Mergers and Acquisitions (Tables)

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

The following table summarizes the determination of the purchase price consideration:


(In thousands, except share and price per share data)
Webster common stock issued	87,965,239
Price per share of Webster common stock on January 31, 2022	$	56.81
Consideration for outstanding common stock	4,997,305
Consideration for preferred stock exchanged	138,942
Consideration for replacement equity awards (1)	43,877
Cash in lieu of fractional shares	176
Total purchase price consideration	$	5,180,300

(1)The fair value of the replacement equity awards issued by Webster and included in the consideration transferred pertain to services performed prior to the merger effective date. The fair value attributed to services performed after the merger effective date will be recognized over the required service vesting period for each award and recorded as compensation and benefits expense on the consolidated statements of income. Webster recognized an incremental $11.0 million and $13.8 million of stock compensation expense related to the replacement equity awards during the three and six months ended June 30, 2022, respectively.

Summary of Purchase Price Allocation

The following table summarizes the preliminary allocation of the purchase price to the fair value of the identifiable assets acquired and liabilities assumed from Sterling at January 31, 2022:


(In thousands)	Unpaid Principal Balance		Fair Value
Purchase price consideration			$	5,180,300
Assets:
Cash and due from banks			510,929
Interest-bearing deposits			3,207
Investment securities available-for-sale			4,429,948
Federal Home Loan Bank and Federal Reserve Bank Stock			150,502
Loans held for sale			23,517
Loans and leases:
Commercial non-mortgage	$	5,570,782	5,527,657
Asset-based	694,137		683,958
Commercial real estate	6,790,600		6,656,405
Multi-family	4,303,381		4,255,906
Equipment financing	1,350,579		1,314,311
Warehouse lending	647,767		643,754
Residential	1,313,785		1,281,637
Home equity	132,758		122,553
Other consumer	12,559		12,525
Total loans and leases	$	20,816,348	20,498,706
Deferred tax assets, net			(52,130)
Premises and equipment (1)			264,421
Other intangible assets			210,100
Bank-owned life insurance policies			645,510
Accrued interest receivable and other assets			959,501
Total assets acquired			$	27,644,211
Liabilities:
Non-interest-bearing deposits			$	6,620,248
Interest-bearing deposits			16,643,755
Securities sold under agreements to repurchase and other borrowings			27,184
Long-term debt			516,881

Accrued expenses and other liabilities (1)			595,275
Total liabilities assumed			$	24,403,343
Net assets acquired			3,240,868
Goodwill			$	1,939,432

(1)Includes $100.0 million of ROU lease assets and $106.9 million of operating lease liabilities reported within premises and equipment and accrued expenses and other liabilities, respectively, which were measured based upon the estimated present value of the remaining lease payments. In addition, ROU lease assets were adjusted for favorable and unfavorable terms of the lease when compared to market terms, as applicable.

Schedule of PCD Loans and Leases by Portfolio Segment

The following table reconciles the unpaid principal balance to the fair value of PCD loans and leases by portfolio segment:


(In thousands)	Commercial		Consumer		Total
Unpaid principal balance	$	3,394,963	$	541,471	$	3,936,434
ACL at acquisition	(115,464)		(20,852)		(136,316)
Non-credit (discount)	(40,947)		(2,784)		(43,731)
Fair value	3,238,552		517,835		3,756,387

Summary of Supplemental Pro Forma Information

The following table summarizes supplemental pro forma financial information giving effect to the merger as if it had been completed on January 1, 2021:


	Three months ended June 30,				Six months ended June 30,
(In thousands)	2022		2021		2022		2021
Net interest income	$	465,392	$	440,538	$	898,741	$	904,528
Non-interest income	120,933		110,659		235,769		226,967
Net income	213,438		164,073		396,605		186,071

Summary of Supplemental Pro Forma Information Adjustments

In addition, the supplemental pro forma financial information was adjusted for merger-related expenses, as follows:


	Three months ended June 30,				Six months ended June 30,
(In thousands)	2022		2021 (6)		2022		2021 (6)
Compensation and benefits (1)	$	24,117	$	466	$	65,702	$	466
Occupancy (2)	30,999		—		31,355		—
Technology and equipment (3)	812		—		19,897		—
Professional and outside services (4)	3,824		16,287		48,281		16,287
Marketing	84		—		135		—
Other expense (5)	6,804		294		9,765		294
Total merger-related expenses	$	66,640	$	17,047	$	175,135	$	17,047

(1)Comprised primarily of severance and employee retention costs, and executive synergy stock awards.

(2)Comprised primarily of $23.1 million in ROU asset impairment charges and a combined $7.7 million in related exit costs and accelerated depreciation on property and equipment related to Webster’s corporate real estate consolidation strategy, which was developed and launched in the second quarter of 2022. Under the consolidation plan, Webster has arranged to close 14 locations in order to reduce the Company's corporate real estate facility square footage by approximately 45% by the end of the year. ROU asset impairment charges were calculated as the difference between the estimated fair value of the assets determined using a discounted cash flow technique, relative to their book value.

(3)Comprised primarily of technology contract termination fees.

(4)Comprised primarily of advisory, legal, accounting, and other professional fees.

(5)Comprised primarily of disposals on property and equipment, transfer tax, and other miscellaneous expenses.

(6)Webster did not incur any merger-related expenses during the three-months ended March 31, 2021. Therefore, amounts recognized as merger-related expenses for the three and six months ended June 30, 2021 are equal.