Segment Reporting

12 Months Ended

Dec. 31, 2019

Webster’s operations are organized into three reportable segments that represent its primary businesses - Commercial Banking, HSA Bank, and Community Banking. These 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, 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 non-interest expense, provision for loan and lease 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 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 the Corporate Treasury function. 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 a Funds Transfer Pricing (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 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 results of funds transfer pricing and allocations for non-interest expense, as well as non-interest income produces pre-tax, pre-provision net revenue, under which basis the segments are reviewed by executive management.

Webster also 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, and resulting impacts from income tax expense were revised accordingly. Allowance for loan and lease losses are included within the Corporate and Reconciling category’s total assets.

Beginning in 2018, income tax expense is estimated for each reportable segment individually. The 2017 income tax expense was estimated for all segments using the consolidated effective tax rate.

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


	Total Assets
(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling		Consolidated Total
At December 31, 2019	$	11,541,803	$	80,176	$	9,348,727	$	9,418,638	$	30,389,344
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:


	Year ended December 31, 2019
(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling		Consolidated Total
Net interest income	$	372,845	$	167,239	$	400,744	$	14,299	$	955,127
Non-interest income	59,063		97,041		109,270		19,941		285,315
Non-interest expense	181,580		135,586		388,399		10,385		715,950
Pre-tax, pre-provision net revenue	250,328		128,694		121,615		23,855		524,492
Provision for loan and lease losses	25,407		—		12,393		—		37,800
Income before income tax expense	224,921		128,694		109,222		23,855		486,692
Income tax expense	55,331		33,460		21,735		(6,557)		103,969
Net income	$	169,590	$	95,234	$	87,487	$	30,412	$	382,723


	Year ended December 31, 2018
(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling		Consolidated Total
Net interest income	$	356,509	$	143,255	$	404,869	$	2,048	$	906,681
Non-interest income	64,765		89,323		109,669		18,811		282,568
Non-interest expense	174,054		124,594		384,599		22,369		705,616
Pre-tax, pre-provision net revenue	247,220		107,984		129,939		(1,510)		483,633
Provision for loan and lease losses	32,388		—		9,612		—		42,000
Income before income tax expense	214,832		107,984		120,327		(1,510)		441,633
Income tax expense	52,849		28,076		23,945		(23,655)		81,215
Net income	$	161,983	$	79,908	$	96,382	$	22,145	$	360,418


	Year ended December 31, 2017
(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling		Consolidated Total
Net interest income	$	322,393	$	104,704	$	383,700	$	(14,510)	$	796,287
Non-interest income	55,194		77,378		107,368		19,538		259,478
Non-interest expense	154,037		113,143		373,081		20,814		661,075
Pre-tax, pre-provision net revenue	223,550		68,939		117,987		(15,786)		394,690
Provision for loan and lease losses	34,066		—		6,834		—		40,900
Income before income tax expense	189,484		68,939		111,153		(15,786)		353,790
Income tax expense	52,676		19,165		30,899		(4,389)		98,351
Net income	$	136,808	$	49,774	$	80,254	$	(11,397)	$	255,439