NOTE 20: Business Segments

Webster's operations are divided into four business segments that represent its core businesses—Commercial Banking, Retail Banking, Consumer Finance and Other. Other includes Health Savings Accounts (HSA) and Private Banking. These segments reflect how executive management responsibilities are assigned by the Chief Executive Officer for each of the core businesses, the products and services provided and the type of customer served, and reflect how financial information is currently evaluated by management. The Company's Treasury unit is included in the Corporate and Reconciling category along with the results of discontinued operations, the amounts required to reconcile profitability metrics to GAAP reported amounts, and the consumer liquidating portfolio. The consumer liquidating portfolio was established as a separate operating unit under Consumer Finance as of April 1, 2010. As of January 1, 2011, consumer liquidating was transferred from the Consumer Finance business segment to the Corporate and Reconciling category. As of January 1, 2011, executive management further realigned its business segment balances by transferring the government and not-for-profit banking operating unit from the Other business segment to the Commercial Banking business segment and the private banking operating unit from the Commercial Banking business segment to the Other business segment to reflect the realignment of responsibilities. In addition, certain support functions were realigned within the corporate function. The 2010 and 2009 segment performance summary and business segment results tables have been adjusted for comparability to the 2011 segment presentation, with the exception of the consumer liquidating portfolio, which was not established as a separate operating unit until April 1, 2010 and, therefore, the first quarter of 2010 and all of 2009 have not been adjusted for this impact.

Webster uses an internal profitability reporting system to generate information by operating segment, which is based on a series of management estimates and allocations regarding funds transfer pricing, the provision for loan and lease losses, non-interest expense and income taxes. These estimates and allocations, certain of which are subjective in nature, are continually being reviewed and refined. Changes in estimates and allocations that affect the reported results of any operating segment do not affect the consolidated financial position or results of operations of Webster as a whole.

The Company uses a matched maturity funding concept, also known as coterminous funds transfer pricing ("FTP"), to allocate interest income and interest expense to each business while also transferring the primary interest rate risk exposures to the Corporate and Reconciling category. The allocation process considers the specific interest rate risk and liquidity risk of financial instruments and other assets and liabilities in each line of business. The "matched maturity funding concept" basically considers the origination date and the earlier of the maturity date or the repricing date of a financial instrument to assign an FTP rate for loans and deposits originated each day. Loans are assigned an FTP rate for funds "used", and deposits are assigned an FTP rate for funds "provided". From a governance perspective, this process is executed by the Company's Financial Planning and Analysis division, and the process is overseen by the Company's Asset/Liability Committee.

As of January 1, 2010, Webster began attributing the provision for loan and lease losses to each segment based on management's estimate of the inherent loss content in each of the specific loan portfolios. Provision expense, for certain elements of risk that are not deemed specifically attributable to a business segment, such as environmental factors, is shown in the Corporate and Reconciling category. For the year ended December 31, 2011, 108.8% of the provision expense is specifically attributable to business segments and reported accordingly. Webster allocates a majority of non-interest expense to each business segment using a full-absorption costing process. Direct and indirect costs are analyzed and pooled by process and assigned to the appropriate business segment and corporate overhead costs are allocated to the business segments. Income tax expense is allocated to each business segment based on the effective income tax rate for the period shown.

The full profitability measurement reports which are prepared for each operating segment reflect non-GAAP reporting methodologies. The differences between these report-based measures are reconciled to GAAP values in the Corporate and Reconciling category.

Webster's business segment results are intended to reflect each segment as if it were a stand-alone business. The following table presents the operating results and total assets for Webster's business segments:


Year ended December 31, 2011 (In thousands)	Commercial Banking			Retail Banking		Consumer Finance			Other		Total Business Segments			Corporate and Reconciling			Consolidated Total
Net interest income	$	168,930		$	233,441	$	107,271		$	25,437	$	535,079		$	28,689		$	563,768
(Benefit) provision for loan and lease losses		(21,213	)		14,189		31,104			398		24,478			(1,978	)		22,500

Net interest income after provision for loan and lease losses		190,143			219,252		76,167			25,039		510,601			30,667			541,268
Non-interest income		27,717			98,763		9,449			24,199		160,128			16,914			177,042
Non-interest expense		95,092			304,271		63,788			40,898		504,049			6,927			510,976

Income from continuing operations before income taxes		122,768			13,744		21,828			8,340		166,680			40,654			207,334
Income tax expense		34,314			3,842		6,101			2,331		46,588			11,363			57,951

Income from continuing operations		88,454			9,902		15,727			6,009		120,092			29,291			149,383
Income from discontinued operations		—			—		—			—		—			1,995			1,995

Income before noncontrolling interests		88,454			9,902		15,727			6,009		120,092			31,286			151,378
Less: Net loss attributable to noncontrolling interests		—			—		(1	)		—		(1	)		—			(1	)

Net income attributable to Webster Financial Corporation	$	88,454		$	9,902	$	15,728		$	6,009	$	120,093		$	31,286		$	151,379

Total assets at period end	$	4,310,195		$	1,546,457	$	5,869,028		$	245,554	$	11,971,234		$	6,743,106		$	18,714,340


Year ended December 31, 2010 (a) (b) (In thousands)	Commercial Banking		Retail Banking		Consumer Finance			Other			Total Business Segments		Corporate and Reconciling		Consolidated Total
Net interest income	$	145,745	$	211,818	$	101,958		$	18,545		$	478,066	$	59,205	$	537,271
Provision (benefit) for loan and lease losses		25,618		10,463		68,214			(902	)		103,393		11,607		115,000

Net interest income after provision for loan and lease losses		120,127		201,355		33,744			19,447			374,673		47,598		422,271
Non-interest income		23,523		107,761		11,218			20,862			163,364		37,861		201,225
Non-interest expense		94,215		306,401		65,153			36,601			502,370		36,604		538,974

Income (loss) from continuing operations before income taxes		49,435		2,715		(20,191	)		3,708			35,667		48,855		84,522
Income tax expense (benefit)		6,969		417		(3,100	)		569			4,855		7,503		12,358

Income (loss) from continuing operations		42,466		2,298		(17,091	)		3,139			30,812		41,352		72,164
Income from discontinued operations		—		—		—			—			—		94		94

Income (loss) before noncontrolling interests		42,466		2,298		(17,091	)		3,139			30,812		41,446		72,258
Less: Net income attributable to noncontrolling interests		—		—		3			—			3		—		3

Net income (loss) attributable to Webster Financial Corporation	$	42,466	$	2,298	$	(17,094	)	$	3,139		$	30,809	$	41,446	$	72,255

Total assets at period end	$	4,080,975	$	1,516,197	$	5,912,862		$	203,707		$	11,713,741	$	6,320,140	$	18,033,881


Year ended December 31, 2009 (a) (b) (In thousands)	Commercial Banking			Retail Banking			Consumer Finance			Other			Total Business Segments			Corporate and Reconciling		Consolidated Total
Net interest income	$	128,282		$	156,030		$	102,837		$	12,762		$	399,911		$	95,475	$	495,386
Provision (benefit) for loan and lease losses		137,816			20,264			141,924			(507	)		299,497			3,503		303,000

Net (loss) interest income after provision for loan and lease losses		(9,534	)		135,766			(39,087	)		13,269			100,414			91,972		192,386
Non-interest income		24,991			118,793			12,854			19,055			175,693			8,702		184,395
Non-interest expense		96,298			293,660			62,902			35,986			488,846			18,548		507,394

(Loss) income from continuing operations before income taxes		(80,841	)		(39,101	)		(89,135	)		(3,662	)		(212,739	)		82,126		(130,613	)
Income tax (benefit) expense		(33,021	)		(16,028	)		(36,538	)		(1,501	)		(87,088	)		33,664		(53,424	)

(Loss) income from continuing operations		(47,820	)		(23,073	)		(52,597	)		(2,161	)		(125,651	)		48,462		(77,189	)
Income from discontinued operations		—			—			—			—			—			302		302

(Loss) income before noncontrolling interests		(47,820	)		(23,073	)		(52,597	)		(2,161	)		(125,651	)		48,764		(76,887	)
Less: Net income attributable to noncontrolling interests		—			—			22			—			22			—		22

Net (loss) income attributable to Webster Financial Corporation	$	(47,820	)	$	(23,073	)	$	(52,619	)	$	(2,161	)	$	(125,673	)	$	48,764	$	(76,909	)

Total assets at period end	$	4,113,157		$	1,553,087		$	6,047,472		$	215,573		$	11,929,289		$	5,807,781	$	17,737,070

(a)

Reclassified to conform to the 2011 presentation. The consumer liquidating portfolio was not established as a separate operating unit until April 2010, as part of the presentation for 2010, the consumer liquidating portfolio for the three months ended March 31, 2010 has not been reclassified to conform to the 2011 presentation. As part of the presentation for 2009, the consumer liquidating portfolio for the year ended December 31, 2009 has not been reclassified to conform to the 2011 presentation, and total assets at December 31, 2009 has not been reclassified to conform to the 2011 and 2010 presentations.

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