Regulatory Matters

6 Months Ended

Jun. 30, 2020

Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract]

Capital Requirements

Webster Financial Corporation is subject to regulatory capital requirements administered by the Federal Reserve System, while Webster Bank is subject to regulatory capital requirements administered by the OCC. Regulatory authorities can initiate certain mandatory actions if Webster Financial Corporation or Webster Bank fail to meet minimum capital requirements, which could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, both Webster Financial Corporation and Webster Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. These quantitative measures require minimum amounts and ratios to ensure capital adequacy.

Total risk-based capital is comprised of three categories as defined by Basel III capital rules: common equity Tier 1 capital (CET1 capital), Tier 1 capital, and Tier 2 capital. CET1 capital includes common shareholders' equity, less deductions for goodwill, other intangibles, and certain deferred tax adjustments. For purposes of CET1 capital, common shareholders' equity excludes AOCL components as permitted by the opt-out election taken by Webster upon adoption of Basel III. Tier 1 capital is comprised of CET1 capital plus perpetual preferred stock, while Tier 2 capital includes qualifying subordinated debt and qualifying allowance for credit losses, that together equal total capital.

The following table provides information on the capital ratios for Webster Financial Corporation and Webster Bank:


	At June 30, 2020
	Actual ⁽¹⁾						Minimum Requirement						Well Capitalized
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Webster Financial Corporation
CET1 risk-based capital	$	2,485,301	11.17	%	$	1,001,376	4.5	%	$	1,446,431	6.5	%
Total risk-based capital	2,985,837		13.42		1,780,223		8.0		2,225,279		10.0
Tier 1 risk-based capital	2,630,338		11.82		1,335,167		6.0		1,780,223		8.0
Tier 1 leverage capital	2,630,338		8.33		1,262,430		4.0		1,578,038		5.0
Webster Bank
CET1 risk-based capital	$	2,666,184	11.99	%	$	1,001,034	4.5	%	$	1,445,938	6.5	%
Total risk-based capital	2,944,269		13.24		1,779,616		8.0		2,224,519		10.0
Tier 1 risk-based capital	2,666,184		11.99		1,334,712		6.0		1,779,616		8.0
Tier 1 leverage capital	2,666,184		8.45		1,261,937		4.0		1,577,421		5.0


	At December 31, 2019
	Actual						Minimum Requirement						Well Capitalized
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Webster Financial Corporation
CET1 risk-based capital	$	2,516,361	11.56	%	$	979,739	4.5	%	$	1,415,179	6.5	%
Total risk-based capital	2,950,181		13.55		1,741,758		8.0		2,177,198		10.0
Tier 1 risk-based capital	2,661,398		12.22		1,306,319		6.0		1,741,758		8.0
Tier 1 leverage capital	2,661,398		8.96		1,188,507		4.0		1,485,634		5.0
Webster Bank
CET1 risk-based capital	$	2,527,645	11.61	%	$	979,497	4.5	%	$	1,414,829	6.5	%
Total risk-based capital	2,739,108		12.58		1,741,328		8.0		2,176,660		10.0
Tier 1 risk-based capital	2,527,645		11.61		1,305,996		6.0		1,741,328		8.0
Tier 1 leverage capital	2,527,645		8.51		1,187,953		4.0		1,484,941		5.0

(1)In accordance with regulatory capital rules, the Company elected an option to delay the estimated impact of CECL on its regulatory capital over a two-year deferral and subsequent three-year transition period ending December 31, 2024. As a result, capital ratios and amounts as of June 30, 2020 exclude the impact of the increased allowance for credit losses on loans, held-to-maturity debt securities, and unfunded loan commitments attributed to the adoption of CECL, adjusted for an approximation of the after-tax provision for credit losses attributable to CECL relative to the incurred loss methodology during the deferral period.

Dividend Restrictions. Webster Financial Corporation is dependent upon dividends from Webster Bank to provide funds for its cash requirements, including payments of dividends to shareholders. Dividends paid by Webster Bank are subject to various federal and state regulatory limitations. Express approval by the OCC is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels, or would exceed the net income for that year combined with the undistributed net income for the preceding two years. Webster Bank paid no dividends to Webster Financial Corporation during the six months ended June 30, 2020 compared to $110 million during the six months ended June 30, 2019.

Cash Restrictions. Webster Bank is required by Federal Reserve System regulations to hold cash reserve balances on hand or with a Federal Reserve Bank. To address liquidity concerns due to COVID-19 the Federal Reserve reset the requirement to zero, effective March 26, 2020. The reserve requirement ratio is subject to adjustment as conditions warrant.

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

+ References + Details