Business Developments

12 Months Ended

Dec. 31, 2021

Restructuring and Related Activities [Abstract]

Merger with Sterling Bancorp

Effective January 31, 2022, Webster completed its previously announced merger with Sterling pursuant to an Agreement and Plan of Merger dated as of April 18, 2021. Pursuant to the merger agreement, Sterling merged with and into Webster, with Webster continuing as the surviving corporation. Following the merger, on February 1, 2022, Sterling National Bank, a wholly-owned subsidiary of Sterling, merged with and into Webster Bank, with Webster Bank continuing as the surviving bank. Sterling was a full-service regional bank headquartered in Pearl River, New York, that primarily served the Greater New York metropolitan area. The merger expanded Webster's geographic footprint and combined two complementary organizations to create one of the largest commercial banks in the Northeast U.S.

At the effective time of the merger, each share of Sterling common stock outstanding, other than certain shares held by Webster and Sterling, was converted into the right to receive a fixed 0.4630 share of Webster common stock. In connection with the completion of the merger and in accordance with the merger agreement, the number of authorized shares of Webster common stock was increased from 200.0 million shares to 400.0 million shares as of January 31, 2022.

In addition, at the effective time of the merger, each outstanding share of Sterling 6.50% Series A Non-Cumulative Perpetual Preferred Stock was converted into the right to receive one share of newly created Webster 6.50% Series G Non-Cumulative Perpetual Preferred Stock, having substantially the same terms. Webster registered and issued 135,000 depositary shares on January 31, 2022, each representing 1/40th interest in a share of 6.50% Series G Non-Cumulative Preferred Perpetual Stock, par value $0.01 per share, with a liquidation preference equal to $1,000 per share (equivalent to $25 per depositary share) (Series G Preferred Stock). The Series G Preferred Stock ranks on parity with Webster's 5.25% Series F Non-Cumulative Preferred Perpetual Stock, par value $0.01 per share, with a liquidation preference of $25,000 per share (equivalent to $25 per depositary share) (Series F Preferred Stock), and senior to Webster common stock, with respect to the payment of dividends and distributions upon the liquidation, dissolution, or winding-up of Webster. Additional information regarding Webster's Series F Preferred Stock can be found within Note 13: Shareholders' Equity.

Further, certain equity awards granted under Sterling's equity compensation plans were converted into a corresponding award with respect to Webster common stock, generally subject to the same terms and conditions, with the number of shares underlying such awards adjusted based on the 0.4630 fixed exchange ratio. Additional information regarding Webster's equity compensation plans can be found within Note 20: Share-Based Plans.

Webster also assumed Sterling's long-term obligations with respect to $274.0 million in aggregate principal amount of 4.00% fixed-to-floating rate subordinated notes due 2029 issued by Sterling on December 16, 2019, and $225.0 million in aggregate principal amount of 3.875% fixed-to-floating rate subordinated notes due 2030 issued by Sterling on October 30, 2020.

The transaction will be accounted for as a business combination. Accordingly, the purchase price will be allocated to the assets acquired and liabilities assumed based on their fair values as of the merger effective date. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and are subject to change. Given the close proximity between the transaction closing date and Webster’s Annual Report on Form 10-K, the preliminary purchase price allocation has not yet been completed. Management expects to complete the initial accounting for its merger with Sterling, including the purchase price allocation, later in the first quarter of 2022. As a result, the estimated fair values of the assets acquired and liabilities assumed, the valuation techniques and inputs used to measure and develop the fair values, and any goodwill recorded will be disclosed in Webster’s Quarterly Report on Form 10-Q for the period ended March 31, 2022, along with supplemental pro forma financial information as if the merger with Sterling had occurred as of January 1, 2020.

During the year ended December 31, 2021, Webster incurred merger-related expenses totaling $37.5 million, which consisted primarily of professional fees for investment banking, legal, and consulting, and employee severance and retention costs. Merger-related expenses are recorded as either professional and outside services, or other non-interest expense on the accompanying Consolidated Statements of Income.

Bend Financial, Inc. Acquisition

On February 18, 2022, Webster acquired 100% of the equity interests of Bend, a cloud-based platform solution provider for HSAs, in exchange for cash. The acquisition accelerates Webster’s efforts underway to deliver enhanced user experiences at HSA Bank. The transaction will be accounted for as a business combination and the assets acquired and liabilities assumed will be reported at fair value. Webster plans to complete the initial purchase price allocation in the first quarter of 2022, which is not expected to have a material impact on the Company's consolidated financial statements.

Strategic Initiatives

During the fourth quarter of 2020, Webster 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.

Costs incurred related to the execution of these strategic initiatives consisted of the following for the years ended December 31:


	Years ended December 31,
(In thousands)	2021		2020
Severance and other benefits	$	(1,562)	$	17,860
Professional fees and other related charges	8,569		10,788
ROU lease asset impairment	1,198		11,954
Other (1)	(1,037)		2,055
Total strategic initiatives costs	$	7,168	$	42,657

(1)Other includes accelerated depreciation and operating lease costs for all periods presented, gain on sale of banking centers and early lease terminations in 2021, and write-downs of property and equipment in 2020.

Severance and other benefits costs are recorded as compensation and benefits, ROU lease asset impairment charges are recorded as occupancy, professional fees and other related charges are recorded as either occupancy or professional and outside services, and other is recorded as either occupancy, technology and equipment, or other non-interest expense on the accompanying Consolidated Statements of Income.

The following table summarizes the changes in accrued expenses and other liabilities associated with these strategic initiatives:


	Year ended December 31, 2021
(In thousands)	Severance and other benefits		Professional fees and other related charges		Total
Balance at December 31, 2019	$	—	$	—	$	—
Additions charged to expense	17,860		10,788		28,648
Cash payments	(185)		(8,668)		(8,853)
Balance at December 31, 2020	$	17,675	$	2,120	$	19,795
Additions charged to expense	2,340		8,569		10,909
Adjustments (1)	(3,902)		—		(3,902)
Cash payments	(10,994)		(8,962)		(19,956)
Balance at December 31, 2021	$	5,119	$	1,727	$	6,846

(1)Changes in employee retention assumptions during the third quarter of 2021 resulted in a release of the Company's previously recorded severance accrual.