Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

As further discussed in Note 17 - Business Segments, the Company reorganized its management reporting structure during the first quarter 2013 and, accordingly, its segment reporting structure and goodwill reporting units. In connection with the reorganization, management reallocated goodwill to the new reporting unit using a relative fair value approach, resulting in amounts detailed as follows:

The following tables present the carrying value allocated to the business segments for goodwill and other intangible assets, net of accumulated amortization:



	At September 30, 2013
(In thousands)	Goodwill		Core Deposits
Business Segments/reporting units
Consumer Deposits ^a	$	377,605	$	6,544
Small Business Banking ^a	138,955		—
Community Banking	516,560		6,544
Other (HSA Bank)	13,327		—
Total	$	529,887	$	6,544

a) These reporting units are included in the Community Banking segment for financial reporting purposes.



	At December 31, 2012
(In thousands)	Goodwill		Core Deposits
Business Segments
Retail Banking	$	516,560	$	10,270
Other (HSA Bank)	13,327		—
Total	$	529,887	$	10,270

Webster uses a valuation methodology that addresses market concerns, Basel III, and fully allocates capital. Capital allocation for segment reporting is based on regulatory targets aimed at risk-weighted assets, tangible assets and deposits. Actual regulatory targets are applied to each of the asset bases and an implied target is used for deposits. The methodology creates two asset bases, risk-weighted assets and tangible assets, as well as a deposit base, intangibles and management assessment.

Webster tests its goodwill for impairment annually as of August 31 (the “Measurement Date”). In performing Step 1 of the goodwill impairment testing and measurement process, the Company primarily relied on the income approach to arrive at an indicated range of fair value for the reporting units, which was then corroborated with the market approach comparable company method and the market capitalization reconciliation. The income approach consists of discounting projected long-term future cash flows, which are derived from internal forecasts and economic expectations for the respective reporting units. The internal forecasts are developed for each reporting unit by considering several key business drivers such as new business initiatives, market share changes, anticipated loan and deposit growth, forward interest rates, historical performance, and industry and economic trends, among other considerations.

The projected future cash flows are discounted using estimated rates based on the Capital Asset Pricing Model, which considers the risk-free interest rate, market risk premium, beta, and unsystematic risk and size premium adjustments specific to the reporting unit. In this analysis, the discount rates ranged from 10.1% to 13.0%. The long-term growth rate used in determining the terminal value of the reporting units cash flows was estimated at 4.0% and is based on management's assessment of the minimum expected terminal growth rate of each reporting unit as well as broader economic considerations. There was no impairment indicated as a result of the Step 1 test performed at August 31, 2013, as the fair value of the Consumer deposits, Small Business Banking, and Other reporting units exceeded carrying value by 52.5%, 18.1%, and 257.8%, respectively.

The gross carrying value and accumulated amortization of other intangible assets allocated to the business segments are as follows:



	At September 30, 2013
(In thousands)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Core deposits:
Community Banking/Consumer Deposits ^a	$	49,420	$	(42,876	)	$	6,544
Core deposits	$	49,420	$	(42,876	)	$	6,544

a) These reporting units are included in the Community Banking segment for financial reporting purposes.



	At December 31, 2012
(In thousands)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Core deposits:
Retail Banking	$	49,420	$	(39,150	)	$	10,270
Other (HSA Bank)	4,699		(4,699		)	—
Core deposits	$	54,119	$	(43,849	)	$	10,270

Amortization of intangible assets for the three and nine months ended September 30, 2013 and 2012, totaled $1.2 million and $3.7 million and $1.4 million and $4.2 million, respectively. Estimated annual amortization expense is summarized below:



(In thousands)
Remainder of 2013	$	1,193
2014	2,685
2015	1,523
2016	1,143
Total	$	6,544

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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