Regulatory Matters

12 Months Ended

Dec. 31, 2011

Regulatory Matters [Abstract]

Regulatory Matters

NOTE 13: Regulatory Matters

Regulatory Capital Requirements. Banks and bank holding companies are subject to various regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weighting and other factors.

Quantitative measures established by regulations to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth in the following table) of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to adjusted quarterly average assets (as defined).

The Tier 1 and total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets. Risk-weighted assets are calculated based on regulatory requirements and include total assets, excluding goodwill and other intangible assets, allocated by risk weight category, and certain off-balance-sheet items (primarily loan commitments). The leverage ratio is calculated by dividing Tier 1 capital by adjusted quarterly average total assets, which exclude goodwill and other intangible assets.

Year-end actual and required capital ratios for Webster and Webster Bank are as follows:

	Actual					Capital Requirements					Well Capitalized
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
At December 31, 2011
Webster Financial Corporation
Total risk-based capital	$	1,766,468		14.6	%	$	967,017		8.0	%	$	1,208,772		10.0	%
Tier 1 capital		1,577,991		13.1			483,509		4.0			725,263		6.0
Tier 1 leverage capital ratio		1,577,991		8.9			713,319		4.0			891,648		5.0
Webster Bank, N.A.
Total risk-based capital	$	1,681,769		14.0	%	$	964,184		8.0	%	$	1,205,230		10.0	%
Tier 1 capital		1,494,529		12.4			482,092		4.0			723,138		6.0
Tier 1 leverage capital ratio		1,494,529		8.4			711,572		4.0			889,466		5.0
At December 31, 2010(a)
Webster Financial Corporation
Total risk-based capital	$	1,645,856		13.9	%	$	944,470		8.0	%	$	1,180,587		10.0	%
Tier 1 capital		1,424,652		12.1			472,235		4.0			708,352		6.0
Tier 1 leverage capital ratio		1,424,652		8.3			685,896		4.0			857,370		5.0
Webster Bank, N.A.
Total risk-based capital	$	1,678,090		14.3	%	$	941,019		8.0	%	$	1,176,273		10.0	%
Tier 1 capital		1,457,794		12.4			470,509		4.0			705,764		6.0
Tier 1 leverage capital ratio		1,457,794		8.5			684,060		4.0			855,076		5.0

(a) Certain previously reported information has been corrected to reflect the deferment of certain commercial loan fees. For more information refer to Note 1.

In the first quarter of 2010, the Company down-streamed $100 million from Webster to Webster Bank, N.A. to improve its overall capital position. This action also had the effect of increasing the bank-level leverage and total capital ratios. As of June 30, 2010, Webster Bank, N.A. became subject to individual minimum capital ratios. Webster Bank, N.A. is required to maintain a Tier 1 leverage ratio of at least 7.5% of adjusted total assets and a total risk-based capital ratio of at least 12% of risk-weighted assets. The Bank exceeded these requirements at December 31, 2011 and 2010.

Webster is subject to the regulatory capital requirements administered by the Federal Reserve, while Webster Bank is subject to the regulatory capital requirements administered by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. Regulatory authorities can initiate certain mandatory actions if Webster or Webster Bank fails to meet the minimum capital requirements, which could have a direct material effect on the Company's Consolidated Financial Statements. Management believes that Webster and Webster Bank met all capital adequacy requirements to which they are subject.

On August 5, 2011, Standard & Poor's rating agency lowered the long-term rating of the U.S. government and federal agencies from AAA to AA+. In response, the federal banking agencies have indicated that for risk-based capital purposes, the risk weights for Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government sponsored entities are not affected.

Dividend Restrictions. In the ordinary course of business, Webster is dependent upon dividends from Webster Bank to provide funds for the payment of dividends to shareholders and to provide for other cash requirements. Banking regulations may limit the amount of dividends that may be paid. Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of Webster Bank to fall below specified minimum levels. Approval is also required if dividends declared exceed the net profits for that year combined with the retained net profits for the preceding two years. In addition, the OCC has the discretion to prohibit any otherwise permitted capital distribution on general safety and soundness grounds. Dividends paid by Webster Bank to Webster Financial Corporation totaled $170.0 million in 2011. At December 31, 2010, Webster Bank had no dividend paying capacity to pay dividends to Webster.

Trust Preferred Securities. In accordance with the applicable accounting standard related to variable interest entities, the accounts of Webster have not been included in the consolidated financial statements. However, $209.9 million in trust preferred securities issued by Webster Capital Trust IV have been included in the Tier 1 capital of Webster for regulatory capital purposes pursuant to guidance from the Federal Reserve Board. On July 21, 2010, sweeping financial regulatory reform legislation entitled the "Dodd-Frank Wall Street Reform and Consumer Protection Act" (the "Dodd-Frank Act") was signed into law. Certain provisions of the Dodd-Frank Act will require Webster to deduct, over a three year period beginning on January 1, 2013, all trust preferred securities from Webster's Tier 1 capital. Nonetheless, excluding trust preferred securities from Tier 1 capital at December 31, 2011 would not affect Webster's ability to meet all capital adequacy requirements to which it is subject. Trust preferred securities will continue to be entitled to be treated as Tier 2 capital after they are phased out of Tier 1 capital.