Loans and Leases

9 Months Ended

Sep. 30, 2019

Loans and Leases Receivable Disclosure [Abstract]

The following table summarizes loans and leases:



(In thousands)	At September 30, 2019		At December 31, 2018
Commercial	$	6,488,056	$	6,216,606
Commercial Real Estate	5,398,084		4,927,145
Equipment Financing	521,828		508,397
Residential	4,873,726		4,416,637
Consumer	2,269,952		2,396,704
Loans and leases ^{(1) (2)}	$	19,551,646	$	18,465,489


(1)	Includes net deferred fees/costs and net premiums/discounts of $13.9 million at both September 30, 2019 and December 31, 2018.


(2)	At September 30, 2019 the Company had pledged $7.6 billion of eligible loans as collateral to support borrowing capacity at the Federal Home Loan Bank (FHLB) of Boston and the Federal Reserve Bank (FRB) of Boston.

The equipment financing portfolio includes net investment in leases of $164.2 million at September 30, 2019. Total undiscounted cash flows to be received from the Company's net investment in leases are $178.5 million at September 30, 2019 and are primarily due within the next five years. The Company's lessor portfolio has recognized interest income of $1.2 million and $4.0 million for the three and nine months ended September 30, 2019, respectively.

Loans and Leases Aging

The following tables summarize the aging of loans and leases:



	At September 30, 2019
(In thousands)	30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		90 or More Days Past Due and Accruing		Non-accrual		Total Past Due and Non-accrual		Current		Total Loans and Leases
Commercial:
Commercial non-mortgage	$	2,760	$	450	$	92	$	58,750	$	62,052	$	5,303,238	$	5,365,290
Asset-based	—		—		—		9,162		9,162		1,113,604		1,122,766
Commercial real estate:
Commercial real estate	1,296		141		—		9,852		11,289		5,087,967		5,099,256
Commercial construction	—		—		—		2,968		2,968		295,860		298,828
Equipment financing	1,666		525		—		5,488		7,679		514,149		521,828
Residential	6,752		6,727		—		43,839		57,318		4,816,408		4,873,726
Consumer:
Home equity	9,192		2,290		—		31,452		42,934		2,007,428		2,050,362
Other consumer	3,075		697		—		1,388		5,160		214,430		219,590
Total	$	24,741	$	10,830	$	92	$	162,899	$	198,562	$	19,353,084	$	19,551,646



	At December 31, 2018
(In thousands)	30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		90 or More Days Past Due and Accruing		Non-accrual		Total Past Due and Non-accrual		Current		Total Loans and Leases
Commercial:
Commercial non-mortgage	$	1,011	$	702	$	104	$	55,810	$	57,627	$	5,189,808	$	5,247,435
Asset-based	—		—		—		224		224		968,947		969,171
Commercial real estate:
Commercial real estate	1,275		245		—		8,242		9,762		4,698,552		4,708,314
Commercial construction	—		—		—		—		—		218,831		218,831
Equipment financing	510		405		—		6,314		7,229		501,168		508,397
Residential	8,513		4,301		—		49,188		62,002		4,354,635		4,416,637
Consumer:
Home equity	9,250		5,385		—		33,495		48,130		2,121,049		2,169,179
Other consumer	1,774		957		—		1,494		4,225		223,300		227,525
Total	$	22,333	$	11,995	$	104	$	154,767	$	189,199	$	18,276,290	$	18,465,489

Interest on non-accrual loans and leases that would have been recorded as additional interest income had the loans and leases been current in accordance with the original terms totaled $3.1 million and $4.3 million for the three months ended September 30, 2019 and 2018, respectively, and $8.9 million and $7.9 million for the nine months ended September 30, 2019 and 2018, respectively.

Allowance for Loan and Lease Losses

The following tables summarize the activity in, as well as the loan and lease balances that were evaluated for, the ALLL:



	At or for three months ended September 30, 2019
(In thousands)	Commercial			Commercial Real Estate			Equipment Financing			Residential			Consumer			Total
ALLL:
Balance, beginning of period	$	98,800		$	61,068		$	4,476		$	21,221		$	26,106		$	211,671
Provision (benefit) charged to expense	11,202			(423		)	(176		)	(689		)	1,386			11,300
Charge-offs	(11,255		)	(32		)	(36		)	(872		)	(3,765		)	(15,960		)
Recoveries	124			3			49			356			1,609			2,141
Balance, end of period	$	98,871		$	60,616		$	4,313		$	20,016		$	25,336		$	209,152



	At or for three months ended September 30, 2018
(In thousands)	Commercial			Commercial Real Estate			Equipment Financing			Residential			Consumer			Total
ALLL:
Balance, beginning of period	$	95,340		$	55,833		$	5,383		$	19,007		$	31,759		$	207,322
Provision (benefit) charged to expense	5,686			4,146			(213		)	407			474			10,500
Charge-offs	(740		)	(1,922		)	(136		)	(874		)	(4,863		)	(8,535		)
Recoveries	431			143			11			133			1,827			2,545
Balance, end of period	$	100,717		$	58,200		$	5,045		$	18,673		$	29,197		$	211,832



	At or for the nine months ended September 30, 2019
(In thousands)	Commercial			Commercial Real Estate			Equipment Financing			Residential			Consumer			Total
ALLL:
Balance, beginning of period	$	98,793		$	60,151		$	5,129		$	19,599		$	28,681		$	212,353
Provision (benefit) charged to expense	22,820			3,901			(208		)	2,865			2,422			31,800
Charge-offs	(24,106		)	(3,478		)	(679		)	(3,277		)	(11,836		)	(43,376		)
Recoveries	1,364			42			71			829			6,069			8,375
Balance, end of period	$	98,871		$	60,616		$	4,313		$	20,016		$	25,336		$	209,152
Individually evaluated for impairment	$	14,555		$	735		$	177		$	3,625		$	1,274		$	20,366
Collectively evaluated for impairment	$	84,316		$	59,881		$	4,136		$	16,391		$	24,062		$	188,786

Loan and lease balances:
Individually evaluated for impairment	$	117,418		$	16,224		$	5,487		$	95,666		$	35,836		$	270,631
Collectively evaluated for impairment	6,370,638			5,381,860			516,341			4,778,060			2,234,116			19,281,015
Loans and leases	$	6,488,056		$	5,398,084		$	521,828		$	4,873,726		$	2,269,952		$	19,551,646



	At or for the nine months ended September 30, 2018
(In thousands)	Commercial			Commercial Real Estate			Equipment Financing			Residential			Consumer			Total
ALLL:
Balance, beginning of period	$	89,533		$	49,407		$	5,806		$	19,058		$	36,190		$	199,994
Provision (benefit) charged to expense	17,596			10,678			(557		)	1,316			2,967			32,000
Charge-offs	(7,869		)	(2,039		)	(246		)	(2,545		)	(14,844		)	(27,543		)
Recoveries	1,457			154			42			844			4,884			7,381
Balance, end of period	$	100,717		$	58,200		$	5,045		$	18,673		$	29,197		$	211,832
Individually evaluated for impairment	$	10,491		$	1,544		$	15		$	4,319		$	1,428		$	17,797
Collectively evaluated for impairment	$	90,226		$	56,656		$	5,030		$	14,354		$	27,769		$	194,035

Loan and lease balances:
Individually evaluated for impairment	$	104,353		$	9,767		$	6,489		$	105,600		$	39,808		$	266,017
Collectively evaluated for impairment	6,070,043			4,761,558			512,565			4,309,463			2,401,373			18,055,002
Loans and leases	$	6,174,396		$	4,771,325		$	519,054		$	4,415,063		$	2,441,181		$	18,321,019

Impaired Loans and Leases

The following tables summarize impaired loans and leases:



	At September 30, 2019
(In thousands)	Unpaid Principal Balance		Total Recorded Investment		Recorded Investment No Allowance		Recorded Investment With Allowance		Related Valuation Allowance
Commercial non-mortgage	$	148,932	$	108,256	$	36,250	$	72,006	$	14,550
Asset-based	9,490		9,162		9,013		149		5
Commercial real estate	19,270		13,256		7,202		6,054		735
Commercial construction	2,969		2,968		2,968		—		—
Equipment financing	5,540		5,487		2,403		3,084		177
Residential	105,576		95,666		61,236		34,430		3,625
Consumer - home equity	64,723		35,836		28,023		7,813		1,274
Total	$	356,500	$	270,631	$	147,095	$	123,536	$	20,366



	At December 31, 2018
(In thousands)	Unpaid Principal Balance		Total Recorded Investment		Recorded Investment No Allowance		Recorded Investment With Allowance		Related Valuation Allowance
Commercial non-mortgage	$	120,165	$	99,287	$	65,724	$	33,563	$	7,818
Asset-based	550		225		—		225		6
Commercial real estate	13,355		10,828		2,125		8,703		1,661
Equipment financing	6,368		6,315		2,946		3,369		196
Residential	113,575		103,531		64,899		38,632		4,286
Consumer - home equity	44,654		39,144		30,576		8,568		1,383
Total	$	298,667	$	259,330	$	166,270	$	93,060	$	15,350

The following table summarizes the average recorded investment and interest income recognized for impaired loans and leases:



	Three months ended September 30,												Nine months ended September 30,
	2019						2018						2019						2018
(In thousands)	Average Recorded Investment		Accrued Interest Income		Cash Basis Interest Income		Average Recorded Investment		Accrued Interest Income		Cash Basis Interest Income		Average Recorded Investment		Accrued Interest Income		Cash Basis Interest Income		Average Recorded Investment		Accrued Interest Income		Cash Basis Interest Income
Commercial non-mortgage	$	102,996	$	751	$	—	$	94,618	$	847	$	—	$	103,772	$	2,515	$	—	$	87,603	$	2,257	$	—
Asset based	4,673		—		—		1,095		—		—		4,694		—		—		809		—		—
Commercial real estate:
Commercial real estate	13,567		60		—		11,222		30		—		12,042		194		—		10,497		164		—
Commercial construction	1,484		—		—		—		—		—		1,484		—		—		—		—		—
Equipment financing	4,718		—		—		6,337		41		—		5,901		—		—		4,907		112		—
Residential	97,917		862		271		107,618		923		301		99,599		2,682		817		109,948		2,852		819
Consumer - home equity	36,584		247		246		40,722		292		238		37,490		803		767		42,622		876		738
Total	$	261,939	$	1,920	$	517	$	261,612	$	2,133	$	539	$	264,982	$	6,194	$	1,584	$	256,386	$	6,261	$	1,557

Credit Quality Indicators. To measure credit risk for the commercial, commercial real estate, and equipment financing portfolios, the Company employs a dual grade credit risk grading system for estimating the probability of default (PD) and the loss given default (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 default. Grades (1) - (6) are considered pass ratings, and (7) - (10) are considered criticized, as defined by the regulatory agencies. Risk ratings, 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.

A (7) Special Mention credit has the potential weakness that, if left uncorrected, may result in deterioration of the repayment prospects for the asset. An (8) Substandard asset has a well defined weakness that jeopardizes the full repayment of the debt. An asset rated (9) Doubtful has all of the same weaknesses as a substandard credit with the added characteristic that the weakness makes collection or liquidation in full, given current facts, conditions, and values, improbable. Assets classified as (10) Loss, in accordance with regulatory guidelines, are considered uncollectible and charged off.

The following table summarizes commercial, commercial real estate and equipment financing loans and leases segregated by risk rating exposure:



	Commercial				Commercial Real Estate				Equipment Financing
(In thousands)	At September 30, 2019		At December 31, 2018		At September 30, 2019		At December 31, 2018		At September 30, 2019		At December 31, 2018
(1) - (6) Pass	$	6,122,391	$	5,781,138	$	5,253,649	$	4,773,298	$	512,219	$	494,585
(7) Special Mention	97,969		206,351		81,256		75,338		915		1,303
(8) Substandard	263,833		222,405		63,179		78,509		8,694		12,509
(9) Doubtful	3,863		6,712		—		—		—		—
Total	$	6,488,056	$	6,216,606	$	5,398,084	$	4,927,145	$	521,828	$	508,397

For residential and consumer loans, the primary credit quality indicator that the Company considers is past due status. Other factors, such as, updated Fair Isaac Corporation (FICO) scores, employment status, collateral, geography, loans discharged in bankruptcy, and the status of first lien position loans on second lien position loans, may also be evaluated as credit quality indicators. On an ongoing basis for portfolio monitoring purposes, the Company estimates the current value of property secured as collateral for home equity and residential first mortgage lending products. The estimate is based on home price indices compiled by the S&P/Case-Shiller Home Price Indices. The real estate price data is applied to the loan portfolios taking into account the age of the most recent valuation and geographic area.

Troubled Debt Restructurings

The following table summarizes information for troubled debt restructurings (TDRs):



(Dollars in thousands)	At September 30, 2019		At December 31, 2018
Accrual status	$	137,493	$	138,479
Non-accrual status	111,643		91,935
Total recorded investment of TDRs	$	249,136	$	230,414

Specific reserves for TDRs included in the balance of ALLL	$	20,015	$	11,930
Additional funds committed to borrowers in TDR status	3,621		3,893

For the portion of TDRs deemed to be uncollectible, Webster charged off $11.0 million and $1.1 million for the three months ended September 30, 2019 and 2018, respectively, and $16.7 million, and $6.3 million for the nine months ended September 30, 2019 and 2018, respectively.

The following table provides information on the type of concession for loans and leases modified as TDRs:



	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
	Number of Loans and Leases	Post- Modification Recorded Investment⁽¹⁾		Number of Loans and Leases	Post- Modification Recorded Investment⁽¹⁾		Number of Loans and Leases	Post- Modification Recorded Investment⁽¹⁾		Number of Loans and Leases	Post- Modification Recorded Investment⁽¹⁾
(Dollars in thousands)	Number of Loans and Leases	Post- Modification Recorded Investment⁽¹⁾		Number of Loans and Leases	Post- Modification Recorded Investment⁽¹⁾		Number of Loans and Leases	Post- Modification Recorded Investment⁽¹⁾		Number of Loans and Leases	Post- Modification Recorded Investment⁽¹⁾
Commercial non - mortgage
Extended Maturity	2	$	29	4	$	537	8	$	222	7	$	622
Adjusted Interest Rate	1	12		—	—		2	112		—	—
Maturity/Rate Combined	3	225		8	8,185		6	296		10	8,236
Other ⁽²⁾	6	30,586		8	10,585		25	64,642		17	39,328
Commercial real estate
Extended Maturity	—	—		—	—		—	—		2	97
Maturity/Rate Combined	—	—		—	—		—	—		1	245
Other ⁽²⁾	1	2,180		—	—		3	4,816		1	5,111
Residential
Extended Maturity	1	67		1	20		5	1,007		1	20
Maturity/Rate Combined	1	368		4	440		14	2,216		7	716
Other ⁽²⁾	2	243		3	356		6	785		16	2,798
Consumer - home equity
Extended Maturity	1	134		1	148		5	504		3	341
Maturity/Rate Combined	2	30		3	170		4	140		6	618
Other ⁽²⁾	8	375		5	258		27	1,595		30	1,951
Total TDRs	28	$	34,249	37	$	20,699	105	$	76,335	101	$	60,083


(1)	Post-modification balances approximate pre-modification balances. The aggregate amount of charge-offs as a result of the restructurings was not significant.


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

The following table provides information on loans and leases modified as TDRs within the previous 12 months and for which there was a payment default for the three and nine months ended September 30, 2019 and 2018.



	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
(Dollars in thousands)	Number of Loans and Leases	Recorded Investment		Number of Loans and Leases	Recorded Investment		Number of Loans and Leases	Recorded Investment		Number of Loans and Leases	Recorded Investment
Commercial non - mortgage	4	$	3,940	—	$	—	4	$	3,940	—	$	—
Residential	—	—		1	241		—	—		2	261
Consumer - home equity	1	78		—	—		1	78		—	—
Total	5	$	4,018	1	$	241	5	$	4,018	2	$	261

The recorded investment of TDRs in commercial, commercial real estate, and equipment financing segregated by risk rating exposure is as follows:



(In thousands)	At September 30, 2019		At December 31, 2018
(1) - (6) Pass	$	11,877	$	13,165
(7) Special Mention	68		84
(8) Substandard	101,825		67,880
(9) Doubtful	3,863		6,610
Total	$	117,633	$	87,739