0001378946us-gaap:ForeignExchangeContractMemberus-gaap:NondesignatedMember2019-01-012019-09-30



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, 2018

2019

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

PEOPLE’S UNITED FINANCIAL, INC.

(Exact name of registrant as specified in its charter)


DelawarePEOPLE’S UNITED FINANCIAL, INC.20-8447891

(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 SymbolName 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 every Interactive Data File required to be submitted 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 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☐
Non-accelerated filer☐Smaller reporting company☐
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, 2018,2019, there were 377,364,168399,365,374 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, 2018 and December 31, 2017

1

2

3

4

5
6

6
7

Item 2.

60
57

Item 3.

107
100

Item 4.

107
100
Part II – Other Information

Item 1.

108
101

Item 1A.

108
101

Item 2.

108
101

Item 3.

108
101

Item 4.

108
101

Item 5.

109
102

Item 6.

109
102
110
103
111
104




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,
2018		  December 31,
2017		 

Assets

   

Cash and due from banks

  $410.5  $505.1 

Short-term investments

   127.5   377.5 
  

 

 

  

 

 

 

Total cash and cash equivalents (note 2)

   538.0   882.6 
  

 

 

  

 

 

 

Securities (notes 2 and 13):

   

Trading debt securities, at fair value

   8.3   8.2 

Equity securities, at fair value

   8.9   8.7 

Debt securitiesavailable-for-sale, at fair value

   3,312.1   3,125.3 

Debt securitiesheld-to-maturity, at amortized cost (fair value of $3.67 billion and $3.63 billion)

   3,742.9   3,588.1 

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

   312.4   312.3 
  

 

 

  

 

 

 

Total securities

   7,384.6   7,042.6 
  

 

 

  

 

 

 

Loansheld-for-sale

   15.2   16.6 
  

 

 

  

 

 

 

Loans (note 3):

   

Commercial real estate

   10,595.5   11,068.7 

Commercial and industrial

   8,568.6   8,731.1 

Equipment financing

   4,209.3   3,905.4 
  

 

 

  

 

 

 

Total Commercial Portfolio

   23,373.4   23,705.2 
  

 

 

  

 

 

 

Residential mortgage

   6,911.9   6,805.7 

Home equity and other consumer

   1,914.0   2,064.4 
  

 

 

  

 

 

 

Total Retail Portfolio

   8,825.9   8,870.1 
  

 

 

  

 

 

 

Total loans

   32,199.3   32,575.3 

Less allowance for loan losses

   (238.0)   (234.4) 
  

 

 

  

 

 

 

Total loans, net

   31,961.3   32,340.9 
  

 

 

  

 

 

 

Goodwill (note 6)

   2,435.2   2,411.4 

Bank-owned life insurance

   407.7   405.0 

Premises and equipment, net

   243.8   253.0 

Other acquisition-related intangible assets (note 6)

   133.7   148.6 

Other assets (notes 1, 3 and 11)

   1,013.7   952.7 
  

 

 

  

 

 

 

Total assets

  $44,133.2  $44,453.4 
  

 

 

  

 

 

 

Liabilities

   

Deposits:

   

Non-interest-bearing

  $8,060.2  $8,002.4 

Savings

   4,048.8   4,410.5 

Interest-bearing checking and money market

   15,065.3   15,189.1 

Time

   6,035.9   5,454.3 
  

 

 

  

 

 

 

Total deposits

   33,210.2   33,056.3 
  

 

 

  

 

 

 

Borrowings:

   

Federal Home Loan Bank advances

   2,369.7   2,774.4 

Federal funds purchased

   735.0   820.0 

Customer repurchase agreements

   261.3   301.6 

Other borrowings

   26.0   207.8 
  

 

 

  

 

 

 

Total borrowings

   3,392.0   4,103.8 
  

 

 

  

 

 

 

Notes and debentures

   885.6   901.6 

Other liabilities (notes 1 and 11)

   686.5   571.8 
  

 

 

  

 

 

 

Total liabilities

   38,174.3   38,633.5 
  

 

 

  

 

 

 

Commitments and contingencies (notes 1 and 8)

   

Stockholders’ Equity(notes 4, 7 and 13)

   

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; 437.7 million shares
and 435.6 million shares issued)

   4.4   4.4 

Additionalpaid-in capital

   6,054.3   6,012.3 

Retained earnings

   1,220.9   1,040.2 

Unallocated common stock of Employee Stock Ownership Plan, at cost (6.4 million shares
and 6.6 million shares)

   (131.9)   (137.3) 

Accumulated other comprehensive loss

   (270.8)   (181.7) 

Treasury stock, at cost (89.0 million shares at both dates)

   (1,162.1)   (1,162.1) 
  

 

 

  

 

 

 

Total stockholders’ equity

   5,958.9   5,819.9 
  

 

 

  

 

 

 

Total liabilities and stockholders’ equity

  $44,133.2  $44,453.4 
  

 

 

  

 

 

 

(in millions)September 30,
2019		December 31,
2018
Assets
Cash and due from banks$635.2  $665.7  
Short-term investments157.8  266.3  
Total cash and cash equivalents (note 3)793.0  932.0  
Securities (note 3):
Trading debt securities, at fair value9.3  8.4  
Equity securities, at fair value7.8  8.1  
Debt securities available-for-sale, at fair value2,978.7  3,121.0  
Debt securities held-to-maturity, at amortized cost (fair value of $3.97 billion and $3.78 billion)3,805.4  3,792.3  
Federal Home Loan Bank and Federal Reserve Bank stock, at cost334.0  303.4  
Total securities7,135.2  7,233.2  
Loans held-for-sale24.8  19.5  
Loans (notes 4 and 14):
Commercial real estate12,186.9  11,649.6  
Commercial and industrial10,545.9  9,088.9  
Equipment financing4,735.6  4,339.2  
Total Commercial Portfolio27,468.4  25,077.7  
Residential mortgage9,308.7  8,154.2  
Home equity and other consumer2,004.3  2,009.5  
Total Retail Portfolio11,313.0  10,163.7  
Total loans38,781.4  35,241.4  
Less allowance for loan losses(246.0) (240.4) 
Total loans, net38,535.4  35,001.0  
Goodwill (notes 2 and 7)2,868.1  2,685.7  
Bank-owned life insurance505.6  467.0  
Premises and equipment, net258.5  267.3  
Other acquisition-related intangible assets (notes 2 and 7)196.8  180.0  
Other assets (notes 1, 4, 12 and 14)1,754.4  1,091.6  
Total assets$52,071.8  $47,877.3  
Liabilities
Deposits:
Non-interest-bearing$9,129.3  $8,543.0  
Savings4,616.6  4,116.5  
Interest-bearing checking and money market16,727.2  16,583.3  
Time8,100.4  6,916.2  
Total deposits38,573.5  36,159.0  
Borrowings:
Federal Home Loan Bank advances2,948.5  2,404.5  
Federal funds purchased1,365.0  845.0  
Customer repurchase agreements315.6  332.9  
Other borrowings—  11.0  
Total borrowings4,629.1  3,593.4  
Notes and debentures915.7  895.8  
Other liabilities (notes 1, 12 and 14)822.8  695.2  
Total liabilities44,941.1  41,343.4  
Commitments and contingencies (notes 1, 9 and 14)
Stockholders’ Equity (notes 2, 5, 8 and 15)
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; 487.6 million shares
   and 466.3 million shares issued)
4.9  4.7  
Additional paid-in capital6,901.5  6,549.3  
Retained earnings1,449.3  1,284.8  
Unallocated common stock of Employee Stock Ownership Plan, at cost (6.0 million shares
   and 6.3 million shares)
(124.7) (130.1) 
Accumulated other comprehensive loss(182.3) (256.8) 
Treasury stock, at cost (89.0 million shares at both dates)(1,162.1) (1,162.1) 
Total stockholders’ equity7,130.7  6,533.9  
Total liabilities and stockholders’ equity$52,071.8  $47,877.3  
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)

  2018   2017   2018   2017 

Interest and dividend income:

        

Commercial real estate

  $114.7   $105.6   $333.2   $299.5 

Commercial and industrial

   93.2    80.0    265.6    218.7 

Equipment financing

   56.2    41.5    155.6    104.6 

Residential mortgage

   56.0    52.5    166.0    154.1 

Home equity and other consumer

   22.0    21.0    64.2    59.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest on loans

   342.1    300.6    984.6    836.2 

Securities

   46.6    37.2    135.7    112.1 

Short-term investments

   1.1    1.1    3.6    2.7 

Loansheld-for-sale

   0.2    0.3    0.6    0.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest and dividend income

   390.0    339.2    1,124.5    951.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense:

        

Deposits

   56.9    34.4    145.5    92.4 

Borrowings

   18.2    12.7    50.9    28.9 

Notes and debentures

   8.5    7.5    24.7    22.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

   83.6    54.6    221.1    143.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

   306.4    284.6    903.4    808.1 

Provision for loan losses (note 3)

   8.2    7.0    20.1    18.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

   298.2    277.6    883.3    789.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-interest income:

        

Bank service charges

   24.9    25.3    73.0    73.8 

Investment management fees

   17.4    16.9    52.3    49.2 

Operating lease income

   11.0    10.9    32.9    32.1 

Insurance revenue

   9.8    9.7    27.9    26.3 

Commercial banking lending fees

   7.9    7.0    27.7    26.7 

Cash management fees

   7.0    6.8    20.6    19.6 

Brokerage commissions

   3.2    2.8    9.5    9.2 

Net security gains (losses) (note 2)

   0.1    —      0.2    (15.6) 

Othernon-interest income (note 2)

   11.0    9.9    33.5    44.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

Totalnon-interest income

   92.3    89.3    277.6    265.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-interest expense:

        

Compensation and benefits (note 13)

   135.7    129.9    411.4    389.9 

Occupancy and equipment

   41.6    40.2    123.6    118.6 

Professional and outside services

   17.0    19.2    56.2    62.8 

Regulatory assessments

   10.0    10.3    30.5    29.8 

Operating lease expense

   8.9    8.8    26.6    26.3 

Amortization of other acquisition-related intangible assets (note 6)

   4.9    7.9    14.9    22.1 

Othernon-interest expense (note 13)

   23.2    20.8    70.2    71.0 
  

 

 

   

 

 

   

 

 

   

 

 

 

Totalnon-interest expense

   241.3    237.1    733.4    720.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

   149.2    129.8    427.5    334.7 

Income tax expense (note 1)

   32.2    39.0    92.4    103.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   117.0    90.8    335.1    230.9 

Preferred stock dividend

   3.5    3.5    10.5    10.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common shareholders

  $113.5   $87.3   $324.6   $220.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share(note 5):

        

Basic

  $0.33   $0.26   $0.95   $0.67 

Diluted

   0.33    0.26    0.94    0.67 

 Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions, except per common share data)2019201820192018
Interest and dividend income:
Commercial real estate$136.6  $114.7  $409.2  $333.2  
Commercial and industrial113.4  93.2  328.7  265.6  
Equipment financing65.3  56.2  187.0  155.6  
Residential mortgage84.7  56.0  240.9  166.0  
Home equity and other consumer24.7  22.0  75.4  64.2  
Total interest on loans424.7  342.1  1,241.2  984.6  
Securities44.7  46.6  138.7  135.7  
Short-term investments1.3  1.1  3.8  3.6  
Loans held-for-sale0.2  0.2  0.6  0.6  
Total interest and dividend income470.9  390.0  1,384.3  1,124.5  
Interest expense:
Deposits92.2  56.9  270.0  145.5  
Borrowings21.5  18.2  58.6  50.9  
Notes and debentures8.5  8.5  26.1  24.7  
Total interest expense122.2  83.6  354.7  221.1  
Net interest income348.7  306.4  1,029.6  903.4  
Provision for loan losses (note 4)7.8  8.2  21.0  20.1  
Net interest income after provision for loan losses340.9  298.2  1,008.6  883.3  
Non-interest income:
Bank service charges27.0  24.9  78.6  73.0  
Investment management fees17.3  17.4  50.9  52.3  
Operating lease income (note 14)13.0  11.0  38.4  32.9  
Commercial banking lending fees11.8  7.9  29.8  27.7  
Insurance revenue10.3  9.8  29.5  27.9  
Cash management fees7.3  7.0  21.2  20.6  
Brokerage commissions2.6  3.2  8.0  9.5  
Other non-interest income (note 3)16.7  11.1  50.5  33.7  
Total non-interest income106.0  92.3  306.9  277.6  
Non-interest expense:
Compensation and benefits158.1  135.7  474.8  411.4  
Occupancy and equipment45.0  41.6  133.7  123.6  
Professional and outside services23.7  17.0  68.6  56.2  
Operating lease expense9.9  8.9  29.2  26.6  
Amortization of other acquisition-related intangible assets
(note 7)		8.0  4.9  22.7  14.9  
Regulatory assessments5.3  10.0  18.8  30.5  
Other non-interest expense31.4  23.2  89.2  70.2  
Total non-interest expense281.4  241.3  837.0  733.4  
Income before income tax expense165.5  149.2  478.5  427.5  
Income tax expense (note 1)30.4  32.2  95.5  92.4  
Net income135.1  117.0  383.0  335.1  
Preferred stock dividend3.5  3.5  10.5  10.5  
Net income available to common shareholders$131.6  $113.5  $372.5  $324.6  
Earnings per common share (note 6):
Basic$0.34  $0.33  $0.97  $0.95  
Diluted0.33  0.33  0.96  0.94  
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)

      2018          2017          2018          2017     

Net income

  $117.0  $90.8  $335.1  $230.9 
  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive (loss) income, net of tax:

     

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

   1.5   0.9   4.5   2.8 

Net unrealized gains and losses on debt securitiesavailable-for-sale

   (12.0)   3.6   (56.3)   21.0 

Amortization of unrealized losses on debt securities transferred
toheld-to-maturity

   0.7   0.6   2.3   1.6 

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

   (0.3)   (0.2)   (2.3)   (0.1) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total other comprehensive (loss) income, net of tax (note 4)

   (10.1)   4.9   (51.8)   25.3 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total comprehensive income

  $106.9  $95.7  $283.3  $256.2 
  

 

 

  

 

 

  

 

 

  

 

 

 

 Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2019201820192018
Net income$135.1  $117.0  $383.0  $335.1  
Other comprehensive income (loss), net of tax:
Net actuarial loss and prior service credit related to
pension and other postretirement plans		1.0  1.5  3.9  4.5  
Net unrealized gains and losses on debt securities
available-for-sale		8.6  (12.0) 66.2  (56.3) 
Amortization of unrealized losses on debt securities
transferred to held-to-maturity		0.8  0.7  2.0  2.3  
Net unrealized gains and losses on derivatives
accounted for as cash flow hedges		0.3  (0.3) 2.4  (2.3) 
Total other comprehensive income (loss),
   net of tax (note 5)
10.7  (10.1) 74.5  (51.8) 
Total comprehensive income$145.8  $106.9  $457.5  $283.3  
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, 2018
(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, 2017

 $244.1  $4.4  $6,012.3  $1,040.2  $(137.3)  $(181.7)  $(1,162.1)  $5,819.9 

Net income

  —     —     —     335.1   —     —     —     335.1 

Total other comprehensive loss,
net of tax (note 4)

  —     —     —     —     —     (51.8)   —     (51.8) 

Cash dividends on common stock
($0.5225 per share)

  —     —     —     (178.8)   —     —     —     (178.8) 

Cash dividends on preferred stock

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

Restricted stock and performance-based
share awards

  —     —     10.8   —     —     —     —     10.8 

Employee Stock Ownership Plan
common committed to be
released (note 7)

  —     —     —     (0.6)   5.4   —     —     4.8 

Common stock repurchased and
retired upon vesting of restricted
stock awards

  —     —     —     (2.4)   —     —     —     (2.4) 

Stock options exercised

  —     —     31.2   —     —     —     —     31.2 

Transition adjustments related to
adoption of new accounting
standards (notes 4 and 13)

  —     —     —     37.9   —     (37.3)   —     0.6 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at September 30, 2018

 $244.1  $4.4  $6,054.3  $1,220.9  $(131.9)  $(270.8)  $(1,162.1)  $5,958.9 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Nine months ended September 30, 2017
(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, 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 4)

  —     —     —     —     —     25.3   —     25.3 

Common stock issued in Suffolk
Bancorp acquisition

  —     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 7)

  —     —     —     (0.7)   5.5   —     —     4.8 

Common stock repurchased and
retired upon vesting of restricted
stock awards

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

Stock options exercised

  —     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 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Three months ended September 30, 2019
(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, 2019$244.1  $4.9  $6,890.7  $1,388.1  $(126.5) $(193.0) $(1,162.1) $7,046.2  
Net income—  —  —  135.1  —  —  —  135.1  
Total other comprehensive income,
net of tax (note 5)		—  —  —  —  —  10.7  —  10.7  
Cash dividend on common stock
   ($0.1775 per share)
—  —  —  (69.9) —  —  —  (69.9) 
Cash dividend on preferred stock—  —  —  (3.5) —  —  —  (3.5) 
Restricted stock and performance-based
share awards		—  —  6.0  —  —  —  —  6.0  
Employee Stock Ownership Plan
common stock committed to be
released (note 8)		—  —  —  (0.4) 1.8  —  —  1.4  
Common stock repurchased and
retired upon vesting of restricted
stock awards		—  —  —  (0.1) —  —  —  (0.1) 
Stock options exercised—  —  4.8  —  —  —  —  4.8  
Balance at September 30, 2019$244.1  $4.9  $6,901.5  $1,449.3  $(124.7) $(182.3) $(1,162.1) $7,130.7  
Nine months ended September 30, 2019
(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, 2018$244.1  $4.7  $6,549.3  $1,284.8  $(130.1) $(256.8) $(1,162.1) $6,533.9  
Net income—  —  —  383.0  —  —  —  383.0  
Total other comprehensive income,
net of tax (note 5)		—  —  —  —  —  74.5  —  74.5  
Common stock issued in BSB Bancorp
acquisition (note 2)		—  0.2  324.3  —  —  —  —  324.5  
Cash dividends on common stock
   ($0.53 per share)
—  —  —  (204.9) —  —  —  (204.9) 
Cash dividends on preferred stock—  —  —  (10.5) —  —  —  (10.5) 
Restricted stock and performance-based
share awards		—  —  10.9  —  —  —  —  10.9  
Employee Stock Ownership Plan
common stock committed to be
released (note 8)		—  —  —  (1.2) 5.4  —  —  4.2  
Common stock repurchased and
retired upon vesting of restricted
stock awards		—  —  —  (1.9) —  —  —  (1.9) 
Stock options exercised—  —  17.0  —  —  —  —  17.0  
Balance at September 30, 2019$244.1  $4.9  $6,901.5  $1,449.3  $(124.7) $(182.3) $(1,162.1) $7,130.7  

4

Three months ended September 30, 2018
(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, 2018$244.1  $4.4  $6,040.3  $1,167.9  $(133.7) $(260.7) $(1,162.1) $5,900.2  
Net income—  —  —  117.0  —  —  —  117.0  
Total other comprehensive loss,
net of tax (note 5)		—  —  —  —  —  (10.1) —  (10.1) 
Cash dividend on common stock
   ($0.1750 per share)
—  —  —  (60.1) —  —  —  (60.1) 
Cash dividend on preferred stock—  —  —  (3.5) —  —  —  (3.5) 
Restricted stock and performance-based
share awards		—  —  3.4  —  —  —  3.4  
Employee Stock Ownership Plan
common stock committed to be
released (note 8)		—  —  —  (0.3) 1.8  —  —  1.5  
Common stock repurchased and
retired upon vesting of restricted
stock awards		—  —  —  (0.1) —  —  —  (0.1) 
Stock options exercised—  —  10.6  —  —  —  —  10.6  
Balance at September 30, 2018$244.1  $4.4  $6,054.3  $1,220.9  $(131.9) $(270.8) $(1,162.1) $5,958.9  
Nine months ended September 30, 2018
(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, 2017$244.1  $4.4  $6,012.3  $1,040.2  $(137.3) $(181.7) $(1,162.1) $5,819.9  
Net income—  —  —  335.1  —  —  —  335.1  
Total other comprehensive loss,
net of tax (note 5)		—  —  —  —  —  (51.8) —  (51.8) 
Cash dividends on common stock
   ($0.5225 per share)
—  —  —  (178.8) —  —  —  (178.8) 
Cash dividends on preferred stock—  —  —  (10.5) —  —  —  (10.5) 
Restricted stock and performance-based
share awards		—  —  10.8  —  —  —  10.8  
Employee Stock Ownership Plan
common stock committed to be
released (note 8)		—  —  —  (0.6) 5.4  —  —  4.8  
Common stock repurchased and
retired upon vesting of restricted
stock awards		—  —  —  (2.4) —  —  —  (2.4) 
Stock options exercised—  —  31.2  —  —  —  —  31.2  
Transition adjustments related to
adoption of new accounting
standards (note 5)		—  —  —  37.9  —  (37.3) —  0.6  
Balance at September 30, 2018$244.1  $4.4  $6,054.3  $1,220.9  $(131.9) $(270.8) $(1,162.1) $5,958.9  
See accompanying notes to consolidated financial statements.


5

People’s United Financial, Inc.

Consolidated Statements of Cash Flows - (Unaudited)

   Nine Months Ended
September 30,		 

(in millions)

      2018          2017     

Cash Flows from Operating Activities:

   

Net income

  $335.1  $230.9 

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

   

Depreciation and amortization of premises and equipment

   26.8   29.3 

Expense related to operating leases

   26.6   26.3 

Provision for loan losses

   20.1   18.5 

Amortization of other acquisition-related intangible assets

   14.9   22.1 

Expense related to share-based awards

   14.8   13.4 

Employee Stock Ownership Plan common stock committed to be released

   4.8   4.8 

Net security (gains) losses

   (0.2)   15.6 

Net gains on sales of residential mortgage loans

   (0.9)   (2.7) 

Originations of loansheld-for-sale

   (126.8)   (212.5) 

Proceeds from sales of loansheld-for-sale

   129.1   239.5 

Net increase in trading debt securities

   —     (1.5) 

Excess income tax benefits from stock option exercises

   1.4   1.3 

Net changes in other assets and other liabilities

   14.1   15.6 
  

 

 

  

 

 

 

Net cash provided by operating activities

   459.8   400.6 
  

 

 

  

 

 

 

Cash Flows from Investing Activities:

   

Proceeds from sales of equity securities

   1.9   —   

Proceeds from principal repayments and maturities of debt securitiesavailable-for-sale

   346.9   456.1 

Proceeds from sales of debt securitiesavailable-for-sale

   0.1   1,016.2 

Proceeds from principal repayments and maturities of debt securitiesheld-to-maturity

   142.1   92.1 

Purchases of debt securitiesavailable-for-sale

   (625.1)   (237.6) 

Purchases of debt securitiesheld-to-maturity

   (309.6)   (1,235.9) 

Net redemptions (purchases) of Federal Reserve Bank stock

   7.3   (19.9) 

Net (purchases) redemptions of Federal Home Loan Bank stock

   (7.4)   17.6 

Proceeds from sales of loans

   11.9   8.4 

Loan disbursements, net of principal collections

   423.3   (325.4) 

Purchases of premises and equipment

   (17.3)   (6.7) 

Purchases of leased equipment

   (31.3)   (20.5) 

Proceeds from sales of real estate owned

   8.1   8.6 

Return of premium on bank-owned life insurance, net

   0.8   1.7 

Net cash (paid) acquired in acquisitions

   (35.8)   28.9 
  

 

 

  

 

 

 

Net cash used in investing activities

   (84.1)   (216.4) 
  

 

 

  

 

 

 

Cash Flows from Financing Activities:

   

Net increase in deposits

   153.9   834.1 

Net decrease in borrowings with terms of three months or less

   (252.8)   (279.4) 

Repayments of borrowings with terms of more than three months

   (456.6)   (356.1) 

Repayment of notes and debentures

   —     (125.0) 

Cash dividends paid on common stock

   (178.8)   (169.3) 

Cash dividends paid on preferred stock

   (10.5)   (10.5) 

Repurchases of common stock

   (2.4)   (3.3) 

Proceeds from stock options exercised

   27.2   28.1 

Contingent consideration payments

   (0.3)   (0.3) 
  

 

 

  

 

 

 

Net cash used in financing activities

   (720.3)   (81.7) 
  

 

 

  

 

 

 

Net (decrease) increase in cash, cash equivalents and restricted cash

   (344.6)   102.5 

Cash, cash equivalents and restricted cash at beginning of period

   882.6   614.1 
  

 

 

  

 

 

 

Cash, cash equivalents and restricted cash at end of period

  $538.0  $716.6 
  

 

 

  

 

 

 

Supplemental Information:

   

Interest payments

  $214.6  $138.4 

Income tax payments

   41.2   100.1 

Real estate properties acquired by foreclosure

   5.3   9.3 

Unsettled purchases of securities

   3.8   110.5 

Assets acquired and liabilities assumed in acquisitions

   

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

   69.1   2,642.1 

Liabilities

   1.4   2,634.1 

Common stock issued in Suffolk Bancorp acquisition

   —     484.8 

 Nine Months Ended
September 30,
(in millions)20192018
Cash Flows from Operating Activities:
Net income$383.0  $335.1  
Adjustments to reconcile net income to net cash provided by operating activities:
Expense related to operating leases29.2  26.6  
Depreciation and amortization of premises and equipment29.0  26.8  
Amortization of other acquisition-related intangible assets22.7  14.9  
Provision for loan losses21.0  20.1  
Expense related to share-based awards18.5  14.8  
Employee Stock Ownership Plan common stock committed to be released4.2  4.8  
Net security gains(0.1) (0.2) 
Net gains on sales of residential mortgage loans(1.5) (0.9) 
Originations of loans held-for-sale(124.8) (126.8) 
Proceeds from sales of loans held-for-sale120.6  129.1  
Net increase in trading debt securities(0.9) —  
Excess income tax benefits from stock option exercises0.3  1.4  
Net changes in other assets and other liabilities(494.9) 14.1  
Net cash provided by operating activities6.3  459.8  
Cash Flows from Investing Activities:
Proceeds from sales of equity securities0.9  1.9  
Proceeds from principal repayments and maturities of debt securities available-for-sale350.0  346.9  
Proceeds from sales of debt securities available-for-sale311.8  0.1  
Proceeds from principal repayments and maturities of debt securities held-to-maturity121.3  142.1  
Purchases of debt securities available-for-sale(305.1) (625.1) 
Purchases of debt securities held-to-maturity(153.5) (309.6) 
Net redemptions of Federal Reserve Bank stock26.1  7.3  
Net purchases of Federal Home Loan Bank stock(25.0) (7.4) 
Proceeds from sales of loans23.6  11.9  
Net principal (disbursements) collections of loans(881.9) 423.3  
Purchases of loans(50.7) —  
Purchases of premises and equipment(19.7) (17.3) 
Purchases of leased equipment, net(34.6) (31.3) 
Proceeds from sales of real estate owned10.4  8.1  
Return of premium on bank-owned life insurance, net1.2  0.8  
Net cash acquired (paid) in acquisitions48.7  (35.8) 
Net cash used in investing activities(576.5) (84.1) 
Cash Flows from Financing Activities:
Net increase in deposits295.8  153.9  
Net increase (decrease) in borrowings with terms of three months or less417.5  (252.8) 
Repayments of borrowings with terms of more than three months(76.8) (456.6) 
Cash dividends paid on common stock(204.9) (178.8) 
Cash dividends paid on preferred stock(10.5) (10.5) 
Repurchases of common stock(1.9) (2.4) 
Proceeds from stock options exercised12.9  27.2  
Contingent consideration payments(0.9) (0.3) 
Net cash provided by (used in) financing activities431.2  (720.3) 
Net decrease in cash, cash equivalents and restricted cash(139.0) (344.6) 
Cash, cash equivalents and restricted cash at beginning of period932.0  882.6  
Cash, cash equivalents and restricted cash at end of period$793.0  $538.0  
Supplemental Information:
Interest payments$356.6  $214.6  
Income taxes payments86.5  41.2  
Significant non-cash transactions:
Right-of-use assets obtained in exchange for lessee operating lease liabilities30.3  —  
Real estate properties acquired by foreclosure17.1  5.3  
Unsettled purchases of securities2.1  3.8  
Assets acquired and liabilities assumed in acquisitions:
Non-cash assets, excluding goodwill and other acquisition-related intangibles2,893.6  69.1  
Liabilities2,862.2  1.4  
Common stock issued in BSB Bancorp acquisition324.3  —  
See accompanying notes to consolidated financial statements.


6
Table of Contents
People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 1. GENERAL


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 loan losses 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 losses in future periods, and the inability to collect outstanding principal may result in increased loan losses.

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 Form 10-K for the year ended December 31, 2018. The results of operations for the three and nine months ended September 30, 2019 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 Annual Report on Form10-K for the year ended December 31, 2017,2018, as supplemented by the Quarterly Report for the periods ended March 31, 20182019 and June 30, 20182019 and this Quarterly Report for the period ended September 30, 2018,2019, 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 ($286.6368.7 million and $250.7$304.1 million at September 30, 20182019 and December 31, 2017,2018, respectively). Included in other liabilities in the Consolidated Statements of Condition is a liability for all legally binding unfunded commitments to fund future investments ($112.5145.5 million and $99.6$119.7 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 ten10 years). Amortization expense, which is included as a component of income tax expense, totaled $4.8$6.4 million and $4.2$4.8 million for the three months ended September 30, 20182019 and 2017,2018, respectively, and $14.0$18.5 million and $12.3$14.0 million for the nine months ended September 30, 2019 and 2018, and 2017, respectively.

Certain information and footnote disclosures normally included


NOTE 2. ACQUISITIONS
BSB Bancorp, Inc.
Effective April 1, 2019, People’s United completed its acquisition of BSB Bancorp, Inc. (“BSB Bancorp”) based 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, 2017.Belmont, Massachusetts. The results of operations for the three and nine months ended September 30, 2018 are not necessarily indicativefair value of the resultsconsideration transferred in the BSB Bancorp acquisition totaled $324.5 million and consisted of operations that may be expected for19.7 million shares of People’s United common stock. At the entire year or any other interim period.

acquisition date, BSB Bancorp operated 6 branches in the greater Boston area.

7
Table of Contents
People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

On June 27, 2018,

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, 2019 include the results of BSB Bancorp 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 related to the BSB Bancorp acquisition recorded during the nine months ended September 30, 2019 totaled $7.3 million, 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 BSB Bancorp are summarized as follows:

(in millions)
Assets:
  Cash and cash equivalents$108.7 
  Securities175.8 
  Loans2,642.9 
  Goodwill144.9 
  Core deposit intangible39.5 
  Premises and equipment8.3 
  Bank-owned life insurance36.8 
  Other assets29.8 
    Total assets$3,186.7 
Liabilities:
  Deposits$2,118.7 
  Borrowings696.6 
  Other liabilities46.9 
    Total liabilities$2,862.2 
Total purchase price$324.5 

Net deferred tax liabilities totaling $3.8 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 summary includes 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 this 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.

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.

8
Table of Contents
People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
Loans
Loans acquired in this acquisition were recorded at fair value with no carryover from BSB Bancorp’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 acquisition date and subsequently classified as purchased performing (see Note 4).

Such loans had a fair value of $2.64 billion and an outstanding principal balance of $2.69 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, 2019 is approximately $42.2 million of interest income attributable to BSB Bancorp since the acquisition date.

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 a 10-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 advances and other borrowings represent contractual repayments discounted using interest rates currently available on borrowings with similar characteristics and remaining maturities.

The following table presents selected unaudited pro forma financial information of the Company reflecting the acquisition of BSB Bancorp assuming the acquisition was completed as of the beginning of the respective periods:
Nine Months Ended
September 30,
(in millions, except per common share data)20192018
Selected Financial Results:
  Net interest income$1,044.7  $949.1  
  Provision for loan losses21.0  20.1  
  Non-interest income308.2  281.3  
  Non-interest expense837.5  756.7  
  Net income395.5  355.6  
  Net income applicable to common shareholders385.0  345.1  
Earnings per common share:
  Basic$0.98  $0.96  
  Diluted0.98  0.95  

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 acquisition 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 acquisition that were incurred by People’s United and BSB Bancorp during the nine months ended September 30, 2019 (none in 2018) are not reflected in the selected unaudited pro forma financial information. Pro forma basic and diluted earnings per common share were calculated using People’s United’s actual weighted-average common shares
9
Table of Contents
People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
outstanding for the periods presented, plus the incremental common shares issued, assuming the acquisition occurred at the beginning of the periods presented.

VAR Technology Finance
Effective January 2, 2019, the Bank completed itsall-cash acquisition of Vend Lease Company (“Vend Lease”VAR Technology Finance ("VAR"), a Baltimore-based equipment finance company. In connection withleasing and financing company headquartered in Mesquite, Texas. The fair value of the transaction,consideration transferred in the Bank acquired a lease and loan portfolio totaling approximately $68 million.VAR acquisition consisted of $60.0 million in cash. Merger-related expenses totaling $1.9 million relating to this transaction were recorded induring the nine months ended September 30, 2018.

NOTE 2. CASH AND CASH EQUIVALENTS AND SECURITIES

At December 31, 2017, cash and due from banks included restricted cash totaling $13.8 million (none at September 30, 2018) relating to one remaining securitization (which was repaid in June 2018) assumed in the acquisition of LEAF Commercial Capital, Inc. (“LEAF”). 2019.


NOTE 3. CASH AND CASH EQUIVALENTS AND SECURITIES
Included in short-term investments are interest-bearing deposits at the Federal Reserve Bank of New York (the“FRB-NY” “FRB-NY”) totaling $107.8$50.6 million at September 30, 20182019 and $340.4$234.0 million at December 31, 2017.2018. These deposits represent an alternative to overnight federal funds sold and had yields of 2.25%yielded 1.80% and 1.50%2.40% at September 30, 20182019 and December 31, 2017,2018, respectively.

The amortized cost, gross unrealized gains and losses, and fair value of People’s United’s debt securitiesavailable-for-sale and debt securitiesheld-to-maturity are as follows:

As of September 30, 2018 (in millions)

  Amortized
Cost		   Gross
Unrealized
Gains		   Gross
Unrealized
Losses		   Fair
Value		 

Debt securitiesavailable-for-sale:

        

U.S. Treasury and agency

  $683.5   $—     $(31.4)   $652.1 

GSE (1) mortgage-backed securities

   2,742.5    1.4    (83.9)    2,660.0 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total debt securitiesavailable-for-sale

  $3,426.0   $1.4   $(115.3)   $3,312.1 
  

 

 

   

 

 

   

 

 

   

 

 

 

Debt securitiesheld-to-maturity:

        

State and municipal

  $2,268.2   $19.7   $(37.4)   $2,250.5 

GSE mortgage-backed securities

   1,407.3    —      (57.7)    1,349.6 

Corporate

   65.9    —      (0.7)    65.2 

Other

   1.5    —      —      1.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total debt securitiesheld-to-maturity

  $3,742.9   $19.7   $(95.8)   $3,666.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

(1)

Government sponsored enterprise

As of December 31, 2017 (in millions)

  Amortized
Cost		   Gross
Unrealized
Gains		   Gross
Unrealized
Losses		   Fair
Value		 

Debt securitiesavailable-for-sale:

        

U.S. Treasury and agency

  $687.1   $—     $(18.3)   $668.8 

GSE mortgage-backed securities

   2,477.8    7.4    (28.7)    2,456.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total debt securitiesavailable-for-sale

  $3,164.9   $7.4   $(47.0)   $3,125.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

Debt securitiesheld-to-maturity:

        

State and municipal

  $2,060.4   $64.5   $(4.6)   $2,120.3 

GSE mortgage-backed securities

   1,474.9    0.3    (15.4)    1,459.8 

Corporate

   51.3    0.8    —      52.1 

Other

   1.5    —      —      1.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total debt securitiesheld-to-maturity

  $3,588.1   $65.6   $(20.0)   $3,633.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

As of September 30, 2019 (in millions)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Debt securities available-for-sale:
U.S. Treasury and agency$690.6  $0.4  $(2.9) $688.1  
GSE (1) mortgage-backed securities2,269.7  24.3  (3.4) 2,290.6  
Total debt securities available-for-sale$2,960.3  $24.7  $(6.3) $2,978.7  
Debt securities held-to-maturity:
State and municipal$2,432.3  $148.3  $(0.3) $2,580.3  
GSE mortgage-backed securities1,291.7  17.0  (0.1) 1,308.6  
Corporate79.9  1.4  (0.2) 81.1  
Other1.5  —  —  1.5  
Total debt securities held-to-maturity$3,805.4  $166.7  $(0.6) $3,971.5  
1.Government sponsored enterprise
As of December 31, 2018 (in millions)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Debt securities available-for-sale:
U.S. Treasury and agency$699.0  $0.1  $(21.1) $678.0  
GSE mortgage-backed securities2,486.6  4.6  (48.2) 2,443.0  
Total debt securities available-for-sale$3,185.6  $4.7  $(69.3) $3,121.0  
Debt securities held-to-maturity:
State and municipal$2,352.4  $35.4  $(18.4) $2,369.4  
GSE mortgage-backed securities1,367.5  —  (33.2) 1,334.3  
Corporate70.9  0.5  (0.7) 70.7  
Other1.5  —  —  1.5  
Total debt securities held-to-maturity$3,792.3  $35.9  $(52.3) $3,775.9  
At September 30, 20182019 and December 31, 2017,2018, debt securitiesavailable-for-sale with fair values of $1.87$2.07 billion and $1.94$2.20 billion, respectively, and debt securitiesheld-to-maturity with amortized costs of $1.30$1.65 billion and $1.37$1.49 billion, respectively, were pledged as collateral for public deposits and for other purposes.


10
Table of Contents
People’s United Financial, 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, 2018,2019, based on remaining period to contractual maturity. Information for GSE mortgage-backed securities 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

  $6.0   $6.0   $—     $—   

After 1 but within 5 years

   677.5    646.1    —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   683.5    652.1    —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

GSE mortgage-backed securities:

        

Within 1 year

   —      —      4.3    4.3 

After 1 but within 5 years

   53.6    52.9    234.7    226.4 

After 5 but within 10 years

   1,014.6    1,000.8    800.4    764.9 

After 10 years

   1,674.3    1,606.3    367.9    354.0 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   2,742.5    2,660.0    1,407.3    1,349.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

State and municipal:

        

Within 1 year

   —      —      23.5    23.5 

After 1 but within 5 years

   —      —      180.3    183.2 

After 5 but within 10 years

   —      —      334.4    340.1 

After 10 years

   —      —      1,730.0    1,703.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   —      —      2,268.2    2,250.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Corporate:

        

After 1 but within 5 years

   —      —      5.0    5.0 

After 5 but within 10 years

   —      —      60.9    60.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   —      —      65.9    65.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Other:

        

After 1 but within 5 years

   —      —      1.5    1.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   —      —      1.5    1.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total:

        

Within 1 year

   6.0    6.0    27.8    27.8 

After 1 but within 5 years

   731.1    699.0    421.5    416.1 

After 5 but within 10 years

   1,014.6    1,000.8    1,195.7    1,165.2 

After 10 years

   1,674.3    1,606.3    2,097.9    2,057.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $3,426.0   $3,312.1   $3,742.9   $3,666.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

 Available-for-SaleHeld-to-Maturity
(in millions)
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
U.S. Treasury and agency:
Within 1 year$158.9  $158.9  $—  $—  
After 1 but within 5 years531.7  529.2  —  —  
Total690.6  688.1  —  —  
GSE mortgage-backed securities:
Within 1 year—  —  2.8  2.8  
After 1 but within 5 years95.4  97.7  766.4  778.9  
After 5 but within 10 years714.9  730.6  217.0  221.3  
After 10 years1,459.4  1,462.3  305.5  305.6  
Total2,269.7  2,290.6  1,291.7  1,308.6  
State and municipal:
Within 1 year—  —  12.0  12.0  
After 1 but within 5 years—  —  213.1  221.5  
After 5 but within 10 years—  —  406.0  430.7  
After 10 years—  —  1,801.2  1,916.1  
Total—  —  2,432.3  2,580.3  
Corporate:
Within 1 year—  —  5.0  5.0  
After 5 but within 10 years—  —  74.9  76.1  
Total—  —  79.9  81.1  
Other:
Within 1 year—  —  1.5  1.5  
Total—  —  1.5  1.5  
Total:
Within 1 year158.9  158.9  21.3  21.3  
After 1 but within 5 years627.1  626.9  979.5  1,000.4  
After 5 but within 10 years714.9  730.6  697.9  728.1  
After 10 years1,459.4  1,462.3  2,106.7  2,221.7  
Total$2,960.3  $2,978.7  $3,805.4  $3,971.5  
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 recognized on debt securities when: (i) People’s United has an intention to sell the security; (ii) it is more likely than not that People’s United will be required to sell the security prior to recovery; or (iii) People’s United does not expect to recover the entire amortized cost basis of the security.

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 asheld-to-maturity until they mature, at which time People’s United expects to receive full value for the securities.

11
Table of Contents
People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
The following tables summarize those debt securities with unrealized losses, segregated by the length of time the securities have been in a continuous unrealized loss position, at the respective dates. 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, 2018 (in millions)

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

Debt securitiesavailable-for-sale:

          

GSE mortgage-backed securities

  $893.6   $(14.2)  $1,604.7   $(69.7)  $2,498.3   $(83.9) 

U.S. Treasury and agency

   152.5    (1.8)   494.6    (29.6)   647.1    (31.4) 

Debt securitiesheld-to-maturity:

          

GSE mortgage-backed securities

   330.7    (11.9)   1,018.9    (45.8)   1,349.6    (57.7) 

State and municipal

   1,048.1    (21.6)   265.4    (15.8)   1,313.5    (37.4) 

Corporate

   51.4    (0.7)   —      —     51.4    (0.7) 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total

  $2,476.3   $(50.2)  $3,383.6   $(160.9)  $5,859.9   $(211.1) 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

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

As of December 31, 2017 (in millions)

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

Debt securitiesavailable-for-sale:

          

GSE mortgage-backed securities

  $1,013.5   $(8.7)  $1,114.8   $(20.0)  $2,128.3   $(28.7) 

U.S. Treasury and agency

   156.0    —     507.7    (18.3)   663.7    (18.3) 

Debt securitiesheld-to-maturity:

          

GSE mortgage-backed securities

   1,289.3    (14.7)   45.0    (0.7)   1,334.3    (15.4) 

State and municipal

   106.2    (0.5)   224.9    (4.1)   331.1    (4.6) 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total

  $2,565.0   $(23.9)  $1,892.4   $(43.1)  $4,457.4   $(67.0) 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

 Continuous Unrealized Loss Position  
 Less Than 12 Months12 Months Or LongerTotal
As of September 30, 2019 (in millions)
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Debt securities available-for-sale:
GSE mortgage-backed securities$201.2  $(0.4) $700.0  $(3.1) $901.2  $(3.5) 
U.S. Treasury and agency105.3  (0.2) 463.1  (2.6) 568.4  (2.8) 
Total debt securities available-for-sale$306.5  $(0.6) $1,163.1  $(5.7) $1,469.6  $(6.3) 
Debt securities held-to-maturity:
GSE mortgage-backed securities$110.4  $(0.1) $9.5  $—  $119.9  $(0.1) 
State and municipal15.6  (0.1) 12.0  (0.2) 27.6  (0.3) 
Corporate—  —  8.4  (0.2) 8.4  (0.2) 
Total debt securities held-to-maturity$126.0  $(0.2) $29.9  $(0.4) $155.9  $(0.6) 
 Continuous Unrealized Loss Position  
 Less Than 12 Months12 Months Or LongerTotal
As of December 31, 2018 (in millions)
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Debt securities available-for-sale:
GSE mortgage-backed securities$132.4  $(0.5) $1,656.3  $(47.7) $1,788.7  $(48.2) 
U.S. Treasury and agency—  —  656.2  (21.1) 656.2  (21.1) 
Total debt securities available-for-sale$132.4  $(0.5) $2,312.5  $(68.8) $2,444.9  $(69.3) 
Debt securities held-to-maturity:
GSE mortgage-backed securities$—  $—  $1,334.3  $(33.2) $1,334.3  $(33.2) 
State and municipal113.4  (0.7) 697.6  (17.7) 811.0  (18.4) 
Corporate31.2  (0.6) 2.7  (0.1) 33.9  (0.7) 
Total debt securities held-to-maturity$144.6  $(1.3) $2,034.6  $(51.0) $2,179.2  $(52.3) 
At September 30, 2018,2019, approximately 56%6% of the 2,1372,165 debt securities owned by the Company, consisting of 15164 debt securities classified asavailable-for-sale and 1,04269 debt securities classified asheld-to-maturity, had gross unrealized losses totaling $115.3$6.3 million and $95.8$0.6 million, respectively. AllWith respect to those securities with unrealized losses, all of the GSE mortgage-backed securities had AAA credit ratings and an average contractual maturity of nine11 years. The state and municipal securities had an average credit rating of AA and ana weighted average maturity of 12seven years.

The cause of the gross unrealized losses with respect to all of the 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, 20182019 represent temporary impairments. NoNaN other-than-temporary impairment losses were recognized in the Consolidated Statements of Income for the three orand nine months ended September 30, 20182019 or 2017.

2018.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)


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 31, 2017,
12
Table of Contents
People’s United sold U.S. Treasury and collateralized mortgage obligation securities with a combined amortized cost of $486.9 million and recorded $15.7 million of gross realized losses.

Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)
Effective January 1, 2018, People’s United adopted new accounting guidance that requires equity investments (other than equity method investments) be measured at fair value with changes in fair value recognized in net income (see Note 13).income. At December 31, 2017, the Company’s securities portfolio included equity securities with an amortized cost of $9.6 million and a fair value of $8.7 million. Accordingly, upon adoption of this guidance, a cumulative-effect transition adjustment, representing the cumulative unrealized loss(net-of-tax) within accumulated other comprehensive income (loss) (“AOCL”), was recorded which served to decrease opening retained earnings by $0.6 million. ForPeople’s United recorded unrealized (losses) gains of $(0.5) million and $0.2 million for the three months ended September 30, 2019 and 2018, respectively, and $0.4 million and $1.0 million for the nine months ended September 30, 2018, People’s United recorded unrealized gains of $0.2 million2019 and $1.0 million,2018, respectively (included in othernon-interest income in the Consolidated Statements of Income) relating to the change in fair value of its equity securities during the respective periods.

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 $134.1$129.7 million and $130.0$124.2 million at September 30, 20182019 and December 31, 2017,2018, 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 $0.7 million and $12.0 million at both September 30, 20182019 and December 31, 2017,2018, 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 no0 impairment in the Company’s investment at September 30, 20182019 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 theFRB-NY (total cost of $177.6$203.6 million and $170.3$178.5 million at September 30, 20182019 and December 31, 2017,2018, 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 no0 impairment in the Company’s investment at September 30, 20182019 and the cost of the investment approximates fair value.

NOTE 3. LOANS


13
Table of Contents
People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
NOTE 4. LOANS
For purposes of disclosures related to the credit quality of financing receivables and the allowance for loan losses, 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.

•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’). All 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 Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

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

•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’ ‘non-accrual’ and the treatment of loan origination costs); and

•Recognition of loan charge-offs.

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, 2018.

2019.

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

  September 30, 2018  December 31, 2017 

(in millions)

 Originated  Acquired  Total  Originated  Acquired  Total 

Commercial:

      

Commercial real estate

 $9,750.9  $844.6  $10,595.5  $10,126.6  $942.1  $11,068.7 

Commercial and industrial

  8,078.9   489.7   8,568.6   8,129.9   601.2   8,731.1 

Equipment financing

  3,734.9   474.4   4,209.3   3,308.5   596.9   3,905.4 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Commercial Portfolio

  21,564.7   1,808.7   23,373.4   21,565.0   2,140.2   23,705.2 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Retail:

      

Residential mortgage:

      

Adjustable-rate

  5,810.8   126.7   5,937.5   5,782.6   144.0   5,926.6 

Fixed-rate

  867.5   106.9   974.4   758.0   121.1   879.1 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total residential mortgage

  6,678.3   233.6   6,911.9   6,540.6   265.1   6,805.7 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Home equity and other consumer:

      

Home equity

  1,823.6   43.6   1,867.2   1,960.0   55.2   2,015.2 

Other consumer

  44.2   2.6   46.8   45.6   3.6   49.2 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total home equity and other consumer

  1,867.8   46.2   1,914.0   2,005.6   58.8   2,064.4 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Retail Portfolio

  8,546.1   279.8   8,825.9   8,546.2   323.9   8,870.1 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total loans

 $30,110.8  $2,088.5  $32,199.3  $30,111.2  $2,464.1  $32,575.3 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 September 30, 2019December 31, 2018
(in millions)OriginatedAcquiredTotalOriginatedAcquiredTotal
Commercial:
Commercial real estate$9,721.4  $2,465.5  $12,186.9  $9,798.5  $1,851.1  $11,649.6  
Commercial and industrial9,720.1  825.8  10,545.9  8,292.3  796.6  9,088.9  
Equipment financing4,484.5  251.1  4,735.6  3,937.7  401.5  4,339.2  
Total Commercial Portfolio23,926.0  3,542.4  27,468.4  22,028.5  3,049.2  25,077.7  
Retail:
Residential mortgage:
Adjustable-rate5,547.9  1,368.5  6,916.4  5,854.1  807.9  6,662.0  
Fixed-rate1,113.8  1,278.5  2,392.3  935.1  557.1  1,492.2  
Total residential mortgage6,661.7  2,647.0  9,308.7  6,789.2  1,365.0  8,154.2  
Home equity and other consumer:
Home equity1,685.7  271.2  1,956.9  1,789.5  173.0  1,962.5  
Other consumer39.3  8.1  47.4  42.8  4.2  47.0  
Total home equity and other consumer1,725.0  279.3  2,004.3  1,832.3  177.2  2,009.5  
Total Retail Portfolio8,386.7  2,926.3  11,313.0  8,621.5  1,542.2  10,163.7  
Total loans$32,312.7  $6,468.7  $38,781.4  $30,650.0  $4,591.4  $35,241.4  
Loan origination fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized in interest income as an adjustment of yield. Depending on the loan portfolio, amounts are amortized or accreted using the level yield method over either the actual life or the estimated average life of the loan. Net deferred loan costs, which are included in loans by respective class and accounted for as interest yield adjustments, totaled $91.7$88.2 million at September 30, 20182019 and $80.4$94.6 million at December 31, 2017.

2018.

14
Table of Contents
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 ended September 30, 20182019 and 2017.2018. 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, 2018 (in millions)

  Originated  Acquired  Total  Originated  Acquired   Total  Total 

Balance at beginning of period

  $202.0  $3.8  $205.8  $30.8  $0.2   $31.0  $236.8 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Charge-offs

   (5.7)   (2.0)   (7.7)   (0.7)   —      (0.7)   (8.4) 

Recoveries

   0.6   0.4   1.0   0.4   —      0.4   1.4 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Net loan charge-offs

   (5.1)   (1.6)   (6.7)   (0.3)   —      (0.3)   (7.0) 

Provision for loan losses

   6.3   1.7   8.0   0.2   —      0.2   8.2 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Balance at end of period

  $203.2  $3.9  $207.1  $30.7  $0.2   $30.9  $238.0 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 
Nine months ended  Commercial  Retail    

September 30, 2018 (in millions)

  Originated  Acquired  Total  Originated  Acquired   Total  Total 

Balance at beginning of period

  $201.1  $3.4  $204.5  $29.7  $0.2   $29.9  $234.4 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Charge-offs

   (12.9)   (6.3)   (19.2)   (2.6)   —      (2.6)   (21.8) 

Recoveries

   2.6   1.0   3.6   1.7   —      1.7   5.3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Net loan charge-offs

   (10.3)   (5.3)   (15.6)   (0.9)   —      (0.9)   (16.5) 

Provision for loan losses

   12.4   5.8   18.2   1.9   —      1.9   20.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Balance at end of period

  $203.2  $3.9  $207.1  $30.7  $0.2   $30.9  $238.0 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 
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 endedCommercialRetail 
September 30, 2019 (in millions)OriginatedAcquiredTotalOriginatedAcquiredTotalTotal
Balance at beginning of period$210.9  $3.7  $214.6  $29.2  $0.2  $29.4  $244.0  
Charge-offs(6.1) (1.4) (7.5) (0.7) —  (0.7) (8.2) 
Recoveries1.6  0.3  1.9  0.5  —  0.5  2.4  
Net loan charge-offs(4.5) (1.1) (5.6) (0.2) —  (0.2) (5.8) 
Provision for loan losses6.9  0.9  7.8  —  —  —  7.8  
Balance at end of period$213.3  $3.5  $216.8  $29.0  $0.2  $29.2  $246.0  
Nine months endedCommercialRetail 
September 30, 2019 (in millions)OriginatedAcquiredTotalOriginatedAcquiredTotalTotal
Balance at beginning of period$205.6  $3.9  $209.5  $30.7  $0.2  $30.9  $240.4  
Charge-offs(13.9) (6.2) (20.1) (2.9) —  (2.9) (23.0) 
Recoveries4.2  1.1  5.3  2.3  —  2.3  7.6  
Net loan charge-offs(9.7) (5.1) (14.8) (0.6) —  (0.6) (15.4) 
Provision for loan losses17.4  4.7  22.1  (1.1) —  (1.1) 21.0  
Balance at end of period$213.3  $3.5  $216.8  $29.0  $0.2  $29.2  $246.0  
Three months endedCommercialRetail 
September 30, 2018 (in millions)OriginatedAcquiredTotalOriginatedAcquiredTotalTotal
Balance at beginning of period$202.0  $3.8  $205.8  $30.8  $0.2  $31.0  $236.8  
Charge-offs(5.7) (2.0) (7.7) (0.7) —  (0.7) (8.4) 
Recoveries0.6  0.4  1.0  0.4  —  0.4  1.4  
Net loan charge-offs(5.1) (1.6) (6.7) (0.3) —  (0.3) (7.0) 
Provision for loan losses6.3  1.7  8.0  0.2  —  0.2  8.2  
Balance at end of period$203.2  $3.9  $207.1  $30.7  $0.2  $30.9  $238.0  
Nine months endedCommercialRetail 
September 30, 2018 (in millions)OriginatedAcquiredTotalOriginatedAcquiredTotalTotal
Balance at beginning of period$201.1  $3.4  $204.5  $29.7  $0.2  $29.9  $234.4  
Charge-offs(12.9) (6.3) (19.2) (2.6) —  (2.6) (21.8) 
Recoveries2.6  1.0  3.6  1.7  —  1.7  5.3  
Net loan charge-offs(10.3) (5.3) (15.6) (0.9) —  (0.9) (16.5) 
Provision for loan losses12.4  5.8  18.2  1.9  —  1.9  20.1  
Balance at end of period$203.2  $3.9  $207.1  $30.7  $0.2  $30.9  $238.0  


15
Table of Contents
People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following tables summarize, by loan portfolio segment and impairment methodology, the allowance for loan losses and related portfolio balances:

   Commercial   Retail   Total 

As of September 30, 2018 (in millions)

  Portfolio   Allowance   Portfolio   Allowance   Portfolio   Allowance 

Originated loans:

            

Collectively evaluated for impairment

  $21,441.6   $195.2   $8,458.9   $28.4   $29,900.5   $223.6 

Individually evaluated for impairment

   123.1    8.0    87.2    2.3    210.3    10.3 

Acquired loans:

            

PCI (1)

   284.3    2.2    110.3    0.1    394.6    2.3 

Purchased performing:

            

Collectively evaluated for impairment

   1,521.2    1.7    167.9    —      1,689.1    1.7 

Individually evaluated for impairment

   3.2    —      1.6    0.1    4.8    0.1 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $23,373.4   $207.1   $8,825.9   $30.9   $32,199.3   $238.0 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   Commercial   Retail   Total 

As of December 31, 2017 (in millions)

  Portfolio   Allowance   Portfolio   Allowance   Portfolio   Allowance 

Originated loans:

            

Collectively evaluated for impairment

  $21,423.8   $196.5   $8,454.1   $27.3   $29,877.9   $223.8 

Individually evaluated for impairment

   141.2    4.6    92.1    2.4    233.3    7.0 

Acquired loans:

            

PCI (1)

   370.4    2.8    128.1    0.2    498.5    3.0 

Purchased performing:

            

Collectively evaluated for impairment

   1,769.8    0.6    193.9    —      1,963.7    0.6 

Individually evaluated for impairment

   —      —      1.9    —      1.9    —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $23,705.2   $204.5   $8,870.1   $29.9   $32,575.3   $234.4 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(1)

Purchased credit impaired (“PCI”) loans are evaluated for impairment on a pool basis.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

 CommercialRetailTotal
As of September 30, 2019 (in millions)PortfolioAllowancePortfolioAllowancePortfolioAllowance
Originated loans:
Collectively evaluated for impairment$22,258.6  $206.0  $9,850.9  $26.9  $32,109.5  $232.9  
Individually evaluated for impairment112.7  7.3  90.6  2.1  203.3  9.4  
Acquired loans:
PCI (1)219.0  2.2  72.2  0.2  291.2  2.4  
Purchased performing:
Collectively evaluated for impairment4,870.5  1.3  1,292.4  —  6,162.9  1.3  
Individually evaluated for impairment7.6  —  6.9  —  14.5  —  
Total$27,468.4  $216.8  $11,313.0  $29.2  $38,781.4  $246.0  
 CommercialRetailTotal
As of December 31, 2018 (in millions)PortfolioAllowancePortfolioAllowancePortfolioAllowance
Originated loans:
Collectively evaluated for impairment$21,900.1  $198.9  $8,535.0  $28.4  $30,435.1  $227.3  
Individually evaluated for impairment128.4  6.7  86.5  2.3  214.9  9.0  
Acquired loans:
PCI (1)300.3  2.2  99.6  0.1  399.9  2.3  
Purchased performing:
Collectively evaluated for impairment2,744.4  1.7  1,439.1  —  4,183.5  1.7  
Individually evaluated for impairment4.5  —  3.5  0.1  8.0  0.1  
Total$25,077.7  $209.5  $10,163.7  $30.9  $35,241.4  $240.4  

1.Purchased credit impaired (“PCI”) loans are evaluated for impairment on a pool basis.

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

   September 30,   December 31, 

(in millions)

  2018   2017 

Commercial:

    

Commercial real estate

  $17.2   $23.7 

Commercial and industrial

   44.9    32.6 

Equipment financing

   49.3    44.3 
  

 

 

   

 

 

 

Total (1)

   111.4    100.6 
  

 

 

   

 

 

 

Retail:

    

Residential mortgage

   32.0    32.7 

Home equity

   14.6    15.4 

Other consumer

   0.1    —   
  

 

 

   

 

 

 

Total (2)

   46.7    48.1 
  

 

 

   

 

 

 

Total

  $158.1   $148.7 
  

 

 

   

 

 

 

(1)

Reported net of government guarantees totaling $2.5 million and $3.1 million at September 30, 2018 and December 31, 2017, 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, 2018, the principal loan classes to which these government guarantees relate are commercial and industrial loans (93%) and commercial real estate loans (7%).

(2)

Includes $17.6 million and $15.2 million of loans in the process of foreclosure at September 30, 2018 and December 31, 2017, respectively.

September 30,
2019		December 31,
2018
(in millions)
Commercial:
Commercial real estate$25.1  $33.5  
Commercial and industrial37.7  38.0  
Equipment financing41.5  42.0  
Total (1)104.3  113.5  
Retail:
Residential mortgage36.6  38.9  
Home equity14.3  15.3  
Other consumer0.1  —  
Total (2)51.0  54.2  
Total$155.3  $167.7  
1.Reported net of government guarantees totaling $1.4 million and $1.9 million at September 30, 2019 and December 31, 2018, 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, 2019, the principal loan classes to which these government guarantees relate are commercial and industrial loans (95%) and commercial real estate loans (5%).
2.Includes $22.1 million and $24.8 million of loans in the process of foreclosure at September 30, 2019 and December 31, 2018, respectively.
16
Table of Contents
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 and/or (ii) covered by a Federal Deposit Insurance Corporation (“FDIC”) loss-share agreement (“LSA”), which totaled $23.7$10.1 million and $25.1$44.1 million at September 30, 20182019 and December 31, 2017,2018, respectively. Such loans otherwise meet People’s United’s definition 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 and the accretable yield on the pools is being recognized 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 $8.6$11.0 million and $4.6$6.0 million at September 30, 20182019 and December 31, 2017,2018, respectively, all of which becamenon-performing subsequent to acquisition.

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.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)


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 off against the allowance for loan losses. There were no0 loans past due 90 days or more and still accruing interest at September 30, 20182019 or December 31, 2017.

2018.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impaired loans also include certain loans whose terms have been modified in such a way that they are considered troubled debt restructurings (“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.

TDRs may either be accruing or placed onnon-accrual status (and reported asnon-performing 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 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 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.

17
Table of Contents
People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
At September 30, 20182019 and December 31, 2017,2018, People’s United’s recorded investment in loans classified as TDRs totaled $177.4$180.6 million and $186.9$179.4 million, respectively. The related allowance for loan losses was $5.4$3.6 million at September 30, 20182019 and $4.4$4.5 million at December 31, 2017.2018. Interest income recognized on TDRs totaled $1.2$1.5 million and $1.4$1.2 million for the three months ended September 30, 20182019 and 2017,2018, respectively, and $4.0$4.3 million and $3.7$4.0 million for the nine months ended September 30, 20182019 and 2017,2018, respectively. Fundings under commitments to lend additional amounts to borrowers with loans classified as TDRs were immaterial for the three and nine months ended September 30, 20182019 and 2017.2018. Loans that were modified and classified as TDRs during the three and nine months ended September 30, 20182019 and 20172018 principally involve reduced payment and/or payment deferral, extension of term (generally no more than two years for commercial loans and five years for retail loans) and/or a temporary reduction of interest rate (generally less than 200 basis points).

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, 20182019 and 2017.2018. For purposes of this disclosure, recorded investments represent amounts immediately prior to and subsequent to the restructuring.

   Three Months Ended September 30, 2018 
       Pre-Modification   Post-Modification 
       Outstanding   Outstanding 
   Number   Recorded   Recorded 

(dollars in millions)

  of Contracts   Investment   Investment 

Commercial:

      

Commercial real estate (1)

   4   $20.7   $20.7 

Commercial and industrial (2)

   10    10.3    10.3 

Equipment financing (3)

   5    10.3    10.3 
  

 

 

   

 

 

   

 

 

 

Total

   19    41.3    41.3 
  

 

 

   

 

 

   

 

 

 

Retail:

      

Residential mortgage (4)

   4    1.4    1.4 

Home equity (5)

   19    2.2    2.2 

Other consumer

   —      —      —   
  

 

 

   

 

 

   

 

 

 

Total

   23    3.6    3.6 
  

 

 

   

 

 

   

 

 

 

Total

   42   $44.9   $44.9 
  

 

 

   

 

 

   

 

 

 

(1)

Represents the following concessions: extension of term (3 contracts; recorded investment of $20.2 million); or reduced payment and/or payment deferral (1 contract; recorded investment of $0.5 million).

(2)

Represents the following concessions: extension of term (6 contracts; recorded investment of $3.6 million); reduced payment and/or payment deferral (2 contracts; recorded investment of $6.4 million); or a combination of concessions (2 contracts; recorded investment of $0.3 million).

(3)

Represents the following concessions: extension of term (2 contracts; recorded investment of $3.3 million); reduced payment and/or payment deferral (2 contracts; recorded investment of $5.9 million); or a combination of concessions (1 contract; recorded investment of $1.1 million).

(4)

Represents the following concessions: loans restructured through bankruptcy (2 contracts; recorded investment of $0.6 million); reduced payment and/or payment deferral (1 contract; recorded investment of $0.7 million); or a combination of concessions (1 contract; recorded investment of $0.1 million).

(5)

Represents the following concessions: loans restructured through bankruptcy (11 contracts; recorded investment of $1.1 million); reduced payment and/or payment deferral (6 contracts; recorded investment of $1.0 million); or a combination of concessions (2 contracts; recorded investment of $0.1 million).

 Three Months Ended September 30, 2019
(dollars in millions)
Number
of Contracts
Pre-Modification
Outstanding
Recorded
Investment
Post-Modification
Outstanding
Recorded
Investment
Commercial:
Commercial real estate (1)7  $13.1  $13.1  
Commercial and industrial (2)8  4.1  4.1  
Equipment financing (3)10  9.5  9.5  
Total25  26.7  26.7  
Retail:
Residential mortgage (4)15  6.5  6.5  
Home equity (5)15  1.3  1.3  
Other consumer—  —  —  
Total30  7.8  7.8  
Total55  $34.5  $34.5  

1.Represents the following concessions: extension of term (5 contracts; recorded investment of $1.7 million); or a combination of concessions (2 contracts; recorded investment of $11.4 million).
2.Represents the following concessions: extension of term (5 contracts; recorded investment of $1.9 million); reduced payment and/or payment deferral (2 contracts; recorded investment of $0.3 million); or a combination of concessions (1 contract; recorded investment of $1.9 million).
3.Represents the following concessions: extension of term (1 contract; recorded investment of $0.4 million); reduced payment and/or payment deferral (5 contracts; recorded investment of $5.1 million); or a combination of concessions (4 contracts; recorded investment of $4.0 million).
4.Represents the following concessions: loans restructured through bankruptcy (4 contracts; recorded investment of $1.6 million); reduced payment and/or payment deferral (9 contracts; recorded investment of $3.7 million); or a combination of concessions (2 contracts; recorded investment of $1.2 million).
5.Represents the following concessions: loans restructured through bankruptcy (6 contracts; recorded investment of $0.4 million); reduced payment and/or payment deferral (5 contracts; recorded investment of $0.6 million); or a combination of concessions (4 contracts; recorded investment of $0.3 million).


18
Table of Contents
People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

   Nine Months Ended September 30, 2018 

(dollars in millions)

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

Commercial:

      

Commercial real estate (1)

   9   $24.3   $24.3 

Commercial and industrial (2)

   34    55.2    55.2 

Equipment financing (3)

   16    20.4    20.4 
  

 

 

   

 

 

   

 

 

 

Total

   59    99.9    99.9 
  

 

 

   

 

 

   

 

 

 

Retail:

      

Residential mortgage (4)

   16    4.9    4.9 

Home equity (5)

   56    4.9    4.9 

Other consumer

   —      —      —   
  

 

 

   

 

 

   

 

 

 

Total

   72    9.8    9.8 
  

 

 

   

 

 

   

 

 

 

Total

   131   $109.7   $109.7 
  

 

 

   

 

 

   

 

 

 

(1)

Represents the following concessions: extension of term (8 contracts; recorded investment of $23.8 million); or reduced payment and/or payment deferral (1 contract; recorded investment of $0.5 million).

(2)

Represents the following concessions: extension of term (21 contracts; recorded investment of $30.7 million); reduced payment and/or payment deferral (10 contracts; recorded investment of $23.8 million); or a combination of concessions (3 contracts; recorded investment of $0.7 million).

(3)

Represents the following concessions: extension of term (2 contracts; recorded investment of $3.3 million); reduced payment and/or payment deferral (8 contracts; recorded investment of $12.9 million); or a combination of concessions (6 contracts; recorded investment of $4.2 million).

(4)

Represents the following concessions: loans restructured through bankruptcy (5 contracts; recorded investment of $0.9 million); reduced payment and/or payment deferral (6 contracts; recorded investment of $2.4 million); or a combination of concessions (5 contracts; recorded investment of $1.6 million).

(5)

Represents the following concessions: loans restructured through bankruptcy (37 contracts; recorded investment of $2.8 million); reduced payment and/or payment deferral (10 contracts; recorded investment of $1.3 million); or a combination of concessions (9 contracts; recorded investment of $0.8 million).

Nine Months Ended September 30, 2019
(dollars in millions)Number
of Contracts		Pre-Modification
Outstanding
Recorded
Investment		Post-Modification
Outstanding
Recorded
Investment
Commercial:
Commercial real estate (1)8  $13.7  $13.7  
Commercial and industrial (2)27  27.5  27.5  
Equipment financing (3)33  22.9  22.9  
Total68  64.1  64.1  
Retail:
Residential mortgage (4)73  22.2  22.2  
Home equity (5)83  7.0  7.0  
Other consumer—  —  —  
Total156  29.2  29.2  
Total224  $93.3  $93.3  


1.Represents the following concessions: extension of term (5 contracts; recorded investment of $1.7 million); reduced payment and/or payment deferral (1 contract; recorded investment of $0.6 million); or a combination of concessions (2 contracts; recorded investment of $11.4 million).
2.Represents the following concessions: extension of term (22 contracts; recorded investment of $24.3 million); reduced payment and/or payment deferral (2 contracts; recorded investment of $0.3 million); or a combination of concessions (3 contracts; recorded investment of $2.9 million).
3.Represents the following concessions: extension of term (5 contracts; recorded investment of $1.6 million); reduced payment and/or payment deferral (22 contracts; recorded investment of $16.9 million); or a combination of concessions (6 contracts; recorded investment of $4.4 million).
4.Represents the following concessions: loans restructured through bankruptcy (39 contracts; recorded investment of $8.2 million); reduced payment and/or payment deferral (21 contracts; recorded investment of $8.4 million); or a combination of concessions (13 contracts; recorded investment of $5.6 million).
5.Represents the following concessions: loans restructured through bankruptcy (48 contracts; recorded investment of $2.6 million); reduced payment and/or payment deferral (16 contracts; recorded investment of $2.8 million); or a combination of concessions (19 contracts; recorded investment of $1.6 million).




19
Table of Contents
People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

   Three 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)

   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, 2018
(dollars in millions)
Number
of Contracts
Pre-Modification
Outstanding
Recorded
Investment
Post-Modification
Outstanding
Recorded
Investment
Commercial:
Commercial real estate (1)4  $20.7  $20.7  
Commercial and industrial (2)10  10.3  10.3  
Equipment financing (3)5  10.3  10.3  
Total19  41.3  41.3  
Retail:
Residential mortgage (4)4  1.4  1.4  
Home equity (5)19  2.2  2.2  
Other consumer—  —  —  
Total23  3.6  3.6  
Total42  $44.9  $44.9  

1.Represents the following concession: extension of term (3 contracts; recorded investment of $20.2 million); or reduced payment and/or payment deferral (1 contract; recorded investment of $0.5 million).
2.Represents the following concessions: extension of term (6 contracts; recorded investment of $3.6 million); reduced payment and/or payment deferral (2 contracts; recorded investment of $6.4 million); or a combination of concessions (2 contracts; recorded investment of $0.3 million).
3.Represents the following concessions: extension of term (2 contracts; recorded investment of $3.3 million); reduced payment and/or payment deferral (2 contracts; recorded investment of $5.9 million); a combination of concessions (1 contract; recorded investment of $1.1 million).
4.Represents the following concessions: loans restructured through bankruptcy (2 contracts; recorded investment of $0.6 million); reduced payment and/or payment deferral (1 contract; recorded investment of $0.7 million); or a combination of concessions (1 contract; recorded investment of $0.1 million).
5.Represents the following concessions: loans restructured through bankruptcy (11 contracts; recorded investment of $1.1 million); reduced payment and/or payment deferral (6 contracts; recorded investment of $1.0 million); or a combination of concessions (2 contracts; recorded investment of $0.1 million).









20
Table of Contents
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, 2018
(dollars in millions)Number
of Contracts		Pre-Modification
Outstanding
Recorded
Investment		Post-Modification
Outstanding
Recorded
Investment
Commercial:
Commercial real estate (1)9  $24.3  $24.3  
Commercial and industrial (2)34  55.2  55.2  
Equipment financing (3)16  20.4  20.4  
Total59  99.9  99.9  
Retail:
Residential mortgage (4)16  4.9  4.9  
Home equity (5)56  4.9  4.9  
Other consumer—  —  —  
Total72  9.8  9.8  
Total131  $109.7  $109.7  


1.Represents the following concessions: extension of term (8 contracts; recorded investment of $23.8 million); or reduced payment and/or payment deferral (1 contract; recorded investment of $0.5 million).
2.Represents the following concessions: extension of term (21 contracts; recorded investment of $30.7 million); reduced payment and/or payment deferral (10 contracts; recorded investment of $23.8 million); or a combination of concessions (3 contracts; recorded investment of $0.7 million).
3.Represents the following concessions: extension of term (2 contracts; recorded investment of $3.3 million): reduced payment and/or payment deferral (8 contracts; recorded investment of $12.9 million); or a combination of concessions (6 contracts; recorded investment of $4.2 million).
4.Represents the following concessions: loans restructured through bankruptcy (5 contracts; recorded investment of $0.9 million); reduced payment and/or payment deferral (6 contracts; recorded investment of $2.4 million); or a combination of concessions (5 contracts; recorded investment of $1.6 million).
5.Represents the following concessions: loans restructured through bankruptcy (37 contracts; recorded investment of $2.8 million); reduced payment and/or payment deferral (10 contracts; recorded investment of $1.3 million); or a combination of concessions (9 contracts; recorded investment of $0.8 million).

21
Table of Contents
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, 20182019 and 2017.2018. 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 or nine months ended September 30, 20182019 or 2017.

   Three Months Ended September 30, 
   2018   2017 

(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

   4    5.0    1    0.1 

Equipment financing

   1    0.2    8    4.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   5    5.2    9    4.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

Retail:

        

Residential mortgage

   5    0.9    2    0.9 

Home equity

   8    0.6    5    0.8 

Other consumer

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   13    1.5    7    1.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   18   $6.7    16   $6.0 
  

 

 

   

 

 

   

 

 

   

 

 

 

   Nine Months Ended September 30, 
   2018   2017 

(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   $0.8    —     $—   

Commercial and industrial

   13    8.5    4    1.5 

Equipment financing

   7    6.8    15    6.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   22    16.1    19    8.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

Retail:

        

Residential mortgage

   7    1.3    9    2.7 

Home equity

   9    0.6    11    1.3 

Other consumer

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   16    1.9    20    4.0 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   38   $18.0    39   $12.3 
  

 

 

   

 

 

   

 

 

   

 

 

 
2018.

 Three Months Ended September 30,
 20192018
(dollars in millions)
Number
of Contracts
Recorded
Investment as of
Period End
Number
of Contracts
Recorded
Investment as of
Period End
Commercial:
Commercial real estate1  $0.2  —  $—  
Commercial and industrial—  —  4  5.0  
Equipment financing1  0.3  1  0.2  
Total2  0.5  5  5.2  
Retail:
Residential mortgage2  0.6  5  0.9  
Home equity3  0.1  8  0.6  
Other consumer—  —  —  —  
Total5  0.7  13  1.5  
Total7  $1.2  18  $6.7  

Nine Months Ended September 30,
20192018
(dollars in millions)Number
of Contracts		Recorded
Investment as of
Period End		Number
of Contracts		Recorded
Investment as of
Period End
Commercial:
Commercial real estate1  $0.2  2  $0.8  
Commercial and industrial—  —  13  8.5  
Equipment financing8  8.2  7  6.8  
Total9  8.4  22  16.1  
Retail:
Residential mortgage6  2.4  7  1.3  
Home equity9  0.6  9  0.6  
Other consumer—  —  —  —  
Total15  3.0  16  1.9  
Total24  $11.4  38  $18.0  
22
Table of Contents
People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

People’s United’s impaired 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, 2018   As of December 31, 2017 

(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

  $31.2   $29.2   $—     $37.7   $36.3   $—   

Commercial and industrial

   29.3    27.1    —      27.9    25.5    —   

Equipment financing

   31.3    28.0    —      36.9    32.8    —   

Retail:

            

Residential mortgage

   64.0    56.8    —      67.6    60.8    —   

Home equity

   23.5    19.9    —      24.0    20.2    —   

Other consumer

   —      —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $179.3   $161.0   $—     $194.1   $175.6   $—   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

With a related allowance for loan losses:

 

          

Commercial:

            

Commercial real estate

  $10.3   $7.4   $0.8   $11.7   $9.9   $0.9 

Commercial and industrial

   25.9    22.7    4.2    26.9    26.0    2.6 

Equipment financing

   12.6    11.9    3.0    11.6    10.7    1.1 

Retail:

            

Residential mortgage

   10.5    10.5    1.8    11.4    11.4    1.7 

Home equity

   1.6    1.6    0.6    1.7    1.6    0.7 

Other consumer

   —      —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $60.9   $54.1   $10.4   $63.3   $59.6   $7.0 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans:

            

Commercial:

            

Commercial real estate

  $41.5   $36.6   $0.8   $49.4   $46.2   $0.9 

Commercial and industrial

   55.2    49.8    4.2    54.8    51.5    2.6 

Equipment financing

   43.9    39.9    3.0    48.5    43.5    1.1 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   140.6    126.3    8.0    152.7    141.2    4.6 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Retail:

            

Residential mortgage

   74.5    67.3    1.8    79.0    72.2    1.7 

Home equity

   25.1    21.5    0.6    25.7    21.8    0.7 

Other consumer

   —      —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   99.6    88.8    2.4    104.7    94.0    2.4 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $240.2   $215.1   $10.4   $257.4   $235.2   $7.0 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 As of September 30, 2019As of December 31, 2018
(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$38.9  $35.7  $—  $31.0  $28.1  $—  
Commercial and industrial34.9  29.9  —  45.6  42.0  —  
Equipment financing21.2  19.2  —  20.2  18.0  —  
Retail:
Residential mortgage69.1  61.4  —  66.8  59.3  —  
Home equity26.5  23.2  —  23.8  20.3  —  
Other consumer—  —  —  —  —  —  
Total$190.6  $169.4  $—  $187.4  $167.7  $—  
With a related allowance for loan losses:
Commercial:
Commercial real estate$2.6  $2.3  $0.1  $23.8  $21.8  $1.6  
Commercial and industrial22.4  18.9  5.6  12.6  10.2  2.4  
Equipment financing14.6  14.3  1.6  16.2  12.8  2.7  
Retail:
Residential mortgage11.5  11.5  1.5  8.8  8.8  1.7  
Home equity1.4  1.4  0.6  1.7  1.6  0.7  
Other consumer—  —  —  —  —  —  
Total$52.5  $48.4  $9.4  $63.1  $55.2  $9.1  
Total impaired loans:
Commercial:
Commercial real estate$41.5  $38.0  $0.1  $54.8  $49.9  $1.6  
Commercial and industrial57.3  48.8  5.6  58.2  52.2  2.4  
Equipment financing35.8  33.5  1.6  36.4  30.8  2.7  
Total134.6  120.3  7.3  149.4  132.9  6.7  
Retail:
Residential mortgage80.6  72.9  1.5  75.6  68.1  1.7  
Home equity27.9  24.6  0.6  25.5  21.9  0.7  
Other consumer—  —  —  —  —  —  
Total108.5  97.5  2.1  101.1  90.0  2.4  
Total$243.1  $217.8  $9.4  $250.5  $222.9  $9.1  

23
Table of Contents
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, 
   2018   2017 

(in millions)

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

Commercial:

        

Commercial real estate

  $36.2   $0.4   $61.8   $0.3 

Commercial and industrial

   52.4    0.2    59.7    0.7 

Equipment financing

   36.0    0.1    46.5    0.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   124.6    0.7    168.0    1.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Retail:

        

Residential mortgage

   68.6    0.4    72.4    0.4 

Home equity

   20.7    0.2    21.8    0.1 

Other consumer

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   89.3    0.6    94.2    0.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $213.9   $1.3   $262.2   $1.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

   Nine Months Ended September 30, 
   2018   2017 

(in millions)

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

Commercial:

        

Commercial real estate

  $40.7   $0.9   $56.9   $0.9 

Commercial and industrial

   50.6    1.3    66.1    1.6 

Equipment financing

   39.8    0.2    43.0    0.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   131.1    2.4    166.0    2.9 
  

 

 

   

 

 

   

 

 

   

 

 

 

Retail:

        

Residential mortgage

   69.5    1.3    71.9    1.3 

Home equity

   21.0    0.4    21.1    0.3 

Other consumer

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   90.5    1.7    93.0    1.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $221.6   $4.1   $259.0   $4.5 
  

 

 

   

 

 

   

 

 

   

 

 

 


 Three Months Ended September 30,
 20192018
(in millions)
Average
Recorded
Investment
Interest
Income
Recognized
Average
Recorded
Investment
Interest
Income
Recognized
Commercial:
Commercial real estate$28.8  $0.4  $36.2  $0.4  
Commercial and industrial47.6  0.3  52.4  0.2  
Equipment financing28.5  0.1  36.0  0.1  
Total104.9  0.8  124.6  0.7  
Retail:
Residential mortgage70.5  0.6  68.6  0.4  
Home equity23.9  0.2  20.7  0.2  
Other consumer—  —  —  —  
Total94.4  0.8  89.3  0.6  
Total$199.3  $1.6  $213.9  $1.3  

Nine Months Ended September 30,
20192018
(in millions)Average
Recorded
Investment		Interest
Income
Recognized		Average
Recorded
Investment		Interest
Income
Recognized
Commercial:
Commercial real estate$39.9  $0.8  $40.7  $0.9  
Commercial and industrial44.3  1.4  50.6  1.3  
Equipment financing25.5  0.2  39.8  0.2  
Total109.7  2.4  131.1  2.4  
Retail:
Residential mortgage67.2  1.6  69.5  1.3  
Home equity22.7  0.5  21.0  0.4  
Other consumer—  —  —  —  
Total89.9  2.1  90.5  1.7  
Total$199.6  $4.5  $221.6  $4.1  
24
Table of Contents
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, 2018 (in millions)

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

Commercial:

          

Commercial real estate

  $9,728.2   $10.1   $12.6   $22.7   $9,750.9 

Commercial and industrial

   8,044.5    14.2    20.2    34.4    8,078.9 

Equipment financing

   3,642.4    75.6    16.9    92.5    3,734.9 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   21,415.1    99.9    49.7    149.6    21,564.7 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Retail:

          

Residential mortgage

   6,625.3    31.9    21.1    53.0    6,678.3 

Home equity

   1,810.6    6.4    6.6    13.0    1,823.6 

Other consumer

   44.0    0.1    0.1    0.2    44.2 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   8,479.9    38.4    27.8    66.2    8,546.1 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total originated loans

  $29,895.0   $138.3   $77.5   $215.8   $30,110.8 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

  Past Due 
As of September 30, 2019 (in millions)Current
30-89
Days
90 Days
or More
Total
Total
Originated
Commercial:
Commercial real estate$9,695.6  $5.2  $20.6  $25.8  $9,721.4  
Commercial and industrial9,696.4  9.1  14.6  23.7  9,720.1  
Equipment financing4,389.0  84.2  11.3  95.5  4,484.5  
Total23,781.0  98.5  46.5  145.0  23,926.0  
Retail:
Residential mortgage6,614.2  25.2  22.3  47.5  6,661.7  
Home equity1,673.2  6.3  6.2  12.5  1,685.7  
Other consumer39.0  0.2  0.1  0.3  39.3  
Total8,326.4  31.7  28.6  60.3  8,386.7  
Total originated loans$32,107.4  $130.2  $75.1  $205.3  $32,312.7  
Included in the “Current” and“30-89 “30-89 Days” categories above are earlynon-performing commercial real estate loans, commercial and industrial loans, and equipment financing loans totaling $4.8$4.6 million, $27.0$24.4 million and $32.4$30.2 million, respectively, and $18.9$22.4 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, 2017 (in millions)

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

Commercial:

          

Commercial real estate

  $10,102.3   $11.0   $13.3   $24.3   $10,126.6 

Commercial and industrial

   8,099.0    14.9    16.0    30.9    8,129.9 

Equipment financing

   3,219.7    83.1    5.7    88.8    3,308.5 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   21,421.0    109.0    35.0    144.0    21,565.0 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Retail:

          

Residential mortgage

   6,487.3    32.8    20.5    53.3    6,540.6 

Home equity

   1,945.2    7.4    7.4    14.8    1,960.0 

Other consumer

   45.3    0.3    —      0.3    45.6 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   8,477.8    40.5    27.9    68.4    8,546.2 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total originated loans

  $29,898.8   $149.5   $62.9   $212.4   $30,111.2 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

  Past Due 
As of December 31, 2018 (in millions)Current
30-89
Days
90 Days
or More
Total
Total
Originated
Commercial:
Commercial real estate$9,762.1  $23.0  $13.4  $36.4  $9,798.5  
Commercial and industrial8,261.5  6.9  23.9  30.8  8,292.3  
Equipment financing3,855.3  68.8  13.6  82.4  3,937.7  
Total21,878.9  98.7  50.9  149.6  22,028.5  
Retail:
Residential mortgage6,723.2  38.6  27.4  66.0  6,789.2  
Home equity1,776.0  5.8  7.7  13.5  1,789.5  
Other consumer42.7  0.1  —  0.1  42.8  
Total8,541.9  44.5  35.1  79.6  8,621.5  
Total originated loans$30,420.8  $143.2  $86.0  $229.2  $30,650.0  
Included in the “Current” and“30-89 “30-89 Days” categories above are earlynon-performing commercial real estate loans, commercial and industrial loans, and equipment financing loans totaling $10.6$20.3 million, $19.5$15.8 million and $38.6$28.4 million, respectively, and $20.2$19.1 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)

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.

25
Table of Contents
People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
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.

Retail Credit Quality Indicators

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 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 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,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.

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 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.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

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.

The following is a summary, by class


26
Table of loan, of credit quality indicators:

As of September 30, 2018 (in millions)

  Commercial
Real Estate		   Commercial
and
Industrial		   Equipment
Financing		   Total 

Commercial:

        

Originated loans:

        

Pass

  $9,500.0   $7,644.2   $3,352.3   $20,496.5 

Special mention

   134.2    170.1    68.5    372.8 

Substandard

   115.9    264.2    314.1    694.2 

Doubtful

   0.8    0.4    —      1.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total originated loans

   9,750.9    8,078.9    3,734.9    21,564.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

Acquired loans:

        

Pass

   779.9    425.8    468.1    1,673.8 

Special mention

   26.2    9.3    3.2    38.7 

Substandard

   38.5    54.6    3.1    96.2 

Doubtful

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total acquired loans

   844.6    489.7    474.4    1,808.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $10,595.5   $8,568.6   $4,209.3   $23,373.4 
  

 

 

   

 

 

   

 

 

   

 

 

 
Contents

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

As of September 30, 2018 (in millions)

  Residential
Mortgage		   Home
Equity		   Other
Consumer		   Total 

Retail:

        

Originated loans:

        

Low risk

  $3,343.1   $862.0   $28.2   $4,233.3 

Moderate risk

   2,829.0    589.6    6.6    3,425.2 

High risk

   506.2    372.0    9.4    887.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total originated loans

   6,678.3    1,823.6    44.2    8,546.1 
  

 

 

   

 

 

   

 

 

   

 

 

 

Acquired loans:

        

Low risk

   136.6    —      —      136.6 

Moderate risk

   52.3    —      —      52.3 

High risk

   44.7    43.6    2.6    90.9 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total acquired loans

   233.6    43.6    2.6    279.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $6,911.9   $1,867.2   $46.8   $8,825.9 
  

 

 

   

 

 

   

 

 

   

 

 

 

As of December 31, 2017 (in millions)

  Commercial
Real Estate		   Commercial
and
Industrial		   Equipment
Financing		   Total 

Commercial:

        

Originated loans:

        

Pass

  $9,859.3   $7,760.7   $2,899.9   $20,519.9 

Special mention

   159.4    124.0    91.8    375.2 

Substandard

   107.0    244.2    316.8    668.0 

Doubtful

   0.9    1.0    —      1.9 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total originated loans

   10,126.6    8,129.9    3,308.5    21,565.0 
  

 

 

   

 

 

   

 

 

   

 

 

 

Acquired loans:

        

Pass

   892.0    520.0    596.9    2,008.9 

Special mention

   14.8    15.2    —      30.0 

Substandard

   35.3    66.0    —      101.3 

Doubtful

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total acquired loans

   942.1    601.2    596.9    2,140.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $11,068.7   $8,731.1   $3,905.4   $23,705.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

As of December 31, 2017 (in millions)

  Residential
Mortgage		   Home
Equity		   Other
Consumer		   Total 

Retail:

        

Originated loans:

        

Low risk

  $3,292.1   $925.6   $28.2   $4,245.9 

Moderate risk

   2,738.8    640.0    7.1    3,385.9 

High risk

   509.7    394.4    10.3    914.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total originated loans

   6,540.6    1,960.0    45.6    8,546.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Acquired loans:

        

Low risk

   148.0    —      —      148.0 

Moderate risk

   65.7    —      —      65.7 

High risk

   51.4    55.2    3.6    110.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total acquired loans

   265.1    55.2    3.6    323.9 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $6,805.7   $2,015.2   $49.2   $8,870.1 
  

 

 

   

 

 

   

 

 

   

 

 

 

The following tables summarize, by class of loan, credit quality indicators:


As of September 30, 2019 (in millions)
Commercial
Real Estate
Commercial
and
Industrial
Equipment
Financing
Total
Commercial:
Originated loans:
Pass$9,448.6  $9,178.2  $4,056.4  $22,683.2  
Special mention194.3  270.4  82.5  547.2  
Substandard77.6  271.2  345.6  694.4  
Doubtful0.9  0.3  —  1.2  
Total originated loans9,721.4  9,720.1  4,484.5  23,926.0  
Acquired loans:
Pass2,382.2  764.7  248.6  3,395.5  
Special mention38.1  17.7  —  55.8  
Substandard45.2  43.3  2.5  91.0  
Doubtful—  0.1  —  0.1  
Total acquired loans2,465.5  825.8  251.1  3,542.4  
Total$12,186.9  $10,545.9  $4,735.6  $27,468.4  

As of September 30, 2019 (in millions)
Residential
Mortgage
Home
Equity
Other
Consumer
Total
Retail:
Originated loans:
Low risk$3,362.7  $785.9  $24.0  $4,172.6  
Moderate risk2,763.9  555.6  5.7  3,325.2  
High risk535.1  344.2  9.6  888.9  
Total originated loans6,661.7  1,685.7  39.3  8,386.7  
Acquired loans:
Low risk1,228.9  —  —  1,228.9  
Moderate risk1,166.7  —  —  1,166.7  
High risk251.4  271.2  8.1  530.7  
Total acquired loans2,647.0  271.2  8.1  2,926.3  
Total$9,308.7  $1,956.9  $47.4  $11,313.0  

27
Table of Contents
People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

As of December 31, 2018 (in millions)
Commercial
Real Estate
Commercial
and
Industrial
Equipment
Financing
Total
Commercial:
Originated loans:
Pass$9,607.0  $7,855.7  $3,549.3  $21,012.0  
Special mention105.5  196.9  92.1  394.5  
Substandard85.2  239.3  296.3  620.8  
Doubtful0.8  0.4  —  1.2  
Total originated loans9,798.5  8,292.3  3,937.7  22,028.5  
Acquired loans:
Pass1,766.2  719.6  394.0  2,879.8  
Special mention27.3  14.6  4.7  46.6  
Substandard57.6  62.4  2.8  122.8  
Doubtful—  —  —  —  
Total acquired loans1,851.1  796.6  401.5  3,049.2  
Total$11,649.6  $9,088.9  $4,339.2  $25,077.7  
As of December 31, 2018 (in millions)
Residential
Mortgage
Home
Equity
Other
Consumer
Total
Retail:
Originated loans:
Low risk$2,912.8  $834.5  $27.3  $3,774.6  
Moderate risk3,360.9  576.4  5.9  3,943.2  
High risk515.5  378.6  9.6  903.7  
Total originated loans6,789.2  1,789.5  42.8  8,621.5  
Acquired loans:
Low risk506.1  —  —  506.1  
Moderate risk639.6  —  —  639.6  
High risk219.3  173.0  4.2  396.5  
Total acquired loans1,365.0  173.0  4.2  1,542.2  
Total$8,154.2  $1,962.5  $47.0  $10,163.7  

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.

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 that, as of the acquisition date, 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.

28
Table of Contents
People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
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

•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.

People’s United Financial, Inc.

Notes to Consolidated Financial Statementschanges 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 – (Unaudited)

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.

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$7.76 billion; expected cash flows of $7.09$7.19 billion; and a fair value (initial carrying amount) of $5.42$5.49 billion. The difference between the contractually required principal and interest payments receivable and the expected cash flows ($560.1572.0 million) represented the initial nonaccretable difference. The difference between the expected cash flows and fair value ($1.671.70 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, 2018,2019, the outstanding principal balance and carrying amount of the PCI loan portfolio were $476.4$375.1 million and $394.7$291.3 million, respectively ($587.7491.6 million and $498.5$399.9 million, respectively, at December 31, 2017)2018).

29
Table of Contents
People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
The following table summarizes activity in the accretable yield for the PCI loan portfolio:

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

(in millions)

  2018  2017  2018  2017 

Balance at beginning of period

  $190.2  $233.4  $219.7  $255.4 

Acquisitions

   —     —     —     13.1 

Accretion

   (5.6)   (7.1)   (17.9)   (22.5) 

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

   —     —     —     —   

Other changes in expected cash flows (2)

   —     —     (17.2)   (19.7) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at end of period

  $184.6  $226.3  $184.6  $226.3 
  

 

 

  

 

 

  

 

 

  

 

 

 

(1)

Results in increased interest accretion as a prospective yield adjustment over the remaining life of the corresponding pool of loans.

(2)


Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2019201820192018
Balance at beginning of period$154.3  $190.2  $189.7  $219.7  
Accretion(4.5) (5.6) (15.5) (17.9) 
Reclassification from nonaccretable difference for loans
   with improved cash flows (1)
—  —  —  —  
Other changes in expected cash flows (2)(13.2) —  (37.6) (17.2) 
Balance at end of period$136.6  $184.6  $136.6  $184.6  
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)

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.


Other Real Estate Owned and Repossessed Assets (included in Other Assets)

Other real estate owned (“REO”) was comprised of commercialresidential and residentialcommercial properties totaling $8.7$12.3 million and $4.4$7.7 million, respectively, at September 30, 2018,2019, and $9.3$5.5 million and $7.6$8.7 million, respectively, at December 31, 2017.2018. Repossessed assets totaled $2.0$6.3 million and $2.5$3.9 million at September 30, 20182019 and December 31, 2017,2018, respectively.

NOTE 4. STOCKHOLDERS’ EQUITY


NOTE 5. 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 outstanding at both September 30, 20182019 and December 31, 2017,2018, and (ii) 1.95 billion shares of common stock, par value of $0.01 per share, of which 437.7487.6 million shares and 435.6466.3 million shares were issued at September 30, 20182019 and December 31, 2017,2018, 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 million shares at both September 30, 20182019 and December 31, 2017)2018) 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 shares at both September 30, 20182019 and December 31, 2017)2018). Following shareholder approval of the People’s United Financial, Inc. 2014 Long-Term Incentive Plan in 2014, no0 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 common stock. Such shares may be repurchased, either directly or through agents, in the open market at prices and terms satisfactory to management. To date, 0 shares have been repurchased.

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 securitiesavailable-for-sale; (iii) net unrealized gains and losses on debt securities transferred toheld-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, 20182019 and 20172018 is reported in the Consolidated Statements of Comprehensive Income.


30
Table of Contents
People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following is a summary of the changes in the components of 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 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, 2017

 $(144.1)  $(21.6)  $(15.1)  $(0.9)  $(181.7) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive income (loss) before reclassifications

  —     (56.2)   —     (2.4)   (58.6) 

Amounts reclassified from AOCL (1)

  4.5   (0.1)   2.3   0.1   6.8 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Current period other comprehensive
income (loss)

  4.5   (56.3)   2.3   (2.3)   (51.8) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Transition adjustments related to adoption of new accounting standards (2)

  (30.0)   (3.9)   (3.2)   (0.2)   (37.3) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at September 30, 2018

 $(169.6)  $(81.8)  $(16.0)  $(3.4)  $(270.8) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(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, 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 (loss)

  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) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(1)

See the following table for details about these reclassifications.

(2)

See Note 13.

(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, 2018$(192.5) $(47.0) $(15.3) $(2.0) $(256.8) 
   Other comprehensive income
before reclassifications		—  66.2  —  1.6  67.8  
   Amounts reclassified from AOCL (1)3.9  —  2.0  0.8  6.7  
Current period other comprehensive
income		3.9  66.2  2.0  2.4  74.5  
Balance at September 30, 2019$(188.6) $19.2  $(13.3) $0.4  $(182.3) 


(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, 2017$(144.1) $(21.6) $(15.1) $(0.9) $(181.7) 
Other comprehensive income
before reclassifications		—  (56.2) —  (2.4) (58.6) 
Amounts reclassified from AOCL (1)4.5  (0.1) 2.3  0.1  6.8  
Current period other comprehensive
income (loss)		4.5  (56.3) 2.3  (2.3) (51.8) 
Transition adjustments related to
adoption of new accounting
standards (2)		(30.0) (3.9) (3.2) (0.2) (37.3) 
Balance at September 30, 2018$(169.6) $(81.8) $(16.0) $(3.4) $(270.8) 
1.See the following table for details about these reclassifications.
2.See Notes 3 and 15.
31
Table of Contents
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  Affected Line Item
in the Statement Where
Net Income is Presented
  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 

(in millions)

   2018      2017      2018      2017   

Details about components of AOCL:

     

Amortization of pension and other postretirement plans items:

     

Net actuarial loss

 $(2.0)  $(1.7)  $(6.2)  $(5.1)  (1)

Prior service credit

  —     0.2   0.2   0.6  (1)
 

 

 

  

 

 

  

 

 

  

 

 

  
  (2.0)   (1.5)   (6.0)   (4.5)  Income before income tax expense
  0.5   0.6   1.5   1.7  Income tax expense
 

 

 

  

 

 

  

 

 

  

 

 

  
  (1.5)   (0.9)   (4.5)   (2.8)  Net income
 

 

 

  

 

 

  

 

 

  

 

 

  

Reclassification adjustment for net realized gains (losses) on debt securitiesavailable-for-sale

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

 

 

  

 

 

  

 

 

  

 

 

  
  —     —     0.1   (9.9)  Net income
 

 

 

  

 

 

  

 

 

  

 

 

  

Amortization of unrealized losses on debt securities transferred toheld-to-maturity

  (0.9)   (0.9)   (3.0)   (2.6)  Income before income tax expense (3)
  0.2   0.3   0.7   1.0  Income tax expense
 

 

 

  

 

 

  

 

 

  

 

 

  
  (0.7)   (0.6)   (2.3)   (1.6)  Net income
 

 

 

  

 

 

  

 

 

  

 

 

  

Amortization of unrealized gains and losses on cash flow hedges:

     

Interest rate swaps

  (0.3)   0.3   (0.3)   0.6  (4)

Interest rate locks

  0.1   0.1   0.1   0.1  (4)
 

 

 

  

 

 

  

 

 

  

 

 

  
  (0.2)   0.4   (0.2)   0.7  Income before income tax expense
  0.1   (0.2)   0.1   (0.3)  Income tax expense
 

 

 

  

 

 

  

 

 

  

 

 

  
  (0.1)   0.2   (0.1)   0.4  Net income
 

 

 

  

 

 

  

 

 

  

 

 

  

Total reclassifications for the period

 $(2.3)  $(1.3)  $(6.8)  $(13.9)  
 

 

 

  

 

 

  

 

 

  

 

 

  

(1)

Included in the computation of net periodic benefit income (expense) reflected in othernon-interest expense (see Notes 7 and 13 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)2019201820192018
Details about components of AOCL:
Amortization of pension and other postretirement plans items:
Net actuarial loss$(1.4) $(2.0) $(4.1) $(6.2) (1) 
Prior service credit—  —  —  0.2  (1) 
(1.4) (2.0) (4.1) (6.0) Income before income tax expense
0.4  0.5  0.2  1.5  Income tax expense
(1.0) (1.5) (3.9) (4.5) Net income
Reclassification adjustment for net realized gains (losses) on debt securities available-for-sale—  —  —  0.1  Income before income tax expense (2)
—  —  —  —  Income tax expense
—  —  —  0.1  Net income
Amortization of unrealized losses on debt securities transferred to
    held-to-maturity
(1.1) (0.9) (2.7) (3.0) Income before income tax expense (3)
0.3  0.2  0.7  0.7  Income tax expense
(0.8) (0.7) (2.0) (2.3) Net income
Amortization of unrealized gains and losses on cash flow hedges:
Interest rate swaps(0.3) (0.3) (1.1) (0.3) (4) 
Interest rate locks0.1  0.1  0.1  0.1  (4) 
(0.2) (0.2) (1.0) (0.2) Income before income tax expense
—  0.1  0.2  0.1  Income tax expense
(0.2) (0.1) (0.8) (0.1) Net income
Total reclassifications for the period$(2.0) $(2.3) $(6.7) $(6.8) 

1.Included in the computation of net periodic benefit income (expense) reflected in other non-interest expense (see Note 8 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.

32
Table of Contents
People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 5. EARNINGS PER COMMON SHARE

NOTE 6. EARNINGS PER COMMON SHARE
The following is an analysis of People’s United’s basic and diluted earnings per common share (“EPS”), reflecting the application of thetwo-class method, as described below:

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

(in millions, except per common share data)

  2018   2017  2018  2017 

Net income available to common shareholders

  $113.5   $87.3  $324.6  $220.4 

Dividends paid on and undistributed earnings allocated to participating securities

   —      (0.1)   (0.2)   (0.4) 
  

 

 

   

 

 

  

 

 

  

 

 

 

Earnings attributable to common shareholders

  $113.5   $87.2  $324.4  $220.0 
  

 

 

   

 

 

  

 

 

  

 

 

 

Weighted average common shares outstanding for basic EPS

   341.4    336.9   340.6   327.6 

Effect of dilutive equity-based awards

   3.6    1.9   3.9   2.0 
  

 

 

   

 

 

  

 

 

  

 

 

 

Weighted average common shares and common-equivalent shares for diluted EPS

   345.0    338.8   344.5   329.6 
  

 

 

   

 

 

  

 

 

  

 

 

 

EPS:

      

Basic

  $0.33   $0.26  $0.95  $0.67 

Diluted

   0.33    0.26   0.94   0.67 

 Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions, except per common share data)2019201820192018
Net income available to common shareholders$131.6  $113.5  $372.5  $324.6  
Dividends paid on and undistributed earnings allocated to
participating securities		(0.1) —  (0.2) (0.2) 
Earnings attributable to common shareholders$131.5  $113.5  $372.3  $324.4  
Weighted average common shares outstanding for basic EPS391.7  341.4  384.6  340.6  
Effect of dilutive equity-based awards2.8  3.6  3.2  3.9  
Weighted average common shares and common-equivalent
shares for diluted EPS		394.5  345.0  387.8  344.5  
EPS:
Basic$0.34  $0.33  $0.97  $0.95  
Diluted0.33  0.33  0.96  0.94  
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”) 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 7.2 million shares and 7.1 million shares for the three and nine months ended September 30, 2019, respectively, and 6.8 million shares for both the three and nine months ended September 30, 2018, and 10.2 million shares and 10.1 million shares for the three and nine months ended September 30, 2017, respectively, have also been excluded from the calculation of diluted EPS.


33
Table of Contents
People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 6. GOODWILL AND OTHER ACQUISITION-RELATED INTANGIBLE ASSETS


NOTE 7. GOODWILL AND OTHER ACQUISITION-RELATED INTANGIBLE ASSETS
Changes in the carrying amounts of People’s United’s goodwill are summarized as follows for the nine months ended September 30, 2019 and 2018, and 2017 are summarized as follows:

   Operating Segment     

(in millions)

  Commercial
Banking		   Retail
Banking		   Wealth
Management		   Total 

Balance at December 31, 2017

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

Acquisition of Vend Lease

   23.8    —      —      23.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2018

  $1,624.1   $720.1   $91.0   $2,435.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

   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 Bancorp

   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 
  

 

 

   

 

 

   

 

 

   

 

 

 

respectively.

 Operating Segment 
(in millions)
Commercial
Banking
Retail
Banking
Wealth
Management
Total
Balance at December 31, 2018$1,759.4  $835.3  $91.0  $2,685.7  
Acquisition of:
   VAR37.5  —  —  37.5  
   BSB Bancorp49.3  95.6  —  144.9  
Balance at September 30, 2019$1,846.2  $930.9  $91.0  $2,868.1  
Operating Segment
(in millions)
Commercial
Banking
Retail
Banking
Wealth
Management
Total
Balance at December 31, 2017$1,600.3  $720.1  $91.0  $2,411.4  
Acquisition of Vend Lease Company23.8  —  —  23.8  
Balance at September 30, 2018$1,624.1  $720.1  $91.0  $2,435.2  
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.

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, 20182019 and December 31, 2017,2018, tax deductible goodwill totaled $91.5$137.2 million and $72.3 $71.0 million, respectively.

People’s United’s other acquisition-related intangible assets totaled $133.7$196.8 million and $148.6$180.0 million at September 30, 20182019 and December 31, 2017,2018, respectively. At September 30, 2018,2019, the carrying amounts of other acquisition-related intangible assets were as follows: trade name ($60.9 million); client relationship intangible ($20.5 million); core deposit intangible ($18.191.8 million); trade name intangible ($54.1 million); client relationships intangible ($18.4 million); trust relationshiprelationships intangible ($12.19.3 million); insurance relationshiprelationships intangible ($4.74.0 million); favorable lease agreement ($0.5 million);non-competeagreements ($0.42.4 million); non-compete agreements ($0.3 million); and mutual fund management contracts, which are not amortized ($16.5 million).

Amortization expense of other acquisition-related intangible assets totaled $4.9$8.0 million and $7.9$4.9 million for the three months ended September 30, 20182019 and 2017,2018, respectively, and $14.9$22.7 million and $22.1$14.9 million for the nine months ended September 30, 20182019 and 2017,2018, respectively. Scheduled amortization expense attributable to other acquisition-related intangible assets for the full-year of 20182019 and each of the next five years is as follows: $19.9 million in 2018; $18.4$30.6 million in 2019; $16.8$29.7 million in 2020; $15.0$27.0 million in 2021; $13.5$24.6 million in 2022; and $8.5$18.7 million in 2023.2023; and $17.0 million in 2024. There were no0 impairment losses relating to goodwill or other acquisition-related intangible assets recorded in the Consolidated Statements of Income during the nine months ended September 30, 20182019 and 2017.

2018.


34
Table of Contents
People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 7. EMPLOYEE BENEFIT PLANS

NOTE 8. 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 a qualified defined benefit pension plan that covers former ChittendenFirst Connecticut Bancorp, Inc. ("First Connecticut") employees who meet certain eligibility requirements (the “Chittenden“First Connecticut Qualified Plan”). Effective December 31, 2005, accruedAll benefits under this plan were frozen based on participants’ then-current service and pay levels. Interest continues to be credited on undistributed balances at a crediting rate specified by the Chittenden Qualified Plan. During April 2010, participants who were in payment status as of April 1, 2010, or whose accrued benefit as of that date was scheduled to be paid in the form of an annuity commencing May 1, 2010 based upon elections made by April 15, 2010, were transferred into the People’s Qualified Plan.

People’s United also continues to maintain a qualified defined benefit pension plan that covers former Suffolk Bancorp employees who meet certain eligibility requirements (the “Suffolk Qualified Plan”). Effective December 31, 2012, 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 by the Suffolk Qualified Plan.

effective February 28, 2013.

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. In February 2018, People’s United made voluntary employer contributions of $40 million to the People’s Qualified Plan and $10 million to the Chittenden Qualified Plan (none to the Suffolk Qualified Plan) in response to tax reform.

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 for certain eligible former First Connecticut 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”).


35
Table of Contents
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 ChittendenFirst Connecticut Qualified Plan, the People's Supplemental Plans and the First Connecticut Supplemental PlansPlan (together the “Pension Plans”) and (ii) the OtherPeople's Postretirement Plan and the First Connecticut Postretirement Plans (together the "Other Postretirement Plans") are as follows:

       Pension Plans           Other    
    Postretirement Plan    		 

Three months ended September 30 (in millions)

  2018   2017   2018   2017 

Net periodic benefit (income) expense:

        

Interest cost

  $4.9   $4.9   $0.2   $0.2 

Expected return on plan assets

   (10.9)    (9.6)    —      —   

Recognized net actuarial loss

   2.0    1.6    —      0.1 

Recognized prior service credit

   —      (0.2)    —      —   

Settlements

   (0.5)    1.1    —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit (income) expense (1)

  $(4.5)   $(2.2)   $0.2   $0.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

   Pension Plans   Other
Postretirement Plan		 

Nine months ended September 30 (in millions)

  2018   2017   2018   2017 

Net periodic benefit (income) expense:

        

Interest cost

  $14.6   $14.3   $0.6   $0.6 

Expected return on plan assets

   (32.7)    (28.3)    —      —   

Recognized net actuarial loss

   6.0    4.9    0.2    0.2 

Recognized prior service credit

   (0.2)    (0.6)    —      —   

Settlements

   0.4    2.6    —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit (income) expense (1)

   (11.9)    (7.1)    0.8    0.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

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

        

Net actuarial loss

   (6.0)    (4.9)    (0.2)    (0.2) 

Prior service credit

   0.2    0.6    —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Totalpre-tax changes recognized in other comprehensive income (loss)

   (5.8)    (4.3)    (0.2)    (0.2) 
  

 

 

   

 

 

   

 

 

   

 

 

 

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

  $(17.7)   $(11.4)   $0.6   $0.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

(1)

As discussed in Note 13, amounts are included in othernon-interest expense for all periods presented.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)


Pension PlansOther    
    Postretirement Plan
Three months ended September 30 (in millions)2019201820192018
Net periodic benefit (income) expense:
Interest cost$5.7  $4.9  $0.2  $0.2  
Expected return on plan assets(11.4) (10.9) —  —  
Recognized net actuarial loss1.3  2.0  0.1  —  
Recognized prior service credit—  —  —  —  
Settlements0.4  (0.5) —  —  
Net periodic benefit (income) expense (1)$(4.0) $(4.5) $0.3  $0.2  
 Pension Plans
Other
Postretirement Plans
Nine months ended September 30 (in millions)2019201820192018
Net periodic benefit (income) expense:
Interest cost$17.1  $14.6  $0.7  $0.6  
Expected return on plan assets(34.3) (32.7) —  —  
Recognized net actuarial loss4.0  6.0  0.1  0.2  
Recognized prior service credit—  (0.2) —  —  
Settlements1.3  0.4  —  —  
Net periodic benefit (income) expense(11.9) (11.9) 0.8  0.8  
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
Net actuarial loss(4.0) (6.0) (0.1) (0.2) 
Prior service credit—  0.2  —  —  
Total pre-tax changes recognized in other comprehensive income (loss)(4.0) (5.8) (0.1) (0.2) 
Total recognized in net periodic benefit (income) expense and other comprehensive income (loss)$(15.9) $(17.7) $0.7  $0.6  
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, 2018,2019, totaled $3.5$3.3 million. At September 30, 2018,2019, the loan balance totaled $180.8$176.5 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.

36
Table of Contents
People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
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 4,094,3164,442,769 shares of People’s United common stock have been allocated or committed to be released to participants’ accounts. At September 30, 2018, 6,359,2592019, 6,010,806 shares of People’s United common stock, with a fair value of $108.9$94.0 million at that date, have not been allocated or committed to be released.

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 $4.2 million and $4.8 million for both the nine months ended September 30, 2019 and 2018, and 2017.

NOTE 8. LEGAL PROCEEDINGS

respectively.


NOTE 9. 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 People’s United’s financial condition, results of operations or liquidity.

NOTE 9. SEGMENT INFORMATION


NOTE 10. SEGMENT INFORMATION
See “Segment Results” included in Item 2 for segment information for the three and nine months ended September 30, 20182019 and 2017.

2018.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 10. FAIR VALUE MEASUREMENTS


NOTE 11. 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 mortgage-backed 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
Table of Contents
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. For those financial instruments not measured at fair value either on a recurring ornon-recurring basis, disclosure of each instrument’s carrying amount and estimated fair value has been provided.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)


Recurring Fair Value Measurements

Trading Debt Securities, Equity Securities and Debt SecuritiesAvailable-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 mortgage-backed securities, all of which are included in Level 2.

The Company’savailable-for-sale debt securities are primarily comprised of GSE mortgage-backed securities. The fair value of these securities is 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, 20182019 and December 31, 2017,2018, the entireavailable-for-sale mortgage-backed securities portfolio was comprised of10- and15-year GSE securities. An active market exists for securities that are similar to the Company’s GSE mortgage-backed 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, 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 7,8, 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.

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 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
Table of Contents
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, 2018 (in millions)

  Level 1   Level 2   Level 3   Total 

Financial assets:

        

Trading debt securities:

        

U.S. Treasury

  $8.3   $—     $—     $8.3 

Debt securitiesavailable-for-sale:

        

U.S. Treasury and agency

   652.1    —      —      652.1 

GSE mortgage-backed securities

   —      2,660.0    —      2,660.0 

Equity securities

   8.9    —      —      8.9 

Other assets:

        

Exchange-traded funds

   39.1    —      —      39.1 

Mutual funds

   3.1    —      —      3.1 

Fixed income securities

   —      0.3    —      0.3 

Interest rate swaps

   —      45.9    —      45.9 

Interest rate caps

   —      3.6    —      3.6 

Foreign exchange contracts

   —      0.6    —      0.6 

Forward commitments to sell residential mortgage loans

   —      0.2    —      0.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $711.5   $2,710.6   $—     $3,422.1 
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial liabilities:

        

Interest rate swaps

  $—     $207.4   $—     $207.4 

Interest rate caps

   —      3.6    —      3.6 

Risk participation agreements (1)

   —      —      —      —   

Foreign exchange contracts

   —      0.4    —      0.4 

Interest rate-lock commitments on residential mortgage loans

   —      0.2    —      0.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $—     $211.6   $—     $211.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

 Fair Value Measurements Using 
As of September 30, 2019 (in millions)Level 1Level 2Level 3Total
Financial assets:
Trading debt securities:
U.S. Treasury$9.3  $—  $—  $9.3  
Debt securities available-for-sale:
U.S. Treasury and agency688.1  —  —  688.1  
GSE mortgage-backed securities—  2,290.6  —  2,290.6  
Equity securities7.8  —  —  7.8  
Other assets:
Exchange-traded funds45.3  —  —  45.3  
Mutual funds3.8  —  —  3.8  
Interest rate swaps—  421.1  —  421.1  
Interest rate caps—  2.1  —  2.1  
Foreign exchange contracts—  1.4  —  1.4  
Forward commitments to sell residential
mortgage loans		—  0.4  —  0.4  
Total$754.3  $2,715.6  $—  $3,469.9  
Financial liabilities:
Interest rate swaps$—  $74.3  $—  $74.3  
Interest rate caps—  2.1  —  2.1  
Risk participation agreements—  0.2  —  0.2  
Foreign exchange contracts—  1.3  —  1.3  
Interest rate-lock commitments on residential
mortgage loans		—  0.5  —  0.5  
Total$—  $78.4  $—  $78.4  


39
Table of Contents
People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

   Fair Value Measurements Using     

As of December 31, 2017 (in millions)

  Level 1   Level 2   Level 3   Total 

Financial assets:

        

Trading debt securities:

        

U.S. Treasury

  $8.2   $—     $—     $8.2 

Debt securitiesavailable-for-sale:

        

U.S. Treasury and agency

   668.8    —      —      668.8 

GSE mortgage-backed securities

   —      2,456.5    —      2,456.5 

Equity securities

   8.7    —      —      8.7 

Other assets:

        

Exchange-traded funds

   36.5    —      —      36.5 

Mutual funds

   3.5    —      —      3.5 

Fixed income securities

   —      1.3    —      1.3 

Interest rate swaps

   —      74.8    —      74.8 

Interest rate caps

   —      2.8    —      2.8 

Foreign exchange contracts

   —      0.1    —      0.1 

Forward commitments to sell residential mortgage loans

   —      0.2    —      0.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $725.7   $2,535.7   $—     $3,261.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial liabilities:

        

Interest rate swaps

  $—     $84.9   $—     $84.9 

Interest rate caps

   —      2.8    —      2.8 

Risk participation agreements (1)

   —      —      —      —   

Foreign exchange contracts

   —      0.4    —      0.4 

Interest rate-lock commitments on residential mortgage loans

   —      0.2    —      0.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $—     $88.3   $—     $88.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

(1)

At both September 30,

 Fair Value Measurements Using 
As of December 31, 2018 (in millions)Level 1Level 2Level 3Total
Financial assets:
Trading debt securities:
U.S. Treasury$8.4  $—  $—  $8.4  
Debt securities available-for-sale:
U.S. Treasury and agency678.0  —  —  678.0  
GSE mortgage-backed securities—  2,443.0  —  2,443.0  
Equity securities8.1  —  —  8.1  
Other assets:
Exchange-traded funds35.5  —  —  35.5  
Mutual funds20.6  —  —  20.6  
Fixed income securities—  0.3  —  0.3  
Interest rate swaps—  98.9  —  98.9  
Interest rate caps—  3.1  —  3.1  
Foreign exchange contracts—  0.9  —  0.9  
Forward commitments to sell residential
mortgage loans		—  0.1  —  0.1  
Total$750.6  $2,546.3  $—  $3,296.9  
Financial liabilities:
Interest rate swaps$—  $135.0  $—  $135.0  
Interest rate caps—  3.1  —  3.1  
Risk participation agreements (1)—  —  —  —  
Foreign exchange contracts—  0.8  —  0.8  
Interest rate-lock commitments on residential
mortgage loans		—  0.1  —  0.1  
Total$—  $139.0  $—  $139.0  
1.At December 31, 2018, and December 31, 2017, the fair value of risk participation agreements totaled less than $0.1 million (see Note 11).

There were no transfers into or out of the Level 1 or Level 2 categories during the nine months ended September 30, 2018 or 2017.

risk participation agreements totaled less than $0.1 million (see Note 12).

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)


Non-Recurring Fair Value Measurements

LoansHeld-for-Sale

Residential mortgage loansheld-for-sale are recorded at the lower of 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 Loans

Loan impairment is deemed 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: (i) the present value of expected future cash flows discounted at the loan’s original effective interest rate; (ii) the loan’s observable market price; or (iii) the fair value of the collateral (less estimated cost to sell) if the loan is collateral dependent. Accordingly, certain impaired loans may be subject to measurement at fair value on anon-recurring basis.

40
Table of Contents
People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
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-dependent loans. 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%.

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 asheld-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.

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, 2018 (in millions)

  Level 1   Level 2   Level 3   Total 

Loansheld-for-sale (1)

  $—     $15.2   $—     $15.2 

Impaired loans (2)

   —      —      54.1    54.1 

REO and repossessed assets (3)

   —      —      15.1    15.1 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $—     $15.2   $69.2   $84.4 
  

 

 

   

 

 

   

 

 

   

 

 

 
   Fair Value Measurements Using     

As of December 31, 2017 (in millions)

  Level 1   Level 2   Level 3   Total 

Loansheld-for-sale (1)

  $—     $16.6   $—     $16.6 

Impaired loans (2)

   —      —      59.6    59.6 

REO and repossessed assets (3)

   —      —      19.4    19.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $—     $16.6   $79.0   $95.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

(1)

Consists of residential mortgage loans; no fair value adjustments were recorded for the nine months ended September 30, 2018 and 2017.

(2)

Represents the recorded investment in originated impaired loans with a related allowance for loan losses measured in accordance with applicable accounting guidance. The total consists of $42.0 million of Commercial loans and $12.1 million of Retail loans at September 30, 2018. The provision for loan losses on impaired loans totaled $7.7 million and $4.1 million for the nine months ended September 30, 2018 and 2017, respectively.

(3)

Represents: (i) $8.7 million of commercial REO; (ii) $4.4 million of residential REO; and (iii) $2.0 million of repossessed assets at September 30, 2018. Charge-offs to the allowance for loan losses related to loans that were transferred to REO or repossessed assets totaled $1.0 million and $2.2 million for the nine months ended September 30, 2018 and 2017, respectively. Write downs and net loss on sale of foreclosed/repossessed assets charged tonon-interest expense totaled $0.1 million and $(0.3) million for the same periods.

 Fair Value Measurements Using     
As of September 30, 2019 (in millions)Level 1Level 2Level 3Total
Loans held-for-sale (1)$—  $24.8  $—  $24.8  
Impaired loans (2)—  —  48.4  48.4  
REO and repossessed assets (3)—  —  26.3  26.3  
Total$—  $24.8  $74.7  $99.5  
 Fair Value Measurements Using 
As of December 31, 2018 (in millions)Level 1Level 2Level 3Total
Loans held-for-sale (1)$—  $19.5  $—  $19.5  
Impaired loans (2)—  —  55.2  55.2  
REO and repossessed assets (3)—  —  18.1  18.1  
Total$—  $19.5  $73.3  $92.8  


1.Consists of residential mortgage loans; 0 fair value adjustments were recorded for the nine months ended September 30, 2019 and 2018.
2.Represents the recorded investment in originated impaired loans with a related allowance for loan losses measured in accordance with applicable accounting guidance. The total consists of $35.5 million of Commercial loans and $12.9 million of Retail loans at September 30, 2019. The provision for loan losses on impaired loans totaled $5.3 million and $7.7 million for the nine months ended September 30, 2019 and 2018, respectively.
3.Represents: (i) $12.3 million of residential REO; (ii) $7.7 million of commercial REO; and (iii) $6.3 million of repossessed assets at September 30, 2019. Charge-offs to the allowance for loan losses related to loans that were transferred to REO or repossessed assets totaled $2.1 million and $1.0 million for the nine months ended September 30, 2019 and 2018, respectively. Write downs and net (gains) loss on sale of foreclosed/repossessed assets charged to non-interest expense totaled $(0.3) million and $0.1 million for the same periods.

41
Table of Contents
People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Financial Assets and Financial Liabilities Not Measured at Fair Value

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, 2018 (in millions)

  Level 1   Level 2   Level 3   Total 

Financial assets:

          

Cash and due from banks

  $410.5   $410.5   $—     $—     $410.5 

Short-term investments

   127.5    —      127.5    —      127.5 

Debt securitiesheld-to-maturity

   3,742.9    —      3,665.3    1.5    3,666.8 

FHLB and FRB stock

   312.4    —      312.4    —      312.4 

Total loans, net (1)

   31,907.2    —      6,582.7    24,805.5    31,388.2 

Financial liabilities:

          

Time deposits

   6,035.9    —      5,997.6    —      5,997.6 

Other deposits

   27,174.3    —      27,174.3    —      27,174.3 

FHLB advances

   2,369.7    —      2,370.2    —      2,370.2 

Federal funds purchased

   735.0    —      735.0    —      735.0 

Customer repurchase agreements

   261.3    —      261.3    —      261.3 

Other borrowings

   26.0    —      26.0    —      26.0 

Notes and debentures

   885.6    —      892.5    —      892.5 

(1)

Excludes impaired loans totaling $54.1 million measured at fair value on anon-recurring basis.

       Estimated Fair Value     
   Carrying
Amount		   Measurements Using     

As of December 31, 2017 (in millions)

  Level 1   Level 2   Level 3   Total 

Financial assets:

          

Cash and due from banks

  $505.1   $505.1   $—     $—     $505.1 

Short-term investments

   377.5    —      377.5    —      377.5 

Debt securitiesheld-to-maturity

   3,588.1    —      3,632.2    1.5    3,633.7 

FHLB and FRB stock

   312.3    —      312.3    —      312.3 

Total loans, net (1)

   32,281.3    —      6,632.2    25,495.3    32,127.5 

Financial liabilities:

          

Time deposits

   5,454.3    —      5,441.1    —      5,441.1 

Other deposits

   27,602.0    —      27,602.0    —      27,602.0 

FHLB advances

   2,774.4    —      2,775.3    —      2,775.3 

Federal funds purchased

   820.0    —      820.0    —      820.0 

Customer repurchase agreements

   301.6    —      301.6    —      301.6 

Other borrowings

   207.8    —      207.2    —      207.2 

Notes and debentures

   901.6    —      910.1    —      910.1 

(1)

Excludes impaired loans totaling $59.6 million measured at fair value on anon-recurring basis.

Carrying
Amount
Estimated Fair Value
Measurements Using
As of September 30, 2019 (in millions)Level 1Level 2Level 3Total
Financial assets:
Cash and due from banks$635.2  $635.2  $—  $—  $635.2  
Short-term investments157.8  —  157.8  —  157.8  
Debt securities held-to-maturity3,805.4  —  3,970.0  1.5  3,971.5  
FHLB and FRB stock334.0  —  334.0  —  334.0  
Total loans, net (1)38,487.0  —  9,064.9  29,474.3  38,539.2  
Financial liabilities:
Time deposits8,100.4  —  8,120.9  —  8,120.9  
Other deposits30,473.1  —  30,473.1  —  30,473.1  
FHLB advances2,948.5  —  2,948.8  —  2,948.8  
Federal funds purchased1,365.0  —  1,365.0  —  1,365.0  
Customer repurchase agreements315.6  —  315.6  —  315.6  
Notes and debentures915.7  —  936.8  —  936.8  


1.Excludes impaired loans totaling $48.4 million measured at fair value on a non-recurring basis.
Carrying
Amount
Estimated Fair Value
Measurements Using
As of December 31, 2018 (in millions)Level 1Level 2Level 3Total
Financial assets:
Cash and due from banks$665.7  $665.7  $—  $—  $665.7  
Short-term investments266.3  —  266.3  —  266.3  
Debt securities held-to-maturity3,792.3  —  3,774.4  1.5  3,775.9  
FHLB and FRB stock303.4  —  303.4  —  303.4  
Total loans, net (1)34,945.8  —  7,806.1  26,800.2  34,606.3  
Financial liabilities:
Time deposits6,916.2  —  6,884.0  —  6,884.0  
Other deposits29,242.8  —  29,242.8  —  29,242.8  
FHLB advances2,404.5  —  2,404.5  —  2,404.5  
Federal funds purchased845.0  —  845.0  —  845.0  
Customer repurchase agreements332.9  —  332.9  —  332.9  
Other borrowings11.0  —  11.0  —  11.0  
Notes and debentures895.8  —  893.4  —  893.4  
1.Excludes impaired loans totaling $55.2 million measured at fair value on a non-recurring basis.


42
Table of Contents
People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 11. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

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 interest rate risk (“IRR”)). Certain other derivatives are entered into in connection with transactions with commercial customers. Derivatives are not used for speculative purposes.

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.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)


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
Table of Contents
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 12)13), 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, 2018.

2019 was $1.4 million, for which People’s United had posted collateral of $0.8 million in the normal course of business. If the Company’s senior unsecured debt rating had fallen below investment grade as of that date, $0.6 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

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 Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)


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
Table of Contents
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.

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-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
Table of Contents
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,
2018		  Dec. 31,
2017		  Sept. 30,
2018		  Dec. 31,
2017		  Sept. 30,
2018		  Dec. 31,
2017		 

Derivatives Not Designated as Hedging Instruments:

       

Interest rate swaps:

       

Commercial customers

  N/A  $6,576.2  $5,769.1  $17.5  $64.7  $199.1  $61.2 

Institutional counterparties

  N/A   6,282.0   5,775.9   28.4   10.1   8.3   23.7 

Interest rate caps:

       

Commercial customers

  N/A   313.0   649.2   —     —     3.6   2.8 

Institutional counterparties

  N/A   313.0   649.2   3.6   2.8   —     —   

Risk participation agreements (2)

  N/A   455.4   439.4   —     —     —     —   

Foreign exchange contracts

  N/A   99.2   46.5   0.6   0.1   0.4   0.4 

Forward commitments to sell
residential mortgage loans

  N/A   18.9   16.4   0.2   0.2   —     —   

Interest rate-lock commitments on residential mortgage loans

  N/A   24.0   18.3   —     —     0.2   0.2 
    

 

 

  

 

 

  

 

 

  

 

 

 

Total

     50.3   77.9   211.6   88.3 
    

 

 

  

 

 

  

 

 

  

 

 

 

Derivatives Designated as Hedging Instruments:

       

Interest rate swaps:

       

Subordinated notes

  Fair value   375.0   375.0   —     —     —     —   

Loans

  Cash flow   210.0   210.0   —     —     —     —   
    

 

 

  

 

 

  

 

 

  

 

 

 

Total

     —     —     —     —   
    

 

 

  

 

 

  

 

 

  

 

 

 

Total fair value of derivatives

    $50.3  $77.9  $211.6  $88.3 
    

 

 

  

 

 

  

 

 

  

 

 

 

(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,
2019		Dec 31,
2018		Sept. 30,
2019		Dec 31, 2018Sept. 30,
2019		Dec 31, 2018
Derivatives Not Designated as Hedging
Instruments:
Interest rate swaps:
Commercial customersN/A$7,592.8  $7,455.9  $416.2  $76.3  $0.7  $102.6  
Institutional counterpartiesN/A7,599.6  7,161.3  4.9  22.6  73.6  32.4  
Interest rate caps:
Commercial customersN/A264.2  329.1  2.1  0.6  —  2.5  
Institutional counterpartiesN/A264.2  329.1  —  2.5  2.1  0.6  
Risk participation agreements (2)N/A786.6  576.5  —  —  0.2  —  
Foreign exchange contractsN/A74.8  145.2  1.4  0.9  1.3  0.8  
Forward commitments to sell
residential mortgage loans		N/A34.8  9.5  0.4  0.1  —  —  
Interest rate-lock commitments on
residential mortgage loans		N/A54.9  13.6  —  —  0.5  0.1  
Total425.0  103.0  78.4  139.0  
Derivatives Designated as Hedging
Instruments:
Interest rate swaps:
Subordinated notesFair value375.0  375.0  —  —  —  —  
LoansCash flow210.0  210.0  —  —  —  —  
Total—  —  —  —  
Total fair value of derivatives$425.0  $103.0  $78.4  $139.0  

1.Assets are recorded in other assets and liabilities are recorded in other liabilities.
2.Fair value totaled less than $0.1 million at December 31, 2018.

46
Table of Contents
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 ofPre-Tax Gain (Loss) 
  Type of
Hedge		  Recognized in Earnings (1)  Recognized in AOCL 

Nine months ended September 30 (in millions)

 2018  2017  2018  2017 

Derivatives Not Designated as Hedging Instruments:

     

Interest rate swaps:

     

Commercial customers

  N/A  $(177.1)  $44.2  $—    $—   

Institutional counterparties

  N/A   184.5   (38.4)   —     —   

Interest rate caps:

     

Commercial customers

  N/A   (0.7)   1.2   —     —   

Institutional counterparties

  N/A   0.8   (0.7)   —     —   

Foreign exchange contracts

  N/A   0.6   0.3   —     —   

Risk participation agreements

  N/A   0.2   0.5   —     —   

Forward commitments to sell residential mortgage loans

  N/A   —     0.1   —     —   

Interest rate-lock commitments on residential mortgage loans

  N/A   —     (0.1)   —     —   
  

 

 

  

 

 

  

 

 

  

 

 

 

Total

   8.3   7.1   —     —   
  

 

 

  

 

 

  

 

 

  

 

 

 

Derivatives Designated as Hedging Instruments:

     

Interest rate swaps

  Fair value   (1.8)   4.5   —     —   

Interest rate swaps

  Cash flow   (0.3)   0.6   (3.1)   0.4 

Interest rate locks

  Cash flow   0.1   0.1   —     —   
  

 

 

  

 

 

  

 

 

  

 

 

 

Total

   (2.0)   5.2   (3.1)   0.4 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  $6.3  $12.3  $(3.1)  $0.4 
  

 

 

  

 

 

  

 

 

  

 

 

 

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)2019201820192018
Derivatives Not Designated as Hedging
Instruments:
Interest rate swaps:
Commercial customersN/A$466.8  $(177.1) $—  $—  
Institutional counterpartiesN/A(451.3) 184.5  —  —  
Interest rate caps:
Commercial customersN/A2.0  (0.7) —  —  
Institutional counterpartiesN/A(2.0) 0.8  —  —  
Foreign exchange contractsN/A0.5  0.6  —  —  
Risk participation agreementsN/A0.1  0.2  —  —  
Forward commitments to sell
residential mortgage loans		N/A0.3  —  —  —  
Interest rate-lock commitments on
residential mortgage loans		N/A(0.3) —  —  —  
Total16.1  8.3  —  —  
Derivatives Designated as Hedging
Instruments:
Interest rate swapsFair value(0.2) (1.8) —  —  
Interest rate swapsCash flow(1.1) (0.3) 2.1  (3.1) 
Interest rate locksCash flow0.1  0.1  —  —  
Total(1.2) (2.0) 2.1  (3.1) 
Total$14.9  $6.3  $2.1  $(3.1) 

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 13. BALANCE SHEET OFFSETTING

NOTE 12. 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.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The Chicago Mercantile Exchange (“CME”) legally characterizes variation margin payments forover-the-counter derivatives that clear as settlements rather than collateral. Accordingly, the Company’s accounting policies 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). At both September 30, 20182019 and December 31, 2017,2018, this presentation impacted one of the Company’s institutional counterparties. 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 both dates.

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.

47
Table of Contents
People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
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. In 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 11.12. 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, 2018 (in millions)

  Instruments  Collateral  Amount 

Financial assets:

          

Interest rate swaps:

          

Counterparty A

  $5.1   $—     $5.1   $(1.0)  $(4.1)  $—   

Counterparty B

   4.4    —      4.4    (2.7)   (1.7)   —   

Counterparty C

   10.3    —      10.3    (1.2)   (9.1)   —   

Counterparty D

   6.3    —      6.3    (1.4)   (4.9)   —   

Counterparty E

   —      —      —      —     —     —   

Other counterparties

   5.9    —      5.9    (0.1)   (5.7)   0.1 

Foreign exchange contracts

   0.6    —      0.6    —     —     0.6 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total

  $32.6   $—     $32.6   $(6.4)  $(25.5)  $0.7 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Financial liabilities:

          

Interest rate swaps:

          

Counterparty A

  $1.0   $—     $1.0   $(1.0)  $—    $—   

Counterparty B

   2.7    —      2.7    (2.7)   —     —   

Counterparty C

   1.2    —      1.2    (1.2)   —     —   

Counterparty D

   1.4    —      1.4    (1.4)   —     —   

Counterparty E

   1.9    —      1.9    —     —     1.9 

Other counterparties

   0.1    —      0.1    (0.1)   —     —   

Foreign exchange contracts

   0.4    —      0.4    —     —     0.4 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total

  $8.7   $—     $8.7   $(6.4)  $—    $2.3 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

 
Gross
Amount
Recognized
Gross
Amount
Offset
Net
Amount
Presented
Gross Amounts Not Offset 
 
Financial
Instruments
 
Net
Amount
As of September 30, 2019 (in millions)Collateral
Financial assets:
Interest rate swaps:
Counterparty A$—  $—  $—  $—  $—  $—  
Counterparty B0.1  —  0.1  (0.1) —  —  
Counterparty C0.1  —  0.1  (0.1) —  —  
Counterparty D—  —  —  —  —  —  
Counterparty E4.5  —  4.5  —  —  4.5  
Other counterparties0.2  —  0.2  (0.2) —  —  
Foreign exchange contracts1.4  —  1.4  —  —  1.4  
Total$6.3  $—  $6.3  $(0.4) $—  $5.9  
Financial liabilities:
Interest rate swaps:
Counterparty A$3.2  $—  $3.2  $—  $(3.2) $—  
Counterparty B7.1  —  7.1  (0.1) (7.0) —  
Counterparty C23.8  —  23.8  (0.1) (23.7) —  
Counterparty D7.6  —  7.6  —  (7.6) —  
Counterparty E—  —  —  —  —  —  
Other counterparties34.0  —  34.0  (0.2) (33.2) 0.6  
Foreign exchange contracts1.3  —  1.3  —  —  1.3  
Total$77.0  $—  $77.0  $(0.4) $(74.7) $1.9  


48
Table of Contents
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, 2017 (in millions)

  Instruments  Collateral  Amount 

Financial assets:

          

Interest rate swaps:

          

Counterparty A

  $2.6   $—     $2.6   $(2.5)  $—    $0.1 

Counterparty B

   1.6    —      1.6    (1.6)   —     —   

Counterparty C

   2.6    —      2.6    (2.6)   —     —   

Counterparty D

   3.5    —      3.5    (3.5)   —     —   

Counterparty E

   —      —      —      —     —     —   

Other counterparties

   2.6    —      2.6    (0.2)   (2.4)   —   

Foreign exchange contracts

   0.1    —      0.1    —     —     0.1 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total

  $13.0   $—     $13.0   $(10.4)  $(2.4)  $0.2 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Financial liabilities:

          

Interest rate swaps:

          

Counterparty A

  $2.5   $—     $2.5   $(2.5)  $—    $—   

Counterparty B

   5.6    —      5.6    (1.6)   (4.0)   —   

Counterparty C

   2.8    —      2.8    (2.6)   (0.2)   —   

Counterparty D

   4.7    —      4.7    (3.5)   (1.2)   —   

Counterparty E

   7.3    —      7.3    —     —     7.3 

Other counterparties

   0.8    —      0.8    (0.2)   (0.6)   —   

Foreign exchange contracts

   0.4    —      0.4    —     —     0.4 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total

  $24.1   $—     $24.1   $(10.4)  $(6.0)  $7.7 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

 
Gross
Amount
Recognized
Gross
Amount
Offset
Net
Amount
Presented
Gross Amounts Not Offset 
 
Financial
Instruments
 
Net
Amount
As of December 31, 2018 (in millions)Collateral
Financial assets:
Interest rate swaps:
Counterparty A$3.1  $—  $3.1  $(1.4) $(1.7) $—  
Counterparty B2.5  —  2.5  (2.5) —  —  
Counterparty C4.8  —  4.8  (3.7) (1.1) —  
Counterparty D3.6  —  3.6  (2.7) (0.1) 0.8  
Counterparty E—  —  —  —  —  —  
Other counterparties11.1  —  11.1  (5.4) (5.7) —  
Foreign exchange contracts0.9  —  0.9  —  —  0.9  
Total$26.0  $—  $26.0  $(15.7) $(8.6) $1.7  
Financial liabilities:
Interest rate swaps:
Counterparty A$1.4  $—  $1.4  $(1.4) $—  $—  
Counterparty B3.8  —  3.8  (2.5) (1.2) 0.1  
Counterparty C3.7  —  3.7  (3.7) —  —  
Counterparty D2.7  —  2.7  (2.7) —  —  
Counterparty E16.0  —  16.0  —  —  16.0  
Other counterparties5.4  —  5.4  (5.4) —  —  
Foreign exchange contracts0.8  —  0.8  —  —  0.8  
Total$33.8  $—  $33.8  $(15.7) $(1.2) $16.9  
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.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following tables 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, 20182019 and December 31, 2017,2018, the Company posted as collateral marketable securities with fair values of $463.9$462.6 million and $453.8$461.3 million, respectively, and, in turn, accepted as collateral marketable securities with fair values of $453.8$458.2 million and $461.9$457.2 million, respectively.

As of September 30, 2018 (in millions)

  Gross
Amount
Recognized		   Gross
Amount
Offset		   Net
Amount
Presented		 

Total resale agreements

  $450.0   $(450.0)   $—   
  

 

 

   

 

 

   

 

 

 

Total repurchase agreements

  $450.0   $(450.0)   $—   
  

 

 

   

 

 

   

 

 

 

As of December 31, 2017 (in millions)

  Gross
Amount
Recognized		   Gross
Amount
Offset		   Net
Amount
Presented		 

Total resale agreements

  $450.0   $(450.0)   $—   
  

 

 

   

 

 

   

 

 

 

Total repurchase agreements

  $450.0   $(450.0)   $—   
  

 

 

   

 

 

   

 

 

 

NOTE 13. NEW ACCOUNTING STANDARDS

As of September 30, 2019 (in millions)
Gross
Amount
Recognized
Gross
Amount
Offset
Net
Amount
Presented
Total resale agreements$450.0  $(450.0) $—  
Total repurchase agreements$450.0  $(450.0) $—  
As of December 31, 2018 (in millions)
Gross
Amount
Recognized
Gross
Amount
Offset
Net
Amount
Presented
Total resale agreements$450.0  $(450.0) $—  
Total repurchase agreements$450.0  $(450.0) $—  


49
Table of Contents
People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
NOTE 14. 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 residual value component of a lease financing receivable represents the estimated fair value of the leased equipment at the end of the lease term. In establishing residual value estimates, the Company may rely on industry data, historical experience, independent appraisals and, where appropriate, information regarding product life cycle, product upgrades and competing products. Upon expiration of a lease, residual assets are remarketed, resulting in an extension of the lease by the lessee, a lease to a new customer or purchase of the residual asset by the lessee or another party. Impairment of residual values arises if the expected fair value is less than the carrying amount. The Company assesses its net investment in lease financing receivables (including residual values) for impairment on a quarterly basis with any impairment losses recognized in accordance with the impairment guidance for financial instruments. As such, net investment in lease financing receivables may be reduced by an allowance for credit losses with changes recognized as provision expense.
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, 2019
Lease payments receivable$1,380.0 
Estimated residual value of leased assets128.4 
Gross investment in lease financing receivables1,508.4 
Plus: Deferred origination costs13.5 
Less: Unearned income(154.4)
Total net investment in lease financing receivables$1,367.5 
The contractual maturities of the Company's lease financing receivables were as follows:
(in millions)September 30, 2019
2019 (1)$229.7  
2020454.8  
2021357.7  
2022245.2  
2023137.0  
Later years84.0  
Total$1,508.4  
1.Contractual maturities for the three months remaining in 2019.
Operating lease income, generated in connection with operating leases for which the Company acts as a lessor, is recognized on a straight-line basis over the lease term as a component of non-interest income in the Consolidated Statements of Income. Depreciation expense for assets under operating leases, which are included in other assets in the Consolidated Statements of Condition, is generally recorded on a straight-line basis over the lease term as a component of non-interest expense in the Consolidated Statements of Income.
For the three months ended September 30, 2019, total lease income was $30.2 million, which consisted of $17.2 million from lease financing receivables and $13.0 million from operating leases. For the nine months ended September 30, 2019, total lease income was $87.6 million, which consisted of $49.2 million from lease financing receivables and $38.4 million from operating leases.
50
Table of Contents
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 2024.
At lease commencement, the Company considers renewal or termination options in the determination of the term of the lease. If it is reasonably certain that a renewal or termination option will be exercised, the effects of such options are included in the determination of the expected lease term. All leases are recorded with the exception of leases with an initial term of twelve months or less for which the Company made the short-term lease election. Within the Consolidated Statements of Condition, ROU assets are reported in other assets and the related lease liabilities are reported in other liabilities.
In recognizing ROU assets and related lease liabilities, lease and non-lease components (such as taxes, insurance and common area maintenance costs) are accounted for separately as such amounts are generally readily determinable under the Company's lease contracts. 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 lease cost and supplemental information:
Three Months Ended  Nine Months Ended
(in millions)September 30, 2019September 30, 2019
Operating lease cost$15.0  $45.4  
Variable lease cost2.0  6.4  
Sublease income(0.3) (1.0) 
Net lease cost$16.7  $50.8  

(dollars in millions)As of and for Nine Months Ended September 30, 2019
Lease ROU assets$235.6 
Lease liabilities260.5 
Cash payments included in the measurement of lease liabilities reported in operating cash flows45.8 
ROU assets obtained in exchange for lessee operating lease liabilities (1)30.3 
Weighted average discount rate3.28 %
Weighted average remaining lease term (in years)7.0
1.Amount excludes related transition adjustment (see Note 15).
51
Table of Contents
People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
The contractual maturities of the Company's lease liabilities were as follows:
(in millions)September 30, 2019
2019 (1)$15.1  
202059.1  
202156.7  
202239.5  
202328.3  
Later years102.8  
Total lease payments301.5  
Less: Interest(41.0) 
Total lease liabilities$260.5  
1.Contractual maturities for the three months remaining in 2019.
At December 31, 2018, future minimum rental commitments under operating leases in excess of one year were: $65.4 million in 2019; $60.1 million in 2020; $56.4 million in 2021; $37.8 million in 2022; $26.1 million in 2023; and an aggregate of $88.5 million in 2024 through 2054. These amounts include variable lease payments which are excluded from the lessee maturity analysis presented above. There has been no significant change in the Company's expected future minimum lease payments since December 31, 2018.

NOTE 15. NEW ACCOUNTING STANDARDS
Standards effective in 2018

Revenue Recognition

2019

Accounting for Leases
In May 2014,February 2016, the Financial Accounting Standards Board (the “FASB”) amended its standards with respect to revenue recognition. The amended guidance serves to replace all current 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 (January 1, 2018 for People’s United) with early adoption, as of the original effective date, permitted. The FASB subsequently 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 did not change the core principle of the guidance and are effective for and follow the same transition requirements as the core principle.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The Company’s revenue is comprised of net interest income on financial assets and financial liabilities (approximately75-80%) andnon-interest income (approximately20-25%). The scope of the guidance explicitly excludes net interest income as well as other revenues associated with financial assets and financial liabilities, including loans, leases, securities and derivatives. Accordingly, the majority of the Company’s revenues are not affected. Certain other recurring revenue streams included innon-interest income are within the scope of the guidance, including service charges and fees on deposit accounts as well as card-based and othernon-deposit fees (all included within bank service charges), and revenues associated with certain products and services offered by the Company’s investment management, insurance and brokerage businesses.

In completing its assessment of those revenue streams within the scope of the guidance, the Company identified one revenue source for which the timing of recognition changes under the new standard. The Company previously recognized revenue for certain insurance brokerage activities, such as installments on agency bill, direct bill and contingent commission revenue, over a period of time either due to the transfer of value to customers or as the remuneration becomes determinable. Under the new guidance, certain of these revenues, as well as certain costs associated with originating such policies, are now substantially recognized on the effective date of the associated policies when control of the policy transfers to the customer.

The guidance was adopted on January 1, 2018 using the modified retrospective method and resulted in a cumulative-effect transition adjustment which served to increase opening retained earnings by $0.6 million(net-of-tax). While the adoption of this standard did not 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, the Company has, where appropriate, completed the necessary changes to its business processes, systems and internal controls in order to support the recognition, measurement and disclosure requirements of the new standard.

For revenue streams within the scope of the guidance, the Company applies the following steps when recognizing revenue from contracts with customers: (i) identify the contract; (ii) identify the performance obligation; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation; and (v) recognize revenue when the performance obligation is satisfied. The Company’s contracts with customers are generally short-term in nature, typically due within one year or less, or cancellable by the Company or the customer upon a short notice period. Performance obligations for customer contracts are generally satisfied at a single point in time, typically when the transaction is complete, or over time. For performance obligations satisfied over time, the value of the products/services transferred to the customer are evaluated to determine when, and to what degree, performance obligations have been satisfied. Payments from customers are typically received, and revenue recognized, concurrent with the satisfaction of our performance obligations. In most cases, this occurs within a single financial reporting period. For payments received in advance of the satisfaction of our performance obligations, revenue recognition is deferred until such time the performance obligations have been satisfied. In cases where a payment has not been received despite satisfaction of our performance obligations, an estimate of the amount due is accrued in the period our performance obligations have been satisfied. For contracts with variable components, amounts for which collection is probable are accrued.

The following summarizes the Company’s performance obligations for those revenue streams deemed to be within the scope of the guidance:

Service charges and fees on deposit accounts – Service charges and fees on deposit accounts consist of monthly account maintenance and other related fees. The Company’s performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Other deposit account related fees, including overdraft charges, are largely transactional-based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Card-based and othernon-deposit fees –Card-based and othernon-deposit fees are comprised, primarily, of debit and credit card income and ATM fees. Debit and credit card income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks. ATM fees are largely transactional-based and, therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment is typically received immediately or in the following month.

Investment management fees – Investment management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon themonth-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts. The Company’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e. as incurred). Payment is received shortly after services are rendered.

Insurance commissions and fees – The Company’s insurance revenue has two distinct performance obligations. The first performance obligation is the selling of the policy as an agent for the carrier. This performance obligation is satisfied upon binding of the policy. The second performance obligation is the ongoing servicing of the policy which is satisfied over the life of the policy. For employee benefits, the payment is typically received monthly. For property and casualty, payments can vary but are typically received at, or in advance of, the start of the policy period.

Brokerage commissions and fees – Brokerage commissions and fees primarily relate to investment advisory and brokerage activities as well as the sale of mutual funds and annuities. The Company’s performance obligation for investment advisory services is generally satisfied, and the related revenue recognized, over the period in which the services are provided. Fees earned for brokerage activities, such as facilitating securities transactions, are generally recognized at the time of transaction execution. The performance obligation for mutual fund and annuity sales is satisfied upon sale of the underlying investment and, therefore, the related revenue is primarily recognized at the time of sale. Payment for these services is typically received immediately or in advance of the service.

The Company generally acts in a principal capacity, on its own behalf, in the majority of its contracts with customers. In such transactions, revenue and the related costs to provide our services are recognized on a gross basis in the financial statements. In some cases, the Company may act in an agent capacity, deriving revenue by assisting other entities in transactions with our customers. In such transactions, revenue and the related costs to provide our services are recognized on a net basis in the financial statements. The extent of the Company’s activities for which it acts as an agent (and for which the related revenue and expense has been presented on a net basis) is immaterial.

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. This amendment, which is being applied prospectively, became effective for People’s United on January 1, 2018 and did not have a significant impact on the Company’s Consolidated Financial Statements.

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 (other than equity method 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. BothFRB-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.

This amendment became effective for People’s United on January 1, 2018. The cumulative effect transition method was 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. At December 31, 2017, the Company’s securities portfolio included equity securities with an amortized cost of $9.6 million and a fair value of $8.7 million. Accordingly, upon adoption of the guidance, a cumulative-effect transition adjustment, representing the cumulative unrealized loss(net-of-tax) within AOCL, was recorded which served to decrease opening retained earnings by $0.6 million. Any further changes in the fair value of equity securities have been recorded in net income. Given the current composition of the Company’s securities portfolio, the standard is not expected to have a significant impact on the Company’s Consolidated Financial Statements. The additional disclosure and presentation requirements set forth in the standard, including the Company’s approach to determining the fair value of itsheld-for-investment loan portfolio for disclosure purposes, have been reflected in the Consolidated Statements of Condition and Note 10, as applicable.

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 bank-owned life insurance 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. This amendment, which is required to be applied retrospectively, became effective for People’s United on January 1, 2018 and did not have a significant impact on the Company’s Consolidated Financial Statements. The classification of cash receipts and payments, as required by the standard and applicable to the Company, has been reflected in the Consolidated Statements of Cash Flows.

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. This amendment, which is being applied prospectively, became effective for People’s United on January 1, 2018 and did not 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. This amendment, which is required to be applied retrospectively, became effective for People’s United on January 1, 2018. Accordingly, net periodic pension and postretirement benefit income (a result of the expected return on plan assets exceeding the sum of the other components) previously reported within compensation and benefits expense is now reported within othernon-interest expense in the Consolidated Statements of Income. For the three and nine months ended September 30, 2017, $1.9 million and $6.3 million, respectively, of net periodic pension and postretirement benefit incomehas been reclassified in accordance with the requirements of the standard.

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 amendment, which is being applied prospectively to awards modified on or after the adoption date, became effective for People’s United on January 1, 2018 and did not 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 GAAP guidance on this topic and requires that an operating lease be recognized on the statement of condition as a “right-of-use”ROU asset along with a corresponding liability representing the rent obligation. Key aspects of current lessor accounting generally remain unchanged from existing guidance, although the definition of eligible initial direct costs (“IDC”) has been amended. Most notably, this standard is expected to result in an increase to assets and liabilities recognized and, therefore, increaserisk-weighted assets for regulatory capital purposes. The guidance will becomebecame effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 (January 1, 2019 for People’s United) and, as originally issued, requiresrequired the use of the modified retrospective transition approach for existing leases that have not expired before the date of initial application.

In July 2018, the FASB issued two targeted improvements to the standard with the objective of reducing the cost and complexity of implementing the guidance. These amendments, which have the same effective date and transition requirements as the new lease standard, serve to (i) introduce an optional transition method allowing entities to recognize a cumulative-effect transition adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented and (ii) provide a practical expedient whereby lessors can elect, by class of underlying asset, to not separate lease and related non-lease components if certain criteria are met.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The Company plans to electelected the optional transition method which will resultresults in the modified retrospective approach being applied on January 1, 2019 (as opposed to January 1, 2017). The Company also expects to electelected certain transition relief options provided in the standard, including the package of practical expedients. These relief options allow the Company to forego (i) the recognition of right-of-useROU assets and lease liabilities arising from short-term leases (i.e. leases with terms of twelve months or less) and (ii) a reassessment as to: (a) whether expired or existing contracts are or contain leases; (b) the lease classification for expired or existing leases; and (c) whether previously capitalized IDC for existing leases would qualify for capitalization under the standard. At this time, theThe Company doesdid not plan to elect the hindsight practical expedient which allows entities to use hindsight when determining lease term and impairment of right-of-useROU assets.

In preparing for adoption, the

The Company has formed a cross-functional working group comprised of individuals from various disciplines, including procurement, real estate and finance, to evaluate the amended guidance and its potential impact on its Consolidated Financial Statements. To date, the Company has identified several areas that are within the scope of the guidance, including (i) its contracts with respect to leased real estate and office equipment and (ii) lease agreements entered into with customers of the Company’s equipment financing businesses. The Company continues
52
Table of Contents
People’s United Financial, Inc.
Notes to evaluate various service contracts in order to determine whether embedded leases exist that are deemed to be in scope.

At this time, theConsolidated Financial Statements – (Unaudited)

The most significant impact is believed to relateof adopting the guidance relates to real estate (primarily branch locations) and office equipment subject to non-cancelable operating lease agreements entered into by the Company as lessee. The amount of the right-of-useROU assets and corresponding lease liabilities recorded upon adoption will bewere based, primarily, on the present value of unpaid future minimum lease payments, the amount of which is dependent upon the population of leases in effect at the date of adoption, as well as assumptions with respect to renewals and/or extensions and the interest rate used to discount the future lease obligations. As of December 31, 2017, the Company reported approximately $353 million in future minimum lease payments due under such agreements. While these leases represent a majority of the leases within the scope of the standard, the lease portfolio is subject to change as a result of the execution of new leases and/or termination of existing leases prior to the effective date. Further, the Company will continue to review contracts up through the effective date and may identify additional leases within the scope of the standard. The Federal banking agencies have indicated that to the extent a right-of-useROU asset arises due to a lease of a tangible asset (e.g. building or equipment), the asset should be: (i) 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.

As it relates to lease agreements entered into with equipment financing customers, and for which the Company acts as lessor, the impact is most likely to be relatedprincipally relates to the definition of eligible IDC under the new guidance. Specifically, the standard maintains a narrower definition of IDC which maywill result in the Company recognizing immediately (rather than deferring) certain lease origination-related expenses. Such expenses would be offset by the recognition of a higher yield on the underlying leases over their contractual term.

The guidance was adopted on January 1, 2019 and resulted in the recognition of (i) operating lease liabilities totaling $268.8 million, based on the present value of the remaining minimum lease payments, determined using a discount rate as of the effective date and (ii) corresponding ROU assets totaling $248.5 million, based upon the operating lease liabilities, adjusted for prepaid and deferred rent, and liabilities associated with lease termination costs. This transition adjustment served to increase risk-weighted assets, resulting in an approximate 5-10 basis point decrease in the risk-based capital ratios of both the Company and the Bank at that time. While the adoption of the guidance did not have a material impact on the Company’s Consolidated Statements of Income or Consolidated Statements of Cash Flows, the Company has, where appropriate, modified its business processes, systems and internal controls in order to support the recognition, measurement and disclosure requirements of the new standard. Expanded disclosures about the nature and terms of lease agreements, which are required prospectively, have been included in Note 14.
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, isbecame effective for public business entities for fiscal years beginning after December 15, 2018 (JanuaryPeople's United on January 1, 2019 for People’s United) with early adoption permitted. The adoption of this amendment isand did 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)

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 isbecame effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 (Januaryon January 1, 2019 for People’s United) with early adoption permitted. Given the limited number of derivatives currently designated as hedging instruments, the adoption of this amendment isUnited and did not expected to have a significant impact on the Company’s Consolidated Financial Statements.

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, as a result of the enactment of the Tax Cuts and Jobs Act (the “Act”), the FASB issued new accounting guidance providing entities with the option to reclassify, from accumulated other comprehensive income to retained earnings, certain “stranded tax effects” resulting from application of the Act. An entity that elects to do so must provide the following disclosures in the period of adoption: (i) that an election was made to reclassify the income tax effects of the Act from accumulated other comprehensive income to retained earnings and (ii) a description of other income tax effects related to the application of the Act that were reclassified from accumulated other comprehensive income to retained earnings, if any (e.g. income tax effects other than the effect of the change in the U.S. federal corporate income tax rate on gross deferred tax amounts and related valuation allowances). Regardless of whether an entity elects to adopt the guidance or not it is required to disclose its accounting policy for releasing income tax effects from accumulated other comprehensive income (e.g. the portfolio approach or thesecurity-by-security approach).


53
Table of Contents
People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
The guidance is effective for all organizations for fiscal years beginning after December 15, 2018 (January 1, 2019 for People’s United), including interim periods within those fiscal years, and early adoption is permitted. Entities electing to apply the guidance should do so (i) as of the beginning of the period of adoption or (ii) retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate is recognized.

The Company elected to early adopt this amendment effective January 1, 2018 (for the reporting period ending on March 31, 2018). Upon adoption, $37.9 million, representing the income tax effects of the Act as well as the indirect impacts from the decreased federal tax effect on future state tax benefits, was reclassified from AOCL to retained earnings. The reclassification adjustment, which related to: (i) the net actuarial loss on defined benefit pension and postretirement plans; (ii) the net unrealized loss on debt securitiesavailable-for-sale and debt securities transferred toheld-to-maturity; and (iii) the net unrealized loss on derivatives accounted for as cash flow hedges, served to increase regulatory capital by $37.9 million, which resulted in an approximate 11 basis point increase in the risk-based capital ratios of both the Company and the Bank.

Bank at that time.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

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 includingcarried at amortized cost, as well as available-for-sale debt securities and purchased financial assets with credit deterioration.deterioration (“PCD assets”). 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)PCD assets), a prospective transition approach is required. For existing PCI assets, upon adoption, the amortized cost basis will be adjusted to reflect the addition of the allowance for credit losses (“ACL”). This transition relief avoids the need for a reporting entity to reassess its purchased financial assets that exist as of the date of adoption in order to determine whether they would have met, at acquisition, the new criteria of ‘more-than insignificant’ credit deterioration since origination. The transition relief also allows an entity to accrete the remaining noncredit discount (based on the revised amortized cost basis) into interest income over the life of the related asset using the interest method.
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’sPeople's United) and earlier application is permitted as of the beginning of an interim or annual reporting period beginning after December 15, 2018. While early adoption is permitted, the Company doeshas not expect to electelected that option.

In preparing for adoption,

To assist in implementing the standard, the Company has establishedformed a cross-functional working group, comprised of individuals from various disciplines, including credit, risk management, information technology and finance. ThatThe implementation activities of the working group which isare subject to the Company’s established corporate governance and oversight structure, is responsible for: (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.structure. To date, implementation efforts have focused on:the working group has: (i) establishingpurchased and installed a third-party vendor solution to aid in application of the standard; (ii) established the Company’s portfolio segmentation; (ii) fulfilling the(iii) fulfilled historical data requirements ofnecessary to comply with the standard according to the established portfolio segmentation;standard; and (iii) purchasing(iv) developed and installing a third-party vendor solution that will aid in the application of the standard. Currently, the working group, in conjunction with an advisory consultant, is devoting considerable time to model selection and development, which includes an assessment of howtested loss estimation models leveraged from existing credit models used to comply with other regulatory requirements may be leveraged. In addition,requirements. Currently, the working group is actively monitoringcontinues to monitor emerging interpretative guidance issued by standard setters while also consideringfinalizing and documenting the relevant processes, systems, internal controls and processesdata sources necessary to support the requirements of the new standard.

standard, including related disclosures. For the remainder of 2019, the Company plans to further test, refine and validate its loss estimation framework during continued parallel runs that involve a comprehensive assessment of: (i) model functionality; (ii) internal control design and effectiveness; and (iii) related governance activities.

Under the standard, the ACL will be determined based on the Company’s historical loss experience, current borrower-specific risk characteristics, forecasts of future economic conditions and other relevant factors. The Company anticipates utilizing a two-year reasonable and supportable forecast period followed by a one-year period over which estimated losses revert to historical loss experience for the remaining life of the loan.
54
Table of Contents
People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
As a result of the required change in approach towardto 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),model, the Company expects the new guidance will result in an increase in the allowance for loan losses, particularly for longer duration portfolios. At this time, based upon forecasted economic conditions and portfolio balances existing as of September 30, 2019, adoption of the standard could result in an overall increase of 15%-25%, or approximately $40-$60 million (pre-tax), as compared to the Company’s current aggregate allowance levels.The increase is driven, primarily, by higher reserve requirements associated with the Company’s retail portfolios (i.e. residential mortgage and home equity) due to the difference between the loss emergence periods currently used for these portfolios under the incurred loss model and the expected remaining life of such loans as required by the standard, partially offset by lower reserve requirements associated with certain of the Company’s commercial portfolios which generally have shorter contractual maturities.
While the Company also expects the new guidance may result in an allowance for held-to-maturity debt securities. In both cases,securities measured at amortized cost, it is not expected that such allowance will be material as the portfolio consists primarily of agency-backed securities and highly-rated municipal and corporate bonds, all of which inherently have minimal non-payment risk.
The Company’s credit loss models remain subject to further development and refinement. Accordingly, the extent of the change is indeterminable at this time as itCompany’s estimate of expected credit losses will be dependent upon portfolio size, composition and credit quality at the adoption date, as well as economic conditions and forecasts at that time. To date, no formal guidanceFurther, in light of the November 1, 2019 merger with United Financial Bancorp, Inc. (“United Financial”) (see Note 16), the Company has beennot yet evaluated the impact of the merger on its implementation effort to ensure that its consolidated estimate of impact gives appropriate consideration to the acquired entity.
In December 2018, the Federal banking agencies issued by either the Company’s or the Bank’s primary regulatorsa final rule with respect to how the impact of the amended standard is to be treated for regulatory capital purposes. However, in April 2018, the federal banking agencies issued a proposal for public comment that would serveThat rule serves to revise the regulatory capital rules to, among other things, provide banks an option tophase-in, over three years, the day-one regulatory capital effects of the standard.

Based upon the September 30, 2019 estimated impact noted above, capital ratios for both the Bank and the Holding Company could decrease by 10-15 basis points.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

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. This amendment, which the Company elected to early adopt effective January 1, 2018, isdid not expected to have a significant impact on the Company’s Consolidated Financial Statements.

Disclosure Requirements – Fair Value Measurement

In August 2018, the FASB issued targeted amendments that serve to eliminate, add and modify certain disclosure requirements for fair value measurements. Among the changes, entities willare no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will beare required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. These amendments are effective for interim and annual reporting periods beginning after December 15, 2019 (January 1, 2020 for People’s United) and early adoption is permitted. Entities may also elect to (i) early adopt the eliminated and/or modified disclosure requirements and (ii) delay adoption of the new disclosure requirements until their effective date. AsThe provisions set forth in this guidance, which the amendments simply serveCompany elected to revise disclosure requirements, they areearly adopt in 2018, have been reflected in Note 11 (as applicable) and did not expected to have a significant impact on the Company’s Consolidated Financial Statements.

55
Table of Contents
People’s United Financial, Inc.
Notes to Consolidated Financial Statements – (Unaudited)
Standards effective in 2021

Disclosure Requirements – Defined Benefit Plans

In August 2018, the FASB issued targeted amendments that serve to make minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. More specifically, the amendments (i) remove disclosures that are no longer considered cost beneficial,beneficial; (ii) clarify the specific requirements of selected disclosuresdisclosures; and (iii) add disclosure requirements identified as relevant. These amendments are effective for fiscal years ending after December 15, 2020 (January 1, 2021 for People’s United) and early adoption is permitted. AsThe provisions set forth in this guidance, which the amendments simply serveCompany elected to revise disclosure requirements, they areearly adopt in 2018, have been reflected in Note 8 (as applicable) and did not expected to have a significant impact on the Company’s Consolidated Financial Statements.

NOTE 14. SUBSEQUENT EVENTS

Acquisition


NOTE 16. SUBSEQUENT EVENTS
Sale of First Connecticut Bancorp, Inc.

Branches

On October 25, 2019, the Bank completed the sale of 8 branches located in central Maine, including approximately: (i) $104 million in loans; (ii) $262 million in deposits; and (iii) $240 million of assets under management. The sale is expected to result in a gain, net of expenses, of approximately $9 to $10 million.
Completed Acquisition
Effective OctoberNovember 1, 2018,2019, People’s United completed its acquisition of First Connecticut Bancorp, Inc. (“First Connecticut”)United Financial based in Farmington,Hartford, Connecticut. Accordingly, People’s United’s consolidated financial statements as of and for the periods ended September 30, 20182019 do not include amounts for First Connecticut.United Financial. At the acquisition date, First Connecticut hadSeptember 30, 2019, United Financial reported total loans of $2.97$5.7 billion and total deposits of $2.40$5.7 billion, and operated 2559 branch locations throughoutconcentrated in central Connecticut and western Massachusetts.

The fair value of the consideration transferred in the First ConnecticutUnited Financial acquisition totaled $486.4$723.6 million and consisted of 28.444.7 million shares of People’s United common stock. Merger-related expenses totaling $1.5$1.0 million relating to this transaction were recorded in the nine months ended September 30, 2018.

2019.


56

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-looking in nature. Such filings include the Annual Report on Form10-K, Quarterly Reports on Form10-Q and Current Reports on Form8-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; and (10) changes in regulation resulting from or relating to financial reform legislation.

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 Acquisition


57

Completed Acquisitions

United Financial Bancorp, Inc.
Effective OctoberNovember 1, 2018,2019, People’s United completed its acquisition of First ConnecticutUnited Financial Bancorp, Inc. (“First Connecticut”United Financial”) based in Farmington,Hartford, Connecticut. Accordingly, People’s United’s consolidated financial statements as of and for the periods ended September 30, 20182019 do not include amounts for First Connecticut.United Financial. At the acquisition date, First Connecticut hadSeptember 30, 2019, United Financial reported total loans of $2.97$5.7 billion and total deposits of $2.40$5.7 billion, and operated 2559 branch locations throughoutconcentrated in central Connecticut and western Massachusetts.

The fair value of the consideration transferred in the First ConnecticutUnited Financial acquisition totaled $486.4$723.6 million and consisted of 28.444.7 million shares of People’s United common stock. Merger-related expenses totaling $1.5$1.0 million relating to this transaction were recorded induring the nine months ended September 30, 2018.

2019.

Selected

BSB Bancorp, Inc.
Effective April 1, 2019, People's United completed its acquisition of BSB Bancorp, Inc. ("BSB Bancorp") based in Belmont, Massachusetts. The fair value of the consideration transferred in the BSB Bancorp acquisition totaled $324.5 million and consisted of 19.7 million shares of People's United common stock. At the acquisition date, BSB Bancorp had total loans of $2.71 billion, total deposits of $2.11 billion and operated six branches in the greater Boston area.

VAR Technology Finance
Effective January 2, 2019, People's United Bank, National Association (the "Bank") completed its acquisition of VAR Technology Finance ("VAR"), a leasing and financing company headquartered in Mesquite, Texas. The fair value of the consideration transferred in the VAR acquisition consisted of $60.0 million in cash.

People's United's results of operations for the three and nine months ended September 30, 2019 include the results of BSB Bancorp and VAR beginning with the respective effective dates. Merger-related expenses totaling $9.2 million relating to these acquisitions were recorded during the nine months ended September 30, 2019. See Note 2 to the Consolidated Financial Information

   Three Months Ended  Nine Months Ended 

(dollars in millions, except per common share data)

  Sept. 30,
2018		  June 30,
2018		  Sept. 30,
2017		  Sept. 30,
2018		  Sept. 30,
2017		 

Earnings Data:

      

Net interest income (fully taxable equivalent)

  $313.0  $307.8  $295.8  $922.9  $839.1 

Net interest income

   306.4   301.2   284.6   903.4   808.1 

Provision for loan losses

   8.2   6.5   7.0   20.1   18.5 

Non-interest income

   92.3   94.9   89.3   277.6   265.6 

Non-interest expense (1)

   241.3   248.6   237.1   733.4   720.5 

Income before income tax expense

   149.2   141.0   129.8   427.5   334.7 

Net income

   117.0   110.2   90.8   335.1   230.9 

Net income available to common shareholders (1)

   113.5   106.7   87.3   324.6   220.4 

Selected Statistical Data:

      

Net interest margin (2)

   3.15%   3.10%   3.04%   3.10%   2.94% 

Return on average assets (1),(2)

   1.06   1.00   0.84   1.01   0.73 

Return on average common equity (2)

   8.0   7.6   6.4   7.7   5.6 

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

   14.5   13.9   11.8   14.1   10.0 

Efficiency ratio (1)

   56.7   58.4   57.3   58.2   58.3 

Common Share Data:

      

Earnings per common share:

      

Basic

  $0.33  $0.31  $0.26  $0.95  $0.67 

Diluted (1)

   0.33   0.31   0.26   0.94   0.67 

Dividends paid per common share

   0.1750   0.1750   0.1725   0.5225   0.5150 

Common dividend payout ratio (1)

   52.9%   56.2%   66.8%   55.1%   76.8% 

Book value per common share (end of period)

  $16.69  $16.56  $16.29  $16.69  $16.29 

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

   9.19   9.02   8.68   9.19   8.68 

Stock price:

      

High

   19.00   19.37   18.26   20.26   19.85 

Low

   16.95   18.00   15.97   16.95   15.97 

Close (end of period)

   17.12   18.09   18.14   17.12   18.14 

Statements for a further discussion on these acquisitions.
(1)

See



Sale of Branches
On October 25, 2019, the Bank completed the sale of eight branches located in central Maine, including approximately: (i) $104 million in loans; (ii) $262 million in deposits; and (iii) $240 million of assets under management. The sale is expected to result in a gain, net of expenses, of approximately $9 to $10 million.


58

Selected Consolidated Financial Information
Three Months EndedNine Months Ended
(dollars in millions, except per common share data)Sept. 30,
2019		June 30,
2019		Sept. 30,
2018		Sept. 30,
2019		Sept. 30,
2018
Earnings Data:
Net interest income (fully taxable equivalent)$356.0  $355.4  $313.0  $1,051.4  $922.9  
Net interest income348.7  348.1  306.4  1,029.6  903.4  
Provision for loan losses7.8  7.6  8.2  21.0  20.1  
Non-interest income106.0  106.3  92.3  306.9  277.6  
Non-interest expense (1)281.4  278.4  241.3  837.0  733.4  
Income before income tax expense165.5  168.4  149.2  478.5  427.5  
Net income135.1  133.2  117.0  383.0  335.1  
Net income available to common shareholders (1)131.6  129.7  113.5  372.5  324.6  
Selected Statistical Data:
Net interest margin (2)3.12 %3.12 %3.15 %3.14 %3.10 %
Return on average assets (1),(2)1.05  1.04  1.06  1.02  1.01  
Return on average common equity (2)7.7  7.7  8.0  7.5  7.7  
Return on average tangible common equity (1),(2)14.0  14.1  14.5  13.7  14.1  
Efficiency ratio (1)56.8  55.8  56.7  56.6  58.2  
Common Share Data:
Earnings per common share:
Basic$0.34  $0.33  $0.33  $0.97  $0.95  
Diluted (1)0.33  0.33  0.33  0.96  0.94  
Dividends paid per common share0.1775  0.1775  0.1750  0.5300  0.5225  
Common dividend payout ratio (1)53.1 %53.8 %52.9 %55.0 %55.1 %
Book value per common share (end of period)$17.54  $17.34  $16.69  $17.54  $16.69  
Tangible book value per common share (end of period) (1)9.74  9.51  9.19  9.74  9.19  
Stock price:
High17.10  17.66  19.00  18.03  20.26  
Low13.81  15.24  16.95  13.81  16.95  
Close (end of period)15.64  16.78  17.12  15.64  17.12  
1.See Non-GAAP Financial Measures and Reconciliation to GAAP.
2.Annualized.
59

As of and for the Three Months Ended
(dollars in millions)Sept. 30, 2019June 30, 2019Mar. 31, 2019Dec. 31, 2018Sept. 30, 2018
Financial Condition Data:
Total assets$52,072  $51,622  $48,092  $47,877  $44,133  
Loans38,781  38,557  35,515  35,241  32,199  
Securities7,135  7,086  7,176  7,233  7,385  
Short-term investments158  275  106  266  128  
Allowance for loan losses246  244  241  240  238  
Goodwill and other acquisition-related intangible assets3,065  3,073  2,897  2,866  2,569  
Deposits38,574  39,467  36,901  36,159  33,210  
Borrowings4,629  3,400  2,860  3,593  3,392  
Notes and debentures916  912  902  896  886  
Stockholders’ equity7,131  7,046  6,621  6,534  5,959  
Total risk-weighted assets:
People’s United39,794  39,026  36,466  35,910  33,181  
People’s United Bank, National Association39,742  38,976  36,447  35,875  33,132  
Non-performing assets (1)182  179  167  186  173  
Net loan charge-offs5.8  4.5  5.1  7.5  7.0  
Average Balances:
Loans$38,317  $38,229  $35,046  $35,016  $32,166  
Securities (2)7,041  7,147  7,311  7,479  7,404  
Short-term investments219  214  203  292  193  
Total earning assets45,577  45,591  42,560  42,786  39,763  
Total assets51,524  51,088  47,800  47,721  44,245  
Deposits38,657  39,211  36,450  35,959  33,058  
Borrowings3,855  3,146  2,937  3,456  3,539  
Notes and debentures914  904  896  886  888  
Total funding liabilities43,427  43,261  40,284  40,302  37,485  
Stockholders’ equity7,079  6,978  6,562  6,515  5,937  
Ratios:
Net loan charge-offs to average total loans (annualized)0.06 %0.05 %0.06 %0.09 %0.09 %
Non-performing assets to originated loans, real estate
owned and repossessed assets (1)		0.56  0.56  0.54  0.61  0.57  
Originated allowance for loan losses to:
Originated loans (1)0.75  0.76  0.76  0.77  0.78  
Originated non-performing loans (1)156.0  146.0  157.0  140.9  147.9  
Average stockholders’ equity to average total assets13.7  13.7  13.7  13.7  13.4  
Stockholders’ equity to total assets13.7  13.6  13.8  13.6  13.5  
Tangible common equity to tangible assets (3)7.8  7.7  7.7  7.6  7.6  
Total risk-based capital:
People’s United12.0  12.0  12.4  12.5  12.8  
People’s United Bank, National Association12.2  12.4  12.9  13.2  13.6  

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


60

Non-GAAP Financial Measures and Reconciliation to GAAP.

(2)

Annualized.

   As of and for the Three Months Ended 

(dollars in millions)

  Sept. 30,
2018		  June 30,
2018		  March 31,
2018		  Dec. 31,
2017		  Sept. 30,
2017		 

Financial Condition Data:

      

Total assets

  $44,133  $44,575  $44,101  $44,453  $43,998 

Loans

   32,199   32,512   32,104   32,575   32,384 

Securities

   7,385   7,324   7,173   7,043   6,914 

Short-term investments

   128   253   470   378   303 

Allowance for loan losses

   238   237   235   234   233 

Goodwill and other acquisition-related intangible assets

   2,569   2,574   2,555   2,560   2,568 

Deposits

   33,210   32,468   32,894   33,056   32,547 

Borrowings

   3,392   4,639   3,877   4,104   4,144 

Notes and debentures

   886   889   892   902   906 

Stockholders’ equity

   5,959   5,900   5,845   5,820   5,746 

Total risk-weighted assets:

      

People’s United

   33,181   33,369   32,833   33,256   32,029 

People’s United Bank, National Association

   33,132   33,317   32,784   33,202   32,981 

Non-performing assets (1)

   173   187   174   168   191 

Net loan charge-offs

   7.0   5.0   4.5   6.5   5.2 

Average Balances:

      

Loans

  $32,166  $32,116  $32,096  $32,271  $31,994 

Securities (2)

   7,404   7,302   7,186   7,022   6,559 

Short-term investments

   193   267   366   361   347 

Total earning assets

   39,763   39,685   39,648   39,654   38,900 

Total assets

   44,245   44,110   44,011   44,039   43,256 

Deposits

   33,058   32,535   32,824   32,879   32,065 

Borrowings

   3,539   4,031   3,752   3,836   4,010 

Notes and debentures

   888   890   895   904   909 

Total funding liabilities

   37,485   37,456   37,471   37,619   36,984 

Stockholders’ equity

   5,937   5,870   5,820   5,774   5,722 

Ratios:

      

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

   0.09%   0.06%   0.06%   0.08%   0.06% 

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

   0.57   0.62   0.58   0.56   0.64 

Originated allowance for loan losses to:

      

Originated loans (1)

   0.78   0.77   0.78   0.77   0.77 

Originatednon-performing loans (1)

   147.9   138.4   149.3   155.2   131.6 

Average stockholders’ equity to average total assets

   13.4   13.3   13.2   13.1   13.2 

Stockholders’ equity to total assets

   13.5   13.2   13.3   13.1   13.1 

Tangible common equity to tangible assets (3)

   7.6   7.3   7.3   7.2   7.1 

Total risk-based capital:

      

People’s United

   12.8   12.5   12.6   12.2   12.0 

People’s United Bank, National Association

   13.6   13.4   12.9   12.6   12.6 

(1)

Excludes acquired loans.

(2)

Average balances for securities are based on amortized cost.

(3)

SeeNon-GAAP Financial Measures and Reconciliation to GAAP.

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) writedowns 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. 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.

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.















61

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,
2018		  June 30,
2018		  Sept. 30,
2017		  Sept. 30,
2018		  Sept. 30,
2017		 

Totalnon-interest expense

  $241.3  $248.6  $237.1  $733.4  $720.5 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Adjustments to arrive at operatingnon-interest expense:

      

Merger-related expenses

   (0.5)   (2.9)   (3.0)   (3.4)   (29.0) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

   (0.5)   (2.9)   (3.0)   (3.4)   (29.0) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operatingnon-interest expense

   240.8   245.7   234.1   730.0   691.5 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating lease expense

   (8.9)   (8.7)   (8.8)   (26.6)   (26.3) 

Amortization of other acquisition-related intangible assets

   (4.9)   (4.9)   (7.9)   (14.9)   (22.1) 

Other (1)

   (1.8)   (1.7)   (1.5)   (4.8)   (3.7) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Totalnon-interest expense for efficiency ratio

  $225.2  $230.4  $215.9  $683.7  $639.4 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest income (FTE basis)

  $313.0  $307.8  $295.8  $922.9  $839.1 

Totalnon-interest income

   92.3   94.9   89.3   277.6   265.6 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total revenues

   405.3   402.7   385.1   1,200.5   1,104.7 

Adjustments:

      

Operating lease expense

   (8.9)   (8.7)   (8.8)   (26.6)   (26.3) 

BOLI FTE adjustment

   0.6   0.4   1.2   1.4   2.6 

Net security (gains) losses

   (0.1)   —     —     (0.2)   15.6 

Other (2)

   —     —     (0.2)   —     —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total revenues for efficiency ratio

  $396.9  $394.4  $377.3  $1,175.1  $1,096.6 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Efficiency ratio

   56.7%   58.4%   57.3%   58.2%   58.3% 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(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,
2019		June 30,
2019		Sept. 30,
2018		Sept. 30,
2019		Sept. 30,
2018
Total non-interest expense$281.4  $278.4  $241.3  $837.0  $733.4  
Adjustments to arrive at operating non-interest expense:
Merger-related expenses(5.0) (6.5) (0.5) (26.5) (3.4) 
Total(5.0) (6.5) (0.5) (26.5) (3.4) 
Operating non-interest expense276.4  271.9  240.8  810.5  730.0  
Operating lease expense(9.9) (9.9) (8.9) (29.2) (26.6) 
Amortization of other acquisition-related intangible assets(8.0) (8.0) (4.9) (22.7) (14.9) 
Other (1)(1.4) (1.4) (1.8) (4.6) (4.8) 
Total non-interest expense for efficiency ratio$257.1  $252.6  $225.2  $754.0  $683.7  
Net interest income (FTE basis)$356.0  $355.4  $313.0  $1,051.4  $922.9  
Total non-interest income106.0  106.3  92.3  306.9  277.6  
Total revenues462.0  461.7  405.3  1,358.3  1,200.5  
Adjustments:
Operating lease expense(9.9) (9.9) (8.9) (29.2) (26.6) 
BOLI FTE adjustment0.5  0.7  0.6  1.8  1.4  
Net security gains—  (0.1) (0.1) (0.1) (0.2) 
Other (2)0.1  —  —  0.4  —  
Total revenues for efficiency ratio$452.7  $452.4  $396.9  $1,331.2  $1,175.1  
Efficiency ratio56.8 %55.8 %56.7 %56.6 %58.2 %
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 added to 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

62

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,
2018		  June 30,
2018		  Sept. 30,
2017		  Sept. 30,
2018		  Sept. 30,
2017		 

Net income available to common shareholders

  $113.5  $106.7  $87.3  $324.6  $220.4 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Adjustments to arrive at operating earnings:

      

Merger-related expenses

   0.5   2.9   3.0   3.4   29.0 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Totalpre-tax adjustments

   0.5   2.9   3.0   3.4   29.0 

Tax effect

   (0.2)   (0.6)   (1.0)   (0.8)   (9.2) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total adjustments, net of tax

   0.3   2.3   2.0   2.6   19.8 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating earnings

  $113.8  $109.0  $89.3  $327.2  $240.2 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Diluted EPS, as reported

  $0.33  $0.31  $0.26  $0.94  $0.67 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Adjustments to arrive at operating EPS:

      

Merger-related expenses

   —     0.01   —     0.01   0.06 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total adjustments per common share

   —     0.01   —     0.01   0.06 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating EPS

  $0.33  $0.32  $0.26  $0.95  $0.73 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Average total assets

  $44,245  $44,110  $43,256  $44,123  $42,091 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating return on average assets (annualized)

   1.03%   0.99%   0.83%   0.99%   0.76% 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 Three Months EndedNine Months Ended
(dollars in millions, except per common share data)Sept. 30,
2019		June 30,
2019		Sept. 30,
2018		Sept. 30,
2019		Sept. 30,
2018
Net income available to common shareholders$131.6  $129.7  $113.5  $372.5  $324.6  
Adjustments to arrive at operating earnings:
Merger-related expenses5.0  6.5  0.5  26.5  3.4  
Total pre-tax adjustments5.0  6.5  0.5  26.5  3.4  
Tax effect(1.1) (1.4) (0.2) (5.6) (0.8) 
Total adjustments, net of tax3.9  5.1  0.3  20.9  2.6  
Operating earnings$135.5  $134.8  $113.8  $393.4  $327.2  
Diluted EPS, as reported$0.33  $0.33  $0.33  $0.96  $0.94  
Adjustments to arrive at operating EPS:
Merger-related expenses0.01  0.01  —  0.05  0.01  
Total adjustments per common share0.01  0.01  —  0.05  0.01  
Operating EPS$0.34  $0.34  $0.33  $1.01  $0.95  
Average total assets$51,524  $51,088  $44,245  $50,151  $44,123  
Operating return on average assets (annualized)1.05 %1.06 %1.03 %1.05 %0.99 %


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,
2018		  June 30,
2018		  Sept. 30,
2017		  Sept. 30,
2018		  Sept. 30,
2017		 

Operating earnings

  $113.8  $109.0  $89.3  $327.2  $240.2 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Average stockholders’ equity

  $5,937  $5,870  $5,722  $5,876  $5,530 

Less: Average preferred stock

   244   244   244   244   244 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Average common equity

   5,693   5,626   5,478   5,632   5,286 

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

   2,572   2,554   2,524   2,561   2,359 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Average tangible common equity

  $3,121  $3,072  $2,954  $3,071  $2,927 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating return on average tangible
common equity (annualized)

   14.6%   14.2%   12.1%   14.2%   10.9% 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   Three Months Ended  Nine Months Ended 

(dollars in millions)

  Sept. 30,
2018		  June 30,
2018		  Sept. 30,
2017		  Sept. 30,
2018		  Sept. 30,
2017		 

Common dividends paid

  $60.0  $59.9  $58.3  $178.7  $169.3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating earnings

  $113.8  $109.0  $89.3  $327.2  $240.2 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating common dividend payout ratio

   52.7%   55.0%   65.3%   54.6%   70.5% 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 Three Months EndedNine Months Ended
(dollars in millions)Sept. 30,
2019		June 30,
2019		Sept. 30,
2018		Sept. 30,
2019		Sept. 30,
2018
Operating earnings$135.5  $134.8  $113.8  $393.4  $327.2  
Average stockholders’ equity$7,079  $6,978  $5,937  $6,875  $5,876  
Less: Average preferred stock244  244  244  244  244  
Average common equity$6,835  $6,734  $5,693  $6,631  $5,632  
Less: Average goodwill and average other
     acquisition-related intangible assets
3,069  3,043  2,572  3,005  2,561  
Average tangible common equity$3,766  $3,691  $3,121  $3,626  $3,071  
Operating return on average tangible
     common equity (annualized)
14.4 %14.6 %14.6 %14.5 %14.2 %
 Three Months EndedNine Months Ended
(dollars in millions)Sept. 30,
2019		June 30,
2019		Sept. 30,
2018		Sept. 30,
2019		Sept. 30,
2018
Common dividends paid$69.9  $69.8  $60.0  $204.9  $178.7  
Operating earnings$135.5  $134.8  $113.8  $393.4  $327.2  
Operating common dividend payout ratio51.6 %51.8 %52.7 %52.1 %54.6 %







63

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,
2018		  June 30,
2018		  March 31,
2018		  Dec. 31,
2017		  Sept. 30,
2017		 

Total stockholders’ equity

  $5,959  $5,900  $5,845  $5,820  $5,746 

Less: Preferred stock

   244   244   244   244   244 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Common equity

   5,715   5,656   5,601   5,576   5,502 

Less: Goodwill and other acquisition-related intangible assets

   2,569   2,574   2,555   2,560   2,568 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Tangible common equity

  $3,146  $3,082  $3,046  $3,016  $2,934 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total assets

  $44,133  $44,575  $44,101  $44,453  $43,998 

Less: Goodwill and other acquisition-related intangible assets

   2,569   2,574   2,555   2,560   2,568 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Tangible assets

  $41,564  $42,001  $41,546  $41,893  $41,430 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Tangible common equity ratio

   7.6%   7.3%   7.3%   7.2%   7.1% 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(in millions, except per common share data)

  Sept. 30,
2018		  June 30,
2018		  March 31,
2018		  Dec. 31,
2017		  Sept. 30,
2017		 

Tangible common equity

  $3,146  $3,082  $3,046  $3,016  $2,934 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Common shares issued

   437.74   437.06   436.56   435.64   433.59 

Less: Common shares classified as treasury shares

   89.02   89.02   89.02   89.04   89.04 

Unallocated ESOP common shares

   6.36   6.45   6.53   6.62   6.71 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Common shares

   342.36   341.59   341.01   339.98   337.84 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Tangible book value per common share

  $9.19  $9.02  $8.93  $8.87  $8.68 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 


(dollars in millions)Sept. 30, 2019June 30, 2019Mar. 31, 2019Dec. 31, 2018Sept. 30, 2018
Total stockholders’ equity$7,131  $7,046  $6,621  $6,534  $5,959  
Less: Preferred stock244  244  244  244  244  
Common equity6,887  6,802  6,377  6,290  5,715  
Less: Goodwill and other acquisition-related
intangible assets		3,065  3,073  2,896  2,866  2,569  
Tangible common equity$3,822  $3,729  $3,481  $3,424  $3,146  
Total assets$52,072  $51,622  $48,092  $47,877  $44,133  
Less: Goodwill and other acquisition-related
intangible assets		3,065  3,073  2,896  2,866  2,569  
Tangible assets$49,007  $48,549  $45,196  $45,011  $41,564  
Tangible common equity ratio7.8 %7.7 %7.7 %7.6 %7.6 %
(in millions, except per common share data)Sept. 30, 2019June 30, 2019Mar. 31, 2019Dec. 31, 2018Sept. 30, 2018
Tangible common equity$3,822  $3,729  $3,481  $3,424  $3,146  
Common shares issued487.59  487.35  467.38  466.32  437.74  
Less: Common shares classified as treasury shares89.01  89.01  89.01  89.03  89.02  
Unallocated ESOP common shares6.01  6.10  6.19  6.27  6.36  
Common shares392.57  392.24  372.18  371.02  342.36  
Tangible book value per common share$9.74  $9.51  $9.35  $9.23  $9.19  


Financial Overview
People’s United completed its acquisitions of Vend Lease Company effective June 27, 2018, First Connecticut Bancorp, Inc. effective October 1, 2018, VAR effective January 2, 2019 and BSB Bancorp effective April 1, 2019. The assets acquired and liabilities assumed in these transactions were recorded at their estimated fair values as of the respective closing dates and People’s United’s results of operations include the results of these acquired companies beginning with the respective closing dates. Financial Overview

data for prior periods has not been restated to include these acquisitions and therefore, are not directly comparable to subsequent periods.

People’s United reported net income of $117.0$135.1 million, or $0.33 per diluted common share, for the three months ended September 30, 2018,2019, compared to $90.8$117.0 million, or $0.26$0.33 per diluted common share, for theyear-ago period. Included in this quarter’s results were merger-related expenses totaling $0.5 million ($0.3 millionafter-tax) or less than $0.01 per common share. Included in the results for the three months ended September 30, 2017 were2019 and 2018 are merger-related expenses totaling $3.0$5.0 million ($2.03.9 millionafter-tax) or $0.01 per common share and $0.5 million ($0.3 million after tax) or less than $0.01 per common share.share, respectively. Compared to theyear-ago period, third quarter 2018of 2019 earnings reflect the benefits from recent acquisitions, continued loan and deposit growth, and meaningful cost control.
People’s United’s return on average assets was 1.06%1.05% for the three months ended September 30, 20182019 compared to 0.84%1.06% for theyear-ago period. Return on average tangible common equity was 14.5%14.0% for the three months ended September 30, 20182019 compared to 11.8%14.5% for theyear-ago period. Compared to the third quarter of 2017,2018, FTE net interest income increased $17.2$43.0 million to $313.0$356.0 million and the net interest margin increased 12decreased three basis points to 3.15%3.12% (see Net Interest Income).

64

Net income for the nine months ended September 30, 20182019 totaled $383.0 million, or $0.96 per diluted common share, compared to $335.1 million, or $0.94 per diluted common share, compared to $230.9 million, or $0.67 per diluted common share, for theyear-ago period. Included in the results for the nine months ended September 30, 2019 and 2018 wereare merger-related expenses totaling $26.5 million ($20.9 million after-tax) or $0.05 per common share and $3.4 million ($2.6 millionafter-tax) or $0.01 per common share. Included in the results for the nine months ended September 30, 2017 were merger-related expenses totaling $29.0 million ($19.8 millionafter-tax) or $0.06 per common share.share, respectively. People’s United’s return on average assets was 1.01% (0.99%1.02% (1.05% on an operating basis) for the nine months ended September 30, 20182019 compared to 0.73% (0.76%1.01% (0.99% on an operating basis) for theyear-ago period. Return on average tangible common equity was 14.1% (14.2%13.7% (14.5% on an operating basis) for the nine months ended September 30, 20182019 compared to 10.0% (10.9%14.1% (14.2% on an operating basis) for theyear-ago period. FTE net interest income totaled $922.9 million$1.1 billion for the nine months ended September 30, 2018,2019, an $83.8$128.5 million increase from theyear-ago period and the net interest margin increased 16four basis points to 3.10%3.14%.

Average total earning assets increased $863 million$5.8 billion compared to the third quarter of 2017,2018, primarily reflecting increases of $845 million in average securities and $173 milliona $6.2 billion increase in average total loans, partially offset by a $155$363 million decrease in short-term investments.average securities. Average total funding liabilities increased $501 million$5.9 billion compared to theyear-ago quarter, primarily reflecting a $993 million increaseincreases of $5.6 billion in average total deposits partially offset by a $471and $317 million decrease in average total borrowings.

Compared to theyear-ago quarter, totalnon-interest income increased $3.0$13.7 million and totalnon-interest expense increased $4.2$40.1 million. The efficiency ratio was 56.7%56.8% for the third quarter of 20182019 compared to 57.3%56.7% for theyear-ago period quarter (seeNon-Interest Income andNon-Interest Expense).

The provision for loan losses in the third quarter of 20182019 totaled $8.2$7.8 million compared to $7.0$8.2 million in theyear-ago period. quarter. Net loan charge-offs as a percentage of average total loans on an annualized basis were 0.09%0.06% in the third quarter of 20182019 compared to 0.06%0.09% in theyear-ago quarter. The allowance for loan losses on originated loans was $233.9$242.3 million at September 30, 2018,2019, a $3.1$6.0 million increase from December 31, 2017.2018. The allowance for loan losses on acquired loans was $3.7 million and $4.1 million at September 30, 2018, a $0.1 million increase from2019 and December 31, 2017.2018, respectively. Non-performing assets (excluding acquirednon-performing loans) totaled $173.2$181.6 million at September 30, 2018,2019, a $5.1$4.2 million increasedecrease from December 31, 2017.2018. At September 30, 2018,2019, the originated allowance for loan losses as a percentage of originated loans was 0.78%0.75% and as a percentage of originatednon-performing loans was 147.9%156.0%, compared to 0.77% and 155.2%140.9%, respectively, at December 31, 20172018 (see Asset Quality).

People’s United’s total stockholders’ equity was $6.0$7.1 billion at September 30, 20182019 compared to $5.8$6.5 billion at December 31, 2017.2018. Stockholders’ equity as a percentage of total assets was 13.5%13.7% and 13.6% at September 30, 2018 compared to 13.1% at2019 and December 31, 2017.2018, respectively. Tangible common equity as a percentage of tangible assets was 7.6%7.8% at September 30, 20182019 compared to 7.2%7.6% at December 31, 20172018 (see Stockholders’ Equity and Dividends). People’s United’sUnited's and People’s United Bank, National Association’s (“the Bank”)Bank's Total risk-based capital ratios were 12.8%12.0% and 13.6%12.2%, respectively, at September 30, 2018,2019, compared to 12.2%12.5% and 12.6%13.2%, respectively, at December 31, 20172018 (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 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.

65

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 loan losses,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.

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 loan losses 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 an operating segment more effectively, it may result in a measure of an operating segment’s provision for loan losses that does not reflect actual incurred losses for the periods presented.

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,Banking; Retail BankingBanking; 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 quantitative impairment test.test as described below. In conducting its 20172018 goodwill impairment evaluation (as of the annual October 1st1st evaluation date), People’s United elected to perform thisthe optional qualitative assessment for both the Commercial Banking and Retail Bankingall three reporting units, and, upon doing so, concluded that performance of thetwo-step quantitative impairment test was not required. Thetwo-step impairment test was elected for purposes of the 2017 goodwill impairment evaluation for the Wealth Management reporting unit as a result of the acquisition of Gerstein, Fisher & Associates, Inc., which occurred subsequent to performance of the Company’s 2016 impairment analysis.

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

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 third step is performedthat excess, not to measureexceed the carrying amount of such impairment, if any.goodwill. At this time, none of the Company’s identified reporting units are at risk of failing the Step 1quantitative goodwill impairment test. See Note 1315 to the Consolidated Financial Statements for a further discussion regarding the assessment of goodwill impairment.

Segment Performance Summary

Three months ended September 30, 2018

(in millions)

  Commercial
Banking		   Retail
Banking		   Total
Reportable
Segments		   Treasury   Other  Total
Consolidated		 

Net interest income (loss)

  $176.9   $115.3   $292.2   $20.0   $(5.8)  $306.4 

Provision for loan losses

   9.8    2.2    12.0    —      (3.8)   8.2 

Totalnon-interest income

   42.9    46.7    89.6    2.6    0.1   92.3 

Totalnon-interest expense

   93.8    138.0    231.8    4.6    4.9   241.3 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Income (loss) before income tax expense (benefit)

   116.2    21.8    138.0    18.0    (6.8)   149.2 

Income tax expense (benefit)

   25.1    4.7    29.8    3.9    (1.5)   32.2 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Net income (loss)

  $91.1   $17.1   $108.2   $14.1   $(5.3)  $117.0 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Average total assets

  $25,632.3   $9,669.0   $35,301.3   $7,934.1   $1,009.2  $44,244.6 

Average total liabilities

   9,068.4    20,101.3    29,169.7    8,669.9    468.4   38,308.0 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Nine months ended September 30, 2018

(in millions)

  Commercial
Banking		   Retail
Banking		   Total
Reportable
Segments		   Treasury   Other  Total
Consolidated		 

Net interest income (loss)

  $515.9   $334.3   $850.2   $69.5   $(16.3)  $903.4 

Provision for loan losses

   28.4    6.6    35.0    —      (14.9)   20.1 

Totalnon-interest income

   130.3    138.5    268.8    7.4    1.4   277.6 

Totalnon-interest expense

   282.5    417.3    699.8    14.0    19.6   733.4 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Income (loss) before income tax expense (benefit)

   335.3    48.9    384.2    62.9    (19.6)   427.5 

Income tax expense (benefit)

   72.4    10.6    83.0    13.6    (4.2)   92.4 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Net income (loss)

  $262.9   $38.3   $301.2   $49.3   $(15.4)  $335.1 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Average total assets

  $25,542.9   $9,710.6   $35,253.5   $7,912.0   $957.2  $44,122.7 

Average total liabilities

   9,137.2    20,150.7    29,287.9    8,540.8    418.0   38,246.7 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 


66

Segment Performance Summary 

Three months ended September 30, 2019
Commercial
Banking
Retail
Banking
Total
Reportable
Segments
TreasuryOther
Total
Consolidated
(in millions)
Net interest income (loss)$200.7  $136.9  $337.6  $15.0  $(3.9) $348.7  
Provision for loan losses11.3  2.3  13.6  —  (5.8) 7.8  
Total non-interest income53.2  49.7  102.9  2.9  0.2  106.0  
Total non-interest expense111.6  150.0  261.6  2.4  17.4  281.4  
Income (loss) before income tax expense (benefit)131.0  34.3  165.3  15.5  (15.3) 165.5  
Income tax expense (benefit)24.1  6.3  30.4  2.9  (2.9) 30.4  
Net income (loss)$106.9  $28.0  $134.9  $12.6  $(12.4) $135.1  
Average total assets$29,886.6  $12,410.2  $42,296.8  $7,686.1  $1,541.4  $51,524.3  
Average total liabilities11,397.3  23,066.4  34,463.7  9,329.5  652.5  44,445.7  

Nine months ended September 30, 2019
Commercial
Banking
Retail
Banking
Total
Reportable
Segments
TreasuryOther
Total
Consolidated
(in millions)
Net interest income (loss)$577.5  $405.4  $982.9  $58.7  $(12.0) $1,029.6  
Provision for loan losses32.6  6.7  39.3  —  (18.3) 21.0  
Total non-interest income151.4  144.2  295.6  9.2  2.1  306.9  
Total non-interest expense330.1  445.7  775.8  11.3  49.9  837.0  
Income (loss) before income tax expense (benefit)366.2  97.2  463.4  56.6  (41.5) 478.5  
Income tax expense (benefit)73.1  19.4  92.5  11.4  (8.4) 95.5  
Net income (loss)$293.1  $77.8  $370.9  $45.2  $(33.1) $383.0  
Average total assets$28,800.9  $12,120.7  $40,921.6  $7,784.2  $1,445.2  $50,151.0  
Average total liabilities10,839.6  22,982.5  33,822.1  8,788.0  666.0  43,276.1  



67

Commercial Banking consists principally of commercial real estate lending, commercial and industrial lending, and commercial deposit gathering activities. This segment also includes equipment financing operations, as well as cash management, correspondent banking, municipal banking, institutional trust services, corporate trust, commercial insurance services provided through People’s United Insurance Agency, Inc. and private banking.

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

(in millions)

  2018   2017   2018   2017 

Net interest income

  $176.9   $164.5   $515.9   $459.0 

Provision for loan losses

   9.8    11.5    28.4    31.6 

Totalnon-interest income

   42.9    40.1    130.3    121.4 

Totalnon-interest expense

   93.8    90.8    282.5    262.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

   116.2    102.3    335.3    286.1 

Income tax expense

   25.1    30.7    72.4    88.9 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $91.1   $71.6   $262.9   $197.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Average total assets

  $25,632.3   $25,307.8   $25,542.9   $21,183.0 

Average total liabilities

   9,068.4    8,121.0    9,137.2    7,578.0 
  

 

 

   

 

 

   

 

 

   

 

 

 

 Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2019201820192018
Net interest income$200.7  $176.9  $577.5  $515.9  
Provision for loan losses11.3  9.8  32.6  28.4  
Total non-interest income53.2  42.9  151.4  130.3  
Total non-interest expense111.6  93.8  330.1  282.5  
Income before income tax expense131.0  116.2  366.2  335.3  
Income tax expense24.1  25.1  73.1  72.4  
Net income$106.9  $91.1  $293.1  $262.9  
Average total assets$29,886.6  $25,632.3  $28,800.9  $25,542.9  
Average total liabilities11,397.3  9,068.4  10,839.6  9,137.2  
Commercial Banking net income increased $19.5$15.8 million for the three months ended September 30, 20182019 compared to theyear-ago period, reflecting increases in net interest income andnon-interest income, partially offset by an increase innon-interest expense. The $12.4$23.8 million increase in net interest income primarily reflects the benefits from an increase in average commercial loans and leases as well as new businessimproved yields, higher than the total portfolio yield, partially offset by the adverse effect offrom increases in net FTP funding charges and interest expense.Non-interest income for the three months ended September 30, 20182019 increased $2.8$10.3 million compared to theyear-ago period, primarily reflecting increases in net customer interest rate swap income, insurance revenue, operating lease income and commercial banking lending fees and investment management fees. The $3.0$17.8 million increase innon-interest expense in the third quarter of 20182019 compared to theyear-ago period reflects a higher levellevels of both direct expenses, partially offset by a decrease inand allocated expenses. Compared to the third quarter of 2017,2018, average total assets increased $325 million,$4.3 billion, reflecting in part, loans and leases acquired in connection with the LEAF Commercial Capital, Inc. (“LEAF”) (August 2017) and Vend Lease (June 2018) acquisitions as well as organic loan growth. Average total liabilities increased $947 million,$2.3 billion, primarily reflecting organic deposit growth.

growth and deposits assumed in connection with acquisitions.


68

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

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

(in millions)

  2018   2017   2018   2017 

Net interest income

  $115.3   $105.0   $334.3   $298.7 

Provision for loan losses

   2.2    3.4    6.6    10.0 

Totalnon-interest income

   46.7    46.9    138.5    136.5 

Totalnon-interest expense

   138.0    136.1    417.3    405.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

   21.8    12.4    48.9    19.4 

Income tax expense

   4.7    3.8    10.6    6.1 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $17.1   $8.6   $38.3   $13.3 
  

 

 

   

 

 

   

 

 

   

 

 

 

Average total assets

  $9,669.0   $9,776.6   $9,710.6   $9,661.3 

Average total liabilities

   20,101.3    20,539.7    20,150.7    20,184.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

 Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2019201820192018
Net interest income$136.9  $115.3  $405.4  $334.3  
Provision for loan losses2.3  2.2  6.7  6.6  
Total non-interest income49.7  46.7  144.2  138.5  
Total non-interest expense150.0  138.0  445.7  417.3  
Income before income tax expense34.3  21.8  97.2  48.9  
Income tax expense6.3  4.7  19.4  10.6  
Net income$28.0  $17.1  $77.8  $38.3  
Average total assets$12,410.2  $9,669.0  $12,120.7  $9,710.6  
Average total liabilities23,066.4  20,101.3  22,982.5  20,150.7  
Retail Banking net income increased $8.5$10.9 million for the three months ended September 30, 20182019 compared to theyear-ago period, reflecting an increaseincreases in net interest income and non-interest income, partially offset by an increase innon-interest expense. The $8.5$21.6 million increase in net interest income primarily reflects the benefits from higher net FTP funding credits, an increase in average residential mortgage loans, and higher net FTP funding credits, as well as new business yields higher than the total portfolio yield, partially offset by an increase in interest expense. Non-interest income for the three months ended September 30, 2019 increased $3.0 million compared to the year-ago period, primarily reflecting an increase in bank service charges. The $1.9$12.0 million increase innon-interest expense in the third quarter of 20182019 compared to theyear-ago period reflects higher levellevels of both direct expenses, partially offset by a lower level ofand allocated expenses. Compared to the third quarter of 2017,2018, average total assets decreased $108 million,increased $2.7 billion, reflecting loans acquired in connection with acquisitions, as well as organic loan growth. Average total liabilities increased $3.0 billion, primarily reflecting a changeorganic deposit growth and deposits assumed in loan mix, and average total liabilities decreased $438 million, primarily reflecting a decrease in deposits.

connection with acquisitions.


69

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)

  2018   2017   2018   2017 

Net interest income

  $20.0   $26.4   $69.5   $80.5 

Totalnon-interest income

   2.6    3.1    7.4    8.2 

Totalnon-interest expense

   4.6    4.4    14.0    11.2 
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

   18.0    25.1    62.9    77.5 

Income tax expense

   3.9    7.5    13.6    24.1 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $14.1   $17.6   $49.3   $53.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

Average total assets

  $7,934.1   $7,293.4   $7,912.0   $7,427.7 

Average total liabilities

   8,669.9    8,485.3    8,540.8    8,411.4 
  

 

 

   

 

 

   

 

 

   

 

 

 

 Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2019201820192018
Net interest income$15.0  $20.0  $58.7  $69.5  
Total non-interest income2.9  2.6  9.2  7.4  
Total non-interest expense2.4  4.6  11.3  14.0  
Income before income tax expense15.5  18.0  56.6  62.9  
Income tax expense2.9  3.9  11.4  13.6  
Net income$12.6  $14.1  $45.2  $49.3  
Average total assets$7,686.1  $7,934.1  $7,784.2  $7,912.0  
Average total liabilities9,329.5  8,669.9  8,788.0  8,540.8  

Treasury net income for the three months ended September 30, 20182019 decreased $3.5$1.5 million compared to theyear-ago period, primarily reflecting decreasesa decrease in net interest income, andpartially offset by a decrease in non-interest income. expense. The $5.0 million decrease in net interest income primarily reflects an increase in interest expense and the unfavorable impact of tax reform on the Company’s municipal bond holdings, which resulteda decrease in a lower FTE adjustment,securities income, partially offset by the benefits from an increase in securities income and higher net FTP funding credits. The decrease in non-interest expense compared to the year-ago period reflects a lower level of allocated expenses. Compared to the third quarter of 2017,2018, average total assets increased $641decreased $248 million, reflecting an increasedecreases in average securities and short term investments, and average total liabilities increased $185$660 million, reflecting an increase in deposits partially offset by a decrease inand borrowings.


70

Other includes the residual financial impact from the allocation of revenues and expenses (including the provision for loan losses) 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. Included innon-interest expense for the three and nine months ended September 30, 2019 are merger-related expenses totaling $5.0 million and $26.5 million, respectively, as well as costs associated with certain legal and other one-time operational expenses. Included in non-interest expense for the three and nine months ended September 30, 2018 are merger-related expenses totaling $0.5 million and $3.4 million, respectively. Also included innon-interest expense for the nine months ended September 30, 2018 is a $4.1 million charge relating to the closure of ten branches.Non-interest expense Compared to the third quarter of 2018, the increases in average total assets and average total liabilities primarily reflect the recognition of a right-of-use ("ROU") asset and a corresponding operating lease liability upon the adoption of the Financial Accounting Standards Board's (the "FASB") leasing standard on January 1, 2019 (see Notes 14 and 15 to the Consolidated Financial Statements for a further discussion regarding the three and nine months ended September 30, 2017 includes merger-related expenses totaling $3.0 million and $29.0 million, respectively.

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

(in millions)

  2018   2017   2018   2017 

Net interest loss

  $(5.8)   $(11.3)   $(16.3)   $(30.1) 

Provision for loan losses

   (3.8)    (7.9)    (14.9)    (23.1) 

Totalnon-interest income

   0.1    (0.8)    1.4    (0.5) 

Totalnon-interest expense

   4.9    5.8    19.6    40.8 
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax benefit

   (6.8)    (10.0)    (19.6)    (48.3) 

Income tax benefit

   (1.5)    (3.0)    (4.2)    (15.3) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

  $(5.3)   $(7.0)   $(15.4)   $(33.0) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Average total assets

  $1,009.2   $878.6   $957.2   $818.6 

Average total liabilities

   468.4    388.2    418.0    386.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Interest Income

accounting for leases).

 Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2019201820192018
Net interest loss$(3.9) $(5.8) $(12.0) $(16.3) 
Provision for loan losses(5.8) (3.8) (18.3) (14.9) 
Total non-interest income0.2  0.1  2.1  1.4  
Total non-interest expense17.4  4.9  49.9  19.6  
Loss before income tax benefit(15.3) (6.8) (41.5) (19.6) 
Income tax benefit(2.9) (1.5) (8.4) (4.2) 
Net loss$(12.4) $(5.3) $(33.1) $(15.4) 
Average total assets$1,541.4  $1,009.2  $1,445.2  $957.2  
Average total liabilities652.5  468.4  666.0  418.0  


Net Interest Income
Net interest income and net interest margin are affected by many factors, including: 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, the

The Federal Reserve Board has raisedlowered the target range for the federal funds rate by 25 basis points on July 31, 2019 and by another 25 basis points on September 19, 2019, bringing the current target range to between 1.75 % and 2.00%. Previously, the Federal Reserve Board raised the target range four times during 2018 by a total of 75100 basis points, to between 2.00% and 2.25% in 2018 after raising the target range three times during 2017 by a total of 75 basis points. For the third quarter of 2018,2019, the average effective federal funds rate was 1.92%2.20%.

The net interest margin was 3.12% in the third quarter of 2019, compared to 3.12% in the second quarter of 2019 and 3.15% in the third quarter of 2018,2018. As compared to 3.10% in the second quarter of 2018 and 3.04% in the third quarter of 2017. The improvement in2019, the net interest margin from the second quarter of 2018 primarily reflectsbenefited from higher yields on new loan originations and the upward repricing of floating-rate loans.

as well as lower deposit costs.


Third Quarter 20182019 Compared to Third Quarter 2017

2018

FTE net interest income increased $17.2$43.0 million compared to the third quarter of 2017,2018, reflecting a $46.2an $81.6 million increase in total interest and dividend income, partially offset by a $29.0$38.6 million increase in total interest expense, and the net interest margin increased 11decreased three basis points to 3.15%3.12%.

Average total earning assets were $39.8$45.6 billion in the third quarter of 2018, an $863 million2019, a $5.8 billion increase from the third quarter of 2017,2018, primarily reflecting increases of $845 million in average securities and $173 million$6.2 billion in average total loans and $26 million in average short-term investments, partially offset by a $155$363 million decrease in short-term investments.average securities. The average total commercial andloan, average residential mortgage loan and average home equity portfolios increased $198 million$3.5 billion, $2.5 billion and $156$96 million, respectively, compared to theyear-ago period, reflecting organic growth and loans and leases acquired in the LEAF and Vend Leaseconnection with acquisitions and the average home equity loan portfolio decreased $175 million. Within the commercial loan portfolio, a $721 million increase in equipment financing was partially offset by a $528 million decrease in commercial real estate. The decrease in the commercial real estate portfolio primarily reflects expectedrun-off in the transactional portion of the New York multi-family portfolio.

as well as organic growth.

71

Average total loans, average securities and average short-term investments comprised 81%84%, 18%15% and 1%, respectively, of average total earning assets in the third quarter of 2018,2019, compared to 82%81%, 17%18% and 1%, respectively, in the third quarter of 2017.2018. In the current quarter, the yield earned on the total loan portfolio was 4.29%4.46% and the yield earned on securities and short-term investments was 2.73%2.79%, compared to 3.81%4.29% and 2.64%2.73%, respectively, in theyear-ago period. At September 30, 2019 and December 31, 2018, approximately 44% and 43%, respectively, of the Company’s loan portfolio was comprised of Prime Rate andone-month Libor-based loans, compared to 43% at December 31, 2017.

floating rate loans.

Average total funding liabilities were $37.5$43.4 billion in the third quarter of 2018,2019, a $501 million$5.9 billion increase from theyear-ago period, primarily reflecting a $993 million increaseincreases of $5.6 billion in average total deposits partially offset by a $471and $317 million decrease in average total borrowings. The increase in average total deposits reflects organic growth and a $761 million increaseas well as deposits assumed in average brokered deposits.connection with acquisitions. Excluding brokered deposits, averagenon-interest-bearing deposits and average time deposits increased $416 million and $313 million, respectively, while average savings, interest-bearing checking and money market deposits, decreased $431 million.average time deposits and average non-interest bearing deposits increased $2.7 billion, $2.1 billion and $752 million, respectively. Average total deposits comprised 88%89% and 87%88% of average total funding liabilities in the third quarters of 2019 and 2018, and 2017, respectively.

The 3024 basis point increase to 0.89%1.13% in the rate paid on average total funding liabilities in the third quarter of 20182019 compared to 20172018 primarily reflects the increases during 2018 in the target federal funds rate discussed above. The rate paid on average total deposits increased 26 basis points, reflecting increases of 56 basis points in time deposits and 2430 basis points in savings, interest-bearing checking and money market deposits and 29 basis points in time deposits, partially offset by the benefit from a $416$752 million increase innon-interest-bearing non-interest bearing deposits. Average savings, interest-bearing checking and money market deposits and average time deposits comprised 58%56% and 18%21%, respectively, of average total deposits in the third quarter of 20182019 compared to 61%58% and 15%18%, respectively, in the comparable 20172018 period.


Third Quarter 20182019 Compared to Second Quarter 2018

2019

FTE net interest income increased $5.2$0.6 million compared to the second quarter of 2018, reflecting2019, as a $14.6$1.9 million increasedecrease in total interest and dividend income partiallywas more than offset by a $9.4$2.5 million increasedecrease in total interest expense, and theexpense. The net interest margin increased five basis points to 3.15%. The improvement in the net interest margin reflects:was unchanged at 3.12%, reflecting (i) higher yieldslower rates on new loan originations and the continued upward repricing of floating-rate loans,deposits, which benefittedbenefited the net interest margin by tenfive basis points;points and (ii) one additional calendar day in the third quarter, which benefitted the margin by two basis points; (iii) higher yields and balances in the securities portfolio and lower borrowing costs, which each benefittedbenefited the net interest margin by one basis point; partially offset by (i) lower yields on the loan and (iv) higher rates on deposits,securities portfolios, which reduced the net interest margin by ninefive basis points and (ii) higher rates on borrowings, which reduced the net interest margin by two basis points.

Average total earning assets increased $78decreased $14 million from the second quarter of 2018,2019, reflecting increases of $102an $87 million in average securities and $50 millionincrease in average total loans partially offset byand a $74$106 million decrease in average short-term investments.securities. In the third quarter of 2018,2019, the average total commercial andloan portfolio increased $422 million, while average residential mortgage loan portfolios increased $62 million and $34 million, respectively, and the average home equity loan portfolioportfolios decreased $46 million. The average$280 million and $51 million, respectively. Within commercial loans, the mortgage warehouse and equipment financing portfolioportfolios increased $197$270 million and $130 million, respectively.
Average total funding liabilities increased $166 million from the second quarter of 2018, reflecting, in part, loans and leases acquired in connection with the Vend Lease acquisition in June 2018.

Average total funding liabilities increased $29 million from the second quarter of 2018,2019, primarily reflecting a $522$709 million increase in average total deposits,borrowings, partially offset by a $493$553 million decrease in average total borrowings.

deposits reflecting in part, the expected withdrawal of a $500 million short-term commercial deposit during the third quarter of 2019.

The following tables presentpresents 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, 2018,2019, June 30, 20182019 and September 30, 2017,2018, and the nine months ended September 30, 20182019 and 2017.2018. 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 tables, classified according to the instrument hedged and the related risk management objective.




72

Average Balance Sheet, Interest and Yield/Rate Analysis (1)
 September 30, 2019June 30, 2019September 30, 2018
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$218.7  $1.3  2.33 %$214.1  $1.2  2.21 %$192.5  $1.1  2.06 %
Securities (2)7,041.3  49.4  2.80  7,147.1  50.8  2.85  7,404.2  50.8  2.75  
Loans:
Commercial real estate12,194.8  136.6  4.48  12,323.2  139.9  4.54  10,641.4  114.7  4.31  
Commercial and industrial10,059.2  116.0  4.61  9,638.2  114.1  4.74  8,584.8  95.6  4.45  
Equipment financing4,640.6  65.3  5.63  4,510.8  62.8  5.56  4,120.8  56.2  5.47  
Residential mortgage9,392.7  84.9  3.62  9,672.6  85.6  3.54  6,887.3  56.2  3.27  
Home equity and other consumer2,029.2  24.7  4.88  2,084.6  25.7  4.94  1,931.8  22.0  4.55  
Total loans38,316.5  427.5  4.46  38,229.4  428.1  4.48  32,166.1  344.7  4.29  
Total earning assets45,576.5  $478.2  4.20 %45,590.6  $480.1  4.21 %39,762.8  $396.6  3.99 %
Other assets5,947.8  5,496.9  4,481.8  
Total assets$51,524.3  $51,087.5  $44,244.6  
Liabilities and stockholders’ equity:
Deposits:
Non-interest-bearing$8,777.3  $—  — %$8,605.6  $—  — %$8,025.2  $—  — %
Savings, interest-bearing
checking and money market
21,758.5  53.4  0.98  22,341.3  57.4  1.03  19,031.4  32.6  0.68  
Time8,121.6  38.8  1.91  8,263.8  39.2  1.90  6,001.3  24.3  1.62  
Total deposits38,657.4  92.2  0.95  39,210.7  96.6  0.99  33,057.9  56.9  0.69  
Borrowings:
Federal Home Loan Bank
advances
2,363.0  14.1  2.39  1,844.0  12.2  2.64  2,560.6  14.0  2.18  
Federal funds purchased1,202.3  6.8  2.26  1,057.8  6.7  2.53  722.7  3.8  2.11  
Customer repurchase agreements290.1  0.6  0.86  240.0  0.4  0.77  234.3  0.3  0.53  
Other borrowings—  —  —  4.3  —  0.64  20.9  0.1  2.05  
Total borrowings3,855.4  21.5  2.23  3,146.1  19.3  2.46  3,538.5  18.2  2.05  
Notes and debentures913.8  8.5  3.73  903.8  8.8  3.89  888.3  8.5  3.83  
Total funding liabilities43,426.6  $122.2  1.13 %43,260.6  $124.7  1.15 %37,484.7  $83.6  0.89 %
Other liabilities1,019.1  848.8  823.3  
Total liabilities44,445.7  44,109.4  38,308.0  
Stockholders’ equity7,078.6  6,978.1  5,936.6  
Total liabilities and stockholders’ equity$51,524.3  $51,087.5  $44,244.6  
Net interest income/spread (3)$356.0  3.07 %$355.4  3.06 %$313.0  3.10 %
Net interest margin3.12 %3.12 %3.15 %
1.Average Balance Sheet, Interestyields earned and Yield/rates paid are annualized.
2.Average balances and yields for securities are based on amortized cost.
3.The FTE adjustment was $7.3 million, $7.3 million and $6.6 million for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively.

73

Average Balance Sheet, Interest and Yield/Rate Analysis (1)
September 30, 2019September 30, 2018
Nine months ended
(dollars in millions)		Average
Balance		InterestYield/
Rate		Average
Balance		InterestYield/
Rate
Assets:
Short-term investments$211.9  $3.8  2.37 %$274.6  $3.6  1.74 %
Securities (2)7,165.4  152.6  2.84  7,298.3  148.0  2.70  
Loans:
Commercial real estate12,037.6  409.2  4.53  10,791.8  333.2  4.12  
Commercial and industrial9,561.1  336.6  4.69  8,521.2  272.8  4.27  
Equipment financing4,504.1  187.0  5.54  3,972.6  155.6  5.22  
Residential mortgage9,077.5  241.5  3.55  6,859.5  166.6  3.24  
Home equity and other consumer2,029.1  75.4  4.95  1,981.1  64.2  4.32  
Total loans37,209.4  1,249.7  4.48  32,126.2  992.4  4.12  
Total earning assets44,586.7  $1,406.1  4.20 %39,699.1  $1,144.0  3.84 %
Other assets5,564.3  4,423.6  
Total assets$50,151.0  $44,122.7  
Liabilities and stockholders’ equity:
Deposits:
Non-interest-bearing$8,563.2  $—  — %$7,899.0  $—  — %
Savings, interest-bearing
checking and money market		21,708.6  159.6  0.98  19,296.0  85.7  0.59  
Time7,842.4  110.4  1.88  5,611.6  59.8  1.42  
Total deposits38,114.2  270.0  0.94  32,806.6  145.5  0.59  
Borrowings:
Federal Home Loan Bank
advances		2,034.1  38.7  2.54  2,748.6  39.7  1.92  
Federal funds purchased1,005.6  18.2  2.41  655.6  9.1  1.85  
Customer repurchase agreements272.1  1.6  0.76  241.7  0.6  0.34  
Other borrowings4.4  0.1  1.86  127.1  1.5  1.60  
Total borrowings3,316.2  58.6  2.35  3,773.0  50.9  1.80  
Notes and debentures904.7  26.1  3.85  891.0  24.7  3.70  
Total funding liabilities42,335.1  $354.7  1.12 %37,470.6  $221.1  0.79 %
Other liabilities941.0  776.1  
Total liabilities43,276.1  38,246.7  
Stockholders’ equity6,874.9  5,876.0  
Total liabilities and stockholders’ equity$50,151.0  $44,122.7  
Net interest income/spread (3)$1,051.4  3.08 %$922.9  3.05 %
Net interest margin3.14 %3.10 %

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 $21.8 million and $19.5 million for the nine months ended September 30, 2019 and 2018, respectively.

74

Volume and Rate Analysis (1)

  September 30, 2018  June 30, 2018  September 30, 2017 

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

 $192.5  $1.1   2.06%  $266.7  $1.3   2.02%  $347.3  $1.1   1.25% 

Securities (2)

  7,404.2   50.8   2.75   7,302.1   49.2   2.69   6,558.8   44.4   2.71 

Loans:

         

Commercial real estate

  10,641.4   114.7   4.31   10,802.9   111.5   4.13   11,169.8   105.6   3.78 

Commercial and industrial

  8,584.8   95.6   4.45   8,558.3   92.6   4.32   8,580.0   84.0   3.91 

Equipment financing

  4,120.8   56.2   5.47   3,923.6   50.5   5.14   3,399.5   41.5   4.89 

Residential mortgage

  6,887.3   56.2   3.27   6,853.6   55.5   3.24   6,731.7   52.8   3.13 

Home equity and other consumer

  1,931.8   22.0   4.55   1,977.6   21.4   4.33   2,112.6   21.0   3.97 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total loans

  32,166.1   344.7   4.29   32,116.0   331.5   4.13   31,993.6   304.9   3.81 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total earning assets

  39,762.8  $396.6   3.99%   39,684.8  $382.0   3.85%   38,899.7  $350.4   3.60% 
  

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Other assets

  4,481.8     4,425.0     4,356.7   
 

 

 

    

 

 

    

 

 

   

Total assets

 $44,244.6    $44,109.8    $43,256.4   
 

 

 

    

 

 

    

 

 

   

Liabilities and stockholders’ equity:

         

Deposits:

         

Non-interest-bearing

 $8,025.2  $—     —  %  $7,872.7  $—     —  %  $7,609.1  $—     —  % 

Savings, interest-bearing
checking and money market

  19,031.4   32.6   0.68   19,220.6   28.2   0.59   19,529.1   21.4   0.44 

Time

  6,001.3   24.3   1.62   5,442.3   19.1   1.40   4,926.8   13.0   1.06 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total deposits

  33,057.9   56.9   0.69   32,535.6   47.3   0.58   32,065.0   34.4   0.43 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Borrowings:

         

Federal Home Loan Bank
advances

  2,560.6   14.0   2.18   3,009.3   14.8   1.97   2,834.3   9.4   1.33 

Federal funds purchased

  722.7   3.8   2.11   634.5   3.0   1.86   649.9   2.1   1.26 

Customer repurchase agreements

  234.3   0.3   0.53   228.7   0.1   0.31   311.3   0.1   0.19 

Other borrowings

  20.9   0.1   2.05   158.5   0.6   1.45   214.2   1.1   2.06 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total borrowings

  3,538.5   18.2   2.05   4,031.0   18.5   1.84   4,009.7   12.7   1.27 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Notes and debentures

  888.3   8.5   3.83   889.6   8.4   3.79   908.9   7.5   3.29 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total funding liabilities

  37,484.7  $83.6   0.89%   37,456.2  $74.2   0.79%   36,983.6  $54.6   0.59% 
  

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Other liabilities

  823.3     784.0     550.6   
 

 

 

    

 

 

    

 

 

   

Total liabilities

  38,308.0     38,240.2     37,534.2   

Stockholders’ equity

  5,936.6     5,869.6     5,722.2   
 

 

 

    

 

 

    

 

 

   

Total liabilities and stockholders’ equity

 $44,244.6    $44,109.8    $43,256.4   
 

 

 

    

 

 

    

 

 

   

Net interest income/spread (3)

  $313.0   3.10%   $307.8   3.06%   $295.8   3.01% 
  

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Net interest margin

    3.15%     3.10%     3.04% 
   

 

 

    

 

 

    

 

 

 

(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 $6.6 million, $6.6 million and $11.2 million for the three months ended September 30, 2018, June 30, 2018 and September 30, 2017, respectively.

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

  September 30, 2018  September 30, 2017 

Nine months ended

(dollars in millions)

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

Assets:

       

Short-term investments

 $274.6  $3.6    1.74%  $357.4  $2.7   1.01% 

Securities (2)

  7,298.3   148.0    2.70   6,704.9   132.2   2.63 

Loans:

       

Commercial real estate

  10,791.8   333.2    4.12   10,913.9   299.5   3.66 

Commercial and industrial

  8,521.2   272.8    4.27   8,192.8   229.6   3.74 

Equipment financing

  3,972.6   155.6    5.22   3,100.5   104.6   4.50 

Residential mortgage

  6,859.5   166.6    3.24   6,601.2   154.8   3.13 

Home equity and other consumer

  1,981.1   64.2    4.32   2,117.6   59.3   3.73 
 

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total loans

  32,126.2   992.4    4.12   30,926.0   847.8   3.66 
 

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total earning assets

  39,699.1  $1,144.0    3.84%   37,988.3  $982.7   3.45% 
  

 

 

   

 

 

   

 

 

  

 

 

 

Other assets

  4,423.6      4,102.3   
 

 

 

     

 

 

   

Total assets

 $44,122.7     $42,090.6   
 

 

 

     

 

 

   

Liabilities and stockholders’ equity:

       

Deposits:

       

Non-interest-bearing

 $7,899.0  $—      —  %  $7,152.2  $—     —  % 

Savings, interest-bearing checking and
money market

  19,296.0   85.7    0.59   19,446.5   57.4   0.39 

Time

  5,611.6   59.8    1.42   4,746.5   35.0   0.98 
 

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total deposits

  32,806.6   145.5    0.59   31,345.2   92.4   0.39 
 

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Borrowings:

       

Federal Home Loan Bank advances

  2,748.6   39.7    1.92   2,698.0   22.3   1.10 

Federal funds purchased

  655.6   9.1    1.85   627.6   4.9   1.03 

Customer repurchase agreements

  241.7   0.6    0.34   311.6   0.4   0.19 

Other borrowings

  127.1   1.5    1.60   102.5   1.3   1.71 
 

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total borrowings

  3,773.0   50.9    1.80   3,739.7   28.9   1.03 
 

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Notes and debentures

  891.0   24.7    3.70   927.1   22.3   3.21 
 

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total funding liabilities

  37,470.6  $221.1    0.79%   36,012.0  $143.6   0.53% 
  

 

 

   

 

 

   

 

 

  

 

 

 

Other liabilities

  776.1      548.5   
 

 

 

     

 

 

   

Total liabilities

  38,246.7      36,560.5   

Stockholders’ equity

  5,876.0      5,530.1   
 

 

 

     

 

 

   

Total liabilities and stockholders’ equity

 $44,122.7     $42,090.6   
 

 

 

     

 

 

   

Net interest income/spread (3)

  $922.9    3.05%   $839.1   2.92% 
  

 

 

   

 

 

   

 

 

  

 

 

 

Net interest margin

     3.10%     2.94% 
    

 

 

    

 

 

 

(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 $19.5 million and $31.0 million for the nine months ended September 30, 2018 and 2017, respectively.

Volume and Rate Analysis

The following tables showshows 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, 2018 Compared To 
   September 30, 2017
Increase (Decrease)		  June 30, 2018
Increase (Decrease)		 

(in millions)

  Volume  Rate   Total  Volume  Rate   Total 

Interest and dividend income:

         

Short-term investments

  $(0.6)  $0.6   $—    $(0.4)  $0.2   $(0.2) 

Securities

   5.8   0.6    6.4   0.7   0.9    1.6 

Loans:

         

Commercial real estate

   (5.2)   14.3    9.1   (1.7)   4.9    3.2 

Commercial and industrial

   —     11.6    11.6   0.3   2.7    3.0 

Equipment financing

   9.5   5.2    14.7   2.6   3.1    5.7 

Residential mortgage

   1.2   2.2    3.4   0.3   0.4    0.7 

Home equity and other consumer

   (1.9)   2.9    1.0   (0.5)   1.1    0.6 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Total loans

   3.6   36.2    39.8   1.0   12.2    13.2 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Total change in interest and dividend income

   8.8   37.4    46.2   1.3   13.3    14.6 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Interest expense:

         

Deposits:

         

Savings, interest-bearing checking and money market

   (0.6)   11.8    11.2   (0.3)   4.7    4.4 

Time

   3.3   8.0    11.3   2.1   3.1    5.2 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Total deposits

   2.7   19.8    22.5   1.8   7.8    9.6 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Borrowings:

         

Federal Home Loan Bank advances

   (1.0)   5.6    4.6   (2.3)   1.5    (0.8) 

Federal funds purchased

   0.3   1.4    1.7   0.4   0.4    0.8 

Customer repurchase agreements

   —     0.2    0.2   —     0.2    0.2 

Other borrowings

   (1.0)   —      (1.0)   (0.6)   0.1    (0.5) 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Total borrowings

   (1.7)   7.2    5.5   (2.5)   2.2    (0.3) 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Notes and debentures

   (0.2)   1.2    1.0   —     0.1    0.1 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Total change in interest expense

   0.8   28.2    29.0   (0.7)   10.1    9.4 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Change in net interest income

  $8.0  $9.2   $17.2  $2.0  $3.2   $5.2 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Volume and Rate Analysis

   Nine Months Ended September 30, 2018
Compared To September 30, 2017
Increase (Decrease)		 

(in millions)

      Volume          Rate          Total     

Interest and dividend income:

    

Short-term investments

  $(0.7)  $1.6  $0.9 

Securities

   11.9   3.9   15.8 

Loans:

    

Commercial real estate

   (3.4)   37.1   33.7 

Commercial and industrial

   9.5   33.7   43.2 

Equipment financing

   32.4   18.6   51.0 

Residential mortgage

   6.2   5.6   11.8 

Home equity and other consumer

   (4.0)   8.9   4.9 
  

 

 

  

 

 

  

 

 

 

Total loans

   40.7   103.9   144.6 
  

 

 

  

 

 

  

 

 

 

Total change in interest and dividend income

   51.9   109.4   161.3 
  

 

 

  

 

 

  

 

 

 

Interest expense:

    

Deposits:

    

Savings, interest-bearing checking and money market

   (0.4)   28.7   28.3 

Time

   7.2   17.6   24.8 
  

 

 

  

 

 

  

 

 

 

Total deposits

   6.8   46.3   53.1 
  

 

 

  

 

 

  

 

 

 

Borrowings:

    

Federal Home Loan Bank advances

   0.4   17.0   17.4 

Federal funds purchased

   0.2   4.0   4.2 

Customer repurchase agreements

   (0.1)   0.3   0.2 

Other borrowings

   0.3   (0.1)   0.2 
  

 

 

  

 

 

  

 

 

 

Total borrowings

   0.8   21.2   22.0 
  

 

 

  

 

 

  

 

 

 

Notes and debentures

   (0.9)   3.3   2.4 
  

 

 

  

 

 

  

 

 

 

Total change in interest expense

   6.7   70.8   77.5 
  

 

 

  

 

 

  

 

 

 

Change in net interest income

  $45.2  $38.6  $83.8 
  

 

 

  

 

 

  

 

 

 

Non-Interest Income

   Three Months Ended   Nine Months Ended 

(in millions)

  Sept. 30,
2018		   June 30,
2018		   Sept. 30,
2017		   Sept. 30,
2018		   Sept. 30,
2017		 

Bank service charges

  $24.9   $24.3   $25.3   $73.0   $73.8 

Investment management fees

   17.4    17.2    16.9    52.3    49.2 

Operating lease income

   11.0    11.2    10.9    32.9    32.1 

Insurance revenue

   9.8    8.3    9.7    27.9    26.3 

Commercial banking lending fees

   7.9    9.4    7.0    27.7    26.7 

Cash management fees

   7.0    7.0    6.8    20.6    19.6 

Brokerage commissions

   3.2    3.2    2.8    9.5    9.2 

Net security gains (losses)

   0.1    —      —      0.2    (15.6) 

Othernon-interest income:

          

Customer interest rate swap income, net

   2.8    4.0    1.9    8.3    7.1 

BOLI

   2.1    1.4    2.1    5.1    4.8 

Net gains on sales of residential mortgage loans

   0.4    0.2    1.1    0.9    2.7 

Other

   5.7    8.7    4.8    19.2    29.7 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total othernon-interest income

   11.0    14.3    9.9    33.5    44.3 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Totalnon-interest income

  $92.3   $94.9   $89.3   $277.6   $265.6 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
 Three Months Ended September 30, 2019 Compared To
 September 30, 2018
Increase (Decrease)		June 30, 2019
Increase (Decrease)
(in millions)VolumeRateTotalVolumeRateTotal
Interest and dividend income:
Short-term investments$0.1  $0.1 ��$0.2  $—  $0.1  $0.1  
Securities(2.5) 1.1  (1.4) (0.7) (0.7) (1.4) 
Loans:
Commercial real estate17.3  4.6  21.9  (1.4) (1.9) (3.3) 
Commercial and industrial16.9  3.5  20.4  4.9  (3.0) 1.9  
Equipment financing7.3  1.8  9.1  1.8  0.7  2.5  
Residential mortgage22.2  6.5  28.7  (2.5) 1.8  (0.7) 
Home equity and other consumer1.1  1.6  2.7  (0.7) (0.3) (1.0) 
Total loans64.8  18.0  82.8  2.1  (2.7) (0.6) 
Total change in interest and dividend income62.4  19.2  81.6  1.4  (3.3) (1.9) 
Interest expense:
Deposits:
Savings, interest-bearing checking and money market5.2  15.6  20.8  (1.5) (2.5) (4.0) 
Time9.6  4.9  14.5  (0.7) 0.3  (0.4) 
Total deposits14.8  20.5  35.3  (2.2) (2.2) (4.4) 
Borrowings:
Federal Home Loan Bank advances(1.1) 1.2  0.1  3.2  (1.3) 1.9  
Federal funds purchased2.7  0.3  3.0  0.9  (0.8) 0.1  
Customer repurchase agreements0.1  0.2  0.3  0.1  0.1  0.2  
Other borrowings(0.1) —  (0.1) —  —  —  
Total borrowings1.6  1.7  3.3  4.2  (2.0) 2.2  
Notes and debentures0.2  (0.2) —  0.1  (0.4) (0.3) 
Total change in interest expense16.6  22.0  38.6  2.1  (4.6) (2.5) 
Change in net interest income$45.8  $(2.8) $43.0  $(0.7) $1.3  $0.6  



75

Nine Months Ended September 30, 2019
Compared To September 30, 2018
Increase (Decrease)
(in millions)VolumeRateTotal
Interest and dividend income:
Short-term investments$(0.9) $1.1  $0.2  
Securities(2.7) 7.3  4.6  
Loans:
Commercial real estate40.5  35.5  76.0  
Commercial and industrial35.1  28.7  63.8  
Equipment financing21.7  9.7  31.4  
Residential mortgage57.8  17.1  74.9  
Home equity and other consumer1.6  9.6  11.2  
Total loans156.7  100.6  257.3  
Total change in interest and dividend income153.1  109.0  262.1  
Interest expense:
Deposits:
Savings, interest-bearing checking and money market11.8  62.1  73.9  
Time28.0  22.6  50.6  
Total deposits39.8  84.7  124.5  
Borrowings:
Federal Home Loan Bank advances(11.8) 10.8  (1.0) 
Federal funds purchased5.8  3.3  9.1  
Customer repurchase agreements0.1  0.9  1.0  
Other borrowings(1.7) 0.3  (1.4) 
Total borrowings(7.6) 15.3  7.7  
Notes and debentures0.4  1.0  1.4  
Total change in interest expense32.6  101.0  133.6  
Change in net interest income$120.5  $8.0  $128.5  


76

Non-Interest Income
Three Months EndedNine Months Ended
(in millions)Sept. 30,
2019		June 30,
2019		Sept. 30,
2018		Sept. 30,
2019		Sept. 30,
2018
Bank service charges$27.0  $26.4  $24.9  $78.6  $73.0  
Investment management fees17.3  17.1  17.4  50.9  52.3  
Operating lease income13.0  12.7  11.0  38.4  32.9  
Commercial banking lending fees11.8  8.7  9.8  29.8  27.7  
Insurance revenue10.3  10.2  7.9  29.5  27.9  
Cash management fees7.3  7.2  7.0  21.2  20.6  
Brokerage commissions2.6  2.6  3.2  8.0  9.5  
Other non-interest income:
Customer interest rate swap income, net5.6  7.5  2.8  16.2  8.3  
BOLI2.2  3.1  2.1  8.0  5.1  
Net gains on sales of residential mortgage loans0.6  0.3  0.4  1.1  0.9  
Other8.3  10.5  5.8  25.2  19.4  
Total other non-interest income16.7  21.4  11.1  50.5  33.7  
Total non-interest income$106.0  $106.3  $92.3  $306.9  $277.6  

Totalnon-interest income in the third quarter of 20182019 increased $3.0$13.7 million compared to the third quarter of 20172018 and decreased $2.6$0.3 million compared to the second quarter of 2018.2019. The increase innon-interest income in the third quarter of 20182019 compared to theyear-ago period primarily reflects increases in net customer interest rate swap income, andinsurance revenue, bank service changes, commercial banking lending fees partially offset by a decrease in net gains on sales of residential mortgage loans.and operating lease income. The decrease innon-interest income compared to the second quarter of 20182019 primarily reflects decreases in othernon-interest income, commercial banking lending fees and net customer interest rate swap income partiallyand BOLI, essentially offset by increasesan increase in insurance revenuecommercial banking lending fees.
The increase in bank service charges in the third quarter of 2019 compared to both the year-ago period and BOLI.

the second quarter of 2019 primarily reflects higher interchange-related fees and benefits from recent acquisitions. The improvementincrease in investment management fees compared to the second quarter of 2019 primarily reflects an improvement in market conditions in the third quarter of 2017 primarily reflects the continued benefits from new revenue initiatives, additional personnel in our key markets and a broader suite of product offerings.2019. At September 30, 2018,2019, assets under administration, which are not reported as assets of People’s United, totaled $23.8 billion, of which $9.3 billion are under discretionary management totaled $9.2 billion compared to $23.8$8.6 billion and $9.1 billion, respectively, at December 31, 2017.

2018.

The increase in insurance revenue fromcompared to the second quarter of 20182019 primarily reflects the seasonality of commercial insurance renewals. The fluctuationsincrease in commercial banking lending fees compared to both the third quarter of 20172018 and the second quarter of 20182019 are primarily related to the level of prepayment income and loan syndication fees collected in the respective periods.

The increasefluctuations in net customer interest rate swap income in the third quarter of 20182019 compared to the third quarter of 20172018 and decrease compared to the second quarter of 20182019 reflects fluctuationsthe levels in both the number and notional value of swap transactions.customer swaps. The decreaseincrease in net gains on sales of residential mortgage loans in the third quarter of 20182019 compared to theyear-ago period second quarter of 2019 reflects a 34% decreaseimprovement in spreads on pricing and an 84% increase in the volume of residential mortgage loans sold as well as narrower spreads on pricing.sold. Loansheld-for-sale at September 30, 20182019 consisted ofnewly-originated residential mortgage loans with a carrying amount of $15.2$24.8 million.

On an FTE basis, BOLI income totaled $2.7 million in the third quarter of 20182019 compared to $1.8$3.8 million in the second quarter of 20182019 and $3.3$2.7 million in theyear-ago quarter. BOLI income in boththe second quarter of 2019 and the third quarter of 2018 and the third quarter of 2017 includes death benefits received totaling $0.9 million and $0.5 million. The FTE adjustment on BOLI income beginning in 2018 reflects a reduction in the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018.

Net security losses for the nine months ended September 30, 2017 reflect $15.7 million, of gross realized losses resulting from the sale oflow-yielding and short duration U.S. Treasury and collateralized mortgage obligations securities with a combined amortized cost of $486.9 million. Included in othernon-interest income are gains related to certain legacy investments totaling $0.6 millionrespectively (none in the third quarter of 2018, $2.02019). Included in other non-interest income are unrealized (losses) gains relating to the change in fair value of equity securities of $(0.5) million, in the second quarter of 2018$0.8 million and $0.3$0.2 million, infor the third quarter of 2017. Othernon-interest income for2019, second quarter of 2019 and third quarter of 2018, respectively (see Note 3 to the nine months ended September 30, 2017 includes a $16.1 million gain recorded in connection with the Company’s exchange of its ownership interest in anon-marketable equity security (previously recorded in other assets) for total consideration of $16.3 million.

Consolidated Financial Statements).

Non-Interest Expense

   Three Months Ended  Nine Months Ended 

(dollars in millions)

  Sept. 30,
2018		  June 30,
2018		  Sept. 30,
2017		  Sept. 30,
2018		  Sept. 30,
2017		 

Compensation and benefits

  $135.7  $135.0  $128.0  $411.4  $383.6 

Occupancy and equipment

   41.6   40.8   40.2   123.6   118.6 

Professional and outside services

   17.0   20.6   19.2   56.2   62.8 

Regulatory assessments

   10.0   9.9   10.3   30.5   29.8 

Operating lease expense

   8.9   8.7   8.8   26.6   26.3 

Amortization of other acquisition-related intangible assets

   4.9   4.9   7.9   14.9   22.1 

Othernon-interest expense:

      

Stationery, printing, postage and telephone

   6.2   6.2   5.0   18.4   16.7 

Advertising and promotion

   3.9   4.2   3.1   10.7   8.7 

Other

   13.1   18.3   14.6   41.1   51.9 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total othernon-interest expense

   23.2   28.7   22.7   70.2   77.3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Totalnon-interest expense

  $241.3  $248.6  $237.1  $733.4  $720.5 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Efficiency ratio

   56.7%   58.4%   57.3%   58.2%   58.3% 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 


77

Non-Interest Expense
 Three Months EndedNine Months Ended
(dollars in millions)Sept. 30,
2019		June 30,
2019		Sept. 30,
2018		Sept. 30,
2019		Sept. 30,
2018
Compensation and benefits$158.1  $161.3  $135.7  $474.8  $411.4  
Occupancy and equipment45.0  44.4  41.6  133.7  123.6  
Professional and outside services23.7  24.9  17.0  68.6  56.2  
Operating lease expense9.9  9.9  8.9  29.2  26.6  
Amortization of other acquisition-related intangible assets8.0  8.0  4.9  22.7  14.9  
Regulatory assessments5.3  6.5  10.0  18.8  30.5  
Other non-interest expense:
Stationary, printing, postage and telephone6.9  6.0  6.2  19.8  18.4  
Advertising and promotion4.4  4.2  3.9  11.9  10.7  
Other20.1  12.7  13.1  57.5  41.1  
Total other non-interest expense31.4  22.9  23.2  89.2  70.2  
Total non-interest expense$281.4  $277.9  $241.3  $837.0  $733.4  
Efficiency ratio56.8 %55.8 %56.7 %56.6 %58.2 %
Totalnon-interest expense in the third quarter of 20182019 increased $4.2$40.1 million compared to the third quarter of 20172018 and decreased $7.3$3.5 million compared to the second quarter of 2018.2019. Included in totalnon-interest expense are merger-related expenses totaling $5.0 million in the third quarter of 2018,2019, $6.5 million in the second quarter of 20182019 and third quarter of 2017 are merger-related expenses totaling $0.5 million $2.9 million and $3.0 million, respectively.in the year-ago quarter. Excluding such expenses, totalnon-interest expense increased $6.7$35.6 million compared to the third quarter of 20172018 and decreased $4.9$5.0 million compared to the second quarter of 2018.2019. Excluding merger-relatedsuch expense, the increase in totalnon-interest expense in the third quarter of 20182019 compared to theyear-ago period primarily reflects the incremental costs resulting from therecent acquisitions, of LEAF in August 2017 and Vend Lease in June 2018, partially offset by a reductiondecrease in regulatory assessments (see below). The increase compared to the amortizationsecond quarter of 2019 primarily reflects an increase in other acquisition-related intangible assets.

non-interest expense, partially offset by decreases in compensation and benefit costs and regulatory assessments.

As compared to the second quarter of 2018,2019, the improvement in thehigher efficiency ratio reflects an increase in adjusted total revenues (1%) and decrease in adjusted total expenses (2%) (seeNon-GAAP Financial Measures and Reconciliation to GAAP).

In March 2017, the Financial Accounting Standards Board (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. This amendment, which is being applied retrospectively, became effective for People’s United on January 1, 2018. Accordingly, net periodic pension and postretirement benefit expense (income) previously included in compensation and benefits expense is now included in othernon-interest expense for all periods presented. For the three and nine months ended September 30, 2017, $1.9 million and $6.3 million, respectively, of net periodic pension and postretirement benefit income has been reclassified in accordance with the requirements of the standard.

The year-over-year increase in compensation and benefits primarily reflects LEAF and Vend Lease personnelthe incremental costs in the current period,from recent acquisitions, as well as the effect of normal merit increases, and higher incentive-related expenses partially offset byand the adverse effect of lower health care costs. The increasedeferred lease origination costs (see below). Excluding $0.8 million and $1.5 million of merger-related expenses included in compensation and benefits compared toin the third quarter of 2019 and the second quarter of 20182019, respectively, the $2.5 million decrease primarily reflects Vend Lease personnel costs in the current period.

lower payroll and benefit-related costs.

The FASB’sFASB's amended standard with respect to the accounting for leases, which isbecame effective for the Company on January 1, 2019 (see Note 1315 to the Consolidated Financial Statements), provides a narrower definition of eligible initial direct costs for lessors. As such, adoption of the standard may resultresulted in the Company recognizing immediately (rather than deferring) certain lease origination-related expenses. Such expenses would be offset by the recognition of a higher yield on the underlying leases over their contractual term. As a result, reported compensation and benefits costs could be higherare expected to increase by approximately $12 million in future periods.

2019.

The increase in occupancy and equipment expense in the third quarter of 20182019 compared to theyear-ago period primarily reflects the incremental costs resulting from the LEAF acquisition.recent acquisitions. Professional and outside services fees include merger-related expenses totaling $3.7 million in the third quarter of 2019, $4.7 million in the second quarter of 2019 and $0.4 million in the third quarter of 2018, $2.1 million in the second quarter of 2018 and $2.7 million in the third quarter of 2017.2018. Excluding such expenses, the decreasefluctuations in professional and outside services fees in the third quarter of 2018 compared to the second quarter of 2018 isare primarily related to the timing of certain projects.

78

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 FDIC issued a final rule effective on July 1, 2016 that implemented a Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 provision requiring banks with over $10 billion in assets to be responsible for recapitalizing the Deposit Insurance Fund (the "DIF") to 1.35% of insured deposits after it reaches a 1.15% reserve ratio. For banks with over $10 billion in assets, the rule imposes a 4.5 basis point surcharge bringing the DIF’s reserve ratio to 1.35% by September 2020. For the surcharge only, the assessment base would be reduced by $10 billion. In November 2018, the FDIC announced that the DIF’s reserve ratio had exceeded the 1.35% minimum reserve ratio. As such, beginning in the fourth quarter of 2018, banks with over $10 billion in assets, are no longer subject to the surcharge. The decrease in regulatory assessments in the third quarter of 2019 compared to third quarter of 2018 primarily reflects a credit received from the FDIC in the third quarter of 2019 as well as the benefit of eliminating the FDIC surcharge in the fourth quarter of 2018. The benefit for the full-year of 2019 associated with the elimination of the surcharge is expected to be approximately $12 million. The decrease in regulatory assessments compared to the second quarter of 2019 primarily reflects the aforementioned credit.
The increase in amortization of other acquisition-related intangible assets expense in the third quarter of 2019 compared to the year-ago period reflects the effect of additional intangible assets resulting from recent acquisitions. Scheduled amortization expense attributable to other acquisition-related intangible assets for the full-year of 20182019 and each of the next five years is as follows: $19.9 million in 2018; $18.4$30.6 million in 2019; $16.8$29.7 million in 2020; $15.0$27.0 million in 2021; $13.5$24.6 million in 2022; and $8.5$18.7 million in 2023. The decline2023; and $17.0 million in amortization of other acquisition-related intangible assets expense in 2018 reflects certain core deposit intangible assets that were fully amortized as of December 31, 2017.

2024.

The increase in advertising and promotion expense in the third quarter of 20182019 compared to both the second quarter of 2019 and third quarter of 20172018 reflects an increased level of spending. Merger-related expenses included in other non-interest expense totaled $0.2 million, $0.2 million and $0.1 million for the third quarter of 2019, second quarter of 2019 and third quarter of 2018, respectively. Included in othernon-interest expense in the third quarter of 20182019 are merger-related expenses totaling $0.1 million. Included incosts associated with certain legal and othernon-interest expense in the second quarter of 2018 is a $4.1 million charge relating to the closure of ten branches and $0.8 million of merger-related expenses. Included in othernon-interest expense in the third quarter of 2017 are merger-related expenses totaling $0.3 million.

Income Taxes

one-time operational matters.


Income Taxes
People’s United’s effective income tax rate was 21.6%20.0% for the nine months ended September 30, 20182019 compared to 27.8%18.8% for the full-year of 2017. The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The most significant provision of the Act applicable to the Company serves to reduce the U.S. federal corporate income tax rate, effective January 1, 2018, from 35% to 21%.2018. People’s United’s effective income tax rate for the full-year 20182019 is expected to be approximately 19%20% to 21%22%. Differences, if any, arising between People’s United’s effective income tax rate and the U.S. federal statutory rate of 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, 20182019 were $44.1$52.1 billion, a $320 million decrease$4.2 billion increase from December 31, 2017,2018, primarily reflecting decreasesincreases of $376 million$3.5 billion in total loans and $345$663 million in other assets, partially offset by decreases of $139 million in total cash and cash equivalents partially offset by a $342and $98 million increase in total securities. The increase in total securities primarily reflects net purchases of government sponsored enterprise mortgage-backed securities and municipal bonds, partially offset by a $74 million increase in the unrealized loss on debt securitiesavailable-for-sale. The decrease in total loans from December 31, 20172018 to September 30, 20182019 reflects decreasesincreases of $332 million$2.4 billion in commercial loans and $44 million$1.1 billion in retail loans. Originated loans totaled $30.1increased $1.7 billion at both September 30, 2018 andfrom December 31, 20172018 to $32.3 billion (commercial loans increased $1.9 billion and retail loans decreased $235 million) and acquired loans decreased $376 millionincreased $1.9 billion since December 31, 2017.2018. At September 30, 2018,2019, the carrying amount of the acquired loan portfolio was $2.1$6.5 billion.

The fair value of the loans acquired in the BSB Bancorp acquisition totaled $2.6 billion. The increase in other assets primarily reflects the recognition of ROU assets related to the Company's adoption of the FASB's leasing standard on January 1, 2019. The decrease in total securities primarily reflects principal repayments and maturities of government sponsored enterprise mortgage-backed securities, partially offset by net purchases of municipal bonds and an $83 million decrease in the unrealized loss on debt securities available-for-sale.

79

Non-performing assets (excluding acquirednon-performing loans) totaled $173.2$181.6 million at September 30, 2018,2019, a $5.1$4.2 million increasedecrease from December 31, 2017,2018, primarily reflecting a $12.3decreases of $8.4 million increase innon-performing commercial real estate loans, $2.3 million in non-performing residential mortgage loans and industrial$1.0 million in non-performing home equity loans, partially offset by decreasesincreases of $6.5 million innon-performing commercial real estate loans and $3.8$5.8 million in other real estate owned (“REO”("REO"). and $2.4 million in repossessed assets. At September 30, 2018,2019, acquirednon-performing loans totaled $32.3$21.1 million compared to $29.7$50.1 million at December 31, 2017.2018. The allowance for loan losses totaled $238.0$242.3 million on originated loans and $3.7 million on acquired loans) at September 30, 2019, compared to $240.4 million ($233.9236.3 million on originated loans and $4.1 million on acquired loans) at September 30, 2018, compared to $234.4 million ($230.8 million on originated loans and $3.6 million on acquired loans) at December 31, 2017.2018. At September 30, 2018,2019, the originated allowance for loan losses as a percentage of originated loans was 0.78%0.75% and as a percentage of originatednon-performing loans was 147.9%156.0%, compared to 0.77% and 155.2%140.9%, respectively, at December 31, 2017.

2018.

At September 30, 2018,2019, total liabilities were $38.2$44.9 billion, a $459 million decrease$3.6 billion increase from December 31, 2017,2018, primarily reflecting a $712 million decreaseincreases of $2.4 billion in total deposits, $1.0 billion in total borrowings partially offset by a $154and $128 million in other liabilities. At the acquisition date, the fair value of BSB Bancorp's deposits totaled $2.1 billion. The increase in total deposits.

other liabilities primarily reflects the recognition of operating lease liabilities related to the Company's adoption of the FASB's leasing standard on January 1, 2019.

People’s United’s total stockholders’ equity was $6.0$7.1 billion at September 30, 2018,2019, a $139$597 million increase from December 31, 2017.2018. As a percentage of total assets, stockholders’ equity was 13.5%13.7% and 13.1%13.6% at September 30, 20182019 and December 31, 2017,2018, respectively. Tangible common equity equaled 7.6%7.8% of tangible assets at September 30, 20182019 compared to 7.2%7.6% at December 31, 20172018 (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 8.7%, 10.3%10.1%, 11.0%10.7% and 12.8%12.0%, respectively, at September 30, 2018,2019, compared to 8.3%8.7%, 9.7%10.3%, 10.4%10.9% and 12.2%12.5%, respectively, at December 31, 2017.2018. The Bank’s Tier 1 Leverage capital ratio and its CET 1, Tier 1 and Total risk-based capital ratios were 9.2%8.8%, 11.6%10.8%, 11.6%10.8% and 13.6%12.2%, respectively, at September 30, 2018,2019, compared to 8.5%9.0%, 10.7%11.4%, 10.7%11.4% and 12.6%13.2%, respectively, at December 31, 20172018 (see Regulatory Capital Requirements).

Loans


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.

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

Commercial Real Estate

(in millions)

  September 30,
2018		   December 31,
2017		 

Property Type:

    

Residential (multi-family)

  $3,627.6   $3,894.0 

Retail

   2,886.9    2,901.5 

Office buildings

   2,043.2    2,142.7 

Hospitality/entertainment

   621.6    622.6 

Industrial/manufacturing

   563.5    642.4 

Health care

   374.6    394.8 

Mixed/special use

   210.4    205.1 

Self storage

   174.7    173.0 

Land

   31.7    44.0 

Other

   61.3    48.6 
  

 

 

   

 

 

 

Total commercial real estate

  $10,595.5   $11,068.7 
  

 

 

   

 

 

 

(in millions)September 30,
2019		December 31,
2018
Property Type:
Residential (multifamily)$4,135.0  $4,026.2  
Retail3,322.1  3,231.3  
Office buildings2,119.6  2,132.9  
Hospitality/entertainment780.2  710.5  
Industrial/manufacturing646.5  558.0  
Health care461.8  395.2  
Mixed/special use274.8  242.8  
Self storage200.4  190.6  
Land61.4  35.4  
Other185.1  126.7  
Total commercial real estate$12,186.9  $11,649.6  
80

Commercial and Industrial

(in millions)

  September 30,
2018		   December 31,
2017		 

Industry:

    

Service

  $1,477.1   $1,586.0 

Finance and insurance

   1,320.0    1,473.1 

Manufacturing

   1,311.2    1,297.7 

Wholesale trade

   1,206.6    1,166.9 

Real estate, rental and leasing

   867.5    819.3 

Health services

   783.1    724.2 

Retail trade

   697.2    756.9 

Transportation and utilities

   310.5    296.4 

Construction

   239.3    248.8 

Arts, entertainment and recreation

   138.5    146.5 

Information and media

   108.1    99.2 

Public administration

   42.2    65.0 

Other

   67.3    51.1 
  

 

 

   

 

 

 

Total commercial and industrial

  $8,568.6   $8,731.1 
  

 

 

   

 

 

 

(in millions)September 30,
2019		December 31,
2018
Industry:
Finance and insurance$2,504.8  $1,366.7  
Service1,827.7  1,734.8  
Manufacturing1,299.8  1,275.6  
Wholesale trade1,276.8  1,240.1  
Real estate, rental and leasing1,064.9  926.7  
Health services879.0  846.8  
Retail trade691.4  702.9  
Transportation and utilities378.4  344.2  
Construction270.3  252.5  
Arts, entertainment and recreation142.4  145.9  
Information and media102.3  114.5  
Public administration47.8  59.2  
Other60.3  79.0  
Total commercial and industrial$10,545.9  $9,088.9  


Equipment Financing

(in millions)

  September 30,
2018		   December 31,
2017		 

Industry:

    

Transportation and utilities

  $1,160.2   $1,148.5 

Construction

   524.5    495.1 

Service

   522.3    388.9 

Rental and leasing

   510.9    505.5 

Manufacturing

   232.2    201.9 

Wholesale trade

   198.9    189.1 

Printing

   195.9    201.3 

Waste management

   193.5    191.9 

Health services

   179.7    168.0 

Packaging

   114.2    99.4 

Retail trade

   97.4    79.6 

Mining, oil and gas

   45.8    53.4 

Other

   233.8    182.8 
  

 

 

   

 

 

 

Total equipment financing

  $4,209.3   $3,905.4 
  

 

 

   

 

 

 

(in millions)September 30,
2019		December 31,
2018
Industry:
Transportation and utilities$1,202.6  $1,181.3  
Service664.9  542.2  
Construction659.8  558.1  
Rental and leasing556.5  543.0  
Manufacturing283.0  234.2  
Wholesale trade245.0  202.8  
Health services205.9  184.3  
Printing188.6  197.9  
Waste management187.5  192.6  
Retail trade111.3  99.2  
Packaging105.8  118.6  
Mining, oil and gas74.5  47.2  
Agriculture61.8  60.6  
Other188.4  177.2  
Total equipment financing$4,735.6  $4,339.2  
Residential Mortgage

(in millions)

  September 30,
2018		   December 31,
2017		 

Adjustable-rate

  $5,937.5   $5,926.6 

Fixed-rate

   974.4    879.1 
  

 

 

   

 

 

 

Total residential mortgage

  $6,911.9   $6,805.7 
  

 

 

   

 

 

 

(in millions)September 30,
2019		December 31,
2018
Adjustable-rate$6,916.4  $6,662.0  
Fixed-rate2,392.3  1,492.2  
Total residential mortgage$9,308.7  $8,154.2  
81

Home Equity and Other Consumer

(in millions)

  September 30,
2018		   December 31,
2017		 

Home equity lines of credit

  $1,636.5   $1,796.1 

Home equity loans

   230.7    219.1 

Other

   46.8    49.2 
  

 

 

   

 

 

 

Total home equity and other consumer

  $1,914.0   $2,064.4 
  

 

 

   

 

 

 

Asset Quality

(in millions)September 30,
2019		December 31,
2018
Home equity lines of credit$1,739.7  $1,729.9  
Home equity loans217.2  232.5  
Other47.4  47.1  
Total home equity and other consumer$2,004.3  $2,009.5  



Asset Quality
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. 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.

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 34 to the Consolidated Financial Statements) that are modified are not considered for TDR classification provided they are evaluated for impairment on a pool basis. 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 loans and written down to the estimated collateral value, regardless of delinquency status. Included in TDRs at September 30, 20182019 are $22.6$27.6 million of such loans. Of this amount, $16.5$24.0 million, or 73%87%, 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 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.

During the nine months ended September 30, 2018,2019, we performed 6675 loan modifications that were not classified as TDRs. The balances of thethese loans at the time of the respective modifications totaled $123.2$220.3 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 34 to the Consolidated Financial Statements for additional disclosures relating to TDRs.


82

Portfolio Risk 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, 2018,2019, the loan portfolio included $1.2$1.1 billion 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, 2018,2019, non-performing residential mortgage loans totaling $0.2$0.3 million had current LTV ratios of more than 100%. At that date, the weighted average LTV ratio and FICO score for the residential mortgage loan portfolio were 63%64% and 759,760, 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, 2018,2019, the Company issued 2215 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 $0.1 million as of September 30, 2018.

2019.

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.

Portfolio Risk 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 a20-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.

83

The following table sets forth, as of September 30, 2018,2019, the committed amount of HELOCs scheduled to have the draw period end during the years shown:

December 31, (in millions)

  Credit Lines 

2018

  $26.5 

2019

   96.5 

2020

   157.5 

2021

   268.7 

2022

   428.0 

2023

   456.7 

Later years

   1,888.7 
  

 

 

 

Total

  $3,322.6 
  

 

 

 

December 31, (in millions)Credit Lines
2019$16.1  
2020130.7  
2021289.6  
2022440.7  
2023457.4  
2024500.6  
Later years2,105.6  
Total$3,940.7  
Approximately 83%86% 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, 20182019 are as follows:

   Portfolio
Balance		   Delinquencies 

(dollars in millions)

  Amount   Percent 

HELOC status:

      

Still in draw period

  $1,364.8   $6.6    0.49% 

Amortizing payment

   271.7    14.5    5.34 
  

 

 

   

 

 

   

 

 

 

Portfolio
Balance		Delinquencies
(dollars in millions)AmountPercent
HELOC status:
Still in draw period$1,501.2  $7.5  0.50 %
Amortizing payment238.5  15.2  6.39  
For the threenine months ended September 30, 2018, 47%2019, 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, 2018,2019, full and complete first lien position data was not readily available for 26%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, 2018,2019, the portion of the home equity portfolio more than 90 days past due with a CLTV greater than 80% was $3.9$3.6 million.

As of September 30, 2018,2019, full and complete first lien position data was readily available for 74%67%, or $1.4$1.3 billion, of the home equity portfolio. Of that total, 39%40%, or $535.6$520.6 million, are in a junior lien position. We estimate that of those junior liens, 35%, or $187.4$182.2 million, are held or serviced by others.

When the first lien is held by a 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, 2018,2019, there were 3334 loans totaling $2.4$2.2 million for which we have received notification that the holder of a superior lien has commenced foreclosure action. For 1917 of the loans (totaling $1.5$0.9 million), our second lien position was performing at the time such foreclosure action was commenced. The total estimated loss related to those 1917 loans was $0.2less than $0.1 million as of September 30, 2018.2019. 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 60% as of September 30, 2018.

2019.

84

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, 2018, 94%2019, 96% 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 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 losses 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 losses 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, 2018,2019, the weighted average CLTV ratio and FICO score for the home equity portfolio were 58% and 762,764, respectively.

Portfolio Risk 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 (such as building materials and labor) and soft (indirect) costs (such as legal and architectural 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.

People’s United’s construction loan portfolio totaled $642.1$955.4 million (2% of total loans) at September 30, 2018.2019. The total committed amount at that date, including both the outstanding balance and the unadvanced portion of such loans, was $1.0$1.8 billion. In some cases, a portion of the total committed amount includes an accompanying interest reserve. At September 30, 2018,2019, construction loans totaling $320.2$466.9 million had remaining available interest reserves of $22.4$52.0 million. At that date, the Company had no construction loans with interest reserves that were onnon-accrual status and included innon-performing loans.

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 $4.9$3.9 million of restructured construction loans at September 30, 2018.

2019.

85

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 usually 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 status 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 Loan Losses

Originated Portfolio

The allowance for loan losses is established through provisions for loan losses charged to income. Losses on loans, including impaired loans, are charged to the allowance for loan losses 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 losses when realized.

People’s United maintains the allowance for loan losses at a level that is deemed to be appropriate to absorb probable losses inherent in the respective loan portfolios, based on a quarterly evaluation of a variety of factors. These factors include, but are not limited to: (i) People’s United’s historical loan loss experience and recent trends in that experience; (ii) 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 that are evaluated on an individual(loan-by-loan) basis; (ii) an allowance forsmaller-balance, homogeneous loans that are evaluated on a collective basis; and (iii) a specific allowance for loans deemed to be impaired, including loans classified as TDRs.

86

Larger-balance,Non-homogeneous Loans.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, each 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, which are updated annually (or more frequently, if necessary), are multiplied by 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 level 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 and industrial, commercial real estate and equipment financing components 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, 2018.

2019.

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 loans that are not assigned individual loan risk ratings. Rather, the assessment of these portfolios, and the establishment of the related allowance for loan losses, is based upon a consideration of (i) historical loss experience over an appropriate look-back period and (ii) certain qualitative factors.

The qualitative component of the allowance for loan losses for smaller-balance, homogenoushomogeneous loans is intended to incorporate risks inherent in 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 the impact of new regulations, (iii) trends in property values; (iv) broader portfolio indicators, including delinquencies,non-performing loans, portfolio concentrations, and trends in the volume and terms 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 verification at the time of underwriting (stated income vs.non-stated income) and the property’s intended use (owner-occupied,non-owner occupied, second home, etc.), the combination of which results in a loan being classified as either “High”, “Moderate” or “Low” risk. These risk classifications are reviewed quarterly to ensure that changes within the portfolio, as well as economic indicators 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 reflecting the Company’s consideration of qualitative factors is added to the amount attributable 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. 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, 2018.

2019.


87

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 $1 million 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 of collateral dependent loans, fair value of the collateral (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 rare 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 result of the existence of a guarantee.

People’s United performs an analysis of its impaired loans, including 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 industrial 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 2018.2019. 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, 2018.

2019.

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 that, as of the acquisition date, 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.

88

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, 20182019 and December 31, 2017,2018, the allowance for loan losses on acquired loans wastotaled $3.7 million and $4.1 million, and $3.6 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.

Provision and Allowance for Loan Losses

   Three Months Ended  Nine Months Ended 

(dollars in millions)

  Sept. 30,
2018		  June 30,
2018		  Sept. 30,
2017		  Sept. 30,
2018		  Sept. 30,
2017		 

Allowance for loan losses on originated loans:

      

Balance at beginning of period

  $232.8  $231.3  $227.9  $230.8  $223.0 

Charge-offs

   (6.4)   (4.7)   (5.8)   (15.5)   (17.1) 

Recoveries

   1.0   1.9   1.5   4.3   5.5 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net loan charge-offs

   (5.4)   (2.8)   (4.3)   (11.2)   (11.6) 

Provision for loan losses

   6.5   4.3   5.6   14.3   17.8 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at end of period

  $233.9  $232.8  $229.2  $233.9  $229.2 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Allowance for loan losses on acquired loans:

      

Balance at beginning of period

  $4.0  $4.0  $3.7  $3.6  $6.3 

Charge-offs

   (2.0)   (2.5)   (1.0)   (6.3)   (2.9) 

Recoveries

   0.4   0.3   0.1   1.0   0.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net loan charge-offs

   (1.6)   (2.2)   (0.9)   (5.3)   (2.8) 

Provision for loan losses

   1.7   2.2   1.4   5.8   0.7 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at end of period

  $4.1  $4.0  $4.2  $4.1  $4.2 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

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

   0.94%   0.93%   0.94%   0.94%   0.94% 

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

   0.36   0.36   0.35   0.36   0.35 

Total originated allowance for loan losses as a percentage of:

      

Originated loans

   0.78   0.77   0.77   0.78   0.77 

Originatednon-performing loans

   147.9   138.4   131.6   147.9   131.6 

Three Months EndedNine Months Ended
(dollars in millions)Sept. 30,
2019		June 30, 2019Sept. 30,
2018		Sept. 30,
2019		Sept. 30,
2018
Allowance for loan losses on originated loans:
Balance at beginning of period$240.1  $236.9  $232.8  $236.3  $230.8  
Charge-offs(6.8) (4.4) (6.4) (16.8) (15.5) 
Recoveries2.1  2.2  1.0  6.5  4.3  
Net loan charge-offs(4.7) (2.2) (5.4) (10.3) (11.2) 
Provision for loan losses6.9  5.4  6.5  16.3  14.3  
Balance at end of period$242.3  $240.1  $233.9  $242.3  $233.9  
Allowance for loan losses on acquired loans:
Balance at beginning of period$3.9  $4.0  $4.0  $4.1  $3.6  
Charge-offs(1.4) (2.9) (2.0) (6.2) (6.3) 
Recoveries0.3  0.6  0.4  1.1  1.0  
Net loan charge-offs(1.1) (2.3) (1.6) (5.1) (5.3) 
Provision for loan losses0.9  2.2  1.7  4.7  5.8  
Balance at end of period$3.7  $3.9  $4.1  $3.7  $4.1  
Total allowance for loan losses$246.0  $244.0  $238.0  $246.0  $238.0  
Originated commercial allowance for loan losses as a percentage of
originated commercial loans		0.89 %0.91 %0.94 %0.89 %0.94 %
Originated retail allowance for loan losses as a percentage of
originated retail loans		0.35  0.34  0.36  0.35  0.36  
Total originated allowance for loan losses as a percentage of:
Originated loans0.75  0.76  0.78  0.75  0.78  
Originated non-performing loans156.0  146.0  147.9  156.0  147.9  
89

The provision for loan losses on originated loans totaled $6.9 million for the three months ended September 30, 2019, reflecting $4.7 million in net loan charge-offs and an increase in the originated allowance for loan losses in response to portfolio-specific risk factors and loan mix. The provision for loan losses on acquired loans for the three months ended September 30, 2019 reflects net loan charge-offs of $1.1 million. The provision for loan losses on originated loans totaled $6.5 million forin the three months ended September 30, 2018,year-ago period, reflecting $5.4 million in net loan charge-offs and an increase in the originated allowance for loan losses in response to portfolio-specific risk factors and loan growth. The provision for loan losses on acquired loans for the three months ended September 30, 2018 reflects impairment. The provision for loan losses on originated loans totaled $5.6 million in theyear-ago period, reflecting $4.3 million in net loan charge-offs and an increase in the originated allowance for loan losses in response to portfolio-specific risk factors and loan growth. The provision for loan losses on acquired loans for the three months ended September 30, 2017 reflects impairment.

Management believes that the level of the allowance for loan losses at September 30, 20182019 is appropriate to cover probable 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 loan 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.

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.

Net Loan Charge-Offs (Recoveries)

   Three Months Ended   Nine Months Ended 

(in millions)

  Sept. 30,
2018		  June 30,
2018		  Sept. 30,
2017		   Sept. 30,
2018		   Sept. 30,
2017		 

Commercial:

        

Commercial real estate

  $1.7  $0.7  $1.5   $2.9   $2.7 

Commercial and industrial

   2.2   1.7   2.0    5.6    4.6 

Equipment financing

   2.9   2.6   0.5    7.1    3.7 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

 

Total

   6.8   5.0   4.0    15.6    11.0 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

 

Retail:

        

Residential mortgage

   0.1   (0.1)   0.1    0.2    0.3 

Home equity

   (0.1)   —     0.9    0.3    2.7 

Other consumer

   0.2   0.1   0.2    0.4    0.4 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

 

Total

   0.2   —     1.2    0.9    3.4 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

 

Total net loan charge-offs

  $7.0  $5.0  $5.2   $16.5   $14.4 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

 

Three Months EndedNine Months Ended
(in millions)Sept. 30,
2019		June 30,
2019		Sept. 30,
2018		Sept. 30,
2019		Sept. 30,
2018
Commercial:
Commercial real estate$(0.2) $0.1  $1.7  $1.0  $2.9  
Commercial and industrial1.6  0.2  2.2  3.5  5.6  
Equipment financing4.2  3.9  2.9  10.3  7.1  
Total5.6  4.2  6.8  14.8  15.6  
Retail:
Residential mortgage—  0.1  0.1  0.2  0.2  
Home equity—  —  (0.1) (0.2) 0.3  
Other consumer0.2  0.2  0.2  0.6  0.4  
Total0.2  0.3  0.2  0.6  0.9  
Total net loan charge-offs$5.8  $4.5  $7.0  $15.4  $16.5  


90

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

   Three Months Ended  Nine Months Ended 
   Sept. 30,
2018		  June 30,
2018		  Sept. 30,
2017		  Sept. 30,
2018		  Sept. 30,
2017		 

Commercial:

      

Commercial real estate

   0.06%   0.03%   0.05%   0.04%   0.03% 

Commercial and industrial

   0.10   0.08   0.09   0.09   0.07 

Equipment financing

   0.28   0.26   0.06   0.24   0.16 

Retail:

      

Residential mortgage

   0.01   (0.01)   0.01   —     0.01 

Home equity

   (0.02)   —     0.18   0.02   0.17 

Other consumer

   1.63   1.13   1.43   1.20   0.95 

Total portfolio

   0.09%   0.06%   0.06%   0.07%   0.06% 

Three Months EndedNine Months Ended
Sept. 30,
2019		June 30,
2019		Sept. 30,
2018		Sept. 30,
2019		Sept. 30,
2018
Commercial:
Commercial real estate(0.01)%— %0.06 %0.01 %0.04 %
Commercial and industrial0.06  0.01  0.10  0.05  0.09  
Equipment financing0.37  0.35  0.28  0.31  0.24  
Retail:
Residential mortgage—  —  0.01  —  —  
Home equity—  —  (0.02) (0.01) 0.02  
Other consumer1.32  1.46  1.63  1.55  1.20  
Total portfolio0.06 %0.05 %0.09 %0.06 %0.07 %
Non-Performing Assets

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 off against the allowance for loan losses. There were no loans past due 90 days or more and still accruing interest at September 30, 20182019 or December 31, 2017.

2018.


91

Non-Performing Assets

(dollars in millions)

  Sept. 30,
2018		  June 30,
2018		  March 31,
2018		  Dec. 31,
2017		  Sept. 30,
2017		 

Originatednon-performing loans:

      

Commercial:

      

Commercial real estate

  $17.2  $20.3  $21.0  $23.7  $36.7 

Commercial and industrial

   44.9   50.1   34.6   32.6   34.9 

Equipment financing

   49.3   49.2   47.7   44.3   54.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

   111.4   119.6   103.3   100.6   125.7 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Retail:

      

Residential mortgage

   32.0   33.5   35.4   32.7   33.8 

Home equity

   14.6   15.1   16.1   15.4   14.8 

Other consumer

   0.1   —     —     —     —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

   46.7   48.6   51.5   48.1   48.6 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total originatednon-performing loans (1)

   158.1   168.2   154.8   148.7   174.3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

REO:

      

Commercial

   8.7   9.3   10.6   9.3   6.3 

Residential

   4.4   5.8   6.8   7.6   4.7 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total REO

   13.1   15.1   17.4   16.9   11.0 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Repossessed assets

   2.0   3.7   1.8   2.5   5.4 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Totalnon-performing assets

  $173.2  $187.0  $174.0  $168.1  $190.7 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Originatednon-performing loans as a percentage of originated loans

   0.53%   0.56%   0.52%   0.49%   0.59% 

Non-performing assets as a percentage of:

      

Originated loans, REO and repossessed assets

   0.57   0.62   0.58   0.56   0.64 

Tangible stockholders’ equity and originated
allowance for loan losses

   4.78   5.25   4.94   4.81   5.60 

(1)

Reported net of government guarantees totaling: $2.5 million at September 30, 2018; $2.6 million at June 30, 2018; $3.0 million at March 31, 2018; $3.1 million at December 31, 2017; and $4.0 million at September 30, 2017. 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, 2018, the principal loan classes to which these government guarantees relate are commercial and industrial loans (93%) and commercial real estate loans (7%).

(dollars in millions)Sept. 30, 2019June 30, 2019Mar. 31, 2019Dec. 31, 2018Sept. 30, 2018
Originated non-performing loans:
Commercial:
Commercial real estate$25.1  $23.2  $33.6  $33.5  $17.2  
Commercial and industrial37.7  45.4  30.3  38.0  44.9  
Equipment financing41.5  42.7  37.5  42.0  49.3  
Total104.3  111.3  101.4  113.5  111.4  
Retail:
Residential mortgage36.6  38.4  35.4  38.9  32.0  
Home equity14.3  14.7  14.1  15.3  14.6  
Other consumer0.1  —  —  —  0.1  
Total51.0  53.1  49.5  54.2  46.7  
Total originated non-performing loans (1)$155.3  164.4  150.9  167.7  158.1  
REO:
Residential$12.3  $8.1  $6.9  $5.5  $4.4  
Commercial7.7  0.6  4.1  8.7  8.7  
Total REO20.0  8.7  11.0  14.2  13.1  
Repossessed assets6.3  5.7  5.6  3.9  2.0  
Total non-performing assets$181.6  $178.8  $167.5  $185.8  $173.2  
Originated non-performing loans as a percentage of originated loans0.48 %0.52 %0.49 %0.55 %0.53 %
Non-performing assets as a percentage of:
Originated loans, REO and repossessed assets0.56  0.56  0.54  0.61  0.57  
Tangible stockholders’ equity and originated
allowance for loan losses		4.21  4.24  4.23  4.76  4.78  
1.Reported net of government guarantees totaling: $1.4 million at September 30, 2019; $1.6 million at June 30, 2019; $1.4 million at March 31, 2019; $1.9 million at December, 31, 2018 and $2.5 million at September 30, 2018. 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, 2019, the principal loan classes to which these government guarantees relate are commercial and industrial loans (95%) and commercial real estate loans (5%).
The table above excludes acquired loans that are (i) accounted for as PCI loans and/or (ii) covered by a FDIC loss-share agreement (“LSA”), which totaled $10.1 million at September 30, 2019; $25.8 million at June 30, 2019; $34.3 million at March 31, 2019; $44.1 million at December 31, 2018 and $23.7 million at September 30, 2018; $21.2 million at June 30, 2018; $23.7 million at March 31, 2018; $25.1 million at December 31, 2017; and $24.5 million at September 30, 2017.2018. Such loans otherwise meet People’s United’s definition 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 and the accretable yield on the pools is being recognized 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 $8.6$11.0 million, $5.5$8.3 million, $6.4$8.3 million, $4.6$6.0 million and $2.1$8.6 million at September 30, 2018,2019, June 30, 2018,2019, March 31, 2018,2019, December 31, 20172018 and September 30, 2017,2018, respectively, all of which $8.6 million, $5.5 million, $6.4 million, $4.6 million and $1.7 million, respectively, becamenon-performing subsequent to acquisition.

Totalnon-performing assets increased $5.1decreased $4.2 million from December 31, 20172018 and equaled 0.57%0.56% of originated loans, REO and repossessed assets at September 30, 2018.2019. The increasedecrease in totalnon-performing assets from December 31, 20172018 primarily reflects increases innon-performing commercial and industrial loans of $12.3 million andnon-performing equipment financing loans of $5.0 million, partially offset by decreases of $6.5$8.4 million innon-performing commercial real estate loans (primarily payment-related) and $3.8$2.3 million in REO. Includednon-performing residential mortgage loans, partially offset by increases of $5.8 million innon-performing loans at REO and $2.4 million in repossessed assets. A single property drove the increase in commercial REO from June 30, 2019 to September 30, 2018 are two unrelated relationships totaling $14.3 million that were placed onnon-accrual status during the second quarter of 2018.

2019.

92

All loans and REO acquired in the Butler Bank acquisition are subject to an FDIC LSA (expiring in 2020), which provides for coverage by the FDIC, up to certain limits, on all such ‘covered assets’. 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 loans discussed above, People’s United has also identified $593.3$596.3 million in potential problem loans at September 30, 20182019 (all of which are included in the originated portfolio). 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.

At September 30, 2018,2019, potential problem loans consisted of equipment financing loans ($264.9304.7 million), commercial and industrial loans ($228.4237.7 million) and commercial real estate loans ($100.053.9 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 loan 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, 2018,2019, People’s United (parent company) liquid assets included $261$397 million in cash and $9$8 million in equity securities, while the Bank’s liquid assets included $3.3$3.0 billion in debt securitiesavailable-for-sale and $277$396 million in cash and cash equivalents. At September 30, 2018,2019, debt securitiesavailable-for-sale with a fair value of $1.9$2.1 billion and debt securitiesheld-to-maturity with an amortized cost of $1.3$1.7 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 $33.2$38.6 billion at September 30, 20182019 and represented 76%75% 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. Borrowings and notes and debentures totaled $3.4$4.6 billion and $886$916 million, respectively, at September 30, 2018,2019, representing 8%9% and 2%, respectively, of total funding at that date.

93

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, 2018,2019, the Bank’s total borrowing capacity from (i) the FHLB of Boston and theFRB-NY for advances and (ii) repurchase agreements was $11.2$11.9 billion based on the level of qualifying collateral available for these borrowings. In addition, the Bank had unsecured borrowing capacity of $1.0$1.5 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 lines of credit and loans, and commercial real estate loans).

At September 30, 2018,2019, the Bank had outstanding commitments to originate loans totaling $1.6 billion and approved, but unused, lines of credit extended to customers totaling $7.4$8.1 billion (including $2.1$2.5 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


Stockholders' Equity and Dividends
People’s United’s total stockholders’ equity was $5.96$7.13 billion at September 30, 2018,2019, a $139.0$596.8 million increase from December 31, 2017.2018. This increase primarily reflectsreflects: (i) net income of $335.1$383.0 million for the nine months ended September 30, 20182019; (ii) the issuance of 19.7 million shares of People’s United common stock in the BSB Bancorp acquisition with a fair value of $324.5 million; and (ii) net stock option and restricted stock-related transactions during the nine months ended September 30,(iii) a $74.5 million decrease in accumulated other comprehensive loss ("AOCL") since December 31, 2018, totaling $39.6 million, partially offset by (i) common dividends paid of $178.8$215.4 million in the nine months ended September 30, 2018 and (ii) a $51.8 million increase (excluding a $37.3 million transition adjustment related to the adoption of new accounting standards) in accumulated other comprehensive loss (“AOCL”) since December 31, 2017.2019. The increasedecrease in AOCL, net of tax, primarily reflects an increasea $63.2 million decrease in the unrealized loss on debt securities available-for-sale. As a percentage of total assets, stockholders’ equity was 13.5%13.7% and 13.1%13.6% at September 30, 20182019 and December 31, 2017,2018, respectively. Tangible common equity equaled 7.6%7.8% of tangible assets at September 30, 20182019 compared to 7.2%7.6% at December 31, 2017.

2018.

In October 2018,2019, People’s United’s Board of Directors declared a quarterly dividend on its common stock of $0.1750$0.1775 per common share. The dividend is payable on November 15, 20182019 to shareholders of record on November 1, 2018.October 31, 2019. Also in October 2018,2019, People’s United’s Board of Directors declared a dividend on its preferred stock, payable on December 15, 20182019 to preferred shareholders of record as of December 1, 2018.2019. In July 2018,August 2019, the Bank paid a cash dividend of $85.0$131.0 million to People’s United (parent company).

Regulatory Capital Requirements

In June 2019, the Company’s Board of Directors authorized the repurchase of up to 20.0 million shares of People’s United’s common stock. Such shares may be repurchased, either directly or through agents, in the open market at prices and terms satisfactory to management. To date, no shares have been repurchased.

94

Regulatory Capital Requirements
On January 1, 2015, both People’s United and the Bank became 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, willwhich are now fully phased-in, 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 1 risk-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 above its minimum risk-based capital requirements. For 2018,2019 and thereafter, the capital conservation buffer is 1.875% and increases to 2.5% in 2019,, the final year of thephase-in period.

In July 2019, U.S. banking agencies have releasedissued a proposal for commentfinal rule intended to simplify certain aspects of the regulatory capital rules. Management does not expect the impact of this proposal tofinal rule will have a material effect on the Company’s or the Bank’s risk-based capital ratios.

For regulatory capital purposes, subordinated note issuances qualify, up to certain limits, as Tier 2 capital for both People’s United’s and the Bank’s Total risk-based capital. Beginning in 2019, and for each of the next four years, the eligible amount of the Bank’s $400 million subordinated notes due 2014 included in Tier 2 capital will be reduced each year by 20%, or $80 million, in accordance with regulatory capital rules.
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, 20182019 and December 31, 20172018 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.

As discussed in Note 15 to the Consolidated Financial Statements, People's United adopted, effective January 1, 2019, new accounting guidance relating to leases. Upon adoption, the Company recorded (i) operating lease liabilities totaling $268.8 million and (ii) corresponding ROU assets totaling $248.5 million. This transition adjustment served to increase risk-weighted assets, resulting in an approximate 5-10 basis point decrease in the risk-based capital ratios of both the Company and the Bank at that time. As also discussed in Note 15, the Company's adoption of a new accounting standard related to financial instruments, effective January 1, 2020, could result in a 10-15 basis points decrease in the capital ratios at both the Bank and People's United. At September 30, 2018,2019, People’s United’s and the Bank’s total risk-weighted assets, as defined, were $33.2$39.8 billion and $33.1$39.7 billion, respectively, compared to $33.3$35.9 billion and $33.2 billion, respectively,for both at December 31, 2017. As discussed2018.

  Minimum Capital Required
Classification as
Well-Capitalized
 As of September 30, 2019
(dollars in millions)AmountRatioAmountRatioAmountRatio
Tier 1 Leverage Capital (1):
People’s United$4,253.3  8.7 %$1,944.8  4.0 %N/A N/A
Bank4,293.8  8.8  1,944.2  4.0  $2,430.3  5.0 %
CET 1 Risk-Based Capital (2):
People’s United4,009.2  10.1  2,785.6  7.0   N/A N/A
Bank4,293.8  10.8  2,781.9  7.0  2,583.2  6.5  
Tier 1 Risk-Based Capital (3):
People’s United4,253.3  10.7  3,382.5  8.5  2,387.7  6.0  
Bank4,293.8  10.8  3,378.0  8.5  3,179.3  8.0  
Total Risk-Based Capital (4):
People’s United4,776.7  12.0  4,178.4  10.5  3,979.4  10.0  
Bank4,862.6  12.2  4,172.9  10.5  3,974.2  10.0  

95

Minimum Capital RequiredClassification as
As of December 31, 2018Basel III Phase-In (2018)Well-Capitalized
(dollars in millions)AmountRatioAmountRatioAmountRatio
Tier 1 Leverage Capital (1):
People's United$3,927.2  8.7 %$1,806.0  4.0 %N/AN/A
Bank4,076.0  9.0  1,805.4  4.0  $2,256.8  5.0 %
CET 1 Risk-Based Capital (2):
People's United3,683.1  10.3  2,289.3  6.375  N/AN/A
Bank4,076.0  11.4  2,287.1  6.375  2,331.9  6.5  
Tier 1 Risk-Based Capital (3):
People's United3,927.2  10.9  2,827.9  7.875  2,154.6  6.0  
Bank4,076.0  11.4  2,825.2  7.875  2,870.0  8.0  
Total Risk-Based Capital (4):
People's United4,505.7  12.5  3,546.1  9.875  3,591.0  10.0  
Bank4,719.1  13.2  3,542.7  9.875  3,587.5  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).
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 Note 13AOCL relating to the Consolidated Financial Statements, regulatory capital was increased during the periodpension and other postretirement benefits divided by $37.9 million as a result of the reclassification ofTotal 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 tax effects from AOCL, which resulted in an approximate 11 basis point increase in the risk-based capital ratios of both the Companylimits, and the Bank. The improvement in the Bank’s capital ratios since December 31, 2017 also reflects an equity contribution from People’s United (parent company) in 2018.

        Minimum Capital Required  Classification as 
  As of September 30, 2018  Basel III Phase-In (2018)  Well-Capitalized 

(dollars in millions)

 Amount  Ratio  Amount  Ratio  Amount  Ratio 

Tier 1 Leverage Capital (1):

      

People’s United

 $3,666.2   8.7%  $1,677.7   4.0%   N/A   N/A 

Bank

  3,856.2   9.2   1,677.7   4.0  $2,096.3   5.0% 

CET 1 Risk-Based Capital (2):

      

People’s United

  3,422.1   10.3   2,115.3   6.375   N/A   N/A 

Bank

  3,856.2   11.6   2,112.2   6.375   2,153.6   6.5 

Tier 1 Risk-Based Capital (3):

      

People’s United

  3,666.2   11.0   2,613.0   7.875   1,990.9   8.0 

Bank

  3,856.2   11.6   2,609.2   7.875   2,650.6   8.0 

Total Risk-Based Capital (4):

      

People’s United

  4,234.3   12.8   3,276.6   9.875   3,318.1   10.0 

Bank

  4,496.9   13.6   3,271.8   9.875   3,313.2   10.0 
        Minimum Capital Required  Classification as 
  As of December 31, 2017  Basel IIIPhase-In (2017)  Well-Capitalized 

(dollars in millions)

 Amount  Ratio  Amount  Ratio  Amount  Ratio 

Tier 1 Leverage Capital (1):

      

People’s United

 $3,474.1   8.3%  $1,666.6   4.0%   N/A   N/A 

Bank

  3,543.0   8.5   1,663.0   4.0  $2,078.7   5.0% 

CET 1 Risk-Based Capital (2):

      

People’s United

  3,230.0   9.7   1,912.2   5.750   N/A   N/A 

Bank

  3,543.0   10.7   1,909.1   5.750   2,158.2   6.5 

Tier 1 Risk-Based Capital (3):

      

People’s United

  3,474.1   10.4   2,411.1   7.250   1,995.4   6.0 

Bank

  3,543.0   10.7   2,407.2   7.250   2,656.2   8.0 

Total Risk-Based Capital (4):

      

People’s United

  4,057.7   12.2   3,076.2   9.250   3,325.6   10.0 

Bank

  4,179.7   12.6   3,071.2   9.250   3,320.2   10.0 

allowance for loan losses, up to 1.25% of Total Risk-Weighted Assets, divided by Total Risk-Weighted Assets.

(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).

(2)

CET 1 Risk-Based Capital ratio represents equity capital, as defined, less:(i) after-tax net unrealized gains (losses) on certain securities classified asavailable-for-sale;(ii) after-tax net unrealized gains (losses) on securities transferred toheld-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.

Market Risk Management

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.

96

Net Interest Income at Risk Simulation is used to measure the sensitivity of net interest income to changes in market rates over a 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, 20182019 and December 31, 2017.2018. Given the interest rate environment at those dates, simulations for interest rate declines of more than 100September 30, 2019, the down 200 basis points were not modeled.

   Estimated Percent Change in 
Parallel Shock Rate Change  Net Interest Income 

(basis points)                        

  September 30, 2018  December 31, 2017 

+300

   9.1%   9.3% 

+200

   6.3   6.5 

+100

   3.3   3.4 

-100

   (4.2)   (4.9) 

   Estimated Percent Change in 
Yield Curve Twist Rate Change  Net Interest Income 

(basis points)                              

  September 30, 2018  December 31, 2017 

Short End-100

   (2.3)%   (2.5)% 

Short End +100

   1.8   1.7 

Long End-100

   (1.7)   (2.3) 

Long End +100

   1.5   1.8 
scenario is no longer simulated due to negative intermediate and long rates in this scenario.

 Estimated Percent Change in
Net Interest Income
Parallel Shock Rate Change
(basis points)                        
September 30, 2019December 31, 2018
+3008.9 %7.6 %
+2006.4  5.3  
+1003.6  2.8  
-100(4.2) (3.6) 
-200N/A  (9.9) 


 
Estimated Percent Change in
Net Interest Income
Yield Curve Twist Rate Change
(basis points)                              
September 30, 2019December 31, 2018
Short End -100(1.7)%(1.7)%
Short End +1001.9  1.6  
Long End -100(2.4) (1.8) 
Long End +1001.8  1.3  

The net interest income at risk simulation results indicate that at both September 30, 20182019 and December 31, 2017,2018, 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, 2019 primarily due to:reflects: (i) approximately 89%87% of the Company’s loan portfolio being funded by less rate-sensitive core deposits; (ii) approximately 44% of the Company’s loan portfolio being comprised of Prime Rate andone-month 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 the reinvestment of securities proceeds all over the twelve-month forecast horizon.

The Company’s net interest income at risk exposure in the down rate scenarios has improvedasset sensitivity increased since December 31, 20172018 primarily due to:to (i) the purchase of securities;organic loan and deposit growth and (ii) slowerfaster mortgage-backed security and residential mortgage loan prepayments as a result of higherlower long-end interest rates; and (iii) the benefitspartially offset by a slightly negative sensitivity impact from the Company’s ability to lower deposit ratesacquisition of BSB Bancorp in lightApril 2019 and the elevated maturities of the current rate environment.certificates of deposit. Based on the Company’s IRR position at September 30, 2018,2019, an immediate 100 basis point parallel increase in interest rates translates to an approximate $42$51 million increase in net interest income on an annualized basis.

97

Economic Value of Equity at Risk Simulation is conducted in tandem with net interest income simulations, to ascertain a longer term view of the Company’s IRR position by capturing longer-termre-pricing repricing 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 andnon-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 interest rate curves for parallel rate shock scenarios. These new 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 current spot interest rate environmentcurve at both September 30, 20182019, a down 200 basis point rate scenario is no longer simulated due to negative intermediate and December 31, 2017, simulations for interest rate declines of more than 100 basis points were not modeled.

   Estimated Percent Change in 
Parallel Shock Rate Change  Economic Value of Equity 

(basis points)                       

  September 30, 2018  December 31, 2017 

+300

   (12.2)%   (10.5)% 

+200

   (7.2)   (5.4) 

+100

   (2.9)   (1.4) 

-100

   0.2   (2.9) 

long rates in this scenario.

 
Estimated Percent Change in
Economic Value of Equity
Parallel Shock Rate Change
(basis points)                       
September 30, 2019December 31, 2018
+300(7.8)%(12.0)%
+200(3.0) (7.2) 
+1000.5  (2.8) 
-100(5.4) (1.0) 
-200N/A  (6.7) 
The Company’s economic value of equity at risk profile indicates that at both September 30, 2019 and December 31, 2018, the Company’s economic value of equity is liability sensitive in a rising rate environment. The increase in liabilityfavorable sensitivity change since December 31, 20172018 primarily reflects: (i)reflects an increase in mortgage-backed security and residential mortgage loan duration; (ii) a decrease in the modeled weighted average life ofnon-maturity deposits and a decrease in the duration of both mortgage-backed securities and residential mortgage loans resulting from higherlower long-end interest rates;rates, partially offset by an unfavorable sensitivity impact from the acquisition of BSB Bancorp and (iii) the purchase of securities.

modeling updates.

People’s United’s IRR position at September 30, 2018,2019, 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 liability sensitive economic value of equity 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-based loan balances that are funded mainly by less rate-sensitive deposits. From an economic value of equity perspective, inliability sensitive risk position is driven primarily by optionality from residential mortgage-related assets and non-maturity deposits. In a rising rate environment, the Company’s assets are more price sensitive than its liabilities due to slightly longeras asset duration which serves to create a liability sensitive risk position.lengthens and 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, 2018,2019, 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.

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, 2018,2019, People’s United used interest rate swaps to manage IRR associated with certaininterest-bearing assets and interest-bearing liabilities.

98

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 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 1213 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, 2018.

2019 was $1.4 million, for which People’s United had posted collateral of $0.8 million in the normal course of business. If the Company’s senior unsecured debt rating had fallen below investment grade as of that date, $0.6 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 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.

99

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		 

As of September 30, 2018 (dollars in millions)

  Cash Flow
Hedge		  Fair Value
Hedge		 

Notional principal amounts

  $210.0  $375.0  $99.2 

Weighted average interest rates:

    

Pay floating (receive fixed)

   2.11% (1.72%)   Libor + 1.265% (4.00%)   N/A 

Weighted average remaining term to maturity (in months)

   25   70   1 

Fair value:

    

Recognized as an asset

  $—    $—    $0.6 

Recognized as a liability

   —     —     0.4 

Interest Rate SwapsForeign
Exchange
Contracts
As of September 30, 2019 (dollars in millions)Cash Flow
Hedge		Fair Value
Hedge
Notional principal amounts$210.0  $375.0  $74.8  
Weighted average interest rates:
Pay floating (receive fixed)2.09%(1.72%)Libor + 1.265% (4.00%)N/A
Weighted average remaining term to maturity (in months)13  58  4  
Fair value:
Recognized as an asset$—  $—  $1.4  
Recognized as a liability—  —  1.3  

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 and caps:

   Interest Rate Swaps   Interest Rate Caps 

As of September 30, 2018 (dollars in millions)

  Commercial
Customers		   Institutional
Counterparties		   Commercial
Customers		  Institutional
Counterparties		 

Notional principal amounts

  $5,676.2   $6,282.0   $313.0  $313.0 

Weighted average interest rates:

       

Pay floating (receive fixed)

   1.96% (2.34%)    —      N/A   N/A 

Pay fixed (receive floating)

   —      2.18% (2.06%)    N/A   N/A 

Weighted average strike rate

   N/A    N/A    0.45%   0.45% 

Weighted average remaining term to maturity (in months)

   77    80    25   25 

Fair value:

       

Recognized as an asset

  $17.5   $28.4   $—    $3.6 

Recognized as a liability

   199.1    8.3    3.6   —   

Interest Rate SwapsInterest Rate Caps
As of September 30, 2019 (dollars in millions)Commercial
Customers		Institutional
Counterparties		Commercial
Customers		Institutional
Counterparties
Notional principal amounts$7,592.8  $7,599.6  $264.2  $264.2  
Weighted average interest rates:
Pay floating (receive fixed)2.12%(2.47%)—  N/AN/A
Pay fixed (receive floating)—  2.34%(2.12%)N/AN/A
Weighted average strike rateN/AN/A3.28 %3.28 %
Weighted average remaining term to maturity (in months)83  83  26  26  
Fair value:
Recognized as an asset$416.2  $4.9  $2.1  $—  
Recognized as a liability0.7  73.6  —  2.1  
See Notes 1112 and 1213 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 10396 through 107100 of this report.


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, 2018,2019, 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.

100

During the quarter ended September 30, 2018,2019, there has not been any change in People’s United’s internal control over financial reporting that has materially affected, or is 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, 2017.

2018.

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, 2018:

2019:

Issuer Purchases of Equity Securities

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, 2018

        

Tendered by employees (1)

   734   $18.09    —      —   

August 1 - 31, 2018

        

Tendered by employees (1)

   743   $18.57    —      —   

September 1 - 30, 2018

        

Tendered by employees (1)

   5,558   $18.42    —      —   
  

 

 

     

 

 

   

 

 

 

Total:

        

Tendered by employees (1)

   7,035   $18.40    —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

(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, 2019
Tendered by employees (1)—  $—  —  —  
August 1 - 31, 2019
Tendered by employees (1)245  $15.19  —  —  
September 1 - 30, 2019
Tendered by employees (1)6,432  $14.62  —  —  
Total:
Tendered by employees (1)6,677  $14.64  —  —  
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.

Item 3 – Defaults Upon Senior Securities

None.

Item 4 – Mine Safety Disclosures

None.

101

Item 5 – Other Information

None.

Item 6 – Exhibits

The following Exhibits are filed herewith:

Designation

Description

  31.1DesignationRule13a-14(a)/15d-14(a) CertificationsDescription
  31.231.1 Rule13a-14(a)/15d-14(a) Certifications
  3231.2 Section 1350Rule 13a-14(a)/15d-14(a) Certifications
101.132 Section 1350 Certifications
101.1 The following financial information from People’s United Financial, Inc.’s Quarterly Report on Form10-Q for the quarterly period ended September 30, 20182019 formatted in XBRL: (i) Consolidated Statements of Condition as of September 30, 20182019 and December 31, 2017;2018; (ii) Consolidated Statements of Income for the three and nine months ended September 30, 20182019 and 2017;2018; (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 20182019 and 2017;2018; (iv) Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 20182019 and 2017;2018; (v) Consolidated Statements of Cash Flows for the three and nine months ended September 30, 20182019 and 2017;2018; and (vi) Notes to Consolidated Financial Statements.


102

INDEX TO EXHIBITS

Designation

Description

  31.1DesignationRule13a-14(a)/15d-14(a) CertificationsDescription
  31.2
31.1
Rule13a-14(a)/15d-14(a) Certifications
  32
31.2
Section 1350Rule 13a-14(a)/15d-14(a) Certifications
101.1
32
Section 1350 Certifications
101.1 The following financial information from People’s United Financial, Inc.’s Quarterly Report on Form10-Q for the quarterly period ended September 30, 20182019 formatted in XBRL: (i) Consolidated Statements of Condition as of September 30, 20182019 and December 31, 2017;2018; (ii) Consolidated Statements of Income for the three and nine months ended September 30, 20182019 and 2017;2018; (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 20182019 and 2017;2018; (iv) Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 20182019 and 2017;2018; (v) Consolidated Statements of Cash Flows for the three and nine months ended September 30, 20182019 and 2017;2018; and (vi) Notes to Consolidated Financial Statements.


103

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, 201812, 2019By: By: 

/s/ John P. Barnes

John P. Barnes
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: November 9, 201812, 2019By: By: 

/s/ R. David Rosato

R. David Rosato
Senior Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: November 9, 201812, 2019By: By: 

/s/ Jeffrey Hoyt

Jeffrey Hoyt
Senior Vice President and

Chief Accounting Officer

(Principal Accounting Officer)

111


104