Segment Reporting

9 Months Ended

Sep. 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 type of customer served, how products and services are provided, 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 uses an internal profitability reporting system to generate information by operating segment, which is based on a series of management estimates for funds transfer pricing, and allocations for 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 any mismatch associated with the matched maturity funding concept called Funds Transfer Pricing is absorbed in corporate treasury activities. 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.

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 September 30, 2019	$	11,174,036	$	75,636	$	9,228,537	$	9,416,891	$	29,895,100
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 for Webster’s reportable segments and the Corporate and Reconciling category:



	Three months ended September 30, 2019
(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling			Consolidated Total
Net interest income (expense)	$	96,817	$	42,206	$	99,459	$	2,057		$	240,539
Non-interest income	13,987		23,526		28,115		4,303			69,931
Non-interest expense	45,261		32,918		99,835		1,880			179,894
Pre-tax, pre-provision net revenue	65,543		32,814		27,739		4,480			130,576
Provision for loan and lease losses	9,312		—		1,988		—			11,300
Income (loss) before income tax expense	56,231		32,814		25,751		4,480			119,276
Income tax expense (benefit)	13,828		8,531		5,128		(2,076		)	25,411
Net income	$	42,403	$	24,283	$	20,623	$	6,556		$	93,865



	Three months ended September 30, 2018
(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling			Consolidated Total
Net interest income (expense)	$	91,243	$	36,731	$	101,952	$	446		$	230,372
Non-interest income	18,305		22,159		26,848		4,972			72,284
Non-interest expense	44,506		30,753		95,769		7,755			178,783
Pre-tax, pre-provision net revenue	65,042		28,137		33,031		(2,337		)	123,873
Provision for loan and lease losses	9,991		—		509		—			10,500
Income (loss) before income tax expense	55,051		28,137		32,522		(2,337		)	113,373
Income tax expense (benefit)	13,542		7,316		6,472		(13,630		)	13,700
Net income	$	41,509	$	20,821	$	26,050	$	11,293		$	99,673



	Nine months ended September 30, 2019
(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling			Consolidated Total
Net interest income (expense)	$	279,498	$	126,573	$	303,518	$	14,288		$	723,877
Non-interest income	42,643		74,082		81,172		16,499			214,396
Non-interest expense	136,075		100,693		291,076		8,376			536,220
Pre-tax, pre-provision net revenue	186,066		99,962		93,614		22,411			402,053
Provision for loan and lease losses	23,294		—		8,506		—			31,800
Income (loss) before income tax expense	162,772		99,962		85,108		22,411			370,253
Income tax expense (benefit)	40,037		25,990		16,940		(4,964		)	78,003
Net income	$	122,735	$	73,972	$	68,168	$	27,375		$	292,250



	Nine months ended September 30, 2018
(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling			Consolidated Total
Net interest income (expense)	$	264,353	$	104,920	$	302,782	$	(2,505	)	$	669,550
Non-interest income	48,662		67,710		78,421		14,612			209,405
Non-interest expense	128,730		93,488		287,795		20,844			530,857
Pre-tax, pre-provision net revenue	184,285		79,142		93,408		(8,737		)	348,098
Provision for loan and lease losses	25,468		—		6,532		—			32,000
Income (loss) before income tax expense	158,817		79,142		86,876		(8,737		)	316,098
Income tax expense (benefit)	39,069		20,577		17,288		(22,416		)	54,518
Net income	$	119,748	$	58,565	$	69,588	$	13,679		$	261,580