Regulatory Matters

9 Months Ended

Sep. 30, 2020

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

Regulatory Matters

Regulatory Matters

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 AOCI/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 non-cumulative 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 September 30, 2020
	Actual (1)				Minimum Requirement				Well Capitalized
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Webster Financial Corporation
CET1 risk-based capital	$	2,519,589	11.23	%	$	1,009,651	4.5	%	$	1,458,385	6.5	%
Total risk-based capital	3,022,511		13.47		1,794,935		8.0		2,243,669		10.0
Tier 1 risk-based capital	2,664,626		11.88		1,346,201		6.0		1,794,935		8.0
Tier 1 leverage capital	2,664,626		8.24		1,293,186		4.0		1,616,482		5.0
Webster Bank
CET1 risk-based capital	$	2,744,235	12.24	%	$	1,009,277	4.5	%	$	1,457,845	6.5	%
Total risk-based capital	3,024,694		13.49		1,794,270		8.0		2,242,838		10.0
Tier 1 risk-based capital	2,744,235		12.24		1,345,703		6.0		1,794,270		8.0
Tier 1 leverage capital	2,744,235		8.49		1,292,763		4.0		1,615,954		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 September 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 the 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 nine months ended September 30, 2020 compared to $170 million during the nine months ended September 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.