WEBSTER FINANCIAL CORPWBS
WEBSTER FINANCIAL CORP Commitments Disclosure
Commitments and Contingencies
Litigation
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:
| December 31, | |||||||||||
| (In thousands) | 2025 | 2024 | |||||||||
| Commitments to extend credit | $ | 12,517,384 | $ | 11,630,765 | |||||||
| Standby letters of credit | 636,811 | 578,912 | |||||||||
| Commercial letters of credit | 22,421 | 28,287 | |||||||||
| Total credit-related financial instruments with off-balance sheet risk | $ | 13,176,616 | $ | 12,237,964 | |||||||
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 or other collateral. Since the majority of the Company’s commitments typically expire without being fully 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 to provide for the unused portion of commitments to lend that are not unconditionally cancellable by the Company. At December 31, 2025, and 2024, the ACL on unfunded loan commitments was $24.1 million and $22.6 million, respectively.
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
In November 2023, the FDIC issued a final rule implementing a special assessment for certain banks, based on the amount of estimated uninsured deposits reported as of December 31, 2022, to recover losses to the DIF associated with protecting uninsured depositors of Silicon Valley Bank and Signature Bank upon their failure in March 2023. At that time, the special assessment was anticipated to be collected over a total of eight quarterly assessment periods, which began during the second quarter of 2024, at a quarterly rate of 3.36 basis points. The Company’s initial estimate of its total special assessment was $47.2 million as of December 31, 2023.
Throughout 2024, the FDIC increased its related loss estimated to the DIF associated with the Silicon Valley Bank and Signature Bank failures, indicating that the special assessment would be collected for an additional two quarters beyond the initial eight-quarter assessment period at a lower quarterly rate. As a result, during the year ended 2024, the Company accrued an additional $10.3 million towards its estimated special assessment charge.
In December 2025, the FDIC issued an interim final rule to amend the collection of the special assessment to reduce the eighth quarterly assessment rate from 3.36 basis points to 2.97 basis points and remove the additional two quarter assessment periods. In light of this interim final rule, the Company released $10.3 million of its special deposit insurance assessment accrual. At December 31, 2025, the Company’s remaining accrual for its estimated special assessment charge was $5.9 million. The Company continues to monitor the estimated loss attributable to the protection of uninsured depositors at Silicon Valley Bank and Signature Bank, which could impact the amount of its accrued liability.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Mar 10, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Feb 29, 2016 | |
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.