Segment Reporting

6 Months Ended

Jun. 30, 2019

Webster’s operations are organized into three reportable segments that represent its primary businesses - Commercial Banking, HSA Bank, and Community Banking. These three segments reflect how executive management responsibilities are assigned, the primary businesses, the products and services provided, the type of customer served, and how discrete financial information is currently evaluated. Certain corporate treasury activities of the Company, along with the amounts required to reconcile profitability metrics to amounts reported in accordance with GAAP, are included in the Corporate and Reconciling category.

Description of Segment Reporting Methodology

Webster’s reportable segment results are intended to reflect each segment as if it were a stand-alone business. Webster uses an internal profitability reporting system to generate information by operating segment, which is based on a series of management estimates and allocations regarding funds transfer pricing, provision for loan and lease losses, non-interest expense, 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 reported results of any operating segment do not affect the consolidated financial position or results of operations of Webster as a whole. The full profitability measurement reports, which are prepared for each operating segment, reflect non-GAAP reporting methodologies. The differences between full profitability and GAAP results are reconciled in the Corporate and Reconciling category.

Webster allocates interest income and interest expense to each business, while also transferring the primary interest rate risk exposures to the Corporate and Reconciling category, using a matched maturity funding concept called Funds Transfer Pricing (FTP). The allocation process considers the specific interest rate risk and liquidity risk of financial instruments and other assets and liabilities in each line of business. The matched maturity funding concept 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. Loans are assigned an FTP rate for funds used and deposits are assigned an FTP rate for funds provided. This process is overseen by the Company's Asset/Liability Committee (ALCO).

Webster allocates the provision for loan and lease losses to each segment based on management’s estimate of the inherent loss content in each of the specific loan and lease portfolios. During the three months ended June 30, 2019, Webster refined and improved the precision of this allocation approach. Prior period provision for loan and lease losses amounts were revised accordingly. Allowance for loan and lease losses are included within the Corporate and Reconciling category’s total assets.

Webster allocates a majority of non-interest expense to each reportable segment using a full-absorption costing process. Costs, including corporate overhead, are analyzed, pooled by process, and assigned to the appropriate reportable segment.

The following table presents total assets for Webster's reportable segments and the Corporate and Reconciling category:



(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling		Consolidated Total
At June 30, 2019	$	11,061,635	$	82,232	$	9,059,657	$	8,738,519	$	28,942,043
At December 31, 2018	10,477,050		70,826		8,727,335		8,335,104		27,610,315

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



	Three months ended June 30, 2019
(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling			Consolidated Total
Net interest income (expense)	$	92,171	$	42,626	$	102,699	$	4,291		$	241,787
Provision for loan and lease losses	7,741		—		4,159		—			11,900
Net interest income (expense) after provision for loan and lease losses	84,430		42,626		98,540		4,291			229,887
Non-interest income	14,645		24,979		27,675		8,554			75,853
Non-interest expense	46,196		34,253		96,166		4,025			180,640
Income before income tax expense	52,879		33,352		30,049		8,820			125,100
Income tax expense (benefit)	13,008		8,672		5,980		(1,209		)	26,451
Net income	$	39,871	$	24,680	$	24,069	$	10,029		$	98,649



	Three months ended June 30, 2018
(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling			Consolidated Total
Net interest income (expense)	$	88,459	$	35,265	$	101,902	$	(616	)	$	225,010
Provision (benefit) for loan and lease losses	8,630		—		1,870		—			10,500
Net interest income (expense) after provision for loan and lease losses	79,829		35,265		100,032		(616		)	214,510
Non-interest income	15,041		22,882		26,378		4,073			68,374
Non-interest expense	42,979		31,220		95,197		11,063			180,459
Income (loss) before income tax expense	51,891		26,927		31,213		(7,606		)	102,425
Income tax expense (benefit)	12,765		7,001		6,211		(5,234		)	20,743
Net income (loss)	$	39,126	$	19,926	$	25,002	$	(2,372	)	$	81,682



	Six months ended June 30, 2019
(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling			Consolidated Total
Net interest income (expense)	$	182,681	$	84,367	$	204,059	$	12,231		$	483,338
Provision for loan and lease losses	13,982		—		6,518		—			20,500
Net interest income (expense) after provision for loan and lease losses	168,699		84,367		197,541		12,231			462,838
Non-interest income	28,656		50,556		53,057		12,196			144,465
Non-interest expense	90,814		67,775		191,241		6,496			356,326
Income before income tax expense	106,541		67,148		59,357		17,931			250,977
Income tax expense (benefit)	26,209		17,459		11,812		(2,888		)	52,592
Net income	$	80,332	$	49,689	$	47,545	$	20,819		$	198,385



	Six months ended June 30, 2018
(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling			Consolidated Total
Net interest income (expense)	$	173,110	$	68,189	$	200,830	$	(2,951	)	$	439,178
Provision for loan and lease losses	15,477		—		6,023		—			21,500
Net interest income (expense) after provision for loan and lease losses	157,633		68,189		194,807		(2,951		)	417,678
Non-interest income	30,357		45,551		51,573		9,640			137,121
Non-interest expense	84,224		62,735		192,026		13,089			352,074
Income (loss) before income tax expense	103,766		51,005		54,354		(6,400		)	202,725
Income tax expense (benefit)	25,527		13,261		10,816		(8,786		)	40,818
Net income	$	78,239	$	37,744	$	43,538	$	2,386		$	161,907