset derivatives and $589.7 million and $559.2 million for liability derivatives at March 31, 2023, and December 31, 2022, respectively, which 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 March 31, 2023
(In thousands)Gross Amount RecognizedDerivative Offset AmountCash Collateral Received/PledgedNet Amount PresentedAmounts Not Offset
Asset derivatives$220,259 $30,506 $181,853 $7,900 $8,270 
Liability derivatives31,360 30,506 400 454 5,032 
At December 31, 2022
(In thousands)Gross Amount RecognizedDerivative Offset AmountCash Collateral Received/PledgedNet Amount PresentedAmounts Not Offset
Asset derivatives$217,246 $16,129 $184,095 $17,022 $17,392 
Liability derivatives16,129 16,129 — — 1,545 
Derivative Activity
The following table summarizes the income statement effect of derivatives designated as hedging instruments:
Recognized InThree months ended March 31,
(In thousands)Net Interest Income20232022
Fair value hedges:
Recognized on derivativesDeposits$(10,235)$— 
Recognized on hedged itemsDeposits10,427 — 
Net recognized on fair value hedges$(192)$— 
Cash flow hedges:
Interest rate derivativesLong-term debt$76 $76 
Interest rate derivativesInterest and fees on loans and leases(736)2,559 
Net recognized on cash flow hedges$(812)$2,483 
The following table summarizes information related to fair value hedging adjustments:
Condensed Consolidated Balance Sheet Line Item in Which Hedged Item is LocatedCarrying Amount of Hedged ItemCumulative Amount of Fair Value Hedging Adjustment Included in Carrying Amount
(In thousands)At March 31,
2023		At December 31,
2022		At March 31,
2023		At December 31,
2022
Deposits$410,254 $— $10,254 $— 
Long-term debt (1)
332,119 333,458 32,119 33,458 
(1)The Company de-designated its fair value hedging relationship on its long-term debt in 2020. The basis adjustment included in the carrying amount is being amortized into interest expense over the remaining life of the long-term debt.
The following table summarizes the income statement effect of derivatives not designated as hedging instruments:
Recognized InThree months ended March 31,
(In thousands)Non-interest Income20232022
Interest rate derivativesOther income$(3,687)$6,445 
Mortgage banking derivativesMortgage banking activities(16)(49)
OtherOther income(735)397 
Total not designated as hedging instruments$(4,438)$6,793 
Time-value premiums, which are amortized on a straight-line basis, are excluded from the assessment of hedge effectiveness for purchased options designated as cash flow hedges. At March 31, 2023, the remaining unamortized balance of time-value premiums was $2.1 million. Over the next twelve months, an estimated decrease to interest income of $9.5 million will be reclassified from AOCI relating to cash flow hedge gain/loss, and an estimated increase to interest expense of $0.3 million will be reclassified from AOCI relating to cash flow hedge terminations. At March 31, 2023, the remaining unamortized loss on terminated cash flow hedges was $0.3 million. The maximum length of time over which forecasted transactions are hedged is 4.9 years.
Additional information regarding cash flow hedge activity impacting AOCI and the related amounts reclassified to net income can be found within Note 9: Accumulated Other Comprehensive Income (Loss), Net of Tax.

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Derivative Exposure. At March 31, 2023, the Company had $38.7 million in initial margin collateral posted at clearing houses. In addition, $187.3 million of cash collateral received is included in Cash and due from banks on the accompanying Condensed Consolidated Balance Sheets. The Company regularly evaluates the credit risk of its derivative customers, taking into account the likelihood of default, net exposures, and remaining contractual life, among other related factors. Credit risk exposure is mitigated as transactions with customers are generally secured by the same collateral of the underlying transactions. Current net credit exposure relating to interest rate derivatives with the Bank's customers was $24.9 million at March 31, 2023. In addition, the Company monitors potential future exposure, representing its best estimate of exposure to remaining contractual maturity. The potential future exposure relating to interest rate derivatives with the Bank's customers totaled $97.8 million at
March 31, 2023. The Company has incorporated a valuation adjustment to reflect non-performance risk in the fair value measurement of its derivatives, which totaled $5.3 million and $8.4 million at March 31, 2023, and December 31, 2022, respectively. Various factors impact changes in the valuation adjustment over time, such as changes in the credit spreads of the contracted parties, and changes in market rates and volatilities, which affect the total expected exposure of the derivative instruments.
Note 14: Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The determination of fair value may require the use of estimates when quoted market prices are not available. Fair value estimates made at a specific point in time are based on management’s judgments regarding future expected losses, current economic conditions, the risk characteristics of each financial instrument, and other subjective factors that cannot be determined with precision.
The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels within the fair value hierarchy are as follows:
•Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date.
•Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, rate volatility, prepayment speeds, and credit ratings), or inputs that are derived principally from or corroborated by market data, correlation, or other means.
•Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. This includes certain pricing models or other similar techniques that require significant management judgment or estimation.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Available-for-Sale Securities. When unadjusted quoted prices are available in an active market, the Company classifies its available-for-sale investment securities within Level 1 of the fair value hierarchy. U.S. Treasury notes have a readily determinable fair value, and accordingly, are classified within Level 1 of the fair value hierarchy.
When quoted market prices are not available, the Company employs an independent pricing service that utilizes matrix pricing to calculate fair value. These fair value measurements consider observable data, such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayments speeds, credit information, and the respective terms and conditions for debt instruments. Management maintains procedures to monitor the pricing service's results and has a process in place to challenge their valuations and methodologies that appear unusual or unexpected. Government agency debentures, Municipal bonds and notes, Agency CMO, Agency MBS, Agency CMBS, CMBS, CLO, Corporate debt, Private label MBS, and Other available-for-sale securities are classified within Level 2 of the fair value hierarchy.
Derivative Instruments. The fair values presented for derivative instruments include any accrued interest. Foreign exchange contracts are valued based on unadjusted quoted prices in active markets, and accordingly, are classified within Level 1 of the fair value hierarchy. Except for mortgage banking derivatives, all other derivative instruments are valued using third-party valuation software, which considers the present value of cash flows discounted using observable forward rate assumptions. The resulting fair value is then validated against valuations performed by independent third parties. These derivative instruments are classified within Level 2 of the fair value hierarchy.
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Mortgage Banking Derivatives. The Company uses forward sales of mortgage loans and mortgage-backed securities to manage the risk of loss associated with its mortgage loan commitments and mortgage loans held for sale. Prior to closing and funding certain single-family residential mortgage loans, an interest rate lock commitment is generally extended to the borrower. During this in-between time period, the Company is subject to the risk that market interest rates may change. If rates rise, investors generally will pay less to purchase mortgage loans, which would result in a reduction in the gain on sale of the loans, or possibly a loss. In an effort to mitigate this risk, forward delivery sales commitments are established in which the Company agrees to either deliver whole mortgage loans to various investors or issue mortgage-backed securities. The fair value of mortgage banking derivatives is determined based on current market prices for similar assets in the secondary market. Accordingly, mortgage banking derivatives are classified within Level 2 of the fair value hierarchy.
Originated Loans Held For Sale. The Company has elected to measure originated loans held for sale at fair value under the fair value option per ASC Topic 825, Financial Instruments. Electing to measure originated loans held for sale at fair value reduces certain timing differences and better reflects the price the Company would expect to receive from the sale of these loans. The fair value of originated loans held for sale is based on quoted market prices of similar loans sold in conjunction with securitization transactions. Accordingly, originated loans held for sale are classified within Level 2 of the fair value hierarchy.
The following table compares the fair value to the unpaid principal balance of originated loans held for sale:
At March 31, 2023At December 31, 2022
(In thousands)Fair ValueUnpaid Principal BalanceDifferenceFair ValueUnpaid Principal BalanceDifference
Originated loans held for sale$811 $684 $127 $1,991 $1,631 $360 
Rabbi Trust Investments. Investments held in each of the Company's Rabbi Trusts consist primarily of mutual funds that invest in equity and fixed income securities. Shares of these mutual funds are valued based on the NAV as reported by the trustee of the funds, which represents quoted prices in active markets. The Company has elected to measure the Rabbi Trusts' investments at fair value. Accordingly, the Rabbi Trusts' investments are classified within Level 1 of the fair value hierarchy. At both
March 31, 2023, and December 31, 2022, the total cost basis of the investments held in the Rabbi Trusts was $10.0 million.
Alternative Investments. Equity investments have a readily determinable fair value when unadjusted quoted prices are available in an active market for identical assets. Accordingly, these alternative investments are classified within Level 1 of the fair value hierarchy. At March 31, 2023, and December 31, 2022, equity investments with a readily determinable fair value had a total carrying amount of $0.5 million and $0.4 million, respectively, with no remaining unfunded commitment. During the three months ended March 31, 2023, there were total write-ups in fair value of $0.1 million associated with these alternative investments.
Equity investments that do not have a readily determinable fair value may qualify for the NAV practical expedient if they meet certain requirements. The Company's alternative investments measured at NAV consist of investments in non-public entities that cannot be redeemed since investments are distributed as the underlying equity is liquidated. Alternative investments measured at NAV are not classified within the fair value hierarchy. At March 31, 2023, and December 31, 2022, these alternative investments had a total carrying amount of $27.0 million and $89.2 million, respectively, and a remaining unfunded commitment of $28.5 million and $82.7 million, respectively.
Contingent Consideration. The Company recorded $16.0 million of contingent consideration at fair value related to two earn-out agreements associated with the acquisition of interLINK on January 11, 2023. The terms of the purchase agreement specified that the seller would receive earn-outs based on the ability of the Company to: (i) re-sign the existing broker dealers under contract, and (ii) generate $2.5 billion in new broker dealer deposit programs within three years of the acquisition date. The estimated fair values of the contingent consideration liabilities are measured on a recurring basis and determined using an income approach considering management’s evaluation of the probability of achievement, forecasted achievement date (payment term), and a discount rate equivalent to the counterparty cost of debt. These significant inputs, which are the responsibility of management and were initially calculated with the assistance of a third-party valuation specialist, are not observable and accordingly, are classified within Level 3 of the fair value hierarchy.
The following table summarizes the unobservable inputs used to derive the estimated fair value of the Company’s contingent consideration liabilities at March 31, 2023 (dollars in thousands):
AgreementMaximum AmountProbability of AchievementPayment Term
(in years)		Discount RateFair Value
(i) Re-sign broker dealers$4,82699.0 %0.225.50 %$4,798
(ii) Deposit program growth$12,500100.0 %1.975.50 %$11,241

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Contingent consideration liabilities are included within Accrued expenses and other liabilities on the accompanying Condensed Consolidated Balance Sheets. Any fair value adjustments to contingent consideration liabilities are included in Other expense on the accompanying Condensed Consolidated Statements of Income.
The following tables summarize the fair values of assets and liabilities measured at fair value on a recurring basis:
 At March 31, 2023
(In thousands)Level 1Level 2Level 3Total
Financial Assets:
Available-for-sale securities:
U.S. Treasury notes$386,772 $— $— $386,772 
Government agency debentures— 262,342 — 262,342 
Municipal bonds and notes— 1,645,228 — 1,645,228 
Agency CMO— 57,462 — 57,462 
Agency MBS— 2,230,850 — 2,230,850 
Agency CMBS— 1,635,252 — 1,635,252 
CMBS— 902,058 — 902,058 
Corporate debt— 625,523 — 625,523 
Private label MBS— 44,262 — 44,262 
Other— 9,228 — 9,228 
Total available-for-sale securities386,772 7,412,205 — 7,798,977 
Gross derivative instruments, before netting (1)
82 245,146 — 245,228 
Originated loans held for sale— 811 — 811 
Investments held in Rabbi Trusts11,992 — — 11,992 
Alternative investments (2)
476 — — 27,486 
Total financial assets$399,322 $7,658,162 $— $8,084,494 
Financial Liabilities:
Gross derivative instruments, before netting (1)
$557 $328,710 $— $329,267 
Contingent consideration— — 16,039 16,039 
Total financial liabilities$557 $328,710 $16,039 $345,306 
 At December 31, 2022
(In thousands)Level 1Level 2Level 3Total
Financial Assets:
Available-for-sale securities:
U.S. Treasury notes$717,040 $— $— $717,040 
Government agency debentures— 258,374 — 258,374 
Municipal bonds and notes— 1,633,202 — 1,633,202 
Agency CMO— 59,965 — 59,965 
Agency MBS— 2,158,024 — 2,158,024 
Agency CMBS— 1,406,486 — 1,406,486 
CMBS— 896,640 — 896,640 
CLO— 2,107 — 2,107 
Corporate debt— 704,412 — 704,412 
Private label MBS— 44,249 — 44,249 
Other— 12,198 — 12,198 
Total available-for-sale securities717,040 7,175,657 — 7,892,697 
Gross derivative instruments, before netting (1)
79 222,827 — 222,906 
Originated loans held for sale— 1,991 — 1,991 
Investments held in Rabbi Trusts12,103 — — 12,103 
Alternative investments (2)
430 — — 89,678 
Total financial assets$729,652 $7,400,475 $— $8,219,375 
Financial Liabilities:
Gross derivative instruments, before netting (1)
$843 $413,656 $— $414,499 
(1)Additional information regarding the impact of netting derivative assets and derivative liabilities, as well as the impact from offsetting cash collateral paid to the same derivative counterparties, can be found within Note 13: Derivative Financial Instruments.
(2)Certain alternative investments are recorded at NAV. Assets measured at NAV are not classified within the fair value hierarchy.
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Assets Measured at Fair Value on a Non-Recurring Basis
The Company measures certain assets at fair value on a non-recurring basis. The following is a description of the valuation methodologies used for assets measured at fair value on a non-recurring basis.
Alternative Investments. The measurement alternative has been elected for alternative investments without readily determinable fair values that do not qualify for the NAV practical expedient. The measurement alternative requires investments to be measured at cost minus impairment, if any, plus or minus adjustments resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. Accordingly, these alternative investments are classified within Level 2 of the fair value hierarchy. At March 31, 2023, and December 31, 2022, the carrying amount of these alternative investments was $46.1 million and $42.8 million, respectively, of which none and $5.9 million, respectively, were considered to be measured at fair value.
Loans Transferred to Held for Sale. Once a decision has been made to sell loans not previously classified as held for sale, these loans are transferred into the held for sale category and carried at the lower of cost or fair value, less estimated costs to sell. At the time of transfer into held for sale classification, any amount by which cost exceeds fair value is accounted for as a valuation allowance. This activity generally pertains to loans with observable inputs, and therefore, are classified within Level 2 of the fair value hierarchy. However, should these loans include adjustments for changes in loan characteristics based on unobservable inputs, the loans would then be classified within Level 3 of the fair value hierarchy. At March 31, 2023, and December 31, 2022, there were $209.9 million and zero loans that were transferred to held for sale on the Condensed Consolidated Balance Sheet.
Collateral Dependent Loans and Leases. Loans and leases for which repayment is substantially expected to be provided through the operation or sale of collateral are considered collateral dependent, and are valued based on the estimated fair value of the collateral, less estimated costs to sell at the reporting date, using customized discounting criteria. Accordingly, collateral dependent loans and leases are classified within Level 3 of the fair value hierarchy.
Other Real Estate Owned and Repossessed Assets. OREO and repossessed assets are held at the lower of cost or fair value and are considered to be measured at fair value when recorded below cost. The fair value of OREO is calculated using independent appraisals or internal valuation methods, less estimated selling costs, and may consider available pricing guides, auction results, and price opinions. Certain repossessed assets may also require assumptions about factors that are not observable in an active market when determining fair value. Accordingly, OREO and repossessed assets are classified within Level 3 of the fair value hierarchy. At March 31, 2023, and December 31, 2022, the total book value of OREO and repossessed assets was $1.5 million and $2.3 million, respectively. In addition, the amortized cost of consumer loans secured by residential real estate property that were in process of foreclosure at March 31, 2023, was $16.4 million.
Estimated Fair Values of Financial Instruments and Mortgage Servicing Assets
The Company is required to disclose the estimated fair values of certain financial instruments and mortgage servicing rights. The following is a description of the valuation methodologies used to estimate fair value for those assets and liabilities.
Cash and Cash Equivalents. Given the short time frame to maturity, the carrying amount of cash and cash equivalents, which comprises cash and due from banks and interest-bearing deposits, approximates fair value. Cash and cash equivalents are classified within Level 1 of the fair value hierarchy.
Held-to-Maturity Securities. When quoted market prices are not available, the Company employs an independent pricing service that utilizes matrix pricing to calculate fair value. These fair value measurements consider observable data, such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the respective terms and conditions for debt instruments. Management maintains procedures to monitor the pricing service's results and has a process in place to challenge their valuations and methodologies that appear unusual or unexpected. Held-to-maturity securities, which include Agency CMO, Agency MBS, Agency CMBS, Municipal bonds and notes, and CMBS, are classified within Level 2 of the fair value hierarchy.
Loans and Leases, net. Except for collateral dependent loans and leases, the fair value of loans and leases held for investment is estimated using a discounted cash flow methodology, based on future prepayments and market interest rates inclusive of an illiquidity premium for comparable loans and leases. The associated cash flows are then adjusted for associated credit risks and other potential losses, as appropriate. Loans and leases are classified within Level 3 of the fair value hierarchy.
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Mortgage Servicing Rights. Mortgage servicing rights are initially measured at fair value and subsequently measured using the amortization method. The Company assesses mortgage servicing rights for impairment each quarter and establishes or adjusts the valuation allowance to the extent that amortized cost exceeds the estimated fair market value. Fair value is calculated as the present value of estimated future net servicing income and relies on market based assumptions for loan prepayment speeds, servicing costs, discount rates, and other economic factors. Accordingly, the primary risk inherent in valuing mortgage servicing rights is the impact of fluctuating interest rates on the related servicing revenue stream. Mortgage servicing rights are classified within Level 3 of the fair value hierarchy.
Deposit Liabilities. The fair value of deposit liabilities, which comprises demand deposits, interest-bearing checking, savings, health savings, and money market accounts, reflects the amount payable on demand at the reporting date. Deposit liabilities are classified within Level 2 of the fair value hierarchy.
Time Deposits. The fair value of fixed-maturity certificates of deposit is estimated using rates that are currently offered for deposits with similar remaining maturities. Time deposits are classified within Level 2 of the fair value hierarchy.
Securities Sold Under Agreements to Repurchase and Other Borrowings. The fair value of securities sold under agreements to repurchase and other borrowings that mature within 90 days approximates their carrying value. The fair value of securities sold under agreements to repurchase and other borrowings that mature after 90 days is estimated using a discounted cash flow methodology based on current market rates and adjusted for associated credit risks, as appropriate. Securities sold under agreements to repurchase and other borrowings are classified within Level 2 of the fair value hierarchy.
Federal Home Loan Bank Advances and Long-Term Debt. The fair value of FHLB advances and long-term debt is estimated using a discounted cash flow methodology in which discount rates are matched with the time period of the expected cash flows and adjusted for associated credit risks, as appropriate. FHLB advances and long-term debt are classified within Level 2 of the fair value hierarchy.
The following table summarizes the carrying amounts, estimated fair values, and classifications within the fair value hierarchy of selected financial instruments and mortgage servicing rights:
 At March 31, 2023At December 31, 2022
(In thousands)Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
Assets:
Level 1
Cash and cash equivalents$2,434,071 $2,434,071 $839,943 $839,943 
Level 2
Held-to-maturity investment securities7,063,223 6,320,682 6,564,697 5,761,453 
Level 3
Loans and leases, net50,312,609 48,825,894 49,169,685 47,604,463 
Mortgage servicing assets9,189 26,959 9,515 27,043 
Liabilities:
Level 2
Deposit liabilities$50,767,700 $50,767,700 $49,893,391 $49,893,391 
Time deposits4,529,779 4,471,757 4,160,949 4,091,979 
Securities sold under agreements to repurchase and other borrowings306,154 306,113 1,151,830 1,151,797 
FHLB advances8,560,461 8,560,329 5,460,552 5,459,218 
Long-term debt (1)
1,071,413 1,005,178 1,073,128 1,001,779 
(1)Any unamortized premiums/discounts, debt issuance costs, or basis adjustments to long-term debt, as applicable, are excluded from the determination of fair value.
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Note 15: Retirement Benefit Plans
Defined Benefit Pension and Other Postretirement Benefits
The following tables summarize the components of net periodic benefit cost (income):
Three months ended March 31,
20232022
(In thousands)PensionSERPOPEBPensionSERPOPEB
Service cost$— $— $7 $— $— $6 
Interest cost2,211 67 380 1,377 15 144 
Expected return on plan assets(2,699)— — (3,669)— — 
Amortization of actuarial loss (gain)1,216 1 (675)422 7 (18)
Net periodic benefit cost (income)$728 $68 $(288)$(1,870)$22 $132 
The components of net periodic benefit cost (income) are included in Other expense on the accompanying Condensed Consolidated Statements of Income. The weighted-average expected long-term rate of return on plan assets for the three months ended March 31, 2023, was 5.50%, as determined at the beginning of the year.
Note 16: Segment Reporting
The Company's operations are organized into three reportable segments that represent its primary businesses: Commercial Banking, HSA Bank, and Consumer Banking. These segments reflect how executive management responsibilities are assigned, how discrete financial information is evaluated, the type of customer served, and how products and services are provided. Certain Treasury activities, including the operations of interLINK, along with the amounts required to reconcile profitability metrics to those reported in accordance with GAAP, are included in the Corporate and Reconciling category.
In connection with the acquisition of interLINK on January 11, 2023, the $143.2 million of preliminary goodwill recorded has been allocated entirely to Commercial Banking. In addition, as previously discussed in Note 2: Mergers and Acquisitions and
Note 6: Goodwill and Other Intangible Assets, the allocation of the purchase price for both the Sterling merger and Bend acquisition are final as of March 31, 2023. Accordingly, of the total $1.9 billion in goodwill recorded in connection with the Sterling merger, $1.7 billion and $0.2 billion has been allocated to Commercial Banking and Consumer Banking, respectively. The $35.7 million of goodwill recorded in connection with the Bend acquisition has been allocated entirely to HSA Bank.
Segment Reporting Methodology
The Company uses an internal profitability reporting system to generate information by reportable segment, which is based on a series of management estimates for funds transfer pricing, and allocations for non-interest expense, provision for credit losses, income taxes, and equity capital. These estimates and allocations, certain of which are subjective in nature, are periodically reviewed and refined. Changes in estimates and allocations that affect the results of any reportable segment do not affect the consolidated financial position or results of operations of the Company as a whole. The full profitability measurement reports, which are prepared for each reportable segment, reflect non-GAAP reporting methodologies. The differences between full profitability and GAAP results are reconciled in the Corporate and Reconciling category.
The Company allocates interest income and interest expense to each business through an internal matched maturity FTP process. The goal of the FTP allocation is to encourage loan and deposit growth consistent with the Company’s overall profitability objectives. The FTP process considers the specific interest rate risk and liquidity risk of financial instruments and other assets and liabilities in each line of business. Loans are assigned an FTP rate for funds used and deposits are assigned an FTP rate for funds provided. The allocation considers the origination date and the earlier of the maturity date or the repricing date of a financial instrument to assign an FTP rate for loans and deposits originated each day. The FTP process transfers the corporate interest rate risk exposure to the Treasury function included within the Corporate and Reconciling category where such exposures are centrally managed.
The Company allocates a majority of non-interest expense to each reportable segment using an activity and driver-based costing process. Costs, including shared services and back-office support areas, are analyzed, pooled by process, and assigned to the appropriate reportable segment. The combination of direct revenue, direct expenses, funds transfer pricing, and allocations of non-interest expense produces PPNR, which is the basis the segments are reviewed by executive management. The Company also allocates the provision for credit losses to each reportable segment based on management's estimate of the expected loss content in each of the specific loan and lease portfolios. The ACL on loans and leases is included in total assets within the Corporate and Reconciling category. Business development expenses, such as merger-related and strategic initiatives costs, are also generally included in the Corporate and Reconciling category.
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The following tables present balance sheet information, including the appropriate allocations, for the Company's reportable segments and the Corporate and Reconciling category:
At March 31, 2023
(In thousands)Commercial BankingHSA BankConsumer BankingCorporate and ReconcilingConsolidated Total
Goodwill$2,029,204 $57,485 $544,776 $— $2,631,465 
Total assets45,868,138 123,478 10,597,860 18,254,919 74,844,395 
At December 31, 2022
(In thousands)Commercial BankingHSA BankConsumer BankingCorporate and ReconcilingConsolidated Total
Goodwill$1,904,291 $57,779 $552,034 $— $2,514,104 
Total assets44,380,582 122,729 10,625,334 16,148,876 71,277,521 
The following tables present operating results, including the appropriate allocations, for the Company’s reportable segments and the Corporate and Reconciling category:
 Three months ended March 31, 2023
(In thousands)Commercial BankingHSA BankConsumer BankingCorporate and ReconcilingConsolidated Total
Net interest income$384,314 $71,730 $210,583 $(71,344)$595,283 
Non-interest income35,397 24,067 25,959 (14,657)70,766 
Non-interest expense108,509 43,700 106,879 73,379 332,467 
Pre-tax, pre-provision net revenue311,202 52,097 129,663 (159,380)333,582 
Provision for credit losses36,037 — 1,784 8,928 46,749 
Income (loss) before income taxes275,165 52,097 127,879 (168,308)286,833 
Income tax expense (benefit)69,066 14,066 33,760 (51,063)65,829 
Net income (loss)$206,099 $38,031 $94,119 $(117,245)$221,004 
 Three months ended March 31, 2022
(In thousands)Commercial BankingHSA BankConsumer BankingCorporate and ReconcilingConsolidated Total
Net interest income$287,069 $44,577 $136,677 $(74,075)$394,248 
Non-interest income38,743 26,958 27,901 10,433 104,035 
Non-interest expense89,240 36,409 95,510 138,626 359,785 
Pre-tax, pre-provision net revenue236,572 35,126 69,068 (202,268)138,498 
Provision (benefit) for credit losses181,931 — 7,136 (222)188,845 
Income (loss) before income taxes54,641 35,126 61,932 (202,046)(50,347)
Income tax expense (benefit)10,055 9,414 16,053 (69,122)(33,600)
Net income (loss)$44,586 $25,712 $45,879 $(132,924)$(16,747)
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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 March 31, 2023
(In thousands)Commercial BankingHSA BankConsumer BankingCorporate and
Reconciling		Consolidated
Total
Non-interest Income:
Deposit service fees$5,390 $22,092 $18,024 $(70)$45,436 
Loan and lease related fees (1)
4,427 — — — 4,427 
Wealth and investment services (2)
2,767 — 3,828 (8)6,587 
Other income— 1,975 358 932 3,265 
Revenue from contracts with customers12,584 24,067 22,210 854 59,715 
Other sources of non-interest income22,813 — 3,749 (15,511)11,051 
Total non-interest income$35,397 $24,067 $25,959 $(14,657)$70,766 
Three months ended March 31, 2022
(In thousands)Commercial BankingHSA BankConsumer BankingCorporate and
Reconciling		Consolidated
Total
Non-interest Income:
Deposit service fees$6,685 $25,134 $15,963 $45 $47,827 
Loan and lease related fees (1)
4,498 — — — 4,498 
Wealth and investment services3,134 — 7,471 (8)10,597 
Other income— 1,824 385 — 2,209 
Revenue from contracts with customers14,317 26,958 23,819 37 65,131 
Other sources of non-interest income24,426 — 4,082 10,396 38,904 
Total non-interest income$38,743 $26,958 $27,901 $10,433 $104,035 
(1)A portion of loan and lease related fees comprises income generated from factored receivables and payroll financing activities that is within the scope of ASC Topic 606.
(2)Effective as of the fourth quarter of 2022, the wealth and investment services revenue stream was impacted by the restructuring of a process in which the Company offers brokerage, investment advisory, and certain insurance-related services to customers. The staff providing these services, who had previously been employees of the Bank, are now employees of a third-party service provider. As a result, the Company now recognizes income from this program on a net basis, which thereby reduces gross reported wealth and investment services non-interest income and the related compensation and benefits non-interest expense on the accompanying Condensed Consolidated Statements of Income.
Contracts with customers did not generate significant contract assets and liabilities at March 31, 2023, or December 31, 2022.
Major Revenue Streams
Deposit service fees consist of fees earned from commercial and consumer customer deposit accounts, such as account maintenance and cash management/analysis fees, as well as other transactional service charges (i.e., insufficient funds, wire transfers, stop payment fees, etc.). Performance obligations for account maintenance services and cash management/analysis fees are satisfied on a monthly basis at a fixed transaction price, whereas performance obligations for other deposit service charges that result from various customer-initiated transactions are satisfied at a point-in-time when the service is rendered. Payment for deposit service fees is generally received immediately or in the following month through a direct charge to the customers' accounts. Certain commercial customer contracts include credit clauses, whereby the Company will grant credit upon the customer meeting pre-determined conditions, which can be used to offset fees. On occasion, the Company may also waive certain fees. Fee waivers are recognized as a reduction to revenue in the period the waiver is granted to the customer.
The deposit service fees revenue stream also includes interchange fees earned from debit and credit card transactions. The transaction price for interchange services is based on the transaction value and the interchange rate set by the card network. Performance obligations for interchange fees are satisfied at a point-in-time when the cardholder's transaction is authorized and settled. Payment for interchange fees is generally received immediately or in the following month.
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Factored receivables non-interest income consists of fees earned from accounts receivable management services. The Company factors accounts receivable, with and without recourse, for customers whereby the Company purchases their accounts receivable at a discount and assumes the risk, as applicable, and ownership of the assets through direct cash receipt from the end consumer. Factoring services are performed in exchange for a non-refundable fee at a transaction price based on a percentage of the gross invoice amount of each receivable purchased, subject to a minimum required amount. The performance obligation for factoring services is generally satisfied at a point-in-time when the receivable is assigned to the Company. However, should the commission earned not meet or exceed the minimum required annual amount, the difference between that and the actual amount is recognized at the end of the contract term. Other fees associated with factoring receivables may include wire transfer and technology fees, field examination fees, and Uniform Commercial Code fees, where the performance obligations are satisfied at a point-in-time when the services are rendered. Payment from the customer for factoring services is generally received immediately or within the following month.
Payroll finance non-interest income consists of fees earned from performing payroll financing and business process outsourcing services, including full back-office technology and tax accounting services, along with payroll preparation, making payroll tax payments, invoice billings, and collections for independently-owned temporary staffing companies 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 the Company collects on amounts due from end consumers on behalf of its customers and at the time of financing payroll, the Company retains the agreed-upon transaction price payable for the performance of its services and remits an amount to the customer net of any advances and payroll tax withholdings, as applicable.
Wealth and investment services consist of fees earned from asset management, trust administration, and investment advisory services, and through facilitating securities transactions. Performance obligations for asset management and trust administration services are satisfied on a monthly or quarterly basis at a transaction price based on a percentage of the period-end market value of the assets under administration. Payment for asset management and trust administration services is generally received a few days after period-end through a direct charge to the customers' accounts. Performance obligations for investment advisory services are satisfied over the period in which the services are provided through a time-based measurement of progress, and the agreed-upon transaction price with the customer varies depending on the nature of the services performed. Performance obligations for facilitating securities transactions are satisfied at a point-in-time when the securities are sold at a transaction price that is based on a percentage of the contract value. Payment for both investment advisory services and facilitating securities transactions may be received in advance of the service, but generally is received immediately or in the following period, in arrears.
Note 18: Commitments and Contingencies
Credit-Related Financial Instruments
In the normal course of business, the Company offers financial instruments with off-balance sheet risk to meet the financing needs of its customers. These transactions include commitments to extend credit, standby letters of credit, and commercial letters of credit, which involve, to varying degrees, elements of credit risk.
The following table summarizes the outstanding amounts of credit-related financial instruments with off-balance sheet risk:
(In thousands)At March 31,
2023		At December 31, 2022
Commitments to extend credit$11,711,880 $11,237,496 
Standby letters of credit378,585 380,655 
Commercial letters of credit52,987 53,512 
Total credit-related financial instruments with off-balance sheet risk$12,143,452 $11,671,663 
The Company enters into contractual commitments to extend credit to its customers (i.e., revolving credit arrangements, term loan commitments, and short-term borrowing agreements), generally with fixed expiration dates or other termination clauses and that require payment of a fee. Substantially all of the 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 the Company's future payment requirements.
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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, the Company would be required to fund the commitment. The contractual amount of each standby letter of credit represents the maximum amount of potential future payments the Company could be required to make. Historically, the majority of the Company's standby letters of credit expire without being funded. However, if the commitment were funded, the Company has recourse against the customer. The Company's standby letter of credit agreements are 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, the Company's commercial letter of credit agreements are often secured by the underlying goods subject to trade.
Allowance for Credit Losses on Unfunded Loan Commitments
An ACL is recorded under the CECL methodology and included in Accrued expenses and other liabilities on the accompanying Condensed Consolidated Balance Sheets to provide for the unused portion of commitments to lend that are not unconditionally cancellable by the Company. At March 31, 2023, and December 31, 2022, the ACL on unfunded loan commitments totaled $26.1 million and $27.7 million, respectively.
Litigation
The Company is subject to certain legal proceedings and unasserted claims and assessments in the ordinary course of business. Legal contingencies are evaluated based on information currently available, including advice of counsel and assessment of available insurance coverage. The Company establishes an accrual for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Once established, each accrual is adjusted to reflect any subsequent developments. Legal contingencies are subject to inherent uncertainties, and unfavorable rulings may occur that could cause the Company to either adjust its litigation accrual or incur actual losses that exceed the current estimate, which ultimately could have a material adverse effect, either individually or in the aggregate, on its business, financial condition, or operating results. The Company will consider settlement of cases when it is in the best interests of the Company and its stakeholders. The Company intends to defend itself in all claims asserted against it, and management currently believes that the outcome of these contingencies will not be material, either individually or in the aggregate, to the Company or its consolidated financial position.
Note 19: Subsequent Events
The Company has evaluated subsequent events from the date of the Condensed Consolidated Financial Statements, and accompanying Notes thereto, through the date of issuance, and determined that no significant events were identified requiring recognition or disclosure.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information regarding quantitative and qualitative disclosures about market risk can be found in Part I within
Note 13: Derivative Financial Instruments in the Notes to the Consolidated Financial Statements contained in Item 1. Financial Statements, and under the section captioned "Asset/Liability Management and Market Risk" contained in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, which are incorporated herein by reference.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of the Chief Executive Officer (who is our principal executive officer) and Chief Financial Officer (who is our principal financial officer), evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of March 31, 2023. The term "disclosure controls and procedures" means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2023, our disclosure controls and procedures were not effective due to the un-remediated material weaknesses in internal control over
73

financial reporting related to certain general information technology controls specific to logical access, which was previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. Prior to the filing of this Quarterly Report on Form 10-Q (this "Form 10-Q"), we completed substantive procedures for the quarter ended March 31, 2023. Based on these procedures, management believes that our Condensed Consolidated Financial Statements included in this Form 10-Q have been prepared in accordance with GAAP. For additional information, please refer to Part II - Item 9A. of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
Remediation
Management is in process of implementing measures designed to ensure that the control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include: (i) designing and implementing controls related to deprovisioning, privileged access, and user access reviews, (ii) developing an enhanced risk assessment process to evaluate logical access, and (iii) improving the existing training program associated with control design and implementation. We believe that these actions will remediate the material weaknesses. The material weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of these material weaknesses will be completed prior to the end of 2023.
Changes in Internal Control Over Financial Reporting
Other than the ongoing remediation efforts described above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
Because of its inherent limitations, management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
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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
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors contained in Part I - Item 1A. Risk Factors of the Company's Annual Report on Form 10-K for the year ended December 31, 2022, which could materially affect our business, results of operations, or financial condition. During the three months ended March 31, 2023, the Company made updates to the following risk factor:
Our stock price can be volatile.
Stock price volatility may make it more difficult for stockholders to resell their common stock when they want and at prices that they find attractive. Our stock price can fluctuate significantly in response to a variety of factors including, among other things:
•actual or anticipated variations in results of operations;
•recommendations or projections by securities analysts;
•operating and stock price performance of other companies that investors deem comparable to us;
•news reports relating to trends, concerns, and other issues in the financial services and healthcare industries;
•perceptions in the marketplace regarding us and/or our competitors;
•new technology used, or services offered, by competitors;
•significant acquisitions or business combinations, strategic partnerships, joint ventures, or capital commitments by or involving us or our competitors, including those of competitor "failed" banks acquired by other competitors;
•changes in dividends and capital returns;
•issuance of additional shares of Webster common stock;
•changes in government regulations; and
•geopolitical conditions such as acts or threats of terrorism or military conflicts, including any military conflict between Russia and Ukraine.
General market fluctuations, including real or anticipated changes in the strength of the economy, industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes, credit loss trends, among other factors, could also cause our stock price to decrease regardless of operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table provides information with respect to any purchase of equity securities for the Company's common stock made by or on behalf of the Company or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, during the three months ended March 31, 2023:
Period
Total
Number of
Shares
Purchased (1)
Average Price
Paid Per Share (2)
Total Number of
Shares Purchased
as Part of Publicly Announced Plans
or Programs
Maximum Dollar Amount Available for Purchase Under the Plans or Programs (3)
January 1, 2023 - January 31, 202322,744$47.53—$401,340,164
February 1, 2023 - February 28, 202397,93754.58—401,340,164
March 1, 2023 - March 31, 2023164,04452.63—401,340,164
Total284,72552.90—401,340,164
(1)All of the shares purchased during the three months ended March 31, 2023, were acquired at market prices outside of the Company's common stock repurchase program and related to employee share-based compensation plan activity.
(2)The average price paid per share is calculated on a trade date basis and excludes commissions and other transaction costs.
(3)The Company maintains a common stock repurchase program, which was approved by the Board of Directors on October 24, 2017, that authorizes management to purchase shares of Webster common stock in open market or privately negotiated transactions, through block trades, and pursuant to any adopted predetermined trading plan, subject to the availability and trading price of stock, general market conditions, alternative uses for capital, regulatory considerations, and the Company's financial performance. On April 27, 2022, the Board of Directors increased management's authority to repurchase shares of Webster common stock under the repurchase program by $600.0 million in shares. This existing repurchase program will remain in effect until fully utilized or until modified, superseded, or terminated.
75

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
76

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
28-K2.14/23/2021
3
Certificate of Incorporation and Bylaws.
3.1
10-Q
3.1
8/9/2016
3.28-K3.22/1/2022
3.3
8-K
3.1
4/28/2023
3.4
8-K
3.1
6/11/2008
3.5
8-K
3.1
11/24/2008
3.6
8-K
3.1
7/31/2009
3.7
8-K
3.2
7/31/2009
3.8
8-A12B
3.3
12/4/2012
3.98-A12B3.312/12/2017
3.10
8-A12B
3.42/1/2022
3.11
8-K
3.1
3/17/2020
3.128-K3.52/1/2022
10.1DEF 14AA3/15/2023
31.1X
31.2X
32.1
X (1)
32.2
X (1)
101
The following financial information from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in Inline Extensible Business Reporting Language (iXBRL) includes: (i) Cover Page, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements Of Income, (iv) Condensed Consolidated Statements Of Comprehensive Income, (v) Condensed Consolidated Statements Of Stockholders' Equity, (vi) Condensed Consolidated Statements Of Cash Flows, and (vii) Notes to Condensed Consolidated Financial Statements, tagged in summary and in detail.
X
104Cover 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.
77

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: May 8, 2023By:/s/ John R. Ciulla
John R. Ciulla
President, Chief Executive Officer, and Director
(Principal Executive Officer)
Date: May 8, 2023By:/s/ Glenn I. MacInnes
Glenn I. MacInnes
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: May 8, 2023By:/s/ Albert J. Wang
Albert J. Wang
Executive Vice President and Chief Accounting Officer
(Principal Accounting Officer)

78

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