People's United Financial, Inc. (Form: 10-Q, Received: 05/10/2017 15:58:35)

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Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017

Commission File Number 001-33326

PEOPLE’S UNITED FINANCIAL, INC.

(Exact name of registrant as specified in its charter)


Delaware		20-8447891
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

850 Main Street, Bridgeport, Connecticut		06604
(Address of principal executive offices)		(Zip Code)

(203) 338-7171

(Registrant’s telephone number, including area code)

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

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

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

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

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

As of April 30, 2017, there were 344,346,175 shares of the registrant’s common stock outstanding.

People’s United Financial Inc.

Form 10-Q

Table of Contents



		Page

Part I – Financial Information

Item 1.	Financial Statements (Unaudited)

	Consolidated Statements of Condition as of March 31, 2017 and December 31, 2016		1

	Consolidated Statements of Income for the Three Months Ended March 31, 2017 and 2016		2

	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2017 and 2016		3

	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2017 and 2016		4

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016		5

	Notes to Consolidated Financial Statements		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		48

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		89

Item 4.	Controls and Procedures		89

Part II – Other Information

Item 1.	Legal Proceedings		89

Item 1A.	Risk Factors		89

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		89

Item 3.	Defaults Upon Senior Securities		90

Item 4.	Mine Safety Disclosures		90

Item 5.	Other Information		90

Item 6.	Exhibits		91

Signatures			92

Part 1 - Financial Information

Item	1 - Financial Statements

People’s United Financial, Inc.

Consolidated Statements of Condition - (Unaudited)


(in millions)	March 31, 2017			December 31, 2016
Assets
Cash and due from banks	$	380.8		$	432.4
Short-term investments (note 2)		392.2			181.7

Total cash and cash equivalents		773.0			614.1

Securities (note 2):
Trading account securities, at fair value		7.8			6.8
Securities available for sale, at fair value		3,772.1			4,409.9
Securities held to maturity, at amortized cost (fair value of $2.34 billion and $2.01 billion)		2,324.0			2,005.4
Federal Home Loan Bank and Federal Reserve Bank stock, at cost		319.6			315.8

Total securities		6,423.5			6,737.9

Loans held for sale		17.1			39.3

Loans (note 3):
Commercial real estate		10,225.3			10,247.3
Commercial and industrial		7,918.3			8,125.1
Equipment financing		2,969.5			3,032.5

Total Commercial Portfolio		21,113.1			21,404.9

Residential mortgage		6,487.7			6,216.7
Home equity and other consumer		2,086.5			2,123.3

Total Retail Portfolio		8,574.2			8,340.0

Total loans		29,687.3			29,744.9
Less allowance for loan losses		(231.3	)		(229.3	)

Total loans, net		29,456.0			29,515.6

Goodwill (note 6)		1,992.7			1,992.7
Bank-owned life insurance		348.8			349.1
Premises and equipment, net		239.4			244.5
Other acquisition-related intangible assets (note 6)		143.1			149.4
Other assets (notes 1, 3 and 11)		836.0			967.2

Total assets	$	40,229.6		$	40,609.8

Liabilities
Deposits:
Non-interest-bearing	$	6,669.5		$	6,660.8
Savings		4,451.7			4,397.7
Interest-bearing checking and money market		14,813.9			14,260.1
Time		4,570.6			4,542.2

Total deposits		30,505.7			29,860.8

Borrowings:
Federal Home Loan Bank advances		2,160.4			3,061.1
Federal funds purchased		613.0			617.0
Customer repurchase agreements		327.7			343.3
Other borrowings		81.9			35.4

Total borrowings		3,183.0			4,056.8

Notes and debentures		903.9			1,030.1
Other liabilities (notes 1 and 11)		442.0			520.2

Total liabilities		35,034.6			35,467.9

Commitments and contingencies (notes 1 and 8)

Stockholders’ Equity
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; 406.4 million shares and 405.0 million shares issued)		4.1			4.0
Additional paid-in capital		5,472.7			5,446.1
Retained earnings		960.9			949.3
Unallocated common stock of Employee Stock Ownership Plan, at cost (6.9 million shares and 7.0 million shares) (note 7)		(142.8	)		(144.6	)
Accumulated other comprehensive loss (note 4)		(181.9	)		(195.0	)
Treasury stock, at cost (89.0 million shares and 89.1 million shares) (note 4)		(1,162.1	)		(1,162.0	)

Total stockholders’ equity		5,195.0			5,141.9

Total liabilities and stockholders’ equity	$	40,229.6		$	40,609.8

See accompanying notes to consolidated financial statements.

People’s United Financial, Inc.

Consolidated Statements of Income - (Unaudited)


	Three Months Ended March 31,
(in millions, except per common share data)	2017			2016
Interest and dividend income:
Commercial real estate	$	88.6		$	86.8
Commercial and industrial		64.6			60.3
Equipment financing		31.6			33.3
Residential mortgage		49.3			43.9
Home equity and other consumer		18.4			18.6

Total interest on loans		252.5			242.9
Securities		37.0			34.5
Loans held for sale		0.3			0.2
Short-term investments		0.7			0.4

Total interest and dividend income		290.5			278.0

Interest expense:
Deposits		27.1			25.2
Borrowings		7.3			5.0
Notes and debentures		7.5			7.7

Total interest expense		41.9			37.9

Net interest income		248.6			240.1
Provision for loan losses (note 3)		4.4			10.5

Net interest income after provision for loan losses		244.2			229.6

Non-interest income:
Bank service charges		23.5			23.8
Investment management fees		16.0			11.1
Operating lease income		10.2			10.4
Insurance revenue		9.1			9.3
Commercial banking lending fees		8.2			8.1
Cash management fees		6.3			6.0
Brokerage commissions		3.0			3.0
Net gains on sales of residential mortgage loans		0.9			0.9
Net security (losses) gains (note 2)		(15.7	)		0.1
Other non-interest income		23.2			9.6

Total non-interest income		84.7			82.3

Non-interest expense (note 14) :
Compensation and benefits		125.6			114.1
Occupancy and equipment		38.6			37.5
Professional and outside services		15.5			17.4
Regulatory assessments		9.6			8.0
Operating lease expense		8.8			9.2
Amortization of other acquisition-related intangible assets (note 6)		6.3			5.8
Other non-interest expense		21.7			25.3

Total non-interest expense		226.1			217.3

Income before income tax expense		102.8			94.6
Income tax expense (notes 1 and 13)		32.0			31.7

Net income		70.8			62.9
Preferred stock dividend		3.5			—

Net income available to common shareholders	$	67.3		$	62.9

Earnings per common share (note 5) :
Basic	$	0.22		$	0.21
Diluted		0.22			0.21

See accompanying notes to consolidated financial statements.

People’s United Financial, Inc.

Consolidated Statements of Comprehensive Income - (Unaudited)


	Three Months Ended March 31,
(in millions)	2017		2016
Net income	$	70.8	$	62.9

Other comprehensive income, net of tax:
Net actuarial loss and prior service credit related to pension and other postretirement plans		0.9		1.0
Net unrealized gains and losses on securities available for sale		11.3		41.0
Amortization of unrealized losses on securities transferred to held to maturity		0.5		0.5
Net unrealized gains and losses on derivatives accounted for as cash flow hedges		0.4		—

Total other comprehensive income, net of tax (note 4)		13.1		42.5

Total comprehensive income	$	83.9	$	105.4

See accompanying notes to consolidated financial statements.

People’s United Financial, Inc.

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


Three months ended March 31, 2017 (in millions, except per share common data)	Preferred Stock		Common Stock		Additional Paid-In Capital		Retained Earnings			Unallocated ESOP Common Stock			Accumulated Other Comprehensive Loss			Treasury Stock			Total Stockholders’ Equity
Balance at December 31, 2016	$	244.1	$	4.0	$	5,446.1	$	949.3		$	(144.6	)	$	(195.0	)	$	(1,162.0	)	$	5,141.9
Net income		—		—		—		70.8			—			—			—			70.8
Total other comprehensive income, net of tax (note 4)		—		—		—		—			—			13.1			—			13.1
Cash dividend on common stock ($0.17 per share)		—		—		—		(52.7	)		—			—			—			(52.7	)
Cash dividend on preferred stock		—		—		—		(3.5	)		—			—			—			(3.5	)
Restricted stock and performance-based share awards		—		—		3.4		—			—			—			(0.1	)		3.3
Employee Stock Ownership Plan common stock committed to be released (note 7)		—		—		—		(0.1	)		1.8			—			—			1.7
Common stock repurchased and retired upon vesting of restricted stock awards		—		—		—		(2.9	)		—			—			—			(2.9	)
Stock option exercises		—		0.1		23.2		—			—			—			—			23.3

Balance at March 31, 2017	$	244.1	$	4.1	$	5,472.7	$	960.9		$	(142.8	)	$	(181.9	)	$	(1,162.1	)	$	5,195.0


Three months ended March 31, 2016 (in millions, except per common share data)	Preferred Stock		Common Stock		Additional Paid-In Capital		Retained Earnings			Unallocated ESOP Common Stock			Accumulated Other Comprehensive Loss			Treasury Stock			Total Stockholders’ Equity
Balance at December 31, 2015	$	—	$	3.9	$	5,337.7	$	880.8		$	(151.8	)	$	(177.2	)	$	(1,161.8	)	$	4,731.6
Net income		—		—		—		62.9			—			—			—			62.9
Total other comprehensive income, net of tax (note 4)		—		—		—		—			—			42.5			—			42.5
Cash dividend on common stock ($0.1675 per share)		—		—		—		(50.7	)		—			—			—			(50.7	)
Restricted stock and performance-based share awards		—		—		2.1		—			—			—			(0.1	)		2.0
Employee Stock Ownership Plan common stock committed to be released (note 7)		—		—		—		(0.5	)		1.8			—			—			1.3
Common stock repurchased and retired upon vesting of restricted stock awards		—		—		—		(2.9	)		—			—			—			(2.9	)
Stock option exercises and related tax benefits		—		—		4.5		—			—			—			—			4.5

Balance at March 31, 2016	$	—	$	3.9	$	5,344.3	$	889.6		$	(150.0	)	$	(134.7	)	$	(1,161.9	)	$	4,791.2

See accompanying notes to consolidated financial statements.

People’s United Financial, Inc.

Consolidated Statements of Cash Flows - (Unaudited)


	Three Months Ended March 31,
(in millions)	2017			2016
Cash Flows from Operating Activities:
Net income	$	70.8		$	62.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment		9.3			9.2
Expense related to operating leases		8.8			9.2
Amortization of other acquisition-related intangible assets		6.3			5.8
Expense related to share-based awards		5.4			3.6
Provision for loan losses		4.4			10.5
Employee Stock Ownership Plan common stock committed to be released		1.7			1.3
Net security losses (gains)		15.7			(0.1	)
Net gains on sales of residential mortgage loans		(0.9	)		(0.9	)
Originations of loans held-for-sale		(75.1	)		(67.4	)
Proceeds from sales of loans held-for-sale		98.2			71.3
Net increase in trading account securities		(1.0	)		—
Excess income tax benefits from stock option exercises (note 13)		1.0			—
Net changes in other assets and other liabilities		32.0			10.6

Net cash provided by operating activities		176.6			116.0

Cash Flows from Investing Activities:
Proceeds from principal repayments and maturities of securities available for sale		177.9			178.1
Proceeds from sales of securities available for sale		472.3			138.9
Proceeds from principal repayments and maturities of securities held to maturity		24.9			22.0
Purchases of securities available for sale		(1.0	)		(471.0	)
Purchases of securities held to maturity		(345.0	)		(90.0	)
Net (purchases) redemptions of Federal Reserve Bank stock		(4.1	)		0.6
Net redemptions of Federal Home Loan Bank stock		0.3			4.9
Proceeds from sales of loans		7.0			—
Loan disbursements, net of principal collections		48.6			(105.1	)
Purchases of premises and equipment		(4.2	)		(3.5	)
Purchases of leased equipment		(4.4	)		—
Proceeds from sales of real estate owned		0.5			1.8
Return of premium on bank-owned life insurance, net		0.7			—

Net cash provided by (used in) investing activities		373.5			(323.3	)

Cash Flows from Financing Activities:
Net increase in deposits		644.9			688.1
Net decrease in borrowings with terms of three months or less		(873.1	)		(589.3	)
Repayments of borrowings with terms of more than three months		(0.1	)		(0.1	)
Repayment of notes and debentures		(125.0	)		—
Cash dividends paid on common stock		(52.7	)		(50.6	)
Cash dividend paid on preferred stock		(3.5	)		—
Common stock repurchases		(2.9	)		(2.9	)
Proceeds from stock options exercised		21.2			0.5

Net cash (used in) provided by financing activities		(391.2	)		45.7

Net increase (decrease) in cash and cash equivalents		158.9			(161.6	)
Cash and cash equivalents at beginning of period		614.1			715.3

Cash and cash equivalents at end of period	$	773.0		$	553.7


Supplemental Information:
Interest payments	$	40.7		$	37.4
Real estate properties acquired by foreclosure		4.1			3.8
Unsettled purchases of securities		3.4			6.3
Income tax payments		5.8			2.4

See accompanying notes to consolidated financial statements.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

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.

Note 1 to People’s United’s audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2016, as supplemented by this Quarterly Report for the period ended March 31, 2017, provides disclosure of People’s United’s significant accounting policies.

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

Affordable housing investments, including all legally binding commitments to fund future investments, are included in other assets in the Consolidated Statements of Condition ($220.3 million and $195.2 million at March 31, 2017 and December 31, 2016, respectively). Included in other liabilities in the Consolidated Statements of Condition is a liability for all legally binding unfunded commitments to fund future investments ($99.9 million and $92.5 million at those dates). The cost of the Company’s investments is amortized on a straight-line basis over the period during which the related federal income tax credits are realized (generally ten years). Amortization expense, which is included as a component of income tax expense in the Consolidated Statements of Income, totaled $4.0 million and $3.0 million for the three months ended March 31, 2017 and 2016, respectively.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) have been omitted or condensed. As a result, the accompanying consolidated financial statements should be read in conjunction with People’s United’s Annual Report on Form 10-K for the year ended December 31, 2016. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results of operations that may be expected for the entire year or any other interim period.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 2. SECURITIES AND SHORT-TERM INVESTMENTS

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


As of March 31, 2017 (in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available for sale:
Debt securities:
U.S. Treasury and agency	$	822.7	$	0.3	$	(24.3	)	$	798.7
GSE (1) mortgage-backed securities and CMOs (2)		2,976.5		13.5		(25.5	)		2,964.5

Total debt securities		3,799.2		13.8		(49.8	)		3,763.2
Equity securities (3)		9.6		—		(0.7	)		8.9

Total securities available for sale	$	3,808.8	$	13.8	$	(50.5	)	$	3,772.1

Securities held to maturity:
Debt securities:
State and municipal	$	1,663.0	$	40.2	$	(21.7	)	$	1,681.5
GSE mortgage-backed securities		648.8		0.2		(3.4	)		645.6
Corporate		10.7		0.2		—			10.9
Other		1.5		—		—			1.5

Total securities held to maturity	$	2,324.0	$	40.6	$	(25.1	)	$	2,339.5

(1)

Government sponsored enterprise

(2)

Collateralized mortgage obligations

(3)

During the quarter ended March 31, 2017, the Company exchanged its ownership interest in a non-marketable equity security (previously recorded in other assets) for cash and common stock in a publicly-traded company (fair value of approximately $10.8 million at acquisition).


As of December 31, 2016 (in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available for sale:
Debt securities:
U.S. Treasury and agency	$	889.9	$	0.3	$	(30.5	)	$	859.7
GSE mortgage-backed securities and CMOs		3,573.1		15.0		(38.1	)		3,550.0

Total debt securities		4,463.0		15.3		(68.6	)		4,409.7
Equity securities		0.2		—		—			0.2

Total securities available for sale	$	4,463.2	$	15.3	$	(68.6	)	$	4,409.9

Securities held to maturity:
Debt securities:
State and municipal	$	1,499.1	$	33.9	$	(23.5	)	$	1,509.5
GSE mortgage-backed securities		500.8		—		(3.2	)		497.6
Corporate		4.0		—		—			4.0
Other		1.5		—		—			1.5

Total securities held to maturity	$	2,005.4	$	33.9	$	(26.7	)	$	2,012.6

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Securities available for sale with a fair value of $1.91 billion and $1.83 billion at March 31, 2017 and December 31, 2016, respectively, were pledged as collateral for public deposits and for other purposes.

The following table is a summary of the amortized cost and fair value of debt securities as of March 31, 2017, based on remaining period to contractual maturity. Information for GSE mortgage-backed securities and CMOs is based on the final contractual maturity dates without considering repayments and prepayments.


	Available for Sale				Held to Maturity
(in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
U.S. Treasury and agency:
Within 1 year	$	1.0	$	1.0	$	—	$	—
After 1 but within 5 years		238.7		235.7		—		—
After 5 but within 10 years		583.0		562.0		—		—

Total		822.7		798.7		—		—

GSE mortgage-backed securities and CMOs:
After 5 but within 10 years		1,016.3		1,028.3		166.6		166.6
After 10 years		1,960.2		1,936.2		482.2		479.0

Total		2,976.5		2,964.5		648.8		645.6

State and municipal:
Within 1 year		—		—		4.2		4.2
After 1 but within 5 years		—		—		30.7		31.3
After 5 but within 10 years		—		—		363.1		381.5
After 10 years		—		—		1,265.0		1,264.5

Total		—		—		1,663.0		1,681.5

Corporate:
After 5 but within 10 years		—		—		5.7		5.8
After 10 years		—		—		5.0		5.1

Total		—		—		10.7		10.9

Other:
Within 1 year		—		—		1.5		1.5

Total		—		—		1.5		1.5

Total:
Within 1 year		1.0		1.0		5.7		5.7
After 1 but within 5 years		238.7		235.7		30.7		31.3
After 5 but within 10 years		1,599.3		1,590.3		535.4		553.9
After 10 years		1,960.2		1,936.2		1,752.2		1,748.6

Total	$	3,799.2	$	3,763.2	$	2,324.0	$	2,339.5

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

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. 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. The amount of the impairment related to other factors is recognized in other comprehensive income. Management has the ability and intent to hold the securities classified as held to maturity until they mature, at which time People’s United expects to receive full value for the securities.

The following tables summarize those 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 March 31, 2017 (in millions)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Securities available for sale:
GSE mortgage-backed securities and CMOs	$	2,315.0	$	(23.2	)	$	62.0	$	(2.3	)	$	2,377.0	$	(25.5	)
U.S. Treasury and agency		768.4		(24.3	)		—		—			768.4		(24.3	)
Equity securities		8.9		(0.7	)		—		—			8.9		(0.7	)
Securities held to maturity:
GSE mortgage-backed securities		553.1		(3.4	)		—		—			553.1		(3.4	)
State and municipal		600.3		(21.7	)		0.1		—			600.4		(21.7	)

Total	$	4,245.7	$	(73.3	)	$	62.1	$	(2.3	)	$	4,307.8	$	(75.6	)


	Continuous Unrealized Loss Position
	Less Than 12 Months					12 Months Or Longer					Total
As of December 31, 2016 (in millions)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Securities available for sale:
GSE mortgage-backed securities and CMOs	$	2,339.6	$	(26.6	)	$	396.9	$	(11.5	)	$	2,736.5	$	(38.1	)
U.S. Treasury and agency		828.3		(30.5	)		—		—			828.3		(30.5	)
Securities held to maturity:
GSE mortgage-backed securities		497.6		(3.2	)		—		—			497.6		(3.2	)
State and municipal		581.7		(23.5	)		—		—			581.7		(23.5	)

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

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

At March 31, 2017, approximately 33% of the 1,753 securities owned by the Company, consisting of 123 securities classified as available for sale and 464 securities classified as held to maturity, had gross unrealized losses totaling $50.5 million and $25.1 million, respectively. All of the GSE mortgage-backed securities and CMOs had AAA credit ratings and an average contractual maturity of 12 years. The state and municipal securities had an average credit rating of AA and an average maturity of 15 years.

The cause of the gross unrealized losses with respect to all of these 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 March 31, 2017 are temporary impairments. No other-than-temporary impairment losses were recognized in the Consolidated Statements of Income for the three months ended March 31, 2017 or 2016.

Security transactions are recorded on the trade date. Realized gains and losses are determined using the specific identification method and reported in non-interest income. During the quarter ended March 31, 2017, People’s United sold U.S. Treasury and CMO securities with a combined amortized cost of $487 million and recorded $15.7 million of gross realized losses.

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 $154.7 million and $155.0 million at March 31, 2017 and December 31, 2016, 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 the Smithtown Bancorp, Inc. acquisition, the Bank acquired shares of capital stock in the FHLB of New York (total cost of $11.3 million at both March 31, 2017 and December 31, 2016). Based on the current capital adequacy and liquidity position of both the FHLB of Boston and the FHLB of New York, management believes there is no impairment in the Company’s investment at March 31, 2017 and the cost of the investment approximates fair value.

The Bank, as a member of the Federal Reserve Bank system, is currently required to purchase and hold shares of capital stock in the Federal Reserve Bank of New York (the “FRB-NY”) (total cost of $153.6 million and $149.5 million at March 31, 2017 and December 31, 2016, respectively) in an amount equal to 6% of its capital and surplus. Based on the current capital adequacy and liquidity position of the FRB-NY, management believes there is no impairment in the Company’s investment at March 31, 2017 and the cost of the investment approximates fair value.

Included in short-term investments are interest-bearing deposits at the FRB-NY totaling $355.4 million at March 31, 2017 and $169.8 million at December 31, 2016. These deposits represent an alternative to overnight federal funds sold and had yields of 1.00% and 0.75% at March 31, 2017 and December 31, 2016, respectively.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 3. LOANS

For purposes of disclosures related to the credit quality of financing receivables and the allowance for loan losses, People’s United has identified two loan portfolio segments, Commercial and Retail, which are comprised of the following loan classes:

•

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

•

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

Loans acquired in connection with business combinations are referred to as ‘acquired’ loans as a result of the manner in which they are accounted for (see further discussion under ‘Acquired Loans’). 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 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’ and the treatment of loan origination costs); and

•

Recognition of loan charge-offs.

The Company did not change its policies with respect to loans or its methodology for determining the allowance for loan losses during the three months ended March 31, 2017.

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


	March 31, 2017						December 31, 2016
(in millions)	Originated		Acquired		Total		Originated		Acquired		Total
Commercial:
Commercial real estate	$	10,001.2	$	224.1	$	10,225.3	$	10,012.6	$	234.7	$	10,247.3
Commercial and industrial		7,737.9		180.4		7,918.3		7,939.0		186.1		8,125.1
Equipment financing		2,963.0		6.5		2,969.5		3,020.9		11.6		3,032.5

Total Commercial Portfolio		20,702.1		411.0		21,113.1		20,972.5		432.4		21,404.9

Retail:
Residential mortgage:
Adjustable-rate		5,699.1		91.1		5,790.2		5,453.8		95.3		5,549.1
Fixed-rate		647.1		50.4		697.5		613.5		54.1		667.6

Total residential mortgage		6,346.2		141.5		6,487.7		6,067.3		149.4		6,216.7

Home equity and other consumer:
Home equity		2,012.0		25.3		2,037.3		2,044.9		27.7		2,072.6
Other consumer		48.5		0.7		49.2		50.0		0.7		50.7

Total home equity and other consumer		2,060.5		26.0		2,086.5		2,094.9		28.4		2,123.3

Total Retail Portfolio		8,406.7		167.5		8,574.2		8,162.2		177.8		8,340.0

Total loans	$	29,108.8	$	578.5	$	29,687.3	$	29,134.7	$	610.2	$	29,744.9

Net deferred loan costs, which are included in loans by respective class and accounted for as interest yield adjustments, totaled $72.3 million at March 31, 2017 and $69.9 million at December 31, 2016.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following table presents a summary, by loan portfolio segment, of activity in the allowance for loan losses for the three months ended March 31, 2017 and 2016. With respect to the originated portfolio, an allocation of a portion of the allowance to one segment does not preclude its availability to absorb losses in another segment.


Three months ended	Commercial									Retail
March 31, 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		(2.9	)		—			(2.9	)		(1.7	)		—		(1.7	)		(4.6	)
Recoveries		1.6			—			1.6			0.6			—		0.6			2.2

Net loan charge-offs		(1.3	)		—			(1.3	)		(1.1	)		—		(1.1	)		(2.4	)
Provision for loan losses		(2.4	)		—			(2.4	)		6.8			—		6.8			4.4

Balance at end of period	$	195.1		$	6.1		$	201.2		$	29.9		$	0.2	$	30.1		$	231.3


Three months ended	Commercial									Retail
March 31, 2016 (in millions)	Originated			Acquired			Total			Originated			Acquired		Total			Total
Balance at beginning of period	$	181.8		$	7.9		$	189.7		$	21.1		$	0.2	$	21.3		$	211.0

Charge-offs		(4.6	)		(0.3	)		(4.9	)		(2.8	)		—		(2.8	)		(7.7	)
Recoveries		0.4			—			0.4			1.3			—		1.3			1.7

Net loan charge-offs		(4.2	)		(0.3	)		(4.5	)		(1.5	)		—		(1.5	)		(6.0	)
Provision for loan losses		7.3			0.1			7.4			3.1			—		3.1			10.5

Balance at end of period	$	184.9		$	7.7		$	192.6		$	22.7		$	0.2	$	22.9		$	215.5

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


As of March 31, 2017	Originated Loans Individually Evaluated for Impairment				Originated Loans Collectively Evaluated for Impairment				Acquired Loans (Discounts Related to Credit Quality)				Total
(in millions)	Portfolio		Allowance		Portfolio		Allowance		Portfolio		Allowance		Portfolio		Allowance
Commercial	$	176.2	$	8.1	$	20,525.9	$	187.0	$	411.0	$	6.1	$	21,113.1	$	201.2
Retail		94.1		3.2		8,312.6		26.7		167.5		0.2		8,574.2		30.1

Total	$	270.3	$	11.3	$	28,838.5	$	213.7	$	578.5	$	6.3	$	29,687.3	$	231.3


As of December 31, 2016	Originated Loans Individually Evaluated for Impairment				Originated Loans Collectively Evaluated for Impairment				Acquired Loans (Discounts Related to Credit Quality)				Total
(in millions)	Portfolio		Allowance		Portfolio		Allowance		Portfolio		Allowance		Portfolio		Allowance
Commercial	$	161.8	$	5.8	$	20,810.7	$	193.0	$	432.4	$	6.1	$	21,404.9	$	204.9
Retail		91.8		3.2		8,070.4		21.0		177.8		0.2		8,340.0		24.4

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

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

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


(in millions)	March 31, 2017		December 31, 2016
Commercial:
Commercial real estate	$	23.4	$	22.3
Commercial and industrial		47.4		41.5
Equipment financing		47.4		39.4

Total (1)		118.2		103.2

Retail:
Residential mortgage		26.3		27.4
Home equity		15.2		17.4
Other consumer		—		—

Total (2)		41.5		44.8

Total	$	159.7	$	148.0

(1)

Reported net of government guarantees totaling $4.4 million and $13.1 million at March 31, 2017 and December 31, 2016, respectively. These government guarantees relate, almost entirely, to guarantees provided by the Small Business Administration as well as selected other Federal agencies and represent the carrying value of the loans that are covered by such guarantees, the extent of which (i.e. full or partial) varies by loan. At March 31, 2017, the principal loan classes to which these government guarantees relate are commercial and industrial loans (99%) and commercial real estate loans (1%).

(2)	Includes $11.8 million and $9.8 million of loans in the process of foreclosure at March 31, 2017 and December 31, 2016, respectively.

The preceding table excludes acquired loans that are (i) accounted for as purchased credit impaired loans or (ii) covered by a Federal Deposit Insurance Corporation (“FDIC”) loss-share agreement (“LSA”) totaling $19.4 million and $2.7 million, respectively, at March 31, 2017 and $21.6 million and $3.1 million, respectively, at December 31, 2016. Such loans otherwise meet People’s United’s definition of a non-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. The acquired 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.

A loan is generally considered “non-performing” when it is placed on non-accrual status. A loan is generally placed on non-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 on non-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. There were no loans past due 90 days or more and still accruing interest at March 31, 2017 or December 31, 2016.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

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 originated loans whose terms have been modified in such a way that they are considered troubled debt restructurings (“TDRs”). Originated 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 on non-accrual status (and reported as non-performing loans) depending upon the loan’s specific circumstances, including the nature and extent of the related modifications. TDRs on non-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 in non-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.

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 impaired non-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.

People’s United’s recorded investment in originated loans classified as TDRs totaled $196.7 million and $189.9 million at March 31, 2017 and December 31, 2016, respectively. The related allowance for loan losses at March 31, 2017 and December 31, 2016 was $4.6 million and $4.2 million, respectively. Interest income recognized on TDRs totaled $1.3 million and $1.1 million for the three months ended March 31, 2017 and 2016, respectively. Fundings under commitments to lend additional amounts to borrowers with loans classified as TDRs were immaterial for the three months ended March 31, 2017 and 2016. Originated loans that were modified and classified as TDRs during the three months ended March 31, 2017 and 2016 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 months ended March 31, 2017 and 2016. For purposes of this disclosure, recorded investments represent amounts immediately prior to and subsequent to the restructuring.


	Three Months Ended March 31, 2017
(dollars in millions)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial:
Commercial real estate (1)		3	$	3.9	$	3.9
Commercial and industrial (2)		9		8.3		8.3
Equipment financing (3)		21		5.9		5.9

Total		33		18.1		18.1

Retail:
Residential mortgage (4)		7		3.8		3.8
Home equity (5)		24		2.2		2.2
Other consumer		—		—		—

Total		31		6.0		6.0

Total		64	$	24.1	$	24.1

(1)	Represents the following concessions: reduced payment and/or payment deferral (2 contracts; recorded investment of $2.2 million); or temporary rate reduction (1 contract; recorded investment of $1.7 million).

(2)	Represents the following concessions: extension of term (8 contracts; recorded investment of $7.4 million); or reduced payment and/or payment deferral (1 contract; recorded investment of $0.9 million).

(3)	Represents the following concessions: reduced payment and/or payment deferral (7 contracts; recorded investment of $2.3 million); or a combination of concessions (14 contracts; recorded investment of $3.6 million).

(4)

Represents the following concessions: loans restructured through bankruptcy (1 contract; recorded investment of $0.1 million); reduced payment and/or payment deferral (4 contracts; recorded investment of $1.3 million); or a combination of concessions (2 contracts; recorded investment of $2.4 million).

(5)

Represents the following concessions: loans restructured through bankruptcy (14 contracts; recorded investment of $1.1 million); reduced payment and/or payment deferral (4 contracts; recorded investment of $0.3 million); or a combination of concessions (6 contracts; recorded investment of $0.8 million).

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)


	Three Months Ended March 31, 2016
(dollars in millions)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial:
Commercial real estate (1)		3	$	1.1	$	1.1
Commercial and industrial (2)		13		5.2		5.2
Equipment financing (3)		10		6.1		6.1

Total		26		12.4		12.4

Retail:
Residential mortgage (4)		19		5.3		5.3
Home equity (5)		19		1.6		1.6
Other consumer		—		—		—

Total		38		6.9		6.9

Total		64	$	19.3	$	19.3

(1)	Represents the following concessions: extension of term (1 contract; recorded investment of $0.2 million); reduced payment and/or payment deferral (1 contract; recorded investment of $0.9 million); or a combination of concessions (1 contract; recorded investment of less than $0.1 million).

(2)	Represents the following concessions: extension of term (7 contracts; recorded investment of $4.4 million); reduced payment and/or payment deferral (3 contracts; recorded investment of $0.4 million); or a combination of concessions (3 contracts; recorded investment of $0.4 million).

(3)	Represents the following concessions: extension of term (2 contracts; recorded investment of $0.4 million); reduced payment and/or payment deferral (5 contracts; recorded investment of $4.3 million); or a combination of concessions (3 contracts; recorded investment of $1.4 million).

(4)

Represents the following concessions: loans restructured through bankruptcy (4 contracts; recorded investment of $1.5 million); reduced payment and/or payment deferral (5 contracts; recorded investment of $1.4 million); or a combination of concessions (10 contracts; recorded investment of $2.4 million).

(5)

Represents the following concessions: loans restructured through bankruptcy (14 contracts; recorded investment of $1.3 million); reduced payment and/or payment deferral (1 contract; recorded investment of $0.1 million); or a combination of concessions (4 contracts; recorded investment of $0.2 million).

The following is a summary, by class of loan, of information related to TDRs of originated loans completed within the previous 12 months that subsequently defaulted during the three months ended March 31, 2017 and 2016. For purposes of this disclosure, the previous 12 months is measured from April 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 months ended March 31, 2017 or 2016.


	Three Months Ended March 31,
	2017				2016
(dollars in millions)	Number of Contracts		Recorded Investment as of Period End		Number of Contracts		Recorded Investment as of Period End
Commercial:
Commercial real estate		1	$	1.7		—	$	—
Commercial and industrial		2		1.4		2		0.6
Equipment financing		8		2.6		5		2.5

Total		11		5.7		7		3.1

Retail:
Residential mortgage		7		2.5		6		1.3
Home equity		1		0.1		7		0.5
Other consumer		—		—		—		—

Total		8		2.6		13		1.8

Total		19	$	8.3		20	$	4.9

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

People’s United’s impaired loans consist of certain originated loans, including all TDRs. The following table summarizes, by class of loan, information related to individually-evaluated impaired loans within the originated portfolio.


	As of March 31, 2017						As of December 31, 2016
(in millions)	Unpaid Principal Balance		Recorded Investment		Related Allowance for Loan Losses		Unpaid Principal Balance		Recorded Investment		Related Allowance for Loan Losses
Without a related allowance for loan losses:
Commercial:
Commercial real estate	$	49.0	$	47.4	$	—	$	41.4	$	40.0	$	—
Commercial and industrial		42.6		40.7		—		50.7		45.7		—
Equipment financing		41.0		37.3		—		38.2		35.3		—
Retail:
Residential mortgage		66.6		60.7		—		63.6		58.0		—
Home equity		22.2		18.5		—		22.4		18.7		—
Other consumer		—		—		—		—		—		—

Total	$	221.4	$	204.6	$	—	$	216.3	$	197.7	$	—


With a related allowance for loan losses:
Commercial:
Commercial real estate	$	8.5	$	8.3	$	0.4	$	12.2	$	11.4	$	0.6
Commercial and industrial		33.5		32.6		6.1		25.9		25.0		4.7
Equipment financing		10.9		9.9		1.6		5.0		4.4		0.5
Retail:
Residential mortgage		12.5		12.5		2.2		13.1		13.1		2.3
Home equity		2.4		2.4		1.0		2.1		2.0		0.9
Other consumer		—		—		—		—		—		—

Total	$	67.8	$	65.7	$	11.3	$	58.3	$	55.9	$	9.0


Total impaired loans:
Commercial:
Commercial real estate	$	57.5	$	55.7	$	0.4	$	53.6	$	51.4	$	0.6
Commercial and industrial		76.1		73.3		6.1		76.6		70.7		4.7
Equipment financing		51.9		47.2		1.6		43.2		39.7		0.5

Total		185.5		176.2		8.1		173.4		161.8		5.8

Retail:
Residential mortgage		79.1		73.2		2.2		76.7		71.1		2.3
Home equity		24.6		20.9		1.0		24.5		20.7		0.9
Other consumer		—		—		—		—		—		—

Total		103.7		94.1		3.2		101.2		91.8		3.2

Total	$	289.2	$	270.3	$	11.3	$	274.6	$	253.6	$	9.0

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

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


	Three Months Ended March 31,
	2017				2016
(in millions)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial:
Commercial real estate	$	51.9	$	0.4	$	60.2	$	0.3
Commercial and industrial		70.0		0.5		63.0		0.4
Equipment financing		39.8		0.1		33.1		0.1

Total		161.7		1.0		156.3		0.8

Retail:
Residential mortgage		71.2		0.4		72.2		0.4
Home equity		20.4		0.1		22.4		0.1
Other consumer		—		—		—		—

Total		91.6		0.5		94.6		0.5

Total	$	253.3	$	1.5	$	250.9	$	1.3

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


			Past Due
As of March 31, 2017 (in millions)	Current		30-89 Days		90 Days or More		Total		Total Originated
Commercial:
Commercial real estate	$	9,979.5	$	13.1	$	8.6	$	21.7	$	10,001.2
Commercial and industrial		7,700.8		18.3		18.8		37.1		7,737.9
Equipment financing		2,880.7		70.0		12.3		82.3		2,963.0

Total		20,561.0		101.4		39.7		141.1		20,702.1


Retail:
Residential mortgage		6,304.8		24.3		17.1		41.4		6,346.2
Home equity		1,999.5		5.6		6.9		12.5		2,012.0
Other consumer		48.3		0.2		—		0.2		48.5

Total		8,352.6		30.1		24.0		54.1		8,406.7

Total originated loans	$	28,913.6	$	131.5	$	63.7	$	195.2	$	29,108.8

Included in the “Current” and “30-89 Days” categories above are early non-performing commercial real estate loans, commercial and industrial loans, and equipment financing loans totaling $14.8 million, $33.0 million and $35.1 million, respectively, and $17.5 million of retail loans in the process of foreclosure or bankruptcy. These loans are less than 90 days past due but have been placed on non-accrual status as a result of having been identified as presenting uncertainty with respect to the collectability of interest and principal.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)


			Past Due
As of December 31, 2016 (in millions)	Current		30-89 Days		90 Days or More		Total		Total Originated
Commercial:
Commercial real estate	$	9,989.9	$	10.9	$	11.8	$	22.7	$	10,012.6
Commercial and industrial		7,899.2		10.0		29.8		39.8		7,939.0
Equipment financing		2,941.5		68.4		11.0		79.4		3,020.9

Total		20,830.6		89.3		52.6		141.9		20,972.5


Retail:
Residential mortgage		6,027.5		22.0		17.8		39.8		6,067.3
Home equity		2,030.3		5.2		9.4		14.6		2,044.9
Other consumer		49.7		0.3		—		0.3		50.0

Total		8,107.5		27.5		27.2		54.7		8,162.2

Total originated loans	$	28,938.1	$	116.8	$	79.8	$	196.6	$	29,134.7

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

Commercial Credit Quality Indicators

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

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

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

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) collateral values/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.

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 Loans 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’s re-rating process has been completed.

Acquired loans are initially recorded at fair value, determined based upon an estimate of the amount and timing of both principal and interest cash flows expected to be collected and discounted using a market interest rate. 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 portfolio. A decrease in the expected cash flows in subsequent periods requires the establishment of an allowance for loan losses at that time. At both March 31, 2017 and December 31, 2016, the allowance for loan losses on acquired loans was $6.3 million.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following is a summary, by class of loan, of credit quality indicators:


As of March 31, 2017 (in millions)	Commercial Real Estate		Commercial and Industrial		Equipment Financing		Total
Commercial:
Originated loans:
Pass	$	9,788.5	$	7,380.5	$	2,554.0	$	19,723.0
Special mention		117.2		115.8		98.5		331.5
Substandard		94.6		240.5		310.5		645.6
Doubtful		0.9		1.1		—		2.0

Total originated loans		10,001.2		7,737.9		2,963.0		20,702.1

Acquired loans:
Pass		180.9		149.4		—		330.3
Special mention		8.0		3.5		5.0		16.5
Substandard		34.5		27.5		1.5		63.5
Doubtful		0.7		—		—		0.7

Total acquired loans		224.1		180.4		6.5		411.0

Total	$	10,225.3	$	7,918.3	$	2,969.5	$	21,113.1


As of March 31, 2017 (in millions)	Residential Mortgage		Home Equity		Other Consumer		Total
Retail:
Originated loans:
Low risk	$	3,198.8	$	935.4	$	30.9	$	4,165.1
Moderate risk		2,642.2		650.5		6.7		3,299.4
High risk		505.2		426.1		10.9		942.2

Total originated loans		6,346.2		2,012.0		48.5		8,406.7

Acquired loans:
Low risk		69.2		—		—		69.2
Moderate risk		31.0		—		—		31.0
High risk		41.3		25.3		0.7		67.3

Total acquired loans		141.5		25.3		0.7		167.5

Total	$	6,487.7	$	2,037.3	$	49.2	$	8,574.2

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)


As of December 31, 2016 (in millions)	Commercial Real Estate		Commercial and Industrial		Equipment Financing		Total
Commercial:
Originated loans:
Pass	$	9,817.2	$	7,580.6	$	2,617.9	$	20,015.7
Special mention		107.3		121.9		98.8		328.0
Substandard		87.1		233.3		304.2		624.6
Doubtful		1.0		3.2		—		4.2

Total originated loans		10,012.6		7,939.0		3,020.9		20,972.5

Acquired loans:
Pass		182.9		155.5		1.0		339.4
Special mention		13.5		3.6		8.6		25.7
Substandard		37.6		27.0		2.0		66.6
Doubtful		0.7		—		—		0.7

Total acquired loans		234.7		186.1		11.6		432.4

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


As of December 31, 2016 (in millions)	Residential Mortgage		Home Equity		Other Consumer		Total
Retail:
Originated loans:
Low risk	$	3,016.4	$	950.9	$	31.1	$	3,998.4
Moderate risk		2,538.9		663.9		7.2		3,210.0
High risk		512.0		430.1		11.7		953.8

Total originated loans		6,067.3		2,044.9		50.0		8,162.2

Acquired loans:
Low risk		75.7		—		—		75.7
Moderate risk		27.5		—		—		27.5
High risk		46.2		27.7		0.7		74.6

Total acquired loans		149.4		27.7		0.7		177.8

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

Acquired Loans

Acquired loans that have evidence of deterioration in credit quality since origination and for which it is probable, at acquisition, that all contractually required payments will not be collected are initially recorded at fair value without recording an 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 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.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Under the accounting model for acquired 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 effective yield method. Accordingly, acquired loans are not subject to classification as non-accrual in the same manner as originated loans. Rather, acquired 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 acquired loans are first applied to the nonaccretable difference and then to any allowance for loan losses recognized subsequent to acquisition.

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

•

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

•

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

•

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

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

An acquired loan 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 within non-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 flow re-assessment for the pool. Acquired 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 acquired loan portfolio had contractually required principal and interest payments receivable of $7.57 billion; expected cash flows of $7.02 billion; and a fair value (initial carrying amount) of $5.36 billion. The difference between the contractually required principal and interest payments receivable and the expected cash flows ($550.9 million) represented the initial nonaccretable difference. The difference between the expected cash flows and fair value ($1.66 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 March 31, 2017, the outstanding principal balance and carrying amount of the acquired loan portfolio were $676.3 million and $578.5 million, respectively ($707.0 million and $610.2 million, respectively, at December 31, 2016).

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

The following tables summarize activity in the accretable yield for the acquired loan portfolio:


	Three Months Ended
	March 31,
(in millions)	2017			2016
Balance at beginning of period	$	255.4		$	296.0
Accretion		(7.6	)		(11.6	)
Reclassification from nonaccretable difference for loans with improved cash flows (1)		—			—
Other changes in expected cash flows (2)		(6.1	)		(3.6	)

Balance at end of period	$	241.7		$	280.8

(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.

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

Other real estate owned (“REO”) was comprised of residential and commercial properties totaling $10.9 million and $4.1 million, respectively, at March 31, 2017, and $8.1 million and $4.0 million, respectively, at December 31, 2016. Repossessed assets totaled $8.2 million and $7.2 million at March 31, 2017 and December 31, 2016, respectively.

NOTE 4. STOCKHOLDERS’ EQUITY

Preferred 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 March 31, 2017 and December 31, 2016, and (ii) 1.95 billion shares of common stock, par value of $0.01 per share, of which 406.4 million shares and 405.0 million shares were issued at March 31, 2017 and December 31, 2016, 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 March 31, 2017 and December 31, 2016) and (ii) common stock purchased in the open market by a trustee with funds provided by People’s United and originally intended for awards under the People’s United Financial, Inc. 2007 Recognition and Retention Plan (the “RRP”) (2.6 million and 2.7 million shares at March 31, 2017 and December 31, 2016, respectively). Following shareholder approval of the People’s United Financial, Inc. 2014 Long-Term Incentive Plan in 2014, no new awards may be granted under the RRP.

Comprehensive Income

Comprehensive income represents the sum of net income and items of “other comprehensive income or loss,” including (on an after-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 securities available for sale; (iii) net unrealized gains and losses on securities transferred to held to maturity; and (iv) net unrealized gains and losses on derivatives accounted for as cash flow hedges. People’s United’s total comprehensive income for the three months ended March 31, 2017 and 2016 is reported in the Consolidated Statements of Comprehensive Income.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

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


(in millions)	Pension and Other Postretirement Plans			Net Unrealized Gains (Losses) on Securities Available for Sale			Net Unrealized Gains (Losses) on Securities Transferred to Held to Maturity			Net Unrealized Gains (Losses) on Derivatives Accounted for as Cash Flow Hedges			Total AOCL
Balance at December 31, 2016	$	(145.6	)	$	(32.3	)	$	(17.4	)	$	0.3		$	(195.0	)

Other comprehensive income before reclassifications		—			1.4			—			0.2			1.6
Amounts reclassified from AOCL (1)		1.0			9.9			0.5			0.1			11.5

Current period other comprehensive income		1.0			11.3			0.5			0.3			13.1

Balance at March 31, 2017	$	(144.6	)	$	(21.0	)	$	(16.9	)	$	0.6		$	(181.9	)


(in millions)	Pension and Other Postretirement Plans			Net Unrealized Gains (Losses) on Securities Available for Sale			Net Unrealized Gains (Losses) on Securities Transferred to Held to Maturity			Net Unrealized Gains (Losses) on Derivatives Accounted for as Cash Flow Hedges			Total AOCL
Balance at December 31, 2015	$	(140.0	)	$	(17.7	)	$	(19.5	)	$	—		$	(177.2	)

Other comprehensive income (loss) before reclassifications		—			41.0			—			(0.2	)		40.8
Amounts reclassified from AOCL (1)		1.0			—			0.5			0.2			1.7

Current period other comprehensive income		1.0			41.0			0.5			—			42.5

Balance at March 31, 2016	$	(139.0	)	$	23.3		$	(19.0	)	$	—		$	(134.7	)

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

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

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


	Amounts Reclassified from AOCL
	Three Months Ended March 31,						Affected Line Item in the Statement Where
(in millions)	2017			2016			Net Income is Presented
Details about components of AOCL:
Amortization of pension and other postretirement plans items:
Net actuarial loss	$	(1.7	)	$	(1.6	)	(1)
Prior service credit		0.2			0.2		(1)

		(1.5	)		(1.4	)	Income before income tax expense
		0.5			0.4		Income tax expense

		(1.0	)		(1.0	)	Net income


Reclassification adjustment for net realized losses on securities available for sale		(15.7	)		—		Income before income tax expense (2)
		5.8			—		Income tax expense

		(9.9	)		—		Net income


Amortization of unrealized losses on securities transferred to held to maturity		(0.8	)		(0.8	)	Income before income tax expense (3)
		0.3			0.3		Income tax expense

		(0.5	)		(0.5	)	Net income


Amortization of unrealized gains and losses on cash flow hedges:
Interest rate swaps		(0.1	)		(0.3	)	(5)
Interest rate locks (4)		—			—		(5)

		(0.1	)		(0.3	)	Income before income tax expense
		—			0.1		Income tax expense

		(0.1	)		(0.2	)	Net income

Total reclassifications for the period	$	(11.5	)	$	(1.7	)

(1)	Included in the computation of net periodic benefit income (expense) reflected in compensation and benefits expense (see Note 7 for additional details).

(2)	Included in other non-interest income.

(3)	Included in interest and dividend income - securities.

(4)	Amount reclassified from AOCL totaled less than $0.1 million for both periods.

(5)	Included in interest expense - notes and debentures.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 5. 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 the two-class method, as described below:


	Three Months Ended March 31,
(in millions, except per common share data)	2017			2016
Net income available to common shareholders	$	67.3		$	62.9
Dividends paid on and undistributed earnings allocated to participating securities		(0.2	)		(0.2	)

Earnings attributable to common shareholders	$	67.1		$	62.7


Weighted average common shares outstanding for basic EPS		308.8			301.9
Effect of dilutive equity-based awards		2.3			—

Weighted average common and common-equivalent shares for diluted EPS		311.1			301.9


Basic EPS	$	0.22		$	0.21

Diluted EPS	$	0.22		$	0.21

Unvested share-based payment awards, which include the right to receive non-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 the two-class method. Restricted stock awards granted by People’s United prior to 2017 are considered participating securities. Calculations of EPS under the two-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 9.8 million shares and 22.4 million shares for the three months ended March 31, 2017 and 2016, respectively, have also been excluded from the calculation of diluted EPS.

NOTE 6. GOODWILL AND OTHER ACQUISITION-RELATED INTANGIBLE ASSETS

People’s United’s goodwill totaled $1.99 billion at both March 31, 2017 and December 31, 2016. At both dates, goodwill was allocated to People’s United’s operating segments as follows: Commercial Banking ($1.22 billion); Retail Banking ($679.6 million); and Wealth Management ($91.0 million).

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 generally 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 March 31, 2017 and December 31, 2016, tax deductible goodwill totaled $76.3 million and $77.9 million, respectively.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

People’s United’s other acquisition-related intangible assets totaled $143.1 million and $149.4 million at March 31, 2017 and December 31, 2016, respectively. At March 31, 2017, the carrying amounts of other acquisition-related intangible assets were as follows: trade name ($70.8 million); client relationship intangible ($23.5 million); trust relationship intangible ($16.4 million); core deposit intangible ($9.0 million); insurance relationship intangible ($5.9 million); favorable lease agreement ($0.6 million); non-compete agreement ($0.4 million); and mutual fund management contracts, which are not amortized ($16.5 million).

Amortization expense of other acquisition-related intangible assets subject to amortization totaled $6.3 million and $5.8 million for the three months ended March 31, 2017 and 2016, respectively. Scheduled amortization expense attributable to other acquisition-related intangible assets for the full-year of 2017 and each of the next five years is as follows: $24.7 million in 2017; $13.2 million in 2018; $12.4 million in 2019; $12.0 million in 2020; $11.7 million in 2021; and $11.1 million in 2022. There were no impairment losses relating to goodwill or other acquisition-related intangible assets recorded during the three months ended March 31, 2017 and 2016.

NOTE 7. 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 Chittenden employees who meet certain eligibility requirements (the “Chittenden Qualified Plan”). Effective December 31, 2005, accrued benefits were frozen based on participants’ then-current service and pay levels. Interest continues to be credited on undistributed balances at a crediting rate specified 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’s funding policy is to contribute the amounts required by applicable regulations, although additional amounts may be contributed from time to time.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

People’s United also maintains (i) unfunded, nonqualified supplemental plans to provide retirement benefits to certain senior officers (the “Supplemental Plans”) and (ii) an unfunded plan that provides retirees with optional medical, dental and life insurance benefits (the “Other 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.

Components of net periodic benefit (income) expense and other amounts recognized in other comprehensive income for the People’s Qualified Plan, the Chittenden Qualified Plan and the Supplemental Plans (together the “Pension Plans”) and the Other Postretirement Plan are as follows:


	Pension Plans						Other Postretirement Plan
Three months ended March 31 (in millions)	2017			2016			2017			2016
Net periodic benefit (income) expense:
Service cost	$	—		$	—		$	0.1		$	0.1
Interest cost		4.5			4.7			0.1			0.1
Expected return on plan assets		(8.9	)		(8.6	)		—			—
Recognized net actuarial loss		1.6			1.5			0.1			0.1
Recognized prior service credit		(0.2	)		(0.2	)		—			—
Settlements		0.4			0.3			—			—

Net periodic benefit (income) expense		(2.6	)		(2.3	)		0.3			0.3

Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net actuarial loss		(1.6	)		(1.5	)		(0.1	)		(0.1	)
Prior service credit		0.2			0.2			—			—

Total pre-tax changes recognized in other comprehensive income		(1.4	)		(1.3	)		(0.1	)		(0.1	)

Total recognized in net periodic benefit (income) expense and other comprehensive income	$	(4.0	)	$	(3.6	)	$	0.2		$	0.2

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 totaled $1.2 million for the three months ended March 31, 2017. At March 31, 2017, the loan balance totaled $184.9 million.

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

Shares of People’s United common stock are held by the ESOP and allocated to eligible participants annually based upon a percentage of each participant’s eligible compensation. Since the ESOP was established, a total of 3,571,639 shares of People’s United common stock have been allocated or committed to be released to participants’ accounts. At March 31, 2017, 6,881,936 shares of People’s United common stock, with a fair value of $125.3 million at that date, have not been allocated or committed to be released.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Compensation expense related to the ESOP is recognized at an amount equal to the number of common shares committed to be released by the ESOP for allocation to participants’ accounts multiplied by the average fair value of People’s United’s common stock during the reporting period. The difference between the fair value of the shares of People’s United’s common stock committed to be released and the cost of those common shares is recorded as a credit to additional paid-in capital (if fair value exceeds cost) or, to the extent that no such credits remain in additional paid-in capital, as a charge to retained earnings (if fair value is less than cost). Expense recognized for the ESOP totaled $1.7 million and $1.3 million for the three months ended March 31, 2017 and 2016, respectively.

NOTE 8. 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.

NOTE 9. SEGMENT INFORMATION

See “Segment Results” included in Item 2 for segment information for the three months ended March 31, 2017 and 2016.

NOTE 10. FAIR VALUE MEASUREMENTS

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

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

•

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

•

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

•

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

•

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).

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 a non-recurring basis, as well as for those financial assets and financial liabilities not measured at fair value but for which fair value is disclosed.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Recurring Fair Value Measurements

Trading Account Securities and Securities Available For Sale

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

The Company’s available-for-sale securities are primarily comprised of GSE mortgage-backed securities and CMOs. The fair values of these securities are 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 March 31, 2017 and December 31, 2016, the entire available-for-sale mortgage-backed securities portfolio was comprised of 10- and 15-year GSE securities. An active market exists for securities that are similar to the Company’s GSE mortgage-backed securities and CMOs, 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 own month-end fair value estimate for all mortgage-backed securities, agency-issued CMOs (also backed by 10- and 15-year mortgage-backed securities), and state and municipal securities. While the Company has not adjusted the prices obtained from the independent pricing service, any notable differences between those prices and the Company’s estimates are subject to further analysis. This additional analysis may include a review of prices provided by other independent parties, a yield analysis, a review of average life changes using Bloomberg analytics and a review of historical pricing for the particular security. Based on management’s review of the prices provided by the pricing service, the fair values incorporate observable market inputs used by market participants at the measurement date and, as such, are classified as Level 2 securities.

Other Assets

As discussed in Note 7, 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, foreign exchange contracts, risk participation agreements, forward commitments to sell residential mortgage loans and interest rate-lock commitments on residential mortgage loans.

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 March 31, 2017 (in millions)	Level 1		Level 2		Level 3		Total
Financial assets:
Trading account securities:
U.S. Treasury	$	7.8	$	—	$	—	$	7.8
Securities available for sale:
U.S. Treasury and agency		798.7		—		—		798.7
GSE mortgage-backed securities and CMOs		—		2,964.5		—		2,964.5
Equity securities		8.9		—		—		8.9
Other assets:
Exchange-traded funds		31.6		—		—		31.6
Fixed income securities		—		3.6		—		3.6
Mutual funds		3.1		—		—		3.1
Interest rate swaps		—		96.2		—		168.6
Foreign exchange contracts		—		0.2		—		0.2
Forward commitments to sell residential mortgage loans		—		0.7		—		0.7

Total	$	850.1	$	3,065.2	$	—	$	3,987.7

Financial liabilities:
Interest rate swaps	$	—	$	72.7	$	—	$	116.8
Risk participation agreements (1)		—		—		—		—
Foreign exchange contracts		—		0.1		—		0.1
Interest rate-lock commitments on residential mortgage loans		—		0.9		—		0.9

Total	$	—	$	73.7	$	—	$	117.8


	Fair Value Measurements Using
As of December 31, 2016 (in millions)	Level 1		Level 2		Level 3		Total
Financial assets:
Trading account securities:
U.S. Treasury	$	6.8	$	—	$	—	$	6.8
Securities available for sale:
U.S. Treasury and agency		859.7		—		—		859.7
GSE mortgage-backed securities and CMOs		—		3,550.0		—		3,550.0
Equity securities		—		0.2		—		0.2
Other assets:
Exchange-traded funds		32.6		—		—		32.6
Fixed income securities		—		4.3		—		4.3
Mutual funds		2.7		—		—		2.7
Interest rate swaps		—		173.1		—		173.1
Foreign exchange contracts		—		0.6		—		0.6
Forward commitments to sell residential mortgage loans		—		0.3		—		0.3

Total	$	901.8	$	3,728.5	$	—	$	4,630.3

Financial liabilities:
Interest rate swaps	$	—	$	121.0	$	—	$	121.0
Risk participation agreements (1)		—		—		—		—
Foreign exchange contracts		—		0.3		—		0.3
Interest rate-lock commitments on residential mortgage loans		—		0.4		—		0.4

Total	$	—	$	121.7	$	—	$	121.7

(1)	At both March 31, 2017 and December 31, 2016, 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 three months ended March 31, 2017 or 2016.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Non-Recurring Fair Value Measurements

Loans Held for Sale

Residential mortgage loans held for sale are recorded at the lower of cost or fair value and are therefore measured at fair value on a non-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: the present value of expected future cash flows discounted at the loan’s original effective interest rate; the loan’s observable market price; or 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 a non-recurring basis.

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 a non-recurring basis. People’s United has estimated the fair values of these assets using Level 3 inputs, such as independent third-party appraisals and price opinions. Such appraisals are based on the market and/or income approach to value and are subject to a discount (to reflect estimated cost to sell) that generally approximates 10%. Assets that are acquired through loan default are recorded as held for 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 a non-recurring basis:


	Fair Value Measurements Using
As of March 31, 2017 (in millions)	Level 1		Level 2		Level 3		Total
Loans held for sale (1)	$	—	$	17.1	$	—	$	17.1
Impaired loans (2)		—		—		65.7		65.7
REO and repossessed assets (3)		—		—		23.2		23.2

Total	$	—	$	17.1	$	88.9	$	106.0


	Fair Value Measurements Using
As of December 31, 2016 (in millions)	Level 1		Level 2		Level 3		Total
Loans held for sale (1)	$	—	$	39.3	$	—	$	39.3
Impaired loans (2)		—		—		55.9		55.9
REO and repossessed assets (3)		—		—		19.3		19.3

Total	$	—	$	39.3	$	75.2	$	114.5

(1)	Consists of residential mortgage loans; no fair value adjustments were recorded for the three months ended March 31, 2017 and 2016.

(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 $50.8 million of Commercial loans and $14.9 million of Retail loans at March 31, 2017. The provision for loan losses on impaired loans totaled $3.5 million and $2.2 million for the three months ended March 31, 2017 and 2016, respectively.

(3)

Represents: (i) $10.9 million of residential REO; (ii) $4.1 million of commercial REO; and (iii) $8.2 million of repossessed assets at March 31, 2017. Charge-offs to the allowance for loan losses related to loans that were transferred to REO or repossessed assets totaled $0.4 million and $0.9 million for the three months ended March 31, 2017 and 2016, respectively. Write downs and net loss on sale of foreclosed/repossessed assets charged to non-interest expense totaled $0.9 million and $1.0 million for the same periods.

Financial Assets and Financial Liabilities Not Measured At Fair Value

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

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

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

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

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

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Securities Held to Maturity

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

FHLB and FRB-NY Stock

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

Loans

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

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

Deposit Liabilities

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

Borrowings and Notes and Debentures

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

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Lending-Related Financial Instruments

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

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 or non-recurring basis:


	Carrying Amount		Estimated Fair Value Measurements Using
As of March 31, 2017 (in millions)	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks	$	380.8	$	380.8	$	—	$	—	$	380.8
Short-term investments		392.2		—		392.2		—		392.2
Securities held to maturity		2,324.0		—		2,338.0		1.5		2,339.5
FHLB and FRB stock		319.6		—		319.6		—		319.6
Total loans, net (1)		29,390.3		—		6,310.0		22,879.7		29,189.7
Financial liabilities:
Time deposits		4,570.6		—		4,564.7		—		4,564.7
Other deposits		25,935.1		—		25,935.1		—		25,935.1
FHLB advances		2,160.4		—		2,162.6		—		2,162.6
Federal funds purchased		613.0		—		613.0		—		613.0
Customer repurchase agreements		327.7		—		327.7		—		327.7
Other borrowings		81.9		—		81.9		—		81.9
Notes and debentures		903.9		—		883.0		—		883.0

(1)	Excludes impaired loans totaling $65.7 million measured at fair value on a non-recurring basis.


	Carrying Amount		Estimated Fair Value Measurements Using
As of December 31, 2016 (in millions)	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks	$	432.4	$	432.4	$	—	$	—	$	432.4
Short-term investments		181.7		—		181.7		—		181.7
Securities held to maturity		2,005.4		—		2,011.2		1.5		2,012.7
FHLB and FRB stock		315.8		—		315.8		—		315.8
Total loans, net (1)		29,459.7		—		6,028.4		23,238.1		29,266.5
Financial liabilities:
Time deposits		4,542.2		—		4,539.7		—		4,539.7
Other deposits		25,318.6		—		25,318.6		—		25,318.6
FHLB advances		3,061.1		—		3,064.4		—		3,064.4
Federal funds purchased		617.0		—		617.0		—		617.0
Customer repurchase agreements		343.3		—		343.3		—		343.3
Other borrowings		35.4		—		35.4		—		35.4
Notes and debentures		1,030.1		—		1,000.0		—		1,000.0

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

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

NOTE 11. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

People’s United uses derivative financial instruments 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.

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, but also include foreign exchange contracts. The interest rate and foreign exchange risks associated with customer interest rate swaps 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.

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), 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 no derivative instruments with such credit-related contingent features in a net liability position at March 31, 2017.

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 a pay floating/receive fixed interest rate swap to reduce its interest rate risk exposure to the variability in interest cash flows on certain floating-rate commercial loans. 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 $110 million. The floating-rate interest payments made under the swap are calculated using the same floating rate received on the commercial loans. The swap effectively converts the floating-rate one-month LIBOR interest payments received on the commercial loans to a fixed rate and consequently reduces the Bank’s exposure to variability in short-term interest rates. This swap is accounted for as a cash flow hedge.

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

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

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Customer Derivatives

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

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’s pro-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 on held-for-sale loans are accounted for as derivatives, with changes in fair value recognized in current earnings.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Interest Rate Locks

In connection with its planned issuance of senior notes in the fourth quarter of 2012, People’s United entered into U.S. Treasury forward interest rate locks (“T-Locks”) to hedge the risk that the 10-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, the T-Locks were terminated and the unrealized gain of $0.9 million was included (on a net-of-tax basis) as a component of AOCL. The gain is being recognized as a reduction of interest expense over the ten-year period during which the hedged item ($500 million senior note issuance) affects earnings.

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		March 31, 2017		Dec. 31, 2016		March 31, 2017		Dec. 31, 2016		March 31, 2017		Dec. 31, 2016
Derivatives Not Designated as Hedging Instruments:
Interest rate swaps:
Commercial customers		N/A	$	5,786.0	$	5,612.2	$	85.3	$	93.9	$	50.9	$	46.9
Institutional counterparties		N/A		5,793.7		5,620.2		10.9		65.6		21.8		74.0
Risk participation agreements (2)		N/A		268.6		251.9		—		—		—		—
Foreign exchange contracts		N/A		41.9		101.2		0.2		0.6		0.1		0.3
Forward commitments to sell residential mortgage loans		N/A		39.4		48.6		0.7		0.3		—		—
Interest rate-lock commitments on residential mortgage loans		N/A		46.9		57.0		—		—		0.9		0.4

Total								97.1		160.4		73.7		121.6


Derivatives Designated as Hedging Instruments:
Interest rate swaps:
Subordinated notes		Fair value		375.0		375.0		—		13.6		—		—
Loans		Cash flow		110.0		—		—		—		—		—
Subordinated notes		Cash flow		—		125.0		—		—		—		0.1

Total								—		13.6		—		0.1

Total fair value of derivatives							$	97.1	$	174.0	$	73.7	$	121.7

(1)	Assets are recorded in other assets and liabilities are recorded in other liabilities.

(2)	Fair value totaled less than $0.1 million at both dates.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

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


	Type of Hedge		Amount of Pre-Tax Gain (Loss) Recognized in Earnings (1)						Amount of Pre-Tax Gain (Loss) Recognized in AOCL
Three months ended March 31 (in millions)	Type of Hedge		2017			2016			2017		2016
Derivatives Not Designated as Hedging Instruments:
Interest rate swaps:
Commercial customers		N/A	$	2.5		$	136.1		$	—	$	—
Institutional counterparties		N/A		0.2			(132.9	)		—		—
Foreign exchange contracts		N/A		0.1			(1.4	)		—		—
Risk participation agreements		N/A		0.1			—			—		—
Forward commitments to sell residential mortgage loans		N/A		0.3			—			—		—
Interest rate-lock commitments on residential mortgage loans		N/A		(0.3	)		(0.1	)		—		—

Total				2.9			1.7			—		—


Derivatives Designated as Hedging Instruments:
Interest rate swaps		Fair value		1.7			2.3			—		—
Interest rate swaps		Cash flow		(0.1	)		(0.3	)		—		(0.3	)
Interest rate locks (2)		Cash flow		—			—			—		—

Total				1.7			2.3			—		—

Total			$	4.6		$	4.0		$	—	$	—

(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.

(2)	Income totaled less than $0.1 million for both periods.

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 of set-off” provisions that provide for a single net settlement of all interest rate swap positions, as well as collateral, in the event of default on, or the termination of, any one contract. Nonetheless, the Company does not, except as indicated below, offset asset and liabilities under such arrangements in the Consolidated Statements of Condition.

Effective January 3, 2017, the Chicago Mercantile Exchange (“CME”) amended their rulebooks to legally characterize variation margin payments for over-the-counter derivatives that clear as settlements rather than collateral. Accordingly, as of that date, the Company updated its accounting policies to classify, for accounting and presentation purposes, variation margin payments deemed to be legal settlements as a single unit of account with the related derivative(s). As of March 31, 2017, this amendment impacted one of the Company’s institutional counterparties. Accordingly, 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 March 31, 2017.

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.

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. The net amounts of the derivative assets and liabilities can be reconciled to the fair value of the Company’s derivative financial instruments in Note 11. 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						Net Amount
As of March 31, 2017 (in millions)	Gross Amount Recognized		Gross Amount Offset		Net Amount Presented		Financial Instruments			Collateral			Net Amount
Financial assets:
Interest rate swaps:
Counterparty A	$	2.1	$	—	$	2.1	$	(2.1	)	$	—		$	—
Counterparty B		1.3		—		1.3		(1.3	)		—			—
Counterparty C		2.0		—		2.0		(2.0	)		—			—
Counterparty D		3.5		—		3.5		(3.5	)		—			—
Other counterparties		2.0		—		2.0		(0.3	)		(1.6	)		0.1
Foreign exchange contracts		0.2		—		0.2		—			—			0.2

Total	$	11.1	$	—	$	11.1	$	(9.2	)	$	(1.6	)	$	0.3


Financial liabilities:
Interest rate swaps:
Counterparty A	$	3.7	$	—	$	3.7	$	(2.1	)	$	(1.6	)	$	—
Counterparty B		7.0		—		7.0		(1.3	)		(5.7	)		—
Counterparty C		3.5		—		3.5		(2.0	)		(1.5	)		—
Counterparty D		6.2		—		6.2		(3.5	)		(2.5	)		0.2
Other counterparties		1.4		—		1.4		(0.3	)		(1.1	)		—
Foreign exchange contracts		0.1		—		0.1		—			—			0.1

Total	$	21.9	$	—	$	21.9	$	(9.2	)	$	(12.4	)	$	0.3

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)


	Gross Amount Recognized		Gross Amount Offset		Net Amount Presented		Gross Amounts Not Offset						Net Amount
As of December 31, 2016 (in millions)	Gross Amount Recognized		Gross Amount Offset		Net Amount Presented		Financial Instruments			Collateral			Net Amount
Financial assets:
Interest rate swaps:
Counterparty A	$	1.9	$	—	$	1.9	$	(1.9	)	$	—		$	—
Counterparty B		1.0		—		1.0		(1.0	)		—			—
Counterparty C		1.7		—		1.7		(1.7	)		—			—
Counterparty D		3.4		—		3.4		(3.4	)		—			—
Counterparty E		69.6		—		69.6		(50.0	)		(19.6	)		—
Other counterparties		1.6		—		1.6		(0.3	)		(1.3	)		—
Foreign exchange contracts		0.6		—		0.6		—			—			0.6

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


Financial liabilities:
Interest rate swaps:
Counterparty A	$	4.3	$	—	$	4.3	$	(1.9	)	$	(2.4	)	$	—
Counterparty B		7.7		—		7.7		(1.0	)		(6.7	)		—
Counterparty C		3.4		—		3.4		(1.7	)		(1.1	)		0.6
Counterparty D		6.9		—		6.9		(3.4	)		(1.7	)		1.8
Counterparty E		50.0		—		50.0		(50.0	)		—			—
Other counterparties		1.8		—		1.8		(0.3	)		(1.5	)		—
Foreign exchange contracts		0.3		—		0.3		—			—			0.3

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

NOTE 13. NEW ACCOUNTING STANDARDS

Standards effective in 2017

Derivatives and Hedging

In March 2016, the Financial Accounting Standards Board (the “FASB”) amended its standards with respect to derivatives and hedging. The first amendment clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship and discontinuation of the application of hedge accounting. This amendment does not require additional disclosures beyond disclosure about a change in accounting principle in the period of adoption. The second amendment clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment is required to assess the embedded call (put) options solely in accordance with a four-step decision sequence and no longer is required to assess whether the event that triggers the ability to exercise the option is related to interest rate or credit risk. These amendments, which are being applied prospectively, became effective for People’s United on January 1, 2017 and did not have a significant impact on the Company’s Consolidated Financial Statements.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Investments – Equity Method and Joint Ventures

In March 2016, the FASB amended its standards with respect to the equity method of accounting by eliminating the requirement that, upon an investment qualifying for use of the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations and retained earnings retrospectively, as if the equity method of accounting had been in effect during all previous periods that the investment was held. Rather, under the new guidance, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. Instead, any unrealized holding gain or loss is to be recognized through other comprehensive income on the date the investment qualifies for use of the equity method. This amendment, which is being applied prospectively, became effective for People’s United on January 1, 2017 and did not have a significant impact on the Company’s Consolidated Financial Statements.

Stock Compensation

In March 2016, the FASB amended its standards with respect to certain aspects of the accounting for share-based payment awards, including: (i) the related income tax consequences; (ii) the classification of awards as either equity or liabilities; and (iii) the classification in the statement of cash flows. This amendment, which is being applied prospectively, became effective for People’s United on January 1, 2017. As a result, the Company realized windfall tax benefits totaling $1.0 million for the three months ended March 31, 2017. This amount, which was recognized as a discrete period income tax benefit, served to lower the Company’s effective tax rate for the period by 1%.

Standards effective in 2018

Revenue Recognition

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

In July 2015, the FASB approved a one-year deferral of the effective date (now January 1, 2018 for People’s United) with early adoption, as of the original effective date, permitted. In March, April and May 2016, the FASB issued amendments to clarify the implementation guidance and add some practical expedients in certain areas, including: (i) principal versus agent considerations; (ii) the identification of performance obligations; and (iii) certain aspects of the accounting for licensing arrangements. These amendments do not change the core principle of the guidance and are effective for and follow the same transition requirements as the core principle.

The Company will adopt this guidance in the first quarter of 2018 using the modified retrospective method with a cumulative-effect adjustment to opening retained earnings, as appropriate. The Company’s revenue is comprised of net interest income on financial assets and financial liabilities (approximately 75%) and non-interest income (approximately 25%). The scope of the guidance explicitly excludes net interest income as well as other revenues associated with financial assets and liabilities, including loans, leases, securities and derivatives. Accordingly, the majority of the Company’s revenues will not be affected. Certain other recurring revenue streams are within the scope of the guidance, including revenues associated with certain products and services offered by the Company’s trust and investment management, insurance and brokerage businesses (collectively, less than 10% of total revenue). The Company’s preliminary analysis suggests that adoption of the guidance is not expected to have a material impact on its current accounting policies or the timing or amount of revenue recognized in the Company’s Consolidated Financial Statements. However, the FASB continues to release new accounting guidance related to the adoption of the amended standard which could impact the Company’s preliminary conclusions with respect to materiality.

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

Presentation of Deferred Taxes

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

Recognition and Measurement of Financial Instruments

In January 2016, the FASB amended its standards to address certain aspects of recognition, presentation and disclosure of financial instruments. The amended guidance (i) requires that equity investments be measured at fair value with changes in fair value recognized in net income and (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by permitting a qualitative assessment to identify impairment. The guidance also contains additional disclosure and presentation requirements associated with financial instruments. For public business entities, this new guidance is effective in fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 (January 1, 2018 for People’s United). The cumulative effect transition method will be applied to all outstanding instruments as of the date of adoption, while changes to the accounting for equity investments without readily determinable fair values will be applied prospectively. While the Company continues to monitor the potential impact of the amended guidance on its Consolidated Financial Statements, such impact is indeterminable at this time as it will be dependent upon portfolio composition at the adoption date. As noted in Note 2, at March 31, 2017, the Company’s securities portfolio included equity securities with an amortized cost of $9.6 million and a fair value of $8.9 million.

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

People’s United Financial, Inc.

Notes to Consolidated Financial Statements – (Unaudited)

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

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 below income from operations (if presented). For public business entities, this new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 (January 1, 2018 for People’s United) and early adoption is permitted. The adoption of this amendment is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

Standards effective in 2019

Accounting for Leases

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

The Company has begun its evaluation of the amended guidance including the potential impact on its Consolidated Financial Statements. To date, the Company has identified several areas that are within the scope of the guidance, including its contracts with respect to leased real estate and office equipment. In addition, operating lease agreements entered into with customers by the Company’s equipment financing businesses are also subject to the new guidance. The Company continues to evaluate the impact of the guidance, including determining whether additional contracts exist that are deemed to be in scope. As such, no conclusions have yet been reached regarding the potential impact of adoption on the Company’s Consolidated Financial Statements. Further, to date, no guidance has been issued by either the Company’s or the Bank’s primary regulators with respect to how the impact of the amended standard is to be treated for regulatory capital purposes.

Premium Amortization – Purchased Callable Debt Securities

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

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

While early adoption is permitted, the Company does not expect to elect that option. The Company has begun its evaluation of the amended guidance including the potential impact on its Consolidated Financial Statements. In addition, the Company has initiated the development of an implementation plan which includes an evaluation of selected third-party vendor solutions intended to aid in the application of the amended standards. As a result of the required change in approach toward determining estimated credit losses from the current “incurred loss” model to one based on estimated cash flows over a loan’s contractual life, adjusted for prepayments (a “life of loan” model), the Company expects the new guidance will result in an increase in the allowance for loan losses, particularly for longer duration portfolios. The Company also expects the new guidance may result in an allowance for debt securities. In both cases, the extent of the change is indeterminable at this time as it will be dependent upon portfolio composition and credit quality at the adoption date, as well as economic conditions and forecasts at that time. Further, to date, no guidance has been issued by either the Company’s or the Bank’s primary regulators with respect to how the impact of the amended standard is to be treated for regulatory capital purposes.

Simplifying the Test for Goodwill Impairment

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

NOTE 14. SUBSEQUENT EVENTS

Acquisition of Suffolk Bancorp

Effective April 1, 2017, People’s United completed its acquisition of Suffolk Bancorp (“Suffolk”) based in Riverhead, New York. Accordingly, People’s United’s consolidated financial statements as of and for the period ended March 31, 2017 do not include Suffolk. At March 31, 2017, Suffolk had total loans of $1.66 billion, total deposits of $1.85 billion and operated 27 branches in the greater Long Island area.

Total consideration paid in the Suffolk acquisition consisted of approximately 26.6 million shares of People’s United common stock with a fair value of approximately $485 million. Merger-related expenses totaling $1.0 million relating to this transaction were recorded in the three months ended March 31, 2017.

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

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 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 Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and may include other forms such as proxy statements. Other written or oral statements made by People’s United or its representatives from time to time may also contain forward-looking statements.

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

All forward-looking statements are subject to risks and uncertainties that could cause People’s United’s actual results or financial condition to differ materially from those expressed in or implied by such statements. Factors of particular importance to People’s United include, but are not limited to: (1) changes in general, international, national or regional economic conditions; (2) changes in interest rates; (3) changes in loan default and charge-off rates; (4) changes in deposit levels; (5) changes in levels of income and expense in non-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.

Selected Consolidated Financial Information


	Three Months Ended
(dollars in millions, except per common share data)	March 31, 2017			Dec. 31, 2016			March 31, 2016
Earnings Data:
Net interest income (fully taxable equivalent)	$	258.1		$	255.2		$	247.4
Net interest income		248.6			246.8			240.1
Provision for loan losses		4.4			7.7			10.5
Non-interest income		84.7			84.2			82.3
Non-interest expense (1)		226.1			217.2			217.3
Income before income tax expense		102.8			106.1			94.6
Net income		70.8			75.9			62.9
Net income available to common shareholders (1)		67.3			74.1			62.9

Selected Statistical Data:
Net interest margin (2)		2.82	%		2.78	%		2.83	%
Return on average assets (1),(2)		0.70			0.75			0.65
Return on average common equity (2)		5.50			6.10			5.30
Return on average tangible common equity (1),(2)		9.6			10.7			9.4
Efficiency ratio (1)		59.4			59.3			62.7

Common Share Data:
Basic and diluted earnings per common share (1)	$	0.22		$	0.24		$	0.21
Dividends paid per common share		0.17			0.17			0.1675
Common dividend payout ratio (1)		78.3	%		69.8	%		80.6	%
Book value per common share (end of period)	$	15.94		$	15.85		$	15.80
Tangible book value per common share (end of period) (1)		9.07			8.92			8.94
Stock price:
High		19.85			20.13			16.27
Low		17.47			15.28			13.62
Close (end of period)		18.20			19.36			15.93

(1)

See Non-GAAP Financial Measures and Reconciliation to GAAP.

(2)

Annualized.


	As of and for the Three Months Ended
(dollars in millions)	March 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			March 31, 2016
Financial Condition Data:
Total assets	$	40,230		$	40,610		$	40,692		$	40,150		$	39,264
Loans		29,687			29,745			29,368			29,038			28,511
Securities		6,424			6,738			7,046			6,785			6,732
Short-term investments		392			182			373			364			251
Allowance for loan losses		231			229			226			220			216
Goodwill and other acquisition-related intangible assets		2,136			2,142			2,070			2,076			2,079
Deposits		30,506			29,861			29,656			28,999			29,105
Borrowings		3,183			4,057			4,437			4,563			3,717
Notes and debentures		904			1,030			1,054			1,058			1,050
Stockholders’ equity		5,195			5,142			4,862			4,830			4,791
Total risk-weighted assets:
People’s United		30,229			30,540			30,451			30,267			29,832
People’s United Bank, National Association		30,202			30,489			30,415			30,232			29,826
Non-performing assets (1)		183			167			180			182			189
Net loan charge-offs		2.4			4.7			2.5			5.1			6.0

Average Balances:
Loans	$	29,355		$	29,346		$	29,107		$	28,558		$	28,159
Securities (2)		6,831			7,074			6,873			6,699			6,498
Short-term investments		371			308			361			298			348
Total earning assets		36,557			36,728			36,341			35,555			35,005
Total assets		40,317			40,623			40,304			39,422			38,773
Deposits		29,923			29,773			29,437			29,079			28,721
Borrowings		3,709			4,148			4,296			3,895			3,664
Notes and debentures		966			1,045			1,056			1,049			1,044
Total funding liabilities		34,598			34,966			34,789			34,023			33,429
Stockholders’ equity		5,166			5,039			4,841			4,795			4,761

Ratios:
Net loan charge-offs to average total loans (annualized)		0.03	%		0.06	%		0.04	%		0.07	%		0.09	%
Non-performing assets to originated loans, real estate owned and repossessed assets (1)		0.63			0.57			0.63			0.64			0.68
Originated allowance for loan losses to:
Originated loans (1)		0.77			0.77			0.76			0.75			0.75
Originated non-performing loans (1)		140.9			150.6			142.0			135.3			123.3
Average stockholders’ equity to average total assets		12.8			12.4			12.0			12.2			12.3
Stockholders’ equity to total assets		12.9			12.7			11.9			12.0			12.2
Tangible common equity to tangible assets (3)		7.4			7.2			7.2			7.2			7.3
Total risk-based capital:
People’s United		12.7			12.5			11.5			11.5			11.5
People’s United Bank, National Association		13.4			13.3			12.8			12.8			12.9

(1)	Excludes acquired loans.

(2)	Average balances for securities are based on amortized cost.

(3)	See Non-GAAP Financial Measures and Reconciliation to GAAP.

Completed Acquisition

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 certain non-GAAP financial measures, such as the efficiency and tangible common equity ratios, tangible book value per common share and operating earnings metrics. Management believes these non-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, including non-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) total non-interest expense (excluding operating lease expense, goodwill impairment charges, amortization of other acquisition-related intangible assets, losses on real estate assets and non-recurring expenses) (the numerator) to (ii) net interest income on a fully taxable equivalent (“FTE”) basis plus total non-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, and non-recurring income) (the denominator). People’s United generally considers an item of income or expense to be non-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 a non-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. Effective in 2016, recurring writedowns of banking house assets and certain severance-related costs are no longer considered to be non-operating expenses. Operating earnings per common share (“EPS”) is derived by determining the per common share impact of the respective adjustments to arrive at operating earnings and adding (subtracting) such amounts to (from) 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 the non-GAAP financial measures discussed above may differ from those used by other financial institutions.

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


	Three Months Ended
(dollars in millions)	March 31, 2017			Dec. 31, 2016			March 31, 2016
Total non-interest expense	$	226.1		$	217.2		$	217.3

Adjustments to arrive at operating non-interest expense:
Merger-related expenses		(1.2	)		(0.9	)		—
Acquisition integration and other costs		—			(0.7	)		—

Total		(1.2	)		(1.6	)		n/a

Operating non-interest expense		224.9			215.6			n/a

Operating lease expense		(8.8	)		(8.3	)		(9.2	)
Amortization of other acquisition-related intangible assets		(6.3	)		(6.2	)		(5.8	)
Other (1)		(1.8	)		(0.6	)		(1.5	)

Total non-interest expense for efficiency ratio	$	208.0		$	200.5		$	200.8


Net interest income (FTE basis)	$	258.1		$	255.2		$	247.4
Total non-interest income		84.7			84.2			82.3

Total revenues		342.8			339.4			329.7
Adjustments:
Net security losses (gains)		15.7			6.0			(0.1	)
Operating lease expense		(8.8	)		(8.3	)		(9.2	)
BOLI FTE adjustment		0.4			0.7			0.5
Other (2)		0.2			0.2			(0.7	)

Total revenues for efficiency ratio	$	350.3		$	338.0		$	320.2

Efficiency ratio		59.4	%		59.3	%		62.7	%

n/a	For the three months ended March 31, 2016, no expenses were considered to be non-operating expenses. Accordingly, operating metrics were not applicable.

(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 (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.

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


	Three Months Ended
(dollars in millions, except per common share data)	March 31, 2017			Dec. 31, 2016			March 31, 2016
Net income available to common shareholders	$	67.3		$	74.1		$	62.9

Adjustments to arrive at operating earnings:
Merger-related expenses		1.2			0.9			—
Acquisition integration and other costs		—			0.7			—

Total pre-tax adjustments		1.2			1.6			n/a
Tax effect		(0.4	)		(0.6	)		n/a

Total adjustments, net of tax		0.8			1.0			n/a

Operating earnings	$	68.1		$	75.1			n/a


EPS, as reported	$	0.22		$	0.24		$	0.21

Adjustments to arrive at operating EPS:
Merger-related expenses		—			—			—
Acquisition integration and other costs		—			—			—

Total adjustments per share		—			—			n/a

Operating EPS	$	0.22		$	0.24			n/a


Average total assets	$	40,317		$	40,623		$	38,773

Operating return on average assets (annualized)		0.68	%		0.74	%		n/a

n/a

For the three months ended March 31, 2016, no expenses were considered to be non-operating expenses. Accordingly, operating metrics were not applicable.

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


	Three Months Ended
(dollars in millions)	March 31, 2017			Dec. 31, 2016			March 31, 2016
Operating earnings	$	68.1		$	75.1			n/a


Average stockholders’ equity	$	5,166		$	5,039		$	4,761
Less: Average preferred stock		244			165			—

Average common equity		4,922			4,874			4,761
Less: Average goodwill and average other acquisition-related intangible assets		2,134			2,094			2,085

Average tangible common equity	$	2,788		$	2,780		$	2,676

Operating return on average tangible common equity		9.8	%		10.8	%		n/a


	Three Months Ended
(dollars in millions)	March 31, 2017			Dec. 31, 2016			March 31, 2016
Common dividends paid	$	52.7		$	51.7		$	50.6


Operating earnings	$	68.1		$	75.1			n/a

Operating common dividend payout ratio		77.3	%		68.8	%		n/a

n/a

For the three months ended March 31, 2016, no expenses were considered to be non-operating expenses. Accordingly, operating metrics were not applicable.

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)	March 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			March 31, 2016
Total stockholders’ equity	$	5,195		$	5,142		$	4,862		$	4,830		$	4,791
Less: Preferred stock		244			244			—			—			—

Common equity		4,951			4,898			4,862			4,830			4,791
Less: Goodwill and other acquisition-related intangible assets		2,136			2,142			2,070			2,076			2,079

Tangible common equity	$	2,815		$	2,756		$	2,792		$	2,754		$	2,712


Total assets	$	40,230		$	40,610		$	40,692		$	40,150		$	39,264
Less: Goodwill and other acquisition-related intangible assets		2,136			2,142			2,070			2,076			2,079

Tangible assets	$	38,094		$	38,468		$	38,622		$	38,074		$	37,185

Tangible common equity ratio		7.4	%		7.2	%		7.2	%		7.2	%		7.3	%


(in millions, except per common share data)	March 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			March 31, 2016
Tangible common equity	$	2,815		$	2,756		$	2,792		$	2,754		$	2,712


Common shares issued		406.43			405.00			400.13			399.74			399.54
Less: Common shares classified as treasury shares		89.04			89.06			89.05			89.05			89.04
Unallocated ESOP common shares		6.88			6.97			7.06			7.14			7.23

Common shares		310.51			308.97			304.02			303.55			303.27

Tangible book value per common share	$	9.07		$	8.92		$	9.18		$	9.07		$	8.94

Financial Overview

People’s United reported net income of $70.8 million, or $0.22 per diluted share, for the three months ended March 31, 2017, compared to $62.9 million, or $0.21 per diluted share, for the year-ago period. Included in this quarter’s results were merger-related expenses totaling $1.2 million ($0.8 million after-tax). Compared to the year-ago period, first quarter 2017 earnings reflect continued loan and deposit growth, meaningful cost control and the negative impact of the historically low interest rate environment. People’s United’s return on average assets was 0.70% for the three months ended March 31, 2017 compared to 0.65% for the year-ago period. Return on average tangible common equity was 9.6% for the three months ended March 31, 2017 compared to 9.4% for the year-ago period.

Compared to the first quarter of 2016, FTE net interest income increased $10.7 million to $258.1 million and the net interest margin decreased one basis point to 2.82%. FTE net interest income increased $2.9 million and the net interest margin increased four basis points compared to the fourth quarter of 2016 (see Net Interest Income).

Average total earning assets increased $1.6 billion compared to the first quarter of 2016, reflecting increases of $1.2 billion in average total loans and $333 million in average securities. Average total funding liabilities increased $1.2 billion compared to the year-ago quarter, reflecting a $1.2 billion increase in average total deposits.

Compared to the year-ago quarter, total non-interest income increased $2.4 million and total non-interest expense increased $8.8 million. The efficiency ratio was 59.4% for the first quarter of 2017, compared to 62.7% for the year-ago period (see Non-Interest Income and Non-Interest Expense).

The provision for loan losses for the three months ended March 31, 2017 totaled $4.4 million compared to $10.5 million in the year-ago period. Net loan charge-offs as a percentage of average total loans on an annualized basis were 0.03% in the first quarter of 2017 compared to 0.09% in the year-ago quarter. The allowance for loan losses on originated loans was $225.0 million at March 31, 2017, a $2.0 million increase from December 31, 2016. The allowance for loan losses on acquired loans was $6.3 million at both March 31, 2017 and December 31, 2016. Non-performing assets (excluding acquired non-performing loans) totaled $182.9 million at March 31, 2017, a $15.6 million increase from December 31, 2016. At March 31, 2017, the originated allowance for loan losses as a percentage of originated loans was 0.77% and as a percentage of originated non-performing loans was 140.9%, compared to 0.77% and 150.6%, respectively, at December 31, 2016 (see Asset Quality).

People’s United’s total stockholders’ equity was $5.2 billion at March 31, 2017, compared to $5.1 billion at December 31, 2016. Stockholders’ equity as a percentage of total assets was 12.9% at March 31, 2017, compared to 12.7% at December 31, 2016. Tangible common equity as a percentage of tangible assets was 7.4% at March 31, 2017, compared to 7.2% at December 31, 2016 (see Stockholders’ Equity and Dividends). People’s United’s and People’s United Bank, National Association (the “Bank”) Total risk-based capital ratios were 12.7% and 13.4%, respectively, at March 31, 2017, compared to 12.5% and 13.3%, respectively, at December 31, 2016 (see Regulatory Capital Requirements).

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.

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. Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

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. For non-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 net charge-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 from year-to-year changes in credit conditions. While this method of allocation allows management to more effectively assess the longer-term profitability of a segment, it may result in a measure of operating segment provision for loan losses that does not reflect actual incurred losses for the periods presented.

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

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

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

When performed, the goodwill impairment analysis is a two-step test. The first step (“Step 1”) 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 deemed to exist and a second step is performed to measure the amount of such impairment, if any. At this time, none of the Company’s identified reporting units are at risk of failing the Step 1 goodwill impairment test.

Segment Performance Summary


Three months ended March 31, 2017 (in millions)	Commercial Banking		Retail Banking			Total Reportable Segments		Treasury		Other			Total Consolidated
Net interest income (loss)	$	140.1	$	91.2		$	231.3	$	26.4	$	(9.1	)	$	248.6
Provision for loan losses		9.6		3.2			12.8		—		(8.4	)		4.4
Total non-interest income		39.7		43.4			83.1		1.5		0.1			84.7
Total non-interest expense		84.5		132.7			217.2		4.2		4.7			226.1

Income (loss) before income tax expense (benefit)		85.7		(1.3	)		84.4		23.7		(5.3	)		102.8
Income tax expense (benefit)		26.7		(0.4	)		26.3		7.4		(1.7	)		32.0

Net income (loss)	$	59.0	$	(0.9	)	$	58.1	$	16.3	$	(3.6	)	$	70.8

Average total assets	$	22,581.1	$	9,420.8		$	32,001.9	$	7,522.0	$	793.4		$	40,317.3
Average total liabilities		7,159.8		19,095.5			26,255.3		8,499.4		396.7			35,151.4


Three months ended March 31, 2016 (in millions)	Commercial Banking		Retail Banking			Total Reportable Segments		Treasury		Other			Total Consolidated
Net interest income (loss)	$	139.7	$	86.2		$	225.9	$	22.6	$	(8.4	)	$	240.1
Provision for loan losses		9.6		3.2			12.8		—		(2.3	)		10.5
Total non-interest income		39.0		39.9			78.9		1.7		1.7			82.3
Total non-interest expense		79.7		126.2			205.9		2.1		9.3			217.3

Income (loss) before income tax expense (benefit)		89.4		(3.3	)		86.1		22.2		(13.7	)		94.6
Income tax expense (benefit)		29.9		(1.1	)		28.8		7.4		(4.5	)		31.7

Net income (loss)	$	59.5	$	(2.2	)	$	57.3	$	14.8	$	(9.2	)	$	62.9

Average total assets	$	22,254.3	$	8,697.4		$	30,951.7	$	7,138.7	$	682.7		$	38,773.1
Average total liabilities		6,402.8		19,150.1			25,552.9		8,109.5		349.9			34,012.3

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


	Three Months Ended March 31,
(in millions)	2017		2016
Net interest income	$	140.1	$	139.7
Provision for loan losses		9.6		9.6
Total non-interest income		39.7		39.0
Total non-interest expense		84.5		79.7

Income before income tax expense		85.7		89.4
Income tax expense		26.7		29.9

Net income	$	59.0	$	59.5

Average total assets	$	22,581.1	$	22,254.3
Average total liabilities		7,159.8		6,402.8

Commercial Banking’s net income for the three months ended March 31, 2017 was essentially unchanged compared to the year-ago period. The $0.4 million increase in net interest income primarily reflects the benefit from an increase in average commercial loans, partially offset by increases in net FTP funding charges and interest expense, and continued pricing pressure within the loan portfolio. Such pricing pressure reflects the pay-off of higher-yielding loans, partially mitigated by new originations at rates higher than the existing portfolio. Non-interest income increased $0.7 million compared to the year-ago period, primarily reflecting increases in institutional and corporate trust fees, partially offset by a decrease in customer interest rate swap income. The $4.8 million increase in non-interest expense in the first quarter of 2017 compared to the year-ago period reflects higher levels of both direct and allocated expenses. Average total assets increased $327 million and average liabilities increased $757 million compared to the first quarter of 2016, reflecting loan and deposit growth, respectively.

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. and non-institutional trust services.


	Three Months Ended March 31,
(in millions)	2017			2016
Net interest income	$	91.2		$	86.2
Provision for loan losses		3.2			3.2
Total non-interest income		43.4			39.9
Total non-interest expense		132.7			126.2

Loss before income tax benefit		(1.3	)		(3.3	)
Income tax benefit		(0.4	)		(1.1	)

Net loss	$	(0.9	)	$	(2.2	)

Average total assets	$	9,420.8		$	8,697.4
Average total liabilities		19,095.5			19,150.1

Retail Banking’s net loss for the three months ended March 31, 2017 decreased $1.3 million compared to the year-ago period. The $5.0 million increase in net interest income primarily reflects the benefit from an increase in average residential mortgage loans and a decrease in interest expense, partially offset by lower net FTP funding credits and continued pricing pressure within the loan portfolio. Such pricing pressure reflects the pay-off of higher-yielding loans, partially mitigated by new originations at rates higher than the existing portfolio. Non-interest income increased $3.5 million from the year-ago period, primarily reflecting the addition of Gerstein, Fisher & Associates, Inc. (“Gerstein Fisher”) in November 2016. The $6.5 million increase in non-interest expense in the first quarter of 2017 compared to the year-ago period reflects higher levels of both direct and allocated expenses. Compared to the first quarter of 2016, average total assets increased $723 million, primarily reflecting loan growth, and average total liabilities decreased $55 million, primarily reflecting a decrease in deposits.

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 consumer 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 sell newly-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 March 31,
(in millions)	2017		2016
Net interest income	$	26.4	$	22.6
Total non-interest income		1.5		1.7
Total non-interest expense		4.2		2.1

Income before income tax expense		23.7		22.2
Income tax expense		7.4		7.4

Net income	$	16.3	$	14.8

Average total assets	$	7,522.0	$	7,138.7
Average total liabilities		8,499.4		8,109.5

Treasury’s net income for the three months ended March 31, 2017 increased $1.5 million compared to the year-ago period. The $3.8 million increase in net interest income primarily reflects an increase in securities income and higher net funding credits, partially offset by an increase in interest expense. Non-interest income in the first quarter of 2017 includes a $16.1 million gain recorded in connection with the exchange of an ownership interest in a non-marketable equity security (previously recorded in other assets) for cash and common stock in a publicly-traded company. Net security losses in the first quarter of 2017 totaling $15.7 million resulting from the sale of low-yielding and short duration U.S. Treasury and collateralized mortgage obligations (“CMO”) securities, with a combined amortized cost of $487 million, are also included in non-interest income. The $2.1 million increase in non-interest expense in the first quarter of 2017 compared to the year-ago period 2016 reflects higher levels of both direct and allocated expenses. Compared to the first quarter of 2016, average total assets increased $383 million, reflecting an increase in securities, and average total liabilities increased $390 million, primarily reflecting an increase in deposits, partially offset by a decrease in notes and debentures.

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 in non-interest expense in the first quarter of 2017 are merger-related expenses totaling $1.2 million.


	Three Months Ended March 31,
(in millions)	2017			2016
Net interest loss	$	(9.1	)	$	(8.4	)
Provision for loan losses		(8.4	)		(2.3	)
Total non-interest income		0.1			1.7
Total non-interest expense		4.7			9.3

Loss before income tax benefit		(5.3	)		(13.7	)
Income tax benefit		(1.7	)		(4.5	)

Net loss	$	(3.6	)	$	(9.2	)

Average total assets	$	793.4		$	682.7
Average total liabilities		396.7			349.9

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 Federal Reserve Board (the “FRB”) raised the targeted range for the federal funds rate by 25 basis points to between 0.75% and 1.00% in March 2017. Since December 2015, the FRB has raised the targeted range for the federal funds rate four times by a total of 100 basis points. Until that date, the FRB had not changed the targeted range of between 0% and 0.25% since December 2008. For the first quarter of 2017, the average effective federal funds rate was 0.70%.

The net interest margin was 2.82% in the first quarter of 2017, compared to 2.78% in the fourth quarter of 2016 and 2.83% in the first quarter of 2016. The improvement in the net interest margin from the fourth quarter of 2016 primarily reflects new loan originations at rates higher than the existing portfolio and an increase in the yield on the securities portfolio, partially offset by higher rates on deposits and borrowing, and two fewer calendar days in the first quarter of 2017. The net interest margin continues to be negatively impacted by the historically low interest rate environment where loan repricings are outpacing the Company’s ability to lower deposit costs as well as the continued investment of a portion of the Company’s capital in low-yielding short-term investments.

First Quarter 2017 Compared to First Quarter 2016

FTE net interest income increased $10.7 million compared to the first quarter of 2016, reflecting a $14.7 million increase in total interest and dividend income, partially offset by a $4.0 million increase in total interest expense, and the net interest margin decreased one basis point to 2.82%.

Average total earning assets were $36.6 billion in the first quarter of 2017, a $1.6 billion increase from the first quarter of 2016, primarily reflecting increases of $1.2 billion in average total loans and $333 million in average securities. Average total loans, average securities and average short-term investments comprised 80%, 19% and 1%, respectively, of average total earning assets in both the first quarter of 2017 and 2016. In the current quarter, the yield earned on the total loan portfolio was 3.49% and the yield earned on securities and short-term investments was 2.44%, compared to 3.50% and 2.28%, respectively, in the year-ago quarter. Excluding adjustable-rate residential mortgage loans, which are mostly of the hybrid variety, 50% of the loan portfolio had floating interest rates at March 31, 2017, compared to 51% at December 31, 2016.

The average total commercial and residential mortgage loan portfolios increased $447 million and $835 million, respectively, compared to the year-ago quarter, reflecting growth. Average consumer loans decreased $86 million compared to the year-ago quarter, primarily reflecting a $90 million decrease in average home equity loans.

Average total funding liabilities were $34.6 billion in the first quarter of 2017, a $1.2 billion increase from the year-ago period, reflecting increases of $1.2 billion in average total deposits and $45 million in average total borrowings, partially offset by a $78 million decrease in average notes and debentures. The increase in average total deposits reflects organic growth and a $153 million increase in average brokered deposits. Excluding brokered deposits, average savings, interest-bearing checking and money market deposits, and average non-interest-bearing deposits increased $939 million and $443 million, respectively, and average time deposits decreased $333 million. Average total deposits comprised 86% of average total funding liabilities in the both the first quarter of 2017 and 2016. The decrease in average notes and debentures reflects the repayment in February 2017 of the $125 million 5.80% fixed-rate/floating-rate subordinated notes.

The three basis point increase to 0.48% in the rate paid on average total funding liabilities primarily reflects an increase in the cost of total borrowings, reflecting the increases in the targeted federal funds rate discussed above. The rate paid on average total deposits increased one basis point compared to the first quarter of 2016, primarily reflecting a six basis points increase in savings, interest-bearing checking and money market deposits, partially offset by a ten basis points decrease in time deposits and a $443 million increase in non-interest-bearing deposits. Average savings, interest-bearing checking and money market deposits and average time deposits comprised 63% and 15%, respectively, of average total deposits in the first quarter of 2017, compared to 62% and 17%, respectively, in the comparable 2016 period.

First Quarter 2017 Compared to Fourth Quarter 2016

FTE net interest income increased $2.9 million compared to the fourth quarter of 2016, reflecting a $5.3 million increase in total interest and dividend income, partially offset by a $2.4 million increase in total interest expense, and the net interest margin increased four basis points to 2.82%. The improvement in the net interest margin reflects new loan originations at rates higher than the existing portfolio and an increase in the yield on the securities portfolio (which each benefited the net interest margin by nine and three basis points, respectively), partially offset by higher rates on deposits and borrowings and two fewer calendar days in the first quarter (which each reduced the net interest margin by four basis points).

Average total earning assets were $36.6 billion in the first quarter of 2017, a $171 million decrease from the fourth quarter of 2016, primarily reflecting a $242 million decrease in average securities, partially offset by a $63 million increase in average short-term investments. In the first quarter of 2017, the average residential mortgage loan portfolio increased $239 million while total average commercial loans decreased $199 million (the average mortgage warehouse portfolio decreased $345 million).

Average total funding liabilities decreased $369 million, reflecting decreases of $439 million in average total borrowings and $79 million in average notes and debentures, partially offset by a $150 million increase in average total deposits. The decrease in average notes and debentures reflects the repayment in February 2017 of the $125 million 5.80% fixed-rate/floating-rate subordinated notes. The increase in average total deposits reflects organic growth and an $86 million increase in average brokered deposits.

The following table presents average balance sheets, FTE-basis interest income, interest expense and the corresponding average yields earned and rates paid for the three months ended March 31, 2017, December 31, 2016 and March 31, 2016. The average balances are principally daily averages and, for loans, include both performing and non-performing balances. Interest income on loans includes the effect of deferred loan fees and costs accounted for as yield adjustments, but does not include interest on loans for which People’s United has ceased to accrue interest. Premium amortization and discount accretion (including amounts attributable to purchase accounting adjustments) are also included in the respective interest income and interest expense amounts. The impact of People’s United’s use of derivative instruments in managing IRR is also reflected in the table, classified according to the instrument hedged and the related risk management objective.

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


	March 31, 2017							December 31, 2016							March 31, 2016
Three months ended (dollars in millions)	Average Balance		Interest		Yield/ Rate			Average Balance		Interest		Yield/ Rate			Average Balance		Interest		Yield/ Rate
Assets:
Short-term investments	$	370.5	$	0.7		0.81	%	$	307.9	$	0.4		0.44	%	$	347.8	$	0.4		0.47	%
Securities (2)		6,831.4		43.2		2.53			7,073.5		42.1		2.38			6,498.0		38.7		2.38
Loans:
Commercial real estate		10,189.7		88.6		3.48			10,079.4		86.8		3.44			9,997.6		86.8		3.47
Commercial and industrial		7,704.4		67.9		3.53			8,023.3		68.2		3.40			7,478.1		63.4		3.39
Equipment financing		2,980.8		31.6		4.24			2,971.4		31.8		4.29			2,951.9		33.3		4.52
Residential mortgage		6,374.8		49.6		3.11			6,136.2		47.3		3.09			5,540.3		44.1		3.18
Home equity and other consumer		2,105.4		18.4		3.50			2,135.9		18.1		3.39			2,191.7		18.6		3.40

Total loans		29,355.1		256.1		3.49			29,346.2		252.2		3.44			28,159.6		246.2		3.50

Total earning assets		36,557.0	$	300.0		3.28	%		36,727.6	$	294.7		3.21	%		35,005.4	$	285.3		3.26	%

Other assets		3,760.3							3,895.4							3,767.7

Total assets	$	40,317.3						$	40,623.0						$	38,773.1

Liabilities and stockholders’ equity:
Deposits:
Non-interest-bearing	$	6,435.0	$	—		—	%	$	6,524.5	$	—		—	%	$	5,992.3	$	—		—	%
Savings, interest-bearing checking and money market		18,907.9		16.4		0.35			18,614.5		14.1		0.30			17,905.6		12.7		0.29
Time		4,580.3		10.7		0.93			4,634.4		11.0		0.95			4,823.6		12.5		1.03

Total deposits		29,923.2		27.1		0.36			29,773.4		25.1		0.34			28,721.5		25.2		0.35

Borrowings:
Federal Home Loan Bank advances		2,711.9		5.8		0.86			3,028.8		5.1		0.67			2,880.0		4.4		0.61
Federal funds purchased		607.5		1.2		0.78			779.3		1.1		0.54			394.0		0.4		0.44
Customer repurchase agreements		309.5		0.1		0.19			328.8		0.2		0.20			389.6		0.2		0.19
Other borrowings		79.9		0.2		0.78			11.0		—		0.67			—		—		—

Total borrowings		3,708.8		7.3		0.79			4,147.9		6.4		0.61			3,663.6		5.0		0.54

Notes and debentures		965.8		7.5		3.10			1,045.0		8.0		3.08			1,043.8		7.7		2.96

Total funding liabilities		34,597.8	$	41.9		0.48	%		34,966.3	$	39.5		0.45	%		33,428.9	$	37.9		0.45	%

Other liabilities		553.6							617.4							583.4

Total liabilities		35,151.4							35,583.7							34,012.3
Stockholders’ equity		5,165.9							5,039.3							4,760.8

Total liabilities and stockholders’ equity	$	40,317.3						$	40,623.0						$	38,773.1

Net interest income/spread (3)			$	258.1		2.80	%			$	255.2		2.76	%			$	247.4		2.81	%

Net interest margin						2.82	%						2.78	%						2.83	%

(1)	Average yields earned and rates paid are annualized.

(2)	Average balances and yields for securities are based on amortized cost.

(3)	The fully taxable equivalent adjustment was $9.5 million, $8.4 million and $7.3 million for the three months ended March 31, 2017, December 31, 2016 and March 31, 2016, respectively.

Volume and Rate Analysis

The following table shows 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: changes in volume (changes in average balances multiplied by the prior year’s average interest rates); changes in rates (changes in average interest rates multiplied by the prior year’s average balances); and the total change. Changes attributable to both volume and rate have been allocated proportionately.


	Three Months Ended March 31, 2017 Compared To
	March 31, 2016									December 31, 2016
	Increase (Decrease)									Increase (Decrease)
(in millions)	Volume			Rate			Total			Volume			Rate			Total
Interest and dividend income:
Short-term investments	$	—		$	0.3		$	0.3		$	0.1		$	0.2		$	0.3
Securities		2.0			2.5			4.5			(1.5	)		2.6			1.1
Loans:
Commercial real estate		1.7			0.1			1.8			1.0			0.8			1.8
Commercial and industrial		2.0			2.5			4.5			(2.8	)		2.5			(0.3	)
Equipment financing		0.3			(2.0	)		(1.7	)		0.1			(0.3	)		(0.2	)
Residential mortgage		6.5			(1.0	)		5.5			1.9			0.4			2.3
Home equity and other consumer		(0.7	)		0.5			(0.2	)		(0.3	)		0.6			0.3

Total loans		9.8			0.1			9.9			(0.1	)		4.0			3.9

Total change in interest and dividend income		11.8			2.9			14.7			(1.5	)		6.8			5.3

Interest expense:
Deposits:
Savings, interest-bearing checking and money market		0.7			3.0			3.7			0.2			2.1			2.3
Time		(0.6	)		(1.2	)		(1.8	)		(0.1	)		(0.2	)		(0.3	)

Total deposits		0.1			1.8			1.9			0.1			1.9			2.0

Borrowings:
Federal Home Loan Bank advances		(0.3	)		1.7			1.4			(0.6	)		1.3			0.7
Federal funds purchased		0.3			0.5			0.8			(0.2	)		0.3			0.1
Customer repurchase agreements		0.1			(0.2	)		(0.1	)		0.1			(0.2	)		(0.1	)
Other borrowings		0.1			0.1			0.2			—			0.2			0.2

Total borrowings		0.2			2.1			2.3			(0.7	)		1.6			0.9

Notes and debentures		(0.6	)		0.4			(0.2	)		(0.6	)		0.1			(0.5	)

Total change in interest expense		(0.3	)		4.3			4.0			(1.2	)		3.6			2.4

Change in net interest income	$	12.1		$	(1.4	)	$	10.7		$	(0.3	)	$	3.2		$	2.9

Non-Interest Income


	Three Months Ended
	March 31,			Dec. 31,			March 31,
(in millions)	2017			2016			2016
Bank service charges	$	23.5		$	24.2		$	23.8
Investment management fees		16.0			14.2			11.1
Operating lease income		10.2			9.5			10.4
Insurance revenue		9.1			6.8			9.3
Commercial banking lending fees		8.2			7.2			8.1
Cash management fees		6.3			6.2			6.0
Brokerage commissions		3.0			2.8			3.0
Net gains on sales of residential mortgage loans		0.9			2.6			0.9
Net security (losses) gains		(15.7	)		(6.0	)		0.1
Other non-interest income:
Customer interest rate swap income, net		2.8			3.8			3.3
BOLI		0.8			1.5			1.0
Other		19.6			11.4			5.3

Total other non-interest income		23.2			16.7			9.6

Total non-interest income	$	84.7		$	84.2		$	82.3

Total non-interest income in the first quarter of 2017 increased $2.4 million compared to the first quarter of 2016 and $0.5 million compared to the fourth quarter of 2016. The increase in non-interest income compared to the first quarter of 2016 primarily reflects increases in investment management fees and other non-interest income (discussed below), partially offset by net security losses. The increase compared to the fourth quarter of 2016 primarily reflects increases in insurance revenue, both investment management and commercial banking lending fees, and other non-interest income, partially offset by an increase in net security losses.

Bank service charges continue to be impacted as a result of certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act as well as lower overdraft fees.

The improvement in investment management fees compared to both the first and fourth quarter of 2016 primarily reflects the acquisition of Gerstein Fisher in early November 2016. At March 31, 2017, assets under administration, which are not reported as assets of People’s United Financial, totaled $22.0 billion, of which $8.3 billion are under discretionary management, compared to $21.3 billion and $8.0 billion, respectively, at December 31, 2016.

The increase in insurance revenue from the fourth quarter of 2016 primarily reflects the seasonal nature of commercial insurance renewals. The increase in commercial banking lending fees compared to the fourth quarter of 2016 primarily reflects higher prepayment fees in the first quarter 2017. The decrease in net gains on sales of residential mortgage loans compared to the fourth quarter of 2016 reflects a 30% decrease in the volume of residential mortgage loan sales and narrower spreads on pricing.

On an FTE basis, BOLI income totaled $1.2 million in the first quarter of 2017, compared to $2.2 million in the fourth quarter of 2016 and $1.5 million in the year-ago quarter. BOLI income in the fourth quarter of 2016 includes death benefits received totaling $0.5 million.

Net security losses in both the first quarter of 2017 and the fourth quarter of 2016 reflect the sale of low-yielding and short duration U.S. Treasury and CMO securities with a combined amortized cost of $487 million and $403 million, respectively.

In the first quarter of 2017, the Company exchanged its ownership interest in a non-marketable equity security (previously recorded in other assets) for total consideration of $16.3 million, including (i) cash and (ii) common stock in a publicly-traded company with a fair value of approximately $10.8 million at acquisition. Included in other non-interest income is a $16.1 million gain recorded in connection with this transaction. Included in other non-interest income in the fourth quarter of 2016 is a $6.3 million gain resulting from the sale of an ownership interest in a legacy privately-held investment.

Non-Interest Expense


	Three Months Ended
	March 31,			Dec. 31,			March 31,
(dollars in millions)	2017			2016			2016
Compensation and benefits	$	125.6		$	114.0		$	114.1
Occupancy and equipment		38.6			37.8			37.5
Professional and outside service fees		15.5			16.3			17.4
Regulatory assessments		9.6			10.4			8.0
Operating lease expense		8.8			8.3			9.2
Amortization of other acquisition-related intangibles		6.3			6.2			5.8
Other non-interest expense:
Stationery, printing, postage and telephone		5.6			5.4			5.5
Advertising and promotion		2.5			3.1			2.3
Other		13.6			15.7			17.5

Total other non-interest expense		21.7			24.2			25.3

Total non-interest expense	$	226.1		$	217.2		$	217.3

Efficiency ratio		59.4	%		59.3	%		62.7	%

Total non-interest expense in the first quarter of 2017 increased $8.9 million compared to the fourth quarter of 2016 and $8.8 million compared to the year-ago period. Included in total non-interest expense in the first quarter of 2017 and fourth quarter of 2016 are merger-related and acquisition integration costs of $1.2 million and $1.6 million, respectively.

As compared to the first quarter of 2016, the improvement in the efficiency ratio reflects an increase in adjusted total revenues, partially offset by an increase in adjusted total expenses (see Non-GAAP Financial Measures and Reconciliation to GAAP).

Compensation and benefits increased $11.6 million compared to the fourth quarter of 2016 ($12.3 million excluding $0.7 million of severance-related costs) and $11.5 million compared to the year-ago quarter. The increase from the fourth quarter of 2016 primarily reflects seasonally-higher payroll and benefit-related costs, increases in incentive and health care expenses, as well as a full quarter of Gerstein Fisher expenses and new hires to support continued growth of the Company. The year-over-year increase primarily reflects normal merit increases and increases in incentive and health care expenses, as well as a full quarter of Gerstein Fisher expenses and new hires to support continued growth of the Company.

Professional and outside services fees include merger-related expenses totaling $0.7 million in the first quarter of 2017 and $0.9 million in the fourth quarter of 2016. Excluding such expenses, the decreases in professional and outside services fees of $0.6 million compared to the fourth quarter of 2016 and $2.6 million compared to the first quarter of 2016 are primarily related to the timing of certain projects in 2017 and the latter half of 2016.

Regulatory assessments include Federal Deposit Insurance Corporation (“FDIC”) insurance premiums that 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 increase in regulatory assessments compared to the first quarter of 2016 primarily reflects an increase in the Bank’s average total assets and the decrease compared to the fourth quarter of 2016 reflects an lower overall annual assessment rate.

Scheduled amortization expense attributable to other acquisition-related intangible assets for the full-year of 2017 and each of the next five years is as follows: $24.7 million in 2017; $13.2 million in 2018; $12.4 million in 2019; $12.0 million in 2020; $11.7 million in 2021; and $11.1 million in 2022.

Income Taxes

People’s United’s effective income tax rate was 31.1% for the three months ended March 31, 2017. Effective January 1, 2017, People’s United adopted new stock-based compensation accounting rules, which require the income tax effects of vestings and exercises be recognized in income tax expense. As a result, the Company realized windfall tax benefits totaling $1.0 million for the three months ended March 31, 2017. This amount, which was recognized as a discrete period income tax benefit, served to lower People’s United’s effective tax rate for the period by 1%. See Note 13 to the Consolidated Financial Statements for additional information. People’s United’s effective income tax rate for the full-year 2017 is expected to be approximately 32%. Differences, if any, arising between People’s United’s effective income tax rate and the U.S. federal statutory rate of 35% 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

Total assets at March 31, 2017 were $40.2 billion, a $380 million decrease from December 31, 2016, primarily reflecting decreases of $314 million in total securities and $58 million in total loans, partially offset by a $159 million increase in cash and cash equivalents. The decrease in total loans from December 31, 2016 to March 31, 2017 reflects decreases of $292 million in commercial loans and $35 million in home equity loans, partially offset by a $271 million increase in residential mortgage loans. Originated loans decreased $26 million from December 31, 2016 to $29.1 billion (commercial loans decreased $270 million and retail loans increased $244 million) and acquired loans decreased $32 million. At March 31, 2017, the carrying amount of the acquired loan portfolio totaled $579 million. The decrease in total securities primarily reflects (i) sales of U.S. Treasury securities and CMOs and (ii) paydowns on government sponsored enterprise (“GSE”) mortgage-backed securities and CMOs, partially offset by the purchase of GSE mortgage-backed securities and municipal bonds.

Non-performing assets (excluding acquired non-performing loans) totaled $182.9 million at March 31, 2017, a $15.6 million increase from December 31, 2016, primarily reflecting increases in non-performing equipment financing loans of $8.0 million, non-performing commercial and industrial loans of $5.9 million and real estate owned (“REO”) of $2.9 million, partially offset by a $2.2 million decrease in non-performing home equity loans. The allowance for loan losses totaled $231.3 million ($225.0 million on originated loans and $6.3 million on acquired loans) at March 31, 2017, compared to $229.3 million ($223.0 million on originated loans and $6.3 million on acquired loans) at December 31, 2016. At March 31, 2017, the originated allowance for loan losses as a percentage of originated loans was 0.77% and as a percentage of originated non-performing loans was 140.9%, compared to 0.77% and 150.6%, respectively, at December 31, 2016.

At March 31, 2017, total liabilities were $35.0 billion, a $433 million decrease from December 31, 2016, primarily reflecting decreases of $874 in total borrowings and $126 million in notes and debentures, partially offset by a $645 million increase in total deposits. The decrease in notes and debentures reflects the repayment of the $125 million 5.80% fixed-rate/floating-rate subordinated notes in February 2017.

People’s United’s total stockholders’ equity was $5.2 billion at March 31, 2017, a $53.1 million increase from December 31, 2016. This increase primarily reflects net income of $70.8 million for the three months ended March 31, 2017, net stock option and restricted stock-related transactions during the three months ended March 31, 2017 totaling $23.7 million and a $13.1 million decrease in accumulated other comprehensive loss (“AOCL”) since December 31, 2016, partially offset by common dividends paid of $52.7 million in the three months ended March 31, 2017. As a percentage of total assets, stockholders’ equity was 12.9% and 12.7% at March 31, 2017 and December 31, 2016, respectively. Tangible common equity equaled 7.4% of tangible assets at March 31, 2017 compared to 7.2% at December 31, 2016.

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 8.5%, 10.0%, 10.8% and 12.7%, respectively, at March 31, 2017, compared to 8.4%, 9.9%, 10.7% and 12.5%, respectively, at December 31, 2016. The Bank’s Tier 1 Leverage capital ratio and its CET 1, Tier 1 and Total risk-based capital ratios were 8.9%, 11.3%, 11.3% and 13.4%, respectively, at March 31, 2017, compared to 8.9%, 11.3%, 11.3% and 13.3%, respectively, at December 31, 2016 (see Regulatory Capital Requirements).

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


	March 31,		December 31,
(in millions)	2017		2016
Property Type:
Residential (multi-family)	$	3,724.2	$	3,790.1
Retail		2,548.4		2,530.1
Office buildings		2,146.7		2,173.7
Industrial/manufacturing		633.0		604.9
Hospitality/entertainment		567.8		548.9
Mixed/special use		221.4		220.3
Self storage		170.0		170.3
Health care		142.1		124.5
Land		38.9		41.8
Other		32.8		42.7

Total commercial real estate	$	10,225.3	$	10,247.3

Commercial and Industrial


	March 31,		December 31,
(in millions)	2017		2016
Industry:
Service	$	1,402.6	$	1,392.8
Finance and insurance		1,229.5		1,520.8
Manufacturing		1,181.7		1,111.4
Wholesale distribution		1,040.1		1,084.2
Health services		911.0		899.4
Retail sales		742.1		741.9
Real estate, rental and leasing		624.9		584.7
Transportation/utility		266.0		252.5
Construction		183.4		194.1
Arts/entertainment/recreation		134.7		131.4
Information/media		96.3		95.5
Public administration		59.3		56.6
Mining, oil and gas		8.6		9.0
Other		38.1		50.8

Total commercial and industrial	$	7,918.3	$	8,125.1

Equipment Financing


	March 31,		December 31,
(in millions)	2017		2016
Industry:
Transportation/utility	$	1,074.2	$	1,088.3
Real estate, rental and leasing		418.5		427.9
Construction		405.3		410.0
Printing		194.6		197.8
Waste		181.2		186.0
Wholesale distribution		136.2		145.8
Manufacturing		136.2		139.7
Packaging		129.6		135.2
Service		75.0		79.0
Mining, oil and gas		56.8		51.8
Health services		50.1		57.2
Other		111.8		113.8

Total equipment financing	$	2,969.5	$	3,032.5

Residential Mortgage


	March 31,		December 31,
(in millions)	2017		2016
Adjustable-rate	$	5,790.2	$	5,549.1
Fixed-rate		697.5		667.6

Total residential mortgage	$	6,487.7	$	6,216.7

Home Equity and Other Consumer


	March 31,		December 31,
(in millions)	2017		2016
Home equity lines of credit	$	1,838.2	$	1,883.3
Home equity loans		199.1		189.3
Other		49.2		50.7

Total home equity and other consumer	$	2,086.5	$	2,123.3

Asset Quality

Recent Trends

While People’s United continues to adhere to prudent underwriting standards, the loan portfolio is not immune to potential negative consequences arising as a result of general economic weakness and, in particular, a prolonged downturn in the housing market on a national scale as was experienced for much of the period from 2008 to 2012. 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.

Over the past few years, People’s United experienced an increase in the number of loan modification requests. Certain originated loans whose terms have been modified are considered troubled debt restructurings (“TDRs”). Acquired loans that are modified are not considered for TDR classification provided they are evaluated for impairment on a pool basis. Originated 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.

The Office of the Comptroller of the Currency guidance requires that loans subject to a borrower’s discharge from personal liability following a Chapter 7 bankruptcy be treated as TDRs, included in non-performing loans and written down to the estimated collateral value, regardless of delinquency status. Included in TDRs at March 31, 2017 are $21.1 million of such loans. Of this amount, $14.7 million, or 70%, were less than 90 days past due on their payments as of that date.

During the three months ended March 31, 2017, we performed 19 loan modifications that were not classified as TDRs. The balances of the loans at the time of the respective modifications totaled $18.4 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 3 to the Consolidated Financial Statements for additional disclosures relating to TDRs.

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-risk Alt-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 March 31, 2017, the loan portfolio included $1.3 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) lower loan-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 March 31, 2017, non-performing residential mortgage loans totaling $0.3 million had current LTV ratios of more than 100%. At March 31, 2017, the weighted average LTV ratio and FICO score for the residential mortgage loan portfolio were 63.1% and 758, 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 three months ended March 31, 2017, the Company repurchased one residential mortgage loan from a GSE and other parties that we had previously sold to the GSE and other parties. The balances of the loan at the time of the repurchase totaled $0.1 million and related fees and expenses incurred totaled less than $0.1 million. During that same time period, the Company issued four investor refunds, totaling less than $0.1 million, under contractual recourse agreements. Based on the limited number of repurchase requests the Company has historically received, the immaterial cost associated with such repurchase requests and management’s view that this past experience is consistent with our current and near-term estimate of such exposure, the Company has established a reserve for such repurchase requests, which totaled $0.2 million as of March 31, 2017.

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 a 20-year repayment phase. During the initial draw period, interest-only payments are required, after which the disbursed balance is fully amortized over a 20-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 a two-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 a 5-year amortization period. An additional small portion of our HELOC portfolio has a 5-year draw period which, at our discretion, may be renewed for an additional 5-year interest-only draw period.

The following table sets forth, as of March 31, 2017, the committed amount of HELOCs scheduled to have the draw period end during the years shown:


December 31, (in millions)	Credit Lines
2017	$	170.7
2018		266.0
2019		118.9
2020		197.6
2021		329.8
2022		507.2
Later years		2,031.6

Total	$	3,621.8

Approximately 90% 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 March 31, 2017 are as follows:


	Portfolio		Delinquencies
(dollars in millions)	Balance		Amount		Percent
HELOC status:
Still in draw period	$	1,625.7	$	7.3		0.45	%
Amortizing payment		212.5		11.3		5.31

For the three months ended March 31, 2017, 39% 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 a two-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 March 31, 2017, full and complete first lien position data was not readily available for 30% 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 combined loan-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 March 31, 2017, the portion of the home equity portfolio more than 90 days past due with a CLTV greater than 80% was $4.2 million.

As of March 31, 2017, full and complete first lien position data was readily available for 70%, or $1.4 billion, of the home equity portfolio. Of that total, 38%, or $538.9 million, are in a junior lien position. We estimate that of those junior liens, 35%, or $188.6 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 March 31, 2017, there were 45 loans totaling $4.5 million for which we have received notification that the holder of a superior lien has commenced foreclosure action. For 34 of the loans (totaling $3.8 million), our second lien position was performing at the time such foreclosure action was commenced. The total estimated loss related to those 34 loans was $0.4 million as of March 31, 2017. It is important to note that the percentage of new home equity originations for which we hold the first lien has increased steadily from approximately 40% in 2009 to approximately 65% as of March 31, 2017.

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 March 31, 2017, 93% 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 of non-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, a charge-off is recognized. This charge-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 recent 12-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 March 31, 2017, the weighted average CLTV ratio and FICO score for the home equity portfolio were 57% and 760, 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 a take-out from a permanent mortgage. The term of the construction period generally does not exceed two years. Loan commitments are based on established construction budgets that represent an estimate of total costs to complete the proposed project, including both hard (direct) costs (building materials, labor, etc.) and soft (indirect) costs (legal and architectural fees, etc.). 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 $599.9 million (2% of total loans) at March 31, 2017. The total committed amount at that date, including both the outstanding balance and the unadvanced portion of such loans, was $904.6 million. In some cases, a portion of the total committed amount includes an accompanying interest reserve. At March 31, 2017, construction loans totaling $247.5 million had remaining available interest reserves of $17.9 million. At that date, the Company had no construction loans with interest reserves that were on non-accrual status and included in non-performing loans.

Recent economic conditions have resulted in an increase in the number of extension requests for commercial real estate and construction loans, some of which have related repayment guarantees. Modifications of originated 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 $7.6 million of restructured construction loans at March 31, 2017.

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 a re-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 typically 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 be charged-off, typically based on the fair value of the collateral securing the loan.

Allowance and Provision for Loan Losses

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 and non-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 for smaller-balance, homogeneous loans that are evaluated on a collective basis; and (iii) a specific allowance for loans deemed to be impaired, including originated loans classified as TDRs.

Larger-balance, Non-homogeneous Loans. The Company establishes a loan loss allowance for its larger-balance, non-homogeneous loans using a methodology that incorporates (i) the probability of default for a given loan risk rating and (ii) historical default data over a multi-year 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 actual charge-off experience. This approach is applied to the commercial, commercial real estate and equipment financing components of the loan portfolio.

In developing 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 consideration of these factors, the Company may adjust the allowance for loan losses upward or downward based on current economic conditions and portfolio trends. In determining the extent of any such adjustment, the Company considers both economic and portfolio-specific data that correlates with loan losses. 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 three months ended March 31, 2017.

Smaller-balance, Homogeneous Loans. Pools of smaller-balance, homogeneous loans with similar risk and loss characteristics are also assessed for probable losses. These loan pools include residential mortgage, home equity and other consumer 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) recent historical loss experience and (ii) certain qualitative factors.

In establishing the allowance for loan losses for residential mortgage loans, the Company principally considers historical portfolio loss experience of the most recent 1- and 3-year periods, as management believes this provides a reasonable basis for estimating the inherent probable losses within the residential mortgage portfolio. In establishing the allowance for loan losses for home equity loans, the Company principally considers historical portfolio loss experience of the most recent 12-month period.

The qualitative component of the allowance for loan losses for smaller-balance, homogenous 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.

The 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, historical charge-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. There were no significant changes in our approach to determining the qualitative component of the related allowance for loan losses during the three months ended March 31, 2017.

Individually Impaired Loans. The allowance for loan losses also includes specific allowances for individually impaired loans. Generally, the Company’s impaired loans consist of (i) classified commercial loans in excess of $750,000 that have been placed on non-accrual status and (ii) originated 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, a charge-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 a charge-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 as non-performing (typically upon becoming 90 days past due).

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

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

People’s United did not change its methodologies with respect to determining the allowance for loan losses during the first three months of 2017. As part of its ongoing assessment of the allowance for loan losses, People’s United regularly makes refinements to certain underlying assumptions used in its methodologies. However, such refinements did not have a material impact on the allowance for loan losses or the provision for loan losses as of or for the three months ended March 31, 2017.

Acquired Loans

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
(dollars in millions)	March 31, 2017			Dec. 31, 2016			March 31, 2016
Allowance for loan losses on originated loans:
Balance at beginning of period	$	223.0		$	219.0		$	202.9
Charge-offs		(4.6	)		(4.7	)		(7.4	)
Recoveries		2.2			1.0			1.7

Net loan charge-offs		(2.4	)		(3.7	)		(5.7	)
Provision for loan losses		4.4			7.7			10.4

Balance at end of period	$	225.0		$	223.0		$	207.6

Allowance for loan losses on acquired loans:
Balance at beginning of period	$	6.3		$	7.3		$	8.1
Charge-offs		—			(1.0	)		(0.3	)
Provision for loan losses		—			—			0.1

Balance at end of period	$	6.3		$	6.3		$	7.9

Commercial originated allowance for loan losses as a percentage of originated commercial loans		0.94	%		0.95	%		0.92	%
Retail originated allowance for loan losses as a percentage of originated retail loans		0.36			0.30			0.30
Total originated allowance for loan losses as a percentage of:
Originated loans		0.77			0.77			0.75
Originated non-performing loans		140.9			150.6			123.3

The provision for loan losses on originated loans totaled $4.4 million for the three months ended March 31, 2017, reflecting $2.4 million in net loan charge-offs and a $3.2 million increase in the originated allowance for loan losses in response to portfolio-specific risk factors and loan growth. The provision for loan losses on originated loans totaled $10.4 million for the year-ago quarter, reflecting $5.7 million in net loan charge-offs and a $6.3 million 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 March 31, 2016 reflects loan impairment.

Management believes that the level of the allowance for loan losses at March 31, 2017 is appropriate to cover probable losses.

Loan Charge-Offs

The Company’s charge-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. Partially charged-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, a charge-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 to charge-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, a charge-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
(in millions)	March 31, 2017			Dec. 31, 2016		March 31, 2016
Commercial:
Commercial real estate	$	—		$	0.9	$	0.7
Commercial and industrial		0.8			1.1		2.2
Equipment financing		0.5			1.3		1.6

Total		1.3			3.3		4.5

Retail:
Residential mortgage		0.1			—		—
Home equity		1.1			1.3		1.4
Other consumer		(0.1	)		0.1		0.1

Total		1.1			1.4		1.5

Total net loan charge-offs	$	2.4		$	4.7	$	6.0

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


	Three Months Ended
	March 31, 2017			Dec. 31, 2016			March 31, 2016
Commercial:
Commercial real estate		—	%		0.04	%		0.03	%
Commercial and industrial		0.04			0.06			0.12
Equipment financing		0.07			0.17			0.22
Retail:
Residential mortgage		—			—			—
Home equity		0.21			0.24			0.26
Other consumer		(0.25	)		0.60			0.87
Total portfolio		0.03	%		0.06	%		0.09	%

Non-Performing Assets

All previously accrued but unpaid interest on non-accrual loans is reversed from interest income in the period in which the accrual of interest is discontinued. Interest payments received on non-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 on non-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 March 31, 2017 or December 31, 2016.

Non-Performing Assets


(dollars in millions)	March 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			March 31, 2016
Originated non-performing loans:
Commercial:
Commercial real estate	$	23.4		$	22.3		$	23.4		$	35.4		$	35.9
Commercial and industrial		47.4			41.5			40.0			34.7			41.5
Equipment financing		47.4			39.4			46.0			40.0			41.1

Total		118.2			103.2			109.4			110.1			118.5

Retail:
Residential mortgage		26.3			27.4			28.2			29.9			31.1
Home equity		15.2			17.4			16.5			17.4			18.9
Other consumer		—			—			—			—			—

Total		41.5			44.8			44.7			47.3			50.0

Total originated non-performing loans (1)		159.7			148.0			154.1			157.4			168.5

REO:
Residential		10.9			8.1			7.9			9.7			8.2
Commercial		4.1			4.0			11.2			3.3			5.4

Total REO		15.0			12.1			19.1			13.0			13.6

Repossessed assets		8.2			7.2			6.9			11.6			7.3

Total non-performing assets	$	182.9		$	167.3		$	180.1		$	182.0		$	189.4


Originated non-performing loans as a percentage of originated loans		0.55	%		0.51	%		0.54	%		0.56	%		0.61	%
Non-performing assets as a percentage of:
Originated loans, REO and repossessed assets		0.63			0.57			0.63			0.64			0.68
Tangible stockholders’ equity and originated allowance for loan losses		5.57			5.19			5.98			6.14			6.49

(1)

Reported net of government guarantees totaling: $4.4 million at March 31, 2017; $13.1 million at December 31, 2016; $13.0 million at September 30, 2016; $15.8 million at June 30, 2016; and $16.2 million at March 31, 2016. These government guarantees relate, almost entirely, to guarantees provided by the Small Business Administration as well as selected other Federal agencies and represent the carrying value of the loans that are covered by such guarantees, the extent of which (i.e. full or partial) varies by loan. At March 31, 2017, the principal loan classes to which these government guarantees relate are commercial and industrial loans (99%) and commercial real estate loans (1%).

The preceding table excludes acquired loans that are (i) accounted for as purchased credit impaired loans or (ii) covered by an FDIC loss-share agreement (“LSA”) totaling: $19.4 million and $2.7 million, respectively, at March 31, 2017; $21.6 million and $3.1 million, respectively, at December 31, 2016; $22.4 million and $2.2 million, respectively, at September 31, 2016; $23.3 million and $2.2 million, respectively, at June 30, 2016; and $25.1 million and $2.3 million, respectively, at March 31, 2016. Such loans otherwise meet People’s United’s definition of a non-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. The acquired 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.

Total non-performing assets increased $15.6 million from December 31, 2016 and equaled 0.63% of originated loans, REO and repossessed assets at March 31, 2017. The increase in total non-performing assets from December 31, 2016 primarily reflects increases in non-performing equipment financing loans of $8.0 million, non-performing commercial and industrial loans of $5.9 million and REO of $2.9 million, partially offset by a $2.2 million decrease in non-performing home equity loans.

All loans and REO acquired in the Butler Bank acquisition are subject to an FDIC LSA, 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 the originated non-performing loans discussed above, People’s United has also identified $535.3 million in originated potential problem loans at March 31, 2017. Originated 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 as non-performing at some time in the future. The originated 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 March 31, 2017, originated potential problem loans consisted of equipment financing loans ($263.1 million), commercial and industrial loans ($199.9 million) and commercial real estate loans ($72.3 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 originated potential problem loans will not become 90 days or more past due, be placed on non-accrual status, be restructured, or require additional provisions for loan losses.

The levels of non-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 of non-performing assets may increase in the future.

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 March 31, 2017, People’s United (parent company) liquid assets included $245 million in cash and $84 million in debt securities available for sale, while the Bank’s liquid assets included $3.7 billion in debt securities available for sale and $528 million in cash and cash equivalents. Securities available for sale with a fair value of $1.91 billion at March 31, 2017 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 $30.5 billion at March 31, 2017 and represented 77% 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 $3.2 billion and $904 million, respectively, at March 31, 2017, representing 8% and 2%, respectively, of total funding at that date.

The Bank’s current available sources of borrowings include: federal funds purchased, advances from the Federal Home Loan Bank (the “FHLB”) of Boston and the Federal Reserve Bank of New York (the “FRB-NY”), and repurchase agreements. At March 31, 2017, the Bank’s total borrowing capacity from (i) the FHLB of Boston and the FRB-NY for advances and (ii) repurchase agreements was $11.2 billion based on the level of qualifying collateral available for these borrowings. In addition, the Bank had unsecured borrowing capacity of $1.0 billion at that date. FHLB advances are secured by the Bank’s investment in FHLB stock and by a security agreement that requires the Bank to maintain, as collateral, sufficient qualifying assets not otherwise pledged (principally single-family residential mortgage loans, HELOCs, home equity loans and commercial real estate loans).

At March 31, 2017, the Bank had outstanding commitments to originate loans totaling $1.0 billion and approved, but unused, lines of credit extended to customers totaling $6.6 billion (including $2.1 billion of HELOCs).

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

Stockholders’ Equity and Dividends

People’s United’s total stockholders’ equity was $5.19 billion at March 31, 2017, a $53.1 million increase from December 31, 2016. This increase primarily reflects net income of $70.8 million for the three months ended March 31, 2017, net stock option and restricted stock-related transactions during the three months ended March 31, 2017 totaling $23.7 million and a $13.1 million decrease in AOCL since December 31, 2016, partially offset by common dividends paid of $52.7 million in the three months ended March 31, 2017. As a percentage of total assets, stockholders’ equity was 12.9% and 12.7% at March 31, 2017 and December 31, 2016, respectively. Tangible common equity equaled 7.4% of tangible assets at March 31, 2017 compared to 7.2% at December 31, 2016.

In April 2017, People’s United’s Board of Directors voted to increase the dividend on its common stock to an annual rate of $0.69 per share. The quarterly dividend of $0.1725 per share is payable on May 15, 2017 to common shareholders of record on May 1, 2017. Also in April 2017, People’s United’s Board of Directors declared a dividend on its preferred stock, payable on June 15, 2017 to preferred shareholders of record as of June 1, 2017. In February 2017, the Bank paid a cash dividend of $69 million to People’s United (parent company).

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 fully phased-in on January 1, 2019, the Basel III capital rules will require U.S. financial institutions to maintain: (i) a minimum ratio of CET 1 capital to total risk-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 is phased-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 1 risk-based capital ratio as that buffer is phased-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 is phased-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 2017, the capital conservation buffer is 1.25%. The capital conservation buffer increases for each year during the phase-in period as follows: 1.875% in 2018; and 2.5% in 2019.

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 March 31, 2017 and December 31, 2016 are based on the capital conservation buffer phase-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 to opt-out of the requirement to include most components of AOCL in CET 1 capital. At March 31, 2017, People’s United’s and the Bank’s total risk-weighted assets, as defined, were both $30.2 billion, compared to $30.5 billion for both at December 31, 2016. Management currently estimates that, as of March 31, 2017, both the Company’s and the Bank’s risk-based capital ratios could be negatively impacted by as much as 10-20 basis points on a “fully phased-in” basis.


						Minimum Capital Required					Classification as
	As of March 31, 2017					Basel III Phase-In (2017)					Well-Capitalized
(dollars in millions)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Tier 1 Leverage Capital (1):
People’s United	$	3,272.0		8.5	%	$	1,536.0		4.0	%	$	1,920.0		5.0	%
Bank		3,407.2		8.9			1,532.4		4.0			1,915.5		5.0
CET 1 Risk-Based Capital (2):
People’s United		3,027.9		10.0			1,738.2		5.75			1,964.9		6.5
Bank		3,407.2		11.3			1,736.6		5.75			1,963.1		6.5
Tier 1 Risk-Based Capital (3):
People’s United		3,272.0		10.8			2,191.6		7.25			2,418.3		8.0
Bank		3,407.2		11.3			2,189.7		7.25			2,416.2		8.0
Total Risk-Based Capital (4):
People’s United		3,836.7		12.7			2,796.2		9.25			3,022.9		10.0
Bank		4,040.7		13.4			2,793.7		9.25			3,020.2		10.0

						Minimum Capital Required					Classification as
	As of December 31, 2016					Basel III Phase-In (2016)					Well-Capitalized
(dollars in millions)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Tier 1 Leverage Capital (1):
People’s United	$	3,256.1		8.4	%	$	1,546.7		4.0	%	$	1,933.4		5.0	%
Bank		3,430.5		8.9			1,537.0		4.0			1,921.2		5.0
CET 1 Risk-Based Capital (2):
People’s United		3,012.0		9.9			1,981.7		5.125			2,513.4		6.5
Bank		3,430.5		11.3			1,969.2		5.125			2,497.6		6.5
Tier 1 Risk-Based Capital (3):
People’s United		3,256.1		10.7			2,023.3		6.625			2,443.2		8.0
Bank		3,430.5		11.3			2,019.9		6.625			2,439.1		8.0
Total Risk-Based Capital (4):
People’s United		3,802.9		12.5			2,634.1		8.625			3,054.0		10.0
Bank		4,062.1		13.3			2,629.7		8.625			3,048.9		10.0

(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 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 represents the risk of loss to earnings, capital and the economic values of certain assets and liabilities resulting from changes in interest rates, equity prices and foreign currency exchange rates. The only significant market risk exposure for People’s United at this time is IRR, which is a result of the Company’s core business activities of making loans and accepting deposits.

Interest Rate Risk

The effective management of IRR is essential to achieving the Company’s financial objectives. Responsibility for overseeing management of IRR resides with ALCO. The goal of ALCO is to generate a stable net interest margin over entire interest rate cycles regardless of changes in either short- or long-term interest rates. Generating earnings by taking excessive IRR is prohibited by the IRR limits established by the Company’s Board of Directors. ALCO manages IRR by using two primary risk measurement techniques: simulation of net interest income and simulation of economic value of equity. These two measurements are complementary and provide both short-term and long-term risk profiles of the Company.

Net Interest Income at Risk Simulation is used to measure the sensitivity of net interest income to changes in market rates over a forward twelve-month period. This simulation captures underlying product behaviors, such as asset and liability re-pricing 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 rates that are based on recent new business origination experience; and (iv) deposit pricing assumptions that are based on historical regression models 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. Internal policy regarding IRR simulations currently specifies that for instantaneous parallel shifts of the yield curve, estimated net interest income at risk for the subsequent one-year period should not decline by more than: 7% for a 100 basis point shift; 10% for a 200 basis point shift; and 15% for a 300 basis point shift. 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”. Current internal policy specifies that for yield curve twist simulations, estimated net interest income at risk for the subsequent one-year period should not decline by more than 7% for a 100 basis point shift and 10% for a 200 basis point shift.

The following tables set forth the estimated percent change in the Company’s net interest income at risk over one-year simulation periods beginning March 31, 2017 and December 31, 2016. Given the interest rate environment at those dates, simulations for interest rate declines of more than 100 basis points were not modeled.


	Estimated Percent Change in
Parallel Shock Rate Change	Net Interest Income
(basis points)	March 31, 2017			December 31, 2016
+300		11.0	%		10.1	%
+200		7.9			7.3
+100		4.3			4.0
-100		(6.8	)		n/a

	Estimated Percent Change in
Yield Curve Twist Rate Change	Net Interest Income
(basis points)	March 31, 2017			December 31, 2016
Short End -100		(3.3	)%		n/a	%
Short End +100		1.9			1.7
Short End +200		3.5			3.3
Long End -100		(3.5	)		(3.4	)
Long End +100		2.5			2.3
Long End +200		4.6			4.3

The net interest income at risk simulation results indicate that at both March 31, 2017 and December 31, 2016, the Company is asset sensitive over the twelve-month forecast horizon (i.e. net interest income will increase if market rates rise). This is primarily due to (i) approximately 89% of the Company’s loan portfolio being funded by less rate-sensitive core deposits and (ii) approximately 44% of the Company’s loan portfolio being comprised of Prime and one-month Libor-based loans.

The increase in the Company’s asset sensitivity since December 31, 2016 primarily reflects (i) the sale of securities with a combined amortized cost of $487 million in the first quarter of 2017; (ii) fewer loans with “in the money floors” as both the Prime rate and one-month Libor rate have risen; and (iii) less reliance on short-term borrowings. The Company is more asset sensitive when the “long-end” rises compared to increases in the “short-end” due primarily to the limited amount of long-term liabilities funding long-term assets. Based on the Company’s IRR position at March 31, 2017, an immediate 100 basis point parallel increase in interest rates translates to an approximate $47 million increase in net interest income on an annualized basis.

Economic Value of Equity at Risk Simulation is conducted in tandem with net interest income simulations, to ascertain a longer term view of the Company’s IRR position by capturing longer-term re-pricing risk and options risk embedded in the balance sheet. It measures the sensitivity of economic value of equity to changes in interest rates. Economic value of equity at risk simulation values only the current balance sheet and does not incorporate the growth assumptions used for income simulations. As with net interest income modeling, this simulation captures product characteristics such as loan resets, re-pricing terms, maturity dates, rate caps and floors. Key assumptions include loan prepayment speeds, deposit pricing elasticity and non-maturity deposit attrition rates. These assumptions can have significant impacts on valuation results as the assumptions remain in effect for the entire life of each asset and liability. The Company conducts core deposit behavior studies on a periodic basis to support deposit assumptions used in the valuation process. All key assumptions are subject to periodic review.

Base case economic value of equity at risk is calculated by estimating the net present value of all future cash flows from existing assets and liabilities using current interest rates. The current spot interest rate curve is shocked up and down to generate new spot interest rate curves for parallel rate shock scenarios. These new spot curves are then used to re-calculate economic value of equity at risk for these rate shock scenarios. Internal policy currently limits the exposure to a decrease in economic value of equity at risk resulting from instantaneous parallel shifts of the yield curve in the following manner: 7% for a 100 basis point shift; 10% for a 200 basis point shift; and 15% for a 300 basis point shift.

The following table sets forth the estimated percent change in the Company’s economic value of equity at risk, assuming various instantaneous parallel shocks in interest rates. Given the interest rate environment at both March 31, 2017 and December 31, 2016, 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)	March 31, 2017			December 31, 2016
+300		(8.5	)%		(7.7	)%
+200		(3.7	)		(3.1	)
+100		(0.5	)		(0.1	)
-100		(4.3	)		n/a

The Company’s economic value of equity at risk profile indicates that at March 31, 2017, the Company’s economic value of equity is moderately liability sensitive in a rising rate environment. The slight increase since December 31, 2016 primarily reflects an increase in the residential mortgage loan portfolio, as well as a decrease in the weighted-average life of non-maturity deposits driven, in part, by higher interest rates.

People’s United’s IRR position at March 31, 2017, as set forth in the net interest income at risk and economic value of equity at risk tables above, reflects an asset sensitive net interest income at risk position and a moderately 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, in a rising rate environment, the Company’s assets are more price sensitive than its liabilities due to slightly longer asset duration, which serves to create a moderately liability sensitive risk position. 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 March 31, 2017, 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 March 31, 2017, People’s United used interest rate swaps to manage IRR associated with certain interest-bearing assets and interest-bearing liabilities.

The Bank has entered into a pay floating/receive fixed interest rate swap 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 counterparty to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated based on a notional amount of $110 million. The floating-rate interest payments made under the swap are calculated using the same floating rate received on the commercial loans. The swap effectively converts the floating-rate one-month LIBOR interest payments received on the commercial loans to a fixed rate and consequently reduces the Bank’s exposure to variability in short-term interest rates. This swap is accounted for as a cash flow hedge.

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 12 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.

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 eliminate its exposure to fluctuations in currency exchange rates on certain of its commercial loans that are denominated in foreign currencies. Gains and losses on foreign exchange contracts substantially offset the translation gains and losses on the related loans.

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
	Cash Flow			Fair Value			Exchange
As of March 31, 2017 (dollars in millions)	Hedge			Hedge			Contracts
Notional principal amounts	$	110.0		$	375.0		$	41.9
Weighted average interest rates:
Pay floating (receive fixed)		0.78% (1.82%	)		Libor +1.265% (4.00%	)		n/a
Weighted average remaining term to maturity (in months)		42			88			1
Fair value:
Recognized as an asset	$	—		$	—		$	0.2
Recognized as a liability		—			—			0.1

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

The following table summarizes certain information concerning these interest rate swaps:


	Interest Rate Swaps
	Commercial			Institutional
As of March 31, 2017 (dollars in millions)	Customers			Counterparties
Notional principal amounts	$	5,786.0		$	5,793.7
Weighted average interest rates:
Pay floating (receive fixed)		1.03% (1.91%	)		—
Pay fixed (receive floating)		—			1.80% (1.03%	)
Weighted average remaining term to maturity (in months)		81			81
Fair value:
Recognized as an asset	$	85.3		$	10.9
Recognized as a liability		50.9			21.8

See Notes 11 and 12 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 84 through 88 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 Rules 13a-15(e) and 15d-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, 2016, 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 Commission under the Exchange Act, is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to management, including the principal executive officer and the principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

During the quarter ended March 31, 2017, 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. In the opinion of management, People’s United’s financial condition, results of operations or liquidity will not be affected materially as a result of the eventual outcome of these legal proceedings. See Note 8 to the Consolidated Financial Statements for a further discussion of legal proceedings.

Item 1A – Risk Factors

There have been no material changes in risk factors since December 31, 2016.

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 March 31, 2017:

Issuer Purchases of Equity Securities


					Total number of		Maximum number
					shares purchased as		of shares that may
	Total number		Average		part of publicly		yet be purchased
	of shares		price paid		announced plans		under the plans
Period	purchased		per share		or programs		or programs
January 1 - 31, 2017:
Tendered by employees (1)		951	$	19.37		—		—
February 1 - 28, 2017:
Tendered by employees (1)		1,723	$	18.82		—		—
March 1 - 31, 2017:
Tendered by employees (1)		148,676	$	19.63		—		—

Total:
Tendered by employees (1)		151,350	$	19.61		—		—

(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 Stock 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.

Item 5 – Other Information

None.

Item 6 – Exhibits

The following Exhibits are filed herewith:


Designation		Description

3.1		Third Amended and Restated Certificate of Incorporation of People’s United Financial, Inc.

10.2*		People’s United Financial, Inc. Short-Term Incentive Plan

10.7*		People’s United Financial, Inc. Amended and Restated 2014 Long-Term Incentive Plan

10.7(a)*		Form of Grant Agreement for Performance Shares under the People’s United Financial, Inc. 2014 Long-Term Incentive Plan

10.7(b)*		Form of Grant Agreement for Stock Options under the People’s United Financial, Inc. 2014 Long-Term Incentive Plan

10.7(c)*		Form of Grant Agreement for Stock Options under the People’s United Financial, Inc. 2014 Long-Term Incentive Plan

10.7(d)*		Form of Grant Agreement for Restricted Stock under the People’s United Financial, Inc. 2014 Long-Term Incentive Plan

10.7(e)*		Form of Grant Agreement for Restricted Stock under the People’s United Financial, Inc. 2014 Long-Term Incentive Plan

31.1		Rule 13a-14(a)/15d-14(a) Certifications

31.2		Rule 13a-14(a)/15d-14(a) Certifications

32		Section 1350 Certifications

101.1		The following financial information from People’s United Financial, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017 formatted in XBRL: (i) Consolidated Statements of Condition as of March 31, 2017 and December 31, 2016; (ii) Consolidated Statements of Income for the three months ended March 31, 2017 and 2016; (iii) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017 and 2016; (iv) Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2017 and 2016; (v) Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016; and (vi) Notes to Consolidated Financial Statements.

*	Each exhibit identified by an asterisk constitutes a management contract or compensatory plan, contract or arrangement.

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: May 10, 2017	By:	/s/ John P. Barnes
		John P. Barnes
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: May 10, 2017	By:	/s/ R. David Rosato
		R. David Rosato
		Senior Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

Date: May 10, 2017	By:	/s/ Jeffrey Hoyt
		Jeffrey Hoyt
		Senior Vice President and Chief Accounting Officer
		(Principal Accounting Officer)

INDEX TO EXHIBITS


Designation		Description

3.1		Third Amended and Restated Certificate of Incorporation of People’s United Financial, Inc.

10.2*		People’s United Financial, Inc. Short-Term Incentive Plan

10.7*		People’s United Financial, Inc. Amended and Restated 2014 Long-Term Incentive Plan

10.7(a)*		Form of Grant Agreement for Performance Shares under the People’s United Financial, Inc. 2014 Long-Term Incentive Plan

10.7(b)*		Form of Grant Agreement for Stock Options under the People’s United Financial, Inc. 2014 Long-Term Incentive Plan

10.7(c)*		Form of Grant Agreement for Stock Options under the People’s United Financial, Inc. 2014 Long-Term Incentive Plan

10.7(d)*		Form of Grant Agreement for Restricted Stock under the People’s United Financial, Inc. 2014 Long-Term Incentive Plan

10.7(e)*		Form of Grant Agreement for Restricted Stock under the People’s United Financial, Inc. 2014 Long-Term Incentive Plan

31.1		Rule 13a-14(a)/15d-14(a) Certifications

31.2		Rule 13a-14(a)/15d-14(a) Certifications

32		Section 1350 Certifications

101.1		The following financial information from People’s United Financial, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017 formatted in XBRL: (i) Consolidated Statements of Condition as of March 31, 2017 and December 31, 2016; (ii) Consolidated Statements of Income for the three months ended March 31, 2017 and 2016; (iii) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017 and 2016; (iv) Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2017 and 2016; (v) Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016; and (vi) Notes to Consolidated Financial Statements.

*	Each exhibit identified by an asterisk constitutes a management contract or compensatory plan, contract or arrangement.

Exhibit 3.1

Delaware

The First State

Page 1

I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF “PEOPLE’S UNITED FINANCIAL, INC.”, FILED IN THIS OFFICE ON THE TWENTY-FOURTH DAY OF APRIL, A.D. 2017, AT 3:49 O’CLOCK P.M.

A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY RECORDER OF DEEDS.



				Jeffrey W. Bullock, Secretary of State
4245096 8100 SR# 20172749224				Authentication: 202426616 Date: 04-24-17

You may verify this certificate online at corp.delaware.gov/authver.shtml

STATE OF DELAWARE

CERTIFICATE OF AMENDMENT

THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

People’s United Financial, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows:

FIRST : At a meeting of the Board of Directors of People’s United Financial, Inc. held on February 16, 2017, the Board approved a proposed amendment of the Third Amended and Restated Certificate of Incorporation of said corporation, declaring said amendment to be advisable and directing that such amendment be submitted to a vote of stockholders at the corporation’s 2017 annual meeting of stockholders. The proposed amendment replaces Section 5.06 of the corporation’s Third Amended and Restated Certificate of Incorporation in its entirety with the following:

SECTION 5.06. NOMINATIONS TO BOARD OF DIRECTORS . Except as otherwise provided in the Bylaws of the Corporation, as may be amended from time to time, nominations of candidates for election as directors shall be made in accordance with the provisions of this Section 5.06. Nominations of candidates for election as directors may be made only by the Board of Directors or by a record owner of Common Stock. Any such holder of Common Stock, however, may nominate one or more persons for election as director at a meeting only if written notice of such holder’s intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid to the Secretary of the Corporation not later than: (a) with respect to an election to be held at an annual meeting of shareholders, one hundred twenty (120) days in advance of such meeting; and (b) with respect to an election to be held at a special meeting of shareholders for the election of directors, the close of business on the seventh day following the earlier of: (i) the date on which notice of such meeting is first given to shareholders; or (ii) the date on which a public announcement of such meeting is first made. Each such notice shall include: (1) the name and address of each shareholder of record who intends to appear in person or by proxy to make the nomination and of the person or persons to be nominated; (2) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (3) such other information regarding each nominee proposed by such shareholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission; and (4) the consent of each nominee to serve as a director of the Corporation if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.

SECOND: At the corporation’s annual meeting of stockholders held on April 20, 2017, the necessary number of shares were voted in favor of the amendment.

State of Delaware

Secretary of State

Division of Corporations

Delivered 03:49 PM 04/24/2017

FILED 03:49 PM 04/24/2017

SR 20172749224 - File Number 4245096

THIRD : Such amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF , said corporation has caused this certificate to be signed this 24 ^th day of April, 2017.



By:
		Authorized Officer
Title:		Assistant Secretary
Name:		Marci C. Pereira

Exhibit 10.2

People’s United Financial, Inc.

Short-Term Incentive Plan

The terms of the People’s United Financial, Inc. Short-Term Incentive Plan (the “STIP”) as adopted by the Compensation, Nominating and Governance Committee of the Board of Directors of the Company on February 16, 2017 and effective as of January 1, 2017 are as follows:

Section 1. Purpose of Plan

The purpose of the STIP is to promote the success of the Company by providing eligible employees of the Company and its Affiliates with opportunities for cash payments based upon the attainment of specified annual performance goals.

Section 2. Definitions and Terms

2.1 Accounting Terms . Except as otherwise expressly provided or the context otherwise requires, financial and accounting terms are used as defined for purposes of, and shall be determined in accordance with, generally accepted accounting principles, as from time to time in effect, as applied and reflected in the consolidated financial statements of the Bank, prepared in the ordinary course of business.

2.2 Specific Terms. The following words and phrases as used herein shall have the following meanings unless a different meaning is plainly required by the context:

“Affiliate” means any entity controlled by or under common control with the Company, including the Bank.

“Award” means any amount (expressed as a percentage of the Participant’s base salary) payable to a Participant as determined in accordance with Section 5 hereof.

“Bank” means People’s United Bank, National Association and any successor.

“Board” means the Board of Directors of the Company

“Code” means the Internal Revenue Code of 1986, as amended.

“Committee” means the Compensation, Nominating and Governance Committee of the Board or any successor to such Committee. The members of the Committee shall be appointed from time to time by and shall serve at the discretion of the Board. Committee members must be deemed an “outside director” within the meaning of Section 162(m) of the Code, a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, and an “independent director” pursuant to Rule 5605(a)(2) of the listing standards of The Nasdaq Stock Market.

“Company” means People’s United Financial, Inc.

“ Covered Employee ” means any person who is a covered employee within the meaning of Section 162(m) of the Code and any regulations promulgated pursuant thereto.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Financial Criteria” has the meaning set forth in Section 5.2 hereof.

“ GAAP ” means generally accepted accounting principles, as from time to time in effect, as applied and reflected in the consolidated financial statements of the Company and the Bank.

“ Key Participant ” shall mean each of the following officers of the Company or of the Bank: the President and Chief Executive Officer; the Chief Financial Officer; the Treasurer; the Controller; and any other Senior Executive Vice President.

“Participant” means any employee of the Company or any Affiliate who is selected by the Committee to be the recipient of an Award.

“Peer Group” means the group of comparable publicly traded bank and thrift holding companies selected by the Board or by the Committee, from time to time.

“Performance Goals” has the meaning set forth in Section 5.3 hereof.

“Plan Year” means the Company’s fiscal year, unless otherwise determined by the Committee or the Board. The initial Plan Year is the year ending December 31, 2017.

“STIP” means this Short-Term Incentive Plan of the Company, as amended from time to time.

Section 3. Effective Date; Term of the Plan

3.1 Effective Date. The STIP shall be effective as of January 1, 2017, but any payments under the STIP to any Participant who is a Covered Employee shall be contingent on the STIP’s approval by the Company’s shareholders at the 2017 annual meeting of shareholders.

3.2 Expiration Date. Unless terminated earlier pursuant to Section 11, the STIP will terminate on December 31, 2022, except for the purpose of determining the amount payable with respect to Awards granted prior to that date and the payment of all amounts so determined.

Section 4. Administration of the Plan

4.1 Power and Authority . The STIP shall be administered by the Committee. Except as limited in the STIP, the Committee shall have all of the express and implied powers and duties set forth in the STIP and shall have full authority to interpret the STIP and to make all other determinations deemed necessary or advisable for the STIP’s administration, and shall otherwise be responsible for the administration of the STIP in accordance with its terms. The Committee shall have the authority to construe and interpret the STIP (except as otherwise provided herein) and any agreement or other document relating to any Award under the STIP, may adopt rules and regulations governing the administration of the STIP, and shall exercise all other duties and powers conferred on it by the STIP, or which are incidental or ancillary thereto. Any decision, determination or interpretation the Committee makes and each action it takes pursuant to the STIP will be considered final, binding, and conclusive for all purposes on all persons, including Participants and their legal representatives, and beneficiaries. No member of the Committee shall be liable for any action or determination made in good faith, or upon the advice of counsel, with respect to the STIP or any Award made under the STIP.

4.2 Retention of Experts . The Committee may retain accountants, attorneys, and other experts as it deems necessary or desirable in connection with the administration of the STIP.

4.3 Delegation . The Committee may in its sole discretion, delegate to management personnel of the Company or any of its Affiliates the authority to take all such other steps deemed necessary, advisable or convenient for the effective administration and record keeping of the STIP in accordance with its terms and purposes. Notwithstanding the foregoing, the Committee may not delegate any portion of such authority to the extent such delegation would cause any Award to cease to qualify for exemption from the deduction limitations of Section 162(m) of the Code.

Section 5. Awards

5.1 Determination of Criteria for Awards. Within ninety (90) days after the commencement of each Plan Year, the Committee shall designate:

(a) The Financial Criteria that will apply to Awards to all Participants for the Plan Year; and

(b) The Performance Goals that must be met (whether on a corporate, divisional, team or individual basis) with respect to the Financial Criteria designated for Participants to earn the Awards for the Plan Year and a payout matrix or formula for achievement of those Performance Goals.

5.2 Financial Criteria. Financial Criteria shall consist of one or more financial measures, including but not limited to the following:


• Earnings per share		• Efficiency ratio
• Core earnings		• Loan growth
• Return on assets		• Deposit growth
• Return on equity		• Core deposit growth
• Price earnings ratio		• Asset quality
• Total shareholder return		• Net interest margin
• Book value		• Non-interest income
• Stock price performance		• Non-interest expense
• Net income		• Expenses as a percentage of assets
• Operating income

Any of the Financial Criteria may be applied on a corporate, divisional, team or individual basis. In addition, any of the Financial Criteria may be measured by using average amounts for the Financial Criteria, in absolute terms, on a cash basis or operating basis, by reference to internal performance targets, or as compared to the Peer Group, or may be measured by the change in that performance target compared to a previous period. Whenever the Committee designates a financial measure that is not a GAAP financial measure as one of the Financial Criteria for a Plan Year, the Committee shall, at the time it designates such non-GAAP financial measure, specify the manner in which such non-GAAP financial measure is to be calculated and reconciled to the most directly comparable GAAP financial measure.

5.3 Performance Goals. To determine the amount of Awards to Participants for a Plan Year, the Committee shall establish in writing specific, objective performance goals (the “Performance Goals”), the outcome of which is substantially uncertain at the time they are established, for the Financial Criteria the Committee designates for that Plan Year against which actual performance is to be measured. The Performance Goals may be described by means of a matrix or formula providing for goals resulting in the payment of Awards under the STIP. In the event that the Committee determines in good faith that external changes or other unanticipated business conditions have materially affected the fairness of the goals and have unduly influenced the Company’s ability to meet them, the Committee may (but shall not be required to) make adjustments to the Performance Goals. Examples of such events include but are not limited to: changes in GAAP; significant acquisitions or dispositions made by the Company; material changes in the monetary policy of the United States; material changes in national or regional economic conditions affecting financial institutions generally; and changes in laws, regulations or regulatory policy affecting

financial institutions generally where such changes are reasonably likely to have a material effect on the operating results of the Company. The Committee shall appropriately document its analysis of the reasons for making adjustments to the Performance Goals, including a summary indicating how the fairness of the previously-established goals has been affected and the manner in which the Company’s ability to meet such goals has been unduly influenced by such external changes or other unanticipated business conditions.

5.4 Payment Deferral. Notwithstanding the provisions of Section 5.5 hereof, the Committee may in its discretion provide that payment of all or any portion of the amount to be paid out pursuant to an Award be deferred until a later specified date or until the later attainment of specified conditions. Any such deferral provisions shall be consistent with the standards for nonqualified deferred compensation plans established by Section 409A of the Code and its interpretive regulations and other regulatory guidance (if applicable), shall .be set forth in writing as part of the grant of the Award and shall be communicated to the Participant receiving such Award as promptly as practicable following the grant of the Award.

5.5 Determination and Payment of Awards. As soon as practicable after the end of a Plan Year, the Committee shall determine the amount of Awards earned by and to be paid to a Participant who is a Covered Employee and the total Awards to be paid in a Plan Year. The Committee shall determine the amount of the Award that each Participant has earned. The determination of the amount of Awards earned by Participants will be made based on application of the Performance Goals in Section 5.3 to the Financial Criteria in Section 5.2 for the Plan Year. Actual payments will be determined based upon one or more of the following, as designated by the Committee for individual Participants: (i) the Participant’s individual performance, (ii) the achievement of Performance Goals by the Participant’s division; (iii) the achievement of Performance Goals by the Participant’s team and (iv) the overall achievement of Performance Goals by the Company; provided, however, that no such payment shall exceed the maximum amount of the Award made to such Participant for the applicable Plan Year. Payment of the Awards will be made in cash (a) in a lump sum following the Committee’s determination of the amount of the Awards to be paid out in accordance with the Company’s then-applicable payroll schedule, (b) at a later date in accordance with any payment deferral provisions established by the Committee in accordance with the provisions of Section 5.4, or (c) in accordance with the provisions of Section 5.7 if applicable.

5.6 Employment Condition . Except as provided in Section 5.7, the Participant must remain actively employed by the Company or one of its Affiliates on the date payment is to be made as contemplated by Section 5.5 (but without regard to any payment deferral provisions applicable to an Award) to be considered eligible for any potential payment under this STIP. If an employee first becomes eligible to participate in the STIP during the Plan Year (e.g, by reason of a promotion or new hire) then the Award to which he or she would be entitled may, in the Committee’s discretion, be prorated based upon the length of his or her employment during the Plan Year following his or her date of eligibility. The method and amount of proration shall be determined by the Committee, in its sole discretion.

5.7 Payment After Death or Disability of Participant . (a) In the event a Participant dies following the end of a Plan Year but prior to the date payment of the Participant’s Award is made pursuant to Section 5.5 hereof, the Participant’s Award shall be paid to the Participant’s estate at the time contemplated by the provisions of Section 5.5 based on the extent to which applicable Performance Goals were attained for the Plan Year. In the event a Participant who has received an Award for a given Plan Year dies prior to the end of that Plan Year, a prorated portion (or, at the Committee’s discretion, the entire portion) of the Participant’s Award shall be paid to the Participant’s estate as soon as reasonably practicable following the Participant’s death. The amount to be paid pursuant to the preceding sentence shall be determined by assuming that all applicable Performance Goals had been attained (but not exceeded) for the Plan Year.

(b) In the event a Participant’s employment terminates following the end of a Plan Year by reason of the Participant’s disability and such termination occurs prior to the date payment of the Participant’s Award is made pursuant to Section 5.5 hereof, the Participant’s Award shall be paid to the Participant at the time contemplated by the provisions of Section 5.5 based on the extent to which applicable Performance Goals were attained for the Plan Year. In the event the employment of a

Participant who has received an Award for a given Plan Year terminates by reason of the Participant’s disability prior to the end of that Plan Year, a prorated portion (or, at the Committee’s discretion, the entire portion) of the Participant’s Award shall be paid to the Participant as soon as reasonably practicable following termination of the Participant’s employment. The amount to be paid pursuant to the preceding sentence shall be determined by assuming that all applicable Performance Goals had been attained (but not exceeded) for the Plan Year.

5.8 Maximum Payment. The maximum bonus amount payable under the STIP shall not exceed, for any Participant, up to 200% of his or her Award, as determined by the Committee in its discretion. The maximum bonus amount that may be paid under the STIP to any Participant in any calendar year may in no event exceed $5 million.

5.9 Withholding. The Company shall have the right to withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy any applicable federal, state, or local withholding tax requirements imposed with respect to the payment of any Award.

Section 6. General Provisions

6.1 No Right to Bonus or Continued Employment . Neither the establishment of the STIP nor the provision for or payment of any amounts hereunder nor any action of the Company or any of its Affiliates (including any predecessor or subsidiary), the Board or the Committee in respect of the STIP, shall be held or construed to confer upon any person any legal right to receive, or any interest in, any benefit under the STIP, or any legal right to be continued in the employ of the Company or any of its Affiliates unless otherwise provided by contract or agreement. The Company and each of its Affiliates expressly reserves any and all rights to discharge a Participant in its sole discretion, without liability of any person, entity or governing body under the STIP or otherwise.

6.2 No Funding of Plan . The Company shall not be required to fund or otherwise segregate any cash or any other assets which may at any time be paid to Participants under the STIP. The STIP shall constitute an “unfunded” plan of the Company.

6.3 No Fiduciary Relationship or Responsibility . The STIP is not subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Company and the Committee are not fiduciaries with respect to the STIP and have no fiduciary obligation with respect to any Participant, beneficiary, or other person claiming a right hereunder. Further, nothing herein contained, and no action or inaction arising pursuant hereto, shall give rise under state or federal law to a trust of any kind or create any fiduciary relationship of any kind or degree for the benefit of Participants, any beneficiary, or any other person.

6.4 Non-Transferability of Benefits and Interests . Except as expressly provided by the Committee, no benefit payable under the STIP shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any such attempted action shall be void, and no such benefit shall be in any manner liable for or subject to debts, contracts, liabilities, engagements or torts of any Participant or former Participant. This Section 6.4 shall not apply to an assignment of a payment due after the death of a Participant to the deceased Participant’s legal representative or beneficiary.

6.5 Code Section 409A. The STIP shall be interpreted and applied in a manner consistent with the standards for nonqualified deferred compensation plans established by Section 409A of the Code and its interpretive regulations and other regulatory guidance, if applicable. To the extent that any terms of this STIP would subject the Participant to gross income inclusion, interest, or additional tax pursuant to Section 409A of the Code, those terms are to that extent superseded by, and shall be adjusted to the minimum extent necessary to satisfy or make the STIP exempt from, the applicable Code Section 409A standards.

6.6 Clawback Provision. If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, any Participant who was a Key Participant during the year(s) for which a restatement is required shall, unless otherwise determined in the sole discretion of the Committee, reimburse the Company for any excess incentive payment amounts paid under the STIP the calculation(s) for which were based on financial results required to be restated. In calculating the excess amount, the Committee shall compare the calculation of the incentive payment based on the relevant results reflected in the restated financials compared to the same results reflected in the original financials that were required to be restated.

6.7 Law to Govern . Except as provided in Section 6.5 and otherwise to the extent preempted by federal law, all questions pertaining to the construction, regulation, validity and effect of the provisions of the STIP shall be determined in accordance with the laws of the State of Connecticut.

6.8 Section Headings . Section headings used herein are for convenience and reference only, and in the event of any conflict, the text of the STIP, rather than the section headings, will control.

6.9 Severability . Whenever possible, each provision of the STIP shall be interpreted in such manner as to be effective and valid under applicable law; provided, however, that if any provision of the STIP shall be held to be prohibited or invalid under such applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this STIP.

6.10 Non-Exclusivity . The STIP does not limit the authority of the Company or the Bank, the Board, the Committee, or the Board of Directors of the Bank or any committee thereof to grant awards or authorize any other compensation under any other plan or authority.

Section 7. Amendments, Suspension or Termination of Plan

The Committee may, from time to time, amend, suspend or terminate, in whole or in part, the STIP, and after any suspension or termination, may reinstate any or all of the provisions of the STIP; provided no amendment, suspension or termination of the STIP shall in any manner affect any Award theretofore granted pursuant to the STIP without the consent of the Participant to whom the Award was granted.

Exhibit 10.7

PEOPLE’S UNITED FINANCIAL, INC.

2014 LONG-TERM INCENTIVE PLAN

As Amended and Restated, February 16, 2017

1. Purpose and Effective Date.

(a) Purpose . The People’s United Financial, Inc. 2014 Long-Term Incentive Plan has two complementary purposes: (i) to attract and retain outstanding individuals to serve as directors, officers and employees and (ii) to increase shareholder value. This Plan will provide participants incentives to increase shareholder value by offering the opportunity to acquire shares of the Company’s common stock, or receive monetary payments, on the terms that this Plan provides.

(b) Effective Date . This Plan will become effective on February 16, 2017 (the “Effective Date”), subject to the approval of the Company’s shareholders at the Company’s 2017 meeting. Awards may be granted under this Plan on and after the Effective Date; provided, that any Awards granted prior to shareholder approval shall be void ab initio if such shareholder approval is not obtained.

2. Definitions. Capitalized terms used in this Plan have the meanings given below. Additional defined terms are set forth in other sections of this Plan.

(a) “10% Shareholder” means an Eligible Employee who, as of the date an ISO is granted to such individual, owns more than ten percent (10%) of the total combined voting power of all classes of Stock then issued by the Company or a Subsidiary corporation.

(b) “Administrator” means the Committee.

(c) “Affiliate” means any entity that, directly or through one or more intermediaries, is controlled by, controls, or is under common control with the Company within the meaning of Code Sections 414(b) or (c), provided that, in applying such provisions, the phrase “at least 50 percent” shall be used in place of “at least 80 percent” each place it appears therein.

(d) “Affiliated Company” or “Affiliated Companies” shall include any company or companies controlled by, controlling or under common control with the Company; provided that when determining when a Participant has experienced a separation from service for purposes of the Plan, control shall be determined pursuant to Code Sections 414(b) or (c), except that the phrase “at least 50 percent” shall be used in place of the phrase “at least 80 percent” in each place it appears in the regulations thereunder.

(e) “Award” means a grant of Options, Stock Appreciation Rights, Performance Shares, Performance Units, Restricted Stock, Restricted Stock Units, Deferred Stock Rights, Dividend Equivalent Units, a Long-Term Incentive Award, or any other type of award permitted under the Plan.

(f) “Bank” means People’s United Bank, National Association, a national banking association organized under the laws of the United States, or any successor thereto.

(g) “Beneficial Ownership” (or derivatives thereof) shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.

(h) “Board” means the Board of Directors of the Company.

(i) “Cause” means (1) if the Participant is subject to an employment agreement with the Company or an Affiliate that contains a definition of “cause”, such definition, or (2) otherwise, except as otherwise determined by the Administrator and set forth in an Award agreement, any of the following as determined by the Administrator: (A) violation of the provisions of any employment agreement, non-competition agreement, confidentiality agreement, or similar agreement with the Company or an Affiliate, or the Company’s or an Affiliate’s code of ethics, as then in effect, (B) conduct rising to the level of gross negligence or willful misconduct in the course of employment with the Company or an Affiliate, (C) commission of an act of dishonesty or disloyalty involving the Company or an Affiliate, (D) violation of any federal, state or local law in connection with the Participant’s employment or service, or (E) breach of any fiduciary duty to the Company or an Affiliate.

(j) “Change in Control” means the first to occur of the following events:

(1) the consummation of a reorganization, merger or consolidation of the Company with one or more other Persons, other than a transaction following which:

(A) at least 51% of the equity ownership interests of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the same relative proportions by Persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the outstanding equity ownership interests in the Company; and

(B) at least 51% of the securities entitled to vote generally in the election of directors of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the same relative proportions by Persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities entitled to vote generally in the election of directors of the Company;

(2) the acquisition of all or substantially all of the assets of the Company or beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the outstanding securities of the Company entitled to vote generally in the election of directors by any Person or by any Persons acting in concert;

(3) a complete liquidation or dissolution of the Company;

(4) the occurrence of any event if, immediately following such event, at least 50% of the members of the Board do not belong to any of the following groups:

(A) individuals who were members of the Board on the Effective Date; or

(B) individuals who first became members of the Board after the Effective Date either:

(i) upon election to serve as a member of the Board by affirmative vote of at least two-thirds of the members of such board, or of a nominating committee thereof, in office at the time of such first election; or

(ii) upon election by the shareholders of the Company to serve as a member of such board, but only if nominated for election by affirmative vote of at least two-thirds of the members of the Board, or of a nominating committee thereof, in office at the time of such first nomination;

provided , however , that such individual’s election or nomination did not result from an actual or threatened election contest or other actual or threatened solicitation of proxies or consents other than by or on behalf of the board;

(5) any event which would be described in section 2(j)(1), (2), (3), or (4) if the term “Bank” were substituted for the term “Company” and the term “board of directors of the Bank” were substituted for the term “Board” therein.

In no event, however, shall a Change in Control be deemed to have occurred as a result of any acquisition of securities or assets of the Company, the Bank, or a subsidiary of either of them, by the Company, the Bank, or any subsidiary of either of them, or by any employee benefit plan maintained by any of them.

Notwithstanding the foregoing, for purposes of an Award (1) that provides for the payment of deferred compensation that is subject to Code Section 409A or (2) with respect to which the Company permits a deferral election, the definition of Change in Control herein shall be deemed amended to conform to the requirements of Code Section 409A to the extent necessary for the Award and deferral election to comply with Code Section 409A.

(k) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a specific provision of the Code includes any successor provision and the regulations promulgated under such provision.

(l) “Commission” means the United States Securities and Exchange Commission or any successor agency.

(m) “Committee” means the Compensation, Nominating and Governance Committee of the Board (or a successor committee with the same or similar authority with respect to the Plan), or such other committee of the Board designated by the Board to administer the Plan and composed of no fewer than two directors, each of whom is a “non-employee director” within the meaning of Rule 16b-3 and an “outside director” within the meaning of Code Section 162(m)(4)(C); provided that if no such committee shall be in existence at any time, the functions of the Committee shall be carried out by the Board.

(n) “Common Stock” means the Company’s common stock, par value $0.01 per share.

(o) “Company” means People’s United Financial, Inc., a Delaware corporation, or any successor thereto.

(p) “Deferred Stock Right” means the right to receive Stock or Restricted Stock at some future time.

(q) “Director” means a member of the Board, and “Non-Employee Director” means a Director who is not also an officer or an employee of the Company or an Affiliate.

(r) “Disability” means, except as otherwise determined by the Administrator and set forth in an Award agreement, any physical or mental impairment which qualifies Participant for disability benefits under the applicable long-term disability plan maintained by the Company or, if no such plan applies, which would qualify Participant for disability benefits under the Federal Social Security System.

(s) “Dividend Equivalent Unit” means the right to receive a payment, in cash or property, equal to the cash dividends or other distributions paid with respect to a Share.

(t) “Eligible Director” means a Non-Employee Director.

(u) “Eligible Employee” means any officer or other employee of the Company or of any Affiliate, or any individual that the Company or an Affiliate has engaged to become an officer or employee.

(v) “Exchange Act” means the Securities Exchange Act of 1934, as amended. Any reference to a specific provision of the Exchange Act includes any successor provision and the regulations and rules promulgated under such provision.

(w) “Excluded Items” means any gains or losses from the sale of assets outside the ordinary course of business; any gains or losses from discontinued operations; any extraordinary gains or losses; the effects of accounting changes; any unusual, nonrecurring, transition, one-time or similar items or charges; the diluted impact of goodwill on acquisitions; and any other items specified by the Administrator; provided that, for

Awards intended to qualify as performance-based compensation under Code Section 162(m), the Administrator shall specify the Excluded Items in writing at the time the Award is made unless, after application of the Excluded Items, the amount payable under the Award is reduced.

(x) “Fair Market Value” means, per Share on a particular date: (i) the mean between the high and low selling prices at which Shares are traded on the principal securities exchange (as that term is used in Section 6 of the Exchange Act) on which the Shares are traded on such date or, if Shares are not traded on such exchange on that date, the mean between the high and low selling prices at which Shares were traded on such exchange on the most recent day on which Shares were so traded; (ii) if the Shares are not listed or admitted to trading on any such exchange, and prices of trades in Shares are regularly reported by the National Association of Securities Dealers Automated Quotations System, the mean between the high and low selling prices for Shares on such date as reported by such system, or, if no high or low selling prices for Shares are reported by such system for such date, then the mean between the high and low selling prices for Shares reported by such system for the most recent day in respect of which both high and low selling prices are quoted; or (iii) if neither subsection (i) or (ii) is applicable, the price determined by the Administrator. The Administrator also shall establish the Fair Market Value of any other property. If an actual sale of a Share occurs on the market, then the Company may consider the sale price to be the Fair Market Value of such Share.

(y) “Incentive Award” means the right to receive a cash payment to the extent Performance Goals are achieved, and shall include “Long-Term Incentive Awards” as described in Section 10.

(z) “Incentive Stock Option” or “ISO” mean an Option that meets the requirements of Code Section 422.

(aa) “Minimum Vesting Condition” means, with respect to any Award, that vesting of (or lapsing of restrictions on) such Award does not occur any more rapidly than on the first anniversary of the date of grant (or the date of commencement of employment or service, in the case of a grant made in connection with a Participant’s commencement of employment or service), other than (i) in connection with a Change in Control (in which case, Section 17(b) hereof shall control), or (ii) as a result of a Participant’s death or Disability; provided, however, that to the extent determined by the Administrator at the time of grant, an Award need not be subject to such condition so long as such Award, together with any other Award granted without being subject to such condition, does not exceed 5% of the total shares reserved for issuance under the Plan under Section 6(a) below.

(bb) “Option” means the right to purchase Shares at a stated price for a specified period of time.

(cc) “Participant” means an individual selected by the Administrator to receive an Award.

(dd) “Performance Awards” means a Performance Share and Performance Unit, and any Award of Restricted Stock, Restricted Stock Units or Deferred Stock Rights the payment or vesting of which is contingent on the attainment of one or more Performance Goals.

(ee) “Performance Goals” means the following categories (in all cases after taking into account any Excluded Items, as applicable), including in each case any measure based on such category:

(i)

Earnings per share.

(ii)

Core earnings per share.

(iii)

Return on assets.

(iv)

Return on equity.

(v)

Price earnings ratio.

(vi)

Total shareholder return.

(vii)

Book value.

(viii)

Stock price performance.

(ix)

Net income.

(x)

Operating income.

(xi)

Efficiency ratio.

(xii)

Loan growth.

(xiii)

Deposit growth.

(xiv)

Core deposit growth.

(xv)

Asset quality.

(xvi)

Net interest margin.

(xvii)

Non-interest income.

(xviii)

Non-interest expense.

(xix)

Expenses as a percentage of assets.

The Performance Goals may be measured (A) for the Company on a consolidated basis, (B) for any one or more Affiliates or divisions of the Company and/or (C) for any other business unit or units of the Company or an Affiliate as defined by the Administrator at the time of selection.

In addition, the Administrator may designate other categories, including categories involving individual performance and subjective targets, not listed above (A) with respect to Awards that are not intended to qualify as performance-based compensation within the meaning of Code Section 162(m) or (B) to the extent that the application of such categories results in a reduction of the maximum amount otherwise payable under the Award.

Where applicable, the Performance Goals may be expressed, without limitation, in terms of attaining a specified level of the particular criterion or the attainment of an increase or decrease (expressed as absolute numbers, averages and/or percentages) in the particular criterion or achievement in relation to a peer group or other index. The Performance Goals may include a threshold level of performance below which no payment will be made (or no vesting will occur), levels of performance at which specified payments will be paid (or specified vesting will occur), and a maximum level of performance above which no additional payment will be made (or at which full vesting will occur).

(ff) “Performance Shares” means the right to receive Shares (including Restricted Stock) to the extent Performance Goals are achieved.

(gg) “Performance Unit” means the right to receive a payment valued in relation to a unit that has a designated dollar value or the value of which is equal to the Fair Market Value of one or more Shares, to the extent Performance Goals are achieved.

(hh) “Person” means any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).

(ii) “Plan” means this People’s United Financial, Inc. 2014 Long-Term Incentive Plan, as may be amended from time to time.

(jj) “Restriction Period” means the length of time established relative to an Award during which the Participant cannot sell, assign, transfer, pledge or otherwise encumber the Stock or Stock Units subject to such Award and at the end of which the Participant obtains an unrestricted right to such Stock or Stock Units.

(kk) “Restricted Stock” means a Share that is subject to a risk of forfeiture or a Restriction Period, or both a risk of forfeiture and a Restriction Period.

(ll) “Restricted Stock Unit” means the right to receive a payment equal to the Fair Market Value of one Share that is subject to a risk of forfeiture or restrictions on transfer, or both a risk of forfeiture and restrictions on transfer.

(mm) “Retirement” means, except as otherwise determined by the Administrator and set forth in an Award agreement, (1) in the case of an Eligible Employee, termination of all service for the Company and its Affiliates as an employee at or after age 65, and (b) in the case of an Eligible Director, termination of all service for the Company and its Affiliates as a voting member of the Board after the attainment of the latest age at which such Eligible Director is eligible for election or appointment as a voting member of the Board under the Company’s Certificate of Incorporation or Bylaws. In the case of any individual who comes within the scope of both subsections (1) and (2) of the foregoing sentence, Retirement will be deemed to have occurred at the earliest possible date.

(nn) “Rule 16b-3” means Rule 16b-3 promulgated by the Commission under the Exchange Act, or any successor rule or regulation thereto.

(oo) “Section 16 Participants” means Participants who are subject to the provisions of Section 16 of the Exchange Act.

(pp) “Share” means a share of Stock.

(qq) “Stock” means the Common Stock of the Company.

(rr) “Stock Appreciation Right” or “SAR” means the right to receive a payment equal to the appreciation of the Fair Market Value of a Share during a specified period of time.

(ss) “Stock Unit” means a right to receive a payment equal to the Fair Market Value of one Share.

(tt) “Subsidiary” means any corporation, limited liability company or other limited liability entity in an unbroken chain of entities beginning with the Company if each of the entities (other than the last entity in the chain) owns the stock or equity interest possessing more than fifty percent (50%) of the total combined voting power of all classes of stock or other equity interests in one of the other entities in the chain.

(uu) “Unrestricted Shares” means Shares issued under the Plan that are not subject to either a risk of forfeiture or a Restriction Period.

3. Administration.

(a) Administration . The Administrator shall administer this Plan. In addition to the authority specifically granted to the Administrator in this Plan, the Administrator has full discretionary authority to administer this Plan and all Awards, including but not limited to the authority to: (i) interpret the provisions of this Plan and any Award agreement; (ii) prescribe, amend and rescind rules and regulations relating to this Plan; (iii) correct any defect, supply any omission, or reconcile any inconsistency in this Plan, any Award or agreement covering an Award in the manner and to the extent it deems desirable to carry this Plan or such Award into effect; and (iv) make all other determinations necessary or advisable for the administration of this Plan. All Administrator determinations shall be made in the sole discretion of the Administrator and are final and binding on all interested parties.

Notwithstanding the above statement or any other provision of the Plan, the Committee shall have no discretion to increase the amount, once established, of compensation payable under an Award that is intended to be performance-based compensation under Code Section 162(m), although the Committee may decrease the amount of compensation a Participant may earn under such an Award.

(b) Delegation to Other Committees or Officers . To the extent applicable law permits, the Board may delegate to another committee of the Board or to one or more officers of the Company, or the Committee may delegate to one or more officers of the Company, any or all of their respective authority and responsibility as an Administrator of the Plan; provided that no such delegation is permitted with respect to Stock-based Awards made to Section 16 Participants or Awards made to Participants subject to Code Section 162(m) at the time any such delegated authority or responsibility is exercised unless the delegation is to another committee of the Board consisting entirely of directors who are “non-employee directors” within the meaning of Rule 16b-3 and “outside directors” within the meaning of Code Section 162(m)(4)(C); and provided further that any authority delegated to an officer of the Company shall be limited to the authority to approve the grant of an Award. If the Board or the Committee has made such a delegation, then all references to the Administrator in this Plan include such other committee or one or more officers to the extent of such delegation.

(c) Indemnification . The Company will indemnify and hold harmless each member of the Board and the Committee, and each officer or member of any other committee to whom a delegation under Section 3(b) has been made, as to any acts or omissions with respect to this Plan or any Award to the maximum extent that the law and the Company’s certificate of incorporation and by-laws permit.

4. Eligibility. The Administrator (to the extent of its authority) may designate any of the following as a Participant from time to time: any officer or other employee of the Company or its Affiliates or any individual that the Company or an Affiliate has engaged to become an officer or employee; and any Eligible Director. The Administrator’s designation of a Participant in any year will not require the Administrator to designate such person to receive an Award in any other year. No individual shall have any right to be granted an Award, even if an Award was granted to such individual at any prior time, or if a similarly-situated individual is or was granted an Award under similar circumstances.

5. Types of Awards. Subject to the terms of this Plan, the Administrator may grant any type of Award to any Participant it selects, but only employees of the Company or a Subsidiary may receive grants of Incentive Stock Options.

6. Shares Reserved under this Plan.

(a) Plan Reserve . Subject to adjustment as provided in Section 17, an aggregate of 75,850,000 Shares are reserved for issuance under this Plan. The Shares reserved for issuance may be either authorized and unissued Shares or Shares reacquired at any time and now or hereafter held as treasury stock. The aggregate number of Shares reserved under this Section 6(a) shall be depleted by one Share for each Share subject to an Option or SAR (that will be settled in Shares), and the aggregate number of Shares reserved under this Section 6(a) shall be depleted by 5.32 Shares for each Share subject to an Award other than an Option or SAR. For purposes of determining the aggregate number of Shares reserved for issuance under this Plan, any fractional Share shall be rounded to the next highest full Share.

(b) [Reserved].

(c) Replenishment of Shares Under this Plan . If (i) an Award lapses, expires, terminates or is cancelled without the issuance of Shares (or payment of cash in lieu of the issuance of Shares, in the case of SARs) under the Award (whether due currently or on a deferred basis), (ii) it is determined during or at the conclusion of the term of an Award that all or some portion of the Shares with respect to which the Award was granted will not be issuable on the basis that the conditions for such issuance will not be satisfied, (iii) Shares are forfeited under an Award or (iv) Shares are issued under any Award and the Company subsequently reacquires them pursuant to rights reserved upon the issuance of the Shares, then such Shares shall be recredited to the Plan’s reserve (in the same number as they depleted the reserve) and may again be used for new Awards under this Plan, but Shares recredited to the Plan’s reserve pursuant to clause (iv) may not be issued pursuant to Incentive Stock Options. Notwithstanding the foregoing, in no event shall the following Shares be recredited to the Plan’s reserve: Shares tendered in payment of the exercise price of an Option; Shares withheld to satisfy federal, state or local tax withholding obligations; Shares purchased by the Company using proceeds from Option exercises; and in the case of Stock Appreciation Rights that were settled in cash, Shares that would (but for the payment of cash) have been issued in settlement of such Stock Appreciation Rights.

(d) Participant Limitations . Subject to adjustment as provided in Section 17, no Participant may be granted Awards that could result in such Participant:

(i) receiving Options for, and/or Stock Appreciation Rights with respect to, more than 1,000,000 Shares during any fiscal year of the Company;

(ii) receiving Awards of Restricted Stock (including any dividends paid thereon) and/or Restricted Stock Units (including any associated Dividend Equivalent Units) and/or Deferred Stock Rights (including any associated Dividend Equivalent Units) relating to more than 500,000 Shares during any fiscal year of the Company;

(iii) receiving Awards of Performance Shares, and/or Awards of Performance Units the value of which is based on the Fair Market Value of Shares, for more than 500,000 Shares during any fiscal year of the Company;

(iv) receiving Awards of Performance Units the value of which is not based on the Fair Market Value of Shares that would pay more than $5,000,000 during any fiscal year of the Company;

(v) receiving other Stock-based Awards pursuant to Section 12 relating to more than 50,000 Shares during any fiscal year of the Company; or

(vi) receiving a Long-Term Incentive Award in any fiscal year of the Company that would pay more than $5,000,000.

In all cases, determinations under this Section 6(d) should be made in a manner that is consistent with the exemption for performance-based compensation that Code Section 162(m) provides.

7. Options. Subject to the terms of this Plan, including, the Minimum Vesting Condition, the Administrator will determine all terms and conditions of each Option, including but not limited to:

(a) Whether the Option is an Incentive Stock Option or a “nonqualified stock option” which does not meet the requirements of Code Section 422;

(b) The number of Shares subject to the Option;

(d) The exercise price, which may not be less than the Fair Market Value of the Shares subject to the Option as determined on the date of grant; provided that an Incentive Stock Option granted to a 10% Shareholder must have an exercise price at least equal to 110% of the Fair Market Value of the Shares subject to the Option as determined on the date of grant;

(e) The terms and conditions of exercise, including the manner and form of payment of the exercise price; provided that if the aggregate Fair Market Value of the Shares subject to all ISOs granted to a Participant (as determined on the date of grant of each such Option) that become exercisable during a calendar year exceeds the dollar limitation set forth in Code Section 422(d), then such ISOs shall be treated as nonqualified stock options to the extent such limitation is exceeded; and

(f) The term; provided that each Option must terminate no later than ten (10) years after the date of grant and each Incentive Stock Option granted to a 10% Shareholder must terminate no later than five (5) years after the date of grant.

In all other respects, the terms of any Incentive Stock Option should comply with the provisions of Code Section 422 except to the extent the Administrator determines otherwise. If an Option that is intended to be an Incentive Stock Option fails to meet the requirements thereof, the Option shall automatically be treated as a nonqualified stock option to the extent of such failure.

8. Stock Appreciation Rights. Subject to the terms of this Plan, including, the Minimum Vesting Condition, the Administrator will determine all terms and conditions of each SAR, including but not limited to:

(a) Whether the SAR is granted independently of an Option or relates to an Option;

(b) The number of Shares to which the SAR relates;

(d) The grant price, provided that the grant price shall not be less than the Fair Market Value of the Shares subject to the SAR as determined on the date of grant;

(e) The terms and conditions of exercise or maturity;

(f) The term, provided that each SAR must terminate no later than ten (10) years after the date of grant; and

(g) Whether the SAR will be settled in cash, Shares or a combination thereof.

If an SAR is granted in relation to an Option, then, unless otherwise determined by the Administrator, the SAR shall be exercisable or shall mature at the same time or times, on the same conditions and to the extent and in the proportion, that the related Option is exercisable and may be exercised or mature for all or part of

the Shares subject to the related Option. Upon exercise of any number of SARs, the number of Shares subject to the related Option shall be reduced accordingly and such Option may not be exercised with respect to that number of Shares. The exercise of any number of Options that relate to an SAR shall likewise result in an equivalent reduction in the number of Shares covered by the related SAR.

9. Performance and Stock Awards. Subject to the terms of this Plan, including, the Minimum Vesting Condition, the Administrator will determine all terms and conditions of each award of Restricted Stock, Restricted Stock Units, Deferred Stock Rights, Performance Shares or Performance Units, including but not limited to:

(a) The number of Shares and/or units to which such Award relates;

(b) Whether, as a condition for the Participant to realize all or a portion of the benefit provided under the Award, one or more Performance Goals must be achieved during such period as the Administrator specifies;

(c) The Restriction Period with respect to Restricted Stock or Restricted Stock Units and the period of deferral for Deferred Stock Rights;

(d) The performance period for Performance Awards;

(e) With respect to Performance Units, whether to measure the value of each unit in relation to a designated dollar value or the Fair Market Value of one or more Shares; and

(f) With respect to Restricted Stock Units and Performance Units, whether to settle such Awards in cash, in Shares, or a combination thereof.

Except as otherwise provided in the Plan, at such time as all restrictions applicable to an Award of Restricted Stock, Deferred Stock Rights or Restricted Stock Units are met and the Restriction Period expires, ownership of the Stock subject to such restrictions shall be transferred to the Participant free of all restrictions except those that may be imposed by applicable law; provided that if Restricted Stock Units are paid in cash, then the payment shall be made to the Participant after all applicable restrictions lapse and the Restriction Period expires.

10. Long-Term Incentive Awards. Subject to the terms of this Plan, including, the Minimum Vesting Condition, the Administrator will determine all terms and conditions of a Long-Term Incentive Award, including but not limited to the Performance Goals, performance period, the potential amount payable, and the timing of payment, subject to the following: (a) the Administrator must require that payment of all or any portion of the amount subject to the Long-Term Incentive Award is contingent on the achievement of one or more Performance Goals during the period the Administrator specifies, although the Administrator may specify that all or a portion of the Performance Goals subject to an Award are deemed achieved upon a Participant’s death, Disability or (for Awards not intended to qualify as performance-based compensation within the meaning of Code Section 162(m)) Retirement, or such other circumstances as the Administrator may specify; and (b) the performance period must relate to a period of more than one fiscal year of the Company.

11. Dividend Equivalent Units. Subject to the terms of this Plan, the Administrator will determine all terms and conditions of each award of Dividend Equivalent Units, including but not limited to whether: (a) such Award will be granted in tandem with another Award; (b) payment of the Award be made currently or credited to an account for the Participant that provides for the deferral of such amounts until a stated time; provided that payment in respect of any Dividend Equivalent Units that relate to any Award that is unvested at the time the cash dividend or other distribution is paid with respect to a Share shall remain subject to, and contingent on, the vesting of such Award and shall not be paid until such Award has vested; and (c) the Award will be settled in cash or Shares; provided that Dividend Equivalent Units may be granted only in connection with a “full-value Award.” For this purpose, a “full-value Award” includes Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units (valued in relation to a Share), Deferred Stock Rights and any other similar Award under which the value of the Award is measured as the full value of a Share, rather than the increase in the value of a Share (i.e., Awards other than Options or SARs).

12. Other Stock-Based Awards. Subject to the terms of this Plan, including, the Minimum Vesting Condition, the Administrator may grant to Participants other types of Awards, which shall be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, Shares, either alone or in addition to or in conjunction with other Awards, and payable in Stock or cash. Without limitation, such Award may include the issuance of Unrestricted Shares (which may be awarded in lieu of cash compensation to which a Participant is otherwise entitled, in exchange for cancellation of a compensation right, as a bonus, upon the attainment of Performance Goals or otherwise) or rights to acquire Stock from the Company. The Administrator shall determine all terms and conditions of the Award, including but not limited to, the time or times at which such Awards shall be made, and the number of Shares to be granted pursuant to such Awards or to which such Award shall relate; provided that any Award that provides for purchase rights shall be priced at 100% of Fair Market Value on the date of grant of the Award; and provided further that the date of grant cannot be prior to the date the Administrator takes action to approve the Award.

13. Effect of Termination on Awards. The Administrator shall have the discretion to determine, at the time an Award is made to a Participant or any time thereafter, the effect of the Participant’s termination of employment or service with the Company and its Affiliates on the Award.

14. Transferability .

(a) Restrictions on Transfer . No Award (other than Unrestricted Shares), and no right under any such Award, shall be assignable, alienable, saleable, or transferable by a Participant otherwise than by will or by the laws of descent and distribution, unless and to the extent the Administrator allows a Participant to: (i) designate in writing a beneficiary to exercise the Award after the Participant’s death; or (ii) transfer an Award.

(b) Restrictions on Exercisability . Each Award, and each right under any Award, shall be exercisable during the lifetime of the Participant only by such individual or, if permissible under applicable law, by such individual’s guardian or legal representative.

15. Termination and Amendment of Plan; Amendment, Modification or Cancellation of Awards.

(a) Term of Plan . Unless the Board or Committee earlier terminates this Plan pursuant to Section 15(b), this Plan will terminate on the date all Shares reserved for issuance have been issued. If the term of this Plan extends beyond ten (10) years from the Effective Date, no Incentive Stock Options may be granted after such time unless the shareholders of the Company have approved an extension of this Plan for such purpose.

(b) Termination and Amendment . The Board or the Committee may amend, alter, suspend, discontinue or terminate this Plan at any time, subject to the following limitations:

(i) the Board must approve any amendment of this Plan to the extent the Company determines such approval is required by: (A) prior action of the Board, (B) applicable corporate law, or (C) any other applicable law;

(ii) shareholders must approve any amendment of this Plan to the extent the Company determines such approval is required by: (A) Section 16 of the Exchange Act, (B) the Code, (C) the listing requirements of any principal securities exchange or market on which the Shares are then traded, or (D) any other applicable law; and

(iii) shareholders must approve any of the following Plan amendments: (A) an amendment to materially increase any number of Shares specified in Section 6(a) or 6(b) or the limits set forth in Section 6(d) (except as permitted by Section 17), (B) an amendment to materially expand the group of individuals that may become Participants, or (C) an amendment that would diminish the protections afforded by Section 15(e).

(i) Subject to the requirements of the Plan, including the limitations of Section 15(e), the Administrator may modify, amend or cancel any Award or waive any restrictions or conditions applicable to any Award or the exercise of the Award, provided that any modification or amendment that materially diminishes the rights of the Participant, or the cancellation of the Award, shall be effective only if agreed to by the Participant or any other person(s) as may then have an interest in the Award, but the Administrator need not obtain Participant (or other interested party) consent for the modification, amendment or cancellation of an Award pursuant to the provisions of Section 17 or as follows: (A) to the extent the Administrator deems such action necessary to comply with any applicable law or the listing requirements of any principal securities exchange or market on which the Shares are then traded; (B) to the extent the Administrator deems necessary to preserve favorable accounting or tax treatment of any Award for the Company; or (C) to the extent the Administrator determines that such action does not materially and adversely affect the value of an Award or that such action is in the best interest of the affected Participant or any other person(s) as may then have an interest in the Award. Notwithstanding the foregoing, unless determined otherwise by the Administrator, any such amendment shall be made in a manner that will enable an Award intended to be exempt from Code Section 409A to continue to be so exempt, or to enable an Award intended to comply with Code Section 409A to continue to so comply.

(ii) Any Awards granted pursuant to this Plan, and any Stock issued or cash paid pursuant to an Award, shall be subject to (A) any recoupment, clawback, equity holding, stock ownership or similar policies adopted by the Company from time to time and (B) any recoupment, clawback, equity holding, stock ownership or similar requirements made applicable by law, regulation or listing standards to the Company from time to time.

(iii) Unless the Award agreement specifies otherwise, the Administrator may cancel any Award at any time if the Participant is not in compliance with all applicable provisions of the Award agreement and the Plan.

(d) Survival of Authority and Awards . Notwithstanding the foregoing, the authority of the Board and the Administrator under this Section 15 and to otherwise administer the Plan will extend beyond the date of this Plan’s termination. In addition, termination of this Plan will not affect the rights of Participants with respect to Awards previously granted to them, and all unexpired Awards will continue in force and effect after termination of this Plan except as they may lapse or be terminated by their own terms and conditions.

(e) Repricing, Substitution and Backdating Prohibited . Notwithstanding anything in this Plan to the contrary, and except for the adjustments provided in Section 17, neither the Administrator nor any other person may (i) amend the terms of outstanding Options or SARs to reduce the exercise price of such outstanding Options or SARs; (ii) cancel outstanding Options or SARs in exchange for Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs, or otherwise substitute Options or SARs for outstanding Options or SARs if the substitute Options or SARs would have an exercise price that is less than the exercise price of the original Options or SARs; or (iii) cancel outstanding Options or SARs with an exercise price above the current Share price in exchange for cash or other securities. In addition, the Administrator may not make a grant of an Option or SAR with a grant date that is effective prior to the date the Administrator takes action to approve such Award.

(f) Code Section 409A . The provisions of Code Section 409A are incorporated herein by reference to the extent necessary for any Award that is subject to Code Section 409A to comply therewith.

16. Taxes.

(a) Withholding . In the event the Company or an Affiliate of the Company is required to withhold any Federal, state or local taxes or other amounts in respect of any income recognized by a Participant as a result of the grant, vesting, payment or settlement of an Award or disposition of any Shares acquired under an Award, the Company may deduct (or require an Affiliate to deduct) from any payments of any kind otherwise due the Participant cash, or with the consent of the Committee, Shares otherwise deliverable or vesting under an Award, to satisfy such tax obligations. Alternatively, the Company may require such Participant to pay to the Company, in cash, promptly on demand, or make other arrangements satisfactory to the Company regarding the payment to the Company of the aggregate amount of any such taxes and

other amounts. If Shares are deliverable upon exercise or payment of an Award, the Committee may permit a Participant to satisfy all or a portion of the Federal, state and local withholding tax obligations arising in connection with such Award by electing to (a) have the Company withhold Shares otherwise issuable under the Award, (b) tender back Shares received in connection with such Award or (c) deliver other previously owned Shares; provided that the amount to be withheld may not exceed the total maximum federal, state and local taxes associated with the transaction (or such lesser amount as may be determined by the Administrator from time to time in order for the Company to avoid adverse accounting treatment). If an election is provided, the election must be made on or before the date as of which the amount of tax to be withheld is determined and otherwise as the Committee requires. In any case, the Company may defer making payment or delivery under any Award if any such tax may be pending unless and until indemnified to its satisfaction.

(b) No Guarantee of Tax Treatment . Notwithstanding any provisions of the Plan, the Company does not guarantee to any Participant or any other Person with an interest in an Award that (i) any Award intended to be exempt from Code Section 409A shall be so exempt, (ii) any Award intended to comply with Code Section 409A or Code Section 422 shall so comply, (iii) any Award shall otherwise receive a specific tax treatment under any other applicable tax law, nor in any such case will the Company or any Affiliate indemnify, defend or hold harmless any individual with respect to the tax consequences of any Award.

(c) Participant Responsibilities . If a Participant shall dispose of Stock acquired through exercise of an ISO within either (i) two (2) years after the date the Option is granted or (ii) one (1) year after the date the Option is exercised (i.e., in a disqualifying disposition), such Participant shall notify the Company within seven (7) days of the date of such disqualifying disposition. In addition, if a Participant elects, under Code Section 83, to be taxed at the time an Award of Restricted Stock (or other property subject to such Code section) is made, rather than at the time the Award vests, such Participant shall notify the Company within seven (7) days of the date the Participant makes such an election.

17. Adjustment Provisions; Change in Control.

(a) Adjustment of Shares . If: (i) the Company shall at any time be involved in a merger or other transaction in which the Shares are changed or exchanged; (ii) the Company shall subdivide or combine the Shares or the Company shall declare a dividend payable in Shares, other securities or other property; (iii) the Company shall effect a cash dividend the amount of which, on a per Share basis, exceeds ten percent (10%) of the Fair Market Value of a Share at the time the dividend is declared, or the Company shall effect any other dividend or other distribution on the Shares in the form of cash, or a repurchase of Shares, that the Board determines by resolution is special or extraordinary in nature or that is in connection with a transaction that the Company characterizes publicly as a recapitalization or reorganization involving the Shares; or (iv) any other event shall occur, which, in the case of this clause (iv), in the judgment of the Board or Committee necessitates an adjustment to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, then the Administrator shall, in such manner as it may deem equitable to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, adjust as applicable: (A) the number and type of Shares subject to this Plan (including the number and type of Shares described in Section 6) and which may after the event be made the subject of Awards; (B) the number and type of Shares subject to outstanding Awards; (C) the grant, purchase, or exercise price with respect to any Award; and (D) to the extent such discretion does not cause an Award that is intended to qualify as performance-based compensation under Code Section 162(m) to lose its status as such, the Performance Goals of an Award. In any such case, the Administrator may also (or in lieu of the foregoing) make provision for a cash payment to the holder of an outstanding Award in exchange for the cancellation of all or a portion of the Award (without the consent of the holder of an Award) in an amount determined by the Administrator effective at such time as the Administrator specifies (which may be the time such transaction or event is effective). However, in each case, with respect to Awards of Incentive Stock Options, no such adjustment may be authorized to the extent that such authority would cause this Plan to violate Code Section 422(b). Further, the number of Shares subject to any Award payable or denominated in Shares must always be a whole number. In any event, previously granted Options or SARs are subject only to such adjustments as are necessary to maintain the relative proportionate interest the Options and SARs represented immediately prior to any such event and to preserve, without exceeding, the value of such Options or SARs.

Without limitation, in the event of any reorganization, merger, consolidation, combination or other similar corporate transaction or event, whether or not constituting a Change in Control (other than any such transaction in which the Company is the continuing corporation and in which the outstanding Stock is not being converted into or exchanged for different securities, cash or other property, or any combination thereof), the Administrator may substitute, on an equitable basis as the Administrator determines, for each Share then subject to an Award and the Shares subject to this Plan (if the Plan will continue in effect), the number and kind of shares of stock, other securities, cash or other property to which holders of Stock are or will be entitled in respect of each Share pursuant to the transaction.

Notwithstanding the foregoing, in the case of a stock dividend (other than a stock dividend declared in lieu of an ordinary cash dividend) or subdivision or combination of the Shares (including a reverse stock split), if no action is taken by the Administrator, adjustments contemplated by this subsection that are proportionate shall nevertheless automatically be made as of the date of such stock dividend or subdivision or combination of the Shares.

(b) Change in Control . If the Participant has in effect an employment, retention, change in control, severance or similar agreement with the Company or any Affiliate that discusses the effect of a Change in Control on the Participant’s Awards, then such agreement shall control. In all other cases, unless provided otherwise in an Award agreement, in connection with any Change in Control, the Administrator may, in its sole discretion, provide for any one or more of the following:

(i) substitution or assumption of Awards,

(ii) to the extent that the surviving entity (or Affiliate thereof) of such Change in Control does not substitute or assume the Awards, full acceleration of vesting of, exercisability of, or lapse of restrictions on, as applicable, any Awards; provided, however that with respect to any performance-vested Awards, any such acceleration of vesting, exercisability, or lapse of restrictions shall be based on target performance through the date of such Change in Control;

(iii) cancellation of any one or more outstanding Awards and payment to the holders of such Awards that are vested as of such cancellation (including, without limitation, any Awards that would vest as a result of the occurrence of such event but for such cancellation or for which vesting is accelerated by the Administrator in connection with such event pursuant to clause (i) above), the value of such Awards, if any, as determined by the Administrator (which value, if applicable, shall be based upon the price per share of Common Stock received or to be received by other shareholders of the Company in such event), including, without limitation, in the case of an outstanding Option or SAR, a cash payment in an amount equal to the excess, if any, of the Fair Market Value of the shares of Common Stock subject to such Option or SAR over the aggregate the purchase or grant price of the shares under the Option or SAR (it being understood that, in such event, any Option or SAR having a per share purchase or grant price equal to, or in excess of, the Fair Market Value of a share of Common Stock subject thereto may be canceled and terminated without any payment or consideration therefor).

For purposes of clause (i) above, an award will be considered granted in substitution of an Award if it has an equivalent value (as determined consistent with clause (iii) above) with the original Award, whether designated in securities of the acquiror in such Change in Control transaction (or an Affiliate thereof), or in cash or other property (including in the same consideration that other stockholders of the Company receive in connection with such Change in Control transaction), and retains the vesting schedule applicable to the original Award. To the extent that Awards are either assumed or substituted pursuant to clause (i) above, upon any termination of a Participant’s employment or service on or following such Change in Control (A) by reason of such Participant’s death or Disability, or (B) by the Company (or the acquiror or other applicable Affiliate employing such Participant immediately following such Change in Control) without Cause, any such assumed or substituted Awards shall vest in full upon such termination.

Notwithstanding anything to the contrary in the foregoing, the Participant has a deferral election in effect with respect to any amount payable under this Section 17(b), such amount shall be deferred pursuant to such election and shall not be paid in a lump sum as provided herein; provided that, with respect to amounts payable to a Participant (or the Participant’s beneficiary or estate) who is entitled to a payment hereunder because the Participant’s employment terminated as a result of death or Disability, or payable to a Participant who has met the requirements for Retirement (without regard to whether the Participant has terminated employment), no payment shall be made unless the Change in Control also constitutes a change of control within the meaning of Code Section 409A.

If the value of an Award is based on the Fair Market Value of a Share, Fair Market Value shall be deemed to mean the per share Change in Control price. The Administrator shall determine the per share Change in Control price paid or deemed paid in the Change in Control transaction.

(c) Application of Limits on Payments . Except as otherwise expressly provided in any agreement between a Participant and the Company or an Affiliate, if the receipt of any payment by a Participant under the circumstances described above would result in the payment by the Participant of any excise tax provided for in Section 280G and Section 4999 of the Code, then the amount of such payment shall be reduced to the extent required to prevent the imposition of such excise tax.

(d) Other Requirements . Prior to any payment or adjustment contemplated under this Section 17, the Administrator may require a Participant to (i) represent and warrant as to the unencumbered title to the Participant’s Awards; (ii) bear such Participant’s pro rata share of any post-closing indemnity obligations, and be subject to the same post-closing purchase price adjustments, escrow terms, offset rights, holdback terms, and similar conditions as the other holders of Common Stock, subject to any limitations or reductions as may be necessary to comply with Code Section 409A; and (iii) deliver customary transfer documentation as reasonably determined by the Administrator. Any adjustment provided under this Section 17 may provide for the elimination of any fractional share that might otherwise become subject to an Award.

18. Miscellaneous.

(a) Other Terms and Conditions . The grant of any Award may also be subject to other provisions (whether or not applicable to the Award granted to any other Participant) as the Administrator determines appropriate, including, without limitation, provisions for:

(i) the payment of the purchase price of Options by delivery of cash or other Shares or other securities of the Company (including by attestation) having a then Fair Market Value equal to the purchase price of such Shares, or by delivery (including by fax) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions to a broker-dealer to sell or margin a sufficient portion of the Shares and deliver the sale or margin loan proceeds directly to the Company to pay for the exercise price;

(ii) one or more means to enable Participants to defer the delivery of Shares or recognition of taxable income relating to Awards or cash payments derived from the Awards on such terms and conditions as the Administrator determines, including, by way of example, the form and manner of the deferral election, the treatment of dividends paid on the Shares during the deferral period or a means for providing a return to a Participant on amounts deferred, and the permitted distribution dates or events (provided that no such deferral means may result in an increase in the number of Shares issuable under this Plan);

(iii) restrictions on resale or other disposition of Shares; and

(iv) compliance with federal or state securities laws and stock exchange requirements.

(b) Employment and Service . The issuance of an Award shall not confer upon a Participant any right with respect to continued employment or service with the Company or any Affiliate. Unless determined otherwise by the Administrator, for purposes of the Plan and all Awards, the following rules shall apply:

(i) a Participant who transfers employment between the Company and its Affiliates, or between Affiliates, will not be considered to have terminated employment; and

(ii) a Participant employed by an Affiliate will be considered to have terminated employment when such entity ceases to be an Affiliate.

Notwithstanding the foregoing, for purposes of an Award that is subject to Code Section 409A, if a Participant’s termination of employment or service triggers the payment of compensation under such Award, then the Participant will be deemed to have terminated employment or service upon his or her “separation from service” within the meaning of Code Section 409A. Notwithstanding any other provision in this Plan or an Award to the contrary, if any Participant is a “specified employee” within the meaning of Code Section 409A as of the date of his or her “separation from service” within the meaning of Code Section 409A, then, to the extent required by Code Section 409A, any payment made to the Participant on account of such separation from service shall not be made before a date that is six months after the date of the separation from service.

(c) No Fractional Shares . No fractional Shares or other securities may be issued or delivered pursuant to this Plan, and the Administrator may determine whether cash, other securities or other property will be paid or transferred in lieu of any fractional Shares or other securities, or whether such fractional Shares or other securities or any rights to fractional Shares or other securities will be canceled, terminated or otherwise eliminated.

(d) Offset . The Company shall have the right to offset, from any amount payable or stock deliverable hereunder, any amount that the Participant owes to the Company or any Affiliate without the consent of the Participant or any individual with a right to the Participant’s Award.

(e) Unfunded Plan . This Plan is unfunded and does not create, and should not be construed to create, a trust or separate fund with respect to this Plan’s benefits. This Plan does not establish any fiduciary relationship between the Company and any Participant or other person. To the extent any person holds any rights by virtue of an Award granted under this Plan, such rights are no greater than the rights of the Company’s general unsecured creditors. Income recognized by a Participant pursuant to an Award shall not

be included in the determination of benefits under any employee pension benefit plan (as such term is defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended) or group insurance or other benefit plans applicable to the Participant which are maintained by the Company or any Affiliate, except as may be provided under the terms of such plans or determined by resolution of the Board.

(f) Requirements of Law and Securities Exchange . The granting of Awards and the issuance of Shares in connection with an Award are subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required. Notwithstanding any other provision of this Plan or any Award agreement, the Company has no liability to deliver any Shares under this Plan or make any payment unless such delivery or payment would comply with all applicable laws and the applicable requirements of any securities exchange or similar entity, and unless and until the Participant has taken all actions required by the Company in connection therewith. The Company may impose such restrictions on any Shares issued under the Plan as the Company determines necessary or desirable to comply with all applicable laws, rules and regulations or the requirements of any national securities exchange.

(g) Restrictive Legends; Representations . All Shares delivered (whether in certificated or book entry form) pursuant to any Award or the exercise thereof shall bear such legends or be subject to such stop transfer orders as the Administrator may deem advisable under the Plan or under applicable laws, rules or regulations or the requirements of any national securities exchange. The Administrator may require each Participant or other Person who acquires Shares under the Plan by means of an Award to represent to the Company in writing that such Participant or other Person is acquiring the Shares without a view to the distribution thereof.

(h) Governing Law . This Plan, and all Awards hereunder, and all determinations made and actions taken pursuant to this Plan, shall be governed by the internal laws of the State of Connecticut (without reference to conflict of law principles thereof) and construed in accordance therewith, to the extent not otherwise governed by the laws of the United States or as otherwise provided hereinafter. Notwithstanding anything to the contrary herein, if any individual (other than the Company) brings a claim involving the Company or an Affiliate, regardless of the basis of the claim (including but not limited to claims relating to wrongful discharge, Title VII discrimination, the Participant’s employment or service with the Company or its Affiliates or the termination thereof, benefits under this Plan or other matters), such claim shall be settled by final binding arbitration in accordance with the rules of the American Arbitration Association (“AAA”) and the following provisions, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

(i) Initiation of Action . Arbitration must be initiated by serving or mailing a written notice of the complaint to the other party. Normally, such written notice should be provided to the other party within one year (365 days) after the day the complaining party first knew or should have known of the events giving rise to the complaint. However, this time frame may be extended if the applicable statute of limitation provides for a longer period of time. If the complaint is not properly submitted within the appropriate time frame, all rights and claims that the complaining party has or may have against the other party shall be waived and void. Any notice sent to the Company shall be delivered to:

Office of General Counsel

People’s United Financial, Inc.

850 Main Street, 16 ^th Floor

Bridgeport, CT 06604

The notice must identify and describe the nature of all complaints asserted and the facts upon which such complaints are based. Notice will be deemed given according to the date of any postmark or the date of time of any personal delivery.

(ii) Compliance with Personnel Policies . Before proceeding to arbitration on a complaint, the claimant must initiate and participate in any complaint resolution procedure identified in the personnel policies of the Company or an Affiliate, as applicable. If the claimant has not initiated the complaint resolution procedure before initiating arbitration on a complaint, the initiation of the arbitration shall be deemed to begin the complaint resolution procedure. No arbitration hearing shall be held on a complaint until any complaint resolution procedure of the Company or an Affiliate, as applicable, has been completed.

(iii) Rules of Arbitration . All arbitration will be conducted by a single arbitrator according to the Employment Dispute Arbitration Rules of the AAA. The arbitrator will have authority to award any remedy or relief that a court of competent jurisdiction could order or grant including, without limitation, specific performance of any obligation created under the award or policy, the awarding of punitive damages, the issuance of any injunction, costs and attorney’s fees to the extent permitted by law, or the imposition of sanctions for abuse of the arbitration process. The arbitrator’s award must be rendered in a writing that sets forth the essential findings and conclusions on which the arbitrator’s award is based.

(iv) Representation and Costs . Each party may be represented in the arbitration by an attorney or other representative selected by the party. The Company or Affiliate shall be responsible for its own costs, the AAA filing fee and all other fees, costs and expenses of the arbitrator and AAA for administering the arbitration. The claimant shall be responsible for his attorney’s or representative’s fees, if any. However, if any party prevails on a statutory claim which allows the prevailing party costs and/or attorneys’ fees, the arbitrator may award costs and reasonable attorneys’ fees as provided by such statute.

(v) Discovery; Location; Rules of Evidence . Discovery will be allowed to the same extent afforded under the Federal Rules of Civil Procedure. Arbitration will be held at a location selected by the Company. AAA rules notwithstanding, the admissibility of evidence offered at the arbitration shall be determined by the arbitrator who shall be the judge of its materiality and relevance. Legal rules of evidence will not be controlling, and the standard for admissibility of evidence will generally be whether it is the type of information that responsible people rely upon in making important decisions.

(vi) Confidentiality . The existence, content or results of any arbitration may not be disclosed by a party or arbitrator without the prior written consent of both parties. Witnesses who are not a party to the arbitration shall be excluded from the hearing except to testify.

(i) Construction . Whenever any words are used herein in the masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and wherever any words are used in the singular or plural, they shall be construed as though they were used in the plural or singular, as the case may be, in all cases where they would so apply. Titles of sections are for general information only, and this Plan is not to be construed with reference to such titles.

(j) Severability . If any provision of this Plan or any Award agreement or any Award (a) is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to any person or Award, or (b) would disqualify this Plan, any Award agreement or any Award under any law the Administrator deems applicable, then such provision should be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Administrator, materially altering the intent of this Plan, Award agreement or Award, then such provision should be stricken as to such jurisdiction, person or Award, and the remainder of this Plan, such Award agreement and such Award will remain in full force and effect.

Exhibit 10.7(a)

LOGO

PERFORMANCE SHARE GRANT AGREEMENT


Employee Name:		[Participant Name]

Number of Performance Shares Subject to Grant (Target):		[Shares Granted]

Award Date:		[Grant Date]

THIS PERFORMANCE SHARE GRANT AGREEMENT (this “Agreement”) is made as of the Award Date shown above by People’s United Financial, Inc., a Delaware corporation, and its subsidiaries (the “Company”), and is hereby communicated to the employee named above (the “Employee”). Undefined capitalized terms used in this Agreement shall have the meanings set forth in the Company’s 2014 Long-Term Incentive Plan as may be amended from time to time (the “Plan”); provided , that the term “Retirement” shall mean any “Retirement” as defined in the Plan that occurs on or after the first anniversary of the Grant Date.

WHEREAS, the Company maintains the Plan.

WHEREAS, pursuant to Section 5 of the Plan, the Committee may grant awards of Performance Shares to employees, representing the right to receive Shares based on the extent specified performance goals are achieved.

WHEREAS, the Company desires to compensate the Employee with a grant of Performance Shares for the Employee’s future services to the Company.

NOW, THEREFORE, in consideration of the premises, the Company grants the Employee an Award of Performance Shares under the following terms and conditions:

1. Grant of Performance Shares .

The Company hereby grants to the Employee a target Award of the number of Performance Shares identified above (the “Grant”), which may be increased or decreased depending on attainment of the performance criteria identified in this Agreement (the “Performance Measure(s)”) to be issued in accordance with all of the terms and conditions set forth in this Agreement and the Plan. Each Performance Share shall be equivalent to one Share until such time as Shares are issued in payment of Performance Shares in accordance with Section 6. All terms and conditions set forth in the Plan are deemed to be incorporated herein in their entirety.

2. Book Entry .

The number of Performance Shares granted pursuant to this Agreement shall be credited to the Employee and shall be maintained on the books of the Company until Shares have been issued to the Employee (or the Employee’s beneficiaries if the Employee is deceased) in payment therefor in accordance with Section 6. No funds shall be set aside or earmarked for any Performance Shares, which shall be purely a bookkeeping device.

3. Performance Period and Vesting Provisions .

(a) The Performance Period is the period beginning on January 1, and ending on December 31, .

(b) Except as provided in this Agreement, the Employee’s Performance Shares will vest only upon the Employee’s continued employment through March 1 following the end of the Performance Period, provided that the Committee certifies the Performance Measure(s) for the Performance Period have been achieved as set forth in Appendix A attached to this Agreement. Appendix A shall set forth the applicable Performance Measures and payout percentages based on the attainment of “Threshold,” “Target,” and “Maximum” performance levels for each Performance Measure.

(c) Notwithstanding any provision to the contrary, if at any time after the Award Date, and before the date that Performance Shares are paid, the Employee’s employment or service with the Company terminates due to death, Disability or Retirement, the Employee shall vest in all of the Performance Shares granted pursuant to this Agreement and related cash dividends, provided that payment of any Award becoming vested pursuant to this subsection (c), including the number of Shares to be issued in payment of the Award and determination of the time of payment, shall be made in accordance with the provisions of Section 6(b).

4. Forfeiture Provisions .

(a) If before the date that the Company pays the Performance Shares the Employee’s employment or service with the Company is terminated for any reason other than death, Disability or Retirement, all of the Employee’s unvested Performance Shares and any unvested cash dividends shall be forfeited.

(b) Notwithstanding any provision of this Agreement to the contrary, the Committee may cause the Employee to forfeit all unvested Performance Shares and require repayment of any amount previously paid under this Agreement in accordance with the terms of the Company’s Incentive Compensation Clawback Policy (“the Policy”), any other applicable policy of the Company, and any other applicable laws and regulations.

(c) This Grant is subject to acceptance of all the terms, conditions and limitations of the Plan. The Plan may be amended from time to time, including but not limited to provisions on tax withholding and forfeiture. This Grant is subject to such rules and regulations that the Committee may adopt for administration of the Plan, and to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

5. Change in Control .

In the event of a Change in Control of the Company defined in Section 2(j) of the Plan, the rights of the Employee with respect to the Performance Shares shall be determined in accordance with the provisions of Section 17(b) of the Plan.

6. Issuance of Stock .

(a) Except as provided in subsection (b), following completion of the Performance Period, the Committee shall determine the extent to which applicable Performance Measure(s) have been attained and shall calculate the number of Shares to be issued in payment of each Performance Share in accordance with the provisions of Appendix A. The Company will cause the number of Shares so calculated to be delivered to or for the account of the Employee within 60 days after the date the Performance Shares vest or as soon as administratively possible after such date (but in no event later than December 31 ^st of the year after the year in which the Performance Period expired), except as otherwise provided in Section 12 below. If the number of Shares so calculated is zero, the Employee shall be deemed to have received payment in full for the Performance Shares made the subject of this Grant even though no Shares are delivered or deliverable.

(b) In the event Performance Shares become vested on an accelerated basis pursuant to Section 3(c) due to the death or Disability of the Employee, the Company will cause a number of Shares equal to the number of Performance Shares granted pursuant to this Agreement to be delivered to or for the account of the Employee as soon as administratively possible after the date such Performance Shares became vested. In the event Performance Shares become vested on an accelerated basis pursuant to Section 3(c) due to the Retirement of the Employee, the number of Shares to be issued in payment of such Performance Shares shall be calculated and such shares shall be delivered to or for the account of the Employee in the manner and at the time described in subsection (a); provided, however, that in the event of such Employee’s death prior to March 1 following the end of the Performance Period, the Company will cause a number of Shares equal to the number of Performance Shares granted pursuant to this Agreement to be delivered to or for the account of the Employee as soon as administratively possible after the date of the Employee’s death.

(c) Notwithstanding any provision to the contrary, if, in the reasonable determination of the Company, an Employee is a “specified employee” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended, and the guidance promulgated thereunder (“Code Section 409A”), then, if necessary to avoid the imposition on the Employee of excise tax and interest under Code Section 409A, the Company shall not deliver the Shares otherwise payable upon the Employee’s termination and separation of service until the date that is 30 days after 6 months following the Employee’s termination and separation of service from the Company.

(d) The delivery of the Shares shall be subject to payment of the applicable withholding tax liability as set forth in Section 7.

(e) If the Employee dies before the Company has distributed any portion of the vested Performance Shares, the Company will transfer any Shares payable with respect to the vested Performance Shares in accordance with the Employee’s written beneficiary designation or to the Employee’s estate if no written beneficiary designation is provided. If the Employee did not have a will, any Shares payable with respect to the vested Performance Shares will be distributed in accordance with the laws of descent and distribution.

7. Withholding Taxes .

The Company shall have the power and the right to deduct or withhold, or require the Employee to remit to the Company, an amount sufficient to satisfy any federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Agreement.

8. Non-transferability of Grant .

During the Performance Period, the Employee shall have no right to transfer, sell, pledge, assign, or hypothecate, other than by will or the laws of descent and distribution, any rights with respect to the Employee’s Award of Performance Shares. No Performance Shares shall be subject to execution, attachment, or similar process.

9. No Voting Rights as Stockholder .

The Employee shall not have any voting rights as a stockholder of the Company with respect to the Performance Shares, but shall have such rights with respect to any Shares issued to the Employee in payment of such Performance Shares.

10. Dividends .

To the extent that cash dividends are paid on Shares after the Award Date and before the date the Employee receives Shares in payment for Performance Shares subject to this Grant, the Employee shall receive credits of cash in a dividend bookkeeping account (the “Dividend Account”). Such cash credits shall be equal in value (based on the reported dividend rate on the date dividends were paid) to the amount of dividends paid on the Shares delivered to or for the account of the Employee in payment for the Performance Shares. The Employee shall vest in the cash in the Dividend Account in accordance with Section 3 of the Agreement in the same manner that the Employee vests in the Performance Shares granted pursuant to this Agreement. A distribution of the cash in the Dividend Account will be paid to the Employee as soon as practicable following the date that the Employee receives the applicable distribution of Shares, but in no event later than March 15 of the calendar year immediately following the applicable Share distribution date.

11. Capital Adjustment Provisions .

In the event of the occurrence of an event described in Section 17(a) of the Plan, the number of Performance Shares granted to the Employee shall be adjusted in accordance with the provisions of Section 17(a) of the Plan.

12. Securities Law Compliance .

The delivery of all or any of the Shares shall only be effective at such time that the issuance of such Shares will not violate any state or federal securities or other laws. The Company is under no obligation to effect any registration of Shares under the Securities Act of 1933 or to effect any state registration or qualification of the Shares. The Company may, in its sole discretion, delay the delivery of the Shares or place restrictive legends on such Shares in order to ensure that the issuance of any Shares will be in compliance with federal or state securities laws and the rules of the NASDAQ Global Select or any other exchange upon which the Company’s common stock is traded. If the Company delays the delivery of the Shares in order to ensure compliance with any state or federal securities or other laws, the Company shall deliver the Shares at the earliest date at which the Company reasonably believes that such delivery will not cause such violation, or at such other date that may be permitted under Code Section 409A.

13. Plan Governs .

This Grant is made under the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions of the Plan shall govern. A copy of the Plan is available upon request by contacting the Human Resources Department at the Company’s executive offices.

14. No Right to Continued Employment .

The Employee understands and agrees that this Agreement does not impact in any way the right of the Company to terminate or change the terms of the employment of the Employee at any time for any reason whatsoever, with or without Cause, nor confer upon any right to continue in the employ of the Company.

15. Addresses for Notices .

Any notice to be given to the Company under the terms of this Agreement shall be addressed to the Company and directed to the attention of the Committee, care of People’s United Bank, N.A., 850 Main Street, Bridgeport, CT 06604, or at such other address as the Company may hereafter designate in writing. Any notice to be given to the Employee shall be addressed to the Employee at the address maintained on the books and records of the Company.

16. Captions .

Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

17. Severability .

In the event that any provision in this Agreement shall be held invalid or unenforceable, such provision shall be severable from, and such invalidity or unenforceability shall not be construed to have any effect on, the remaining provisions of this Agreement.

18. Expenses .

Costs of administration of the terms and conditions of this Agreement will be paid by the Company.

19. Governing Law / Compliance with Applicable Law .

The terms and conditions of this Agreement shall be governed by the laws of the State of Connecticut, except to the extent preempted by federal law.

20. Entire Agreement; Amendment; Code Section 409A Provisions .

This Agreement and the Plan contain the terms and conditions with respect to the subject matter hereof and supersede any previous agreements, written or oral, relating to the subject matter hereof. This Agreement shall be interpreted in accordance with Code Section 409A. This Agreement shall be deemed to be modified to the maximum extent necessary to be in compliance with Code Section 409A’s rules. If the Employee is unexpectedly required to include in the Employee’s current year’s income any amount of compensation relating to the Performance Shares because of a failure to meet the requirements of Code Section 409A, then to the extent permitted by Code Section 409A, the Employee may receive a distribution of Shares or cash in an amount not to exceed the amount required to be included in income as a result of the failure to comply with Code Section 409A.

21 . Non-Solicitation .

During the period of the Employee’s employment with the Company, and for a period of months after the cessation of such employment for any reason, whether with or without Cause, the Employee will not, directly or indirectly, on his or her own behalf or on behalf of any other person, and whether through his or her own efforts or through the efforts or employing the assistance of any other person (including without limitation any consultant or any person employed by or associated with any person with whom the Employee become employed or associated):

call on or solicit in any manner any customer of the Company for the purpose of doing business of the type done by the Company with such customer. For purposes of this Agreement, “customer” means any individual, firm, partnership, corporation, or other entity or person (i) currently doing business or who has done business with the Company in the 12 months prior to the cessation of the Employee’s employment, or (ii) any prospective customer that the Employee knows to be a prospective customer of the Company and with whom the Company is in discussion with and reasonably expects to do business; or

Solicit or otherwise induce any employee of the Company to leave the employ of the Company.

By accepting and agreeing to the terms of this Agreement, the Employee acknowledges that his or her receipt of the grant of the Award evidenced by this Agreement represents adequate consideration for the undertaking set forth in this Section 21.

22. Acceptance of Grant; Revocation .

No later than forty-five (45) days after the date of this Award (the “Acceptance Date”), the Employee must formally accept and agree to the terms of the Award as set forth in this Agreement. The Employee must do so (a) electronically if the Employee is directed to do so at the time the Award is formally communicated to him or her and the Employee receives a copy of this Agreement, or (b) by returning a signed copy of this Agreement to the Executive Rewards Manager in the Human Resources Department, 850 Main Street, BC-03, Bridgeport, CT 06604 so that it is actually received no later than the close of business on the Acceptance Date. If the Employee does not accept and agree to the terms and conditions of the Award as set forth in this Agreement by the Acceptance Date, the Award evidenced hereby shall be null and void, and shall be deemed to have been revoked, on the first business day following the Acceptance Date. If the 45 ^th day after the date of this Award is not a business day, the Acceptance Date will be the first business day after such 45 ^th day. A business day is any day other than a Saturday, a Sunday or a day on which the Company’s banking offices in Connecticut are not scheduled to be open for business.

Approval and Acceptance

The Award evidenced by this Agreement was approved by the Board of Directors (or by a duly authorized committee of the Board, or by the Chief Executive Officer acting pursuant to delegated authority) of the Company on the Award Date. The Employee’s acceptance of the Award evidenced by this Agreement, whether electronically, by email or in such other form as is permitted by the Company, also evidenced the Employee’s intent to be legally bound by the terms of this Agreement effective as of the Award Date, regardless of the date of the Employee’s acceptance.

Appendix A

Performance Measures and Measurement

The Performance Measures for the 2017-2019 Performance Period are:


Performance Measure		Explanation
Change in Net Income		Average annual percentage change in net income over performance period vs. designated target percentage

Return on Average Tangible Common Equity (ROATCE)		Average annual return on average tangible common equity over performance period vs. designated target percentage

Relative Total Shareholder Return (RTSR)		The Company’s total shareholder return (TSR) relative to the TSR for a peer group of financial institutions selected by the Committee prior to or within 90 days following commencement of the Performance Period

Following completion of the Performance Period, the Committee will evaluate and certify the level of attainment for each Performance Measure compared to performance targets approved by the Committee within 90 days following commencement of the Performance Period for each Performance Measure. The level of attainment compared to target will determine the level of payouts as follows:


Performance below Threshold:		zero payout
Performance at Threshold:		50% payout
Performance at Target:		100% payout
Performance at or above Maximum:		150% payout

If the Performance Measures are achieved at a level that either is between Threshold and Target, or between Target and Maximum, the amount of Performance Shares that will be paid will be equal to an amount that is linearly interpolated between the applicable payout percentages. Linear interpolation means that an increase in a goal above one specified level but below another level will result in a similar incremental increase in the payout percentage.

One-third of the payout depends on the results for each Performance Measure, independent of the other two measures. For example, in the case of a grant of 1,500 Performance Shares where the payout percentage is 50% at Threshold, the methodology described results in a payout of 250 Shares if one Performance Measure is at Threshold and the other two measures are below Threshold.

Exhibit 10.7(b)

LOGO

STOCK OPTION AGREEMENT

(Under the People’s United Financial, Inc. 2014 Long-Term Incentive Plan)

Granted To: (“you” or the “Participant”)

In accordance with the terms of the People’s United Financial, Inc. 2014 Long-Term Incentive Plan (the “Plan”), People’s United Financial, Inc. (the “Company”) is pleased to grant you a non-statutory stock option (the “Option”) to purchase granted shares of the Company’s Common Stock (the “Optioned Shares”) at an Option price of $ per share, representing the Fair Market Value of the Common Stock on (grant date). The Option is exercisable at the times specified in Section 3 of this Agreement, and is subject to the other terms and conditions contained in this Agreement and in the Plan.

You and the Company agree that the Option is subject to the following terms and conditions:

1. Definitions. All of the terms and provisions of the Plan are incorporated into this Agreement by reference to the same effect as if the Plan were set forth herein in its entirety. All terms used in this Agreement and defined in the Plan shall, unless otherwise defined herein, have the same meanings as in the Plan. The term “Common Stock” refers to the Company’s Common Stock, par value $.01 per share, and includes any class or series of securities into which such capital stock may be changed, as contemplated by Section 17 of the Plan. The terms “affiliate”, “directors”, “person”, and “security”, or any variations of such terms, shall have the broadest meanings assigned to them by the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934 (the “Exchange Act”). The term “Retirement” shall mean any “Retirement” as defined in the Plan that occurs on or after the first anniversary of the Grant Date. The terms “you” and “your” shall include, when the context requires, any persons entitled to exercise this Option by virtue of Section 6 of this Agreement.

2. Term of Option. The Option is granted and made effective on (the “Grant Date”) and shall terminate, expire and no longer be exercisable, to the extent not previously exercised or surrendered, on the tenth anniversary of the Grant Date, or at such earlier time as may be specified in the Plan or in Section 8 of this Agreement (the “Option Period”).

3. Exercise of Option. Provided that the Option has not sooner expired and terminated in accordance with the Plan or Section 8 hereof, the Option shall be exercisable commencing on the earlier of (a) the first day of the month following your Retirement, as to 100% of the Optioned Shares, or (b) the date of termination of your employment by reason of your death or Disability, as to 100% of the Optioned Shares, or (c) the first day of the month following the anniversary of the Grant Date, in the following percentage installments:


Date Option Becomes Exercisable		Percentage of Optioned Shares as to which the Option Becomes Exercisable
(a) Commencing on (vest date)		33 1/3% of Optioned Shares
(b) Commencing on (vest date)		33 1/3% of Optioned Shares
(c) Commencing on (vest date)		33 1/3% of Optioned Shares

Once Optioned Shares have become available for purchase in accordance with the foregoing schedule, any unpurchased shares included in an installment or part of an installment of the Optioned Shares shall remain subject to purchase on a cumulative basis until the Option expires or terminates in accordance with the Plan or Section 8 hereof. The Option may not be exercised for fractional shares of Common Stock; all fractional shares shall be rounded to the nearest whole number below the actual number of shares.

4. Method of Exercise. You (or such other person as is provided in Section 6 hereof) may exercise the Option only by delivering written notice to the Company setting forth your irrevocable election to purchase all or a designated part of any then matured installment or installments of the Optioned Shares. Subject to Section 8 hereof, the notice of exercise must be delivered to the Company on or before the close of business on a date which is or precedes the last day of the Option Period, except that if the last day of the Option Period is a Saturday, Sunday or a day on which either the Company’s corporate headquarters or the markets for equity securities generally are closed, the notice shall be delivered before the close of business on the business day preceding the last day of the Option Period.

The notice shall contain specific reference to this Agreement and the Plan and must be signed by you (or by such other person as is provided in Section 6 hereof). The notice shall be accompanied by payment in full of the Option Price by cash, certified or bank check or, if the Committee consents, payment in full or in part may also be made in the form of Common Stock already owned by you. If at any time this Agreement is in effect, you are or potentially could be subject to Section 16(b) of the Exchange Act, an election to make payment in full or in part in the form of Common Stock shall be subject to compliance with the provisions of Section 16 of the Exchange Act and the Rules and Regulations of the Securities and Exchange Commission (the “SEC”) promulgated thereunder, as interpreted by the Committee. No Optioned Shares shall be issued until full payment therefore has been made, including payment of all applicable withholding taxes, or the Committee has approved arrangements for payment.

If you (or such other person as is provided in Section 6 hereof) effect an option exercise electronically using a system designated by the Company, you (or such other person) will be deemed to have satisfied the requirements for providing signed, written notice to the Company in connection with such exercise as required by this Section.

5. Withholding. With the express written consent of the Committee, upon the exercise of the Option in accordance with the terms of Section 4 hereof, the Company, on behalf of the Company affiliate by which you are employed, will withhold the amount that it is required to withhold for any federal, state, local or foreign withholding tax purposes. In that event, withholding obligations will be settled by withholding from distribution to you a number of Optioned Shares having a Fair Market Value on the date that the amount of tax to be withheld otherwise would be withheld in cash (the “Tax Date”), equal in value to the amount required to be withheld. If, at any time this Agreement is in effect, you are or potentially could be subject to Section 16(b) of the Exchange Act, the method for settling withholding obligations described herein shall be subject to compliance with the provisions of Section 16 of the Exchange Act and the Rules and Regulations of the SEC promulgated thereunder, as interpreted by the Committee.

6. Persons Entitled to Exercise. The Option may be exercised:

(a) except as provided below or in the Plan, only by you during your lifetime;

(b) in the event of your death while in the employment of the Company (or one or more of its affiliates) (or following termination of your employment by reason of your Retirement) by your legal representative or by the legal representative of your estate; and

In the event of your death while you are in the employment of the Company (or one or more of its affiliates), all Options remaining unexercised as of the date of death may be exercised by the personal representative of your estate, including the executor under your will or an administrator with the will annexed, or the administrator of your estate in the event you should die intestate; provided that such installments must be exercised, if at all, prior to the expiration of the Option Period. In the event of termination of your employment by reason of your permanent and total Disability, as that term is defined in Section 22(e)(3) of the Code, all Options remaining unexercised at the time of termination of employment may be exercised by you or your legal representative (as the case may be), provided that such installments must be exercised, if at all, prior to the expiration of the Option Period. Exercise of the Option by your representative or fiduciary or your estate shall be subject to all of the terms and conditions of this Agreement and of the Plan and shall entitle such representative or fiduciary to no greater part of the Optioned Shares than you could have acquired if you had exercised the Option at the time of your death or termination of employment by reason of permanent Disability. To the extent that any such representative or fiduciary shall be entitled to exercise the Option in accordance with the provisions of Section 6 and the other sections of this Agreement, the terms “you” and “your” shall include such representative or fiduciary for purposes of this Agreement.

7. Delivery of Certificates. The Company may postpone the time of delivery of certificates for the Optioned Shares for such time as the Company deems necessary or desirable to enable it to comply with the listing requirements of any securities exchange or stock quotation system upon which the Common Stock may be listed or quoted, the requirements of the Securities Act or the Exchange Act, any rules or regulations of the Securities and Exchange Commission promulgated thereunder, or the requirements of applicable state laws relating to the authorization, issuance or sale of securities generally or bank securities specifically. Until certificates representing Optioned Shares are delivered to you or transfer is effected by book entry on the stock transfer records of the Company, you will have no right to vote or receive dividends with respect to the Optioned Shares.

8. Termination of Option Period. The Option shall lapse and terminate (i) on the date of termination of your employment (or, if sooner, the expiration date of the Option Period), as to all of the Optioned Shares that either (A) are not yet exercisable on the date of such termination or (B) do not become exercisable at the time of such termination pursuant to the terms of this Agreement, and (ii) as to all of the Optioned Shares that are exercisable (but unexercised) on the date of termination of your employment, on the first to occur of the events listed in (a) through (d) below:

(a) Expiration of the Option Period; or

(b) Immediately, upon the termination of your employment for Cause; or

(c) Expiration of three months after termination of your employment with the Company (or one or more of its affiliates) for any reason other than death, Disability, Retirement or Cause; and this Agreement shall be of no further validity or effect, except with respect to Optioned Shares previously purchased; or

(d) Expiration of one year after termination of your employment with the Company (or one or more of its affiliates) by reason of death, Disability or Retirement; and this Agreement shall be of no further validity or effect, except with respect to Optioned Shares previously purchased.

9. Reservation of Shares. During the Option Period, the Company will reserve from its authorized and unissued Common Stock, or from its treasury stock (or part from both), a sufficient number of shares to provide for the delivery of the Optioned Shares upon exercise of the Option in accordance herewith and subject to the provisions of Section 7 hereof. If the Option should expire, lapse or otherwise become unexercisable for any reason specified in or contemplated by this Agreement or the Plan, to the extent that the Option shall not have been exercised as to the full number of the Optioned Shares subject thereto, the unpurchased Optioned Shares shall be deemed freed automatically from any such reservation and shall become immediately available for issuance and delivery pursuant to other option agreements under the Plan.

paid and non-assessable. Throughout the Option Period (subject to the foreshortening thereof under Section 8 hereof), the Company will have full legal right and authority to issue and deliver the Optioned Shares as contemplated by this Agreement. You shall have none of the rights of a shareholder until the Optioned Shares are in fact issued and delivered to you.

11. Adjustments in Optioned Shares. In the event of any changes in the capital structure or reorganization of the Company during the term of this Agreement, the provisions of Section 17(a) of the Plan shall apply.

12. Restrictions on Transferability. Except as provided in Section 6 hereof, neither the Option nor any of your rights, interests or benefits thereunder or hereunder shall be subject to voluntary or involuntary assignment, transfer, pledge, hypothecation or other form of absolute or conditional alienation or disposition, directly or indirectly. The Option shall be unexercisable during any period in which there is in effect, and may be terminated in all respects by the Company in the event of, a purported assignment of the Option or of any such rights, interests or benefits thereunder or under this Agreement, except as provided in Section 6 hereof.

13. Modification and Waiver. No modification or waiver of any of the provisions of this Agreement shall be binding upon either the Company or you unless made in writing and signed by you and countersigned on behalf of the Company by an executive officer thereof (other than you, if you should be or become such an officer).

14. Binding Effect. Except as provided in Section 12 hereof, this Agreement shall be binding upon and inure to the benefit of the parties hereto, their heirs, personal representatives, successors and assigns.

15. Resolution of Controversies. Any dispute or disagreement that may arise under, or in any way may relate to, the interpretation, construction or application of this Agreement shall be subject to determination by the Committee after appropriate notice to the affected parties and reasonable opportunity to be heard by the Committee. Any determination made by the Committee shall be final, binding and conclusive for all purposes.

16. Notices. All notices, requests, demands, or other communications required, permitted or contemplated by this Agreement shall be deemed effectively served, delivered or otherwise made (a) upon receipt if manually delivered, or (b) upon the delivery date shown on the returned receipt (or if delivery is refused on the date presented for delivery) if mailed by the United States registered or certified mail, postage prepaid, return receipt requested, and if intended for the Company, directed to the Committee’s attention in care of People’s United Bank, 850 Main Street, Bridgeport, Connecticut 06604; or if intended for you, directed to you at the address set forth below immediately following your signature. Either party may, by notice delivered in accordance with this Section, notify the other party of a different address for all future notices, which will be effective upon delivery to the other party.

17. Non-Solicitation. During the period of your employment with the Company or any of its affiliates, and for a period of months after the cessation of your employment for any reason, whether with or without Cause, you will not, directly or indirectly, on your own behalf or on behalf of any other person, and whether through your own efforts or through the efforts or employing the assistance of any other person (including without limitation any consultant or any person employed by or associated with any person with whom you become employed or associated):

call on or solicit in any manner any customer of the Company or any of its affiliates for the purpose of doing business of the type done by the Company or any of its affiliates with such customer. For purposes of this Agreement, “customer” means any individual, firm, partnership, corporation, or other entity or person (i) currently doing business or who has done business with the Company or any of its affiliates in the 12 months prior to the cessation of your employment, or (ii) any prospective customer that you know to be a prospective customer of the Company or any of its affiliates and with whom the Company or any of its affiliates is in discussion with and reasonably expects to do business; or

Solicit or otherwise induce any employee of the Company or any of its affiliates to leave the employ of the Company or any of its affiliates.

To the extent the terms of this Section 17 are less restrictive (from your perspective) than comparable non-solicitation restrictions agreed to by you pursuant to any Option agreement or Restricted Stock agreement dated prior to the date hereof (collectively, the “Prior Agreements”), the terms of this Section 17 shall supersede and replace the comparable non-solicitation provisions in each such Prior Agreement.

By accepting and agreeing to the terms of this Agreement, you acknowledge that your receipt of the grant of the Award evidenced by this Agreement represents adequate consideration for the undertaking set forth in this Section 17.

18. Revocation of Grant. No later than forty-five (45) days after the Grant Date (the “Acceptance Date”), you must formally accept and agree to the terms and conditions of the Option as set forth in this Agreement. You must do so (a) electronically, if you are directed to do so at the time your Option is formally communicated to you and you receive a copy of this Agreement, or (b) by returning a signed copy of this Agreement to the Manager of Executive Rewards in the Human Resources Department, 850 Main Street, BC-03, Bridgeport, CT 06604 so that it is received no later than the close of business on the Acceptance Date. If you do not accept and agree to the terms and conditions of the Option as set forth in this Agreement by the Acceptance Date, the Option evidenced hereby shall be null and void, and shall be deemed to have been revoked, on the first business day following the Acceptance Date. If the 45 ^th day after the Grant Date is not a business day, the Acceptance Date will be the first business day after such 45 ^th day. A business day is any day other than a Saturday, a Sunday, or a day on which the Company’s banking offices in Connecticut are not scheduled to be open for business.

19. Severability. In case any covenant, condition, term or provision contained in this Agreement shall be held to be invalid, illegal or unenforceable in any respect, in whole or in part, by a judgment, order or decree of any court of competent jurisdiction, from which judgment, order or decree no further appeal or petition for review is available, the validity of the remaining covenants, conditions, terms and provisions contained in this Agreement, and the validity of the remaining part of any term or provision held to be partially invalid, illegal or unenforceable, shall in no way be affected, prejudiced or disturbed thereby.

20. Entire Agreement. This Agreement and the Plan contain all understandings between you and the Company and any of its affiliates regarding the Optioned Shares. No other communications regarding the Optioned Shares are to be considered binding upon you and the Company unless they are identified as amendments to this Agreement, are in writing and are signed by you and the Company as provided in this Agreement.

Approval and Acceptance

The Award evidenced by this Agreement was approved by the Board of Directors (or by a duly authorized committee of the Board, or by the Chief Executive Officer acting pursuant to delegated authority) of the Company on the Grant Date. Your acceptance of the Award evidenced by this Agreement, whether electronically, by email or in such other form as is permitted by the Company, also evidences your intent to be legally bound by the terms of this Agreement effective as of the Grant Date, regardless of the date of your acceptance.

Exhibit 10.7(c)

LOGO

STOCK OPTION AGREEMENT

(Under the People’s United Financial, Inc. 2014 Long-Term Incentive Plan)

Granted To: (“you” or the “Participant”)

You and the Company agree that the Option is subject to the following terms and conditions:

1. Definitions. All of the terms and provisions of the Plan are incorporated into this Agreement by reference to the same effect as if the Plan were set forth herein in its entirety. All terms used in this Agreement and defined in the Plan shall, unless otherwise defined herein, have the same meanings as in the Plan. The term “Common Stock” refers to the Company’s Common Stock, par value $.01 per share, and includes any class or series of securities into which such capital stock may be changed, as contemplated by Section 17 of the Plan. The terms “affiliate”, “directors”, “person”, and “security”, or any variations of such terms, shall have the broadest meanings assigned to them by the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934 (the “Exchange Act”). The terms “you” and “your” shall include, when the context requires, any persons entitled to exercise this Option by virtue of Section 6 of this Agreement.


Date Option Becomes Exercisable		Percentage of Optioned Shares as to which the Option Becomes Exercisable
(a) Commencing on (vest date)		33 1/3% of Optioned Shares
(b) Commencing on (vest date)		33 1/3% of Optioned Shares
(c) Commencing on (vest date)		33 1/3% of Optioned Shares

6. Persons Entitled to Exercise. The Option may be exercised:

(a) except as provided below or in the Plan, only by you during your lifetime;

(a) Expiration of the Option Period; or

(b) Immediately, upon the termination of your employment for Cause; or

10. Corporate Law Status of Shares. The shares of Common Stock issuable upon exercise of the Option in accordance herewith, upon issuance, delivery and payment for such shares in accordance with Section 7 of this Agreement, shall constitute validly issued and outstanding shares of capital stock of the Company. When so paid for, such shares will be fully paid and non-assessable. Throughout the Option Period (subject to the foreshortening thereof under Section 8 hereof), the Company will have full legal right and authority to issue and deliver the Optioned Shares as contemplated by this Agreement. You shall have none of the rights of a shareholder until the Optioned Shares are in fact issued and delivered to you.

Solicit or otherwise induce any employee of the Company or any of its affiliates to leave the employ of the Company or any of its affiliates.

Approval and Acceptance

The Award evidenced by this Agreement was approved by the Board of Directors (or by a duly authorized committee of the Board, or by the Chief Executive Officer acting pursuant to delegated authority) of the Company on the Grant Date. Your acceptance of the Award evidenced by this Agreement, whether electronically, by email or in such other form as is permitted by the Company, also evidences your intent to be legally bound by the terms of this Agreement effective as of the Grant Date, regardless of the date of your acceptance.

Exhibit 10.7(d)

LOGO

RESTRICTED STOCK AGREEMENT

(Under the People’s United Financial, Inc. 2014 Long-Term Incentive Plan)

Granted To: (“you” or the “Participant”)

In accordance with the terms of the People’s United Financial, Inc. 2014 Long-Term Incentive Plan (the “Plan”), People’s United is pleased to grant you an award (the “Award”) of shares of People’s United Financial, Inc. (the “Company”) Common Stock (the “Shares”). The Shares granted to you under this Agreement are subject to the restrictions set forth in Section 3 hereof and to the other terms and conditions set forth in this Agreement and in the Plan.

You and the Company agree that the Award is subject to the following terms and conditions:

1. Definitions. All of the terms and provisions of the Plan are deemed incorporated into this Agreement by reference to the same purposes and effect as if the Plan were set forth in its entirety in this Agreement. All terms used in this Agreement and defined in the Plan shall, unless otherwise defined herein, have the same meanings as in the Plan. The term “Common Stock” refers to the Company’s Common Stock, par value $.01 per share, and includes any class or series of securities into which such capital stock may be changed, as contemplated by Section 17 of the Plan. The terms “person” and “security,” and any variations of such terms, shall have the broadest meanings assigned to them by the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934 (the “Exchange Act”). The term “Retirement” shall mean any “Retirement” as defined in the Plan that occurs on or after the first anniversary of the Grant Date.

2. Grant Date. The Award is granted and made effective (the “Grant Date”). Each Share has a Fair Market Value of $ on the Grant Date.

3. Restrictions on Shares. Subject to the provisions of the Plan, you may not sell, assign, transfer, pledge, hypothecate or otherwise dispose of or encumber the Shares until they have vested in accordance with the vesting schedule set forth in Section 4 of this Agreement. The Company will permit transfer of the Shares only in accordance with the terms of this Agreement. Any transfer of the Shares made in any manner contrary to this Agreement will be void and ineffective to constitute the transferee a shareholder of the Company entitled to any rights, benefits or privileges as such.

4. Vesting. Thirty three and one-third percent (33 1/3%) of the Shares will vest on ; thirty three and one-third percent (33 1/3%) of the Shares will vest on ; and the remaining thirty three and one-third percent (33 1/3%) of the Shares will vest on . Vesting will occur only if you have continuously been an employee of the Company (or one or more of its affiliates) from the Grant Date through the applicable vesting date; provided, however, that notwithstanding the foregoing, all Shares which are unvested as of the date of your termination of employment with the Company (or one or more of its affiliates) by reason of your death, Disability or Retirement shall vest immediately upon such termination, and the Restriction Period applicable to all such Shares shall expire.

5. Forfeiture. You will forfeit all unvested Shares upon the termination of your employment with the Company (or one or more of its affiliates) for any reason (other than death, Disability or Retirement) during the applicable Restriction Period.

6. Voting. You will have the right to vote the Shares from the Grant Date. Your right to vote the Shares will expire immediately upon forfeiture or revocation of the Award with respect to all Shares so forfeited or revoked.

7. Cash Dividends. Any cash dividends that may be paid with respect to the Shares will be paid to you as soon as practicable following the applicable vesting date of such Shares but in no event later than March 15 of the calendar year immediately following the applicable vesting date. Dividends will be paid to you, and will be taxable in the same manner as other compensation paid to you, by the Company. In the case of any Shares which are forfeited by you, no cash dividends will be paid to you with respect to any forfeited Shares on or after the date such forfeiture occurs.

8. Other Distributions. Any stock dividends that may be paid with respect to the Shares will be payable in the form of additional shares of Restricted Stock which will be subject to the terms, conditions and restrictions set forth in this Agreement. If any warrants or rights are issued with respect to the Shares and are exercised, the shares issued with respect to such warrants or rights shall also be Restricted Stock subject to the terms, conditions and restrictions set forth in this Agreement. The restrictions on such stock dividends will lapse when the restrictions on the Shares lapse.

9. Return of Certain Dividends and Distributions. If this Award is subsequently revoked pursuant to Section 19 of this Agreement, and if prior to the date of such revocation you received or became eligible to receive any dividends or other distributions with respect to this Award, you will be required to repay or return all such dividends or distributions to the Company within five (5) business days following the later of (a) the date your Award is revoked or (b) the date such dividends are paid or such distribution is made to you. In the event you fail to do so, the Company may withhold the amount to be repaid or returned by you from any subsequent payments (including salary, bonus or other compensation) payable to you by the Company or any of its affiliates as a result of your employment.

10. Absence of Share Certificates. The Shares will be registered in your name on the Company’s stock transfer records but will be issued in book-entry form and will not be represented by certificates.

11. Delivery of Certificates. If the Company issues certificates representing the Shares, it may postpone the delivery of the certificates for the Shares for such time as it deems necessary or desirable to enable it to comply with the requirements of the Securities Act or the Exchange Act, any rules or regulations of the SEC promulgated thereunder, or the requirements of applicable state laws relating to the authorization, issuance or sale of securities generally.

12. Adjustments in Shares. In the event of any changes in the Company’s capital structure during the term of this Agreement, the provisions of Section 17(a) of the Plan shall apply.

13. Corporate Law Status of Shares. The Shares granted pursuant to this Agreement constitute validly issued and outstanding Shares of the capital stock of the Company and are fully paid and nonassessable.

14. Modification and Waiver. No modification or waiver of any of the provisions of this Agreement shall be binding upon either the Company or you unless it is made in writing, signed by you and countersigned on behalf of the Company by an executive officer thereof (other than you).

15. Binding Effect. Except as provided in Section 3 hereof, this Agreement shall be binding upon and inure to the benefit of the parties hereto, their heirs, personal representatives, successors and assigns.

16. Resolution of Controversies. Any dispute or disagreement that may arise under, or in any way may relate to, the interpretation, construction or application of this Agreement shall be subject to determination by the Committee after appropriate notice to the affected parties and reasonable opportunity to be heard by the Committee. Any determination made by the Committee shall be final, binding and conclusive for all purposes.

17. Notices. All notices, requests, demands, or other communications required, permitted or contemplated by this Agreement shall be deemed effectively served, delivered or otherwise made (a) upon receipt if manually delivered, or (b) upon the delivery date shown on the returned receipt (or if delivery is refused, on the date presented for delivery) if mailed by United States registered or certified mail, postage prepaid, return receipt requested, and if intended for the Company, directed to the Committee’s attention, in care of People’s United Bank, 850 Main Street, Bridgeport, Connecticut 06604; or if intended for you, directed to you at the address set forth below immediately following your signature. Either party may, by notice delivered in accordance with this Section, notify the other party of a different address for all future notices, which will be effective upon delivery to the other party.

18. Non-Solicitation. During the period of your employment with the Company or any of its affiliates, and for a period of months after the cessation of your employment for any reason, whether with or without Cause, you will not, directly or indirectly , on your own behalf or on behalf of any other person, and whether through your own efforts or through the efforts or employing the assistance of any other person (including without limitation any consultant or any person employed by or associated with any person with whom you become employed or associated):

Solicit or otherwise induce any employee of the Company or any of its affiliates to leave the employ of the Company or any of its affiliates.

To the extent the terms of this Section 18 are less restrictive (from your perspective) than comparable non-solicitation restrictions agreed to by you pursuant to any Option agreement or Restricted Stock agreement dated prior to the date hereof (collectively, the “Prior Agreements”), the terms of this Section 18 shall supersede and replace the comparable non-solicitation provisions in each such Prior Agreement.

19. Revocation of Grant. No later than forty-five (45) days after the Grant Date (the “Acceptance Date”), you must formally accept and agree to the terms and conditions of the Award as set forth in this Agreement. You must do so (a) electronically, if you are directed to do so at the time your Award is formally communicated to you and you receive a copy of this Agreement, or (b) by returning a signed copy of this Agreement to the Executive Rewards Manager in the Human Resources Department, 850 Main Street, BC-03, Bridgeport, CT 06604 so that it is received no later than the close of business on the Acceptance Date. If you do not accept and agree to the terms and conditions of the Award as set forth in this Agreement by the Acceptance Date, the Award evidenced hereby shall be null and void, and shall be deemed to have been revoked, on the first business day following the Acceptance Date. If the 45 ^th day after the Grant Date is not a business day, the Acceptance Date will be the first business day after such 45 ^th day. A business day is any day other than a Saturday, a Sunday, or a day on which the Company’s banking offices in Connecticut are not scheduled to be open for business.

20. Entire Agreement. This Agreement and the Plan contain all understandings between you, the Company, and any of its affiliates regarding the Shares. No other communications regarding the Shares are to be considered binding upon you and the Company unless they are identified as amendments to this Agreement, are in writing and are signed by you and the Company as provided in this Agreement.

Approval and Acceptance

The Award evidenced by this Agreement was approved by the Board of Directors (or by a duly authorized committee of the Board, or by the Chief Executive Officer acting pursuant to delegated authority) of the Company on the Grant Date. Your acceptance of the Award evidenced by this Agreement, whether electronically, by email or in such other form as is permitted by the Company, also evidences your intent to be legally bound by the terms of this Agreement effective as of the Grant Date, regardless of the date of your acceptance.

Exhibit 10.7(e)

LOGO

RESTRICTED STOCK AGREEMENT

(Under the People’s United Financial, Inc. 2014 Long-Term Incentive Plan)

Granted To: (“you” or the “Participant”)

You and the Company agree that the Award is subject to the following terms and conditions:

2. Grant Date. The Award is granted and made effective (the “Grant Date”). Each Share has a Fair Market Value of $ on the Grant Date.

12. Adjustments in Shares. In the event of any changes in the Company’s capital structure during the term of this Agreement, the provisions of Section 17(a) of the Plan shall apply.

Solicit or otherwise induce any employee of the Company or any of its affiliates to leave the employ of the Company or any of its affiliates.

Approval and Acceptance

The Award evidenced by this Agreement was approved by the Board of Directors (or by a duly authorized committee of the Board, or by the Chief Executive Officer acting pursuant to delegated authority) of the Company on the Grant Date. Your acceptance of the Award evidenced by this Agreement, whether electronically, by email or in such other form as is permitted by the Company, also evidences your intent to be legally bound by the terms of this Agreement effective as of the Grant Date, regardless of the date of your acceptance.

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certifications

CERTIFICATIONS

I, John P. Barnes, certify that:

I have reviewed this Quarterly Report on Form 10-Q of People’s United Financial, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certifications

CERTIFICATIONS

I, R. David Rosato, certify that:

I have reviewed this Quarterly Report on Form 10-Q of People’s United Financial, Inc.;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Exhibit 32

Section 1350 Certifications

Executive Certifications

pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of People’s United Financial, Inc. (the “Company”), a Delaware corporation, does hereby certify, to the best of such officer’s knowledge, that:

The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934.

Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period ended March 31, 2017.

This Certification is made effective as of the date the Report is filed with the Securities and Exchange Commission.


Date: May 10, 2017				/s/ John P. Barnes
				John P. Barnes
				Principal Executive Officer

Date: May 10, 2017				/s/ R. David Rosato
				R. David Rosato
				Principal Financial Officer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Actof 2002 and is not being filed as part of the Report or as a separate disclosure document.