UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017

2021

or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number001-33326

PEOPLE’S UNITED FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

Delaware20-8447891People's United Financial, Inc.

(Exact name of registrant as specified in its charter)

Delaware20-8447891
(State or other jurisdiction of


incorporation or organization)

(I.R.S. Employer


Identification No.)

850 Main Street
Bridgeport, Connecticut06604
(Address of principal executive offices)(Zip Code)
(203) 338-7171
(Registrant's telephone number, including area code)

(203)338-7171

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per sharePBCTNASDAQ Global Select Market
Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A, $0.01 par value per sharePBCTPNASDAQ Global Select Market
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ☒   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act. (Check one):

Large accelerated filer☒☒Accelerated filer☐Smaller reporting company☐
Non-accelerated filer☐
Non-accelerated filer☐  (Do not check if a smaller reporting company)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 Rule12b-2 of the Exchange Act).     Yes  ☐    No  ☒

As of October 31, 2017,2021, there were 346,251,605428,020,009 shares of the registrant’s common stock outstanding.




People’s United Financial Inc.

Form10-Q

Table of Contents

Page
Part I – Financial InformationPage
Item 1.
1

Item 1.

Financial Statements (Unaudited)

Consolidated Statements of Condition as of September  30, 2017
and December 31, 2016

1

2

3

4

5
6

6
7

Item 2.

63
53

Item 3.

108
94

Item 4.

Controls and Procedures108
Part II – Other Information
Item 4.
95

Item 1.

Part II – Other Information		Legal Proceedings109

Item 1A.

1.
Risk Factors95
109

Item 1A.
95
Item 2.

109
95

Item 3.

109
96

Item 4.

109
96

Item 5.

110
96

Item 6.

110
96
111
97
112
98




Part 1 - Financial Information

Item 1- Financial Statements

Item 1 - Financial Statements
People’s United Financial, Inc.

Consolidated Statements of Condition - (Unaudited)

(in millions)

  September 30,
2017		  December 31,
2016		 

Assets

   

Cash and due from banks

  $414.1  $432.4 

Short-term investments (note 3)

   302.5   181.7 
  

 

 

  

 

 

 

Total cash and cash equivalents

   716.6   614.1 
  

 

 

  

 

 

 

Securities (note 3):

   

Trading account securities, at fair value

   8.3   6.8 

Securities available for sale, at fair value

   3,197.5   4,409.9 

Securities held to maturity, at amortized cost (fair value of $3.44 billion and $2.01 billion)

   3,387.6   2,005.4 

Federal Home Loan Bank and Federal Reserve Bank stock, at cost

   320.9   315.8 
  

 

 

  

 

 

 

Total securities

   6,914.3   6,737.9 
  

 

 

  

 

 

 

Loans held for sale

   15.0   39.3 
  

 

 

  

 

 

 

Loans (note 4):

   

Commercial real estate

   11,180.5   10,247.3 

Commercial and industrial

   8,624.7   8,125.1 

Equipment financing

   3,705.6   3,032.5 
  

 

 

  

 

 

 

Total Commercial Portfolio

   23,510.8   21,404.9 
  

 

 

  

 

 

 

Residential mortgage

   6,781.0   6,216.7 

Home equity and other consumer

   2,092.7   2,123.3 
  

 

 

  

 

 

 

Total Retail Portfolio

   8,873.7   8,340.0 
  

 

 

  

 

 

 

Total loans

   32,384.5   29,744.9 

Less allowance for loan losses

   (233.4)   (229.3) 
  

 

 

  

 

 

 

Total loans, net

   32,151.1   29,515.6 
  

 

 

  

 

 

 

Goodwill (note 7)

   2,411.4   1,992.7 

Bank-owned life insurance

   405.6   349.1 

Premises and equipment, net

   264.7   244.5 

Other acquisition-related intangible assets (note 7)

   156.5   149.4 

Other assets (notes 1, 4 and 12)

   963.0   967.2 
  

 

 

  

 

 

 

Total assets

  $43,998.2  $40,609.8 
  

 

 

  

 

 

 

Liabilities

   

Deposits:

   

Non-interest-bearing

  $7,655.3  $6,660.8 

Savings

   4,513.1   4,397.7 

Interest-bearing checking and money market

   15,143.1   14,260.1 

Time

   5,235.8   4,542.2 
  

 

 

  

 

 

 

Total deposits

   32,547.3   29,860.8 
  

 

 

  

 

 

 

Borrowings:

   

Federal Home Loan Bank advances

   3,074.1   3,061.1 

Federal funds purchased

   543.0   617.0 

Customer repurchase agreements

   295.8   343.3 

Other borrowings

   231.1   35.4 
  

 

 

  

 

 

 

Total borrowings

   4,144.0   4,056.8 
  

 

 

  

 

 

 

Notes and debentures

   906.2   1,030.1 

Other liabilities (notes 1 and 12)

   654.6   520.2 
  

 

 

  

 

 

 

Total liabilities

   38,252.1   35,467.9 
  

 

 

  

 

 

 

Commitments and contingencies (notes 1 and 9)

   

Stockholders’ Equity(notes 2, 5 and 8)

   

Preferred stock ($0.01 par value; 50.0 million shares authorized; 10.0 million shares
issued and outstanding at both dates)

   244.1   244.1 

Common stock ($0.01 par value; 1.95 billion shares authorized; 433.6 million shares
and 405.0 million shares issued)

   4.3   4.0 

Additionalpaid-in capital

   5,972.2   5,446.1 

Retained earnings

   996.4   949.3 

Unallocated common stock of Employee Stock Ownership Plan, at cost (6.7 million shares
and 7.0 million shares)

   (139.1)   (144.6) 

Accumulated other comprehensive loss

   (169.7)   (195.0) 

Treasury stock, at cost (89.0 million shares and 89.1 million shares)

   (1,162.1)   (1,162.0) 
  

 

 

  

 

 

 

Total stockholders’ equity

   5,746.1   5,141.9 
  

 

 

  

 

 

 

Total liabilities and stockholders’ equity

  $43,998.2  $40,609.8 
  

 

 

  

 

 

 

(in millions)September 30,
2021		December 31,
2020
Assets
Cash and due from banks$410.6 $477.3 
Short-term investments7,723.0 3,766.0 
Total cash and cash equivalents (note 2)8,133.6 4,243.3 
Securities (note 2):
Debt securities available-for-sale, at fair value6,257.0 4,925.5 
Debt securities held-to-maturity, at amortized cost and net of allowance for credit losses
   of $1.6 million at both dates (fair value of $4.13 billion and $4.27 billion)
3,929.8 3,993.8 
Federal Reserve Bank and Federal Home Loan Bank stock, at cost264.7 266.6 
Equity securities, at fair value— 5.3 
Total securities10,451.5 9,191.2 
Loans held-for-sale9.8 26.5 
Loans (notes 3, 4 and 5):
Commercial and industrial12,769.0 14,982.3 
Commercial real estate12,662.6 13,336.9 
Equipment financing5,040.3 4,930.0 
Total Commercial Portfolio30,471.9 33,249.2 
Residential mortgage7,269.8 8,518.9 
Home equity and other consumer1,784.1 2,101.4 
Total Retail Portfolio9,053.9 10,620.3 
Total loans39,525.8 43,869.5 
Less allowance for credit losses on loans(352.4)(425.1)
Total loans, net39,173.4 43,444.4 
Goodwill (note 8)2,680.8 2,680.8 
Bank-owned life insurance716.5 711.6 
Premises and equipment, net249.9 276.7 
Other acquisition-related intangible assets (note 8)136.1 165.1 
Other assets (notes 1, 2, 3, 5 and 13)2,121.0 2,352.2 
Total assets$63,672.6 $63,091.8 
Liabilities
Deposits:
Non-interest-bearing$16,334.6 $15,881.7 
Savings6,685.4 6,029.7 
Interest-bearing checking and money market25,614.7 24,567.5 
Time4,236.6 5,658.8 
Total deposits52,871.3 52,137.7 
Borrowings:
Federal Home Loan Bank advances569.6 569.7 
Customer repurchase agreements407.8 452.9 
Federal funds purchased— 125.0 
Total borrowings977.4 1,147.6 
Notes and debentures999.4 1,009.6 
Other liabilities (notes 1, 4, 5 and 13)1,041.5 1,194.1 
Total liabilities55,889.6 55,489.0 
Commitments and contingencies (notes 1, 5 and 10)00
Stockholders’ Equity (notes 1, 6 and 9)
Preferred stock ($0.01 par value; 50.0 million shares authorized;
   10.0 million shares issued and outstanding at both dates)
244.1 244.1 
Common stock ($0.01 par value; 1.95 billion shares authorized;
   536.8 million shares and 533.7 million shares issued)
5.4 5.3 
Additional paid-in capital7,714.9 7,663.6 
Retained earnings1,574.7 1,363.6 
Unallocated common stock of Employee Stock Ownership Plan, at cost
   (5.3 million shares and 5.6 million shares)
(110.2)(115.6)
Accumulated other comprehensive loss(176.9)(89.2)
Treasury stock, at cost (109.0 million shares at both dates)(1,469.0)(1,469.0)
Total stockholders’ equity7,783.0 7,602.8 
Total liabilities and stockholders’ equity$63,672.6 $63,091.8 

See accompanying notes to consolidated financial statements.

1

People’s United Financial, Inc.

Consolidated Statements of Income - (Unaudited)

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 

(in millions, except per common share data)

      2017           2016           2017          2016     

Interest and dividend income:

       

Commercial real estate

  $105.6   $85.7   $299.5  $257.8 

Commercial and industrial

   80.0    66.9    218.7   190.0 

Equipment financing

   41.5    32.8    104.6   99.1 

Residential mortgage

   52.5    45.7    154.1   133.4 

Home equity and other consumer

   21.0    18.4    59.3   55.4 
  

 

 

   

 

 

   

 

 

  

 

 

 

Total interest on loans

   300.6    249.5    836.2   735.7 

Securities

   37.2    34.2    112.1   103.4 

Short-term investments

   1.1    0.4    2.7   1.1 

Loans held for sale

   0.3    0.4    0.7   0.8 
  

 

 

   

 

 

   

 

 

  

 

 

 

Total interest and dividend income

   339.2    284.5    951.7   841.0 
  

 

 

   

 

 

   

 

 

  

 

 

 

Interest expense:

       

Deposits

   34.4    25.2    92.4   75.8 

Borrowings

   12.7    6.1    28.9   16.4 

Notes and debentures

   7.5    7.9    22.3   23.4 
  

 

 

   

 

 

   

 

 

  

 

 

 

Total interest expense

   54.6    39.2    143.6   115.6 
  

 

 

   

 

 

   

 

 

  

 

 

 

Net interest income

   284.6    245.3    808.1   725.4 

Provision for loan losses (note 4)

   7.0    8.4    18.5   28.9 
  

 

 

   

 

 

   

 

 

  

 

 

 

Net interest income after provision for loan losses

   277.6    236.9    789.6   696.5 
  

 

 

   

 

 

   

 

 

  

 

 

 

Non-interest income:

       

Bank service charges

   25.3    25.3    73.8   73.8 

Investment management fees

   16.9    11.6    49.2   34.1 

Operating lease income

   10.9    11.2    32.1   31.7 

Commercial banking lending fees

   7.0    7.1    26.7   24.4 

Insurance revenue

   9.7    9.8    26.3   26.1 

Cash management fees

   6.8    6.5    19.6   18.8 

Brokerage commissions

   2.8    3.2    9.2   9.4 

Net gains on sales of residential mortgage loans

   1.1    1.9    2.7   3.7 

Net security (losses) gains (note 3)

   —      —      (15.6)   0.1 

Othernon-interest income

   8.8    14.2    41.6   36.4 
  

 

 

   

 

 

   

 

 

  

 

 

 

Totalnon-interest income

   89.3    90.8    265.6   258.5 
  

 

 

   

 

 

   

 

 

  

 

 

 

Non-interest expense(note 2):

       

Compensation and benefits

   128.0    116.1    383.6   341.6 

Occupancy and equipment

   40.2    37.7    118.6   112.6 

Professional and outside services

   19.2    17.7    62.8   51.5 

Regulatory assessments

   10.3    9.9    29.8   27.1 

Operating lease expense

   8.8    9.7    26.3   28.0 

Amortization of other acquisition-related intangible assets (note 7)

   7.9    5.8    22.1   17.4 

Othernon-interest expense

   22.7    24.5    77.3   73.4 
  

 

 

   

 

 

   

 

 

  

 

 

 

Totalnon-interest expense

   237.1    221.4    720.5   651.6 
  

 

 

   

 

 

   

 

 

  

 

 

 

Income before income tax expense

   129.8    106.3    334.7   303.4 

Income tax expense (notes 1 and 14)

   39.0    32.6    103.8   98.3 
  

 

 

   

 

 

   

 

 

  

 

 

 

Net income

   90.8    73.7    230.9   205.1 

Preferred stock dividend

   3.5    —      10.5   —   
  

 

 

   

 

 

   

 

 

  

 

 

 

Net income available to common shareholders

  $87.3   $73.7   $220.4  $205.1 
  

 

 

   

 

 

   

 

 

  

 

 

 

Earnings per common share(note 6):

       

Basic

  $0.26   $0.24   $0.67  $0.68 

Diluted

   0.26    0.24    0.67   0.68 

 Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions, except per common share data)2021202020212020
Interest and dividend income:
Commercial and industrial$104.3 $110.7 $328.3 $329.5 
Commercial real estate96.5 110.5 296.9 382.5 
Equipment financing62.3 65.4 187.6 201.2 
Residential mortgage58.8 82.1 193.1 257.3 
Home equity and other consumer15.2 19.9 47.9 68.0 
Total interest on loans337.1 388.6 1,053.8 1,238.5 
Securities53.8 47.5 157.6 148.5 
Short-term investments2.8 0.4 5.3 2.6 
Loans held-for-sale0.1 0.3 0.4 3.9 
Total interest and dividend income393.8 436.8 1,217.1 1,393.5 
Interest expense:
Deposits15.1 36.5 54.9 157.1 
Borrowings1.2 7.4 3.5 24.5 
Notes and debentures7.2 1.5 21.6 18.9 
Total interest expense23.5 45.4 80.0 200.5 
Net interest income370.3 391.4 1,137.1 1,193.0 
Provision for credit losses on loans (note 4)12.0 27.1 (42.3)141.4 
Provision for credit losses on securities (note 2)0.1 (0.3)— (0.3)
Net interest income after provision for credit losses358.2 364.6 1,179.4 1,051.9 
Non-interest income:
Bank service charges25.9 24.5 74.3 72.8 
Investment management fees21.1 18.8 62.5 54.3 
Commercial banking lending fees11.8 12.7 39.5 35.4 
Operating lease income (note 5)10.6 12.4 33.1 36.8 
Cash management fees9.6 8.8 28.4 24.3 
Other non-interest income (notes 2 and 5)21.4 23.9 56.2 90.9 
Total non-interest income100.4 101.1 294.0 314.5 
Non-interest expense:
Compensation and benefits167.7 166.5 518.1 508.2 
Occupancy and equipment50.2 49.1 149.3 148.1 
Professional and outside services27.6 24.1 91.2 88.3 
Amortization of other acquisition-related intangible assets (note 8)8.9 10.2 28.7 31.1 
Regulatory assessments6.6 8.4 22.5 25.8 
Operating lease expense7.0 9.3 22.4 27.9 
Other non-interest expense21.2 26.0 73.9 88.3 
Total non-interest expense289.2 293.6 906.1 917.7 
Income before income tax expense169.4 172.1 567.3 448.7 
Income tax expense (note 1)29.7 27.5 112.3 83.8 
Net income139.7 144.6 455.0 364.9 
Preferred stock dividend3.5 3.5 10.5 10.5 
Net income available to common shareholders$136.2 $141.1 $444.5 $354.4 
Earnings per common share (note 7):
Basic$0.32 $0.34 $1.06 $0.84 
Diluted0.32 0.34 1.05 0.84 

See accompanying notes to consolidated financial statements.

2

People’s United Financial, Inc.

Consolidated Statements of Comprehensive Income - (Unaudited)

   Three Months Ended
September 30,		  Nine Months Ended
September 30,		 

(in millions)

    2017      2016      2017      2016   

Net income

  $90.8  $73.7  $230.9  $205.1 
  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive income (loss), net of tax:

     

Net actuarial loss and prior service credit related to pension
and other postretirement plans

   0.9   0.9   2.8   2.8 

Net unrealized gains and losses on securities available for sale

   3.6   (1.7)   21.0   52.3 

Amortization of unrealized losses on securities transferred
to held to maturity

   0.6   0.5   1.6   1.5 

Net unrealized gains and losses on derivatives accounted
for as cash flow hedges

   (0.2)   0.2   (0.1)   0.2 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total other comprehensive income (loss), net of tax (note 5)

   4.9   (0.1)   25.3   56.8 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total comprehensive income

  $95.7  $73.6  $256.2  $261.9 
  

 

 

  

 

 

  

 

 

  

 

 

 

 Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2021202020212020
Net income$139.7 $144.6 $455.0 $364.9 
Other comprehensive income (loss), net of tax:
Net actuarial gains and losses related to pension and other
   postretirement plans		2.0 1.5 7.5 4.7 
Net unrealized gains and losses on debt securities
   available-for-sale		(35.0)(5.9)(99.2)84.1 
Amortization of unrealized losses on debt securities
   transferred to held-to-maturity		0.7 0.7 2.9 2.7 
Net unrealized gains and losses on derivatives accounted
   for as cash flow hedges		0.2 (0.3)1.1 (2.5)
Total other comprehensive income (loss),
   net of tax (note 6)		(32.1)(4.0)(87.7)89.0 
Total comprehensive income$107.6 $140.6 $367.3 $453.9 

See accompanying notes to consolidated financial statements.


3

People’s United Financial, Inc.

Consolidated Statements of Changes in Stockholders’ Equity - (Unaudited)

Nine months ended September 30, 2017
(in millions, except per share common data)

 Preferred
Stock		  Common
Stock		  Additional
Paid-In
Capital		  Retained
Earnings		  Unallocated
ESOP
Common
Stock		  Accumulated
Other
Comprehensive
Loss		  Treasury
Stock		  Total
Stockholders’
Equity		 

Balance at December 31, 2016

 $244.1  $4.0  $5,446.1  $949.3  $(144.6)  $(195.0)  $(1,162.0)  $5,141.9 

Net income

  —     —     —     230.9   —     —     —     230.9 

Total other comprehensive income,
net of tax (note 5)

  —     —     —     —     —     25.3   —     25.3 

Common stock issued in Suffolk
Bancorp acquisition (note 2)

  —     0.2   484.6   —     —     —     —     484.8 

Cash dividends on common stock
($0.5150 per share)

  —     —     —     (169.3)   —     —     —     (169.3) 

Cash dividends on preferred stock

  —     —     —     (10.5)   —     —     —     (10.5) 

Restricted stock and performance-based
share awards

  —     —     9.1   —     —     —     (0.1)   9.0 

Employee Stock Ownership Plan
common committed to be
released (note 8)

  —     —     —     (0.7)   5.5   —     —     4.8 

Common stock repurchased and
retired upon vesting of restricted
stock awards

  —     —     —     (3.3)   —     —     —     (3.3) 

Stock option exercises

  —     0.1   32.4   —     —     —     —     32.5 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at September 30, 2017

 $244.1  $4.3  $5,972.2  $996.4  $(139.1)  $(169.7)  $(1,162.1)  $5,746.1 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Nine months ended September 30, 2016
(in millions, except per common share data)

 Preferred
Stock		  Common
Stock		  Additional
Paid-In
Capital		  Retained
Earnings		  Unallocated
ESOP
Common
Stock		  Accumulated
Other
Comprehensive
Loss		  Treasury
Stock		  Total
Stockholders’
Equity		 

Balance at December 31, 2015

 $—    $3.9  $5,337.7  $880.8  $(151.8)  $(177.2)  $(1,161.8)  $4,731.6 

Net income

  —     —     —     205.1   —     —     —     205.1 

Total other comprehensive income,
net of tax (note 5)

  —     —     —     —     —     56.8   —     56.8 

Cash dividends on common stock
($0.5075 per share)

  —     —     —     (154.1)   —     —     —     (154.1) 

Restricted stock and performance-based
share awards

  —     —     7.1   0.1   —     —     (0.2)   7.0 

Employee Stock Ownership Plan
common committed to be
released (note 8)

  —     —     —     (1.4)   5.4   —     —     4.0 

Common stock repurchased and
retired upon vesting of restricted
stock awards

  —     —     —     (3.2)   —     —     —     (3.2) 

Stock option exercises and related
tax benefits

  —     0.1   15.0   —     —     —     —     15.1 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at September 30, 2016

 $—    $4.0  $5,359.8  $927.3  $(146.4)  $(120.4)  $(1,162.0)  $4,862.3 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Three months ended September 30, 2021
(in millions, except per common share data)		Preferred
Stock		Common
Stock		Additional
Paid-In
Capital		Retained
Earnings		Unallocated
ESOP (1)
Common
Stock		Accumulated
Other
Comprehensive
Loss		Treasury
Stock		Total
Stockholders’
Equity
Balance at June 30, 2021$244.1 $5.4 $7,709.4 $1,516.5 $(112.0)$(144.8)$(1,469.0)$7,749.6 
Net income— — — 139.7 — — — 139.7 
Total other comprehensive loss,
   net of tax (note 6)		— — — — — (32.1)— (32.1)
Cash dividend on common stock
   ($0.1825 per share)
— — — (77.4)— — — (77.4)
Cash dividend on preferred stock— — — (3.5)— — — (3.5)
Restricted stock and performance-based
   share awards		— — 4.1 — — — — 4.1 
ESOP common stock committed to be
   released (note 9)		— — — (0.3)1.8 — — 1.5 
Common stock repurchased and
   retired upon vesting of restricted
   stock awards		— — — (0.3)— — — (0.3)
Stock options exercised— — 1.4 — — — — 1.4 
Balance at September 30, 2021$244.1 $5.4 $7,714.9 $1,574.7 $(110.2)$(176.9)$(1,469.0)$7,783.0 
Nine months ended September 30, 2021
(in millions, except per common share data)		Preferred
Stock		Common
Stock		Additional
Paid-In
Capital		Retained
Earnings		Unallocated
ESOP
Common
Stock		Accumulated
Other
Comprehensive
Loss		Treasury
Stock		Total
Stockholders’
Equity
Balance at December 31, 2020$244.1 $5.3 $7,663.6 $1,363.6 $(115.6)$(89.2)$(1,469.0)$7,602.8 
Net income— — — 455.0 — — — 455.0 
Total other comprehensive loss,
   net of tax (note 6)		— — — — — (87.7)— (87.7)
Cash dividends on common stock
   ($0.545 per share)
— — — (230.4)— — — (230.4)
Cash dividends on preferred stock— — — (10.5)— — — (10.5)
Restricted stock and performance-based
   share awards		— — 12.5 — — — — 12.5 
ESOP common stock committed to be
   released (note 9)		— — — (1.0)5.4 — — 4.4 
Common stock repurchased and
   retired upon vesting of restricted
   stock awards		— — — (2.0)— — — (2.0)
Stock options exercised— 0.1 38.8 — — — — 38.9 
Balance at September 30, 2021$244.1 $5.4 $7,714.9 $1,574.7 $(110.2)$(176.9)$(1,469.0)$7,783.0 

(1) Employee Stock Ownership Plan
Three months ended September 30, 2020
(in millions, except per common share data)		Preferred
Stock		Common
Stock		Additional
Paid-In
Capital		Retained
Earnings		Unallocated
ESOP
Common
Stock		Accumulated
Other
Comprehensive
Loss		Treasury
Stock		Total
Stockholders’
Equity
Balance at June 30, 2020$244.1 $5.3 $7,651.2 $1,524.6 $(119.3)$(73.9)$(1,469.0)$7,763.0 
Net income— — — 144.6 — — — 144.6 
Total other comprehensive loss,
   net of tax (note 6)		— — — — — (4.0)— (4.0)
Cash dividend on common stock
   ($0.18 per share)
— — — (75.7)— — — (75.7)
Cash dividend on preferred stock— — — (3.5)— — — (3.5)
Restricted stock and performance-based
   share awards		— — 4.6 — — — 4.6 
ESOP common stock committed to be
   released (note 9)		— — — (0.9)1.9 — — 1.0 
Stock options exercised— — 1.5 — — — — 1.5 
Balance at September 30, 2020$244.1 $5.3 $7,657.3 $1,589.1 $(117.4)$(77.9)$(1,469.0)$7,831.5 
Nine months ended September 30, 2020
(in millions, except per common share data)		Preferred
Stock		Common
Stock		Additional
Paid-In
Capital		Retained
Earnings		Unallocated
ESOP
Common
Stock		Accumulated
Other
Comprehensive
Loss		Treasury
Stock		Total
Stockholders’
Equity
Balance at December 31, 2019$244.1 $5.3 $7,639.4 $1,512.8 $(122.9)$(166.9)$(1,164.6)$7,947.2 
Net income— — — 364.9 — — — 364.9 
Total other comprehensive income,
   net of tax (note 6)		— — — — — 89.0 — 89.0 
Cash dividends on common stock
   ($0.5375 per share)
— — — (228.5)— — — (228.5)
Cash dividends on preferred stock— — — (10.5)— — — (10.5)
Restricted stock and performance-based
   share awards		— — 12.0 — — — 12.0 
Common stock repurchased (note 6)— — — — — — (304.4)(304.4)
ESOP common stock committed to be
   released (note 9)		— — — (2.2)5.5 — — 3.3 
Common stock repurchased and
   retired upon vesting of restricted
   stock awards		— — — (1.5)— — — (1.5)
Stock options exercised— — 5.9 — — — — 5.9 
Transition adjustments related to
   adoption of new accounting
   standards (note 1)		— — — (45.9)— — — (45.9)
Balance at September 30, 2020$244.1 $5.3 $7,657.3 $1,589.1 $(117.4)$(77.9)$(1,469.0)$7,831.5 
See accompanying notes to consolidated financial statements.


4

People’s United Financial, Inc.

Consolidated Statements of Cash Flows - (Unaudited)

   Nine Months Ended
September 30,		 

(in millions)

  2017  2016 

Cash Flows from Operating Activities:

   

Net income

  $230.9  $205.1 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Depreciation and amortization of premises and equipment

   29.3   27.6 

Expense related to operating leases

   26.3   28.0 

Amortization of other acquisition-related intangible assets

   22.1   17.4 

Provision for loan losses

   18.5   28.9 

Expense related to share-based awards

   13.4   11.4 

Employee Stock Ownership Plan common stock committed to be released

   4.8   4.0 

Net security losses (gains)

   15.6   (0.1) 

Net gains on sales of residential mortgage loans

   (2.7)   (3.7) 

Originations of loansheld-for-sale

   (212.5)   (296.1) 

Proceeds from sales of loansheld-for-sale

   239.5   287.8 

Net increase in trading account securities

   (1.5)   (0.1) 

Excess income tax benefits from stock option exercises (note 14)

   1.3   —   

Net changes in other assets and other liabilities

   15.3   (23.8) 
  

 

 

  

 

 

 

Net cash provided by operating activities

   400.3   286.4 
  

 

 

  

 

 

 

Cash Flows from Investing Activities:

  

Proceeds from principal repayments and maturities of securities available for sale

   456.1   680.2 

Proceeds from sales of securities available for sale

   1,016.2   249.9 

Proceeds from principal repayments and maturities of securities held to maturity

   92.1   83.6 

Purchases of securities available for sale

   (237.6)   (1,228.3) 

Purchases of securities held to maturity

   (1,235.9)   (286.8) 

Net redemptions (purchases) of Federal Reserve Bank stock

   17.6   (9.1) 

Net purchases of Federal Home Loan Bank stock

   (19.9)   (1.0) 

Proceeds from sales of loans

   8.4   2.8 

Loan disbursements, net of principal collections

   (325.4)   (944.8) 

Purchases of loans

   —     (30.6) 

Purchases of premises and equipment

   (6.7)   (14.9) 

Purchases of leased equipment

   (20.5)   (14.3) 

Proceeds from sales of real estate owned

   8.6   8.0 

Return of premium on bank-owned life insurance, net

   1.7   1.7 

Net cash acquired in acquisitions

   28.9   —   
  

 

 

  

 

 

 

Net cash used in investing activities

   (216.4)   (1,503.6) 
  

 

 

  

 

 

 

Cash Flows from Financing Activities:

  

Net increase in deposits

   834.1   1,238.1 

Net (decrease) increase in borrowings with terms of three months or less

   (279.4)   131.2 

Repayments of borrowings with terms of more than three months

   (356.1)   (0.2) 

Repayment of notes and debentures

   (125.0)   —   

Cash dividends paid on common stock

   (169.3)   (154.1) 

Cash dividends paid on preferred stock

   (10.5)   —   

Common stock repurchases

   (3.3)   (3.2) 

Proceeds from stock options exercised

   28.1   10.4 
  

 

 

  

 

 

 

Net cash (used in) provided by financing activities

   (81.4)   1,222.2 
  

 

 

  

 

 

 

Net increase in cash and cash equivalents

   102.5   5.0 

Cash and cash equivalents at beginning of period

   614.1   715.3 
  

 

 

  

 

 

 

Cash and cash equivalents at end of period

  $716.6  $720.3 
  

 

 

  

 

 

 

Supplemental Information:

  

Interest payments

  $138.4  $114.3 

Unsettled purchases of securities

   110.5   9.7 

Income tax payments

   100.1   86.1 

Real estate properties acquired by foreclosure

   9.3   17.9 

Assets acquired and liabilities assumed in acquisitions (note 2):

   

Non-cash assets, excluding goodwill and other acquisition-related intangibles

   2,642.1   —   

Liabilities

   2,634.1   —   

Common stock issued in Suffolk Bancorp acquisition

   484.8   —   

 Nine Months Ended
September 30,
(in millions)20212020
Cash Flows from Operating Activities:
Net income$455.0 $364.9 
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses(42.3)141.1 
Depreciation and amortization of premises and equipment33.1 32.7 
Amortization of other acquisition-related intangible assets28.7 31.1 
Expense related to operating leases22.4 27.9 
Expense related to share-based awards21.1 20.0 
ESOP common stock committed to be released4.4 3.3 
Net gains on sales of loans— (16.0)
Net gains on sales of residential mortgage loans held-for-sale(1.5)(2.4)
Originations of loans held-for-sale(39.1)(136.6)
Proceeds from sales of loans held-for-sale57.3 628.9 
Net decrease in trading debt securities— 7.1 
Excess income tax benefits from stock option exercises0.8 — 
Net changes in other assets and other liabilities366.4 (453.5)
Net cash provided by operating activities906.3 648.5 
Cash Flows from Investing Activities:
Proceeds from sales of equity securities6.4 0.9 
Proceeds from principal repayments and maturities of debt securities available-for-sale977.5 969.9 
Proceeds from sales of debt securities available-for-sale145.6 — 
Proceeds from principal repayments and maturities of debt securities held-to-maturity193.9 219.3 
Purchases of debt securities available-for-sale(2,796.4)(1,363.3)
Purchases of debt securities held-to-maturity(154.8)(275.5)
Net purchases of Federal Reserve Bank stock(0.6)(24.4)
Net redemptions of Federal Home Loan Bank stock2.5 98.3 
Proceeds from sales of loans54.6 83.0 
Net principal collections (disbursements) of loans4,274.7 (1,633.4)
Purchases of loans(58.4)(30.6)
Purchases of premises and equipment(24.2)(27.2)
Purchases of leased equipment, net— (9.5)
Proceeds from sales of real estate owned7.4 11.4 
Return of premium on bank-owned life insurance, net0.9 1.8 
Net cash provided by (used in) investing activities2,629.1 (1,979.3)
Cash Flows from Financing Activities:
Net increase in deposits733.6 6,047.0 
Net decrease in borrowings with terms of three months or less(170.0)(3,872.4)
Repayments of borrowings with terms of more than three months(0.2)(45.2)
Cash dividends paid on common stock(230.4)(228.5)
Cash dividends paid on preferred stock(10.5)(10.5)
Repurchases of common stock(2.0)(305.9)
Proceeds from stock options exercised34.4 0.7 
Net cash provided by financing activities354.9 1,585.2 
Net increase in cash and cash equivalents3,890.3 254.4 
Cash and cash equivalents at beginning of period4,243.3 801.0 
Cash and cash equivalents at end of period$8,133.6 $1,055.4 
Supplemental Information:
Income tax payments$82.1 $77.3 
Interest payments79.0 207.4 
Significant non-cash transactions:
Right-of-use assets obtained in exchange for lessee operating lease liabilities9.2 15.3 
Real estate properties acquired by foreclosure2.1 2.8 
Unsettled purchases of securities— 38.3 

See accompanying notes to consolidated financial statements.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 1. GENERAL

5


NOTE 1. GENERAL
In the opinion of management, the accompanying unaudited consolidated financial statements of People’s United Financial, Inc. (“People’s United” or the “Company”) have been prepared to reflect all adjustments necessary to present fairly the financial position and results of operations as of the dates and for the periods shown. All significant intercompany transactions and balances are eliminated in consolidation. Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

In preparing the consolidated financial statements, management is required to make significant estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from management’s current estimates, as a result of changing conditions and future events.

Several accounting estimates are particularly critical and are susceptible to significant near-term change, including the allowance for loancredit losses (“ACL”) and asset impairment judgments, such as the recoverability of goodwill and other intangible assets. These accounting estimates are reviewed with the Audit Committee of the Board of Directors.

The judgments used by management in applying critical accounting policies may be affected by economic conditions, which may result in changes to future financial results. For example, subsequent evaluations of the loan portfolio, in light of the factors then prevailing, may result in significant changes in the allowance for loan lossesACL in future periods, and the inability to collect outstanding principal may result in increased loancredit losses.

Note 1 to People’s United’s audited consolidated financial statements included in the Annual Report on Form10-K for the year ended December 31, 2016, as supplemented by the Quarterly Reports for the periods ended March 31, 2017 and June 30, 2017 and this Quarterly Report for the period ended September 30, 2017, provides disclosure of People’s United’s significant accounting policies.

People’s United holds ownership interests in limited partnerships formed to develop and operate affordable housing units for lower income tenants throughout its franchise area. The underlying partnerships, which are considered variable interest entities (“VIEs”), are not consolidated into the Company’s Consolidated Financial Statements. These investments have historically played a role in enabling People’s United Bank, National Association (the “Bank”) to meet its Community Reinvestment Act requirements while, at the same time, providing federal income tax credits.

Affordable housing investments, including all legally binding commitments to fund future investments, are included in other assets in the Consolidated Statements of Condition ($250.0 million and $195.2 million at September 30, 2017 and December 31, 2016, respectively). Included in other liabilities in the Consolidated Statements of Condition is a liability for all legally binding unfunded commitments to fund future investments ($109.6 million and $92.5 million at those dates). The cost of the Company’s investments is amortized on a straight-line basis over the period during which the related federal income tax credits are realized (generally ten years). Amortization expense, which is included as a component of income tax expense, totaled $4.2 million and $3.0 million for the three months ended September 30, 2017 and 2016, respectively, and $12.3 million and $8.9 million for the nine months ended September 30, 2017 and 2016, respectively.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) have been omitted or condensed. As a result, the accompanying consolidated financial statements should be read in conjunction with People’s United’s Annual Report on
Form10-K for the year ended December 31, 2016.2020 (the “2020 Form 10-K”). The results of operations for the three and nine months ended September 30, 20172021 are not necessarily indicative of the results of operations that may be expected for the entire year or any other interim period.

Note 1 to People’s United’s audited consolidated financial statements included in the 2020 Form 10-K, as supplemented by the Quarterly Reports for the periods ended March 31, 2021 and June 30, 2021, and this Quarterly Report for the period ended September 30, 2021, provides disclosure of People’s United’s significant accounting policies.
People’s United holds ownership interests in limited partnerships formed to develop and operate affordable housing units for lower income tenants throughout its franchise area. The underlying partnerships, which are considered variable interest entities, are not consolidated into the Company’s Consolidated Financial Statements. These investments have historically played a role in enabling People’s United Bank, National Association (the “Bank”) to meet its Community Reinvestment Act requirements while, at the same time, providing federal income tax credits.
Affordable housing investments, including all legally binding commitments to fund future investments, are included in other assets in the Consolidated Statements of Condition ($592.5 million and $460.8 million at September 30, 2021 and
December 31, 2020, respectively). Included in other liabilities in the Consolidated Statements of Condition is a liability for all legally binding unfunded commitments to fund future investments ($268.9 million and $182.4 million at those dates). The cost of the Company’s investments is amortized on a straight-line basis over the period during which the related federal income tax credits are realized (generally 10 years). Amortization expense, which is included as a component of income tax expense, totaled $9.6 million and $8.0 million for the three months ended September 30, 2021 and 2020, respectively, and $26.4 million and $23.2 million for the nine months ended September 30, 2021 and 2020, respectively.
Current Expected Credit Losses
On January 1, 2020, the Company adopted new accounting guidance, which requires entities to estimate and recognize an allowance for lifetime expected credit losses for financial assets measured at amortized cost, including loans, held-to-maturity securities and other receivables, as well as certain off-balance sheet credit exposures (the “CECL standard”). Upon adoption of this guidance, a transition adjustment decreasing opening retained earnings by $45.9 million was recorded. The Company did not change its application of the accounting policies with respect to loans or its methodology for determining the ACL during the nine months ended September 30, 2021.
6

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 2 – ACQUISITIONS

LEAF Commercial Capital, Inc.

Effective August 1, 2017,

Pending Acquisition
On February 22, 2021, People’s United and M&T Bank Corporation (“M&T”) announced that they have entered into a definitive agreement under which M&T will acquire People’s United in an all-stock transaction. Under the Bank completed its acquisition of LEAF Commercial Capital, Inc. (“LEAF”) a Philadelphia-based commercial equipment finance company. The fair valueterms of the consideration transferred in the LEAF acquisition consistedagreement, each share of approximately $220 million in cash.

The assets acquired and liabilities assumed in this transaction were recorded by People’s United at their estimated fair values ascommon stock will be converted into the right to receive 0.118 shares of M&T common stock. The merger, which has been approved by the boards of directors and shareholders of each company, is expected to close promptly after the parties have satisfied customary closing conditions, including the approval of the effective date and People’s United’s resultsBoard of operationsGovernors of the Federal Reserve System. Merger-related expenses recorded for the three and nine months ended September 30, 2017 include2021 totaled $4.7 million and $21.4 million, respectively.

Recent Developments
On August 5, 2021, the results of LEAF beginningBank announced it had reached an agreement with the effective date. The excessStop & Shop to retain 27 in-store branch and corresponding ATM locations in Connecticut slated to close as part of the purchase pricepreviously announced decision not to renew existing in-store branch contracts in Connecticut. The locations were strategically selected based on a variety of factors including proximity to nearby traditional branches, transaction volume, customer feedback and input from community leaders. The new agreement does not impact the previously announced exit period for all other Connecticut Stop & Shop branch locations. Closures will occur over several years using a phased approach and begin in 2022. Customers of the impacted branch locations will receive a minimum of 90 days’ notice prior to the closure. As of September 30, 2021, People’s United operated 125 Stop & Shop branch locations, 84 in Connecticut and 41 in New York.
On January 21, 2021, the Bank announced its decision not to renew its agreements with Stop & Shop to operate
140 in-store branches in Connecticut and New York upon their expiration in 2022. Branch closures will take place over several years using a phased approach. In the first quarter of 2021, the Bank reached an agreement with Stop & Shop on the timing of the exit from all New York in-store branch and ATM locations, which began in the third quarter of 2021 with a full exit occurring over the estimated fair valuenext three quarters. Contract termination costs recorded for the three and nine months ended
September 30, 2021 totaled $1.6 million and $15.7 million, respectively.
On March 11, 2020, the World Health Organization declared the outbreak of a strain of novel coronavirus disease (“COVID-19”) a global pandemic. Economic activity in many countries, including the United States, began to deteriorate rapidly as the COVID-19 pandemic spread across the globe. In the United States, which has been operating under a presidentially-declared national emergency since March 13, 2020, the COVID-19 pandemic caused severe disruption to the capital markets as well as business and economic activity. In response, individual municipalities and entire states adopted travel and work location restrictions, social distancing requirements, and in some cases, shelter-in-place protocols in order to slow the spread of the net assets acquiredvirus. These measures resulted in the closure of many schools, stores, offices, restaurants and manufacturing facilities, causing a decline in spending and an increase in layoffs.
In response, the Federal government introduced several measures to mitigate the magnitude of the pandemic’s effects. Most notably, on March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which provides financial assistance for businesses and individuals as well as targeted regulatory relief for financial institutions, was recorded as goodwill, whichsigned into law. This relief package was allocatedsubsequently followed by additional government stimulus in the form of the Consolidated Appropriations Act, 2021 in December 2020 and the American Rescue Plan in March 2021. The impact of the COVID-19 pandemic on economic conditions, both in the United States and abroad, has created global uncertainty about the future economic environment including the length and depth of any global recession that may occur. Concerns over interest rates, domestic and global policy issues, U.S. trade policy and geopolitical events, and the influence of those factors on the markets in general, further add to this uncertainty.
NOTE 2. CASH AND CASH EQUIVALENTS AND SECURITIES
Included in short-term investments are interest-bearing deposits at the Commercial Banking segment. Merger-related expenses recorded during Federal Reserve Bank of New York
(the nine months ended“FRB-NY”) totaling $7.62 billion at September 30, 2017 related2021 and $3.60 billion at December 31, 2020. These deposits represent an alternative to the LEAF acquisition totaled $2.2 million, including fees for investment advisory, legalovernight federal funds sold and valuation services.

The acquisition-date estimated fair values of the assets acquired and liabilities assumed in the acquisition of LEAF are summarized as follows:

(in millions)

    

Assets:

  

Cash and cash equivalents

  $74.9 

Loans

   717.9 

Goodwill

   148.4 

Trade name intangible

   0.9 

Premises and equipment

   2.4 

Non-compete agreement

   0.2 

Other assets

   13.0 
  

 

 

 

Total assets

  $957.7 
  

 

 

 

Liabilities:

  

Borrowings

  $708.1 

Other liabilities

   29.6 
  

 

 

 

Total liabilities

  $737.7 
  

 

 

 

Total purchase price

  $220.0 
  

 

 

 

Prior to the acquisition, and in connection with its previous revolving warehouse debt facilities and term note securitization transactions, LEAF established bankruptcy-remote special-purpose entities (“SPEs”) that issued term debt to institutional investors. These SPEs were VIEs, of which LEAF was deemed the primary beneficiary, and, therefore, the related financings were treated as secured borrowings with the SPEs consolidated in LEAF’s financial statements. Following the Company’s acquisition of LEAF, approximately $460 million of LEAF’s borrowings were repaid prior toyielded 0.15% at September 30, 2017, including all but one remaining securitization, which can be repaid without penalty in 2018.

Net deferred tax assets totaling $3.9 million were established in connection with recording the related purchase accounting adjustments (other than goodwill). Fair value adjustments to assets acquired (other than loans, see Note 4)2021 and liabilities assumed are generally amortized on a straight-line basis over periods consistent with the average life, useful life and/or contractual term of the related assets and liabilities.

0.10% at December 31, 2020, respectively.

7

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Suffolk Bancorp

Effective April 1, 2017, People’s United completed its acquisition of Suffolk Bancorp (“Suffolk”) based in Riverhead, New York. The fair value of the consideration transferred in the Suffolk acquisition totaled approximately $485 million and consisted of approximately 26.6 million shares of People’s United common stock. At the acquisition date, Suffolk operated 27 branches in the greater Long Island area.

The assets acquired and liabilities assumed in this transaction were recorded by People’s United at their estimated fair values as of the effective date and People’s United’s results of operations for the nine months ended September 30, 2017 include the results of Suffolk beginning with the effective date. The excess of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill, which was allocated to the Commercial Banking and Retail Banking segments. Merger-related expenses recorded during the nine months ended September 30, 2017 and 2016 related to the Suffolk acquisition totaled $26.5 million and $1.9 million, respectively, including: (i) fees for investment advisory, legal, accounting and valuation services; (ii) costs associated with contract terminations and branch closings; and (iii) compensatory charges.

The acquisition-date estimated fair values of the assets acquired and liabilities assumed in the acquisition of Suffolk are summarized as follows:

(in millions)

    

Assets:

  

Cash and cash equivalents

  $174.0 

Securities

   167.4 

Loans

   1,617.5 

Goodwill

   270.3 

Core deposit intangible

   28.1 

Premises and equipment

   40.4 

Bank-owned life insurance

   54.1 

Other real estate owned

   0.5 

Other assets

   28.9 
  

 

 

 

Total assets

  $2,381.2 
  

 

 

 

Liabilities:

  

Deposits

  $1,852.4 

Borrowings

   15.1 

Other liabilities

   28.9 
  

 

 

 

Total liabilities

  $1,896.4 
  

 

 

 

Total purchase price

  $484.8 
  

 

 

 

Net deferred tax liabilities totaling $0.3 million were established in connection with recording the related purchase accounting adjustments (other than goodwill). Fair value adjustments to assets acquired (other than loans, see Note 4) and liabilities assumed are generally amortized on a straight-line basis over periods consistent with the average life, useful life and/or contractual term of the related assets and liabilities.

The preceding summaries include adjustments to record the acquired assets and assumed liabilities at their respective fair values based on management’s best estimate using the information available at the time of the respective acquisition. While there may be changes in the respective acquisition-date fair values of certain balance sheet amounts and other items, management does not expect that such changes, if any, will be material.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Fair values of the major categories of assets acquired and liabilities assumed were determined as follows:

Cash and Cash Equivalents

The fair values of cash and cash equivalents approximate the respective carrying amounts because the instruments are payable on demand or have short-term maturities.

Securities

The fair values of securities acquired were based on quoted market prices. If a quoted market price for a certain security was not available, then a quoted price for a similar security in active markets was used to estimate fair value.

Loans

Loans acquired in connection with these acquisitions were recorded at fair value with no carryover of either LEAF’s or Suffolk’s previously established allowance for loan losses. Fair value of the loans was determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected as adjusted for an estimate of future credit losses and prepayments and then applying a market-based discount rate to those cash flow. The acquired loans were evaluated upon the respective acquisition dates and classified as either purchased performing or purchased credit impaired (“PCI”) (see Note 4).

In the aggregate, loans totaling $57 million were deemed PCI and were recorded at a discount from the corresponding outstanding principal balance of $67 million. The remaining acquired loans were deemed purchased performing and had a fair value of $2.28 billion and an outstanding principal balance of $2.32 billion, resulting in a discount that will be accreted over the remaining lives of the loans. Included in the Consolidated Statements of Income for the nine months ended September 30, 2017 is approximately $44 million of interest income attributable to these acquisitions since the respective acquisition dates.

Core Deposit Intangible

The core deposit intangible represents the value of the relationships with deposit customers. The fair value was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, net maintenance costs of the deposit base, the alternative cost of funds and the interest cost associated with customer deposits. The core deposit intangible will be amortized using an accelerated amortization method over a6-year period, reflective of the manner in which the related benefit attributable to the deposits will be recognized.

Deposits

The fair values of acquired savings and transaction deposit accounts were assumed to approximate the respective carrying amounts as these accounts have no stated maturity and are payable on demand. Time deposits were valued based on the present value of the contractual cash flows over the remaining period to maturity using a market rate.

Borrowings

The fair values of Federal Home Loan Bank (“FHLB”) advances and other borrowings, including securitizations, represent contractual repayments discounted using interest rates currently available on borrowings with similar characteristics and remaining maturities.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following table presents selected unaudited pro forma financial information of the Company reflecting the acquisitions of Suffolk and LEAF assuming the acquisitions were completed as of the beginning of the respective periods:

   Nine Months Ended
September 30,		 

(in millions, except per common share data)

  2017   2016 

Selected Financial Results:

    

Net interest income

  $835.9   $797.3 

Provision for loan losses

   18.5    28.9 

Non-interest income

   275.5    275.5 

Non-interest expense

   720.6    707.1 

Net income

   258.0    227.7 

Net income applicable to common shareholders

   247.5    227.7 

Basic and diluted earnings per common share

  $0.73   $0.69 

The selected unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the financial results of the combined companies had the acquisitions actually been completed at the beginning of the periods presented, nor does it indicate future results for any other interim or full-year period. Merger-related expenses attributable to the acquisitions that were incurred by People’s United, Suffolk and LEAF during the nine months ended September 30, 2017 and 2016 are not reflected in the selected unaudited pro forma financial information. Pro forma basic and diluted earnings per common share (“EPS”) were calculated using People’s United’s actual weighted-average common shares outstanding for the periods presented, plus the incremental common shares issued, assuming the acquisitions occurred at the beginning of the periods presented.

Recent acquisitions have been undertaken with the objective of expanding the Company’s business, both geographically and through product offerings, as well as realizing synergies and economies of scale by combining with the acquired entities. For these reasons, a market-based premium was paid for the acquired entities which, in turn, resulted in the recognition of goodwill, representing the excess of the respective purchase prices over the estimated fair value of the net assets acquired (see Note 7).

All of People’s United’s tax deductible goodwill was created in transactions in which the Company purchased the assets of the target (as opposed to purchasing the issued and outstanding stock of the target). At September 30, 2017 and December 31, 2016, tax deductible goodwill totaled $73.2 million and $77.9 million, respectively.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 3. SECURITIES AND SHORT-TERM INVESTMENTS

The amortized cost, ACL, gross unrealized gains and losses, and fair value of People’s United’s debt securities
available-for-sale and debt securities available for sale and securities held to maturityheld-to-maturity are as follows:

As of September 30, 2017 (in millions)

  Amortized
Cost		   Gross
Unrealized
Gains		   Gross
Unrealized
Losses		   Fair
Value		 

Securities available for sale:

        

Debt securities:

        

U.S. Treasury and agency

  $760.9   $0.1   $(19.1)   $741.9 

GSE (1) mortgage-backed securities
and CMOs (2)

   2,450.1    11.5    (15.0)    2,446.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total debt securities

   3,211.0    11.6    (34.1)    3,188.5 

Equity securities (3)

   9.6    —      (0.6)    9.0 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total securities available for sale

  $3,220.6   $11.6   $(34.7)   $3,197.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Securities held to maturity:

        

Debt securities:

        

State and municipal

  $1,999.2   $60.7   $(8.5)   $2,051.4 

GSE mortgage-backed securities

   1,344.6    1.5    (6.5)    1,339.6 

Corporate

   42.3    0.8    —      43.1 

Other

   1.5    —      —      1.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total securities held to maturity

  $3,387.6   $63.0   $(15.0)   $3,435.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

(1)Government sponsored enterprise
(2)Collateralized mortgage obligations
(3)During the quarter ended March 31, 2017, the Company exchanged its ownership interest in anon-marketable equity security (previously recorded in other assets) for cash and common stock in a publicly-traded company (fair value of approximately $10.8 million at acquisition).

As of December 31, 2016 (in millions)

  Amortized
Cost		   Gross
Unrealized
Gains		   Gross
Unrealized
Losses		   Fair
Value		 

Securities available for sale:

        

Debt securities:

        

U.S. Treasury and agency

  $889.9   $0.3   $(30.5)   $859.7 

GSE mortgage-backed securities
and CMOs

   3,573.1    15.0    (38.1)    3,550.0 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total debt securities

   4,463.0    15.3    (68.6)    4,409.7 

Equity securities

   0.2    —      —      0.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total securities available for sale

  $4,463.2   $15.3   $(68.6)   $4,409.9 
  

 

 

   

 

 

   

 

 

   

 

 

 

Securities held to maturity:

        

Debt securities:

        

State and municipal

  $1,499.1   $33.9   $(23.5)   $1,509.5 

GSE mortgage-backed securities

   500.8    —      (3.2)    497.6 

Corporate

   4.0    —      —      4.0 

Other

   1.5    —      —      1.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total securities held to maturity

  $2,005.4   $33.9   $(26.7)   $2,012.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

As of September 30, 2021 (in millions)Amortized
Cost		ACLGross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Debt securities available-for-sale:
U.S. Treasury and agency$523.4 $— $6.7 $— $530.1 
GSE (1) mortgage-backed and
   CMO (2) securities		5,744.4 — 70.4 (87.9)5,726.9 
Total debt securities
   available-for-sale		$6,267.8 $— $77.1 $(87.9)$6,257.0 
Debt securities held-to-maturity:
State and municipal$2,888.8 $(0.1)$181.1 $(8.1)$3,061.7 
GSE mortgage-backed securities954.3 — 24.2 — 978.5 
Corporate86.8 (1.5)2.2 — 87.5 
Other1.5 — — — 1.5 
Total debt securities
   held-to-maturity		$3,931.4 $(1.6)$207.5 $(8.1)$4,129.2 

(1)Government sponsored enterprise
(2)Collateralized mortgage obligations
As of December 31, 2020 (in millions)
Amortized
Cost
ACLGross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Debt securities available-for-sale:
U.S. Treasury and agency$529.8 $— $11.8 $— $541.6 
GSE mortgage-backed and
   CMO securities		4,274.7 — 110.9 (1.7)4,383.9 
Total debt securities
   available-for-sale		$4,804.5 $— $122.7 $(1.7)$4,925.5 
Debt securities held-to-maturity:
State and municipal$2,824.3 $(0.1)$236.0 $— $3,060.2 
GSE mortgage-backed securities1,079.9 — 36.4 — 1,116.3 
Corporate89.7 (1.5)1.0 (0.2)89.0 
Other1.5 — — — 1.5 
Total debt securities
   held-to-maturity		$3,995.4 $(1.6)$273.4 $(0.2)$4,267.0 
Accrued interest receivable on both debt securities available-for-sale and held-to-maturity is excluded from the estimate of credit losses. At September 30, 2021 and December 31, 2020, accrued interest receivable associated with (i) debt securities
available-for-sale totaling $13.1 million and $10.7 million, respectively, and (ii) debt securities held-to-maturity totaling $30.4 million and $31.5 million, respectively, is reported in other assets in the Consolidated Statements of Condition.
With regard to U.S. Treasury and residential mortgage-backed securities issued by the U.S. government, or agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost bases of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. government. Accordingly, no ACL has been recorded for these securities. With regard to securities issued by corporations, states and/or political subdivisions and other held-to-maturity securities, management considers a number of factors, including: (i) issuer bond ratings; (ii) historical loss rates for given bond ratings; and (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities.
8

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Securities available for sale with a fair value of $2.92 billion and $1.83 billion at

At September 30, 2017 and December 31, 2016, respectively,2021, no debt securities held-to-maturity were pledged as collateral for public deposits and for other purposes.

past due or in non-accrual status. The following table is a summary oftables summarize changes in the amortized cost and fair value of debt securities as of September 30, 2017, based on remaining period to contractual maturity. Information for GSE mortgage-backed securities and CMOs is based on the final contractual maturity dates without considering repayments and prepayments.

   Available for Sale   Held to Maturity 

(in millions)

  Amortized
Cost		   Fair
Value		   Amortized
Cost		   Fair
Value		 

U.S. Treasury and agency:

        

Within 1 year

  $1.0   $1.0   $—     $—   

After 1 but within 5 years

   361.3    355.0    —      —   

After 5 but within 10 years

   398.6    385.9    —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   760.9    741.9    —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

GSE mortgage-backed securities and CMOs:

        

After 1 but within 5 years

   —      —      69.4    69.4 

After 5 but within 10 years

   604.6    613.9    834.3    830.4 

After 10 years

   1,845.5    1,832.7    440.9    439.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   2,450.1    2,446.6    1,344.6    1,339.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

State and municipal:

        

Within 1 year

   —      —      18.7    18.7 

After 1 but within 5 years

   —      —      114.1    117.4 

After 5 but within 10 years

   —      —      343.2    363.2 

After 10 years

   —      —      1,523.2    1,552.1 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   —      —      1,999.2    2,051.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

Corporate:

        

After 1 but within 5 years

   —      —      5.0    5.0 

After 5 but within 10 years

   —      —      37.3    38.1 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   —      —      42.3    43.1 
  

 

 

   

 

 

   

 

 

   

 

 

 

Other:

        

After 1 but within 5 years

   —      —      1.5    1.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   —      —      1.5    1.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total:

        

Within 1 year

   1.0    1.0    18.7    18.7 

After 1 but within 5 years

   361.3    355.0    190.0    193.3 

After 5 but within 10 years

   1,003.2    999.8    1,214.8    1,231.7 

After 10 years

   1,845.5    1,832.7    1,964.1    1,991.9 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $3,211.0   $3,188.5   $3,387.6   $3,435.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

Management conducts a periodic review and evaluation of the securities portfolio to determine if the decline in fair value of any security is deemed to be other-than-temporary. Other-than-temporary impairment losses are recognizedACL on debt securities when: (i) People’s United hasheld-to-maturity for the three and nine months ended September 30, 2021 and 2020:
Three Months Ended September 30,
20212020
(in millions)CorporateState and municipalTotalCorporateState and municipalTotal
Balance at beginning of period$1.4 $0.1 $1.5 $1.8 $0.1 $1.9 
Provision charged (credited) to income0.1 — 0.1 (0.3)— (0.3)
Balance at end of period$1.5 $0.1 $1.6 $1.5 $0.1 $1.6 
Nine Months Ended September 30,
20212020
(in millions)CorporateState and municipalTotalCorporateState and municipalTotal
Balance at beginning of period$1.5 $0.1 $1.6 $— $— $— 
CECL transition adjustment— — — 1.8 0.1 1.9 
Balance at beginning of period, adjusted1.5 0.1 1.6 1.8 0.1 1.9 
Provision charged (credited) to income— — — (0.3)— (0.3)
Balance at end of period$1.5 $0.1 $1.6 $1.5 $0.1 $1.6 

Credit Quality Indicators
Credit ratings, which are updated monthly, are a key measure for estimating the probability of a bond’s default and for monitoring credit quality on an intention to sellon-going basis. For bonds other than U.S. Treasuries and bonds issued or guaranteed by
U.S. government agencies, credit ratings issued by one or more nationally recognized statistical rating organizations such as Moody’s, S&P, Fitch or Kroll are considered in conjunction with an assessment by the security; (ii) it is more likely than not that People’s United will be required to sellCompany’s risk management department. In the security prior to recovery;case of multiple ratings, generally the lower rating prevails. Investment grade reflects a credit rating of
BBB- or (iii) People’s United does not expect to recoverabove.
The tables below indicate the entire amortized cost basiscredit profile of the security.

Company’s debt securities held-to-maturity at amortized cost:
As of September 30, 2021 (in millions)Investment GradeNon-Investment GradeTotal
State and municipal$2,888.6 $0.2 $2,888.8 
GSE mortgage-backed securities954.3 — 954.3 
Corporate81.8 5.0 86.8 
Other1.5 — 1.5 
Total$3,926.2 $5.2 $3,931.4 
As of December 31, 2020 (in millions)Investment GradeNon-Investment GradeTotal
State and municipal$2,824.1 $0.2 $2,824.3 
GSE mortgage-backed securities1,079.9 — 1,079.9 
Corporate84.7 5.0 89.7 
Other1.5 — 1.5 
Total$3,990.2 $5.2 $3,995.4 


9

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Other-than-temporary impairment losses on debt securities are reflected in earnings as realized losses to the extent the impairment is related to credit losses of the issuer. The amount of the impairment related to other factors is recognized in other comprehensive income. Management has the ability and intent to hold the securities classified as held to maturity until they mature, at which time People’s United expects to receive full value for the securities.

The following tables summarize those debt securities available-for-sale with unrealized losses segregated byclassified as to the length of time the securitieslosses have existed and for which no ACL has been in a continuous unrealized loss position at the respective dates.recognized. Certain unrealized losses totaled less than $0.1 million.

  Continuous Unrealized Loss Position       
  Less Than 12 Months  12 Months Or Longer  Total 

As of September 30, 2017 (in millions)

 Fair
Value		  Unrealized
Losses		  Fair
  Value  		    Unrealized  
Losses		  Fair
Value		  Unrealized
Losses		 

Securities available for sale:

      

GSE mortgage-backed securities and CMOs

 $1,675.6  $(12.1)  $133.9  $(2.9)  $1,809.5  $(15.0) 

U.S. Treasury and agency

  206.6   (3.0)   530.1   (16.1)   736.7   (19.1) 

Equity securities

  9.0   (0.6)   —     —     9.0   (0.6) 

Securities held to maturity:

      

GSE mortgage-backed securities

  1,029.5   (6.5)   —     —     1,029.5   (6.5) 

State and municipal

  270.3   (1.7)   207.5   (6.8)   477.8   (8.5) 

Corporate

  2.8   —     —     —     2.8   —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $3,193.8  $(23.9)  $871.5  $(25.8)  $4,065.3  $(49.7) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

  Continuous Unrealized Loss Position       
  Less Than 12 Months  12 Months Or Longer  Total 

As of December 31, 2016 (in millions)

 Fair
Value		  Unrealized
Losses		  Fair
  Value  		    Unrealized  
Losses		  Fair
Value		  Unrealized
Losses		 

Securities available for sale:

      

GSE mortgage-backed securities and CMOs

 $2,339.6  $(26.6)  $396.9  $(11.5)  $2,736.5  $(38.1) 

U.S. Treasury and agency

  828.3   (30.5)   —     —     828.3   (30.5) 

Securities held to maturity:

      

GSE mortgage-backed securities

  497.6   (3.2)   —     —     497.6   (3.2) 

State and municipal

  581.7   (23.5)   —     —     581.7   (23.5) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $4,247.2  $(83.8)  $396.9  $(11.5)  $4,644.1  $(95.3) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 Continuous Unrealized Loss Position  
 Less Than 12 Months12 Months Or LongerTotal
As of September 30, 2021 (in millions)
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Debt securities available-for-sale:
GSE mortgage-backed and CMO
   securities		$3,533.6 $(85.2)$56.9 $(2.7)$3,590.5 $(87.9)
U.S. Treasury and agency16.2 — — — 16.2 — 
Total$3,549.8 $(85.2)$56.9 $(2.7)$3,606.7 $(87.9)

Continuous Unrealized Loss Position
Less Than 12 Months12 Months Or LongerTotal
As of December 31, 2020 (in millions)
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Debt securities available-for-sale:
GSE mortgage-backed and CMO
   securities		$225.5 $(1.7)$— $— $225.5 $(1.7)
Total$225.5 $(1.7)$— $— $225.5 $(1.7)
At September 30, 2017, approximately 27%2021, 149 of the 2,046393 debt securities available-for-sale owned by the Company consisting of 96 securities classified as available for sale and 453 securities classified as held to maturity, had gross unrealized losses totaling $34.7 million and $15.0 million, respectively. All$87.9 million. With respect to those securities with unrealized losses, all of the GSE mortgage-backed securities and CMOsCMO securities had AAA credit ratings and an average contractual maturity of 1123 years. The state and municipal
As of September 30, 2021, no ACL has been recognized on debt securities hadavailable-for-sale in an averageunrealized loss position as management does not believe any of those securities are impaired due to reasons of credit rating of AA and an average maturity of 12 years.

Thequality. Rather, the cause of the gross unrealized losses with respect to all of thesethe debt securities is directly related to changes in interest rates. At this time, management does not intend to sell such securities nor is it more likely than not, based upon available evidence, that management will be required to sell such securities prior to recovery. As such, management believes that all gross unrealized losses within the securities portfolio at September 30, 2017 are temporary impairments. No other-than-temporarycredit impairment losses were recognizedrecorded in the Consolidated Statements of Income forduring the three or nine months ended September 30, 2017 or 2016.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

2021 and 2020.

Security transactions are recorded on the trade date. Realized gains and losses are determined using the specific identification method and reported innon-interest income. During the quarter ended March
At September 30, 2021 and December 31, 2017, 2020, debt securities available-for-sale with fair values of $3.60 billion and $4.93 billion, respectively, and debt securities held-to-maturity with amortized costs of $1.79 billion and $2.08 billion, respectively, were pledged as collateral for public deposits and for other purposes.

10

People’s United sold U.S. TreasuryFinancial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
The following table is a summary of the amortized cost and fair value of debt securities as of September 30, 2021, based on remaining period to contractual maturity. Information for GSE mortgage-backed and CMO securities is based on the final contractual maturity dates without considering repayments and prepayments.
 Available-for-SaleHeld-to-Maturity
(in millions)
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
U.S. Treasury and agency:
Within 1 year$266.9 $269.4 $— $— 
After 1 but within 5 years256.5 260.7 — — 
Total523.4 530.1 — — 
GSE mortgage-backed and CMO securities:
Within 1 year11.7 11.7 4.5 4.6 
After 1 but within 5 years79.8 83.7 790.6 809.0 
After 5 but within 10 years1,510.6 1,533.3 159.2 164.9 
After 10 years4,142.3 4,098.2 — — 
Total5,744.4 5,726.9 954.3 978.5 
State and municipal:
Within 1 year— — 38.2 38.9 
After 1 but within 5 years— — 224.5 233.4 
After 5 but within 10 years— — 755.7 810.3 
After 10 years— — 1,870.4 1,979.1 
Total— — 2,888.8 3,061.7 
Corporate:
Within 1 year— — 1.0 1.0 
After 1 but within 5 years— — 11.8 11.9 
After 5 but within 10 years— — 74.0 74.6 
Total— — 86.8 87.5 
Other:
After 1 but within 5 years— — 1.5 1.5 
Total— — 1.5 1.5 
Total:
Within 1 year278.6 281.1 43.7 44.5 
After 1 but within 5 years336.3 344.4 1,028.4 1,055.8 
After 5 but within 10 years1,510.6 1,533.3 988.9 1,049.8 
After 10 years4,142.3 4,098.2 1,870.4 1,979.1 
Total$6,267.8 $6,257.0 $3,931.4 $4,129.2 
Equity investments (other than equity method investments) are measured at fair value with a combined amortized costchanges in fair value recognized in net income. People’s United recorded unrealized losses of $487$0.3 million for the three months ended
September 30, 2020 (none for the three months ended September 30, 2021), and $0.2 million and recorded $15.7$1.8 million for the nine months ended September 30, 2021 and 2020, respectively, relating to the change in fair value of gross realized losses.

its equity securities (included in other non-interest income in the Consolidated Statements of Income).

11

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
The Bank, as a member of the FHLBFederal Reserve Bank system, is currently required to purchase and hold shares of capital stock in the FRB-NY (total cost of $229.0 million and $228.4 million at September 30, 2021 and December 31, 2020, respectively) in an amount equal to 6% of its capital and surplus. Based on the current capital adequacy and liquidity position of the FRB-NY, management believes there is no impairment in the Company’s investment at September 30, 2021 and the cost of the investment approximates fair value.
The Bank, as a member of the Federal Home Loan Bank (the “FHLB”) of Boston, is currently required to purchase and hold shares of capital stock in the FHLB of Boston (total cost of $139.5$35.7 million and $155.0$38.2 million at September 30, 20172021 and December 31, 2016,2020, respectively) in an amount equal to its membership base investment plus an activity based investment determined according to the Bank’s level of outstanding FHLB advances. As a result of prior acquisitions, the Bank acquired shares of capital stock in the FHLB of New York (total cost of $12.0 million and $11.3 million at September 30, 2017 and December 31, 2016, respectively). Based on the current capital adequacy and liquidity position of both the FHLB of Boston, and the FHLB of New York, management believes there is no impairment in the Company’s investment at
September 30, 20172021 and the cost of the investment approximates fair value.

The Bank, as a member of the Federal Reserve Bank system, is currently required to purchase and hold shares of capital stock in the Federal Reserve Bank of New York (the“FRB-NY”) (total cost of $169.4 million and $149.5 million at September 30, 2017 and December 31, 2016, respectively) in an amount equal to 6% of its capital and surplus. Based on the current capital adequacy and liquidity position of theFRB-NY, management believes there is no impairment in the Company’s investment at September 30, 2017 and the cost of the investment approximates fair value.

Included in short-term investments are interest-bearing deposits at theFRB-NY totaling $259.4 million at September 30, 2017 and $169.8 million at December 31, 2016. These deposits represent an alternative to overnight federal funds sold and had yields of 1.25% and 0.75% at September 30, 2017 and December 31, 2016, respectively.

NOTE 4. LOANS

For purposes of disclosures related to the credit quality of financing receivables and the allowance for loan losses,

NOTE 3. LOANS
People’s United has identified two2 loan portfolio segments, Commercial and Retail, which are comprised of the following loan classes:

•Commercial Portfolio: commercial real estate; commercial and industrial; and equipment financing.

•Retail Portfolio: residential mortgage; home equity; and other consumer.

Loans acquired in connection with business combinations are referred to as ‘acquired’ loans as a result of the manner in which they are accounted for (see further discussion under ‘Acquired Loans’

•Commercial Portfolio: commercial real estate; commercial and industrial; equipment financing; and mortgage warehouse/asset based lending (“MW/ABL”). All
•Retail Portfolio: residential mortgage; home equity; and other loans are referred to as ‘originated’ loans. Accordingly, selected credit quality disclosures that follow are presented separately for the ‘originated’ loan portfolio and the ‘acquired’ loan portfolio.

People’s United maintains several significant accounting policies with respect to loans, including:

consumer.
Establishment of the allowance for loan losses (including the identification of ‘impaired’ loans and related impairment measurement considerations);

Income recognition (including the classification of a loan as‘non-accrual’ and the treatment of loan origination costs); and

Recognition of loan charge-offs.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The Company did not change its application of the accounting policies noted above or its methodology for determining the allowance for loan losses during the nine months ended September 30, 2017.

The following table summarizes People’s United’s loans by loan portfolio segment and class:

  September 30, 2017  December 31, 2016 

(in millions)

 Originated  Acquired  Total  Originated  Acquired  Total 

Commercial:

      

Commercial real estate

 $10,194.1  $986.4  $11,180.5  $10,012.6  $234.7  $10,247.3 

Commercial and industrial

  7,971.3   653.4   8,624.7   7,939.0   186.1   8,125.1 

Equipment financing

  3,039.1   666.5   3,705.6   3,020.9   11.6   3,032.5 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Commercial Portfolio

  21,204.5   2,306.3   23,510.8   20,972.5   432.4   21,404.9 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Retail:

      

Residential mortgage:

      

Adjustable-rate

  5,800.9   147.5   5,948.4   5,453.8   95.3   5,549.1 

Fixed-rate

  706.7   125.9   832.6   613.5   54.1   667.6 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total residential mortgage

  6,507.6   273.4   6,781.0   6,067.3   149.4   6,216.7 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Home equity and other consumer:

      

Home equity

  1,981.8   59.7   2,041.5   2,044.9   27.7   2,072.6 

Other consumer

  47.3   3.9   51.2   50.0   0.7   50.7 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total home equity and other consumer

  2,029.1   63.6   2,092.7   2,094.9   28.4   2,123.3 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Retail Portfolio

  8,536.7   337.0   8,873.7   8,162.2   177.8   8,340.0 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total loans

 $29,741.2  $2,643.3  $32,384.5  $29,134.7  $610.2  $29,744.9 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Loan origination fees
(in millions)September 30, 2021December 31, 2020
Commercial:
Commercial real estate (1)$12,662.6 $13,336.9 
Commercial and industrial (1)9,191.6 10,764.1 
Equipment financing5,040.3 4,930.0 
MW/ABL3,577.4 4,218.2 
Total Commercial Portfolio30,471.9 33,249.2 
Retail:
Residential mortgage:
Adjustable-rate4,323.7 5,517.3 
Fixed-rate2,946.1 3,001.6 
Total residential mortgage7,269.8 8,518.9 
Home equity and other consumer:
Home equity1,700.4 1,997.2 
Other consumer83.7 104.2 
Total home equity and other consumer1,784.1 2,101.4 
Total Retail Portfolio9,053.9 10,620.3 
Total loans$39,525.8 $43,869.5 

(1)In the first quarter of 2021, the Company completed a portfolio review to ensure consistent classification of certain commercial loans across the Company's franchise and conformity to industry practice for such loans. As a result, approximately $350 million of loans secured by non-owner-occupied commercial properties were prospectively reclassified, in March 2021, from commercial and industrial loans to commercial real estate loans. Prior period balances were not restated to conform to the current presentation.
12

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
Paycheck Protection Program
The CARES Act created a loan guarantee program known as the Paycheck Protection Program (“PPP”), the objective of which is to provide small businesses with financial support to cover payroll and certain direct loan origination costsother qualifying expenses. The Consolidated Appropriations Act, 2021, signed into law in December 2020, included additional funding for first and second draws of PPP loans up to March 31, 2021. In March 2021, the PPP Extension Act of 2021 was signed into law, extending the program to May 31, 2021. Loans made under the PPP are deferred,fully guaranteed by the Small Business Administration (“SBA”), whose guarantee is backed by the full faith and credit of the net fee or cost is recognized in interest income as an adjustmentUnited States. PPP loans also afford borrowers forgiveness up to the principal amount of yield. Depending on the loan, portfolio, amountsplus accrued interest, provided the loan proceeds are amortizedused to retain workers and maintain payroll or accreted using the level yield method over either the actual life or the estimated average lifeto make certain mortgage interest, lease and utility payments, and certain other criteria are satisfied. The SBA will reimburse PPP lenders for any amount of a PPP loan that is forgiven, and PPP lenders will not be held liable for any representations made by PPP borrowers in connection with their requests for loan forgiveness. Included in commercial and industrial loans at September 30, 2021 and December 31, 2020 are PPP loans totaling $935.4 million and $2.28 billion, respectively, and associated deferred loan fees totaling $35.8 million and $45.9 million, respectively. For regulatory capital purposes, PPP loans are assigned a zero risk-weighting as a result of the loan. related SBA guarantee.
Net deferred loan costs, which are included in loans by respective class and accounted for as interest yield adjustments,exclude deferred fees on loans issued under the PPP, totaled $73.1$63.8 million at September 30, 20172021 and $69.9$68.1 million at December 31, 2016.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following tables present a summary, by loan portfolio segment, of activity in the allowance for loan losses for the three and nine months ended2020. At September 30, 2017 and 2016. With respect to the originated portfolio, an allocation of a portion of the allowance to one segment does not preclude its availability to absorb losses in another segment.

Three months ended  Commercial  Retail    

September 30, 2017 (in millions)

  Originated  Acquired  Total  Originated  Acquired   Total  Total 

Balance at beginning of period

  $198.3  $3.6  $201.9  $29.6  $0.1   $29.7  $231.6 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Charge-offs

   (4.0)   (1.0)   (5.0)   (1.8)   —      (1.8)   (6.8) 

Recoveries

   0.9   0.1   1.0   0.6   —      0.6   1.6 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Net loan charge-offs

   (3.1)   (0.9)   (4.0)   (1.2)   —      (1.2)   (5.2) 

Provision for loan losses

   4.3   1.3   5.6   1.3   0.1    1.4   7.0 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Balance at end of period

  $199.5  $4.0  $203.5  $29.7  $0.2   $29.9  $233.4 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 
Nine months ended  Commercial  Retail    

September 30, 2017 (in millions)

  Originated  Acquired  Total  Originated  Acquired   Total  Total 

Balance at beginning of period

  $198.8  $6.1  $204.9  $24.2  $0.2   $24.4  $229.3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Charge-offs

   (12.0)   (2.9)   (14.9)   (5.1)   —      (5.1)   (20.0) 

Recoveries

   3.8   0.1   3.9   1.7   —      1.7   5.6 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Net loan charge-offs

   (8.2)   (2.8)   (11.0)   (3.4)   —      (3.4)   (14.4) 

Provision for loan losses

   8.9   0.7   9.6   8.9   —      8.9   18.5 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Balance at end of period

  $199.5  $4.0  $203.5  $29.7  $0.2   $29.9  $233.4 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 
Three months ended  Commercial  Retail    

September 30, 2016 (in millions)

  Originated  Acquired  Total  Originated  Acquired   Total  Total 

Balance at beginning of period

  $189.7  $7.2  $196.9  $23.3  $0.2   $23.5  $220.4 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Charge-offs

   (2.7)   (0.1)   (2.8)   (1.1)   —      (1.1)   (3.9) 

Recoveries

   0.9   —     0.9   0.5   —      0.5   1.4 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Net loan charge-offs

   (1.8)   (0.1)   (1.9)   (0.6)   —      (0.6)   (2.5) 

Provision for loan losses

   7.1   —     7.1   1.3   —      1.3   8.4 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Balance at end of period

  $195.0  $7.1  $202.1  $24.0  $0.2   $24.2  $226.3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 
Nine months ended  Commercial  Retail    

September 30, 2016 (in millions)

  Originated  Acquired  Total  Originated  Acquired   Total  Total 

Balance at beginning of period

  $181.8  $7.9  $189.7  $21.1  $0.2   $21.3  $211.0 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Charge-offs

   (10.7)   (0.4)   (11.1)   (6.6)   —      (6.6)   (17.7) 

Recoveries

   1.6   —     1.6   2.5   —      2.5   4.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Net loan charge-offs

   (9.1)   (0.4)   (9.5)   (4.1)   —      (4.1)   (13.6) 

Provision for loan losses

   22.3   (0.4)   21.9   7.0   —      7.0   28.9 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Balance at end of period

  $195.0  $7.1  $202.1  $24.0  $0.2   $24.2  $226.3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following is a summary, by loan portfolio segment and impairment methodology, of the allowance for loan losses and related portfolio balances:

   Originated Loans   Originated Loans             
As of  Individually Evaluated   Collectively Evaluated                 
September 30, 2017  for Impairment   for Impairment   Acquired Loans (1)   Total 

(in millions)

  Portfolio   Allowance   Portfolio   Allowance   Portfolio   Allowance   Portfolio   Allowance 

Commercial

  $172.5   $5.7   $21,032.0   $193.8   $2,306.3   $4.0   $23,510.8   $203.5 

Retail

   94.3    2.4    8,442.4    27.3    337.0    0.2    8,873.7    29.9 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $266.8   $8.1   $29,474.4   $221.1   $2,643.3   $4.2   $32,384.5   $233.4 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   Originated Loans   Originated Loans             
As of  Individually Evaluated   Collectively Evaluated                 
December 31, 2016  for Impairment   for Impairment   Acquired Loans (1)   Total 

(in millions)

  Portfolio   Allowance   Portfolio   Allowance   Portfolio   Allowance   Portfolio   Allowance 

Commercial

  $161.8   $5.8   $20,810.7   $193.0   $432.4   $6.1   $21,404.9   $204.9 

Retail

   91.8    3.2    8,070.4    21.0    177.8    0.2    8,340.0    24.4 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $253.6   $9.0   $28,881.1   $214.0   $610.2   $6.3   $29,744.9   $229.3 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(1)Approximately $3.8 million of the allowance at September 30, 2017 relates to Commercial and Retail PCI loans totaling $406.5 million and $134.7 million, respectively. The remainder of the acquired portfolio represents purchased performing loans with an allowance of approximately $0.4 million at that date. The allowance at December 31, 2016 relates entirely to PCI loans (no acquired loans were purchased performing at that date).

The recorded investments, by class of loan, in originatednon-performing loans are summarized as follows:

   September 30,   December 31, 

(in millions)

  2017   2016 

Commercial:

    

Commercial real estate

  $36.7   $22.3 

Commercial and industrial

   34.9    41.5 

Equipment financing

   54.1    39.4 
  

 

 

   

 

 

 

Total (1)

   125.7    103.2 
  

 

 

   

 

 

 

Retail:

    

Residential mortgage

   33.8    27.4 

Home equity

   14.8    17.4 

Other consumer

   —      —   
  

 

 

   

 

 

 

Total (2)

   48.6    44.8 
  

 

 

   

 

 

 

Total

  $174.3   $148.0 
  

 

 

   

 

 

 

(1)Reported net of government guarantees totaling $4.0 million and $13.1 million at September 30, 2017 and December 31, 2016, respectively. These government guarantees relate, almost entirely, to guarantees provided by the Small Business Administration as well as selected other Federal agencies and represent the carrying value of the loans that are covered by such guarantees, the extent of which (i.e. full or partial) varies by loan. At September 30, 2017, the principal loan classes to which these government guarantees relate are commercial and industrial loans (95%) and commercial real estate loans (5%).
(2)Includes $17.8 million and $9.8 million of loans in the process of foreclosure at September 30, 2017 and December 31, 2016, respectively.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The preceding table excludes acquired loans that are (i) accounted for as PCI loans or (ii) covered by a Federal Deposit Insurance Corporation (“FDIC”) loss-share agreement (“LSA”) totaling $24.5 million and $24.7 million at September 30, 20172021 and December 31, 2016, respectively. Such2020, accrued interest receivable associated with loans otherwise meet People’s United’s definitiontotaled $130.0 million and $159.9 million, respectively, and is reported in other assets in the Consolidated Statements of anon-performing loan but are excluded because the loans are included in loan pools thatCondition.

Past Due and Non-Accrual Loans
Loans are considered performing and/or credit losses are covered by an FDIC LSA. The discounts arising from recording these loans at fair value werepast due in part, to credit quality. Accordingly, such loans are generally accounted for on a pool basisif required principal and the accretable yield on the pools is being recognizedinterest payments have not been received as interest income over the life of the loans based on expected cash flows at the pool level. In addition, the table excludes purchased performing loans totaling $2.1 million at September 30, 2017, of which $0.5 million becamenon-performing subsequent to acquisition.

date such payments were contractually due. A loan is generally considered“non-performing” “non-performing” when it is placed onnon-accrual status.
A loan is generally placed onnon-accrual status when it becomes 90 days past due as to interest or principal payments. Past due status is based on the contractual payment terms of the loan. A loan may be placed onnon-accrual status before it reaches 90 days past due if such loan has been identified as presenting uncertainty with respect to the collectability of interest and principal. A loan past due 90 days or more may remain on accruing status if such loan is both well secured and in the process of collection.

All previously accrued but unpaid interest onnon-accrual loans is reversed from interest income in the period in which the accrual of interest is discontinued. Interest payments received onnon-accrual loans (including impaired loans) are generally applied as a reduction of principal if future collections are doubtful, although such interest payments may be recognized as income. Interest income recognized on non-accrual loans totaled $0.7 million and $0.6 million for the three months ended September 30, 2021 and 2020, respectively, and $1.4 million and $2.2 million for the nine months ended September 30, 2021 and 2020, respectively.
A loan remains onnon-accrual status until the factors that indicated doubtful collectability no longer exist or until a loan is determined to be uncollectible and is charged offcharged-off against the allowance for loan losses.ACL. There were no loans past due 90 days or more and still accruing interest at September 30, 20172021 or December 31, 2016.

A2020.

13

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
The following tables summarize aging information by class of loan:
  Past Due 
As of September 30, 2021 (in millions)Current
30-89
Days
90 Days
or More
TotalTotal
Commercial:
Commercial real estate$12,590.9 $15.1 $56.6 $71.7 $12,662.6 
Commercial and industrial9,145.3 15.3 31.0 46.3 9,191.6 
Equipment financing4,967.6 58.0 14.7 72.7 5,040.3 
MW/ABL3,577.4 — — — 3,577.4 
Total30,281.2 88.4 102.3 190.7 30,471.9 
Retail:
Residential mortgage7,213.0 27.7 29.1 56.8 7,269.8 
Home equity1,687.5 4.6 8.3 12.9 1,700.4 
Other consumer83.3 0.4 — 0.4 83.7 
Total8,983.8 32.7 37.4 70.1 9,053.9 
Total loans$39,265.0 $121.1 $139.7 $260.8 $39,525.8 
Included in the “Current” and “30-89 Days” categories above are early non-performing commercial real estate loans, commercial and industrial loans, equipment financing loans and MW/ABL loans totaling $42.1 million, $26.4 million, $84.5 million and $0.9 million, respectively, and $28.0 million of retail loans in the process of foreclosure or bankruptcy. These loans are less than 90 days past due but have been placed on non-accrual status as a result of having been identified as presenting uncertainty with respect to the collectability of interest and principal.
  Past Due 
As of December 31, 2020 (in millions)Current
30-89
Days
90 Days
or More
TotalTotal
Commercial:
Commercial real estate$13,283.2 $27.3 $26.4 $53.7 $13,336.9 
Commercial and industrial10,694.9 17.3 51.9 69.2 10,764.1 
Equipment financing4,846.8 64.0 19.2 83.2 4,930.0 
MW/ABL4,218.2 — — — 4,218.2 
Total33,043.1 108.6 97.5 206.1 33,249.2 
Retail:
Residential mortgage8,447.9 32.2 38.8 71.0 8,518.9 
Home equity1,977.3 8.4 11.5 19.9 1,997.2 
Other consumer103.4 0.7 0.1 0.8 104.2 
Total10,528.6 41.3 50.4 91.7 10,620.3 
Total loans$43,571.7 $149.9 $147.9 $297.8 $43,869.5 
Included in the “Current” and “30-89 Days” categories above are early non-performing commercial real estate loans, commercial and industrial loans, equipment financing loans and MW/ABL loans totaling $34.0 million, $26.0 million, $90.1 million and $1.0 million, respectively, and $32.6 million of retail loans in the process of foreclosure or bankruptcy. These loans are less than 90 days past due but have been placed on non-accrual status as a result of having been identified as presenting uncertainty with respect to the collectability of interest and principal.
14

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
The recorded investment in non-accrual loans, by class of loan and year of origination, is considered impaired when, based on current informationsummarized as follows:
Non-Accrual Loans
As of September 30, 2021 (in millions)20212020201920182017PriorRevolving LoansRevolving Loans Converted
to Term		TotalNon-Accrual Loans With No ACL
Commercial:
Commercial real estate$— $— $11.1 $25.5 $4.9 $55.4 $0.1 $1.7 $98.7 $46.8 
Commercial and industrial0.1 — 5.6 0.9 5.5 28.7 3.9 11.6 56.3 16.9 
Equipment financing0.9 15.1 25.3 21.5 21.4 15.0 — — 99.2 4.3 
MW/ABL— — — — — — — 0.9 0.9 — 
Total (1)1.0 15.1 42.0 47.9 31.8 99.1 4.0 14.2 255.1 68.0 
Retail:
Residential mortgage— 0.2 1.8 3.4 1.6 42.1 — — 49.1 21.6 
Home equity— 0.1 — 0.6 0.5 2.6 — 12.5 16.3 5.3 
Other consumer— — — — — — — — — — 
Total (2)— 0.3 1.8 4.0 2.1 44.7 — 12.5 65.4 26.9 
Total$1.0 $15.4 $43.8 $51.9 $33.9 $143.8 $4.0 $26.7 $320.5 $94.9 
Non-Accrual Loans
As of December 31, 2020 (in millions)20202019201820172016PriorRevolving LoansRevolving Loans Converted
to Term		TotalNon-Accrual Loans With No ACL
Commercial:
Commercial real estate$— $8.6 $9.7 $2.8 $1.9 $35.4 $0.2 $1.8 $60.4 $10.9 
Commercial and industrial0.2 3.1 2.3 16.2 13.4 17.5 15.5 7.2 75.4 27.8 
Equipment financing16.4 27.4 25.3 25.5 7.8 6.9 — — 109.3 0.6 
MW/ABL— — — — — — — 1.0 1.0 — 
Total (1)16.6 39.1 37.3 44.5 23.1 59.8 15.7 10.0 246.1 39.3 
Retail:
Residential mortgage— 2.9 3.9 1.8 2.6 51.1 — — 62.3 28.3 
Home equity— — 0.4 0.1 0.6 2.8 — 16.6 20.5 7.9 
Other consumer— 0.1 — 0.1 — — — — 0.2 — 
Total (2)— 3.0 4.3 2.0 3.2 53.9 — 16.6 83.0 36.2 
Total$16.6 $42.1 $41.6 $46.5 $26.3 $113.7 $15.7 $26.6 $329.1 $75.5 

(1)Reported net of government guarantees totaling $1.1 million and events, it is probable that$2.5 million at September 30, 2021 and
December 31, 2020, respectively. These government guarantees relate, almost entirely, to guarantees provided by the Company will be unable to collect all amounts due in accordance withSBA as well as selected other Federal agencies and represent the original contractual termscarrying value of the loan agreement, including scheduled principalloans that are covered by such guarantees, the extent of which (i.e. full or partial) varies by loan. At September 30, 2021, these government guarantees relate to commercial and interest payments. Impairedindustrial loans.
(2)Includes $16.1 million and $23.6 million of loans also include certain loans whose terms have been modified in such a way that they are considered troubled debt restructurings (“TDRs”).the process of foreclosure at September 30, 2021 and
December 31, 2020, respectively.

15

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
Collateral Dependent Loans are considered TDRs if
Loans for which the borrower is experiencing financial difficulty and repayment is affordedexpected to be provided substantially through the operation or sale of the collateral are considered to be collateral dependent loans. Collateral can have a concession by People’s United, such as,significant financial effect in mitigating exposure to credit risk and, where there is sufficient collateral, an allowance for expected credit losses is not recognized or is minimal.
For collateral dependent commercial loans, the allowance for expected credit losses is individually assessed based on the fair value of the collateral. Various types of collateral are used, including real estate, inventory, equipment, accounts receivable, securities and cash, among others. For commercial real estate loans, collateral values are generally based on appraisals which are updated based on management judgment under the specific circumstances on a case-by-case basis. The collateral value for other financial assets is generally based on quoted market prices or broker quotes (in the case of securities) or appraisals. Commercial loan balances are charged-off at the time all or a portion of the balance is deemed uncollectible. At
September 30, 2021 and December 31, 2020, the Company had collateral dependent commercial loans totaling $89.2 million and $71.1 million, respectively.
Collateral dependent residential mortgage and home equity loans are carried at the lower of amortized cost or fair value of the collateral less costs to sell, with any excess in the carrying amount of the loan representing the related ACL. Collateral values are based on broker price opinions or appraisals. At September 30, 2021 and December 31, 2020, the Company had collateral dependent residential mortgage and home equity loans totaling $27.6 million and $37.8 million, respectively.
Troubled Debt Restructurings
Troubled Debt Restructurings (“TDRs”), which, beginning in 2020, also includes loans reasonably expected to become TDRs, represent loans for which the original contractual terms have been modified to provide for terms that are less than what the Company would be willing to accept for new loans with comparable risk because of deterioration in the borrower’s financial condition. Such loan modifications are handled on a case-by-case basis and are negotiated to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. Modifications may include changes to one or more terms of the loan, including, but not limited to: (i) payment deferral; (ii) a reduction ofin the stated interest rate for the remaining contractual life of the loan; (iii) an extension of the loan’s original contractual term at a stated interest rate lower than the current market rate for a new loan with similar risk; (iv) capitalization of interest; or (v) forgiveness of principal or interest.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

TDRs may either be accruing or placed onnon-accrual status (and reported asnon-performing non-accrual loans) depending upon the loan’s specific circumstances, including the nature and extent of the related modifications. TDRs onnon-accrual status remain classified as such until the loan qualifies for return to accrual status. Loans qualify for return to accrual status once they have demonstrated performance with the restructured terms of the loan agreement for a minimum of six months in the case of a commercial loan or, in the case of a retail loan, when the loan is less than 90 days past due. Loans may continue to be reported as TDRs after they are returned to accrual status. In accordance with regulatory guidance, residential mortgage and home equity loans restructured in connection with the borrower’s bankruptcy and meeting certain criteria are also required to be classified as TDRs, included innon-performing non-accrual loans and written down to the estimated collateral value, regardless of delinquency status. Acquired loans that are modified are not considered for TDR classification provided they are evaluated for impairment on a pool basis (see further discussion under ‘Acquired Loans’).

Impairment is evaluated on a collective basis for smaller-balance loans with similar credit risk

At September 30, 2021 and on an individual loan basis for other loans. If a loan is deemed to be impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported (net of the allowance) at the present value of expected future cash flows discounted at the loan’s original effective interest rate or at the fair value of the collateral less cost to sell if repayment is expected solely from the collateral. Interest payments on impairednon-accrual loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

December 31, 2020, People’s United’s recorded investment in loans classified as TDRs totaled $194.4$178.4 million and $189.9$196.9 million, respectively, and the related ACL was $19.7 million and $12.0 million at September 30, 2017 and December 31, 2016, respectively. The related allowance for loan losses was $4.6 million at September 30, 2017 and $4.2 million at December 31, 2016.the respective dates. Interest income recognized on TDRs totaled $1.4$1.0 million and $1.2 million for the three months ended September 30, 20172021 and 2016,2020, respectively, and $3.7$2.7 million and $3.3$3.7 million for the nine months ended September 30, 20172021 and 2016,2020, respectively. FundingsFunding under commitments to lend additional amounts to borrowers with loans classified as TDRs werewas immaterial for the three and nine months ended September 30, 20172021 and 2016.2020. Loans that were modified and classified as TDRs during the three and nine months ended September 30, 20172021 and 20162020 principally involve reduced payment and/or payment deferral, extension of term (generally no more than twofour years for commercial loans and fiveten years for retail loans)
and/or a temporary reduction of interest rate (generally less than 200 basis points).

The CARES Act and guidance issued by the Federal banking agencies provides that certain loan modifications to borrowers experiencing financial distress as a result of the economic impacts created by the COVID-19 pandemic are not required to be treated as TDRs under GAAP. As such, the Company suspended TDR accounting for COVID-19 related loan modifications meeting the loan modification criteria set forth under the CARES Act or as specified in the regulatory guidance. Further, loans that were granted payment deferrals related to COVID-19 are not required to be reported as past due or placed on
non-accrual status (provided the loans were not past due or on non-accrual status prior to the deferral).

16

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following tables summarize, by class of loan, the recorded investments in loans modified as TDRs during the three and nine months ended September 30, 20172021 and 2016.2020. For purposes of this disclosure, recorded investments represent amounts immediately prior to and subsequent to the restructuring.

   Three Months Ended September 30, 2017 
       Pre-Modification   Post-Modification 
       Outstanding   Outstanding 
   Number   Recorded   Recorded 

(dollars in millions)

  of Contracts   Investment   Investment 

Commercial:

      

Commercial real estate (1)

   1   $0.1   $0.1 

Commercial and industrial (2)

   9    11.6    11.6 

Equipment financing (3)

   13    8.1    8.1 
  

 

 

   

 

 

   

 

 

 

Total

   23    19.8    19.8 
  

 

 

   

 

 

   

 

 

 

Retail:

      

Residential mortgage (4)

   17    3.8    3.8 

Home equity (5)

   19    1.5    1.5 

Other consumer

   —      —      —   
  

 

 

   

 

 

   

 

 

 

Total

   36    5.3    5.3 
  

 

 

   

 

 

   

 

 

 

Total

   59   $25.1   $25.1 
  

 

 

   

 

 

   

 

 

 

(1)Represents the following concession: extension of term (1 contract; recorded investment of $0.1 million).
(2)Represents the following concessions: extension of term (9 contracts; recorded investment of $11.6 million).
(3)Represents the following concessions: reduced payment and/or payment deferral (12 contracts; recorded investment of $8.0 million); or a combination of concessions (1 contract; recorded investment of $0.1 million).
(4)Represents the following concessions: loans restructured through bankruptcy (9 contracts; recorded investment of $1.7 million); reduced payment and/or payment deferral (5 contract; recorded investment of $1.7 million); or a combination of concessions (3 contracts; recorded investment of $0.4 million).
(5)Represents the following concessions: loans restructured through bankruptcy (10 contracts; recorded investment of $1.0 million); reduced payment and/or payment deferral (4 contracts; recorded investment of $0.3 million); or a combination of concessions (5 contracts; recorded investment of $0.2 million).

 Three Months Ended September 30, 2021
(dollars in millions)
Number
of Contracts
Pre-Modification
Outstanding
Recorded
Investment
Post-Modification
Outstanding
Recorded
Investment
Commercial:
Commercial real estate (1)3 $7.0 $7.0 
Commercial and industrial (2)8 10.4 10.4 
Equipment financing (3)2 0.2 0.2 
MW/ABL— — — 
Total13 17.6 17.6 
Retail:
Residential mortgage (4)8 3.9 3.9 
Home equity (5)12 0.8 0.8 
Other consumer— — — 
Total20 4.7 4.7 
Total33 $22.3 $22.3 

(1)Represents the following concessions: extension of term (2 contracts; recorded investment of $4.1 million); or reduced payment and/or payment deferral (1 contract; recorded investment of $2.9 million).
(2)Represents the following concessions: extension of term (6 contracts; recorded investment of $8.8 million); or a combination of concessions (2 contracts; recorded investment of $1.6 million).
(3)Represents the following concessions: a combination of concessions (2 contracts; recorded investment of $0.2 million).
(4)Represents the following concessions: loans restructured through bankruptcy (2 contracts; recorded investment of $0.2 million); extension of term (1 contract; recorded investment of $2.0 million); reduced payment and/or payment deferral (4 contracts; recorded investment of $1.5 million); or a combination of concessions (1 contract; recorded investment of $0.2 million).
(5)Represents the following concessions: loans restructured through bankruptcy (3 contracts; recorded investment of $0.2 million); reduced payment and/or payment deferral (3 contracts; recorded investment of $0.1 million); or a combination of concessions (6 contracts; recorded investment of $0.5 million).
17

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

   Nine Months Ended September 30, 2017 

(dollars in millions)

  Number
of Contracts		   Pre-Modification
Outstanding
Recorded
Investment		   Post-Modification
Outstanding
Recorded
Investment		 

Commercial:

      

Commercial real estate (1)

   8   $5.3   $5.3 

Commercial and industrial (2)

   28    39.6    39.6 

Equipment financing (3)

   54    25.1    25.1 
  

 

 

   

 

 

   

 

 

 

Total

   90    70.0    70.0 
  

 

 

   

 

 

   

 

 

 

Retail:

      

Residential mortgage (4)

   45    10.8    10.8 

Home equity (5)

   65    4.5    4.5 

Other consumer

   —      —      —   
  

 

 

   

 

 

   

 

 

 

Total

   110    15.3    15.3 
  

 

 

   

 

 

   

 

 

 

Total

   200   $85.3   $85.3 
  

 

 

   

 

 

   

 

 

 

(1)Represents the following concessions: extension of term (5 contracts; recorded investment of $1.4 million); reduced payment and/or payment deferral (2 contracts; recorded investment of $2.2 million); or a temporary rate reduction (1 contract; recorded investment of $1.7 million).
(2)Represents the following concessions: extension of term (25 contracts; recorded investment of $29.9 million); reduced payment and/or payment deferral (2 contracts; recorded investment of $9.4 million); or a combination of concessions (1 contract; recorded investment of $0.3 million).
(3)Represents the following concessions: reduced payment and/or payment deferral (28 contracts; recorded investment of $17.4 million); or a combination of concessions (26 contracts; recorded investment of $7.7 million).
(4)Represents the following concessions: loans restructured through bankruptcy (28 contracts; recorded investment of $4.2 million); reduced payment and/or payment deferral (10 contracts; recorded investment of $3.4 million); or a combination of concessions (7 contracts; recorded investment of $3.2 million).
(5)Represents the following concessions: loans restructured through bankruptcy (41 contracts; recorded investment of $2.6 million); reduced payment and/or payment deferral (10 contracts; recorded investment of $0.8 million); or a combination of concessions (14 contracts; recorded investment of $1.1 million).

Nine Months Ended September 30, 2021
(dollars in millions)Number
of Contracts		Pre-Modification
Outstanding
Recorded
Investment		Post-Modification
Outstanding
Recorded
Investment
Commercial:
Commercial real estate (1)10 $32.0 $32.0 
Commercial and industrial (2)19 18.9 18.9 
Equipment financing (3)17 2.9 2.9 
MW/ABL (4)1 0.7 0.7 
Total47 54.5 54.5 
Retail:
Residential mortgage (5)39 13.2 13.2 
Home equity (6)61 4.1 4.1 
Other consumer— — — 
Total100 17.3 17.3 
Total147 $71.8 $71.8 
(1)Represents the following concessions: extension of term (6 contracts; recorded investment of $7.6 million); reduced payment and/or payment deferral (2 contract; recorded investment of $11.6 million); or a combination of concessions
(2 contracts; recorded investment of $12.8 million).
(2)Represents the following concessions: extension of term (14 contracts; recorded investment of $13.0 million); reduced payment and/or payment deferral (1 contract; recorded investment of $4.1 million); or a combination of concessions
(4 contracts; recorded investment of $1.8 million).
(3)Represents the following concessions: extension of term (11 contracts; recorded investment of $0.9 million); reduced payment and/or payment deferral (2 contracts; recorded investment of $1.5 million); or a combination of concessions
(4 contracts; recorded investment of $0.5 million).
(4)Represents the following concessions: extension of term (1 contract; recorded investment of $0.7 million).
(5)Represents the following concessions: loans restructured through bankruptcy (9 contracts; recorded investment of $0.6 million); extension of term (1 contract; recorded investment of $2.0 million); reduced payment and/or payment deferral (21 contracts; recorded investment of $7.0 million); or a combination of concessions (8 contracts; recorded investment of $3.6 million).
(6)Represents the following concessions: loans restructured through bankruptcy (11 contracts; recorded investment of $1.1 million); extension of term (4 contracts; recorded investment of $0.2 million); reduced payment and/or payment deferral (12 contracts; recorded investment of $0.7 million); or a combination of concessions (34 contracts; recorded investment of $2.1 million).



18

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

   Three Months Ended September 30, 2016 

(dollars in millions)

  Number
of Contracts		   Pre-Modification
Outstanding
Recorded
Investment		   Post-Modification
Outstanding
Recorded
Investment		 

Commercial:

      

Commercial real estate (1)

   7   $22.1   $22.1 

Commercial and industrial (2)

   11    4.5    4.5 

Equipment financing (3)

   22    10.4    10.4 
  

 

 

   

 

 

   

 

 

 

Total

   40    37.0    37.0 
  

 

 

   

 

 

   

 

 

 

Retail:

      

Residential mortgage (4)

   9    2.9    2.9 

Home equity (5)

   17    1.2    1.2 

Other consumer

   —      —      —   
  

 

 

   

 

 

   

 

 

 

Total

   26    4.1    4.1 
  

 

 

   

 

 

   

 

 

 

Total

   66   $41.1   $41.1 
  

 

 

   

 

 

   

 

 

 

(1)Represents the following concessions: extension of term (5 contracts; recorded investment of $3.3 million); reduced payment and/or payment deferral (1 contract; recorded investment of $1.7 million); or a combination of concessions (1 contract; recorded investment of $17.1 million).
(2)Represents the following concessions: extension of term (9 contracts; recorded investment of $4.1 million); or reduced payment and/or payment deferral (2 contracts; recorded investment of $0.4 million).
(3)Represents the following concessions: extension of term (6 contracts; recorded investment of $4.3 million); reduced payment and/or payment deferral (13 contracts; recorded investment of $4.7 million); or a combination of concessions (3 contracts; recorded investment of $1.4 million).
(4)Represents the following concessions: loans restructured through bankruptcy (6 contracts; recorded investment of $1.0 million); reduced payment and/or payment deferral (1 contract; recorded investment of $0.7 million); or a combination of concessions (2 contracts; recorded investment of $1.2 million).
(5)Represents the following concessions: loans restructured through bankruptcy (11 contracts; recorded investment of $0.5 million); reduced payment and/or payment deferral (1 contract; recorded investment of $0.2 million); or a combination of concessions (5 contracts; recorded investment of $0.5 million).


 Three Months Ended September 30, 2020
(dollars in millions)
Number
of Contracts
Pre-Modification
Outstanding
Recorded
Investment
Post-Modification
Outstanding
Recorded
Investment
Commercial:
Commercial real estate (1)4 $6.2 $6.2 
Commercial and industrial (2)9 13.5 13.5 
Equipment financing (3)9 3.8 3.8 
MW/ABL (4)3 1.9 1.9 
Total25 25.4 25.4 
Retail:
Residential mortgage (5)9 2.9 2.9 
Home equity (6)6 0.7 0.7 
Other consumer— — — 
Total15 3.6 3.6 
Total40 $29.0 $29.0 
(1)Represents the following concessions: extension of term (3 contracts; recorded investment of $2.8 million); or reduced payment and/or payment deferral (1 contract; recorded investment of $3.4 million).
(2)Represents the following concessions: extension of term (5 contracts; recorded investment of $9.8 million); reduced payment and/or payment deferral (2 contracts; recorded investment of $2.7 million); or a combination of concessions
(2 contracts; recorded investment of $1.0 million).
(3)Represents the following concessions: extension of term (7 contracts; recorded investment of $1.2 million); reduced payment and/or payment deferral (1 contract; recorded investment of $0.2 million); or a combination of concessions
(1 contract; recorded investment of $2.4 million).
(4)Represents the following concessions: extension of term (3 contracts; recorded investment of $1.9 million).
(5)Represents the following concessions: loans restructured through bankruptcy (3 contracts; recorded investment of $0.3 million); reduced payment and/or payment deferral (2 contracts; recorded investment of $1.0 million); or a combination of concessions (4 contracts; recorded investment of $1.6 million).
(6)Represents the following concessions: loans restructured through bankruptcy (3 contracts; recorded investment of $0.4 million); or a combination of concessions (3 contracts; recorded investment of $0.3 million).
19

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

   Nine Months Ended September 30, 2016 

(dollars in millions)

  Number
of Contracts		   Pre-Modification
Outstanding
Recorded
Investment		   Post-Modification
Outstanding
Recorded
Investment		 

Commercial:

      

Commercial real estate (1)

   12   $25.9   $25.9 

Commercial and industrial (2)

   36    22.9    22.9 

Equipment financing (3)

   49    21.7    21.7 
  

 

 

   

 

 

   

 

 

 

Total

   97    70.5    70.5 
  

 

 

   

 

 

   

 

 

 

Retail:

      

Residential mortgage (4)

   47    13.1    13.1 

Home equity (5)

   50    3.8    3.8 

Other consumer

   —      —      —   
  

 

 

   

 

 

   

 

 

 

Total

   97    16.9    16.9 
  

 

 

   

 

 

   

 

 

 

Total

   194   $87.4   $87.4 
  

 

 

   

 

 

   

 

 

 

(1)Represents the following concessions: extension of term (8 contracts; recorded investment of $6.2 million); reduced payment and/or payment deferral (2 contracts; recorded investment of $2.6 million); or a combination of concessions (2 contracts; recorded investment of $17.1 million).
(2)Represents the following concessions: extension of term (23 contracts; recorded investment of $12.3 million); reduced payment and/or payment deferral (9 contracts; recorded investment of $9.8 million); or a combination of concessions (4 contracts; recorded investment of $0.8 million).
(3)Represents the following concessions: extension of term (17 contracts; recorded investment of $6.3 million); reduced payment and/or payment deferral (25 contracts; recorded investment of $12.5 million); or a combination of concessions (7 contracts; recorded investment of $2.9 million).
(4)Represents the following concessions: loans restructured through bankruptcy (18 contracts; recorded investment of $3.2 million); reduced payment and/or payment deferral (11 contracts; recorded investment of $5.5 million); or a combination of concessions (18 contracts; recorded investment of $4.4 million).
(5)Represents the following concessions: loans restructured through bankruptcy (31 contracts; recorded investment of $2.1 million); reduced payment and/or payment deferral (2 contracts; recorded investment of $0.3 million); or a combination of concessions (17 contracts; recorded investment of $1.4 million).


Nine Months Ended September 30, 2020
(dollars in millions)Number
of Contracts		Pre-Modification
Outstanding
Recorded
Investment		Post-Modification
Outstanding
Recorded
Investment
Commercial:
Commercial real estate (1)12 $11.0 $11.0 
Commercial and industrial (2)37 63.5 63.5 
Equipment financing (3)37 11.9 11.9 
MW/ABL (4)8 6.6 6.6 
Total94 93.0 93.0 
Retail:
Residential mortgage (5)29 11.6 11.6 
Home equity (6)38 3.7 3.7 
Other consumer— — — 
Total67 15.3 15.3 
Total161 $108.3 $108.3 
(1)Represents the following concessions: extension of term (10 contracts; recorded investment of $7.1 million); or reduced payment and/or payment deferral (2 contracts; recorded investment of $3.9 million).
(2)Represents the following concessions: extension of term (20 contracts; recorded investment of $28.7 million); reduced payment and/or payment deferral (8 contracts; recorded investment of $30.2 million); temporary rate reduction
(2 contracts; recorded investment of $0.9 million); or a combination of concessions (7 contracts; recorded investment of $3.7 million).
(3)Represents the following concessions: extension of term (18 contracts; recorded investment of $4.3 million); reduced payment and/or payment deferral (13 contracts; recorded investment of $3.4 million); or a combination of concessions
(6 contracts; recorded investment of $4.2 million).
(4)Represents the following concessions: extension of term (8 contracts; recorded investment of $6.6 million).
(5)Represents the following concessions: loans restructured through bankruptcy (9 contracts; recorded investment of $2.3 million); reduced payment and/or payment deferral (11 contracts; recorded investment of $6.5 million); or a combination of concessions (9 contracts; recorded investment of $2.8 million).
(6)Represents the following concessions: loans restructured through bankruptcy (15 contracts; recorded investment of $1.1 million); reduced payment and/or payment deferral (2 contracts; recorded investment of $0.2 million); or a combination of concessions (21 contracts; recorded investment of $2.4 million).


20

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following is a summary, by class of loan, of information related to TDRs completed within the previous 12 months that subsequently defaulted during the three and nine months ended September 30, 20172021 and 2016.2020. For purposes of this disclosure, the previous 12 months is measured from October 1 of the respective prior year and a default represents a previously-modified loan that became past due 30 days or more during the three orand nine months ended September 30, 2017 2021
or 2016.

   Three Months Ended September 30, 
   2017   2016 

(dollars in millions)

  Number
of Contracts		   Recorded
Investment as of
Period End		   Number
of Contracts		   Recorded
Investment as of
Period End		 

Commercial:

        

Commercial real estate

   —     $—      —     $—   

Commercial and industrial

   1    0.1    —      —   

Equipment financing

   8    4.2    14    2.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   9    4.3    14    2.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Retail:

        

Residential mortgage

   2    0.9    3    0.6 

Home equity

   5    0.8    —      —   

Other consumer

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   7    1.7    3    0.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   16   $6.0    17   $2.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

   Nine Months Ended September 30, 
   2017   2016 

(dollars in millions)

  Number
of Contracts		   Recorded
Investment as of
Period End		   Number
of Contracts		   Recorded
Investment as of
Period End		 

Commercial:

        

Commercial real estate

   —     $—      2   $0.9 

Commercial and industrial

   4    1.5    5    0.6 

Equipment financing

   15    6.8    20    5.9 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   19    8.3    27    7.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

Retail:

        

Residential mortgage

   9    2.7    10    1.9 

Home equity

   11    1.3    7    0.5 

Other consumer

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   20    4.0    17    2.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   39   $12.3    44   $9.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

2020.

 Three Months Ended September 30,
 20212020
(dollars in millions)
Number
of Contracts
Recorded
Investment as of
Period End
Number
of Contracts
Recorded
Investment as of
Period End
Commercial:
Commercial real estate— $— 1 $1.1 
Commercial and industrial— — 7 3.2 
Equipment financing1 0.1 6 1.4 
MW/ABL— — — — 
Total1 0.1 14 5.7 
Retail:
Residential mortgage1 0.1 1 0.1 
Home equity— — 1 0.1 
Other consumer— — — — 
Total1 0.1 2 0.2 
Total2 $0.2 16 $5.9 
Nine Months Ended September 30,
20212020
(dollars in millions)Number
of Contracts		Recorded
Investment as of
Period End		Number
of Contracts		Recorded
Investment as of
Period End
Commercial:
Commercial real estate— $— 1 $1.1 
Commercial and industrial— — 8 3.5 
Equipment financing11 1.4 7 1.4 
MW/ABL— — — — 
Total11 1.4 16 6.0 
Retail:
Residential mortgage3 2.1 1 0.1 
Home equity— — 2 0.1 
Other consumer— — — — 
Total3 2.1 3 0.2 
Total14 $3.5 19 $6.2 

21

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

People’s United’s impaired

Credit Quality Indicators
As part of the on-going monitoring of the credit quality of the loan portfolio, management tracks certain credit quality indicators, including trends related to: (i) internal Commercial loan risk ratings; (ii) internal Retail loan risk classification; and (iii) non-accrual loans consist of certain loans that have been placed onnon-accrual status, including all TDRs. The following table summarizes, by class of loan, information related toindividually-evaluated impaired loans.

   As of September 30, 2017   As of December 31, 2016 

(in millions)

  Unpaid
Principal
Balance		   Recorded
Investment		   Related
Allowance
for Loan
Losses		   Unpaid
Principal
Balance		   Recorded
Investment		   Related
Allowance
for Loan
Losses		 

Without a related allowance for loan losses:

 

          

Commercial:

            

Commercial real estate

  $50.7   $46.1   $—     $41.4   $40.0   $—   

Commercial and industrial

   39.3    36.7    —      50.7    45.7    —   

Equipment financing

   42.8    39.1    —      38.2    35.3    —   

Retail:

            

Residential mortgage

   66.8    60.0    —      63.6    58.0    —   

Home equity

   23.5    20.0    —      22.4    18.7    —   

Other consumer

   —      —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $223.1   $201.9   $—     $216.3   $197.7   $—   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

With a related allowance for loan losses:

 

          

Commercial:

            

Commercial real estate

  $13.5   $12.8   $1.2   $12.2   $11.4   $0.6 

Commercial and industrial

   25.2    24.6    3.0    25.9    25.0    4.7 

Equipment financing

   14.1    13.2    1.5    5.0    4.4    0.5 

Retail:

            

Residential mortgage

   12.4    12.4    1.7    13.1    13.1    2.3 

Home equity

   1.9    1.9    0.7    2.1    2.0    0.9 

Other consumer

   —      —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $67.1   $64.9   $8.1   $58.3   $55.9   $9.0 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans:

            

Commercial:

            

Commercial real estate

  $64.2   $58.9   $1.2   $53.6   $51.4   $0.6 

Commercial and industrial

   64.5    61.3    3.0    76.6    70.7    4.7 

Equipment financing

   56.9    52.3    1.5    43.2    39.7    0.5 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   185.6    172.5    5.7    173.4    161.8    5.8 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Retail:

            

Residential mortgage

   79.2    72.4    1.7    76.7    71.1    2.3 

Home equity

   25.4    21.9    0.7    24.5    20.7    0.9 

Other consumer

   —      —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   104.6    94.3    2.4    101.2    91.8    3.2 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $290.2   $266.8   $8.1   $274.6   $253.6   $9.0 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following tables summarize, by class of loan, the average recorded investment and interest income recognized on impaired loans for the periods indicated. The average recorded investment amounts are based onmonth-end balances.

   Three Months Ended September 30, 
   2017   2016 

(in millions)

  Average
Recorded
Investment		   Interest
Income
Recognized		   Average
Recorded
Investment		   Interest
Income
Recognized		 

Commercial:

        

Commercial real estate

  $61.8   $0.3   $54.1   $0.4 

Commercial and industrial

   59.7    0.7    60.5    0.3 

Equipment financing

   46.5    0.2    38.2    0.1 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   168.0    1.2    152.8    0.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

Retail:

        

Residential mortgage

   72.4    0.4    71.7    0.4 

Home equity

   21.8    0.1    21.3    0.1 

Other consumer

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   94.2    0.5    93.0    0.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $262.2   $1.7   $245.8   $1.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

   Nine Months Ended September 30, 
   2017   2016 

(in millions)

  Average
Recorded
Investment		   Interest
Income
Recognized		   Average
Recorded
Investment		   Interest
Income
Recognized		 

Commercial:

        

Commercial real estate

  $56.9   $0.9   $58.6   $1.1 

Commercial and industrial

   66.1    1.6    61.9    1.2 

Equipment financing

   43.0    0.4    35.9    0.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   166.0    2.9    156.4    2.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Retail:

        

Residential mortgage

   71.9    1.3    72.1    1.2 

Home equity

   21.1    0.3    21.9    0.2 

Other consumer

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   93.0    1.6    94.0    1.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $259.0   $4.5   $250.4   $3.9 
  

 

 

   

 

 

   

 

 

   

 

 

 

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following tables summarize, by class of loan, aging information for originated loans:

       Past Due     

As of September 30, 2017 (in millions)

  Current   30-89
Days		   90 Days
or More		   Total   Total
Originated		 

Commercial:

          

Commercial real estate

  $10,158.6   $20.3   $15.2   $35.5   $10,194.1 

Commercial and industrial

   7,943.2    10.1    18.0    28.1    7,971.3 

Equipment financing

   2,942.7    88.4    8.0    96.4    3,039.1 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   21,044.5    118.8    41.2    160.0    21,204.5 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Retail:

          

Residential mortgage

   6,455.4    31.8    20.4    52.2    6,507.6 

Home equity

   1,968.5    7.0    6.3    13.3    1,981.8 

Other consumer

   46.5    0.8    —      0.8    47.3 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   8,470.4    39.6    26.7    66.3    8,536.7 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total originated loans

  $29,514.9   $158.4   $67.9   $226.3   $29,741.2 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Included in the “Current” and“30-89 Days” categories above are earlynon-performing commercial real estate loans, commercial and industrial loans, and equipment financing loans totaling $21.7 million, $20.7 million and $46.1 million, respectively, and $21.9 million of retail loans in the process of foreclosure or bankruptcy. These loans are less than 90 days past due but have been placed onnon-accrual status as a result of having been identified as presenting uncertainty with respect to the collectability of interest and principal.

       Past Due     

As of December 31, 2016 (in millions)

  Current   30-89
Days		   90 Days
or More		   Total   Total
Originated		 

Commercial:

          

Commercial real estate

  $9,989.9   $10.9   $11.8   $22.7   $10,012.6 

Commercial and industrial

   7,899.2    10.0    29.8    39.8    7,939.0 

Equipment financing

   2,941.5    68.4    11.0    79.4    3,020.9 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   20,830.6    89.3    52.6    141.9    20,972.5 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Retail:

          

Residential mortgage

   6,027.5    22.0    17.8    39.8    6,067.3 

Home equity

   2,030.3    5.2    9.4    14.6    2,044.9 

Other consumer

   49.7    0.3    —      0.3    50.0 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   8,107.5    27.5    27.2    54.7    8,162.2 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total originated loans

  $28,938.1   $116.8   $79.8   $196.6   $29,134.7 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Included in the “Current” and“30-89 Days” categories above are earlynon-performing commercial real estate loans, commercial and industrial loans, and equipment financing loans totaling $10.5 million, $24.8 million and $28.4 million, respectively, and $17.6 million of retail loans in the process of foreclosure or bankruptcy. These loans are less than 90 days past due but have been placed onnon-accrual status as a result of having been identified as presenting uncertainty with respect to the collectability of interest and principal.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

(see details above).

Commercial Credit Quality Indicators

The Company utilizes an internal loan risk rating system as a means of monitoring portfolio credit quality and identifying both problem and potential problem loans. Under the Company’s risk rating system, loans not meeting the criteria for problem and potential problem loans as specified below are considered to be “Pass”-rated loans. Problem and potential problem loans are classified as either “Special Mention,” “Substandard” or “Doubtful.” Loans that do not currently expose the Company to sufficient enough risk of loss to warrant classification as either Substandard or Doubtful, but possess weaknesses that deserve management’s close attention, are classified as Special Mention. Substandard loans represent those credits characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful possess all the weaknesses inherent in those classified Substandard with the added characteristic that collection or liquidation in full, on the basis of existing facts, conditions and values, is highly questionable and/or improbable.

Risk ratings on commercial loans are subject to ongoing monitoring by lending and credit personnel with such ratings updated annually or more frequently, if warranted. The Company’s internal Loan Review function is responsible for independently evaluating the appropriateness of those credit risk ratings in connection with its cyclical reviews, the approach to which is risk-based and determined by reference to underlying portfolio credit quality and the results of prior reviews. Differences in risk ratings noted in conjunction with such periodic portfolio loan reviews, if any, are reported to management each month.

22

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
The following tables present Commercial loan risk ratings, by class of loan and year of origination:
As of September 30, 2021 (in millions)20212020201920182017PriorRevolving LoansRevolving Loans Converted to TermTotal
Commercial real
   estate:
 Pass$454.5 $891.2 $1,783.1 $1,314.4 $1,057.1 $5,191.6 $127.2 $30.7 $10,849.8 
 Special Mention13.8 110.2 105.5 168.7 122.5 303.0 — 0.4 824.1 
 Substandard1.0 12.4 116.4 146.5 124.5 580.9 1.7 4.1 987.5 
 Doubtful— — — 0.2 — 1.0 — — 1.2 
 Total$469.3 $1,013.8 $2,005.0 $1,629.8 $1,304.1 $6,076.5 $128.9 $35.2 $12,662.6 
 Commercial and
   industrial:
 Pass$1,743.7 $828.5 $940.2 $577.5 $459.0 $1,653.8 $2,207.0 $96.5 $8,506.2 
 Special Mention3.2 4.5 17.6 9.3 52.6 80.2 13.3 0.2 180.9 
 Substandard14.5 16.4 77.3 46.0 90.6 148.8 90.7 18.3 502.6 
 Doubtful— — 0.3 — — 1.5 — 0.1 1.9 
 Total$1,761.4 $849.4 $1,035.4 $632.8 $602.2 $1,884.3 $2,311.0 $115.1 $9,191.6 
 Equipment financing:
 Pass$1,488.7 $1,289.2 $965.3 $453.3 $196.4 $107.0 $— $— $4,499.9 
 Special Mention26.8 9.9 14.3 8.1 9.5 2.8 — — 71.4 
 Substandard117.0 131.4 108.8 57.3 32.0 22.5 — — 469.0 
 Doubtful— — — — — — — — — 
 Total$1,632.5 $1,430.5 $1,088.4 $518.7 $237.9 $132.3 $— $— $5,040.3 
 MW/ABL:
 Pass$26.3 $26.2 $7.0 $14.3 $4.7 $33.9 $3,399.5 $— $3,511.9 
 Special Mention— — 9.3 — — — 18.7 — 28.0 
 Substandard— — — — — — 36.6 0.9 37.5 
 Doubtful— — — — — — — — — 
 Total$26.3 $26.2 $16.3 $14.3 $4.7 $33.9 $3,454.8 $0.9 $3,577.4 
23

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
As of December 31, 2020 (in millions)20202019201820172016PriorRevolving LoansRevolving Loans Converted to TermTotal
Commercial real
   estate:
Pass$848.5 $1,743.2 $1,490.4 $1,397.8 $1,274.2 $5,039.3 $165.8 $19.7 $11,978.9 
Special Mention28.5 72.9 225.6 131.2 58.9 362.7 0.5 — 880.3 
Substandard12.0 26.7 63.3 51.9 63.2 252.7 2.8 4.2 476.8 
Doubtful— — — — — 0.9 — — 0.9 
Total$889.0 $1,842.8 $1,779.3 $1,580.9 $1,396.3 $5,655.6 $169.1 $23.9 $13,336.9 
Commercial and
   industrial:
Pass$2,952.8 $1,236.9 $821.9 $527.1 $487.2 $1,588.5 $1,949.1 $77.4 $9,640.9 
Special Mention113.9 41.7 46.4 120.3 57.1 122.1 80.8 6.3 588.6 
Substandard27.0 86.3 84.2 47.6 29.8 141.2 97.7 18.4 532.2 
Doubtful— — — — 0.8 1.5 — 0.1 2.4 
Total$3,093.7 $1,364.9 $952.5 $695.0 $574.9 $1,853.3 $2,127.6 $102.2 $10,764.1 
Equipment financing:
Pass$1,703.3 $1,358.7 $727.2 $362.1 $155.5 $67.1 $— $— $4,373.9 
Special Mention20.5 27.5 16.7 7.3 4.2 1.5 — — 77.7 
Substandard169.9 137.5 87.7 49.8 17.9 15.6 — — 478.4 
Doubtful— — — — — — — — — 
Total$1,893.7 $1,523.7 $831.6 $419.2 $177.6 $84.2 $— $— $4,930.0 
MW/ABL:
Pass$99.4 $18.6 $18.3 $8.8 $14.1 $19.6 $3,994.3 $— $4,173.1 
Special Mention— 6.9 — — — — 20.5 — 27.4 
Substandard— 1.7 — — — — 15.0 1.0 17.7 
Doubtful— — — — — — — — — 
Total$99.4 $27.2 $18.3 $8.8 $14.1 $19.6 $4,029.8 $1.0 $4,218.2 

24

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
Retail Credit Quality Indicators

Pools of smaller-balance, homogeneousRetail loans with similar risk and loss characteristics are also assessed for probable losses. These loan pools include residential mortgage, home equity and other consumer loans that are not assigned individual loan risk ratings. Rather, the assessment of these portfolios is based upon a consideration of recent historical loss experience, broader portfolio indicators, including trends in delinquencies,non-performing non-accrual loans and portfolio concentrations, and portfolio-specific risk characteristics, the combination of which determines whether a loan is classified as “High”, “Moderate” or “Low” risk.

The portfolio-specific risk characteristics considered include: (i) collateralvalues/loan-to-value (“LTV”) ratios (above and below 70%); (ii) borrower credit scores under the FICO scoring system (above and below a score of 680); and (iii) other relevant portfolio risk elements such as income verification at the time of underwriting (stated income vs.non-stated income) and the property’s intended use (owner occupied,(owner-occupied, non-owner occupied, second home, etc.). In classifying a loan as either “High”, “Moderate” or “Low” risk, the combination of each of the aforementioned risk characteristics is considered for that loan, resulting, effectively, in a “matrix approach” to its risk classification. These risk classifications are reviewed quarterly to ensure that they continue to be appropriate in light of changes within the portfolio and/or economic indicators as well as other industry developments.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

For example, to the extent LTV ratios exceed 70% (reflecting a weaker collateral position for the Company) or borrower FICO scores are less than 680 (reflecting weaker financial standing and/or credit history of the customer), the loans are considered to have an increased level of inherent loss. As a result, a loan with a combination of these characteristics would generally be classified as “High” risk. Conversely, as LTV ratios decline (reflecting a stronger collateral position for the Company) or borrower FICO scores exceed 680 (reflecting stronger financial standing and/or credit history of the customer), the loans are considered to have a decreased level of inherent loss. A loan with a combination of these characteristics would generally be classified as “Low” risk. This analysis also considers (i) the extent of underwriting that occurred at the time of origination (direct income verification provides further support for credit decisions) and (ii) the property’s intended use (owner-occupied
(owner-occupied properties are less likely to default compared to ‘investment-type’non-owner occupied properties, second homes, etc.). Loans not otherwise deemed to be “High” or “Low” risk are classified as “Moderate” risk.

LTV ratios and FICO scores are determined at origination and updated periodically throughout the life of the loan. LTV ratios are updated for loans 90 days past due and FICO scores are updated for the entire portfolio quarterly. The portfolio stratification (“High”, “Moderate” and “Low” risk) and identification of the corresponding credit quality indicators also occurs quarterly.

Commercial and Retail loans are also evaluated to determine whether they are impaired loans. Such loans are included in the tabular disclosures of credit quality indicators that follow.

Acquired Loan Credit Quality Indicators

Upon acquiring a loan portfolio, the Company’s internal Loan Review function undertakes the process of assigning risk ratings to all commercial loans in accordance with the Company’s established policy, which may differ in certain respects from the risk rating policy of the predecessor company. The length of time necessary to complete this process varies based on the size of the acquired portfolio, the quality of the documentation maintained in the underlying loan files and the extent to which the predecessor company followed a risk rating approach comparable to People’s United’s. As a result, while acquired loans are risk rated, there are occasions when such ratings may be deemed “preliminary” until the Company’sre-rating process has been completed.

Acquired loans are initially recorded at fair value, determined based upon an estimate of the amount and timing of both principal and interest cash flows expected to be collected and discounted using a market interest rate. For purchased performing loans, the required allowance for loan losses is determined in a manner similar to that for originated loans with a provision for loan losses only recorded when the required allowance for loan losses exceeds any remaining purchase discount at the loan level. For PCI loans, the difference between contractually required principal and interest payments at the acquisition date and the undiscounted cash flows expected to be collected at the acquisition date is referred to as the “nonaccretable difference”, which includes an estimate of future credit losses expected to be incurred over the life of the loans in each pool. A decrease in the expected cash flows in subsequent periods requires the establishment of an allowance for loan losses at that time. At September 30, 2017 and December 31, 2016, the allowance for loan losses on acquired loans was $4.2 million and $6.3 million, respectively.

25

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following is a summary,tables present Retail loan risk classification, by class of loan and year of credit quality indicators:

As of September 30, 2017 (in millions)

  Commercial
Real Estate		   Commercial
and
Industrial		   Equipment
Financing		   Total 

Commercial:

        

Originated loans:

        

Pass

  $9,926.2   $7,588.1   $2,619.7   $20,134.0 

Special mention

   129.1    122.8    101.8    353.7 

Substandard

   137.9    259.6    317.6    715.1 

Doubtful

   0.9    0.8    —      1.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total originated loans

   10,194.1    7,971.3    3,039.1    21,204.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Acquired loans:

        

Pass

   940.9    562.2    666.5    2,169.6 

Special mention

   6.2    42.4    —      48.6 

Substandard

   38.6    48.8    —      87.4 

Doubtful

   0.7    —      —      0.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total acquired loans

   986.4    653.4    666.5    2,306.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $11,180.5   $8,624.7   $3,705.6   $23,510.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

As of September 30, 2017 (in millions)

  Residential
Mortgage		   Home
Equity		   Other
Consumer		   Total 

Retail:

        

Originated loans:

        

Low risk

  $3,259.8   $928.2   $27.2   $4,215.2 

Moderate risk

   2,715.9    652.2    8.0    3,376.1 

High risk

   531.9    401.4    12.1    945.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total originated loans

   6,507.6    1,981.8    47.3    8,536.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

Acquired loans:

        

Low risk

   154.9    —      —      154.9 

Moderate risk

   60.2    —      —      60.2 

High risk

   58.3    59.7    3.9    121.9 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total acquired loans

   273.4    59.7    3.9    337.0 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $6,781.0   $2,041.5   $51.2   $8,873.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

origination:
As of September 30, 2021 (in millions)20212020201920182017PriorRevolving LoansRevolving Loans Converted
to Term		Total
Residential mortgage:
Low Risk$540.1 $661.5 $294.9 $224.9 $356.6 $2,103.0 $— $— $4,181.0 
Moderate Risk452.4 663.8 281.4 252.9 289.2 568.6 — — 2,508.3 
High Risk63.6 55.2 37.3 62.5 76.8 285.1 — — 580.5 
Total$1,056.1 $1,380.5 $613.6 $540.3 $722.6 $2,956.7 $— $— $7,269.8 
 Home equity:
Low Risk$1.2 $1.5 $5.5 $16.4 $18.5 $29.4 $545.4 $44.5 $662.4 
Moderate Risk0.4 0.4 2.9 6.9 9.3 14.7 434.0 44.5 513.1 
High Risk1.2 2.2 15.1 25.0 15.7 18.9 325.7 121.1 524.9 
Total$2.8 $4.1 $23.5 $48.3 $43.5 $63.0 $1,305.1 $210.1 $1,700.4 
Other consumer:
Low Risk$0.9 $0.6 $1.3 $1.4 $0.8 $2.7 $16.9 $0.1 $24.7 
Moderate Risk— — — — — — 4.6 0.1 4.7 
High Risk4.0 3.0 14.6 9.0 0.9 5.8 16.9 0.1 54.3 
Total$4.9 $3.6 $15.9 $10.4 $1.7 $8.5 $38.4 $0.3 $83.7 

As of December 31, 2020 (in millions)20202019201820172016PriorRevolving LoansRevolving Loans Converted
to Term		Total
Residential mortgage:
Low Risk$609.5 $349.1 $338.3 $504.0 $1,004.6 $1,793.8 $— $— $4,599.3 
Moderate Risk752.5 456.8 443.9 517.5 520.2 519.8 — — 3,210.7 
High Risk81.2 60.4 95.0 109.6 86.6 276.1 — — 708.9 
Total$1,443.2 $866.3 $877.2 $1,131.1 $1,611.4 $2,589.7 $— $— $8,518.9 
Home equity:
Low Risk$1.9 $7.4 $21.1 $24.6 $10.7 $25.8 $580.0 $42.9 $714.4 
Moderate Risk0.6 3.7 9.2 12.2 6.6 13.4 520.0 45.3 611.0 
High Risk2.8 21.8 38.1 22.0 7.5 18.8 415.7 145.1 671.8 
Total$5.3 $32.9 $68.4 $58.8 $24.8 $58.0 $1,515.7 $233.3 $1,997.2 
Other consumer:
Low Risk$0.9 $1.7 $1.7 $0.9 $0.4 $2.7 $11.4 $0.1 $19.8 
Moderate Risk— — — — — 0.1 4.8 0.1 5.0 
High Risk5.5 27.3 17.9 2.3 1.0 8.5 16.8 0.1 79.4 
Total$6.4 $29.0 $19.6 $3.2 $1.4 $11.3 $33.0 $0.3 $104.2 

26

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

As of December 31, 2016 (in millions)

  Commercial
Real Estate		   Commercial
and
Industrial		   Equipment
Financing		   Total 

Commercial:

        

Originated loans:

        

Pass

  $9,817.2   $7,580.6   $2,617.9   $20,015.7 

Special mention

   107.3    121.9    98.8    328.0 

Substandard

   87.1    233.3    304.2    624.6 

Doubtful

   1.0    3.2    —      4.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total originated loans

   10,012.6    7,939.0    3,020.9    20,972.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Acquired loans:

        

Pass

   182.9    155.5    1.0    339.4 

Special mention

   13.5    3.6    8.6    25.7 

Substandard

   37.6    27.0    2.0    66.6 

Doubtful

   0.7    —      —      0.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total acquired loans

   234.7    186.1    11.6    432.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $10,247.3   $8,125.1   $3,032.5   $21,404.9 
  

 

 

   

 

 

   

 

 

   

 

 

 
   Residential   Home   Other     

As of December 31, 2016 (in millions)

  Mortgage   Equity   Consumer   Total 

Retail:

        

Originated loans:

        

Low risk

  $3,016.4   $950.9   $31.1   $3,998.4 

Moderate risk

   2,538.9    663.9    7.2    3,210.0 

High risk

   512.0    430.1    11.7    953.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total originated loans

   6,067.3    2,044.9    50.0    8,162.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Acquired loans:

        

Low risk

   75.7    —      —      75.7 

Moderate risk

   27.5    —      —      27.5 

High risk

   46.2    27.7    0.7    74.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total acquired loans

   149.4    27.7    0.7    177.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $6,216.7   $2,072.6   $50.7   $8,340.0 
  

 

 

   

 

 

   

 

 

   

 

 

 

Acquired Loans

Loans acquired in a business combination are initially recorded at fair value with no carryover of an acquired entity’s previously established allowance for loan losses. Fair value of the loans is determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected, as adjusted for an estimate of future credit losses and prepayments, and then applying a market-based discount rate to those cash flows. Acquired loans are evaluated upon acquisition and classified as either purchased performing or PCI.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

For purchased performing loans, any premium or discount, representing the difference between the fair value and the outstanding principal balance of the loans, is recognized (using the level yield method) as an adjustment to interest income over the remaining period to contractual maturity or until the loan is repaid in full or sold. Subsequent to the acquisition date, the method utilized to estimate the required allowance for loan losses for these loans is similar to that for originated loans. However, a provision for loan losses is only recorded when the required allowance for loan losses exceeds any remaining purchase discount at the loan level.

PCI loans represent those acquired loans with specific evidence of deterioration in credit quality since origination and for which it is probable, at acquisition, that all contractually required principal and interest payments will not be collected Such loans are generally accounted for on a pool basis, with pools formed based on the loans’ common risk characteristics, such as loan collateral type and accrual status. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.

Under the accounting model for PCI loans, the excess of cash flows expected to be collected over the carrying amount of the loans, referred to as the “accretable yield”, is accreted into interest income over the life of the loans in each pool using the level yield method. Accordingly, PCI loans are not subject to classification asnon-accrual in the same manner as other loans. Rather, PCI loans are considered to be accruing loans because their interest income relates to the accretable yield recognized at the pool level and not to contractual interest payments at the loan level. The difference between contractually required principal and interest payments and the cash flows expected to be collected, referred to as the “nonaccretable difference”, includes estimates of both the impact of prepayments and future credit losses expected to be incurred over the life of the loans in each pool. As such, charge-offs on PCI loans are first applied to the nonaccretable difference and then to any allowance for loan losses recognized subsequent to acquisition.

Subsequent to acquisition, actual cash collections are monitored relative to management’s expectations and revised cash flow forecasts are prepared, as warranted. These revised forecasts involve updates, as necessary, of the key assumptions and estimates used in the initial estimate of fair value. Generally speaking, expected cash flows are affected by:

•Changes in the expected principal and interest payments over the estimated life – Updates to changes in expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows resulting from loan modifications are included in the assessment of expected cash flows;

•Changes in prepayment assumptions – Prepayments affect the estimated life of the loans which may change the amount of interest income, and possibly principal, expected to be collected; and

•Changes in interest rate indices for variable rate loans – Expected future cash flows are based, as applicable, on the variable rates in effect at the time of the assessment of expected cash flows.

A decrease in expected cash flows in subsequent periods may indicate that the loan pool is impaired, which would require the establishment of an allowance for loan losses by a charge to the provision for loan losses. An increase in expected cash flows in subsequent periods serves, first, to reduce any previously established allowance for loan losses by the increase in the present value of cash flows expected to be collected, and results in a recalculation of the amount of accretable yield for the loan pool. The adjustment of accretable yield due to an increase in expected cash flows is accounted for as a change in estimate. The additional cash flows expected to be collected are reclassified from the nonaccretable difference to the accretable yield, and the amount of periodic accretion is adjusted accordingly over the remaining life of the loans in the pool.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

PCI loans may be resolved either through receipt of payment (in full or in part) from the borrower, the sale of the loan to a third party or foreclosure of the collateral. In the event of a sale of the loan, a gain or loss on sale is recognized and reported withinnon-interest income based on the difference between the sales proceeds and the carrying amount of the loan. In other cases, individual loans are removed from the pool based on comparing the amount received from its resolution (fair value of the underlying collateral less costs to sell in the case of a foreclosure) with its outstanding balance. Any difference between these amounts is absorbed by the nonaccretable difference established for the entire pool. For loans resolved by payment in full, there is no adjustment of the nonaccretable difference since there is no difference between the amount received at resolution and the outstanding balance of the loan. In these cases, the remaining accretable yield balance is unaffected and any material change in remaining effective yield caused by the removal of the loan from the pool is addressed in connection with the subsequent cash flowre-assessment for the pool. PCI loans subject to modification are not removed from the pool even if those loans would otherwise be deemed TDRs as the pool, and not the individual loan, represents the unit of account.

At the respective acquisition dates, on an aggregate basis, the PCI loan portfolio had contractually required principal and interest payments receivable of $7.65 billion; expected cash flows of $7.09 billion; and a fair value (initial carrying amount) of $5.42 billion. The difference between the contractually required principal and interest payments receivable and the expected cash flows ($560.1 million) represented the initial nonaccretable difference. The difference between the expected cash flows and fair value ($1.67 billion) represented the initial accretable yield. Both the contractually required principal and interest payments receivable and the expected cash flows reflect anticipated prepayments, determined based on historical portfolio experience. At September 30, 2017, the outstanding principal balance and carrying amount of the PCI loan portfolio were $630.6 million and $541.2 million, respectively ($707.0 million and $610.2 million, respectively, at December 31, 2016).

The following table summarizes activity inis a summary of revolving loans that converted to term during the accretable yield for the PCI loan portfolio:

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 

(in millions)

  2017   2016   2017   2016 

Balance at beginning of period

  $233.4   $270.3   $255.4   $296.0 

Acquisitions

   —      —      13.1    —   

Accretion

   (7.1)    (9.0)    (22.5)    (31.1) 

Reclassification from nonaccretable difference for loans with improved cash flows (1)

   —      —      —      —   

Other changes in expected cash flows (2)

   —      2.4    (19.7)    (1.2) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

  $226.3   $263.7   $226.3   $263.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

(1)Results in increased interest accretion as a prospective yield adjustment over the remaining life of the corresponding pool of loans.
(2)Represents changes in cash flows expected to be collected due to factors other than credit (e.g. changes in prepayment assumptions and/or changes in interest rates on variable rate loans), as well as loan sales, modifications and payoffs.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

three and nine months ended September 30, 2021:

Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2021202020212020
Commercial:
Commercial real estate$2.0 $0.4 $12.8 $1.7 
Commercial and industrial57.6 8.3 63.2 23.9 
Equipment financing— — — — 
MW/ABL— — — — 
Total59.6 8.7 76.0 25.6 
Retail:
Residential mortgage— — — — 
Home equity12.5 9.5 33.4 24.4 
Other consumer0.1 — 0.1 0.1 
Total12.6 9.5 33.5 24.5 
Total$72.2 $18.2 $109.5 $50.1 
Other Real Estate Owned and Repossessed Assets (included in Other Assets)

Other real estate owned (“REO”) was comprised of residential properties totaling $1.6 million and $3.2 million at September 30, 2021 and December 31, 2020, respectively, and commercial properties totaling $4.7$3.6 million and $6.3 million, respectively,at
December 31, 2020 (none at September 30, 2017, and $8.1 million and $4.0 million, respectively, at December 31, 2016.2021). Repossessed assets totaled $5.4$7.4 million and $7.2$5.7 million at
September 30, 20172021 and December 31, 2016,2020, respectively.

NOTE 5. STOCKHOLDERS’ EQUITY



27

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
NOTE 4. ALLOWANCE FOR CREDIT LOSSES
Allowance for Credit Losses – Loans
At September 30, 2021 and December 31, 2020, the collective ACL totaled $340.0 million and $404.6 million, respectively, and the specific allocations of the ACL for loans evaluated on an individual basis totaled $12.4 million and $20.5 million, respectively.
The following tables summarize, by loan portfolio segment, activity in the ACL for the three and nine months ended September 30, 2021 and 2020:
Three Months Ended September 30,
20212020
(in millions)CommercialRetailTotalCommercialRetailTotal
Balance at beginning of period$241.0 $107.1 $348.1 $277.4 $136.6 $414.0 
Charge-offs(12.6)(0.6)(13.2)(18.4)(0.9)(19.3)
Recoveries4.4 1.1 5.5 1.2 0.8 2.0 
Net loan charge-offs(8.2)0.5 (7.7)(17.2)(0.1)(17.3)
Provision for credit losses(3.1)15.1 12.0 31.1 (4.0)27.1 
Balance at end of period$229.7 $122.7 $352.4 $291.3 $132.5 $423.8 
Nine Months Ended September 30,
20212020
(in millions)CommercialRetailTotalCommercialRetailTotal
Balance at beginning of period$303.6 $121.5 $425.1 $217.9 $28.7 $246.6 
CECL transition adjustment— — — (17.3)89.5 72.2 
Balance at beginning of period, adjusted303.6 121.5 425.1 200.6 118.2 318.8 
Charge-offs(42.4)(2.5)(44.9)(36.4)(5.8)(42.2)
Recoveries11.0 3.5 14.5 3.9 1.9 5.8 
Net loan charge-offs(31.4)1.0 (30.4)(32.5)(3.9)(36.4)
Provision for credit losses(42.5)0.2 (42.3)123.2 18.2 141.4 
Balance at end of period$229.7 $122.7 $352.4 $291.3 $132.5 $423.8 

Allowance for Credit Losses – Off-Balance-Sheet Credit Exposures
The following table summarizes changes in the ACL on off-balance-sheet credit exposures for the three and nine months ended September 30, 2021 and 2020:
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2021202020212020
Balance at beginning of period$29.6 $21.8 $26.9 $5.6 
CECL transition adjustment— — — 14.5 
Balance at beginning of period, adjusted29.621.8 26.920.1 
Provision charged (credited) to income0.5 2.9 3.2 4.6 
Balance at end of period$30.1 $24.7 $30.1 $24.7 


28

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
NOTE 5. LEASES
Lessor Arrangements
People’s United provides equipment financing to its customers through a variety of lessor arrangements, some of which may include options to renew and/or for the lessee to purchase the leased equipment at the end of the lease term. Direct financing leases and sales-type leases (collectively, “lease financing receivables”) are carried at the aggregate of lease payments receivable plus the estimated residual value of the leased assets and any initial direct costs incurred to originate these leases, less unearned income, which is accreted to interest income over the lease term using the interest method.
The composition of the Company’s total net investment in lease financing receivables included within equipment financing loans in the Consolidated Statements of Condition was as follows:
(in millions)September 30, 2021December 31, 2020
Lease payments receivable$1,385.7 $1,418.4 
Estimated residual value of leased assets130.7 132.7 
Gross investment in lease financing receivables1,516.4 1,551.1 
Plus: Deferred origination costs10.5 11.6 
Less: Unearned income(142.9)(150.7)
Total net investment in lease financing receivables$1,384.0 $1,412.0 
The contractual maturities of the Company’s lease financing receivables were as follows:
(in millions)September 30, 2021
2021 (1)$149.7 
2022503.8 
2023374.5 
2024261.4 
2025150.6 
Later years76.4 
Total$1,516.4 
(1)Contractual maturities for the remaining three months in 2021.
The following table summarizes People’s United’s total lease income:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2021202020212020
Lease financing receivables$16.3 $17.4 $50.0 $52.5 
Operating leases10.6 12.4 33.1 36.8 
Total lease income$26.9 $29.8 $83.1 $89.3 


29

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
Lessee Arrangements
Substantially all of the Company’s lessee arrangements represent non-cancelable operating leases for real estate (primarily branch locations) and office equipment with terms extending through 2054. Under these arrangements, People’s United records right-of-use (“ROU”) assets and corresponding lease liabilities at lease commencement. Lease liabilities are recognized based on the present value of the remaining lease payments and discounted using the Company’s incremental borrowing rate for borrowings of similar term. ROU assets initially equal the related lease liability, adjusted for any lease payments made prior to the lease commencement and any lease incentives. Portions of certain properties are subleased for terms extending through 2038.
Within the Consolidated Statements of Condition, ROU assets are reported in other assets and the related lease liabilities are reported in other liabilities.Lease expense is recognized on a straight-line basis over the lease term and is recorded within occupancy and equipment expense in the Consolidated Statements of Income. Variable lease payments, which generally relate to the non-lease components noted above, are expensed as incurred.
The following tables provide the components of net lease cost and supplemental information:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2021202020212020
Operating lease cost$15.8 $16.1 $47.8 $49.2 
Variable lease cost2.6 2.7 7.4 7.4 
Finance lease cost0.1 0.1 0.3 0.3 
Sublease income(0.6)(0.5)(1.6)(1.5)
Net lease cost$17.9 $18.4 $53.9 $55.4 
(dollars in millions)September 30, 2021December 31, 2020
Lease ROU assets:
Operating leases$219.3 $234.9 
Finance leases2.2 2.3 
Lease liabilities:
Operating leases252.2 270.4 
Finance leases4.6 4.9 
Weighted-average discount rate:
Operating leases2.87 %3.08 %
Finance leases2.59 2.59 
Weighted-average remaining lease term (in years):
Operating leases7.37.7
Finance leases10.511.7
Nine Months Ended
September 30,
(in millions)20212020
Cash payments included in the measurement of lease liabilities:
Reported in operating cash from operating leases$51.3 $51.0 
Reported in financing cash from finance leases0.3 0.3 
ROU assets obtained in exchange for lessee:
Operating lease liabilities9.2 15.3 


30

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
The contractual maturities of the Company’s lease liabilities as of September 30, 2021 were as follows:
(in millions)Operating LeasesFinance Leases
2021 (1)$17.1 $0.1 
202254.2 0.5 
202342.8 0.5 
202437.7 0.5 
202533.9 0.5 
Later years97.9 3.2 
Total lease payments283.6 5.3 
Less: Interest(31.4)(0.7)
Total lease liabilities$252.2 $4.6 
(1)Contractual maturities for the remaining three months in 2021.

In the third quarter of 2021, the Company completed 2 sale-leaseback transactions on properties located in
Connecticut and New York. The transactions resulted in a net gain of $3.9 million, which is included in other non-interest income in the Consolidated Statements of Income.
NOTE 6. STOCKHOLDERS’ EQUITY
Preferred Stock

and Common Stock

People’s United is authorized to issue (i) 50.0 million shares of preferred stock, par value of $0.01 per share, of which 10.0 million shares were outstandingissued at both September 30, 20172021 and December 31, 2016,2020, and (ii) 1.95 billion shares of common stock, par value of $0.01 per share, of which 433.6536.8 million shares and 405.0533.7 million shares were issued at September 30, 20172021 and December 31, 2016,2020, respectively.

Treasury Stock

Treasury stock includes (i) common stock repurchased by People’s United, either directly or through agents, in the open market at prices and terms satisfactory to management in connection with stock repurchases authorized by its Board of Directors (86.4(106.4 million shares at both September 30, 20172021 and December 31, 2016)2020) and (ii) common stock purchased in the open market by a trustee with funds provided by People’s United and originally intended for awards under the People’s United Financial, Inc. 2007 Recognition and Retention Plan (the “RRP”) (2.6 million and 2.7 million shares at both September 30, 20172021 and
December 31, 2016, respectively)2020). Following shareholder approval of the People’s United Financial, Inc. 2014 Long-Term Incentive Plan in 2014, no new awards may be granted under the RRP.

In June 2019, the Company’s Board of Directors authorized the repurchase of up to 20.0 million shares of People’s United’s outstanding common stock. Such shares may be repurchased, either directly or through agents, in the open market at prices and terms satisfactory to management. During the first quarter of 2020, the Company completed the repurchase authorization by purchasing 19.8 million shares of People’s United common stock at a total cost of $304.4 million.

31

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
Comprehensive Income

Comprehensive income represents the sum of net income and items of “other comprehensive income or loss,” including (on anafter-tax basis): (i) net actuarial gains and losses, prior service credits and costs, and transition assets and obligations related to People’s United’s pension and other postretirement plans; (ii) net unrealized gains and losses on debt securities available for sale;available-for-sale; (iii) net unrealized gains and losses on debt securities transferred to held to maturity;held-to-maturity; and (iv) net unrealized gains and losses on derivatives accounted for as cash flow hedges. People’s United’s total comprehensive income for the three and nine months ended September 30, 20172021 and 20162020 is reported in the Consolidated Statements of Comprehensive Income.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following is a summary of the changes in the components of accumulated other comprehensive lossincome (loss) (“AOCL”), which are included in People’s United’s stockholders’ equity on anafter-tax basis:

(in millions)

 Pension
and Other
Postretirement
Plans		  Net Unrealized
Gains (Losses)
on Securities
Available for Sale		  Net Unrealized
Gains (Losses)
on Securities
Transferred to
Held to Maturity		  Net Unrealized
Gains (Losses)
on Derivatives
Accounted for as
Cash Flow Hedges		  Total
AOCL		 

Balance at December 31, 2016

 $(145.6)  $(32.3)  $(17.4)  $0.3  $(195.0) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive income before reclassifications

  —     11.1   —     0.3   11.4 

Amounts reclassified from AOCL (1)

  2.8   9.9   1.6   (0.4)   13.9 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Current period other comprehensive income

  2.8   21.0   1.6   (0.1)   25.3 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at September 30, 2017

 $(142.8)  $(11.3)  $(15.8)  $0.2  $(169.7) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(in millions)

 Pension
and Other
Postretirement
Plans		  Net Unrealized
Gains (Losses)
on Securities
Available for Sale		  Net Unrealized
Gains (Losses)
on Securities
Transferred to
Held to Maturity		  Net Unrealized
Gains (Losses)
on Derivatives
Accounted for as
Cash Flow Hedges		  Total
AOCL		 

Balance at December 31, 2015

 $(140.0)  $(17.7)  $(19.5)  $0.0  $(177.2) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive income (loss) before reclassifications

  —     52.4   —     (0.1)   52.3 

Amounts reclassified from AOCL (1)

  2.8   (0.1)   1.5   0.3   4.5 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Current period other comprehensive income

  2.8   52.3   1.5   0.2   56.8 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at September 30, 2016

 $(137.2)  $34.6  $(18.0)  $0.2  $(120.4) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(1)See the following table for details about these reclassifications.

(in millions)
Pension and
Other
Postretirement
Plans
Net Unrealized
Gains (Losses)
on Debt Securities
Available-for-Sale
Net Unrealized
Gains (Losses)
on Debt
Securities
Transferred to
Held-to-Maturity
Net Unrealized
Gains (Losses)
on Derivatives
Accounted for as
Cash Flow Hedges
Total
AOCL
Balance at December 31, 2020$(181.8)$103.1 $(8.2)$(2.3)$(89.2)
Other comprehensive income (loss)
   before reclassifications		— (99.2)0.1 0.1 (99.0)
Amounts reclassified from AOCL (1)7.5 — 2.8 1.0 11.3 
Current period other comprehensive
   income (loss)		7.5 (99.2)2.9 1.1 (87.7)
Balance at September 30, 2021$(174.3)$3.9 $(5.3)$(1.2)$(176.9)

(in millions)
Pension and
Other
Postretirement
Plans
Net Unrealized
Gains (Losses)
on Debt Securities
Available-for-Sale
Net Unrealized
Gains (Losses)
on Debt
Securities
Transferred to
Held-to-Maturity
Net Unrealized
Gains (Losses)
on Derivatives
Accounted for as
Cash Flow Hedges
Total
AOCL
Balance at December 31, 2019$(176.2)$20.8 $(11.8)$0.3 $(166.9)
Other comprehensive income (loss)
   before reclassifications		— 84.1 — (0.8)83.3 
Amounts reclassified from AOCL (1)4.7 — 2.7 (1.7)5.7 
Current period other comprehensive
   income		4.7 84.1 2.7 (2.5)89.0 
Balance at September 30, 2020$(171.5)$104.9 $(9.1)$(2.2)$(77.9)
(1)See the following table for details about these reclassifications.
32

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following is a summary of the amounts reclassified from AOCL:

   Amounts Reclassified from AOCL   
   Three Months Ended
September 30,		  Nine Months Ended
September 30,		  

Affected Line Item

in the Statement Where

Net Income is Presented

(in millions)

    2017      2016      2017      2016    

Details about components of AOCL:

      

Amortization of pension and other postretirement plans items:

      

Net actuarial loss

  $(1.7)  $(1.7)  $(5.1)  $(4.8)  (1)

Prior service credit

   0.2   0.2   0.6   0.6  (1)
  

 

 

  

 

 

  

 

 

  

 

 

  
   (1.5)   (1.5)   (4.5)   (4.2)  Income before income tax expense
   0.6   0.6   1.7   1.4  Income tax expense
  

 

 

  

 

 

  

 

 

  

 

 

  
   (0.9)   (0.9)   (2.8)   (2.8)  Net income
  

 

 

  

 

 

  

 

 

  

 

 

  

Reclassification adjustment for net realized gains (losses) on securities available for sale

   —     —     (15.6)   0.1  Income before income tax expense (2)
   —     —     5.7   —    Income tax expense
  

 

 

  

 

 

  

 

 

  

 

 

  
   —     —     (9.9)   0.1  Net income
  

 

 

  

 

 

  

 

 

  

 

 

  

Amortization of unrealized losses on securities transferred to held to held to maturity

   (0.9)   (0.9)   (2.6)   (2.4)  Income before income tax expense (3)
   0.3   0.4   1.0   0.9  Income tax expense
  

 

 

  

 

 

  

 

 

  

 

 

  
   (0.6)   (0.5)   (1.6)   (1.5)  Net income
  

 

 

  

 

 

  

 

 

  

 

 

  

Amortization of unrealized gains and losses on cash flow hedges:

      

Interest rate swaps

   0.3   (0.1)   0.6   (0.6)  (4)

Interest rate locks

   0.1   0.1   0.1   0.1  (4)
  

 

 

  

 

 

  

 

 

  

 

 

  
   0.4   —     0.7   (0.5)  Income before income tax expense
   (0.2)   —     (0.3)   0.2  Income tax expense
  

 

 

  

 

 

  

 

 

  

 

 

  
   0.2   —     0.4   (0.3)  Net income
  

 

 

  

 

 

  

 

 

  

 

 

  

Total reclassifications for the period

  $(1.3)  $(1.4)  $(13.9)  $(4.5)  
  

 

 

  

 

 

  

 

 

  

 

 

  

(1)Included in the computation of net periodic benefit income (expense) reflected in compensation and benefits expense (see Note 8 for additional details).
(2)Included in othernon-interest income.
(3)Included in interest and dividend income - securities.
(4)Included in interest expense - notes and debentures.

 Amounts Reclassified from AOCL
Affected Line Item
in the Statement Where
Net Income is Presented
 Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2021202020212020
Details about components of AOCL:
Amortization of pension and other
   postretirement plans items:
Net actuarial loss$(2.6)$(2.0)$(7.8)$(6.1)(1)
(2.6)(2.0)(7.8)(6.1)Income before income tax expense
0.6 0.5 0.3 1.4 Income tax expense
(2.0)(1.5)(7.5)(4.7)Net income
Reclassification adjustment for net
   realized gains (losses) on debt
   securities available-for-sale		— — — — Income before income tax expense (2)
— — — — Income tax expense
— — — — Net income
Amortization of unrealized losses on
   debt securities transferred to
   held-to-maturity		(0.9)(0.9)(3.7)(3.6)Income before income tax expense (3)
0.2 0.2 0.9 0.9 Income tax expense
(0.7)(0.7)(2.8)(2.7)Net income
Amortization of unrealized gains and
   losses on cash flow hedges:
Interest rate swaps(0.6)1.4 (1.4)2.1 (4)
Interest rate locks0.1 0.1 0.1 0.1 (4)
(0.5)1.5 (1.3)2.2 Income before income tax expense
0.1 (0.3)0.3 (0.5)Income tax expense
(0.4)1.2 (1.0)1.7 Net income
Total reclassifications for the period$(3.1)$(1.0)$(11.3)$(5.7)

(1)Included in the computation of net periodic benefit income (expense) reflected in other non-interest expense (see Note 9 for additional details).
(2)Included in other non-interest income.
(3)Included in interest and dividend income - securities.
(4)Included in interest expense - notes and debentures.
33

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 6. EARNINGS PER COMMON SHARE

NOTE 7. EARNINGS PER COMMON SHARE
The following is an analysis of People’s United’s basic and diluted EPS,earnings per common share (“EPS”), reflecting the application of thetwo-class method, as described below:

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 

(in millions, except per common share data)

  2017   2016   2017   2016 

Net income available to common shareholders

  $87.3   $73.7   $220.4   $205.1 

Dividends paid on and undistributed earnings
allocated to participating securities

   (0.1)    (0.2)    (0.4)    (0.6) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings attributable to common shareholders

  $87.2   $73.5   $220.0   $204.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding
for basic EPS

   336.9    302.9    327.6    302.4 

Effect of dilutive equity-based awards

   1.9    0.4    2.0    0.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common and common-equivalent
shares for diluted EPS

   338.8    303.3    329.6    302.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic EPS

  $0.26   $0.24   $0.67   $0.68 

Diluted EPS

  $0.26   $0.24   $0.67   $0.68 

 Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions, except per common share data)2021202020212020
Net income available to common shareholders$136.2 $141.1 $444.5 $354.4 
Dividends paid on and undistributed earnings allocated to
   participating securities		— — — — 
Earnings attributable to common shareholders$136.2 $141.1 $444.5 $354.4 
Weighted average common shares outstanding for basic EPS421.4 418.0 420.5 421.0 
Effect of dilutive equity-based awards3.4 2.2 3.7 2.2 
Weighted average common shares and common-equivalent
   shares for diluted EPS		424.8 420.2 424.2 423.2 
EPS:
Basic$0.32 $0.34 $1.06 $0.84 
Diluted0.32 0.34 1.05 0.84 

Unvested share-based payment awards, which include the right to receivenon-forfeitable dividends or dividend equivalents, are considered to participate with common stock in undistributed earnings for purposes of computing EPS. Companies that have such participating securities, including People’s United, are required to calculate basic and diluted EPS using thetwo-class method. Restricted stock awards granted by People’s United prior to 2017 are considered participating securities. Calculations of EPS under thetwo-class method (i) exclude from the numerator any dividends paid or owed on participating securities and any undistributed earnings considered to be attributable to participating securities and (ii) exclude from the denominator the dilutive impact of the participating securities.

All unallocated Employee Stock Ownership Plan (“ESOP”)ESOP common shares and all common shares accounted for as treasury shares have been excluded from the calculation of basic and diluted EPS. Anti-dilutive equity-based awards totaling 10.211.4 million shares and 10.118.2 million shares for the three months ended September 30, 2021 and 2020, respectively, and 11.4 million shares and 18.1 million shares for the nine months ended September 30, 2017,2021 and 2020, respectively and 18.2 million shares for both the three and nine months ended September 30, 2016, have also been excluded from the calculation of diluted EPS.

NOTE 8. GOODWILL AND OTHER ACQUISITION-RELATED INTANGIBLE ASSETS
Recent acquisitions have been undertaken with the objective of expanding the Company’s business, both geographically and through product offerings, as well as realizing synergies and economies of scale by combining with the acquired entities. For these reasons, a market-based premium was paid for the acquired entities which, in turn, resulted in the recognition of goodwill, representing the excess of the respective purchase prices over the estimated fair value of the net assets acquired.
People’s United’s goodwill totaled $2.68 billion at both September 30, 2021 and December 31, 2020, and was allocated to its operating segments as follows: Commercial Banking ($1.97 billion); Retail Banking ($657.9 million); and Wealth Management ($56.8 million).
Based on the quantitative assessment performed as of October 1, 2020, People’s United recognized, in the quarter ended December 31, 2020, a non-cash goodwill impairment charge totaling $353.0 million (representing 12% of total goodwill) associated with the Retail Banking reporting unit, while the fair values of the Commercial Banking and Wealth Management reporting units continued to exceed the respective carrying values by 4% and 103%, respectively.
Subsequent to the October 1st measurement date, an improved outlook with regard to interest rates and a reduction in the level of economic uncertainty due, in part, to widespread distribution of the COVID-19 vaccine, has resulted in significant appreciation in People’s United’s stock price, market capitalization and expectations with respect to future earnings and cash flows. The Company qualitatively assessed, as of September 30, 2021, recent potential triggering events that could serve as indicators that the carrying amount of its goodwill is impaired. Based on this evaluation, which also considered the results of the 2020 impairment assessment, the Company concluded that it was not more likely than not that the fair value of any reporting unit was less than its carrying amount at that date.
34

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 7. GOODWILL AND OTHER ACQUISITION-RELATED INTANGIBLE ASSETS

Changes in the carrying amount

All of People’s United’s goodwill are summarized as follows fortax deductible goodwill was created in transactions in which the nine months endedCompany purchased the assets of the target (as opposed to purchasing the issued and outstanding stock of the target). At September 30, 20172021 and 2016:

   Operating Segment     

(in millions)

  Commercial
Banking		   Retail
Banking		   Wealth
Management		   Total 

Balance at December 31, 2016

  $1,222.1   $679.6   $91.0   $1,992.7 

Acquisition of:

        

Suffolk

   229.8    40.5    —      270.3 

LEAF

   148.4    —      —      148.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2017

  $1,600.3   $720.1   $91.0   $2,411.4 
  

 

 

   

 

 

   

 

 

   

 

 

 
   Operating Segment     

(in millions)

  Commercial
Banking		   Retail
Banking		   Wealth
Management		   Total 

Balance at December 31, 2015

  $1,222.8   $681.9   $54.0   $1,958.7 

Acquisition of Eagle Insurance Group, LLC

   —      —      1.4    1.4 

Adjustments

   (0.7)    (2.3)    (0.1)    (3.1) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2016

  $1,222.1   $679.6   $55.3   $1,957.0 
  

 

 

   

 

 

   

 

 

   

 

 

 


December 31, 2020, tax deductible goodwill totaled $106.3 million and $113.6 million, respectively.

People’s United’s other acquisition-related intangible assets totaled $156.5$136.1 million and $149.4$165.1 million at
September 30, 20172021 and December 31, 2016,2020, respectively. At September 30, 2017,2021, the carrying amounts of other
acquisition-related intangible assets were as follows: trade name ($68.1 million); core deposit intangible ($27.978.6 million); trade name intangible ($39.9 million); client relationshiprelationships intangible ($22.514.4 million); trust relationshiprelationships intangible ($14.9 million); insurance relationship intangible ($5.4 million); favorable lease agreement ($0.6 million);non-compete agreements ($0.63.2 million); and mutual fund management contracts, which are not amortized ($16.5both favorable lease agreements and non-compete agreements (total less than $0.1 million).

Amortization expense of other acquisition-related intangible assets totaled $7.9$8.9 million and $5.8$10.2 million for the
three months ended September 30, 20172021 and 2016,2020, respectively, and $22.1$28.7 million and $17.4$31.1 million for the nine months ended
September 30, 20172021 and 2016,2020, respectively. Scheduled amortization expense attributable to other acquisition-related intangible assets for the full-year of 20172021 and each of the next five years is as follows: $30.0 million in 2017; $19.9 million in 2018; $18.4 million in 2019; $16.8 million in 2020; $15.0$35.3 million in 2021; and $13.5$30.9 million in 2022.2022; $23.2 million in 2023; $19.5 million in 2024; $16.6 million in 2025; and $13.7 million in 2026. There were no impairment losses relating to goodwill or otheracquisition-related intangible assets recorded in the Consolidated Statements of Income during the nine months ended September 30, 20172021 and 2016.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 8. EMPLOYEE BENEFIT PLANS

2020.

NOTE 9. EMPLOYEE BENEFIT PLANS
People’s United Employee Pension and Other Postretirement Plans

People’s United maintains a qualified noncontributory defined benefit pension plan (the “People’s Qualified Plan”) that covers substantially all full-time and part-time employees who (i) meet certain age and length of service requirements and (ii) were employed by the Bank prior to August 14, 2006. Benefits are based upon the employee’s years of credited service and either the average compensation for the last five years or the average compensation for the five consecutive years of the last
ten years that produce the highest average.

New employees of the Bank starting on or after August 14, 2006 are not eligible to participate in the People’s Qualified Plan. Instead, the Bank makes contributions on behalf of these employees to a qualified defined contribution plan in an annual amount equal to 3% of the employee’s eligible compensation. Employee participation in this plan is restricted to employees who (i) are at least 18 years of age and (ii) worked at least 1,000 hours in a year. Both full-time and part-time employees are eligible to participate as long as they meet these requirements.

In July 2011, the Bank amended the People’s Qualified Plan to “freeze”, effective December 31, 2011, the accrual of pension benefits for People’s Qualified Plan participants. As such, participants will not earn any additional benefits after that date. Instead, effective January 1, 2012, the Bank began making contributions on behalf of these participants to a qualified defined contribution plan in an annual amount equal to 3% of the employee’s eligible compensation.

In addition to the People’s Qualified Plan, People’s United continues to maintain athe qualified defined benefit pension plan that covers former ChittendenUnited Financial Bancorp, Inc. employees who meet certain eligibility requirements (the “Chittenden“United Financial Qualified Plan”). EffectiveAll benefits under this plan were frozen effective December 31, 2005, accrued benefits were frozen based on participants’ then-current service and pay levels. Interest continues to be credited on undistributed balances at a crediting rate specified by2012. Effective March 31, 2021, the ChittendenUnited Financial Qualified Plan. During April 2010, participants who were in payment status as of April 1, 2010, or whose accrued benefit as of that datePlan was scheduled to be paid in the form of an annuity commencing May 1, 2010 based upon elections made by April 15, 2010, were transferredmerged into the People’sPeople's Qualified Plan.

People’s United’s funding policy is to contribute the amounts required by applicable regulations, although additional amounts may be contributed from time to time.

People’s United also maintains (i) unfunded, nonqualified supplemental plans to provide retirement benefits to certain senior officers (the “Supplemental“People’s Supplemental Plans”) and (ii) an unfunded plan that provides retirees with optional medical, dental and life insurance benefits (the “Other“People’s Postretirement Plan”). People’s United accrues the cost of these postretirement benefits over the employees’ years of service to the date of their eligibility for such benefit.

People’s United also continues to maintain: (1) for certain eligible former First Connecticut Bancorp, Inc. employees (i) an unfunded, nonqualified supplemental retirement plan (the “First Connecticut Supplemental Plan”) and (ii) unfunded plans that provide medical, dental and life insurance benefits (the “First Connecticut Postretirement Plans”); (2) for certain eligible former BSB Bancorp, Inc. employees (i) an unfunded, nonqualified supplemental retirement plan (the “BSB Bancorp Supplemental Plan”) and (ii) unfunded plans that provide life insurance benefits (the “BSB Bancorp Post Retirement Welfare (Life Insurance) Plan”); and (3) for certain former United Financial Bancorp, Inc. employees (i) an unfunded, nonqualified supplemental retirement plan (the “United Financial Supplemental Plan”) and (ii) unfunded plans that provide medical, dental and life insurance benefits (the “United Financial Postretirement Benefit Plan”).

35

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Components of net periodic benefit (income) expense and other amounts recognized in other comprehensive income (loss) for (i) the People’s Qualified Plan, the ChittendenUnited Financial Qualified Plan, the People’s Supplemental Plans, the First Connecticut Supplemental Plan, the BSB Bancorp Supplemental Plan and the United Financial Supplemental PlansPlan (together the “Pension Plans”) and (ii) the OtherPeople’s Postretirement Plan, the First Connecticut Postretirement Plans, the BSB Bancorp Post Retirement Welfare (Life Insurance) Plan and the United Financial Postretirement Plan (together the “Other Postretirement Plans”) are as follows:

           Other 
   Pension Plans   Postretirement Plan 

Three months ended September 30 (in millions)

  2017   2016       2017           2016     

Net periodic benefit (income) expense:

        

Service cost

  $—     $—     $0.1   $—   

Interest cost

   4.9    4.7    0.1    0.2 

Expected return on plan assets

   (9.6)    (8.7)    —      —   

Recognized net actuarial loss

   1.6    1.6    0.1    0.1 

Recognized prior service credit

   (0.2)    (0.2)    —      —   

Settlements

   1.1    0.3    —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit (income) expense

  $(2.2)   $(2.3)   $0.3   $0.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

           Other 
   Pension Plans   Postretirement Plan 

Nine months ended September 30 (in millions)

  2017   2016       2017           2016     

Net periodic benefit (income) expense:

        

Service cost

  $—     $—     $0.2   $0.2 

Interest cost

   14.3    14.1    0.4    0.5 

Expected return on plan assets

   (28.3)    (25.9)    —      —   

Recognized net actuarial loss

   4.9    4.6    0.2    0.2 

Recognized prior service credit

   (0.6)    (0.6)    —      —   

Settlements

   2.6    0.9    —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit (income) expense

   (7.1)    (6.9)    0.8    0.9 
  

 

 

   

 

 

   

 

 

   

 

 

 

Other changes in plan assets and benefit obligations recognized in other comprehensive income:

        

Net actuarial loss

   (4.9)    (4.6)    (0.2)    (0.2) 

Prior service credit

   0.6    0.6    —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Totalpre-tax changes recognized in other comprehensive income

   (4.3)    (4.0)    (0.2)    (0.2) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total recognized in net periodic benefit
(income) expense and other
comprehensive income

  $(11.4)   $(10.9)   $0.6   $0.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Pension PlansOther    
    Postretirement Plan
Three months ended September 30 (in millions)2021202020212020
Net periodic benefit (income) expense:
Interest cost$4.2 $5.0 $0.1 $0.2 
Expected return on plan assets(13.6)(12.4)— — 
Recognized net actuarial loss1.8 1.9 — 0.1 
Settlements(0.2)0.8 — — 
Net periodic benefit (income) expense$(7.8)$(4.7)$0.1 $0.3 
 Pension Plans
Other
Postretirement Plans
Nine months ended September 30 (in millions)2021202020212020
Net periodic benefit (income) expense:
Interest cost$12.0 $14.8 $0.4 $0.7 
Expected return on plan assets(40.5)(37.2)— — 
Recognized net actuarial loss6.3 5.9 0.1 0.2 
Settlements0.3 2.5 — — 
Net periodic benefit (income) expense(21.9)(14.0)0.5 0.9 
Other changes in plan assets and benefit obligations
   recognized in other comprehensive income (loss):
Net actuarial loss(6.3)(5.9)(0.1)(0.2)
Total pre-tax changes recognized in other
   comprehensive income (loss)		(6.3)(5.9)(0.1)(0.2)
Total recognized in net periodic benefit (income)
   expense and other comprehensive income (loss)		$(28.2)$(19.9)$0.4 $0.7 

Employee Stock Ownership Plan

In April 2007, People’s United established an ESOP. At that time, People’s United loaned the ESOP $216.8 million to purchase 10,453,575 shares of People’s United common stock in the open market. In order for the ESOP to repay the loan, People’s United expects to make annual cash contributions of approximately $18.8 million until 2036. Such cash contributions may be reduced by the cash dividends paid on unallocated ESOP shares, which, for the nine months ended September 30, 2017,2021, totaled $3.6$3.0 million. At September 30, 2017,2021, the loan balance totaled $184.9$166.7 million.

Employee participation in this plan is restricted to those employees who (i) are at least 18 years of age and (ii) worked at least 1,000 hours within 12 months of their hire date or any plan year (January 1 to December 31) after their date of hire. Employees meeting the aforementioned eligibility criteria during the plan year must continue to be employed as of the last day of the plan year in order to receive an allocation of shares for that plan year.

Shares of People’s United common stock are held by the ESOP and allocated to eligible participants annually based upon a percentage of each participant’s eligible compensation. Since the ESOP was established, a total of 3,745,8645,139,677 shares of People’s United common stock have been allocated or committed to be released to participants’ accounts. At
September 30, 2017, 6,707,7112021, 5,313,898 shares of People’s United common stock, with a fair value of $121.7$92.8 million at that date, have not been allocated or committed to be released.

36

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
Compensation expense related to the ESOP is recognized at an amount equal to the number of common shares committed to be released by the ESOP for allocation to participants’ accounts multiplied by the average fair value of People’s United’s common stock during the reporting period. The difference between the fair value of the shares of People’s United’s common stock committed to be released and the cost of those common shares is recorded as a credit to additionalpaid-in capital (if fair value exceeds cost) or, to the extent that no such credits remain in additionalpaid-in capital, as a charge to retained earnings (if fair value is less than cost). Expense recognized for the ESOP totaled $4.8$4.4 million and $4.0$3.3 million for the nine months ended September 30, 20172021 and 2016,2020, respectively.

NOTE 9. LEGAL PROCEEDINGS

NOTE 10. LEGAL PROCEEDINGS
In the normal course of business, People’s United is subject to various legal proceedings. Management has discussed with legal counsel the nature of these legal proceedings and, based on the advice of counsel and the information currently available, believes that the eventual outcome of these legal proceedings will not have a material adverse effect on itsPeople’s United’s financial condition, results of operations or liquidity.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 10. SEGMENT INFORMATION

NOTE 11. SEGMENT INFORMATION
See “Segment Results” included in Item 2 for segment information for the three and nine months ended
September 30, 20172021 and 2016.

NOTE 11. FAIR VALUE MEASUREMENTS

2020.

NOTE 12. FAIR VALUE MEASUREMENTS
Accounting standards related to fair value measurements define fair value, provide a framework for measuring fair value and establish related disclosure requirements. Broadly, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accordingly, an “exit price” approach is required in determining fair value. In support of this principle, a fair value hierarchy has been established that prioritizes the inputs used to measure fair value, requiring entities to maximize the use of market or observable inputs (as more reliable measures) and minimize the use of unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs generally require significant management judgment.

The three levels within the fair value hierarchy are as follows:

•Level 1 – Unadjusted quoted market prices for identical assets or liabilities in active markets that the entity has the ability to access at the measurement date (such as active exchange-traded equity securities or mutual funds and certain U.S. and government agency debt securities).


•Level 2 – Observable inputs other than quoted prices included in Level 1, such as:

▪quoted prices for similar assets or liabilities in active markets (such as U.S. agency and GSE issued
mortgage-backed securities and CMOs)CMO securities);

▪quoted prices for identical or similar assets or liabilities in less active markets (such as certain U.S. and government agency debt securities, and corporate and municipal debt securities that trade infrequently); and

▪other inputs that (i) are observable for substantially the full term of the asset or liability (e.g. interest rates, yield curves, prepayment speeds, default rates, etc.) or (ii) can be corroborated by observable market data (such as interest rate and currency derivatives and certain other securities).


•Level 3 – Valuation techniques that require unobservable inputs that are supported by little or no market activity and are significant to the fair value measurement of the asset or liability (such as pricing models, discounted cash flow methodologies and similar techniques that typically reflect management’s own estimates of the assumptions a market participant would use in pricing the asset or liability).


37

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
People’s United maintains policies and procedures to value assets and liabilities using the most relevant data available. Described below are the valuation methodologies used by People’s United and the resulting fair values for those financial instruments measured at fair value on both a recurring and anon-recurring basis, as well as for basis. For those financial assets and financial liabilitiesinstruments not measured at fair value but for whicheither on a recurring or non-recurring basis, disclosure of each instrument’s carrying amount and estimated fair value is disclosed.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

has been provided.

Recurring Fair Value Measurements

Trading AccountDebt Securities, Equity Securities and Debt Securities Available For Sale

Available-For-Sale

When available, People’s United uses quoted market prices for identical securities received from an independent, nationally-recognized, third-party pricing service (as discussed further below) to determine the fair value of investment securities such as U.S. Treasury and agency securities and equity securities that are included in Level 1. When quoted market prices for identical securities are unavailable, People’s United uses prices provided by the independent pricing service based on recent trading activity and other observable information including, but not limited to, market interest rate curves, referenced credit spreads and estimated prepayment rates where applicable. These investments include certain U.S. and government agency debt securities, corporate and municipal debt securities, and GSE residential mortgage-backed securities and CMOs,CMO securities, all of which are included in Level 2.

The Company’s debt securities available-for-sale securities are primarily comprised of GSE mortgage-backed securities and CMOs.securities. The fair values
value of these securities areis based on prices obtained from the independent pricing service. The pricing service uses various
techniques to determine pricing for the Company’s mortgage-backed securities, including option pricing and discounted cash
flow analysis. The inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities,
bids, offers, reference data, monthly payment information and collateral performance. At both September 30, 20172021 and
December 31, 2016,2020, the entireavailable-for-sale mortgage-backed securities available-for-sale portfolio was entirely comprised of10- GSE
mortgage-backed and15-year GSE securities. CMO securities with original final maturities ranging from 7 to 40 years. An active market exists for securities that are similar to the Company’s GSE mortgage-backed securities and CMOs,CMO securities, making observable inputs readily available.

Changes in the prices obtained from the pricing service are analyzed from month to month, taking into consideration changes in market conditions including changes in mortgage spreads, changes in U.S. Treasury security yields and changes in generic pricing of securities with similar duration. As a further point of validation, the Company generates its ownmonth-end fair value estimate for all mortgage-backed securities, agency-issued CMOs (also backed by10- and15-year mortgage-backed securities), and state and municipal securities. While the Company has not adjusted the prices obtained from the independent pricing service, any notable differences between those prices and the Company’s estimates are subject to further analysis. This additional analysis may include a review of prices provided by other independent parties, a yield analysis, a review of average life changes using Bloomberg analytics and a review of historical pricing for the particular security. Based on management’s review of the prices provided by the pricing service, the fair values incorporate observable market inputs used by market participants at the measurement date and, as such, are classified as Level 2 securities.

Other Assets

As discussed in Note 8,9, certain unfunded nonqualified supplemental plans have been established to provide retirement benefits to certain senior officers. People’s United has funded two trusts to provide benefit payments to the extent such benefits are not paid directly by People’s United, the assets of which are included in other assets in the Consolidated Statements of Condition. When available, People’s United determines the fair value of the trust assets using quoted market prices for identical securities received from a third-party nationally recognized pricing service.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Derivatives

People’s United values its derivatives using internal models that are based on market or observable inputs including interest rate curves and forward/spot prices for selected currencies. Derivative assets and liabilities included in Level 2 represent interest rate swaps/swaps and caps, foreign exchange contracts, risk participation agreements, forward commitments to sell residential mortgage loans and interest rate-lock commitments on residential mortgage loans.


38

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
The following tables summarize People’s United’s financial instruments that are measured at fair value on a recurring basis:

`  Fair Value Measurements Using     

As of September 30, 2017 (in millions)

  Level 1   Level 2   Level 3   Total 

Financial assets:

        

Trading account securities:

        

U.S. Treasury

  $8.3   $—     $—     $8.3 

Securities available for sale:

        

U.S. Treasury and agency

   741.9    —      —      741.9 

GSE mortgage-backed securities and CMOs

   —      2,446.6    —      2,446.6 

Equity securities

   9.0    —      —      9.0 

Other assets:

     —       

Exchange-traded funds

   35.0    —      —      35.0 

Fixed income securities

   —      1.7    —      1.7 

Mutual funds

   3.6    —      —      3.6 

Interest rate swaps/caps

   —      101.9    —      101.9 

Foreign exchange contracts

   —      0.2    —      0.2 

Forward commitments to sell residential
mortgage loans

   —      0.6    —      0.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $797.8   $2,551.0   $—     $3,348.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial liabilities:

        

Interest rate swaps/caps

  $—     $60.5   $—     $60.5 

Risk participation agreements (1)

   —      —      —      —   

Foreign exchange contracts

   —      0.2    —      0.2 

Interest rate-lock commitments on residential mortgage loans

   —      0.7    —      0.7 
  

 

 

   

 

 

   

 

 

   

 

��

 

Total

  $—     $61.4   $—     $61.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

 Fair Value Measurements Using 
As of September 30, 2021 (in millions)Level 1Level 2Level 3Total
Financial assets:
Debt securities available-for-sale:
U.S. Treasury and agency$530.1 $— $— $530.1 
GSE mortgage-backed and CMO securities— 5,726.9 — 5,726.9 
Other assets:
Exchange-traded funds87.1 — — 87.1 
Mutual funds3.9 — — 3.9 
Interest rate swaps— 470.7 — 470.7 
Interest rate caps— 2.0 — 2.0 
Foreign exchange contracts— 3.1 — 3.1 
Forward commitments to sell residential mortgage loans (1)— — — — 
Total$621.1 $6,202.7 $— $6,823.8 
Financial liabilities:
Interest rate swaps$— $116.1 $— $116.1 
Interest rate caps— 2.0 — 2.0 
Risk participation agreements— 0.3 — 0.3 
Foreign exchange contracts— 2.9 — 2.9 
Interest rate-lock commitments on residential mortgage loans (1)— — — — 
Total$— $121.3 $— $121.3 

 Fair Value Measurements Using 
As of December 31, 2020 (in millions)Level 1Level 2Level 3Total
Financial assets:
Debt securities available-for-sale:
U.S. Treasury and agency$541.6 $— $— $541.6 
GSE mortgage-backed and CMO securities— 4,383.9 — 4,383.9 
Equity securities5.3 — — 5.3 
Other assets:
Exchange-traded funds53.0 — — 53.0 
Mutual funds3.9 — — 3.9 
Interest rate swaps— 783.8 — 783.8 
Interest rate caps— 3.0 — 3.0 
Foreign exchange contracts— 12.8 — 12.8 
Forward commitments to sell residential mortgage loans— 0.7 — 0.7 
Total$603.8 $5,184.2 $— $5,788.0 
Financial liabilities:
Interest rate swaps$— $157.2 $— $157.2 
Interest rate caps— 3.0 — 3.0 
Risk participation agreements— 0.4 — 0.4 
Foreign exchange contracts— 8.8 — 8.8 
Interest rate-lock commitments on residential mortgage loans— 1.0 — 1.0 
Total$— $170.4 $— $170.4 
(1)Fair value (Level 2) totaled less than $0.1 million at September 30, 2021 (see Note 13).
39

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

   Fair Value Measurements Using     

As of December 31, 2016 (in millions)

  Level 1   Level 2   Level 3   Total 

Financial assets:

        

Trading account securities:

        

U.S. Treasury

  $6.8   $—     $—     $6.8 

Securities available for sale:

        

U.S. Treasury and agency

   859.7    —      —      859.7 

GSE mortgage-backed securities and CMOs

   —      3,550.0    —      3,550.0 

Equity securities

   —      0.2    —      0.2 

Other assets:

        

Exchange-traded funds

   32.6    —      —      32.6 

Fixed income securities

   —      4.3    —      4.3 

Mutual funds

   2.7    —      —      2.7 

Interest rate swaps/caps

   —      173.1    —      173.1 

Foreign exchange contracts

   —      0.6    —      0.6 

Forward commitments to sell residential
mortgage loans

   —      0.3    —      0.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $901.8   $3,728.5   $—     $4,630.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial liabilities:

        

Interest rate swaps/caps

  $—     $121.0   $—     $121.0 

Risk participation agreements (1)

   —      —      —      —   

Foreign exchange contracts

   —      0.3    —      0.3 

Interest rate-lock commitments on residential mortgage loans

   —      0.4    —      0.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $—     $121.7   $—     $121.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

(1)At both September 30, 2017 and December 31, 2016, the fair value of risk participation agreements totaled less than $0.1 million (see Note 12).

There were no transfers into or out of the Level 1 or Level 2 categories during the nine months ended September 30, 2017 or 2016.

Non-Recurring Fair Value Measurements

The valuation techniques and inputs used by People’s United for those assets measured at fair value on a non-recurring basis, excluding goodwill, are described below.
Loans Held for Sale

Residential mortgage loans held for saleHeld-for-Sale

Loans held-for-sale are recorded at the lower of amortized cost or fair value and are therefore measured at fair value on anon-recurring basis. When available, People’s United uses observable secondary market data, including pricing on recent closed market transactions for loans with similar characteristics. Accordingly, such loans are classified as Level 2 measurements. When observable data is unavailable, valuation methodologies using current market interest rate data adjusted for inherent credit risk are used, and such loans are included in Level 3.

Impaired

Collateral Dependent Loans

Loan impairment is deemed

The Company’s approach to exist when full repayment of principal and interest according to the contractual terms of the loan is no longer probable. Impaired loans are reported based on one of three measures: the present value of expected future cash flows discounted at the loan’s original effective interest rate; the loan’s observable market price; ordetermining the fair value of the collateral (less estimated cost to sell) if the loandependent loans is collateral dependent. Accordingly, certain impaired loans may be subject to measurement at fair value on anon-recurring basis.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

described in Note 3, “Loans”.

People’s United has estimated the fair values of these assets using Level 3 inputs, such as discounted cash flows based on inputs that are largely unobservable and, instead, reflect management’s own estimates of the assumptions a market participant would use in pricing such loans and/or the fair value of collateral based on independent third-party appraisals for collateral-dependentcollateral dependent loans. Such appraisals are based on the market and/or income approach to value and are subject to a discount (to
(to reflect estimated cost to sell) that generally approximates 10%.

REO and Repossessed Assets

REO and repossessed assets are recorded at the lower of cost or fair value, less estimated selling costs, and are therefore measured at fair value on anon-recurring basis. People’s United has estimated the fair values of these assets using Level 3 inputs, such as independent third-party appraisals and price opinions. Such appraisals are based on the market and/or income approach to value and are subject to a discount (to reflect estimated cost to sell) that generally approximates 10%. Assets that are acquired through loan default are recorded as held for saleheld-for-sale initially at the lower of the recorded investment in the loan or fair value (less estimated selling costs) upon the date of foreclosure/repossession. Subsequent to foreclosure/repossession, valuations are updated periodically and the carrying amounts of these assets may be reduced further.

Mortgage Servicing Rights
Mortgage servicing rights are evaluated for impairment based upon the fair value of the servicing rights as compared to their amortized cost. The fair value of mortgage servicing rights is based on a valuation model that calculates the present value of estimated net servicing income. This model incorporates certain assumptions that market participants would likely use in estimating future net servicing income, such as interest rates, prepayment speeds and the cost to service (including delinquency and foreclosure costs), all of which require a degree of management judgment. Adjustments are only recorded when the discounted cash flows derived from the valuation model are less than the carrying value of the asset. As such, mortgage servicing rights are subject to measurement at fair value on a non-recurring basis and are classified as Level 3 assets.

40

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
The following tables summarize People’s United’s assets that are measured at fair value on anon-recurring basis:

   Fair Value Measurements Using     

As of September 30, 2017 (in millions)

  Level 1   Level 2   Level 3   Total 

Loans held for sale (1)

  $—     $15.0   $—     $15.0 

Impaired loans (2)

   —      —      64.9    64.9 

REO and repossessed assets (3)

   —      —      16.4    16.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $—     $15.0   $81.3   $96.3 
  

 

 

   

 

 

   

 

 

   

 

 

 
   Fair Value Measurements Using     

As of December 31, 2016 (in millions)

  Level 1   Level 2   Level 3   Total 

Loans held for sale (1)

  $—     $39.3   $—     $39.3 

Impaired loans (2)

   —      —      55.9    55.9 

REO and repossessed assets (3)

   —      —      19.3    19.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $—     $39.3   $75.2   $114.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

(1)Consists of residential mortgage loans; no fair value adjustments were recorded for the nine months ended September 30, 2017 and 2016.
(2)Represents the recorded investment in impaired loans with a related allowance for loan losses measured in accordance with applicable accounting guidance. The total consists of $50.6 million of Commercial loans and $14.3 million of Retail loans at September 30, 2017. The provision for loan losses on impaired loans totaled $4.1 million and $3.5 million for the nine months ended September 30, 2017 and 2016, respectively.
(3)Represents: (i) $6.3 million of commercial REO; (ii) $4.7 million of residential REO; and (iii) $5.4 million of repossessed assets at September 30, 2017. Charge-offs to the allowance for loan losses related to loans that were transferred to REO or repossessed assets totaled $2.2 million and $3.3 million for the nine months ended September 30, 2017 and 2016, respectively. Write downs and net loss on sale of foreclosed/repossessed assets charged tonon-interest expense totaled $(0.3) million and $2.9 million for the same periods.

 Fair Value Measurements Using 
As of September 30, 2021 (in millions)Level 1Level 2Level 3Total
Loans held-for-sale (1)$— $9.8 $— $9.8 
Collateral dependent loans (2)— — 21.3 21.3 
REO and repossessed assets (3)— — 9.0 9.0 
Mortgage servicing rights (4)— — 4.3 4.3 
Total$— $9.8 $34.6 $44.4 
 Fair Value Measurements Using 
As of December 31, 2020 (in millions)Level 1Level 2Level 3Total
Goodwill (5)$— $— $2,680.8 $2,680.8 
Loans held-for-sale (1)— 26.5 — 26.5 
Collateral dependent loans (2)— — 32.8 32.8 
REO and repossessed assets (3)— — 12.5 12.5 
Mortgage servicing rights (4)— — 4.8 4.8 
Total$— $26.5 $2,730.9 $2,757.4 


(1)Consists of residential mortgage loans; no fair value adjustments were recorded for the nine months ended
September 30, 2021 and 2020.
(2)Represents the recorded investment in collateral dependent loans with a related ACL totaling $12.4 million and $20.5 million measured in accordance with applicable accounting guidance at September 30, 2021 and
December 31, 2020, respectively. The provision for credit losses on collateral dependent loans totaled $2.4 million and $16.5 million for the nine months ended September 30, 2021 and 2020, respectively.
(3)Represents: (i) $1.6 million of residential REO and (ii) $7.4 million of repossessed assets at September 30, 2021. Charge-offs to the ACL related to loans that were transferred to REO or repossessed assets totaled $1.1 million and $3.9 million for the nine months ended September 30, 2021 and 2020, respectively. Write downs and net losses on sale of foreclosed/repossessed assets charged to non-interest expense totaled $0.3 million and $4.8 million for the same periods.
(4)Fair value adjustments totaling $(0.5) million and $(5.2) million were recorded for the nine months ended
September 30, 2021 and 2020, respectively.
(5)Goodwill was evaluated for impairment as of October 1, 2020 (the Company’s annual measurement date).

41

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Financial Assets and Financial Liabilities Not Measured At Fair Value

As discussed previously, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date (an “exit price” approach to fair value).

Acceptable valuation techniques (when quoted market prices are not available) that might be used to estimate the fair value of financial instruments include discounted cash flow analyses and comparison to similar instruments. Such estimates are highly subjective and require judgments regarding significant matters such as the amount and timing of future cash flows and the selection of discount rates that appropriately reflect market and credit risks. Changes in these judgments often have a material impact on the fair value estimates. In addition, since these estimates are made as of a specific point in time, they are susceptible to material near-term changes. Fair values estimated in this manner do not reflect any premium or discount that could result from the sale of a large volume of a particular financial instrument, nor do they reflect possible tax ramifications or estimated transaction costs.

The following is a description of the principal valuation methods used by People’s United for those financial instruments that are not measured at fair value either on a recurring ornon-recurring basis:

Cash, Short-Term Investments and Securities Purchased Under Agreements to Resell

Cash and due from banks are classified as Level 1. Short-term investments and securities purchased under agreements to resell have fair values that approximate the respective carrying amounts because the instruments are payable on demand or have short-term maturities, and present relatively low credit risk and interest rate risk (“IRR”). As such, these fair values are classified as Level 2.

Securities Held to Maturity

When available, the fair values of investment securities held to maturity are measured based on quoted market prices for identical securities in active markets and, accordingly, are classified as Level 1 assets. When quoted market prices for identical securities are not available, fair values are estimated based on quoted prices for similar assets in active markets or through the use of pricing models containing observable inputs (i.e. market interest rates, financial information and credit ratings of the issuer, etc.). These fair values are included in Level 2. In cases where there may be limited information available and/or little or no market activity for the underlying security, fair value is estimated using pricing models containing unobservable inputs and classified as Level 3.

FHLB andFRB-NY Stock

Both FHLB andFRB-NY stock arenon-marketable equity securities classified as Level 2 and reported at cost, which equals par value (the amount at which shares have been redeemed in the past). No significant observable market data is available for either of these securities.

Loans

For valuation purposes, the loan portfolio is segregated into its significant categories, which are commercial real estate, commercial and industrial, equipment financing, residential mortgage, home equity and other consumer. These categories are further segregated, where appropriate, into components based on significant financial characteristics such as type of interest rate (fixed or adjustable) and payment status (performing ornon-performing). Fair values are estimated for each component using a valuation method selected by management.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The fair values of performing loans were estimated by discounting the anticipated cash flows from the respective portfolios, assuming future prepayments and using market interest rates for new loans with comparable credit risk. As a result, the valuation method for performing loans, which is consistent with certain guidance provided in accounting standards, does not fully incorporate the “exit price” approach to fair value. The fair values ofnon-performing loans were based on recent collateral appraisals or management’s analysis of estimated cash flows discounted at rates commensurate with the credit risk involved. The estimated fair values of residential mortgage loans are classified as Level 2 as a result of the observable market inputs (i.e. market interest rates, prepayment assumptions, etc.) available for this loan type. The fair values of all other loan types are classified as Level 3 as the inputs contained within the respective discounted cash flow models are largely unobservable and, instead, reflect management’s own estimates of the assumptions a market participant would use in pricing such loans. The fair value of home equity lines of credit was based on the outstanding loan balances, and therefore does not reflect the value associated with earnings from future loans to existing customers.

Deposit Liabilities

The fair values of time deposits represent contractual cash flows discounted at current rates determined by reference to observable inputs including a LIBOR/swap curve over the remaining period to maturity. As such, these fair values are classified as Level 2. The fair values of other deposit liabilities (those with no stated maturity, such as checking and savings accounts) are equal to the carrying amounts payable on demand. Deposit fair values do not include the intangible value of core deposit relationships that comprise a significant portion of People’s United’s deposit base. Management believes that People’s United’s core deposit relationships provide a relatively stable,low-cost funding source that has a substantial intangible value separate from the deposit balances.

Borrowings and Notes and Debentures

The fair values of federal funds purchased and customer repurchase agreements are equal to the respective carrying amounts due to the short maturities (generally overnight). The fair values of FHLB advances and other borrowings represent contractual repayments discounted using interest rates currently available on borrowings with similar characteristics and remaining maturities and are classified as Level 2. The fair values of notes and debentures were based on dealer quotes and are classified as Level 2.

Lending-Related Financial Instruments

The estimated fair values of People’s United’s lending-related financial instruments approximate the respective carrying amounts. Such instruments include commitments to extend credit, unadvanced lines of credit and letters of credit, for which fair values were estimated based on an analysis of the interest rates and fees currently charged to enter into similar transactions, considering the remaining terms of the instruments and the creditworthiness of the potential borrowers.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following tables summarize the carrying amounts, estimated fair values and placement in the fair value hierarchy of People’s United’s financial instruments that are not measured at fair value either on a recurring ornon-recurring basis:

       Estimated Fair Value     
   Carrying
Amount		   Measurements Using     

As of September 30, 2017 (in millions)

    Level 1   Level 2   Level 3   Total 

Financial assets:

          

Cash and due from banks

  $414.1   $414.1   $—     $—     $414.1 

Short-term investments

   302.5    —      302.5    —      302.5 

Securities held to maturity

   3,387.6    —      3,434.1    1.5    3,435.6 

FHLB and FRB stock

   320.9    —      320.9    —      320.9 

Total loans, net (1)

   32,086.2    —      6,583.6    25,363.9    31,947.5 

Financial liabilities:

          

Time deposits

   5,235.8    —      5,232.4    —      5,232.4 

Other deposits

   27,311.5    —      27,311.5    —      27,311.5 

FHLB advances

   3,074.1    —      3,076.0    —      3,076.0 

Federal funds purchased

   543.0    —      543.0    —      543.0 

Customer repurchase agreements

   295.8    —      295.8    —      295.8 

Other borrowings

   231.1    —      230.9    —      230.9 

Notes and debentures

   906.2    —      902.6    —      902.6 

Carrying
Amount
Estimated Fair Value
Measurements Using
As of September 30, 2021 (in millions)Level 1Level 2Level 3Total
Financial assets:
Cash and due from banks$410.6 $410.6 $— $— $410.6 
Short-term investments7,723.0 — 7,723.0 — 7,723.0 
Debt securities held-to-maturity, net3,929.8 — 4,127.7 1.5 4,129.2 
FRB and FHLB stock264.7 — 264.7 — 264.7 
Total loans, net (1)39,152.1 — 7,178.5 32,133.7 39,312.2 
Financial liabilities:
Time deposits4,236.6 — 4,254.4 — 4,254.4 
Other deposits48,634.7 — 48,634.7 — 48,634.7 
FHLB advances569.6 — 569.8 — 569.8 
Customer repurchase agreements407.8 — 407.8 — 407.8 
Notes and debentures999.4 — 1,024.6 — 1,024.6 
Carrying
Amount
Estimated Fair Value
Measurements Using
As of December 31, 2020 (in millions)Level 1Level 2Level 3Total
Financial assets:
Cash and due from banks$477.3 $477.3 $— $— $477.3 
Short-term investments3,766.0 — 3,766.0 — 3,766.0 
Debt securities held-to-maturity, net3,993.8 — 4,265.5 1.5 4,267.0 
FRB and FHLB stock266.6 — 266.6 — 266.6 
Total loans, net (1)43,411.6 — 8,539.4 35,294.0 43,833.4 
Financial liabilities:
Time deposits5,658.8 — 5,699.7 — 5,699.7 
Other deposits46,478.9 — 46,478.9 — 46,478.9 
FHLB advances569.7 — 570.3 — 570.3 
Federal funds purchased452.9 — 452.9 — 452.9 
Customer repurchase agreements125.0 — 125.0 — 125.0 
Notes and debentures1,009.6 — 1,035.8 — 1,035.8 
(1)Excludes collateral dependent loans measured at fair value on a non-recurring basis totaling $21.3 million at
September 30, 2021 and $32.8 million at December 31, 2020.

42

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
(1)Excludes impaired loans totaling $64.9 million measured at fair value on anon-recurring basis.
NOTE 13. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

       Estimated Fair Value     
   Carrying
Amount		   Measurements Using     

As of December 31, 2016 (in millions)

    Level 1   Level 2   Level 3   Total 

Financial assets:

          

Cash and due from banks

  $432.4   $432.4   $—     $—     $432.4 

Short-term investments

   181.7    —      181.7    —      181.7 

Securities held to maturity

   2,005.4    —      2,011.2    1.5    2,012.7 

FHLB and FRB stock

   315.8    —      315.8    —      315.8 

Total loans, net (1)

   29,459.7    —      6,028.4    23,238.1    29,266.5 

Financial liabilities:

          

Time deposits

   4,542.2    —      4,539.7    —      4,539.7 

Other deposits

   25,318.6    —      25,318.6    —      25,318.6 

FHLB advances

   3,061.1    —      3,064.4    —      3,064.4 

Federal funds purchased

   617.0    —      617.0    —      617.0 

Customer repurchase agreements

   343.3    —      343.3    —      343.3 

Other borrowings

   35.4    —      35.4    —      35.4 

Notes and debentures

   1,030.1    —      1,000.0    —      1,000.0 

(1)Excludes impaired loans totaling $55.9 million measured at fair value on anon-recurring basis.

NOTE 12. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

People’s United uses derivative financial instruments as components of its market risk management (principally to manage IRR)interest rate risk (“IRR”)). Certain other derivatives are entered into in connection with transactions with commercial customers. Derivatives are not used for speculative purposes.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

All derivatives are recognized as either assets or liabilities in the Consolidated Statements of Condition, reported at fair value and presented on a gross basis. Until a derivative is settled, a favorable change in fair value results in an unrealized gain that is recognized as an asset, while an unfavorable change in fair value results in an unrealized loss that is recognized as a liability.

The Company generally applies hedge accounting to its derivatives used for market risk management purposes. Hedge accounting is permitted only if specific criteria are met, including a requirement that a highly effective relationship exist between the derivative instrument and the hedged item, both at inception of the hedge and on an ongoing basis. The hedge accounting method depends upon whether the derivative instrument is classified as a fair value hedge (i.e. hedging an exposure related to a recognized asset or liability, or a firm commitment) or a cash flow hedge (i.e. hedging an exposure related to the variability of future cash flows associated with a recognized asset or liability, or a forecasted transaction). Changes in the fair value of effective fair value hedges are recognized in current earnings (with the change in fair value of the hedged asset or liability also recorded in earnings). Changes in the fair value of effective cash flow hedges are recognized in other comprehensive income (loss) until earnings are affected by the variability in cash flows of the designated hedged item. Ineffective portions of hedge results are recognized in current earnings. Changes in the fair value of derivatives for which hedge accounting is not applied are recognized in current earnings.

People’s United formally documents at inception all relationships between the derivative instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transactions. This process includes linking all derivatives that are designated as hedges to specific assets and liabilities, or to specific firm commitments or forecasted transactions. People’s United also formally assesses, both at inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the fair values or cash flows of the hedged items. If it is determined that a derivative is not highly effective or has ceased to be a highly effective hedge, People’s United would discontinue hedge accounting prospectively. Gains or losses resulting from the termination of a derivative accounted for as a cash flow hedge remain in AOCL and are amortized to earnings over the remaining period of the former hedging relationship, provided the hedged item continues to be outstanding or it is probable the forecasted transaction will occur.

People’s United uses the dollar offset method, regression analysis and scenario analysis to assess hedge effectiveness at inception and on an ongoing basis. Such methods are chosen based on the nature of the hedge strategy and are used consistently throughout the life of the hedging relationship.

Certain derivative financial instruments are offered to commercial customers to assist them in meeting their financing and investing objectives and for their risk management purposes. These derivative financial instruments consist primarily of interest rate swaps and caps, but also include foreign exchange contracts. The interest rate and foreign exchange risks associated with customer interest rate swaps and caps and foreign exchange contracts are mitigated by entering into similar derivatives having essentially offsetting terms with institutional counterparties.

Interest rate-lock commitments extended to borrowers relate to the origination of residential mortgage loans. To mitigate the IRR inherent in these commitments, People’s United enters into mandatory delivery and best efforts contracts to sell adjustable-rate and fixed-rate residential mortgage loans (servicing released). Forward commitments to sell and interest
rate-lock commitments on residential mortgage loans are considered derivatives and their respective estimated fair values are adjusted based on changes in interest rates.

Changes in the fair value of derivatives for which hedge accounting is not applied are recognized in current earnings, including customer derivatives, interest-rate lock commitments and forward sale commitments.

43

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

By using derivatives, People’s United is exposed to credit risk to the extent that counterparties to the derivative contracts do not perform as required. Should a counterparty fail to perform under the terms of a derivative contract, the Company’s counterparty credit risk is equal to the amount reported as a derivative asset in the Consolidated Statements of Condition. In accordance with the Company’s balance sheet offsetting policy (see Note 13)14), amounts reported as derivative assets represent derivative contracts in a gain position, without consideration for derivative contracts in a loss position with the same counterparty (to the extent subject to master netting arrangements) and posted collateral. People’s United seeks to minimize counterparty credit risk through credit approvals, limits, monitoring procedures, execution of master netting arrangements and obtaining collateral, where appropriate. Counterparties to People’s United’s derivatives include major financial institutions and exchanges that undergo comprehensive and periodic internal credit analysis as well as maintain investment grade credit ratings from the major credit rating agencies. As such, management believes the risk of incurring credit losses on derivative contracts with those counterparties is remote and losses, if any, would be immaterial.

Certain of People’s United’s derivative contracts contain provisions establishing collateral requirements (subject to minimum collateral posting thresholds) based on the Company’s external credit rating. If the Company’s senior unsecured debt rating were to fall below the level generally recognized as investment grade, the counterparties to such derivative contracts could require additional collateral on those derivative transactions in a net liability position (after considering the effect of master netting arrangements and posted collateral). There were noThe aggregate fair value of derivative instruments with such credit-related
contingent features that were in a net liability position at September 30, 2017.

2021 was $34.3 million, for which People’s United had

posted collateral totaling $33.9 million in the normal course of business. If the Company’s senior unsecured debt rating had fallen below investment grade as of that date, $0.4 million in additional collateral would have been required.
The following sections further discuss each class of derivative financial instrument used by People’s United, including management’s principal objectives and risk management strategies.

Interest Rate Swaps/Caps

Swaps

People’s United may, from time to time, enter into interest rate swaps that are used to manage IRR associated with certain interest-earning assets and interest-bearing liabilities.

The Bank has entered into pay floating/receive fixed interest rate swaps to reduce its IRR exposure to the variability in interest cash flows on certain floating-rate commercial loans. The Bank has agreed with the swap counterparties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated based on notional amounts totaling $210 million. The floating-rate interest payments made under the swaps are calculated using the same floating rate received on the commercial loans. The swaps effectively convert the floating-rateone-month LIBOR interest payments received on the commercial loans to a fixed rate and consequently reduce the Bank’s exposure to variability in short-term interest rates. These swaps are accounted for as cash flow hedges.

The Bank has entered into a pay floating/receive fixed interest rate swap to hedge the change in fair value due to changes in interest rates of the Bank’s $400 million subordinated notes. The Bank has agreed with the swap counterparty to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated based on a notional amount of $375 million. The fixed-rate interest payments received on the swap will essentially offset the fixed-rate interest payments made on these notes, notwithstanding the notional difference between these notes and the swap. The floating-rate interest amounts paid under the swap are calculated based on three-month LIBOR plus 126.5 basis points. The swap effectively converts the fixed-rate subordinated notes to a floating-rate liability. This swap is accounted for as a fair value hedge.

People’s United had previously

The Bank has entered into atwo-year and three-year pay fixed/receive floating interest rate swapswaps to hedge the LIBOR-based floating rate payments on the Company’s $125 million 5.80% fixed-rate/floating-rate subordinated notes. On February 14, 2017, the Company repaid the subordinated notes and, concurrent with the repayment, the interest rate swap designated to these subordinated notes matured. This swap was accounted for as a cash flow hedge.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

As a result of the LEAF acquisition, the Company assumed two interest-rate caps with a total notional amount of $150 million, both of which mature in December 2017. Prior to the acquisition, LEAF entered into derivative contracts to reduce potential volatility in its financing costs and to manage its interest rate exposure by hedging the variability in interest cash flows on certain rolling three-month funding liabilities, which may consist of FHLB advances. The Bank has agreed with the swap counterparty to changes in one-month LIBOR. Subsequent toexchange, at specified intervals, the LEAF acquisition, hedge accounting was not applieddifference between fixed-rate and floating-rate interest amounts calculated based on an aggregate notional amount of $550 million. The interest rate swaps effectively convert a short-term benchmark interest rate (LIBOR) into a fixed-rate. These swaps are accounted for these derivatives.

as cash flow hedges.

Customer Derivatives

People’s United enters into interest rate swaps and caps with certain of its commercial customers. In order to minimize its risk, these customer interest rate swaps (pay floating/receive fixed) and caps have been offset with essentially matching interest rate swaps (pay fixed/receive floating) and caps with People’s United’s institutional counterparties. Hedge accounting has not been applied for these derivatives. Accordingly, changes in the fair value of all such interest rate swaps and caps are recognized in current earnings.


44

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
Foreign Exchange Contracts

Foreign exchange contracts are commitments to buy or sell foreign currency on a future date at a contractual price. People’s United uses these instruments on a limited basis to (i) eliminate its exposure to fluctuations in currency exchange rates on certain of its commercial loans that are denominated in foreign currencies and (ii) provide foreign exchange contracts on behalf of commercial customers within credit exposure limits. Gains and losses on foreign exchange contracts substantially offset the translation gains and losses on the related loans.

Risk Participation Agreements

People’s United enters into risk participation agreements under which it may either assume or sell credit risk associated with a borrower’s performance under certain interest rate derivative contracts. In those instances in which People’s United has assumed credit risk, it is not a party to the derivative contract and has entered into the risk participation agreement because it is also a party to the related loan agreement with the borrower. In those instances in which People’s United has sold credit risk, it is a party to the derivative contract and has entered into the risk participation agreement because it sold a portion of the related loan. People’s United manages its credit risk under risk participation agreements by monitoring the creditworthiness of the borrower, based on its normal credit review process. The notional amounts of the risk participation agreements reflect People’s United’spro-rata share of the derivative contracts, consistent with its share of the related loans.

Forward Commitments to Sell Residential Mortgage Loans and Related Interest Rate-Lock Commitments

People’s United enters into forward commitments to sell adjustable-rate and fixed-rate residential mortgage loans (all to be sold servicing released) in order to reduce the market risk associated with originating loans for sale in the secondary market. In order to fulfill a forward commitment, People’s United delivers originated loans at prices or yields specified by the contract. The risks associated with such contracts arise from the possible inability of counterparties to meet the contract terms or People’s United’s inability to originate the necessary loans. Gains and losses realized on the forward contracts are reported in the Consolidated Statements of Income as a component of the net gains on sales of residential mortgage loans. In the normal course of business, People’s United will commit to an interest rate on a mortgage loan application at the time of application, or anytime thereafter. The risks associated with these interest rate-lock commitments arise if market interest rates change prior to the closing of these loans. Both forward sales commitments and interest rate-lock commitments made to borrowers onheld-for-sale loans are accounted for as derivatives, with changes in fair value recognized in current earnings.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Interest Rate Locks

In connection with its planned issuance of senior notes in the fourth quarter of 2012, People’s United entered into
U.S. Treasury forward interest rate locks(“T-Locks”) to hedge the risk that the10-year U.S. Treasury yield component of the underlying coupon of the fixed ratefixed-rate senior notes would rise prior to establishing the fixed interest rate on the senior notes. Upon pricing the senior notes, theT-Locks were terminated and the unrealized gain of $0.9 million was included (on anet-of-tax basis) as a component of AOCL. The gain is being recognized as a reduction of interest expense over theten-year period during which the hedged item ($500 million senior note issuance) affects earnings.


45

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
The table below provides a summary of the notional amounts and fair values (presented on a gross basis) of derivatives outstanding:

           Fair Values (1) 
     Notional Amounts  Assets  Liabilities 

(in millions)

 Type of
Hedge		  Sept. 30,
2017		  Dec. 31,
2016		  Sept. 30,
2017		  Dec. 31,
2016		  Sept. 30,
2017		  Dec. 31,
2016		 

Derivatives Not Designated as Hedging Instruments:

       

Interest rate swaps/caps:

       

Commercial customers

  N/A  $6,101.2  $5,612.2  $91.5  $93.9  $39.7  $46.9 

Institutional counterparties

  N/A   5,958.2   5,620.2   10.4   65.6   20.8   74.0 

Risk participation agreements (2)

  N/A   383.4   251.9   —     —     —     —   

Foreign exchange contracts

  N/A   42.6   101.2   0.2   0.6   0.2   0.3 

Forward commitments to sell
residential mortgage loans

  N/A   26.0   48.6   0.6   0.3   —     —   

Interest rate-lock commitments on residential mortgage loans

  N/A   31.7   57.0   —     —     0.7   0.4 
    

 

 

  

 

 

  

 

 

  

 

 

 

Total

     102.7   160.4   61.4   121.6 
    

 

 

  

 

 

  

 

 

  

 

 

 

Derivatives Designated as Hedging Instruments:

       

Interest rate swaps:

       

Subordinated notes

  Fair value   375.0   375.0   —     13.6   —     —   

Loans

  Cash flow   210.0   —     —     —     —     —   

Subordinated notes

  Cash flow   —     125.0   —     —     —     0.1 
    

 

 

  

 

 

  

 

 

  

 

 

 

Total

     —     13.6   —     0.1 
    

 

 

  

 

 

  

 

 

  

 

 

 

Total fair value of derivatives

    $102.7  $174.0  $61.4  $121.7 
    

 

 

  

 

 

  

 

 

  

 

 

 

(1)Assets are recorded in other assets and liabilities are recorded in other liabilities.
(2)Fair value totaled less than $0.1 million at both dates.

    Fair Values (1)
  Notional AmountsAssetsLiabilities
(in millions)
Type of
Hedge
Sept. 30,
2021		Dec. 31, 2020Sept. 30,
2021		Dec. 31, 2020Sept. 30,
2021		Dec. 31, 2020
Derivatives Not Designated as Hedging
   Instruments:
Interest rate swaps:
Commercial customersN/A$8,727.9 $8,878.6 $467.0 $778.0 $11.9 $0.4 
Institutional counterpartiesN/A8,729.4 8,881.3 3.7 5.8 104.2 156.8 
Interest rate caps:
Commercial customersN/A177.2 185.1 1.8 3.0 0.2 — 
Institutional counterpartiesN/A177.2 185.1 0.2 — 1.8 3.0 
Risk participation agreementsN/A918.4 924.3 — — 0.3 0.4 
Foreign exchange contractsN/A337.0 285.3 3.1 12.8 2.9 8.8 
Forward commitments to sell
   residential mortgage loans (2)		N/A0.9 25.4 — 0.7 — — 
Interest rate-lock commitments on
   residential mortgage loans (2)		N/A0.9 41.5 — — — 1.0 
Total475.8 800.3 121.3 170.4 
Derivatives Designated as Hedging
   Instruments:
Interest rate swaps:
FHLB advancesCash flow550.0 550.0 — — — — 
Subordinated notesFair value375.0 375.0 — — — — 
Total— — — — 
Total fair value of derivatives$475.8 $800.3 $121.3 $170.4 

(1)Assets are recorded in other assets and liabilities are recorded in other liabilities.
(2)Fair value totaled less than $0.1 million at September 30, 2021.



46

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following table summarizes the impact of People’s United’s derivatives onpre-tax income and AOCL:

     Amount of Pre-Tax Gain (Loss)  Amount of Pre-Tax Gain (Loss) 
  Type of
Hedge		  Recognized in Earnings (1)  Recognized in AOCL 

Nine months ended September 30 (in millions)

  2017  2016  2017  2016 

Derivatives Not Designated as Hedging Instruments:

     

Interest rate swaps/caps:

     

Commercial customers

  N/A  $45.4  $210.7  $—    $—   

Institutional counterparties

  N/A   (39.1)   (200.3)   —     —   

Foreign exchange contracts

  N/A   0.3   (0.6)   —     —   

Risk participation agreements

  N/A   0.5   0.1   —     —   

Forward commitments to sell residential mortgage loans

  N/A   0.1   0.8   —     —   

Interest rate-lock commitments on residential mortgage loans

  N/A   (0.1)   (1.1)   —     —   
  

 

 

  

 

 

  

 

 

  

 

 

 

Total

   7.1   9.6   —     —   
  

 

 

  

 

 

  

 

 

  

 

 

 

Derivatives Designated as Hedging Instruments:

     

Interest rate swaps

  Fair value   4.5   6.4   —     —   

Interest rate swaps

  Cash flow   0.6   (0.6)   —     (0.2) 

Interest rate locks

  Cash flow   0.1   0.1   —     —   
  

 

 

  

 

 

  

 

 

  

 

 

 

Total

   5.2   5.9   —     (0.2) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  $12.3  $15.5  $—    $(0.2) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Type of
Hedge
Amount of Pre-Tax Gain (Loss)
Recognized in Earnings (1)
Amount of Pre-Tax Gain (Loss)
Recognized in AOCL
Nine months ended September 30 (in millions)2021202020212020
Derivatives Not Designated as Hedging
   Instruments:
Interest rate swaps:
Commercial customersN/A$(176.6)$684.6 $— $— 
Institutional counterpartiesN/A180.4 (671.5)— — 
Interest rate caps:
Commercial customersN/A(0.9)1.8 — — 
Institutional counterpartiesN/A1.4 (1.8)— — 
Foreign exchange contractsN/A1.2 0.7 — — 
Risk participation agreementsN/A0.1 (0.4)— — 
Forward commitments to sell
   residential mortgage loans		N/A(0.7)1.2 — — 
Interest rate-lock commitments on
   residential mortgage loans		N/A1.0 (1.3)— — 
Total5.9 13.3 — — 
Derivatives Designated as Hedging
   Instruments:
Interest rate swapsFair value7.1 3.6 — — 
Interest rate swapsCash flow(1.4)2.1 0.1 (1.2)
Interest rate locksCash flow0.1 0.1 — — 
Total5.8 5.8 0.1 (1.2)
Total$11.7 $19.1 $0.1 $(1.2)

(1)Amounts recognized in earnings are recorded in interest income, interest expense or other non-interest income for derivatives designated as hedging instruments and in other non-interest income for derivatives not designated as hedging instruments.
(1)Amounts recognized in earnings are recorded in interest income, interest expense or othernon-interest income for derivatives designated as hedging instruments and in othernon-interest income for derivatives not designated as hedging instruments.
NOTE 14. BALANCE SHEET OFFSETTING

NOTE 13. BALANCE SHEET OFFSETTING

Assets and liabilities relating to certain financial instruments, including derivatives, may be eligible for offset in the Consolidated Statements of Condition and/or subject to enforceable master netting arrangements or similar agreements. People’s United’s derivative transactions with institutional counterparties are generally executed under International Swaps and Derivative Association (“ISDA”) master agreements, which include “right ofset-off” provisions that provide for a single net settlement of all interest rate swap positions, as well as collateral, in the event of default on, or the termination of, any one contract. Nonetheless, the Company does not, except as indicated below, offset asset and liabilities under such arrangements in the Consolidated Statements of Condition.

Effective January 3, 2017, the

The Chicago Mercantile Exchange (“CME”) amended their rulebooks to legally characterizecharacterizes variation margin payments forover-the-counter derivatives that clear as settlements rather than collateral. Accordingly, as of that date, the Company updated itsCompany’s accounting policies to classify, for accounting and presentation purposes, variation margin payments deemed to be legal settlements as a single unit of account with the related derivative(s). As ofAt both September 30, 2017,2021 and December 31, 2020, this amendmentpresentation impacted one of the Company’s institutional counterparties. Accordingly,As such, People’s United has, subject to the corresponding enforceable master netting arrangement, netted the institutional counterparty’s CME derivative position and offset the counterparty’s variation margin payments in the Consolidated Statement of Condition as of September 30, 2017.

both dates.


47

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Collateral (generally in the form of marketable debt securities) pledged by counterparties in connection with derivative transactions is not reported in the Consolidated Statements of Condition unless the counterparty defaults. Collateral that has been pledged by People’s United to counterparties continues to be reported in the Consolidated Statements of Condition unless the Company defaults.

The following tables provide a gross presentation, the effects of offsetting, and a net presentation of the Company’s financial instruments that are eligible for offset in the Consolidated Statements of Condition. The collateral amounts in these tables are limited to the outstanding balances of the related asset or liability (after netting is applied) and, therefore, instances of overcollateralization are not presented. The net amountsIn the tables below, the Net Amount Presented of the derivative assets and liabilities can be reconciled to the fair value of the Company’s derivative financial instruments in Note 12.13. The Company’s derivative contracts with commercial customers and customer repurchase agreements are not subject to master netting arrangements and, therefore, have been excluded from the tables below.

   Gross
Amount
Recognized		   Gross
Amount
Offset		   Net
Amount
Presented		   Gross Amounts Not Offset    
         Financial     Net 

As of September 30, 2017 (in millions)

        Instruments  Collateral  Amount 

Financial assets:

          

Interest rate swaps/caps:

          

Counterparty A

  $1.7   $—     $1.7   $(1.7)  $—    $—   

Counterparty B

   0.8    —      0.8    (0.8)   —     —   

Counterparty C

   1.4    —      1.4    (1.4)   —     —   

Counterparty D

   2.8    —      2.8    (2.8)   —     —   

Counterparty E

   2.4    —      2.4    —     —     2.4 

Other counterparties

   1.3    —      1.3    (0.3)   (0.9)   0.1 

Foreign exchange contracts

   0.2    —      0.2    —     —     0.2 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total

  $10.6   $—     $10.6   $(7.0)  $(0.9)  $2.7 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Financial liabilities:

          

Interest rate swaps/caps:

          

Counterparty A

  $3.2   $—     $3.2   $(1.7)  $(1.5)  $—   

Counterparty B

   6.9    —      6.9    (0.8)   (6.1)   —   

Counterparty C

   3.7    —      3.7    (1.4)   (2.3)   —   

Counterparty D

   5.9    —      5.9    (2.8)   (3.1)   —   

Other counterparties

   1.2    —      1.2    (0.3)   (0.9)   —   

Foreign exchange contracts

   0.2    —      0.2    —     —     0.2 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total

  $21.1   $—     $21.1   $(7.0)  $(13.9)  $0.2 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

 
Gross
Amount
Recognized
Gross
Amount
Offset
Net
Amount
Presented
Gross Amounts Not Offset 
 
Financial
Instruments
 
Net
Amount
As of September 30, 2021 (in millions)Collateral
Financial assets:
Interest rate swaps:
Counterparty A$0.1 $— $0.1 $(0.1)$— $— 
Counterparty B— — — — — — 
Counterparty C1.4 — 1.4 (1.4)— — 
Counterparty D0.5 — 0.5 (0.5)— — 
Counterparty E0.2 — 0.2 (0.2)— — 
Other counterparties1.7 — 1.7 (1.4)— 0.3 
Foreign exchange contracts3.1 — 3.1 — — 3.1 
Total$7.0 $— $7.0 $(3.6)$— $3.4 
Financial liabilities:
Interest rate swaps:
Counterparty A$3.2 $— $3.2 $(0.1)$(3.1)$— 
Counterparty B4.2 — 4.2 — (4.2)— 
Counterparty C34.5 — 34.5 (1.4)(33.1)— 
Counterparty D13.0 — 13.0 (0.5)(12.1)0.4 
Counterparty E9.9 — 9.9 (0.2)— 9.7 
Other counterparties41.2 — 41.2 (1.4)(39.3)0.5 
Foreign exchange contracts2.9 — 2.9 — — 2.9 
Total$108.9 $— $108.9 $(3.6)$(91.8)$13.5 

48

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

   Gross
Amount
Recognized		   Gross
Amount
Offset		   Net
Amount
Presented		   Gross Amounts Not Offset    
         Financial     Net 

As of December 31, 2016 (in millions)

        Instruments  Collateral  Amount 

Financial assets:

          

Interest rate swaps/caps:

          

Counterparty A

  $1.9   $—     $1.9   $(1.9)  $—    $—   

Counterparty B

   1.0    —      1.0    (1.0)   —     —   

Counterparty C

   1.7    —      1.7    (1.7)   —     —   

Counterparty D

   3.4    —      3.4    (3.4)   —     —   

Counterparty E

   69.6    —      69.6    (50.0)   (19.6)   —   

Other counterparties

   1.6    —      1.6    (0.3)   (1.3)   —   

Foreign exchange contracts

   0.6    —      0.6    —     —     0.6 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total

  $79.8   $—     $79.8   $(58.3)  $(20.9)  $0.6 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Financial liabilities:

          

Interest rate swaps/caps:

          

Counterparty A

  $4.3   $—     $4.3   $(1.9)  $(2.4)  $—   

Counterparty B

   7.7    —      7.7    (1.0)   (6.7)   —   

Counterparty C

   3.4    —      3.4    (1.7)   (1.1)   0.6 

Counterparty D

   6.9    —      6.9    (3.4)   (1.7)   1.8 

Counterparty E

   50.0    —      50.0    (50.0)   —     —   

Other counterparties

   1.8    —      1.8    (0.3)   (1.5)   —   

Foreign exchange contracts

   0.3    —      0.3    —     —     0.3 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total

  $74.4   $—     $74.4   $(58.3)  $(13.4)  $2.7 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

 
Gross
Amount
Recognized
Gross
Amount
Offset
Net
Amount
Presented
Gross Amounts Not Offset 
 
Financial
Instruments
 
Net
Amount
As of December 31, 2020 (in millions)Collateral
Financial assets:
Interest rate swaps:
Counterparty A$— $— $— $— $— $— 
Counterparty B— — — — — — 
Counterparty C0.3 — 0.3 (0.3)— — 
Counterparty D— — — — — — 
Counterparty E5.4 — 5.4 — — 5.4 
Other counterparties0.1 — 0.1 (0.1)— — 
Foreign exchange contracts12.8 — 12.8 — — 12.8 
Total$18.6 $— $18.6 $(0.4)$— $18.2 
Financial liabilities:
Interest rate swaps:
Counterparty A$5.6 $— $5.6 $— $(5.6)$— 
Counterparty B7.1 — 7.1 — (7.1)— 
Counterparty C56.6 — 56.6 (0.3)(56.3)— 
Counterparty D21.4 — 21.4 — (10.4)11.0 
Counterparty E— — — — — — 
Other counterparties69.1 — 69.1 (0.1)(69.0)— 
Foreign exchange contracts8.8 — 8.8 — — 8.8 
Total$168.6 $— $168.6 $(0.4)$(148.4)$19.8 
Resale and repurchase agreements represent agreements to purchase/sell securities subject to an obligation to
resell/repurchase the same or similar securities. People’s United accounts for securities resale agreements as secured lending transactions and securities repurchase agreements as secured borrowings since the transferor maintains effective control over the transferred securities and the transfer meets the other criteria for such accounting. The securities are pledged by the transferor as collateral and the transferee has the right by contract to repledge that collateral provided the same collateral is returned to the transferor upon maturity of the underlying agreement. The fair value of the pledged collateral approximates the recorded amount of the secured loan or borrowing. Decreases in the fair value of the transferred securities below an established threshold require the transferor to provide additional collateral.

The following table showstables show the extent to which assets and liabilities exchanged under resale and repurchase agreements have been offset in the Consolidated Statements of Condition. These agreements: (i) are entered into simultaneously with the same financial institution counterparty; (ii) have the same principal amounts and inception/maturity dates; and (iii) are subject to a master netting arrangement that contains a conditional right of offset upon default. At September 30, 2017,2021 and
December 31, 2020, the Company posted as collateral marketable securities with a fair valuevalues of $248.3$254.5 million and $258.7 million, respectively, and, in turn, accepted as collateral marketable securities with a fair valuevalues of $255.5 million and $254.4 million.

As of September 30, 2017 (in millions)

  Gross
Amount
Recognized		   Gross
Amount
Offset		   Net
Amount
Presented		 

Total resale agreements

  $250.0   $(250.0)   $—   
  

 

 

   

 

 

   

 

 

 

Total repurchase agreements

  $250.0   $(250.0)   $—   
  

 

 

   

 

 

   

 

 

 

million, respectively.
As of September 30, 2021 (in millions)
Gross
Amount
Recognized
Gross
Amount
Offset
Net
Amount
Presented
Total resale agreements$250.0 $(250.0)$— 
Total repurchase agreements$250.0 $(250.0)$— 
As of December 31, 2020 (in millions)
Gross
Amount
Recognized
Gross
Amount
Offset
Net
Amount
Presented
Total resale agreements$250.0 $(250.0)$— 
Total repurchase agreements$250.0 $(250.0)$— 


49

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 14. NEW ACCOUNTING STANDARDS

Standards effective

NOTE 15. NEW ACCOUNTING STANDARDS
Reference Rate Reform
In 2017, the United Kingdom’s Financial Conduct Authority announced that it will cease to compel its panel banks to submit London Interbank Offered Rate (“LIBOR”) rates after December 31, 2021 as a result of the steadily decreasing number of transaction-based borrowing observations between banks in 2017

interbank funding markets. LIBOR is widely used by the Company as it serves as the primary index rate for approximately 49% of its loan portfolio. As a result of LIBOR cessation, a Company-wide initiative was introduced to assess all applicable loan, deposit and borrowing categories, and develop a comprehensive plan for the transition away from LIBOR. The Company expects to follow recommendations from the Federal Reserve’s Alternative Reference Rate Committee and the International Swaps and Derivatives and Hedging

Association, along with
industry-led solutions, in establishing a replacement index, or indices, for LIBOR.

In March 2016,2020, the Financial Accounting Standards Board (the “FASB”) amended its standardsissued a new standard providing temporary optional expedients and exceptions to existing U.S. GAAP on contract modifications and hedge accounting in order to ease the financial reporting burdens associated with respecttransitioning away from LIBOR and other interbank offered rates to derivativesacceptable alternative rates. Under the new guidance, an entity can elect, by accounting topic or industry subtopic, to account for the modification of a contract affected by reference rate reform as a continuation of the existing contract, if certain conditions are met. In addition, the new guidance allows an entity to elect, on a hedge-by-hedge basis, to continue to apply hedge accounting for hedging relationships in which the critical terms change due to reference rate reform, if certain conditions are met. A
one-time election to sell and/or transfer held-to-maturity debt securities that reference a rate affected by reference rate reform is also permitted under the new guidance. While the standard is effective upon issuance, the Company continues to evaluate the impact and hedging. The first amendment clarifieswhich optional expedients and exceptions might be elected. These optional elections will generally cease to apply to contract modifications or existing hedging relationships after December 31, 2022.
In November 2020, the Federal banking agencies issued a statement encouraging banks that enter into new financial contracts prior to December 31, 2021 to utilize a reference rate other than LIBOR and to include robust fallback language that specifies a clearly defined alternative reference rate after LIBOR's discontinuation. People’s United began incorporating recent ISDA-derived LIBOR fallback language in new LIBOR-based interest rate swap transactions effective after January 25, 2021. Bank-wide efforts to transition from LIBOR-based originations to alternate indices prior to December 31, 2021 are continuing, including upgrades and enhancements to certain Bank systems. Separately, the agencies indicated that a change inbank may use any reference rate for its loans that the counterpartybank determines to a derivative instrument that has been designated asbe appropriate for its funding model and customer needs.
In January 2021, the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship and discontinuationFASB issued clarifying guidance regarding the scope of the applicationoptional relief for reference rate reform contemplated in its March 2020 standard. This guidance permits entities to apply certain of hedge accounting.the optional practical expedients and exceptions included in its March 2020 standard to the accounting for derivative contracts and hedging activities that may be affected by changes in interest rates used for discounting cash flows, computing variation margin settlements and calculating price alignment interest (the “discounting transition”). These optional practical expedients and exceptions may be applied to derivative instruments impacted by the discounting transition even if such instruments do not reference a rate that is expected to be discontinued. This amendment does not require additional disclosures beyondguidance is effective immediately and an entity may elect to apply the amendments as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to January 7, 2021, up to the date that financial statements are available to be issued.
50

People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
Disclosure Requirements – Defined Benefit Plans
In August 2018, the FASB issued targeted amendments that serve to make minor changes to the disclosure about a change in accounting principle in the period of adoption. The second amendment clarifies the requirements for assessing whether contingent call (put) optionsemployers that can acceleratesponsor defined benefit pension and/or other postretirement benefit plans. More specifically, the payment of principal on debt instrumentsamendments (i) remove disclosures that are clearly and closely related to their debt hosts. An entity performing the assessment is required to assess the embedded call (put) options solely in accordance with a four-step decision sequence and no longer is required to assess whetherconsidered cost beneficial; (ii) clarify the event that triggers the ability to exercise the option is related to interest rate or credit risk.specific requirements of selected disclosures; and (iii) add disclosure requirements identified as relevant. These amendments which are being applied prospectively, became effective for fiscal years ending after December 15, 2020 (January 1, 2021 for People’s United on January 1, 2017United) and early adoption is permitted. The provisions set forth in this guidance, which the Company elected to early adopt in 2018, have been reflected in Note 9 (as applicable) and did not have a significant impact on the Company’s Consolidated Financial Statements.

Investments – Equity Method and Joint Ventures

Simplifying the Accounting for Income Taxes
In March 2016,December 2019, the FASB amended its standards with respect to income taxes, simplifying the equity method of accounting by eliminating the requirement that, upon an investment qualifying for use of the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operationsseveral areas, including intra-period tax allocation, deferred tax liabilities related to outside basis differences, and retained earnings retrospectively, as if the equity method of accounting had beenyear-to-date losses in effect during all previousinterim periods, that the investment was held. Rather, under the new guidance, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. Instead, any unrealized holding gain or loss is to be recognized through other comprehensive income on the date the investment qualifies for use of the equity method.among others. This amendment which is being applied prospectively, became effective for People’s United on January 1, 2017 and did not have a significant impact on the Company’s Consolidated Financial Statements.

Stock Compensation

In March 2016, the FASB amended its standards with respect to certain aspects of the accounting forshare-based payment awards, including: (i) the related income tax consequences; (ii) the classification of awards as either equity or liabilities; and (iii) the classification in the statement of cash flows. This amendment, which is being applied prospectively, became effective2021 for People’s United on January 1, 2017. As a result, the Company realized windfall income tax benefits totaling $1.3 million for the nine months ended September 30, 2017. This amount, which was recognized as a discrete period income tax benefit, served to lower the Company’syear-to-date effective income tax rate by 0.05%.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Standards effective in 2018

Revenue Recognition

In May 2014, the FASB amended its standards with respect to revenue recognition. The amended guidance serves to replace all current U.S. GAAP guidance on this topic and eliminate all industry-specific guidance, providing a unified model to determine when and how revenue is recognized. The underlying principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments also require enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. As originally issued, this new guidance, which can be applied retrospectively or through the use of the cumulative effect transition method, was to become effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2016 (January 1, 2017 for People’s United) and early adoption was not permitted.

In July 2015, the FASB approved aone-year deferral of the effective date (now January 1, 2018 for People’s United) with early adoption, as of the original effective date, permitted. Since that date, the FASB has issued amendments to clarify the implementation guidance and add some practical expedients in certain areas, including: (i) principal versus agent considerations; (ii) the identification of performance obligations; and (iii) certain aspects of the accounting for licensing arrangements. These amendments do not change the core principle of the guidance and are effective for and follow the same transition requirements as the core principle.

The Company will adoptUnited. Currently, this guidance in the first quarter of 2018 using the modified retrospective method with a cumulative-effect adjustment to opening retained earnings, as appropriate. The Company’s revenue is comprised of net interest income on financial assets and financial liabilities (approximately 75%) andnon-interest income (approximately 25%). The scope of the guidance explicitly excludes net interest income as well as other revenues associated with financial assets and liabilities, including loans, leases, securities and derivatives. Accordingly, the majority of the Company’s revenues will not be affected. Certain other recurring revenue streams are within the scope of the guidance, including service charges and fees on deposit accounts, card-based and other non-deposit fees, and revenues associated with certain products and services offered by the Company’s trust and investment management, insurance and brokerage businesses.

The Company’s assessment ofin-scope revenue streams is substantially complete and its preliminary analysis suggests that adoption of the guidance, including the related transition adjustment, as appropriate, is not expected to have a material impact on the Company’s Consolidated Financial Statements, its current accounting policies and practices or the timing or amount of revenue recognized. However, as new interpretative guidance related to the adoption of the amended standard is issued, the Company’s preliminary conclusions with respect to materiality could be impacted. In connection with its adoption efforts, the Company has, where appropriate, evaluated necessary changes to business processes, systems and internal controls in order to support the recognition, measurement and disclosure requirements of the new standard.

Presentation of Deferred Taxes

In November 2015, the FASB amended its standards with respect to the presentation of deferred income taxes to eliminate the requirement to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of condition, thereby simplifying the presentation of deferred income taxes. For public business entities, this new amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 (January 1, 2018 for People’s United) and may be applied either prospectively or retrospectively to all periods presented. Earlier application of the amendment is permitted as of the beginning of an interim or annual reporting period. The adoption of this amendment is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

Statements or related disclosures.

51

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Recognition and Measurement of Financial Instruments

In January 2016, the FASB amended its standards to address certain aspects of recognition, presentation and disclosure of financial instruments. The amended guidance (i) requires that equity investments be measured at fair value with changes in fair value recognized in net income and (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by permitting a qualitative assessment to identify impairment. Both FRB-NY and FHLB stock will continue to be presented at cost. The guidance also contains additional disclosure and presentation requirements associated with financial instruments. Specifically, the standard emphasizes the existing requirement to use “exit price” when determining fair value for disclosure purposes, clarifying that entities should not make use of a practicability exception in determining the fair value of loans.

For public business entities, this new guidance is effective in fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 (January 1, 2018 for People’s United). The cumulative effect transition method will be applied to all outstanding instruments as of the date of adoption, while changes to the accounting for equity investments without readily determinable fair values will be applied prospectively. While the Company continues to monitor the potential impact of the amended guidance on its Consolidated Financial Statements, such impact is indeterminable at this time as it will be dependent upon portfolio composition at the adoption date. As noted in Note 3, at September 30, 2017, the Company’s securities portfolio included equity securities with an amortized cost of $9.6 million and a fair value of $9.0 million. The Company does expect to refine the calculation used to determine the fair value of itsheld-for-investment loan portfolio in connection with adopting the standard.

Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB amended its standards to address the classification of certain cash receipts and payments within the statement of cash flows. Specifically, the amended guidance addresses the following: (i) debt prepayment or debt extinguishment costs; (ii) settlement ofzero-coupon bonds; (iii) contingent payments made after a business combination; (iv) proceeds from the settlement of insurance claims; (v) proceeds from the settlement of corporate-owned life insurance policies, including BOLI policies; (vi) distributions received from equity method investees; (vii) beneficial interests in securitization transactions; and (viii) separately identifiable cash flows and application of the predominance principle. For public business entities, this new guidance is effective in fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 (January 1, 2018 for People’s United). The retrospective transition method will be applied to all periods presented and early adoption is permitted. An entity that elects early adoption must adopt all of the amendments in the same period. The adoption of this amendment is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

Asset Derecognition and Accounting for Partial Sales of Nonfinancial Assets

In February 2017, the FASB amended its standards to clarify the scope of its guidance on derecognition of a nonfinancial asset and provide additional guidance on the definition ofin-substance nonfinancial assets and partial sales of nonfinancial assets. Under prior guidance, several different accounting models existed for use in evaluating whether the transfer of certain assets qualified for sale treatment. The amended guidance reduces the number of potential accounting models that might apply and clarifies which model does apply in various circumstances. For public business entities, this new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 (January 1, 2018 for People’s United). The adoption of this amendment is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

In March 2017, the FASB amended its standards to (i) require that the service cost component of net benefit cost associated with pension and postretirement plans be reported in the same line item in which the related employees’ compensation cost is reported and (ii) specify that only the service cost component is eligible for capitalization. The other components of net benefit cost, which may not be capitalized, are to be presented separately. For public business entities, this new guidance, which is to be applied retrospectively, is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 (January 1, 2018 for People’s United) and early adoption is permitted. The adoption of this amendment will result in a reclassification of certain net benefit cost components from compensation and benefits expense to othernon-interest expense and, as such, is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

Stock Compensation

In July 2017, the FASB amended its standards with respect to share-based payment awards to provide explicit guidance pertaining to the provisions of modification accounting. The amendment clarifies that an entity should not account for the effects of a modification if the award’s fair value, vesting conditions and classification (as either debt or equity) are the same immediately before and after the modification. This new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 (January 1, 2018 for People’s United) and is to be applied prospectively to awards modified on or after the adoption date. Earlier application of the amendment is permitted. The adoption of this amendment is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

Standards effective in 2019

Accounting for Leases

In February 2016, the FASB amended its standards with respect to the accounting for leases. The amended guidance serves to replace all current U.S. GAAP guidance on this topic and requires that an operating lease be recognized on the statement of condition as a“right-of-use” asset along with a corresponding liability representing the rent obligation. Key aspects of current lessor accounting remain unchanged from existing guidance. This standard is expected to result in an increase to assets and liabilities recognized and, therefore, increase risk-weighted assets for regulatory capital purposes. The guidance requires the use of the modified retrospective transition approach for existing leases that have not expired before the date of initial application and will become effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 (January 1, 2019 for People’s United).

The Company has begun its evaluation of the amended guidance including the potential impact on its Consolidated Financial Statements. To date, the Company has identified several areas that are within the scope of the guidance, including its contracts with respect to leased real estate and office equipment. In addition, operating lease agreements entered into with customers by the Company’s equipment financing businesses are also subject to the new guidance. The Company continues to evaluate the impact of the guidance, including determining whether additional contracts exist that are deemed to be in scope. As such, no conclusions have yet been reached regarding the potential impact of adoption on the Company’s Consolidated Financial Statements. The Federal banking agencies have indicated that to the extent a “right-of-use” asset arises due to a lease of a tangible asset (e.g. building or equipment), the asset should: (i) be treated as a tangible asset not subject to deduction from regulatory capital; (ii) risk-weighted at 100%; and (iii) included in total assets for leverage capital purposes.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Premium Amortization – Purchased Callable Debt Securities

In April 2017, the FASB amended its standards to shorten the amortization period for certain callable debt securities held at a premium, requiring such premiums to be amortized to the earliest call date unless applicable guidance related to certain pools of securities is applied to consider estimated prepayments. Under prior guidance, entities were generally required to amortize premiums on individual,non-pooled callable debt securities as a yield adjustment over the contractual life of the security. This amendment, which does not change the accounting for callable debt securities held at a discount, is effective for public business entities for fiscal years beginning after December 15, 2018 (January 1, 2019 for People’s United) with early adoption permitted. The adoption of this amendment is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

Derivatives and Hedging

In August 2017, the FASB amended its standards with respect to the accounting for derivatives and hedging, simplifying existing guidance in order to enable companies to more accurately portray the economic effects of risk management activities in the financial statements and enhancing the transparency and understandability of hedge results through improved disclosures. This new guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 (January 1, 2019 for People’s United) with early adoption permitted. The Company is still evaluating whether to apply the early adoption provisions of the standard. However, given the limited number of derivatives currently designated as hedging instruments, the adoption of this amendment is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

Standards effective in 2020

Financial Instruments – Credit Losses

In June 2016, the FASB amended its standards with respect to certain aspects of measurement, recognition and disclosure of credit losses on loans and other financial instruments, includingavailable-for-sale debt securities and purchased financial assets with credit deterioration. The amendment is to be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). For certain assets (such as debt securities for which an other-than-temporary impairment has been recognized before the effective date and purchased financial assets with credit deterioration), a prospective transition approach is required. For public business entities, this new amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (January 1, 2020 for People’s United) and earlier application is permitted as of the beginning of an interim or annual reporting period beginning after December 15, 2018.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

While early adoption is permitted, the Company does not expect to elect that option. In preparing for adoption, the Company has established a cross-functional working group comprised of individuals from various disciplines, including credit, risk management, information technology and finance. That working group, which is subject to the Company’s established corporate governance and oversight structure, is currently engaged in: (i) identifying key interpretative issues; (ii) determining the appropriate level of portfolio segmentation; (iii) reviewing historical data so as to identify potential data and resource gaps; and (iv) evaluating existing credit loss forecasting models and processes in order to determine what modifications may be required. In addition, the Company has purchased a third-party vendor solution that will aid in the application of the standard. As a result of the required change in approach toward determining estimated credit losses from the current “incurred loss” model to one based on estimated cash flows over a loan’s contractual life, adjusted for prepayments (a “life of loan” model), the Company expects the new guidance will result in an increase in the allowance for loan losses, particularly for longer duration portfolios. The Company also expects the new guidance may result in an allowance for debt securities. In both cases, the extent of the change is indeterminable at this time as it will be dependent upon portfolio composition and credit quality at the adoption date, as well as economic conditions and forecasts at that time. Further, to date, no guidance has been issued by either the Company’s or the Bank’s primary regulators with respect to how the impact of the amended standard is to be treated for regulatory capital purposes.

Simplifying the Test for Goodwill Impairment

In January 2017, the FASB amended its standards with respect to goodwill, simplifying how an entity is required to conduct the impairment assessment by eliminating Step 2, which requires a hypothetical purchase price allocation, from the goodwill impairment test. Instead, goodwill impairment will now be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. An entity will still have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. For public business entities, this new guidance is effective in fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (January 1, 2020 for People’s United) and is to be applied prospectively. Early adoption is permitted for any impairment tests performed after January 1, 2017. The adoption of this amendment is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

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

Forward-Looking Statements

Forward Looking Statements
Periodic and other filings made by People’s United Financial, Inc. (“People’s United” or the “Company”) with the Securities and Exchange Commission (the “SEC”) pursuant to the Securities Exchange Act of 1934 (the “Exchange Act”) may, from time to time, contain information and statements that are forward- lookingforward-looking in nature. Such filings include the Annual Report on Form10-K, Quarterly Reports on Form10-Q and Current Reports onForm 8-K, and may include other forms such as proxy statements. Other written or oral statements made by People’s United or its representatives from time to time may also contain forward-looking statements.

In general, forward-looking statements usually use words such as “expect,” “anticipate,” “believe,” “should,” and similar expressions, and include all statements about People’s United’s operating results or financial position for future periods. Forward-looking statements represent management’s beliefs, based upon information available at the time the statements are made, with regard to the matters addressed; they are not guarantees of future performance.

All forward-looking statements are subject to risks and uncertainties that could cause People’s United’s actual results or financial condition to differ materially from those expressed in or implied by such statements. Factors of particular importance to People’s United include, but are not limited to: (1) changes in general, international, national or regional economic conditions; (2) changes in interest rates; (3) changes in loan default andcharge-off rates; (4) changes in deposit levels; (5) changes in levels of income and expense innon-interest income and expense related activities; (6) changes in accounting and regulatory guidance applicable to banks; (7) price levels and conditions in the public securities markets generally; (8) competition and its effect on pricing, spending, third-party relationships and revenues; (9) the successful integration of acquisitions; andpending merger with
M&T Bank Corporation (“M&T”); (10) changes in regulation resulting from or relating to financial reform legislation.

legislation; and
(11) the COVID-19 pandemic and its effect on the economic and business environment in which we operate.

All forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. People’s United does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Completed Acquisitions

LEAF Commercial Capital, Inc.

Effective

Recent Developments
On August 1, 2017, People’s5, 2021, People's United Bank, National Association (the “Bank”) completed its acquisition of LEAF Commercial Capital, Inc. (“LEAF”) a Philadelphia-based commercial equipment finance company. The fair valueannounced it had reached an agreement with Stop & Shop to retain 27 in-store branch and corresponding ATM locations in Connecticut slated to close as part of the consideration transferredpreviously announced decision not to renew existing in-store branch contracts in Connecticut. The locations were strategically selected based on a variety of factors including proximity to nearby traditional branches, transaction volume, customer feedback and input from community leaders. The new agreement does not impact the LEAF acquisition consistedpreviously announced exit period for all other Connecticut Stop & Shop branch locations (see below). Closures will occur over several years using a phased approach and begin in 2022. Customers of approximately $220 million in cash.

Suffolk Bancorp

Effective April 1, 2017,the impacted branch locations will receive a minimum of 90 days’ notice prior to the closure. People’s United completed its acquisition of Suffolk Bancorp (“Suffolk”) basedcurrently operates 111 Stop & Shop branch locations, 84 in Riverhead,Connecticut and 27 in New York. The fair value

On February 22, 2021, People’s United and M&T announced that they have entered into a definitive agreement under which M&T will acquire People’s United in an all-stock transaction. Under the terms of the consideration transferred in the Suffolk acquisition totaled approximately $485 million and consisted of approximately 26.6 million sharesagreement, each share of People’s United common stock will be converted into the right to receive 0.118 shares of M&T common stock. AtThe merger, which has been approved by the acquisition date, Suffolk operated 27 branches inboards of directors and shareholders of each company, is expected to close promptly after the greater Long Island area.

People’s United’s resultsparties have satisfied customary closing conditions, including the approval of operationsthe Board of Governors of the Federal Reserve System. Merger-related expenses recorded for the three and nine months ended September 30, 2017 include2021 totaled $4.7 million and $21.4 million, respectively.

On January 21, 2021, the Bank announced its decision not to renew its agreements with Stop & Shop to operate
140 in-store branches in Connecticut and New York upon their expiration in 2022. Branch closures will take place over several years using a phased approach. In the first quarter of 2021, the Bank reached an agreement with Stop & Shop on the timing of the exit from all New York in-store branch and ATM locations, which began in the third quarter of 2021, with a full exit occurring over the next three quarters. Contract termination costs recorded for the three and nine months ended
September 30, 2021 totaled $1.6 million and $15.7 million, respectively.
52

On March 11, 2020, the World Health Organization declared the outbreak of a strain of novel coronavirus disease (“COVID-19”) a global pandemic. Economic activity in many countries, including the United States, began to deteriorate rapidly as the COVID-19 pandemic spread across the globe. In the United States, which has been operating under a presidentially-declared national emergency since March 13, 2020, the COVID-19 pandemic caused severe disruption to the capital markets as well as business and economic activity. In response, individual municipalities and entire states adopted travel and work location restrictions, social distancing requirements, and in some cases, shelter-in-place protocols in order to slow the spread of the virus. These measures resulted in the closure of many schools, stores, offices, restaurants and manufacturing facilities, causing a decline in spending and an increase in layoffs.
In response, the Federal government introduced several measures to mitigate the magnitude of the pandemic’s effects. Most notably, on March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which provides financial assistance for businesses and individuals as well as targeted regulatory relief for financial institutions, was signed into law. This relief package was subsequently followed by additional government stimulus in the form of the Consolidated Appropriations Act, 2021 in December 2020 and the American Rescue Plan in March 2021 (see Asset Quality). Also in
March 2020, the Federal Open Market Committee (the “FOMC”) of the Federal Reserve reduced short-term interest rates by 150 basis points (to near zero) and announced various other initiatives to enhance liquidity and support the flow of credit to households and businesses.
The impact of the COVID-19 pandemic on economic conditions, both in the United States and abroad, has created global uncertainty about the future economic environment including the length and depth of any global recession that may occur. Concerns over interest rates, domestic and global policy issues, U.S. trade policy and geopolitical events, and the influence of those factors on the markets in general, further add to this uncertainty.
Critical Accounting Estimates
In preparing the consolidated financial statements, management is required to make significant estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from management’s current estimates, as a result of LEAFchanging conditions and Suffolk beginning with the respective effective dates. Seefuture events.
People’s United’s critical accounting policies and critical estimates are summarized in Note 21 to the Consolidated Financial Statements of the Company's Annual Report on Form 10-K for a further discussionthe year ended December 31, 2020
(the “2020 Form 10-K”). Several accounting estimates are particularly critical and are susceptible to significant near-term change, including the allowance for credit losses (“ACL”) and the recoverability of goodwill and other intangible assets.
On January 1, 2020, the Company adopted new accounting guidance, which requires entities to estimate and recognize an allowance for lifetime expected credit losses for financial assets measured at amortized cost, including loans, held-to-maturity securities and other receivables, as well as certain off-balance sheet credit exposures (the “CECL standard”). These accounting policies are discussed in “Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2020 Form 10-K. There have been no significant changes in the Company’s application of these acquisitions.

Selected Consolidatedcritical accounting policies since December 31, 2020.



53

Selected Consolidated Financial Information
Three Months EndedNine Months Ended
(dollars in millions, except per common share data)Sept. 30,
2021		June 30,
2021		Sept. 30,
2020		Sept. 30,
2021		Sept. 30,
2020
Earnings Data:
Net interest income (fully taxable equivalent)$377.9 $388.7 $398.7 $1,160.1 $1,215.4 
Net interest income370.3 380.9 391.4 1,137.1 1,193.0 
Provision for credit losses12.1 (40.8)26.8 (42.3)141.1 
Non-interest income100.4 99.0 101.1 294.0 314.5 
Non-interest expense (1)289.2 305.0 293.6 906.1 917.7 
Income before income tax expense169.4 215.7 172.1 567.3 448.7 
Net income139.7 170.8 144.6 455.0 364.9 
Net income available to common shareholders (2)136.2 167.3 141.1 444.5 354.4 
Selected Statistical Data:
Net interest margin (2)2.64 %2.70 %2.97 %2.69 %3.05 %
Return on average assets (1), (2)0.87 1.07 0.94 0.95 0.80 
Return on average common equity (2)7.2 9.1 7.5 8.0 6.3 
Return on average tangible common equity (1), (2)11.6 14.7 13.1 12.9 11.0 
Efficiency ratio (2)56.8 57.4 53.8 56.9 53.8 
Common Share Data:
Earnings per common share:
Basic$0.32 $0.40 $0.34 $1.06 $0.84 
Diluted (1)0.32 0.39 0.34 1.05 0.84 
Dividends paid per common share0.1825 0.1825 0.1800 0.5450 0.5375 
Common dividend payout ratio (1)56.8 %46.2 %53.6 %51.8 %64.5 %
Book value per common share (end of period)$17.85 $17.77 $18.11 $17.85 $18.11 
Tangible book value per common share (end of period) (1)11.18 11.08 10.37 11.18 10.37 
Stock price:
High18.08 19.62 12.36 19.62 17.00 
Low15.18 16.75 9.74 12.66 9.37 
Close (end of period)17.47 17.14 10.31 17.47 10.31 
(1)See Non-GAAP Financial Information

   Three Months Ended  Nine Months Ended 

(dollars in millions, except per common share data)

  Sept. 30,
2017		  June 30,
2017		  Sept. 30,
2016		  Sept. 30,
2017		  Sept. 30,
2016		 

Earnings Data:

      

Net interest income (fully taxable equivalent)

  $295.8  $285.2  $254.2  $839.1  $749.3 

Net interest income

   284.6   274.9   245.3   808.1   725.4 

Provision for loan losses

   7.0   7.1   8.4   18.5   28.9 

Non-interest income

   89.3   91.6   90.8   265.6   258.5 

Non-interest expense (1)

   237.1   257.3   221.4   720.5   651.6 

Income before income tax expense

   129.8   102.1   106.3   334.7   303.4 

Net income

   90.8   69.3   73.7   230.9   205.1 

Net income available to common shareholders (1)

   87.3   65.8   73.7   220.4   205.1 

Selected Statistical Data:

      

Net interest margin (2)

   3.04%   2.96%   2.80%   2.94%   2.80% 

Return on average assets (1),(2)

   0.84   0.65   0.73   0.73   0.69 

Return on average common equity (2)

   6.4   4.8   6.1   5.6   5.7 

Return on average tangible common equity (1),(2)

   11.8   8.7   10.7   10.0   10.1 

Efficiency ratio (1)

   57.3   58.4   59.9   58.3   61.0 

Common Share Data:

      

Basic and diluted earnings per common share (1)

  $0.26  $0.19  $0.24  $0.67  $0.68 

Dividends paid per common share

   0.1725   0.1725   0.17   0.5150   0.5075 

Common dividend payout ratio (1)

   66.8%   88.6%   70.1%   76.8%   75.1% 

Book value per common share (end of period)

  $16.29  $16.18  $15.99  $16.29  $15.99 

Tangible book value per common share (end of period) (1)

   8.68   8.99   9.18   8.68   9.18 

Stock price:

      

High

   18.26   18.21   16.40   19.85   16.68 

Low

   15.97   16.44   14.22   15.97   13.62 

Close (end of period)

   18.14   17.66   15.82   18.14   15.82 

Measures and Reconciliation to GAAP.
(2)Annualized.
54

.
As of and for the Three Months Ended
(dollars in millions)Sept. 30, 2021June 30,
2021		Mar. 31, 2021Dec. 31,
2020		Sept. 30,
2020
Financial Condition Data:
Total assets$63,673 $63,341 $64,173 $63,092 $60,871 
Loans39,526 41,366 42,770 43,870 45,231 
Securities10,451 10,597 10,445 9,191 8,270 
Short-term investments7,723 5,249 4,992 3,766 439 
Allowance for credit losses on loans352 348 399 425 424 
Goodwill and other acquisition-related intangible assets2,817 2,826 2,835 2,846 3,244 
Deposits52,871 52,581 53,475 52,138 49,637 
Borrowings977 952 1,156 1,148 1,237 
Notes and debentures999 1,002 1,003 1,010 1,012 
Stockholders’ equity7,783 7,750 7,592 7,603 7,831 
Total risk-weighted assets:
People’s United42,721 43,654 43,833 45,075 45,756 
People’s United Bank, National Association42,716 43,623 43,812 45,016 45,685 
Non-accrual loans321 328 353 329 306 
Net loan charge-offs7.7 10.3 12.4 13.4 17.3 
Average Balances:
Loans$39,934 $41,683 $42,854 $44,061 $44,853 
Securities (1)10,432 10,418 9,561 8,390 7,922 
Short-term investments6,999 5,469 5,000 2,582 842 
Total earning assets57,365 57,570 57,415 55,034 53,617 
Total assets63,876 63,930 64,057 62,396 61,293 
Deposits52,822 53,041 52,876 50,674 49,542 
Borrowings940 1,012 1,143 1,233 1,283 
Notes and debentures1,002 1,003 1,008 1,011 1,014 
Total funding liabilities54,764 55,056 55,027 52,918 51,839 
Stockholders’ equity7,779 7,634 7,606 7,884 7,801 
Ratios:
Net loan charge-offs to average total loans (annualized)0.08 %0.10 %0.12 %0.12 %0.15 %
Non-performing assets to total loans, real estate
   owned and repossessed assets		0.83 0.82 0.85 0.78 0.71 
Allowance for credit losses on loans to:
Total loans0.89 0.84 0.93 0.97 0.94 
Non-accrual loans109.9 106.1 113.0 129.1 138.4 
Average stockholders’ equity to average total assets12.9 11.9 11.9 12.6 12.7 
Stockholders’ equity to total assets12.2 12.2 11.8 12.1 12.9 
Tangible common equity to tangible assets (2)7.8 7.7 7.4 7.5 7.5 
Total risk-based capital:
People’s United13.4 13.1 12.9 12.4 11.8 
People’s United Bank, National Association13.6 13.5 13.5 12.8 12.3 

(1)Average balances for securities are based on amortized cost.
(2)See Non-GAAP Financial Measures and Reconciliation to GAAP.

55

(1)See
Non-GAAP Financial Measures and Reconciliation to GAAP.GAAP
(2)Annualized.

   As of and for the Three Months Ended 

(dollars in millions)

  Sept. 30,
2017		  June 30,
2017		  March 31,
2017		  Dec. 31,
2016		  Sept. 30,
2016		 

Financial Condition Data:

      

Total assets

  $43,998  $43,023  $40,230  $40,610  $40,692 

Loans

   32,384   31,611   29,687   29,745   29,368 

Securities

   6,914   6,880   6,424   6,738   7,046 

Short-term investments

   303   216   392   182   373 

Allowance for loan losses

   233   232   231   229   226 

Goodwill and other acquisition-related intangible assets

   2,568   2,426   2,136   2,142   2,070 

Deposits

   32,547   31,815   30,506   29,861   29,656 

Borrowings

   4,144   4,084   3,183   4,057   4,437 

Notes and debentures

   906   907   904   1,030   1,054 

Stockholders’ equity

   5,746   5,704   5,195   5,142   4,862 

Total risk-weighted assets:

      

People’s United

   33,029   32,095   30,229   30,540   30,451 

People’s United Bank, National Association

   32,981   32,050   30,202   30,489   30,415 

Non-performing assets (1)

   191   198   183   167   180 

Net loan charge-offs

   5.2   6.8   2.4   4.7   2.5 

Average Balances:

      

Loans

  $31,994  $31,400  $29,355  $29,346  $29,107 

Securities (2)

   6,559   6,728   6,831   7,074   6,873 

Short-term investments

   347   355   371   308   361 

Total earning assets

   38,900   38,483   36,557   36,728   36,341 

Total assets

   43,256   42,666   40,317   40,623   40,304 

Deposits

   32,065   32,024   29,923   29,773   29,437 

Borrowings

   4,010   3,498   3,709   4,148   4,296 

Notes and debentures

   909   907   966   1,045   1,056 

Total funding liabilities

   36,984   36,429   34,598   34,966   34,789 

Stockholders’ equity

   5,722   5,696   5,166   5,039   4,841 

Ratios:

      

Net loan charge-offs to average total loans (annualized)

   0.06%   0.09%   0.03%   0.06%   0.04% 

Non-performing assets to originated loans, real estate owned and repossessed assets (1)

   0.64   0.67   0.63   0.57   0.63 

Originated allowance for loan losses to:

      

Originated loans (1)

   0.77   0.77   0.77   0.77   0.76 

Originatednon-performing loans (1)

   131.6   128.1   140.9   150.6   142.0 

Average stockholders’ equity to average total assets

   13.2   13.4   12.8   12.4   12.0 

Stockholders’ equity to total assets

   13.1   13.3   12.9   12.7   11.9 

Tangible common equity to tangible assets (3)

   7.1   7.5   7.4   7.2   7.2 

Total risk-based capital:

      

People’s United

   12.0   12.6   12.7   12.5   11.5 

People’s United Bank, National Association

   12.6   13.3   13.4   13.3   12.8 

(1)Excludes acquired loans.
(2)Average balances for securities are based on amortized cost.
(3)SeeNon-GAAP Financial Measures and Reconciliation to GAAP.

Non-GAAP Financial Measures and Reconciliation to GAAP

In addition to evaluating People’s United’s results of operations in accordance with U.S. generally accepted accounting principles (“GAAP”), management routinely supplements its evaluation with an analysis of certainnon-GAAP financial measures, such as the efficiency and tangible common equity ratios, tangible book value per common share and operating earnings metrics. Management believes thesenon-GAAP financial measures provide information useful to investors in understanding People’s United’s underlying operating performance and trends, and facilitates comparisons with the performance of other financial institutions. Further, the efficiency ratio and operating earnings metrics are used by management in its assessment of financial performance, includingnon-interest expense control, while the tangible common equity ratio and tangible book value per common share are used to analyze the relative strength of People’s United’s capital position.

The efficiency ratio, which represents an approximate measure of the cost required by People’s United to generate a dollar of revenue, is the ratio of (i) totalnon-interest expense (excluding operating lease expense, goodwill impairment charges, amortization of other acquisition-related intangible assets, losses on real estate assets andnon-recurring expenses) (the numerator) to (ii) net interest income on a fully taxable equivalent (“FTE”) basis plus totalnon-interest income (including the FTE adjustment on bank-owned life insurance (“BOLI”) income, the netting of operating lease expense and excluding gains and losses on sales of assets other than residential mortgage loans and acquired loans, andnon-recurring income) (the denominator). People’s United generally considers an item of income or expense to benon-recurring if it is not similar to an item of income or expense of a type incurred within the last two years and is not similar to an item of income or expense of a type reasonably expected to be incurred within the following two years.

Operating earnings exclude from net income available to common shareholders those items that management considers to be of such anon-recurring or infrequent nature that, by excluding such items (net of income taxes), People’s United’s results can be measured and assessed on a more consistent basis from period to period. Items excluded from operating earnings, which include, but are not limited to:(i) non-recurring gains/losses; (ii) merger-related expenses, including acquisition integration and other costs; (iii) writedownswrite-downs of banking house assets and related lease termination costs; (iv) severance-related costs; and (v) charges related to executive-level management separation costs, are generally also excluded when calculating the efficiency ratio. Effective in 2016, recurring writedowns of banking house assets and certain severance-related costs are no longer considered to benon-operating expenses. Operating earnings per common share (“EPS”) is derived by determining the per common share impact of the respective adjustments to arrive at operating earnings and adding (subtracting) such amounts to (from) diluted EPS, as reported. Operating return on average assets is calculated by dividing operating earnings (annualized) by average total assets. Operating return on average tangible common equity is calculated by dividing operating earnings (annualized) by average tangible common equity. The operating common dividend payout ratio is calculated by dividing common dividends paid by operating earnings for the respective period.

Pre-provision net revenue is a useful financial measure as it enables an assessment of the Company's ability to generate earnings to cover credit losses through a credit cycle as well as providing an additional basis for comparing the Company's results of operation between periods by isolating the impact of the provision for credit losses, which can vary significantly between periods.
The tangible common equity ratio is the ratio of (i) tangible common equity (total stockholders’ equity less preferred stock, goodwill and other acquisition-related intangible assets) (the numerator) to (ii) tangible assets (total assets less goodwill and other acquisition-related intangible assets) (the denominator). Tangible book value per common share is calculated by dividing tangible common equity by common shares (total common shares issued, less common shares classified as treasury shares and unallocated Employee Stock Ownership Plan (“ESOP”) common shares).

In light of diversity in presentation among financial institutions, the methodologies used by People’s United for determining thenon-GAAP financial measures discussed above may differ from those used by other financial institutions.



56

The following table summarizes People’s United’s operatingnon-interest expense and efficiency ratio, as derived from amounts reported in the Consolidated Statements of Income:

   Three Months Ended  Nine Months Ended 

(dollars in millions)

  Sept. 30,
2017		  June 30,
2017		  Sept. 30,
2016		  Sept. 30,
2017		  Sept. 30,
2016		 

Totalnon-interest expense

  $237.1  $257.3  $221.4  $720.5  $651.6 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Adjustments to arrive at operatingnon-interest expense:

      

Merger-related expenses

   (3.0)   (24.8)   (3.1)   (29.0)   (3.1) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

   (3.0)   (24.8)   (3.1)   (29.0)   (3.1) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operatingnon-interest expense

   234.1   232.5   218.3   691.5   648.5 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating lease expense

   (8.8)   (8.7)   (9.7)   (26.3)   (28.0) 

Amortization of other acquisition-related intangible assets

   (7.9)   (7.9)   (5.8)   (22.1)   (17.4) 

Other (1)

   (1.5)   (0.4)   (1.8)   (3.7)   (5.1) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Totalnon-interest expense for efficiency ratio

  $215.9  $215.5  $201.0  $639.4  $598.0 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest income (FTE basis)

  $295.8  $285.2  $254.2  $839.1  $749.3 

Totalnon-interest income

   89.3   91.6   90.8   265.6   258.5 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total revenues

   385.1   376.8   345.0   1,104.7   1,007.8 

Adjustments:

      

Net security (gains) losses

   —     (0.1)   —     15.6   (0.1) 

Operating lease expense

   (8.8)   (8.7)   (9.7)   (26.3)   (28.0) 

BOLI FTE adjustment

   1.2   1.0   0.6   2.6   2.1 

Other (2)

   (0.2)   —     (0.3)   —     (1.0) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total revenues for efficiency ratio

  $377.3  $369.0  $335.6  $1,096.6  $980.8 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Efficiency ratio

   57.3%   58.4%   59.9%   58.3%   61.0% 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(1)Items classified as “other” and deducted fromnon-interest expense for purposes of calculating the efficiency ratio include certain franchise taxes and real estate owned expenses.
(2)Items classified as “other” and deducted from total revenues for purposes of calculating the efficiency ratio include, as applicable, asset write-offs and gains associated with the sale of branch locations.

Three Months EndedNine Months Ended
(dollars in millions)Sept. 30,
2021		June 30,
2021		Sept. 30,
2020		Sept. 30,
2021		Sept. 30,
2020
Total non-interest expense$289.2 $305.0 $293.6 $906.1 $917.7 
Adjustments to arrive at operating non-interest expense:
Merger-related expenses(4.7)(9.2)(4.6)(21.4)(41.0)
Stop & Shop contract termination costs(1.6)(2.0)— (15.7)— 
Total(6.3)(11.2)(4.6)(37.1)(41.0)
Operating non-interest expense282.9 293.8 289.0 869.0 876.7 
Adjustments:
Amortization of other acquisition-related
   intangible assets		(8.9)(8.8)(10.2)(28.7)(31.1)
Operating lease expense(7.0)(7.6)(9.3)(22.4)(27.9)
Other (1)(1.2)(1.3)(5.1)(4.2)(8.9)
Total non-interest expense for efficiency ratio$265.8 $276.1 $264.4 $813.7 $808.8 
Net interest income (FTE basis)$377.9 $388.7 $398.7 $1,160.1 $1,215.4 
Total non-interest income100.4 99.0 101.1 294.0 314.5 
Total revenues478.3 487.7 499.8 1,454.1 1,529.9 
Adjustments:
Operating lease expense(7.0)(7.6)(9.3)(22.4)(27.9)
BOLI FTE adjustment1.0 0.7 0.8 2.3 2.6 
Other (2)(4.0)— (0.1)(5.1)(0.4)
Total revenues for efficiency ratio$468.3 $480.8 $491.2 $1,428.9 $1,504.2 
Efficiency ratio56.8 %57.4 %53.8 %56.9 %53.8 %
(1)Items classified as “other” and deducted from non-interest expense for purposes of calculating the efficiency ratio include certain franchise taxes and real estate owned expenses.
(2)Items classified as “other” and deducted from total revenues for purposes of calculating the efficiency ratio include, as applicable, asset write-offs and gains/losses associated with the sale of branch locations.
The following table summarizes People's United's pre-provision net revenue, as derived from amounts reported in the Consolidated Statements of Income:
Three Months EndedNine Months Ended
(in millions)Sept. 30,
2021		June 30,
2021		Sept. 30,
2020		Sept. 30,
2021		Sept. 30,
2020
Net interest income$370.3 $380.9 $391.4 $1,137.1 $1,193.0 
Non-interest income100.4 99.0101.1294.0 314.5
Non-interest expense(289.2)(305.0)(293.6)(906.1)(917.7)
Pre-provision net revenue181.5 174.9 198.9525.0 589.8
Non-operating expense6.3 11.2 4.6 37.1 41.0 
Operating pre-provision net revenue$187.8 $186.1 $203.5 $562.1 $630.8 
57

The following table summarizes People’s United’s operating earnings, operating EPS and operating return on average assets:

   Three Months Ended  Nine Months Ended 

(dollars in millions, except per common share data)

  Sept. 30,
2017		  June 30,
2017		  Sept. 30,
2016		  Sept. 30,
2017		  Sept. 30,
2016		 

Net income available to common shareholders

  $87.3  $65.8  $73.7  $220.4  $205.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Adjustments to arrive at operating earnings:

      

Merger-related expenses

   3.0   24.8   3.1   29.0   3.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Totalpre-tax adjustments

   3.0   24.8   3.1   29.0   3.1 

Tax effect

   (1.0)   (8.0)   (1.0)   (9.2)   (1.0) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total adjustments, net of tax

   2.0   16.8   2.1   19.8   2.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating earnings

  $89.3  $82.6  $75.8  $240.2  $207.2 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

EPS, as reported

  $0.26  $0.19  $0.24  $0.67  $0.68 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Adjustments to arrive at operating EPS:

      

Merger-related expenses

   —     0.05   0.01   0.06   0.01 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total adjustments per common share

   —     0.05   0.01   0.06   0.01 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating EPS

  $0.26  $0.24  $0.25  $0.73  $0.69 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Average total assets

  $43,256  $42,666  $40,304  $42,091  $39,503 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating return on average assets (annualized)

   0.83%   0.77%   0.75%   0.76%   0.70% 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 Three Months EndedNine Months Ended
(dollars in millions, except per common share data)Sept. 30,
2021		June 30,
2021		Sept. 30,
2020		Sept. 30,
2021		Sept. 30,
2020
Net income available to common shareholders$136.2 $167.3 $141.1 $444.5 $354.4 
Adjustments to arrive at operating earnings:
Merger-related expenses4.7 9.2 4.6 21.4 41.0 
Stop & Shop contract termination costs1.6 2.0 — 15.7 — 
Total pre-tax adjustments6.3 11.2 4.6 37.1 41.0 
Tax effect(1.4)(2.4)(1.0)(7.9)(8.6)
Total adjustments, net of tax4.9 8.8 3.6 29.2 32.4 
Operating earnings$141.1 $176.1 $144.7 $473.7 $386.8 
Diluted EPS, as reported$0.32 $0.39 $0.34 $1.05 $0.84 
Adjustments to arrive at operating EPS:
Merger-related expenses0.01 0.02 — 0.05 0.07 
Stop & Shop contract termination costs— — — 0.02 — 
Total adjustments per common share0.01 0.02 — 0.07 0.07 
Operating EPS$0.33 $0.41 $0.34 $1.12 $0.91 
Average total assets$63,876 $63,930 $61,293 $63,954 $60,582 
Operating return on average assets (annualized)0.88 %1.10 %0.94 %0.99 %0.85 %

The following tables summarize People’s United’s operating return on average tangible common equity and operating common dividend payout ratio:

   Three Months Ended  Nine Months Ended 

(dollars in millions)

  Sept. 30,
2017		  June 30,
2017		  Sept. 30,
2016		  Sept. 30,
2017		  Sept. 30,
2016		 

Operating earnings

  $89.3  $82.6  $75.8  $240.2  $207.2 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Average stockholders’ equity

  $5,722  $5,696  $4,841  $5,530  $4,799 

Less: Average preferred stock

   244   244   —     244   —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Average common equity

   5,478   5,452   4,841   5,286   4,799 

Less: Average goodwill and average other
acquisition-related intangible assets

   2,524   2,415   2,073   2,359   2,079 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Average tangible common equity

  $2,954  $3,037  $2,768  $2,927  $2,720 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating return on average tangible common equity

   12.1%   10.9%   11.0%   10.9%   10.2% 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   Three Months Ended  Nine Months Ended 

(dollars in millions)

  Sept. 30,
2017		  June 30,
2017		  Sept. 30,
2016		  Sept. 30,
2017		  Sept. 30,
2016		 

Common dividends paid

  $58.3  $58.3  $51.7  $169.3  $154.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating earnings

  $89.3  $82.6  $75.8  $240.2  $207.2 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating common dividend payout ratio

   65.3%   70.6%   68.2%   70.5%   74.4% 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 Three Months EndedNine Months Ended
(dollars in millions)Sept. 30,
2021		June 30,
2021		Sept. 30,
2020		Sept. 30,
2021		Sept. 30,
2020
Operating earnings$141.1 $176.1 $144.7 $473.7 $386.8 
Average stockholders’ equity$7,779 $7,634 $7,801 $7,674 $7,788 
Less: Average preferred stock244 244 244 244 244 
Average common equity7,535 7,390 7,557 7,430 $7,544 
Less: Average goodwill and average other
     acquisition-related intangible assets
2,822 2,831 3,249 2,831 3,259 
Average tangible common equity$4,713 $4,559 $4,308 $4,599 $4,285 
Operating return on average tangible
     common equity (annualized)
12.0 %15.4 %13.4 %13.7 %12.0 %
 Three Months EndedNine Months Ended
(dollars in millions)Sept. 30,
2021		June 30,
2021		Sept. 30,
2020		Sept. 30,
2021		Sept. 30,
2020
Common dividends paid$77.4 $77.3 $75.7 $230.4 $228.5 
Operating earnings$141.1 $176.1 $144.7 $473.7 $386.8 
Operating common dividend payout ratio54.8 %43.9 %52.3 %48.6 %59.1 %



58

The following tables summarize People’s United’s tangible common equity ratio and tangible book value per common share derived from amounts reported in the Consolidated Statements of Condition:

(dollars in millions)

  Sept. 30,
2017		  June 30,
2017		  March 31,
2017		  Dec. 31,
2016		  Sept. 30,
2016		 

Total stockholders’ equity

  $5,746  $5,704  $5,195  $5,142  $4,862 

Less: Preferred stock

   244   244   244   244   —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Common equity

   5,502   5,460   4,951   4,898   4,862 

Less: Goodwill and other acquisition-related intangible assets

   2,568   2,426   2,136   2,142   2,070 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Tangible common equity

  $2,934  $3,034  $2,815  $2,756  $2,792 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total assets

  $43,998  $43,023  $40,230  $40,610  $40,692 

Less: Goodwill and other acquisition-related intangible assets

   2,568   2,426   2,136   2,142   2,070 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Tangible assets

  $41,430  $40,597  $38,094  $38,468  $38,622 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Tangible common equity ratio

   7.1%   7.5%   7.4%   7.2%   7.2% 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(in millions, except per common share data)

  Sept. 30,
2017		  June 30,
2017		  March 31,
2016		  Dec. 31,
2016		  Sept. 30,
2016		 

Tangible common equity

  $2,934  $3,034  $2,815  $2,756  $2,792 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Common shares issued

   433.59   433.34   406.43   405.00   400.13 

Less: Common shares classified as treasury shares

   89.04   89.04   89.04   89.06   89.05 

Unallocated ESOP common shares

   6.71   6.79   6.88   6.97   7.06 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Common shares

   337.84   337.51   310.51   308.97   304.02 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Tangible book value per common share

  $8.68  $8.99  $9.07  $8.92  $9.18 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Financial Overview

(dollars in millions)Sept. 30, 2021June 30, 2021Mar. 31, 2021Dec. 31, 2020Sept. 30, 2020
Total stockholders’ equity$7,783 $7,750 $7,592 $7,603 $7,831 
Less: Preferred stock244 244 244 244 244 
Common equity7,539 7,506 7,348 7,359 7,587 
Less: Goodwill and other acquisition-related
     intangible assets		2,817 2,826 2,835 2,846 3,244 
Tangible common equity$4,722 $4,680 $4,513 $4,513 $4,343 
Total assets$63,673 $63,341 $64,172 $63,092 $60,871 
Less: Goodwill and other acquisition-related
     intangible assets		2,817 2,826 2,835 2,846 3,244 
Tangible assets$60,856 $60,515 $61,337 $60,246 $57,627 
Tangible common equity ratio7.8 %7.7 %7.4 %7.5 %7.5 %
(in millions, except per common share data)Sept. 30, 2021June 30, 2021Mar. 31, 2021Dec. 31, 2020Sept. 30, 2020
Tangible common equity$4,722 $4,680 $4,513 $4,513 $4,343 
Common shares issued536.75 536.75 536.20 533.68 533.67 
Less: Shares classified as treasury shares108.98 108.98 108.98 109.00 109.00 
Common shares outstanding427.77 427.77 427.22 424.68 424.67 
Less: Unallocated ESOP shares5.31 5.40 5.49 5.57 5.66 
Common shares422.46 422.37 421.73 419.11 419.01 
Tangible book value per common share$11.18 $11.08 $10.70 $10.77 $10.37 

Financial Overview
People’s United reported net income of $90.8$139.7 million, or $0.26$0.32 per diluted common share, for the three months ended September 30, 2017,2021, compared to $73.7$144.6 million, or $0.24$0.34 per diluted common share, for theyear-ago period. Included in this quarter’sthe results were merger-relatedfor the three months ended September 30, 2021 are non-operating expenses totaling $3.0$6.3 million ($2.04.9 millionafter-tax) or less than $0.01 per common share. Included in the results for the year-ago period were merger-relatedthree months ended September 30, 2020 are non-operating expenses totaling $3.1$4.6 million ($2.13.6 million after-tax), or $0.01 with no per common share.share impact. Compared to theyear-ago period, third quarter 2017of 2021 earnings primarily reflect a decrease in the benefits from recent acquisitions, continued loanprovision for credit losses on loans and deposit growth, and meaningful cost control.

well-controlled expenses.

People’s United’s return on average assets was 0.84%0.87% (0.88% on an operating basis) for the three months ended
September 30, 20172021 compared to 0.73%0.94% (0.94% on an operating basis) for theyear-ago period. Return on average tangible common equity was 11.8%11.6% (12.0% on an operating basis) for the three months ended September 30, 20172021 compared to 10.7%13.1% (13.4% on an operating basis) for theyear-ago period. Compared to the third quarter of 2016,2020, FTE net interest income increased $41.6decreased $20.8 million to $295.8$377.9 million and the net interest margin increased 24decreased 33 basis points to 3.04%. FTE net interest income increased $10.6 million and the net interest margin increased eight basis points compared to the second quarter of 20172.64% (see Net Interest Income).

Net income for the nine months ended September 30, 20172021 totaled $230.9$455.0 million, or $0.67$1.05 per diluted common share, compared to $205.1$364.9 million, or $0.68$0.84 per diluted common share, for theyear-ago period. Included in the results for the
nine months ended September 30, 2021 are non-operating expenses totaling $37.1 million ($29.2 million after-tax) or
$0.07 per common share. Included in the results for the nine months ended September 30, 2017 and 20162020 were merger-relatednon-operating expenses totaling $29.0$41.0 million ($19.832.4 millionafter-tax) or $0.06$0.07 per common share, and $3.1 million ($2.1 millionafter-tax) or $0.01 per common share, respectively. share.
59

People’s United’s return on average assets was 0.73%0.95% (0.99% on an operating basis) for the nine months ended September 30, 20172021 compared to 0.69%0.80% (0.85% on an operating basis) for theyear-ago period. Return on average tangible stockholders’common equity was 10.0%12.9% (13.7% on an operating basis) for the nine months ended September 30, 20172021 compared to 10.1%11.0% (12.0% on an operating basis) for theyear-ago period. On an operating basis, return on average assets was 0.76% and return on average tangible common equity was 10.9%FTE net interest income totaled $1.2 billion for the nine months ended September 30, 2017. FTE net interest income totaled $839.12021, a $55.3 million fordecrease from the nine months ended September 30, 2017, an $89.8 million increase from theyear-ago period and the net interest margin increased 14decreased 35 basis points
to 2.94%2.69%.

Average total earning assets increased $2.6$3.7 billion compared to the third quarter of 2016,2020, reflecting a $2.9increases of $6.2 billion increase in average total loansshort-term investments and $2.5 billion in average securities, partially offset by a $169 million$4.9 billion decrease in average securities.total loans. Average total funding liabilities increased $2.2$2.9 billion compared to theyear-ago quarter, reflecting a $2.6$3.3 billion increase in average total deposits, partially offset by decreases of $286a $343 million decrease in average total borrowings and $147 million in average notes and debentures.

borrowings.

Compared to theyear-ago quarter, totalnon-interest income decreased $1.5$0.7 million and totalnon-interest expense increased $15.7decreased $4.4 million. The efficiency ratio was 57.3%56.8% for the third quarter of 20172021 compared to 59.9%53.8% for theyear-ago period quarter (seeNon-Interest Income andNon-Interest Expense).

The provision for loancredit losses on loans in the third quarter of 20172021 totaled $7.0$12.0 million, comparedreflecting notable improvements in the economic outlook (e.g. Gross Domestic Product (“GDP”) and unemployment) largely attributable to $8.4continued COVID-19 vaccine distribution, an easing of social distancing restrictions and further government stimulus. The provision for credit losses of $27.1 million in theyear-ago period. quarter reflects the economic uncertainty brought about by COVID-19. Net loan charge-offs as a percentage of average total loans on an annualized basis were 0.06%0.08% in the third quarter of 20172021 compared to 0.04%0.15% in theyear-ago quarter. The allowance for loan losses on originated loansACL was $229.2$352.4 million at September 30, 2017,2021, a $6.2 million increase from December 31, 2016. The allowance for loan losses on acquired loans was $4.2 million at September 30, 2017, a $1.9$72.7 million decrease from December 31, 2016.2020. Non-performing assets (excluding acquirednon-performing loans) totaled $190.7$329.5 million at September 30, 2017,2021, a $23.4$12.1 million increasedecrease from December 31, 2016.2020. At September 30, 2017,2021, the originated allowance for loan lossesACL as a percentage of originatedtotal loans was 0.77%0.89% and as a percentage of originatednon-performing
non-accrual loans was 131.6%109.9%, compared to 0.77%0.97% and 150.6%129.1%, respectively, at December 31, 20162020 (see Asset Quality).

People’s United’s total stockholders’ equity was $5.7$7.78 billion at September 30, 20172021 compared to $5.1$7.60 billion at
December 31, 2016.2020. Stockholders’ equity as a percentage of total assets was 13.1%12.2% and 12.1% at September 30, 2017 compared to 12.7% at2021 and December 31, 2016.2020, respectively. Tangible common equity as a percentage of tangible assets was 7.1%7.8% at September 30, 20172021 compared to 7.2%7.5% at December 31, 20162020 (see Stockholders’ Equity and Dividends). People’s United’s and the Bank’s Total risk-based capital ratios were 12.0%13.4% and 12.6%13.6%, respectively, at September 30, 2017,2021, compared to 12.5%12.4% and 13.3%12.8%, respectively, at December 31, 20162020 (see Regulatory Capital Requirements).

Segment Results

Segment Results
Public companies are required to report (i) certain financial and descriptive information about “reportable operating segments,” as defined, and (ii) certain enterprise-wide financial information about products and services, geographic areas and major customers. Operating segment information is reported using a “management approach” that is based on the way management organizes the segments for purposes of making operating decisions and assessing performance.

People’s United’s operations are divided into three primary operating segments that represent its core businesses: Commercial Banking; Retail Banking; and Wealth Management. In addition, the Treasury area manages People’s United’s securities portfolio, short-term investments, brokered deposits, wholesale borrowings and the funding center.

The Company’s operating segments have been aggregated into two reportable segments: Commercial Banking and Retail Banking. These reportable segments have been identified and organized based on the nature of the underlying products and services applicable to each segment, the type of customers to whom those products and services are offered and the distribution channel through which those products and services are made available. With respect to the Company’s traditional wealth management activities, this presentation results in the allocation of the Company’s insurance business (prior to its sale in November 2020) and certain trust activities to the Commercial Banking segment, and the allocation of the Company’s brokerage business and certain other trust activities to the Retail Banking segment.

People’s United uses an internal profitability reporting system to generate information by operating segment, which is based on a series of management estimates and allocations regarding funds transfer pricing (“FTP”), the provision for loancredit losses on loans, non-interest expense and income taxes. These estimates and allocations, some of which are subjective in nature, are subject to periodic review and refinement. Any changes in estimates and allocations that may affect the reported results of any segment will not affect the consolidated financial position or results of operations of People’s United as a whole.

60

FTP, which is used in the calculation of each operating segment’s net interest income, measures the value of funds used in and provided by an operating segment. The difference between the interest income on earning assets and the interest expense on funding liabilities, and the corresponding FTP charge for interest income or credit for interest expense, results in net spread income (see Treasury). For fixed-term assets and liabilities, the FTP rate is assigned at the time the asset or liability is originated by reference to the Company’s FTP yield curve, which is updated daily. Fornon-maturity-term assets and liabilities, the FTP rate is determined based upon the underlying characteristics, or behavior, of each particular product and results in the use of a historical rolling average FTP rate determined over a period that is most representative of the average life of the particular asset or liability. While the Company’s FTP methodology serves to remove interest rate risk (“IRR”) from the operating segments and better facilitate pricing decisions, thereby allowing management to more effectively assess the
longer-term profitability of an operating segment, it may, in sustained periods of low and/or high interest rates, result in a measure of operating segment net interest income that is not reflective of current interest rates.

A five-year rolling average netcharge-off rate is used as the basis for the provision for loancredit losses on loans for the respective operating segment in order to present a level of portfolio credit cost that is representative of the Company’s historical experience, without presenting the potential volatility fromyear-to-year changes in credit conditions. While this method of allocation allows management to more effectively assess the longer-term profitability of aan operating segment more effectively, it may result in a measure of an operating segmentsegment’s provision for loancredit losses on loans that does not reflect actual incurred losses recognized for the periods presented.

The provision for credit losses for Treasury reflects the application of the CECL standard.

People’s United allocates a majority ofnon-interest expenses to each operating segment using afull-absorption costing process (i.e. all expenses are fully-allocated to the segments). Direct and indirect costs are analyzed and pooled by process and assigned to the appropriate operating segment and corporate overhead costs are allocated to the operating segments. Income tax expense is allocated to each operating segment using a constant rate, based on an estimate of the consolidated effective income tax rate for the year. Average total assets and average total liabilities are presented for each reportable segment due to management’s reliance, in part, on such average balances for purposes of assessing segment performance.

Average total assets of each reportable segment include allocated goodwill and intangible assets, both of which are reviewed for impairment at least annually. For the purpose of goodwill impairment evaluations, management has identified reporting units based upon the Company’s three operating segments: Commercial Banking; Retail Banking; and Wealth Management. The impairment evaluation is performed as of an annual date or more frequently if a triggering event indicates that impairment may have occurred.

Entities have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of such events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the entity is not required to perform thetwo-step impairment test. People’s United elected to perform this optional qualitative assessment in its evaluation of goodwill impairment as of October 1st (the annual impairment evaluation date) in 2016, and concluded that performance of thetwo-step quantitative impairment test was not required.

When performed, the goodwill impairment analysis is atwo-step test. as described below.

The first step (“Step 1”)quantitative test is used to identify potential impairment, and involves comparing each reporting unit’s estimated fair value to its carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill is not deemed to be impaired. Should the carrying amount of the reporting unit exceed its estimated fair value, an indicator of potential impairment is deemedloss shall be recognized in an amount equal to exist and a second step is performedthat excess, not to measureexceed the carrying amount of suchgoodwill.
Based on the quantitative assessment performed as of October 1, 2020, People’s United recognized, in the quarter ended December 31, 2020, a non-cash goodwill impairment if any. At this time, nonecharge totaling $353.0 million (representing 12% of total goodwill) associated with the Retail Banking reporting unit, while the fair values of the Commercial Banking and Wealth Management reporting units continued to exceed the respective carrying values by 4% and 103%, respectively. The projected cash flows of the Retail Banking reporting unit declined from prior period valuations due to record-low mortgage rates and the Federal Reserve’s updated guidance in the third quarter of 2020 regarding inflation targeting and expectations for interest rates to remain low for an extended period of time. The lower yielding and longer duration nature of the Company’s identifiedresidential mortgage portfolio and a decline in home equity portfolio balances in recent years adversely impacted the Retail Banking reporting units are at risk of failing the Step 1 goodwill impairment test. See Note 14unit.
61

Subsequent to the Consolidated Financial StatementsOctober 1st measurement date, an improved outlook with regard to interest rates and a reduction in the level of economic uncertainty due, in part, to widespread distribution of the COVID-19 vaccine, has resulted in significant appreciation in People’s United’s stock price, market capitalization and expectations with respect to future earnings and cash flows. See the 2020 Form 10-K for a further discussion regardingdiscussion.
The Company qualitatively assessed, as of September 30, 2021, recent potential triggering events that could serve as indicators that the carrying amount of its goodwill is impaired. Based on this evaluation, which also considered the results of the 2020 impairment assessment, the Company concluded that it was not more likely than not that the fair value of any reporting unit was less than its carrying amount at that date.
Due to the high degree of subjectivity involved in estimating the fair value of the Company’s reporting units, a decline in People’s United’s expected future cash flows or projected growth rates due to further deterioration in the economic environment, or continued market capitalization of the Company below book value, could result in an additional non-cash goodwill impairment.

Segment Performance Summary

Three months ended September 30, 2017

(in millions)

  Commercial
Banking		   Retail
Banking		   Total
Reportable
Segments		   Treasury   Other  Total
Consolidated		 

Net interest income (loss)

  $164.5   $105.0   $269.5   $26.4   $(11.3)  $284.6 

Provision for loan losses

   11.5    3.4    14.9    —      (7.9)   7.0 

Totalnon-interest income

   40.1    46.9    87.0    3.1    (0.8)   89.3 

Totalnon-interest expense

   90.8    136.1    226.9    4.4    5.8   237.1 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Income (loss) before income tax expense (benefit)

   102.3    12.4    114.7    25.1    (10.0)   129.8 

Income tax expense (benefit)

   30.7    3.8    34.5    7.5    (3.0)   39.0 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Net income (loss)

  $71.6   $8.6   $80.2   $17.6   $(7.0)  $90.8 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Average total assets

  $25,307.8   $9,776.6   $35,084.4   $7,293.4   $878.6  $43,256.4 

Average total liabilities

   8,121.0    20,539.7    28,660.7    8,485.3    388.2   37,534.2 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Nine months ended September 30, 2017

(in millions)

  Commercial
Banking		   Retail
Banking		   Total
Reportable
Segments		   Treasury   Other  Total
Consolidated		 

Net interest income (loss)

  $459.0   $298.7   $757.7   $80.5   $(30.1)  $808.1 

Provision for loan losses

   31.6    10.0    41.6    —      (23.1)   18.5 

Totalnon-interest income

   121.4    136.5    257.9    8.2    (0.5)   265.6 

Totalnon-interest expense

   262.7    405.8    668.5    11.2    40.8   720.5 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Income (loss) before income tax expense (benefit)

   286.1    19.4    305.5    77.5    (48.3)   334.7 

Income tax expense (benefit)

   88.9    6.1    95.0    24.1    (15.3)   103.8 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Net income (loss)

  $197.2   $13.3   $210.5   $53.4   $(33.0)  $230.9 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Average total assets

  $24,183.0   $9,661.3   $ 33,844.3   $7,427.7   $ 818.6  $42,090.6 

Average total liabilities

   7,578.0    20,184.4    27,762.4    8,411.4    386.7   36,560.5 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

impairment charge that is material to People’s United’s results from operations but would have no effect on the Company’s cash balances, liquidity or tangible equity. In addition, because goodwill and other acquisition-related intangible assets are not included in the calculation of regulatory capital, the Company’s well-capitalized regulatory capital ratios would not be affected by such a potential non-cash charge.


Segment Performance Summary 
Three months ended September 30, 2021
Commercial
Banking
Retail
Banking
Total
Reportable
Segments
TreasuryOther
Total
Consolidated
(in millions)
Net interest income (loss)$284.9 $168.5 $453.4 $(81.8)$(1.3)$370.3 
Provision for credit losses13.2 2.0 15.2 0.1 (3.2)12.1 
Total non-interest income41.1 51.0 92.1 3.7 4.6 100.4 
Total non-interest expense111.1 163.3 274.4 1.2 13.6 289.2 
Income (loss) before income tax
   expense (benefit)		201.7 54.2 255.9 (79.4)(7.1)169.4 
Income tax expense (benefit)35.4 9.5 44.9 (13.9)(1.3)29.7 
Net income (loss)$166.3 $44.7 $211.0 $(65.5)$(5.8)$139.7 
Average total assets$33,356.1 $10,562.1 $43,918.2 $18,188.7 $1,769.5 $63,876.4 
Average total liabilities19,123.6 29,052.9 48,176.5 7,024.3 896.3 56,097.1 
Nine months ended September 30, 2021Commercial
Banking		Retail
Banking		Total
Reportable
Segments		TreasuryOtherTotal
Consolidated
(in millions)
Net interest income (loss)$861.8 $506.0 $1367.8 $(221.5)$(9.2)$1,137.1 
Provision for credit losses39.9 6.8 46.7 — (89.0)(42.3)
Total non-interest income126.5 146.6 273.1 11.6 9.3 294.0 
Total non-interest expense342.9 497.4 840.3 4.5 61.3 906.1 
Income (loss) before income tax
   expense (benefit)		605.5 148.4 753.9 (214.4)27.8 567.3 
Income tax expense (benefit)119.2 29.0 148.2 (41.9)6.0 112.3 
Net income (loss)$486.3 $119.4 $605.7 $(172.5)$21.8 $455.0 
Average total assets$34,243.3 $11,258.1 $45,501.4 $16,731.8 $1,720.6 $63,953.8 
Average total liabilities19,200.3 28,822.8 48,023.1 7,388.4 868.5 56,280.0 

62

Commercial Banking consists principally of commercial real estate lending, commercialmiddle market and industrial lending,business banking, equipment financing, and mortgage warehouse and asset-based lending. This segment also provides treasury management services, capital market capabilities and commercial deposit gathering activities. This segment also includes equipment financing operations, as well as cash management, correspondent banking, municipal banking, institutional trustproducts. Commercial insurance services corporate trust, insurance serviceswere previously provided through People’s United Insurance Agency, Inc. and private banking.

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 

(in millions)

  2017   2016   2017   2016 

Net interest income

  $164.5   $143.6   $459.0   $423.2 

Provision for loan losses

   11.5    10.0    31.6    29.3 

Totalnon-interest income

   40.1    42.5    121.4    120.3 

Totalnon-interest expense

   90.8    84.1    262.7    244.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

   102.3    92.0    286.1    269.9 

Income tax expense

   30.7    28.2    88.9    87.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $71.6   $63.8   $197.2   $182.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

Average total assets

  $25,307.8   $23,003.3   $24,183.0   $22,613.4 

Average total liabilities

   8,121.0    6,852.4    7,578.0    6,575.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

(“PUIA”), which the Bank sold on November 2, 2020.
 Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2021202020212020
Net interest income$284.9 $283.7 $861.8 $815.8 
Provision for credit losses13.2 13.8 39.9 39.1 
Total non-interest income41.1 49.6 126.5 169.2 
Total non-interest expense111.1 122.9 342.9 366.0 
Income before income tax expense201.7 196.6 605.5 579.9 
Income tax expense35.4 31.3 119.2 108.0 
Net income$166.3 $165.3 $486.3 $471.9 
Average total assets$33,356.1 $36,741.2 $34,243.3 $35,809.1 
Average total liabilities19,123.6 17,162.0 19,200.3 15,901.5 

Commercial BankingBanking’s net income increased $7.8$1.0 million for the three months ended September 30, 20172021 compared to theyear-ago period. period, reflecting an increase in net interest income and a decrease in non-interest expense, partially offset by a decrease in non-interest income. The $20.9$1.2 million increase in net interest income primarily reflects the benefitbenefits from an increaseincreases in FTP net spread income and a decrease in interest expense, essentially offset by a decline in average commercial loansloan and leases (including new business yields higher thanlease balances and the total portfolio yield), partially offset by increasesadverse effect of a decline in net FTP funding charges and interest expense.loan yields. Non-interest income for the three months ended
September 30, 20172021 decreased $2.4$8.5 million compared to theyear-ago period, primarily reflecting decreases in net customer interest rate swapinsurance revenue and operating lease income, and commercial banking lendingpartially offset by an increase in cash management fees. The $6.7$11.8 million increasedecrease in
non-interest expense in the third quarter of 20172021 compared to theyear-ago period reflects higherlower levels of both direct and allocated expenses. Average total assets increased $2.3 billion and average total liabilities increased $1.3 billion comparedCompared to the third quarter of 2016,2020, average total assets decreased $3.4 billion, primarily reflecting the Suffolk and LEAF acquisitions, as well as organicdeclines in commercial loan and lease balances and other assets. Average total liabilities increased $2.0 billion, primarily reflecting organic deposit growth.

growth, partially offset by a decline in other liabilities.


63

Retail Banking includes, as its principal business lines, consumer lending (including residential mortgage and home equity lending) and consumer deposit gathering activities.products. This segment also includesprovides brokerage, financial advisory services, investment management services and life insurance provided bythrough People’s Securities, Inc., investment advisory services and financial management and planning services through People’s United Advisors, Inc. and non-institutional trust services.

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 

(in millions)

  2017   2016   2017   2016 

Net interest income

  $105.0   $87.0   $298.7   $258.8 

Provision for loan losses

   3.4    3.3    10.0    9.7 

Totalnon-interest income

   46.9    42.8    136.5    124.2 

Totalnon-interest expense

   136.1    128.0    405.8    380.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income tax expense (benefit)

   12.4    (1.5)    19.4    (7.0) 

Income tax expense (benefit)

   3.8    (0.5)    6.1    (2.3) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  $8.6   $(1.0)   $13.3   $(4.7) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Average total assets

  $9,776.6   $9,023.2   $9,661.3   $8,847.8 

Average total liabilities

   20,539.7    19,194.9    20,184.4    19,256.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

 Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2021202020212020
Net interest income$168.5 $165.5 $506.0 $474.2 
Provision for credit losses2.0 2.8 6.8 7.3 
Total non-interest income51.0 46.2 146.6 134.5 
Total non-interest expense163.3 169.6 497.4 491.6 
Income before income tax expense54.2 39.3 148.4 109.8 
Income tax expense9.5 6.2 29.0 20.2 
Net income$44.7 $33.1 $119.4 $89.6 
Average total assets$10,562.1 $13,381.1 $11,258.1 $13,709.0 
Average total liabilities29,052.9 27,601.2 28,822.8 26,722.4 

Retail BankingBanking’s net income increased $11.6 million for the three months ended September 30, 2021 compared to the
year-ago period, primarily reflecting increases in net interest income and non-interest income and a decrease in non-interest expense. The $3.0 million increase in net interest income primarily reflects a decrease in interest expense and the benefit from an increase in FTP net spread income, partially offset by the adverse effect of declines in average residential mortgage loan balances and loan yields. Non-interest income for the three months ended September 30, 20172021 increased $4.8 million compared to a net loss for the year-ago period, primarily reflects an increasereflecting increases in net interest income partially offset by an increasebank service charges and investment management fees. The $6.3 million decrease innon-interest expense. The $18.0 million increase in net interest income primarily reflects the benefit from higher net FTP funding credits and an increase in average residential mortgage loans, including new business yields higher than the total portfolio yield, partially offset by an increase in interest expense.Non-interest income increased $4.1 million from theyear-ago period, primarily reflecting the addition of Gerstein, Fisher & Associates, Inc. (“Gerstein Fisher”) in November 2016. The $8.1 million increase innon-interest expense in the third quarter of 20172021 compared to theyear-ago period reflects a lower of allocated expenses, partially offset by a higher levelslevel of both direct and allocated expenses. Compared to the third quarter of 2016,2020, average total assets increased $753 million and averagedecreased $2.8 billion, primarily reflecting a decline in retail loans. Average total liabilities increased $1.3$1.5 billion, primarily reflecting the Suffolk acquisition and organic loan and deposit growth.


64

Treasury encompasses the securities portfolio, short-term investments, brokered deposits, wholesale borrowings and the funding center, which includes the impact of derivative financial instruments used for risk management purposes.

The income or loss for the funding center represents the IRR component of People’s United’s net interest income as calculated by its FTP model in deriving each operating segment’s net interest income. Under this process, the funding center buys funds from liability-generating business lines, such as consumerretail deposits, and sells funds to asset-generating business lines, such as commercial lending. The price at which funds are bought and sold on any given day is set by People’s United’s Treasury group and is based on the wholesale cost to People’s United of assets and liabilities with similar maturities.
Liability-generating businesses sellnewly-originated liabilities to the funding center and recognize a funding credit, while asset-generating businesses buy funding for newly-originated assets from the funding center and recognize a funding charge. Once funding for an asset is purchased from or a liability is sold to the funding center, the price that is set by the Treasury group will remain with that asset or liability until it matures or reprices, which effectively transfers responsibility for managing IRR to the Treasury group.

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 

(in millions)

  2017   2016   2017   2016 

Net interest income

  $26.4   $21.0   $80.5   $65.8 

Totalnon-interest income

   3.1    6.7    8.2    12.2 

Totalnon-interest expense

   4.4    1.9    11.2    5.9 
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

   25.1    25.8    77.5    72.1 

Income tax expense

   7.5    7.9    24.1    23.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $17.6   $17.9   $53.4   $48.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

Average total assets

  $7,293.4   $7,552.0   $7,427.7   $7,338.3 

Average total liabilities

   8,485.3    9,069.1    8,411.4    8,525.1 
  

 

 

   

 

 

   

 

 

   

 

 

 

Treasury
 Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2021202020212020
Net interest loss$(81.8)$(41.8)$(221.5)$(65.1)
Provision for credit losses0.1 (0.3)— (0.3)
Total non-interest income3.7 2.7 11.6 3.8 
Total non-interest expense1.2 0.7 4.5 4.2 
Loss before income tax benefit(79.4)(39.5)(214.4)(65.2)
Income tax benefit(13.9)(6.3)(41.9)(11.1)
Net loss$(65.5)$(33.2)$(172.5)$(54.1)
Average total assets$18,188.7 $9,519.7 $16,731.8 $9,395.9 
Average total liabilities7,024.3 7,906.8 7,388.4 9,309.0 

The increase in Treasury’s net incomeloss for the three months ended September 30, 2017 decreased $0.3 million2021 compared to theyear-ago period. period primarily reflects a decrease in net interest income. The $5.4$40.0 million increasedecrease in net interest income primarily reflects the adverse effect from a decrease in FTP net spread income, primarily resulting from the reduction in interest rates initiated by the FOMC (see Recent Developments and Net Interest Income), partially offset by the benefits from higher net funding creditsa decrease in interest expense and an increase in average securities income, partially offset by an increase in interest expense.Non-interest income for the three and nine months ended September 30, 2016 includes income related to a distribution received on an acquired equity investment. The $2.5 million increase innon-interest expense in the third quarter of 2017 compared to theyear-ago period reflects a higher level of allocated expenses.balances. Compared to the third quarter of 2016,2020, average total assets decreased $259 million,increased $8.7 billion, primarily reflecting a decreaseincreases in averageshort-term investments and securities, and average total liabilities decreased $584 million,$0.9 billion, primarily reflecting decreases in borrowingsdeposits and notes and debentures, partially offset by an increase in deposits.

borrowings.


65

Other includes the residual financial impact from the allocation of revenues and expenses (including the provision for loan losses)credit losses on loans) and certain revenues and expenses not attributable to a particular segment; assets and liabilities not attributable to a particular segment; reversal of the FTE adjustment since net interest income for each segment is presented on an FTE basis; and the FTP impact from excess capital.Non-interest The provision for credit losses on loans in 2021 reflects notable improvements in the economic outlook (e.g. GDP and unemployment) largely attributable to continued COVID-19 vaccine distribution, an easing of social distancing restrictions and further government stimulus, while the provision in 2020 reflects the application of the CECL standard and the impact of COVID-19. Included in non-interest income for the three and nine months ended September 30, 2016 includes2021 is a $1.2$3.9 million net gain onresulting from the salesale-leaseback of an interesttwo buildings. Included in a real estate investment.Non-interestnon-interest expense for the three and nine months ended September 30, 2017 includesmerger-related2021 are non-operating expenses totaling $3.0$6.3 million and $29.0$37.1 million, respectively,respectively. Included in non-interest expense for the three and $3.1nine months ended September 30, 2020 are
non-operating expenses totaling $4.6 million for both periods in 2016.

   Three Months Ended
September 30,		  Nine Months Ended
September 30,		 

(in millions)

  2017  2016  2017  2016 

Net interest loss

  $(11.3)  $(6.3)  $(30.1)  $(22.4) 

Provision for loan losses

   (7.9)   (4.9)   (23.1)   (10.1) 

Totalnon-interest income

   (0.8)   (1.2)   (0.5)   1.8 

Totalnon-interest expense

   5.8   7.4   40.8   21.1 
  

 

 

  

 

 

  

 

 

  

 

 

 

Loss before income tax benefit

   (10.0)   (10.0)   (48.3)   (31.6) 

Income tax benefit

   (3.0)   (3.0)   (15.3)   (10.2) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net loss

  $(7.0)  $(7.0)  $(33.0)  $(21.4) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Average total assets

  $878.6  $725.5  $818.6  $703.1 

Average total liabilities

   388.2   347.1   386.7   346.4 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net Interest Income

and $41.0 million, respectively.
 Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2021202020212020
Net interest loss$(1.3)$(16.0)$(9.2)$(31.9)
Provision for credit losses on loans(3.2)10.5 (89.0)95.0 
Total non-interest income4.6 2.6 9.3 7.0 
Total non-interest expense13.6 0.4 61.3 55.9 
Income (loss) before income tax benefit(7.1)(24.3)27.8 (175.8)
Income tax expense (benefit)(1.3)(3.7)6.0 (33.3)
Net income (loss)$(5.8)$(20.6)$21.8 $(142.5)
Average total assets$1,769.5 $1,651.4 $1,720.6 $1,668.1 
Average total liabilities896.3 822.1 868.5 861.7 


Net Interest Income
Net interest income and net interest margin are affected by many factors, includingincluding: changes in average balances; interest rate fluctuations and the slope of the yield curve; sales of loans and securities; residential mortgage loan and mortgage-backed security prepayment rates; product pricing; competitive forces; the relative mix, repricing characteristics and maturity of interest-earning assets and interest-bearing liabilities;non-interest-bearing sources of funds; hedging activities; and asset quality.

In response to continued signs of a moderately expanding U.S. economy,March 2020, the Federal Reserve Board (the “FRB”) has raisedFOMC lowered the targetedtarget range for the federal funds rate (currentlytwice by a total of 150 basis points (see Recent Developments), bringing the current target range to between 1.00%0.00% and 1.25%) four0.25%. In 2019, the FOMC lowered the target range three times by a total of 10075 basis points since December 2015. Until that date, the FRB had not changed the targeted range of between 0% and 0.25% since December 2008.points. For the third quarter of 2017,2021, the average effective federal funds rate was 1.16%0.09%.

The net interest margin was 3.04%2.64% in the third quarter of 2017,2021, compared to 2.96%2.97% in the third quarter of 2020 and 2.70% in the second quarter of 2017 and 2.80% in2021. As compared to the thirdsecond quarter of 2016. The improvement2021, the decrease in the net interest margin from the second quarter of 2017 primarily reflects higherlower yields on the securities and loan portfolio.

portfolios, partially offset by the benefit of lower rates on deposits.

Third Quarter 20172021 Compared to Third Quarter 2016

2020

FTE net interest income increased $41.6decreased $20.8 million compared to the third quarter of 2016,2020, reflecting a $57.0$42.7 million increasedecrease in total interest and dividend income, partially offset by a $15.4$21.9 million increasedecrease in total interest expense, and the net interest margin increased 24decreased 33 basis points to 3.04%2.64%.

Average total earning assets were $38.9$57.4 billion in the third quarter of 2017,2021, a $2.6$3.7 billion increase from the third quarter of 2016,2020, reflecting a $2.9increases of $6.2 billion increase in average total loansshort-term investments and $2.5 billion in average securities, partially offset by a $314 million$4.9 billion decrease in average securities. total loans. The average total commercial loan, average residential mortgage loan and average home equity portfolios decreased $2.5 billion, $2.0 billion and $433 million, respectively, compared to the
year-ago period.
66

Average total loans, average securities and average short-term investments comprised 82%70%, 17%18% and 1%12%, respectively, of average total earning assets in the third quarter of 20172021, compared to 80%84%, 19%15% and 1%, respectively in the third quarter of 2016.2020. In the current quarter, the yield earned on the total loan portfolio was 3.81%3.40% and the yield earned on securities and
short-term investments was 2.64%1.42%, compared to 3.49% and 2.18%2.41%, respectively, in theyear-ago quarter. Excluding adjustable-rate residential mortgage loans, which are mostly period. At September 30, 2021, approximately 49% of the hybrid variety, 50% of theCompany’s loan portfolio hadwas comprised of Prime Rate and LIBOR-based floating interest rates at September 30, 2017,rate loans, compared to 51%approximately 46% at December 31, 2016.

The average total commercial and residential mortgage loan portfolios increased $2.1 billion and $796 million, respectively, compared to theyear-ago quarter, reflecting organic growth and loans acquired in the Suffolk and LEAF acquisitions. Average consumer loans decreased $43 million compared to theyear-ago quarter, primarily reflecting a $46 million decrease in average home equity loans.

2020.

Average total funding liabilities were $37.0$54.8 billion in the third quarter of 2017,2021, a $2.2$2.9 billion increase from the
year-ago period, reflecting a $2.6$3.3 billion increase in average total deposits, partially offset by decreases of $286a $343 million decrease in average total borrowings and $147 million in average notes and debentures.borrowings. The increase in average total deposits reflects organic growth, deposits acquired in the Suffolk acquisition and a $206 million increase in average brokered deposits.growth. Excluding brokered deposits, averagenon-interest-bearing deposits, average savings, interest-bearing checking and money market deposits, and average non-interest bearing deposits increased $5.1 billion and $2.7 billion, respectively, while average time deposits increased $1.3 billion, $1.1 billion and $54 million, respectively.decreased $2.0 billion. Average total deposits comprised 87%96% of average total funding liabilities in both the third quarters of 2021 and 85% of2020.
The 18 basis point decrease to 0.17% in the rate paid on average total funding liabilities in the third quarter of 2017 and theyear-ago period, respectively. The decrease in average notes and debentures reflects the repayment in February 2017 of the $125 million 5.80%fixed-rate/floating-rate subordinated notes.

The 14 basis point increase2021 compared to 0.59% in the rate paid on average total funding liabilities2020 primarily reflects the increasesdecreases in the targetedtarget federal funds rate discussed above. The rate paid on average total deposits increased ninedecreased 18 basis points, compared to the third quarterreflecting decreases of 2016, reflecting increases of 1561 basis points in time deposits and 12 basis points in savings,interest-bearing checking and money market deposits and six basis points in time deposits, partially offset byas well as the benefit from a $1.3$2.7 billion increase innon-interest-bearing non-interest bearing deposits. Average savings, interest-bearing checking and money market deposits and average time deposits comprised 61% and 15%8%, respectively, of average total deposits in the third quarter of 2017,2021 compared to 62%58% and 16%14%, respectively, in the comparable 20162020 period.

Third Quarter 20172021 Compared to Second Quarter 2017

2021

FTE net interest income increased $10.6decreased $10.8 million compared to the second quarter of 2017,2021, reflecting an $18.1a $12.7 million increasedecrease in total interest and dividend income, partially offset by a $7.5$1.9 million increasedecrease in total interest expense,expense. The net interest margin decreased six basis points to 2.64%, reflecting: lower yields on the securities and loan portfolios, which reduced the net interest margin increased eightby five and four basis points, to 3.04%. The improvement in the net interest margin reflects higher yields on the loan portfolio,respectively; partially offset by one additional calendar day in the third quarter of 2017 and an increase in the yieldlower rates on the securities portfolio (whichdeposits, which benefited the net interest margin by 12, two and one basis point, respectively), partially offset by higher ratesrespectively. Excess liquidity resulting from deposits at the Federal Reserve Bank of New York (the “FRB-NY”) had a seven basis point negative impact on borrowings and deposits (which reduced the net interest margin by four and threein the third quarter of 2021 compared to two basis points respectively)in the second quarter of 2021.
Included in interest income in the third and second quarters of 2021 are fees, net of related costs, totaling $20.3 million and $20.1 million, respectively, recognized in connection with the Company's role in originating loans under the Paycheck Protection Program (“PPP”). The acquisitionFees earned as a participating PPP lender are deferred and recognized over the earlier of LEAF in early August benefitedthe life of the related loans or until forgiven by the Small Business Administration (“SBA”). PPP loans had a ten basis point favorable impact on the net interest margin by approximately fivein the third quarter of 2021 compared to seven basis points.

points in the second quarter of 2021.

Average total earning assets increased $417decreased $204 million from the second quarter of 2017, primarily2021, reflecting a $593 million increase$1.7 billion decrease in average total loans, partially offset by a $169 million decrease$1.5 billion increase in average securities.short-term investments. In the third quarter of 2017,2021, the average total commercial loan, average residential mortgage loan and average home equity portfolios decreased $1.3 billion, $390 million and $83 million, respectively. Within commercial loans, the commercial and industrial portfolio increased $577decreased
$810 million primarily due to(PPP loans averaged $1.3 billion and $2.3 billion in the LEAF acquisition.

third and second quarters of 2021, respectively) and the commercial real estate portfolio decreased $528 million.

Average total funding liabilities increased $555decreased $292 million primarilyfrom the second quarter of 2021, reflecting increasesdecreases of $512$218 million in average total borrowingsdeposits and $41$72 million in average total deposits. The increase in average total borrowings reflects the additional funding used to support securities purchases late in the quarter, as well as borrowings assumed in the LEAF acquisition.

borrowings.

The following tables present average balance sheets,FTE-basis interest income, interest expense and the corresponding average yields earned and rates paid for the three months ended September 30, 2017,2021, June 30, 20172021 and September 30, 2016,2020, and the nine months ended September 30, 20172021 and 2016.2020. The average balances are principally daily averages and, for loans, include both performing andnon-performing balances. Interest income on loans includes the effect of deferred loan fees and costs accounted for as yield adjustments, but does not include interest on loans for which People’s United has ceased to accrue interest. Premium amortization and discount accretion (including amounts attributable to purchase accounting adjustments) are also included in the respective interest income and interest expense amounts. The impact of People’s United’s use of derivative instruments in managing IRR is also reflected in the table,tables, classified according to the instrument hedged and the related risk management objective.

67

Average Balance Sheet, Interest and Yield/Rate Analysis (1)
 September 30, 2021June 30, 2021September 30, 2020
Three months ended
(dollars in millions)
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
Assets:
Short-term investments$6,999.3 $2.8 0.16 %$5,468.5 $1.3 0.09 %$841.5 $0.4 0.19 %
Securities (2)10,432.0 59.1 2.27 10,418.3 57.6 2.21 7,922.4 52.5 2.65 
Loans:
Commercial real estate12,906.9 96.5 2.99 13,434.9 101.6 3.02 13,853.1 110.5 3.19 
Commercial and industrial12,759.6 106.6 3.34 13,570.0 110.5 3.26 14,419.8 113.0 3.13 
Equipment financing5,001.7 62.3 4.99 4,933.7 62.5 5.07 4,876.4 65.4 5.37 
Residential mortgage7,437.6 58.9 3.16 7,828.0 64.4 3.29 9,408.0 82.4 3.51 
Home equity and other
   consumer		1,828.2 15.2 3.32 1,916.2 16.2 3.39 2,296.0 19.9 3.47 
Total loans39,934.0 339.5 3.40 41,682.8 355.2 3.41 44,853.3 391.2 3.49 
Total earning assets57,365.3 $401.4 2.80 %57,569.6 $414.1 2.88 %53,617.2 $444.1 3.31 %
Other assets6,511.1 6,360.5 7,676.2 
Total assets$63,876.4 $63,930.1 $61,293.4 
Liabilities and stockholders’ equity:
Deposits:
Non-interest-bearing$16,469.5 $— — %$16,324.6 $— — %$13,753.8 $— — %
Savings, interest-bearing
   checking and money market
32,030.8 8.9 0.11 32,088.4 10.1 0.13 28,970.0 16.4 0.23 
Time4,322.2 6.2 0.57 4,627.6 7.0 0.61 6,817.8 20.1 1.18 
Total deposits52,822.5 15.1 0.11 53,040.6 17.1 0.13 49,541.6 36.5 0.29 
Borrowings:
Federal Home Loan Bank
   advances
569.6 1.1 0.79 569.7 1.0 0.70 640.5 1.3 0.79 
Customer repurchase
   agreements		370.5 0.1 0.10 379.6 0.1 0.11 382.6 0.2 0.18 
Federal funds purchased— — — 62.6 — 0.09 260.1 — 0.08 
Total borrowings940.1 1.2 0.52 1,011.9 1.1 0.44 1,283.2 1.5 0.46 
Notes and debentures1,001.7 7.2 2.85 1,003.6 7.2 2.89 1,014.0 7.4 2.92 
Total funding liabilities54,764.3 $23.5 0.17 %55,056.1 $25.4 0.19 %51,838.8 $45.4 0.35 %
Other liabilities1,332.8 1,239.8 1,653.3 
Total liabilities56,097.1 56,295.9 53,492.1 
Stockholders’ equity7,779.3 7,634.2 7,801.3 
Total liabilities and
   stockholders’ equity		$63,876.4 $63,930.1 $61,293.4 
Net interest income/spread (3)$377.9 2.63 %$388.7 2.69 %$398.7 2.96 %
Net interest margin2.64 %2.70 %2.97 %
(1)Average Balance Sheet, Interestyields earned and Yield/Rate Analysis rates paid are annualized.
(2)Average balances and yields for securities are based on amortized cost.
(3)The FTE adjustment was $7.6 million, $7.8 million and $7.3 million for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively.


68

Average Balance Sheet, Interest and Yield/Rate Analysis (1)
September 30, 2021September 30, 2020
Nine months ended
(dollars in millions)
Average
Balance		InterestYield/
Rate		Average
Balance		InterestYield/
Rate
Assets:
Short-term investments$5,829.9 $5.3 0.12 %$635.9 $2.6 0.55 %
Securities (2)10,140.2 173.4 2.28 8,061.0 163.3 2.70 
Loans:
Commercial real estate13,206.3 296.9 3.00 14,219.8 382.5 3.59 
Commercial and industrial13,544.0 335.5 3.30 13,065.7 337.6 3.44 
Equipment financing4,941.5 187.6 5.06 4,908.5 201.2 5.47 
Residential mortgage7,861.4 193.5 3.28 9,820.4 258.0 3.50 
Home equity and other consumer1,926.4 47.9 3.31 2,475.7 70.7 3.81 
Total loans41,479.6 1,061.4 3.41 44,490.1 1,250.0 3.75 
Total earning assets57,449.7 $1,240.1 2.88 %53,187.0 $1,415.9 3.55 %
Other assets6,504.1 7,395.1 
Total assets$63,953.8 $60,582.1 
Liabilities and stockholders’ equity:
Deposits:
Non-interest-bearing$16,207.1 $— — %$12,233.7 $— — %
Savings, interest-bearing
   checking and money market
31,980.5 31.8 0.13 27,111.2 77.5 0.38 
Time4,725.4 23.1 0.65 8,046.8 79.6 1.32 
Total deposits52,913.0 54.9 — 47,391.7 157.1 0.44 
Borrowings:
Federal Home Loan Bank
   advances
569.7 3.1 0.74 1,639.6 12.6 1.02 
Customer repurchase agreements390.8 0.4 0.11 356.0 0.9 0.35 
Federal funds purchased70.5 — 0.09 847.7 5.4 0.85 
Total borrowings1,031.0 3.5 0.46 2,843.3 18.9 0.89 
Notes and debentures1,004.3 21.6 2.87 1,009.1 24.5 3.24 
Total funding liabilities54,948.3 $80.0 0.19 %51,244.1 $200.5 0.52 %
Other liabilities1,331.7 1,550.5 
Total liabilities56,280.0 52,794.6 
Stockholders’ equity7,673.8 7,787.5 
Total liabilities and stockholders’ equity$63,953.8 $60,582.1 
Net interest income/spread (3)$1,160.1 2.69 %$1,215.4 3.03 %
Net interest margin2.69 %3.05 %
(1)

  September 30, 2017  June 30, 2017  September 30, 2016 

Three months ended

(dollars in millions)

 Average
Balance		  Interest  Yield/
Rate		  Average
Balance		  Interest  Yield/
Rate		  Average
Balance		  Interest  Yield/
Rate		 

Assets:

         

Short-term investments

 $347.3  $1.1   1.25%  $354.8  $0.9   0.97%  $361.0  $0.4   0.47% 

Securities (2)

  6,558.8   44.4   2.71   6,727.5   44.6   2.65   6,872.5   38.9   2.26 

Loans:

         

Commercial real estate

  11,169.8   105.6   3.78   11,371.4   105.3   3.70   9,978.8   85.7   3.44 

Commercial and industrial

  8,580.0   84.0   3.91   8,276.1   77.7   3.75   8,053.2   71.1   3.53 

Equipment financing

  3,399.5   41.5   4.89   2,924.8   31.5   4.31   2,984.7   32.8   4.39 

Residential mortgage

  6,731.7   52.8   3.13   6,693.3   52.4   3.14   5,935.3   46.1   3.11 

Home equity and other consumer

  2,112.6   21.0   3.97   2,134.8   19.9   3.73   2,155.4   18.4   3.41 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total loans

  31,993.6   304.9   3.81   31,400.4   286.8   3.65   29,107.4   254.1   3.49 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total earning assets

  38,899.7  $350.4   3.60%   38,482.7  $332.3   3.45%   36,340.9  $293.4   3.23% 
  

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Other assets

  4,356.7     4,183.1     3,963.1   
 

 

 

    

 

 

    

 

 

   

Total assets

 $43,256.4    $42,665.8    $40,304.0   
 

 

 

    

 

 

    

 

 

   

Liabilities and stockholders’ equity:

         

Deposits:

         

Non-interest-bearing

 $7,609.1  $—     —  %  $7,399.5  $—     —  %  $6,325.3  $—     —  % 

Savings, interest-bearing checking and money market

  19,529.1   21.4   0.44   19,895.8   19.6   0.39   18,356.6   13.3   0.29 

Time

  4,926.8   13.0   1.06   4,728.7   11.3   0.96   4,755.1   11.9   1.00 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total deposits

  32,065.0   34.4   0.43   32,024.0   30.9   0.39   29,437.0   25.2   0.34 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Borrowings:

         

Federal Home Loan Bank advances

  2,834.3   9.4   1.33   2,546.6   7.1   1.11   3,306.7   5.1   0.62 

Federal funds purchased

  649.9   2.1   1.26   625.2   1.6   1.04   674.1   0.9   0.51 

Customer repurchase agreements

  311.3   0.1   0.19   313.9   0.1   0.19   314.8   0.1   0.19 

Other borrowings

  214.2   1.1   2.06   11.8   0.1   0.79   —     —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total borrowings

  4,009.7   12.7   1.27   3,497.5   8.9   1.02   4,295.6   6.1   0.57 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Notes and debentures

  908.9   7.5   3.29   907.2   7.3   3.24   1,056.4   7.9   2.97 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total funding liabilities

  36,983.6  $54.6   0.59%   36,428.7  $47.1   0.52%   34,789.0  $39.2   0.45% 
  

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Other liabilities

  550.6     541.0     674.5   
 

 

 

    

 

 

    

 

 

   

Total liabilities

  37,534.2     36,969.7     35,463.5   

Stockholders’ equity

  5,722.2     5,696.1     4,840.5   
 

 

 

    

 

 

    

 

 

   

Total liabilities and stockholders’ equity

 $43,256.4    $42,665.8    $40,304.0   
 

 

 

    

 

 

    

 

 

   

Net interest income/spread (3)

  $295.8   3.01%   $285.2   2.93%   $254.2   2.78% 
  

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Net interest margin

    3.04%     2.96%     2.80% 
   

 

 

    

 

 

    

 

 

 

Average yields earned and rates paid are annualized.
(2)Average balances and yields for securities are based on amortized cost.
(3)The FTE adjustment was $23.0 million and $22.4 million for the nine months ended September 30, 2021 and 2020, respectively.
69

(1)Average yields earned
Volume and rates paid are annualized.Rate Analysis
(2)Average balances and yields for securities are based on amortized cost.
(3)The FTE adjustment was $11.2 million, $10.3 million and $8.9 million for the three months ended September 30, 2017, June 30, 2017 and September 30, 2016, respectively.

Average Balance Sheet, Interest and Yield/Rate Analysis (1)

  September 30, 2017  September 30, 2016 

Nine months ended

(dollars in millions)

 Average
Balance		  Interest  Yield/
Rate		  Average
Balance		  Interest  Yield/
Rate		 

Assets:

      

Short-term investments

 $357.4  $2.7   1.01%  $335.7  $1.1   0.46% 

Securities (2)

  6,704.9   132.2   2.63   6,690.4   116.7   2.33 

Loans:

      

Commercial real estate

  10,913.9   299.5   3.66   9,991.1   257.8   3.44 

Commercial and industrial

  8,192.8   229.6   3.74   7,754.1   200.6   3.45 

Equipment financing

  3,100.5   104.6   4.50   2,972.7   99.1   4.44 

Residential mortgage

  6,601.2   154.8   3.13   5,719.3   134.2   3.13 

Home equity and other consumer

  2,117.6   59.3   3.73   2,173.1   55.4   3.40 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total loans

  30,926.0   847.8   3.66   28,610.3   747.1   3.48 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total earning assets

  37,988.3  $982.7   3.45%   35,636.4  $864.9   3.24% 
  

 

 

  

 

 

   

 

 

  

 

 

 

Other assets

  4,102.3     3,866.2   
 

 

 

    

 

 

   

Total assets

 $42,090.6    $39,502.6   
 

 

 

    

 

 

   

Liabilities and stockholders’ equity:

      

Deposits:

      

Non-interest-bearing

 $7,152.2  $—     —  %  $6,139.3  $—     —  % 

Savings, interest-bearing checking and money market

  19,446.5   57.4   0.39   18,138.6   38.9   0.29 

Time

  4,746.5   35.0   0.98   4,802.7   36.9   1.02 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total deposits

  31,345.2   92.4   0.39   29,080.6   75.8   0.35 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Borrowings:

      

Federal Home Loan Bank advances

  2,698.0   22.3   1.10   3,115.5   14.1   0.61 

Federal funds purchased

  627.6   4.9   1.03   497.2   1.8   0.48 

Customer repurchase agreements

  311.6   0.4   0.19   340.0   0.5   0.19 

Other borrowings

  102.5   1.3   1.71   —     —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total borrowings

  3,739.7   28.9   1.03   3,952.7   16.4   0.55 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Notes and debentures

  927.1   22.3   3.21   1,049.7   23.4   2.97 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total funding liabilities

  36,012.0  $143.6   0.53%   34,083.0  $115.6   0.45% 
  

 

 

  

 

 

   

 

 

  

 

 

 

Other liabilities

  548.5     620.6   
 

 

 

    

 

 

   

Total liabilities

  36,560.5     34,703.6   

Stockholders’ equity

  5,530.1     4,799.0   
 

 

 

    

 

 

   

Total liabilities and stockholders’ equity

 $42,090.6    $39,502.6   
 

 

 

    

 

 

   

Net interest income/spread (3)

  $839.1   2.92%   $749.3   2.79% 
  

 

 

  

 

 

   

 

 

  

 

 

 

Net interest margin

    2.94%     2.80% 
   

 

 

    

 

 

 

(1)Average yields earned and rates paid are annualized.
(2)Average balances and yields for securities are based on amortized cost.
(3)The FTE adjustment was $31.0 million and $23.9 million for the nine months ended September 30, 2017 and 2016, respectively.

Volume and Rate Analysis

The following tables show the extent to which changes in interest rates and changes in the volume of average total earning assets and average interest-bearing liabilities have affected People’s United’s net interest income. For each category of earning assets and interest-bearing liabilities, information is provided relating to: (i) changes in volume (changes in average balances multiplied by the prior year’s average interest rates); (ii) changes in rates (changes in average interest rates multiplied by the prior year’s average balances); and (iii) the total change. Changes attributable to both volume and rate have been allocated proportionately.

   Three Months Ended September 30, 2017 Compared To 
   September 30, 2016  June 30, 2017 
   Increase (Decrease)  Increase (Decrease) 

(in millions)

  Volume  Rate   Total  Volume  Rate   Total 

Interest and dividend income:

         

Short-term investments

  $—    $0.7   $0.7  $—    $0.2   $0.2 

Securities

   (1.8)   7.3    5.5   (1.1)   0.9    (0.2) 

Loans:

         

Commercial real estate

   10.8   9.1    19.9   (1.9)   2.2    0.3 

Commercial and industrial

   4.9   8.0    12.9   2.9   3.4    6.3 

Equipment financing

   4.8   3.9    8.7   5.5   4.5    10.0 

Residential mortgage

   6.2   0.5    6.7   0.3   0.1    0.4 

Home equity and other consumer

   (0.4)   3.0    2.6   (0.2)   1.3    1.1 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Total loans

   26.3   24.5    50.8   6.6   11.5    18.1 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Total change in interest and dividend income

   24.5   32.5    57.0   5.5   12.6    18.1 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Interest expense:

         

Deposits:

         

Savings, interest-bearing checking and money market

   0.9   7.2    8.1   (0.4)   2.2    1.8 

Time

   0.4   0.7    1.1   0.5   1.2    1.7 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Total deposits

   1.3   7.9    9.2   0.1   3.4    3.5 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Borrowings:

         

Federal Home Loan Bank advances

   (0.8)   5.1    4.3   0.9   1.4    2.3 

Federal funds purchased

   —     1.2    1.2   0.1   0.4    0.5 

Customer repurchase agreements

   —     —      —     —     —      —   

Other borrowings

   1.1   —      1.1   1.0   —      1.0 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Total borrowings

   0.3   6.3    6.6   2.0   1.8    3.8 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Notes and debentures

   (1.2)   0.8    (0.4)   —     0.2    0.2 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Total change in interest expense

   0.4   15.0    15.4   2.1   5.4    7.5 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Change in net interest income

  $24.1  $17.5   $41.6  $3.4  $7.2   $10.6 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Volume and Rate Analysis

   Nine Months Ended September 30, 2017
Compared To September 30, 2016		 
   Increase (Decrease) 

(in millions)

      Volume          Rate          Total     

Interest and dividend income:

    

Short-term investments

  $0.1  $1.5  $1.6 

Securities

   0.3   15.2   15.5 

Loans:

    

Commercial real estate

   24.7   17.0   41.7 

Commercial and industrial

   11.7   17.3   29.0 

Equipment financing

   4.3   1.2   5.5 

Residential mortgage

   20.7   (0.1)   20.6 

Home equity and other consumer

   (1.4)   5.3   3.9 
  

 

 

  

 

 

  

 

 

 

Total loans

   60.0   40.7   100.7 
  

 

 

  

 

 

  

 

 

 

Total change in interest and dividend income

   60.4   57.4   117.8 
  

 

 

  

 

 

  

 

 

 

Interest expense:

    

Deposits:

    

Savings, interest-bearing checking and money market

   3.0   15.5   18.5 

Time

   (0.4)   (1.5)   (1.9) 
  

 

 

  

 

 

  

 

 

 

Total deposits

   2.6   14.0   16.6 
  

 

 

  

 

 

  

 

 

 

Borrowings:

    

Federal Home Loan Bank advances

   (2.1)   10.3   8.2 

Federal funds purchased

   0.6   2.5   3.1 

Customer repurchase agreements

   —     (0.1)   (0.1) 

Other borrowings

   1.3   —     1.3 
  

 

 

  

 

 

  

 

 

 

Total borrowings

   (0.2)   12.7   12.5 
  

 

 

  

 

 

  

 

 

 

Notes and debentures

   (2.9)   1.8   (1.1) 
  

 

 

  

 

 

  

 

 

 

Total change in interest expense

   (0.5)   28.5   28.0 
  

 

 

  

 

 

  

 

 

 

Change in net interest income

  $60.9  $28.9  $89.8 
  

 

 

  

 

 

  

 

 

 

Non-Interest Income

   Three Months Ended   Nine Months Ended 
   Sept. 30,   June 30,   Sept. 30,   Sept. 30,  Sept. 30, 

(in millions)

  2017   2017   2016   2017  2016 

Bank service charges

  $25.3   $25.0   $25.3   $73.8  $73.8 

Investment management fees

   16.9    16.3    11.6    49.2   34.1 

Operating lease income

   10.9    11.0    11.2    32.1   31.7 

Commercial banking lending fees

   7.0    11.5    7.1    26.7   24.4 

Insurance revenue

   9.7    7.5    9.8    26.3   26.1 

Cash management fees

   6.8    6.5    6.5    19.6   18.8 

Brokerage commissions

   2.8    3.4    3.2    9.2   9.4 

Net gains on sales of residential mortgage loans

   1.1    0.7    1.9    2.7   3.7 

Net security gains (losses)

   —      0.1    —      (15.6)   0.1 

Othernon-interest income:

         

Customer interest rate swap income, net

   1.9    2.4    3.7    7.1   10.6 

BOLI

   2.1    1.9    1.2    4.8   4.2 

Other

   4.8    5.3    9.3    29.7   21.6 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Total othernon-interest income

   8.8    9.6    14.2    41.6   36.4 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Totalnon-interest income

  $89.3   $91.6   $90.8   $265.6  $258.5 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

 Three Months Ended September 30, 2021 Compared To
 September 30, 2020
Increase (Decrease)		June 30, 2021
Increase (Decrease)
(in millions)VolumeRateTotalVolumeRateTotal
Interest and dividend income:
Short-term investments$2.5 $(0.1)$2.4 $0.4 $1.1 $1.5 
Securities14.9 (8.3)6.6 0.1 1.4 1.5 
Loans:
Commercial real estate(7.3)(6.7)(14.0)(4.0)(1.1)(5.1)
Commercial and industrial(13.6)7.2 (6.4)(6.8)2.9 (3.9)
Equipment financing1.7 (4.8)(3.1)0.9 (1.1)(0.2)
Residential mortgage(16.1)(7.4)(23.5)(3.1)(2.4)(5.5)
Home equity and other consumer(3.9)(0.8)(4.7)(0.7)(0.3)(1.0)
Total loans(39.2)(12.5)(51.7)(13.7)(2.0)(15.7)
Total change in interest and dividend
   income		(21.8)(20.9)(42.7)(13.2)0.5 (12.7)
Interest expense:
Deposits:
Savings, interest-bearing checking and
   money market		1.6 (9.1)(7.5)— (1.2)(1.2)
Time(5.8)(8.1)(13.9)(0.5)(0.3)(0.8)
Total deposits(4.2)(17.2)(21.4)(0.5)(1.5)(2.0)
Borrowings:
Federal Home Loan Bank advances(0.1)(0.1)(0.2)— 0.1 0.1 
Customer repurchase agreements— (0.1)(0.1)— — — 
Federal funds purchased(0.1)0.1 — — — — 
Total borrowings(0.2)(0.1)(0.3)— 0.1 0.1 
Notes and debentures(0.1)(0.1)(0.2)— — — 
Total change in interest expense(4.5)(17.4)(21.9)(0.5)(1.4)(1.9)
Change in net interest income$(17.3)$(3.5)$(20.8)$(12.7)$1.9 $(10.8)

70



Nine Months Ended September 30, 2021
Compared To September 30, 2020
Increase (Decrease)
(in millions)VolumeRateTotal
Interest and dividend income:
Short-term investments$6.2 $(3.5)$2.7 
Securities38.0 (27.9)10.1 
Loans:
Commercial real estate(25.9)(59.7)(85.6)
Commercial and industrial12.1 (14.2)(2.1)
Equipment financing1.3 (14.9)(13.6)
Residential mortgage(48.9)(15.6)(64.5)
Home equity and other consumer(14.4)(8.4)(22.8)
Total loans(75.8)(112.8)(188.6)
Total change in interest and dividend income(31.6)(144.2)(175.8)
Interest expense:
Deposits:
Savings, interest-bearing checking and money market12.0 (57.7)(45.7)
Time(25.4)(31.1)(56.5)
Total deposits(13.4)(88.8)(102.2)
Borrowings:
Federal Home Loan Bank advances(6.6)(2.9)(9.5)
Customer repurchase agreements0.1 (0.6)(0.5)
Federal funds purchased(2.7)(2.7)(5.4)
Total borrowings(9.2)(6.2)(15.4)
Notes and debentures(0.1)(2.8)(2.9)
Total change in interest expense(22.7)(97.8)(120.5)
Change in net interest income$(8.9)$(46.4)$(55.3)
71

Non-Interest Income
Three Months EndedNine Months Ended
(in millions)Sept. 30,
2021		June 30,
2021		Sept. 30,
2020		Sept. 30,
2021		Sept. 30,
2020
Bank service charges$25.9 $24.9 $24.5 $74.3 $72.8 
Investment management fees21.1 21.5 18.8 62.5 54.3 
Commercial banking lending fees11.8 14.1 12.7 39.5 35.4 
Operating lease income10.6 11.2 12.4 33.1 36.8 
Cash management fees9.6 9.6 8.8 28.4 24.3 
Other non-interest income:
BOLI3.6 2.9 2.9 8.7 9.6 
Customer interest rate swap income, net1.8 2.4 1.2 4.3 12.7 
Net gains on sales of residential mortgage loans
    held-for-sale		— — 0.8 1.5 2.4 
Other16.0 12.4 19.0 41.7 66.2 
Total other non-interest income21.4 17.7 23.9 56.2 90.9 
Total non-interest income$100.4 $99.0 $101.1 $294.0 $314.5 
Totalnon-interest income in the third quarter of 20172021 decreased $1.5$0.7 million compared to the third quarter of 20162020 and $2.3increased $1.4 million compared to the second quarter of 2017.2021. The decrease innon-interest income compared to the third quarter of 2016year-ago period primarily reflects decreases in net customer interest rate swapoperating lease income and other non-interest income, recorded in the third quarter of 2016 related to a distribution received on an acquired equity investment (included in other), essentiallypartially offset by an increaseincreases in bank service charges and investment management fees. The decreaseincrease compared to the second quarter of 20172021 primarily reflects decreasesincreases in bank service charges and other non-interest income, partially offset by a decrease in commercial banking lending fees, brokerage commissions and net customer interest rate swap income, partially offset by anfees.
The increase in insurance revenue.

bank service charges in the third quarter of 2021 compared to both the year-ago period and second quarter of 2021 primarily reflects the level of customer activity resulting from the economic uncertainty brought about by COVID-19. The improvementfluctuations in investment management fees compared to both the thirdyear-ago period and second quarter of 20162021 primarily reflects the acquisitioneffect of Gerstein Fisher in November 2016.recent market volatility. At September 30, 2017,2021, assets under administration, which are not reported as assets of People’s United, totaled $23.0 billion, of which $8.9 billion are under discretionary management totaled $10.1 billion compared to $21.3$9.5 billion and $8.0 billion, respectively, at December 31, 2016.

The increase in insurance revenue from the second quarter of 2017 primarily reflects the seasonality of commercial insurance renewals. 2020.

The decrease in commercial banking lending fees compared to both the third quarter of 2020 and second quarter of 20172021 are primarily reflects higherrelated to the levels of prepayment income and loan syndication fees collected in the second quarter of 2017.respective periods. The decrease in net gains on sales of residential mortgage loans held-for-sale in the third quarter of 20172021 compared to theyear-ago period third quarter of 2020 reflects a 40%91% decrease in the volume of residential mortgage loans sold as well asand narrower spreads on pricing.

The fluctuations in net customer interest rate swap income in the third quarter of 2021 compared to the third quarter of 2020 and second quarter of 2021 reflects the levels in both the number and notional value of customer swaps.

On an FTE basis, BOLI income totaled $3.3$4.6 million in the third quarter of 20172021 compared to $2.9$3.7 million in the
year-ago quarter and $3.5 million in the second quarter of 2017 and $1.8 million in theyear-ago quarter.2021. BOLI income in both the third and second quarters of 2017each period includes death benefits received totaling $0.5 million.

Non-Interest Expense

   Three Months Ended  Nine Months Ended 
   Sept. 30,  June 30,  Sept. 30,  Sept. 30,  Sept. 30, 

(dollars in millions)

  2017  2017  2016  2017  2016 

Compensation and benefits

  $128.0  $130.0  $116.1  $383.6  $341.6 

Occupancy and equipment

   40.2   39.8   37.7   118.6   112.6 

Professional and outside service fees

   19.2   28.1   17.7   62.8   51.5 

Regulatory assessments

   10.3   9.9   9.9   29.8   27.1 

Operating lease expense

   8.8   8.7   9.7   26.3   28.0 

Amortization of other acquisition-related intangibles

   7.9   7.9   5.8   22.1   17.4 

Othernon-interest expense:

      

Stationery, printing, postage and telephone

   5.0   6.1   4.6   16.7   14.0 

Advertising and promotion

   3.1   3.1   3.0   8.7   8.1 

Other

   14.6   23.7   16.9   51.9   51.3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total othernon-interest expense

   22.7   32.9   24.5   77.3   73.4 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Totalnon-interest expense

  $237.1  $257.3  $221.4  $720.5  $651.6 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Efficiency ratio

   57.3%   58.4%   59.9%   58.3%   61.0% 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

$1.3 million, $0.8 million and $0.6 million, respectively.

Included in other non-interest income are unrealized losses relating to the change in fair value of equity securities totaling $0.3 million in both the third quarter of 2020 and the second quarter of 2021 (see Note 2 to the Consolidated Financial Statements). Included in other non-interest income in the third quarter of 2021 is a $3.9 million net gain resulting from the
sale-leaseback of two buildings. Other non-interest income includes insurance revenue totaling $1.8 million in the third quarter of 2021, $9.7 million in the third quarter of 2020 and $1.7 million in the second quarter of 2021. The year-over-year variance reflects the sale of PUIA in November 2020.
72

Non-Interest Expense
 Three Months EndedNine Months Ended
(dollars in millions)Sept. 30,
2021		June 30,
2021		Sept. 30,
2020		Sept. 30,
2021		Sept. 30,
2020
Compensation and benefits$167.7 $177.6 $166.5 $518.1 $508.2 
Occupancy and equipment50.2 50.0 49.1 149.3 148.1 
Professional and outside services27.6 30.0 24.1 91.2 88.3 
Amortization of other acquisition-related intangible assets8.9 8.8 10.2 28.7 31.1 
Regulatory assessments6.6 7.8 8.4 22.5 25.8 
Operating lease expense7.0 7.6 9.3 22.4 27.9 
Other non-interest expense:
Stationary, printing, postage and telephone4.6 5.3 6.6 16.0 20.1 
Advertising and promotion4.6 2.7 2.6 10.4 8.9 
Other12.0 15.2 16.8 47.5 59.3 
Total other non-interest expense21.2 23.2 26.0 73.9 88.3 
Total non-interest expense$289.2 $305.0 $293.6 $906.1 $917.7 
Efficiency ratio56.8 %57.4 %53.8 %56.9 %53.8 %
Totalnon-interest expense in the third quarter of 2017 increased $15.72021 decreased $4.4 million compared to the third quarter of 20162020 and decreased $20.2$15.8 million compared to the second quarter of 2017.2021. Included in totalnon-interest expense are merger relatedmerger-related and other non-operating expenses totaling $3.0$6.3 million in the third quarter of 2017, $24.82021, $4.6 million in the year-ago quarter and $11.2 million in the second quarter of 2017 and $3.12021. Excluding such expenses, total non-interest expense decreased $6.1 million in theyear-ago quarter.

As compared to boththe third quarter of 2020 (primarily reflecting a decrease in other non-interest expense, partially offset by an increase in advertising and promotion) and decreased $10.9 million compared to the second quarter of 20172021 (primarily reflecting a decrease in compensation and benefits).

As compared to the third quarter of 2016,2020, the improvementincrease in the efficiency ratio reflects increasesa decrease in both adjusted total revenues of 4% and an increase in adjusted total expenses of 1% (seeNon-GAAP Financial Measures and Reconciliation to GAAP).

The year-over-year increase in compensation and benefits reflects LEAF, Suffolk and Gerstein Fisher personnel costs in the current period (none in the prior year period), increases in incentive and health care expenses, as well as normal merit increases. Excluding $3.4 million of merger-related expenses includeddecrease in compensation and benefits in the secondthird quarter of 2017, the $1.4 million increase2021 compared to the second quarter of 20172021 primarily reflects a partialhigher incentive-related accruals in the second quarter of LEAF personnel costs.

2021.

Professional and outside services fees include merger-related and other non-operating expenses totaling $2.7$4.1 million in the third quarter of 2017, $10.82021, $1.4 million in the third quarter of 2020 and $6.0 million in the second quarter of 2017 and $3.1 million in the third quarter of 2016.2021. Excluding such expenses, the $0.8 million decreasefluctuations in professional and outside services fees compared to the second quarter of 2017 and $1.9 million increase compared to the third quarter of 2016 are primarily related to the timing of certain projects in 2017 and the latter half of 2016.

projects.

Regulatory assessments include Federal Deposit Insurance Corporation (“FDIC”) insurance premiums, thatwhich are primarily based on the Bank’s average total assets and average tangible equity, and FDIC-defined risk factors. The actual amount of future regulatory assessments will be dependent on several factors, including: (i) the Bank’s average total assets and average tangible equity; (ii) the Bank’s risk profile; and (iii) whether additional special assessments are imposed in future periods and the manner in which such assessments are determined. The increasesdecrease in regulatory assessments in the third quarter of 2021 compared to both the third quarter of 2020 and second quarter of 2017 and third quarter of 20162021 primarily reflectreflects an increaseimprovement in the Bank’s average total assets.

Bank's risk profile.

Scheduled amortization expense attributable to other acquisition-related intangible assets for the full-year of 20172021 and each of the next five years is as follows: $30.0 million in 2017; $19.9 million in 2018; $18.4 million in 2019; $16.8 million in 2020; $15.0$35.3 million in 2021; and $13.5$30.9 million in 2022.

Included2022; $23.2 million in 2023; $19.5 million in 2024; $16.6 million in 2025; and $13.7 million in 2026.

Goodwill is evaluated for impairment as of the annual measurement date or more frequently if a triggering event indicates that it is more likely than not that an impairment loss has been incurred. People’s United performed a quantitative assessment of goodwill impairment as of October 1, 2020 (its annual measurement date). A quantitative assessment includes determining the estimated fair value of each reporting unit, utilizing a combination of the discounted cash flow method of the income approach and the guideline public company method of the market approach, and comparing that fair value to each reporting unit’s carrying amount. Based on the quantitative assessment performed as of October 1, 2020, People’s United recognized a non-cash goodwill impairment charge totaling $353.0 million (representing 12% of total goodwill) associated with the Retail Banking reporting unit (see Note 8 to the Consolidated Financial Statements for a further discussion).
73

Merger-related expenses included in othernon-interest expense totaled $2.0 million for the third quarter of 2020 and
$3.0 million for the second quarter of 2021 (none in the third quarter of 2021). Other non-interest expense in both the third quarter of 2021 and second quarter of 2017 are merger-related expenses2021 also include Stop & Shop contract termination costs (considered non-operating expenses) totaling $0.3$1.6 million and $10.6$2.0 million, respectively.

In March 2017, the Financial Accounting Standards Board amended its standards to (i) require that the service cost component of net benefit cost associated with pension and postretirement plans be reported in the same line item in which the related employees’ compensation cost is reported and (ii) specify that only the service cost component is eligible for capitalization. The other components of net benefit cost, which may not be capitalized, are to be presented separately. This new guidance, which is to be applied retrospectively, is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 (January 1, 2018 for People’s United) and early adoption is permitted. The adoption of this amendment will result in a reclassification of certain net benefit cost components from compensation and benefits expense to othernon-interest expense.

Income Taxes

Income Taxes
People’s United’s effective income tax rate was 31.0%19.8% for the nine months ended September 30, 20172021 compared to 32.4%37.0% for the full-year of 2016. Effective January 1, 2017, People’s United adopted newstock-based compensation accounting rules, which require the income tax effects of vestings and exercises be recognized in income tax expense. As a result, the Company realized windfall income tax benefits totaling $1.3 million for the nine months ended September 30, 2017. This amount, which was recognized as a discrete period income tax benefit, served to lower People’s United’s year-to-date2020. The full-year 2020 effective income tax rate by 0.05%. See Note 14 toreflects the Consolidated Financial Statementsimpact of a non-deductible goodwill impairment charge for additional information.which no tax benefit was realized. Excluding non-deductible goodwill impairment, the effective income tax rate was 18.4% for the full-year of 2020. People’s United’s effective income tax rate for the full-year 20172021 is expected to be approximately 31%19% to 21%. Differences, if any, arising between People’s United’s effective income tax rate and the
U.S. federal statutory rate of 35%21% are generally attributable to:(i) tax-exempt interest earned on certain investments;
(ii) tax-exempt income from BOLI; and (iii) state income taxes.


FINANCIAL CONDITION

General

General

Total assets at September 30, 20172021 were $44.0$63.7 billion, a $3.4 billion$581 million increase from December 31, 2016,2020, primarily reflecting increases of $2.6$4.0 billion in short-term investments and $1.3 billion in total securities, partially offset by decreases of $4.3 billion in total loans $419and $231 million in goodwill and $176 million in total securities.other assets. The increasedecrease in total loans from December 31, 20162020 to September 30, 20172021 reflects increasesdecreases of $2.1$2.8 billion in commercial loans and $534 million$1.6 billion in retail loans. OriginatedIncluded in commercial loans increased $607at September 30, 2021 are PPP loans totaling $935 million fromcompared to $2.28 billion at December 31, 2016 to $29.7 billion (commercial loans increased $232 million and retail loans increased $375 million) and acquired loans increased $2.0 billion. At the respective acquisition dates, the fair value of Suffolk’s and LEAF’s loans totaled $1.6 billion and $718 million, respectively. At September 30, 2017, the carrying amount of the acquired loan portfolio totaled $2.6 billion.2020. The increase in total securities primarily reflects net purchases of government sponsored enterprise (“GSE”) mortgage-backed securities and municipal bonds,collateralized mortgage obligation securities, partially offset by sales and paydownsa $132 million increase in the unrealized loss on debt securities available-for-sale. The decrease in other assets primarily reflects the change in fair value of U.S. Treasury securities and CMOs.

derivative financial instruments, partially offset by an increase in affordable housing investments.

Non-performing assets (excluding acquirednon-performing loans) totaled $190.7$329.5 million at September 30, 2017,2021, a $23.4$12.1 million decrease from December 31, 2020, primarily reflecting decreases of $19.1 million in non-accrual commercial and industrial loans, $13.2 million in non-accrual residential mortgage loans and $10.1 million in non-accrual equipment financing loans, partially offset by a $38.3 million increase in non-accrual commercial real estate loans. The ACL totaled $352.4 million at September 30, 2021, compared to $425.1 million at December 31, 2020. At September 30, 2021, the ACL as a percentage of total loans was 0.89% and as a percentage of non-accrual loans was 109.9%, compared to 0.97% and 129.1%, respectively, at December 31, 2020.
At September 30, 2021, total liabilities were $55.9 billion, a $401 million increase from December 31, 2016,2020, primarily reflecting increasesa $734 million increase innon-performing equipment financing loans of $14.7 million andnon-performing commercial real estate loans of $14.4 million, total deposits, partially offset by a $6.6 million decrease innon-performing commercial and industrial loans. At September 30, 2017, acquirednon-performing loans totaled $26.6 million compared to $24.7 million at December 31, 2016. The allowance for loan losses totaled $233.4 million ($229.2 million on originated loans and $4.2 million on acquired loans) at September 30, 2017, compared to $229.3 million ($223.0 million on originated loans and $6.3 million on acquired loans) at December 31, 2016. At September 30, 2017, the originated allowance for loan losses as a percentagedecreases of originated loans was 0.77% and as a percentage of originatednon-performing loans was 131.6%, compared to 0.77% and 150.6%, respectively, at December 31, 2016.

At September 30, 2017, total liabilities were $38.3 billion, a $2.8 billion increase from December 31, 2016, primarily reflecting increases of $2.7 billion in total deposits and $87$170 million in total borrowings partially offset by a $124and $153 million decrease in notes and debentures. At the acquisition date, the fair value of Suffolk’s deposits totaled $1.9 billion. The decrease in notes and debentures reflects the repayment of the $125 million 5.80% fixed-rate/floating-rate subordinated notes in February 2017.

other liabilities.

People’s United’s total stockholders’ equity was $5.7$7.8 billion at September 30, 2017,2021, a $604$180 million increase from
December 31, 2016.2020. As a percentage of total assets, stockholders’ equity was 13.1%12.2% and 12.7%12.1% at September 30, 20172021 and December 31, 2016,2020, respectively. Tangible common equity equaled 7.1%7.8% of tangible assets at September 30, 20172021 compared to 7.2%7.5% at December 31, 20162020 (see Stockholders Equity and Dividends).

People’s United’s (consolidated) Tier 1 Leverage capital ratio and its Common Equity Tier 1 (“CET 1”), Tier 1 and Total risk-based capital ratios were 8.3%8.6%, 9.5%11.7%, 10.2%12.3% and 12.0%13.4%, respectively, at September 30, 2017,2021, compared to 8.4%8.3%, 9.9%10.5%, 10.7%11.0% and 12.5%12.4%, respectively, at December 31, 2016.2020. The Bank’s Tier 1 Leverage capital ratio and its CET 1, Tier 1 and Total
risk-based capital ratios were 8.6%8.8%, 10.6%12.6%, 10.6%12.6% and 12.6%13.6%, respectively, at September 30, 2017,2021, compared to 8.9%8.7%, 11.3%11.5%, 11.3%11.5% and 13.3%12.8%, respectively, at December 31, 20162020 (see Regulatory Capital Requirements).

Loans


74

Loans
People’s United’s lending activities consist of originating loans secured by commercial and residential properties, and extending secured and unsecured loans to commercial and consumer customers.

In the first quarter of 2021, the Company completed a portfolio review to ensure consistent classification of certain commercial loans across the Company's franchise and conformity to industry practice for such loans. As a result, approximately $350 million of loans secured by non-owner-occupied commercial properties were prospectively reclassified, in March 2021, from commercial and industrial loans to commercial real estate loans. Prior period balances were not restated to conform to the current presentation. Included in commercial and industrial loans at September 30, 2021 are PPP loans totaling $935 million (including $319 million in Service, $223 million in Health services, $104 million in Construction, $94 million in Manufacturing and $53 million in Retail trade) and associated deferred loan fees totaling $35.8 million.

The following tables summarize People’s United’s loan portfolios:

Commercial Real Estate

   September 30,   December 31, 

(in millions)

  2017   2016 

Property Type:

    

Residential (multi-family)

  $3,984.8   $3,790.1 

Retail

   2,874.4    2,530.1 

Office buildings

   2,187.7    2,173.7 

Industrial/manufacturing

   635.7    604.9 

Hospitality/entertainment

   607.9    548.9 

Health care

   382.7    124.5 

Mixed/special use

   245.6    220.3 

Self storage

   174.0    170.3 

Land

   52.9    41.8 

Other

   34.8    42.7 
  

 

 

   

 

 

 

Total commercial real estate

  $11,180.5   $10,247.3 
  

 

 

   

 

 

 

(in millions)September 30,
2021		December 31,
2020
Property Type:
Residential (multifamily)$3,750.8 $4,231.4 
Retail3,215.7 3,579.3 
Office buildings2,203.1 2,366.7 
Health care1,039.2 560.7 
Hospitality/entertainment972.3 980.4 
Industrial/manufacturing810.8 840.3 
Mixed/special use327.3 353.2 
Self storage175.6 198.7 
Land41.7 79.3 
Other126.1 146.9 
Total commercial real estate$12,662.6 $13,336.9 

Commercial and Industrial

   September 30,   December 31, 

(in millions)

  2017   2016 

Industry:

    

Service

  $1,512.7   $1,392.8 

Finance and insurance

   1,450.7    1,520.8 

Manufacturing

   1,355.4    1,111.4 

Wholesale distribution

   1,086.8    1,084.2 

Real estate, rental and leasing

   811.3    584.7 

Retail sales

   783.8    741.9 

Health services

   731.5    899.4 

Transportation/utility

   301.2    252.5 

Construction

   242.0    194.1 

Arts/entertainment/recreation

   139.6    131.4 

Information/media

   103.1    95.5 

Public administration

   58.3    56.6 

Mining, oil and gas

   8.4    9.0 

Other

   39.9    50.8 
  

 

 

   

 

 

 

Total commercial and industrial

  $8,624.7   $8,125.1 
  

 

 

   

 

 

 

(in millions)September 30,
2021		December 31,
2020
Industry:
Finance and insurance$3,782.6 $4,485.5 
Service2,311.9 2,688.4 
Wholesale trade1,294.2 1,223.4 
Real estate, rental and leasing1,185.3 1,152.1 
Manufacturing1,147.4 1,384.7 
Health services914.5 1,489.6 
Retail trade742.7 851.3 
Transportation and utilities429.5 450.4 
Construction365.1 533.6 
Arts, entertainment and recreation183.2 236.2 
Information and media177.7 165.7 
Printing45.7 79.0 
Packaging43.8 58.5 
Public administration37.6 49.9 
Other107.8 134.0 
Total commercial and industrial$12,769.0 $14,982.3 


75

Equipment Financing

   September 30,   December 31, 

(in millions)

  2017   2016 

Industry:

    

Transportation/utility

  $1,102.8   $1,088.3 

Construction

   481.2    410.0 

Rental and leasing

   425.5    422.3 

Service

   313.7    79.0 

Manufacturing

   221.7    139.7 

Printing

   204.0    197.8 

Waste

   181.8    186.0 

Wholesale distribution

   176.5    145.8 

Health services

   149.8    57.2 

Packaging

   109.2    135.2 

Mining, oil and gas

   52.8    51.8 

Other (1)

   286.6    119.4 
  

 

 

   

 

 

 

Total equipment financing

  $3,705.6   $3,032.5 
  

 

 

   

 

 

 

(1)Increase from December 31, 2016 reflects the August 1, 2017 acquisition of LEAF. The Company is currently reviewing LEAF’s portfolio in order to determine appropriate industry type classification.

(in millions)September 30,
2021		December 31,
2020
Industry:
Transportation and utilities$1,120.0 $1,122.8 
Construction772.3 716.7 
Service737.9 713.1 
Rental and leasing456.0 500.3 
Manufacturing459.7 416.6 
Health services296.1 268.8 
Wholesale trade287.5 263.3 
Waste management200.6 198.9 
Printing166.0 178.7 
Retail trade149.0 142.3 
Packaging104.3 118.7 
Mining, oil and gas66.5 67.4 
Other224.4 222.4 
Total equipment financing$5,040.3 $4,930.0 

Residential Mortgage

   September 30,   December 31, 

(in millions)

  2017   2016 

Adjustable-rate

  $5,948.4   $5,549.1 

Fixed-rate

   832.6    667.6 
  

 

 

   

 

 

 

Total residential mortgage

  $6,781.0   $6,216.7 
  

 

 

   

 

 

 

(in millions)September 30,
2021		December 31,
2020
Adjustable-rate$4,323.7 $5,517.3 
Fixed-rate2,946.1 3,001.6 
Total residential mortgage$7,269.8 $8,518.9 

Home Equity and Other Consumer

(in millions)

  September 30,
2017		   December 31,
2016		 

Home equity lines of credit

  $1,824.2   $1,883.3 

Home equity loans

   217.3    189.3 

Other

   51.2    50.7 
  

 

 

   

 

 

 

Total home equity and other consumer

  $2,092.7   $2,123.3 
  

 

 

   

 

 

 

Asset Quality

Recent Trends

(in millions)September 30,
2021		December 31,
2020
Home equity lines of credit$1,560.5 $1,814.1 
Home equity loans139.9 183.1 
Other83.7 104.2 
Total home equity and other consumer$1,784.1 $2,101.4 


Asset Quality
CARES Act
Issued in response to the economic disruption caused by the COVID-19 pandemic, the CARES Act provides financial assistance for businesses and individuals as well as targeted regulatory relief for financial institutions. The following provisions of the CARES Act are significant to People’s United.
Paycheck Protection Program
The CARES Act created a new loan guarantee program known as the PPP, the objective of which is to provide small businesses with financial support to cover payroll and certain other qualifying expenses. Loans made under the PPP are fully guaranteed by the SBA, whose guarantee is backed by the full faith and credit of the United States. PPP loans also afford borrowers forgiveness up to the principal amount of the loan, plus accrued interest, provided the loan proceeds are used to retain workers and maintain payroll or to make certain mortgage interest, lease and utility payments, and certain other criteria are satisfied. The SBA will reimburse PPP lenders for any amount of a PPP loan that is forgiven, and PPP lenders will not be held liable for any representations made by PPP borrowers in connection with their requests for loan forgiveness. As of
November 1, 2021, People’s United, as a participating PPP lender, had approved, submitted to the SBA and funded PPP loan requests totaling approximately $3.8 billion, of which approximately $0.7 billion remains outstanding. For regulatory capital purposes, PPP loans are assigned a zero risk-weighting as a result of the related SBA guarantee.
76

Loan Forbearance Initiatives
The CARES Act, along with supervisory guidance issued by the federal banking regulators, also creates a forbearance program for federally-backed mortgage loans and provides financial institutions with the option to temporarily suspend certain requirements under U.S. GAAP related to troubled debt restructurings (“TDRs”). Specifically, short-term modifications made on a good faith basis in response to COVID-19 to borrowers that are current prior to any relief, are not required to be considered for TDR classification. This includes short-term (e.g. six months or less) modifications such as payment deferrals, fee waivers, extensions of repayment terms or other delays in payment that are insignificant. This exception relates to any eligible loan modification made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the national emergency related to COVID-19 is ended. In December 2020, the signing of the Consolidated Appropriations Act, 2021 extended this guidance to modifications made until the earlier of January 1, 2022 or 60 days after the end of the COVID-19 national emergency. Further, for loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral. The Company applied this guidance since March 2020 however, its policies and practices with respect to the assessment of loan repayment, non-accrual status and charge-offs remain unchanged.
As of November 1, 2021, the Company had granted loan forbearance requests representing approximately $7.5 billion of outstanding balances across nearly all of the Company’s loan portfolios, with the most significant activity noted in commercial real estate, commercial and industrial, and equipment financing. Of the loans that were granted a deferral related to COVID-19, approximately 97% have left deferral and made their first full payment. We anticipate that this percentage will increase as the remainder of these loans exit their first deferral.
The CARES Act also prohibits servicers of federally-backed mortgage loans from initiating any foreclosure action on any residential property that is not vacant or abandoned for a period of 60 days, beginning on March 18, 2020. In addition to these federal measures, some state governments have taken action to require forbearance with respect to certain loans and fees. The Company continues to monitor both federal and state regulatory developments in relation to COVID-19 and their potential impact on our operations.
General
While People’s United continues to adhere to prudent underwriting standards, the loan portfolio is not immune to potential negative consequences arising as a result of general economic weakness and, in particular, a prolonged downturn in the housing market on a national scale as was experienced for much of the period from 2008 to 2012.scale. Decreases in real estate values could adversely affect the value of property used as collateral for loans. In addition, adverse changes in the economy could have a negative effect on the ability of borrowers to make scheduled loan payments, which would likely have an adverse impact on earnings. Further, an increase in loan delinquencies may serve to decrease interest income and adversely impact loan loss experience, resulting in an increased provision and allowance for loan losses.

ACL.

People’s United actively manages asset quality through its underwriting practices and collection operations. Underwriting practices tend to focus on optimizing the return of a given risk classification while collection operations focus on minimizing losses once an account becomes delinquent. People’s United attempts to minimize losses associated with commercial loans by requiring borrowers to pledge adequate collateral and/or provide for third-party guarantees. Loss mitigation within the residential mortgage loan portfolio is highly dependent on the value of the underlying real estate.

Certain loans whose terms have been modified are considered troubled debt restructurings (“TDRs”). Purchased credit impaired (“PCI”) loans (see Note 4 to the Consolidated Financial Statements) that are modified are not considered for TDR classification provided they are evaluated for impairment on a pool basis.TDRs. Loans are considered TDRs if the borrower is experiencing financial difficulty and is afforded a concession by People’s United, such as, but not limited to: (i) payment deferral; (ii) a reduction of the stated interest rate for the remaining contractual life of the loan; (iii) an extension of the loan’s original contractual term at a stated interest rate lower than the current market rate for a new loan with similar risk; (iv) capitalization of interest; or (v) forgiveness of principal or interest.

Guidance issued by the Office of the Comptroller of the Currency requires that loans subject to a borrower’s discharge from personal liability following a Chapter 7 bankruptcy be treated as TDRs, included innon-performing non-accrual loans and written down to the estimated collateral value, regardless of delinquency status. Included in TDRs at September 30, 20172021 are $23.1$31.0 million of such loans. Of this amount, $18.6$25.4 million, or 81%82%, were less than 90 days past due on their payments as of that date.

TDRs may either be accruing or placed onnon-accrual status (and reported asnon-performing non-accrual loans) depending upon the loan’s specific circumstances, including the nature and extent of the related modifications. TDRs onnon-accrual status remain classified as such until the loan qualifies for return to accrual status. Loans qualify for return to accrual status once they have demonstrated performance with the restructured terms of the loan agreement for a minimum of six months in the case of a commercial loan or, in the case of a retail loan, when the loan is less than 90 days past due. Loans may continue to be reported as TDRs after they are returned to accrual status.

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During the nine months ended September 30, 2017,2021, we performed 6628 loan modifications that were not classified as TDRs. The balances of thethese loans at the time of the respective modifications totaled $83.2$94.1 million. In each case, we concluded that the modification did not result in the granting of a concession based on one or more of the following considerations: (i) the receipt of additional collateral (the nature and amount of which was deemed to serve as adequate compensation for other terms of the restructuring) and/or guarantees; (ii) the borrower having access to funds at a market rate for debt with similar risk characteristics as the restructured debt; and (iii) the restructuring resulting in a delay in payment that is insignificant in relation to the other terms of the obligation. See Note 43 to the Consolidated Financial Statements and Loan Forbearance Initiatives above for additional disclosures relating to TDRs.

Portfolio Risk Elements—Elements – Residential Mortgage Lending

People’s United does not actively engage in subprime mortgage lending that has, historically, been the riskiest sector of the residential housing market. People’s United has virtually no exposure to subprime loans, or to similarly high-riskAlt-A loans and structured investment vehicles. While no standard definition of “subprime” exists within the industry, the Company has generally defined subprime as borrowers with credit scores of 660 or less, either at or subsequent to origination.

At September 30, 2017,2021, the loan portfolio included $1.3 billion$645 million of interest-only residential mortgage loans. People’s United began originating interest-only residential mortgage loans in March 2003. The underwriting guidelines and requirements for such loans are generally more restrictive than those applied to other types of residential mortgage loans. People’s United has not originated interest-only residential mortgage loans that permit negative amortization or optional payment amounts. Amortization of an interest-only residential mortgage loan begins after the initial interest rate changes (e.g. after 5 years for a 5/1 adjustable-rate mortgage). In general, People’s United’s underwriting guidelines for residential mortgage loans require the following: (i) properties must be single-family and owner-occupied primary residences; (ii) lowerloan-to-value (“LTV”) ratios (less than 60% on average); (iii) higher credit scores (greater than 700 on average); and (iv) sufficient post-closing reserves.

Updated estimates of property values are obtained from an independent third-party for residential mortgage loans 90 days past due. At September 30, 2017,non-performing2021, non-accrual residential mortgage loans totaling $0.2 million had current LTV ratios of more than 100%. At September 30, 2017,that date, the weighted average LTV ratio and FICO score for the residential mortgage loan portfolio were 63.1%61% and 758,762, respectively.

The Company continues to monitor its foreclosure policies and procedures to ensure ongoing compliance with applicable industry standards. We believe that our established procedures for reviewing foreclosure affidavits and validating information contained in related loan documentation are sound and consistently applied, and that our foreclosure affidavits are accurate. As a result, People’s United has not found it necessary to interrupt or suspend foreclosure proceedings. We have also considered the effect of representations and warranties that we made to third-party investors in connection with whole loan sales, and believe our representations and warranties were true and correct and do not expose the Company to any material loss.

During the nine months ended September 30, 2017,2021, the Company repurchased oneeight residential mortgage loanloans from a GSEGSEs and other parties that we had previously sold to the GSEGSEs and other parties. The balance of the loanloans at the time of the repurchaserespective repurchases totaled $0.1$1.8 million and related fees and expenses incurred totaled less than $0.1 million. During that same time period, the Company issued 2321 investor refunds, totaling less than $0.1 million, under contractual recourse agreements. Based on the limited number of repurchase requests the Company has historically received, the immaterial cost associated with such repurchase requests and management’s view that this past experience is consistent with our current and near-term estimate of such exposure, the Company has established a reserve for such repurchase requests, which totaled $0.2$0.5 million as of
September 30, 2017.

2021.

The aforementioned foreclosure issues and the potential for additional legal and regulatory action could impact future foreclosure activities, including lengthening the time required for residential mortgage lenders, including the Bank, to initiate and complete the foreclosure process. In recent years, foreclosure timelines have increased as a result of, among other reasons: (i) delays associated with the significant increase in the number of foreclosure cases as a result of current economic conditions; (ii) additional consumer protection initiatives related to the foreclosure process; and (iii) voluntary and/or mandatory programs intended to permit or require lenders to consider loan modifications or other alternatives to foreclosure. Further increases in the foreclosure timeline may have an adverse effect on collateral values and our ability to minimize losses.

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Portfolio Risk Elements—Elements – Home Equity Lending

The majority of our home equity lines of credit (“HELOCs”) have an initial draw period of 9 1⁄/2 years followed by a
20-year repayment phase. During the initial draw period, interest-only payments are required, after which the disbursed balance is fully amortized over a20-year repayment term. HELOCs carry variable rates indexed to the Prime Rate with a lifetime interest rate ceiling and floor, and are secured by first or second liens on the borrower’s primary residence. The rate used to qualify borrowers is the Prime Rate plus 3.00%, even though the initial rate may be substantially lower. The maximum LTV ratio is 80% on a single-family property, including a condominium, and 70% on atwo-family property. Lower LTV ratios are required on larger line amounts. The minimum FICO credit score is 680. The borrower has the ability to convert the entire balance or a portion of the balance to a fixed-rate term loan during the draw period. There is a limit of three term loans that must be fully amortized over a term not to exceed the original HELOC maturity date.

A smaller portion of our HELOC portfolio has an initial draw period of 10 years with a variable-rate interest-only payment, after which there is a5-year amortization period. An additional small portion of our HELOC portfolio has a5-year draw period which, at our discretion, may be renewed for an additional5-year interest-only draw period.

The following table sets forth, as of September 30, 2017,2021, the committed amount of HELOCs scheduled to have the draw period end during the years shown:

December 31, (in millions)

  Credit Lines 

2017

  $56.3 

2018

   243.2 

2019

   115.1 

2020

   185.2 

2021

   308.0 

2022

   479.2 

Later years

   2,189.3 
  

 

 

 

Total

  $3,576.3 
  

 

 

 

December 31, (in millions)Credit Lines
2021$51.1 
2022332.3 
2023381.0 
2024421.5 
2025417.4 
2026429.4 
Later years1,863.5 
Total$3,896.2 

Approximately 90%88% of our HELOCs are presently in their draw period. Although converted amortizing payment loans represent only a small portion of the portfolio, our default and delinquency statistics indicate a higher level of occurrence for such loans when compared to HELOCs that are still in the draw period.

Delinquency statistics for the HELOC portfolio as of September 30, 20172021 are as follows:

   Portfolio   Delinquencies 

(dollars in millions)

  Balance   Amount   Percent 

HELOC status:

      

Still in draw period

  $1,584.7   $7.5    0.48% 

Amortizing payment

   239.5    12.3    5.26 
  

 

 

   

 

 

   

 

 

 

Portfolio
Balance		Delinquencies
(dollars in millions)AmountPercent
HELOC status:
Still in draw period$1,509.3 $8.3 0.61 %
Amortizing payment191.1 10.3 5.41 

For the threenine months ended September 30, 2017, 42%2021, 53% of our borrowers with balances outstanding under HELOCs paid only the minimum amount due.

The majority of home equity loans fully amortize over terms ranging from 5 to 20 years. Home equity loans are limited to first or second liens on a borrower’s primary residence. The maximum LTV ratio is 80% on a single-family property, including a condominium, and 70% on atwo-family property. Lower LTV ratios are required on larger line amounts.

We are not able, at this time, to develop statistics for the entire home equity portfolio (both HELOCs and home equity loans) with respect to first liens serviced by third parties that have priority over our junior liens, as lien position data has not historically been captured on our loan servicing systems. As of September 30, 2017,2021, full and complete first lien position data was not readily available for 29%33% of the home equity portfolio. Effective January 2011, we began tracking lien position data for all new originations and our collections department continues to add lien position data once a loan reaches 75 days past due in connection with our updated assessment of combinedloan-to-value (“CLTV”) exposure, which takes place for loans 90 days past due. In addition, when we are notified that the holder of a superior lien has commenced a foreclosure action, our home equity account is identified in the collections system for ongoing monitoring of the legal action. As of September 30, 2017,2021, the portion of the home equity portfolio more than 90 days past due with a CLTV greater than 80% was $4.5$0.7 million.

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As of September 30, 2017,2021, full and complete first lien position data was readily available for 71%67%, or $1.4$1.1 billion, of the home equity portfolio. Of that total, 38%40%, or $552.0$427.5 million, are in a junior lien position. We estimate that of those junior liens,
35%, or $193.2$149.6 million, are held or serviced by others.

When the first lien is held by a third party,third-party, we can, in some cases, obtain an indication that a first lien is in default through information reported to credit bureaus. However, because more than one mortgage may be reported in a borrower’s credit report and there may not be a corresponding property address associated with reported mortgages, we are often unable to associate a specific first lien with our junior lien. As of September 30, 2017,2021, there were 2925 loans totaling $2.4$1.2 million for which we have received notification that the holder of a superior lien has commenced foreclosure action. For 17 of the loans (totaling $1.7$0.9 million), our second lien position was performing at the time such foreclosure action was commenced. The totalThere was no estimated loss related to those 17 loans was $0.2 million as of September 30, 2017.2021. It is important to note that the percentage of new home equity originations for which we hold the first lien has increased steadily from approximately 40% in 2009 to approximately 65%
55% as of September 30, 2017.

2021.

We believe there are several factors that serve to mitigate the potential risk associated with the limitations on available first lien data. Most importantly, our underwriting guidelines for home equity loans, which have been, and continue to be, consistently applied, generally require the following: (i) properties located within our geographic footprint; (ii) lower LTV ratios; and (iii) higher credit scores. Notwithstanding the maximum LTV ratios and minimum FICO scores discussed previously, actual LTV ratios at origination were less than 60% on average and current FICO scores of our borrowers are greater than 750 on average. In addition, as of September 30, 2017, 93%2021, 97% of the portfolio balance relates to originations that occurred since 2005, which is generally recognized as the peak of the last housing bubble. We believe these factors are a primary reason for the portfolio’s relatively low level ofnon-performing non-accrual loans and net loan charge-offs, both in terms of absolute dollars and as a percentage of average total loans.

Each month, all home equity and second mortgage loans greater than 180 days past due (regardless of our lien position) are analyzed in order to determine the amount by which the balance outstanding (including any amount subject to a first lien) exceeds the underlying collateral value. To the extent a shortfall exists, acharge-off is recognized. Thischarge-off activity is reflected in our established allowance for loan lossesACL for home equity and second mortgage loans as part of the component attributable to historical portfolio loss experience, which considers losses incurred over the most recent12-month period. While the limitations on available first lien data could impact the accuracy of our loan loss estimates, we believe that our methodology results in an allowance for loan lossesACL that appropriately estimates the inherent probable losses within the portfolio, including those loans originated prior to
January 2011 for which certain lien position data is not available.

As of September 30, 2017,2021, the weighted average CLTV ratio and FICO score for the home equity portfolio were 58.6%56% and 760,
750, respectively.

Portfolio Risk Elements—Elements – Commercial Real Estate Lending

In general, construction loans originated by People’s United are used to finance improvements to commercial, industrial or residential property. Repayment is typically derived from the sale of the property as a whole, the sale of smaller individual units or by atake-out from a permanent mortgage. The term of the construction period generally does not exceed two years. Loan commitments are based on established construction budgets that represent an estimate of total costs to complete the proposed project, including both hard (direct) costs (building(such as building materials labor, etc.)and labor) and soft (indirect) costs (legal(such as legal and architectural fees, etc.)fees). In addition, project costs may include an appropriate level of interest reserve to carry the project through to completion. If established, such interest reserves are determined based on: (i) a percentage of the committed loan amount; (ii) the loan term; and (iii) the applicable interest rate. Regardless of whether a loan contains an interest reserve, the total project cost statement serves as the basis for underwriting and determining which items will be funded by the loan and which items will be funded through borrower equity.

Construction loans are funded, at the request of the borrower, not more than once per month, based on the extent of work completed, and are monitored, throughout the life of the project, by an independent professional construction engineer and the Company’s commercial real estate lending department. Interest is advanced to the borrower upon request, based on the progress of the project toward completion. The amount of interest advanced is added to the total outstanding principal under the loan commitment. Should the project not progress as scheduled, the adequacy of the interest reserve necessary to carry the project through to completion is subject to close monitoring by management. Should the interest reserve be deemed to be inadequate, the borrower is required to fund the deficiency. Similarly, once a loan is fully funded, the borrower is required to fund all interest payments.

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People’s United’s construction loan portfolio totaled $616.9$939 million (2% of total loans) at September 30, 2017.2021. The total committed amount at that date, including both the outstanding balance and the unadvanced portion of such loans, was $909.3 million.
$1.3 billion. In some cases, a portion of the total committed amount includes an accompanying interest reserve.
At September 30, 2017,2021, construction loans totaling $279.0$579 million had remaining available interest reserves of $24.6$28.9 million. At that date, the Company had no construction loans with interest reserves that were onnon-accrual status and included innon-performing non-accrual loans.

Recent

Historically, certain economic conditions have resulted in an increase in the number of extension requests for commercial real estate and construction loans, some of which may have included related repayment guarantees. Modifications of commercial real estate loans involving maturity extensions are evaluated according to the Company’s normal underwriting standards and are classified as TDRs if the borrower is experiencing financial difficulty and is afforded a concession by People’s United similar to those discussed previously. People’s United had $5.2$12.2 million of restructured construction loans at September 30, 2017.

2021.

An extension may be granted to allow for the completion of the project, marketing or sales of completed units, or to provide for permanent financing, and is based on are-underwriting of the loan and management’s assessment of the borrower’s ability to perform according to the agreed-upon terms. Typically, at the time of an extension, borrowers are performing in accordance with contractual loan terms. Extension terms generally do not exceed 12 to 18 months and typicallyusually require that the borrower provide additional economic support in the form of partial repayment, additional collateral or guarantees. In cases where the fair value of the collateral or the financial resources of the borrower are deemed insufficient to repay the loan, reliance may be placed on the support of a guarantee, if applicable. However, such guarantees are never considered the sole source of repayment.

People’s United evaluates the financial condition of guarantors based on the most current financial information available. Most often, such information takes the form of (i) personal financial statements of net worth, cash flow statements and tax returns (for individual guarantors) and (ii) financial and operating statements, tax returns and financial projections (for legal entity guarantors). The Company’s evaluation is primarily focused on various key financial metrics, including net worth, leverage ratios and liquidity. It is the Company’s policy to update such information annually, or more frequently as warranted, over the life of the loan.

While People’s United does not specifically track the frequency with which it has pursued guarantor performance under a guarantee, the Company’s underwriting process, both at origination and upon extension, as applicable, includes an assessment of the guarantor’s reputation, creditworthiness and willingness to perform. Historically, when the Company has found it necessary to seek performance under a guarantee, it has been able to effectively mitigate its losses.

In considering the impairment statuscollectability of such loans, an evaluation is made of the collateral and future cash flow of the borrower as well as the anticipated support of any repayment guarantor. In the event that the guarantor is unwilling or unable to perform, a legal remedy is pursued. When performance under the loan terms is deemed to be uncertain, including performance of the guarantor, all or a portion of the loan may becharged-off, typically based on the fair value of the collateral securing the loan.

Allowance and Provision for LoanCredit Losses

Originated Portfolio

on Loans

The allowance for loan lossesACL is established through provisions for loancredit losses on loans charged to income. Losses on loans including impaired loans, are charged to the allowance for loan lossesACL when all or a portion of a loan is deemed to be uncollectible. Recoveries of loans previously charged off are credited to the allowance for loan lossesACL when realized.

People’s United maintains

Under the CECL standard, the Company determines the ACL on loans based upon a consideration of its historical portfolio loss experience, current borrower-specific risk characteristics, forecasts of future economic conditions and other relevant factors. The allowance for loan losses at a level that is deemed to be appropriate to absorb probable losses inherent in the respective loan portfolios, basedmeasured on a quarterly evaluation of a variety of factors. These factors include, but arecollective (pool) basis when similar risk characteristics exist. Loans that do not limited to: (i) People’s United’s historical loan loss experience and recent trends in that experience; (ii)share common risk ratings assigned by lending personnel to commercial real estate loans, commercial and industrial loans, and equipment financing loans, and the results of ongoing reviews of those ratings by People’s United’s independent loan review function; (iii) an evaluation of delinquent andnon-performing loans and related collateral values; (iv) the probability of loss in view of geographic and industry concentrations and other portfolio risk characteristics; (v) the present financial condition of borrowers; and (vi) current economic conditions.

The Company’s allowance for loan losses consists of three elements: (i) an allowance for larger-balance,non-homogeneous loans thatcharacteristics are evaluated on an individual(loan-by-loan) basis; (ii) an allowance basis and are excluded from the collective evaluation. At September 30, 2021 and December 31, 2020, the collective ACL totaled $340.0 million and $404.6 million, respectively, and the specific allocations of the ACL forsmaller-balance, homogeneous loans that are evaluated on a collective basis;an individual basis totaled $12.4 million and (iii) a specific allowance for loans deemed to be impaired, including loans classified as TDRs.

Larger-balance,Non-homogeneous Loans.$20.5 million, respectively.

The Company establishes a loan loss allowance for itslarger-balance,non-homogeneous loans using a methodology that incorporates (i) the probability of default for a given loan risk rating and (ii) historical loss-given-default data, both derived using an appropriate look back period. In accordance with the Company’s loan risk rating system,portfolio segments include Commercial and Retail and each of these segments comprises multiple loan with the exception of those included in large groups of smaller-balance homogeneous loans, is assigned a risk rating (using a nine-grade scale) by the originating loan officer, credit management, internal loan review or loan committee. Loans rated “One” represent those loans least likely to default while loans rated “Nine” represent a loss. The probability of loans defaulting for each risk rating, referred to as default factors, are estimated based on the historical pattern of loans migrating from one risk rating to another and to default status over time as well as the length of time that it takes losses to emerge. Estimated loan default factors,classes, which are updated annually (or more frequently, if necessary), are multipliedcharacterized by similarities in initial measurement, risk attributes, and the manner in which credit risk is monitored and assessed. The Commercial loan balances within each risk-rating category and again multiplied by a historical loss-given-default estimate for each loan type to determine an appropriate levelportfolio segment is comprised of allowance by loan type. The historical loss-given-default estimates are also updated annually (or more frequently, if necessary) based on actualcharge-off experience. This approach is applied to the commercial, commercial real estate, commercial and industrial, equipment financing componentsand mortgage warehouse/asset based lending (“MW/ABL”) loan classes. The Retail loan portfolio segment is comprised of the loan portfolio.

In establishing the allowance for loan losses for larger-balance,non-homogeneous loans, the Company also gives consideration to certain qualitative factors, including the macroeconomic environment and any potential imprecision inherent in its loan loss model that may result from having limited historical loan loss data which, in turn, may result in inaccurate probability of default and loss-given-default estimates. In this manner, historical portfolio experience, as described above, is not adjusted and the allowance for loan losses always includes a component attributable to qualitative factors, the degree of which may change from period to period as such qualitative factors indicate improving or worsening trends. The Company evaluates the qualitative factors on a quarterly basis in order to conclude that they continue to be appropriate. There were no significant changes in our approach to determining the qualitative component of the related allowance for loan losses during the nine months ended September 30, 2017.

Smaller-balance, Homogeneous Loans.Pools of smaller-balance, homogeneous loans with similar risk and loss characteristics are also assessed for probable losses. These loan pools include residential mortgage, home equity and other consumer loan classes. Common characteristics and risk profiles include the type/purpose of loan and historical/expected credit loss patterns. The Company periodically reassesses each pool to ensure the loans within the pool continue to share similar characteristics and risk profiles and to determine whether further segmentation is necessary.

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The ACL on loans represents management’s current estimate of lifetime expected credit losses inherent in the loan portfolio at the balance sheet date. As such, the estimate of expected credit losses is dependent upon portfolio size, composition and credit quality, as well as economic conditions and forecasts existing at that time. Expected future losses are estimated for the loan's entire contractual term adjusted for anticipated prepayments, as appropriate. The contractual term excludes expected extensions, renewals, and modifications unless (i) management has a reasonable expectation that a TDR will be executed with an individual borrower or (ii) such extension or renewal options are not assignedunconditionally cancellable by the Company and, in such cases, the borrower is likely to meet applicable conditions and likely to request extension or renewal.
Credit loss expense related to loans reflects the totality of actions taken on all loans for a particular period including any necessary increases or decreases in the allowance related to changes in credit loss expectations associated with specific loans or pools of loans. Portions of the allowance may be allocated for specific credits; however, the entire allowance is available for any credit that, in management’s judgment, should be charged-off. While management utilizes its best judgment and information available, the ultimate appropriateness of the allowance is dependent upon a variety of factors beyond management's control, including the performance of the loan portfolio, changes in interest rates and the broader economy.
The ACL on loans is comprised of three components: (i) quantitative (formulaic) reserves; (ii) qualitative (judgmental) reserves; and (iii) individual loan risk ratings. Rather,reserves.
Quantitative Component
Management estimates the assessment of these portfolios,quantitative component by projecting (i) probability-of-default, representing the likelihood that a loan will stop performing/default (“PD”), (ii) loss-given-default, representing the expected loss rate for loans in default (“LGD”) and (iii) exposure-at-default (“EAD”), representing the establishmentestimated outstanding principal balance of the related allowanceloans upon default, adjusted for loananticipated prepayments, as appropriate, based on economic parameters for each month of a loan’s remaining contractual term. Expected credit losses is based uponfor the quantitative component are calculated as the product of the PD, LGD and EAD.
Historical credit experience provides the basis for the estimation of expected credit losses, with adjustments made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency levels and terms, as well as for changes in the economic environment over a consideration of (i) recentreasonable and supportable forecast period. The Company utilizes a two-year reasonable and supportable forecast period followed by a one-year period over which estimated losses revert, on a straight-line basis, to average historical loss experience, and (ii) certain qualitative factors.

The qualitative componentdetermined over the historical observation period, for the remaining life of the allowance forloan.

PDs are estimated by analyzing internal data related to the historical performance of each loan pool over an economic cycle. PDs are adjusted to reflect the current impact of certain macroeconomic variables as well as their expected changes over the reasonable and supportable forecast period. The LGD is based on historical losses for smaller-balance, homogenous loans is intendedeach loan pool, adjusted to incorporate risks inherent inreflect the portfolio, economic uncertainties, regulatory requirements and other subjective factors such as changes in underwriting standards. Accordingly, consideration is given to: (i) present and forecasted economic conditions, including unemployment rates; (ii) changes in industry trends, including thecurrent impact of new regulations, (iii) trends in property values; (iv) broader portfolio indicators, including delinquencies,non-performing loans, portfolio concentrations, and trends incertain macroeconomic variables as well as their expected changes over a two-year forecast period. EAD is estimated using a linear regression model that estimates the volume and termsaverage percentage of loans; and (v) portfolio-specific risk characteristics.

Portfolio-specific risk characteristics considered include: (i) collateral values/LTV ratios (above and below 70%); (ii) borrower credit scores under the FICO scoring system (above and below a score of 680); and (iii) other relevant portfolio risk elements such as income verificationloan balance that remains at the time of underwriting (stated income vs.non-stated income)a default event. The macroeconomic variables utilized as inputs in the Company’s quantitative modeling process were selected primarily based on their relevance and correlation to historical credit losses. The Company’s quantitative models yield a measurement of expected credit losses reflective of average historical loss rates for periods subsequent to the reasonable and supportable forecast period by reverting such modeling inputs to their historical mean while also considering loan/borrower specific attributes. This same forecast/reversion period is used for all macroeconomic variables employed in all of the Company’s models.

The measurement of expected credit losses is impacted by loan/borrower attributes and certain macroeconomic variables derived from an externally-sourced forward-looking economic scenario. Significant loan/borrower attributes utilized in the Company’s quantitative modeling include, among other things: (i) origination date; (ii) maturity date; (iii) payment type;
(iv) collateral type and amount; (v) current risk rating (as applicable); (vi) current unpaid balance and commitment utilization rate; and (vii) payment status/delinquency history. Significant macroeconomic variables utilized in the Company’s quantitative modeling include, among other things: (i) U.S. GDP; (ii) selected market interest rates including U.S. Treasury rates, Prime rate, 30-year fixed mortgage rate, BBB corporate bond rate (spread), among others; (iii) unemployment rates; and
(iv) commercial and residential property prices. In establishing its estimate of expected credit losses, the Company typically employs three separate, externally-sourced forward-looking economic scenarios. Those scenarios, which range from more benign to more severe, represent a ‘most likely outcome’ (the “Baseline” scenario) and two less likely scenarios referred to as the “Upside” scenario and the property’s intended use (owner-occupied,non-owner occupied, second home, etc.),“Downside” scenario.
82

Qualitative Component
The ACL on loans also includes qualitative considerations related to idiosyncratic risk factors, changes in current economic conditions that may not be reflected in quantitatively-derived results, weightings to economic scenarios based on an assessment of the combinationeconomic outlook and other relevant factors. These qualitative adjustments may increase or decrease management's estimate of which resultsexpected credit losses by a calculated percentage or amount based upon the estimated level of risk.
The various risks that may be considered in making qualitative adjustments include, among other things, the impact of:
(i) changes in lending policies and procedures, including changes in underwriting standards and practices for collections,
write-offs, and recoveries; (ii) actual and expected changes in international, national, regional, and local economic and business conditions and developments that affect collectability of the loan pools; (iii) changes in the nature and volume of the loan pools and in the terms of the underlying loans; (iv) changes in the experience, ability, and depth of our lending management and staff; (v) changes in volume and severity of past due financial assets, the volume of non-accrual assets, and the volume and severity of adversely classified or graded assets; (vi) changes in the quality of our credit review function; (vii) changes in the value of the underlying collateral for loans that are non-collateral dependent; (viii) the existence, growth, and effect of any concentrations of credit; and (ix) other external factors such as the regulatory, legal and technological environments, competition and events, such as natural disasters or health pandemics.
The weighted estimate of expected credit losses under various economic scenarios is compared to the result of the Baseline scenario with the difference included as an element of the qualitative component. The Company recognizes an approach using three scenarios may be insufficient in certain economic environments. This may result in a loan being classifiedchange to the weighting assigned to the three scenarios or the inclusion of additional scenarios.
For instance, as either “High”, “Moderate” or “Low” risk. These risk classifications are reviewed quarterly to ensurea result of a deterioration in U.S. economic conditions caused by the emergence, in March 2020, of the COVID-19 pandemic, and the corresponding increase in economic uncertainty, a fourth forward-looking economic scenario (the “Severe Downside” scenario) has also been considered for purposes of estimating expected credit losses since that changes withintime. All four scenarios reflect the portfolio,effects of the COVID-19 pandemic as well as the United States government’s monetary and fiscal response. Each scenario is assigned a weighting with the majority of the weighting placed on the Baseline scenario and lower weights placed on each of the Upside, Downside and Severe Downside scenarios. The weightings assigned by management are based on the economic indicatorsoutlook and industry developments, have been appropriately considered in establishing the related allowance for loan losses.

In establishing the allowance for loan losses for smaller-balance, homogeneous loans, the amount reflectingavailable information at each reporting date.

While the Company’s consideration of qualitativeloss estimation methodologies strive to reflect all relevant risk factors, is addeduncertainty exists associated with, but not limited to, potential imprecision in the estimation process due to the amount attributableinherent time lag of obtaining information and normal variations between estimates and actual outcomes, including with respect to historical portfolio loss experience. In this manner, historicalcharge-off data (whether periods or amounts) is not adjusted and the allowance for loan losses always includes a component attributable to qualitative factors, the degree of which may change from period to period as such qualitative factors indicate improving or worsening trends.forward-looking economic forecasts. The Company evaluates the qualitative factors on a quarterly basis in order to conclude that they continue to be appropriate. There were no significant changes in our approach to determining the qualitative component is designed to adjust the ACL to reflect such risk factors.
Individual Component
In some cases, management may determine that an individual loan exhibits unique risk characteristics which differentiate that loan from other loans within the pool. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the related allowance forACL are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk of the loan losses duringand economic conditions affecting the nine months ended September 30, 2017.

Individually Impaired Loans.The allowance for loan losses also includes specific allowances for individually impaired loans. Generally, the Company’s impaired loans consist of (i) classified commercial loans in excess of $750,000 that have been placed onnon-accrual status and (ii) loans classified as TDRs. Individually impaired loans are measured based upon observable market prices; the present value of expected future cash flows discounted at the loan’s original effective interest rate; or, in the case ofborrower’s industry, among other things. For collateral dependent loans, fair value of the collateral (basedexpected credit losses are based on appraisals and other market information) less cost to sell. If the recorded investment in a loan exceeds the amount measured as described in the preceding sentence, a specific allowance for loan losses would be established as a component of the overall allowance for loan losses or, in the case of a collateral dependent loan, acharge-off would be recorded for the difference between the loan’s recorded investment and management’s estimate of the fair value of the collateral (less cost to sell). It would be rareat the measurement date, adjusted for the Company to identify a loan that meets the criteria stated above and requires a specific allowance or acharge-off and not deem it impaired solely as a resultestimated selling costs if satisfaction of the existenceloan depends on the sale of a guarantee.

People’s United performs an analysisthe collateral. The Company reevaluates the fair value of its impaired loans, includingcollateral supporting collateral dependent impaired loans on a quarterly basis. Individually impaired collateral dependent loans are measured based upon the appraised value of the underlying collateral and other market information. Generally, the Company’s policy is to obtain updated appraisals for commercial collateral dependent loans when the loan is downgraded to a risk rating of “substandard” or “doubtful”, and the most recent appraisal is more than 12 months old or a determination has been made that the property has experienced a significant decline in value. Appraisals are prepared by independent, licensed third-party appraisers and are subject to review by the Company’s internal commercial appraisal department or external appraisers contracted by the commercial appraisal department. The conclusions of the external appraisal review are reviewed by the Company’s Chief Commercial Appraiser prior to acceptance. The Company’s policy with respect to impaired loans secured by residential real estate is to receive updated estimates of property values upon the loan being classified asnon-performing (typically upon becoming 90 days past due).

In determining the allowance for loan losses, People’s United gives appropriate consideration to the age of appraisals through its regular evaluation of other relevant qualitative and quantitative information. Specifically, between scheduled appraisals, property values are monitored within the commercial portfolio by reference to current originations of collateral dependent loans and the related appraisals obtained during underwriting as well as by reference to recent trends in commercial property sales as published by leading industry sources. Property values are monitored within the residential mortgage and home equity portfolios by reference to available market indicators, including real estate price indices within the Company’s primary lending areas.

In most situations where a guarantee exists, the guarantee arrangement is not a specific factor in the assessment of the related allowance for loan losses. However, the assessment of a guarantor’s credit strength is reflected in the Company’s internal loan risk ratings which, in turn, are an important factor in its allowance for loan loss methodology for loans within the commercial and commercial real estate portfolios.

People’s United did not change its methodologies with respect to determining the allowance for loan losses during the first nine months of 2017. As part of its ongoing assessment of the allowance for loan losses, People’s United regularly makes refinements to certain underlying assumptions used in its methodologies. However, such refinements did not have a material impact on the allowance for loan losses or the provision for loan losses as of or for the nine months ended September 30, 2017.

Acquired Portfolio

Loans acquired in a business combination are initially recorded at fair value with no carryover of an acquired entity’s previously established allowance for loan losses. Fair value of the loans is determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected, as adjusted for an estimate of future credit losses and prepayments, and then applying a market-based discount rate to those cash flows. Acquired loans are evaluated upon acquisition and classified as either purchased performing or PCI, which represents those acquired loans with specific evidence of deterioration in credit quality since origination and for which it is probable, at acquisition, that all contractually required principal and interest payments will not be collected. PCI loans are generally accounted for on a pool basis, with pools formed based on the loans’ common risk characteristics, such as loan collateral type and accrual status. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.

For purchased performing loans, the required allowance for loan losses is determined in a manner similar to that for originated loans with a provision for loan losses only recorded when the required allowance for loan losses exceeds any remaining purchase discount at the loan level. For PCI loans, the difference between contractually required principal and interest payments at the acquisition date and the undiscounted cash flows expected to be collected at the acquisition date is referred to as the “nonaccretable difference”, which includes an estimate of future credit losses expected to be incurred over the life of the loans in each pool. A decrease in the expected cash flows in subsequent periods requires the establishment of an allowance for loan losses at that time. At September 30, 2017 and December 31, 2016, the allowance for loan losses on acquired loans was $4.2 million and $6.3 million, respectively.

Under the accounting model for PCI loans, the excess of cash flows expected to be collected over the carrying amount of the loans, referred to as the “accretable yield”, is accreted into interest income over the life of the loans in each pool using the level yield method. Accordingly, PCI loans are not subject to classification asnon-accrual in the same manner as other loans. Rather, PCI loans are considered to be accruing loans because their interest income relates to the accretable yield recognized at the pool level and not to contractual interest payments at the loan level. The difference between contractually required principal and interest payments and the cash flows expected to be collected, referred to as the “nonaccretable difference”, includes estimates of both the impact of prepayments and future credit losses expected to be incurred over the life of the loans in each pool. As such, charge-offs on PCI loans are first applied to the nonaccretable difference and then to any allowance for loan losses recognized subsequent to acquisition. A decrease in expected cash flows in subsequent periods may indicate that the loan pool is impaired, which would require the establishment of an allowance for loan losses by a charge to the provision for loan losses.

Selected asset quality metrics presented below distinguish between the ‘originated’ portfolio and the ‘acquired’ portfolio. All loans acquired in connection with acquisitions comprise the acquired loan portfolio; all other loans of the Company comprise the originated portfolio, including originations subsequent to the respective acquisition dates.


83

Provision and Allowance for LoanCredit Losses

   Three Months Ended  Nine Months Ended 

(dollars in millions)

  Sept. 30,
2017		  June 30,
2017		  Sept. 30,
2016		  Sept. 30,
2017		  Sept. 30,
2016		 

Allowance for loan losses on originated loans:

      

Balance at beginning of period

  $227.9  $225.0  $213.0  $223.0  $202.9 

Charge-offs

   (5.8)   (6.7)   (3.8)   (17.1)   (17.3) 

Recoveries

   1.5   1.8   1.4   5.5   4.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net loan charge-offs

   (4.3)   (4.9)   (2.4)   (11.6)   (13.2) 

Provision for loan losses

   5.6   7.8   8.4   17.8   29.3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at end of period

  $229.2  $227.9  $219.0  $229.2  $219.0 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Allowance for loan losses on acquired loans:

      

Balance at beginning of period

  $3.7  $6.3  $7.4  $6.3  $8.1 

Charge-offs

   (1.0)   (1.9)   (0.1)   (2.9)   (0.4) 

Recoveries

   0.1   —     —     0.1   —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net loan charge-offs

   (0.9)   (1.9)   (0.1)   (2.8)   (0.4) 

Provision for loan losses

   1.4   (0.7)   —     0.7   (0.4) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at end of period

  $4.2  $3.7  $7.3  $4.2  $7.3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Originated commercial allowance for loan losses as a percentage of originated commercial loans

   0.94%   0.94%   0.94%   0.94%   0.94% 

Originated retail allowance for loan losses as a percentage of originated retail loans

   0.35   0.35   0.30   0.35   0.30 

Total originated allowance for loan losses as a percentage of:

      

Originated loans

   0.77   0.77   0.76   0.77   0.76 

Originatednon-performing loans

   131.6   128.1   142.0   131.6   142.0 

Three Months EndedNine Months Ended
(dollars in millions)Sept. 30,
2021		June 30,
2021		Sept. 30,
2020		Sept. 30,
2021		Sept. 30,
2020
ACL:
Balance at beginning of period$348.1 $399.1 $414.0 $425.1 $246.6 
CECL transition adjustment— — —— 72.2
Balance at beginning of period, adjusted348.1 399.1 414.0 425.1 318.8 
Charge-offs(13.2)(13.9)(19.3)(44.9)(42.2)
Recoveries5.5 3.6 2.0 14.5 5.8 
Net loan charge-offs(7.7)(10.3)(17.3)(30.4)(36.4)
Provision for credit losses12.0 (40.7)27.1 (42.3)141.4 
Balance at end of period$352.4 $348.1 $423.8 $352.4 $423.8 
ACL as a percentage of:
Total loans0.89 %0.84 %0.94 %0.89 %0.94 %
Non-accrual loans109.9 106.1 138.4 109.9 138.4 


The provision for loancredit losses on originated loans totaled $5.6$12.0 million for the three months ended September 30, 2017,2021, reflecting $4.3$7.7 million in net loan charge-offs and a $3.1$4.3 million increase in the originated allowance for loan losses in response to portfolio-specific risk factors and loan growth.ACL from June 30, 2021. The provision for loancredit losses on originated loans totaled $8.4 million for theyear-ago period, reflecting $2.4 million in net loancharge-offs and a $6.7 million increase2021 reflects notable improvements in the originated allowance foreconomic outlook (e.g. GDP and unemployment) largely attributable to continued COVID-19 vaccine distribution, an easing of social distancing restrictions and further government stimulus. Net loan losses in response toportfolio-specific risk factors and loan growth. The provision for loan losses on acquired loanscharge-offs for the three months ended September 30, 2017 reflects2021 include a commercial real estate loan, impairment.

which had a previously established specific reserve, where the borrower was negatively impacted by the COVID-19 pandemic. The provision for credit losses on loans totaled $27.1 million in the year-ago period, reflecting $17.3 million in net loan charge-offs and an increase in the ACL reflecting the economic uncertainty brought about by COVID-19, portfolio-specific risk factors and loan mix. Excluding PPP loans, the ACL as a percentage of total loans was 0.91% at September 30, 2021 and 1.02% at
December 31, 2020.

Management believes that the level of the allowance for loan lossesACL at September 30, 2017 is2021 represents an appropriate to cover probableestimate of lifetime expected credit losses.

Loan Charge-Offs

The Company’scharge-off policies, which comply with standards established by banking regulators, are consistently applied from period to period. Charge-offs are recorded on a monthly basis. Partiallycharged-off loans continue to be evaluated on a monthly basis and additional charge-offs or loancredit loss provisions may be recorded on the remaining loan balance based on the same criteria.

For unsecured consumer loans, charge-offs are generally recorded when the loan is deemed to be uncollectible or
120 days past due, whichever occurs first. For consumer loans secured by real estate, including residential mortgage loans, charge-offs are generally recorded when the loan is deemed to be uncollectible or 180 days past due, whichever occurs first, unless it can be clearly demonstrated that repayment will occur regardless of the delinquency status. Factors that demonstrate an ability to repay may include: (i) a loan that is secured by adequate collateral and is in the process of collection; (ii) a loan supported by a valid guarantee or insurance; or (iii) a loan supported by a valid claim against a solvent estate.

For commercial loans, acharge-off is recorded when the Company determines that it will not collect all amounts contractually due based on the fair value of the collateral less cost to sell, or the present value of expected future cash flows.

sell.

The decision whether tocharge-off all or a portion of a loan rather than to record a specific or general loss allowance is based on an assessment of all available information that aids in determining the loan’s net realizable value. Typically, this involves consideration of both (i) the fair value of any collateral securing the loan, including whether the estimate of fair value has been derived from an appraisal or other market information and (ii) other factors affecting the likelihood of repayment, including the existence of guarantees and insurance. If the amount by which the Company’s recorded investment in the loan exceeds its net realizable value is deemed to be a confirmed loss, acharge-off is recorded. Otherwise, a specific or general reserve is established, as applicable. The comparatively low level of net loan charge-offs in recent years, in terms of absolute dollars and as a percentage of average total loans, may not be sustainable in the future.

84

Net Loan Charge-Offs

   Three Months Ended   Nine Months Ended 

(in millions)

  Sept. 30,
2017		   June 30,
2017		   Sept. 30,
2016		   Sept. 30,
2017		   Sept. 30,
2016		 

Commercial:

          

Commercial real estate

  $1.5   $1.2   $0.2   $2.7   $0.8 

Commercial and industrial

   2.0    1.8    0.4    4.6    3.7 

Equipment financing

   0.5    2.7    1.3    3.7    5.0 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   4.0    5.7    1.9    11.0    9.5 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Retail:

          

Residential mortgage

   0.1    0.1    0.4    0.3    1.1 

Home equity

   0.9    0.7    0.1    2.7    2.7 

Other consumer

   0.2    0.3    0.1    0.4    0.3 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   1.2    1.1    0.6    3.4    4.1 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net loan charge-offs

  $5.2   $6.8   $2.5   $14.4   $13.6 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Recoveries)
Three Months EndedNine Months Ended
(in millions)Sept. 30,
2021		June 30,
2021		Sept. 30,
2020		Sept. 30,
2021		Sept. 30,
2020
Commercial:
Commercial real estate$3.7 $0.8 $4.1 $10.3 $9.3 
Commercial and industrial0.3 3.0 6.9 2.8 7.9 
Equipment financing4.2 6.9 6.2 18.3 15.3 
MW/ABL— — — — — 
Total8.2 10.7 17.2 31.4 32.5 
Retail:
Residential mortgage(0.7)(0.4)(0.2)(1.4)0.6 
Home equity(0.1)(0.2)— (0.5)0.7 
Other consumer0.3 0.2 0.3 0.9 2.6 
Total(0.5)(0.4)0.1 (1.0)3.9 
Total net loan charge-offs$7.7 $10.3 $17.3 $30.4 $36.4 


Net Loan Charge-Offs (Recoveries) as a Percentage of Average Total Loans (Annualized)

   Three Months Ended  Nine Months Ended 
   Sept. 30,
2017		  June 30,
2017		  Sept. 30,
2016		  Sept. 30,
2017		  Sept. 30,
2016		 

Commercial:

      

Commercial real estate

   0.05%   0.04%   0.01%   0.03%   0.01% 

Commercial and industrial

   0.09   0.09   0.02   0.07   0.06 

Equipment financing

   0.06   0.37   0.17   0.16   0.22 

Retail:

      

Residential mortgage

   0.01   0.01   0.03   0.01   0.03 

Home equity

   0.18   0.13   0.02   0.17   0.17 

Other consumer

   1.43   1.66   1.23   0.95   1.03 

Total portfolio

   0.06%   0.09%   0.04%   0.06%   0.06% 

Non-Performing Assets

Three Months EndedNine Months Ended
Sept. 30,
2021		June 30,
2021		Sept. 30,
2020		Sept. 30,
2021		Sept. 30,
2020
Commercial:
Commercial real estate0.11 %0.02 %0.12 %0.10 %0.09 %
Commercial and industrial0.01 0.12 0.25 0.06 0.10 
Equipment financing0.34 0.56 0.50 0.49 0.41 
MW/ABL— — — (0.02)(0.01)
Retail:
Residential mortgage(0.04)(0.02)(0.01)(0.02)0.01 
Home equity(0.03)(0.03)— (0.03)0.05 
Other consumer1.10 1.13 1.03 1.24 2.65 
Total portfolio0.08 %0.10 %0.15 %0.10 %0.11 %
Past Due and Non-Accrual Loans
Loans are considered past due if required principal and interest payments have not been received as of the date such payments were contractually due. A loan is generally considered“non-performing” “non-performing” when it is placed onnon-accrual status. A loan is generally placed onnon-accrual status when it becomes 90 days past due as to interest or principal payments. Past due status is based on the contractual payment terms of the loan. A loan may be placed onnon-accrual status before it reaches 90 days past due if such loan has been identified as presenting uncertainty with respect to the collectability of interest and principal. A loan past due 90 days or more may remain on accruing status if such loan is both well secured and in the process of collection.

All previously accrued but unpaid interest onnon-accrual loans is reversed from interest income in the period in which the accrual of interest is discontinued. Interest payments received onnon-accrual loans (including impaired loans) are generally applied as a reduction of principal if future collections are doubtful, although such interest payments may be recognized as income. A loan remains onnon-accrual status until the factors that indicated doubtful collectability no longer exist or until a loan is determined to be uncollectible and is charged offcharged-off against the allowance for loan losses.ACL. There were no loans past due 90 days or more and still accruing interest at September 30, 20172021 or December 31, 2016.

2020.


85

Non-Performing Assets

(dollars in millions)

  Sept. 30,
2017		  June 30,
2017		  March 31,
2016		  Dec. 31,
2016		  Sept. 30,
2016		 

Originatednon-performing loans:

      

Commercial:

      

Commercial real estate

  $36.7  $42.9  $23.4  $22.3  $23.4 

Commercial and industrial

   34.9   40.2   47.4   41.5   40.0 

Equipment financing

   54.1   48.2   47.4   39.4   46.0 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

   125.7   131.3   118.2   103.2   109.4 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Retail:

      

Residential mortgage

   33.8   30.8   26.3   27.4   28.2 

Home equity

   14.8   15.8   15.2   17.4   16.5 

Other consumer

   —     —     —     —     —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

   48.6   46.6   41.5   44.8   44.7 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total originatednon-performing loans (1)

   174.3   177.9   159.7   148.0   154.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

REO:

      

Residential

   4.7   6.7   10.9   8.1   7.9 

Commercial

   6.3   4.3   4.1   4.0   11.2 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total REO

   11.0   11.0   15.0   12.1   19.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Repossessed assets

   5.4   9.2   8.2   7.2   6.9 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Totalnon-performing assets

  $190.7  $198.1  $182.9  $167.3  $180.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Originatednon-performing loans as a percentage of originated loans

   0.59%   0.60%   0.55%   0.51%   0.54% 

Non-performing assets as a percentage of:

      

Originated loans, REO and repossessed assets

   0.64   0.67   0.63   0.57   0.63 

Tangible stockholders’ equity and originated allowance for loan losses

   5.60   5.65   5.57   5.19   5.98 

(1)
(dollars in millions)Sept. 30, 2021June 30, 2021Mar. 31, 2021Dec. 31, 2020Sept. 30, 2020
Non-accrual loans:
Commercial:
Commercial real estate$98.7 $96.1 $90.2 $60.4 $85.3 
Commercial and industrial56.3 56.1 68.2 75.4 85.7 
Equipment financing99.2 107.2 118.1 109.3 49.0 
MW/ABL0.9 0.9 1.0 1.0 1.0 
Total Commercial255.1 260.3 277.5 246.1 221.0 
Retail:
Residential mortgage49.1 49.5 56.9 62.3 62.9 
Home equity16.3 18.1 18.7 20.5 22.1 
Other consumer— 0.1 0.2 0.2 0.2 
Total Retail65.4 67.7 75.8 83.0 85.2 
Total non-accrual loans (1)320.5 328.0 353.3 329.1 306.2 
REO:
Residential1.6 1.6 3.5 3.2 1.9 
Commercial— 3.5 1.5 3.6 3.6 
Total REO1.6 5.1 5.0 6.8 5.5 
Repossessed assets7.4 5.4 5.4 5.7 9.7 
Total non-performing assets$329.5 $338.5 $363.7 $341.6 $321.4 
Non-accrual loans as a percentage of total loans0.81 %0.79 %0.83 %0.75 %0.68 %
Non-performing assets as a percentage of:
Total loans, REO and repossessed assets0.83 0.82 0.85 0.78 0.71 
Tangible stockholders’ equity and ACL6.20 6.43 7.05 6.59 6.41 
(1)Reported net of government guarantees totaling: $4.0 million at September 30, 2017; $4.2 million at June 30, 2017; $4.4 million at March 31, 2017; $13.1 million at December 31, 2016; and $13.0 million at September 30, 2016. These government guarantees relate, almost entirely, to guarantees provided by the Small Business Administration as well as selected other Federal agencies and represent the carrying value of the loans that are covered by such guarantees, the extent of which (i.e. full or partial) varies by loan. At September 30, 2017, the principal loan classes to which these government guarantees relate are commercial and industrial loans (95%) and commercial real estate loans (5%).

The preceding table excludes acquired loans that are (i) accounted for as PCI loans or (ii) covered by an FDIC loss-share agreement (“LSA”) totaling: $24.5$1.1 million at September 30, 2017; $25.12021; $1.2 million at June 30, 2017; $22.12021;
$2.5 million at March 31, 2017; $24.72021; $2.5 million at December 31, 2016;2020; and $24.6$2.4 million at September 30, 2016. Such loans otherwise meet People’s United’s definition2020. These government guarantees relate, almost entirely, to guarantees provided by the SBA as well as selected other Federal agencies and represent the carrying value of anon-performing loan but are excluded because the loans are included in loan pools that are considered performing and/or credit losses are covered by an FDIC LSA. The discounts arising from recording these loans at fair value were due, in part, to credit quality. Accordingly, such loans are generally accounted for on a pool basis andguarantees, the accretable yield on the pools is being recognized as interest income over the lifeextent of the loans based on expected cash flows at the pool level. In addition, the table excludes purchased performing loans totaling $2.1 million atwhich
(i.e. full or partial) varies by loan. At September 30, 20172021, these government guarantees relate to commercial and $1.3 million at June 30, 2017, of which $0.5 million and $1.3 million, respectively, becamenon-performing subsequent to acquisition.

Totalnon-performingindustrial loans.

Non-performing assets increased $23.4decreased $12.1 million from December 31, 20162020, primarily reflecting decreases of $19.1 million in non-accrual commercial and equaled 0.64% of originatedindustrial loans, $13.2 million in non-accrual residential mortgage loans, $10.1 million in
non-accrual equipment financing loans, $5.2 million in real estate owned (“REO”) and repossessed assets at September 30, 2017. The$4.2 million in non-accrual home equity loans, partially offset by a $38.3 million increase in totalnon-performing assets from December 31, 2016 reflects increases innon-performing equipment financing loans of $14.7 million,non-performingnon-accrual commercial real estate loans of $14.4 million andnon-performing residential mortgage(primarily due to three loans of $6.4 million, partially offset by decreases innon-performing commercial and industrial loans of $6.6 million,non-performing home equity loans of $2.6 million, repossessed assets of $1.8 million, and REO of $1.1 million.

All loans and REO acquired inwhere the Butler Bank acquisition are subject to an FDIC LSA (expiring in 2020), which provides for coverageborrowers were negatively impacted by the FDIC, up to certain limits, on all such ‘covered assets’COVID-19 pandemic). The FDIC is obligated to reimburse the Company for 80% of any future losses on covered assets up to $34 million. The Company will reimburse the FDIC for 80% of recoveries with respect to losses for which the FDIC paid the Company 80% reimbursement under the loss-sharing coverage.

In addition to thenon-performing non-accrual loans discussed above, People’s United has also identified $596.5 million$1.7 billion in potential problem loans at September 30, 2017 (all of which are included in the originated portfolio).2021. Potential problem loans represent loans that are currently performing, but for which known information about possible credit deterioration on the part of the related borrowers causes management to have concerns as to the ability of such borrowers to comply with contractual loan repayment terms and which may result in the disclosure of such loans asnon-performing at some time in the future. The potential problem loans are generally loans that, although performing, have been classified as “substandard” in accordance with People’s United’s loan rating system, which is consistent with guidelines established by banking regulators.

86

At September 30, 2017,2021, potential problem loans consisted of equipment financingcommercial real estate loans ($263.5889.9 million), commercial and industrial loans ($230.4447.4 million), equipment financing loans ($370.7 million) and commercial real estateMW/ABL loans ($102.636.7 million). Such loans are closely monitored by management and have remained in performing status for a variety of reasons including, but not limited to, delinquency status, borrower payment history and fair value of the underlying collateral. Management cannot predict the extent to which economic conditions may worsen or whether other factors may adversely impact the ability of these borrowers to make payments. Accordingly, there can be no assurance that potential problem loans will not become 90 days or more past due, be placed onnon-accrual status, be restructured, or require additional provisions for loancredit losses.

The levels ofnon-performing assets and potential problem loans are expected to fluctuate in response to changing economic and market conditions, and the relative sizes of the respective loan portfolios, along with management’s degree of success in resolving problem assets. While management takes a proactive approach with respect to the identification and resolution of problem loans, the level ofnon-performing assets may increase in the future.

Liquidity

Liquidity
Liquidity is defined as the ability to generate sufficient cash flows to meet all present and future funding requirements at reasonable costs. Liquidity management addresses both People’s United’s and the Bank’s ability to fund new loans and investments as opportunities arise, to meet customer deposit withdrawals and to repay borrowings and subordinated notes as they mature. People’s United’s, as well as the Bank’s, liquidity positions are monitored daily by management. The Asset and Liability Management Committee (“ALCO”) of the Bank has been authorized by the Board of Directors of People’s United to set guidelines to ensure maintenance of prudent levels of liquidity for People’s United as well as for the Bank. ALCO reports to the Treasury and Finance Committee of the Board of Directors of People’s United.

Asset liquidity is provided by: cash; short-term investments and securities purchased under agreements to resell; proceeds from maturities, principal repayments and sales of securities; and proceeds from scheduled principal collections, prepayments and sales of loans. In addition, certain securities may be used to collateralize borrowings under repurchase agreements. The Consolidated Statements of Cash Flows present data on cash provided by and used in People’s United’s operating, investing and financing activities. At September 30, 2017,2021, People’s United (parent company) liquid assets included $250$440 million in cash, and $84 million in debt securities available for sale, while the Bank’s liquid assets included $3.1$6.3 billion in debt securities available for saleavailable-for-sale and $467 million$7.7 billion in cash and cash equivalents. Securities available for saleAt September 30, 2021, debt securities available-for-sale with a fair value of $2.92$3.6 billion at September 30, 2017and debt securities
held-to-maturity with an amortized cost of $1.8 billion were pledged as collateral for public deposits and for other purposes.

Liability liquidity is measured by both People’s United’s and the Bank’s ability to obtain deposits and borrowings at
cost-effective rates that are diversified with respect to markets and maturities. Deposits, which are considered the most stable source of liability liquidity, totaled $32.5$52.9 billion at September 30, 20172021 and represented 75%84% of total funding (the sum of total deposits, total borrowings, notes and debentures, and stockholders’ equity). Borrowings are used to diversify People’s United’s funding mix and to support asset growth. BorrowingsBoth borrowings and notes and debentures totaled $4.1$1.0 billion and $906 million, respectively, at September 30, 2017,2021, each representing 10% and 2%, respectively, of total funding at that date.

The Bank’s current available sources of borrowings include: federal funds purchased, advances from the Federal Home Loan Bank (the “FHLB”) of Boston and the Federal Reserve Bank of New York (the “FRB-NY”),FRB-NY, and repurchase agreements. At September 30, 2017,2021, the Bank’s total borrowing capacity from (i) the FHLB of Boston and the FRB-NY for advances and (ii) repurchase agreements was $10.6$16.6 billion based on the level of qualifying collateral available for these borrowings. In addition, the Bank had unsecured borrowing capacity of $1.0 billion at that date. FHLB advances are secured by the Bank’s investment in FHLB stock and by a security agreement that requires the Bank to maintain, as collateral, sufficient qualifying assets not otherwise pledged (principally single-family residential mortgage loans, home equity loans lines of credit and loans, and commercial real estate loans).

At September 30, 2017,2021, the Bank had outstanding commitments to originate loans totaling $1.4$1.7 billion and approved, but unused, lines of credit extended to customers totaling $6.6$11.4 billion (including $2.1$3.1 billion of HELOCs).

The sources of liquidity discussed above are deemed by management to be sufficient to fund outstanding loan commitments and to meet both People’s United’s and the Bank’s other obligations.

Stockholders’ Equity and Dividends

87

Stockholders' Equity and Dividends
People’s United’s total stockholders’ equity was $5.75$7.78 billion at September 30, 2017,2021, a $604.2$180.2 million increase from December 31, 2016.2020. This increase primarily reflects: (i) shares issued in the Suffolk acquisition with a fair value of $484.8 million; (ii) net income of $230.9$455.0 million for the nine months ended
September 30, 2021, partially offset by (i) common and preferred dividends paid totaling $230.4 million in the nine months ended September 30, 2017; (iii) net stock option2021 and restricted stock-related transactions during the nine months ended September 30, 2017 totaling $38.2 million; and (iv) a $25.3(ii) an $87.7 million decreaseincrease in accumulated other comprehensive loss (“AOCL”) since December 31, 2016, partially offset by common dividends paid2020. The increase in AOCL, net of $169.3tax, primarily reflects a $100.4 million increase in the nine months ended September 30, 2017.unrealized loss on debt securities available-for-sale. As a percentage of total assets, stockholders’ equity was 13.1%12.2% and 12.7%12.1% at
September 30, 20172021 and December 31, 2016,2020, respectively. Tangible common equity equaled 7.1%7.8% of tangible assets at September 30, 20172021 compared to 7.2%7.5% at December 31, 2016.

2020.

In October 2017,2021, People’s United’s Board of Directors declared a quarterly dividend on its common stock of $0.1725
$0.1825 per common share. The dividend is payable on November 15, 20172021 to shareholders of record on November 1, 2017.2021. Also in October 2017,2021, People’s United’s Board of Directors declared a dividend on its preferred stock, subject to and conditioned upon the effective time of the merger between the Company and M&T not occurring prior to the close of business on December 1, 2021. The dividend is payable on December 15, 20172021 to preferred shareholders of record as of
December 1, 2017.2021. In July 2017,August 2021, the Bank paid a cash dividend of $73$168.0 million to People’sPeople's United (parent company).

Regulatory Capital Requirements

On January 1, 2015, both

Regulatory Capital Requirements
Both People’s United and the Bank becameare subject to new capital rules (the “Basel III capital rules”) issued by U.S. banking agencies. When fullyphased-in on January 1, 2019, theThe Basel III capital rules will require U.S. financial institutions to maintain: (i) a minimum ratio of CET 1 capital to totalrisk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% CET 1 risk-based capital ratio, as that buffer isphased-in beginning in 2016, effectively resulting in a minimum CET 1 risk-based capital ratio of 7.0% upon full implementation)); (ii) a minimum ratio of Tier 1 capital to total risk-weighted assets of at least 6.0%, plus the capital conservation buffer (which is added to the 6.0% Tier 1risk-based capital ratio, as that buffer isphased-in beginning in 2016, effectively resulting in a minimum Tier 1risk-based capital ratio of 8.5% upon full implementation)); (iii) a minimum ratio of Total (that is, Tier 1 plus Tier 2) capital to total risk-weighted assets of at least 8.0%, plus the capital conservation buffer (which is added to the 8.0% Total risk-based capital ratio, as that buffer isphased-in beginning in 2016, effectively resulting in a minimum Total risk-based capital ratio of 10.5% upon full implementation)); and (iv) a minimum Tier 1 Leverage capital ratio of at least 4.0%, calculated as the ratio of Tier 1 capital to average total assets, as defined.

In order to avoid limitations on distributions, including dividend payments, and certain discretionary bonus payments, a financial institution must hold a capital conservation buffer of 2.50% above its minimum risk-based capital requirements.
For 2017,regulatory capital purposes, subordinated note issuances qualify, up to certain limits, as Tier 2 capital for Total
risk-based capital. In accordance with regulatory capital rules, the eligible amount of the Bank’s $400 million subordinated notes due 2024 and People's United's $75 million subordinated notes due 2024 included in Tier 2 capital conservation buffer is 1.25%. The capital conservation buffer increases forwill both be reduced each year duringuntil the year of final maturity by 20%, or $80 million and $15 million, respectively.
In December 2018, the Federal banking agencies approved a final rule allowing an option to phase-in, period as follows: 1.875% over three years, the day one regulatory capital effects of the CECL standard. In March 2020, the Federal banking agencies issued an interim final rule providing an alternative option to delay, for two years, an estimate of the CECL standard’s effect on regulatory capital (relative to incurred loss methodology's effect on regulatory capital), followed by a three-year transition period. The Company has elected the alternative option provided in 2018; and 2.5% in 2019.

the March 2020 interim final rule.

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The following is a summary of People’s United’s and the Bank’s regulatory capital amounts and ratios under the Basel III capital rules. The minimum capital required amounts as of September 30, 2017 and December 31, 2016 are based on the capital conservation bufferphase-in provisions of the Basel III capital rules. In connection with the adoption of the Basel III capital rules, both the Company and the Bank elected toopt-out of the requirement to include most components of AOCL in CET 1 capital. At September 30, 2017,2021, People’s United’s and the Bank’s total risk-weighted assets, as defined, were both $33.0$42.7 billion, compared to $30.5$45.1 billion for bothand $45.0 billion at
December 31, 2016. Management currently estimates that,2020, respectively. For regulatory capital purposes, PPP loans are assigned a zero risk-weighting as a result of September 30, 2017, both the Company’srelated SBA guarantee on such loans.
  Minimum Capital Required
Classification as
Well-Capitalized
 At September 30, 2021
(dollars in millions)AmountRatioAmountRatioAmountRatio
Tier 1 Leverage Capital (1):
People’s United$5,242.6 8.6 %$2,451.1 4.0 %N/A N/A
Bank5,375.7 8.8 2,450.9 4.0 $3,063.6 5.0 %
CET 1 Risk-Based Capital (2):
People’s United4,998.5 11.7 2,990.5 7.0  N/A N/A
Bank5,375.7 12.6 2,990.1 7.0 2,776.5 6.5 
Tier 1 Risk-Based Capital (3):
People’s United5,242.6 12.3 3,631.3 8.5 2,563.2 6.0 
Bank5,375.7 12.6 3,630.9 8.5 3,417.3 8.0 
Total Risk-Based Capital (4):
People’s United5,732.1 13.4 4,485.7 10.5 4,272.1 10.0 
Bank5,820.2 13.6 4,485.2 10.5 4,271.6 10.0 
Minimum Capital RequiredClassification as
At December 31, 2020Well-Capitalized
(dollars in millions)AmountRatioAmountRatioAmountRatio
Tier 1 Leverage Capital (1):
People's United$4,967.8 8.3 %$2,388.4 4.0 %N/AN/A
Bank5,168.4 8.7 2,387.9 4.0 $2,984.8 5.0 %
CET 1 Risk-Based Capital (2):
People's United4,723.7 10.5 3,155.3 7.0 N/AN/A
Bank5,168.4 11.5 3,151.1 4.0 2,926.0 6.5 
Tier 1 Risk-Based Capital (3):
People's United4,967.8 11.0 3,831.4 8.5 2,704.5 6.0 
Bank5,168.4 11.5 3,826.3 8.5 3,601.3 8.0 
Total Risk-Based Capital (4):
People's United5,589.5 12.4 4,732.9 10.5 4,507.5 10.0 
Bank5,745.1 12.8 4,726.7 10.5 4,501.6 10.0 
(1)Tier 1 Leverage Capital ratio represents CET 1 Capital plus Additional Tier 1 Capital instruments (together, “Tier 1 Capital”) divided by Average Total Assets (less goodwill, other acquisition-related intangibles and other deductions from CET 1 Capital). Average PPP loans are included in Average Total Assets.
(2)CET 1 Risk-Based Capital ratio represents equity capital, as defined, less: (i) after-tax net unrealized gains (losses) on certain securities classified as available-for-sale; (ii) after-tax net unrealized gains (losses) on securities transferred to held-to-maturity; (iii) goodwill and other acquisition-related intangible assets; and (iv) the amount recorded in AOCL relating to pension and other postretirement benefits divided by Total Risk-Weighted Assets.
(3)Tier 1 Risk-Based Capital ratio represents Tier 1 Capital divided by Total Risk-Weighted Assets.
(4)Total Risk-Based Capital ratio represents Tier 1 Capital plus subordinated notes and debentures, up to certain limits, and the Bank’s risk-based capital ratios could be negatively impactedACL, up to 1.25% of Total Risk-Weighted Assets, divided by as much as10-20 basis points on a “fullyphased-in” basis.

          Minimum Capital Required  Classifiaction as 
   As of September 30, 2017  Basel III Phase-In (2017)  Well-Capitalized 

(dollars in millions)

  Amount   Ratio  Amount   Ratio  Amount   Ratio 

Tier 1 Leverage Capital (1):

          

People’s United

  $3,381.1    8.3%  $1,634.8    4.0%   N/A    N/A 

Bank

   3,508.4    8.6   1,631.1    4.0  $2,038.8    5.0% 

CET 1 Risk-Based Capital (2):

          

People’s United

   3,137.1    9.5   1,899.2    5.750   N/A    N/A 

Bank

   3,508.4    10.6   1,896.4    5.750   2,143.8    6.5 

Tier 1 Risk-Based Capital (3):

          

People’s United

   3,381.1    10.2   2,394.6    7.250   1,981.8    6.0 

Bank

   3,508.4    10.6   2,391.1    7.250   2,638.5    8.0 

Total Risk-Based Capital (4):

          

People’s United

   3,964.3    12.0   3,055.2    9.250   3,302.9    10.0 

Bank

   4,144.1    12.6   3,050.8    9.250   3,298.1    10.0 
          Minimum Capital Required  Classifiaction as 
     As of December 31, 2016    Basel III Phase-In (2016)  Well-Capitalized 

(dollars in millions)

  Amount   Ratio  Amount   Ratio  Amount   Ratio 

Tier 1 Leverage Capital (1):

          

People’s United

  $3,256.1    8.4%  $1,546.7    4.0%   N/A    N/A 

Bank

   3,430.5    8.9   1,537.0    4.0  $1,921.2    5.0% 

CET 1 Risk-Based Capital (2):

          

People’s United

   3,012.0    9.9   1,981.7    5.125   N/A    N/A 

Bank

   3,430.5    11.3   1,969.2    5.125   2,497.6    6.5 

Tier 1 Risk-Based Capital (3):

          

People’s United

   3,256.1    10.7   2,023.3    6.625   1,832.4    6.0 

Bank

   3,430.5    11.3   2,019.9    6.625   2,439.1    8.0 

Total Risk-Based Capital (4):

          

People’s United

   3,802.9    12.5   2,634.1    8.625   3,054.0    10.0 

Bank

   4,062.1    13.3   2,629.7    8.625   3,048.9    10.0 

Total Risk-Weighted Assets.
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(1)Tier 1 Leverage Capital ratio represents CET 1 Capital plus Additional Tier 1 Capital instruments (together, “Tier 1 Capital”) divided by Average Total Assets (less goodwill, other acquisition-related intangibles and other deductions from CET 1 Capital).
Market Risk Management
(2)CET 1 Risk-Based Capital ratio represents equity capital, as defined, less:(i) after-tax net unrealized gains (losses) on certain securities classified as available for sale;(ii) after-tax net unrealized gains (losses) on securities transferred to held to maturity; (iii) goodwill and other acquisition-related intangible assets; and (iv) the amount recorded in AOCL relating to pension and other postretirement benefits divided by Total Risk-Weighted Assets.
(3)Tier 1 Risk-Based Capital ratio represents Tier 1 Capital divided by Total Risk-Weighted Assets.
(4)Total Risk-Based Capital ratio represents Tier 1 Capital plus subordinated notes and debentures, up to certain limits, and the allowance for loan losses, up to 1.25% of Total Risk-Weighted Assets, divided by Total Risk-Weighted Assets.

U.S. banking agencies recently released proposals for comment intended to simplify certain aspects of the regulatory capital rules and to extend the regulatory capital treatment of certain transition items. Management does not expect the impact of these proposals to have a material effect on the Company’s or the Bank’srisk-based capital ratios.

Market Risk Management

Market risk represents the risk of loss to earnings, capital and the economic values of certain assets and liabilities resulting from changes in interest rates, equity prices and foreign currency exchange rates. The only significant market risk exposure for People’s United at this time is IRR, which is a result of the Company’s core business activities of making loans and accepting deposits.

Interest Rate Risk

The effective management of IRR is essential to achieving the Company’s financial objectives. Responsibility for overseeing management of IRR resides with ALCO. The goal of ALCO is to generate a stable net interest margin over entire interest rate cycles regardless of changes in either short- or long-term interest rates. Generating earnings by taking excessive IRR is prohibited by the IRR limits established by the Company’s Board of Directors. ALCO manages IRR by using two primary risk measurement techniques: simulation of net interest income and simulation of economic value of equity. These two measurements are complementary and provide both short-term and long-term risk profiles of the Company.

Net Interest Income at Risk Simulation is used to measure the sensitivity of net interest income to changes in market rates over a forward twelve-month period.period of time, such as 12 or 24 months. This simulation captures underlying product behaviors, such as asset and liabilityre-pricing repricing dates, balloon dates, interest rate indices and spreads, rate caps and floors, as well as other behavioral attributes. The simulation of net interest income also requires a number of key assumptions such as: (i) future balance sheet volume and mix assumptions that are management judgments based on estimates and historical experience; (ii) prepayment projections for loans and securities that are projected under each interest rate scenario using internal and external analytics; (iii) new business loan spreads that are based on recent new business origination experience; and (iv) deposit pricing assumptions that are based on historical regression modelsexperience and management judgment. Combined, these assumptions can be inherently uncertain, and as a result, actual results may differ from simulation forecasts due to the timing, magnitude and frequency of interest rate changes, future business conditions, as well as unanticipated changes in management strategies.

The Company uses two sets of standard scenarios to measure net interest income at risk. Parallel shock scenarios assume instantaneous parallel movements in the yield curve compared to a flat yield curve scenario.

Yield curve twist scenarios assume the shape of the curve flattens or steepens instantaneously centered on the 18-month point of the curve, thereby segmenting the yield curve into a “short-end” and a “long-end”.

The following tables set forth the estimated percent change in the Company’s net interest income at risk overone-year simulation periods beginning September 30, 20172021 and December 31, 2016. Given the interest rate environment at those dates, simulations for interest rate declines of more than 100 basis points were not modeled.

   Estimated Percent Change in 
Parallel Shock Rate Change  Net Interest Income 

(basis points)                       

  September 30, 2017  December 31, 2016 

+300

   10.3%   10.1% 

+200

   7.3   7.3 

+100

   3.9   4.0 

-100

   (6.0)   n/a 

   Estimated Percent Change in 
Yield Curve Twist Rate Change  Net Interest Income 

(basis points)                              

  September 30, 2017  December 31, 2016 

Short End-100

   (2.8)%   n/a% 

Short End +100

   1.8   1.7 

Short End +200

   3.4   3.3 

Long End-100

   (3.0)   (3.4) 

Long End +100

   2.2   2.3 

Long End +200

   4.2   4.3 

2020.
 Estimated Percent Change in
Net Interest Income
Parallel Shock Rate Change
(basis points)                        
September 30, 2021December 31, 2020
+30024.4 %22.6 %
+20017.3 16.0 
+1008.8 8.2 
-25(1.7)(1.7)

 
Estimated Percent Change in
Net Interest Income
Yield Curve Twist Rate Change
(basis points)                              
September 30, 2021December 31, 2020
Short End -25(1.0)%(1.0)%
Short End +1006.8 6.1 
Long End -25(0.7)(0.7)
Long End +1002.3 2.4 
The net interest income at risk simulation results indicate that at both September 30, 20172021 and December 31, 2016,2020, the Company is asset sensitive over the twelve-month forecast horizon (i.e. net interest income will increase if market rates rise). This isThe asset sensitive position at September 30, 2021 primarily due toreflects: (i) approximately 87%100% of the Company’s loan portfolio being funded by less rate-sensitive core deposits anddeposits; (ii) approximately 43%49% of the Company’s loan portfolio being comprised of Prime rateRate and
one-month Libor-based loans.

LIBOR-based floating-rate loans; and (iii) the repricing of variable-rate loans, the origination of fixed-rate loans as well as the purchase and reinvestment of securities all over the twelve-month forecast horizon.

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The slight increase in the Company’s asset sensitivity is essentially unchanged since December 31, 2016, as the benefits from2020 is primarily due to: (i) fewerdecreases in residential mortgage and PPP loans with “in the money floors” (as both the Prime rate andone-month Libor rate have risen) and (ii) higher core deposit balances were largelyliquid deposits resulting from governmental stimulus programs and reduced consumer spending; partially offset by (i) the additionsecurity purchases and slower modeled mortgage-backed security and residential mortgage loan prepayment speeds as a result of LEAF’s fixed-rate portfolio in August 2017 and (ii) securities purchases. The acquisition of Suffolk in April 2017 did not have a material impact on the Company’s nethigher long-end interest income at risk position.rates. Based on the Company’s IRR position at September 30, 2017,2021, an immediate 100 basis point parallel increase in interest rates translates to an approximate $48$122 million increase in net interest income on an annualized basis.

Economic Value of Equity at Risk Simulation is conducted in tandem with net interest income simulations, to ascertain a longer termlonger-term view of the Company’s IRR position by capturing longer-termre-pricing risk and options risk embedded in the balance sheet. It measures the sensitivity of economic value of equity to changes in interest rates. Economic value of equity at risk simulation values only the current balance sheet and does not incorporate the growth assumptions used for income simulations. As with net interest income modeling, this simulation captures product characteristics such as loan resets,re-pricing repricing terms, maturity dates, rate caps and floors. Key assumptions include loan prepayment speeds, deposit pricing elasticity and
non-maturity deposit attrition rates. These assumptions can have significant impacts on valuation results as the assumptions remain in effect for the entire life of each asset and liability. The Company conducts core deposit behavior studies on a periodic basis to support deposit assumptions used in the valuation process. All key assumptions are subject to periodic review.

Base case economic value of equity at risk is calculated by estimating the net present value of all future cash flows from existing assets and liabilities using current interest rates. The current spot interest rate curve is shocked up and down to generate new spot interest rate curves for parallel rate shock scenarios. These new spot curves are then used tore-calculate recalculate economic value of equity at risk for these rate shock scenarios.

The following table sets forth the estimated percent change in the Company’s economic value of equity at risk, assuming various instantaneous parallel shocks in interest rates. Given the interest rate environment at both September 30, 2017 and December 31, 2016, simulations for interest rate declines of more than 100 basis points were not modeled.

Parallel Shock Rate Change

(basis points)                       

  Estimated Percent Change in 
  Economic Value of Equity 
  September 30, 2017  December 31, 2016 

+300

   (9.4)%   (7.7)% 

+200

   (4.3)   (3.1) 

+100

   (0.7)   (0.1) 

-100

   (3.9)   n/a 

 
Estimated Percent Change in
Economic Value of Equity
Parallel Shock Rate Change
(basis points)                       
September 30, 2021December 31, 2020
+3006.3 %11.6 %
+2008.6 13.7 
+1006.9 10.3 
-25(2.8)(3.9)

The Company’s economic value of equity at risk profile indicates that at September 30, 2017,2021, the Company’s economic value of equity is moderately liability sensitiveasset sensitive. The decrease in a rising rate environment. The increaseasset sensitivity since December 31, 20162020 primarily reflects: (i) security purchases and (ii) an increase in the duration of both mortgage-backed securities and residential mortgage loan portfolio; (ii) extending asset durationloans and a decrease in the modeled weighted average life of non-maturity deposits resulting from purchases of mortgage-backedhigher long-end interest rates; partially offset by decreases in residential mortgage and statePPP loans and municipal securities; and (iii) the acquisition of LEAF’s fixed-rate portfolio. The Suffolk acquisition did not have a material impact to the Company’s economic value of equity at risk position.

an increase in liquid deposits.

People’s United’s IRR position at September 30, 2017,2021, as set forth in the net interest income at risk and economic value of equity at risk tables above, reflects an asset sensitive net interest income at risk position and a moderately liabilityan asset sensitive economic value of equity at risk position. From a net interest income perspective, asset sensitivity over the next 12 months is primarily attributable to the effect of the substantial Prime and Libor-basedLIBOR-based loan balances that are funded mainlyand the funding of all loans primarily by less rate-sensitive deposits. From an economic value of equity perspective, in a rising rate environment, the Company’s assets are moreless price sensitive than its liabilities due to slightly longershorter asset duration,duration; and the optionality embedded in mortgage related assets and non-maturity deposits at various interest rate levels which servesserve to create a moderately liabilityan asset sensitive risk position. Asset sensitivity declines with progressively larger interest rate shocks as mortgage-backed securities and residential mortgage loans extend in duration and, conversely, non-maturity deposit duration shortens. Given the uncertainty of the magnitude, timing and direction of future interest rate movements and the shape of the yield curve, actual results may vary from those predicted by the Company’s models.

Management has established procedures to be followed in the event of an anticipated or actual breach in policy limits. As of September 30, 2017,2021, there were no breaches of the Company’s internal policy limits with respect to either IRR measure. Management utilizes both interest rate measures in the normal course of measuring and managing IRR and believes that each measure is valuable in understanding the Company’s IRR position.

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People’s United uses derivative financial instruments, including interest rate swaps, as components of its market risk management (principally to manage IRR). Certain other derivatives are entered into in connection with transactions with commercial customers. Derivatives are not used for speculative purposes. At September 30, 2017,2021, People’s United used interest rate swaps to manage IRR associated with certaininterest-bearing assets and interest-bearing liabilities.

The Bank has entered into pay floating/receive fixed interest rate swaps to reduce its IRR exposure to the variability in interest cash flows on certain floating-rate commercial loans. The Bank has agreed with the swap counterparties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated based on notional amounts totaling $210 million. The floating-rate interest payments made under the swaps are calculated using the same floating rate received on the commercial loans. The swaps effectively convert the floating-rateone-month LIBOR interest payments received on the commercial loans to a fixed rate and consequently reduce the Bank’s exposure to variability in short-term interest rates. These swaps are accounted for as cash flow hedges.

The Bank has entered into a pay floating/receive fixed interest rate swap to hedge the change in fair value due to changes in interest rates of the Bank’s $400 million subordinated notes. The Bank has agreed with the swap counterparty to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated based on a notional amount of $375 million. The fixed-rate interest payments received on the swap will essentially offset the fixed-rate interest payments made on these notes, notwithstanding the notional difference between these notes and the swap. The floating-rate interest amounts paid under the swap are calculated based on three-month LIBOR plus 126.5 basis points. The swap effectively converts the fixed-rate subordinated notes to a floating-rate liability. This swap is accounted for as a fair value hedge.

The Bank has entered into two-year and three-year pay fixed/receive floating interest rate swaps to reduce its interest rate exposure by hedging the variability in interest cash flows on certain rolling three-month funding liabilities which may consist of FHLB advances. The Bank has agreed with the swap counterparty to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated based on an aggregate notional amount of $550 million. The interest rate swaps effectively convert a short-term benchmark interest rate (LIBOR) into a fixed-rate. These swaps are accounted for as cash flow hedges.
People’s United has written guidelines that have been approved by its Board of Directors and ALCO governing the use of derivative financial instruments, including approved counterparties and credit limits. Credit risk associated with these instruments is controlled and monitored through policies and procedures governing collateral management and credit approval.

By using derivatives, People’s United is exposed to credit risk to the extent that counterparties to the derivative contracts do not perform as required. Should a counterparty fail to perform under the terms of a derivative contract, the Company’s counterparty credit risk is equal to the amount reported as a derivative asset in the Consolidated Statements of Condition. In accordance with the Company’s balance sheet offsetting policy (see Note 1314 to the Consolidated Financial Statements), amounts reported as derivative assets represent derivative contracts in a gain position, without consideration for derivative contracts in a loss position with the same counterparty (to the extent subject to master netting arrangements) and posted collateral. People’s United seeks to minimize counterparty credit risk through credit approvals, limits, monitoring procedures, execution of master netting arrangements and obtaining collateral, where appropriate. Counterparties to People’s United’s derivatives include major financial institutions and exchanges that undergo comprehensive and periodic internal credit analysis as well as maintain investment grade credit ratings from the major credit rating agencies. As such, management believes the risk of incurring credit losses on derivative contracts with those counterparties is remote and losses, if any, would be immaterial.

Certain of People’s United’s derivative contracts contain provisions establishing collateral requirements (subject to minimum collateral posting thresholds) based on the Company’s external credit rating. If the Company’s senior unsecured debt rating were to fall below the level generally recognized as investment grade, the counterparties to such derivative contracts could require additional collateral on those derivative transactions in a net liability position (after considering the effect of master netting arrangements and posted collateral). There were noThe aggregate fair value of derivative instruments with such credit-related
contingent features that were in a net liability position at September 30, 2017.

2021 was $34.3 million, for which People’s United had

posted collateral totaling $33.9 million in the normal course of business. If the Company’s senior unsecured debt rating had fallen below investment grade as of that date, $0.4 million in additional collateral would have been required.
Foreign Currency Risk

Foreign exchange contracts are commitments to buy or sell foreign currency on a future date at a contractual price. People’s United uses these instruments on a limited basis to (i) eliminate its exposure to fluctuations in currency exchange rates on certain of its commercial loans that are denominated in foreign currencies.currencies and (ii) provide foreign exchange contracts on behalf of commercial customers within credit exposure limits. Gains and losses on foreign exchange contracts substantially offset the translation gains and losses on the related loans.

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Derivative Financial Instruments

The following table summarizes certain information concerning derivative financial instruments utilized by People’s United in its management of IRR and foreign currency risk:

   Interest Rate Swaps  Foreign
Exchange
Contracts		 
   Cash Flow  Fair Value  

As of September 30, 2017 (dollars in millions)

  Hedge  Hedge  

Notional principal amounts

  $210.0  $375.0  $42.6 

Weighted average interest rates:

    

Pay floating (receive fixed)

   0.78% (1.82%)   Libor +1.265% (4.00%)   n/a 

Weighted average remaining term to maturity (in months)

   37   82   2 

Fair value:

    

Recognized as an asset

  $—    $—    $0.2 

Recognized as a liability

   —     —     0.2 

Interest Rate SwapsForeign
Exchange
Contracts
As of September 30, 2021 (dollars in millions)Fair Value
Hedge		Cash Flow Hedge
Notional principal amounts$375.0 $550.0 $337.0 
Weighted average interest rates:
Pay floating (receive fixed)Libor + 1.265% (4.00%)N/AN/A
Pay fixed (receive floating)N/A0.53%(0.13%)N/A
Weighted average remaining term to maturity (in months)34 11 5 
Fair value:
Recognized as an asset$— $— $3.1 
Recognized as a liability— — 2.9 

People’s United enters into interest rate swaps and caps with certain of its commercial customers. In order to minimize its risk, these customer interest rate swaps (pay floating/receive fixed) and caps have been offset with essentially matching interest rate swaps (pay fixed/receive floating) and caps with People’s United’s institutional counterparties. Hedge accounting has not been applied for these derivatives. Accordingly, changes in the fair value of all such interest rate swaps and caps are recognized in current earnings.

The following table summarizes certain information concerning these interest rate swaps/caps:

   Interest Rate Swaps/Caps 
   Commercial   Institutional 

As of September 30, 2017 (dollars in millions)

  Customers   Counterparties 

Notional principal amounts

  $6,101.2   $5,808.2 

Weighted average interest rates:

    

Pay floating (receive fixed)

   1.41% (1.94%)    —   

Pay fixed (receive floating)

   —      1.83% (1.41%) 

Weighted average remaining term to maturity (in months)

   78    78 

Fair value:

    

Recognized as an asset

  $91.5   $10.4 

Recognized as a liability

   39.7    20.8 

As a result of the LEAF acquisition, the Company assumed two interest-rate caps with a total notional amount of $150 million, both of which mature in December 2017. Prior to the acquisition, LEAF entered into derivative contracts to reduce potential volatility in its financing costsswaps and to manage its interest rate exposure to changes inone-month LIBOR. Subsequent to the LEAF acquisition, hedge accounting was not applied for these derivatives. Such interest rate caps have been excluded from the tables above.

caps:
Interest Rate SwapsInterest Rate Caps
As of September 30, 2021 (dollars in millions)Commercial
Customers		Institutional
Counterparties		Commercial
Customers		Institutional
Counterparties
Notional principal amounts$8,727.9 $8,729.4 $177.2 $177.2 
Weighted average interest rates:
Pay floating (receive fixed)0.33%/(2.32%)— N/AN/A
Pay fixed (receive floating)— 2.19%(0.33%)N/AN/A
Weighted average strike rateN/AN/A3.04 %3.04 %
Weighted average remaining term to maturity (in months)72 72 25 25 
Fair value:
Recognized as an asset$467.0 $3.7 $1.8 $0.2 
Recognized as a liability11.9 104.2 0.2 1.8 

See Notes 1213 and 1314 to the Consolidated Financial Statements for further information relating to derivatives.

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

The information required by this item appears on pages 10491 through 10894 of this report.

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Item 4 – Controls and Procedures

People’s United’s management, including the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of People’s United’s disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and15d-15(e)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that People’s United’s disclosure controls and procedures are effective, as of
September 30, 2017,2021, to ensure that information relating to People’s United, which is required to be disclosed in the reports People’s United files with the Securities and Exchange CommissionSEC under the Exchange Act, is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to management, including the principal executive officer and the principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

During the quarter ended September 30, 2017,2021, there has not been any change in People’s United’s internal control over financial reporting that has materially affected, or isare reasonably likely to materially affect, People’s United’s internal control over financial reporting.


Part II – Other Information

Item 1 – Legal Proceedings

In the normal course of business, People’s United is subject to various legal proceedings. Management has discussed with legal counsel the nature of these legal proceedings and, based on the advice of counsel and the information currently available, believes that the eventual outcome of these legal proceedings will not have a material adverse effect on its financial condition, results of operations or liquidity.

Item 1A – Risk Factors

There have been no material changes in risk factors since December 31, 2016.

2020.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

(c) The following table provides information with respect to purchases made by People’s United of its common stock during the three months ended September 30, 2017:

2021:

Issuer Purchases of Equity Securities

           Total number of   Maximum number 
           shares purchased as   of shares that may 
   Total number   Average   part of publicly   yet be purchased 
   of shares   price paid   announced plans   under the plans 

Period

  purchased   per share   or programs   or programs 

July 1 - 31, 2017:

        

Tendered by employees (1)

   —     $—      —      —   

August 1 - 31, 2017:

        

Tendered by employees (1)

   271   $17.55    —      —   

September 1 - 30, 2017:

        

Tendered by employees (1)

   4,564   $16.82    —      —   
  

 

 

     

 

 

   

 

 

 

Total:

        

Tendered by employees (1)

   4,835   $16.86    —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

(1)All shares listed were tendered by employees of People’s United in satisfaction of their related minimum tax withholding obligations upon the vesting of restricted stock awards granted in prior periods and/or in payment of the exercise price and satisfaction of their related minimum tax withholding obligations upon the exercise of stock options granted in prior periods. The average price paid per share is equal to the average of the high and low trading price of People’s United’s common stock on The NASDAQ Global Select Market on the vesting or exercise date or, if no trades took place on that date, the most recent day for which trading data was available. There is no limit on the number of shares that may be tendered by employees of People’s United in the future for these purposes. Shares acquired in payment of the option exercise price or in satisfaction of minimum tax withholding obligations are not eligible for reissuance in connection with any subsequent grants made pursuant to equity compensation plans maintained by People’s United. All shares acquired in this manner are retired by People’s United, resuming the status of authorized but unissued shares of People’s United’s common stock.

Period
Total number
of shares
purchased
Average
price paid
per share
Total number of
shares purchased as
part of publicly
announced plans
or programs
Maximum number
of shares that may
yet be purchased
under the plans
or programs
July 1 - 31, 2021
Tendered by employees (1)3,248 $17.29 — — 
August 1 - 31, 2021
Tendered by employees (1)— $— — — 
September 1 - 30, 2021
Tendered by employees (1)18,115 $16.35 1— — 
Total:
Tendered by employees (1)21,363 $16.49 — — 

(1)All shares listed were tendered by employees of People’s United in satisfaction of their related minimum tax withholding obligations upon the vesting of restricted stock awards granted in prior periods and/or in payment of the exercise price and satisfaction of their related minimum tax withholding obligations upon the exercise of stock options granted in prior periods. The average price paid per share is equal to the average of the high and low trading price of People’s United’s common stock on The NASDAQ Global Select Market on the vesting or exercise date or, if no trades took place on that date, the most recent day for which trading data was available. There is no limit on the number of shares that may be tendered by employees of People’s United in the future for these purposes. Shares acquired in payment of the option exercise price or in satisfaction of minimum tax withholding obligations are not eligible for reissuance in connection with any subsequent grants made pursuant to equity compensation plans maintained by People’s United. All shares acquired in this manner are retired by People’s United, resuming the status of authorized but unissued shares of People’s United’s common stock.
94


Item 3 – Defaults Upon Senior Securities

None.

Item 4 – Mine Safety Disclosures

None.

Item 5 – Other Information

None.

Item 6 – Exhibits

The following Exhibits are filed herewith:

Designation

Description

  31.1Rule13a-14(a)/15d-14(a) Certifications
  31.2DesignationRule13a-14(a)/15d-14(a) CertificationsDescription
  3231.1Section 1350Rule 13a-14(a)/15d-14(a) Certifications
101.131.2Rule 13a-14(a)/15d-14(a) Certifications
32Section 1350 Certifications
101.1The following financial information from People’s United Financial, Inc.’s Quarterly Report on Form10-Q for the quarterly period ended September 30, 20172021 formatted in Inline XBRL: (i) Consolidated Statements of Condition as of September 30, 20172021 and December 31, 2016;2020; (ii) Consolidated Statements of Income for the three and nine months ended September 30, 20172021 and 2016;2020; (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 20172021 and 2016;2020; (iv) Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 20172021 and 2016; 2020;
(v) Consolidated Statements of Cash Flows for the nine months ended September 30, 20172021 and 2016;2020; and (vi) Notes to Consolidated Financial Statements.


95

INDEX TO EXHIBITS

Designation

Description

  31.1Rule13a-14(a)/15d-14(a) Certifications
  31.2DesignationRule13a-14(a)/15d-14(a) CertificationsDescription
  32
31.1
Section 1350Rule 13a-14(a)/15d-14(a) Certifications
101.1
31.2
Rule 13a-14(a)/15d-14(a) Certifications
32
Section 1350 Certifications
101.1The following financial information from People’s United Financial, Inc.’s Quarterly Report on Form10-Q for the quarterly period ended September 30, 20172021 formatted in Inline XBRL: (i) Consolidated Statements of Condition as of September 30, 20172021 and December 31, 2016;2020; (ii) Consolidated Statements of Income for the three and nine months ended September 30, 20172021 and 2016;2020; (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 20172021 and 2016;2020; (iv) Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 20172021 and 2016; 2020;
(v) Consolidated Statements of Cash Flows for the nine months ended September 30, 20172021 and 2016;2020; and (vi) Notes to Consolidated Financial Statements.


96

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, People’s United Financial, Inc. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PEOPLE’S UNITED FINANCIAL, INC.
Date: November 9, 20172021By: By: 

/s/ John P. Barnes

John P. Barnes
PresidentChairman and Chief Executive Officer
(Principal Executive Officer)
Date: November 9, 20172021By: By: 

/s/ R. David Rosato

R. David Rosato

Senior Executive Vice President and

Chief Financial Officer

Chief Financial Officer
(Principal Financial Officer)
Date: November 9, 20172021By: By: 

/s/ Jeffrey Hoyt

Jeffrey Hoyt

Senior Vice President and

Chief Accounting Officer

Chief Accounting Officer
(Principal Accounting Officer)

112


97