Segment Reporting

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

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 credit 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 (FTP) 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 a 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. Beginning in 2020, Webster refined the FTP calculation to reflect the allocation of capital credit to net interest income to better align segment results with key measurements used to review segment performance. Prior period net interest income and income tax expense were revised to reflect this change.

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 credit losses to each segment based on management's estimate of the inherent loss content in each of the specific loan and lease portfolios. Allowance for credit losses on loans and leases is included in total assets within the Corporate and Reconciling category.

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, 2020	$	12,666,764	$	83,104	$	10,039,505	$	10,205,070	$	32,994,443
At December 31, 2019	11,541,803		80,176		9,348,727		9,418,638		30,389,344

The following tables present the operating results, including all appropriate allocations, for Webster’s reportable segments and the Corporate and Reconciling category:

	Three months ended September 30, 2020
(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling		Consolidated Total
Net interest income	$	107,417	$	39,861	$	108,218	$	(36,240)	$	219,256
Non-interest income	13,099		27,235		28,970		5,756		75,060
Non-interest expense	47,610		34,789		98,991		2,606		183,996
Pre-tax, pre-provision net revenue	72,906		32,307		38,197		(33,090)		110,320
Provision for credit losses	30,793		—		(8,040)		(3)		22,750
Income before income tax expense	42,113		32,307		46,237		(33,087)		87,570
Income tax expense	10,314		8,626		9,155		(9,806)		18,289
Net income	$	31,799	$	23,681	$	37,082	$	(23,281)	$	69,281

	Three months ended September 30, 2019
(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling		Consolidated Total
Net interest income	$	104,549	$	43,581	$	104,613	$	(12,204)	$	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	73,275		34,189		32,893		(9,781)		130,576
Provision for credit losses	9,312		—		1,988		—		11,300
Income before income tax expense	63,963		34,189		30,905		(9,781)		119,276
Income tax expense	15,863		9,060		6,552		(6,064)		25,411
Net income	$	48,100	$	25,129	$	24,353	$	(3,717)	$	93,865

	Nine months ended September 30, 2020
(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling		Consolidated Total
Net interest income	$	311,595	$	121,868	$	312,558	$	(71,557)	$	674,464
Non-interest income	41,063		76,721		79,995		10,735		208,514
Non-interest expense	138,848		105,887		291,644		3,037		$	539,416
Pre-tax, pre-provision net revenue	213,810		$	92,702	100,909		(63,859)		343,562
Provision for credit losses	131,876		—		6,965		(91)		138,750
Income before income tax expense	81,934		92,702		93,944		(63,768)		204,812
Income tax expense	20,066		24,751		18,601		(19,183)		44,235
Net income	$	61,868	$	67,951	$	75,343	$	(44,585)	$	160,577

	Nine months ended September 30, 2019
(In thousands)	Commercial Banking		HSA Bank		Community Banking		Corporate and Reconciling		Consolidated Total
Net interest income	$	303,107	$	130,692	$	318,741	$	(28,663)	$	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	209,675		104,081		108,837		(20,540)		402,053
Provision for credit losses	23,294		—		8,506		—		31,800
Income before income tax expense	186,381		104,081		100,331		(20,540)		370,253
Income tax expense	46,224		27,582		21,269		(17,072)		78,003
Net income	$	140,157	$	76,499	$	79,062	$	(3,468)	$	292,250