NOTE 21: Commitments and Contingencies

Lease Commitments. At December 31, 2011, Webster was obligated under various non-cancelable operating leases for properties used as banking offices and other office facilities. Many of the leases contain renewal options and escalation clauses which provide for increased rental expense based primarily upon increases in real estate taxes over a base year. Rental expense under leases was $20.4 million, $20.7 million and $22.3 million for the years ended December 31, 2011, 2010 and 2009, respectively and is recorded as a component of occupancy expense in the accompanying Consolidated Statements of Operations. Webster is also entitled to rental income under various non-cancelable operating leases for properties owned. Rental income was $1.1 million, $1.3 million and $2.0 million in 2011, 2010 and 2009, respectively, and is recorded as a component of other non-interest income in the accompanying Consolidated Statements of Operations.

The following is a schedule of future minimum rental payments and receipts required under these leases as of December 31, 2011:


(In thousands)	Rental Payments		Rental Receipts
For years ending December 31,
2012	$	18,929	$	658
2013		18,148		456
2014		16,679		339
2015		15,565		253
2016		14,977		315
Thereafter		79,255		—

Total	$	163,553	$	2,021

It is expected that certain leases will be renewed, or equipment replaced with new leased equipment, as these leases expire.

Credit-Related Financial Instruments. The Company is a party to credit related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Company's exposure to credit loss is represented by the contractual amount of these commitments as it does for on-balance sheet instruments.

The following table summarizes the outstanding financial instruments whose contract amounts represent credit risk for the periods ending:


	December 31,
(In thousands)	2011		2010
Commitments to extend credit	$	318,001	$	339,249
Unfunded commitments under existing lines and loans		3,390,816		3,330,712
Standby letters of credit		159,930		166,744
Commercial letters of credit		3,087		11,555

Total financial instruments with off-balance sheet risk	$	3,871,834	$	3,848,260

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of secured collateral, if deemed necessary by the Company, is based on management's credit evaluation of the customer.

The following table provides activity details for the Company's reserve for unfunded credit commitments for the periods presented:


	December 31,
(In thousands)	2011 (a)			2010 (a)			2009 (a)
Beginning balance	$	9,378		$	10,105		$	10,500
Provision		209			311			300
Benefit		(4,138	)		(1,038	)		(695	)

Ending balance	$	5,449		$	9,378		$	10,105

(a)	The reserve for unfunded credit commitments is reported as a component of accrued expenses and other liabilities in the accompanying Consolidated Balance Sheets.

Reserve for Loan Repurchases. In connection with the sale of mortgage loans, the Company enters into agreements containing representations and warranties about certain characteristics of the mortgage loans sold and the Company's origination process. The Company may be required to repurchase a loan in the event of certain breaches of these representations and warranties or in the event of default of the borrower within 90 days of origination. The reserve for loan repurchases provides for estimated losses associated with the repurchase of loans sold in connection with the Company's mortgage banking operations. The reserve reflects management's continual evaluation of loss experience and the quality of loan originations. It also reflects management's expectation of losses from repurchase requests for which management has not yet been notified. Factors considered in the evaluation process for establishing the reserves include identity of counterparty, the vintage of the loans sold, the amount of open repurchase requests, specific loss estimates for each open request, current level of loan losses in similar vintages held in the residential loan portfolio, and estimated recoveries on the underlying collateral. While management uses its best judgment and information available, the adequacy of this reserve is dependent upon factors outside the Company's control including the performance of loans sold and the quality of the servicing provided by the acquirer.

The following table provides detail of activity in the Company's reserve for loan repurchases for the periods presented:


	December 31,
(In thousands)	2011			2010			2009
Beginning balance	$	3,658		$	1,595		$	—
Provision		3,475			5,725			1,595
Loans Repurchased		(4,864	)		(3,662	)		—

Ending balance-reserve for loan repurchases	$	2,269		$	3,658		$	1,595

The provision recorded at the time of loan sale is netted from mortgage banking activities, included as a component of non-interest income. Incremental provision, post loan sale, is recorded in other non-interest expense.

Litigation Reserves

Webster is involved in routine legal proceedings occurring in the ordinary course of business and is subject to loss contingencies related to such litigation and claims arising therefrom. Webster evaluates these contingencies based on information currently available, including advice of counsel and assessment of available insurance coverage. Webster establishes accruals for litigation and claims when a loss contingency is considered probable and the related amount is reasonably estimable. Any accruals are periodically reviewed and may be adjusted as circumstances change. For certain matters, when able to do so, Webster also estimates loss contingencies for possible litigation and claims, whether or not there is an accrued probable loss. The estimates included in this range are based on analysis of currently available information and are subject to significant judgment and to change as new information becomes available.

There is no assurance that the Company's litigation reserves will not need to be adjusted in future periods. Webster believes it has defenses to all the claims asserted against it in existing litigation matters and intends to defend itself in all matters. Based upon its current knowledge, after consultation with counsel and after taking into consideration its current litigation reserves, Webster believes that the legal actions and proceedings currently pending against it should not have a material adverse effect on Webster's consolidated financial condition. However, in light of the uncertainties involved in such actions and proceedings, there is no assurance that the ultimate resolution of these matters will not significantly exceed the reserves currently accrued by Webster; as a result, the outcome of a particular matter may be material to the Company's operating results for a particular period depending on, among other factors, the size of the loss or liability imposed and the level of the Company's income for that period.