Business Developments

6 Months Ended

Jun. 30, 2021

Business Combination and Restructuring and Related Activities [Abstract]

Pending Merger

On April 19, 2021, Webster and Sterling announced that their boards of directors approved by unanimous vote a definitive agreement under which the two companies will combine in an all-stock transaction. Under the terms of the agreement, Sterling will merge into Webster, and Sterling's shareholders will receive a fixed exchange ratio of 0.463 of a Webster common share for each share of Sterling common stock owned. In addition, at the effective time of the merger, each outstanding share of Sterling's Series A non-cumulative perpetual preferred stock will be converted into the right to receive a newly created series of Webster preferred stock having substantially the same terms.

The merger is expected to close in the fourth quarter of 2021, subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals and approval by the shareholders of Webster and Sterling. In connection with the proposed transaction, the Company incurred $17.1 million of merger-related expenses during the three months ended June 30, 2021, primarily consisting of professional fees for investment banking, legal, accounting, and employee retention costs. Merger-related expenses are recorded as either professional and outside services, compensation and benefits, or other non-interest expense on the accompanying Condensed Consolidated Statements of Income, and are presented in the Corporate and Reconciling category for segment reporting purposes.

Strategic Initiatives

During the fourth quarter of 2020, the Company launched a strategic plan to drive incremental revenue and cost savings measures across the organization through the consolidation of banking centers and corporate facilities, process automation, ancillary spend reduction, and other organizational actions.

The following table presents the changes in reserves associated with the Company's strategic initiatives for the three and six months ended June 30, 2021:


	Three months ended June 30, 2021
(In thousands)	Severance		ROU Asset		Other		Total
Beginning balance	$	18,370	$	—	$	4,545	$	22,915
Charged to earnings	45		30		1,063		1,138

Charged against assets	—		(30)		(332)		(362)
Cash payments	(4,451)		—		(3,046)		(7,497)
Ending balance	$	13,964	$	—	$	2,230	$	16,194

	Six months ended June 30, 2021
	Severance		ROU Asset		Other		Total
Beginning balance	$	17,675	$	—	$	2,120	$	19,795
Charged to earnings	2,105		209		8,265		10,579

Charged against assets	—		(209)		(1,966)		(2,175)
Cash payments	(5,816)		—		(6,189)		(12,005)
Ending balance	$	13,964	$	—	$	2,230	$	16,194

The reserves associated with strategic initiatives are included in accrued expenses and other liabilities on the accompanying Condensed Consolidated Balance Sheets. Severance costs are recorded as compensation and benefits, Right-of-Use (ROU) lease asset charges are recorded as occupancy expense, and Other is recorded as either occupancy, technology and equipment, professional and outside services, or other non-interest expense on the accompanying Condensed Consolidated Statements of Income. Strategic initiative costs are presented in the Corporate and Reconciling category for segment reporting purposes.