Loans and Leases

3 Months Ended

Mar. 31, 2022

Loans and Leases Receivable Disclosure [Abstract]

Loans and Leases

Loans and Leases

The following table summarizes loans and leases by portfolio segment and class:

(In thousands)	At March 31, 2022		At December 31, 2021
Commercial non-mortgage	$	13,105,173	$	6,882,480
Asset-based	1,807,545		1,067,248
Commercial real estate	11,957,747		5,463,321
Multi-family	5,627,200		1,139,859
Equipment financing	1,909,284		627,058
Warehouse lending	564,137		—
Commercial portfolio	34,971,086		15,179,966
Residential	6,798,199		5,412,905
Home equity	1,679,443		1,593,559
Other consumer	87,757		85,299
Consumer portfolio	8,565,399		7,091,763
Loans and leases	$	43,536,485	$	22,271,729

The increase of $21.3 billion in loans and leases from December 31, 2021 to March 31, 2022 is primarily attributed to $20.5 billion of loans and leases acquired from Sterling in the merger, which is inclusive of a $317.6 million purchase discount. The carrying amount of loans and leases at March 31, 2022 and December 31, 2021 includes net unamortized (discounts)/premiums and net unamortized deferred (costs)/fees totaling $(124.1) million and $12.3 million, respectively. Accrued interest receivable of $122.6 million and $50.7 million at March 31, 2022 and December 31, 2021, respectively, is excluded from the carrying amount of loans and leases and is reported within accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets. At March 31, 2022, Webster had pledged $7.6 billion and $0.2 billion of eligible loans as collateral to support borrowing capacity at the FHLB and FRB, respectively.

Non-Accrual and Past Due Loans and Leases

The following table summarizes the aging of accrual and non-accrual loans and leases by class:

	At March 31, 2022
(In thousands)	30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		90 or More Days Past Due and Accruing		Non-accrual		Total Past Due and Non-accrual		Current		Total Loans and Leases
Commercial non-mortgage	$	1,981	$	1,788	$	124	$	87,005	$	90,898	$	13,014,275	$	13,105,173
Asset-based	23,387		—		—		5,356		28,743		1,778,802		1,807,545
Commercial real estate	6,506		674		—		68,204		75,384		11,882,363		11,957,747
Multi-family	346		13,007		—		383		13,736		5,613,464		5,627,200
Equipment financing	3,276		881		—		15,364		19,521		1,889,763		1,909,284
Warehouse lending	—		—		—		—		—		564,137		564,137
Commercial portfolio	35,496		16,350		124		176,312		228,282		34,742,804		34,971,086
Residential	7,518		1,786		—		26,602		35,906		6,762,293		6,798,199
Home equity	3,834		1,593		—		31,910		37,337		1,642,106		1,679,443
Other consumer	361		196		—		154		711		87,046		87,757
Consumer portfolio	11,713		3,575		—		58,666		73,954		8,491,445		8,565,399
Total	$	47,209	$	19,925	$	124	$	234,978	$	302,236	$	43,234,249	$	43,536,485

	At December 31, 2021
(In thousands)	30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		90 or More Days Past Due and Accruing		Non-accrual		Total Past Due and Non-accrual		Current		Total Loans and Leases
Commercial non-mortgage	$	3,729	$	4,524	$	1,977	$	59,607	$	69,837	$	6,812,643	$	6,882,480
Asset-based	—		—		—		2,086		2,086		1,065,162		1,067,248
Commercial real estate	508		417		519		5,046		6,490		5,456,831		5,463,321
Multi-family	—		—		—		—		—		1,139,859		1,139,859
Equipment financing	1,034		—		—		3,728		4,762		622,296		627,058
Commercial portfolio	5,271		4,941		2,496		70,467		83,175		15,096,791		15,179,966
Residential	3,212		368		—		15,747		19,327		5,393,578		5,412,905
Home equity	3,467		1,600		—		23,489		28,556		1,565,003		1,593,559
Other consumer	379		181		—		224		784		84,515		85,299
Consumer portfolio	7,058		2,149		—		39,460		48,667		7,043,096		7,091,763
Total	$	12,329	$	7,090	$	2,496	$	109,927	$	131,842	$	22,139,887	$	22,271,729

The following table provides additional information on non-accrual loans and leases:

	At March 31, 2022				At December 31, 2021
(In thousands)	Non-accrual		Non-accrual with No Allowance		Non-accrual		Non-accrual with No Allowance
Commercial non-mortgage	$	87,005	$	17,877	$	59,607	$	4,802
Asset-based	5,356		1,959		2,086		2,086
Commercial real estate	68,204		24,193		5,046		4,310
Multi-family	383		—		—		—
Equipment financing	15,364		1,272		3,728		—
Warehouse lending	—		—		—		—
Commercial portfolio	176,312		45,301		70,467		11,198
Residential	26,602		9,847		15,747		10,584
Home equity	31,910		17,233		23,489		18,920
Other consumer	154		3		224		2
Consumer portfolio	58,666		27,083		39,460		29,506
Total	$	234,978	$	72,384	$	109,927	$	40,704

Interest on non-accrual loans and leases that would have been recognized as additional interest income had the loans and leases been current in accordance with their original terms totaled $4.4 million and $4.0 million for the three months ended March 31, 2022 and 2021, respectively.

Allowance for Credit Losses on Loans and Leases

The following table summarizes the change in the ACL on loans and leases by portfolio segment:

	At or for the three months ended March 31,
	2022						2021
(In thousands)	Commercial Portfolio		Consumer Portfolio		Total		Commercial Portfolio		Consumer Portfolio		Total
ACL on loans and leases:
Balance, beginning of period	$	257,877	$	43,310	$	301,187	$	312,244	$	47,187	$	359,431
Initial allowance for PCD loans and leases (1)	78,376		9,669		88,045		—		—		—
Provision (benefit)	184,327		4,741		189,068		(23,653)		(2,106)		(25,759)
Charge-offs	(11,248)		(1,120)		(12,368)		(6,321)		(2,974)		(9,295)
Recoveries	1,364		2,075		3,439		1,636		2,338		3,974
Balance, end of period	$	510,696	$	58,675	$	569,371	$	283,906	$	44,445	$	328,351
Individually evaluated for impairment	32,736		12,057		44,793		14,809		4,913		19,722
Collectively evaluated for impairment	$	477,960	$	46,618	$	524,578	$	269,097	$	39,532	$	308,629

(1)Represents the establishment of the initial reserve for PCD loans and leases, which is reported net of $48.3 million of day one charge-offs recognized at the date of acquisition in accordance with GAAP.

Credit Quality Indicators

To measure credit risk for the commercial portfolio, the Company employs a dual grade credit risk grading system for estimating the PD and LGD. The credit risk grade system assigns a rating to each borrower and to the facility, which together form a Composite Credit Risk Profile. The credit risk grade system categorizes borrowers by common financial characteristics that measure the credit strength of borrowers and facilities by common structural characteristics. The Composite Credit Risk Profile has ten grades, with each grade corresponding to a progressively greater risk of loss. Grades (1) to (6) are considered pass ratings, and grades (7) to (10) are considered criticized, as defined by the regulatory agencies. A (7) "Special Mention" rating has a potential weakness that, if left uncorrected, may result in deterioration of the repayment prospects for the asset. A (8) "Substandard" rating has a well-defined weakness that jeopardizes the full repayment of the debt. A (9) "Doubtful" rating has all of the same weaknesses as a substandard asset with the added characteristic that the weakness makes collection or liquidation in full given current facts, conditions, and values improbable. Assets classified as a (10) "Loss" rating are considered uncollectible and are charged-off. Risk ratings, which are assigned to differentiate risk within the portfolio, are reviewed on an ongoing basis and revised to reflect changes in a borrower's current financial position and outlook, risk profile, and the related collateral and structural position. Loan officers review updated financial information or other loan factors on at least an annual basis for all pass rated loans to assess the accuracy of the risk grade. Criticized loans undergo more frequent reviews and enhanced monitoring.

The following tables summarize the amortized cost basis of commercial loans and leases by Composite Credit Risk Profile grade and origination year:

	At March 31, 2022
(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial non-mortgage:
Pass	$	1,184,061	$	2,726,171	$	1,570,383	$	1,173,542	$	781,857	$	1,071,677	$	4,211,772	$	12,719,463
Special mention	—		13,405		—		405		27,790		15,491		23,979		81,070
Substandard	—		4,159		91,597		53,013		90,196		24,393		37,425		300,783
Doubtful	—		—		—		—		—		—		3,857		3,857
Commercial non-mortgage	1,184,061		2,743,735		1,661,980		1,226,960		899,843		1,111,561		4,277,033		13,105,173
Asset-based:
Pass	—		1,585		4,737		9,697		2,589		20,543		1,676,341		1,715,492
Special mention	—		—		11,597		—		—		—		40,953		52,550
Substandard	—		—		—		—		—		—		39,503		39,503
Asset-based	—		1,585		16,334		9,697		2,589		20,543		1,756,797		1,807,545
Commercial real estate:
Pass	480,774		2,300,007		1,862,529		2,271,370		1,324,793		3,092,728		—		11,332,201
Special mention	87,287		—		33,796		46,723		75,725		109,753		—		353,284
Substandard	1,646		1,503		5,752		46,189		68,445		148,727		—		272,262
Commercial real estate	569,707		2,301,510		1,902,077		2,364,282		1,468,963		3,351,208		—		11,957,747
Multi-family:
Pass	353,825		1,154,643		526,163		790,407		555,600		2,107,897		—		5,488,535
Special mention	—		—		—		5,223		46,200		32,374		—		83,797
Substandard	—		—		397		16,652		6,903		30,916		—		54,868
Multi-family	353,825		1,154,643		526,560		812,282		608,703		2,171,187		—		5,627,200
Equipment financing:
Pass	87,396		460,154		498,215		450,145		171,362		176,105		—		1,843,377
Special mention	—		—		1,042		4,132		11,208		4,929		—		21,311
Substandard	689		4,406		18,001		7,802		5,218		8,480		—		44,596
Equipment financing	88,085		464,560		517,258		462,079		187,788		189,514		—		1,909,284
Warehouse lending:
Pass	—		—		—		—		—		—		564,137		564,137
Warehouse lending	—		—		—		—		—		—		564,137		564,137
Commercial portfolio	$	2,195,678	$	6,666,033	$	4,624,209	$	4,875,300	$	3,167,886	$	6,844,013	$	6,597,967	$	34,971,086

	At December 31, 2021
(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial non-mortgage:
Pass	$	2,270,320	$	1,179,620	$	757,343	$	581,633	$	292,637	$	275,789	$	1,182,562	$	6,539,904
Special mention	14,216		22,892		37,877		15,575		9,721		15,399		27,808		143,488
Substandard	3,660		46,887		30,437		69,963		5,255		19,483		23,403		199,088
Commercial non-mortgage	2,288,196		1,249,399		825,657		667,171		307,613		310,671		1,233,773		6,882,480
Asset-based:
Pass	7,609		19,141		12,810		13,456		6,113		25,850		920,496		1,005,475
Special mention	—		—		—		675		—		—		59,012		59,687
Substandard	—		—		2,086		—		—		—		—		2,086
Asset-based	7,609		19,141		14,896		14,131		6,113		25,850		979,508		1,067,248
Commercial real estate:
Pass	1,152,431		733,220		1,146,149		594,180		384,664		1,136,384		55,044		5,202,072
Special mention	95		3,084		—		84,475		51,536		79,096		—		218,286
Substandard	—		82		227		373		13,874		28,407		—		42,963
Commercial real estate	1,152,526		736,386		1,146,376		679,028		450,074		1,243,887		55,044		5,463,321
Multi-family:
Pass	222,875		135,924		185,087		322,688		17,054		203,558		566		1,087,752
Special mention	—		—		—		35,201		—		—		—		35,201
Substandard	—		400		—		6,933		—		9,573		—		16,906
Multi-family	222,875		136,324		185,087		364,822		17,054		213,131		566		1,139,859
Equipment financing:
Pass	231,762		188,031		93,547		41,276		14,864		32,588		—		602,068
Special mention	—		108		2,229		3,341		—		600		—		6,278
Substandard	—		8,388		4,756		2,612		332		2,624		—		18,712
Equipment financing	231,762		196,527		100,532		47,229		15,196		35,812		—		627,058
Commercial portfolio	$	3,902,968	$	2,337,777	$	2,272,548	$	1,772,381	$	796,050	$	1,829,351	$	2,268,891	$	15,179,966

To measure credit risk for the consumer portfolio, the most relevant credit characteristic is the FICO score, which is a widely used credit scoring system that ranges from 300 to 850. A lower FICO score is indicative of higher credit risk and a higher FICO score is indicative of lower credit risk. FICO scores are updated at least on a quarterly basis.

The following tables summarize the amortized cost basis of consumer loans by FICO score and origination year:

	At March 31, 2022
(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Residential:
800+	$	39,359	$	797,341	$	450,236	$	159,820	$	32,779	$	988,591	$	—	$	2,468,126
740-799	179,363		1,150,417		371,094		141,957		41,325		904,628		—		2,788,784
670-739	63,399		371,717		122,158		66,514		26,780		483,134		—		1,133,702
580-669	3,646		41,718		18,238		9,163		4,729		197,165		—		274,659
579 and below	868		2,420		1,595		47,842		728		79,475		—		132,928
Residential	286,635		2,363,613		963,321		425,296		106,341		2,652,993		—		6,798,199
Home equity:
800+	9,110		34,957		29,116		10,058		14,217		62,760		483,151		643,369
740-799	8,128		42,151		20,593		7,809		10,159		41,587		435,737		566,164
670-739	4,811		18,414		8,147		5,161		8,432		34,326		251,203		330,494
580-669	290		2,023		1,394		1,037		1,835		15,424		84,571		106,574
579 and below	73		326		676		720		647		6,487		23,913		32,842
Home equity	22,412		97,871		59,926		24,785		35,290		160,584		1,278,575		1,679,443
Other consumer:
800+	49		352		1,205		1,918		651		494		11,781		16,450
740-799	57		988		683		779		438		3,344		10,524		16,813
670-739	—		—		3,486		5,089		1,900		945		15,697		27,117
580-669	185		712		5,497		9,478		3,002		866		1,986		21,726
579 and below	13		291		835		2,119		467		490		1,436		5,651
Other consumer	304		2,343		11,706		19,383		6,458		6,139		41,424		87,757
Consumer portfolio	$	309,351	$	2,463,827	$	1,034,953	$	469,464	$	148,089	$	2,819,716	$	1,319,999	$	8,565,399

	At December 31, 2021
(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Residential:
800+	$	590,238	$	428,118	$	161,664	$	35,502	$	105,198	$	735,517	$	—	$	2,056,237
740-799	1,083,608		421,380		154,960		32,172		95,662		456,722		—		2,244,504
670-739	374,460		135,146		73,499		25,099		34,550		227,863		—		870,617
580-669	38,644		13,782		9,348		3,056		9,000		71,811		—		145,641
579 and below	9,478		1,051		49,252		390		2,519		33,216		—		95,906
Residential	2,096,428		999,477		448,723		96,219		246,929		1,525,129		—		5,412,905
Home equity:
800+	35,678		30,157		9,591		16,347		11,068		58,189		463,334		624,364
740-799	42,430		22,030		9,413		13,317		7,711		33,777		409,518		538,196
670-739	17,493		9,162		5,889		8,220		5,802		31,160		233,744		311,470
580-669	1,773		1,397		1,298		1,066		1,329		15,042		66,361		88,266
579 and below	380		446		725		1,060		434		5,666		22,552		31,263
Home equity	97,754		63,192		26,916		40,010		26,344		143,834		1,195,509		1,593,559
Other consumer:
800+	463		1,343		2,398		916		231		118		10,160		15,629
740-799	2,588		5,408		8,303		2,985		379		77		9,528		29,268
670-739	1,061		7,034		13,602		3,859		607		412		5,644		32,219
580-669	256		1,083		2,550		735		216		211		1,267		6,318
579 and below	147		87		215		159		40		21		1,196		1,865
Other consumer	4,515		14,955		27,068		8,654		1,473		839		27,795		85,299
Consumer portfolio	$	2,198,697	$	1,077,624	$	502,707	$	144,883	$	274,746	$	1,669,802	$	1,223,304	$	7,091,763

Collateral Dependent Loans and Leases

A loan or lease is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is substantially expected to be provided through the operation or sale of collateral. At March 31, 2022 and December 31, 2021, the carrying amount of collateral dependent commercial loans and leases totaled $102.2 million and $16.6 million, respectively, and the carrying amount of collateral dependent consumer loans totaled $32.1 million and $34.9 million, respectively. Commercial non-mortgage, asset-based, and equipment financing loans and leases are generally secured by machinery and equipment, inventory, receivables, or other non-real estate assets, whereas commercial real estate, multi-family, warehouse lending, residential, home equity, and other consumer loans are secured by real estate. The ACL for collateral dependent loans and leases is individually assessed based on the fair value of the collateral less costs to sell at the reporting date. At March 31, 2022 and December 31, 2021, the collateral value associated with collateral dependent loans and leases totaled $139.9 million and $86.0 million, respectively.

Troubled Debt Restructurings

The following table summarizes information related to TDRs:

(In thousands)	At March 31, 2022		At December 31, 2021
Accrual status	$	104,910	$	110,625
Non-accrual status	46,338		52,719
Total TDRs	$	151,248	$	163,344
Additional funds committed to borrowers in TDR status	$	5,747	$	5,975
Specific reserves for TDRs included in the ACL on loans and leases:
Commercial portfolio	$	2,939	$	9,017
Consumer portfolio	3,689		3,745

The respective portions of commercial and consumer TDRs deemed to be uncollectible and charged off were $9.1 million and $0.1 million during the three months ended March 31, 2022, and $1.6 million and $0.3 million during the three months ended March 31, 2021.

The following table summarizes loans and leases modified as TDRs by class and modification type:

	Three months ended March 31,
	2022			2021
(Dollars in thousands)	Number of Contracts	Recorded Investment (1)		Number of Contracts	Recorded Investment (1)
Commercial non-mortgage
Extended maturity	2	$	98	6	$	507
Maturity/rate combined	2	92		1	37
Other (2)	—	—		2	113
Commercial real estate
Extended maturity	—	—		1	183
Residential
Extended maturity	—	—		1	99
Other (2)	5	2,985		2	233
Home equity
Extended maturity	—	—		1	28
Maturity/rate combined	4	44		5	1,011
Other (2)	17	1,242		7	433
Total TDRs	30	$	4,461	26	$	2,644

(1)Post-modification balances approximate pre-modification balances. The aggregate amount of charge-offs due to restructurings was not significant.

(2)Other includes covenant modifications, forbearance, discharges under Chapter 7 bankruptcy, or other concessions.

For the three months ended March 31, 2022 and 2021, there were no significant loans and leases modified as TDRs within the previous 12 months and for which there was a payment default.