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Mergers and Acquisitions (Tables)
 9 Months Ended
Sep. 30, 2022
Business Combination and Asset Acquisition [Abstract]  
Summary of Purchase Price Consideration
The following table summarizes the determination of the purchase price consideration:
(In thousands, except share and price per share data)
Webster common stock issued87,965,239 
Price per share of Webster common stock on January 31, 2022$56.81 
Consideration for outstanding common stock4,997,305 
Consideration for preferred stock exchanged138,942 
Consideration for replacement equity awards (1)
43,877 
Cash in lieu of fractional shares176 
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 $2.6 million and $16.4 million of stock compensation expense related to the replacement equity awards during the three and nine months ended September 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 BalanceFair Value
Purchase price consideration$5,180,300 
Assets:
Cash and due from banks510,929 
Interest-bearing deposits3,207 
Investment securities available-for-sale4,429,948 
Federal Home Loan Bank and Federal Reserve Bank Stock150,502 
Loans held for sale23,517 
Loans and leases:
Commercial non-mortgage$5,570,782 5,527,657 
Asset-based694,137 683,958 
Commercial real estate6,790,600 6,656,405 
Multi-family4,303,381 4,255,906 
Equipment financing1,350,579 1,314,311 
Warehouse lending647,767 643,754 
Residential1,313,785 1,281,637 
Home equity132,758 122,553 
Other consumer12,559 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 assets210,100 
Bank-owned life insurance policies645,510 
Accrued interest receivable and other assets959,501 
Total assets acquired$27,644,211 
Liabilities:
Non-interest-bearing deposits$6,620,248 
Interest-bearing deposits16,643,755 
Securities sold under agreements to repurchase and other borrowings27,184 
Long-term debt516,881 
Accrued expenses and other liabilities (1)
595,275 
Total liabilities assumed$24,403,343 
Net assets acquired3,240,868 
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)CommercialConsumerTotal
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 value3,238,552 517,835 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 September 30,Nine months ended September 30,
(In thousands)2022202120222021
Net interest income$538,125 $440,300 $1,436,867 $1,344,827 
Non-interest income113,636 120,961 349,405 347,928 
Net income239,569 181,980 636,174 368,051 
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 September 30,Nine months ended September 30,
(In thousands)2022202120222021
Compensation and benefits (1)
$5,770 $7,731 $71,472 $8,197 
Occupancy (2)
4,389 — 35,744 — 
Technology and equipment (3)
1,478 33 21,375 33 
Professional and outside services (4)
10,792 2,028 59,073 18,315 
Marketing64 — 199 — 
Other expense (5)
3,043 55 12,808 349 
Total merger-related expenses$25,536 $9,847 $200,671 $26,894 
(1)Comprised primarily of severance and employee retention costs, and executive synergy stock awards.
(2)Comprised primarily of charges associated with 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. During the three and nine months ended September 30, 2022, respectively, the Company recognized a combined $4.3 million and $12.0 million in related exit costs and accelerated depreciation on property and equipment. The amount for the nine months ended September 30, 2022 also includes $23.1 million in ROU asset impairment charges, which 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.