WEBSTER FINANCIAL CORP - Quarter Report: 2023 September (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________________________________

FORM 10-Q

_________________________________________________________________________________________________________________________________________-___________________________________________________________________________________________________

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2023

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____ to ____

Commission File Number: 001-31486

_______________________________________________________________________________________

WEBSTER FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

______________________________________________________________________________________


Delaware						06-1187536
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

200 Elm Street, Stamford, Connecticut 06902

(Address and zip code of principal executive offices)

(203) 578-2202

(Registrant's telephone number, including area code)

______________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock, par value $0.01 per share	WBS	New York Stock Exchange
Depositary Shares, each representing 1/1000th interest in a share	WBS-PrF	New York Stock Exchange
of 5.25% Series F Non-Cumulative Perpetual Preferred Stock
Depositary Shares, each representing 1/40th interest in a share	WBS-PrG	New York Stock Exchange
of 6.50% Series G Non-Cumulative Perpetual Preferred Stock

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares of common stock, par value $0.01 per share, outstanding as of November 3, 2023 was 172,035,064.

INDEX


		Page No.

Key to Acronyms and Terms		ii
Forward-Looking Statements		iii

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	35

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	83

Item 4.	Controls and Procedures	83

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	85

Item 1A.	Risk Factors	85

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85

Item 3.	Defaults Upon Senior Securities	85

Item 4.	Mine Safety Disclosures	85

Item 5.	Other Information	85

Item 6.	Exhibits	86

EXHIBIT INDEX		86

SIGNATURES		87

KEY TO ACRONYMS AND TERMS


ACL			Allowance for credit losses
Agency CMBS			Agency commercial mortgage-backed securities
Agency CMO			Agency collateralized mortgage obligations
Agency MBS			Agency mortgage-backed securities
ALCO			Asset/Liability Committee
AOCI			Accumulated other comprehensive income
ASC			Accounting Standards Codification
ASU or the Update			Accounting Standards Update
Basel III			Capital rules under a global regulatory framework developed by the Basel Committee on Banking Supervision
Bend			Bend Financial, Inc.
BHC Act			Bank Holding Company Act of 1956, as amended
CECL			Current expected credit losses
CET1 capital			Common Equity Tier 1 Capital, defined by Basel III capital rules
CFPB			Consumer Financial Protection Bureau
CLO			Collateralized loan obligations
CMBS			Non-agency commercial mortgage-backed securities
COVID-19			Coronavirus
CRA			Community Reinvestment Act of 1977
DTA			Deferred tax asset
EAD			Exposure at default
FASB			Financial Accounting Standards Board
FDIC			Federal Deposit Insurance Corporation
FHLB			Federal Home Loan Bank
FICO			Fair Isaac Corporation
FRB			Federal Reserve Bank
FTE			Fully tax-equivalent
FTP			Funds Transfer Pricing, a matched maturity funding concept
GAAP			U.S. Generally Accepted Accounting Principles
Holding Company			Webster Financial Corporation
HSA			Health savings account
HSA Bank			HSA Bank, a division of Webster Bank, National Association

interLINK			Interlink Insured Sweep LLC
IRA			Inflation Reduction Act
ITGC			Information technology general controls
LGD			Loss given default
LIBOR			London Interbank Offered Rate
LIHTC			Low-income housing tax credit
MBS			Non-agency mortgage-backed securities
NAV			Net asset value
OCC			Office of the Comptroller of the Currency
OPEB			Other post-employment medical and life insurance benefits
OREO			Other real estate owned
PCD			Purchased credit-deteriorated
PD			Probability of default
PPNR			Pre-tax, pre-provision net revenue

ROU			Right-of-use
S&P			Standard and Poor's Rating Services

SEC			United States Securities and Exchange Commission
SERP			Supplemental executive defined benefit retirement plan
SOFR			Secured overnight financing rate
Sterling			Sterling Bancorp, collectively with its consolidated subsidiaries
TDR			Troubled debt restructuring, defined in ASC 310-40 "Receivables - Troubled Debt Restructurings by Creditors"
Webster Bank or the Bank			Webster Bank, National Association, a wholly-owned subsidiary of Webster Financial Corporation
Webster or the Company			Webster Financial Corporation, collectively with its consolidated subsidiaries

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “continue,” “remain,” “will,” “should,” “may,” “plans,” “estimates,” and similar references to future periods. However, these words are not the exclusive means of identifying such statements.

Examples of forward-looking statements include, but are not limited to:

▪projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items;

▪statements of plans, objectives, and expectations of the Company or its management or Board of Directors;

▪statements of future economic performance; and

▪statements of assumptions underlying such statements.

Forward-looking statements are based on the Company’s current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. The Company’s actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Factors that could cause our actual results to differ from those discussed in any forward-looking statements include, but are not limited to:

▪our ability to successfully integrate the operations of Webster and Sterling and realize the anticipated benefits of the merger, including validation of our recently completed core conversion and any issues that may arise therefrom;

▪our ability to successfully execute our business plan and strategic initiatives, and manage any risks or uncertainties;

▪any continuation of the recent turmoil in the banking industry, including the associated impact of any regulatory changes or other mitigation efforts taken by government agencies in response;

▪volatility in Webster's stock price due to investor sentiment, including in light of the recent turmoil in the banking industry;

▪local, regional, national, and international economic conditions, and the impact they may have on us or our customers;

▪volatility and disruption in national and international financial markets, including as a result of geopolitical conflict;

▪unforeseen events, such as pandemics or natural disasters, and any governmental or societal responses thereto;

▪changes in laws and regulations, or existing laws and regulations that we become subject to, including those concerning banking, taxes, dividends, securities, insurance, and healthcare, with which we and our subsidiaries must comply;

▪adverse conditions in the securities markets that could lead to impairment in the value of our securities portfolio;

▪inflation, monetary fluctuations, the possibility of a recession, and changes in interest rates, including the impact of such changes on economic conditions, customer behavior, funding costs, and our loans and leases and securities portfolios;

▪possible changes in governmental monetary and fiscal policies, including, but not limited to, Federal Reserve policies in connection with continued inflationary pressures and the ability of the U.S. Congress to increase the U.S. statutory debt limit, as needed;

▪the impact of a potential U.S. federal government shutdown;

▪the timely development and acceptance of new products and services, and the perceived value of those products and services by customers;

▪changes in deposit flows, consumer spending, borrowings, and savings habits;

▪our ability to implement new technologies and maintain secure and reliable technology systems;

▪the effects of any cyber threats, attacks or events, or fraudulent activity, including those that involve our third-party vendors and service providers;

▪performance by our counterparties and third-party vendors;

▪our ability to increase market share and control expenses;

▪changes in the competitive environment among banks, financial holding companies, and other traditional and non-traditional financial service providers;

▪our ability to maintain adequate sources of funding and liquidity;

▪changes in the level of non-performing assets and charge-offs;

▪changes in estimates of future reserve requirements based upon periodic review under relevant regulatory and accounting requirements;

▪the effect of changes in accounting policies and practices applicable to us, including impacts of recently adopted accounting guidance;

▪our inability to remediate the material weaknesses in our internal control related to ineffective ITGCs;

▪legal and regulatory developments, including the resolution of legal proceedings or regulatory or other governmental inquiries, and the results of regulatory examinations or reviews; and

▪our ability to appropriately address any environmental, social, governmental, and sustainability concerns that may arise from our business activities.

Any forward-looking statement in this Quarterly Report on Form 10-Q speaks only as of the date on which it is made. Factors or events that could cause the Company's actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as may be required by law.

iii

PART I – FINANCIAL INFORMATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information that management believes is necessary to understand the Company's financial condition, results of operations, and cash flows for the three and nine months ended September 30, 2023, as compared to 2022. This information should be read in conjunction with the Condensed Consolidated Financial Statements, and accompanying Notes thereto, contained in Part I - Item 1. Financial Statements of this report, and the Consolidated Financial Statements, and accompanying Notes thereto, contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2022. The Company's financial condition, results of operations, and cash flows for the three and nine months ended September 30, 2023, are not necessarily indicative of future results that may be attained for the entire year or other interim periods.

Executive Overview

Nature of Operations

Webster Financial Corporation is a bank holding company and financial holding company under the BHC Act, incorporated under the laws of Delaware in 1986, and headquartered in Stamford, Connecticut. Webster Bank, along with its HSA Bank division, is a leading commercial bank in the Northeast that delivers a wide range of digital and traditional financial solutions to businesses, individuals, families, and partners across its three differentiated lines of business: Commercial Banking, HSA Bank, and Consumer Banking. While its core footprint spans from New York to Rhode Island and Massachusetts, certain businesses operate in extended geographies. HSA Bank is one of the largest providers of employee benefit solutions in the United States.

Recent Industry Developments

Throughout 2023, the banking industry has experienced significant volatility with multiple high-profile bank failures and industry-wide concerns related to liquidity, deposit outflows, unrealized losses on securities, and eroding consumer confidence in the banking system. Despite these negative industry developments, the Company's total deposits at September 30, 2023, were $60.3 billion, representing a net $6.3 billion increase as compared to its total deposits at December 31, 2022. The Holding Company's and the Bank's regulatory capital ratios at September 30, 2023, also remained in excess of the well-capitalized minimum as defined by capital adequacy guidelines and the regulatory framework for prompt corrective action.

Additional information regarding regulatory capital ratios can be found within Note 10: Regulatory Capital and Restrictions in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.

interLINK Acquisition

On January 11, 2023, Webster acquired interLINK, a technology-enabled deposit management platform that administers over $9 billion of deposits from FDIC-insured cash sweep programs between banks and broker/dealers and clearing firms. The acquisition expanded the Company's core deposit funding sources and scalable liquidity and added another technology-enabled channel to its already differentiated, omnichannel deposit gathering capabilities. At September 30, 2023, interLINK provided the Company with an additional $5.2 billion of money market deposits.

Additional information regarding the acquisition of interLINK can be found within Note 2: Mergers and Acquisitions in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.

Sterling Integration Update

On January 31, 2022, Webster completed its merger with Sterling. In July 2023, the Company executed and completed its transition to a unified core operating system (“core conversion”). This involved changing and/or merging the legacy Webster and legacy Sterling platforms and software that had historically been used to process the Bank's daily operating activities, as well as other internal systems and applications. The completion of such core conversion marked a significant milestone in the Company's overall integration process.

LIBOR Transition Update

Effective July 1, 2023, LIBOR is no longer published for the overnight, one-month, three-month, six-month, and twelve-month settings. Alternative reference rates, including Federal fall-backs, have been incorporated into all legacy LIBOR contracts as part of the Company's LIBOR remediation plan. Any remaining legacy LIBOR contracts as of the third quarter or 2023 are set to transition to their applicable alternate reference rate at their first rate reset date after June 30, 2023.

Results of Operations

The following table summarizes selected financial highlights and key performance indicators:


	At or for the three months ended September 30,						At or for the nine months ended September 30,
(In thousands, except per share and ratio data)	2023			2022			2023			2022
Income and performance ratios:
Net income	$	226,475		$	233,968		$	682,447		$	399,532
Net income available to common stockholders	222,313			229,806			669,960			387,776
Earnings per diluted common share	1.28			1.31			3.85			2.32
Return on average assets (annualized)	1.23		%	1.38		%	1.23		%	0.85		%
Return on average tangible common stockholders' equity (annualized) (non-GAAP)	17.51			18.62			17.76			11.10
Return on average common stockholders' equity (annualized)	11.00			11.78			11.11			7.01
Non-interest income as a percentage of total revenue	13.34			17.10			12.42			19.12
Asset quality:
ACL on loans and leases	$	635,438		$	574,325		$	635,438		$	574,325
Non-performing assets (1)	218,402			211,627			218,402			211,627
ACL on loans and leases / total loans and leases	1.27		%	1.20		%	1.27		%	1.20		%
Net charge-offs / average loans and leases (annualized)	0.23			0.25			0.19			0.15
Non-performing loans and leases / total loans and leases (1)	0.43			0.44			0.43			0.44
Non-performing assets / total loans and leases plus OREO (1)	0.44			0.44			0.44			0.44
ACL on loans and leases / non-performing loans and leases (1)	295.48			274.12			295.48			274.12
Other ratios:

Tangible common equity (non-GAAP)	7.22		%	7.27		%	7.22		%	7.27		%
Tier 1 risk-based capital	11.64			11.35			11.64			11.35
Total risk-based capital	13.79			13.38			13.79			13.38
CET1 risk-based capital	11.12			10.80			11.12			10.80
Stockholders' equity / total assets	11.21			11.33			11.21			11.33
Net interest margin	3.49			3.54			3.49			3.35
Efficiency ratio (non-GAAP)	41.75			41.17			41.87			44.68
Equity and share related:
Common equity	$	7,915,222		$	7,542,431		$	7,915,222		$	7,542,431
Book value per common share	46.00			43.32			46.00			43.32
Tangible book value per common share (non-GAAP)	29.48			27.69			29.48			27.69
Common stock closing price	40.31			45.20			40.31			45.20
Dividends and equivalents declared per common share	0.40			0.40			1.20			1.20
Common shares outstanding	172,056			174,116			172,056			174,116
Weighted-average common shares outstanding - basic	171,210			173,868			172,233			165,743
Weighted-average common shares outstanding - diluted	171,350			173,944			172,326			165,813

(1)Non-performing asset balances and related asset quality ratios exclude the impact of net unamortized (discounts)/premiums and net unamortized deferred (fees)/costs on loans and leases.

Non-GAAP Financial Measures

The non-GAAP financial measures identified in the preceding table provide both management and investors with information useful in understanding Webster's financial position, results of operations, the strength of its capital position, and overall business performance. These measures are used by management for internal planning and forecasting purposes, as well as by securities analysts, investors, and other interested parties to assess peer company operating performance. Management believes that this presentation, together with the accompanying reconciliations, provides investors with a more complete understanding of the factors and trends affecting the Company's business and allows investors to view its performance in a similar manner.

Tangible book value per common share represents stockholders’ equity less preferred stock and goodwill and other intangible assets (tangible common equity) divided by common shares outstanding at the end of the reporting period. The tangible common equity ratio represents tangible common equity divided by total assets less goodwill and other intangible assets (tangible assets). Both of these measures are used by management to evaluate the Company's capital position. The annualized return on average tangible common stockholders' equity is calculated using net income available to common stockholders, adjusted for the annualized tax-effected amortization of intangible assets, as a percentage of average tangible common equity. This measure is used by management to assess the Company's performance against its peer financial institutions. The efficiency ratio, which represents the costs expended to generate a dollar of revenue, is calculated excluding certain non-operational items in order to measure how well the Company is managing its recurring operating expenses.

These non-GAAP financial measures should not be considered a substitute for GAAP basis financial measures. Because
non-GAAP financial measures are not standardized, it may not be possible to compare these with other companies that present financial measures having the same or similar names.

The following tables reconcile non-GAAP financial measures to the most comparable financial measures defined by GAAP:


	At September 30,
(Dollars and shares in thousands, except per share data)	2023			2022
Tangible book value per common share:
Stockholders' equity	$	8,199,201		$	7,826,410
Less: Preferred stock	283,979			283,979
Common stockholders' equity	$	7,915,222		$	7,542,431
Less: Goodwill and other intangible assets	2,843,217			2,721,040
Tangible common stockholders' equity	$	5,072,005		$	4,821,391
Common shares outstanding	172,056			174,116
Tangible book value per common share	$	29.48		$	27.69
Book value per common share (GAAP)	$	46.00		$	43.32

Tangible common equity ratio:
Tangible common stockholders' equity	$	5,072,005		$	4,821,391
Total assets	$	73,130,851		$	69,052,566
Less: Goodwill and other intangible assets	2,843,217			2,721,040
Tangible assets	$	70,287,634		$	66,331,526
Tangible common equity ratio	7.22		%	7.27		%
Total common stockholders' equity to total assets (GAAP)	10.82		%	10.92		%


	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2023			2022			2023			2022
Return on average tangible common stockholders' equity:
Net income	$	226,475		$	233,968		$	682,447		$	399,532
Less: Preferred stock dividends	4,162			4,162			12,487			11,756
Add: Intangible assets amortization, tax-effected	7,030			6,724			21,795			18,723
Income adjusted for preferred stock dividends and intangible assets amortization	$	229,343		$	236,530		$	691,755		$	406,499
Income adjusted for preferred stock dividends and intangible assets amortization (annualized)	$	917,372		$	946,120		$	922,340		$	541,999
Average stockholders' equity	$	8,370,469		$	8,090,044		$	8,327,715		$	7,640,807
Less: Average preferred stock	283,979			283,979			283,979			268,202
Average goodwill and other intangible assets	2,847,560			2,725,200			2,851,264			2,491,394
Average tangible common stockholders' equity	$	5,238,930		$	5,080,865		$	5,192,472		$	4,881,211
Return on average tangible common stockholders' equity (annualized)	17.51		%	18.62		%	17.76		%	11.10		%
Return on average common stockholders' equity (annualized) (GAAP)	11.00		%	11.78		%	11.11		%	7.01		%

Efficiency ratio:
Non-interest expense	$	362,578		$	330,071		$	1,039,134		$	1,048,083
Less: Foreclosed property activity	(492)			(393)			(1,186)			(826)
Intangible assets amortization	8,899			8,511			27,589			23,700
Operating lease depreciation	1,146			2,115			4,669			6,172
Merger-related expenses	61,625			25,536			131,838			200,671
Common stock contribution to charitable foundation	—			10,500			—			10,500
Strategic initiatives charges	—			1,117			—			(3,175)
Non-interest expense	$	291,400		$	282,685		$	876,224		$	811,041
Net interest income	$	587,136		$	551,003		$	1,766,248		$	1,431,911
Add: Tax-equivalent adjustment	17,906			13,247			51,109			33,137
Non-interest income	90,382			113,636			250,522			338,604
Other income (1)	3,614			11,186			12,960			18,073
Less: Operating lease depreciation	1,146			2,115			4,669			6,172
(Loss) on sale of investment securities	—			(2,234)			(16,795)			(2,234)
Gain on extinguishment of borrowings	—			2,548			—			2,548
Income	$	697,892		$	686,643		$	2,092,965		$	1,815,239
Efficiency ratio	41.75		%	41.17		%	41.87		%	44.68		%
Non-interest expense as a percentage of total revenue (GAAP)	53.52		%	49.66		%	51.52		%	59.20		%

(1)Other income (non-GAAP) includes the taxable equivalent of net income generated from LIHTC investments.

Net Interest Income

Net interest income is the Company's primary source of revenue, representing 86.7% and 87.6% of total revenues for the three and nine months ended September 30, 2023, respectively, and 82.9% and 80.9% of total revenues for the three and nine months ended September 30, 2022, respectively. Net interest income is the difference between interest income on interest-earning assets (i.e., loans and leases and investment securities) and interest expense on interest-bearing liabilities (i.e., deposits and borrowings), which are used to fund interest-earning assets and other activities. Net interest margin is calculated as the ratio of FTE net interest income to average interest-earning assets.

Net interest income, net interest margin, yields, and ratios on an FTE basis are considered non-GAAP financial measures, and are used by management to evaluate the comparability of the Company's revenue arising from both taxable and non-taxable sources. FTE adjustments are determined assuming a statutory federal income tax rate of 21%.

Net interest income and net interest margin are influenced by the volume and mix of interest-earning assets and interest-bearing liabilities, changes in interest rate levels, re-pricing frequencies, contractual maturities, prepayment behavior, and the use of interest rate derivative financial instruments. These factors are affected by changes in economic conditions, which impacts monetary policies, competition for loans and deposits, as well as the extent of interest lost on non-performing assets.

Comparison to Prior Year Quarter

Net interest income increased $36.1 million, or 6.6%, from $551.0 million for the three months ended September 30, 2022, to $587.1 million for the three months ended September 30, 2023. On an FTE basis, net interest income increased $40.8 million. The increase in net interest income is primarily due to the higher interest rate environment and higher average loan and lease balances driven by organic loan growth in 2023, partially offset due to lower purchase accounting accretion on interest-earning assets that were acquired from Sterling. Net interest margin decreased 5 basis points from 3.54% for the three months ended September 30, 2022, to 3.49% for the three months ended September 30, 2023. The decrease in net interest margin is primarily due to lower purchase accounting accretion on interest-earning assets that were acquired from Sterling, partially offset by the impact from the higher interest rate environment.

Average total interest-earning assets increased $4.9 billion, or 8.0%, from $62.2 billion for the three months ended September 30, 2022, to $67.1 billion for the three months ended September 30, 2023, primarily due to increases of $4.7 billion in average loans and leases and $0.6 billion in average interest-bearing deposits held at the FRB, partially offset by a $0.3 billion decrease in average investment securities. The average yield on interest-earning assets increased 153 basis points from 3.96% for the three months ended September 30, 2022, to 5.49% for the three months ended September 30, 2023, primarily due to the higher interest rate environment, partially offset due to lower purchase accounting accretion on interest-earning assets that were acquired from Sterling.

Average loans and leases increased $4.7 billion, or 10.1%, from $46.2 billion for the three months ended September 30, 2022, to $50.9 billion for the three months ended September 30, 2023, primarily due to organic loan growth and a lower volume of commercial loan sales in the third quarter of 2023. At September 30, 2023, and 2022, average loans and leases comprised 75.8% and 74.3% of total average interest-earning assets, respectively. The average yield on loans and leases increased 168 basis points from 4.52% for the three months ended September 30, 2022, to 6.20% for the three months ended September 30, 2023, primarily due to the higher interest rate environment, partially offset due to lower purchase accounting accretion on loans and leases that were acquired from Sterling.

Average interest-bearing deposits held at the FRB increased $0.6 billion, or 102.6%, from $0.6 billion for the three months ended September 30, 2022, to $1.2 billion for the three months ended September 30, 2023, which was a direct result of the Company's risk management approach to hold higher levels of on-balance sheet liquidity in 2023. At September 30, 2023, and 2022, average interest-bearing deposits held at the FRB comprised 1.8% and 0.9% of total average interest-earning assets, respectively. The average yield on interest-bearing deposits held at the FRB increased 313 basis points from 2.19% for the three months ended September 30, 2022, to 5.32% for the three months ended September 30, 2023, primarily due to the higher interest rate environment.

Average total investment securities decreased $0.3 billion, or 2.3%, from $15.0 billion for the three months ended September 30, 2022, to $14.7 billion for the three months ended September 30, 2023, primarily due to an increase in gross unrealized losses on available-for-sale securities resulting from higher market rates in the third quarter of 2023. At September 30, 2023, and 2022, the average total investment securities portfolio comprised 21.9% and 24.2% of total average interest-earning assets, respectively. The average yield on investment securities increased 69 basis points from 2.40% for the three months ended September 30, 2022, to 3.09% for the three months ended September 30, 2023, primarily due to the reinvestment at higher yields of securities that either had matured or were sold in 2023.

Average total interest-bearing liabilities increased $5.0 billion, or 8.4%, from $58.8 billion for the three months ended September 30, 2022, to $63.8 billion for the three months ended September 30, 2023, primarily due to increases of $5.6 billion in average total deposits and $0.5 billion in average FHLB advances, partially offset by decreases of $0.9 billion in average federal funds purchased and $0.3 billion in average securities sold under agreements to repurchase. The average rate on interest-bearing liabilities increased 169 basis points from 0.45% for the three months ended September 30, 2022, to 2.14% for the three months ended September 30, 2023, primarily due to the higher interest rate environment.

Average total deposits increased $5.6 billion, or 10.4%, from $54.0 billion for the three months ended September 30, 2022, to $59.6 billion for the three months ended September 30, 2023, reflecting a $7.9 billion increase in interest-bearing deposits, partially offset by a $2.3 billion decrease in non-interest-bearing deposits. The overall increase in deposits was primarily due to the acquisition of interLINK, as well as time deposit and HSA deposit growth. At September 30, 2023, and 2022, average total deposits comprised 93.5% and 91.8% of total average interest-bearing liabilities, respectively. The average rate on deposits increased 168 basis points from 0.28% for the three months ended September 30, 2022, to 1.96% for the three months ended September 30, 2023, primarily due to the higher interest rate environment and growth in higher costing deposit products. Higher cost time deposits as a percentage of average total interest-bearing deposits increased from 6.7% for the three months ended September 30, 2022, to 15.2% for the three months ended September 30, 2023, primarily due to a shift in customer preferences from lower rate checking and savings products into higher rate certificates of deposit products.

Average FHLB advances increased $0.5 billion, or 22.6%, from $2.4 billion for the three months ended September 30, 2022, to $2.9 billion for the three months ended September 30, 2023, primarily due to short-term funding needs and the Company's risk management approach to hold higher levels of on-balance sheet liquidity in 2023. At September 30, 2023, and 2022, average FHLB advances comprised 4.6% and 4.1% of total average interest-bearing liabilities, respectively. The average rate on FHLB advances increased 309 basis points from 2.25% for the three months ended September 30, 2022, to 5.34% for the three months ended September 30, 2023, primarily due to the higher interest rate environment.

Average federal funds purchased were $0.9 billion for the three months ended September 30, 2022, and had an average rate of 2.24%. There were no average federal funds purchased for the three months ended September 30, 2023. At September 30, 2022, average federal funds purchased comprised 1.5% of total average interest-bearing liabilities.

Average securities sold under agreements to repurchase decreased $0.3 billion, or 64.5%, from $0.5 billion for the three months ended September 30, 2022, to $0.2 billion for the three months ended September 30, 2023, primarily due to the Company's extinguishment of its two long-term structured repurchase agreements in mid-September 2022, and the overall timing of maturities. At September 30, 2023, and 2022, average securities sold under agreements to repurchase comprised 0.3% and 0.8% of total average interest-bearing liabilities, respectively. The average rate on securities sold under agreements to repurchase decreased 83 basis points from 0.95% for the three months ended September 30, 2022, to 0.12% for the three months ended September 30, 2023, primarily due to the Company's extinguishment of its two long-term structured repurchase agreements in mid-September 2022, which were contracted at a higher cost.

Comparison to Prior Year to Date

Net interest income increased $334.3 million, or 23.3%, from $1.4 billion for the nine months ended September 30, 2022, to $1.8 billion for the nine months ended September 30, 2023. On an FTE basis, net interest income increased $352.3 million. Net interest margin increased 14 basis points from 3.35% for the nine months ended September 30, 2022, to 3.49% for the nine months ended September 30, 2023. These increases are primarily attributed to the higher interest rate environment and higher average loan and lease balances driven by organic loan growth in 2023, partially offset due to lower purchase accounting accretion on interest-earning assets that were acquired from Sterling.

Average total interest-earning assets increased $10.2 billion, or 17.8%, from $57.6 billion for the nine months ended September 30, 2022, to $67.8 billion for the nine months ended September 30, 2023, primarily due to increases of $8.6 billion, $1.3 billion, $189.9 million, and $152.2 million in average loans and leases, average interest-bearing deposits held at the FRB, average FHLB and FRB stock, and average investment securities, respectively. The average yield on interest-earning assets increased 170 basis points from 3.60% for the nine months ended September 30, 2022, to 5.30% for the nine months ended September 30, 2023, primarily due to the higher interest rate environment, partially offset due to lower purchase accounting accretion on interest-earning assets that were acquired from Sterling.

Average loans and leases increased $8.6 billion, or 20.4%, from $42.1 billion for the nine months ended September 30, 2022, to $50.7 billion for the nine months ended September 30, 2023, primarily due to organic loan growth. At September 30, 2023, and 2022, average loans and leases comprised 74.8% and 73.2% of average total interest-earning assets, respectively. The average yield on loans and leases increased 188 basis points from 4.14% for the nine months ended September 30, 2022, to 6.02% for the nine months ended September 30, 2023, primarily due to the higher interest rate environment, partially offset due to lower purchase accounting accretion on loans and leases that were acquired from Sterling.

Average interest-bearing deposits held at the FRB increased $1.3 billion, or 200.2%, from $0.6 billion for the nine months ended September 30, 2022, to $1.9 billion for the nine months ended September 30, 2023, which was a direct result of the Company's risk management approach to hold higher levels of on-balance sheet liquidity in 2023. At September 30, 2023, and 2022, average interest-bearing deposits held at the FRB comprised 2.76% and 1.08% of total average interest-earnings assets, respectively. The average yield on interest-bearing deposits held at the FRB increased 404 basis points from 1.00% for the nine months ended September 30, 2022, to 5.04% for the nine months ended September 30, 2023, primarily due to the higher interest rate environment.

Average FHLB and FRB stock increased $189.9 million, or 75.2%, from $252.6 million for the nine months ended September 30, 2022, to $442.4 million for the nine months ended September 30, 2023, primarily due to the additional FHLB stock investment required as a result of the increase in FHLB advances. At September 30, 2023, and 2022, average FHLB and FRB stock comprised 0.7% and 0.4% of total average interest-earning assets, respectively. The average yield on FHLB and FRB stock increased 328 basis points from 2.52% for the nine months ended September 30, 2022, to 5.80% for the nine months ended September 30, 2023, primarily due to the higher interest rate environment.

Average total investment securities increased $152.2 million, or 1.0%, from $14.5 billion for the nine months ended September 30, 2022, to $14.7 billion for the nine months ended September 30, 2023, primarily due to purchases exceeding paydown activities. At September 30, 2023, and 2022, the total average investment securities portfolio comprised 21.7% and 25.3% of total average interest-earning assets, respectively. The average yield on investment securities increased 73 basis points from 2.22% for the nine months ended September 30, 2022, to 2.95% for the nine months ended September 30, 2023, primarily due to the reinvestment at higher yields of securities that either had matured or were sold in 2023.

Average total interest-bearing liabilities increased $10.0 billion, or 18.3%, from $54.3 billion for the nine months ended September 30, 2022, to $64.3 billion for the nine months ended September 30, 2023, primarily due to increases of $6.6 billion in average total deposits and $3.9 billion in average FHLB advances, partially offset by decreases of $0.3 billion in both average securities sold under agreements to repurchase and average federal funds purchased. The average rate on interest-bearing liabilities increased 166 basis points from 0.27% for the nine months ended September 30, 2022, to 1.93% for the nine months ended September 30, 2023, primarily due to the higher interest rate environment.

Average total deposits increased $6.6 billion, or 12.8%, from $51.1 billion for the nine months ended September 30, 2022, to $57.7 billion for the nine months ended September 30, 2023, primarily reflecting a $7.6 billion increase in interest-bearing deposits, partially offset by a $1.0 billion decrease in non-interest-bearing deposits. The overall increase in deposits was primarily due to the acquisition of interLINK, as well as time deposit and HSA deposit growth, partially offset by the effect of customers rebalancing their deposit concentrations as a result of the high-profile bank failures in the first and second quarters of 2023. At September 30, 2023, and 2022, average total deposits comprised 89.7% and 94.1% of total average interest-bearing liabilities, respectively. The average rate on deposits increased 146 basis points from 0.15% for the nine months ended September 30, 2022, to 1.61% for the nine months ended September 30, 2023, primarily due to the higher interest rate environment and growth in higher costing deposit products. Higher cost time deposits as a percentage of average total interest-bearing deposits increased from 6.9% for the nine months ended September 30, 2022, to 13.5% for the nine months ended September 30, 2023, primarily due to a shift in customer preferences from lower rate checking and savings products into higher rate certificates of deposit products.

Average FHLB advances increased $3.9 billion, or 325.8%, from $1.2 billion for the nine months ended September 30, 2022, to $5.1 billion for the nine months ended September 30, 2023, primarily due to short-term funding needs and a direct result of the Company's risk management approach to hold higher levels of on-balance sheet liquidity in 2023. At September 30, 2023, and 2022, average FHLB advances comprised 7.9% and 2.2% of total average interest-bearing liabilities, respectively. The average rate on FHLB advances increased 322 basis points from 1.87% for the nine months ended September 30, 2022, to 5.09% for the nine months ended September 30, 2023, primarily due to the higher interest rate environment.

Average securities sold under agreements to repurchase decreased $0.3 billion, or 60.3%, from $0.5 billion for the nine months ended September 30, 2022, to $0.2 billion for the nine months ended September 30, 2023, primarily due to the Company's extinguishment of its two long-term structured repurchase agreements in mid-September 2022, and the overall timing of maturities. At September 30, 2023, and 2022, average securities sold under agreements to repurchase comprised 0.3% and 1.0% of total average interest-bearing liabilities, respectively. The average rate on securities sold under agreements to repurchase decreased 77 basis points from 0.88% for the nine months ended September 30, 2022, to 0.11% for the nine months ended September 30, 2023, primarily due to the Company's extinguishment of its two long-term structured repurchase agreements in mid-September 2022, which were contracted at a higher cost.

Average federal funds purchased decreased $0.3 billion, or 53.7%, from $0.5 billion for the nine months ended September 30, 2022, to $0.2 billion for the nine months ended September 30, 2023, as the additional liquidity generated from the interLINK deposit sweep program allowed for the paydown of higher rate federal funds purchased during the first quarter of 2023. At September 30, 2023, and 2022, average federal funds purchased comprised 0.3% and 0.9% of total average interest-bearing liabilities, respectively. The average rate on federal funds purchased increased 287 basis points from 1.75% for the nine months ended September 30, 2022, to 4.62% for the nine months ended September 30, 2023, primarily due to the higher interest rate environment.

The following tables summarize daily average balances, interest, and average yield/rate by major category, and net interest margin on an FTE basis:


	Three months ended September 30,
	2023						2022
(Dollars in thousands)	Average Balance		Interest Income/Expense		Average Yield/Rate		Average Balance		Interest Income/Expense		Average Yield/Rate

Assets
Interest-earning assets:
Loans and leases (1)	$	50,912,188	$	804,930	6.20	%	$	46,229,678	$	532,062	4.52	%
Investment securities: (2)
Taxable	12,215,340		106,486		3.25		12,336,926		79,562		2.47
Non-taxable	2,471,458		13,511		2.19		2,702,584		13,999		2.07
Total investment securities	14,686,798		119,997		3.09		15,039,510		93,561		2.40
FHLB and FRB stock	355,495		7,619		8.50		326,860		1,875		2.28
Interest-bearing deposits (3)	1,187,096		16,132		5.32		585,807		3,278		2.19

Loans held for sale	6,756		17		1.03		580		40		27.73
Total interest-earning assets	67,148,333		$	948,695	5.49	%	62,182,435		$	630,816	3.96	%
Non-interest-earning assets	6,459,493						5,823,755
Total assets	$	73,607,826					$	68,006,190

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Demand deposits	$	11,335,734	$	—	—	%	$	13,590,667	$	—	—	%
Health savings accounts	8,235,632		3,126		0.15		7,854,425		1,146		0.06
Interest-bearing checking, money market and savings	32,673,899		214,891		2.61		29,798,562		33,808		0.45
Time deposits	7,342,757		75,938		4.10		2,716,885		2,538		0.37
Total deposits	59,588,022		293,955		1.96		53,960,539		37,492		0.28

Securities sold under agreements to repurchase	170,256		50		0.12		479,308		1,158		0.95
Federal funds purchased	—		—		—		889,818		5,084		2.24

FHLB advances	2,945,136		40,196		5.34		2,402,596		13,814		2.25
Long-term debt (2)	1,051,380		9,452		3.70		1,075,683		9,018		3.47

Total interest-bearing liabilities	63,754,794		$	343,653	2.14	%	58,807,944		$	66,566	0.45	%
Non-interest-bearing liabilities	1,482,563						1,108,202
Total liabilities	65,237,357						59,916,146

Preferred stock	283,979						283,979
Common stockholders' equity	8,086,490						7,806,065
Total stockholders' equity	8,370,469						8,090,044
Total liabilities and stockholders' equity	$	73,607,826					$	68,006,190
Net interest income (FTE)			$	605,042					$	564,250
Less: FTE adjustment			(17,906)						(13,247)
Net interest income			$	587,136					$	551,003
Net interest margin (FTE)					3.49	%					3.54	%

(1)Non-accrual loans have been included in the computation of average balances.

(2)For the purposes of our average yield/rate and margin computations, unsettled trades on investment securities and unrealized gain (loss) balances on securities available-for-sale and senior fixed-rate note hedges are excluded.

(3)Interest-bearing deposits are included as a component of Cash and cash equivalents on the Condensed Consolidated Statements of Cash Flows included in Part I - Item 1. Financial Statements.


	Nine months ended September 30,
	2023						2022
(Dollars in thousands)	Average Balance		Interest Income/Expense		Average Yield/Rate		Average Balance		Interest Income/Expense		Average Yield/Rate

Assets
Interest-earning assets:
Loans and leases (1)	$	50,733,691	$	2,313,030	6.02	%	$	42,125,526	$	1,317,941	4.14	%
Investment securities: (2)
Taxable	12,187,552		301,268		3.11		12,127,249		210,323		2.26
Non-taxable	2,512,744		40,730		2.16		2,420,867		36,465		2.01
Total investment securities	14,700,296		341,998		2.95		14,548,116		246,788		2.22
FHLB and FRB stock	442,429		19,204		5.80		252,559		4,768		2.52
Interest-bearing deposits (3)	1,872,657		71,536		5.04		623,866		4,711		1.00

Loans held for sale	35,982		454		1.68		12,160		73		0.80
Total interest-earning assets	67,785,055		$	2,746,222	5.30	%	57,562,227		$	1,574,281	3.60	%
Non-interest-earning assets	6,271,968						5,448,419
Total assets	$	74,057,023					$	63,010,646

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Demand deposits	$	11,775,500	$	—	—	%	$	12,758,489	$	—	—	%
Health savings accounts	8,259,408		9,243		0.15		7,809,082		3,358		0.06
Interest-bearing checking, money market and savings	31,442,258		516,646		2.20		27,887,362		48,992		0.23
Time deposits	6,192,415		169,736		3.66		2,649,328		5,000		0.25
Total deposits	57,669,581		695,625		1.61		51,104,261		57,350		0.15

Securities sold under agreements to repurchase	209,723		180		0.11		528,353		3,537		0.88
Federal funds purchased	221,266		7,760		4.62		478,038		6,338		1.75
Other borrowings	—		—		—		—		1		—
FHLB advances	5,104,372		196,878		5.09		1,198,754		17,034		1.87
Long-term debt (2)	1,061,643		28,422		3.68		1,017,120		24,973		3.40

Total interest-bearing liabilities	64,266,585		$	928,865	1.93	%	54,326,526		$	109,233	0.27	%
Non-interest-bearing liabilities	1,462,723						1,043,313
Total liabilities	65,729,308						55,369,839

Preferred stock	283,979						268,202
Common stockholders' equity	8,043,736						7,372,605
Total stockholders' equity	8,327,715						7,640,807
Total liabilities and stockholders' equity	$	74,057,023					$	63,010,646
Net interest income (FTE)			$	1,817,357					$	1,465,048
Less: FTE adjustment			(51,109)						(33,137)
Net interest income			$	1,766,248					$	1,431,911
Net interest margin (FTE)					3.49	%					3.35	%

(1)Non-accrual loans have been included in the computation of average balances.

(3)Interest-bearing deposits are included as a component of Cash and cash equivalents on the Condensed Consolidated Statements of Cash Flows included in Part I - Item 1. Financial Statements.

The following table summarizes the change in net interest income attributable to changes in rate and volume, and reflects net interest income on an FTE basis:


	Three months ended September 30,						Nine months ended September 30,
	2023 vs. 2022 Increase (decrease) due to						2023 vs. 2022 Increase (decrease) due to
(In thousands)	Rate (1)		Volume		Total		Rate (1)		Volume		Total
Change in interest on interest-earning assets:
Loans and leases	$	219,773	$	53,095	$	272,868	$	720,420	$	274,669	$	995,089
Investment securities	28,485		(2,049)		26,436		92,498		2,712		95,210

FHLB and FRB stock	5,580		164		5,744		10,851		3,585		14,436
Interest bearing-deposits	9,489		3,365		12,854		57,393		9,432		66,825
Loans held for sale	(859)		836		(23)		(476)		857		381
Total interest income	$	262,468	$	55,411	$	317,879	$	880,686	$	291,255	$	1,171,941
Change in interest on interest-bearing liabilities:

Health savings accounts	$	1,924	$	56	$	1,980	$	5,691	$	194	$	5,885
Interest-bearing checking, money market, and savings	165,796		15,287		181,083		451,029		16,625		467,654
Time deposits	59,813		13,587		73,400		128,496		36,240		164,736
Securities sold under agreements to repurchase	(361)		(747)		(1,108)		(1,224)		(2,133)		(3,357)
Federal funds purchased	—		(5,084)		(5,084)		4,826		(3,404)		1,422
Other borrowings	—		—		—		(1)		—		(1)
FHLB advances	23,262		3,120		26,382		124,347		55,497		179,844
Long-term debt	644		(210)		434		2,315		1,134		3,449
Total interest expense	$	251,078	$	26,009	$	277,087	$	715,479	$	104,153	$	819,632
Net change in net interest income	$	11,390	$	29,402	$	40,792	$	165,207	$	187,102	$	352,309

(1)The change attributable to mix, a combined impact of rate and volume, is included with the change due to rate.

Provision for Credit Losses

Comparison to Prior Year Quarter

The provision for credit losses remained relatively flat at $36.5 million for both the three months ended September 30, 2023, and 2022, and reflects the impact of the current macroeconomic environment on credit performance and the overall loan portfolio composition.

During the three months ended September 30, 2023, and 2022, total net charge-offs were $29.3 million and $28.5 million, respectively. The net increase of $0.8 million is primarily due to an increase in net charge-offs in the commercial real estate category, partially offset by a decrease in net charge-offs in the commercial non-mortgage category.

Comparison to Prior Year to Date

The provision for credit losses totaled $114.7 million and $237.6 million for the nine months ended September 30, 2023, and 2022, respectively. The balance for the nine months ended September 30, 2022, included the establishment of the initial ACL of $175.1 million for non-PCD loans and leases that were acquired from Sterling in the merger. Excluding this charge, the provision for credit losses increased $52.2 million, primarily due to the impact of the current macroeconomic environment on credit performance and organic loan growth.

During the nine months ended September 30, 2023, and 2022, total net charge-offs were $74.1 million and $47.1 million, respectively. The net increase of $27.0 million is primarily due to an increase in net charge-offs in the commercial real estate and asset-based lending categories, partially offset by a decrease in net charge-offs in the commercial non-mortgage category.

Additional information regarding the Company's provision for credit losses and ACL can be found under the sections captioned "Loans and Leases" through "Allowance for Credit Losses on Loans and Leases" contained elsewhere in this Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Non-Interest Income


	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2023		2022			2023		2022
Deposit service fees	$	41,005	$	50,807		$	131,859	$	150,019
Loan and lease related fees	19,966		26,769			63,499		77,355
Wealth and investment services	7,254		11,419			21,232		33,260
Mortgage banking activities	42		86			230		616
Cash surrender value of life insurance policies	6,620		7,718			19,641		22,694
(Loss) on sale of investment securities	—		(2,234)			(16,795)		(2,234)

Other income	15,495		19,071			30,856		56,894
Total non-interest income	$	90,382	$	113,636		$	250,522	$	338,604

Comparison to Prior Year Quarter

Total non-interest income decreased $23.2 million, or 20.5%, from $113.6 million for the three months ended September 30, 2022, to $90.4 million for the three months ended September 30, 2023, primarily due to decreases in deposit service fees, loan and lease related fees, wealth and investment services, and other income, partially offset by a loss on sale of investment securities in the prior period.

Deposit service fees decreased $9.8 million, or 19.3%, from $50.8 million for the three months ended September 30, 2022, to $41.0 million for the three months ended September 30, 2023, primarily due to lower customer account service fees and cash management and analysis fees, partially offset by higher interchange income.

Loan and lease related fees decreased $6.8 million, or 25.4%, from $26.8 million for the three months ended September 30, 2022, to $20.0 million for the three months ended September 30, 2023, primarily due to lower syndication fees, loan servicing fee income, and prepayment penalties.

Wealth and investment services decreased $4.2 million, or 36.5%, from $11.4 million for the three months ended September 30, 2022, to $7.2 million for the three months ended September 30, 2023, primarily due to lower investment services income in 2023, which is a direct result of the outsourcing of the consumer investment services platform effective as of the fourth quarter of 2022.

Other income decreased $3.6 million, or 18.8%, from $19.1 million for the three months ended September 30, 2022, to $15.5 million for the three months ended September 30, 2023, primarily due to lower income generated from customer interest rate derivative activities and direct investments.

The Company sold $67.5 million of Municipal bonds and notes classified as available-for-sale for proceeds of $65.3 million during the three months ended September 30, 2022, which resulted in $2.2 million of gross realized losses. There were no sales of investment securities during the three months ended September 30, 2023.

Comparison to Prior Year to Date

Total non-interest income decreased $88.1 million, or 26.0%, from $338.6 million for the nine months ended September 30, 2022, to $250.5 million for the nine months ended September 30, 2023, primarily due to decreases in other income, deposit service fees, loan and lease related fees, and wealth and investment services, and losses on sale of investment securities.

Other income decreased $26.0 million, or 45.8%, from $56.9 million for the nine months ended September 30, 2022, to $30.9 million for the nine months ended September 30, 2023, primarily due to lower income generated from customer interest rate derivative activities and direct investments.

Deposit service fees decreased $18.2 million, or 12.1%, from $150.0 million for the nine months ended September 30, 2022, to $131.8 million for the nine months ended September 30, 2023, primarily due to lower customer account service fees and cash management and analysis fees, partially offset by higher interchange income.

Loan and lease related fees decreased $13.9 million, or 17.9%, from $77.4 million for the nine months ended September 30, 2022, to $63.5 million for the nine months ended September 30, 2023, primarily due to lower loan servicing fee income and prepayment penalties.

Wealth and investment services decreased $12.1 million, or 36.2%, from $33.3 million for the nine months ended September 30, 2022, to $21.2 million for the nine months ended September 30, 2023, primarily due to lower investment services income in 2023, which is a direct result of the outsourcing of the consumer investment services platform effective as of the fourth quarter of 2022.

The Company sold $418.8 million of U.S. Treasury notes, Corporate securities, and Municipal bonds and notes classified as available-for-sale for proceeds of $398.3 million during the nine months ended September 30, 2023, which resulted in $20.5 million of gross realized losses. The $16.8 million loss on sale of investment securities included in non-interest income for the nine months ended September 30, 2023, represents the portion of the total charge that was not attributed to a decline in credit quality. The Company sold $67.5 million of Municipal bonds and notes classified as available-for-sale for proceeds of $65.3 million during the nine months ended September 30, 2022, which resulted in $2.2 million of gross realized losses.

Non-Interest Expense


	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2023		2022			2023		2022
Compensation and benefits	$	180,333	$	173,983		$	526,838	$	545,641
Occupancy	18,617		23,517			59,042		93,725
Technology and equipment	55,261		45,283			151,442		142,182
Intangible assets amortization	8,899		8,511			27,589		23,700
Marketing	4,810		3,918			13,446		10,868
Professional and outside services	26,874		21,618			88,693		91,041
Deposit insurance	13,310		8,026			39,356		19,996
Other expense	54,474		45,215			132,728		120,930
Total non-interest expense	$	362,578	$	330,071		$	1,039,134	$	1,048,083

Comparison to Prior Year Quarter

Total non-interest expense increased $32.5 million, or 9.8%, from $330.1 million for the three months ended September 30, 2022, to $362.6 million for the three months ended September 30, 2023, primarily due to increases in technology and equipment, other expense, compensation and benefits, deposit insurance, and professional and outside services, partially offset by a decrease in occupancy.

Technology and equipment increased $10.0 million, or 22.0%, from $45.3 million for the three months ended September 30, 2022, to $55.3 million for the three months ended September 30, 2023, primarily due to a $8.2 million increase in merger-related expenses, particularly as it relates to charges associated with the core conversion completed in July 2023, and higher recurring technology service contract fees.

Other expense increased $9.3 million, or 20.5%, from $45.2 million for the three months ended September 30, 2022, to $54.5 million for the three months ended September 30, 2023, primarily due to a $19.7 million increase in merger-related expenses, particularly as it relates to contract termination charges, partially offset by a decrease in community affairs costs.

Compensation and benefits increased $6.3 million, or 3.6%, from $174.0 million for the three months ended September 30, 2022, to $180.3 million for the three months ended September 30, 2023, primarily due to a $3.8 million increase in merger-related expenses, particularly as it relates to severance and retention, and increases in salaries, group insurance, and other compensation costs, partially offset by the outsourcing of the consumer investment services platform effective as of the fourth quarter of 2022, and decreases in incentive compensation and commissions.

Deposit insurance increased $5.3 million, or 65.8%, from $8.0 million for the three months ended September 30, 2022, to $13.3 million for the three months ended September 30, 2023, primarily due to the increased initial base deposit insurance assessment rate schedules adopted by the FDIC, which took effect as of the first quarter of 2023 for all insured depository institutions, along with asset growth.

Professional and outside services increased $5.3 million, or 24.3%, from $21.6 million for the three months ended September 30, 2022, to $26.9 million for the three months ended September 30, 2023, primarily due to a $7.4 million increase in merger-related expenses, particularly as it relates to charges associated with the core conversion completed in July 2023, partially offset by a decrease in other consulting charges.

Occupancy decreased $4.9 million, or 20.8%, from $23.5 million for the three months ended September 30, 2022, to $18.6 million for the three months ended September 30, 2023, primarily due to the launch of the Company's corporate real estate consolidation plan in the second quarter of 2022, which resulted in a combined $4.3 million in related exit costs and accelerated depreciation on property and equipment in the prior period. There were no such charges in the current period.

Comparison to Prior Year to Date

Total non-interest expense remained relatively flat at approximately $1.0 billion for both the nine months ended September 30, 2023, and 2022. Although the financial statement caption as a whole did not significantly change, notable fluctuations were experienced across all of its underlying line items.

Compensation and benefits decreased $18.8 million, or 3.4%, from $545.6 million for the nine months ended September 30, 2022, to $526.8 million for the nine months ended September 30, 2023, primarily due to a $44.1 million decrease in merger-related expenses, particularly as it relates to severance and retention, decreases in incentive compensation and commissions, and the outsourcing of the consumer investment services platform effective as of the fourth quarter of 2022, partially offset by increases in salaries, group insurance, and other compensation costs.

Occupancy decreased $34.7 million, or 37.0%, from $93.7 million for the nine months ended September 30, 2022, to $59.0 million for the nine months ended September 30, 2023, primarily due to the launch of the Company's corporate real estate consolidation plan in the second quarter of 2022, which resulted in a $23.1 million ROU asset impairment charge and a combined $12.0 million in related exit costs and accelerated depreciation on property and equipment in the prior period. There were no such charges in the current period.

Technology and equipment increased $9.2 million, or 6.5%, from $142.2 million for the nine months ended September 30, 2022, to $151.4 million for the nine months ended September 30, 2023, primarily due to higher recurring technology service contract fees, partially offset by a $6.6 million decrease in merger-related expenses resulting from lower contract termination charges in 2023.

Intangible assets amortization increased $3.9 million, or 16.4%, from $23.7 million for the nine months ended September 30, 2022, to $27.6 million for the nine months ended September 30, 2023, primarily due to the amortization expense related to the broker dealer relationship and non-competition agreement intangible assets recorded in connection with the interLINK acquisition.

Marketing increased $2.5 million, or 23.7%, from $10.9 million for the nine months ended September 30, 2022, to $13.4 million for the nine months ended September 30, 2023, primarily due to a $2.3 million increase in merger-related charges, particularly as it relates to core conversion customer communications.

Professional and outside services decreased $2.3 million, or 2.6%, from $91.0 million for the nine months ended September 30, 2022, to $88.7 million for the nine months ended September 30, 2023, primarily due to a $2.0 million decrease in merger-related expenses, particularly as it relates to advisory and legal fees.

Deposit insurance increased $19.4 million, or 96.8%, from $20.0 million for the nine months ended September 30, 2022, to $39.4 million for the nine months ended September 30, 2023, primarily due to the increased initial base deposit insurance assessment rate schedules adopted by the FDIC, which took effect as of the first quarter of 2023 for all insured depository institutions, along with asset growth.

Other expense increased $11.8 million, or 9.8%, from $120.9 million for the nine months ended September 30, 2022, to $132.7 million for the nine months ended September 30, 2023, primarily due to a $16.1 million increase in merger-related expenses, particularly as it relates to contract termination charges and fixed asset write-offs, and increases in other miscellaneous expenses, partially offset by a decrease in community affairs costs.

Income Taxes

Comparison to Prior Year Quarter

For the three months ended September 30, 2023, and 2022, the Company recognized income tax expense of $52.0 million and $64.1 million, respectively, reflecting effective tax rates of 18.7% and 21.5%, respectively.

The decrease in income tax expense is primarily due to a lower level of pre-tax income recognized for the three months ended September 30, 2023, which is attributed to an increase in merger-related expenses in the third quarter of 2023 as compared to 2022. The decrease in the effective tax rate reflects the impact of higher merger-related expenses, as well as the recognition of a $3.3 million net discrete benefit in the third quarter of 2023 attributable to 2022 tax return true-up adjustments.

Comparison to Prior Year to Date

For the nine months ended September 30, 2023, and 2022, the Company recognized income tax expense of $180.4 million and $85.3 million, respectively, reflecting effective tax rates of 20.9% and 17.6%, respectively.

The lower income tax expense recognized for the nine months ended September 30, 2022, reflects the recognition of the
pre-tax loss and $33.6 million income tax benefit in the first quarter of 2022 associated with the Sterling merger, which resulted in decreases to both income tax expense and the effective tax rate for the nine months ended September 30, 2022, whereas the income tax expense recognized for nine months ended September 30, 2023, represents a more normalized effective tax rate.

Additional information regarding the Company's income taxes, including its DTAs, can be found within Note 9: Income Taxes in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Segment Reporting

The Company's operations are organized into three reportable segments that represent its primary businesses: Commercial Banking, HSA Bank, and Consumer Banking. These segments reflect how executive management responsibilities are assigned, how discrete financial information is evaluated, the type of customer served, and how products and services are provided. Segments are evaluated using PPNR. Certain Treasury activities, including the operations of interLINK, along with the amounts required to reconcile profitability metrics to those reported in accordance with GAAP, are included in the Corporate and Reconciling category. Additional information regarding the Company's reportable segments and its segment reporting methodology can be found within Note 16: Segment Reporting in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.

The following is a description of the Company’s three reportable segments and their primary services:

Commercial Banking serves businesses with more than $2 million of revenue through its Commercial Real Estate and Equipment Finance, Middle Market, Business Banking, Asset-Based Lending and Commercial Services, Public Sector Finance, Mortgage Warehouse, Sponsor and Specialty Finance, Verticals and Support, Private Banking, and Treasury Management business units.

HSA Bank offers a comprehensive consumer-directed healthcare solution that includes HSAs, health reimbursement arrangements, flexible spending accounts, and commuter benefits. HSAs are used in conjunction with high deductible health plans in order to facilitate tax advantages for account holders with respect to health care spending and savings, in accordance with applicable laws. HSAs are distributed nationwide directly to employers and individual consumers, as well as through national and regional insurance carriers, benefit consultants, and financial advisors. HSA Bank deposits provide long duration, low-cost funding that is used to minimize the Company’s use of wholesale funding in support of its loan growth. In addition, non-interest revenue is generated predominantly through service fees and interchange income.

Consumer Banking serves individual customers and small businesses with less than $2 million of revenues by offering consumer deposits, residential mortgages, home equity lines, secured and unsecured loans, debit and credit card products, and investment services. Consumer Banking operates a distribution network consisting of 199 banking centers and 350 ATMs, a customer care center, and a full range of web and mobile-based banking services, primarily throughout southern New England and the New York Metro and Suburban markets.

Commercial Banking

Operating Results:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2023		2022		2023		2022
Net interest income	$	391,386	$	333,554	$	1,159,306	$	954,044
Non-interest income	30,605		40,497		98,257		128,670
Non-interest expense	110,306		102,415		329,397		294,375
Pre-tax, pre-provision net revenue	$	311,685	$	271,636	$	928,166	$	788,339

Comparison to Prior Year Quarter

Commercial Banking's PPNR increased $40.0 million, or 14.7%, for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, due to an increase in net interest income, partially offset by a decrease in non-interest income and an increase in non-interest expense. The $57.8 million increase in net interest income is primarily due to organic loan growth and the impact of the higher interest rate environment. The $9.9 million decrease in non-interest income is primarily due to lower cash management fees, syndication fees, loan servicing fees, customer interest rate derivative activities, and prepayment penalties. The $7.9 million increase in non-interest expense is primarily due to an increase in both technology and employee-related costs in order to support balance sheet growth.

Comparison to Prior Year to Date

Commercial Banking's PPNR increased $139.8 million, or 17.7%, for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, due to an increase in net interest income, partially offset by a decrease in non-interest income and an increase in non-interest expense. The $205.2 million increase in net interest income is primarily due to organic loan growth and the impact of the higher interest rate environment. The $30.4 million decrease in non-interest income is primarily due to lower customer interest rate derivative activities, loan servicing fees, prepayment penalties, cash management fees, and direct investment income. The $35.0 million increase in non-interest expense is primarily due to an increase in both technology and employee-related costs in order to support balance sheet growth.

Selected Balance Sheet and Off-Balance Sheet Information:


(In thousands)	At September 30, 2023		At December 31, 2022
Loans and leases	$	40,260,913	$	40,115,067
Deposits	19,410,863		19,563,227

Assets under administration / management (off-balance sheet)	2,726,632		2,258,635

Loans and leases increased $145.8 million, or 0.4%, at September 30, 2023, as compared to December 31, 2022, primarily due to organic growth in the commercial non-mortgage and commercial real estate categories, partially offset by net principal paydowns in the warehouse lending, equipment finance, and asset-based lending categories. Total portfolio originations for the nine months ended September 30, 2023, and 2022, were $6.3 billion and $10.6 billion, respectively. The $4.3 billion decrease was primarily due to a decrease in commercial real estate and commercial non-mortgage originations.

Deposits decreased $152.4 million, or 0.8%, at September 30, 2023, as compared to December 31, 2022, primarily due to customers rebalancing their deposit concentrations as a result of the high-profile bank failures in the first and second quarters of 2023, partially offset by the seasonal inflow of municipal deposits.

Commercial Banking held $0.9 billion and $0.6 billion in assets under administration and $1.8 billion and $1.7 billion in assets under management at September 30, 2023, and December 31, 2022, respectively. The combined increase of $0.4 billion, or 20.7%, was primarily due to customers shifting their deposits into investment accounts to purchase U.S. Treasury securities with government-backing, and higher valuations in the equity markets during the nine months ended September 30, 2023.

HSA Bank

Operating Results:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2023		2022		2023		2022
Net interest income	$	77,669	$	58,567	$	224,820	$	152,702
Non-interest income	20,799		25,842		67,889		79,352
Non-interest expense	39,870		36,725		126,213		110,674
Pre-tax net revenue	$	58,598	$	47,684	$	166,496	$	121,380

Comparison to Prior Year Quarter

HSA Bank's pre-tax net revenue increased $10.9 million, or 22.9%, for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, due to an increase in net interest income, partially offset by a decrease in non-interest income and an increase in non-interest expense. The $19.1 million increase in net interest income is primarily due to an increase in the net deposit interest rate spread and organic deposit growth. The $5.1 million decrease in non-interest income is primarily due to lower customer account service fees. The $3.1 million increase in non-interest expense is primarily due to an increase in compensation and benefits, higher service contract expenses related to additional account holders, and costs associated with the ongoing HSA Bank user experience build out.

Comparison to Prior Year to Date

HSA Bank's pre-tax net revenue increased $45.1 million, or 37.2%, for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, due to an increase in net interest income, partially offset by a decrease in non-interest income and an increase in non-interest expense. The $72.1 million increase in net interest income is primarily due to an increase in the net deposit interest rate spread and organic deposit growth. The $11.5 million decrease in non-interest income is primarily due to lower customer account service fees. The $15.5 million increase in non-interest expense is primarily due to an increase in compensation and benefits, higher service contract expenses related to additional account holders, and costs associated with the ongoing HSA Bank user experience build out.

Selected Balance Sheet and Off-Balance Sheet Information:


(In thousands)	At September 30, 2023		At December 31, 2022
Deposits	$	8,229,618	$	7,944,919

Assets under administration, through linked investment accounts (off-balance sheet)	4,094,690		3,393,832

Deposits increased $0.3 billion, or 3.6%, at September 30, 2023, as compared to December 31, 2022, primarily due to an increase in the number of account holders and organic deposit growth. HSA deposits accounted for approximately 13.6% and 14.7% of the Company's total consolidated deposits at September 30, 2023, and December 31, 2022, respectively.

Assets under administration, through linked investment accounts, increased $0.7 billion, or 20.7%, at September 30, 2023, as compared to December 31, 2022, primarily due to additional account holders and higher valuations in the equity markets during the nine months ended September 30, 2023.

Consumer Banking

Operating Results:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2023		2022		2023		2022
Net interest income	$	195,315	$	195,748	$	610,353	$	511,712
Non-interest income	26,886		33,842		81,722		92,541
Non-interest expense	105,703		109,588		321,462		312,464
Pre-tax, pre-provision net revenue	$	116,498	$	120,002	$	370,613	$	291,789

Comparison to Prior Year Quarter

Consumer Banking's PPNR decreased $3.5 million, or 2.9%, for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, due to decreases in both net interest income and non-interest income, partially offset by a decrease in non-interest expense. The $0.4 million decrease in net interest income is primarily due to a slight decrease in deposits, partially offset by organic loan growth. The $7.0 million decrease in non-interest income is primarily due to lower investment services income driven by the outsourcing of the consumer investment services platform in the fourth quarter of 2022, and lower deposit and loan servicing fee income, partially offset by higher miscellaneous fee income. The $3.9 million decrease in non-interest expense is primarily driven by the outsourcing of the consumer investment services platform in the fourth quarter of 2022, coupled with lower technology expenses.

Comparison to Prior Year to Date

Consumer Banking's PPNR increased $78.8 million, or 27.0%, for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, due to an increase in net interest income, partially offset by a decrease in non-interest income and an increase in non-interest expense. The $98.6 million increase in net interest income is primarily due to organic loan growth and the impact of the higher interest rate environment. The $10.8 million decrease in non-interest income is primarily due to lower investment services income driven by the outsourcing of the consumer investment services platform in the fourth quarter of 2022, partially offset by higher miscellaneous fee income. The $9.0 million increase in non-interest expense is primarily due to increased staffing and servicing costs associated with deposit growth initiatives, which were partially offset by lower compensation and benefits expenses driven by the outsourcing of the consumer investment services platform effective as of the fourth quarter of 2022.

Selected Balance Sheet and Off-Balance Sheet Information:


(In thousands)	At September 30, 2023		At December 31, 2022
Loans	$	9,807,617	$	9,624,465
Deposits	23,624,285		23,609,941
Assets under administration (off-balance sheet)	7,614,507		7,872,397

Loans increased $0.2 billion, or 1.9%, at September 30, 2023, as compared to December 31, 2022, primarily due to growth in residential mortgages and small business commercial loans, partially offset by net principal paydowns in home equity and other consumer loans. Total portfolio originations for the nine months ended September 30, 2023, and 2022, were $1.0 billion and $2.1 billion, respectively. The $1.1 billion decrease was primarily due to the increase in market rates and low housing inventories, which resulted in lower residential mortgage originations.

Deposits increased $14.3 million, or 0.1%, at September 30, 2023, as compared to December 31, 2022, primarily due to the impact of the higher interest rate environment, which has attracted consumers to certificates of deposit and money market products, partially offset by seasonal demand deposit outflows.

Assets under administration decreased $0.3 billion, or 3.3%, at September 30, 2023, as compared to December 31, 2022, primarily due to customer investment outflows, partially offset by higher valuations in the equity markets during the nine months ended September 30, 2023.

Financial Condition

Total assets increased $1.8 billion, or 2.6%, from $71.3 billion at December 31, 2022, to $73.1 billion at September 30, 2023. The change in total assets was primarily attributed to the following, which experienced changes greater than $100 million dollars:

•Cash and cash equivalents increased $1.3 billion, primarily due to the Company's risk management approach to hold higher levels of on-balance sheet liquidity in 2023;

•FHLB and FRB stock decreased $139.8 million, primarily due to the lower FHLB stock investment required as a result of the decrease in FHLB advances;

•DTAs, net increased $107.3 million, primarily due to the $85.6 million deferred tax effect on the increase in other comprehensive loss;

•Loans and leases increased $0.3 billion, primarily due to $7.3 billion of originations during the nine months ended September 30, 2023, particularly across the commercial non-mortgage and commercial real estate categories, partially offset by net principal paydowns and commercial loan sales; and

•Goodwill and other net intangible assets increased a combined $129.8 million. Goodwill increased $117.4 million, which reflects the $143.2 million recognized in connection with the interLINK acquisition, partially offset by the impact of the Sterling merger measurement period adjustments recorded during the first quarter of 2023. The $12.4 million increase in other net intangible assets is primarily due to the $36.0 million broker dealer relationship and $4.0 million non-competition agreement recognized in connection with the interLINK acquisition, partially offset by year-to-date amortization charges.

Total liabilities increased $1.7 billion, or 2.7%, from $63.2 billion at December 31, 2022, to $64.9 billion at September 30, 2023. The change in total liabilities was primarily attributed to the following:

•Total deposits increased $6.3 billion, reflecting a $7.8 billion increase in interest-bearing deposits, partially offset by a $1.5 billion decrease in non-interest-bearing deposits. The overall increase in deposits is primarily due to the $5.2 billion of sweep money market deposits added as a result of the interLINK acquisition, as well as time deposit and HSA deposit growth, partially offset by the impact of customers rebalancing their deposit concentrations as a result of the high-profile bank failures in the first and second quarters of 2023;

•Securities sold under agreements to repurchase and other borrowings decreased $1.0 billion, primarily due to $0.9 billion of federal funds purchased at December 31, 2022, as compared to none at September 30, 2023. The additional liquidity generated from the interLINK deposit sweep program allowed for the paydown of higher rate federal funds purchased in the first quarter of 2023;

•FHLB advances decreased $3.7 billion, as the additional liquidity generated from the interLINK deposit sweep program allowed for the paydown of FHLB advances;

•Long-term debt decreased $22.6 million, primarily due to the repurchase and retirement of $17.5 million of the 4.375% Senior fixed-rate notes due February 15, 2024;

•Accrued expenses and other liabilities increased $100.2 million, primarily due to increases in treasury derivative liabilities, accrued interest payable, and unfunded LIHTC commitments, partially offset by the payment of accrued employee bonuses in the first quarter of 2023, and a decrease in operating lease liabilities.

Total stockholders' equity increased $0.1 billion, or 1.8%, from $8.1 billion at December 31, 2022, to $8.2 billion at
September 30, 2023. The change in total stockholders' equity was attributed to the following:

•The adoption of ASU No. 2022-02, which resulted in a $4.2 million cumulative-effect adjustment to retained earnings;

•Net income recognized of $682.4 million;

•Other comprehensive loss, net of tax, of $230.8 million, primarily due to increases in unrealized losses resulting from higher market rates, impacting both the available-for-sale securities portfolio and cash flow hedges;

•Dividends paid to common and preferred stockholders of $209.2 million and $12.5 million, respectively;

•Employee stock-based compensation plan activity of $40.2 million, inclusive of restricted stock amortization and forfeitures, and stock options exercised of $1.7 million; and

•Repurchases of common stock of $108.8 million under the Company's common stock repurchase program and $15.8 million related to employee stock-based compensation plans.

Investment Securities

Through its Corporate Treasury function, the Company maintains and invests in debt securities that are primarily used to provide a source of liquidity for operating needs, to generate interest income, and as a means to manage the Company's
interest-rate risk. The Company's investment securities are classified into two major categories: available-for-sale and
held-to-maturity.

The ALCO manages the Company's investment securities in accordance with regulatory guidelines and corporate policies, which include limitations on aspects such as concentrations in and types of investments, as well as minimum risk ratings per type of security. In addition, the OCC may further establish individual limits on certain types of investments if the concentration in such security presents a safety and soundness concern. At both September 30, 2023, and December 31, 2022, the Company had investment securities totaling $14.5 billion, with an average risk weighting for regulatory purposes of 17.3% and 19.0%, respectively. Although the Bank held the entirety of the Company's investment securities portfolio at both September 30, 2023, and December 31, 2022, the Holding Company may also directly hold investment securities.

The following table summarizes the balances and percentage composition of the Company's investment securities:


	At September 30, 2023				At December 31, 2022
(In thousands)	Amount		%		Amount		%
Available-for-sale:
U.S. Treasury notes	$	387,021	5.1	%	$	717,040	9.1	%
Government agency debentures	248,536		3.2		258,374		3.3
Municipal bonds and notes	1,523,322		19.9		1,633,202		20.7
Agency CMO	49,905		0.7		59,965		0.8
Agency MBS	2,252,635		29.4		2,158,024		27.3
Agency CMBS	1,755,131		22.9		1,406,486		17.8
CMBS	786,602		10.3		896,640		11.4
CLO	—		—		2,107		—
Corporate debt	601,582		7.9		704,412		8.9
Private label MBS	39,878		0.5		44,249		0.6
Other	8,779		0.1		12,198		0.1
Total available-for-sale securities	$	7,653,391	100.0	%	$	7,892,697	100.0	%

Held-to-maturity:
Agency CMO	$	24,406	0.4	%	$	28,358	0.4	%
Agency MBS	2,470,192		35.9		2,626,114		40.0
Agency CMBS	3,363,390		48.9		2,831,949		43.1
Municipal bonds and notes (1)	917,755		13.3		928,845		14.2
CMBS	100,232		1.5		149,613		2.3
Total held-to-maturity securities	$	6,875,975	100.0	%	$	6,564,879	100.0	%
Total investment securities	$	14,529,366			$	14,457,576

(1)The balances at both September 30, 2023, and December 31, 2022, exclude the $0.2 million ACL recorded on held-to-maturity securities.

Available-for-sale securities decreased $0.2 billion, or 3.0%, from $7.9 billion at December 31, 2022, to $7.7 billion at
September 30, 2023, primarily due to sales of $0.4 billion in U.S. Treasury notes, Corporate debt securities, and Municipal bonds and notes, and the increase in gross unrealized losses, partially offset by purchases exceeding paydown activities, particularly across the Agency MBS, Agency CMBS, and CMBS categories. The sale of available-for-sale securities during the nine months ended September 30, 2023, resulted in $20.5 million of gross realized losses, $3.8 million of which was attributed to a decline in credit quality, and therefore has been included in the Provision for credit losses. The average FTE yield on the available-for-sale portfolio was 3.14% and 2.96% for the three and nine months ended September 30, 2023, respectively, as compared to 2.38% and 2.20% for the three and nine months ended September 30, 2022, respectively. The 76 basis point increase for both periods is primarily due to higher market rates on securities purchased in 2023.

At September 30, 2023, and December 31, 2022, gross unrealized losses on available-for-sale securities were $1.1 billion and $0.9 billion, respectively. The $0.2 billion increase is primarily due to higher market rates. Available-for-sale securities are evaluated for credit losses on a quarterly basis. No ACL was recorded on available-for-sale securities as of either period as each of the securities in the Company's portfolio are investment grade, current as to principal and interest, and their price changes are consistent with interest and credit spreads when adjusting for convexity, rating, and industry differences. At September 30, 2023, based on current market conditions and the Company's current targeted balance sheet composition strategy, the Company intends to hold its available-for-sale securities in unrealized loss positions through the anticipated recovery period, and it is more-likely-than-not that the Company will not have to sell these available-for-sale securities before the recovery of the entire amortized cost basis.

Held-to-maturity securities increased $0.3 billion, or 4.7%, from $6.6 billion at December 31, 2022, to $6.9 billion at
September 30, 2023, primarily due to purchases exceeding paydown activities, particularly across the Agency MBS and Agency CMBS categories. The average FTE yield on the held-to-maturity portfolio was 3.01% and 2.94% for the three and nine months ended September 30, 2023, respectively, as compared to 2.43% and 2.25% for the three and nine months ended September 30, 2022, respectively. The 58 and 69 basis point increases, respectively, are primarily due to higher market rates on securities purchased in 2023.

At September 30, 2023, and December 31, 2022, gross unrealized losses on held-to-maturity securities were $1.2 billion and $0.8 billion, respectively. The $0.4 billion increase is primarily due to higher market rates. Held-to-maturity securities are evaluated for credit losses on a quarterly basis under the CECL methodology. At both September 30, 2023, and December 31, 2022, the ACL on held-to-maturity securities was $0.2 million.

The following table summarizes the book value of investment securities by the earlier of either contractual maturity or call date, as applicable, along with the respective weighted-average yields:


	At September 30, 2023
	1 Year or Less				1 - 5 Years				5 - 10 Years				After 10 Years				Total
(Dollars in thousands)	Amount		Weighted- Average Yield (1)		Amount		Weighted- Average Yield (1)		Amount		Weighted- Average Yield (1)		Amount		Weighted- Average Yield (1)		Amount		Weighted- Average Yield (1)
Available-for-sale:
U.S. Treasury notes	$	24,064	1.30	%	$	362,957	1.28	%	$	—	—	%	$	—	—	%	$	387,021	1.28	%
Government agency debentures	—		—		73,257		2.41		6,976		2.20		168,303		3.26		248,536		2.98
Municipal bonds and notes	12,406		2.17		167,706		1.63		644,252		1.55		698,958		1.58		1,523,322		1.58
Agency CMO	—		—		351		2.96		4,795		3.14		44,759		2.89		49,905		2.91
Agency MBS	12		(4.55)		19,048		1.30		136,130		1.74		2,097,445		2.93		2,252,635		2.85
Agency CMBS	1,589		2.27		106,916		1.09		22,116		2.15		1,624,510		3.43		1,755,131		3.27
CMBS	—		—		68,704		6.91		—		—		717,898		6.88		786,602		6.88

Corporate debt	9,215		3.44		157,763		2.55		380,332		3.19		54,272		3.54		601,582		3.06
Private label MBS	—		—		—		—		—		—		39,878		4.01		39,878		4.01
Other	—		—		4,745		3.80		4,034		2.71		—		—		8,779		3.30
Total available-for-sale securities	$	47,286	1.97	%	$	961,447	2.03	%	$	1,198,635	2.12	%	$	5,446,023	3.45	%	$	7,653,391	3.06	%
Held-to-maturity:
Agency CMO	$	—	—	%	$	—	—	%	$	—	—	%	$	24,406	2.90	%	$	24,406	2.90	%
Agency MBS	148		3.13		833		2.12		26,693		2.49		2,442,518		2.47		2,470,192		2.47
Agency CMBS	—		—		—		—		124,287		2.67		3,239,103		3.12		3,363,390		3.10
Municipal bonds and notes	8,186		3.32		56,204		3.25		212,301		2.69		641,064		3.22		917,755		3.10
CMBS	—		—		—		—		—		—		100,232		2.66		100,232		2.66
Total held-to-maturity securities	$	8,334	3.31	%	$	57,037	3.23	%	$	363,281	2.67	%	$	6,447,323	2.87	%	$	6,875,975	2.86	%
Total investment securities	$	55,620	2.17	%	$	1,018,484	2.10	%	$	1,561,916	2.24	%	$	11,893,346	3.14	%	$	14,529,366	2.97	%

(1)Weighted-average yields exclude FTE adjustments, and are calculated using the sum of the total book value multiplied by the yield divided by the sum of the total book value for each security, major type, and maturity bucket.

Additional information regarding the Company's investment securities' portfolios can be found within Note 3: Investment Securities in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.

Loans and Leases

The following table summarizes the amortized cost and percentage composition of the Company's loans and leases:


	At September 30, 2023				At December 31, 2022
(Dollars in thousands)	Amount		%		Amount		%
Commercial non-mortgage	$	16,508,188	33.0	%	$	16,392,795	32.9	%
Asset-based	1,632,962		3.3		1,821,642		3.7
Commercial real estate	13,348,495		26.6		12,997,163		26.1
Multi-family	7,234,759		14.4		6,621,982		13.3
Equipment financing	1,431,858		2.9		1,628,393		3.3
Warehouse lending	118,478		0.2		641,976		1.3
Residential	8,228,451		16.4		7,963,420		16.0
Home equity	1,533,046		3.1		1,633,107		3.3
Other consumer	51,909		0.1		63,948		0.1
Total loans and leases (1)	$	50,088,146	100.0	%	$	49,764,426	100.0	%

(1)The amortized cost balances at September 30, 2023, and December 31, 2022, exclude the ACL recorded on loans and leases of $635.4 million and $594.7 million, respectively.

The following table summarizes loans and leases by contractual maturity, along with the indication of whether interest rates are fixed or variable:


	At September 30, 2023
(In thousands)	1 Year or Less		1 - 5 Years		5 - 15 Years		After 15 Years		Total
Fixed rate:
Commercial non-mortgage	$	148,655	$	606,978	$	2,255,590	$	1,540,099	$	4,551,322
Asset-based	26,863		22,288		—		—		49,151
Commercial real estate	533,984		1,911,013		1,118,623		119,612		3,683,232
Multi-family	339,336		2,893,705		1,366,070		63,685		4,662,796
Equipment financing	150,523		1,010,986		270,349		—		1,431,858

Residential	447		58,856		391,502		5,036,580		5,487,385
Home equity	3,955		24,580		175,486		207,500		411,521
Other consumer	13,977		8,162		308		136		22,583
Total fixed rate loans and leases	$	1,217,740	$	6,536,568	$	5,577,928	$	6,967,612	$	20,299,848
Variable rate:
Commercial non-mortgage	$	3,758,122	$	7,630,541	$	499,569	$	68,634	$	11,956,866
Asset-based	369,057		1,209,493		5,261		—		1,583,811
Commercial real estate	2,019,188		4,810,103		2,140,275		695,697		9,665,263
Multi-family	298,155		1,090,687		1,156,737		26,384		2,571,963

Warehouse lending	118,478		—		—		—		118,478
Residential	632		10,526		307,574		2,422,334		2,741,066
Home equity	2,111		6,665		135,247		977,502		1,121,525
Other consumer	5,608		14,336		2,486		6,896		29,326
Total variable rate loans and leases	$	6,571,351	$	14,772,351	$	4,247,149	$	4,197,447	$	29,788,298
Total loans and leases (1)	$	7,789,091	$	21,308,919	$	9,825,077	$	11,165,059	$	50,088,146

(1)Amounts due exclude total accrued interest receivable of $261.7 million.

Credit Policies and Procedures

The Bank has credit policies and procedures in place designed to support its lending activities within an acceptable level of risk, which are reviewed and approved by management and the Board of Directors on a regular basis. To assist with this process, management inspects reports generated by the Company's loan reporting systems related to loan production, loan quality, concentrations of credit, loan delinquencies, non-performing loans, and potential problem loans.

Commercial non-mortgage, asset-based, equipment finance, and warehouse lending loans are underwritten after evaluating and understanding the borrower’s ability to operate and service its debt. Assessment of the borrower's management is a critical element of the underwriting process and credit decision. Once it has been determined that the borrower’s management possesses sound ethics and a solid business acumen, current and projected cash flows are examined to determine the ability of the borrower to repay obligations, as contracted. Commercial non-mortgage, asset-based, and equipment finance loans are primarily made based on the identified cash flows of the borrower, and secondarily on the underlying collateral provided by the borrower. Warehouse lending loans are primarily made based on the borrower's ability to originate high-quality, first-mortgage residential loans that can be sold into the agency, government, or private jumbo markets, and secondarily on the underlying cash flows of the borrower. However, the cash flows of borrowers may not be as expected, and the collateral securing these loans, as applicable, may fluctuate in value. Most commercial non-mortgage, asset-based, and equipment finance loans are secured by the assets being financed and may incorporate personal guarantees of the principal balance. Warehouse lending loans are generally uncommitted facilities.

Commercial real estate loans, including multi-family, are subject to underwriting standards and processes similar to those for commercial non-mortgage, asset-based, equipment finance, and warehouse lending loans. These loans are primarily viewed as cash flow loans, and secondarily as loans secured by real estate. Repayment of commercial real estate loans is largely dependent on the successful operation of the property securing the loan, the market in which the property is located, and the tenants of the property securing the loan. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type and geographic location, which reduces the Company's exposure to adverse economic events that may affect a particular market. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. All transactions are appraised to determine market value. Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. Management periodically utilizes third-party experts to provide insight and guidance about economic conditions and trends affecting its commercial real estate loan portfolio.

Consumer loans are subject to policies and procedures developed to manage the specific risk characteristics of the portfolio. These policies and procedures, coupled with relatively small individual loan amounts and predominately collateralized loan structures, are spread across many different borrowers, minimizing the level of credit risk. Trend and outlook reports are reviewed by management on a regular basis, and policies and procedures are modified or developed, as needed. Underwriting factors for residential mortgage and home equity loans include the borrower’s FICO score, the loan amount relative to property value, and the borrower’s debt-to-income level. The Bank originates both qualified mortgage and non-qualified mortgage loans, as defined by applicable CFPB rules.

Allowance for Credit Losses on Loans and Leases

The ACL on loans and leases increased $40.7 million, or 6.8%, from $594.7 million at December 31, 2022, to $635.4 million at September 30, 2023, primarily due to the impact of the current macroeconomic environment on credit performance and organic loan growth, partially offset by year to date net charge-offs.

The following table summarizes the percentage allocation of the ACL across the loans and leases categories:


	At September 30, 2023				At December 31, 2022
(Dollars in thousands)	Amount		% (1)		Amount		% (1)
Commercial non-mortgage	$	222,735	35.0	%	$	197,950	33.3	%
Asset-based	19,289		3.0		16,094		2.7
Commercial real estate	232,177		36.5		214,771		36.1
Multi-family	85,539		13.5		80,652		13.6
Equipment financing	24,116		3.8		23,081		3.9
Warehouse lending	637		0.1		577		0.1
Residential	22,793		3.6		26,907		4.5
Home equity	27,667		4.4		32,296		5.4
Other consumer	485		0.1		2,413		0.4
Total ACL on loans and leases	$	635,438	100.0	%	$	594,741	100.0	%

(1)The ACL allocated to a single loan and lease category does not preclude its availability to absorb losses in other categories.

Methodology

The Company's ACL on loans and leases is considered to be a critical accounting policy. The ACL on loans and leases is a contra-asset account that offsets the amortized cost basis of loans and leases for the credit losses that are expected to occur over the life of the asset. Executive management reviews and advises on the adequacy of the allowance, which is maintained at a level that management deems to be sufficient to cover expected losses within the loan and lease portfolios.

The ACL on loans and leases is determined using the CECL model, whereby an expected lifetime credit loss is recognized at the origination or purchase of an asset, including those acquired through a business combination, which is then reassessed at each reporting date over the contractual life of the asset. The calculation of expected credit losses includes consideration of past events, current conditions, and reasonable and supportable economic forecasts that affect the collectability of the reported amounts. Generally, expected credit losses are determined through a pooled, collective assessment of loans and leases with similar risk characteristics. However, if the risk characteristics of a loan or lease change such that it no longer matches that of the collectively assessed pool, it is removed from the population and individually assessed for credit losses. The total ACL on loans and leases recorded by management represents the aggregated estimated credit loss determined through both the collective and individual assessments.

Collectively Assessed Loans and Leases. Collectively assessed loans and leases are segmented based on product type, credit quality, risk ratings, and/or collateral types within its commercial and consumer portfolios, and expected losses are determined using a PD, LGD, and EAD, loss rate, or discounted cash flow framework.

For portfolios using the PD/LGD/EAD framework, credit losses are calculated as the product of the probability of a loan defaulting, expected loss given the occurrence of a default, and the expected exposure of a loan at default. Summing the product across loans over their lives yields the lifetime expected credit losses for a given portfolio. Management's PD and LGD calculations are predictive models that measure the current risk profile of the loan pools using forecasts of future macroeconomic conditions, historical loss information, loan-level risk attributes, and credit quality indicators. The calculation of EAD follows an iterative process to determine the expected remaining principal balance of a loan based on historical paydown rates for loans of a similar segment within the same portfolio. The calculation of portfolio exposure in future quarters incorporates expected losses, the loan's amortization schedule, and prepayment rates.

Under the loss rate method, expected credit losses are estimated using a loss rate that is multiplied by the amortized cost of the asset at the balance sheet date. For each loan segment identified above, management applies an expected historical loss trend based on third-party loss estimates, and correlates them to observed economic metrics and reasonable and supportable forecasts of economic conditions. Under the discounted cash flow method, expected credit losses are determined by comparing the amortized cost of the asset at the balance sheet date to the present value of estimated future principal and interest payments expected to be collected over the remaining life of the asset. The Company's loss model generates cash flow projections at the loan level based on reasonable and supportable projections, from which management estimates payment collections adjusted for accelerated payments, recovery time, PD, and LGD.

The Company's models incorporate a single economic forecast scenario and macroeconomic assumptions over a reasonable and supportable forecast period. The development of the reasonable and supportable forecast assumes each macroeconomic variable will revert to long-term expectations, with reversion characteristics unique to specific economic indicators and forecasts. Reversion towards long-term expectations generally begins two to three years from the forecast start date and is complete within three to five years. Certain models use output reversion and revert to mean historical portfolio loss rates on a
straight-line basis in the third year of the forecast. Other models use input reversion and revert to the mean of macroeconomic variables in reasonable and supportable forecasts.

The Company incorporates forecasts of macroeconomic variables in the determination of expected credit losses. Macroeconomic variables are selected for each class of financing receivable based on relevant factors, such as asset type and the correlation of the variables to credit losses, among others. Data from the forecast scenario of these variables is used as an input to the modeled loss calculation.

A portion of the collective ACL is comprised of qualitative adjustments for risk characteristics that are not reflected or captured in the quantitative models, but are likely to impact the measurement of estimated credit losses. Qualitative factors are based on management's judgement of the Company, market, industry, or business specific data including loan trends, portfolio segment composition, and loan rating or credit scores. Qualitative adjustments may be applied in relation to economic forecasts when relevant facts and circumstances are expected to impact credit losses, particularly in times of significant volatility in economic activity.

Individually Assessed Loans and Leases. If the risk characteristics of a loan or lease change such that it no longer matches the risk characteristics of the collectively assessed pool, it is removed from the population and individually assessed for credit losses. Generally, all non-accrual loans, loans with a charge-off, and collateral dependent loans where the borrower is experiencing financial difficulty, are individually assessed. The measurement method used to calculate the expected credit loss on an individually assessed loan or lease is dependent on the type and whether the loan or lease is considered to be collateral dependent. Methods for collateral dependent loans are either based on the fair value of the collateral less estimated cost to sell (when the basis of repayment is the sale of collateral), or the present value of the expected cash flows from the operation of the collateral. For non-collateral dependent loans, either a discounted cash flow method or other loss factor method is used. Any individually assessed loan or lease for which no specific valuation allowance is deemed necessary is either the result of sufficient cash flows or sufficient collateral coverage relative to the amortized cost of the asset.

Additional information regarding the Company's ACL methodology can be found within Note 1: Summary of Significant Accounting Policies in the Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Asset Quality Ratios

The Company manages asset quality using risk tolerance levels established through the Company's underwriting standards, servicing, and management of its loan and lease portfolio. Loans and leases for which a heightened risk of loss has been identified are regularly monitored to mitigate further deterioration and preserve asset quality in future periods. Non-performing assets, credit losses, and net charge-offs are considered by management to be key measures of asset quality.

The following table summarizes key asset quality ratios and their underlying components:


(Dollars in thousands)	At September 30, 2023			At December 31, 2022
Non-performing loans and leases (1)	$	215,053		$	203,791
Total loans and leases	50,088,146			49,764,426
Non-performing loans and leases as a percentage of loans and leases	0.43		%	0.41		%

Non-performing assets (1)	$	218,402		$	206,136
Total loans and leases	$	50,088,146		$	49,764,426
Add: OREO	3,349			2,345
Total loans and leases plus OREO	$	50,091,495		$	49,766,771
Non-performing assets as a percentage of loans and leases plus OREO	0.44		%	0.41		%

Non-performing assets (1)	$	218,402		$	206,136
Total assets	73,130,851			71,277,521
Non-performing assets as a percentage of total assets	0.30		%	0.29		%

ACL on loans and leases	$	635,438		$	594,741
Non-performing loans and leases (1)	215,053			203,791
ACL on loans and leases as a percentage of non-performing loans and leases	295.48		%	291.84		%

ACL on loans and leases	$	635,438		$	594,741
Total loans and leases	50,088,146			49,764,426
ACL on loans and leases as a percentage of loans and leases	1.27		%	1.20		%

ACL on loans and leases	$	635,438		$	594,741
Net charge-offs	98,780			67,288
Ratio of ACL on loans and leases to net charge-offs (2)	6.43x			8.84x

(1)Non-performing assets balances and related asset quality ratios exclude the impact of net unamortized (discounts)/premiums and net unamortized deferred (fees)/costs on loans and leases.

(2)Calculated for the September 30, 2023, period based on annualized year-to-date net charge-offs.

The following table summarizes net charge-offs (recoveries) as a percentage of average loans and leases for each category:


	At or for the three months ended September 30,
	2023						2022
(Dollars in thousands)	Net Charge-offs (Recoveries)		Average Balance		% (1)		Net Charge-offs (Recoveries)		Average Balance		% (1)
Commercial non-mortgage	$	1,827	$	17,077,110	0.04	%	$	24,388	$	14,404,363	0.68	%
Asset-based	2,999		1,663,481		0.72		(1)		1,811,073		—
Commercial real estate	19,736		13,451,160		0.59		4,684		12,430,026		0.15
Multi-family	—		7,163,174		—		201		6,073,051		0.01
Equipment financing	2,506		1,479,821		0.68		671		1,741,214		0.15
Warehouse lending	—		282,845		—		—		635,203		—
Residential	(129)		8,200,938		(0.01)		(515)		7,384,704		(0.03)
Home equity	1,087		1,539,824		0.28		(1,285)		1,673,477		(0.31)
Other consumer	1,286		53,835		9.56		383		76,567		2.00
Total	$	29,312	$	50,912,188	0.23	%	$	28,526	$	46,229,678	0.25	%

	At or for the nine months ended September 30,
	2023						2022
(Dollars in thousands)	Net Charge-offs (Recoveries)		Average Balance		% (1)		Net Charge-offs (Recoveries)		Average Balance		% (1)
Commercial non-mortgage	$	5,808	$	16,936,954	0.05	%	$	42,023	$	12,917,615	0.43	%
Asset-based	16,188		1,736,374		1.24		(48)		1,735,435		—
Commercial real estate	48,129		13,407,047		0.48		7,410		10,850,895		0.09
Multi-family	1,033		6,962,983		0.02		404		5,830,630		0.01
Equipment financing	1,667		1,556,090		0.14		1,030		1,645,453		0.08
Warehouse lending	—		417,950		—		—		518,941		—
Residential	(963)		8,088,625		(0.02)		(1,067)		6,874,793		(0.02)
Home equity	(146)		1,572,045		(0.01)		(3,652)		1,668,474		(0.29)
Other consumer	2,369		55,623		5.68		955		83,290		1.53
Total	$	74,085	$	50,733,691	0.19	%	$	47,055	$	42,125,526	0.15	%

(1)Percentage represents annualized year-to-date net charge-offs (recoveries) to average loans and leases within the comparable category.

Net charge-offs for both the three months ended September 30, 2023, and 2022, reflect the effects of the Company's commercial portfolio optimization charges. Although total net charge-offs modestly increased for the three months ended September 30, 2023, as compared to 2022, net charge-offs as a percentage of average loans and leases respectively decreased from 0.25% to 0.23%, due to the higher average loans and leases balance in 2023.

Net charge-offs as a percentage of average loans and leases were 0.19% and 0.15% for the nine months ended September 30, 2023, and 2022, respectively. The increased level of net charge-offs is primarily due to the impact of the current macroeconomic environment on credit performance and higher commercial portfolio optimization charges in 2023.

Liquidity and Capital Resources

The Company manages its cash flow requirements through proactive liquidity measures at both the Holding Company and the Bank. In order to maintain stable, cost-effective funding, and to promote overall balance sheet strength, the liquidity position of the Company is continuously monitored, and adjustments are made to balance sources and uses of funds, as appropriate.

At September 30, 2023, management is not aware of any events that are reasonably likely to have a material adverse effect on the Company’s liquidity position, capital resources, or operating activities. Although regulatory agencies have not issued formal guidance mandating more stringent liquidity and capital requirements, the Company is anticipating a greater focus on the liquidity and capital adequacy of financial institutions in response to the high-profile bank failures that occurred during the first and second quarters of 2023, and has taken appropriate measures to mitigate the risk that such requirements, if implemented, may have on its business, financial positions, and results of operations.

Cash inflows are provided through a variety of sources, including principal and interest payments on loans and investments, unpledged securities that can be sold or utilized to secure funding, and new deposits. The Company is committed to maintaining a strong base of core deposits, which consists of demand, interest-bearing checking, savings, health savings, and money market accounts, to support growth in its loan portfolios. Management actively monitors the interest rate environment and makes adjustments to its deposit strategy in response to evolving market conditions, bank funding needs, and client relationship dynamics.

Holding Company Liquidity. The primary source of liquidity at the Holding Company is dividends from the Bank. To a lesser extent, investment income, net proceeds from investment sales, borrowings, and public offerings may provide additional liquidity. The Holding Company generally uses its funds for principal and interest payments on senior notes, subordinated notes, and junior subordinated debt, dividend payments to preferred and common stockholders, repurchases of its common stock, and purchases of investment securities, as applicable.

During the three and nine months ended September 30, 2023, the Bank paid $250.0 million and $500.0 million in dividends to the Holding Company, respectively. At September 30, 2023, there was $693.9 million of retained earnings available for the payment of dividends by the Bank to the Holding Company. On October 24, 2023, the Bank was approved to pay the Holding Company $100.0 million in dividends for the fourth quarter of 2023.

There are certain restrictions on the Bank's payment of dividends to the Holding Company, which can be found within
Note 10: Regulatory Capital and Restrictions in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements of this report, and in the section captioned "Supervision and Regulation" in Part I - Item 1. Business of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

The quarterly cash dividend to common stockholders remained at $0.40 per common share during the three months ended
September 30, 2023. On October 24, 2023, it was announced that the Holding Company’s Board of Directors had declared a quarterly cash dividend of $0.40 per share on Webster common stock. For the Series F Preferred Stock and Series G Preferred Stock, quarterly cash dividends of $328.125 per share and $16.25 per share were declared, respectively. The Company continues to monitor economic forecasts, anticipated earnings, and its capital position in the determination of its dividend payments.

The Holding Company maintains a common stock repurchase program, which was approved by the Board of Directors, that authorizes management to purchase shares of its common stock in open market or privately negotiated transactions, through block trades, and pursuant to any adopted predetermined trading plan, subject to certain conditions. During the three months ended September 30, 2023, the Holding Company repurchased 1,201,476 shares under the program at a weighted-average price of $41.60 per share, totaling $50.0 million. At September 30, 2023, the Holding Company's remaining purchase authority was $293.4 million. In addition, the Company will periodically acquire common shares outside of the repurchase program related to employee stock compensation plan activity. During the three months ended September 30, 2023, the Company repurchased 8,777 shares at a weighted-average price of $41.18 per share, totaling $0.4 million, for this purpose.

The IRA imposes a 1% excise tax on the value of net stock repurchased by certain publicly traded corporations, including the Company, after December 31, 2022. At September 30, 2023, the Company recorded a $0.8 million liability for such excise tax owed, with an offset to Treasury stock on the Condensed Consolidated Balance Sheet.

Webster Bank Liquidity. The Bank's primary source of funding is core deposits. Including time deposits, the Bank had a loan to total deposit ratio of 83.0% and 92.1% at September 30, 2023, and December 31, 2022, respectively.

The Bank is required by OCC regulations to maintain a sufficient level of liquidity to ensure safe and sound operations. The adequacy of liquidity, as assessed by the OCC, depends on factors such as overall asset and liability structure, market conditions, competition, and the nature of the institution’s deposit and loan customers. At September 30, 2023, the Bank exceeded all regulatory liquidity requirements. The Company has designed a detailed contingency plan in order to respond to any liquidity concerns in a prompt and comprehensive manner, including early detection of potential problems and corrective action to address liquidity stress scenarios.

Capital Requirements. The Holding Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory actions by regulators that could have a direct material effect on the Company’s Consolidated Financial Statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, both the Holding Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated pursuant to regulatory directives. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by Basel III to ensure capital adequacy require financial institutions to maintain minimum ratios of CET1 capital, Tier 1 capital, Total capital to risk-weighted assets, and Tier 1 capital to average tangible assets (as defined in the regulations). At September 30, 2023, both the Holding Company and the Bank were classified as well-capitalized. Management believes that no events or changes have occurred subsequent to quarter-end that would change this designation.

In accordance with regulatory capital rules, the Company elected an option to delay the estimated impact of the adoption of CECL on its regulatory capital over a two-year deferral period, which ended on January 1, 2022, and subsequent three-year transition period ending on December 31, 2024. During the three-year transition period, capital ratios will phase out the aggregate amount of the regulatory capital benefit provided from the delayed CECL adoption in the initial two years. For 2022, 2023, and 2024, the Company is allowed 75%, 50%, and 25%, respectively, of the regulatory capital benefit as of
December 31, 2021, with full absorption occurring in 2025. At September 30, 2023, the regulatory capital benefit allowed from the delayed CECL adoption resulted in a 6, 6, and 4 basis point increase to the Holding Company's and the Bank's CET1 capital to total risk-weighted assets (CET1 risk-based capital), Tier 1 capital to total risk-weighted assets (Tier 1 risk-based capital), and Tier 1 capital to average tangible assets (Tier 1 leverage capital), respectively, and a 1 basis point decrease to Total capital to total risk-weighted assets (Total risk-based capital). Both the Holding Company's and the Bank's regulatory ratios remain in excess of being well-capitalized, even without the regulatory capital benefit of the delayed CECL adoption impact.

Additional information regarding the required regulatory capital levels and ratios applicable to the Holding Company and the Bank can be found within Note 10: Regulatory Capital and Restrictions in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.

Sources and Uses of Funds

Sources of Funds. Deposits are the primary source of cash flows for the Bank’s lending activities and general operational needs. Loan and securities repayments, proceeds from loans and securities held for sale, and maturities also provide cash flows. While scheduled loan and securities repayments are a relatively stable source of funds, prepayments and other deposit inflows are influenced by economic conditions and prevailing interest rates, the timing of which is inherently uncertain. Additional sources of funds are provided by both short-term and long-term borrowings, and to a lesser extent, dividends received as part of the Bank's membership with the FHLB and FRB.

Deposits. The Bank offers a wide variety of checking and savings deposit products designed to meet the transactional and investment needs of both its consumer and business customers. The Bank’s deposit services include, but are not limited to, ATM and debit card use, direct deposit, ACH payments, mobile banking, internet-based banking, banking by mail, account transfers, and overdraft protection, among others. The Bank manages the flow of funds in its deposit accounts and interest rates consistent with FDIC regulations. The Bank’s Consumer and Digital Pricing Committee and its Commercial and Institutional Liability and Loan Pricing Committee both meet regularly to determine pricing and marketing initiatives.

With the acquisition of interLINK during the first quarter of 2023, the Bank received $5.2 billion of money market deposits at September 30, 2023, which added a unique source of core deposit funding and scalable liquidity to the Company's already differentiated, omnichannel deposit gathering capabilities.

Total deposits were $60.3 billion and $54.0 billion at September 30, 2023, and December 31, 2022, respectively. The $6.3 billion increase was primarily due to the interLINK money market deposits, as well as time deposit and HSA deposit growth, partially offset by customers rebalancing their deposit concentrations as a result of the high-profile bank failures in the first and second quarters of 2023. Throughout 2023, customer preferences have shifted from checking and savings account products to certificates of deposit and money market products, which are currently more attractive in the higher interest rate environment.

The following table summarizes daily average balances of deposits by type and the weighted-average rates paid thereon:


	Three months ended September 30,
	2023				2022
(Dollars in thousands)	Average Balance		Average Rate		Average Balance		Average Rate
Non-interest-bearing:
Demand	$	11,335,734	—	%	$	13,590,667	—	%
Interest-bearing:
Checking	8,762,995		1.57		9,274,538		0.37
Health savings accounts	8,235,632		0.15		7,854,425		0.06
Money market	17,088,597		3.85		11,287,581		0.71
Savings	6,822,307		0.83		9,236,443		0.22
Time deposits	7,342,757		4.10		2,716,885		0.37
Total interest-bearing	48,252,288		2.44		40,369,872		0.37
Total average deposits	$	59,588,022	1.96	%	$	53,960,539	0.28	%

	Nine months ended September 30,
	2023				2022
(Dollars in thousands)	Average Balance		Average Rate		Average Balance		Average Rate
Non-interest-bearing:
Demand	$	11,775,500	—	%	$	12,758,489	—	%
Interest-bearing:
Checking	8,826,074		1.37		8,797,586		0.19
Health savings accounts	8,259,408		0.15		7,809,082		0.06
Money market	15,154,298		3.42		10,609,705		0.37
Savings	7,461,886		0.69		8,480,071		0.10
Time deposits	6,192,415		3.66		2,649,328		0.25
Total interest-bearing	45,894,081		2.02		38,345,772		0.20
Total average deposits	$	57,669,581	1.61	%	$	51,104,261	0.15	%

Uninsured deposits represent the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit or similar state deposit insurance regime, and amounts in any other uninsured investment or deposit accounts that are classified as deposits and not subject to any federal or state deposit insurance regimes. The Company calculates its uninsured deposit balances based on the methodologies and assumptions used for regulatory reporting requirements, which includes an estimated portion, and affiliate deposits. At September 30, 2023, and December 31, 2022, total uninsured deposits as per regulatory reporting requirements and reported on Schedule RC-O of the Bank's Call Report were $22.0 billion and $22.5 billion, respectively.

The following table summarizes uninsured deposits information at September 30, 2023, after certain exclusions:



(In thousands)	At September 30, 2023
Uninsured deposits, per regulatory reporting requirements	$	22,032,100
Less: Affiliate deposits	(2,909,761)
Collateralized deposits	(5,737,371)
Uninsured deposits, after exclusions	$	13,384,968

Immediately available liquidity (1)	$	19,762,581
Uninsured deposits coverage	147.6%

(1)Reflects $13.4 billion and $3.6 billion of additional borrowing capacity from the FHLB and the FRB, respectively, and $2.8 billion in unencumbered liquid assets.

Uninsured deposits, after adjusting for affiliate deposits and collateralized deposits, represented 22.2% of total deposits at September 30, 2023. Management believes that this presentation provides a more accurate view of deposits at risk given that affiliate deposits are not customer facing, and therefore are eliminated upon consolidation, and collateralized deposits are secured by other means. As of the date of this Quarterly Report on Form 10-Q, the Company's uninsured deposits as a percentage of total deposits, adjusted for affiliate deposits and collateralized deposits, is consistent with the percentage reported at September 30, 2023.

The following table summarizes the portion of U.S. time deposits in excess of the FDIC insurance limit and time deposits otherwise uninsured by contractual maturity:


(In thousands)	September 30, 2023
Portion of U.S. time deposits in excess of insurance limit	$	2,745,580
Time deposits otherwise uninsured with a maturity of:
3 months or less	$	1,977,398
Over 3 months through 6 months	689,549
Over 6 months through 12 months	70,944
Over 12 months	7,689

Additional information regarding period-end deposit balances and rates can be found within Note 7: Deposits in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.

Borrowings. The Bank's primary borrowing sources include securities sold under agreements to repurchase, federal funds purchased, FHLB advances, and long-term debt. Total borrowed funds were $3.0 billion and $7.7 billion at September 30, 2023, and December 31, 2022, respectively, and represented 4.1% and 10.8% of total assets, respectively. The $4.7 billion decrease is primarily due to decreases of $3.7 billion, $0.9 billion, and $0.1 billion in FHLB advances, federal funds purchased, and securities sold under agreements to repurchase, respectively.

The Bank had additional borrowing capacity from the FHLB of $13.4 billion and $4.3 billion at September 30, 2023, and December 31, 2022, respectively. The Bank also had additional borrowing capacity from the FRB of $3.6 billion and $1.2 billion at September 30, 2023, and December 31, 2022, respectively. Unpledged investment securities of $1.0 billion at September 30, 2023, could have been used for collateral on borrowings or to increase borrowing capacity by either $0.8 billion with the FHLB or $1.0 billion with the FRB.

Securities sold under agreements to repurchase are generally a form of short-term funding for the Bank in which it sells securities to counterparties with an agreement to buy them back in the future at a fixed price. Securities sold under agreements to repurchase totaled $157.5 million and $282.0 million at September 30, 2023, and December 31, 2022, respectively. The $124.5 million decrease is primarily due to fluctuations in customers' overnight account balances.

The Bank may also purchase term and overnight federal funds to meet its short-term liquidity needs. There were no federal funds purchased at September 30, 2023, whereas federal funds purchased totaled $0.9 billion at December 31, 2022. The additional liquidity generated from the interLINK deposit sweep program allowed for the paydown of higher rate federal funds purchased in the first quarter of 2023. There were no federal funds purchased in either the second or third quarter of 2023.

FHLB advances are not only utilized as a source of funding, but also for interest rate risk management purposes. FHLB advances totaled $1.8 billion and $5.5 billion at September 30, 2023, and December 31, 2022, respectively. The $3.7 billion decrease is primarily due to the additional liquidity generated from the interLINK deposit sweep program, which allowed for the paydown of FHLB advances.

Long-term debt consists of senior fixed-rate notes maturing in 2024 and 2029, subordinated fixed-to-floating-rate notes maturing in 2029 and 2030, and floating-rate junior subordinated notes maturing in 2033. Long-term debt remained relatively flat on a comparative basis, totaling approximately $1.1 billion at both September 30, 2023, and December 31, 2022.

The following table summarizes daily average balances of borrowings by type and the weighted-average rates paid thereon:


	Three months ended September 30,
	2023				2022
(Dollars in thousands)	Average Balance		Average Rate		Average Balance		Average Rate
Securities sold under agreements to repurchase	$	170,256	0.12	%	$	479,308	0.95	%
Federal funds purchased	—		—		889,818		2.24
FHLB advances	2,945,136		5.34		2,402,596		2.25
Long-term debt	1,051,380		3.70		1,075,683		3.47

Total average borrowings	$	4,166,772	4.72	%	$	4,847,405	2.38	%

	Nine months ended September 30,
	2023				2022
(Dollars in thousands)	Average Balance		Average Rate		Average Balance		Average Rate
Securities sold under agreements to repurchase	$	209,723	0.11	%	$	528,353	0.88	%
Federal funds purchased	221,266		4.62		478,038		1.75
FHLB advances	5,104,372		5.09		1,198,754		1.87
Long-term debt	1,061,643		3.68		1,017,120		3.40

Total average borrowings	$	6,597,004	4.69	%	$	3,222,265	2.16	%

Additional information regarding period-end borrowings balances and rates can be found within Note 8: Borrowings in the Notes to Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements.

Federal Home Loan Bank and Federal Reserve Bank Stock. The Bank is a member of the FHLB System, which consists of eleven district FHLBs, each of which is subject to the supervision and regulation of the Federal Housing Finance Agency. An activity-based capital stock investment in the FHLB is required in order for the Bank to maintain its membership and access to advances and other extensions of credit for sources of funds and liquidity purposes. The FHLB capital stock investment is restricted as there is no market for it, and it can only be redeemed by the FHLB. The Bank held FHLB capital stock of $78.7 million and $221.4 million at September 30, 2023, and December 31, 2022, respectively. The most recent FHLB quarterly cash dividend was paid on November 2, 2023, in an amount equal to an annual yield of 8.31%.

The Bank is also required to hold FRB stock equal to 6% of its capital and surplus, of which 50% is paid. The remaining 50% is subject to call when deemed necessary by the Federal Reserve System. Similar to FHLB stock, the FRB capital stock investment is restricted as there is no market for it, and it can only be redeemed by the FRB. The Bank held FRB capital stock of $227.4 million and $224.5 million at September 30, 2023, and December 31, 2022, respectively. The most recent FRB semi-annual cash dividend was paid on June 30, 2023, in an amount equal to an annual yield of 3.79%.

Uses of Funds. The Company enters into various contractual obligations in the normal course of business that require future cash payments and that could impact its short-term and long-term liquidity and capital resource needs. The following table summarizes significant fixed and determinable contractual obligations at September 30, 2023. The actual timing and amounts of future cash payments may differ from the amounts presented. Based on the Company's current liquidity position, it is expected that our sources of funds will be sufficient to fulfill these obligations when they come due.


	Payments Due by Period (1)
(In thousands)	2023		2024		2025		2026		2027		Thereafter		Total
Senior notes	$	—	$	132,550	$	—	$	—	$	—	$	300,000	$	432,550
Subordinated notes	—		—		—		—		—		499,000		499,000
Junior subordinated debt	—		—		—		—		—		77,320		77,320
FHLB advances	1,550,113		250,000		—		—		239		9,866		1,810,218
Securities sold under agreements to repurchase	157,491		—		—		—		—		—		157,491

Time deposits	3,454,002		3,790,109		137,311		54,969		34,419		16,709		7,487,519
Operating lease liabilities	7,438		42,527		39,423		35,413		29,978		99,347		254,126
Contingent consideration	—		12,500		4,826		—		—		—		17,326
Royalty liabilities	855		8,940		1,560		—		—		—		11,355
Purchase obligations (2)	145,267		51,808		29,067		13,257		8,845		18,620		266,864
Total contractual obligations	$	5,315,166	$	4,288,434	$	212,187	$	103,639	$	73,481	$	1,020,862	$	11,013,769

(1)Interest payments on borrowings have been excluded.

(2)Purchase obligations represent agreements to purchase goods or services of $1.0 million or more that are enforceable and legally binding and specify all significant terms.

In addition, in the normal course of business, the Company offers financial instruments with off-balance sheet risk to meet the financing needs of its customers. These transactions include commitments to extend credit, and commercial and standby letters of credit, which involve to a varying degree, elements of credit risk. Since many of these commitments are expected to expire unused or be only partially funded, the total commitment amount of $11.6 billion at September 30, 2023, does not necessarily reflect future cash payments.

The Company also enters into commitments to invest in venture capital and private equity funds, as well as LIHTC investments to assist the Bank in meeting its responsibilities under the CRA. The total unfunded commitment for these alternative investments was $512.4 million at September 30, 2023. However, the timing of capital calls cannot be reasonably estimated, and depending on the nature of the contract, the entirety of the capital committed by the Company may not be called.

Pension obligations are funded by the Company, as needed, to provide for participant benefit payments as it relates to the Company's frozen, non-contributory, qualified defined benefit pension plan. Decisions to contribute to the defined benefit pension plan are made based upon pension funding requirements under the Pension Protection Act, the maximum amount deductible under the Internal Revenue Code, the actual performance of plan assets, and trends in the regulatory environment. There is no requirement for the Company to contribute to the defined benefit pension plan in 2023, nor does it currently anticipate that it will be required to contribute in 2024. The Company's non-qualified supplemental executive retirement plans and other post-employment benefit plans are unfunded.

At September 30, 2023, the Company's Condensed Consolidated Balance Sheet reflects a liability for uncertain tax positions of $11.0 million and $2.5 million of accrued interest and penalties, respectively. The ultimate timing and amount of any related future cash settlements cannot be predicted with reasonable certainty.

On May 22, 2023, the FDIC published a proposed rule to charge certain banks a special assessment to recover losses incurred by protecting uninsured depositors of Silicon Valley Bank and Signature Bank upon their failure in March 2023. The proposed rule would levy a special assessment to certain banks at an annual rate of 12.5 basis points based on their uninsured deposits balance as of December 31, 2022, payable in eight quarterly installments beginning in the first quarter of 2024. Based on the proposed rule, the Company estimates that its total special assessment charge would be approximately $44.0 million. The FDIC has the authority to make further changes to the proposed rule before finalization, including changes to the underlying data or calculation methodology used to determine the special assessment. However, since the final rule has not yet been published in the Federal Register, no legal obligation has been incurred, and therefore, no accrual has been recognized.

Additional information regarding credit-related financial instruments and alternative investments can be found within
Note 18: Commitments and Contingencies and Note 11: Variable Interest Entities, respectively, in the Notes to the Condensed Consolidated Financial Statements contained in Part I - Item 1. Financial Statements of this report. Additional information regarding defined benefit pension and other postretirement benefit plans and income taxes can be found within
Note 19: Retirement Benefit Plans and Note 9: Income Taxes, respectively, in the Notes to the Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Asset/Liability Management and Market Risk

An effective asset/liability management process must balance the risks and rewards from both short-term and long-term interest rate risk when determining the Company's strategy and action. To facilitate this process, interest rate sensitivity is monitored on an ongoing basis by the Company's ALCO, whose primary goal is to manage interest rate risk and maximize net income and net economic value over time in changing interest rate environments. The ALCO meets frequently to make decisions on the Company's investment and funding portfolios based on the economic outlook, its interest rate expectations, the risk position, and other factors.

Four main tools are used for managing interest rate risk:

•the size, duration, and credit risk of the investment portfolio;

•the size and duration of the wholesale funding portfolio;

•interest rate contracts; and

•the pricing and structure of loans and deposits.

Management measures interest rate risk using simulation analysis and asset/liability modeling software to calculate the Company's earnings at risk and equity at risk. Interest rates are generally assumed to change up or down in a parallel fashion, and the net interest income results in each scenario are compared to a flat rate base scenario. The flat rate base scenario holds the end of period yield curve constant over a twelve-month forecast horizon. At September 30, 2023, and December 31, 2022, the flat rate base scenario assumed a federal funds rate of 5.50% and 4.50%, respectively. The federal funds rate target range was 5.25-5.50% at September 30, 2023, and 4.25-4.50% at December 31, 2022. Since interest rates rose sharply in 2022, and have continued to rise in 2023, management has incorporated the up and down 300 basis point rate scenarios back into its assessment of interest rate risk.

The following table summarizes the estimated impact that gradual parallel changes in interest rates of up and down 100, 200, and 300 basis points might have on the Company's net interest income over a twelve-month period starting at September 30, 2023, and December 31, 2022, as compared to actual net interest income and assuming no changes in interest rates:


	-300bp	-200bp	-100bp	+100bp	+200bp	+300bp
September 30, 2023	(6.0)%	(3.6)%	(1.6)%	1.1%	2.4%	4.1%
December 31, 2022	n/a	(6.9)%	(3.3)%	3.2%	6.5%	n/a

Asset sensitivity in terms of net interest income decreased at September 30, 2023, as compared to December 31, 2022, primarily due to changes in the overall balance sheet composition, which included the addition of $5.2 billion in price-sensitive deposits from interLINK, an increase in interest paid on deposits, and the implementation of incremental asset sensitivity measures, such as hedges, during the nine months ended September 30, 2023. Loans at floors were $0.3 billion at September 30, 2023, and $0.4 billion at December 31, 2022. While loans with floors, which are considered “in the money”, have the impact of reducing overall asset sensitivity, as interest rates continue to rise, these loans will move through their floors and reprice accordingly.

The following table summarizes the estimated impact that yield curve twists or immediate non-parallel changes in interest rates of up and down 50 and 100 basis points might have on the Company's net interest income for the subsequent twelve-month period starting at September 30, 2023, and December 31, 2022:


	Short End of the Yield Curve				Long End of the Yield Curve
	-100bp	-50bp	+50bp	+100bp	-100bp	-50bp	+50bp	+100bp
September 30, 2023	(1.0)%	(0.4)%	(0.1)%	(0.2)%	(2.4)%	(1.2)%	1.0%	2.1%
December 31, 2022	(4.2)%	(2.0)%	1.7%	3.3%	(2.4)%	(1.2)%	1.3%	2.6%

These non-parallel scenarios are modeled with the short end of the yield curve moving up or down 50 and 100 basis points, while the long end of the yield curve remains unchanged, and vice versa. The short end of the yield curve is defined as terms less than eighteen months and the long end of the yield curve is defined as terms greater than eighteen months. The results reflect the annualized impact of immediate interest rate changes.

Sensitivity to both the short end and the long end of the yield curve for net interest income generally decreased at September 30, 2023, as compared to December 31, 2022, primarily due to changes in the overall balance sheet composition.

The following table summarizes the estimated economic value of financial assets, financial liabilities, and off-balance sheet financial instruments and the corresponding estimated change in economic value if interest rates were to instantaneously increase or decrease by 100 basis points at September 30, 2023, and December 31, 2022:


(Dollars in thousands)	Book Value		Estimated Economic Value		Estimated Economic Value Change

					-100bp			+100bp
September 30, 2023
Assets	$	73,130,851	$	68,038,024	$	969,732		$	(1,495,766)
Liabilities	64,931,650		58,803,372		1,816,456			(1,651,571)
Net	$	8,199,201	$	9,234,652	$	(846,724)		$	155,805
Net change as % base net economic value					(9.2)		%	1.7		%

December 31, 2022
Assets	$	71,277,521	$	67,920,989	$	1,161,794		$	(1,247,083)
Liabilities	63,221,335		55,951,495		1,959,399			(1,716,697)
Net	$	8,056,186	$	11,969,494	$	(797,605)		$	469,614
Net change as % base net economic value					(6.7)		%	3.9		%

Changes in economic value can best be described through duration, which is a measure of the price sensitivity of financial instruments due to changes in interest rates. For fixed-rate financial instruments, it can be thought of as the weighted-average expected time to receive future cash flows, whereas for floating-rate financial instruments, it can be thought of as the
weighted-average expected time until the next rate reset. Overall, the longer the duration, the greater the price sensitivity due to changes in interest rates. Generally, increases in interest rates reduce the economic value of fixed-rate financial assets as future discounted cash flows are worth less at higher interest rates. In a rising interest rate environment, the economic value of financial liabilities decreases for the same reason. A reduction in the economic value of financial liabilities is a benefit to the Company. Floating-rate financial instruments may have durations as short as one day, and therefore, may have very little price sensitivity due to changes in interest rates.

Duration gap represents the difference between the duration of financial assets and financial liabilities. A duration gap at or near zero would imply that the balance sheet is matched, and therefore, would exhibit no change in estimated economic value for changes in interest rates. At September 30, 2023, and December 31, 2022, the Company's duration gap was negative 1.1 years and negative 1.4 years, respectively. A negative duration gap implies that the duration of financial liabilities is longer than the duration of financial assets, and therefore, liabilities have more price sensitivity than assets and will reset their interest rates at a slower pace. Consequently, the Company's net estimated economic value would generally be expected to increase when interest rates rise, as the benefit of the decreased value of financial liabilities would more than offset the decreased value of financial assets. The opposite would generally be expected to occur when interest rates fall. Earnings would also generally be expected to increase when interest rates rise, and decrease when interest rates fall over the long term, absent the effects of any new business booked in the future.

These earnings and net economic value estimates are subject to factors that could cause actual results to differ, and also assume that management does not take any additional action to mitigate any positive or negative effects from changing interest rates. Management believes that the Company's interest rate risk position at September 30, 2023, represents a reasonable level of risk given the current interest rate outlook. Management continues to monitor interest rates and other relevant factors given recent market volatility and is prepared to take additional action, as necessary.

Additional information regarding the Company's asset/liability management process can be found under the section captioned "Asset/Liability Management and Market Risk" contained in Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Critical Accounting Estimates

The preparation of the Company's Condensed Consolidated Financial Statements, and accompanying notes thereto, in accordance with GAAP and practices generally applicable to the financial services industry, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the disclosure of contingent assets and liabilities. While management's estimates are made based on historical experience, current available information, and other factors that are deemed to be relevant, actual results could significantly differ from those estimates.

Accounting estimates are necessary in the application of certain accounting policies and can be susceptible to significant change in the near term. Critical accounting estimates are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on the Company's financial condition or results of operations. Management has identified that the Company's most critical accounting estimates are those related to the ACL on loans and leases and business combinations accounting policies. These accounting policies and their underlying estimates are discussed directly with the Audit Committee of the Board of Directors.

Allowance for Credit Losses on Loans and Leases

The ACL on loans and leases is a reserve established through a provision for credit losses charged to expense, which represents management’s best estimate of expected lifetime credit losses within the Company's loan and lease portfolios at the balance sheet date. The calculation of expected credit losses is determined using predictive methods and models that follow a
PD/LGD/EAD, loss rate, or discounted cash flow framework, and include consideration of past events, current conditions, macroeconomic variables (i.e., unemployment, gross domestic product, property values, and interest rate spreads), and reasonable and supportable economic forecasts that affect the collectability of the reported amounts. Changes to the ACL on loans and leases, and therefore, to the related provision for credit losses, can materially affect financial results.

The determination of the appropriate level of ACL on loans and leases inherently involves a high degree of subjectivity and requires the Company to make significant estimates of current credit risks and trends using existing qualitative and quantitative information, and reasonable and supportable forecasts of future economic conditions, all of which may undergo frequent and material changes. Changes in economic conditions affecting borrowers and macroeconomic variables that the Company is more susceptible to, unforeseen events such as natural disasters and pandemics, along with new information regarding existing loans, identification of additional problem loans, the fair value of underlying collateral, and other factors, both within and outside the Company's control, may indicate the need for an increase or decrease in the ACL on loans and leases.

It is difficult to estimate the sensitivity of how potential changes in any one economic factor or input might affect the overall reserve because a wide variety of factors and inputs are considered in estimating the ACL and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all product types. Further, changes in factors and inputs may also be directionally inconsistent, such that improvement in one factor may offset deterioration in others.

Executive management reviews and advises on the adequacy of the ACL on loans and leases on a quarterly basis. Although the overall balance is determined based on specific portfolio segments and individually assessed assets, the entire balance is available to absorb credit losses for any of the loan and lease portfolios.

Additional information regarding the determination of the ACL on loans and leases, including the Company's valuation methodology, can be found under the section captioned "Allowance for Credit Losses on Loans and Leases" contained elsewhere in this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, and within Note 1: Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements contained in
Part II - Item 8. Financial Statements and Supplementary Data included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Business Combinations

The acquisition method of accounting generally requires that the identifiable assets acquired and liabilities assumed in business combinations are recorded at fair value as of the acquisition date. The determination of fair value often involves the use of internal or third-party valuation techniques, such as discounted cash flow analyses or appraisals. Particularly, the valuation techniques used to estimate the fair value of loans and leases and the core deposit intangible asset acquired in the Sterling merger include estimates related to discount rates, credit risk, and other relevant factors, which are inherently subjective. A description of the valuation methodologies used to estimate the fair values of the significant assets acquired and liabilities assumed from the Sterling merger can be found within Note 2: Mergers and Acquisitions in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

ITEM 1. FINANCIAL STATEMENTS

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30, 2023		December 31, 2022
(In thousands, except share data)	(Unaudited)
Assets:
Cash and due from banks	$	406,300	$	264,118
Interest-bearing deposits	1,766,431		575,825
Investment securities available-for-sale, at fair value	7,653,391		7,892,697


Investment securities held-to-maturity, net of allowance for credit losses of $203 and $182	6,875,772		6,564,697
Federal Home Loan Bank and Federal Reserve Bank stock	306,085		445,900
Loans held for sale ($837 and $1,991 valued under fair value option)	46,267		1,991
Loans and leases	50,088,146		49,764,426
Allowance for credit losses on loans and leases	(635,438)		(594,741)
Loans and leases, net	49,452,708		49,169,685
Deferred tax assets, net	478,926		371,634
Premises and equipment, net	431,698		430,184
Goodwill	2,631,465		2,514,104
Other intangible assets, net	211,752		199,342
Cash surrender value of life insurance policies	1,242,648		1,229,169
Accrued interest receivable and other assets	1,627,408		1,618,175
Total assets	$	73,130,851	$	71,277,521
Liabilities and stockholders' equity:
Deposits:
Non-interest-bearing	$	11,410,063	$	12,974,975
Interest-bearing	48,921,704		41,079,365
Total deposits	60,331,767		54,054,340
Securities sold under agreements to repurchase and other borrowings	157,491		1,151,830
Federal Home Loan Bank advances	1,810,218		5,460,552
Long-term debt	1,050,539		1,073,128
Accrued expenses and other liabilities	1,581,635		1,481,485
Total liabilities	64,931,650		63,221,335
Stockholders’ equity:
Preferred stock, $0.01 par value: Authorized—3,000,000 shares;
Series F issued and outstanding—6,000 shares	145,037		145,037
Series G issued and outstanding—135,000 shares	138,942		138,942
Common stock, $0.01 par value: Authorized—400,000,000 shares;
Issued—182,778,045 shares	1,828		1,828
Paid-in capital	6,164,846		6,173,240
Retained earnings	3,170,330		2,713,861
Treasury stock, at cost—10,721,945 and 8,770,472 shares	(506,003)		(431,762)
Accumulated other comprehensive (loss), net of tax	(915,779)		(684,960)
Total stockholders' equity	8,199,201		8,056,186
Total liabilities and stockholders' equity	$	73,130,851	$	71,277,521

See accompanying Notes to Condensed Consolidated Financial Statements.

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


	Three months ended				Nine months ended
	September 30,				September 30,
(In thousands, except per share data)	2023		2022		2023		2022
Interest Income:
Interest and fees on loans and leases	$	793,626	$	525,960	$	2,281,955	$	1,303,774
Taxable interest and dividends on investments	123,635		77,570		371,974		200,832
Non-taxable interest on investment securities	13,511		13,999		40,730		36,465
Loans held for sale	17		40		454		73
Total interest income	930,789		617,569		2,695,113		1,541,144
Interest Expense:
Deposits	293,955		37,492		695,625		57,350
Securities sold under agreements to repurchase and other borrowings	50		6,242		7,940		9,876
Federal Home Loan Bank advances	40,196		13,814		196,878		17,034
Long-term debt	9,452		9,018		28,422		24,973
Total interest expense	343,653		66,566		928,865		109,233
Net interest income	587,136		551,003		1,766,248		1,431,911
Provision for credit losses	36,500		36,531		114,747		237,619
Net interest income after provision for credit losses	550,636		514,472		1,651,501		1,194,292
Non-interest Income:
Deposit service fees	41,005		50,807		131,859		150,019
Loan and lease related fees	19,966		26,769		63,499		77,355
Wealth and investment services	7,254		11,419		21,232		33,260
Mortgage banking activities	42		86		230		616
Cash surrender value of life insurance policies	6,620		7,718		19,641		22,694
(Loss) on sale of investment securities	—		(2,234)		(16,795)		(2,234)

Other income	15,495		19,071		30,856		56,894
Total non-interest income	90,382		113,636		250,522		338,604
Non-interest Expense:
Compensation and benefits	180,333		173,983		526,838		545,641
Occupancy	18,617		23,517		59,042		93,725
Technology and equipment	55,261		45,283		151,442		142,182
Intangible assets amortization	8,899		8,511		27,589		23,700
Marketing	4,810		3,918		13,446		10,868
Professional and outside services	26,874		21,618		88,693		91,041
Deposit insurance	13,310		8,026		39,356		19,996
Other expense	54,474		45,215		132,728		120,930
Total non-interest expense	362,578		330,071		1,039,134		1,048,083
Income before income taxes	278,440		298,037		862,889		484,813
Income tax expense	51,965		64,069		180,442		85,281
Net income	226,475		233,968		682,447		399,532
Preferred stock dividends	4,162		4,162		12,487		11,756
Net income available to common stockholders	$	222,313	$	229,806	$	669,960	$	387,776

Earnings per common share:
Basic	$	1.29	$	1.31	$	3.85	$	2.32
Diluted	1.28		1.31		3.85		2.32

See accompanying Notes to Condensed Consolidated Financial Statements.

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)


	Three months ended				Nine months ended
	September 30,				September 30,
(In thousands)	2023		2022		2023		2022
Net income	$	226,475	$	233,968	$	682,447	$	399,532
Other comprehensive (loss) income, net of tax:
Investment securities available-for-sale	(174,594)		(242,231)		(188,013)		(692,383)
Derivative instruments	(22,711)		(13,699)		(48,860)		(21,851)
Defined benefit pension and other postretirement benefit plans	349		361		6,054		(87)
Other comprehensive (loss), net of tax	(196,956)		(255,569)		(230,819)		(714,321)
Comprehensive income (loss)	$	29,519	$	(21,601)	$	451,628	$	(314,789)

See accompanying Notes to Condensed Consolidated Financial Statements.

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)


	At or for the three months ended September 30, 2023
(In thousands, except per share data)	Preferred Stock		Common Stock		Paid-In Capital		Retained Earnings		Treasury Stock, at cost		Accumulated Other Comprehensive (Loss), Net of Tax		Total Stockholders' Equity
Balance at June 30, 2023	$	283,979	$	1,828	$	6,150,713	$	3,017,445	$	(455,416)	$	(718,823)	$	8,279,726

Net income	—		—		—		226,475		—		—		226,475
Other comprehensive (loss), net of tax	—		—		—		—		—		(196,956)		(196,956)
Common stock dividends and equivalents—$0.40 per share	—		—		—		(69,428)		—		—		(69,428)
Series F preferred stock dividends—$328.125 per share	—		—		—		(1,968)		—		—		(1,968)
Series G preferred stock dividends—$16.25 per share	—		—		—		(2,194)		—		—		(2,194)
Stock-based compensation	—		—		14,133		—		250		—		14,383

Common shares acquired from stock compensation plan activity	—		—		—		—		(361)		—		(361)
Common stock repurchase program	—		—		—		—		(50,476)		—		(50,476)
Balance at September 30, 2023	$	283,979	$	1,828	$	6,164,846	$	3,170,330	$	(506,003)	$	(915,779)	$	8,199,201

	At or for the three months ended September 30, 2022
(In thousands, except per share data)	Preferred Stock		Common Stock		Paid-In Capital		Retained Earnings		Treasury Stock, at cost		Accumulated Other Comprehensive (Loss), Net of Tax		Total Stockholders' Equity
Balance at June 30, 2022	$	283,979	$	1,828	$	6,148,853	$	2,383,638	$	(339,178)	$	(481,332)	$	7,997,788

Net income	—		—		—		233,968		—		—		233,968
Other comprehensive (loss), net of tax	—		—		—		—		—		(255,569)		(255,569)
Common stock dividends and equivalents—$0.40 per share	—		—		—		(70,429)		—		—		(70,429)
Series F preferred stock dividends—$328.125 per share	—		—		—		(1,968)		—		—		(1,968)
Series G preferred stock dividends—$16.25 per share	—		—		—		(2,194)		—		—		(2,194)
Common stock contribution to charitable foundation	—		—		(1,701)		—		12,201		—		10,500
Stock-based compensation	—		—		14,307		—		(1,545)		—		12,762
Exercise of stock options	—		—		(162)		—		300		—		138
Common shares acquired from stock compensation plan activity	—		—		—		—		(1,450)		—		(1,450)
Common stock repurchase program	—		—		—		—		(97,136)		—		(97,136)
Balance at September 30, 2022	$	283,979	$	1,828	$	6,161,297	$	2,543,015	$	(426,808)	$	(736,901)	$	7,826,410



	At or for the nine months ended September 30, 2023
(In thousands, except per share data)	Preferred Stock		Common Stock		Paid-In Capital		Retained Earnings		Treasury Stock, at cost		Accumulated Other Comprehensive (Loss), Net of Tax		Total Shareholders' Equity
Balance at December 31, 2022	$	283,979	$	1,828	$	6,173,240	$	2,713,861	$	(431,762)	$	(684,960)	$	8,056,186
Adoption of ASU No. 2022-02	—		—		—		(4,245)		—		—		(4,245)
Net income	—		—		—		682,447		—		—		682,447
Other comprehensive (loss), net of tax	—		—		—		—		—		(230,819)		(230,819)
Common stock dividends and equivalents—$1.20 per share	—		—		—		(209,246)		—		—		(209,246)
Series F preferred stock dividends—$984.38 per share	—		—		—		(5,906)		—		—		(5,906)
Series G preferred stock dividends—$48.75 per share	—		—		—		(6,581)		—		—		(6,581)


Stock-based compensation	—		—		(6,368)		—		46,563		—		40,195
Exercise of stock options	—		—		(2,026)		—		3,749		—		1,723
Common shares acquired from stock compensation plan activity	—		—		—		—		(15,765)		—		(15,765)
Common stock repurchase program	—		—		—		—		(108,788)		—		(108,788)
Balance at September 30, 2023	$	283,979	$	1,828	$	6,164,846	$	3,170,330	$	(506,003)	$	(915,779)	$	8,199,201

	At or for the nine months ended September 30, 2022
(In thousands, except per share data)	Preferred Stock		Common Stock		Paid-In Capital		Retained Earnings		Treasury Stock, at cost		Accumulated Other Comprehensive Income, Net of Tax		Total Shareholders' Equity
Balance at December 31, 2021	$	145,037	$	937	$	1,108,594	$	2,333,288	$	(126,951)	$	(22,580)	$	3,438,325

Net income	—		—		—		399,532		—		—		399,532
Other comprehensive (loss), net of tax	—		—		—		—		—		(714,321)		(714,321)
Common stock dividends and equivalents—$1.20 per share	—		—		—		(178,049)		—		—		(178,049)
Series F preferred stock dividends—$984.38 per share	—		—		—		(5,906)		—		—		(5,906)
Series G preferred stock dividends—$48.75 per share	—		—		—		(5,850)		—		—		(5,850)
Issued in business combination	138,942		891		5,040,291		—		—		—		5,180,124
Common stock contribution to charitable foundation	—		—		(1,701)		—		12,201		—		10,500
Stock-based compensation	—		—		14,726		—		28,505		—		43,231
Exercise of stock options	—		—		(613)		—		1,248		—		635
Common shares acquired from stock compensation plan activity	—		—		—		—		(22,545)		—		(22,545)
Common stock repurchase program	—		—		—		—		(319,266)		—		(319,266)
Balance at September 30, 2022	$	283,979	$	1,828	$	6,161,297	$	2,543,015	$	(426,808)	$	(736,901)	$	7,826,410

See accompanying Notes to Condensed Consolidated Financial Statements.

WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Nine months ended September 30,
(In thousands)	2023		2022
Operating Activities:
Net income	$	682,447	$	399,532
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	114,747		237,619
Deferred income tax expense (benefit)	(27,986)		(49,239)
Stock-based compensation	40,195		43,231
Common stock contribution to charitable foundation	—		10,500
Depreciation and amortization of property and equipment and intangible assets	58,649		62,403
(Accretion) and amortization of interest-earning assets and borrowings	(15,787)		(27,025)
Amortization of low-income housing tax credit investments	54,284		31,671
Amortization of mortgage servicing assets	1,061		2,151
Reduction of right-of-use lease assets	24,228		47,874
Net (gain) on sale, net of write-downs, of foreclosed properties and repossessed assets	(1,356)		(1,010)
Net loss on sale, net of write-downs, of property and equipment	3,862		6,507
Loss on sale of investment securities	16,795		2,234
(Gain) on extinguishment of long-term debt	(698)		—
Originations of loans held for sale	(9,900)		(29,628)
Proceeds from sale of loans held for sale	11,250		33,886
Net (gain) on mortgage banking activities	(219)		(529)
Net (gain) on sale of loans not originated for sale	(723)		(3,135)
(Increase) in cash surrender value of life insurance policies	(19,641)		(22,694)
(Gain) from life insurance policies	(3,063)		(2,494)
Net decrease in derivative contract assets and liabilities	94,600		539,257

Net (increase) in accrued interest receivable and other assets	(3,183)		(51,300)
Net (decrease) in accrued expenses and other liabilities	(128,728)		(169,146)
Net cash provided by operating activities	890,834		1,060,665
Investing Activities:
Purchases of available-for-sale securities	(930,546)		(1,099,810)
Proceeds from principal payments, maturities, and calls of available-for-sale securities	456,384		612,783
Proceeds from sale of available-for-sale securities	398,296		65,330
Purchases of held-to-maturity securities	(619,957)		(963,655)
Proceeds from principal payments, maturities, and calls of held-to-maturity securities	312,720		627,887
Net decrease (increase) in Federal Home Loan Bank and Federal Reserve Bank stock	139,815		(150,706)
Alternative investments (capital calls), net of distributions	(18,095)		(7,811)
Net (increase) in loans	(905,906)		(5,526,220)
Proceeds from sale of loans not originated for sale	512,622		648,573
Proceeds from sale of foreclosed properties and repossessed assets	4,443		2,071
Proceeds from sale of property and equipment	4,145		300
Additions to property and equipment	(33,980)		(18,526)
Proceeds from life insurance policies	17,207		17,002
Net cash paid for acquisition of interLINK	(157,646)		—
Net cash paid for acquisition of Bend	—		(54,407)
Net cash received in merger with Sterling	—		513,960
Net cash (used for) investing activities	(820,498)		(5,333,229)

See accompanying Notes to Condensed Consolidated Financial Statements.


WEBSTER FINANCIAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited), continued

	Nine months ended September 30,
(In thousands)	2023		2022
Financing Activities:
Net increase in deposits	6,267,722		889,964
Proceeds from Federal Home Loan Bank advances	18,000,000		13,150,000
Repayments of Federal Home Loan Bank advances	(21,650,334)		(9,650,280)
Proceeds from extinguishment of borrowings	—		2,548
Net (decrease) increase in securities sold under agreements to repurchase and other borrowings	(994,339)		560,786
Repayment of long-term debt	(16,752)		—


Dividends paid to common stockholders	(209,333)		(178,161)
Dividends paid to preferred stockholders	(12,487)		(9,562)
Exercise of stock options	1,723		635

Common stock repurchase program	(107,983)		(319,266)
Common shares acquired related to stock compensation plan activity	(15,765)		(22,545)

Net cash provided by financing activities	1,262,452		4,424,119
Net increase in cash and cash equivalents	1,332,788		151,555
Cash and cash equivalents, beginning of period	839,943		461,570
Cash and cash equivalents, end of period	$	2,172,731	$	613,125

Supplemental disclosure of cash flow information:
Interest paid	$	877,678	$	114,542
Income taxes paid	213,796		129,926
Non-cash investing and financing activities:
Transfer of loans and leases to foreclosed properties and repossessed assets	$	4,091	$	163
Transfer of loans and leases to loans held-for-sale	557,462		621,922

Merger with Sterling: (1)
Tangible assets acquired	17,607		26,919,975
Goodwill and other intangible assets	(25,561)		2,149,532
Liabilities assumed	(7,954)		24,403,343
Common stock issued	—		5,041,182
Preferred stock exchanged	—		138,942
Acquisition of Bend: (1)
Tangible assets acquired	294		15,731
Goodwill and other intangible assets	(294)		38,966
Liabilities assumed	—		290
Acquisition of interLINK:
Tangible assets acquired	6,417		—
Goodwill and other intangible assets	183,216		—
Liabilities assumed	15,948		—
Contingent consideration	16,039		—

(1)The non-cash merger and acquisition activities presented for 2023 reflect adjustments recorded within the one-year measurement period, which were identified as a result of extended information gathering and new information that arose from integration activities during the first quarter of 2023. Additional information regarding these amounts can be found within Note 2: Mergers and Acquisitions and Note 6: Goodwill and Other Intangible Assets.

See accompanying Notes to Condensed Consolidated Financial Statements.

Note 1: Summary of Significant Accounting Policies

Nature of Operations

Basis of Presentation

The unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with GAAP for interim financial information and Article 10 of Regulation S-X. Certain information and footnote disclosures required by GAAP for complete financial statements have been omitted or condensed. Therefore, the Condensed Consolidated Financial Statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2022. The results of operations for the nine months ended September 30, 2023, are not necessarily indicative of the future results that may be attained for the entire year or other interim periods.

In the opinion of management, all necessary adjustments have been reflected to present fairly the financial position, results of operations, and cash flows for the reporting periods presented. Intercompany transactions and balances have been eliminated in consolidation. Assets under administration or assets under management that the Company holds or manages in a fiduciary or agency capacity for customers are not included in the Condensed Consolidated Financial Statements.

Use of Estimates

The preparation of the Condensed Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Accounting Standards Adopted in the Current Period

ASU No. 2022-02—Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

In March 2022, the FASB issued ASU No. 2022-02, which eliminates the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance in paragraphs 310-20-35-9 through 35-11 to determine whether a modification results in a new loan or a continuation of an existing loan. In addition, the Update requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost in the vintage disclosures required by paragraph 326-20-50-6.

Modifications to borrowers experiencing financial difficulty include principal forgiveness, interest rate reductions, payment delays, term extensions, or combinations thereof. Expected losses or recoveries on loans where modifications have been granted to borrowers experiencing financial difficulty have been factored into the ACL on loans and leases. Upon adoption of ASU 2022-02, the Company is no longer required to use a discounted cash flow (or reconcilable) method to measure the ACL resulting from a modification with a borrower experiencing financial difficulty. Accordingly, the Company now applies the same credit loss methodology it uses for similar loans that were not modified.

The Company adopted the Update on January 1, 2023. The Company elected the option to apply the modified retrospective transition method related to the recognition and measurement of TDRs, which resulted in a $5.9 million increase to the Allowance for credit losses on loans and leases and a $1.7 million decrease to DTAs, net, with a corresponding $4.2 million cumulative-effect adjustment to retained earnings as of the adoption date. The enhanced disclosure requirements provided for by the Update were adopted on a prospective basis. Reporting periods prior to the adoption of the Update are accounted for and presented in accordance with the applicable GAAP.

Refer to Note 4: Loans and Leases for additional information regarding modifications granted to borrowers experiencing financial difficulty.

ASU No. 2022-01—Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method

In March 2022, the FASB issued ASU No. 2022-01—Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method, which expands the current last-of-layer method of hedge accounting that permits only one hedged layer to allow multiple hedged layers of a single closed portfolio. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. Additionally, the amendments in this Update: (i) expand the scope of the portfolio layer method to include non-prepayable assets; (ii) specify eligible hedging instruments in a single-layer hedge; (iii) provide additional guidance on the accounting for and disclosure of hedge basis adjustments; and (iv) specify how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. An entity may also reclassify debt securities classified in the held-to-maturity category at the date of adoption to the available-for-sale category only if the entity applies portfolio layer method hedging to one or more closed portfolios that include those debt securities within a 30-day period.

The Company adopted the Update on January 1, 2023 on a prospective basis. The adoption of this guidance did not have a material impact on the Company's Consolidated Financial Statements. The Company did not reclassify any debt securities from the held-to-maturity category to the available-for-sale category as permitted upon adoption.

ASU No. 2021-08—Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

In October 2021, the FASB issued ASU No. 2021-08—Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.

The Company adopted the Update on January 1, 2023 on a prospective basis. The adoption of this guidance did not have a material impact on the Company's Consolidated Financial Statements.

Relevant Accounting Standards Issued But Not Yet Adopted

ASU No. 2023-02—Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)

In March 2023, the FASB issued ASU No. 2023-02—Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force), which permits reporting entities to elect to account for their tax equity investments, regardless of the program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. A reporting entity may make an accounting policy election to apply the proportional amortization method in accordance with paragraph 323-740-25-4 on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments.

A reporting entity that applies the proportional amortization method to qualifying tax equity investments must account for the receipt of the investment tax credits using the flow-through method under Topic 740, Income Taxes, even if the entity applies the deferral method for other investment tax credit received. The amendments also remove certain guidance for Qualified Affordable Housing Project Investments, require the application of the delayed equity contribution guidance to all tax equity investments, and require specific disclosures that must be applied to all investments that generate income tax credits and other income tax benefits from a tax credit program for which the entity has elected to apply the proportional amortization method in accordance with Subtopic 323-740.

The Update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The amendments generally must be applied on either a modified retrospective or retrospective basis with a cumulative-effect adjustment to retained earnings reflecting the difference between the previous method used to account for the tax equity investment and the application of the proportional amortization method since the investment was entered into. The adoption of this guidance is not expected to have a material impact on the Consolidated Financial Statements as the Company's investments in tax credit structures are currently limited to LIHTC investments, which are already being accounted for using the proportional amortization method.

ASU No. 2023-01—Leases (Topic 842): Common Control Arrangements

In March 2023, the FASB issued ASU No. 2023-01—Leases (Topic 842): Common Control Arrangements, which requires that leasehold improvements associated with leases between entities under common control be: (i) amortized by the lessee over the useful lives of the leasehold improvements to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset (the leased asset) through a lease; however, if the lessor obtained the right to control the use of the underlying asset through a lease with another entity not within the same common control group, the amortization period may not exceed the amortization period of the common control group; and (ii) accounted for as a transfer between entities under common control through an adjustment to equity, if, and when, the lessee no longer controls the use of the underlying asset. Additionally, those leasehold improvements are subject to the impairment guidance in Topic 360, Property, Plant, and Equipment.

The Update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The amendments either may be applied prospectively to all new and existing leasehold improvements recognized on or after the adoption date with any remaining unamortized balance of existing leasehold improvements amortized over their remaining useful life to the common control group determined at that date; or retrospectively to the beginning of the period in which the entity first applied Topic 842, with any leasehold improvements that otherwise would not have been amortized or impaired recognized through a cumulative-effect adjustment to the opening balance of retained earnings at the beginning of the earliest period presented in accordance with Topic 842. The adoption of this guidance is not expected to have a material impact on the Consolidated Financial Statements as the Company's operating lease arrangements in which it is lessee are not between entities under common control.

ASU No. 2022-03—Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

In June 2022, the FASB issued ASU No. 2022-03—Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security, and therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction, and requires the following disclosures for equity securities subject to contractual sale restrictions: (i) the fair value of equity securities subject to contractual sale restrictions reflected on the balance sheet; (ii) the nature and remaining duration of the restriction(s); and (iii) the circumstances that could cause a lapse in the restriction(s).

The Update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. For all entities except investment companies, the amendments should be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. The adoption of this guidance is not expected to have a material impact on the Consolidated Financial Statements and disclosures. The Company does not currently consider contractual restrictions on the sale of an equity security in measuring fair value.

Note 2: Mergers and Acquisitions

interLINK Acquisition

On January 11, 2023, Webster acquired 100% ownership of interLINK from StoneCastle Partners LLC. interLINK is a technology-enabled deposit management platform that administers over $9 billion of deposits from FDIC-insured cash sweep programs between banks and broker/dealers and clearing firms. The acquisition provides the Company with access to a unique source of core deposit funding and scalable liquidity and adds another technology-enabled channel to its already differentiated, omnichannel deposit gathering capabilities.

The total purchase price of the acquisition was $174.6 million, which included cash paid of $158.6 million and $16.0 million of contingent consideration measured at fair value. The contingent consideration is payable in cash upon the achievement of discrete customer and deposit growth events within three years of the acquisition date. Additional information regarding the determination of fair value for contingent consideration liabilities can be found within Note 14: Fair Value Measurements.

The transaction has been accounted for as a business combination, and resulted in the addition of $31.4 million in net assets measured at fair value, which primarily comprised $36.0 million of broker dealer relationship intangible assets, $6.0 million of developed technology, a $4.0 million non-competition agreement intangible asset, and $15.9 million of royalty liabilities. The $143.2 million of goodwill recognized is deductible for tax purposes. The Company's valuations of the assets acquired and liabilities assumed in the interLINK acquisition were considered final as of June 30, 2023.

Bend Financial, Inc. Acquisition

On February 18, 2022, Webster acquired 100% of the equity interests of Bend, a cloud-based platform solution provider for HSAs, in exchange for cash of $55.3 million. The transaction was accounted for as a business combination, and resulted in the addition of $19.6 million in net assets measured at fair value, which primarily comprised $15.9 million of internal use software and a $3.0 million customer relationship intangible asset. The Company's valuations of the assets acquired and liabilities assumed in the Bend acquisition were considered final as of March 31, 2023.

Merger with Sterling Bancorp

On January 31, 2022, Webster completed its merger with Sterling. The transaction was accounted for as a business combination. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their fair values as of the merger effective date. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and are subject to change. Fair value estimates of the assets acquired and liabilities assumed were subject to adjustment during the one-year measurement period following the closing of the merger if new information was obtained about facts and circumstances that existed as of the merger effective date that, if known, would have affected the measurement of the amounts recognized as of that date. Measurement period adjustments made during the first quarter of 2023 totaled a net $25.6 million, which pertained to other assets and other liabilities and their related deferred tax impact. The Company's valuations of the assets acquired and liabilities assumed in the merger with Sterling were considered final as of March 31, 2023.

The following table summarizes the allocation of the purchase price to the fair value of the identifiable assets acquired and liabilities assumed from Sterling as of 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			(59,716)
Premises and equipment			264,421
Other intangible assets			210,100
Bank-owned life insurance policies			645,510
Accrued interest receivable and other assets			986,729
Total assets acquired			$	27,663,853
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			589,689
Total liabilities assumed			$	24,397,757
Net assets acquired			3,266,096
Goodwill			$	1,914,204

In connection with the merger with Sterling, the Company recorded $1.9 billion of goodwill, which represents the excess of the purchase price over the fair value of the net assets acquired. Information regarding the allocation of goodwill to the Company's reportable segments can be found within Note 16: Segment Reporting. For a description of the valuation methodologies used to estimate the fair values of the significant assets acquired and liabilities assumed, refer to Note 2: Mergers and Acquisitions of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Merger-Related Expenses and Exit Activities

The following table summarizes total merger-related expenses, which were primarily incurred in connection with the merger with Sterling:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2023		2022		2023		2022
Compensation and benefits (1)	$	9,583	$	5,770	$	27,370	$	71,472
Occupancy (2)	(79)		4,389		1,151		35,744
Technology and equipment (3)	9,652		1,478		14,780		21,375
Professional and outside services (4)	18,171		10,792		57,119		59,073
Marketing	1,574		64		2,535		199
Other expense (5)	22,724		3,043		28,883		12,808
Total merger-related expenses	$	61,625	$	25,536	$	131,838	$	200,671

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

(2)Comprised primarily of charges associated with the Company's corporate real estate consolidation plan in 2022.

(3)Comprised primarily of technology contract termination costs, and charges to support core conversion activities in 2023.
The amount for the nine months ended September 30, 2023, includes a reduction of $4.8 million to a previously recorded technology-related contract termination charge during the three months ended March 31, 2023, due to a change in the expected use of certain services after core conversion.

(4)Comprised primarily of advisory, accounting, and other professional fees, and charges to support core conversion activities in 2023. The amount for the nine months ended September 30, 2023, includes a reduction of $1.7 million to a previously recorded contract termination charge during the three months ended March 31, 2023, due to a decrease in volume usage.

(5)Comprised primarily of contract termination costs, disposals on property and equipment, and other miscellaneous expenses.

The following tables summarize the change in accrued expenses and other liabilities as it relates to severance and contract termination costs, which were primarily incurred in connection with the merger with Sterling:


	Three months ended September 30,
	2023						2022
(In thousands)	Severance		Contract Termination		Total		Severance		Contract Termination		Total
Balance, beginning of period	$	3,169	$	23,775	$	26,944	$	24,514	$	17,704	$	42,218
Additions charged to expense	3,557		14,000		17,557		840		—		840
Cash payments	(971)		(23,775)		(24,746)		(10,032)		—		(10,032)
Other	(166)		—		(166)		(9)		—		(9)
Balance, end of period	$	5,589	$	14,000	$	19,589	$	15,313	$	17,704	$	33,017

	Nine months ended September 30,
	2023						2022
(In thousands)	Severance		Contract Termination		Total		Severance (1)		Contract Termination		Total
Balance, beginning of period	$	7,583	$	30,362	$	37,945	$	10,835	$	—	$	10,835
Additions charged to expense	11,741		14,000		25,741		35,619		17,704		53,323
Cash payments	(12,509)		(23,775)		(36,284)		(26,827)		—		(26,827)
Other	(1,226)		(6,587)		(7,813)		(4,314)		—		(4,314)
Balance, end of period	$	5,589	$	14,000	$	19,589	$	15,313	$	17,704	$	33,017

(1)Other reflects the release of $4.3 million from the Company's severance accrual, as the Company re-evaluated its strategic priorities as a combined organization in connection with the Sterling merger, which resulted in modifications to the Company's strategic initiatives that were previously announced in December 2020.

Note 3: Investment Securities

Available-for-Sale

The following tables summarize the amortized cost and fair value of available-for-sale securities by major type:


	At September 30, 2023
(In thousands)	Amortized Cost (1)		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury notes	$	407,891	$	—	$	(20,870)	$	387,021
Government agency debentures	302,164		—		(53,628)		248,536
Municipal bonds and notes	1,646,582		2		(123,262)		1,523,322
Agency CMO	55,718		—		(5,813)		49,905
Agency MBS	2,636,344		123		(383,832)		2,252,635
Agency CMBS	2,152,871		—		(397,740)		1,755,131
CMBS	811,117		—		(24,515)		786,602

Corporate debt	706,110		6		(104,534)		601,582
Private label MBS	46,921		—		(7,043)		39,878
Other	9,823		—		(1,044)		8,779
Total available-for-sale securities	$	8,775,541	$	131	$	(1,122,281)	$	7,653,391

	At December 31, 2022
(In thousands)	Amortized Cost (1)		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury notes	$	755,968	$	—	$	(38,928)	$	717,040
Government agency debentures	302,018		—		(43,644)		258,374
Municipal bonds and notes	1,719,110		5		(85,913)		1,633,202
Agency CMO	64,984		—		(5,019)		59,965
Agency MBS	2,461,337		26		(303,339)		2,158,024
Agency CMBS	1,664,600		—		(258,114)		1,406,486
CMBS	929,588		—		(32,948)		896,640
CLO	2,108		—		(1)		2,107
Corporate debt	795,999		—		(91,587)		704,412
Private label MBS	48,895		—		(4,646)		44,249
Other	12,548		—		(350)		12,198
Total available-for-sale securities	$	8,757,155	$	31	$	(864,489)	$	7,892,697

(1)Accrued interest receivable on available-for-sale securities of $42.5 million and $36.9 million at September 30, 2023, and December 31, 2022, respectively, is excluded from amortized cost and is included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets.

Unrealized Losses

The following tables summarize the gross unrealized losses and fair value of available-for-sale securities by length of time each major security type has been in a continuous unrealized loss position:


	At September 30, 2023
	Less Than 12 Months				12 Months or More				Total
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Number of Holdings	Fair Value		Unrealized Losses
U.S. Treasury notes	$	—	$	—	$	387,021	$	(20,870)	14	$	387,021	$	(20,870)
Government agency debentures	—		—		248,536		(53,628)		19	248,536		(53,628)
Municipal bonds and notes	34,562		(1,836)		1,484,023		(121,426)		416	1,518,585		(123,262)
Agency CMO	—		—		49,905		(5,813)		36	49,905		(5,813)
Agency MBS	339,979		(8,137)		1,883,669		(375,695)		477	2,223,648		(383,832)
Agency CMBS	490,774		(39,102)		1,264,357		(358,638)		151	1,755,131		(397,740)
CMBS	43,894		(1,004)		742,708		(23,511)		45	786,602		(24,515)

Corporate debt	—		—		597,275		(104,534)		90	597,275		(104,534)
Private label MBS	—		—		39,878		(7,043)		3	39,878		(7,043)
Other	—		—		8,779		(1,044)		2	8,779		(1,044)
Total	$	909,209	$	(50,079)	$	6,706,151	$	(1,072,202)	1,253	$	7,615,360	$	(1,122,281)


	At December 31, 2022
	Less Than Twelve Months				Twelve Months or Longer				Total
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Number of Holdings	Fair Value		Unrealized Losses
U.S. Treasury notes	$	337,563	$	(19,167)	$	379,477	$	(19,761)	23	$	717,040	$	(38,928)
Government agency debentures	258,374		(43,644)		—		—		19	258,374		(43,644)
Municipal bonds and notes	1,616,771		(85,913)		—		—		444	1,616,771		(85,913)
Agency CMO	55,693		(4,640)		4,272		(379)		39	59,965		(5,019)
Agency MBS	1,641,544		(206,412)		515,206		(96,927)		460	2,156,750		(303,339)
Agency CMBS	485,333		(68,674)		921,153		(189,440)		132	1,406,486		(258,114)
CMBS	273,150		(8,982)		598,490		(23,966)		52	871,640		(32,948)
CLO	—		—		2,107		(1)		1	2,107		(1)
Corporate debt	692,990		(89,692)		8,421		(1,895)		105	701,411		(91,587)
Private label MBS	44,249		(4,646)		—		—		3	44,249		(4,646)
Other	12,198		(350)		—		—		4	12,198		(350)
Total	$	5,417,865	$	(532,120)	$	2,429,126	$	(332,369)	1,282	$	7,846,991	$	(864,489)

The $257.8 million increase in gross unrealized losses from December 31, 2022, to September 30, 2023, is primarily due to higher market rates. The Company assesses each available-for-sale security that is in an unrealized loss position to determine whether the decline in fair value below the amortized cost basis is a result from a credit loss or other factors. At both September 30, 2023, and December 31, 2022, no ACL was recorded on available-for-sale securities as each of the securities in the Company's portfolio are investment grade, current as to principal and interest, and their price changes are consistent with interest and credit spreads when adjusting for convexity, rating, and industry differences.

At September 30, 2023, based on current market conditions and the Company's current targeted balance sheet composition strategy, the Company intends to hold its available-for-sale securities with unrealized loss positions through the anticipated recovery period, and it is more-likely-than-not that the Company will not have to sell these available-for-sale securities before the recovery of the entire amortized cost basis. The issuers of these available-for-sale securities have not, to the Company’s knowledge, established any cause for default. Market prices are expected to approach par as the securities approach maturity.

Contractual Maturities

The following table summarizes the amortized cost and fair value of available-for-sale securities by contractual maturity:


	At September 30, 2023
(In thousands)	Amortized Cost		Fair Value
Maturing within 1 year	$	48,951	$	47,286
After 1 year through 5 years	1,026,082		961,447
After 5 through 10 years	1,348,774		1,198,635
After 10 years	6,351,734		5,446,023
Total available-for-sale securities	$	8,775,541	$	7,653,391

Available-for-sale securities that are not due at a single maturity date have been categorized based on the maturity date of the underlying collateral. Actual principal cash flows may differ from this categorization as borrowers have the right to repay their obligations with or without prepayment penalties.

Sales of Available-for Sale Securities

There were no sales of available-for-sale debt securities during the three months ended September 30, 2023. During the nine months ended September 30, 2023, the Company sold U.S. Treasury notes, Corporate debt securities, and Municipal bonds and notes classified as available-for-sale for proceeds of $398.3 million, which resulted in gross realized losses of $20.5 million, respectively. Because $3.8 million of the total loss recognized for the nine months ended September 30, 2023, was attributed to a decline in credit quality, those portions of the charges have been included in the Provision for credit losses on the accompanying Condensed Consolidated Statements of Income. During the three and nine months ended September 30, 2022, the Company sold Municipal bonds and notes classified as available-for-sale for proceeds of $65.3 million, which resulted in gross realized losses on sale of $2.2 million.

Other Information

The following table summarizes the carrying value of available-for-sale securities pledged for deposits, borrowings, and other purposes:


(In thousands)	At September 30, 2023		At December 31, 2022
Pledged for deposits	$	2,911,558	$	2,573,072
Pledged for borrowings and other	3,991,253		1,195,101
Total available-for-sale securities pledged	$	6,902,811	$	3,768,173

At September 30, 2023, the Company had callable available-for-sale securities with an aggregate carrying value of $2.5 billion.

Held-to-Maturity

The following tables summarize the amortized cost, fair value, and ACL on held-to-maturity securities by major type:


	At September 30, 2023
(In thousands)	Amortized Cost (1)		Unrealized Gains		Unrealized Losses		Fair Value		Allowance		Net Carrying Value
Agency CMO	$	24,406	$	—	$	(2,482)	$	21,924	$	—	$	24,406
Agency MBS	2,470,192		34		(428,971)		2,041,255		—		2,470,192
Agency CMBS	3,363,390		—		(662,950)		2,700,440		—		3,363,390
Municipal bonds and notes	917,755		2		(96,878)		820,879		203		917,552
CMBS	100,232		—		(9,056)		91,176		—		100,232
Total held-to-maturity securities	$	6,875,975	$	36	$	(1,200,337)	$	5,675,674	$	203	$	6,875,772


	At December 31, 2022
(In thousands)	Amortized Cost (1)		Unrealized Gains		Unrealized Losses		Fair Value		Allowance		Net Carrying Value
Agency CMO	$	28,358	$	—	$	(2,060)	$	26,298	$	—	$	28,358
Agency MBS	2,626,114		827		(339,592)		2,287,349		—		2,626,114
Agency CMBS	2,831,949		845		(407,648)		2,425,146		—		2,831,949
Municipal bonds and notes	928,845		1,098		(47,183)		882,760		182		928,663
CMBS	149,613		—		(9,713)		139,900		—		149,613
Total held-to-maturity securities	$	6,564,879	$	2,770	$	(806,196)	$	5,761,453	$	182	$	6,564,697

(1)Accrued interest receivable on held-to-maturity securities of $19.7 million and $24.2 million at September 30, 2023, and December 31, 2022, respectively, is excluded from amortized cost and is included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets.

An ACL on held-to-maturity securities is recorded for certain Municipal bonds and notes to account for expected lifetime credit losses. Agency securities represent obligations issued by a U.S. government-sponsored enterprise or other federally-related entity and are either explicitly or implicitly guaranteed and therefore, assumed to be zero loss. Held-to-maturity securities with gross unrealized losses and no ACL are considered to be high credit quality, and therefore, zero credit loss has been recorded.

The following table summarizes the activity in the ACL on held-to-maturity securities:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2023		2022		2023		2022
Balance, beginning of period	$	216	$	210	$	182	$	214

(Benefit) provision for credit losses	(13)		(1)		21		(5)
Balance, end of period	$	203	$	209	$	203	$	209

Contractual Maturities

The following table summarizes the amortized cost and fair value of held-to-maturity securities by contractual maturity:


	At September 30, 2023
(In thousands)	Amortized Cost		Fair Value
Maturing within 1 year	$	8,334	$	8,308
After 1 year through 5 years	57,037		56,361
After 5 through 10 years	363,281		333,255
After 10 years	6,447,323		5,277,750
Total held-to-maturity securities	$	6,875,975	$	5,675,674

Held-to-maturity securities that are not due at a single maturity date have been categorized based on the maturity date of the underlying collateral. Actual principal cash flows may differ from this categorization as borrowers have the right to prepay their obligations with or without prepayment penalties.

Credit Quality Information

The Company monitors the credit quality of held-to-maturity securities through credit ratings provided by Standard & Poor's Rating Services, Moody's Investor Services, Fitch Ratings, Inc., Kroll Bond Rating Agency, or DBRS Inc. Credit ratings express opinions about the credit quality of a security, and are updated at each quarter end. Investment grade securities are rated BBB- or higher by S&P, or Baa3 or higher by Moody's, and are generally considered by the rating agencies and market participants to be of low credit risk. Conversely, securities rated below investment grade, which are labeled as speculative grade by the rating agencies, are considered to have distinctively higher credit risk than investment grade securities. There were no speculative grade held-to-maturity securities at September 30, 2023, or December 31, 2022. Held-to-maturity securities that are not rated are collateralized with U.S. Treasury obligations.

The following tables summarize the amortized cost of held-to-maturity securities based on their lowest publicly available credit rating:


	September 30, 2023
	Investment Grade
(In thousands)	Aaa		Aa1		Aa2		Aa3		A1		A2		A3		Not Rated
Agency CMO	$	—	$	24,406	$	—	$	—	$	—	$	—	$	—	$	—
Agency MBS	—		2,470,192		—		—		—		—		—		—
Agency CMBS	—		3,363,390		—		—		—		—		—		—
Municipal bonds and notes	333,985		162,790		254,061		115,800		32,908		—		4,165		14,046
CMBS	100,232		—		—		—		—		—		—		—
Total held-to-maturity securities	$	434,217	$	6,020,778	$	254,061	$	115,800	$	32,908	$	—	$	4,165	$	14,046


	December 31, 2022
	Investment Grade
(In thousands)	Aaa		Aa1		Aa2		Aa3		A1		A2		A3		Not Rated
Agency CMO	$	—	$	28,358	$	—	$	—	$	—	$	—	$	—	$	—
Agency MBS	—		2,626,114		—		—		—		—		—		—
Agency CMBS	—		2,831,949		—		—		—		—		—		—
Municipal bonds and notes	336,035		163,312		255,235		116,870		38,177		4,165		—		15,051
CMBS	149,613		—		—		—		—		—		—		—
Total held-to-maturity securities	$	485,648	$	5,649,733	$	255,235	$	116,870	$	38,177	$	4,165	$	—	$	15,051

At September 30, 2023, and December 31, 2022, there were no held-to-maturity securities past due under the terms of their agreements nor in non-accrual status.

Other Information

The following table summarizes the carrying value of held-to-maturity securities pledged for deposits, borrowings, and other purposes:


(In thousands)	At September 30, 2023		At December 31, 2022
Pledged for deposits	$	1,623,674	$	1,596,777
Pledged for borrowings and other	4,942,275		260,735
Total held-to-maturity securities pledged	$	6,565,949	$	1,857,512

At September 30, 2023, the Company had callable held-to-maturity securities with an aggregate carrying value of $0.9 billion.

Note 4: Loans and Leases

The following table summarizes loans and leases by portfolio segment and class:


(In thousands)	At September 30, 2023		At December 31, 2022
Commercial non-mortgage	$	16,508,188	$	16,392,795
Asset-based	1,632,962		1,821,642
Commercial real estate	13,348,495		12,997,163
Multi-family	7,234,759		6,621,982
Equipment financing	1,431,858		1,628,393
Warehouse lending	118,478		641,976
Commercial portfolio	40,274,740		40,103,951
Residential	8,228,451		7,963,420
Home equity	1,533,046		1,633,107
Other consumer	51,909		63,948
Consumer portfolio	9,813,406		9,660,475
Loans and leases	$	50,088,146	$	49,764,426

The carrying amount of loans and leases at September 30, 2023, and December 31, 2022, includes net unamortized
(discounts)/premiums and net unamortized deferred (fees)/costs totaling $(34.9) million and $(68.7) million, respectively. Accrued interest receivable of $261.7 million and $226.3 million at September 30, 2023, and December 31, 2022, respectively, is excluded from the carrying amount of loans and leases and is included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets. At September 30, 2023, the Company had pledged $16.6 billion of eligible loans as collateral to support borrowing capacity at the FHLB.

Non-Accrual and Past Due Loans and Leases

The following tables summarize the aging of accrual and non-accrual loans and leases by class:


	At September 30, 2023
(In thousands)	30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		90 or More Days Past Due and Accruing		Non-accrual		Total Past Due and Non-accrual		Current (1)		Total Loans and Leases
Commercial non-mortgage	$	4,209	$	1,551	$	138	$	110,891	$	116,789	$	16,391,399	$	16,508,188
Asset-based	—		—		—		10,325		10,325		1,622,637		1,632,962
Commercial real estate	1,404		—		—		25,376		26,780		13,321,715		13,348,495
Multi-family	2,103		155		—		5,726		7,984		7,226,775		7,234,759
Equipment financing	32,271		765		—		7,972		41,008		1,390,850		1,431,858
Warehouse lending	—		—		—		—		—		118,478		118,478
Commercial portfolio	39,987		2,471		138		160,290		202,886		40,071,854		40,274,740
Residential	12,920		3,329		—		27,623		43,872		8,184,579		8,228,451
Home equity	8,145		3,372		—		26,042		37,559		1,495,487		1,533,046
Other consumer	451		119		—		110		680		51,229		51,909
Consumer portfolio	21,516		6,820		—		53,775		82,111		9,731,295		9,813,406
Total	$	61,503	$	9,291	$	138	$	214,065	$	284,997	$	49,803,149	$	50,088,146


	At December 31, 2022
(In thousands)	30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		90 or More Days Past Due and Accruing		Non-accrual		Total Past Due and Non-accrual		Current		Total Loans and Leases
Commercial non-mortgage	$	8,434	$	821	$	645	$	71,884	$	81,784	$	16,311,011	$	16,392,795
Asset-based	5,921		—		—		20,024		25,945		1,795,697		1,821,642
Commercial real estate	1,494		23,492		68		39,057		64,111		12,933,052		12,997,163
Multi-family	1,157		—		—		636		1,793		6,620,189		6,621,982
Equipment financing	806		9,988		—		12,344		23,138		1,605,255		1,628,393
Warehouse lending	—		—		—		—		—		641,976		641,976
Commercial portfolio	17,812		34,301		713		143,945		196,771		39,907,180		40,103,951
Residential	8,246		3,083		—		25,424		36,753		7,926,667		7,963,420
Home equity	5,293		2,820		—		27,924		36,037		1,597,070		1,633,107
Other consumer	1,028		85		13		148		1,274		62,674		63,948
Consumer portfolio	14,567		5,988		13		53,496		74,064		9,586,411		9,660,475
Total	$	32,379	$	40,289	$	726	$	197,441	$	270,835	$	49,493,591	$	49,764,426

The following table provides additional information on non-accrual loans and leases:


	At September 30, 2023				At December 31, 2022
(In thousands)	Non-accrual		Non-accrual with No Allowance		Non-accrual		Non-accrual with No Allowance
Commercial non-mortgage	$	110,891	$	19,274	$	71,884	$	12,598
Asset-based	10,325		1,330		20,024		1,491
Commercial real estate	25,376		21,084		39,057		90
Multi-family	5,726		5,726		636		—
Equipment financing	7,972		1,543		12,344		2,240

Commercial portfolio	160,290		48,957		143,945		16,419
Residential	27,623		11,440		25,424		10,442
Home equity	26,042		13,995		27,924		15,193
Other consumer	110		5		148		5
Consumer portfolio	53,775		25,440		53,496		25,640
Total	$	214,065	$	74,397	$	197,441	$	42,059

Interest income on non-accrual loans and leases that would have been recognized had the loans and leases been current in accordance with their contractual terms totaled $7.8 million and $7.6 million for the three months ended September 30, 2023, and 2022, respectively, and $18.6 million and $14.1 million for the nine months ended September 30, 2023, and 2022, respectively.

Allowance for Credit Losses on Loans and Leases

The following table summarizes the change in the ACL on loans and leases by portfolio segment:



	At or for the three months ended September 30,
	2023						2022
(In thousands)	Commercial Portfolio		Consumer Portfolio		Total		Commercial Portfolio		Consumer Portfolio		Total
ACL on loans and leases:
Balance, beginning of period	$	572,653	$	56,258	$	628,911	$	511,745	$	59,754	$	571,499


Provision (benefit)	38,908		(3,069)		35,839		34,513		(3,161)		31,352
Charge-offs	(27,360)		(3,642)		(31,002)		(31,356)		(1,453)		(32,809)
Recoveries	292		1,398		1,690		1,413		2,870		4,283
Balance, end of period	$	584,493	$	50,945	$	635,438	$	516,315	$	58,010	$	574,325


	At or for the nine months ended September 30,
	2023						2022
(In thousands)	Commercial Portfolio		Consumer Portfolio		Total		Commercial Portfolio		Consumer Portfolio		Total
ACL on loans and leases:
Balance, beginning of period	$	533,125	$	61,616	$	594,741	$	257,877	$	43,310	$	301,187
Adoption of ASU No. 2022-02	7,704		(1,831)		5,873		—		—		—
Initial allowance for PCD loans and leases (1)	—		—		—		78,376		9,669		88,045
Provision (benefit)	116,489		(7,580)		108,909		230,881		1,267		232,148
Charge-offs	(75,715)		(5,825)		(81,540)		(61,361)		(3,469)		(64,830)
Recoveries	2,890		4,565		7,455		10,542		7,233		17,775
Balance, end of period	$	584,493	$	50,945	$	635,438	$	516,315	$	58,010	$	574,325
Individually evaluated for credit losses	40,756		6,421		47,177		36,394		13,278		49,672
Collectively evaluated for credit losses	$	543,737	$	44,524	$	588,261	$	479,921	$	44,732	$	524,653

(1)Represents the establishment of the initial reserve for PCD loans and leases, which is reported net of $48.3 million of day one charge-offs recognized at the date of acquisition in accordance with GAAP.

Credit Quality Indicators

To measure credit risk for the commercial portfolio, the Company employs a dual grade credit risk grading system for estimating the PD and LGD. The credit risk grade system assigns a rating to each borrower and to the facility, which together form a Composite Credit Risk Profile. The credit risk grade system categorizes borrowers by common financial characteristics that measure the credit strength of borrowers and facilities by common structural characteristics. The Composite Credit Risk Profile has ten grades, with each grade corresponding to a progressively greater risk of loss. Grades (1) to (6) are considered pass ratings, and grades (7) to (10) are considered criticized, as defined by the regulatory agencies. A (7) "Special Mention" rating has a potential weakness that, if left uncorrected, may result in deterioration of the repayment prospects for the asset. A (8) "Substandard" rating has a well-defined weakness that jeopardizes the full repayment of the debt. A (9) "Doubtful" rating has all of the same weaknesses as a substandard asset with the added characteristic that the weakness makes collection or liquidation in full given current facts, conditions, and values improbable. Assets classified as a (10) "Loss" rating are considered uncollectible and are charged-off. Risk ratings, which are assigned to differentiate risk within the portfolio, are reviewed on an ongoing basis and revised to reflect changes in a borrower's current financial position and outlook, risk profile, and the related collateral and structural position. Loan officers review updated financial information or other loan factors on at least an annual basis for all pass rated loans to assess the accuracy of the risk grade. Criticized loans undergo more frequent reviews and enhanced monitoring.

To measure credit risk for the consumer portfolio, the most relevant credit characteristic is the FICO score, which is a widely used credit scoring system that ranges from 300 to 850. A lower FICO score is indicative of higher credit risk and a higher FICO score is indicative of lower credit risk. FICO scores are updated on at least a quarterly basis.

The following tables summarize the amortized cost basis of commercial loans and leases by Composite Credit Risk Profile grade and origination year:


	At September 30, 2023
(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial non-mortgage:
Risk rating:
Pass	$	1,998,598	$	4,377,097	$	1,434,709	$	765,133	$	630,440	$	981,671	$	5,629,505	$	15,817,153
Special mention	13,863		87,572		75,247		33,537		11,929		18,921		71,822		312,891
Substandard	49,664		114,769		25,383		35,778		44,531		19,772		88,247		378,144

Total commercial non-mortgage	2,062,125		4,579,438		1,535,339		834,448		686,900		1,020,364		5,789,574		16,508,188
Current period gross write-offs	324		2,007		647		511		241		3,782		—		7,512
Asset-based:
Risk rating:
Pass	11,188		1,223		—		1,374		7,776		43,633		1,395,893		1,461,087
Special mention	—		—		—		—		—		—		75,025		75,025
Substandard	—		3,901		—		—		1,330		896		90,723		96,850
Total asset-based	11,188		5,124		—		1,374		9,106		44,529		1,561,641		1,632,962
Current period gross write-offs	—		—		—		—		13,189		3,000		—		16,189
Commercial real estate:
Risk rating:
Pass	1,606,944		3,505,510		1,940,429		1,330,879		1,268,342		3,252,414		167,848		13,072,366
Special mention	825		957		8,044		31,549		23,593		51,125		1,204		117,297
Substandard	23,411		17,455		16,681		15,426		37,360		48,499		—		158,832

Total commercial real estate	1,631,180		3,523,922		1,965,154		1,377,854		1,329,295		3,352,038		169,052		13,348,495
Current period gross write-offs	2,590		—		2,574		3,813		2,754		36,575		—		48,306
Multi-family:
Risk rating:
Pass	1,214,619		1,913,835		1,020,778		419,684		609,830		1,996,593		1		7,175,340
Special mention	—		—		—		9,251		359		36,135		—		45,745
Substandard	—		—		—		368		—		13,306		—		13,674


Total multi-family	1,214,619		1,913,835		1,020,778		429,303		610,189		2,046,034		1		7,234,759
Current period gross write-offs	—		—		—		—		—		1,033		—		1,033
Equipment financing:
Risk rating:
Pass	270,568		321,562		268,145		214,395		211,682		76,550		—		1,362,902
Special mention	—		1,436		1,589		—		10,642		6,850		—		20,517
Substandard	—		5,887		7,020		9,347		13,727		12,458		—		48,439
Total equipment financing	270,568		328,885		276,754		223,742		236,051		95,858		—		1,431,858
Current period gross write-offs	—		—		—		2,634		—		41		—		2,675
Warehouse lending:
Risk rating:
Pass	—		—		—		—		—		—		118,478		118,478
Total warehouse lending	—		—		—		—		—		—		118,478		118,478
Current period gross write-offs	—		—		—		—		—		—		—		—
Total commercial portfolio	$	5,189,680	$	10,351,204	$	4,798,025	$	2,866,721	$	2,871,541	$	6,558,823	$	7,638,746	$	40,274,740
Current period gross write-offs	$	2,914	$	2,007	$	3,221	$	6,958	$	16,184	$	44,431	$	—	$	75,715


	At December 31, 2022
(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial non-mortgage:
Pass	$	5,154,781	$	1,952,158	$	965,975	$	792,977	$	593,460	$	780,200	$	5,670,532	$	15,910,083
Special mention	104,277		15,598		21,168		263		14,370		7,770		40,142		203,588
Substandard	28,203		11,704		69,954		36,604		70,634		16,852		41,917		275,868
Doubtful	—		—		—		1		—		—		3,255		3,256
Total commercial non-mortgage	5,287,261		1,979,460		1,057,097		829,845		678,464		804,822		5,755,846		16,392,795
Asset-based:
Pass	19,659		3,901		9,424		14,413		5,163		55,553		1,551,250		1,659,363
Special mention	—		—		—		—		—		—		80,476		80,476
Substandard	—		—		—		1,491		—		—		80,312		81,803
Total asset-based	19,659		3,901		9,424		15,904		5,163		55,553		1,712,038		1,821,642
Commercial real estate:
Pass	3,420,635		2,246,672		1,556,185		1,605,869		1,058,730		2,681,052		97,832		12,666,975
Special mention	21,878		8,995		7,264		37,570		47,419		66,652		1,000		190,778
Substandard	519		2,459		216		31,163		47,021		57,997		—		139,375
Doubtful	—		—		—		1		—		34		—		35
Total commercial real estate	3,443,032		2,258,126		1,563,665		1,674,603		1,153,170		2,805,735		98,832		12,997,163
Multi-family:
Pass	1,992,980		1,057,705		507,065		694,066		444,564		1,748,337		51,655		6,496,372
Special mention	37,677		—		—		95		40,307		726		8,838		87,643
Substandard	—		—		382		—		12,681		24,904		—		37,967
Total multi-family	2,030,657		1,057,705		507,447		694,161		497,552		1,773,967		60,493		6,621,982
Equipment financing:
Pass	388,641		345,792		331,419		308,441		98,874		83,264		—		1,556,431
Special mention	—		185		—		11,965		6,775		25		—		18,950
Substandard	314		16,711		18,436		5,016		5,307		7,228		—		53,012
Total equipment financing	388,955		362,688		349,855		325,422		110,956		90,517		—		1,628,393
Warehouse lending:
Pass	—		—		—		—		—		—		641,976		641,976




Total warehouse lending	—		—		—		—		—		—		641,976		641,976
Total commercial portfolio	$	11,169,564	$	5,661,880	$	3,487,488	$	3,539,935	$	2,445,305	$	5,530,594	$	8,269,185	$	40,103,951

The following tables summarize the amortized cost basis of consumer loans by FICO score and origination year:


	At September 30, 2023
(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total
Residential:
Risk rating:
800+	$	146,015	$	783,183	$	1,080,117	$	439,900	$	152,423	$	927,801	$	—	$	3,529,439
740-799	320,705		774,244		788,042		303,391		106,743		683,795		—		2,976,920
670-739	128,325		307,265		304,316		95,158		48,146		336,117		—		1,219,327
580-669	11,714		48,750		50,865		14,916		11,133		122,544		—		259,922
579 and below	1,322		51,996		8,697		189		116,917		63,722		—		242,843
Total residential	608,081		1,965,438		2,232,037		853,554		435,362		2,133,979		—		8,228,451
Current period gross write-offs	—		—		3		—		—		348		—		351
Home equity:
Risk rating:
800+	20,653		27,163		34,930		25,418		7,914		59,074		409,133		584,285
740-799	20,009		22,878		31,037		15,529		5,887		35,482		351,533		482,355
670-739	13,299		15,757		14,689		5,940		3,418		31,292		250,737		335,132
580-669	2,083		3,261		1,875		1,281		1,266		11,419		66,901		88,086
579 and below	544		787		909		895		556		5,909		33,588		43,188
Total home equity	56,588		69,846		83,440		49,063		19,041		143,176		1,111,892		1,533,046
Current period gross write-offs	—		3		81		—		—		2,312		—		2,396
Other consumer:
Risk rating:
800+	345		434		1,968		336		509		134		21,869		25,595
740-799	1,172		709		565		838		1,102		447		4,144		8,977
670-739	406		588		383		1,143		1,826		154		9,644		14,144
580-669	55		143		123		246		461		67		1,203		2,298
579 and below	59		91		54		11		43		30		607		895
Total other consumer	2,037		1,965		3,093		2,574		3,941		832		37,467		51,909
Current period gross write-offs	2,354		7		3		203		286		225		—		3,078
Total consumer portfolio	$	666,706	$	2,037,249	$	2,318,570	$	905,191	$	458,344	$	2,277,987	$	1,149,359	$	9,813,406
Current period gross write-offs	$	2,354	$	10	$	87	$	203	$	286	$	2,885	$	—	$	5,825


	At December 31, 2022
(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Residential:
800+	$	527,408	$	954,568	$	469,518	$	160,596	$	28,361	$	997,409	$	—	$	3,137,860
740-799	963,026		946,339		311,295		111,913		43,684		689,771		—		3,066,028
670-739	381,515		350,671		103,999		62,365		18,451		384,687		—		1,301,688
580-669	40,959		49,648		14,484		5,836		2,357		138,107		—		251,391
579 and below	52,464		3,693		2,057		84,032		1,299		62,908		—		206,453
Total residential	1,965,372		2,304,919		901,353		424,742		94,152		2,272,882		—		7,963,420
Home equity:
800+	25,475		35,129		25,612		7,578		12,545		55,352		465,318		627,009
740-799	26,743		35,178		17,621		8,111		7,765		32,270		398,692		526,380
670-739	18,396		16,679		8,175		3,635		7,614		30,060		259,646		344,205
580-669	2,848		3,068		1,520		1,456		1,163		13,607		76,614		100,276
579 and below	426		386		651		661		563		4,736		27,814		35,237
Total home equity	73,888		90,440		53,579		21,441		29,650		136,025		1,228,084		1,633,107
Other consumer:
800+	495		218		544		1,045		247		56		19,196		21,801
740-799	888		2,624		1,959		2,494		941		364		12,218		21,488
670-739	977		603		2,480		4,238		1,041		118		6,107		15,564
580-669	211		117		337		801		173		54		2,223		3,916
579 and below	169		101		29		116		36		21		707		1,179
Total other consumer	2,740		3,663		5,349		8,694		2,438		613		40,451		63,948
Total consumer portfolio	$	2,042,000	$	2,399,022	$	960,281	$	454,877	$	126,240	$	2,409,520	$	1,268,535	$	9,660,475

Collateral Dependent Loans and Leases

A loan or lease is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is substantially expected to be provided through the operation or sale of collateral. At September 30, 2023, and December 31, 2022, the carrying amount of collateral dependent commercial loans and leases totaled $35.9 million and $43.8 million, respectively, and the carrying amount of collateral dependent consumer loans totaled $41.0 million and $45.2 million, respectively. Commercial non-mortgage, asset-based, and equipment financing loans and leases are generally secured by machinery and equipment, inventory, receivables, or other non-real estate assets, whereas commercial real estate, multi-family, residential, home equity, and other consumer loans are secured by real estate. The ACL for collateral dependent loans and leases is individually assessed based on the fair value of the collateral less costs to sell. At September 30, 2023, and December 31, 2022, the collateral value associated with collateral dependent loans and leases totaled $110.6 million and $108.0 million, respectively.

Modifications for Borrowers Experiencing Financial Difficulty

On January 1, 2023, the Company adopted ASU 2022-02, which eliminates the accounting guidance for TDRs and enhances the disclosure requirements for certain loan modifications when a borrower is experiencing financial difficulty. For a description of the Company's accounting policies related to the accounting and reporting of TDRs, for which comparative period information is presented, refer to Note 1: Summary of Significant Accounting Policies of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

In certain circumstances, the Company enters into agreements to modify the terms of loans to borrowers experiencing financial difficulty. A variety of solutions are offered to borrowers experiencing financial difficulty, including loan modifications that may result in principal forgiveness, interest rate reductions, payment delays, term extension, or a combination thereof. The following is a description of each of these types of modifications:

•Principal forgiveness – The outstanding principal balance of a loan may be reduced by a specified amount. Principal forgiveness may occur voluntarily as part of a negotiated agreement with a borrower, or involuntarily through a bankruptcy proceeding.

•Interest rate reductions – Includes modifications where the contractual interest rate of the loan has been reduced.

•Payment delays – Deferral arrangements which allow borrowers to delay a scheduled loan payment to a later date. Deferred loan payments do not affect the original contractual terms of the loan. Modifications that result in only an insignificant payment delay are not disclosed. The Company considers that a three month or less payment delay generally would be considered insignificant.

•Term extensions – Extensions of the original contractual maturity date of the loan.

•Combination – Combination includes loans that have undergone more than one of the above loan modification types.

Significant judgment is required to determine if a borrower is experiencing financial difficulty. These considerations vary by portfolio class. The Company has identified modifications to borrowers experiencing financial difficulty that are included in its disclosures as follows:

•Commercial: The Company evaluates modifications of loans to commercial borrowers that are rated substandard or worse, and includes the modifications in its disclosures to the extent that the modification is considered
other-than-insignificant.

•Consumer: The Company generally evaluates modifications of loans to consumer borrowers subject to its loss mitigation program and includes them in its disclosures to the extent that the modification is considered other-than-insignificant.

The following table summarizes the amortized cost basis at September 30, 2023, of loans modified to borrowers experiencing financial difficulty, disaggregated by class and type of concession granted:


	For the three months ended September 30, 2023
(In thousands)	Interest Rate Reduction		Term Extension		Payment Delay		Combination Term Extension and Interest Rate Reduction		Combination Term Extension and Payment Delay		Combination Term Extension, Interest Rate Reduction, and Principal Forgiveness		Total		% of Total Class (2)
Commercial non-mortgage	$	—	$	26,970	$	—	$	940	$	17,798	$	—	$	45,708	0.3	%
Asset-based	—		13,317		—		—		—		896		14,213		0.9
Commercial real estate	—		768		—		17,247		506		—		18,521		0.1



Residential	257		138		—		—		—		—		395		—
Home equity	118		—		4		308		—		—		430		—

Total (1)	$	375	$	41,193	$	4	$	18,495	$	18,304	$	896	$	79,267	0.2	%

	For the nine months ended September 30, 2023
(In thousands)	Interest Rate Reduction		Term Extension		Payment Delay		Combination Term Extension and Interest Rate Reduction		Combination Term Extension and Payment Delay		Combination Term Extension, Interest Rate Reduction, and Principal Forgiveness		Total		% of Total Class (2)
Commercial non-mortgage	$	—	$	65,470	$	9,409	$	1,253	$	29,314	$	—	$	105,446	0.6	%
Asset-based	—		13,317		—		—		—		896		14,213		0.9
Commercial real estate	—		3,928		182		17,247		506		—		21,863		0.2

Equipment financing	—		—		1,362		—		—		—		1,362		0.1

Residential	257		1,287		1,600		—		—		—		3,144		—
Home equity	181		105		4		516		—		—		806		0.1

Total (1)	$	438	$	84,107	$	12,557	$	19,016	$	29,820	$	896	$	146,834	0.3	%

(1)The total amortized cost excludes accrued interest receivable of $0.2 million and $0.3 million for the three and nine months ended September 30, 2023, respectively.

(2)Represents the total amortized cost of the loans modified as a percentage of the total period end loan balance by class.

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty:


			For the three months ended September 30, 2023
			Financial Effect
Interest Rate Reduction:

Residential			Reduced weighted average interest rate by 2.3%
Home equity			Reduced weighted average interest rate by 0.3%

Term Extension:
Commercial non-mortgage			Extended term by a weighted average of 1.3 years
Asset-based			Extended term by a weighted average of 0.4 years
Commercial real estate			Extended term by a weighted average of 0.8 years
Residential			Extended term by a weighted average of 4.9 years

Payment Delay:




Home equity			Provided partial payment deferrals for a weighted average of 0.4 years
Combination Term Extension and Interest Rate Reduction:
Commercial non-mortgage			Extended term by a weighted average of 0.6 years and reduced weighted average interest rate by 2.0%
Commercial real estate			Extended term by a weighted average of 3.0 years and reduced weighted average interest rate by 2.4%
Home equity			Extended term by a weighted average of 19.6 years and reduced weighted average interest rate by 2.5%

Combination Term Extension and Payment Delay:
Commercial non-mortgage			Extended term by a weighted average of 1.2 years and provided partial payment deferrals for a weighted average of 2.0 years
Commercial real estate			Extended term by a weighted average of 0.5 years and provided payment deferrals for a weighted average of 0.5 years
Combination Term Extension, Interest Rate Reduction, and Principal Forgiveness:
Asset-based			Extended term by a weighted average of 4.6 years, reduced weighted average interest rate by 10.8%, and provided 1/3 principal forgiveness contingent upon payment


			For the nine months ended September 30, 2023
			Financial Effect
Interest Rate Reduction:

Residential			Reduced weighted average interest rate by 2.3%
Home equity			Reduced weighted average interest rate by 0.3%
Term Extension:
Commercial non-mortgage			Extended term by a weighted average of 1.1 years
Asset-based			Extended term by a weighted average of 0.4 years
Commercial real estate			Extended term by a weighted average of 1.9 years
Residential			Extended term by a weighted average of 1.8 years
Home equity			Extended term by a weighted average of 11.5 years
Payment Delay:
Commercial non-mortgage			Provided partial payment deferrals for a weighted average of 0.5 years
Commercial real estate			Provided payment deferrals for a weighted average of 0.3 years to be received at contractual maturity
Equipment financing			Provided partial payment deferrals for a weighted average of 0.5 years
Residential			Provided payment deferrals for a weighted average of 1.0 year
Home equity			Provided partial payment deferrals for a weighted average of 0.4 years
Combination Term Extension and Rate Reduction:
Commercial non-mortgage			Extended term by a weighted average of 1.4 years and reduced weighted average interest rate by 1.8%
Commercial real estate			Extended term by a weighted average of 3.0 years and reduced weighted average interest rate by 2.4%
Home equity			Extended term by a weighted average of 16.8 years and reduced weighted average interest rate by 2.1%
Combination Term Extension and Payment Delay:
Commercial non-mortgage			Extended term by a weighted average of 1.1 years and provided partial payment deferrals for a weighted average of 1.9 years
Commercial real estate			Extended term by a weighted average of 0.5 years and provided payment deferrals for a weighted average of 0.5 years
Combination Term Extension, Interest Rate Reduction, and Principal Forgiveness:
Asset-based			Extended term by a weighted average of 4.6 years, reduced weighted average interest rate by 10.8%, and provided 1/3 principal forgiveness contingent upon payment

The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table summarizes the aging of loans that have been modified in the nine months ended September 30, 2023:


	At September 30, 2023
(In thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Non-Accrual		Total
Commercial non-mortgage	$	51,613	$	—	$	—	$	—	$	53,833	$	105,446
Asset-based	13,317		—		—		—		896		14,213
Commercial real estate	4,435		—		—		—		17,428		21,863

Equipment financing	1,362		—		—		—		—		1,362

Residential	327		—		—		—		2,817		3,144
Home equity	240		—		—		—		566		806

Total	$	71,294	$	—	$	—	$	—	$	75,540	$	146,834

Loans made to borrowers experiencing financial difficulty that were modified during the three or nine months ended September 30, 2023, and that subsequently defaulted were not significant. For the purposes of this disclosure, a payment default is defined as 90 or more days past due and still accruing. Non-accrual loans that are modified to borrowers experiencing financial difficulty remain on non-accrual status until the borrower has demonstrated performance under the modified terms. Commitments to lend additional funds to borrowers experiencing financial difficulty whose loans had been modified were not significant.

Troubled Debt Restructurings Prior to the Adoption of ASU 2022-02

The following table summarizes information related to TDRs:


(In thousands)	At December 31, 2022
Accrual status	$	110,868
Non-accrual status	83,954
Total TDRs	$	194,822

Additional funds committed to borrowers in TDR status	$	1,724
Specific reserves for TDRs included in the ACL on loans and leases:
Commercial portfolio	$	14,578
Consumer portfolio	3,559

The following table summarizes loans and leases modified as TDRs by class and modification type during the three and nine months ended September 30, 2022:


	Three months ended September 30, 2022			Nine months ended September 30, 2022
(Dollars in thousands)	Number of Contracts	Recorded Investment (1)		Number of Contracts	Recorded Investment (1)
Commercial non-mortgage
Term extension	1	$	24	3	$	121

Combination - Term extension and interest rate reduction	3	322		8	765
Other (2)	15	17,408		16	40,372




Equipment financing


Other (2)	—	—		1	1,157
Residential
Extended maturity	—	—		1	893
Maturity/rate combined	1	124		1	124
Other (2)	1	298		7	3,060
Home equity

Adjusted interest rate	—	—		1	74
Combination - Term extension and interest rate reduction	3	1,515		14	2,239
Other (2)	6	444		30	1,777
Total TDRs	30	$	20,135	82	$	50,582

(1)Post-modification balances approximated pre-modification balances. The aggregate amount of charge-offs due to restructurings was not significant.

(2)Other included covenant modifications, forbearance, discharges under Chapter 7 bankruptcy, or other concessions.

The portion of TDRs deemed to be uncollectible and charged-off totaled zero for the commercial portfolio and $0.1 million for the consumer portfolio for the three months ended September 30, 2022, and $10.0 million for the commercial portfolio and $0.2 million for the consumer portfolio for the nine months ended September 30, 2022. There were 5 loans and leases with an aggregated amortized cost of $0.9 million that were modified as TDRs within the previous 12 months and for which there was a payment default during the three and nine months ended September 30, 2022.

Note 5: Transfers and Servicing of Financial Assets

The Company originates and sells residential mortgage loans in the normal course of business, primarily to government-sponsored entities through established programs and securitizations. Residential mortgage origination fees, adjustments for changes in fair value, and any gain or loss recognized on residential mortgage loans sold are included in Mortgage banking activities on the accompanying Condensed Consolidated Statements of Income.

The following table summarizes information related to mortgage banking activities:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2023		2022		2023		2022
Net gain on sale	$	51	$	26	$	219	$	529
Origination fees	7		22		52		194
Fair value adjustment	(16)		38		(41)		(107)
Mortgage banking activities	$	42	$	86	$	230	$	616

Proceeds from sale	$	2,590	$	1,053	$	11,250	$	33,886
Loans sold with servicing rights retained	633		147		5,981		30,464

Under certain circumstances, the Company may decide to sell loans that were not originated or otherwise acquired with the intent to sell. During the three months ended September 30, 2023, and 2022, the Company sold commercial loans not originated for sale for proceeds of $71.5 million and $530.1 million, respectively, which resulted in net gains (losses) on sale that were not significant. During the nine months ended September 30, 2023, and 2022, the Company sold commercial loans not originated for sale for proceeds of $512.6 million and $648.6 million, respectively, which resulted in net gains on sale of $0.7 million and $3.1 million, respectively.

In addition, the Company may retain servicing rights on its residential mortgage loans sold in the normal course of business. At September 30, 2023, and December 31, 2022, the aggregate principal balance of residential mortgage loans serviced for others totaled $1.8 billion and $2.0 billion, respectively. Mortgage servicing rights are held at the lower of cost, net of accumulated amortization, or fair market value, and are included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets. The Company assesses mortgage servicing rights for impairment each quarter and establishes or adjusts the valuation allowance to the extent that amortized cost exceeds the estimated fair market value.

The following table presents the change in the carrying amount for mortgage servicing rights:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2023		2022		2023		2022
Balance, beginning of period	$	8,858	$	8,592	$	9,515	$	9,237
Acquired from Sterling	—		—		—		859
Additions	13		1,627		65		1,892
Amortization	(352)		(382)		(1,061)		(2,151)

Balance, end of period	$	8,519	$	9,837	$	8,519	$	9,837

Loan servicing fees, net of mortgage servicing rights amortization, were $1.2 million and $1.3 million for the three months ended September 30, 2023, and 2022, respectively, and $3.8 million and $2.9 million for the nine months ended September 30, 2023, and 2022, respectively, and are included in Loan and lease related fees on the accompanying Condensed Consolidated Statements of Income. Information regarding the fair value of loans held for sale and mortgage servicing rights can be found within Note 14: Fair Value Measurements.

Note 6: Goodwill and Other Intangible Assets

Goodwill

The following table summarizes changes in the carrying amount of goodwill:


(In thousands)	At September 30, 2023		At December 31, 2022
Balance, beginning of period	$	2,514,104	$	538,373
interLINK acquisition	143,216		—
Sterling merger (1)	(25,561)		1,939,765
Bend acquisition (1)	(294)		35,966
Balance, end of period	$	2,631,465	$	2,514,104

(1)The 2023 changes reflect adjustments recorded within the one-year measurement period, which were identified in the first quarter as a result of extended information gathering and new information that arose from integration activities. The allocation of the purchase price and goodwill calculations for both the Sterling merger and Bend acquisition were final as of March 31, 2023.

Information regarding goodwill by reportable segment can be found within Note 16: Segment Reporting.

Other Intangible Assets

The following table summarizes other intangible assets:


	At September 30, 2023						At December 31, 2022
(In thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Core deposits	$	146,037	$	49,871	$	96,166	$	146,037	$	36,710	$	109,327
Customer relationships (1)	151,000		38,814		112,186		115,000		24,985		90,015
Non-competition agreement (1)	4,000		600		3,400		—		—		—
Total other intangible assets	$	301,037	$	89,285	$	211,752	$	261,037	$	61,695	$	199,342

(1)The increase in the gross carrying amount is attributed to the acquisition of interLINK during the first quarter of 2023, in which the Company identified and recorded a $36.0 million intangible asset for broker dealer relationships, which is being amortized on an accelerated basis over an estimated useful life of 10 years, and a $4.0 million non-competition agreement, which is being amortized on a straight-line basis over an estimated useful life of 5 years.

The remaining estimated aggregate future amortization expense for other intangible assets is as follows:


(In thousands)	At September 30, 2023
Remainder of 2023	$	8,617
2024	29,618
2025	25,956
2026	25,565
2027	25,565
Thereafter	96,431

Note 7: Deposits

The following table summarizes deposits by type:


(In thousands)	At September 30, 2023		At December 31, 2022
Non-interest-bearing:
Demand	$	11,410,063	$	12,974,975
Interest-bearing:
Health savings accounts	8,229,889		7,944,892
Checking	8,826,265		9,237,529
Money market	17,755,198		11,062,652
Savings	6,622,833		8,673,343
Time deposits	7,487,519		4,160,949
Total interest-bearing	$	48,921,704	$	41,079,365
Total deposits	$	60,331,767	$	54,054,340

Time deposits, money market, and interest-bearing checking obtained through brokers (1)	$	3,050,332	$	1,964,873
Aggregate amount of time deposit accounts that exceeded the FDIC limit	3,467,080		1,894,950
Demand deposit overdrafts reclassified as loan balances	9,867		8,721

(1)Excludes $5.2 billion of money market sweep deposits received through interLINK at September 30, 2023.

The following table summarizes the scheduled maturities of time deposits:


(In thousands)	At September 30, 2023
Remainder of 2023	$	3,454,002
2024	3,790,109
2025	137,311
2026	54,969
2027	34,419
Thereafter	16,709
Total time deposits	$	7,487,519

Note 8: Borrowings

The following table summarizes securities sold under agreements to repurchase and other borrowings:


	At September 30, 2023				At December 31, 2022
(Dollars in thousands)	Total Outstanding		Rate		Total Outstanding		Rate



Securities sold under agreements to repurchase (1)	$	157,491	0.12	%	$	282,005	0.11	%
Federal funds purchased	—		—		869,825		4.44

Securities sold under agreements to repurchase and other borrowings	$	157,491	0.12	%	$	1,151,830	3.38	%

(1)The Company has the right of offset with respect to all repurchase agreement assets and liabilities. Total securities sold under agreements to repurchase are presented as gross transactions, as only liabilities are outstanding for the periods presented.

Securities sold under agreements to repurchase, all of which have an original maturity of one year or less for the periods presented, are used as a source of borrowed funds and are collateralized by Agency MBS and Corporate debt. The Company's repurchase agreement counterparties are limited to primary dealers in government securities, and commercial and municipal customers through the Corporate Treasury function. The Company may also purchase unsecured term and overnight federal funds to satisfy its short-term liquidity needs.

The following table summarizes information for FHLB advances:


	At September 30, 2023				At December 31, 2022
(Dollars in thousands)	Total Outstanding		Weighted- Average Contractual Coupon Rate		Total Outstanding		Weighted- Average Contractual Coupon Rate
Maturing within 1 year	$	1,800,113	5.55	%	$	5,450,187	4.40	%
After 1 but within 2 years	—		—		—		—
After 2 but within 3 years	—		—		—		—
After 3 but within 4 years	—		—		—		—
After 4 but within 5 years	471		1.35		252		—
After 5 years	9,634		2.07		10,113		2.09
Total FHLB advances	$	1,810,218	5.53	%	$	5,460,552	4.39	%

Aggregate carrying value of assets pledged as collateral	$	20,943,861			$	13,692,379
Remaining borrowing capacity at FHLB	13,380,838				4,291,326

The Bank may borrow up to the amount of eligible mortgages and securities that have been pledged as collateral to secure FHLB advances, which includes certain residential and commercial real estate loans, home equity lines of credit, CMBS, Agency MBS, Agency CMO, U.S. Treasury notes, and MBS. The Bank was in compliance with its FHLB collateral requirements at both September 30, 2023, and December 31, 2022.

The following table summarizes long-term debt:


(Dollars in thousands)		At September 30, 2023		At December 31, 2022
4.375%	Senior fixed-rate notes due February 15, 2024 (2)	$	132,550	$	150,000
4.100%	Senior fixed-rate notes due March 25, 2029 (3)	329,443		333,458
4.000%	Subordinated fixed-to-floating rate notes due December 30, 2029	274,000		274,000
3.875%	Subordinated fixed-to-floating rate notes due November 1, 2030	225,000		225,000
Junior subordinated debt Webster Statutory Trust I floating-rate notes due September 17, 2033 (4)		77,320		77,320
Total senior and subordinated debt		1,038,313		1,059,778
Discount on senior fixed-rate notes		(592)		(756)
Debt issuance cost on senior fixed-rate notes		(1,516)		(1,824)
Premium on subordinated fixed-to-floating rate notes		14,334		15,930
Long-term debt (1)		$	1,050,539	$	1,073,128

(1)The classification of debt as long-term is based on the initial terms of greater than one year as of the date of issuance.

(2)The Company repurchased and retired $17.5 million of these senior notes at 96 cents on the dollar in May 2023. The resulting
$0.7 million gain recognized on extinguishment is included in Other income on the accompanying Condensed Consolidated Statements of Income for the nine months ended September 30, 2023.

(3)The Company de-designated its fair value hedging relationship on these senior notes in 2020. A basis adjustment of $29.4 million and $33.5 million at September 30, 2023, and December 31, 2022, respectively, is included in the carrying value and is being amortized over the remaining life of the senior notes.

(4)The interest rate on the Webster Statutory Trust I floating-rate notes, which varies quarterly based on 3-month SOFR (previously
3-month LIBOR prior to the July 1, 2023 publication cessation date) plus 2.95%, which yielded 8.62% and 7.69% at
September 30, 2023, and December 31, 2022, respectively.

Note 9: Accumulated Other Comprehensive (Loss) Income, Net of Tax

The following tables summarize the changes in each component of accumulated other comprehensive (loss) income, net of tax:


	Three months ended September 30, 2023								Nine months ended September 30, 2023
(In thousands)	Securities Available For Sale		Derivative Instruments		Defined Benefit Pension and Other Postretirement Benefit Plans		Total		Securities Available For Sale		Derivative Instruments		Defined Benefit Pension and Other Postretirement Benefit Plans		Total
Balance, beginning of period	$	(644,579)	$	(35,023)	$	(39,221)	$	(718,823)	$	(631,160)	$	(8,874)	$	(44,926)	$	(684,960)
Other comprehensive (loss) income before reclassifications	(174,594)		(23,132)		—		(197,726)		(203,031)		(50,473)		3,553		(249,951)
Amounts reclassified from accumulated other comprehensive (loss)	—		421		349		770		15,018		1,613		2,501		19,132
Other comprehensive (loss) income, net of tax	(174,594)		(22,711)		349		(196,956)		(188,013)		(48,860)		6,054		(230,819)
Balance, end of period	$	(819,173)	$	(57,734)	$	(38,872)	$	(915,779)	$	(819,173)	$	(57,734)	$	(38,872)	$	(915,779)


	Three months ended September 30, 2022								Nine months ended September 30, 2022
(In thousands)	Securities Available For Sale		Derivative Instruments		Defined Benefit Pension and Other Postretirement Benefit Plans		Total		Securities Available For Sale		Derivative Instruments		Defined Benefit Pension and Other Postretirement Benefit Plans		Total
Balance, beginning of period	$	(445,616)	$	(2,082)	$	(33,634)	$	(481,332)	$	4,536	$	6,070	$	(33,186)	$	(22,580)
Other comprehensive (loss) before reclassifications	(243,872)		(14,416)		(248)		(258,536)		(694,024)		(24,099)		(1,295)		(719,418)
Amounts reclassified from accumulated other comprehensive (loss)	1,641		717		609		2,967		1,641		2,248		1,208		5,097
Other comprehensive (loss) income, net of tax	(242,231)		(13,699)		361		(255,569)		(692,383)		(21,851)		(87)		(714,321)
Balance, end of period	$	(687,847)	$	(15,781)	$	(33,273)	$	(736,901)	$	(687,847)	$	(15,781)	$	(33,273)	$	(736,901)

The following table further summarizes the amounts reclassified from accumulated other comprehensive (loss) income:


Accumulated Other Comprehensive (Loss) Income Components	Three months ended				Nine months ended				Associated Line Item on the Condensed Consolidated Statements of Income
	September 30,				September 30,
	2023		2022		2023		2022
(In thousands)
Investment securities available-for-sale:
Net holding (losses)	$	—	$	(2,234)	$	(20,531)	$	(2,234)	(Loss) on sale of investment securities


Tax benefit	—		593		5,513		593		Income tax expense
Net of tax	$	—	$	(1,641)	$	(15,018)	$	(1,641)
Derivative instruments:
Hedge terminations	$	(67)	$	(76)	$	(242)	$	(229)	Interest expense
Premium amortization	(510)		(909)		(1,970)		(2,856)		Interest income
Tax benefit	156		268		599		837		Income tax expense
Net of tax	$	(421)	$	(717)	$	(1,613)	$	(2,248)
Defined benefit pension and other postretirement benefit plans:
Actuarial net loss amortization	$	(479)	$	(835)	$	(1,562)	$	(1,657)	Other expense
Other	—		—		(1,869)		—		Other expense
Tax benefit	130		226		930		449		Income tax expense
Net of tax	$	(349)	$	(609)	$	(2,501)	$	(1,208)

Note 10: Regulatory Capital and Restrictions

Capital Requirements

The Holding Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory actions by regulators that could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and/or the regulatory framework for prompt corrective action (such provisions apply to the Bank only), both the Holding Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated pursuant to regulatory directives. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by Basel III to ensure capital adequacy require the Company to maintain minimum ratios of CET1 capital to total risk-weighted assets (CET1 risk-based capital), Tier 1 capital to total risk-weighted assets (Tier 1 risk-based capital), Total capital to total risk-weighted assets (Total risk-based capital), and Tier 1 capital to average tangible assets (Tier 1 leverage capital), as defined in the regulations. CET1 capital consists of common stockholders’ equity less deductions for goodwill and other intangible assets, and certain deferred tax adjustments. Upon adoption of Basel III, the Company elected to opt-out of the requirement to include certain components of AOCI in CET1 capital. Tier 1 capital consists of CET1 capital plus preferred stock. Total capital consists of Tier 1 capital and Tier 2 capital, as defined in the regulations. Tier 2 capital includes permissible portions of subordinated debt and the ACL.

At September 30, 2023, and December 31, 2022, both the Holding Company and the Bank were classified as well-capitalized. Management believes that no events or changes have occurred subsequent to year-end that would change this designation.

The following tables provides information on the capital ratios for the Holding Company and the Bank:


	At September 30, 2023
	Actual (1)				Minimum Requirement				Well Capitalized
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio










Webster Financial Corporation
CET1 risk-based capital	$	6,048,469	11.12	%	$	2,447,347	4.5	%	$	3,535,056	6.5	%
Total risk-based capital	7,497,339		13.79		4,350,838		8.0		5,438,548		10.0
Tier 1 risk-based capital	6,332,448		11.64		3,263,129		6.0		4,350,838		8.0
Tier 1 leverage capital	6,332,448		8.83		2,869,002		4.0		3,586,253		5.0
Webster Bank
CET1 risk-based capital	$	6,790,765	12.51	%	$	2,443,048	4.5	%	$	3,528,848	6.5	%
Total risk-based capital	7,365,002		13.57		4,343,197		8.0		5,428,997		10.0
Tier 1 risk-based capital	6,790,765		12.51		3,257,398		6.0		4,343,197		8.0
Tier 1 leverage capital	6,790,765		9.48		2,866,587		4.0		3,583,234		5.0


	At December 31, 2022
	Actual (1)				Minimum Requirement				Well Capitalized
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Webster Financial Corporation
CET1 risk-based capital	$	5,822,369	10.71	%	$	2,446,344	4.5	%	$	3,533,608	6.5	%
Total risk-based capital	7,203,029		13.25		4,349,056		8.0		5,436,320		10.0
Tier 1 risk-based capital	6,106,348		11.23		3,261,792		6.0		4,349,056		8.0
Tier 1 leverage capital	6,106,348		8.95		2,730,212		4.0		3,412,765		5.0
Webster Bank
CET1 risk-based capital	$	6,661,504	12.28	%	$	2,442,058	4.5	%	$	3,527,417	6.5	%
Total risk-based capital	7,165,935		13.20		4,341,437		8.0		5,426,796		10.0
Tier 1 risk-based capital	6,661,504		12.28		3,256,078		6.0		4,341,437		8.0
Tier 1 leverage capital	6,661,504		9.77		2,727,476		4.0		3,409,345		5.0

(1)In accordance with regulatory capital rules, the Company elected an option to delay the estimated impact of the adoption of CECL on its regulatory capital over a two-year deferral period, which ended on January 1, 2022, and a subsequent three-year transition period ending on December 31, 2024. During the three-year transition period, regulatory capital ratios will phase out the aggregate amount of the regulatory capital benefit provided from the delayed CECL adoption in the initial two years. For 2022, 2023, and 2024, the Company is allowed 75%, 50%, and 25%, respectively, of the regulatory capital benefit as of December 31, 2021, with full absorption occurring in 2025.

Dividend Restrictions

The Holding Company is dependent upon dividends from the Bank to provide funds for the payment of dividends to stockholders and for other cash requirements. Dividends paid by the Bank are subject to various federal and state regulatory limitations. Express approval by the OCC is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels or if the amount would exceed net income for that year combined with undistributed net income for the preceding two years.

The Bank paid dividends to the Holding Company totaling $250.0 million and $500.0 million for the three and nine months ended September 30, 2023, respectively, and $250.0 million and $375.0 million for the three and nine months ended September 30, 2022, respectively, for which no express approval from the OCC was required.

Cash Restrictions

The Bank is required under Federal Reserve regulations to maintain cash reserve balances in the form of vault cash or deposits held at a FRB to ensure that it is able to meet customer demands. The reserve requirement ratio is subject to adjustment as economic conditions warrant. Effective March 26, 2020, the Federal Reserve reset the requirement to zero in order to address liquidity concerns resulting from the COVID-19 pandemic. Pursuant to this action, the Bank has not been required to hold cash reserve balances since that date.

Note 11: Variable Interest Entities

The Company has an investment interest in the following entities that each meet the definition of a variable interest entity. Information regarding the Company's consolidation of variable interest entities can be found within Note 1: Summary of Significant Accounting Policies in the Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Consolidated

Rabbi Trusts. The Company established a Rabbi Trust to meet its obligations due under the Webster Bank Deferred Compensation Plan for Directors and Officers and to mitigate expense volatility. The funding of the Rabbi Trust and the discontinuation of the Webster Bank Deferred Compensation Plan for Directors and Officers occurred during 2012. In connection with the Sterling merger in 2022, the Company acquired assets held in a separate Rabbi Trust that had been previously established to fund obligations due under the Greater New York Savings Bank Directors' Retirement Plan.

Investments held in the Rabbi Trusts consist primarily of mutual funds that invest in equity and fixed income securities. The Company is considered the primary beneficiary of these Rabbi Trusts as it has the power to direct the activities of the Rabbi Trusts that most significantly impact its economic performance and it has the obligation to absorb losses and/or the right to receive benefits of the Rabbi Trusts that could potentially be significant.

The Rabbi Trusts' assets are included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets. Investment earnings and any changes in fair value are included in Other income on the accompanying Condensed Consolidated Statements of Income. Additional information regarding the Rabbi Trusts' investments can be found within Note 14: Fair Value Measurements.

Non-Consolidated

Low-Income Housing Tax Credit Investments. The Company makes non-marketable equity investments in entities that sponsor affordable housing and other community development projects that qualify for the LIHTC Program pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is not only to assist the Bank in meeting its responsibilities under the CRA, but also to provide a return, primarily through the realization of tax benefits. While the Company's investment in an entity may exceed 50% of its outstanding equity interests, the entity is not consolidated as the Company is not the primary beneficiary. The Company has determined that it is not the primary beneficiary due to its inability to direct the activities that most significantly impact economic performance. The Company applies the proportional amortization method to subsequently measure its investments in qualified affordable housing projects.

The following table summarizes the Company's LIHTC investments and related unfunded commitments:


(In thousands)	September 30, 2023		December 31, 2022
Gross investment in LIHTC investments	$	921,100	$	797,453
Accumulated amortization	(123,708)		(69,424)
Net investment in LIHTC investments	$	797,392	$	728,029

Unfunded commitments for LIHTC investments	$	391,896	$	335,959

The aggregate carrying value of the Company's LIHTC investments is included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets, and represents the Company's maximum exposure to loss. The related unfunded commitments are included in Accrued expenses and other liabilities on the accompanying Condensed Consolidated Balance Sheets. There were $120.9 million and $123.4 million of net commitments approved to fund LIHTC investments during the nine months ended September 30, 2023, and 2022, respectively.

Webster Statutory Trust. The Company owns all the outstanding common stock of Webster Statutory Trust, a financial vehicle that has issued, and in the future may issue, trust preferred securities. The Company is not the primary beneficiary of Webster Statutory Trust. Webster Statutory Trust's only assets are junior subordinated debentures that are issued by the Company, which were acquired using the proceeds from the issuance of trust preferred securities and common stock. The junior subordinated debentures are included in Long-term debt on the accompanying Condensed Consolidated Balance Sheets, and the related interest expense is included in Long-term debt on the accompanying Condensed Consolidated Statements of Income. Additional information regarding these junior subordinated debentures can be found within Note 8: Borrowings.

Other Non-Marketable Investments. The Company invests in alternative investments comprising interests in non-public entities that cannot be redeemed since the underlying equity is distributed as the investment is liquidated. The ultimate timing and amount of these distributions cannot be predicted with reasonable certainty. For each of these alternative investments that is classified as a variable interest entity, the Company has determined that it is not the primary beneficiary due to its inability to direct the activities that most significantly impact economic performance. The aggregate carrying value of the Company's other non-marketable investments was $179.5 million and $144.9 million at September 30, 2023, and December 31, 2022, respectively, which is included in Accrued interest receivable and other assets on the accompanying Condensed Consolidated Balance Sheets, and its maximum exposure to loss, including unfunded commitments, was $299.9 million and $243.9 million, respectively. Additional information regarding the fair value of other non-marketable investments can be found within
Note 14: Fair Value Measurements.

Note 12: Earnings Per Common Share

The following table summarizes the calculation of basic and diluted earnings per common share:


	Three months ended September 30,				Nine months ended September 30,
(In thousands, except per share data)	2023		2022		2023		2022
Net income	$	226,475	$	233,968	$	682,447	$	399,532
Less: Preferred stock dividends	4,162		4,162		12,487		11,756
Net income available to common stockholders	222,313		229,806		669,960		387,776
Less: Earnings allocated to participating securities	2,146		2,128		6,211		3,562
Earnings applicable to common stockholders	$	220,167	$	227,678	$	663,749	$	384,214

Weighted-average common shares outstanding - basic	171,210		173,868		172,233		165,743
Add: Effect of dilutive stock options and restricted stock	140		76		93		70
Weighted-average common shares outstanding - diluted	171,350		173,944		172,326		165,813

Basic earnings per common share	$	1.29	$	1.31	$	3.85	$	2.32
Diluted earnings per common share	1.28		1.31		3.85		2.32

Earnings per common share is calculated under the two-class method in which all earnings (distributed and undistributed) are allocated to common stock and participating securities based on their respective rights to receive dividends. The Company may grant restricted stock, restricted stock units, non-qualified stock options, incentive stock options, or stock appreciation rights to certain employees and directors under its stock-based compensation programs, which entitle recipients to receive
non-forfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock. These unvested awards meet the definition of participating securities.

Potential common shares from performance-based restricted stock that were not included in the computation of dilutive earnings per common share because they were anti-dilutive under the treasury stock method were 96,415 and 187,349 for the three and nine months ended September 30, 2023, respectively, and 97,294 and 330,688 for the three and nine months ended September 30, 2022, respectively.

Note 13: Derivative Financial Instruments

Derivative Positions and Offsetting

Derivatives Designated as Hedging Instruments. Interest rate swaps allow the Company to change the fixed or variable nature of an interest rate without the exchange of the underlying notional amount. Certain pay fixed/receive variable interest rate swaps are designated as cash flow hedges to effectively convert variable-rate debt into fixed-rate debt, whereas certain receive fixed/pay variable interest rate swaps are designated as fair value hedges to effectively convert fixed-rate long-term debt into variable-rate debt. Certain purchased options are also designated as cash flow hedges. Purchased options allow the Company to limit the potential adverse impact of variable interest rates by establishing a cap rate or floor rate in exchange for an upfront premium. The purchased options designated as cash flow hedges represent interest rate caps where payment is received from the counterparty if interest rates rise above the cap rate, and interest rate floors where payment is received from the counterparty when interest rates fall below the floor rate.

Derivatives Not Designated as Hedging Instruments. The Company also enters into other derivative transactions to manage economic risks, but does not designate the instruments in hedge relationships. In addition, the Company enters into derivative contracts to accommodate customer needs. Derivative contracts with customers are offset with dealer counterparty transactions structured with matching terms to ensure minimal impact on earnings.

The following tables present the notional amounts and fair values, including accrued interest, of derivative positions:


	At September 30, 2023
	Asset Derivatives				Liability Derivatives
(In thousands)	Notional Amounts		Fair Value		Notional Amounts		Fair Value
Designated as hedging instruments:
Interest rate derivatives (1)	$	450,000	$	8	$	5,400,000	$	77,384
Not designated as hedging instruments:
Interest rate derivatives (1)	7,580,155		472,844		7,546,167		479,766
Mortgage banking derivatives (2)	1,113		8		—		—
Other (3)	264,524		749		684,520		118
Total not designated as hedging instruments	7,845,792		473,601		8,230,687		479,884
Gross derivative instruments, before netting	$	8,295,792	473,609		$	13,630,687	557,268
Less: Master netting agreements			78,044				78,044
Cash collateral			392,408				—
Total derivative instruments, after netting			$	3,157			$	479,224

	At December 31, 2022
	Asset Derivatives				Liability Derivatives
(In thousands)	Notional Amounts		Fair Value		Notional Amounts		Fair Value
Designated as hedging instruments:
Interest rate derivatives (1)	$	1,350,000	$	1,515	$	1,750,000	$	9,632
Not designated as hedging instruments:
Interest rate derivatives (1)	7,024,507		221,225		7,022,844		403,952
Mortgage banking derivatives (2)	3,283		32		—		—
Other (3)	161,934		134		606,478		915
Total not designated as hedging instruments	7,189,724		221,391		7,629,322		404,867
Gross derivative instruments, before netting	$	8,539,724	222,906		$	9,379,322	414,499
Less: Master netting agreements			16,129				16,129
Cash collateral			184,095				—
Total derivative instruments, after netting			$	22,682			$	398,370

(1)Balances related to clearing houses are presented as a single unit of account. In accordance with their rule books, clearing houses legally characterize variation margin payments as settlement of derivatives rather than collateral against derivative positions. At September 30, 2023, and December 31, 2022, notional amounts of interest rate swaps cleared through clearing houses include $0.1 billion and $2.7 billion for asset derivatives, respectively, and $0.4 billion and zero for liability derivatives, respectively. The related fair values approximate zero.

(2)Notional amounts related to residential loans exclude approved floating rate commitments of $2.2 million and $2.4 million at September 30, 2023, and December 31, 2022, respectively.

(3)Other derivatives include foreign currency forward contracts related to lending arrangements, a Visa equity swap transaction, and risk participation agreements. Notional amounts of risk participation agreements include $206.4 million and $125.6 million for asset derivatives and $667.6 million and $559.2 million for liability derivatives at September 30, 2023, and December 31, 2022, respectively, which have insignificant related fair values.

The following tables present fair value positions transitioned from gross to net upon applying counterparty netting agreements:


	At September 30, 2023
(In thousands)	Gross Amount Recognized		Derivative Offset Amount		Cash Collateral Received/Pledged		Net Amount Presented		Amounts Not Offset
Asset derivatives	$	472,969	$	78,044	$	392,408	$	2,517	$	2,538
Liability derivatives	78,044		78,044		—		—		6,442

	At December 31, 2022
(In thousands)	Gross Amount Recognized		Derivative Offset Amount		Cash Collateral Received/Pledged		Net Amount Presented		Amounts Not Offset
Asset derivatives	$	217,246	$	16,129	$	184,095	$	17,022	$	17,392
Liability derivatives	16,129		16,129		—		—		1,545

Derivative Activity

The following table summarizes the income statement effect of derivatives designated as hedging instruments:


	Recognized In	Three months ended September 30,				Nine months ended September 30,
(In thousands)	Net Interest Income	2023		2022		2023		2022
Fair value hedges:
Interest rate derivatives	Deposits interest expense	$	7,393	$	—	$	8,086	$	—
Hedged item	Deposits interest expense	(6,145)		—		(5,870)		—
Net recognized on fair value hedges		$	(1,248)	$	—	$	(2,216)	$	—
Cash flow hedges:
Interest rate derivatives	Long-term debt interest expense	$	68	$	76	$	243	$	229
Interest rate derivatives	Interest and fees on loans and leases	(4,197)		(483)		(5,657)		3,320
Net recognized on cash flow hedges		$	(4,265)	$	(559)	$	(5,900)	$	3,091

The following table summarizes information related to fair value hedging adjustments:


Condensed Consolidated Balance Sheet Line Item in Which Hedged Item is Located	Notional Amount of Hedged Item				Carrying Amount of Hedged Item				Cumulative Amount of Fair Value Hedging Adjustment Included in Carrying Amount
(In thousands)	At September 30, 2023		At December 31, 2022		At September 30, 2023		At December 31, 2022		At September 30, 2023		At December 31, 2022
Deposits	$	400,000	$	—	$	394,130	$	—	$	(5,870)	$	—
Long-term debt (1)	300,000		300,000		329,443		333,458		29,443		33,458

(1)The Company de-designated its fair value hedging relationship on its long-term debt in 2020. The basis adjustment included in the carrying amount is being amortized into interest expense over the remaining life of the long-term debt.

Time-value premiums, which are amortized on a straight-line basis, are excluded from the assessment of hedge effectiveness for purchased options designated as cash flow hedges. At September 30, 2023, the remaining unamortized balance of time-value premiums was $0.9 million. Over the next twelve months, an estimated decrease to interest income of $42.0 million will be reclassified from AOCI relating to cash flow hedge gain/loss, and an estimated increase to interest expense of $0.1 million will be reclassified from AOCI relating to cash flow hedge terminations. At September 30, 2023, the remaining unamortized loss on terminated cash flow hedges was $0.1 million. The maximum length of time over which forecasted transactions are hedged is 4.4 years. Additional information regarding cash flow hedge activity impacting AOCI and the related amounts reclassified to net income can be found within Note 9: Accumulated Other Comprehensive (Loss) Income, Net of Tax.

The following table summarizes the income statement effect of derivatives not designated as hedging instruments:


	Recognized In	Three months ended September 30,				Nine months ended September 30,
(In thousands)	Non-interest Income	2023		2022		2023		2022
Interest rate derivatives	Other income	$	1,474	$	6,032	$	(2,407)	$	25,291
Mortgage banking derivatives	Mortgage banking activities	4		31		(24)		(47)
Other	Other income	1,552		3,196		(104)		4,620
Total not designated as hedging instruments		$	3,030	$	9,259	$	(2,535)	$	29,864

Derivative Exposure. At September 30, 2023, the Company had $6.5 million in initial margin collateral posted at clearing houses. In addition, $398.9 million of cash collateral received is included in Cash and due from banks on the accompanying Condensed Consolidated Balance Sheets. The Company regularly evaluates the credit risk of its derivative customers, taking into account the likelihood of default, net exposures, and remaining contractual life, among other related factors. Credit risk exposure is mitigated as transactions with customers are generally secured by the same collateral of the underlying transactions. Current net credit exposure relating to derivatives with the Bank's customers was $0.6 million at September 30, 2023. In addition, the Company monitors potential future exposure, representing its best estimate of exposure to remaining contractual maturity. The potential future exposure relating to derivatives with the Bank's customers totaled $102.4 million at September 30, 2023. The Company has incorporated a valuation adjustment to reflect non-performance risk in the fair value measurement of its derivatives, which totaled $10.4 million and $8.4 million at September 30, 2023, and December 31, 2022, respectively. Various factors impact changes in the valuation adjustment over time, such as changes in the credit spreads of the contracted parties, and changes in market rates and volatilities, which affect the total expected exposure of the derivative instruments.

Note 14: Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The determination of fair value may require the use of estimates when quoted market prices are not available. Fair value estimates made at a specific point in time are based on management’s judgments regarding future expected losses, current economic conditions, the risk characteristics of each financial instrument, and other subjective factors that cannot be determined with precision.

The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels within the fair value hierarchy are as follows:

•Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date.

•Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, rate volatility, prepayment speeds, and credit ratings), or inputs that are derived principally from or corroborated by market data, correlation, or other means.

•Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. This includes certain pricing models or other similar techniques that require significant management judgment or estimation.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Available-for-Sale Securities. When unadjusted quoted prices are available in an active market, the Company classifies its available-for-sale investment securities within Level 1 of the fair value hierarchy. U.S. Treasury notes have a readily determinable fair value, and accordingly, are classified within Level 1 of the fair value hierarchy.

When quoted market prices are not available, the Company employs an independent pricing service that utilizes matrix pricing to calculate fair value. These fair value measurements consider observable data, such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayments speeds, credit information, and the respective terms and conditions for debt instruments. Management maintains procedures to monitor the pricing service's results and has a process in place to challenge their valuations and methodologies that appear unusual or unexpected. Government agency debentures, Municipal bonds and notes, Agency CMO, Agency MBS, Agency CMBS, CMBS, CLO, Corporate debt, Private label MBS, and Other available-for-sale securities are classified within Level 2 of the fair value hierarchy.

Derivative Instruments. The fair values presented for derivative instruments include any accrued interest. Foreign exchange contracts are valued based on unadjusted quoted prices in active markets, and accordingly, are classified within Level 1 of the fair value hierarchy. Except for mortgage banking derivatives, all other derivative instruments are valued using third-party valuation software, which considers the present value of cash flows discounted using observable forward rate assumptions. The resulting fair value is then validated against valuations performed by independent third parties. These derivative instruments are classified within Level 2 of the fair value hierarchy.

Mortgage Banking Derivatives. The Company uses forward sales of mortgage loans and mortgage-backed securities to manage the risk of loss associated with its mortgage loan commitments and mortgage loans held for sale. Prior to closing and funding certain single-family residential mortgage loans, an interest rate lock commitment is generally extended to the borrower. During this in-between time period, the Company is subject to the risk that market interest rates may change. If rates rise, investors generally will pay less to purchase mortgage loans, which would result in a reduction in the gain on sale of the loans, or possibly a loss. In an effort to mitigate this risk, forward delivery sales commitments are established in which the Company agrees to either deliver whole mortgage loans to various investors or issue mortgage-backed securities. The fair value of mortgage banking derivatives is determined based on current market prices for similar assets in the secondary market. Accordingly, mortgage banking derivatives are classified within Level 2 of the fair value hierarchy.

Originated Loans Held For Sale. The Company has elected to measure originated loans held for sale at fair value under the fair value option per ASC Topic 825, Financial Instruments. Electing to measure originated loans held for sale at fair value reduces certain timing differences and better reflects the price the Company would expect to receive from the sale of these loans. The fair value of originated loans held for sale is based on quoted market prices of similar loans sold in conjunction with securitization transactions. Accordingly, originated loans held for sale are classified within Level 2 of the fair value hierarchy.

The following table compares the fair value to the unpaid principal balance of originated loans held for sale:


	At September 30, 2023						At December 31, 2022
(In thousands)	Fair Value		Unpaid Principal Balance		Difference		Fair Value		Unpaid Principal Balance		Difference
Originated loans held for sale	$	837	$	1,319	$	(482)	$	1,991	$	1,631	$	360

Rabbi Trust Investments. Investments held in each of the Company's Rabbi Trusts consist primarily of mutual funds that invest in equity and fixed income securities. Shares of these mutual funds are valued based on the NAV as reported by the trustee of the funds, which represents quoted prices in active markets. The Company has elected to measure the Rabbi Trusts' investments at fair value. Accordingly, the Rabbi Trusts' investments are classified within Level 1 of the fair value hierarchy. At September 30, 2023, and December 31, 2022, the total cost basis of the investments held in the Rabbi Trusts was $10.3 million and $10.0 million, respectively.

Alternative Investments. Equity investments have a readily determinable fair value when unadjusted quoted prices are available in an active market for identical assets. Accordingly, these alternative investments are classified within Level 1 of the fair value hierarchy. At September 30, 2023, and December 31, 2022, equity investments with a readily determinable fair value had a total carrying amount of $0.9 million and $0.4 million, respectively, with no remaining unfunded commitment. During the three and nine months ended September 30, 2023, there were total write-ups in fair value of $0.3 million and $0.5 million, respectively, associated with these alternative investments.

Equity investments that do not have a readily determinable fair value may qualify for the NAV practical expedient if they meet certain requirements. The Company's alternative investments measured at NAV consist of investments in non-public entities that cannot be redeemed since investments are distributed as the underlying equity is liquidated. Alternative investments measured at NAV are not classified within the fair value hierarchy. At September 30, 2023, and December 31, 2022, these alternative investments had a total carrying amount of $31.3 million and $89.2 million, respectively, and a remaining unfunded commitment of $29.9 million and $82.7 million, respectively.

Contingent Consideration. The Company recorded $16.0 million of contingent consideration at fair value related to two earn-out agreements associated with the acquisition of interLINK on January 11, 2023. The terms of the purchase agreement specified that the seller would receive earn-outs based on the ability of the Company to: (i) re-sign the existing broker dealers under contract, and (ii) generate $2.5 billion in new broker dealer deposit programs within three years of the acquisition date. The estimated fair values of the contingent consideration liabilities are measured on a recurring basis and determined using an income approach considering management’s evaluation of the probability of achievement, forecasted achievement date (payment term), and a discount rate equivalent to the counterparty cost of debt. These significant inputs, which are the responsibility of management and calculated with the assistance of a third-party valuation specialist, are not observable and accordingly, are classified within Level 3 of the fair value hierarchy.

The following table summarizes the unobservable inputs used to derive the estimated fair value of the Company’s contingent consideration liabilities at September 30, 2023 (dollars in thousands):


Agreement	Maximum Amount		Probability of Achievement	Payment Term (in years)	Discount Rate	Fair Value
(i) Re-sign broker dealers	$	4,826	99.0 %	2.13	6.40 %	$	4,231
(ii) Deposit program growth	$	12,500	100.0 %	1.25	6.40 %	$	11,568

Contingent consideration liabilities are included within Accrued expenses and other liabilities on the accompanying Condensed Consolidated Balance Sheets. Any fair value adjustments to contingent consideration liabilities are included in Other expense on the accompanying Condensed Consolidated Statements of Income.

The following tables summarize the fair values of assets and liabilities measured at fair value on a recurring basis:


	At September 30, 2023
(In thousands)	Level 1		Level 2		Level 3		Total
Financial Assets:
Available-for-sale securities:
U.S. Treasury notes	$	387,021	$	—	$	—	$	387,021
Government agency debentures	—		248,536		—		248,536
Municipal bonds and notes	—		1,523,322		—		1,523,322
Agency CMO	—		49,905		—		49,905
Agency MBS	—		2,252,635		—		2,252,635
Agency CMBS	—		1,755,131		—		1,755,131
CMBS	—		786,602		—		786,602

Corporate debt	—		601,582		—		601,582
Private label MBS	—		39,878		—		39,878
Other	—		8,779		—		8,779
Total available-for-sale securities	387,021		7,266,370		—		7,653,391
Gross derivative instruments, before netting (1)	713		472,896		—		473,609
Originated loans held for sale	—		837		—		837
Investments held in Rabbi Trusts	12,837		—		—		12,837
Alternative investments (2)	891		—		—		32,206
Total financial assets	$	401,462	$	7,740,103	$	—	$	8,172,880
Financial Liabilities:
Gross derivative instruments, before netting (1)	$	64	$	557,204	$	—	$	557,268
Contingent consideration	—		—		15,799		15,799
Total financial liabilities	$	64	$	557,204	$	15,799	$	573,067


	At December 31, 2022
(In thousands)	Level 1		Level 2		Level 3		Total
Financial Assets:
Available-for-sale securities:
U.S. Treasury notes	$	717,040	$	—	$	—	$	717,040
Government agency debentures	—		258,374		—		258,374
Municipal bonds and notes	—		1,633,202		—		1,633,202
Agency CMO	—		59,965		—		59,965
Agency MBS	—		2,158,024		—		2,158,024
Agency CMBS	—		1,406,486		—		1,406,486
CMBS	—		896,640		—		896,640
CLO	—		2,107		—		2,107
Corporate debt	—		704,412		—		704,412
Private label MBS	—		44,249		—		44,249
Other	—		12,198		—		12,198
Total available-for-sale securities	717,040		7,175,657		—		7,892,697
Gross derivative instruments, before netting (1)	79		222,827		—		222,906
Originated loans held for sale	—		1,991		—		1,991
Investments held in Rabbi Trusts	12,103		—		—		12,103
Alternative investments (2)	430		—		—		89,678
Total financial assets	$	729,652	$	7,400,475	$	—	$	8,219,375
Financial Liabilities:
Gross derivative instruments, before netting (1)	$	843	$	413,656	$	—	$	414,499

(1)Additional information regarding the impact of netting derivative assets and derivative liabilities, as well as the impact from offsetting cash collateral paid to the same derivative counterparties, can be found within Note 13: Derivative Financial Instruments.

(2)Certain alternative investments are recorded at NAV. Assets measured at NAV are not classified within the fair value hierarchy.

Assets Measured at Fair Value on a Non-Recurring Basis

The Company measures certain assets at fair value on a non-recurring basis. The following is a description of the valuation methodologies used for assets measured at fair value on a non-recurring basis.

Alternative Investments. The measurement alternative has been elected for alternative investments without readily determinable fair values that do not qualify for the NAV practical expedient. The measurement alternative requires investments to be measured at cost minus impairment, if any, plus or minus adjustments resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. Accordingly, these alternative investments are classified within Level 2 of the fair value hierarchy. At September 30, 2023, and December 31, 2022, the carrying amount of these alternative investments was $50.0 million and $42.8 million, respectively, of which $4.8 million and $5.9 million, respectively, were considered to be measured at fair value. There were $0.9 million and $1.2 million in total write-ups due to observable price changes during the three and nine months ended September 30, 2023, respectively, and $1.0 million in write-downs due to impairment.

Loans Transferred to Held for Sale. Once a decision has been made to sell loans not previously classified as held for sale, these loans are transferred into the held for sale category and carried at the lower of cost or fair value, less estimated costs to sell. At the time of transfer into held for sale classification, any amount by which cost exceeds fair value is accounted for as a valuation allowance. This activity generally pertains to loans with observable inputs, and therefore, are classified within Level 2 of the fair value hierarchy. However, should these loans include adjustments for changes in loan characteristics based on unobservable inputs, the loans would then be classified within Level 3 of the fair value hierarchy. At September 30, 2023, and December 31, 2022, there were $45.4 million and zero loans that were transferred to held for sale on the Condensed Consolidated Balance Sheet.

Collateral Dependent Loans and Leases. Loans and leases for which repayment is substantially expected to be provided through the operation or sale of collateral are considered collateral dependent, and are valued based on the estimated fair value of the collateral, less estimated costs to sell at the reporting date, using customized discounting criteria. Accordingly, collateral dependent loans and leases are classified within Level 3 of the fair value hierarchy.

Other Real Estate Owned and Repossessed Assets. OREO and repossessed assets are held at the lower of cost or fair value and are considered to be measured at fair value when recorded below cost. The fair value of OREO is calculated using independent appraisals or internal valuation methods, less estimated selling costs, and may consider available pricing guides, auction results, and price opinions. Certain repossessed assets may also require assumptions about factors that are not observable in an active market when determining fair value. Accordingly, OREO and repossessed assets are classified within Level 3 of the fair value hierarchy. At September 30, 2023, and December 31, 2022, the total book value of OREO and repossessed assets was $3.3 million and $2.3 million, respectively. In addition, the amortized cost of consumer loans secured by residential real estate property that were in process of foreclosure at September 30, 2023, was $16.3 million.

Estimated Fair Values of Financial Instruments and Mortgage Servicing Assets

The Company is required to disclose the estimated fair values of certain financial instruments and mortgage servicing rights. The following is a description of the valuation methodologies used to estimate fair value for those assets and liabilities.

Cash and Cash Equivalents. Given the short time frame to maturity, the carrying amount of cash and cash equivalents, which comprises cash and due from banks and interest-bearing deposits, approximates fair value. Cash and cash equivalents are classified within Level 1 of the fair value hierarchy.

Held-to-Maturity Securities. When quoted market prices are not available, the Company employs an independent pricing service that utilizes matrix pricing to calculate fair value. These fair value measurements consider observable data, such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the respective terms and conditions for debt instruments. Management maintains procedures to monitor the pricing service's results and has a process in place to challenge their valuations and methodologies that appear unusual or unexpected. Held-to-maturity securities, which include Agency CMO, Agency MBS, Agency CMBS, Municipal bonds and notes, and CMBS, are classified within Level 2 of the fair value hierarchy.

Loans and Leases, net. Except for collateral dependent loans and leases, the fair value of loans and leases held for investment is estimated using a discounted cash flow methodology, based on future prepayments and market interest rates inclusive of an illiquidity discount for comparable loans and leases. The associated cash flows are then adjusted for associated credit risks and other potential losses, as appropriate. Loans and leases are classified within Level 3 of the fair value hierarchy.

Mortgage Servicing Rights. Mortgage servicing rights are initially measured at fair value and subsequently measured using the amortization method. The Company assesses mortgage servicing rights for impairment each quarter and establishes or adjusts the valuation allowance to the extent that amortized cost exceeds the estimated fair market value. Fair value is calculated as the present value of estimated future net servicing income and relies on market based assumptions for loan prepayment speeds, servicing costs, discount rates, and other economic factors. Accordingly, the primary risk inherent in valuing mortgage servicing rights is the impact of fluctuating interest rates on the related servicing revenue stream. Mortgage servicing rights are classified within Level 3 of the fair value hierarchy.

Deposit Liabilities. The fair value of deposit liabilities, which comprises demand deposits, interest-bearing checking, savings, health savings, and money market accounts, reflects the amount payable on demand at the reporting date. Deposit liabilities are classified within Level 2 of the fair value hierarchy.

Time Deposits. The fair value of fixed-maturity certificates of deposit is estimated using rates that are currently offered for deposits with similar remaining maturities. Time deposits are classified within Level 2 of the fair value hierarchy.

Securities Sold Under Agreements to Repurchase and Other Borrowings. The fair value of securities sold under agreements to repurchase and other borrowings that mature within 90 days approximates their carrying value. The fair value of securities sold under agreements to repurchase and other borrowings that mature after 90 days is estimated using a discounted cash flow methodology based on current market rates and adjusted for associated credit risks, as appropriate. Securities sold under agreements to repurchase and other borrowings are classified within Level 2 of the fair value hierarchy.

Federal Home Loan Bank Advances and Long-Term Debt. The fair value of FHLB advances and long-term debt is estimated using a discounted cash flow methodology in which discount rates are matched with the time period of the expected cash flows and adjusted for associated credit risks, as appropriate. FHLB advances and long-term debt are classified within Level 2 of the fair value hierarchy.

The following table summarizes the carrying amounts, estimated fair values, and classifications within the fair value hierarchy of selected financial instruments and mortgage servicing rights:


	At September 30, 2023				At December 31, 2022
(In thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Level 1
Cash and cash equivalents	$	2,172,731	$	2,172,731	$	839,943	$	839,943
Level 2
Held-to-maturity investment securities	6,875,772		5,675,674		6,564,697		5,761,453
Level 3
Loans and leases, net	49,452,708		47,196,492		49,169,685		47,604,463
Mortgage servicing assets	8,519		24,822		9,515		27,043
Liabilities:
Level 2
Deposit liabilities	$	52,844,248	$	52,844,248	$	49,893,391	$	49,893,391
Time deposits	7,487,519		7,452,837		4,160,949		4,091,979
Securities sold under agreements to repurchase and other borrowings	157,491		157,474		1,151,830		1,151,797
FHLB advances	1,810,218		1,810,810		5,460,552		5,459,218
Long-term debt (1)	1,050,539		995,176		1,073,128		1,001,779

(1)Any unamortized premiums/discounts, debt issuance costs, or basis adjustments to long-term debt, as applicable, are excluded from the determination of fair value.

Note 15: Retirement Benefit Plans

Defined Benefit Pension and Other Postretirement Benefits

The following tables summarize the components of net periodic benefit cost (income):


	Three months ended September 30,
	2023						2022
(In thousands)	Pension		SERP		OPEB		Pension		SERP		OPEB
Service cost	$	—	$	—	$	6	$	—	$	—	$	9
Interest cost	2,164		48		263		1,441		17		194
Expected return on plan assets	(3,435)		—		—		(3,669)		—		—
Amortization of actuarial loss (gain)	1,153		2		(676)		821		7		7
Net periodic benefit (income) cost	$	(118)	$	50	$	(407)	$	(1,407)	$	24	$	210



	Nine months ended September 30,
	2023						2022
(In thousands)	Pension		SERP		OPEB		Pension		SERP		OPEB
Service cost	$	—	$	—	$	20	$	—	$	—	$	24
Interest cost	6,586		162		906		4,198		49		551
Expected return on plan assets	(8,833)		—		—		(11,006)		—		—
Amortization of actuarial loss (gain)	3,585		5		(2,028)		1,667		20		(30)
Net periodic benefit cost (income)	$	1,338	$	167	$	(1,102)	$	(5,141)	$	69	$	545

The components of net periodic benefit cost (income) are included in Other expense on the accompanying Condensed Consolidated Statements of Income. The weighted-average expected long-term rate of return on plan assets determined as of the beginning of the year was 5.50%, and was subsequently remeasured at 6.00% during the September 30, 2023 interim period.

Note 16: Segment Reporting

In connection with the acquisition of interLINK on January 11, 2023, the $143.2 million of goodwill recorded was allocated entirely to Commercial Banking. In addition, as previously discussed in Note 2: Mergers and Acquisitions and
Note 6: Goodwill and Other Intangible Assets, the allocation of the purchase price for both the Sterling merger and Bend acquisition was final as of March 31, 2023. As a result, of the total $1.9 billion in goodwill recorded in connection with the Sterling merger, $1.7 billion and $0.2 billion was allocated to Commercial Banking and Consumer Banking, respectively. The $35.7 million of goodwill recorded in connection with the Bend acquisition was allocated entirely to HSA Bank.

Segment Reporting Methodology

The Company uses an internal profitability reporting system to generate information by reportable segment, which is based on a series of management estimates for FTP, and allocations for non-interest expense, provision for credit losses, income taxes, and equity capital. These estimates and allocations, certain of which are subjective in nature, are periodically reviewed and refined. Changes in estimates and allocations that affect the results of any reportable segment do not affect the consolidated financial position or results of operations of the Company as a whole. The full profitability measurement reports, which are prepared for each reportable segment, reflect non-GAAP reporting methodologies. The differences between full profitability and GAAP results are reconciled in the Corporate and Reconciling category.

The Company allocates interest income and interest expense to each business through an internal matched maturity FTP process. The goal of the FTP allocation is to encourage loan and deposit growth consistent with the Company’s overall profitability objectives. The FTP process considers the specific interest rate risk and liquidity risk of financial instruments and other assets and liabilities in each line of business. Loans are assigned an FTP rate for funds used and deposits are assigned an FTP rate for funds provided. The allocation 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. The FTP process transfers the corporate interest rate risk exposure to the Treasury function included within the Corporate and Reconciling category where such exposures are centrally managed.

The Company allocates a majority of non-interest expense to each reportable segment using an activity and driver-based costing process. Costs, including shared services and back-office support areas, are analyzed, pooled by process, and assigned to the appropriate reportable segment. The combination of direct revenue, direct expenses, FTP, and allocations of non-interest expense produces PPNR, which is the basis the segments are reviewed by executive management. The Company also allocates the provision for credit losses to each reportable segment based on management's estimate of the expected loss content in each of the specific loan and lease portfolios. The ACL on loans and leases is included in total assets within the Corporate and Reconciling category. Business development expenses, such as merger-related and strategic initiatives costs, are also generally included in the Corporate and Reconciling category.

The following tables present balance sheet information, including the appropriate allocations, for the Company's reportable segments and the Corporate and Reconciling category:


	At September 30, 2023
(In thousands)	Commercial Banking		HSA Bank		Consumer Banking		Corporate and Reconciling		Consolidated Total
Goodwill	$	2,029,204	$	57,485	$	544,776	$	—	$	2,631,465
Total assets	42,802,857		118,313		10,803,140		19,406,541		73,130,851

	At December 31, 2022
(In thousands)	Commercial Banking		HSA Bank		Consumer Banking		Corporate and Reconciling		Consolidated Total
Goodwill	$	1,904,291	$	57,779	$	552,034	$	—	$	2,514,104
Total assets	44,380,582		122,729		10,625,334		16,148,876		71,277,521

The following tables present operating results, including the appropriate allocations, for the Company’s reportable segments and the Corporate and Reconciling category:



	Three months ended September 30, 2023
(In thousands)	Commercial Banking		HSA Bank		Consumer Banking		Corporate and Reconciling		Consolidated Total
Net interest income	$	391,386	$	77,669	$	195,315	$	(77,234)	$	587,136
Non-interest income	30,605		20,799		26,886		12,092		90,382
Non-interest expense	110,306		39,870		105,703		106,699		362,578
Pre-tax, pre-provision net revenue	311,685		58,598		116,498		(171,841)		314,940
Provision (benefit) for credit losses	39,477		—		(3,638)		661		36,500
Income before income taxes	272,208		58,598		120,136		(172,502)		278,440
Income tax expense	68,324		15,822		31,716		(63,897)		51,965
Net income	$	203,884	$	42,776	$	88,420	$	(108,605)	$	226,475



	Three months ended September 30, 2022
(In thousands)	Commercial Banking		HSA Bank		Consumer Banking		Corporate and Reconciling		Consolidated Total
Net interest income	$	333,554	$	58,567	$	195,748	$	(36,866)	$	551,003
Non-interest income	40,497		25,842		33,842		13,455		113,636
Non-interest expense	102,415		36,725		109,588		81,343		330,071
Pre-tax, pre-provision net revenue	271,636		47,684		120,002		(104,754)		334,568
Provision (benefit) for credit losses	33,341		—		(1,989)		5,179		36,531
Income before income taxes	238,295		47,684		121,991		(109,933)		298,037
Income tax expense	59,574		12,779		31,718		(40,002)		64,069
Net income	$	178,721	$	34,905	$	90,273	$	(69,931)	$	233,968



	Nine months ended September 30, 2023
(In thousands)	Commercial Banking		HSA Bank		Consumer Banking		Corporate and Reconciling		Consolidated Total
Net interest income	$	1,159,306	$	224,820	$	610,353	$	(228,231)	$	1,766,248
Non-interest income	98,257		67,889		81,722		2,654		250,522
Non-interest expense	329,397		126,213		321,462		262,062		$	1,039,134
Pre-tax, pre-provision net revenue	928,166		$	166,496	370,613		(487,639)		977,636
Provision (benefit) for credit losses	109,994		—		(1,085)		5,838		114,747
Income before income tax expense	818,172		166,496		371,698		(493,477)		862,889
Income tax expense	205,361		44,954		98,128		(168,001)		180,442
Net income	$	612,811	$	121,542	$	273,570	$	(325,476)	$	682,447



	Nine months ended September 30, 2022
(In thousands)	Commercial Banking		HSA Bank		Consumer Banking		Corporate and Reconciling		Consolidated Total
Net interest income	$	954,044	$	152,702	$	511,712	$	(186,547)	$	1,431,911
Non-interest income	128,670		79,352		92,541		38,041		338,604
Non-interest expense	294,375		110,674		312,464		330,570		1,048,083
Pre-tax, pre-provision net revenue	788,339		121,380		291,789		(479,076)		722,432
Provision (benefit) for credit losses	238,054		—		(5,906)		5,471		237,619
Income before income tax expense	550,285		121,380		297,695		(484,547)		484,813
Income tax expense	133,966		32,530		77,352		(158,567)		85,281
Net income	$	416,319	$	88,850	$	220,343	$	(325,980)	$	399,532

Note 17: Revenue from Contracts with Customers

The following tables summarize revenues recognized in accordance with ASC Topic 606, Revenue from Contracts with Customers. These disaggregated amounts, together with sources of other non-interest income that are subject to other GAAP topics, have been reconciled to non-interest income by reportable segment as presented within Note 16: Segment Reporting.



	Three months ended September 30, 2023
(In thousands)	Commercial Banking		HSA Bank		Consumer Banking		Corporate and Reconciling		Consolidated Total
Non-interest Income:
Deposit service fees	$	5,056	$	19,573	$	15,251	$	1,125	$	41,005
Loan and lease related fees (1)	4,274		—		—		—		4,274
Wealth and investment services (2)	2,861		—		4,393		—		7,254
Other income	—		1,226		3,541		1,092		5,859
Revenue from contracts with customers	12,191		20,799		23,185		2,217		58,392
Other sources of non-interest income	18,414		—		3,701		9,875		31,990
Total non-interest income	$	30,605	$	20,799	$	26,886	$	12,092	$	90,382



	Three months ended September 30, 2022
(In thousands)	Commercial Banking		HSA Bank		Consumer Banking		Corporate and Reconciling		Consolidated Total
Non-interest Income:
Deposit service fees	$	7,573	$	24,008	$	18,728	$	498	$	50,807
Loan and lease related fees (1)	5,623		—		—		—		5,623
Wealth and investment services	2,672		—		8,756		(9)		11,419
Other income	—		1,834		413		—		2,247
Revenue from contracts with customers	15,868		25,842		27,897		489		70,096
Other sources of non-interest income	24,629		—		5,945		12,966		43,540
Total non-interest income	$	40,497	$	25,842	$	33,842	$	13,455	$	113,636



	Nine months ended September 30, 2023
(In thousands)	Commercial Banking		HSA Bank		Consumer Banking		Corporate and Reconciling		Consolidated Total
Non-interest Income:
Deposit service fees	$	16,028	$	62,651	$	52,456	$	724	$	131,859
Loan and lease related fees (1)	13,024		—		—		—		13,024
Wealth and investment services (2)	8,501		—		12,746		(15)		21,232
Other income	—		5,238		5,097		3,146		13,481
Revenue from contracts with customers	37,553		67,889		70,299		3,855		179,596
Other sources of non-interest income	60,704		—		11,423		(1,201)		70,926
Total non-interest income	$	98,257	$	67,889	$	81,722	$	2,654	$	250,522

	Nine months ended September 30, 2022
(In thousands)	Commercial Banking		HSA Bank		Consumer Banking		Corporate and Reconciling		Consolidated Total
Non-interest Income:
Deposit service fees	$	21,905	$	74,091	$	53,057	$	966	$	150,019
Loan and lease related fees (1)	16,198		—		—		—		16,198
Wealth and investment services	8,576		—		24,706		(22)		33,260
Other income	—		5,261		1,083		—		6,344
Revenue from contracts with customers	46,679		79,352		78,846		944		205,821
Other sources of non-interest income	81,991		—		13,695		37,097		132,783
Total non-interest income	$	128,670	$	79,352	$	92,541	$	38,041	$	338,604

(1)A portion of loan and lease related fees comprises income generated from factored receivables and payroll financing activities that is within the scope of ASC Topic 606.

(2)Effective as of the fourth quarter of 2022, the wealth and investment services revenue stream was impacted by the restructuring of a process in which the Company offers brokerage, investment advisory, and certain insurance-related services to customers. The staff providing these services, who had previously been employees of the Bank, are now employees of a third-party service provider. As a result, the Company now recognizes income from this program on a net basis, which thereby reduces gross reported wealth and investment services non-interest income and the related compensation and benefits non-interest expense on the accompanying Condensed Consolidated Statements of Income.

Contracts with customers did not generate significant contract assets and liabilities at September 30, 2023, or December 31, 2022.

Major Revenue Streams

Deposit service fees consist of fees earned from commercial and consumer customer deposit accounts, such as account maintenance and cash management/analysis fees, as well as other transactional service charges (i.e., insufficient funds, wire transfers, stop payment fees, etc.). Performance obligations for account maintenance services and cash management/analysis fees are satisfied on a monthly basis at a fixed transaction price, whereas performance obligations for other deposit service charges that result from various customer-initiated transactions are satisfied at a point-in-time when the service is rendered. Payment for deposit service fees is generally received immediately or in the following month through a direct charge to the customers' accounts. Certain commercial customer contracts include credit clauses, whereby the Company will grant credit upon the customer meeting pre-determined conditions, which can be used to offset fees. On occasion, the Company may also waive certain fees. Fee waivers are recognized as a reduction to revenue in the period the waiver is granted to the customer.

The deposit service fees revenue stream also includes interchange fees earned from debit and credit card transactions. The transaction price for interchange services is based on the transaction value and the interchange rate set by the card network. Performance obligations for interchange fees are satisfied at a point-in-time when the cardholder's transaction is authorized and settled. Payment for interchange fees is generally received immediately or in the following month.

Factored receivables non-interest income consists of fees earned from accounts receivable management services. The Company factors accounts receivable, with and without recourse, for customers whereby the Company purchases their accounts receivable at a discount and assumes the risk, as applicable, and ownership of the assets through direct cash receipt from the end consumer. Factoring services are performed in exchange for a non-refundable fee at a transaction price based on a percentage of the gross invoice amount of each receivable purchased, subject to a minimum required amount. The performance obligation for factoring services is generally satisfied at a point-in-time when the receivable is assigned to the Company. However, should the commission earned not meet or exceed the minimum required annual amount, the difference between that and the actual amount is recognized at the end of the contract term. Other fees associated with factoring receivables may include wire transfer and technology fees, field examination fees, and Uniform Commercial Code fees, where the performance obligations are satisfied at a point-in-time when the services are rendered. Payment from the customer for factoring services is generally received immediately or within the following month.

Payroll finance non-interest income consists of fees earned from performing payroll financing and business process outsourcing services, including full back-office technology and tax accounting services, along with payroll preparation, making payroll tax payments, invoice billings, and collections for independently-owned temporary staffing companies nationwide. Performance obligations for payroll finance and business processing activities are either satisfied upon completion of the support services or as payroll remittances are made on behalf of customers to fund their employee payroll, which generally occurs on a weekly basis. The agreed-upon transaction price is based on a fixed-percentage per the terms of the contract, which could be subject to a hold-back reserve to provide for any balances that are assessed to be at risk of collection. When the Company collects on amounts due from end consumers on behalf of its customers and at the time of financing payroll, the Company retains the agreed-upon transaction price payable for the performance of its services and remits an amount to the customer net of any advances and payroll tax withholdings, as applicable.

Wealth and investment services consist of fees earned from asset management, trust administration, and investment advisory services, and through facilitating securities transactions. Performance obligations for asset management and trust administration services are satisfied on a monthly or quarterly basis at a transaction price based on a percentage of the period-end market value of the assets under administration. Payment for asset management and trust administration services is generally received a few days after period-end through a direct charge to the customers' accounts. Performance obligations for investment advisory services are satisfied over the period in which the services are provided through a time-based measurement of progress, and the agreed-upon transaction price with the customer varies depending on the nature of the services performed. Performance obligations for facilitating securities transactions are satisfied at a point-in-time when the securities are sold at a transaction price that is based on a percentage of the contract value. Payment for both investment advisory services and facilitating securities transactions may be received in advance of the service, but generally is received immediately or in the following period, in arrears.

Note 18: Commitments and Contingencies

Credit-Related Financial Instruments

In the normal course of business, the Company offers financial instruments with off-balance sheet risk to meet the financing needs of its customers. These transactions include commitments to extend credit, standby letters of credit, and commercial letters of credit, which involve, to varying degrees, elements of credit risk.

The following table summarizes the outstanding amounts of credit-related financial instruments with off-balance sheet risk:


(In thousands)	At September 30, 2023		At December 31, 2022
Commitments to extend credit	$	11,130,936	$	11,237,496
Standby letters of credit	402,120		380,655
Commercial letters of credit	56,464		53,512
Total credit-related financial instruments with off-balance sheet risk	$	11,589,520	$	11,671,663

The Company enters into contractual commitments to extend credit to its customers (i.e., revolving credit arrangements, term loan commitments, and short-term borrowing agreements), generally with fixed expiration dates or other termination clauses and that require payment of a fee. Substantially all of the Company's commitments to extend credit are contingent upon its customers maintaining specific credit standards at the time of loan funding, and are often secured by real estate collateral. Since the majority of the Company's commitments typically expire without being funded, the total contractual amount does not necessarily represent the Company's future payment requirements.

Standby letters of credit are written conditional commitments issued by the Company to guarantee its customers' performance to a third party. In the event the customer does not perform in accordance with the terms of its agreement with a third-party, the Company would be required to fund the commitment. The contractual amount of each standby letter of credit represents the maximum amount of potential future payments the Company could be required to make. Historically, the majority of the Company's standby letters of credit expire without being funded. However, if the commitment were funded, the Company has recourse against the customer. The Company's standby letter of credit agreements are often secured by cash or other collateral.

Commercial letters of credit are issued to finance either domestic or foreign customer trade arrangements. As a general rule, drafts are committed to be drawn when the goods underlying the transaction are in transit. Similar to standby letters of credit, the Company's commercial letter of credit agreements are often secured by the underlying goods subject to trade.

Allowance for Credit Losses on Unfunded Loan Commitments

An ACL is recorded under the CECL methodology and included in Accrued expenses and other liabilities on the accompanying Condensed Consolidated Balance Sheets to provide for the unused portion of commitments to lend that are not unconditionally cancellable by the Company. At September 30, 2023, and December 31, 2022, the ACL on unfunded loan commitments totaled $23.0 million and $27.7 million, respectively.

Litigation

The Company is subject to certain legal proceedings and unasserted claims and assessments in the ordinary course of business. Legal contingencies are evaluated based on information currently available, including advice of counsel and assessment of available insurance coverage. The Company establishes an accrual for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Once established, each accrual is adjusted to reflect any subsequent developments. Legal contingencies are subject to inherent uncertainties, and unfavorable rulings may occur that could cause the Company to either adjust its litigation accrual or incur actual losses that exceed the current estimate, which ultimately could have a material adverse effect, either individually or in the aggregate, on its business, financial condition, or operating results. The Company will consider settlement of cases when it is in the best interests of the Company and its stakeholders. The Company intends to defend itself in all claims asserted against it, and management currently believes that the outcome of these contingencies will not be material, either individually or in the aggregate, to the Company or its consolidated financial position.

Federal Deposit Insurance Corporation Special Assessment

The FDIC has the authority to make further changes to the proposed rule before finalization, including changes to the underlying data and calculation methodology used to determine the special assessment. The comment period on the proposed rule expired on July 21, 2023, and no final rule has been published in the Federal Register as of the date of this Quarterly Report on Form 10-Q. Accordingly, no legal obligation has been incurred, and therefore, no accrual has been recognized.

Note 19: Subsequent Events

The Company has evaluated subsequent events from the date of the Condensed Consolidated Financial Statements, and accompanying Notes thereto, through the date of issuance, and determined that no significant events were identified requiring recognition or disclosure.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information regarding quantitative and qualitative disclosures about market risk can be found in Part I within Note 13: Derivative Financial Instruments in the Notes to the Consolidated Financial Statements contained in Item 1. Financial Statements, and under the section captioned "Asset/Liability Management and Market Risk" contained in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, which are incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of the Chief Executive Officer (who is our principal executive officer) and Chief Financial Officer (who is our principal financial officer), evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of September 30, 2023. The term "disclosure controls and procedures" means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2023, our disclosure controls and procedures were not effective due to the un-remediated material weaknesses in internal control over financial reporting related to certain general information technology controls specific to logical access, which was previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. Prior to the filing of this Quarterly Report on Form 10-Q (this "Form 10-Q"), we completed substantive procedures for the quarter ended September 30, 2023. Based on these procedures, management believes that our Condensed Consolidated Financial Statements included in this Form 10-Q have been prepared in accordance with GAAP. For additional information, please refer to Part II - Item 9A. of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Remediation

Management is in process of implementing measures designed to ensure that the control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include: (i) designing and implementing controls related to deprovisioning, privileged access, and user access reviews, (ii) developing an enhanced risk assessment process to evaluate logical access, and (iii) improving the existing training program associated with control design and implementation. We believe that these actions will remediate the material weaknesses. The material weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of these material weaknesses will be completed prior to the end of 2023.

Changes in Internal Control Over Financial Reporting

In July 2023, the Company executed and completed its core conversion in connection with the merger with Sterling.

Other than changes made related to such core conversion, as well as the ongoing material weakness remediation efforts described above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

Because of its inherent limitations, management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information regarding legal proceedings can be found within Note 18: Commitments and Contingencies in the Notes to Consolidated Financial Statements contained in Part I - Item 1. Financial Statements, which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, or subsequent Quarterly Reports on Form 10-Q.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table provides information with respect to any purchase of equity securities for the Company's common stock made by or on behalf of the Company or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, during the three months ended September 30, 2023:


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Amount Available for Purchase Under the Plans or Programs (3)
July 1, 2023 - July 31, 2023	2,249	$	41.05	—	$	343,340,118
August 1, 2023 - August 31, 2023	720,664	41.65		720,351	313,340,201
September 1, 2023 - September 30, 2023	487,340	41.53		481,125	293,356,942
Total	1,210,253	41.60		1,201,476	293,356,942

(1)During the three months ended September 30, 2023, 8,777 of the total number of shares purchased were acquired at market prices outside of the Company's common stock repurchase program and related to employee share-based compensation plan activity.

(2)The average price paid per share is calculated on a trade date basis and excludes commissions and other transaction costs.

(3)The Company maintains a common stock repurchase program, which was approved by the Board of Directors on October 24, 2017, that authorizes management to purchase shares of Webster common stock in open market or privately negotiated transactions, through block trades, and pursuant to any adopted predetermined trading plan, subject to the availability and trading price of stock, general market conditions, alternative uses for capital, regulatory considerations, and the Company's financial performance. On April 27, 2022, the Board of Directors increased management's authority to repurchase shares of Webster common stock under the repurchase program by $600.0 million in shares. This existing repurchase program will remain in effect until fully utilized or until modified, superseded, or terminated.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

During the three months ended September 30, 2023, no director or officer of the Company adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408 of Regulation S-K.

ITEM 6. EXHIBITS

A list of exhibits to this Form 10-Q is set forth below.

Exhibit Number

Exhibit Description

Exhibit Included

Incorporated by Reference

Form

Exhibit

Filing Date

2.1

Agreement and Plan of Merger, dated as of April 18, 2021, by and between Sterling Bancorp and Webster Financial Corporation

8-K

2.1

4/23/2021

3.1

Fourth Amended and Restated Certificate of Incorporation

10-Q

3.1

8/9/2016

3.2

Certificate of Amendment to Fourth Amended and Restated Certificate of Incorporation of Webster Financial Corporation, effective as of January 31, 2022

8-K

3.2

2/1/2022

3.3

Certificate of Amendment to Fourth Amended and Restated Certificate of Incorporation of Webster Financial Corporation, effective as of April 28, 2023

8-K

3.1

4/28/2023

3.4

Certificate of Designations establishing the rights of the Company's 8.50% Series A Non-Cumulative Perpetual Convertible Preferred Stock

8-K

3.1

6/11/2008

3.5

Certificate of Designations establishing the rights of the Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series B

8-K

3.1

11/24/2008

3.6

Certificate of Designations establishing the rights of the Company's Perpetual Participating Preferred Stock, Series C

8-K

3.1

7/31/2009

3.7

Certificate of Designations establishing the rights of the Company's Non-Voting Perpetual Participating Preferred Stock, Series D

8-K

3.2

7/31/2009

3.8

Certificate of Designations establishing the rights of the Company's 6.40% Series E Non-Cumulative Perpetual Preferred Stock

8-A12B

3.3

12/4/2012

3.9

Certificate of Designations establishing the rights of the Company's 5.25% Series F Non-Cumulative Perpetual Preferred Stock

8-A12B

3.3

12/12/2017

3.10

Certificate of Designations establishing the rights of the Company's 6.50% Series G Non-Cumulative Perpetual Preferred Stock

8-A12B

3.4

2/1/2022

3.11

Bylaws, as amended effective March 15, 2020

8-K

3.1

3/17/2020

3.12

Amendment to Bylaws of Webster Financial Corporation, effective as of January 31, 2022

8-K

3.5

2/1/2022

10.1

Webster Financial Corporation 2021 Stock Incentive Plan (as amended and restated effective April 26, 2023)

DEF 14A

3/15/2023

31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer.

31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by the Chief Financial Officer.

32.1

Written statement pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer.

X (1)

32.2

Written statement pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Financial Officer.

X (1)

101

The following financial information from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline Extensible Business Reporting Language (iXBRL) includes: (i) Cover Page, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements Of Income, (iv) Condensed Consolidated Statements Of Comprehensive Income, (v) Condensed Consolidated Statements Of Stockholders' Equity, (vi) Condensed Consolidated Statements Of Cash Flows, and (vii) Notes to Condensed Consolidated Financial Statements, tagged in summary and in detail.

104

Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101)

(1)Exhibit is furnished herewith and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

WEBSTER FINANCIAL CORPORATION

(Registrant)

Date: November 7, 2023

By:

/s/ John R. Ciulla

John R. Ciulla

President, Chief Executive Officer, and Director

(Principal Executive Officer)

Date: November 7, 2023

By:

/s/ Glenn I. MacInnes

Glenn I. MacInnes

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Date: November 7, 2023

By:

/s/ Albert J. Wang

Albert J. Wang

Executive Vice President and Chief Accounting Officer

(Principal Accounting Officer)